Stanley Reports First Quarter Earnings

Meets Analyst Expectations Despite Market-Related Sales Decline



Apr 18, 2001, 01:00 ET from The Stanley Works

    NEW BRITAIN, Conn., April 18 /PRNewswire/ -- The Stanley Works (NYSE:   SWK)
 announced that first quarter net income was $47 million, or $.54 per diluted
 share, matching the First Call consensus estimate of Wall Street analysts and
 equal to last year.
     Net sales were $627 million, 10% lower than last year, on more severe than
 originally anticipated weakness across consumer and industrial tool channels
 in the Americas. Sales declined 7% from unit volume, 2% from foreign currency
 translation and 1% from price / mix. Approximately one-third of the decline
 occurred in Mac Tools where repositioning initiatives had a temporary negative
 impact. On a segment basis, sales decreased 9% in Tools and 11% in Doors. On a
 geographic basis, sales decreased 13% in the Americas but increased 2% in both
 Europe and Asia/Pacific. Exclusive of the effects of foreign currency, sales
 increased 12% in Asia/Pacific, 8% in Europe and 4% in Latin America.
     John M. Trani, Chairman and Chief Executive Officer, commented: "Despite
 numerous recent share gains, revenue was impacted by weak U.S. and Canadian
 economies and the continuation of inventory corrections at major retailers and
 industrial customers. The U.S. economic environment, which rapidly
 deteriorated in the fourth quarter of 2000, eroded even further in the first
 quarter of 2001 with some of our largest customers experiencing their worst
 environment in twenty years. Despite experiencing a similar trend, we were
 able to deliver earnings per share at the same level as last year."
     Gross margin, exclusive of special credits and charges discussed below,
 was 37.3%, an increase of 30 basis points over 37.0% in the first-quarter of
 2000 despite the sales volume decline. The negative impacts of price pressure,
 inflationary commodity costs and lower volume were more than offset by
 improved cost controls in operations, continuing restructuring and material
 cost productivity.
     Exclusive of one-time charges and credits, selling, general and
 administrative expenses of $150 million (24.0% of sales) were $22 million or
 70 basis points below first quarter 2000 levels and declined $4 million
 sequentially from the fourth quarter of 2000. These costs were not expected to
 decline as a percentage of sales until the second quarter of this year.
 Resulting operating margin was 13.4%, up 110 basis points from 12.3% last
 year.
     Mr. Trani continued: "Again this quarter we dealt with the likelihood of
 weak markets and adjusted our employment and production early. Approximately
 500 positions were eliminated, exceeding our original expectation. Our
 operations team continues to rationalize our manufacturing structure while
 administrative costs have been tightened. Selling, general and administrative
 costs continue to be reduced sequentially despite investment in
 growth-oriented marketing initiatives."
     Net interest expense of $7 million and other net expenses of $6 million,
 exclusive of one-time charges and credits, approximated first quarter 2000
 levels. The company's income tax rate was 33% versus 34% in the first quarter
 last year reflecting the continued benefit of structural changes. The company
 expects the 33% rate to be sustainable.
     In the first quarter, the company recorded a non-recurring $29 million, or
 $.22 per fully diluted share, pension-related gain in accordance with FAS 88.
 In connection with this gain, the company expects a reversion of cash within
 twelve to twenty-four months.
     Also during the quarter, the company undertook new initiatives for
 reduction of its cost structure and executed several business repositionings
 intended to improve its competitiveness, including continuing movement of
 production, permanent reduction of the overhead cost structure in its
 manufacturing system and a series of initiatives in Mac Tools. As a result,
 the company incurred an $18 million charge for new restructuring-related
 severance obligations of which $3 million was paid out during the quarter. In
 addition, the company recorded an $11 million one-time charge associated with
 the aforementioned repositionings. The net difference between the one-time
 pension gain and the one-time restructuring and other charges was negligible.
     Addressing business prospects for the second quarter and beyond, Mr. Trani
 continued: "Our solid balance sheet and inherent strong cash flow position us
 well in this unfavorable economic environment. We expect the markets for our
 products to remain lackluster at least through the second quarter. As a result
 and consistent with recent quarters, we will pursue a myriad of programs to
 lower our manufacturing cost base and administrative expenses.
     "Our growth initiatives are continuing, and the business transitions
 embarked upon in the first quarter are reaching completion. In particular, the
 per-truck sales trend of Mac Tools' direct sales representatives showed an
 encouraging diminishing of previous declines in March, an indication that
 interruptions in that business are subsiding. In the second half of 2001 and
 beyond, if the economy rebounds and the Euro stays at its current level, our
 operating leverage should result in double-digit percentage earnings per share
 gains."
     Despite expectations of continued economic weakness, the company expects
 fully-diluted earnings per share in the second quarter to approximate last
 year's $.58 per share. For the full year 2001, management reaffirmed its
 confidence in the current First Call consensus of analyst estimates of
 $2.41 per diluted share, up 9% over 2000.
     Accounts receivable decreased $2 million from year-end, largely reflecting
 lower sales volume. Inventories increased $20 million as they traditionally do
 in the first quarter in preparation for peak selling seasons.
     Tools sales decreased 9% from the first quarter of 2000 to $492 million.
 Operating margin was 14.6%, an improvement of 100 basis points over the same
 period last year. Doors segment sales of $135 million decreased 11% versus
 last year's first quarter. Operating margin increased to 8.8% of sales
 compared with 7.5% 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 Stanley Works, an S&P 500 company, is a worldwide supplier of tools,
 door systems and related hardware for professional, industrial and consumer
 use.
 
