SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): July 26, 2004
The Stanley Works
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(Exact name of registrant as specified in charter)
Connecticut 1-5244 06-0548860
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
1000 Stanley Drive, New Britain, Connecticut 06053
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (860) 225-5111
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Not Applicable
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(Former name or former address, if changed since last report)
Exhibit Index is located on Page 4
Page 1 of 16
Item 7. Financial Statements and Exhibits.
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(c) 99.1 Press Release dated July 26, 2004 announcing second quarter
2004 results and providing third quarter and full year 2004 as well
as full year 2005 guidance furnished pursuant to Item 12 hereof.
Item 12. In a press release attached to this Form 8-K, the company
reported its results for the second quarter of 2004, provided
guidance for the third quarter and full year 2004 as well a full
year 2005 and elaborated on certain other activities.
Page 2 of 16
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE STANLEY WORKS
Date: July 26, 2004 By: /s/ Bruce H. Beatt
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Name: Bruce H. Beatt
Title: Vice President, General
Counsel and Secretary
Page 3 of 16
EXHIBIT INDEX
Current Report on Form 8-K
Dated July 26, 2004
Exhibit No. Page
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99.1 5
Page 4 of 16
Exhibit 99.1
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FOR IMMEDIATE RELEASE
Stanley Reports Strong 2nd Quarter Revenue, Earnings Per Share and Cash Flow
Results
Revenues Grow 22 Percent; Continuing Operations' EPS Record 73 cents; Operating
Cash Flow Increases 42 percent
New Britain, Connecticut, July 26, 2004 ... The Stanley Works (NYSE: SWK)
announced that second quarter 2004 net income from continuing operations was $61
million (73 cents per fully-diluted share), surpassing the company's estimates
of 63-67 cents per fully-diluted share provided on April 26, as strong organic
sales growth continued throughout the quarter. These results compare with
earnings of $9 million (11 cents per fully-diluted share) from continuing
operations in the second quarter of 2003; such prior year results included
pre-tax restructuring costs, impairment charges and other exit costs totaling
$48 million pre-tax, or 38 cents per fully diluted share. Aside from these
costs, prior year earnings per fully diluted share from continuing operations
were 48 cents.
Net sales from continuing operations were $795 million, up 22 percent over last
year. Excluding the effects of recent acquisitions (CST/Berger, Blick plc and
Frisco Bay Industries) sales increased 13 percent. Strong demand continued from
home center and mass merchant customers; industrial tool sales benefited from
favorable market conditions and improved execution in several businesses;
Security Solutions revenues increased primarily due to share gains in the access
door business; and both Europe and Asia benefited from currency translations. As
a result, double-digit percentage organic sales growth was achieved in all three
business segments - Consumer Products, Industrial Tools and Security Solutions.
John F. Lundgren, Chairman and Chief Executive Officer, stated: "Our team
delivered another solid performance, executing our strategy and serving our
customers well. The company continues to generate double-digit percentage
organic sales growth, supplemented with accretive acquisitions. Eight business
units - hand tools, consumer storage, home decor, assembly technologies,
hydraulic tools, industrial mechanics tools, fastening systems and Security
Solutions - had double-digit percentage organic sales increases this quarter.
"We are especially pleased with our continued strong free cash flow, which
should enable us to achieve our short-term de-leveraging objectives, while
positioning us to capitalize on further growth opportunities over the longer
term."
Gross profit from continuing operations was $283 million, or 35.6 percent of
sales, versus $220 million in the prior year. Second quarter 2003 included $3
million of impairment charges related to the company's restructuring
Page 5 of 16
initiatives. Aside from such costs, gross margin was 34.3 percent last year.
Thus an improvement of 130bps was realized, attributable to the carryover
benefit of 2003 restructuring programs, volume leverage, the inclusion of
higher-margin acquired businesses and favorable pricing and product mix. These
benefits were offset to a significant degree by higher steel costs and other
inflation.
