The Stanley Works (Form: 8-K)

4Q Revenues Up 15%; 4Q EPS $1.11; 4Q and FY Cash Flows At Record Levels; 4.2 Million Shares Repurchased ($200 Million) During 4Q07 and Early 2008

New Britain, Connecticut, January 28, 2008 ... The Stanley Works (NYSE: SWK) announced full year and fourth quarter 2007 financial results today.

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Net sales were $4.5 billion, up 12% vs. prior year. The increase was attributable to organic growth (2 pts.), currency (3 pts.) and acquisitions (7 pts.). Strong double-digit growth in Industrial and Security segments supplemented modest gains in CDIY segment.

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Pretax income and operating margin were up 23% and 26%, respectively, as price realization, operations productivity and acquisition mix more than offset inflationary headwinds.

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Income tax rate was 25% vs. 21% a year ago. The higher tax rate impacted results by $0.25 per fully-diluted share in 2007.

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Fully-diluted EPS from continuing operations was a record $4.00, up 15% over 2006.

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Working capital turns at year-end improved to a record 5.1 vs. 4.5 at year-end 2006, attributable to continued realization of benefits associated with the Stanley Fulfillment System.

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Free cash flow was a record $457 million (136% of net income), an increase of $99 million over 2006, fueled by higher cash earnings and improved working capital turns.

John F. Lundgren, Chairman and Chief Executive Officer, stated: “2007 was a year in which our team excelled in the face of a challenging market environment. Our performance was consistent with the company’s long term financial objectives and significant progress was made both strategically and operationally.”

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Net sales were $1.2 billion, up 15% vs. prior year. The increase was attributable to organic growth (2 pts.), currency (5 pts.) and acquisitions (8 pts.).

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Fully-diluted EPS from continuing operations was $1.11, up 7% over prior year.

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Charges totaled $0.04 per share during the quarter for resolution of previously unanticipated legal matters, the largest of which was an unfavorable Bostitch-related litigation judgment.

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Income tax rate was 21%, compared with 14% a year ago. The higher tax rate impacted results by $0.10 per fully-diluted share in the fourth quarter of 2007.

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Operating margin rate was 13.6%, a 60bp improvement. Gross margin rate was 37.2% of sales, up 70 bps over the fourth quarter of 2006 and SG&A expenses were 23.5% of sales, unchanged from the prior year.

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Free cash flow was $186 million (202% of net income), up 89% over the prior year.

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In CDIY, double-digit sales increases in Europe, Australia, Canada, Latin America and Asia more than offset weakness in the U.S. New product initiatives and currency were the primary drivers of these increases. The segment profit rate was lower primarily due to product mix and un-recovered cost inflation within the U.S.

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Industrial segment sales benefited from 5% organic sales growth in Industrial and Automotive Repair Tools (Facom, Proto and Mac) and 15% organic growth in Engineered Solutions. The profit rate expanded as a result of strong price realization and productivity.

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In Security, acquisitions (primarily HSM, acquired in early 2007) accounted for 25 pts. of the sales increase. Mechanical Access sales were very strong, partially offset by weak legacy U.S. Systems Integration (USSI) sales. Segment profit benefited from the inclusion of HSM, as well as strong price realization and a mix shift between Mechanical Access and legacy USSI.

Mr. Lundgren added: “2008 promises to be an equally, if not more, challenging year from an end-market perspective. Fortunately, we are entering the year with our portfolio in excellent shape and with the majority of our businesses exhibiting strong momentum. We also are enjoying increasing operational benefits from the Stanley Fulfillment System, which is rapidly becoming a positive force within the company’s culture.”

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EPS of $4.20-$4.40 per fully diluted share, an increase of 5-10% over 2007 earnings. The 2008 tax rate is expected to be consistent with the 2007 rate.

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Organic sales growth (ex currency) of 0-1%, based on a subdued 2008 economic environment, including a possible mild and short-lived U.S. recession, as well as continued deterioration of North American markets associated with homebuilding and remodeling (about 25% of consolidated revenues). Such growth is estimated to be marginally negative in the CDIY segment, marginally positive in the Industrial segment and up 2-3% in the Security segment.

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Acquisitions are expected to supplement organic growth although the effects of potential future acquisitions are not included in the estimate.

As previously announced, during the fourth quarter the company repurchased 2.0 million of its common shares in the open market for $100 million, an average price per share of $50.77. For the full year 2007, the company repurchased 3.7 million shares for $200 million. Further, today the company announced that, during January 2008, it repurchased an additional 2.2 million shares in the open market at an average price of $46.23 per share.

