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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 January 3, 1998
[ ] 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 Exchange
9% Notes due 1998*
7 3/8% Notes Due December 15, 2002
*repaid February 1, 1998
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 30, 1998 was approximately $4.8 billion. As of March 30,
1998, there were 89,109,513 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
January 3, 1998 are incorporated by reference into Parts I and II.
Portions of the definitive Proxy Statement dated March 9, 1998, 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 producer of tools, hardware and door products for
professional, industrial and consumer use. Stanley(R) is a brand recognized
around the world for quality and value.
In 1997, Stanley had net sales of $2.7 billion and employed approximately
18,000 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) July 1997 Restructuring Initiative. On July 18, 1997 the company
announced a major initiative to reallocate resources in order to deliver
profitable growth on a sustained basis. This growth will be fueled by increased
spending on new product development, new ventures to expand the Company's
markets and brand development with the savings achieved from streamlining
operations and reorganizing into a product management structure. The company
has moved from a portfolio company with 11 fully independent businesses to a
single operating company comprised of eight product groups, three geographic
regions and corporate leaders of brand development, operations, technology and
several support functions. The support functions such as finance, human
resources and information technology are being centralized. Manufacturing and
distribution operations are being rationalized. The company plans to move from
83 manufacturing plants to 45 and from 40 distribution facilities to 25. The
sales organization has been reorganized to reduce redundant coverage of key
customers and channels. Overall, these actions will change the composition of
the company's workforce and are expected to reduce net employment levels by
4,500 people.
1(b) Industry Segment Information. Financial information regarding the
Company's industry segments is incorporated herein by reference from page 29 of
the Company's Annual Report to Shareholders for the year ended January 3, 1998.
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
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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.
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
1997, the Company invested approximately $84 million in facilities, new
equipment, technology and software in order to achieve enhanced customer
service, operational excellence in manufacturing and new product 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
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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 1997, there was significant price erosion for certain fastening tools
manufactured by the Company. Highly engineered fastening tools have
historically been protected from low-cost foreign sourced competition due to a
market preference for a higher quality U.S. made product. The introduction of
foreign sourced tools of an acceptable quality resulted in significant pricing
pressure on the market for these products. In addition, the Company reduced its
prices in Europe in a strategic response to market conditions.
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. In 1997,
approximately 12% of the Company's consolidated sales were to The Home Depot. A
consolidation of retailers in the home center and mass merchant distribution
channel 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 Home Depot as well as certain of
the other 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.
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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 7, 1998, the Company had $135 million in unfilled
orders compared with approximately $149 million in unfilled orders at February
1, 1997. 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 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
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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 January 3, 1998, the Company
had reserves of $32 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 Connecticut Department of Public
Utility Control.
Employees. During 1997, the Company had approximately 18,000 employees,
approximately 12,000 of whom were employed in the U.S. Of these U.S. employees,
approximately 20% are covered by collective bargaining agreements with
approximately 9 labor unions. The majority of the Company's hourly- and
weekly-paid
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employees outside the U.S. are covered by collective bargaining agreements. The
Company's labor agreements in the U.S. expire in 1998, 1999, 2000 and 2001.
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 achieve operational excellence and deliver sustained,
profitable growth to its shareholders.
The Company's drive for operational excellence is focused on improving customer
service, consolidating multiple manufacturing and distribution facilities,
outsourcing non-core activities and converting to common systems. The ability
to implement the initiatives associated with these goals is dependent on the
Company's ability to manufacture products that meet customer requirements for
on-time delivery, quality and value and the ability to develop and execute
comprehensive plans for the facility consolidations; the ability of the
organization to complete the transition to a product management structure
without losing focus on the business; the availability of vendors to perform
the non-core 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 during the
transition; and unforeseen events.