Selling, general and administrative ("SG&A") expenses from continuing operations
were $177 million (22.3 percent of sales). Aside from $20 million of costs
relating primarily to the exiting of Mac Direct, prior year SG&A expenses were
$149 million, or 22.9 percent of sales; thus an improvement of 60bps was
realized. Businesses acquired in 2004 accounted for $15 million of the $28
million increase in SG&A expenses and the remainder of the business portfolio
increased SG&A spending levels by 8 percent in connection with the 13 percent
organic sales increase and increased funding for brand support.
Operating income was $105 million versus $74 million last year and operating
margins were 13.3 percent versus 11.4 percent last year, excluding prior year
impairment charges and other exit costs referred to above.
Other-net expenses of $10 million, versus $7 million excluding charges last
year, increased principally due to $3 million of unfavorable currency impact and
$3 million of incremental amortization of acquired intangibles, partially offset
by other items.
The effective income tax rate on continuing operations was 29 percent versus 31
percent on income excluding charges in the same quarter last year and 31 percent
in the first quarter of 2004. This reflects a reduction in the year-to-date tax
rate to 30 percent due to increased earnings in foreign locations, a recent
favorable tax law change in a foreign country and other tax planning activities.
In the second quarter of 2004, Consumer Products sales increased 15 percent to
$298 million, due to the aforementioned strength in home center and mass
merchant channels in the U.S. and favorable currency impacts in Europe. Pricing
represented 2 percent of the sales increase, currency 3 percent and volume 10
percent. Operating margin was 13.6 percent versus 12.0 percent excluding charges
last year, due primarily to favorable price, mix and operating leverage from
higher sales volumes.
Industrial Tools sales increased 16 percent to $322 million. Excluding
CST/Berger, acquired in the first quarter, Industrial Tools organic sales
increased 11 percent to $306 million. Pricing represented 4 percent of the sales
increase, currency 1 percent and volume 6 percent. Market conditions and strong
execution in a number of the business units - including fastening systems,
industrial mechanics tools, assembly technologies and hydraulic tools - brought
about the improvement. Mac Tools revenues were down slightly, as traditional
distributor additions and higher route average sales nearly offset the
anticipated decline from last year's Mac Direct exit. Exclusive of impairment
charges and exit costs incurred in the prior year, second quarter Industrial
Page 6 of 16
Tools operating margin improved to 11.4 percent vs. 7.2 percent in 2003 due to
higher volume, substantial improvement in the margin performances of Mac Tools
and industrial mechanics tools (i.e., Proto), as well as the inclusion of
CST/Berger.
Security Solutions sales increased 50 percent to $175 million. Excluding Blick
plc and Frisco Bay Industries, acquired in the first quarter, Security Solutions
organic sales increased 15 percent to $134 million, on exceptional strength in
the supply and service of automatic commercial door systems in Access
Technologies. In addition, Best Access Systems delivered 5 percent organic sales
volume growth. Operating margin decreased to 16.2 percent versus 20.0 percent
excluding charges last year, due to the inclusion of acquired businesses,
overall business mix, commodity inflation and negative field productivity
related partially to a change in the geographic mix of the business.
Operating cash flow was $91 million in the second quarter, a 42 percent increase
over 2003, as working capital levels were closely managed during this period of
strong sales volume growth. Free cash flow before dividends (cash from
operations less capital expenditures) was $78 million vs. $56 million last year,
a 39 percent increase, reflecting the cash flow from operations and continued
effective management of capital expenditures. On a year-to-date basis, operating
cash flow of $143 million and free cash flow of $122 million are 23 percent and
21 percent ahead of 2003, respectively.
On December 18, 2003, the company announced that it was evaluating the sale of
as much as $175 million of equity-linked securities as a possible longer-term
funding alternative for recent acquisitions. Citing recent free cash flow levels
and a continued commitment to divest non-core activities, management announced
today that the sale of equity-linked securities will not be required at this
time. James M. Loree, Executive Vice President and Chief Financial Officer,
stated: "The $122 million of free cash flow realized in the first half of the
year leads us to expect that our total year free cash flow is likely to be at
the upper end of our previously estimated range of $250-$300 million. This, in
combination with the potential for the near-term divestiture of certain small
non-core activities, should enable us to achieve our desired leverage levels
without the potentially-higher dilutive effects of equity-linked securities."
