UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K/A #2
(Mark One)
(X)Annual Report pursuant to Section 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 2001
or
( ) Transition Report Pursuant to Section 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______ to _______
Commission file number 1-5224
Stanley Account Value Plan
------------------------------------------------------
(Full title of the plan)
The Stanley Works
1000 Stanley Drive
New Britain, Connecticut 06053
------------------------------------------------------
(Name of issuer of the securities held pursuant to the plan
and the address of its principal executive offices
The Stanley Account Value Plan (the "Plan") hereby amends its Annual
Report for the Year Ended December 31, 2001 on Form 11-K to update Footnote 1.
Description of the Plan. The purpose of the amendment is to describe more
accurately the terms of the Plan, including the discussion of voting rights with
respect to shares of The Stanley Works held by participants in the Plan.
Stanley Account Value Plan
Audited Financial Statements
and Supplemental Schedules
Years ended December 31, 2001 and 2000
CONTENTS
Report of Independent Auditors................................................1
Audited Financial Statements
Statement of Net Assets Available for Benefits at December 31, 2001...........2
Statement of Net Assets Available for Benefits at December 31, 2000...........3
Statement of Changes in Net Assets Available for Benefits for the
Year Ended December 31, 2001..............................................4
Statement of Changes in Net Assets Available for Benefits for the
Year Ended December 31, 2000..............................................5
Notes to Financial Statements.................................................6
Supplemental Schedules
Schedule H, Line 4(i)--Schedule of Assets (Held At End of Year)..............12
Schedule H, Line 4(j)--Schedule of Reportable Transactions...................13
Report of Independent Auditors
Finance and Pension Committee of The Board of Directors
The Stanley Works
We have audited the accompanying statements of net assets available for benefits
of the Stanley Account Value Plan as of December 31, 2001 and 2000, and the
related statements of changes in net assets available for benefits for the years
then ended. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 2001 and 2000, and the changes in net assets available for benefits
for the years then ended, in conformity with accounting principles generally
accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
(held at end of year) as of December 31, 2001, and reportable transactions for
the year then ended, are presented for purposes of additional analysis and are
not a required part of the financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. These supplemental schedules are the responsibility of the Plan's
management. The supplemental schedules have been subjected to the auditing
procedures applied in our audits of the financial statements and, in our
opinion, are fairly stated in all material respects in relation to the financial
statements taken as a whole.
/s/ Ernst & Young LLP
Hartford, Connecticut
June 25, 2002
Stanley Account Value Plan
Statement of Net Assets Available for Benefits
December 31, 2001
UNALLOCATED
STANLEY STOCK CORNERSTONE STANLEY STOCK MUTUAL
FUND LOAN FUND FUND FUND FUNDS TOTAL
---- --------- ----------- ------------- ----- -----
ASSETS
Investments, at current market value:
The Stanley Works Common Stock:
89,761 shares (cost $1,448,234) $4,180,170 $4,180,170
6,017,356 shares
(cost $166,704,171) $280,228,269 280,228,269
7,637,039 shares
(cost $133,113,081) $355,656,906 355,656,906
Short-term investments 2,122,068 1,776,109 34,293 $9,281 3,941,751
Mutual Funds 23,954,928 19,886,848 43,841,776
------------ ----------- ------------ ----------- ------------
282,350,337 29,911,207 355,691,199 19,896,129 687,848,872
Cash 3,297,266 119,734 (6,643) 6,643 3,417,000
Contributions receivable 5,716,603 5,716,603
Dividends and interest receivable 2,918 575,098 148 77,737 655,901
Debt issuance costs, net of
accumulated amortization of
$330,327 2,501,050 2,501,050
Loans to participants 6,839,274 6,839,274
------------ ---------- ----------- ------------ ----------- ------------
$285,650,521 $6,959,008 $36,196,265 $358,192,397 $19,980,509 $706,978,700
============ ========== =========== ============ =========== ============
LIABILITIES
Liabilities:
Debt $187,736,600 $187,736,600
Accounts payable $525,589 $174,794 700,383
----------- ------------ ----------- ------------
525,589 187,736,600 174,794 188,436,983
Net assets available for benefits $285,650,521 $6,959,008 35,670,676 170,455,797 19,805,715 518,541,717
------------ ---------- ----------- ------------ ----------- ------------
$285,650,521 $6,959,008 $36,196,265 $358,192,397 $19,980,509 $706,978,700
============ ========== =========== ============ =========== ============
See accompanying notes.
