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

	SECOND QUARTER						YEAR TO DATE
	2008			2007			2008			2007
NET SALES	$	1,154.2		$	1,095.7		$	2,227.9		$	2,133.8
COSTS AND EXPENSES
Cost of sales		712.3			673.3			1,380.0			1,325.2
Gross margin		441.9			422.4			847.9			808.6
% to Net sales		38.3	%		38.6	%		38.1	%		37.9	%
Selling, general and administrative		283.2			263.4			558.3			517.7
% to Net sales		24.5	%		24.0	%		25.1	%		24.3	%
Operating margin		158.7			159.0			289.6			290.9
% to Net sales		13.7	%		14.5	%		13.0	%		13.6	%
Other-net		21.1			23.5			41.4			42.5
Restructuring charges		17.0			3.6			20.2			7.6
Income from operations		120.6			131.9			228.0			240.8
Interest-net		17.8			20.3			36.2			40.4
EARNINGS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES		102.8			111.6			191.8			200.4
Income taxes		27.1			29.0			50.7			52.3
NET EARNINGS FROM CONTINUING OPERATIONS		75.7			82.6			141.1			148.1
Earnings from discontinued operations before income taxes		4.7			4.4			8.8			7.8
Income taxes on discontinued operations		0.8			1.7			2.3			3.0
NET EARNINGS FROM DISCONTINUED OPERATIONS		3.9			2.7			6.5			4.8
NET EARNINGS	$	79.6		$	85.3		$	147.6		$	152.9
BASIC EARNINGS PER SHARE OF COMMON STOCK
Continuing operations	$	0.96		$	1.00		$	1.79		$	1.79
Discontinued operations		0.05			0.03			0.08			0.06
Total basic earnings per share of common stock	$	1.01		$	1.03		$	1.87		$	1.85
DILUTED EARNINGS PER SHARE OF COMMON STOCK
Continuing operations	$	0.95		$	0.98		$	1.76		$	1.75
Discontinued operations		0.05			0.03			0.08			0.06
Total diluted earnings per share of common stock	$	1.00		$	1.01		$	1.84		$	1.81
DIVIDENDS PER SHARE	$	0.31		$	0.30		$	0.62		$	0.60
AVERAGE SHARES OUTSTANDING (in thousands)
Basic		78,650			82,810			78,878			82,752
Diluted		79,827			84,542			80,096			84,605

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

	(Unaudited)
	June 30, 2008		December 29, 2007
ASSETS
Cash and cash equivalents	$	384.2	$	240.4
Accounts and notes receivable		928.1		831.1
Inventories		563.3		556.4
Other current assets		177.2		192.0
Total current assets		2,052.8		1,819.9
Property, plant and equipment		572.5		564.9
Goodwill and other intangibles		2,233.9		2,206.7
Other assets		207.3		188.4
Total assets	$	5,066.5	$	4,779.9
LIABILITIES AND SHAREOWNERS’ EQUITY
Short-term borrowings	$	464.7	$	292.8
Accounts payable		529.6		499.6
Other current liabilities		491.4		486.0
Total current liabilities		1,485.7		1,278.4
Long-term debt		1,197.8		1,212.1
Other long-term liabilities		591.7		560.9
Shareowners’ equity		1,791.3		1,728.5
Total liabilities and equity	$	5,066.5	$	4,779.9

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

	SECOND QUARTER						YEAR TO DATE
	2008			2007			2008			2007
OPERATING ACTIVITIES
Net earnings	$	79.6		$	85.3		$	147.6		$	152.9
Depreciation and amortization		40.5			40.7			81.3			77.9
Changes in working capital		(24.6	)		(13.4	)		(32.7	)		(32.1	)
Other		(12.0	)		(10.5	)		(5.0	)		(2.8	)
Net cash provided by operating activities		83.5			102.1			191.2			195.9
INVESTING AND FINANCING ACTIVITIES
Capital and software expenditures		(28.5	)		(17.3	)		(53.6	)		(43.5	)
Proceeds from sale of business		3.3			—			3.3			—
Business acquisitions and asset disposals		(26.5	)		(21.8	)		(27.0	)		(563.2	)
Proceeds from long-term borrowings		—			0.1			—			529.8
Cash dividends on common stock		(24.3	)		(24.6	)		(48.6	)		(49.5	)
Other		51.9			(23.6	)		78.5			(20.4	)
Net cash used in investing and financing activities		(24.1	)		(87.2	)		(47.4	)		(146.8	)
Increase (Decrease) in Cash and Cash Equivalents		59.4			14.9			143.8			49.1
Cash and Cash Equivalents, Beginning of Period		324.8			210.8			240.4			176.6
Cash and Cash Equivalents, End of Period	$	384.2		$	225.7		$	384.2		$	225.7
Free Cash Flow Computation
Operating cash flow	$	83.5		$	102.1		$	191.2		$	195.9
Less: capital and software expenditures		(28.5	)		(17.3	)		(53.6	)		(43.5	)
Free cash flow (before dividends)	$	55.0		$	84.8		$	137.6		$	152.4

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)

	SECOND QUARTER						YEAR TO DATE
	2008			2007			2008			2007
NET SALES
Construction & DIY	$	451.8		$	432.6		$	857.6		$	836.9
Industrial		338.2			302.2			670.9			610.3
Security		364.2			360.9			699.4			686.6
Total	$	1,154.2		$	1,095.7		$	2,227.9		$	2,133.8
SEGMENT PROFIT
Construction & DIY	$	65.8		$	63.3		$	112.8		$	121.8
Industrial		44.1			45.9			92.8			91.1
Security		66.0			67.4			118.9			113.0
Segment Profit		175.9			176.6			324.5			325.9
Corporate Overhead		(17.2	)		(17.6	)		(34.9	)		(35.0	)
Total	$	158.7		$	159.0		$	289.6		$	290.9
Segment Profit as a Percentage of Net Sales
Construction & DIY		14.6	%		14.6	%		13.2	%		14.6	%
Industrial		13.0	%		15.2	%		13.8	%		14.9	%
Security		18.1	%		18.7	%		17.0	%		16.5	%
Segment Profit		15.2	%		16.1	%		14.6	%		15.3	%
Corporate Overhead		-1.5	%		-1.6	%		-1.6	%		-1.7	%
Total		13.7	%		14.5	%		13.0	%		13.6	%