--  Net sales from continuing operations were $919 million, down 20%       versus prior year as growth due to acquisitions (+6%) and price (+2%)       were more than offset by unit volume declines of 24%.  Currency       translation impacted revenues unfavorably by 4%.     --  The 2Q'09 gross margin rate improved 160 bps versus 2Q'08 to a record       39.9%.  The increase was driven by price realization and improved mix       due to performance in Security. Lower material input prices       essentially offset negative productivity associated with volume       declines.     --  SG&A expenses were 27.8% of sales, down $28 million versus the prior       year.  Excluding acquisitions, SG&A expenses declined 18% versus the       prior year.     --  As a result of steeper than expected unit volume declines in the       quarter, management elected to implement additional cost actions       effective in July 2009. These actions are largely a continuation of       the company's focus on rapidly adjusting its cost structure to current       volume levels without adversely affecting future growth potential. The       actions are expected to generate annual savings of $50 million, of       which $25 million will be realized in 2009.     --  The company posted free cash flow of $43 million for the quarter,       driven primarily by working capital benefits. The Stanley Fulfillment       System continued to favorably impact results as working capital turns       improved slightly to 4.9 from 4.8 in the prior year.     --  As disclosed in its 1Q'09 10Q, the Company repurchased $103 million of       its junior subordinated debt securities issued in November 2005 for       $59 million in cash on May 1, 2009. The transaction resulted in a       pretax gain of $44 million and had a $0.34 positive impact on EPS.       Under the American Recovery & Reinvestment Act of 2009, taxes payable       on the gain are to be deferred and paid out ratably over five years       beginning 2014.   

John F. Lundgren, Chairman and Chief Executive Officer, commented, "We are extremely pleased with the record gross margins achieved in the face of the continued decline in unit volume. Coupled with the fact that we are gaining share in several of our markets, we believe that Stanley is extremely well positioned for growth and increased profitability once our end markets turn around."

   Segment Results:                            2Q'09                         Versus 2Q'08     ($ millions)           Segment    Segment             Segment    Segment                 Sales     Profit   Profit Rate   Sales  Profit   Profit Rate    Security      $391      $74        19.0%        +8%    +13%        +80 bp    Industrial    $204      $19         9.4%       -40%    -56%       -360 bp    CDIY          $324      $37        11.3%       -28%    -45%       -330 bp     --  The Security segment continued to benefit from the well-executed       integration of accretive acquisitions and ongoing strategic cost       management in order to post a 19.0% profit margin. Organic revenues       for the segment declined 8%. For the Convergent (Electronic) Security       Solutions (CSS) business, organic revenue declines were in the low       teens as increased recurring monthly revenue (RMR) and price partially       offset lower installation revenues. Mechanical Access Solutions (MAS)       organic revenues decreased mid-single digits, due to lower volume       partially offset by an increase in price. The segment was helped by       the relative strength in the refurbish/renovation market and its       consistent focus on customer service, which lead to increased customer       captivity and market share gains.     --  Industrial revenues fell 40% versus prior year due to ongoing weakness       in Europe and the U.S. where unit volume fell 39% in both regions. The       impact of foreign exchange pushed European revenues down 8% versus       prior year. Customer inventory corrections within the Industrial and       Automotive Tools businesses accounted for approximately 50% of the       total unit volume declines experienced in Europe and the U.S.  Segment       profit rate decreased due to sales volume declines combined with the       longer time frame associated with European cost savings realization,       which will be fully realized later in the year.     --  While CDIY withstood unit volume weakness across the globe (the U.S.       and Europe were down 24% and 27%, respectively) during 2Q, there are       indications that year-over-year sales trends are beginning to show       signs of improvement. Foreign exchange had a 5% negative impact on the       business, which was partially offset by a 3% increase in price versus       2Q'08. The positive impacts of price and productivity on the segment       profit rate were more than offset by sales volume declines combined       with the longer time frame associated with the implementation of cost       reduction actions in Europe. The Bostitch integration announced in       1Q'09 continues to exceed targets on a gross margin level and provided       an overall lift to the segment.   

James M. Loree, Executive Vice President and Chief Operating Officer stated, "While we are clearly still being impacted by severe revenue declines in CDIY and Industrial, we are encouraged by our ability to carefully manage costs while also focusing on growth, brand support and best-in-class service. Our Security businesses continue to show resilience with 9% organic growth in the CSS recurring revenue base and total segment operating profit margins of 19%."

Management expects full year 2009 EPS to be in the range of $2.34 - $2.84 ($2.00 - $2.50 range plus the 2Q'09 $0.34 gain on debt extinguishment) based on the following new/updated assumptions:

   --  Unit volume shipments in 2009 will be down 18% - 20% (as opposed to       down 13% - 15%) versus 2008. The steep volume declines are anticipated       to begin to ease in the second half of the year as the company       anniversaries a weak set of prior year comparables, industrial       customer inventory corrections gradually abate and the benefit of CDIY       share gains materializes.   --  The gross margin rate is expected to be strong for the remainder of       the year and will likely range between 38-39% in the second half of       the year due to pricing, material deflation and continued favorable       performance in the Security segment.    --  The cost structure has been adjusted slightly by an additional $50       million in savings on an annualized basis. The incremental per share       benefit is expected to total approximately $0.24 in 2009. This brings       the total 2009 per share cost reduction benefits to $2.27, inclusive       of the $2.03 benefit from the cost reduction programs previously       announced in 2008 and 1Q'09.  Total restructuring and related charges       for 2009 are still expected to be $45 million.  

For 2010, the per share benefit of all programs is expected to be $0.99 ($0.24 from 4Q'08, $0.51 from 1Q'09 and $0.24 from 2Q'09).

Free cash flow for 2009 is expected to be approximately $300 million, based on expected working capital turn improvement of approximately 10% versus 2008. The company has leveraged strong process controls as a part of the Stanley Fulfillment System to improve working capital turns in these conditions.

Donald Allan Jr., Vice President and Chief Financial Officer, commented, "Our financial priorities remain unchanged in this environment of significant negative volume trends which have dramatically reduced our earnings potential this year. We will maintain a laser focus on the Stanley Fulfillment System processes to drive further improvements in working capital in order to achieve our free cash flow objectives for 2009 and protect our balance sheet."

The company will host a conference call with investors at 10:00am ET, Wednesday, July 22nd, 2009 to discuss quarterly results. The slides that will accompany the conference call are available at this time on http://www.stanleyworks.com/. The call will be accessible by telephone at (877) 242-3653 and from outside the U.S. at (763) 416-6917 with the conference identification number 19198545; also, via the Internet at http://www.stanleyworks.com/ by selecting "Events and Webcasts" from the "Investors" section of the web site. To listen, please go to the web site at least fifteen minutes early to register, download and install any necessary audio software. A replay will also be available two hours after the call and can be accessed at (800) 642-1687 or (706) 645-9291 by entering the conference identification number 19198545.

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

Operating margin is defined as sales less cost of sales less SG&A. Management uses operating margin and its percentage of net sales as key measures to assess the performance of the company as a whole, as well as the related measures at the segment level.

Free cash flow is defined as cash flow from operations less capital and capitalized software expenditures (reconciliation). Free cash flow does not reflect, among other things, deductions for mandatory debt service, other borrowing activity, discretionary dividends on the company's common stock and acquisitions.