2
Stanley Account Value Plan
Statement of Net Assets Available for Benefits
December 31, 2000
UNALLOCATED
STANLEY STOCK CORNERSTONE STANLEY STOCK MUTUAL
FUND LOAN FUND FUND FUND FUNDS TOTAL
---- --------- ----------- ------------- ----- -----
ASSETS
Investments, at current market value:
The Stanley Works Common Stock:
68,402 shares (cost $1,096,439) $ 2,133,322 $ 2,133,322
7,236,426 shares
(cost $151,677,907) $225,689,654 225,689,654
8,129,686 shares
(cost $141,026,106) $253,548,287 253,548,287
Short-term investments 1,831,359 1,863,331 5,490 $ 9,740 3,709,920
Mutual Funds 18,607,094 17,018,314 35,625,408
-------------- -------------- -------------- -------------- ------------
227,521,013 22,603,747 253,553,777 17,028,054 520,706,591
Cash 1,224,843 $ 82,780 1,307,623
Contributions receivable 13,557,664 13,557,664
Dividends and interest receivable 7,888 540,184 1,079 30,872 580,023
Debt issuance costs, net of
accumulated amortization
of $235,948 2,595,430 2,595,430
Loans to participants 8,000,490 8,000,490
-------------- -------------- -------------- -------------- -------------- ------------
$228,753,744 $8,083,270 $36,701,595 $256,150,286 $17,058,926 $546,747,821
============== ============== ============== ============== ============== ============
LIABILITIES
Liabilities:
Debt $194,836,244 $194,836,244
Accounts payable $ 506,635 $ 102,563 609,198
-------------- -------------- -------------- ------------
506,635 194,836,244 102,563 195,445,442
Net assets available for benefits $228,753,744 $8,083,270 $36,194,960 61,314,042 16,956,363 351,302,379
-------------- -------------- -------------- -------------- -------------- ------------
$228,753,744 $8,083,270 $36,701,595 $256,150,286 $17,058,926 $546,747,821
============== ============== ============== ============== ============== ============
See accompanying notes.
3
Stanley Account Value Plan
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2001
UNALLOCATED
STANLEY STOCK CORNERSTONE FUND STANLEY STOCK
FUND LOAN FUND FUND
------------------ ----------------- ------------------ ------------------
ADDITIONS
Investment income:
Dividends $ 6,166,824 $ 55,023 $ 7,407,669
Interest 79,873 44,600 23,183
------------------ ------------------ ------------------
6,246,697 99,623 7,430,852
Net appreciation (depreciation) 96,574,945 5,664,875 110,031,252
Employee contributions 6,891,338
Employer contribution 3,254,644 10,568,534
DEDUCTIONS
Withdrawals (74,360,737)
Administrative expenses (107,686) (74,468)
Amortization expense (94,379)
Interest expense (11,662,059)
Interfund transfers - net 18,397,576 $ (1,124,262) (16,782,848) 3,436,089
------------------ ----------------- ------------------ ------------------
Net increase (decrease) 56,896,777 (1,124,262) (524,284) 109,141,755
Net assets available for benefits at beginning of
year 228,753,744 8,083,270 36,194,960 61,314,042
------------------ ----------------- ------------------ ------------------
Net assets available for benefits at end of year $ 285,650,521 $ 6,959,008 $ 35,670,676 $ 170,455,797
================== ================= ================== ==================
MUTUAL FUNDS TOTAL
------------------ -------------------
ADDITIONS
Investment income:
Dividends $ 350,991 $ 13,980,507
Interest 417 148,073
------------------ -------------------
351,408 14,128,580
Net appreciation (depreciation) (1,271,534) 210,999,538
Employee contributions 7,757,378 14,648,716
Employer contribution 13,823,178
DEDUCTIONS
Withdrawals (74,360,737)
Administrative expenses (61,345) (243,499)
Amortization expense (94,379)
Interest expense (11,662,059)
Interfund transfers - net (3,926,555)
------------------ -------------------
Net increase (decrease) 2,849,352 167,239,338
Net assets available for benefits at beginning of
year 16,956,363 351,302,379
------------------ -------------------
Net assets available for benefits at end of year $ 19,805,715 $ 518,541,717
================== ===================
See accompanying notes.
