~~(STANLEY LOGO)~~

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended~~September 27, 2008~~April 4, 2009..
OR
o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the transition period from [ ] to [ ]

Commission File Number 1-5224

THE STANLEY WORKS

(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


CONNECTICUT		06-0548860

(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)		(I.R.S. EMPLOYER IDENTIFICATION NUMBER)


1000 STANLEY DRIVE
NEW BRITAIN, CONNECTICUT		06053

(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)		(ZIP CODE)

(860) 225-5111

(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” inRule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer x	Accelerated filer o	Non-accelerated filer o	Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).

Yeso Nox

~~78,794,900~~79,076,109 shares of the registrant’s common stock were outstanding as of ~~October 24, 2008~~April 28, 2009

TABLE OF CONTENTS


PART I –-- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
~~CONSOLIDATED STATEMENTS OF OPERATIONS~~
~~CONSOLIDATED BALANCE SHEETS~~
~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS~~
~~BUSINESS SEGMENT INFORMATION~~
~~THE STANLEY WORKS AND SUBSIDIARIES NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 27, 2008~~
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 4. CONTROLS AND PROCEDURES
CAUTIONARY STATEMENT Under the Private Securities Litigation Reform Act of 1995
PART II – OTHER INFORMATION
ITEM 1A. RISK FACTORS
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS
~~SIGNATURE~~EX-1
~~EX-31.I.A: CERTIFICATION~~EX-10.III.A
~~EX-31.I.B: CERTIFICATION~~EX-10.III.B
~~EX-32.I: CERTIFICATION~~EX-10.III.C
~~EX-32.II: CERTIFICATION~~EX-10.III.D
EX-31.I.A
EX-31.I.B
EX-32.I
EX-32.II

PART I –— FINANCIAL INFORMATION


ITEM 1.	FINANCIAL STATEMENTS

THE STANLEY WORKS AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 27,~~APRIL 4, 2009 AND MARCH 29, 2008 ~~AND SEPTEMBER 29, 2007~~
(Unaudited, Millions of Dollars, Except Per Share Amounts)


	Third Quarter						Year to Date
	2008			2007			2008			2007			2009			2008

NET SALES	$	1,119.7		$	1,106.2		$	3,347.6		$	3,240.0		$	913.0		$	1,071.0
COSTS AND EXPENSES
Cost of sales		688.3			684.6			2,068.3			2,009.8		$	551.9		$	665.1
Selling, general and administrative		269.4			250.6			822.7			762.0			247.6			272.4
Provision for doubtful accounts		5.6			1.8			10.6			8.1			5.1			2.2
Interest expense		21.0			21.3			61.9			63.8			17.0			21.9
Interest income		(2.7	)		(1.1	)		(7.4	)		(3.2	)		(0.7	)		(1.0	)
Other, net		28.7			25.2			70.1			67.7			30.3			20.1
Restructuring charges and asset impairments		4.8			2.8			25.0			10.4			9.1			3.2

		1,015.1			985.2			3,051.2			2,918.6			860.3			983.9

Earnings from continuing operations before income taxes		104.6			121.0			296.4			321.4			52.7			87.1
Income taxes		26.2			32.5			76.9			84.8			13.7			22.8

Net earnings from continuing operations		78.4			88.5			219.5			236.6			39.0			64.3

Earnings from discontinued operations before income taxes (including a $128.1 gain on divestiture in the third quarter 2008 and $129.7year-to-date 2008)		130.4			4.6			139.2			12.4
Income taxes on discontinued operations		44.3			1.7			46.6			4.7
Less: net earnings attributable to noncontrolling interests														0.7			0.2

Net earnings from discontinued operations		86.1			2.9			92.6			7.7
NET EARNINGS FROM CONTINUING OPERATIONS ATTRIBUTABLE TO COMMON SHAREOWNERS														38.3			64.1

NET EARNINGS	$	164.5		$	91.4		$	312.1		$	244.3
Net (loss) earnings from discontinued operations before incomes taxes														(1.1	)		3.8
Income taxes (benefit) on discontinued operations														(0.5	)		1.4

NET EARNINGS PER SHARE OF COMMON STOCK
Basic:
NET (LOSS) EARNINGS FROM DISCONTINUED OPERATIONS														(0.6	)		2.4

NET EARNINGS ATTRIBUTABLE TO COMMON SHAREOWNERS													$	37.7		$	66.5

BASIC EARNINGS PER SHARE OF COMMON STOCK
Continuing operations	$	1.00		$	1.08		$	2.78		$	2.86		$	0.48		$	0.81
Discontinued operations		1.09			0.03			1.17			0.09			(0.01	)		0.03

Total basic earnings per common share	$	2.09		$	1.11		$	3.96		$	2.96
Total basic earnings per share of common stock													$	0.48		$	0.84

Diluted:
DILUTED EARNINGS PER SHARE OF COMMON STOCK
Continuing operations	$	0.98		$	1.05		$	2.74		$	2.80		$	0.48		$	0.80
Discontinued operations		1.08			0.03			1.16			0.09			(0.01	)		0.03

Total diluted earnings per common share	$	2.06		$	1.09		$	3.90		$	2.89
Total diluted earnings per share of common stock													$	0.47		$	0.83

DIVIDENDS PER SHARE OF COMMON STOCK	$	0.32		$	0.31		$	0.94		$	0.91		$	0.32		$	0.31

AVERAGE SHARES OUTSTANDING (in thousands):
Basic		78,808			82,288			78,867			82,616			79,209			79,176

Diluted		79,846			83,999			80,025			84,417			79,471			80,404

See notes to condensed consolidated financial statements.

THE STANLEY WORKS AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
~~SEPTEMBER 27, 2008~~APRIL 4, 2009 AND ~~DECEMBER 29, 2007~~JANUARY 3, 2009
(Unaudited, Millions of Dollars)


		2008			2007				2009			2008

ASSETS	ASSETS							ASSETS
Current assets
Cash and cash equivalents		$	299.3		$	240.4			$	128.0		$	211.6
Accounts and notes receivable			884.7			831.1				659.1			677.7
Inventories			571.4			556.4				503.7			514.7
Other current assets			88.9			86.0				100.3			90.1
Assets held for sale			4.2			106.0

Total current assets			1,848.5			1,819.9				1,391.1			1,494.1
Property, plant and equipment			1,477.4			1,449.0				1,457.9			1,458.0
Less: accumulated depreciation			888.7			884.1				891.8			878.2

			588.7			564.9				566.1			579.8
Goodwill			1,664.7			1,512.5				1,749.2			1,739.2
Trademarks			342.5			332.2				323.9			333.6
Customer relationships			433.6			321.4				459.3			482.3
Other intangible assets			46.1			40.6				37.7			40.9
Other assets			197.2			188.4				196.4			195.6

Total assets		$	5,121.3		$	4,779.9			$	4,723.7		$	4,865.5

															LIABILITIES AND SHAREOWNERS’ EQUITY
Current liabilities
Short-term borrowings		$	442.9		$	282.5			$	202.2		$	213.7
Current maturities of long-term debt			13.3			10.3				12.9			13.9
Accounts payable			523.8			499.6				400.8			461.5
Accrued expenses			516.4			467.5				482.2			507.9
Liabilities held for sale			2.4			18.5

Total current liabilities			1,498.8			1,278.4				1,098.1			1,197.0
Long-term debt			1,194.4			1,212.1				1,385.4			1,383.8
Other liabilities			556.6			560.9				534.0			559.9
Commitments and contingencies (Note L)
Shareowners’ equity
Commitments and contingencies (Note J)
The Stanley Works shareowners’ equity
Common stock, par value $2.50 per share			233.9			233.9				230.9			230.9
Retained earnings			2,288.9			2,045.5				2,288.0			2,291.4
Accumulated other comprehensive income			19.0			47.7				(172.8	)		(152.0	)
ESOP			(88.8	)		(93.8	)			(85.6	)		(87.2	)

			2,453.0			2,233.3				2,260.5			2,283.1
Less: cost of common stock in treasury			581.5			504.8				573.5			576.8

Total shareowners’ equity			1,871.5			1,728.5
The Stanley Works shareowners’ equity										1,687.0			1,706.3
Noncontrolling interests										19.2			18.5

Total equity										1,706.2			1,724.8

Total liabilities and shareowners’ equity		$	5,121.3		$	4,779.9			$	4,723.7		$	4,865.5

See notes to condensed consolidated financial statements.

THE STANLEY WORKS AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE ~~AND NINE~~ MONTHS ENDED ~~SEPTEMBER 27,~~APRIL 4, 2009 AND MARCH 29, 2008 ~~AND SEPTEMBER 29, 2007~~
(Unaudited, Millions of Dollars)


	Third Quarter						Year to Date
	2008			2007			2008			2007			2009			2008

OPERATING ACTIVITIES
Net earnings	$	164.5		$	91.4		$	312.1		$	244.3		$	38.4		$	66.7
Less: Net earnings attributable to noncontrolling interest														0.7			0.2

Net earnings attributable to common shareowners														37.7			66.5
Depreciation and amortization		47.2			42.2			128.5			120.1			48.0			40.8
Changes in working capital		28.0			(22.3	)		(4.7	)		(54.4	)		(45.3	)		(8.1	)
Net gain on sale of businesses		(84.3	)		—			(85.9	)		—
Changes in other assets and liabilities		10.5			19.0			7.1			16.2			(36.8	)		8.5

Cash provided by operating activities		165.9			130.3			357.1			326.2			3.6			107.7
INVESTING ACTIVITIES
Capital expenditures		(28.3	)		(11.5	)		(81.9	)		(55.0	)		(21.7	)		(25.1	)
Proceeds from sale of businesses, net of income taxes paid		162.5			—			165.8			—
Business acquisitions		(336.2	)		(64.2	)		(364.4	)		(633.1	)
Proceeds from sale of businesses														0.8			—
Business acquisitions and asset disposals														(6.0	)		(0.5	)
Other investing activities		15.8			6.6			24.5			9.7			—			4.0

Cash used in investing activities		(186.2	)		(69.1	)		(256.0	)		(678.4	)		(26.9	)		(21.6	)
FINANCING ACTIVITIES
Payments on long-term debt		(1.0	)		(0.5	)		(8.7	)		(76.9	)		(1.1	)		(1.1	)
Proceeds from long-term borrowings		0.2			—			0.2			529.8			0.2			—
Deferred financing costs and other		(4.0	)		—			(11.8	)		(12.1	)
Bond hedge premium		—			—			—			(49.3	)
Stock purchase contract fees														(3.8	)		(4.0	)
Net short-term borrowings		(31.5	)		13.4			141.0			145.7			(7.4	)		119.7
Cash dividends on common stock		(25.2	)		(25.4	)		(73.8	)		(74.9	)		(25.3	)		(24.3	)
Proceeds from issuance of common stock and warrants		7.4			4.1			17.4			89.9
Proceeds from the issuance of common stock														—			2.9
Purchase of common stock for treasury		—			—			(102.3	)		(106.9	)		(0.6	)		(102.4	)
Premium paid for share repurchase option														(16.4	)		—

Cash (used in) provided by financing activities		(54.1	)		(8.4	)		(38.0	)		445.3
Cash used in financing activities														(54.4	)		(9.2	)
Effect of exchange rate changes on cash		(10.5	)		2.1			(4.2	)		10.9			(5.9	)		7.5

Change in cash and cash equivalents		(84.9	)		54.9			58.9			104.0			(83.6	)		84.4

Cash and cash equivalents, beginning of period		384.2			225.7			240.4			176.6			211.6			240.4

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	299.3		$	280.6		$	299.3		$	280.6		$	128.0		$	324.8

See notes to condensed consolidated financial statements.

Consolidated Statements of Changes in Shareowners’ Equity
Periods ended April 4, 2009 and March 29, 2008
(Millions of Dollars, Except Per Share Amounts)


	The Stanley Works Shareowners’ Equity
						Accumulated Other
	Common		Retained			Comprehensive						Treasury			Noncontrolling			Shareowners’
	Stock		Earnings			Income (Loss)			ESOP			Stock			Interest			Equity

Balance December 29, 2007	$	230.9	$	2,074.4		$	47.2		$	(93.8	)	$	(504.8	)	$	18.3		$	1,772.2
Comprehensive income:
Net earnings				66.5												0.2			66.7
Less: Redeemable interest reclassified to liabilities																(0.1	)		(0.1	)

				66.5												0.1			66.6
Currency translation adjustment and other							37.4												37.4
Cash flow hedge, net of tax							2.4												2.4
Change in pension							(2.6	)											(2.6	)

Total comprehensive income																			103.8
Cash dividends declared — $0.31 per share				(24.3	)														(24.3	)
Issuance of common stock				(6.7	)								8.8						2.1
Repurchase of common stock (2,211,522 shares)													(102.4	)					(102.4	)
Other, stock-based compensation related, net of tax				4.5															4.5
Tax benefit related to stock options exercised				1.8															1.8
ESOP and related tax benefit				0.4						1.7									2.1

Balance March 29, 2008	$	230.9	$	2,116.6		$	84.4		$	(92.1	)	$	(598.4	)	$	18.4		$	1,759.8

Balance January 3, 2009	$	230.9	$	2,291.4		$	(152.0	)	$	(87.2	)	$	(576.8	)	$	18.5		$	1,724.8
Comprehensive income:
Net earnings				37.7												0.7			38.4
Less: Redeemable interest reclassified to liabilities																—			—

				37.7												0.7			38.4
Currency translation adjustment and other							(18.3	)											(18.3	)
Cash flow hedge, net of tax							(1.6	)											(1.6	)
Change in pension							(0.9	)											(0.9	)

Total comprehensive income																			17.6
Cash dividends declared — $0.32 per share				(25.3	)														(25.3	)
Issuance of common stock				(3.3	)								3.9						0.6
Repurchase of common stock (18,646 shares)													(0.6	)					(0.6	)
Premium paid for share repurchase option				(16.4	)														(16.4	)
Other, stock-based compensation related, net of tax				3.7															3.7
Tax benefit related to stock options exercised				(0.3	)														(0.3	)
ESOP and related tax benefit				0.5						1.6									2.1

Balance April 4, 2009	$	230.9	$	2,288.0		$	(172.8	)	$	(85.6	)	$	(573.5	)	$	19.2		$	1,706.2

See notes to condensed consolidated financial statements.

THE STANLEY WORKS AND SUBSIDIARIES
NOTES TO (UNAUDITED) CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
~~SEPTEMBER 27, 2008~~APRIL 4, 2009


A.	Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (hereafter referred to as “generally accepted accounting principles” ~~or “GAAP”~~) for interim financial statements and with the instructions toForm 10-Q and Article 10 ofRegulation S-X and do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations for the interim periods have been included and are of a normal, recurring nature. For further information, refer to the consolidated financial statements and footnotes included in The Stanley Works and Subsidiaries’ (collectively, the “Company”)Form 10-K for the year ended ~~December 29, 2007.~~January 3, 2009.

The prior year financial statements have been adjusted to reflect the adoption of new accounting standards FSPAPB 14-1 and SFAS 160 which required retrospective application as described in Note B. Certain prior year amounts have been reclassified to conform to the current year presentation. The assets and liabilities of discontinued operations have been reclassified as held for sale in the 2007 consolidated balance sheet, and the earnings from discontinued operations have been reclassified within the consolidated statements of operations.