Management also updated earnings estimates for 2004, projecting total sales
growth of 18-20 percent and organic sales growth, aside from effects of
acquisition and divestiture activity, of 8-10 percent in the third quarter of
2004. For the full year 2004, total sales growth of approximately 18 percent,
including organic sales growth of approximately 10 percent, are projected.
The company continues to experience a significant impact from extraordinarily
high levels of input cost inflation (particularly steel) and continues the
active pursuit of price increases. The effect of commodity inflation, including
freight increases, is now expected to total $70-80 million in the year 2004, of
which approximately two-thirds is expected to be offset with related price
increases.
Page 7 of 16
Based on these sales and material cost inflation outlooks, the company expects
third quarter 2004 earnings from continuing operations of approximately 70 cents
per fully diluted share, versus 46 cents earned last year, and up approximately
17 percent over 60 cents per share earned last year from continuing operations
on a basis excluding charges.
Management reaffirmed its previous full year 2004 earnings guidance, indicating
that income from continuing operations is expected to approximate $2.75-$2.85
per fully diluted share versus $1.14 earned last year, and up 30-35 percent over
$2.10 per share earned from continuing operations last year on a basis excluding
charges.
Mr. Lundgren added: "This solid second quarter performance - together with the
strong first quarter results we previously reported - positions us to achieve
the revenue and earnings growth levels we've projected for the full year,
despite the inflationary environment in which we are operating. In addition, the
strength of our business portfolio leads us to expect 3-5 percent organic
revenue growth and double-digit percentage earnings growth in the year 2005."
The company has scheduled a conference call with investors for 11:00 am EDT
Tuesday, July 27, 2004 to discuss the information in this release. The call is
accessible by telephone at (800) 267-8424 and via the Internet at
www.stanleyworks.com by selecting "Investor Relations". A replay will also be
available two hours after the call and can be accessed at (800) 642-1687 by
entering the conference identification number 8428206.
Prior-year reported earnings within this release were supplemented with related
amounts and percentages that excluded restructuring costs, impairment charges
and other exit costs. Management believes these supplemental financial measures
provide useful information by removing the effect of variances in reported
results that, at that time, were not indicative of fundamental changes in the
company's earnings capacity. Full reconciliations with reported amounts are
included on pages 11-12.
The Stanley Works, an S&P 500 company, is a worldwide supplier of consumer
products, industrial tools and security solutions for professional, industrial
and consumer use. More information about The Stanley Works can be found at
http://www.stanleyworks.com.
Contact: Gerry Gould, V. P. - Investor Relations
(860) 827-3833 or ggould@stanleyworks.com
The Stanley Works corporate press releases are available on the company's
Internet web site at http://www.stanleyworks.com.
Page 8 of 16
CAUTIONARY STATEMENTS
Under the Private Securities Litigation Reform Act of 1995
Statements in the company's press release attached to this Current Report on
Form 8-K regarding the company's ability to (i) achieve full year 2004 free cash
flow in the upper end of $250-$300 million; (ii) divest certain small non-core
activities; (iii) achieved desired leverage levels; (iv) achieve third quarter
2004 sales growth of 18-20 percent (8-10 percent organic) and full year 2004
sales growth of approximately 18 percent (10 percent organic); (v) pursue and
achieve price increases and limit the effects of commodity inflation to $70-$80
million; (vi) achieve third quarter 2004 earnings from continuing operations of
approximately 70 cents per fully diluted share and full year 2004 earnings from
continuing operations of $2.75-$2.85 per fully diluted share; and (vii) achieve
3-5 percent organic revenue growth and double digit percentage earnings growth
in 2005 are forward looking and inherently subject to risk and uncertainty.
The company's ability to deliver the results as described above (the "Results")
is based on current expectations and involves inherent risks and uncertainties,
including factors listed below and other factors that could delay, divert, or
change any of them, and could cause actual outcomes and results to differ
materially from current expectations.