4
Stanley Account Value Plan
Statement of Changes in Net Assets Available for Benefits
Year ended December 31, 2000
UNALLOCATED
STANLEY STOCK CORNERSTONE FUND STANLEY STOCK
FUND LOAN FUND FUND
------------------ ----------------- ------------------ ------------------
ADDITIONS
Investment income:
Dividends $ 5,040,212 $ 1,711,552 $ 7,536,145
Interest 102,864 $ 28,889 75,391 1,742
------------------ ----------------- ------------------ ------------------
5,143,076 28,889 1,786,943 7,537,887
Net realized and unrealized appreciation
(depreciation) 4,896,909 (3,262,247) 1,350,045
Employee contributions 9,124,783
Employer contribution 4,633,497 20,724,584
DEDUCTIONS
Withdrawals (42,538,567)
Administrative expenses (248,437) (74) (93,964)
Amortization expense (94,379)
Interest expense (12,103,340)
Interfund transfers - net 8,684,765 (1,677,290) (9,054,012) 3,697,880
------------------ ----------------- ------------------ ------------------
Net increase (decrease) (10,303,974) (1,648,475) 10,101,304 388,093
Net assets available for benefits at beginning of
year 239,057,718 9,731,745 26,093,656 60,925,949
------------------ ----------------- ------------------ ------------------
Net assets available for benefits at end of year $ 228,753,744 $ 8,083,270 $ 36,194,960 $ 61,314,042
================== ================= ================== ==================
MUTUAL FUNDS TOTAL
------------------ -------------------
ADDITIONS
Investment income:
Dividends $ 197,942 $ 14,485,851
Interest 302,106 510,992
------------------ -------------------
500,048 14,996,843
Net realized and unrealized appreciation
(depreciation) (1,482,965) 1,501,742
Employee contributions 8,424,265 17,549,048
Employer contribution 25,358,081
DEDUCTIONS
Withdrawals (42,538,567)
Administrative expenses (52,542) (395,017)
Amortization expense (94,379)
Interest expense (12,103,340)
Interfund transfers - net (1,651,343) -
------------------ -------------------
Net increase (decrease) 5,737,463 4,274,411
Net assets available for benefits at beginning of
year 11,218,900 347,027,968
------------------ -------------------
Net assets available for benefits at end of year $ 16,956,363 $ 351,302,379
================== ===================
See accompanying notes.
5
Stanley Account Value Plan
Notes to Financial Statements
December 31, 2001
1. DESCRIPTION OF THE PLAN
The Stanley Account Value Plan (the "Plan"), which operates as a leveraged
employee stock ownership plan, is designed to comply with Sections 401(a),
401(k) and 4975(e)(7) of the Internal Revenue Code of 1986, as amended, and is
subject to the applicable provisions of the Employee Retirement Income Security
Act of 1974, as amended. The Plan is a defined contribution plan for eligible
United States salaried and hourly paid employees of The Stanley Works and its
affiliates (the "Company").
Each year, subject to certain additional limitations participants may contribute
to the Plan, through pre-tax payroll deductions up to 15% of their compensation,
as defined in the Plan. Non-highly compensated employees have the option of
making after-tax contributions to the Plan. Pre-tax contributions are matched in
an amount equal to 50% of the participant's pre-tax contributions for a year up
to a maximum matching allocation of 3 1/2% of the participant's compensation for
the year. A participant's contributions and matching allocations are allocated
to a "Choice Account."