B.	New Accounting Standards

Implemented: The Company adopted Statement of Financial Accounting Standard No. 157, “Fair Value Measurements” (“SFAS 157”), with respect to items that are regularly adjusted to fair value, as of the beginning of its fiscal year. SFAS 157 provides a common fair value hierarchy to follow in determining fair value measurements in the preparation of financial statements and expands disclosure requirements relating to how such measurements were developed. SFAS 157 indicates that an exit value (selling price) should be utilized in fair value measurements rather than an entrance value, or cost basis, and that performance risks, such as credit risk, should be included in the measurements of fair value even when the risk of non-performance is remote. SFAS 157 clarifies the principle that fair value measurements should be based on assumptions the marketplace would use when pricing an asset whenever practicable, rather than company-specific assumptions. On February 12, 2008 the FASB issued Staff Position~~No. 157-2,~~ ~~“Effective Date of FASB Statement No. 157”(“FSP 157-2”)~~ which amends SFAS 157 to delay the effective date for all non-financial assets and non-financial liabilities, except for those that are recognized at fair value in the financial statements on a recurring basis. Accordingly, in fiscal 2008 the Company has followed the SFAS 157 guidance to value its financial assets and liabilities that are routinely adjusted to fair value, predominantly derivatives. The remaining assets and liabilities, to which the~~FSP 157-2~~ deferral relates, will be measured at fair value as applicable beginning in fiscal 2009. The partial adoption of SFAS 157 as described above had an immaterial impact on the Company in the current fiscal year. The Company is in the process of determining the impact, if any, that the second phase of the adoption of SFAS 157 in fiscal 2009 will have relating to its fair value measurements of non-financial assets and liabilities (such as intangible assets). Refer to Note O for further information regarding fair value measurements.

In February 2007, the FASB issued SFAS No 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). This statement became effective for the Company at the beginning of the current fiscal year. SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The Company did not elect to utilize voluntary fair value measurements as permitted by the standard.

~~Not Yet Implemented:~~In May 2008, the Financial Accounting Standards Board (“FASB”) issued FASB ~~issued~~ Staff Position Accounting Principles Board (“APB”)14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB14-1”). FSP APB14-1 applies to

convertible debt instruments that have a “net settlement feature” permitting settlement partially or fully in cash upon conversion. The guidance requires issuers of such convertible debt securities to separately account for the liability and equity components in a manner that reflects the issuer’s nonconvertible, unsecured debt borrowing rate. The FSP requires bifurcation of a component of the debt into equity, representative of the approximate fair value of the conversion feature at inception, and the amortization of the resulting debt discount to interest expense in the Consolidated Statement of Operations. ~~The Company is in the process of assessing the impact of~~ FSP APB14-1 but estimates that approximately $55 million of Long-term debt will be reclassified to equity as of the inception of the $330 million of convertible notes issued in March 2007. The estimated $55 million debt discount will be amortized to interest expense resulting in the recognition of approximately $8-$12 million of additional non-cash interest expense annually. The non-cash interest recognized will gradually increase over time using the effective interest method. FSP APB~~14-1~~ ~~will become~~is effective for the Company beginning in ~~the first quarter of~~January 2009 and has been applied retrospectively, as required. The impact of adoption of this FSP at the March 2007 issuance date of the $330.0 million of Convertible Notes was a $54.9 million decrease in Long-term debt and a $20.9 million increase in associated deferred tax liabilities pertaining to the interest accretion, and a $0.3 million reclassification of debt issuance costs, net of tax, related to the conversion option feature of the Convertible Notes, totaling a $33.7 million increase to equity. As described more fully in Note I Long-term Debt and Financing Arrangements of the Company’s 2008 Form 10K, in November 2008, the Company repurchased and thereby extinguished $10 million of the Convertible Notes. As a result of this November 2008 $10 million partial extinguishment of the Convertible Notes, the debt discount was reduced by $1.2 million and equity decreased $0.7 million net of tax. The remaining $53.7 million debt discount is ~~required~~being amortized to interest expense using the effective interest method through the Convertible Notes maturity in May 2012. Interest accretion recognized under the FSP in each year is as follows: $7.7 million in 2007; $10.3 million in 2008; $10.2 million in 2009; $10.6 million in 2010; $11.0 million in 2011; and $3.9 million in 2012. The net earnings impact of the interest accretion recognized in accordance with the FSP was $1.6 million, or 2 cents per diluted share, in each of the three month periods ended April 4, 2009 and March 29, 2008. Refer to Note I Convertible Notes for further details.

In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements.”(“SFAS 157”). SFAS 157 establishes a single definition of fair value and a framework for measuring fair value, sets out a fair value hierarchy to be used to classify the source of information used in fair value measurements, and requires new disclosures of assets and liabilities measured at fair value based on their level in the hierarchy. SFAS 157 indicates that an exit value (selling price) should be utilized in fair value measurements rather than an entrance value, or cost

basis, and that performance risks, such as credit risk, should be included in the measurements of fair value even when the risk of non-performance is remote. SFAS 157 also clarifies the principle that fair value measurements should be based on assumptions the marketplace would use when pricing an asset whenever practicable, rather than company-specific assumptions. In February 2008, the FASB issued Staff Positions (“FSPs”)No. 157-1 andNo. 157-2, which, respectively, removed leasing transactions from the scope of SFAS 157 and deferred its effective date for one year relative to nonfinancial assets and nonfinancial liabilities except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Accordingly, in fiscal 2008 the Company applied ~~retrospectively~~SFAS 157 guidance to: (i) all applicable financial assets and liabilities; and (ii) nonfinancial assets and liabilities that are recognized or disclosed at fair value in the Company’s financial statements on a recurring basis (at least annually). In January 2009, the Company applied this guidance to all remaining assets and liabilities measured on a non-recurring basis at fair value. The adoption of SFAS 157 for these items did not have a material effect on the Company. Refer to Note M Fair Value Measurements for disclosures relating to SFAS 157.

In June 2008, the FASB issued FASB Staff Position Emerging Issues Task Force (“EITF”)No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities” (“FSPEITF 03-6-1”). Under the FSP, unvested share-based payment awards with ~~early adoption prohibited.~~rights to receive nonforfeitable dividends (whether paid or unpaid) are participating securities that must be included in the two-class method of computing EPS. The Company adopted FSP EITFNo. 03-6-1 as of January 3, 2009 and calculated basic and diluted earnings per share under both the treasury stock method and the two-class method for all periods presented. There was no difference in the earnings per share under the two methods for the three months ended April 4, 2009 and March 29, 2008, and the treasury stock method continues to be reported as detailed in Note C Earnings Per Share.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141(R)”). SFAS 141(R) requires the acquiring entity in a business combination to recognize the full fair value of assets acquired and liabilities assumed in the transaction (whether a full or partial acquisition), establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed, and requires the acquirer to disclose the information needed to evaluate and understand the nature and effect of the business combination. This statement applies to all transactions or other events in which the acquirer obtains control of one or more businesses, including those sometimes referred to as “true mergers” or “mergers of equals” and combinations achieved without the transfer of consideration, for example, by contract alone or through the lapse of minority veto rights. For new acquisitions made following the adoption of SFAS 141(R), significant costs directly related to the acquisition including legal, audit and other fees, as well as most acquisition-related restructuring, ~~will have to~~must be expensed as incurred rather than recorded to goodwill as is generally permitted under ~~Statement of Financial Accounting Standards No. 141, “Business Combinations” (“~~SFAS ~~141”).~~141. Additionally, contingent purchase price arrangements (also known as earn-outs) ~~will~~must be re-measured to estimated fair value with the impact reported in ~~earnings, whereas under present rules the contingent purchase consideration is~~earnings. With respect to all acquisitions, including those consummated in prior years, changes in tax reserves pertaining to resolution of contingencies or other post acquisition developments will be recorded to ~~goodwill when determined.~~earnings rather than goodwill. SFAS 141(R) was applied to the Company’s business combinations completed during the first quarter of 2009. The ~~Company is continuing to assess the impact the~~ adoption of SFAS 141(R) ~~will entail. SFAS 141(R) applies prospectively to business combinations for which~~did not have a material impact on the ~~acquisition date is on or after January 4, 2009.~~Company in the first quarter of fiscal 2009, but may have a significant impact in future periods.

In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements — an amendment of ARB No. 51” (“SFAS 160”). SFAS 160 requires reporting entities to present non-controlling (minority) interests as equity (as opposed to a liability or mezzanine equity) and provides guidance on the accounting for transactions between an entity and non-controlling interests. SFAS 160 ~~will apply prospectively and is effective as of the~~has been applied beginning ofin fiscal 2009 ~~except for~~as required by the Statement and the presentation and disclosure requirements ~~which will be~~have been applied retrospectively as required for all periods ~~presented upon adoption. The Company is in~~presented. As a result of the ~~process of determining the impact, if any, that the adoption~~implementation of SFAS 160, ~~will~~$19.2 million and $18.5 million relating to non-controlling interests as of April 4, 2009 and January 3, 2009, respectively, have ~~on its results~~been recast from Other liabilities to Noncontrolling interests within Equity.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment of ~~operations~~FASB Statement No. 133” (“SFAS 161”) effective for fiscal years and ~~financial position.~~interim periods beginning after November 15, 2008. This pronouncement requires enhanced disclosures but does not impact the accounting for derivative instruments. The Company adopted SFAS 161 in January 2009 and the related disclosures are in Note G Derivative Financial Instruments.

In June 2008, the ~~Financial Accounting Standards Board (FASB)~~FASB issued ~~FASB Staff Position (FSP) Emerging Issues Task Force (EITF)~~EITF IssueNo. ~~03-6-1,~~07-5, ~~“Determining~~Determining Whether ~~Instruments Granted~~an Instrument (or an Embedded Feature) is Indexed to an Entity’s Own Stock(“EITF 07-5”), which is effective for the Company in ~~Share-Based Payment Transactions Are Participating Securities.~~January, 2009.EITF 07-5 requires an entity to reevaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including consideration of the contingent exercise and settlement provisions in such instruments. The Company has several instruments that are in scope of the EITF, all of which were reassessed and continue to be classified in equity. As a result, the adoption ofEITF 07-5 had no impact on the Company.

Not Yet Implemented: In December 2008, the FASB issued FSP SFAS No. 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets.” ~~Under~~This FSP amends SFAS No. 132, “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” to provide guidance on disclosures about plan assets of defined benefit pension and other postretirement benefit plans. The FSP requires disclosures about how investment allocation decisions are made, the ~~FSP, unvested share-based payment awards that contain rights~~major categories of plan assets, the inputs and valuation techniques used to ~~receive nonforfeitable dividends (whether paid or unpaid) are participating securities,~~measure the fair value of plan assets, the effect of fair value measurements using significant unobservable inputs and ~~should be included in the two-class method~~significant concentrations of ~~computing EPS.~~risk within plan assets. The FSP is effective for fiscal years ~~beginning~~ending after December 15, ~~2008, and interim periods within those years, and is~~2009, with prospective application. The FSP requires enhanced disclosures but does not ~~expected to~~change the accounting for pensions. Accordingly, the FSP will not have ~~a significant~~any impact on the Company’s results of operations, financial condition or liquidity.

In April ~~2008,~~2009, the FASB issued FSP~~No. FAS 142-3,~~ ~~“Determination of the Useful Life of Intangible Assets.” This FSP amends the factors that should be considered in developing renewal or extension~~

~~assumptions used to determine the useful life of a recognized intangible asset under~~ SFAS No. ~~142, “Goodwill~~107-1 and ~~Other Intangible Assets” (“SFAS 142”). The objective~~APB OpinionNo. 28-1, Interim Disclosures About Fair Value of Financial Instruments, requiring fair value disclosures for financial instruments that are not reflected in the Condensed Consolidated Balance Sheets at fair value. Prior to the issuance of this FSP, ~~is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure~~ the fair values of those assets and liabilities were required annually but will now be required on a quarterly basis. In addition, quantitative and qualitative information about fair value ofestimates for all financial instruments not measured in the ~~asset under SFAS 141(R), and other GAAP. This~~Condensed Consolidated Balance Sheets at fair value is required. The FSP ~~applies prospectively to all intangible assets acquired~~will be effective for interim reporting periods that end after ~~the effective date in fiscal~~June 15, 2009 ~~whether acquired in a business combination or otherwise. Early~~with early adoption ~~is prohibited.~~permitted for periods ending after March 15, 2009. The Company ~~is evaluating~~will implement the disclosure requirements under this ~~guidance but does not expect it to have a significant impact on its financial position or results~~FSP in the second quarter of ~~operations.~~2009.


C.	Earnings Per Share

The following table reconciles the weighted average shares outstanding used to calculate basic and diluted earnings per share for the three months ended April 4, 2009 and ~~nine month periods ended September 27, 2008 and September~~March 29, ~~2007:~~2008:


	Third Quarter				Year to Date
	2008		2007		2008		2007		2009		2008

Numerator (in millions):
Net earnings – basic and diluted	$	164.5	$	91.4	$	312.1	$	244.3
Net earnings attributable to common shareowners — basic and diluted									$	37.7	$	66.5

Denominator (in thousands):
Basic earnings per share weighted average shares		78,808		82,288		78,867		82,616
Basic earnings per share — weighted average shares										79,209		79,176
Dilutive effect of stock options and awards		1,038		1,711		1,158		1,801		262		1,228

Diluted earnings per share – weighted average shares		79,846		83,999		80,025		84,417
Diluted earnings per share — weighted average shares										79,471		80,404

Earnings per share of common stock:
Basic	$	2.09	$	1.11	$	3.96	$	2.96	$	0.48	$	0.84
Diluted	$	2.06	$	1.09	$	3.90	$	2.89	$	0.47	$	0.83


E.	~~Accounts Receivable~~

In June 2008, the Company acquired a third party’s interest in a Special Purpose Entity (“SPE”). As a result, the entity became non-qualifying and the net assets, which consisted of accounts receivable of $17.3 million, were consolidated in the Company’s balance sheet. Net cash flows between the Company and the SPE for 2008 totaled $43.2 million, primarily related to receivable sales, collections on receivables and servicing fees. There were no gains or losses on the sale of receivables to the SPE or on the acquisition of the third party interest.


F.	Inventories

The components of inventories at ~~September 27, 2008~~April 4, 2009 and ~~December 29, 2007~~January 3, 2009 are as follows (in millions):


	2008		2007		2009		2008

Finished products	$	406.8	$	397.2	$	360.4	$	365.0
Work in process		70.9		57.5		57.2		58.2
Raw materials		93.7		101.7		86.1		91.5

Total inventories	$	571.4	$	556.4	$	503.7	$	514.7


G.	~~Assets Held for Sale~~

The assets of one small security business (Blick Alfia) are classified as held for sale at September 27, 2008, as detailed in Note P “Discontinued Operations”. In addition to the security business, the assets of CST/berger and one other small business (Facom Lista) in the amount of $76.5 million were held for sale as of December 29, 2007. Further, the Company held $24.3 million of financing lease receivables generated by the Blick business as of December 29, 2007. These receivables were sold during the first quarter of 2008.