     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 http://www.stanleyworks.com. Alternatively, they are
 available through PR Newswire's "Company News On-Call" service by FAX at 800-
 758-5804, ext. 874363.
 
                      THE  STANLEY  WORKS AND SUBSIDIARIES
     Consolidated Statements of Operations and Business Segment Information
           Excluding 2001 Restructuring and Special Credits & Charges
                          First Quarter 2001 vs. 2000
           (Unaudited, Millions of Dollars Except Per Share Amounts)
 
                                            2001                        2000
                           Excluding
                         Restructuring  Restructuring
                          and Special    and Special
                            Charges &     Charges &
                             Credits       Credits      Reported      Reported
 
     Net Sales               $626.9        $(0.7)       $626.2        $695.4
     Cost of sales            393.0           5.5        398.5         438.0
     Gross margin             233.9         (6.2)        227.7         257.4
                              37.3%            --        36.4%         37.0%
 
     SG&A expenses            150.2           3.3        153.5         171.9
                              24.0%            --        24.5%         24.7%
 
     Operating profit          83.7         (9.5)         74.2          85.5
                              13.4%            --        11.8%         12.3%
 
     Interest, net              6.6            --          6.6           6.5
     Other, net                 6.5        (27.6)       (21.1)           6.0
     Restructuring charge        --          18.3         18.3            --
 
     Earnings before
      income taxes             70.6         (0.2)         70.4          73.0
     Income taxes              23.3           0.5         23.8          24.8
                              33.0%            --        33.8%         34.0%
 
     Net earnings             $47.3        $(0.7)        $46.6         $48.2
 
     Average shares
      outstanding (diluted)  87,113        87,113       87,113        89,158
 
     Earnings Per Share
      (diluted)               $0.54         $0.00        $0.54         $0.54
 
     INDUSTRY SEGMENTS
     Net sales
       Tools                 $492.1        $(0.7)       $491.4        $543.7
       Doors                  134.8            --        134.8         151.7
       Consolidated          $626.9        $(0.7)       $626.2        $695.4
 