Prior to July 1, 1998, participant contributions were invested solely in common
stock of The Stanley Works. Effective July 1, 1998, post-June 30, 1998
participant contributions could be invested in four investment funds in addition
to The Stanley Works common stock. Effective April 1, 1999, a Stanley Stock
Fund, consisting primarily of shares of common stock of The Stanley Works, holds
the common stock of The Stanley Works that is offered as an investment under the
Plan. Participants may now invest their post-June 30, 1998 contributions in one
or more of the investment funds, including the Stanley Stock Fund, or choose one
of three pre-mixed blended investment options. All matching allocations and all
pre-July 1, 1998 participant contributions are invested exclusively in the
Stanley Stock Fund. Participants' pre-tax contributions made prior to July 1,
1998 are guaranteed while invested in the Stanley Stock Fund by the Pension Plan
for Hourly Paid Employees of The Stanley Works. (Prior to April 30, 2001, the
guarantee was provided for certain participants under The Stanley Works
Retirement Plan. Effective April 30, 2001, the guarantee is provided through the
Pension Plan for Hourly Paid Employees of The Stanley Works). This guarantee
provides that the investment return from the Stanley Stock Fund attributable to
pre-tax employee contributions will not be less than an investment return based
on two-year U.S. Treasury notes. For post-June 30, 1998 participant
contributions, the following investment funds are offered:
STANLEY STOCK FUND--Consists of common stock of The Stanley Works, along with a
minor portion in cash for transaction purposes. This stock is traded on the New
York and Pacific Stock Exchanges under the symbol SWK.
MUTUAL FUNDS
PYRAMID EQUITY INDEX FUND--Seeks long-term growth, subject to the short-term
fluctuations characteristic of the stock market. The fund invests in most of
the Standard & Poors 500 (S&P 500), as well as other investments whose value
is based on S&P 500 stocks.
INVESCO RETIREMENT TRUST STABLE VALUE FUND--Seeks liquidity and safety of
principal, while providing a higher return than is typically offered by
money market funds. The fund invests in a diversified portfolio of
investment contracts with insurance companies, banks and other financial
institutions.
6
Stanley Account Value Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
AMERICAN FUNDS EUROPACIFIC GROWTH FUND--Seeks long-term growth, subject to
the risks involved in investing outside of the United States, such as
currency fluctuations, political instability, differing securities
regulations and periods of liquidity.
FIDELITY SMALL CAP INDEPENDENCE FUND--Seeks long-term growth, subject to the
short-term fluctuations characteristic of the small stock market. The fund
invests in securities of small capitalization companies in various
industries.
CORNERSTONE FUND
In 1998, the Plan was amended to provide an additional allocation for eligible
U.S. salaried and non-union hourly employees ("Cornerstone Fund"). No employees
of Contact East, Inc. and no employees who are accruing a benefit under the
Pension Plan for Hourly Paid Employees of The Stanley Works are eligible for
Cornerstone Fund allocations. Under this arrangement, eligible participants
currently receive allocations to Cornerstone Accounts of amounts ranging from 3%
to 9% of compensation depending upon age. Additional Cornerstone Fund
allocations are required for active participants who were covered under The
Stanley Works Retirement Plan on January 31, 1998. The amount of this additional
allocation is a percentage of pay based on age and service as set forth in the
Plan. Also, certain additional funds may be allocated to Cornerstone Accounts in
a particular year for designated groups of participants. Assets of the
Cornerstone Fund are invested in professionally managed diversified investment
funds.
Employees are fully vested as to amounts in their accounts attributable to
their own contributions and earnings thereon and amounts transferred from other
qualified plans on their behalf. All participants are vested in 100% of the
value of the matching allocations and Cornerstone Fund allocations made on their
behalf once they have completed 5 years of service with no vesting in the
matching allocations and Cornerstone Fund allocations until completion of 5
years of service.
Benefits generally are distributed upon termination of employment. Normally, a
lump-sum distribution is made in cash or shares of the Company's Common Stock
(hereinafter referred to as Common Stock, Stanley Stock, or shares), at the
election of the participant, from the Stanley Stock Fund.
