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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

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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

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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.

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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	%