     Operating profit
       Tools                  $71.9        $(9.2)        $62.7         $74.1
       Doors                   11.8         (0.3)         11.5          11.4
       Consolidated           $83.7        $(9.5)        $74.2         $85.5
 
     Interest, net             $6.6           $--         $6.6          $6.5
     Other, net                 6.5        (27.6)       (21.1)           6.0
     Restructuring charge        --          18.3         18.3            --
 
     Earnings before
      income taxes            $70.6        $(0.2)        $70.4         $73.0
 
                       THE STANLEY WORKS AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
           (Unaudited, Millions of Dollars Except Per Share Amounts)
 
                                                           First Quarter
                                                         2001           2000
 
     NET SALES                                        $ 626.2         $695.4
 
     COSTS AND EXPENSES
       Cost of sales                                    398.5          438.0
       Selling, general and administrative              153.5          171.9
       Interest - net                                     6.6            6.5
       Other - net                                     (21.1)            6.0
       Restructuring charge                              18.3             --
 
                                                        555.8          622.4
     EARNINGS BEFORE INCOME TAXES                        70.4           73.0
       Income Taxes                                      23.8           24.8
     NET EARNINGS                                       $46.6          $48.2
 
     NET EARNINGS PER SHARE
      OF COMMON STOCK
       Basic                                            $0.54          $0.54
 
       Diluted                                          $0.54          $0.54
 
     DIVIDENDS PER SHARE                                $0.23          $0.22
 
     AVERAGE SHARES OUTSTANDING (in thousands)
       Basic                                           85,897         88,936
 
       Diluted                                         87,113         89,158
 
                       THE STANLEY WORKS AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                        (Unaudited, Millions of Dollars)
 
                                                       March 31       April 1
                                                         2001           2000
 
     ASSETS
       Cash and cash equivalents                       $111.4         $128.9
       Accounts receivable                              530.0          584.4
       Inventories                                      417.6          390.8
       Other current assets                              78.1           75.5
         Total current assets                         1,137.1        1,179.6
       Property, plant and equipment                    496.8          522.2
       Goodwill and other intangibles                   170.6          181.6
       Other assets                                     148.9           84.3
                                                     $1,953.4       $1,967.7
 
 
     LIABILITIES AND SHAREOWNERS' EQUITY
       Short-term borrowings                           $285.7         $290.3
       Accounts payable                                 232.5          223.2
       Accrued expenses                                 248.2          295.4
         Total current liabilities                      766.4          808.9
       Long-term debt                                   240.4          277.4
       Other long-term liabilities                      187.5          167.1
       Shareowners' equity                              759.1          714.3
                                                     $1,953.4       $1,967.7
 
                       THE STANLEY WORKS AND SUBSIDIARIES
                         SUMMARY OF CASH FLOW ACTIVITY
                        (Unaudited, Millions of Dollars)
 
                                                            First Quarter
                                                         2001           2000
     OPERATING ACTIVITIES
       Net earnings                                    $ 46.6         $ 48.2
       Depreciation and amortization                     22.3           23.7
       Restructuring charge                              18.3             --
 
       Other non-cash items                            (30.4)            7.2
       Changes in working capital                      (46.0)         (61.6)
       Changes in other operating
        assets and liabilities                         (32.0)         (20.0)
       Net cash used by operating activities           (21.2)          (2.5)
 
     INVESTING AND FINANCING ACTIVITIES
       Capital and software expenditures               (15.9)         (16.0)
       Proceeds from sales of assets                       --            0.7
       Net borrowing activity                            72.7          127.9
       Net stock transactions                             5.1         (44.0)
       Cash dividends on common stock                  (19.7)         (19.5)
       Other                                            (3.2)          (5.7)
       Net cash provided by investing and
        financing activities                             39.0           43.4
 
 
     Increase in Cash and Cash Equivalents               17.8           40.9
 
     Cash and Cash Equivalents, Beginning of Period      93.6           88.0
 
     Cash and Cash Equivalents, End of First Quarter   $111.4         $128.9
 
 