During active employment, subject to financial hardship rules, participants may
withdraw a portion of vested amounts in their Choice Accounts.
7
Stanley Account Value Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
LOAN FUND
Participants may borrow from their Choice Accounts up to an aggregate amount
equal to the lesser of $50,000 or 50% of the value of their vested interest in
such accounts with a minimum loan of $1,000. The $50,000 loan amount limitation
is reduced by the participant's highest outstanding loan balance during the 12
months preceding the date the loan is made. Each loan is evidenced by a
negotiable promissory note bearing a rate of interest equal to the prime rate as
reported in The Wall Street Journal on the first business day of the month in
which the loan request is processed, which is payable, through payroll
deductions, over a term of not more than five years. Participants are allowed
ten years to repay the loan if the proceeds are used to purchase a principal
residence. Only one loan per participant may be outstanding at any time.
If a loan is outstanding at the time a distribution becomes payable to a
participant (or beneficiary), the distribution is made net of the loan
outstanding, and the distribution shall fully discharge the Plan with respect to
the participant's account value attributable to the outstanding loan balance.
UNALLOCATED STANLEY STOCK FUND
The Plan borrowed $95,000,000 in 1989 from a group of financial institutions and
$180,000,000 in 1991 from the Company (see Notes 3 and 4) to acquire 5,868,088
and 9,696,968 shares, respectively, of Common Stock from the Company's treasury
and previously unissued shares. The shares purchased from the proceeds of the
loans were placed in the Unallocated Stanley Stock Fund (the "Unallocated
Fund"). Under the 1989 loan agreement, the Company guaranteed the loan and is
obligated to make annual contributions sufficient to enable the Plan to repay
the loan plus interest.
Monthly transfers of shares of Stanley Stock are made from the Unallocated Fund
for allocation to participants based on the portion of principal and interest
paid under each loan for the month. Dividends received on allocated and
unallocated shares of Stanley Stock and employee and Company contributions are
used to make payments under the loans. If dividends on the allocated shares are
applied to the payment of debt service, a number of shares of Stanley Stock
having a fair market value at least equal to the amount of the dividends so
applied are allocated to the Choice Accounts of participants who would otherwise
have received cash dividends.
8
Stanley Account Value Plan
Notes to Financial Statements (continued)
1. DESCRIPTION OF THE PLAN (CONTINUED)
The fair market value of shares of Stanley Stock released from the Unallocated
Fund pursuant to loan repayments made during any year, along with contributions
made during that year that are not used to repay the loan may exceed the total
of employee contributions, matching allocations (other than allocations
attributable to forfeitures), Cornerstone Fund allocations (other than
allocations attributable to forfeitures) and cash dividends on allocated shares
of Stanley Stock applied to the payment of a loan for the year. If that occurs,
such excess value is allocated in shares of Stanley Stock among all non-union
participants who are employed by the Company on the last day of the year based
on relative compensation.
The trust agreement governing the Plan provides that the trustee will vote the
shares of Stanley Stock in the Stanley Stock Fund attributable to a
participant's Choice Account in the Plan in accordance with such participant's
directions. The trust agreement governing the Plan provides that, if the trustee
does not receive voting instructions with respect to shares of Stanley Stock in
the Stanley Stock Fund attributable to a participant's Choice Account in the
Plan, the trustee will vote such shares in the same proportion as it votes the
allocated shares for which instructions are received from Plan participants. The
trust agreement also provides that shares in the Unallocated Fund are to be
voted by the trustee in the same proportion as it votes the shares of Stanley
Stock in the Stanley Stock Fund attributable to Choice Accounts for which
instructions are received from Plan participants. Therefore, by providing voting
instructions with respect to shares of Stanley Stock in the Stanley Stock Fund
attributable to a participant's Choice Account in the Plan, a Plan participant
will in effect be providing instructions with respect to a portion of the shares
in the Unallocated Fund and a portion of the shares of Stanley Stock in the
Stanley Stock Fund attributable to Choice Accounts in the Plan for which
instructions were not provided as well. The foregoing provisions are subject to
applicable law which requires the trustee to act as a fiduciary for Plan
participants. Therefore, it is possible that the trustee may vote shares of
Stanley Stock in the Stanley Stock Fund attributable to Choice Accounts in the
Plan for which it does not receive instructions (as well as shares held in the
Unallocated Fund) in a manner other than the proportionate method described
above if it believes that proportionate voting would violate applicable law.