Mr. Lundgren added: “Our portfolio transformation strategy and our commitment to upper-tier credit ratings remain intact. In addition, periodic share repurchases and consistent dividend increases are important elements of the total return we deliver to shareholders. Our strong cash flows have afforded us the opportunity to repurchase nearly 6 million shares of our common stock in the past nine months. Our recent 10 million share repurchase authorization provides flexibility to buy additional shares in the future.”

The company will host a conference call with investors at 10:00am EST today, Monday, January 28, 2008 to discuss quarterly results. The call is accessible by telephone at (800) 267-8424 and (706) 634-0695 (international) and via the Internet at www.stanleyworks.com by selecting “Investor Relations”. A slide presentation to accompany the call will be available at www.stanleyworks.com and will remain available after the call.

A replay will also be available two hours after the call and can be accessed at (800) 642-1687 using the conference identification number 30996408.

Operating margin is defined as sales less cost of sales less SG&A. Management uses operating margin and its percentage of 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.

Free cash flow is defined as cash flow from operations less capital and capitalized software expenditures (reconciliation on pg. 8). 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. Organic sales growth is defined as total sales growth less sales of companies acquired in the past twelve months and less foreign currency impacts. The company believes these are important measures of its liquidity, of its ability to fund future growth and to provide a return to the shareowners, and of its sales performance.

The Stanley Works, an S&P 500 company, is a diversified worldwide supplier of tools and engineered solutions for professional, industrial, construction and do-it-yourself use, and security solutions for commercial applications. More information about The Stanley Works can be found at http://www.stanleyworks.com.

The Stanley Works corporate press releases are available on the company’s Internet web site at http://www.stanleyworks.com.

CAUTIONARY STATEMENTS
Under the Private Securities Litigation Reform Act of 1995

Statements in this press release, including but not limited to those regarding the Company’s ability to: (i) deliver 2008 earnings of $4.20 — $4.40 per fully diluted share; (ii) deliver free cash flow of approximately $500 million in 2008; (iii) deliver organic sales growth (excluding currency) of flat to 1% in 2008; and (iv) to supplement organic growth through acquisitions during 2008 are “forward looking statements” and 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. In addition to the risks, uncertainties and other factors discussed in this press release, the risks, uncertainties and other factors that could cause or contribute to actual results differing materially from those expressed or implied in the forward looking statements include, without limitation, those set forth under Item 1A Risk Factors of the Company’s Annual Report on Form 10-K and any material changes thereto set forth in any subsequent Quarterly Reports on Form 10-Q, those contained in the Company’s other filings with the Securities and Exchange Commission, and those set forth below.

The Company’s ability to deliver the Results is dependent upon: (i) the Company’s ability to identify appropriate acquisition opportunities and to complete such acquisitions; (ii) the Company’s ability to successfully integrate HSM and other recent acquisitions, as well as future acquisitions, while limiting associated costs; (iii) the Company’s ability to continue to deliver cost reductions and profit improvement in its Fastening Systems business; (iv) the Company’s ability to minimize the costs to relocate equipment and inventory; (v) the Company’s ability to complete the Fastening reorganization within the anticipated time frame; (vi) the success of the Company’s efforts to expand its tools and security businesses; (vii) the Company’s success at new product development and introduction, and identifying and developing new markets; (viii) the success of the Company’s efforts to manage freight costs, steel and other commodity costs; (ix) the success of the Company’s efforts to sustain or increase prices in order to, among other things, offset or mitigate the impact of steel, freight, energy, non-ferrous commodity and other commodity costs and other inflation increases; (x) the Company’s ability to reduce its costs, increase its prices, change the manufacturing location or find alternate sources for products made in China in order to (a) mitigate the impact of an increase in the VAT rate applicable to products the Company makes or purchases in China and (b) mitigate the impact of an anti-dumping tariff recently imposed on certain nails imported from China; (xi) the Company’s ability to generate free cash flow and maintain a strong debt to capital ratio; (xii) the Company’s ability to identify and effectively execute productivity improvements and cost reductions while minimizing any associated restructuring charges; (xiii) the Company’s ability to obtain favorable settlement of routine tax audits; (xiv) the ability of the Company to generate earnings sufficient to realize future income tax benefits during periods when temporary differences become deductible; (xv) the continued ability of the Company to access credit markets under satisfactory terms; and (xvi) the Company’s ability to negotiate satisfactory payment terms under which the Company buys and sells goods, materials and products.