SOURCE The Stanley Works
    NEW BRITAIN, Conn., April 18 /PRNewswire/ -- The Stanley Works (NYSE:   SWK)
 announced that first quarter net income was $47 million, or $.54 per diluted
 share, matching the First Call consensus estimate of Wall Street analysts and
 equal to last year.
     Net sales were $627 million, 10% lower than last year, on more severe than
 originally anticipated weakness across consumer and industrial tool channels
 in the Americas. Sales declined 7% from unit volume, 2% from foreign currency
 translation and 1% from price / mix. Approximately one-third of the decline
 occurred in Mac Tools where repositioning initiatives had a temporary negative
 impact. On a segment basis, sales decreased 9% in Tools and 11% in Doors. On a
 geographic basis, sales decreased 13% in the Americas but increased 2% in both
 Europe and Asia/Pacific. Exclusive of the effects of foreign currency, sales
 increased 12% in Asia/Pacific, 8% in Europe and 4% in Latin America.
     John M. Trani, Chairman and Chief Executive Officer, commented: "Despite
 numerous recent share gains, revenue was impacted by weak U.S. and Canadian
 economies and the continuation of inventory corrections at major retailers and
 industrial customers. The U.S. economic environment, which rapidly
 deteriorated in the fourth quarter of 2000, eroded even further in the first
 quarter of 2001 with some of our largest customers experiencing their worst
 environment in twenty years. Despite experiencing a similar trend, we were
 able to deliver earnings per share at the same level as last year."
     Gross margin, exclusive of special credits and charges discussed below,
 was 37.3%, an increase of 30 basis points over 37.0% in the first-quarter of
 2000 despite the sales volume decline. The negative impacts of price pressure,
 inflationary commodity costs and lower volume were more than offset by
 improved cost controls in operations, continuing restructuring and material
 cost productivity.
     Exclusive of one-time charges and credits, selling, general and
 administrative expenses of $150 million (24.0% of sales) were $22 million or
 70 basis points below first quarter 2000 levels and declined $4 million
 sequentially from the fourth quarter of 2000. These costs were not expected to
 decline as a percentage of sales until the second quarter of this year.
 Resulting operating margin was 13.4%, up 110 basis points from 12.3% last
 year.
     Mr. Trani continued: "Again this quarter we dealt with the likelihood of
 weak markets and adjusted our employment and production early. Approximately
 500 positions were eliminated, exceeding our original expectation. Our
 operations team continues to rationalize our manufacturing structure while
 administrative costs have been tightened. Selling, general and administrative
 costs continue to be reduced sequentially despite investment in
 growth-oriented marketing initiatives."
     Net interest expense of $7 million and other net expenses of $6 million,
 exclusive of one-time charges and credits, approximated first quarter 2000
 levels. The company's income tax rate was 33% versus 34% in the first quarter
 last year reflecting the continued benefit of structural changes. The company
 expects the 33% rate to be sustainable.
     In the first quarter, the company recorded a non-recurring $29 million, or
 $.22 per fully diluted share, pension-related gain in accordance with FAS 88.
 In connection with this gain, the company expects a reversion of cash within
 twelve to twenty-four months.
     Also during the quarter, the company undertook new initiatives for
 reduction of its cost structure and executed several business repositionings
 intended to improve its competitiveness, including continuing movement of
 production, permanent reduction of the overhead cost structure in its
 manufacturing system and a series of initiatives in Mac Tools. As a result,
 the company incurred an $18 million charge for new restructuring-related
 severance obligations of which $3 million was paid out during the quarter. In
 addition, the company recorded an $11 million one-time charge associated with
 the aforementioned repositionings. The net difference between the one-time
 pension gain and the one-time restructuring and other charges was negligible.
     Addressing business prospects for the second quarter and beyond, Mr. Trani
 continued: "Our solid balance sheet and inherent strong cash flow position us
 well in this unfavorable economic environment. We expect the markets for our
 products to remain lackluster at least through the second quarter. As a result
 and consistent with recent quarters, we will pursue a myriad of programs to
 lower our manufacturing cost base and administrative expenses.
     "Our growth initiatives are continuing, and the business transitions
 embarked upon in the first quarter are reaching completion. In particular, the
 per-truck sales trend of Mac Tools' direct sales representatives showed an
 encouraging diminishing of previous declines in March, an indication that
 interruptions in that business are subsiding. In the second half of 2001 and
 beyond, if the economy rebounds and the Euro stays at its current level, our
 operating leverage should result in double-digit percentage earnings per share
 gains."
     Despite expectations of continued economic weakness, the company expects
 fully-diluted earnings per share in the second quarter to approximate last
 year's $.58 per share. For the full year 2001, management reaffirmed its
 confidence in the current First Call consensus of analyst estimates of
 $2.41 per diluted share, up 9% over 2000.
     Accounts receivable decreased $2 million from year-end, largely reflecting
 lower sales volume. Inventories increased $20 million as they traditionally do
 in the first quarter in preparation for peak selling seasons.
     Tools sales decreased 9% from the first quarter of 2000 to $492 million.
 Operating margin was 14.6%, an improvement of 100 basis points over the same
 period last year. Doors segment sales of $135 million decreased 11% versus
 last year's first quarter. Operating margin increased to 8.8% of sales
 compared with 7.5% 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 Stanley Works, an S&P 500 company, is a worldwide supplier of tools,
 door systems and related hardware for professional, industrial and consumer
 use.
 