The Company's ability to generate sustained, profitable growth is dependent on
successfully freeing up resources to fund new product and brand development and
new ventures to broaden its markets and to defend market share in the face of
intense price competition. Success at developing new products will depend on
the ability of the new product development process to foster creativity and
identify viable new product ideas as well as the Company's ability to attract
new product engineers. The achievement of growth through new ventures will
depend upon the ability to successfully identify, negotiate, consummate and
integrate into operations acquisitions, joint ventures and /or strategic
alliances.
The Company's ability to achieve and sustain the improvements resulting from
these initiatives will be dependent on the extent of pricing pressure within
the Company's markets and other changes in its competitive markets, the
continued consolidation of customers in consumer channels, increasing global
competition, changes in trade, monetary and fiscal policies and laws,
inflation, currency exchange fluctuations, the impact of currency exchange
rates on the competitiveness of the Company's products and recessionary or
expansive trends in the economies in which the Company operates.
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1(d) Financial information about foreign and domestic operations and export
sales. Geographic area information on page 29 of the Annual Report to
Shareholders for the year ended January 3, 1998 is incorporated herein by
reference.
Item 2. Properties.
As of January 3, 1998, Registrant and its subsidiaries owned or leased
facilities for manufacturing, distribution and sales offices in 31 states and
30 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, North Carolina; Columbus, Georgetown and Sabina, Ohio; Allentown,
Royersford and York, Pennsylvania; East Greenwich, Rhode Island; Cheraw, South
Carolina; Shelbyville, Tennessee; Dallas and Wichita Falls, Texas; Pittsfield
and Shaftsbury, Vermont; Heidelberg West and Ingleburn, Australia; Smiths
Falls, Canada; Pecky, Czech Republic; Ecclesfield, Hellaby, Manchester and
Sheffield, England; Besancon Cedex and Maxonchamp, France; Wieseth, Germany;
Chihuahua and Puebla, Mexico; Wroclaw, Poland; 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 and Troy, Michigan.
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, Canada; and Northampton, England.
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Hardware
Tupelo, Mississippi; and Oakville, Ontario.
Specialty Hardware
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 EPA'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.
On October 24, 1996, a group of eight defendants, including the Company
(the "settling defendants") filed a third party contribution claim against 23
parties and a counterclaim against various federal agencies that sent materials
to the site. On April 4, 1997, the settling defendants along with eleven
third-party defendants reached a settlement with the government for $900,000 to
resolve their respective liabilities for past response costs. The Company
agreed to pay $112,801. The court entered the consent order regarding the
settlement on August 11, 1997. The settlement does not resolve the government's
potential claims against the settling parties for response costs that are
incurred after the settlement date. However, the Company believes that it is
unlikely that any additional significant remediation work will be necessary. If
this is not the case, the government likely will bring claims against the
settling defendants, including the Company, to recover such costs.
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 on the Company's consolidated financial position,
results of operations or liquidity.
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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 January 3, 1998:
Elected
Name, Age, Birth date Office to Office
- --------------------- ------ ---------
J.M. Trani (53) Chairman and Chief Executive Officer. 12/31/96
(3/15/45) Joined Stanley December 31, 1996;
1986 President and Chief Executive
Officer of GE Medical Systems.
J.A. Cosentino, Jr.(48) Vice President, Operations. Joined 10/29/97
(11/12/49) Stanley October 1997; 1997 President/
CEO Todd Combustion, Inc.; 1995 CEO,
Rau Fastener Company, L.L.C.; 1990
President, Otis Elevator Company -
N.A. Operations.
W.D. Hill (48) Vice President, Engineering. Joined 9/17/97
(9/18/49) Stanley August 1997; 1996 Director
Product Management - Tool Group,
Danaher Tool; 1994 Vice President,
Product Development Global
Accessories, The Black & Decker
Corporation; 1992 Vice President
Product Development - N.A. Power
Tools, The Black & Decker Corporation.
