-Page 6-

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

	FIRST QUARTER
	2007			2006
NET SALES	$	1,062.1		$	968.7
COSTS AND EXPENSES
Cost of sales		666.8			636.8
Selling, general and administrative		259.0			238.8
Interest-net		20.2			15.6
Other-net		19.9			19.3
Restructuring charges		4.0			7.3
		969.9			917.8
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES		92.2			50.9
Income taxes		24.6			12.4
NET EARNINGS FROM CONTINUING OPERATIONS	$	67.6		$	38.5
Loss from discontinued operations (including loss
on disposal of $1.5 million in 2006) before income taxes		—			(1.0	)
Income tax benefit on discontinued operations		—			(0.2	)
NET LOSS FROM DISCONTINUED OPERATIONS		—			(0.8	)
NET EARNINGS	$	67.6		$	37.7
BASIC EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Continuing operations	$	0.82		$	0.46
Discontinued operations		—			(0.01	)
Total basic earnings (loss) per share of common stock	$	0.82		$	0.46
DILUTED EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Continuing operations	$	0.80		$	0.45
Discontinued operations		—			(0.01	)
Total diluted earnings (loss) per share of common stock	$	0.80		$	0.45
DIVIDENDS PER SHARE	$	0.30		$	0.29
AVERAGE SHARES OUTSTANDING (in thousands)
Basic		82,851			82,892
Diluted		84,774			84,804
Gross Margin	$	395.3		$	331.9
% of Net Sales		37.2	%		34.3	%
SG&A % of Net Sales		24.4	%		24.7	%
Operating Margin	$	136.3		$	93.1
% of Net Sales		12.8	%		9.6	%

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

	March 31, 2007		December 30, 2006
ASSETS
Cash and cash equivalents	$	210.8	$	176.6
Accounts and notes receivable		803.4		749.6
Inventories		615.7		598.9
Other current assets		83.3		85.2
Assets held for sale		28.4		28.2
Total current assets		1,741.6		1,638.5
Property, plant and equipment		568.2		559.4
Goodwill and other intangibles		2,188.5		1,621.5
Other assets		142.1		116.0
Total assets	$	4,640.4	$	3,935.4
LIABILITIES AND SHAREOWNERS’ EQUITY
Short-term borrowings	$	332.1	$	320.0
Accounts payable		462.4		445.2
Accrued expenses		501.4		485.9
Total current liabilities		1,295.9		1,251.1
Long-term debt		1,209.2		679.2
Other long-term liabilities		569.1		453.1
Shareowners’ equity		1,566.2		1,552.0
Total liabilities and equity	$	4,640.4	$	3,935.4

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

	FIRST QUARTER
	2007			2006
OPERATING ACTIVITIES
Net earnings	$	67.6		$	37.7
Depreciation and amortization		37.2			30.3
Changes in working capital		(18.7	)		13.7
Other		7.7			3.5
Net cash provided by operating activities		93.8			85.2
INVESTING AND FINANCING ACTIVITIES
Capital and software expenditures		(26.2	)		(14.5	)
Proceeds from sale of business		—			0.9
Business acquisitions and asset disposals		(541.4	)		(490.6	)
Proceeds from long-term borrowings		529.7			—
Cash dividends on common stock		(24.9	)		(23.8	)
Other		3.2			(10.1	)
Net cash used in investing and financing activities		(59.6	)		(538.1	)
Increase(decrease) in Cash and Cash Equivalents		34.2			(452.9	)
Cash and Cash Equivalents, Beginning of Period		176.6			657.8
Cash and Cash Equivalents, End of Period	$	210.8		$	204.9
Free Cash Flow Computation
Operating Cash Flow	$	93.8		$	85.2
Less: capital and software expenditures		(26.2	)		(14.5	)
Free Cash Flow (before dividends)	$	67.6		$	70.7

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

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

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

	FIRST QUARTER
	2007			2006
NET SALES
Construction & DIY	$	423.7		$	410.6
Industrial		310.7			285.6
Security		327.7			272.5
Total	$	1,062.1		$	968.7
SEGMENT PROFIT
Construction & DIY	$	62.5		$	57.9
Industrial		45.5			22.6
Security		45.7			27.9
Segment Profit		153.7			108.4
Corporate Overhead		(17.4	)		(15.3	)
Total	$	136.3		$	93.1
SEGMENT PROFIT AS A % OF NET SALES
Construction & DIY		14.8	%		14.1	%
Industrial		14.6	%		7.9	%
Security		13.9	%		10.2	%
Segment Profit		14.4	%		11.2	%
Corporate Overhead		-1.6	%		-1.6	%
Total		12.8	%		9.6	%

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THE STANLEY WORKS AND SUBSIDIARIES
RECONCILIATION OF OPERATING MARGIN TO OPERATING INCOME
(Unaudited, Millions of Dollars)

	FIRST QUARTER
	2007		2006
NET SALES	$	1,062.1	$	968.7
COSTS AND EXPENSES
Cost of sales		666.8		636.8
Selling, general and administrative		259.0		238.8
OPERATING MARGIN		136.3		93.1
Other – net		19.9		19.3
Restructuring charges		4.0		7.3
OPERATING INCOME	$	112.4	$	66.5

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