     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 http://www.stanleyworks.com. Alternatively, they are
 available through PR Newswire's "Company News On-Call" service by FAX at 800-
 758-5804, ext. 874363.
 
                      THE  STANLEY  WORKS AND SUBSIDIARIES
     Consolidated Statements of Operations and Business Segment Information
           Excluding 2001 Restructuring and Special Credits & Charges
                          First Quarter 2001 vs. 2000
           (Unaudited, Millions of Dollars Except Per Share Amounts)
 
                                            2001                        2000
                           Excluding
                         Restructuring  Restructuring
                          and Special    and Special
                            Charges &     Charges &
                             Credits       Credits      Reported      Reported
 
     Net Sales               $626.9        $(0.7)       $626.2        $695.4
     Cost of sales            393.0           5.5        398.5         438.0
     Gross margin             233.9         (6.2)        227.7         257.4
                              37.3%            --        36.4%         37.0%
 
     SG&A expenses            150.2           3.3        153.5         171.9
                              24.0%            --        24.5%         24.7%
 
     Operating profit          83.7         (9.5)         74.2          85.5
                              13.4%            --        11.8%         12.3%
 
     Interest, net              6.6            --          6.6           6.5
     Other, net                 6.5        (27.6)       (21.1)           6.0
     Restructuring charge        --          18.3         18.3            --
 
     Earnings before
      income taxes             70.6         (0.2)         70.4          73.0
     Income taxes              23.3           0.5         23.8          24.8
                              33.0%            --        33.8%         34.0%
 
     Net earnings             $47.3        $(0.7)        $46.6         $48.2
 
     Average shares
      outstanding (diluted)  87,113        87,113       87,113        89,158
 
     Earnings Per Share
      (diluted)               $0.54         $0.00        $0.54         $0.54
 
     INDUSTRY SEGMENTS
     Net sales
       Tools                 $492.1        $(0.7)       $491.4        $543.7
       Doors                  134.8            --        134.8         151.7
       Consolidated          $626.9        $(0.7)       $626.2        $695.4
 
     Operating profit
       Tools                  $71.9        $(9.2)        $62.7         $74.1
       Doors                   11.8         (0.3)         11.5          11.4
       Consolidated           $83.7        $(9.5)        $74.2         $85.5
 
