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

	THIRD QUARTER						YEAR TO DATE
	2007			2006			2007			2006
NET SALES	$	1,131.3		$	1,012.7		$	3,316.4		$	2,999.3
COSTS AND EXPENSES
Cost of sales		700.2			634.9			2,057.9			1,912.9
Gross Margin		431.1			377.8			1,258.5			1,086.4
% to Net Sales		38.1	%		37.3	%		37.9	%		36.2	%
Selling, general and administrative		256.5			231.9			783.7			715.3
% to Net Sales		22.7	%		22.9	%		23.6	%		23.8	%
Operating Margin		174.6			145.9			474.8			371.1
% to Net Sales		15.4	%		14.4	%		14.3	%		12.4	%
Other-net		25.9			15.4			69.9			45.6
Restructuring charges		2.9			0.9			10.5			10.0
Income from Operations		145.8			129.6			394.4			315.5
Interest-net		20.2			16.5			60.6			49.5
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES		125.6			113.1			333.8			266.0
Income taxes		34.2			22.9			89.5			62.3
NET EARNINGS FROM CONTINUING OPERATIONS	$	91.4		$	90.2		$	244.3		$	203.7
Loss from discontinued operations (including loss
on disposal of $1.5 million in 2006) before income taxes		—			0.5			—			(1.0	)
Income tax benefit on discontinued operations		—			0.2			—			(0.2	)
NET LOSS FROM DISCONTINUED OPERATIONS		—			0.3			—			(0.8	)
NET EARNINGS	$	91.4		$	90.5		$	244.3		$	202.9
BASIC EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Continuing operations	$	1.11		$	1.11		$	2.96		$	2.49
Discontinued operations		—			—			—			(0.01	)
Total basic earnings per share of common stock	$	1.11		$	1.11		$	2.96		$	2.48
DILUTED EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Continuing operations	$	1.09		$	1.09		$	2.89		$	2.43
Discontinued operations		—			—			—			(0.01	)
Total diluted earnings per share of common stock	$	1.09		$	1.09		$	2.89		$	2.43
DIVIDENDS PER SHARE	$	0.31		$	0.30		$	0.91		$	0.88
AVERAGE SHARES OUTSTANDING (in thousands)
Basic		82,288			81,206			82,616			81,853
Diluted		83,999			82,867			84,417			83,669

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

	(Unaudited)
	September 29, 2007		December 30, 2006
ASSETS
Cash and cash equivalents	$	280.6	$	176.6
Accounts and notes receivable		906.2		749.6
Inventories		624.5		598.9
Other current assets		84.3		85.2
Assets held for sale		15.5		28.2
Total current assets		1,911.1		1,638.5
Property, plant and equipment		566.3		559.4
Goodwill and other intangibles		2,256.9		1,621.5
Other assets		131.1		116.0
Total assets	$	4,865.4	$	3,935.4
LIABILITIES AND SHAREOWNERS’ EQUITY
Short-term borrowings	$	396.0	$	320.0
Accounts payable		491.9		445.2
Accrued expenses		501.9		485.9
Total current liabilities		1,389.8		1,251.1
Long-term debt		1,212.2		679.2
Other long-term liabilities		568.3		453.1
Shareowners’ equity		1,695.1		1,552.0
Total liabilities and equity	$	4,865.4	$	3,935.4

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

	THIRD QUARTER						YEAR TO DATE
	2007			2006			2007			2006
OPERATING ACTIVITIES
Net earnings	$	91.4		$	90.5		$	244.3		$	202.9
Depreciation and amortization		42.2			30.0			120.1			91.3
Changes in working capital		(22.3	)		(38.2	)		(54.4	)		(26.5	)
Other		19.0			35.0			16.2			52.1
Net cash provided by operating activities		130.3			117.3			326.2			319.8
INVESTING AND FINANCING ACTIVITIES
Capital and software expenditures		(11.5	)		(21.2	)		(55.0	)		(59.8	)
Business acquisitions and asset disposals		(55.9	)		(24.4	)		(619.1	)		(540.2	)
Proceeds from long-term borrowings		—			—			529.8			—
Cash dividends on common stock		(25.4	)		(24.3	)		(74.9	)		(71.6	)
Other		17.4			(13.2	)		(3.0	)		(64.7	)
Net cash used in investing and financing activities		(75.4	)		(83.1	)		(222.2	)		(736.3	)
Increase(Decrease) in Cash and Cash Equivalents		54.9			34.2			104.0			(416.5	)
Cash and Cash Equivalents, Beginning of Period		225.7			207.1			176.6			657.8
Cash and Cash Equivalents, End of Period	$	280.6		$	241.3		$	280.6		$	241.3
Free Cash Flow Computation
Operating cash flow	$	130.3		$	117.3		$	326.2		$	319.8
Less: capital and software expenditures		(11.5	)		(21.2	)		(55.0	)		(59.8	)
Free cash flow (before dividends)	$	118.8		$	96.1		$	271.2		$	260.0

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. 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 current accounts receivable, inventory and accounts payable.

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

	THIRD QUARTER						YEAR TO DATE
	2007			2006			2007			2006
NET SALES
Construction & DIY	$	457.4		$	445.8		$	1,336.2		$	1,286.8
Industrial		300.3			266.1			915.5			841.4
Security		373.6			300.8			1,064.7			871.1
Total	$	1,131.3		$	1,012.7		$	3,316.4		$	2,999.3
SEGMENT PROFIT
Construction & DIY	$	77.0		$	80.6		$	207.2		$	203.1
Industrial		41.7			28.6			133.4			85.4
Security		68.8			51.4			182.1			129.7
Segment Profit		187.5			160.6			522.7			418.2
Corporate Overhead		(12.9	)		(14.7	)		(47.9	)		(47.1	)
Total	$	174.6		$	145.9		$	474.8		$	371.1
Segment Profit as a Percentage of Net Sales
Construction & DIY		16.8	%		18.1	%		15.5	%		15.8	%
Industrial		13.9	%		10.7	%		14.6	%		10.1	%
Security		18.4	%		17.1	%		17.1	%		14.9	%
Segment Profit		16.6	%		15.9	%		15.8	%		13.9	%
Corporate Overhead		-1.2	%		-1.5	%		-1.5	%		-1.5	%
Total		15.4	%		14.4	%		14.3	%		12.4	%