The Company’s ability to deliver the Results is also dependent upon: (i) the continued success of the Company’s marketing and sales efforts; (ii) the success of recruiting programs and other efforts to maintain or expand overall Mac Tools truck count versus prior years; (iii) the ability of the Company to maintain or improve production rates in the Company’s manufacturing facilities, respond to significant changes in product demand and fulfill demand for new and existing products; (iv) the ability to continue successfully managing and defending claims and litigation; (v) the Company’s ability to continue improvements in working capital; (vi) the success of the Company’s efforts to mitigate any cost increases generated by, for example, continued increases in the cost of energy or significant Chinese Renminbi or other currency appreciation; and (vii) the geographic distribution of the Company’s earnings.

The Company’s ability to achieve the Results will also be affected by external factors. These external factors include: pricing pressure and other changes within competitive markets; the continued consolidation of customers particularly 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 exchange and interest rates on the competitiveness of products and the Company’s debt program; the strength of the U.S. economy; the extent to which North American markets associated with homebuilding and remodeling continue to deteriorate; and the impact of events that cause or may cause disruption in the Company’s manufacturing, 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.

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


	FOURTH QUARTER						YEAR TO DATE
	2007			2006			2007			2006
*NET SALES*	$	1,167.4		$	1,019.3		$	4,483.8		$	4,018.6

*COSTS AND EXPENSES*
Cost of sales		733.7			647.2			2,791.6			2,560.1

Gross Margin		433.7			372.1			1,692.2			1,458.5
% to Net Sales		37.2	%		36.5	%		37.7	%		36.3	%

Selling, general and administrative		274.7			239.9			1,058.4			955.2
% to Net Sales		23.5	%		23.5	%		23.6	%		23.8	%


Operating Margin		159.0			132.2			633.8			503.3
% to Net Sales		13.6	%		13.0	%		14.1	%		12.5	%

Other-net		19.8			11.9			89.7			57.5
Restructuring charges		2.3			3.8			12.8			13.8

Income from Operations		136.9			116.5			531.3			432.0

Interest-net		19.6			15.4			80.2			64.9

*EARNINGS FROM CONTINUING OPERATIONS*
*BEFORE INCOME TAXES*		117.3			101.1			451.1			367.1
Income taxes		25.0			14.1			114.5			76.4


*NET EARNINGS FROM CONTINUING OPERATIONS*	$	92.3		$	87.0		$	336.6		$	290.7


Loss from discontinued operations (including loss
on disposal of $1.5 million in 2006) before income taxes		—			(0.5	)		—			(1.5	)
Income tax benefit on discontinued operations		—			(0.1	)		—			(0.3	)

*NET LOSS FROM DISCONTINUED OPERATIONS*		—			(0.4	)		—			(1.2	)


*NET EARNINGS*	$	92.3		$	86.6		$	336.6		$	289.5


*BASIC EARNINGS (LOSS) PER SHARE OF COMMON STOCK*
Continuing operations	$	1.13		$	1.06		$	4.09		$	3.55
Discontinued operations		—			(0.01	)		—			(0.01	)

Total basic earnings per share of common stock	$	1.13		$	1.06		$	4.09		$	3.54


*DILUTED EARNINGS (LOSS) PER SHARE OF COMMON STOCK*
Continuing operations	$	1.11		$	1.04		$	4.00		$	3.47
Discontinued operations		—			(0.01	)		—			(0.01	)

Total diluted earnings per share of common stock	$	1.11		$	1.03		$	4.00		$	3.46


*DIVIDENDS PER SHARE*	$	0.31		$	0.30		$	1.22		$	1.18


*AVERAGE SHARES OUTSTANDING (in thousands)*
Basic		81,556			81,796			82,313			81,866


Diluted		83,089			83,691			84,046			83,704

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



	December 29, 2007		December 30, 2006
*ASSETS*

Cash and cash equivalents	$	240.4	$	176.6
Accounts and notes receivable		848.4		749.6
Inventories		567.3		598.9
Other current assets		88.0		85.2
Assets held for sale		24.3		28.2

Total current assets		1,768.4		1,638.5

Property, plant and equipment		569.3		559.4
Goodwill and other intangibles		2,252.6		1,621.5
Other assets		189.6		116.0

Total assets	$	4,779.9	$	3,935.4


*LIABILITIES AND SHAREOWNERS’ EQUITY*

Short-term borrowings	$	292.8	$	320.0
Accounts payable		508.6		445.2
Accrued expenses		476.1		485.9

Total current liabilities		1,277.5		1,251.1

Long-term debt		1,212.1		679.2
Other long-term liabilities		561.8		453.1
Shareowners’ equity		1,728.5		1,552.0

Total liabilities and equity	$	4,779.9	$	3,935.4

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


	FOURTH QUARTER						YEAR TO DATE
	2007			2006			2007			2006

*OPERATING ACTIVITIES*

Net earnings	$	92.3		$	86.6		$	336.6		$	289.5
Depreciation and amortization		42.1			29.9			162.2			121.2
Changes in working capital		106.1			55.2			51.7			28.7
Other		(22.6	)		(52.4	)		(6.4	)		(0.3	)