H.E.	Acquisitions and Goodwill

~~In July~~During 2008, the Company completed ~~the~~fourteen acquisitions for an aggregate value of Sonitrol Corporation (“Sonitrol”) and Xmark Corporation (“Xmark”) for $281.3 million in cash and $46.6 million in cash, respectively. The Sonitrol acquisition has preliminarily resulted in $133.1 million of goodwill, the majority of which, will not be deductible for income tax purposes. Sonitrol is a market leader in North American commercial security monitoring services, access control and fire detection systems, with annual revenues of approximately $110$576.6 million. The acquisition will complement the product offering of the pre-existing security integration businesses including HSM acquired in early 2007. The Xmark acquisition has preliminarily resulted in $22.7 million of goodwill, none of which is deductible for income tax purposes. Xmark, headquartered in Canada, markets and sells radio frequency identification based systems used to identify, locate and protect people and assets, with annual revenues of approximately $30 million. The acquisition will enhance the Company’s personal security business.

~~The Company also made five small acquisitions relating to its mechanical access systems and convergent security solutions businesses during 2008.~~ These ~~five~~ acquisitions were ~~acquired for a combined purchase price of $34.0 million.~~

~~The total purchase price of $361.9 for the 2008 acquisitions was~~ accounted for as purchases in accordance with SFAS 141. ~~The total~~During the first quarter of 2009 the Company completed two minor acquisitions for a combined purchase price of $6.0 million. These two acquisitions were accounted for as purchases in accordance with SFAS 141(R) which was adopted by the ~~acquisitions reflects transaction costs and is net~~Company at the beginning of ~~cash acquired, and was allocated to~~ the ~~assets acquired and liabilities assumed based on their estimated fair values.~~current fiscal year. The purchase price allocations ~~of these~~for the 2008 acquisitions are largely complete but preliminary ~~mainly~~ with respect to ~~the finalization of intangible asset valuations, related~~ deferred taxes and certain other items.

~~During 2007, the Company completed nine acquisitions for a total purchase price of $646.7 million.~~ The purchase price ~~allocation~~allocations for ~~one small acquisition with a total purchase price of $11.1 million is~~the minor 2009 acquisitions are preliminary ~~mainly~~ with respect to ~~execution of acquisition date integration plans~~intangible asset valuation, income taxes and other ~~minor items. There were no significant changes~~matters. Changes to the purchase price allocation ~~made~~recorded during ~~2008.~~

Acquisition Related: During the first quarter of 2009, $2.4 million of reserves were established for an acquisition closed in the latter half of 2008 related to the consolidation of security monitoring call centers. Of this amount $0.8 million was for the severance of approximately 90 employees and $1.6 million related to the closure of a branch facility, primarily from remaining lease obligations. The Company utilized $1.0 million of the restructuring reserves during the first quarter of 2009 established for previous acquisitions and as of April 4, 2009, $13.7 million in acquisition-related accruals remain. The remaining balance primarily relates to approximately $7 million ~~pertaining to the~~for Facom ~~acquisition~~ for which the timing of payments depends upon the actions of certain European governmental ~~agencies. A summary~~agencies as well as the call center consolidation expected to occur in the later quarters of ~~the Company’s restructuring reserve activity from December 29, 2007 to September 27, 2008 is as follows (in millions):~~

Net

12/29/07 Additions Usage Currency 9/27/08

Acquisitions

Severance $ 18.8 $ 0.8 $ (6.0 ) — $ 13.6
Facility Closure 1.6 1.4 (0.9 ) — 2.1
Other 1.0 — (0.4 ) — 0.6
2008 Actions
— 25.0 (15.1 ) (0.8 ) 9.1
Pre-2008 Actions
2.3 — (2.3 ) — —

$ 23.7 $ 27.2 $ (24.7 ) $ (0.8 ) $ 25.4

~~2008 Actions:~~ During the first nine months of 2008, the Company initiated cost reduction initiatives in order to maintain its cost competitiveness. Severance and related charges of $20.0 million were recorded during the first nine months relating to the reduction of approximately 700 employees. In addition to severance, $5.0 million was recorded for asset impairments primarily relating to the exit of a business. Approximately $10.9 million of the total charges pertained to the Construction and DIY segment; $6.2 million to the Industrial segment; and $7.9 million to the Security segment. Of these amounts, $15.1 million has been utilized to date, with $9.1 million of reserves remaining as of September 27, 2008.

~~Pre-2008 Actions:~~ During 2007, the Company initiated $11.8 million of cost reduction actions in various businesses. These actions were comprised of the severance of 525 employees and the exit of a leased facility. This entire amount has been utilized as of September 27, 2008.

~~Acquisition Related:~~ During the third quarter of 2008, $2.0 million of reserves were established primarily relating to the Sonitrol acquisition. Of this amount, $0.6 million was for severance of approximately 100 employees and $1.4 million relates to the planned closure of 9 facilities. During 2007, $3.0 million of reserves were established for HSM in purchase accounting. Of this amount, $1.1 million was for severance of approximately 80 employees and $1.9 million related to the closure of 13 branch facilities. As of September 27, 2008, $2.1 million has been utilized, leaving $0.9 million remaining. The Company also utilized $6.7 million of restructuring reserves during the first nine months of 2008 established for various other current year and prior year acquisitions. As of September 27, 2008, $16.3 million in accruals for restructuring remain, primarily relating to the Facom, HSM and Sonitrol acquisitions.


J.	~~Credit Facility~~

On February 27, 2008, the Company amended its credit facility to provide for an increase and extension of its committed credit facility to $800 million from $550 million. In May 2008, the Company’s commercial paper program was also increased to $800 million. The credit facility continues to be designated as a liquidity back-stop for the Company’s commercial paper program. The amended and restated facility expires in February 2013.2009.


K.G.	Derivative Financial Instruments

The Company is exposed to market risk from changes in foreign currency exchange rates, interest rates, stock prices and commodity prices. As part of the Company’s risk management program, it uses a variety of financial instruments such as interest rate swap and currency swap agreements, purchased currency options and foreign exchange contracts to mitigate interest rate and foreign currency exposure. Generally, commodity price exposures are not hedged with derivative financial instruments and instead are actively managed through customer pricing initiatives, procurement-driven cost reduction initiatives and other productivity improvement projects. Financial instruments are not utilized for speculative purposes. If the Company elects to do so and if the instrument meets the criteria specified in SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, as amended (SFAS 133), management designates its derivative instruments as cash flow hedges, fair value hedges or net investment hedges.

A summary of the fair value of the Company’s derivatives recorded in the Consolidated Balance Sheets are as follows (in millions):


	Balance Sheet					Balance Sheet
	Classification	4/4/09		1/3/09		Classification	4/4/09		1/3/09

Derivatives designated as hedging instruments:
Interest Rate Contracts
Cash Flow	Other current assets	$	—	$	—	Accrued expenses	$	0.6	$	0.6
	LT Other assets		—		—	LT Other liabilities		5.0		6.0
Fair Value	Other current assets		2.6		—	Accrued expenses		—		—
	LT Other assets		1.0		—	LT Other liabilities		—		—
Foreign Exchange Contracts
Cash Flow	Other current assets		1.1		0.5	Accrued expenses		0.2		1.4
	LT Other assets		0.1		—	LT Other liabilities		18.3		22.0
Net Investment Hedge	Other current assets		—		—	Accrued expenses		13.8		—
	LT Other assets		—		—	LT Other liabilities		—		20.7

		$	4.8	$	0.5		$	37.9	$	50.7

Derivatives not designated as hedging instruments:
Foreign Exchange Contracts	Other current assets	$	7.7	$	10.3	Accrued expenses	$	3.2	$	19.5
	LT Other assets		16.3		21.0	LT Other liabilities		10.8		14.0

		$	24.0	$	31.3		$	14.0	$	33.5

The counterparties to all of the above mentioned financial instruments are major international financial institutions. The Company is exposed to credit risk for net exchanges under these agreements, but not for the notional amounts. The risk is limited to the asset amounts noted above. The Company limits its exposure and concentration of risk by diversifying financial institutions and does not anticipate non-performance by any of its counterparties. Further, as more fully discussed in Note M Fair Value Measurements, the Company considers non-performance risk of its counterparties at each reporting

period and adjusts the carrying value of these assets accordingly. The risk of default is considered remote.

CASH FLOW HEDGES

For derivative instruments that are so designated at inception and qualify as cash flow hedges, the Company records the effective portions of the gain or loss on the derivative instrument in Accumulated other comprehensive income, a separate component of Shareowners’ Equity, and subsequently reclassifies these amounts into earnings in the period during which the hedged transaction is recognized in earnings. The ineffective portion of the gain or loss, if any, is immediately recognized in the same caption where the hedged items are recognized in the Consolidated Statements of Operations, generallyOther-net. The Company measures hedge effectiveness by comparing the cumulative change in the hedge contract with the cumulative change in the hedged item, both of which are based on forward rates. For interest rate swaps designated as cash flow hedges, the Company measures the hedge effectiveness by offsetting the change in the variable portion of the interest rate swap with the change in the expected interest flows due to fluctuations in the LIBOR based interest rate.

There is a $3.2 million and $4.8 million after-tax gain reported for cash flow hedge effectiveness in Accumulated other comprehensive income as of April 4, 2009 and January 3, 2009, respectively. Of this amount $2.3 million is expected to be reclassified to earnings as the hedged transactions occur or as amounts are amortized within the next 12 months. The ultimate amount recognized will vary based on fluctuations of the hedged currencies through the maturity dates. The table below details pre-tax amounts reclassified from Accumulated other comprehensive income into earnings during the periods in which the underlying hedged transactions affected earnings; due to the effectiveness of these instruments in matching the underlying on a net basis there was no significant earnings impact.

Gain (Loss)

Recognized in

Income on

Derivatives

(Ineffective

Classification of

Gain (Loss)

Portion & Amount

Gain (Loss)

Reclassified from

Excluded from

Gain (Loss)

Reclassified from

OCI to Income

Effectiveness

(In millions)

Recorded in OCI

OCI to Income

(Effective Portion)

Testing)

Interest Rate

Contracts

(0.1

)

Interest expense

(1.2

)

—

Foreign

Exchange

Contracts

1.3

Cost of sales

1.6

—

3.6

Other-net

6.8

—

The impact of de-designated hedges was a pre-tax gain of $0.6 million in the first quarter of 2009. The hedged items impact to the income statement for the first quarter of 2009 was a loss of $2.9 million to Cost of sales and a loss of $6.4 million to Other-net. There was no impact related to the interest rate contracts hedged items.

Interest Rate Contracts

The Company enters into interest rate swap agreements in order to obtain the lowest cost source of funds within a targeted range of variable to fixed-rate debt proportions. At April 4, 2009, the Company has outstanding contracts fixing the interest rate on its $320.0 million floating rate convertible notes (LIBOR less 350 basis points) at 1.43%.

Foreign Currency Contracts

Forward contracts: Through its global businesses, the Company enters into transactions and makes investments denominated in multiple currencies that give rise to foreign currency risk. The Company and its subsidiaries regularly purchase inventory from itsnon-United States dollar subsidiaries that creates volatility in the Company’s results of operations. The Company utilizes forward contracts to

hedge these forecasted purchases of inventory. Gains and losses reclassified from Accumulated other comprehensive income for the effective and ineffective portions of the hedge as well as any amounts excluded from effectiveness testing are recorded to Cost of sales. As of April 4, 2009 the notional values of the hedge contracts is as follows (includes $36.7 million which is de-designated):


			Year of
(In millions)	Notional		Maturity

Chinese renminbi		32.5		2009
Euro		19.8		2009
Great Britain pound		8.1		2009
Japanese yen		2.6		2009-2010
Thai baht		6.0		2009

Total forward contracts	$	69.0

Currency swaps: The Company and its subsidiaries have entered into various inter-company transactions whereby the notional values are denominated in currencies other than the functional currencies of the party executing the trade. In order to better match the cash flows of its inter-company obligations with cash flows from operations, the Company enters into currency swaps. The notional value of the United States dollar exposure and the related hedge contracts outstanding as of April 4, 2009 is $150.0 million.

FAIR VALUE HEDGES

For derivative instruments that are so designated at inception and qualify as fair value hedges, the Company records the changes in the fair value of the derivative instrument as well as the hedged item in the income statement within the same caption. The Company measures effectiveness by comparing the cumulative change in the hedged contract with the cumulative change in the hedged item, both of which are based on forward rates.

Interest Rate Risk

In an effort ~~to continue~~ to optimize the mix of fixed versus floating rate debt in the Company’s capital structure, ~~in May 2008~~the Company enters into interest rate swaps. In January 2009, the Company entered into ~~a $200 million~~ interest rate ~~swap.~~swaps with notional values which equaled the Company’s $200.0 million 4.9% notes due 2012 and $250.0 million 6.15% notes due 2013. The ~~swap matures November 2012, matching the maturity of the outstanding 4.9%, $200 million Note. On the~~ interest rate ~~swap,~~swaps effectively converted the ~~Company will pay a~~Company’s fixed rate debt to floating rate ~~of interest and will receive a fixed rate of interest equal to~~debt based on LIBOR, thereby hedging the ~~fixed rate payable on the Note. The swap hedges the fluctuations~~fluctuation in ~~the~~ fair value resulting from changes in interest rates. ~~At September 27, 2008,~~A summary of the fair value adjustments relating to these swaps for the first quarter of ~~this~~2009 are as follows (in millions):


			First Quarter 2009
Income Statement	Notional Value of		Gain/(Loss) on		Gain / (Loss) on
Classification	Open Contracts		Swaps		Borrowings

Interest Expense	$	450.0	$	1.1	$	(1.1	)

In addition to the amounts in the table above, the net swap settlements that occur each period and amortization of terminated swaps are also reported in interest ~~rate swap~~expense, and amounted to a $3.0 million gain for the first quarter of 2009. Interest expense for the period was $6.4 million on the underlying debt.

NET INVESTMENT HEDGES

Foreign Exchange Contracts

The Company utilizes net investment hedges to offset the translation adjustment arising from remeasurement of its investment in the assets, liabilities, revenues, and expenses of its foreign subsidiaries. For derivative instruments that are designated at inception and qualify as net investment hedges, the Company records the effective portion of the gain or loss on the derivative instrument in Accumulated other comprehensive income. The Company measures effectiveness by comparing the cumulative change in the hedged contract with the cumulative change in the hedged item, both of which are based on forward rates. The total after-tax amount in Accumulated other comprehensive income was a loss of ~~$1.2 million. This amount is recorded~~$2.4 million and $6.6 million at April 4, 2009 and January 3, 2009, respectively. In December 2008 the Company entered into a foreign exchange contract to hedge its net investment in ~~Long-term debt~~euro assets, as detailed in the ~~Consolidated Balance Sheet~~pre-tax amounts below (in millions).