The Stanley Works reserves the right to terminate the Plan at any time. Upon
such termination of the Plan, the interest of each participant in the trust fund
will become vested and be distributed to such participant or his or her
beneficiary at the time prescribed by the Plan terms and the Internal Revenue
Code.
The Plan sponsor has engaged Hewitt Associates to maintain separate accounts for
each participant. Such accounts are credited with each participant's
contributions, matching allocations, Cornerstone Fund allocations, related
gains, losses, dividend income, and loan activity.
At December 31, 2001 and 2000, benefits payable to terminated vested
participants amounted to $3,360,480 and $1,201,101, respectively.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENTS
The Plan investments consist primarily of shares of Stanley Stock. Stanley Stock
is traded on a national exchange and is valued at the last reported sales price
on the last business day of the plan year. Mutual funds are stated at fair value
which equals the quoted market price on the last business day of the plan year.
Short-term investments consist of short-term bank-administered trust funds which
earn interest daily at rates approximating U.S. Government securities; cost
approximates market value.
The assets of the Plan are held in trust by an independent corporate trustee,
Citibank, N. A. (the "Trustee") pursuant to the terms of a written Trust
Agreement between the Trustee and the Company.
9
Stanley Account Value Plan
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that can affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
DIVIDEND INCOME
Dividend income is accrued on the ex-dividend date.
GAINS OR LOSSES ON SALES OF INVESTMENTS
Gains or losses realized on the sales of investments are determined based on
average cost.
EXPENSES
Administrative expenses not paid by the Plan are paid by the Company.
3. DEBT
Debt consisted of the following at December 31:
2001 2000
-------------------- --------------------
Notes payable in monthly installments to 2009 with interest
at 6.07% $ 22,510,763 $ 27,910,763
Notes payable to the Company in monthly installments to 2028
with interest at 6.09% 165,225,837 166,925,481
-------------------- --------------------
$ 187,736,600 $ 194,836,244
==================== ====================
During 1998, notes payable to financial institutions were refinanced, resulting
in a reduction in the interest rate, extension of the maturity and a prepayment
penalty of $2,831,378, which is being amortized over the remaining term of the
debt. Concurrently, notes payable to the Company were restructured, resulting in
a reduction in the interest rate and extension of the maturity. Additionally,
the Plan borrowed funds from the Company to pay the prepayment penalty.
10
Stanley Account Value Plan
Notes to Financial Statements (continued)
3. DEBT (CONTINUED)
The scheduled maturities of debt for the next five years are as follows:
2002--$6,900,000; 2003--$7,000,000; 2004--$6,900,000; 2005--$7,150,999; and
2006--$8,400,000.
The notes payable to the Company are secured by shares held in the Unallocated
Stock Fund. The number of shares held as security is reduced as shares are
released to Stanley Stock Fund pursuant to principal and interest payments.
During the year, 256,845 shares were released and at December 31, 2001,
7,120,955 shares are pledged as security.
Payment of the Plan's debt has been guaranteed by the Company. Should the
principal and interest due exceed the dividends paid on shares in the Stanley
Stock and Unallocated Stock Funds, and employee and Company matching
contributions, the Company is responsible for funding such shortfall.
4. TRANSACTIONS WITH PARTIES-IN-INTEREST
Fees paid during 2001 and 2000 for management and other services rendered by
parties-in-interest were based on customary and reasonable rates for such
services. The majority of such fees were paid by the Plan. Fees incurred and
paid by the Plan during 2001 and 2000 were $243,499 and $395,017, respectively.