The company's ability to deliver the Results is dependent upon (i) the success
of the Company in integrating its recently announced acquisitions; (ii) the
success of the company's efforts to raise prices in order to, among other
things, offset the impact of steel and other commodity and material price
inflation; (iii) the need to respond to significant changes in product demand
due to economic and other changes; and (iv) continued improvements in
productivity and cost reductions.
The company's ability to deliver the Results is also dependent upon (i) the
continued success of the company's marketing and sales efforts, including the
company's ability to recruit and retain an adequate sales force; (ii) the
continued success of The Home Depot, Lowe's and Wal-Mart sales initiatives as
well as other programs to stimulate demand for company products; (iii) the
success of recruiting programs and other efforts to maintain or expand overall
Mac Tools truck count versus prior years; (iv) the ability of the company to
fulfill increasing demand for its products; (v) the ability to continue
successfully managing and defending claims and litigation; and (vi) the absence
or mitigation of increased pricing pressures from customers and competitors and
the ability to defend market share in the face of price competition.
The company's ability to achieve the Results will also be affected by external
factors. These external factors may include pricing pressure and other changes
within competitive markets, the continued consolidation of customers in consumer
channels, inventory management pressures on the company's customers, increasing
competition, changes in trade, monetary, tax and fiscal policies and laws,
inflation, currency exchange fluctuations, the impact of dollar/foreign currency
Page 9 of 16
exchange and interest rates on the competitiveness of products and the company's
debt program, the strength of the U.S. Economy and the impact of events that
cause or may cause disruption in the company's distribution and sales networks
such as war, terrorist activities, political unrest and recessionary or
expansive trends in the economies of the world in which the company operates.
The company undertakes no obligation to publicly update or revise any
forward-looking statements to reflect events or circumstances that may arise
after the date hereof.
Page 10 of 16
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, Millions of Dollars Except Per Share Amounts)
Second Quarter Year to Date
-------------------- ---------------------
2004 2003 2004 2003
--------- --------- --------- ---------
NET SALES $ 794.7 $ 652.6 $ 1,573.3 $ 1,284.8
COSTS AND EXPENSES
Cost of sales 511.8 432.2 1,011.0 851.0
Selling, general and administrative 177.5 169.0 350.0 336.8
Interest - net 8.6 6.6 16.6 14.4
Other - net 10.3 10.1 24.4 17.5
Restructuring charges and
asset impairments - 21.9 - 25.0
--------- --------- --------- ---------
708.2 639.8 1,402.0 1,244.7
--------- --------- --------- ---------
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 86.5 12.8 171.3 40.1
Income taxes 25.1 3.5 51.4 11.8
--------- --------- --------- ---------
NET EARNINGS FROM CONTINUING
OPERATIONS $ 61.4 $ 9.3 $ 119.9 $ 28.3
========= ========= ========= =========
Earnings from discontinued operations (including
gain on disposal of $142.7 million) - 5.1 142.6 5.3
Income taxes on discontinued operations - 2.0 47.6 2.0
--------- --------- --------- ---------
NET EARNINGS FROM DISCONTINUED OPERATIONS - 3.1 95.0 3.3