First Quarter 2009

Ineffective Portion &

Amount Excluded

Notional Value

Amount

Effective Portion

from Effectiveness

Income Statement

of Open

Recorded in OCI

Recorded in Income

Testing Recorded in

Classification

Contract

Gain (Loss)

Statement

Income Statement

Other-net

223.4

6.8

—

UNDESIGNATED HEDGES

Foreign Exchange Contracts

Currency swaps and foreign exchange forward contracts are used to ~~recognize~~reduce exchange risks arising from the change in ~~the~~ fair value of certain foreign currency denominated assets and liabilities (i.e. affiliate loans, payables, receivables). The objective of these practices is to minimize the ~~long-term debt and~~impact of foreign currency fluctuations on operating results. The following is a summary of contracts outstanding at April 4, 2009:


			Year of
(In millions)	Notional		Maturity

Forward Contracts:
Australian dollar	$	4.5		2009
Canadian dollar		18.5		2009
Chinese renminbi		18.0		2009
Czech koruna		1.0		2009
Danish krone		32.9		2009
Euro		18.2		2009 — 2010
Great Britain pound		12.9		2009
Japanese yen		0.9		2009
Mexican peso		3.1		2009
New Zealand dollar		0.5		2009
Polish zloty		6.8		2009
South African rand		0.9		2009
Swiss franc		10.2		2009
Swedish krona		0.1		2009
Taiwan dollar		61.7		2009
Thai Baht		12.1		2009

Total forward contracts	$	202.3

Currency Swaps:
Canadian dollar		25.0		2010
Euro		68.6		2010
Great Britain pound		28.5		2011
United States dollar		129.4		2010

Total currency swaps	$	251.5

The income statement impacts related to derivatives not designated as hedging instruments under SFAS 133 for the first quarter of 2009 is as follows (in millions):


Derivatives Not			Amount of Gain (Loss)
Designated as Hedging	Income Statement		Recorded in Income on
Instruments under SFAS 133	Classification		Derivative

Foreign Exchange Contracts		Other-net	$	2.2

In January 2009, a Great Britain pound currency swap matured, resulting in ~~Other liabilities to record the fair value~~a cash payment of ~~the swap. The swap is highly effective and, accordingly, no amount is recorded for ineffectiveness in the Consolidated Statement of Operations.~~$10.5 million.


L.H.	~~Commitments and Contingencies~~Equity Option

In January 2009, the Company purchased from financial institutions over the counter15-month capped call options on 3 million shares of its common stock for an aggregate premium of $16.4 million, or an average of $5.47 per option. In accordance withEITF 00-19 “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock” the premium paid was recorded as a reduction to equity. The gain or loss on the option will depend on the actual market price of the Company’s stock on exercise dates which occur in March 2010. The contracts for each of the three series of options generally provide that the options may, at the Company’s election, be cash settled, physically settled or net-share settled (the default settlement method). Each series of options has various expiration dates within the month of March 2010. The options will be automatically exercised if the market price of the Company’s common stock on the relevant expiration date is greater than the applicable lower strike price (i.e. the options are “in-the-money”). If the market price of the Company’s common stock at the expiration date is below the applicable lower strike price, the relevant options will expire with no value. If the market price of the Company’s common stock on the relevant expiration date is between the applicable lower and upper strike prices, the value per option to the Company will be the then-current market price less that lower strike price. If the market price of the Company’s common stock is above the applicable upper strike price, the value per option to the Company will be the difference between the applicable upper strike price and lower strike price. The aggregate fair value of the options at April 4, 2009 was $13.9 million.


					(Per Share)
			Net Premium		Initial		Lower		Upper Strike
Series	Number of Options		Paid (In millions)		Hedge Price		Strike Price		Price

Series I		1,000,000	$	5.5	$	32.97	$	31.33	$	46.16
Series II		1,000,000	$	5.5	$	32.80	$	31.16	$	45.92
Series III		1,000,000	$	5.4	$	32.73	$	31.10	$	45.83

		3,000,000	$	16.4	$	32.84	$	31.19	$	45.97


I.	Convertible Notes

FSP APB14-1 applies to the Company’s $320.0 million in outstanding convertible notes (the “Convertible Notes”) that were issued on March 20, 2007 and are due May 17, 2012. At maturity, the Company is obligated to repay the principal in cash, and may elect to settle the conversion option value, if any, as detailed further below, in either cash or shares of the Company’s common stock. The Convertible Notes bear interest at an annual rate of3-month LIBOR minus 3.5%, reset quarterly (but never less than zero), and initially set at 1.85%. Interest is payable quarterly commencing August 17, 2007. At the March 20, 2007 issuance date the estimated market rate of interest for the Convertible Notes would have been 5.13% (the non-convertible or “straight-debt” borrowing rate) without the conversion option feature. The FSP requires the Company to record non-cash interest accretion to reflect the straight-debt borrowing rate on the Convertible Notes and to recast prior periods for comparability. The Convertible Notes are unsecured general obligations and rank equally with all of the Company’s other unsecured and unsubordinated debt. The Convertible Notes were issued as a component of the Company’s Equity Units and are pledged as collateral to secure the holders’ obligations to purchase common stock under the terms of the Equity Purchase Contract component of these units, as described more fully in Note I Long-Term Debt and Financing Arrangements in the Company’s 2008Form 10-K.

The Company is obligated to remarket the Convertible Notes commencing on May 10, 2010 to the extent that holders of the Convertible Note element of an Equity Unit or holders of separate Convertible Notes elect to participate in the remarketing. Holders of Equity Units may elect to have the Convertible Note element of their units not participate in the remarketing by the following means: create a Treasury Unit (replace the Convertible Notes with zero-coupon U.S. Treasury securities as collateral to secure their performance under the Equity Purchase Contracts); settle the Equity Purchase Contracts early; or settle the Equity Purchase Contracts in cash prior to May 7, 2010. Upon a successful

remarketing of the Convertible Notes, the proceeds will be utilized to satisfy in full the Equity Unit holders’ obligations to purchase the applicable amount of the Company’s common stock under the Equity Purchase Contracts on May 17, 2010. In the event the remarketing of the Convertible Notes is not successful, the holders may elect to pay cash or to deliver the Convertible Notes to the Company as consideration to satisfy their obligation to purchase common shares under the Equity Purchase Contract.

The conversion premium for the Convertible Notes is 19.0%, equivalent to the initial conversion price of $64.80 based on the $54.45 value of the Company’s common stock at the date of issuance. Upon conversion on May 17, 2012 (or in respect of a cash merger event), the Company will deliver to each holder of the Convertible Notes $1,000 cash for the principal amount of each note. Additionally at conversion, to the extent, if any, that the conversion option is “in the money”, the Company will deliver, at its election, either cash or shares of the Company’s common stock based on an initial conversion rate of 15.4332 shares (equivalent to the initial conversion price set at $64.80) and the applicable market value of the Company’s common stock. The ultimate conversion rate may be increased above 15.4332 shares in accordance with standard anti-dilution provisions applicable to the Convertible Notes or in the event of a cash merger. For example, an increase in the ultimate conversion rate will apply if the Company increases the per share common stock dividend rate during the five year term of the Convertible Notes; accordingly such changes to the conversion rate are within the Company’s control under its discretion regarding distributions it may make and dividends it may declare. Also, the holders may elect to accelerate conversion, and “make whole” adjustments to the conversion rate may apply, in the event of a cash merger or “fundamental change”. Subject to the foregoing, if the market value of the Company’s common shares is below the conversion price at conversion, (initially set at a rate equating to $64.80 per share), the conversion option would be “out of the money” and the Company would have no obligation to deliver any consideration beyond the $1,000 principal payment required under each of the Convertible Notes. To the extent, if any, that the conversion option of the Convertible Notes becomes “in the money” in any interim period prior to conversion, there will be a related increase in diluted shares outstanding utilized in the determination of the Company’s diluted earnings per share in accordance with the treasury stock method prescribed by SFAS No. 128, Earnings Per Share. At April 4, 2009, the conversion option is out of the money and accordingly the Company does not have any obligation beyond the $320.0 million of outstanding convertible notes.

The principal amount of the Convertible Notes was $320.0 million at both April 4, 2009 and January 3, 2009. The net carrying value and unamortized discount of the Convertible Notes was $286.8 million and $33.2 million, respectively, at April 4, 2009 and $284.3 million and $35.7 million, respectively, at January 3, 2009. The remaining unamortized balance will be recorded to interest expense through the Convertible Notes maturity in May 2012. The equity component carrying value was $32.9 million at both balance sheet dates.

No interest expense was recorded for the contractual interest coupon on the Convertible Notes for the periods presented because it would be less than a zero interest rate based upon the applicable3-month LIBOR minus 3.5% rate in these periods. The Company has outstanding derivative contracts fixing the interest rate on the $320.0 million floating rate Convertible Notes(3-month LIBOR less 350 basis points) at 1.43% and recognized $1.2 million of interest expense pertaining to these interest rate swaps in each of the three month periods ending April 4, 2009 and March 29, 2008. The non-cash interest expense accretion related to the amortization of the liability balance as required under the FSP totaled $2.5 million for both the first quarter of 2009 and the first quarter of 2008. The interest expense recognized on the $320.0 million of Convertible Notes reflecting both the fixed interest rate swaps and the interest accretion required under the FSP represented an effective interest rate of 5.1% for the first quarter of 2009 and 5.2% for the first quarter of 2008.

In order to offset the common shares that may be deliverable pertaining to the previously discussed conversion option feature of the Convertible Notes, the Company entered into Bond Hedges with certain major financial institutions. The Company paid the financial institutions a premium of $49.3 million for the Bond Hedge which was recorded, net of $14.0 million of anticipated tax benefits,

as a reduction of Shareowners’ Equity. The terms of the Bond Hedge mirror those of the conversion option feature of the Convertible Notes such that the financial institutions may be required to deliver shares of the Company’s common stock to the Company upon conversion at its exercise in May 2012. To the extent, if any, that the conversion option feature becomes “in the money” during the five year term of the Convertible Notes, diluted shares outstanding will increase accordingly. Because the Bond Hedge is anti-dilutive, it will not be included in any diluted shares outstanding computation prior to its maturity. However, at maturity of the Convertible Notes and the Bond Hedge in 2012, the aggregate effect of these instruments is that there will be no net increase in the Company’s common shares.

J. Commitments and Contingencies

The Company is involved in various legal proceedings relating to environmental issues, employment, product liability and workers’ compensation claims and other matters. The Company periodically reviews the status of these proceedings with both inside and outside counsel, as well as an actuary for risk insurance. Management believes that the ultimate disposition of these matters will not have a material adverse effect on the Company’s operations or financial condition taken as a whole.

The Company’s policy is to accrue environmental investigatory and remediation costs for identified sites when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. As of ~~September 27, 2008~~April 4, 2009 and ~~December 29, 2007,~~January 3, 2009, the Company had reserves of ~~$29.3~~$28.4 million and ~~$30.1~~$28.8 million, respectively, primarily for remediation activities associated with company-owned properties as well as for Superfund sites. The range of environmental remediation costs that is reasonably possible is ~~$19.5~~$18.9 million to ~~$52.5~~$52.0 million which is subject to change in the near term.

As of September 27, 2008 the Company has commitments to purchase Générale de Protection (“GdP”) and Scan Modul for approximately $166 million and $20 million in cash, respectively. Both acquisitions closed on October 1 as disclosed in Note Q. Subsequent Events.


M.K.	Guarantees

The Company’s financial guarantees at ~~September 27, 2008 were~~April 4, 2009 are as follows (in millions):


		Maximum		Liability				Maximum		Liability
		Potential		Carrying				Potential		Carrying
	Term	Payment		Amount		Term		Payment		Amount

Guarantees on the residual values of leased properties	Up to 6 years	$	80.5	$	19.2		Less than 1 year	$	53.8	$	—
Standby letters of credit	Generally 1 year		35.1		—		Generally 1 year		35.1		—
Commercial customer financing arrangements	Up to 5 years		17.7		15.3		Up to 6 years		15.0		13.6
Guarantee on the external Employee Stock Ownership Plan (“ESOP”) borrowings	Through 2009		2.0		2.0		Through 2009		1.0		1.0

		$	135.3	$	36.5			$	104.9	$	14.6

The Company has guaranteed a portion of the residual value arising from its synthetic lease and U.S. master personal property lease programs. The lease guarantees aggregate ~~$80.5~~$53.8 million while the fair value of the underlying assets is estimated at ~~$96.9~~$63.7 million. The related assets would be available to satisfy the guarantee obligations and therefore it is unlikely the Company will incur any future loss associated with these lease guarantees. ~~The Company has recorded $19.2 million in debt pertaining to one of these synthetic leases.~~ The Company has issued $35.1 million in standby letters of credit that guarantee future payments which may be required under certain insurance programs. The Company provides various limited and full recourse guarantees to financial institutions that provide financing to U.S. and Canadian Mac Tool distributors for their initial purchase of the inventory and truck necessary to function as a distributor. In addition, the Company provides alimited and full recourse ~~guarantee~~guarantees to a financial ~~institution~~institutions that ~~extends~~extend credit to certain end retail customers of its U.S. Mac Tool distributors. The gross amount guaranteed in these arrangements is ~~$17.7~~$15.0 million and the ~~$15.3~~$13.6 million carrying value of the guarantees issued is recorded in debt and other liabilities as appropriate in the consolidated balance sheet.

The Company provides product and service warranties which vary across its businesses. The types of warranties offered generally range from one year to limited lifetime, while certain products carry no ~~warranty or customer service considerations.~~warranty. Further, the Company at times incurs discretionary costs to service its products in connection

with product performance issues. Historical warranty and service claim experience forms the basis for warranty obligations recognized. Adjustments are recorded to the warranty liability as new information becomes available.

The changes in the carrying amount of product and service warranties for the ~~nine~~three months ended ~~September 27, 2008~~April 4, 2009 are as follows (in millions):


Balance December 29, 2007	$	63.7
Balance January 3, 2009				$	65.6
Warranties and guarantees issued		16.7			4.9
Warranty payments		(17.2	)		(5.7	)
Currency and other		1.7			(0.7	)

Balance September 27, 2008	$	64.9
Balance April 4, 2009				$	64.1


N.L.	Net Periodic Benefit Cost –— Defined Benefit Plans

Following are the components of net periodic benefit cost for the three months ended April 4, 2009 and ~~nine month periods ended September 27,~~March 29, 2008 ~~and September 29, 2007~~ (in millions):

Third Quarter
Pension Benefits Other Benefits
U.S. Plans Non-U.S. Plans U.S. Plans
2008 2007 2008 2007 2008 2007

Service cost $ 0.7 $ 0.6 $ 0.9 $ 0.9 $ 0.2 $ 0.4
Interest cost 2.4 2.2 3.2 3.5 0.2 0.2
Expected return on plan assets (2.6 ) (2.5 ) (3.8 ) (4.6 ) — —
Amortization of transition liability — — — 0.1 — —
Amortization of prior service cost/(credit) 0.3 (0.8 ) — — (0.1 ) —
Amortization of net (gain) loss 0.1 0.1 0.6 1.3 (0.1 ) (0.2 )
Curtailment (gain) loss — 1.1 (0.2 ) 0.3 — —

Net periodic benefit cost $ 0.9 $ 0.7 $ 0.7 $ 1.5 $ 0.2 $ 0.4


	Year to Date
	Pension Benefits												Other Benefits						Pension Benefits												Other Benefits
	U.S. Plans						Non-U.S. Plans						U.S. Plans						U.S. Plans						Non-U.S. Plans						U.S. Plans
	2008			2007			2008			2007			2008			2007			2009			2008			2009			2008			2009			2008

Service cost	$	2.0		$	2.0		$	3.4		$	3.3		$	0.8		$	0.9		$	0.9		$	0.6		$	0.7		$	1.1		$	0.3		$	0.3
Interest cost		7.3			6.8			11.3			11.1			1.0			1.0			2.5			2.4			3.1			4.1			0.4			0.4
Expected return on plan assets		(7.7	)		(7.3	)		(13.9	)		(13.6	)		—			—			(1.7	)		(2.5	)		(3.4	)		(5.1	)		—			—
Amortization of transition liability		—			—			0.1			0.1			—			—
Amortization of prior service cost/(credit)		1.0			—			0.1			0.1			(0.2	)		(0.1	)
Amortization of net (gain) loss		0.1			0.4			2.8			4.7			(0.2	)		(0.2	)
Curtailment loss		—			1.1			0.9			0.3			—			—
Amortization of prior service cost																				0.3			0.3			—			0.1			—			—
Amortization of net loss (gain)																				0.8			0.1			0.6			1.1			(0.1	)		(0.1	)

Net periodic benefit cost	$	2.7		$	3.0		$	4.7		$	6.0		$	1.4		$	1.6		$	2.8		$	0.9		$	1.0		$	1.3		$	0.6		$	0.6


O.M.	Fair Value Measurements

SFAS 157 defines, ~~fair value,~~ establishes a consistent framework for measuring, ~~fair value~~ and expands disclosure requirements about fair value. SFAS 157 requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1 –— Quoted prices for identical instruments in active markets.