In 1991, the Plan borrowed $180,000,000 from the Company, the proceeds of which
were used to purchase 9,696,968 shares of stock for the Plan. In 1998, the Plan
borrowed $2.8 million from the Company, the proceeds of which were used to pay a
prepayment penalty incurred in connection with debt refinancing. The Plan made
$10,119,808 and $11,921,749 of principal and interest payments related to such
debt in 2001 and 2000, respectively. At December 31, 2001, $165,225,837 was
outstanding on such debt.
5. INCOME TAX STATUS
The Internal Revenue Service has ruled that the Plan and the trust qualify under
Sections 401(a) and 401(k) of the Internal Revenue Code (IRC) and are therefore
not subject to tax under present income tax law. Once qualified, the Plan is
required to operate in accordance with the IRC to maintain its qualification.
The Pension Committee is not aware of any course of action or series of events
that have occurred that might adversely affect the Plan's qualified status.
11
Stanley Account Value Plan
Schedule H, Line 4(i)--Schedule of Assets (Held At End of Year)
EIN-06-0548860
December 31, 2001
DESCRIPTION OF INVESTMENT, INCLUDING
MATURITY DATE, RATE OF INTEREST, PAR
IDENTITY OF ISSUE, BORROWER, OR OR MATURITY VALUE
SIMILAR PARTY COST CURRENT VALUE
----------------------------------------------------------------------------------------------------------------------
Common Stock:
The Stanley Works* 13,744,156 shares of Common Stock; par
value $2.50 per share
$ 301,265,486 $ 640,065,345
Citibank, N.A.* Short-Term Investment Fund- Pooled
Bank Fund 3,941,751 3,941,751
Mutual Funds:
BT S&P Index Fund Pyramid Equity Index Fund 9,019,256 8,146,344
Invesco Retirement Trust Stable
Value Fund Invesco Retirement Trust 4,848,499 4,848,269
American Funds Euro Pacific
Growth Fund Euro Pacific Growth Fund 3,818,003 3,106,898
Fidelity Small Cap Independence Fidelity Select Small Capitalization
Fund Pool 3,467,811 3,785,337
BT Pyramid Russell 3000 Fund
Russell 300 Fund 19,408,418 16,768,347
BT Pyramid Broad Market Fixed
Income Fund Fixed Income Fund 5,785,893 7,186,581
----------------------------------------
Total investments 351,555,117 687,848,872
Loans to participants Promissory notes at prime rate with
maturities of five years or ten
years 6,839,274 6,839,274
----------------------------------------
Total $ 358,394,391 $ 694,688,146
========================================
*Indicates party-in-interest to the Plan.
12
Stanley Account Value Plan
Schedule H, 4(j)--Schedule of Reportable Transactions
EIN 06-0548860
Year ended December 31, 2001
CURRENT VALUE OF
ASSET ON
IDENTITY OF PARTY PURCHASE DESCRIPTION OF TRANSACTION DATE NET GAIN (LOSS)
INVOLVED ASSETS SELLING PRICE COST OF ASSET
------------------------------------------------------------------------------------------------------------------------
Category (iii) - Series of transactions in excess of 5 percent of plan assets
Citibank, N.A.* Short-Term Investment Fund-
United States
Government Securities $ 13,130,429 $ 13,130,429
Citibank, N.A.* Short-Term Investment Fund-
United States
Government Securities $ 47,437,680 26,741,825 47,437,680 $ 20,695,855
There were no category (i), (ii) or (iv) reportable transactions during 2001.
* Indicates party-in-interest to the Plan.
13
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Stanley Account Value Plan has duly caused this annual report to be signed on
its behalf by the undersigned hereto duly authorized.
The Stanley Works
Account Value Plan
Date: July 19, 2002 By: /s/ Mark Mathieu
------------------------
Mark Mathieu
Vice President, Human Resources
EXHIBIT 23
Consent of Independent Auditors
We consent to the use of our report dated June 25, 2002, included in the Annual
Report (Form 11-K) of The Stanley Works Account Value Plan for the year ended
December 31, 2001, with respect to the financial statements and schedules, as
amended, included in this Form 11-K/A #2.
/s/ Ernst & Young LLP
Hartford, Connecticut
July 18, 2002