--------- --------- --------- ---------
NET EARNINGS $ 61.4 $ 12.4 $ 214.9 $ 31.6
========= ========= ========= =========
BASIC EARNINGS PER SHARE OF COMMON STOCK
Continuing operations $ 0.75 $ 0.11 $ 1.47 $ 0.33
Discontinued operations - 0.04 1.16 0.04
--------- --------- --------- ---------
TOTAL basic earnings per share
of common stock $ 0.75 $ 0.14 $ 2.63 $ 0.37
DILUTED EARNINGS PER SHARE OF COMMON STOCK
Continuing operations $ 0.73 $ 0.11 $ 1.43 $ 0.33
Discontinued Operations - 0.04 1.13 0.04
--------- --------- --------- ---------
TOTAL diluted earnings per share
of common stock $ 0.73 $ 0.14 $ 2.57 $ 0.36
DIVIDENDS PER SHARE $ 0.26 $ 0.26 $ 0.52 $ 0.51
========= ========= ========= =========
AVERAGE SHARES OUTSTANDING (in thousands)
Basic 81,940 85,555 81,777 86,407
========= ========= ========= =========
Diluted 84,112 86,002 83,763 86,988
========= ========= ========= =========
Page 11 of 16
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited, Millions of Dollars)
July 3, 2004 January 3, 2004
------------ ---------------
ASSETS
Cash and cash equivalents $ 235.7 $ 204.4
Accounts receivable 571.7 482.4
Inventories 394.7 377.1
Other current assets 86.5 98.9
Assets held for sale 2.9 37.9
--------- ---------
TOTAL current assets 1,291.5 1,200.7
--------- ---------
Property, plant and equipment 413.7 413.3
Goodwill and other intangibles 891.6 643.3
Other assets 197.1 166.5
--------- ---------
$ 2,793.9 $ 2,423.8
========= =========
LIABILITIES AND SHAREOWNERS' EQUITY
Short-term borrowings and current maturities $ 271.2 $ 157.7
Accounts payable 285.0 240.2
Accrued expenses 375.7 326.4
Liabilities held for sale - 29.2
--------- ---------
TOTAL current liabilities 931.9 753.5
--------- ---------
Long-term debt 516.6 534.5
Other long-term liabilities 304.3 277.2
Shareowners' equity 1,041.1 858.6
--------- ---------
$ 2,793.9 $ 2,423.8
========= =========
Page 12 of 16
THE STANLEY WORKS AND SUBSIDIARIES
SUMMARY OF CASH FLOW ACTIVITY
(Unaudited, Millions of Dollars)
Second Quarter Year to Date
-------------- --------------
2004 2003 2004 2003
------ ------ ------ ------
OPERATING ACTIVITIES
Net earnings $ 61.4 $ 12.4 $214.9 $ 31.6
Depreciation and amortization 22.7 21.9 47.1 44.5
Restructuring charge and asset impairments - 21.9 - 25.0
Changes in working capital 2.9 (25.6) (13.0) (46.1)
Other 3.9 33.5 (106.0) 60.8
------ ------ ------ ------
Net cash provided by operating activities 90.9 64.1 143.0 115.8
INVESTING AND FINANCING ACTIVITIES
Capital and software expenditures (12.9) (7.8) (21.1) (15.3)
Proceeds (taxes paid) from sale of business (21.9) - 140.0 -
Business acquisitions (4.4) - (254.5) (16.4)
Cash dividends on common stock (21.2) (21.8) (42.4) (44.0)
Other 12.7 (62.8) 66.3 (34.1)
------ ------ ------ ------
Net cash used in investing and
Financing activities (47.7) (92.4) (111.7) (109.8)
Increase (Decrease) in Cash and Cash Equivalents 43.2 (28.3) 31.3 6.0
Cash and Cash Equivalents, Beginning of Period 192.5 156.0 204.4 121.7
------ ------ ------ ------
Cash and Cash Equivalents, End of Period $235.7 $127.7 $235.7 $127.7
====== ====== ====== ======
Free Cash Flow Computation
--------------------------
Operating cash flow $ 90.9 $ 64.1 $143.0 $115.8
Less: capital and software expenditures (12.9) (7.8) (21.1) (15.3)
------ ------ ------ ------
Free cash flow from operations
(before dividends) $ 78.0 $ 56.3 $121.9 $100.5
====== ====== ====== ======
Free cash flow is defined as cash flow from operations less capital 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.