Level 2 –— Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs and significant value drivers are observable.

Level 3 –— Instruments that are valued using unobservable inputs.

The Company holds various derivative financial instruments that are employed to manage risks, including foreign currency and interest rate exposures. These financial instruments are carried at fair value and are included within the scope of SFAS 157. The Company determines ~~the~~ fair value of derivatives through the use of matrix or model pricing, which ~~utilizes~~utilize verifiable inputs such as market interest and currency rates. When determining the fair value of these financial instruments for which Level 1 evidence does not exist, the Company considers various factors including the following: exchange or

market price quotations of similar instruments, time value and volatility factors, the Company’s own credit rating and the credit rating of the counter-party.

The following table presents the fair value and the hierarchy levels, for financial assets and liabilities that are measured at fair value ~~as of September 27, 2008~~ (in millions):


	Total Carrying		Quoted Prices in		Significant Other		Significant								Significant
	Value at		Active Markets		Observable Inputs		Unobservable Inputs				Quoted Prices in		Significant Other		Unobservable
	September 27, 2008		(Level 1)		(Level 2)		(Level 3)		Total Carrying		Active Markets		Observable Inputs		Inputs
	Value		(Level 1)		(Level 2)		(Level 3)

April 4, 2009:
Derivative assets	$	30.6	$	—	$	30.6	$	—	$	28.8	$	—	$	28.8	$	—
Derivative liabilities	$	97.4	$	—	$	97.4	$	—
Derivatives liabilities									$	51.9	$	—	$	51.9	$	—
January 3, 2009:
Derivative assets									$	31.8	$	—	$	31.8	$	—
Derivatives liabilities									$	84.2	$	—	$	84.2	$	—

The Company recorded $0.7 million in restructuring related asset impairments during the first quarter, as discussed in Note F Restructuring. Fair value for impaired production assets was based on the present value of discounted cash flows. This included an estimate for future cash flows as production activities are phased out as well as auction values (prices for similar assets) for assets where use has been discontinued or future cash flows are minimal. The assumptions represented Level 3 inputs.


P.N.	Discontinued Operations

~~On July 25,~~During 2008, the Company sold its CST/berger laser leveling and measuring business ~~which was formerly in its CDIY segment,~~ to Robert Bosch Tool Corporation, for ~~$204~~$196.7 million in ~~cash.~~ cash and recorded an $83.2 million after-tax gain as a result of the sale. The Company sold three other smaller businesses during 2008 for total cash proceeds of $7.9 million and a total after-tax loss of $0.2 million. The divestitures of these businesses were made pursuant to the Company’s growth strategy which entails a reduction of risk associated with certain large customer concentrations and reallocation of capital resources to increase shareowner value.

CST/berger, which was formerly in the Company’s CDIY segment, manufactures and distributes surveying accessories as well as building and construction instruments primarily in the Americas and Europe. ~~The sale resulted in an $84.3 million after tax gain which was recorded during~~Two of the small businesses that were sold were part of the Security segment, while the third ~~quarter~~minor business was part of ~~2008. Goodwill disposed of in this divestiture amounted to $26.9 million.~~

~~During~~ the second quarter of 2008, a small business (Facom Lista) in the industrial segment was sold. This sale resulted in a $1.6 million gain, net of tax, which has been reported in discontinued operations. Goodwill disposed of in this divestiture amounted to $0.9 million.

The Company has classified the assets and liabilities of a small business (Blick Alfia) in the security segment as held for sale. This business will be sold in the fourth quarter of 2008. The divestitures of these three businesses have been made pursuant to the Company’s growth and portfolio diversification strategyIndustrial segment.

In accordance with the provisions of SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the results of operations of CST/berger and the ~~two other~~three small businesses ~~for the periods presented~~ have been reported as discontinued operations. The operating results of ~~these entities~~the four divested businesses are summarized as follows ~~for the nine months ended September 27, 2008 and September 29, 2007~~ (in millions):

2008 2007

Net sales $ 48.5 $ 76.4
Pretax earnings from operations 9.5 12.4
Pretax gain on sale 129.7 —

Pretax earnings $ 139.2 $ 12.4


	2009			2008

Net sales	$	—		$	25.9
Pretax (loss)/earnings		(1.1	)		3.8
Income taxes (benefit)		(0.5	)		1.4

Net (loss)/earnings from discontinued operations	$	(0.6	)	$	2.4

~~The~~There were no assets ~~and~~or liabilities ~~of Blick Alfia are classified as held for sale in the Consolidated Balance Sheet at September 27, 2008. CST/berger and the two other small businesses have been~~ classified as held for sale in the Consolidated Balance Sheets at ~~December 29, 2007. The assets~~April 4, 2009 and ~~liabilities of the businesses classified as held for sale as of September 27, 2008 and of December 29, 2007 are as follows (in millions):~~

2008 2007

Accounts receivable $ 1.8 $ 17.3
Inventories 1.1 10.9
Other assets 1.1 3.0
Property, plant and equipment 0.2 4.5
Goodwill and other intangible assets 0.0 46.0

Total assets $ 4.2 $ 81.7

Accounts payable $ 0.9 $ 9.0
Accrued expenses 1.5 8.6
Other liabilities 0.0 0.9

Total liabilities $ 2.4 $ 18.5

January 3, 2009.


Q.O.	Subsequent Events

On ~~September 29, 2008~~May 1, 2009, the Company ~~completed an offering~~committed to repurchase $103.0 million of ~~$250 million aggregate principal amount of senior notes which are due~~its junior subordinated debt securities issued in ~~2013. These notes bear a fixed coupon of 6.15% per annum. The Company will use the net proceeds from the offering to reduce borrowings under its existing commercial paper programand/or~~ ~~other short term obligations and~~November 2005 for ~~other general corporate purposes.~~

~~On October 1, 2008 the Company completed the acquisition of Générale de Protection (“GdP”) for $166~~$58.7 million in cash. ~~GdP, headquartered~~The Company expects the transaction will result in ~~Vitrolles, France, is~~ a ~~leading provider~~pretax gain of ~~audio and video security monitoring services, primarily for small and mid-sized businesses located in France and Belgium. Also,~~approximately $44 million. The cash settlement of the transaction will occur on October 1, 2008, the Company completed the purchase of Scan Modul for $20 million in cash. Scan Modul, headquartered in Hillerod, Denmark, provides engineered healthcare storage equipment and services throughout Europe. The acquisition of Scan Modul expands the Company’s healthcare storage technology offering provided by its existing InnerSpace business acquired in July 2007.May 6, 2009.

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ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The financial and business analysis below provides information which the Company believes is relevant to an assessment and understanding of its consolidated financial position, results of operations and cash flows. This financial and business analysis should be read in conjunction with the consolidated financial statements and related notes.

The following discussion contains statements reflecting the Company’s views about its future performance that constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations, estimates, forecasts and projections about the industry and markets in which the Company operates and management’s beliefs and assumptions. Any statements contained herein (including without limitation statements to the effect that The Stanley Works or its management “believes”, “expects”, “anticipates”, “plans” and similar expressions) that are not statements of historical fact should be considered forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. There are a number of important factors that could cause actual results to differ materially from those indicated by such forward-looking statements. These factors include, without limitation, those set forth, or incorporated by reference, below under the heading “Cautionary Statements”. The Company does not intend to update publicly any forward-looking statements whether as a result of new information, future events or otherwise.

OVERVIEW

The Company is a diversified worldwide supplier of tools and engineered solutions for professional, industrial, construction, and do-it-yourself (“DIY”) use, as well as engineered ~~solutions~~ and security solutions for industrial and commercial applications. Its operations are classified into three business segments: Security, Industrial and Construction & DIY (“CDIY”), Industrial and Security. The CDIY segment manufactures and markets hand tools, storage systems, and fasteners, as these products are principally utilized in construction and do-it-yourself projects. These products are sold primarily to professional end users and distributed through retailers (including home centers, mass merchants, hardware stores, and retail lumber yards). The Industrial segment manufactures and markets professional mechanics tools and storage systems, plumbing, heating, air conditioning and roofing tools, assembly tools and systems, hydraulic tools and specialty tools (Stanley supply and services). These products are sold to industrial customers and distributed primarily through third party distributors as well as direct sales forces. The Security segment is a provider of access and security solutions primarily for retailers, educational, financial and healthcare institutions, as well as commercial, governmental and industrial customers. The Company provides an extensive suite of mechanical and electronic security products and systems, and a variety of security services. These include security integration systems, software, related installation, maintenance, ~~and a variety of security services including security~~ monitoring services, ~~electronic integration systems, software, related installation and maintenance services,~~healthcare solutions, automatic doors, door closers, exit devices, hardware and locking mechanisms. Security products are sold primarily on a direct sales basis and in certain instances, through third party distributors. The Industrial segment manufactures and markets: professional industrial and automotive mechanics tools and storage systems; assembly tools and systems; plumbing, heating and air conditioning tools; hydraulic tools and accessories; and specialty tools. These products are sold to industrial customers and distributed primarily through third party distributors as well as direct sales forces. The CDIY segment manufactures and markets hand tools, consumer mechanics tools, storage systems, pneumatic tools and fastener products which are principally utilized in construction and do-it-yourself projects. These products are sold primarily to professional end users as well as consumers, and are distributed through retailers (including home centers, mass merchants, hardware stores, and retail lumber yards).

~~For~~Over the past several years, the Company has generated strong free cash flow and received substantial proceeds from divestitures that enabled a transformation of the business portfolio. Beginning with the first significant security acquisitions in 2002, Stanley has consummated $2.8 billion in acquisitions and pursued a diversification strategy to enable profitable growth. The strategy involves industry, geographic and customer diversification, as exemplified by the expansion of security solution product offerings, the growing proportion of sales outside the U.S., and the deliberate reduction of the Company’s dependence on sales to U.S. home centers and mass merchants. ~~Execution~~Sales outside the U.S. represented 41% of ~~this strategy has entailed~~the total in 2009, up from 29% in 2002. Sales to U.S. home centers and mass merchants have declined from a high point of approximately ~~$2.5 billion~~40% in 2002 to 14% in 2009. The reallocation of capital to higher growth businesses and attendant diversification of the revenue base helped position Stanley to weather the current challenging economic times. In the near term, management will concentrate primarily on debt reduction, driving operating efficiencies through the Stanley Fulfillment System disciplines, and the integration of acquisitions ~~since~~to achieve further synergies. Management continues to monitor markets for attractive acquisition targets. In the ~~beginning of 2002, several divestitures, and increased brand investments. Additionally,~~medium term the ~~strategy reflects management’s vision~~Company intends to ~~build a~~pursue further growth ~~platform~~opportunities in security solutions, industrial tools, healthcare markets and emerging markets while ~~expanding~~maintaining focus on the valuable branded tools ~~platform. Over the past several years, the Company has generated strong free cash flow~~ and ~~received substantial proceeds from divestitures that enabled a transformation of the business portfolio.~~storage businesses. Refer to the “Business Overview” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report onForm 10-K for the fiscal year ended ~~December 29, 2007~~January 3, 2009 for additional strategic discussion.

First Quarter 2009 Cost Actions and Outlook

The global economic downturn deepened during the first quarter as evidenced by a 19% decline in sales unit volumes versus the prior year. A contingency cost reduction plan was developed early in the year to protect earnings and cash flow in the event estimated full year 2009 volume declines were greater than10-12%. Management elected to implement this plan as the quarter progressed and projections evolved to indicate that full year sales volume declines were more likely to be between13-15%, with smaller volume declines in the back half of the year as comparisons become easier.

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~~Key developments~~The Company estimates that full year diluted earnings per share will be in ~~2008 pursuant~~the range of $2.00 to ~~this diversification and profitable growth strategy include~~$2.50 based on the ~~following.~~following assumptions:


•	~~In July~~Diluted earnings per share are expected to decrease within the range of $2.40 — $2.90 compared to 2008 stemming from the Company completed the sale of the CST/berger laser leveling and measuring business for $204 million in cash. The transaction generated a pre-tax book gain of $128 million, and $152 million in net after-tax cash proceeds. CST/berger had 2007 revenues of $80 million. The Company also announced plans to exit several other small, non-strategic businesses with approximately $50 million in annual revenues. As a result, CST/berger, along with two other small businesses, is reported in discontinued operations and prior periods have been recast for comparability.13-15% sales volume decline mentioned previously

•	~~On July 18, 2008,~~With the U.S. dollar at present exchange levels, the Company ~~completed~~expects revenues for the ~~acquisitions~~year will decline 4% from unfavorable translation. Continued weakness of Sonitrol Corporation (“Sonitrol”), for $281 million in cash, and Xmark Corporation (“Xmark”), for $47 million in cash. Sonitrol, with annual revenue totaling approximately $110 million, provides security monitoring services, access control and fire detection systemsforeign currencies relative to ~~commercial customers in North America via two monitoring centers and a national multi-channel distribution network. Sonitrol~~the dollar at present levels will ~~complement the product offering~~engender an estimated $.50 per diluted share earnings decrease versus 2008 due to currency, most of the pre-existing security integration and monitoring businesses, including HSM acquired in early 2007. Xmark, headquartered in Canada, markets and sells radio frequency identification (“RFID”)-based systems used to identify, locate and protect people and assets. Xmark annual revenues exceed $30 million and itwhich will ~~enhance the Company’s personal security business. Both acquisitions are reported in the Security segment.~~occur by mid-year.

•	~~On October 1,~~Acquisitions completed in 2008 ~~(in~~are expected to provide approximately $0.10 per diluted share earnings accretion in 2009.