K.O. Lewis (44) Vice President, Marketing and Brand 11/3/97
(5/28/53) Management. Joined Stanley
November 1997; 1996 Executive Vice
President Strategic Alliances, Marvel
Entertainment Group; 1986 Director
Participant Marketing, Walt Disney
Attractions.
T.E. Mahoney (56) President, Consumer Sales Americas. 6/5/95
(3/20/42) Joined Stanley in 1965; 1995 Vice
President, Marketing Development
and President and General Manager
of Stanley Customer Support Division;
1992 President and General Manager,
Stanley Hardware.
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M.J. Mathieu (46) Vice President, Human Resources. 9/17/97
(2/20/52) Joined Stanley September 1997;
1996 Manager - Human Resources,
GE Motors & Industrial Systems
(Fort Wayne, Indiana); 1994
Consultant - Executive Staffing,
General Electric Company (Fairfield,
Connecticut); 1989 Consultant -
Union Relations, General Electric
Company.
P.W. Russo (44) Vice President, Strategy and 9/18/95
(5/23/53) Development. 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.
J.E. Turpin (51) Vice President, Operational Excellence. 4/23/97
(6/9/46) Joined Stanley in 1970; 1995 Vice
President Operations, The Stanley
Works; 1992 President & General
Manager, Stanley Air Tools.
S.S. Weddle (59) Vice President, General Counsel 1/1/88
(11/9/38) and Secretary. Joined Stanley in 1978.
T.F. Yerkes (42) Vice President and Controller. Joined 7/1/93
(9/9/55) Stanley in 1989; 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 22 and 23 and the material captioned
"Investor and Shareowner Information" on page 45 of its Annual Report to
Shareholders for the year ended January 3, 1998.
Item 6. Selected Financial Data. Registrant
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incorporates by reference pages 22 and 23 of its Annual Report to Shareholders
for the year ended January 3, 1998.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations. Registrant incorporates by reference pages 24 through 28
of its Annual Report to Shareholders for the year ended January 3, 1998.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Registrant incorporates by reference the material captioned "Market Risk" on
page 27 of its Annual Report to Shareholders for the year ended January 3,
1998.
Item 8. Financial Statements and Supplementary Data. The consolidated
financial statements and report of independent auditors included on pages 30 to
43 and page 21, respectively, of the Annual Report to Shareholders for the year
ended January 3, 1998 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 9, 1998.
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 6 through
14 of its definitive Proxy Statement, dated March 9, 1998.
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 9,
1998.
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:
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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.
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 15, 1997 Press releases, dated October
15, 1997 announcing hiring of
new Vice President, Marketing
and Brand Development and
third quarter results.
October 29, 1997 Press release dated October
29, 1997 announcing the hiring
of a Vice President,
Operations.
November 10, 1997 Press release dated November
10, 1997 announcing the
acquisition of Atro
Industriale S.p.A.
December 15, 1997 Announcement that R. Alan
Hunter, President and Chief
Operating Officer was leaving
the company and designation of
"executive officers" and
"officers" as of January
1, 1998.
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).
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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 25, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on February 25, 1998 by the following persons on
behalf of the Registrant and in the capacities indicated.
John M. Trani James G. Kaiser
- -------------------------------- ----------------------------
John M. Trani, Chairman, James G. Kaiser, Director
Chief Executive Officer and
Director
Theresa F. Yerkes Eileen S. Kraus
- -------------------------------- ----------------------------
Theresa F. Yerkes, Vice President Eileen S. Kraus, Director
and Controller (Chief Financial
Officer and Chief Accounting
Officer)
Stillman B. Brown Hugo E. Uyterhoeven
- -------------------------------- ----------------------------
Stillman B. Brown, Director Hugo E. Uyterhoeven, Director
Edgar R. Fiedler Walter W. Williams
- -------------------------------- ----------------------------
Edgar R. Fiedler, Director Walter W. Williams, Director
Mannie L. Jackson Kathryn D. Wriston
- -------------------------------- ----------------------------
Mannie L. Jackson, Director Kathryn D. Wriston, Director
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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 January 3,
1998, are incorporated by reference in Item 8:
Report of Independent Auditors
Consolidated Statements of Operations--fiscal years ended January 3, 1998,
December 28, 1996 and December 30, 1995.