Page 13 of 16
THE STANLEY WORKS AND SUBSIDIARIES
BUSINESS SEGMENT INFORMATION
(Unaudited, Millions of Dollars)
Second Quarter Year to Date
-------------------- --------------------
2004 2003 2004 2003
--------- --------- --------- ---------
BUSINESS SEGMENTS
Net Sales
Consumer products $ 298.3 $ 259.7 $ 604.3 $ 512.9
Industrial tools 321.5 276.4 637.5 547.9
Security Solutions 174.9 116.5 331.5 224.0
--------- --------- --------- ---------
Consolidated $ 794.7 $ 652.6 $ 1,573.3 $ 1,284.8
========= ========= ========= =========
Operating Profit (Loss)
Consumer products $ 40.5 $ 27.6 $ 88.5 $ 59.4
Industrial tools 36.5 1.7 66.6 (1.0)
Security Solutions 28.4 22.1 57.2 38.6
--------- --------- --------- ---------
Consolidated $ 105.4 $ 51.4 $ 212.3 $ 97.0
========= ========= ========= =========
Page 14 of 16
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND BUSINESS SEGMENT INFORMATION
RECONCILIATION TO GAAP EARNINGS
SECOND QUARTER 2004 vs. 2003
(Unaudited, Millions of Dollars Except Per Share Amounts)
2004 2003
-------- -----------------------------
(a)
Excluding
Reported Charges Charges Reported
-------- --------- ------- --------
Net sales $ 794.7 $ 652.6 $ - $ 652.6
Cost of sales 511.8 428.8 3.4 432.2
------- ------- ------- -------
Gross Margin 282.9 223.8 (3.4) 220.4
35.6% 34.3% 33.8%
Selling, general and administrative 177.5 149.4 19.6 169.0
------- ------- ------- -------
22.3% 22.9% 25.9%
Subtotal 105.4 74.4 (23.0) 51.4
13.3% 11.4% 7.9%
Interest, net 8.6 6.6 - 6.6
Other, net 10.3 7.1 3.0 10.1
Restructuring charges and asset impairments - - 21.9 21.9
------- ------- ------- -------
Earnings from continuing operations
before income taxes 86.5 60.7 (47.9) 12.8
Income taxes 25.1 19.0 (15.5) 3.5
------- ------- ------- -------
29.0% 31.3% 27.3%
Net earnings from continuing operations $ 61.4 $ 41.7 $ (32.4) $ 9.3
Earnings from discontinued operations - 5.1 - 5.1
Income taxes on discontinued operations - 2.0 - 2.0
------- ------- ------- -------
Net earnings from discontinued operations - 3.1 - 3.1
Net earnings $ 61.4 $ 44.8 $ (32.4) $ 12.4
======= ======= ======= =======
Average shares outstanding
(diluted, in thousands) 84,112 86,002 86,002 86,002
Earnings per share (diluted) $ 0.73 $ 0.52 $ (0.38) $ 0.14
======= ======= ======= =======
BUSINESS SEGMENTS
Net Sales
Consumer products $ 298.3 $ 259.7 $ - $ 259.7
Industrial tools 321.5 276.4 - 276.4
Security Solutions 174.9 116.5 - 116.5
------- ------- ------- -------
Consolidated $ 794.7 $ 652.6 $ - $ 652.6
======= ======= ======= =======
Operating Profit
Consumer products $ 40.5 $ 31.1 $ (3.5) $ 27.6
Industrial tools 36.5 20.0 (18.3) 1.7
Security Solutions 28.4 23.3 (1.2) 22.1
------- ------- ------- -------
Consolidated $ 105.4 $ 74.4 $ (23.0) $ 51.4
------- ------- ------- -------
Interest, net 8.6 6.6 - 6.6
Other, net 10.3 7.1 3.0 10.1
Restructuring and asset impairment charges - - 21.9 21.9
------- ------- ------- -------
Net earnings from continuing
operations before income taxes $ 86.5 $ 60.7 $ (47.9) $ 12.8
======= ======= ======= =======
(a) Includes Operation 15 restructuring costs, asset impairment charges, other
exit costs, and CEO retirement costs. Aggregate charges of $27.9 million arising
from the exit of the Mac Direct retail channel are classified as follows: Cost
of sales - $3.4 million; SG&A - $11.4 million; Other, net - $3.0 million;
Restructuring and asset impairment charges - $10.1 million. In addition, SG&A
reflects $7.5 million in compensation and benefit costs associated with the
former CEO's announced retirement plans. The $11.8 million in remaining
restructuring and asset impairment charges is mainly attributable to severance
and related benefits for headcount reductions pertaining to other Operation 15
initiatives.