•	The cost reduction plan initiated in the fiscal fourth quarter), the Company completed the acquisition of Générale de Protection (“GdP”) for $166 million (118 million euros) in cash. GdP, headquartered in Vitrolles, France, is a leading provider of audio and video security monitoring services, primarily for small and mid-sized businesses located in France and Belgium. GdP, with 2007 revenues totaling approximately $87 million (64 million euros) represents Stanley��s first significant expansion of its electronic security platform in continental Europe. GdPquarter is expected to ~~have no effect on 2008 earnings from continuing operations and have a modest accretive impact~~generate annual savings of $100 million, an estimated $45 million of which will be realized in 2009. The Company plans to reinvest approximately $15 million of the $45 million in current year savings from the 2009 plan to fund investments in brand development and Security organic growth initiatives. The brand development entails expanded advertising in major league U.S. baseball stadiums as well as NASCAR racing sponsorships. The 2009 restructuring program, net of the previously mentioned brand and growth investments, will provide an estimated $.28 benefit per diluted share in 2009. The diluted earnings per share benefit from the 2008 actions will approximate $1.75 in 2009. The 2008 restructuring actions reflect necessary cost cutting to align with lower sales and are supplemented by the 2009 actions which are designed to improve the effectiveness of the organization as well as promote efficiency. Fastening systems will be consolidated with the consumer tools and storage business. These CDIY segment businesses have significant channel and customer overlap so the combination will leverage resources and enable more efficient operations.

•	Restructuring and related charges for the above mentioned programs are projected to total approximately $35 million in 2009, with an additional $10 million in carryover charges from the 2008 actions to be recognized later in 2009, primarily pertaining to headcount reductions in Europe which are pending regulatory processes. As a result, the Company expects 2009 pre-tax restructuring and related charges will total approximately $45 million, of which $10 million was recognized in the first quarter, while most of the remaining charges will be recorded in the second and third quarters.

The diluted per share carryover savings from both cost reduction programs in 2010 will be partially offset by a number of factors including cost pressures and increased share count. Management believes the cost reduction and other strategic actions taken will position Stanley well for future growth.

RESULTS OF OPERATIONS

Below is a summary of consolidated operating results for the three ~~and nine~~ months ending ~~September 27, 2008,~~April 4, 2009, followed by an overview of performance by business segment. The terms “organic” and “core” are utilized to describe results aside from the impact of acquisitions during their initial 12 months of ownership. This ensures appropriate comparability to operating results in the prior period.

Net Sales: Net sales from continuing operations were ~~$1.120~~$913 million in the first quarter of 2009 as compared to $1.071 billion in the ~~third~~first quarter of 2008, ~~as compared to $1.106 billion in the third quarter~~representing a decrease of ~~2007, representing an increase of $14~~$158 million or 1%15%. Acquisitions, primarily Sonitrol and ~~Xmark,~~Générale de Protection (“GdP”) in the Security segment, contributed ~~3% of~~a 7% increase in net sales. ~~Foreign~~Organic sales volume declined 19% and unfavorable foreign currency translation ~~generated a 2% increase in sales, as most major currencies~~ in all regions ~~strengthened relative to the U.S. dollar compared to prior year, but weakened versus levels in the second quarter of 2008. Aside from acquisitions and currency,~~impacted sales ~~declined 4% attributable to a 7% unit volume decline~~by 6%, which was offset partially by favorable pricing of 3%. Nearly 2% of the unit volume decline pertained to the previously disclosed loss of a major customer in the hardware business within the security segment (this impact will anniversary in the fourth quarter of 2008). Approximately half of the total unit volume decline occurred in the CDIY segment, as North America continued to be adversely impacted by the contraction in residential construction markets while demand in other regions, particularly Europe, further softened in the third quarter. The remaining unit volume decline was predominantly in the industrial segment, most significantly in the North American automotive repair business reflecting the deepening U.S. economic downturn. The European economy also weakened in the third quarter unfavorably affecting all of the Company’s industrial segment businesses. This was partially offset by ~~growth~~3% of favorable customer pricing. There were double digit percentage sales volume declines in the ~~U.S. engineered~~Americas, Europe and Asia arising from global economic weakness, with Europe, down 24%, posting the most severe volume decrease. The Industrial segment, with its European-based Facom business, had the most significant decline of the three segments with a 27% drop in sales volume which was exacerbated by distributor inventory corrections associated with credit market pressures. The CDIY segment unit volume sales declined 22% as both the fastening systems and consumer tools and storage ~~and hydraulic tool businesses.~~businesses struggled in

1622

~~Year-to-date~~ ~~net~~contracting construction markets around the world. The Security segment continued to buttress the Company’s overall performance with relatively modest organic sales from continuing operations were $3.348 billion in 2008, a $108 million or 3% increase, versus $3.240 billion for the first nine months of 2007. Acquisition growth contributed 2% of the increase, attributable to Sonitrol, Xmark, and several small security segment acquisitions. Foreign currency provided a 4% increase, pricing 3%, while volume decreased 5% compared to the prior year. The businesses contributing to the first nine months sales performance are mainly the same as those discussed above pertaining to the third quarter. However in the first six months of 2008, Europe achieved healthy growth which subsided in the third quarter.declines by comparison.

Gross Profit: Gross profit from continuing operations was ~~$431~~$361 million, or ~~38.5%~~39.6% of net sales, in the ~~third~~first quarter of ~~2008, as~~2009, compared ~~with $422~~to $406 million, ~~of gross profit,~~ or ~~38.1%~~37.9% of net sales, in the prior year. The lower gross profit amount pertained to the previously discussed widespread sales volume decline. Acquisitions, primarily Sonitrol and GdP, generated $40 million in gross profit and contributed ~~$19 million~~ to ~~gross profit. Core~~the strong gross margin ~~represented 38.1% of sales consistent with the prior year as the favorable impacts of customer price increases and productivity were offset primarily by cost inflation and lower unit volumes.~~rate expansion. The ~~pace of energy and commodity cost inflation, particularly steel, which accelerated dramatically this summer, stabilized to some extent later~~170 basis point improvement in the ~~third quarter. As a result, the Company’s estimate of full year 2008 inflation remains at approximately $150 million, which management plans to partially mitigate through various~~gross margin rate was further enabled by overall customer pricing actions that ~~are expected~~lagged cost inflation as well as strong performance in the Security segment, particularly by the U.S. mechanical lock and electronic security integration businesses. Additionally, the cost actions taken to ~~recover nearly 90% of this impact.~~

~~On ayear-to-date~~ ~~basis, gross profit from continuing operations was $1.279 billion, or 38.2% of net sales, in 2008, compared~~adjust to ~~$1.230 billion, or 38.0% of net sales, for the corresponding 2007 period. The increase in gross profit was attributable to acquisitions, primarily Sonitrol and Xmark. The factors affecting theyear-to-date~~ performance are the same as those discussed pertaining to the third quarter. Successful execution of productivity projects and customer pricing increases collectively more than offset nearly $100 million of~~year-to-date~~ ~~cost inflation.~~slow demand helped cushion margin rate pressure.

SG&A expenses: Selling, general and administrative expense (“SG&A”) ~~expenses~~ from continuing operations, inclusive of the provision for doubtful accounts, ~~were $275~~was $253 million, or ~~24.6%~~27.7% of net sales, in the ~~third~~first quarter of ~~2008,~~2009, compared to ~~$252~~$275 million, or ~~22.8%~~25.6% of net sales, in the prior year. ~~On ayear-to-date~~ ~~basis,~~Aside from acquisitions, which contributed $23 million of incremental SG&A, ~~was $833 million, or 24.9% of net sales, versus $770 million, or 23.8% of net sales, in 2007. Acquisitions contributed $11 million and $22 million of the~~ SG&A ~~increase~~declined $45 million from the prior year. The Company implemented headcount reductions and various cost containment actions such as temporarily suspending certain U.S. retirement benefits in ~~the quarter,~~2009 and~~year-to-date,~~ ~~respectively. The remaining increase in SG&A primarily reflects foreign~~ sharply curtailing travel and other discretionary spending. There was also some reduction from variable selling and other costs as well as favorable currency ~~impact, inflation and strategic investments in emerging markets, offset partially by cost reduction actions.~~translation.

Interest andOther-net: Net interest expense from continuing operations in the ~~third quarter~~first three months of ~~2008~~2009 was ~~$18~~$16 million compared to ~~$20~~$21 million in ~~2007.~~the first three months of 2008. The decrease is ~~primarily due~~related to ~~repayment of $150 million of debt that matured in November 2007 as well as increased~~lower interest ~~income earned~~rates on ~~higher foreign cash balances~~short-term borrowings in the current year. Additionally, the Company entered into interest rate swaps on certain term debt which reduced the effective interest rate.

~~Year-to-date~~Other-net ~~net interest~~ expense from continuing operations ~~was $55~~amounted to $30 million in the first quarter of 2009 versus $20 million in 2008, ~~compared~~primarily due to $61 million over the first nine months of 2007. The reduction pertained to the same factors discussed in relation to the third quarter. Additionally, interest expense related to commercial paper declined as a result of lower borrowing costs in the current year.

~~Other-net~~ ~~expenses from continuing operations were $29 million in the third quarter of 2008 versus $25 million in 2007. Higher~~increased intangible asset amortization expense and acquisition deal costs required to be expensed from the ~~Sonitrol and Xmark acquisitions was the primary driver~~adoption of ~~this increase.Year-to-dateother-net~~ ~~expenses from continuing operations were $70 million~~SFAS 141R in ~~2008, relatively consistent with $68 million in 2007.~~January 2009.

Income Taxes: The ~~Company’s~~ effective income tax rate ~~from~~on continuing operations was ~~25.0%~~26.0% in the ~~third~~first quarter of this year, ~~compared~~consistent with ~~26.9%~~26.2% in the prior ~~year’s quarter. Theyear-to-date~~ effective income tax rate from continuing operations was 25.9% in 2008 versus 26.4% in 2007. The lower effective tax rate in the current year is mainly attributable to a decrease in earnings in certain jurisdictions with higher tax rates.

~~Discontinued Operations:~~ Net earnings from discontinued operations amounted to $86 million for the third quarter of 2008, up from $3 million in 2007, primarily due to the $84 million after-tax gain realized on the sale of CST/berger. Net earnings from discontinued operations for the first nine months of 2008 totaled $93 million versus $8 million in the prior year. ~~As discussed more fully in Note P,~~

~~discontinued operations primarily reflects the operating results of the CST/berger business which was sold on July 25, 2008.~~

Business Segment Results

The Company’s reportable segments are ~~an aggregation~~aggregations of businesses that have similar products, services and ~~services,~~end markets, among other factors. The Company utilizes segment profit ~~which~~(which is defined as net sales minus cost of sales, and SG&A ~~(aside~~aside from corporate overhead expense), and segment profit as a percentage of net sales to assess the profitability of each segment. Segment profit excludes the corporate overhead expense element of SG&A, interest income, interest expense,other-net (inclusive of intangible asset amortization expense), restructuring and asset impairments, and income tax expense. Corporate overhead is comprised of world headquarters facility expense, ~~costs~~cost for the executive management team and ~~for~~the expense pertaining to certain centralized functions that benefit the entire Company but are not directly attributable to the businesses, such as legal and corporate finance functions. ~~The~~Refer to the Restructuring and Asset Impairments section of MD&A for the restructuring charges attributable to each segment. As discussed previously, the Company’s operations are classified into three business segments: ~~Construction & DIY,~~Security, Industrial, and ~~Security.~~Construction and Do-It-Yourself (“CDIY”).

Security: Security sales ~~from continuing operations~~ increased 7%12% to ~~$395~~$374 million during the ~~third quarter~~first three months of ~~2008~~2009 from ~~$371~~$333 million in the corresponding ~~2007~~2008 period. Acquisitions, primarily Sonitrol and ~~Xmark,~~GdP, contributed ~~10% of the sales increase. Pricing increased~~ nearly ~~3%, while~~a 22% increase in sales. There was a 5% unfavorable foreign currency impact from Europe and Canada. Organic unit volume ~~declined 6% attributable primarily to the previously disclosed loss of~~declines were partially offset by favorable customer pricing. On a ~~major customer in the hardware business.~~

~~Year-to-date~~ net sales from continuing operations were $1.094 billion in 2008 as compared to $1.057 billion in 2007, an increase of 4%. Acquisitions accounted for 5%; currency contributed 1%; pricing increased 2%;combined basis, price and volume ~~declined 5%. In addition to the factors described in the analysis of the third quarter, segment sales in the first nine months reflected growth~~were down mid-single digits in convergent security, ~~which benefited from strength~~and for mechanical access solutions the decrease was in line with the overall segment decline. Mechanical access solutions posted volume growth with services, certain national and governmental accounts, and remodeling and retro-fit activity that were more than offset by overall weakness in retail, banking and other sectors. Lower organic unit volume in convergent electronic security primarily pertained to fewer system installations especially in national accounts, ~~in the U.S., and robust sales in both Canada and Great Britain.~~causing a mix shift to higher

margin recurring monthly service revenue.

Security segment profit amounted to ~~$74~~$71 million, or ~~18.7%~~18.9% of net sales, for the ~~third~~first quarter of ~~2008~~2009 as compared with ~~$68~~$53 million, or ~~18.5%~~16.0% of net sales, in the prior year. ~~On ayear-to-date~~This 290 basis ~~segment~~point profit expansion was ~~$193 million, or 17.6% of net sales, in 2008 compared to $181 million, or 17.1% of net sales, in the prior year period. The Sonitrol acquisition was accretive~~attributable to the ~~segment profit rate. The strong segment profit was further enabled by the successful reverse integration~~previously mentioned mix shift to higher margin service revenues, acquisitions and related synergies, benefits of ~~the legacy systems integration business into HSM. Additionally, productivity and~~ customer pricing ~~benefits largely offset~~and proactive cost ~~inflation and the hardware volume impact.~~actions.

Industrial: Industrial sales of ~~$298~~$236 million in the ~~third~~first quarter of ~~2008 were flat with~~2009 decreased 29% from $333 million in the prior year. ~~Foreign~~Unfavorable foreign currency translation, ~~provided a 4% increase,~~primarily European, reduced sales by 5%. Unit volumes in Europe and ~~favorable pricing 2%~~the Americas fell 29% and 25%, ~~which~~respectively, and all businesses within the segment experienced 20% or greater declines. The Industrial and Automotive Tools businesses experienced significant customer inventory corrections that accounted for approximately one third of the unit volume declines in Europe and the U.S. In Engineered Solutions, price gains and stable government demand were more than offset by ~~a 6% unit volume decrease. The North American automotive repair business was adversely affected by distributor attrition and~~lower volumes due to reduced capital expenditures within the deteriorating U.S. economy. European sales volumes which had been positive in the first half of the year, declined in the third quarter as Facom and other businesses reflected the contraction of the European economy. These volume declines were partially offset by strong sales growth in~~U.S.-based~~ engineered storage and to a lesser extent the hydraulic tools business. The sales growth in engineered storage was driven by government spending, particularly by army and navy bases, and also strength with commercial ~~customers.~~

~~Year-to-date~~ net sales from continuing operations were $969 million in 2008, up 7% or $61 million as compared to 2007. The InnerSpace acquisition contributed nearly 2% of the sales increase. Foreign currency generated a 6% favorable impact, customer pricing a 2% increase while organic unit volume declined 3%. The factors resulting in the Industrial segment’s nine month performance are primarily the same as those discussed pertaining to the third quarter. However, in the first six months of 2008, Europe achieved healthy growth which subsided in the third quarter.base.