Consolidated Balance Sheets--January 3, 1998 and December 28, 1996.
Consolidated Statements of Cash Flows--fiscal years ended January 3, 1998,
December 28, 1996 and December 30, 1995.
Consolidated Statements of Changes in Shareholders' Equity--fiscal years
ended January 3, 1998, December 28, 1996 and December 30, 1995.
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 29, 1998, included in the 1997
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 29, 1998, 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 26, 1998
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, 1998, with respect to the financial statements and schedules of
The Stanley Works 401(k) Savings Plan for the year ended December 31, 1997
included as Exhibit 99(i) to this Annual Report (Form 10-K) for the fiscal year
ended January 3, 1998.
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 26, 1998
F-3
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THE STANLEY WORKS AND SUBSIDIARIES
Fiscal years ended January 3, 1998, December 28, 1996 and December 30, 1995 (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 January 3, 1998
Reserves and allowances deducted from
asset accounts:
Allowance for doubtful accounts:
Current $22.5 $20.2 ($6.8)(B) $16.1 (A) $19.8
Noncurrent 0.8 (0.2) 0.1 (B) 0.7
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 $0.4(B) $12.8 (A) $18.2
Noncurrent 0.5 0.3 0.8
Notes: (A) Represents doubtful accounts charged off, less recoveries of
accounts previously charged off.
(B) Represents net transfers to/from other accounts, foreign currency
translation adjustments and acquisitions.
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)(a) 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
(incorporated reference to Exhibit 4(iv) to Annual
Report on Form 10-K for year ended December 28, 1996)
(b) Letter Agreement, dated October 22, 1997 regarding
the extension of the Amended and Restated Facility
A (364 Day) Credit Agreement.
E-1-
(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 (incorporated reference to Exhibit 4(v)
to Annual Report on Form 10-K for year ended
December 28, 1996)
(10) (i) Executive Agreements (incorporated by reference
to Exhibit 10(i) to Annual Report on Form 10-K
for year ended January 3, 1987)*
(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, as amended*
(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 Report on Form 10-K
for year ended December 30, 1995)*
(vi) 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)
* Management contract or compensation plan or arrangement
E-2-
(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)
(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) (a) Supplemental Executive Retirement Program effective May
20, 1997*
(b) Amendment to John M. Trani's Supplemental Executive
Retirement Program, dated September 17, 1997*
(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
* Management contract or compensation plan or arrangement
E-3-
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 (incorporated by
reference to Exhibit 10 (xiii) to Annual Report on Form 10-K
for the year ended December 28, 1996)
(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,
as amended December 18, 1996
(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)*
(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)*
(xx) Letter Agreement, dated April 30, 1996 between The Stanley
Works and Paul W. Russo *
(xxi) 1997 Long-Term Incentive Plan*
* Management contract or compensation plan or arrangement
E-4-
(11) Statement re computation of per share earnings (the information
required to be presented in this exhibit appears in footnote J to
the Company's Consolidated Financial Statements set forth in the
Annual Report to Shareholders for the year ended January 3, 1998)
(12) Statement re computation of ratio of earnings to fixed charges
(13) Annual Report to Shareholders for year ended January 3, 1998
(21) Subsidiaries of Registrant
(23) Consents of Independent Auditors (at pages F-2 and F-3)
(27) Financial Data Schedule for 1997 Fiscal Year End
(i) Financial Data Schedule for 1997 interim periods and 1996 Fiscal
Year End
(ii) Financial Data Schedule for 1996 interim periods and 1995 Fiscal
Year End
(99) (i) Financial Statements and report of independent auditors for the
year ended December 31, 1997, 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)
E-5-