Net cash provided by operating activities		217.9			119.3			544.1			439.1

*INVESTING AND FINANCING ACTIVITIES*

Capital and software expenditures		(31.9	)		(20.7	)		(86.9	)		(80.5	)
Business acquisitions and asset disposals		(5.8	)		0.3			(624.9	)		(539.9	)
Proceeds from long-term borrowings		0.1			—			529.9			—
Cash dividends on common stock		(24.9	)		(24.5	)		(99.8	)		(96.1	)
Other		(195.6	)		(139.1	)		(198.6	)		(203.8	)

Net cash used in investing and financing activities		(258.1	)		(184.0	)		(480.3	)		(920.3	)

Increase(Decrease) in Cash and Cash Equivalents		(40.2	)		(64.7	)		63.8			(481.2	)

Cash and Cash Equivalents, Beginning of Period		280.6			241.3			176.6			657.8


Cash and Cash Equivalents, End of Period	$	240.4		$	176.6		$	240.4		$	176.6




Free Cash Flow Computation

Operating cash flow	$	217.9		$	119.3		$	544.1		$	439.1
Less: capital and software expenditures		(31.9	)		(20.7	)		(86.9	)		(80.5	)

Free cash flow (before dividends)	$	186.0		$	98.6		$	457.2		$	358.6

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.

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


	FOURTH QUARTER						YEAR TO DATE
	2007			2006			2007			2006
*NET SALES*
Construction & DIY	$	458.8		$	437.1		$	1,795.0		$	1,723.9
Industrial		340.4			296.3			1,255.9			1,137.7
Security		368.2			285.9			1,432.9			1,157.0

Total	$	1,167.4		$	1,019.3		$	4,483.8		$	4,018.6


*SEGMENT PROFIT*
Construction & DIY	$	62.8		$	68.0		$	270.0		$	271.1
Industrial		50.6			38.6			184.0			124.0
Security		60.0			41.8			242.1			171.5

Segment Profit		173.4			148.4			696.1			566.6
Corporate Overhead		(14.4	)		(16.2	)		(62.3	)		(63.3	)

Total	$	159.0		$	132.2		$	633.8		$	503.3

*Segment Profit as a Percentage of Net Sales*
Construction & DIY		13.7	%		15.6	%		15.0	%		15.7	%
Industrial		14.9	%		13.0	%		14.7	%		10.9	%
Security		16.3	%		14.6	%		16.9	%		14.8	%

Segment Profit		14.8	%		14.6	%		15.5	%		14.1	%
Corporate Overhead		-1.2	%		-1.6	%		-1.4	%		-1.6	%

Total		13.6	%		13.0	%		14.1	%		12.5	%


Connecticut	1-5244	06-0548860
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)

1000 Stanley Drive, New Britain, Connecticut		06053
_________________________________ (Address of principal executive offices)		___________ (Zip Code)


	The Stanley Works

January 28, 2008	By:	/s/ Bruce H. Beatt

		Name: Bruce H. Beatt
		Title: Vice President, General Counsel and Secretary


Exhibit No.		Description

99.1		The Stanley Works' press release dated January 28, 2008 announcing fourth quarter and full year 2007 results and providing full year 2008 guidance. The press release and financial information are both furnished pursuant to Item 2.02 hereof.
99.1		Financial statements contained in The Stanley Works' January 28, 2008 press release.


	2007							Versus 2006
			Segment		Segment						Segment			Segment
(millions)	Sales		Profit		Profit Rate			Sales			Profit			Profit Rate

CDIY	$	1,795	$	270		15.0	%		+ 4	%		0	%	- 70bps

Industrial	$	1,256	$	184		14.7	%		+10	%		+48	%	+380bps

Security	$	1,433	$	242		16.9	%		+24	%		+41	%	+210bps


	4Q07							Versus 4Q06
			Segment		Segment						Segment			Segment
(millions)	Sales		Profit		Profit Rate			Sales			Profit			Profit Rate

CDIY	$	459	$	63		13.7	%		+ 5	%		- 8	%	- 190bps

Industrial	$	340	$	51		14.9	%		+15	%		+31	%	+180bps

Security	$	368	$	60		16.3	%		+29	%		+44	%	+170bps


Date of Report (Date of Earliest Event Reported):		January 28, 2008


Registrant’s telephone number, including area code:		(860) 225-5111


Contact:		Gerry Gould, V. P. — Investor Relations (860) 827-3833 or ggould@stanleyworks.com