Industrial segment profit was ~~$40~~$25 million, or ~~13.5%~~10.4% of net sales, for the ~~third~~first quarter of ~~2008,~~2009, compared ~~to $41~~with $49 million, or ~~13.9%~~14.6% of net sales, in ~~2007. Industrial segment~~2008. Segment profit ~~improved 50 basis points~~

~~sequentially over~~decreased substantially due to the ~~second quarter but declined 40 basis points versus~~sales volume declines. Also, European cost savings from headcount reduction actions take longer to achieve due to the ~~prior year.Year-to-date~~ ~~segment~~European Union works council process; these actions should help alleviate profit ~~for the Industrial segment was $133 million, or 13.7% of net sales, for 2008, flat compared with 2007 when it represented 14.6% of net sales. Customer pricing offset inflation~~pressure later in the ~~third quarter;~~year once implemented. Customer price recovery and productivity exceeded inflation ~~had temporarily outpaced pricing in~~enabling the ~~first half. The segment~~double digit profit rate ~~was affected by volume declines as well as unfavorable product mix in both the hydraulic tools and Mac Tools businesses, partially offset by productivity improvements.~~despite difficult economic conditions.

Construction & Do-It-Yourself (“CDIY”): CDIY sales ~~of $427 million during the third quarter of 2008 represented a 2% decrease from $438~~were $303 million in the ~~third~~first quarter of ~~2007. Unit volume declined 9%, and was partially offset by favorable pricing and foreign currency of 4% and 3% respectively. Volume was negatively impacted by~~2009, down 25% from $406 million in the ~~contraction in residential construction~~prior year. Segment unit volumes dropped 23% in both the Americas and Europe and to a lesser extent in Asia as ~~well as a decline in industrial markets served~~the global economic downturn expanded geographically. Foreign currency translation negatively impacted sales by ~~fastening systems, reflecting increasingly weak macro-economic conditions.~~7% which was partially offset by favorable customer pricing. International sales declined rapidly throughout the first quarter and significantly from the fourth quarter of 2008. Fastening systems continued ~~its planned shift toward more profitable~~to be affected by sharply lower construction and industrial economic activity worldwide. U.S. sales for the consumer tools and storage (“CT&S”) business ~~which resulted in additional volume pressure. Pervasive pricing actions~~ were ~~implemented in order to mitigate cost inflation across~~down by 11%, slightly better than the ~~entire segment.~~

~~Year-to-date~~ net sales from continuing operations were $1.284 billion in 2008 as compared to $1.274 billion in 2007, an increase of 1%. Favorable foreign currency translation and pricing contributed 4% and 3% of the increase, respectively, while unit volume declined 6%. The most significant decrease was in North American markets due to the recessionary U.S. environment. Europe had essentially flat unit volume13% decline in the fourth quarter of 2008. Key U.S. customer point of sale data for CT&S products were down 9% versus the first ~~half~~quarter of ~~2008 but declined in the third quarter.~~2008.

Segment profit was ~~$54~~$29 million, ~~for the third quarter of 2008, compared to $72 million, representing 12.7% and 16.5%~~or 9.5% of net sales, ~~respectively. CDIY made progress on customer pricing actions and manufacturing productivity within~~for the first quarter ~~however cost inflation and lower sales volume pressures more than offset these benefits. On ayear-to-date~~ ~~basis, segment profit was $167~~of 2009, compared to $47 million or ~~13.0% of net sales, compared to $194 million, or 15.2%~~11.6% of net sales in ~~2007.~~the prior year. While the 9.5% segment profit rate declined 210 basis points from the first quarter of 2008, it represents a sequential improvement from 6.4% in the fourth quarter of 2008. The~~year-to-date~~ ~~performance reflects~~ positive impacts of customer pricing and manufacturing productivity on the ~~same factors~~segment profit rate were more than offset by lower sales volumes. As previously discussed ~~relating~~pertaining to the ~~third quarter~~industrial segment, there is a longer time frame necessary for implementation of cost reduction actions in ~~addition to spending to develop emerging markets.~~Europe but these should favorably impact the profit rate later in the year.

Restructuring ~~Charges~~ and Asset Impairments

At ~~September 27, 2008,~~April 4, 2009, the Company’s restructuring reserve balance was ~~$25.4~~$65.1 million. ~~This~~The Company expects to utilize a majority of these reserves in 2009 and estimates approximately 30% will be ~~substantially~~ expended in 2010

depending upon the timing of actions in Europe as discussed below. A summary of the restructuring reserve activity from January 3, 2009 to April 4, 2009 is as follows (in millions):


			Acquisition		Net
	1/3/09		Accrual		Additions		Usage			Currency			4/4/09

Acquisitions
Severance and related costs	$	10.8	$	0.8	$	—	$	(0.9	)	$	(0.3	)	$	10.4
Facility closure		1.8		1.6		—		(0.1	)		—			3.3

Subtotal acquisitions		12.6		2.4		—		(1.0	)		(0.3	)		13.7

2009 Actions
Severance and related costs		—		—		8.3		(1.2	)		—			7.1
Asset impairments		—		—		0.7		(0.7	)		—			—
Facility closure		—		—		0.1		(0.1	)		—			—

Subtotal 2009 actions		—		—		9.1		(2.0	)		—			7.1

Pre-2009 Actions
Severance and related costs		54.1		—		—		(8.7	)		(1.1	)		44.3
Other		1.2		—		—		(1.2	)		—			—

Subtotal Pre-2009 actions		55.3		—		—		(9.9	)		(1.1	)		44.3

Total	$	67.9	$	2.4	$	9.1	$	(12.9	)	$	(1.4	)	$	65.1

2009 Actions: In response to further sales volume declines associated with the economic recession, the Company initiated various cost reduction programs in the first quarter of 2009. Severance charges of $8.3 million were recorded during the quarter relating to the reduction of approximately 480 employees. In addition to severance, $0.7 million in charges was recognized for asset impairments. The asset impairments pertain to production and distribution assets written down as a result of the decision to move certain manufacturing activities to lower cost countries and the closure of several small distribution centers. Facility closure costs totaled $0.1 million. Of the amounts charged in the first quarter, $2.0 million has been utilized to date, with $7.1 million of reserves remaining as of April 4, 2009. Of the charges recognized in the first quarter of 2009: $4.2 million pertains to the Security segment, $1.6 million to the Industrial segment; $2.9 million to the CDIY segment; and $0.4 million to non-operating entities.

Pre-2009 Actions: During 2008, ~~aside~~the Company initiated cost reduction initiatives in order to maintain its cost competitiveness. A large portion of these actions were initiated in the fourth quarter as the Company responded to deteriorating business conditions resulting from the U.S. economic weakness and slowing global demand, primarily in its CDIY and Industrial segments. Severance charges of $70.0 million were recorded relating to the reduction of approximately 2,700 employees. In addition to severance, $13.6 million in charges were recognized pertaining to asset impairments for production assets and real estate, and $0.7 million for facility closure costs. Of the $85.5 million full year 2008 restructuring and asset impairment charges, $13.8 million, $29.7 million, $35.6 million, and $6.4 million pertained to the Security, Industrial, CDIY, and Non-operating segments, respectively. Also, $1.2 million in other charges stemmed from the termination of service contracts. During 2007, the Company also initiated $11.8 million of cost reduction actions in various businesses entailing severance for 525 employees and the exit of a leased facility. As of January 3, 2009 the reserve balance related to these prior actions totaled $55.3 million. The amount utilized in the first quarter of 2009 totaled $9.9 million. The remaining reserve balance of $44.3 million predominantly relates to actions in Europe that are pending completion with the European Works Council process.

~~amounts, $15.1 million has been utilized to date, with $9.1 million of reserves remaining as of September 27, 2008.~~

FINANCIAL CONDITION

Liquidity, Sources and Uses of Capital:

Operating and Investing Activities: Cash flow from operations was ~~$166~~$4 million in the ~~third~~first quarter of ~~2008~~2009 compared to ~~$130~~$108 million in ~~2007. The increase primarily relates~~2008, related to ~~strong~~lower earnings in the current year associated with the economic recession, working capital ~~performance, partially offset by~~and other operating outflows. Working capital usage was $45 million in the quarter due to a decrease in accounts payable pertaining to lower ~~earnings aside from~~manufacturing activity and other spending reductions. Other operating cash outflows were $37 million in the ~~gain on the sale~~first three months of ~~CST/berger.Year-to-date~~ ~~cash flow from operations was $357~~2009 as compared with a $9 million ~~compared to $326 million~~inflow in the prior year. ~~The $31 millionyear-to-date~~ ~~increase in cash flow from operations~~This fluctuation is mainly attributable to ~~the same factors discussed pertaining to the third quarter along with lower~~payments on foreign currency related derivative contracts as well as higher restructuring payments in the current year.

Capital and software expenditures were ~~$28~~$22 million in the ~~third~~first quarter of ~~2008 versus $12~~2009, down slightly compared to $25 million in ~~2007. On~~2008. The Company will continue to make capital investments that are necessary to drive productivity and cost structure improvements while ensuring that such investments provide a~~year-to-date~~ ~~basis~~ rapid return on capital and software expenditures were $82 million representing a $27 million increase compared to the prior year. The increase primarily pertains to software investments as the Company is in the midst of North American systems implementations, along with physical security and other facility-related investments.employed.

Free cash flow, as defined in the following table, was ~~$138~~an $18 million outflow in the ~~third~~first quarter of ~~2008~~2009 compared to ~~$118~~an $83 million inflow in the corresponding ~~2007~~2008 period. The Company believes free cash flow is an important measure of its liquidity, as well as its ability to fund future growth and provide a dividend to shareowners. Free cash flow does not include deductions for mandatory debt service, other borrowing activity, discretionary dividends on the Company’s common stock and business acquisitions, among other items.


(Millions of Dollars)	2008			2007			2009			2008

Net cash provided by operating activities	$	166		$	130		$	4		$	108
Less: capital and software expenditures		(28	)		(12	)		(22	)		(25	)

Free cash flow	$	138		$	118
Free cash (outflow) inflow							$	(18	)	$	83

In the third quarter of 2008 the Company received $163 million in cash from the sale of the CST/berger business, net of taxes paid and transaction costs. Approximately $11 million in cash outflows for taxes due on the gain are expected to occur in the fourth quarter. On a~~year-to-date~~ ~~basis cash inflows from the sale of businesses were $166 million reflecting a small European divestiture in addition to CST/berger.~~

For the third quarter of 2008, acquisition spending totaled $336 million mainly due to cash paid for the Sonitrol and Xmark acquisitions, compared to $64 million in 2007, primarily for the InnerSpace

acquisition. Acquisitions entailed a $364 million cash outflow for the first three quarters of 2008 versus $633 million in 2007, which reflected the January 2007 acquisition of the HSM security monitoring business.

Financing Activities:

~~There were no repurchases of common stock during the third quarter of 2008 or 2007. On ayear-to-date~~ basis, common stock repurchase activity was $102 million (for 2.2 million shares) in 2008, down slightly from $107 million (for 1.7 million shares) in 2007. The Company will continue to assess the possibility of repurchasing more of its outstanding common stock, based on a number of factors including the level of acquisition activity, the market price of the Company’s common stock and the current financial condition of the Company.

Proceeds from the issuance of common stock during the third quarter of 2008 amounted to $7 million, versus $4 million in the prior year, which reflected higher levels of stock option exercises. Proceeds from the issuance of common stock and warrants totaled $17 million for the first three quarters of 2008 and $90 million for the corresponding 2007 period. The higher amount in 2007 is attributable to stock option exercises as well as $19 million of proceeds from warrants sold in connection with the March, 2007 equity units offering to finance the HSM acquisition.

Net proceeds from short-term borrowings amounted to a cash ~~outflow~~outflows of ~~$32~~$7 million in ~~the third quarter~~2009 compared to inflows of ~~2008, compared with a $13 million inflow in 2007. Net proceeds from short-term borrowings totaled $141~~$120 million in ~~the first nine months of 2008 versus $146 million in 2007, with over $100 million of~~2008. The net proceeds in each year utilized to fund share repurchases. The remaining net short-term borrowings in 2008 pertained to acquisition funding and cash outflows for the termination of the U.S. receivable securitization facility. There were nominal long-term borrowings in 2008, while the $530 million of proceeds for the~~year-to-date~~ ~~2007 period represents the $330 million in five-year convertible notes and $200 million in three-year term notes issued to finance the HSM acquisition. The $49 million outflow~~ in the prior year ~~for the bond hedge premium also pertained~~were primarily utilized to ~~the financing of the HSM acquisition.~~fund $102 million in common stock repurchases.

~~Cash dividends on~~As described more fully in Note H. Equity Option, the Company paid a $16 million premium in the first quarter of 2009 for options to repurchase 3 million shares of its common stock ~~totaled $25 million for~~at a strike price averaging $31.19. These options have a cap on the ~~third~~appreciation at an average of $45.97 per share and expire in March 2010.

During the first quarter of ~~both 2008~~2009, Fitch Ratings affirmed the Company’s long and ~~2007. On a~~short term debt ratings at A and F1 respectively and kept the outlook as stable. After placing the ratings under review in January, on April 16 Moody’s Investor Services downgraded the Company’s senior unsecured debt rating by one “notch” from A2 to A3 and short term debt rating term from~~year-to-date~~P-1 ~~basis~~toP-2 while maintaining the cash outflow for dividends was $74 million in 2008, down slightly from $75 million in the prior year as the higher dividend rate per share in the current period was more than offset by lower outstanding shares.

~~Debt to Capital Ratio~~

stable outlook. The Company’s debt ~~to capital ratio was 47% as~~ratings and outlook remain unchanged by Standard & Poors with a corporate credit rating of ~~September 27, 2008. Reflecting~~A, short term rating ofA-1, and stable outlook. As detailed in the ~~credit protection measures that are incorporated into the terms~~Liquidity and Financial Condition section of the ~~$450 million Enhanced Trust Preferred Securities (“ETPS”) issued in 2005 and the equity characteristics of the $330 million in Equity Units issued in 2007, the debt to capital ratio of~~Company’s 2008 Annual Report on Form 10K, the Company ~~is more fairly represented by apportioning 50% of the ETPS issuance and50-75%~~ ~~of the Equity Units issuance to equity when making the ratio calculation. The resulting debt to capital ratio from these apportionments is33-36%~~ ~~as of September 27, 2008. The equity content adjustments to reported debt are consistent~~has adequate liquidity with the treatment accorded these securities by the nationally recognized statistical ratings organizations that rate the Company’s debt securities, and accordingly the equity-content-adjusted debt to capital ratio is considered a relevant measure of its financial condition.various credit lines.