Page 15 of 16
THE STANLEY WORKS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND BUSINESS SEGMENT INFORMATION
RECONCILIATION TO GAAP EARNINGS
YEAR 2004 vs. 2003
(Unaudited, Millions of Dollars Except Per Share Amounts)
2004 2003
--------- ------------------------------
(a)
Excluding
Reported Charges Charges Reported
--------- --------- ------- ---------
Net sales $ 1,573.3 $ 1,284.8 $ - $ 1,284.8
Cost of sales 1,011.0 844.0 7.0 851.0
--------- --------- ------- ---------
Gross Margin 562.3 440.8 (7.0) 433.8
35.7% 34.3% 33.8%
Selling, general and administrative 350.0 307.0 29.8 336.8
--------- --------- ------- ---------
22.2% 23.9% 26.2%
Subtotal 212.3 133.8 (36.8) 97.0
13.5% 10.4% 7.5%
Interest, net 16.6 14.4 - 14.4
Other, net 24.4 14.5 3.0 17.5
Restructuring charges and asset impairments - - 25.0 25.0
--------- --------- ------- ---------
Earnings from continuing operations
before income taxes 171.3 104.9 (64.8) 40.1
Income taxes 51.4 32.5 (20.7) 11.8
--------- --------- ------- ---------
30.0% 31.0% 29.4%
Net earnings from continuing
operations $ 119.9 $ 72.4 $ (44.1) $ 28.3
Earnings from discontinued operations 142.6 5.3 - 5.3
Income taxes on discontinued operations 47.6 2.0 - 2.0
--------- --------- ------- ---------
Net earnings from discontinued operations 95.0 3.3 - 3.3
Net earnings $ 214.9 $ 75.7 $ (44.1) $ 31.6
========= ========= ======= =========
Average shares outstanding
(diluted, in thousands) 83,763 86,988 86,988 86,988
Earnings per share (diluted) $ 2.57 $ 0.87 $ (0.51) $ 0.36
========= ========= ======= =========
BUSINESS SEGMENTS
Net Sales
Consumer products $ 604.3 $ 512.9 $ - $ 512.9
Industrial tools 637.5 547.9 - 547.9
Security Solutions 331.5 224.0 - 224.0
--------- --------- ------- ---------
Consolidated $ 1,573.3 $ 1,284.8 $ - $ 1,284.8
========= ========= ======= =========
Operating Profit (Loss)
Consumer products $ 88.5 $ 62.9 $ (3.5) $ 59.4
Industrial tools 66.6 31.1 (32.1) (1.0)
Security Solutions 57.2 39.8 (1.2) 38.6
--------- --------- ------- ---------
Consolidated $ 212.3 $ 133.8 $ (36.8) $ 97.0
--------- --------- ------- ---------
Interest, net 16.6 14.4 - 14.4
Other, net 24.4 14.5 3.0 17.5
Restructuring and asset impairment charges - - 25.0 25.0
--------- --------- ------- ---------
Net earnings from continuing
operations before income taxes $ 171.3 $ 104.9 $ (64.8) $ 40.1
========= ========= ======= =========
(a) Includes Operation 15 restructuring costs, asset impairment charges, other
exit costs, and CEO retirement costs. Aggregate charges of $41.7 arising from
the exit of the Mac Direct retail channel are classified as follows: Cost of
sales - $7.0 million; SG&A - $21.6 million; Other, net - $3.0 million;
Restructuring and asset impairment charges - $10.1 million. In addition, SG&A
reflects $7.5 million in compensation and benefit costs associated with the
former CEO's announced retirement plans. The $14.9 million in remaining
restructuring and asset impairment charges is mainly attributable to severance
and related benefits for headcount reductions pertaining to other Operation 15
initiatives.
Page 16 of 16