     Interest, net             $6.6           $--         $6.6          $6.5
     Other, net                 6.5        (27.6)       (21.1)           6.0
     Restructuring charge        --          18.3         18.3            --
 
     Earnings before
      income taxes            $70.6        $(0.2)        $70.4         $73.0
 
                       THE STANLEY WORKS AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
           (Unaudited, Millions of Dollars Except Per Share Amounts)
 
                                                           First Quarter
                                                         2001           2000
 
     NET SALES                                        $ 626.2         $695.4
 
     COSTS AND EXPENSES
       Cost of sales                                    398.5          438.0
       Selling, general and administrative              153.5          171.9
       Interest - net                                     6.6            6.5
       Other - net                                     (21.1)            6.0
       Restructuring charge                              18.3             --
 
                                                        555.8          622.4
     EARNINGS BEFORE INCOME TAXES                        70.4           73.0
       Income Taxes                                      23.8           24.8
     NET EARNINGS                                       $46.6          $48.2
 
     NET EARNINGS PER SHARE
      OF COMMON STOCK
       Basic                                            $0.54          $0.54
 
       Diluted                                          $0.54          $0.54
 
     DIVIDENDS PER SHARE                                $0.23          $0.22
 
     AVERAGE SHARES OUTSTANDING (in thousands)
       Basic                                           85,897         88,936
 
       Diluted                                         87,113         89,158
 
                       THE STANLEY WORKS AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                        (Unaudited, Millions of Dollars)
 
                                                       March 31       April 1
                                                         2001           2000
 
     ASSETS
       Cash and cash equivalents                       $111.4         $128.9
       Accounts receivable                              530.0          584.4
       Inventories                                      417.6          390.8
       Other current assets                              78.1           75.5
         Total current assets                         1,137.1        1,179.6
       Property, plant and equipment                    496.8          522.2
       Goodwill and other intangibles                   170.6          181.6
       Other assets                                     148.9           84.3
                                                     $1,953.4       $1,967.7
 
 
     LIABILITIES AND SHAREOWNERS' EQUITY
       Short-term borrowings                           $285.7         $290.3
       Accounts payable                                 232.5          223.2
       Accrued expenses                                 248.2          295.4
         Total current liabilities                      766.4          808.9
       Long-term debt                                   240.4          277.4
       Other long-term liabilities                      187.5          167.1
       Shareowners' equity                              759.1          714.3
                                                     $1,953.4       $1,967.7
 
                       THE STANLEY WORKS AND SUBSIDIARIES
                         SUMMARY OF CASH FLOW ACTIVITY
                        (Unaudited, Millions of Dollars)
 
                                                            First Quarter
                                                         2001           2000
     OPERATING ACTIVITIES
       Net earnings                                    $ 46.6         $ 48.2
       Depreciation and amortization                     22.3           23.7
       Restructuring charge                              18.3             --
 
       Other non-cash items                            (30.4)            7.2
       Changes in working capital                      (46.0)         (61.6)
       Changes in other operating
        assets and liabilities                         (32.0)         (20.0)
       Net cash used by operating activities           (21.2)          (2.5)
 
     INVESTING AND FINANCING ACTIVITIES
       Capital and software expenditures               (15.9)         (16.0)
       Proceeds from sales of assets                       --            0.7
       Net borrowing activity                            72.7          127.9
       Net stock transactions                             5.1         (44.0)
       Cash dividends on common stock                  (19.7)         (19.5)
       Other                                            (3.2)          (5.7)
       Net cash provided by investing and
        financing activities                             39.0           43.4
 
 
     Increase in Cash and Cash Equivalents               17.8           40.9
 
     Cash and Cash Equivalents, Beginning of Period      93.6           88.0
 
     Cash and Cash Equivalents, End of First Quarter   $111.4         $128.9
 
 SOURCE  The Stanley Works