2126

The following table reconciles the debt to capital ratio computed with reported debt and equity to the same measure after the equity content adjustments attributed to the ETPS and Equity Unit securities:

Equity Units

ETPS 50%
50 – 75%
As Adjusted
Reported on
equity
equity
for Equity
Balance Sheet
content
content
Content
(Millions of Dollars) (GAAP) adjustment adjustment (non-GAAP)

Debt $ 1,651 (225) (165) – (247) $1,261 – $1,179
Equity $ 1,871 225 165 – 247 $2,261 – $2,343
Capital (debt + equity) $ 3,522 $3,522
Debt to capital ratio 47% 36% – 33%

As disclosed in Note Q Subsequent Events, on September 29, 2008 the Company completed an offering of $250 million aggregate principal amount of senior notes which are due in 2013. These notes bear a fixed coupon of 6.15% per annum. The Company utilized the net proceeds from the offering to reduce borrowings under its existing commercial paper program~~and/or~~ ~~other short term obligations and for other general corporate purposes.~~

~~OTHER COMMERCIAL COMMITMENTS~~

~~Additionally, as discussed in Note E, Accounts Receivable, the Company terminated its accounts receivable securitization facility.~~

OTHER MATTERS

Critical Accounting Estimates: There have been no other significant changes in the Company’s critical accounting estimates during ~~2008.~~the first quarter of 2009. Refer to the “Other Matters” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s Annual Report onForm 10-K for the fiscal year ended ~~December 29, 2007~~January 3, 2009 for a discussion of the Company’s critical accounting estimates.

~~New Accounting Standards:~~ ~~Refer to Note B for a discussion of new accounting standards.~~


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There has been no significant change in the Company’s exposure to market risk during the ~~third~~first quarter of ~~2008.~~2009. For discussion of the Company’s exposure to market risk, refer to Part II, Item 7A, Quantitative and Qualitative Disclosures About Market Risk, contained in the Company’sForm 10-K for the year ended ~~December 29, 2007.~~January 3, 2009.


ITEM 4.	CONTROLS AND PROCEDURES

Under the supervision and with the participation of management, including the Company’s Chairman and Chief Executive Officer and its ~~Executive~~ Vice President and Chief Financial Officer, the Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures (as defined inRule 13a-15(e)), as of ~~September 27, 2008,~~April 4, 2009, as required byRule 13a-15(b) of the Securities Exchange Act of 1934. Based upon that evaluation, the Company’s Chairman and Chief Executive Officer and its ~~Executive~~ Vice President and Chief Financial Officer have concluded that, as of ~~September 27, 2008,~~April 4, 2009, the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company (including its consolidated subsidiaries) required to be included in its periodic Securities and Exchange Commission filings. There has been no

change in the Company’s internal controls that occurred during the ~~third~~first quarter of ~~2008~~2009 that have materially affected or are reasonably likely to materially affect the registrant’s internal control over financial reporting.

CAUTIONARY STATEMENT
Under the Private Securities Litigation Reform Act of 1995

Certain statements contained in this Quarterly Report onForm 10-Q that are not historical, including, but not limited to, the statements regarding the Company’s ability to: (i) ~~limit the~~generate full year ~~2008 inflation impact to $150~~2009 EPS in the range of $2.00 — 2.50 per fully diluted share; (ii) reinvest approximately $15 million in brand development and ~~recover approximately 90%~~organic growth initiatives; (iii) realize annual savings of ~~this impact through various customer pricing actions; (ii) build a growth platform~~$100 million ($45 million in ~~security while expanding~~2009) from the ~~branded tools platform; (iii) dispose of various legal proceedings without material adverse effect on~~cost reduction plan initiated in the ~~operations or financial condition of the Company;~~quarter; and (iv) ~~limit costs associated with environmental remediation to~~realize a ~~range~~diluted earnings per share benefit of ~~$20 million to $53 million,~~$1.75 in 2009 from the cost reduction actions initiated in 2008 (the “Results”); are ~~forward~~“forward looking ~~statements~~statements” and are based on current expectations.

These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. There are a number of risks, uncertainties and important factors that could cause actual results to differ materially from those indicated by such forward-looking statements. In addition to any such risks, uncertainties and other factors discussed elsewhere herein, 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 in the Company’s Annual Report onForm 10-K (together with any material changes thereto contained in subsequent filed Quarterly Reports onForm 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 implement the cost savings measures discussed in its December 11, 2008 and April 24, 2009 press releases within anticipated time frames and to limit associated costs; (ii) the Company’s ability to limit restructuring charges in 2009 to $45 million; (iii) the Company’s ability to limit unit volume declines to13-15% relative to 2008 sales while maintaining or improving the existing product mix and geographic distribution; (iv) the Company’s ability to successfully integrate recent acquisitions (including Sonitrol, Xmark, Scan Modul and GdP), as well as any future acquisitions, while limiting associated costs;

(v) the success of the Company’s efforts to expand its tools and security businesses; ~~(ii)~~(vi) the success of the Company’s efforts to build a growth platform and market leadership in Convergent Securities Solutions; (vii) the Company’s success atin developing and introducing new ~~product development~~products, growing sales in existing markets and ~~introduction and at~~ identifying and developing new ~~markets; (iii)~~markets for its products; (viii) the continued acceptance of technologies used in the Company’s products, including Convergent Security Solutions products; (ix) the Company’s ability to manage existing Sonitrol franchisee and Mac Tools distributor relationships; (x) the Company’s ability to minimize costs associated with any sale or discontinuance of a business or product line, including any severance, restructuring, legal or other costs; (xi) the proceeds realized with respect to any business or product line disposals; (xii) the extent of any asset impairments with respect to any businesses or product lines that are sold or discontinued; (xiii) the success of the Company’s efforts to manage freight costs, steel and other commodity costs; ~~(iv) the success of~~(xiv) the Company’s ~~efforts~~ability 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~~any inflation increases; ~~(v)~~(xv) 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~~generate free cash flow and maintain a strong debt to (a) mitigate the impact of an increase in the VAT rate applicable to products the Company makes in China and (b) mitigate the impact of an anti-dumping tariff recently imposed on certain nails imported from China; (vi)capital ratio; (xvi) the Company’s ability to identify and effectively execute productivity improvements and cost reductions, while minimizing any associated restructuring charges; (xvii) the Company’s ability to obtain favorable settlement of routine tax audits; (xviii) the ability of the Company to generate earnings sufficient to realize future income tax benefits during periods when temporary differences become deductible; (xix) the continued ability of the Company to access credit markets under satisfactory terms; and ~~(vii)~~(xx) the Company’s ability to negotiate satisfactory payment terms under which the Company buys and sells goods, services, 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; (iii) the Company’s ability to continue improvements in working capital; (iv) the ability to continue successfully managing and defending claims and litigation; (v) 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 (vi) 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

PART II – OTHER INFORMATION


ITEM 1A.	RISK FACTORS

There have been no material changes to the risk factors as disclosed in the Company’s ~~2007~~2008 Annual Report onForm 10-K filed with the Securities and Exchange Commission on February ~~27, 2008.~~26, 2009.


ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table provides information about the Company’s purchases of equity securities that are registered by the Company pursuant to Section 12 of the Exchange Act during the three months ended ~~September 27, 2008:~~April 4, 2009:

(a)
Total Number
Maximum Number

Total
Of Shares
Of Shares That

Number Of
Average Price
Purchased As
May Yet Be

Shares
Paid Per
Part Of A Publicly
Purchased Under

2008 Purchased Share Announced Program The Program

June 29 – August 2
480 $ 44.89 — —
August 3 – August 30
84 47.24 — —
August 31 – September 27
— — — —

564 $ 45.24 — —


	(a)				Total Number		Maximum Number
	Total				Of Shares		Of Shares That
	Number Of		Average Price		Purchased As		May Yet Be
	Shares		Paid Per		Part Of A Publicly		Purchased Under
2009	Purchased		Share		Announced Program		The Program

January 4 — February 7		4,265	$	33.16		—		—
February 8 — March 7		13,251	$	29.97		—		—
March 8 — April 4		1,130	$	29.20		—		—

		18,646	$	30.66		—		—

As of April 4, 2009, 7.8 million shares of common stock remain authorized for repurchase. The Company may repurchase shares in the open market or through privately negotiated transactions from time to time pursuant to this prior authorization to the extent management deems warranted based on a number of factors, including the level of acquisition activity, the market price of the Company’s common stock and the current financial condition of the Company.


(a)		The shares of common stock in this column were deemed surrendered to the Company by participants in various of the Company’s benefit plans to satisfy the taxes related to the vesting or delivery of a combination of restricted share units and long-term incentive shares under those plans.


ITEM 5.	OTHER INFORMATION

(a) On May 4, 2009, the Company entered into an equity distribution agreement (the “Distribution Agreement”) with UBS Securities LLC (the “Manager”). Pursuant to the Distribution Agreement, the Company may sell from time to time through or to the Manager shares of the Company’s common stock having an aggregate offering price of up to $200,000,000 (the “Shares”).

Under the Distribution Agreement, the Company designates the minimum price and maximum number of Shares to be sold through the Manager on any given trading day or days, and the Manager is then required to use commercially reasonable efforts to offer such Shares on such days, subject to certain conditions. Sales of Shares, if any, will be made by means of ordinary brokers’ transactions on the New York Stock Exchange at market prices or as otherwise agreed with the Manager. The Company may also agree to sell Shares to the Manager, as principal for its own account, on terms agreed to by the parties.

The Company is not obligated to sell and the Manager is not obligated to buy or sell any Shares under the Distribution Agreement. No assurance can be given that the Company will sell any Shares under the Distribution Agreement, or, if it does, as to the sales price or number of Shares that the Company will sell, or the dates when such sales will take place. The program may be terminated or suspended by the Company at any time.

The foregoing description of the Distribution Agreement does not purport to be complete and is qualified in its entirety by reference to the Distribution Agreement, which is filed as Exhibit 1 to this Quarterly Report onForm 10-Q.

2429


	Third Quarter				Year to Date
	2008		2007		2008		2007		2009		2008

Number of stock options (in thousands)		1,902		569		1,640		745		5,198		1,572
Number of stock warrants (in thousands)		5,093		5,093		5,093		3,565		4,939		5,092


	Construction
	& DIY			Industrial			Security			Total

Balance as of December 29, 2007	$	214.2		$	387.3		$	911.0		$	1,512.5
Acquisitions during the year		—			—			173.0			173.0
Foreign currency translation/other		(0.7	)		(4.6	)		(15.5	)		(20.8	)

Balance as of September 27, 2008	$	213.5		$	382.7		$	1,068.5		$	1,664.7


							Construction
	Security			Industrial			& DIY			Total

Balance as of January 3, 2009	$	1,210.2		$	321.8		$	207.2		$	1,739.2
Goodwill acquired during the year		0.3			4.2			—			4.5
Purchase accounting adjustments		26.3			—			—			26.3
Foreign currency translation / other		(5.4	)		(9.4	)		(6.0	)		(20.8	)

Balance as of April 4, 2009	$	1,231.4		$	316.6		$	201.2		$	1,749.2


	~~(4)~~(1)			~~Officers’ Certificate relating~~Equity Distribution Agreement dated as of May 4, 2009 between the Company and UBS Securities LLC.
	(10)(i)			Amendment No. 1 to ~~6.15% Notes due 2013~~the Amended and Restated Credit Agreement, dated as of February 17, 2009 (incorporated by reference to Exhibit ~~4.1~~10(v)(a) to ~~Current~~the Company’s Annual Report onForm ~~8-K~~10-K ~~dated September 29, 2008)~~for the year ended January 3, 2009).
	(iii)(a)			The Stanley Works 2009 Long-Term Incentive Plan*
	(iii)(b)			Form of award letter for restricted stock units grants to executive officers pursuant to the Company’s 2009 Long Term Incentive Plan*
	(iii)(c)			Form of award letter for long term performance award grants to executive officers pursuant to the Company’s 2009 Long Term Incentive Plan*
	(iii)(d)			Employee Stock Purchase Plan as amended April 23, 2009*
	(11)			Statement re computation of per share earnings (the information required to be presented in this exhibit appears in Note C to the Company’s Condensed Consolidated Financial Statements set forth in this Quarterly Report onForm 10-Q).
	(31)(i)(a)			Certification by Chief Executive Officer pursuant toRule 13a-14(a)
	(i)(b)			Certification by Chief Financial Officer pursuant toRule 13a-14(a)
	(32)(i)			Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	(ii)			Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


			Acquisition		Net
($ in millions)	1/3/09		Accrual		Additions		Usage			Currency			4/4/09

Acquisitions
Severance and related costs	$	10.8	$	0.8	$	—	$	(0.9	)	$	(0.3	)	$	10.4
Facility closure		1.8		1.6		—		(0.1	)		—			3.3

Subtotal acquisitions		12.6		2.4		—		(1.0	)		(0.3	)		13.7

2009 Actions
Severance and related costs		—		—		8.3		(1.2	)		—			7.1
Asset impairments		—		—		0.7		(0.7	)		—			—
Facility closure		—		—		0.1		(0.1	)		—			—

Subtotal 2009 actions		—		—		9.1		(2.0	)		—			7.1

Pre-2009 Actions
Severance and related costs		54.1		—		—		(8.7	)		(1.1	)		44.3
Other		1.2		—		—		(1.2	)		—			—

Subtotal Pre-2009 actions		55.3		—		—		(9.9	)		(1.1	)		44.3

Total	$	67.9	$	2.4	$	9.1	$	(12.9	)	$	(1.4	)	$	65.1


			Net
	12/29/07		Additions		Usage			Currency			9/27/08

Acquisitions
Severance	$	18.8	$	0.8	$	(6.0	)		—		$	13.6
Facility Closure		1.6		1.4		(0.9	)		—			2.1
Other		1.0		—		(0.4	)		—			0.6
2008 Actions		—		25.0		(15.1	)		(0.8	)		9.1
Pre-2008 Actions		2.3		—		(2.3	)		—			—

	$	23.7	$	27.2	$	(24.7	)	$	(0.8	)	$	25.4


	2008		2007

Accounts receivable	$	1.8	$	17.3
Inventories		1.1		10.9
Other assets		1.1		3.0
Property, plant and equipment		0.2		4.5
Goodwill and other intangible assets		0.0		46.0

Total assets	$	4.2	$	81.7

Accounts payable	$	0.9	$	9.0
Accrued expenses		1.5		8.6
Other liabilities		0.0		0.9

Total liabilities	$	2.4	$	18.5


				Equity Units
			ETPS 50%	50 – 75%	As Adjusted
	Reported on		equity	equity	for Equity
	Balance Sheet		content	content	Content
(Millions of Dollars)	(GAAP)		adjustment	adjustment	(non-GAAP)

Debt	$	1,651	(225)	(165) – (247)	$1,261 – $1,179
Equity	$	1,871	225	165 – 247	$2,261 – $2,343
Capital (debt + equity)	$	3,522			$3,522
Debt to capital ratio		47%			36% – 33%


*		~~THE STANLEY WORKS~~
~~Date: November 3, 2008~~		~~By:~~ ~~/s/ James M. Loree~~ ~~James M. Loree~~ ~~Executive Vice President and~~ ~~Chief Financial Officer~~ ~~(Principal Financial Officer)~~ Management contract or compensation plan or arrangement.


D.	~~Comprehensive Income~~


I.F.	Restructuring ~~Charges and Asset Impairments~~