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

	Third Quarter					Year to Date
	2004			2003		2004		2003
NET SALES	$	791.2		$	665.6	$	2,364.5	$	1,950.4
COSTS AND EXPENSES
Cost of sales		503.7			438.2		1,514.7		1,289.2
Selling, general and administrative		178.5			143.5		528.5		480.3
Interest – net		8.4			7.1		25.0		21.5
Other – net		10.6			14.0		35.0		31.5
Restructuring charges and asset impairments		—			10.8		—		35.8
		701.2			613.6		2,103.2		1,858.3
EARNINGS FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES		90.0			52.0		261.3		92.1
Income taxes		26.1			14.6		77.5		26.4
NET EARNINGS FROM CONTINUING OPERATIONS	$	63.9		$	37.4	$	183.8	$	65.7
Earnings from discontinued operations (including gain on disposal of $142.3 million)
		(0.4	)		6.8		142.2		12.1
Income taxes on discontinued operations		(0.4	)		2.5		47.2		4.5
NET EARNINGS FROM DISCONTINUED OPERATIONS		—			4.3		95.0		7.6
NET EARNINGS	$	63.9		$	41.7	$	278.8	$	73.3
BASIC EARNINGS PER SHARE OF COMMON STOCK
Continuing operations	$	0.78		$	0.46	$	2.24	$	0.77
Discontinued operations		—			0.05		1.16		0.09
Total basic earnings per share of common stock	$	0.78		$	0.51	$	3.40	$	0.86
DILUTED EARNINGS PER SHARE OF COMMON STOCK
Continuing operations	$	0.76		$	0.46	$	2.19	$	0.77
Discontinued operations		—			0.05		1.13		0.09
Total diluted earnings per share of common stock	$	0.76		$	0.51	$	3.32	$	0.86
DIVIDENDS PER SHARE	$	0.28		$	0.26	$	0.80	$	0.77
AVERAGE SHARES OUTSTANDING (in thousands)
Basic		82,173			81,475		81,904		84,930
Diluted		84,384			82,126		83,945		85,482

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

	October 2, 2004		January 3, 2004
ASSETS
Cash and cash equivalents	$	256.3	$	204.4
Accounts receivable		618.6		482.4
Inventories		415.9		377.1
Other current assets		86.6		98.9
Assets held for sale		1.3		37.9
Total current assets		1,378.7		1,200.7
Property, plant and equipment		413.3		413.3
Goodwill and other intangibles		889.5		643.3
Other assets		166.8		166.5
	$	2,848.3	$	2,423.8
LIABILITIES AND SHAREOWNERS’ EQUITY
Short-term borrowings	$	252.3	$	157.7
Accounts payable		290.0		240.2
Accrued expenses		390.6		326.4
Liabilities held for sale		—		29.2
Total current liabilities		932.9		753.5
Long-term debt		489.8		534.5
Other long-term liabilities		330.4		277.2
Shareowners’ equity		1,095.2		858.6
	$	2,848.3	$	2,423.8

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

	Third Quarter						Year to Date
	2004			2003			2004			2003
OPERATING ACTIVITIES
Net earnings	$	63.9		$	41.7		$	278.8		$	73.3
Depreciation and amortization		23.2			21.0			70.3			65.5
Restructuring charges and asset impairments		—			10.8			—			35.8
Reclassify taxes paid (proceeds) from sale of
business to investing activities		10.5			—			(129.5	)		—
Changes in working capital		(34.0	)		23.6			(47.0	)		(22.5	)
Other		36.6			53.7			70.6			114.5
Net cash provided by operating activities		100.2			150.8			243.2			266.6
INVESTING AND FINANCING ACTIVITIES
Capital and software expenditures		(15.3	)		(12.4	)		(36.4	)		(27.7	)
Proceeds (taxes paid) from sale of business		(10.5	)		—			129.5			—
Business acquisitions		(3.5	)		(4.5	)		(258.0	)		(20.9	)
Cash dividends on common stock		(24.2	)		(21.0	)		(66.6	)		(65.0	)
Other		(26.1	)		(71.0	)		40.2			(105.1	)
Net cash used in investing activities and
financing activities		(79.6	)		(108.9	)		(191.3	)		(218.7	)
Increase in Cash and Cash Equivalents		20.6			41.9			51.9			47.9
Cash and Cash Equivalents, Beginning of Period		235.7			127.7			204.4			121.7
Cash and Cash Equivalents, End of Period	$	256.3		$	169.6		$	256.3		$	169.6
Free Cash Flow Computation
Operating Cash Flow	$	100.2		$	150.8		$	243.2		$	266.6
less: capital and software expenditures		(15.3	)		(12.4	)		(36.4	)		(27.7	)
Free Cash Flow from Operations (before dividends)	$	84.9		$	138.4		$	206.8		$	238.9

Free cash flow is defined as cash flow from operations less capital expenditures; the company believes this is an important
measure of its liquidity, as well as its ability to fund future growth and to provide a return to the shareowners.

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

	Third Quarter				Year to Date
	2004		2003		2004		2003
BUSINESS SEGMENTS
Net Sales
Consumer products	$	296.4	$	278.5	$	900.7	$	791.4
Industrial tools		323.5		264.4		961.0		812.3
Security solutions		171.3		122.7		502.8		346.7
Consolidated	$	791.2	$	665.6	$	2,364.5	$	1,950.4
Operating Profit
Consumer products	$	43.6	$	39.3	$	132.1	$	98.7
Industrial tools		34.7		18.7		101.3		17.7
Security solutions		30.7		25.9		87.9		64.5
Consolidated	$	109.0	$	83.9	$	321.3	$	180.9

THE STANLEY WORKS AND SUBSIDIARIES
Consolidated Statements of Operations and Business Segment Information
Reconciliation to GAAP Earnings
Third Quarter 2004 versus 2003
(Unaudited, Millions of Dollars Except Per Share Amounts)

	2004			2003
								(a	)
	Reported			Excluding Charges			Charges			Reported
Net sales	$	791.2		$	665.6		$	—		$	665.6
Cost of sales		503.7			438.2			—			438.2
Gross margin		287.5			227.4			—			227.4
		36.3	%		34.2	%					34.2	%
Selling, general & administrative		178.5			143.1			0.4			143.5
		22.6	%		21.5	%					21.6	%
Subtotal		109.0			84.3			(0.4	)		83.9
		13.8	%		12.7	%					12.6	%
Interest, net		8.4			7.1			—			7.1
Other, net		10.6			8.1			5.9			14.0
Restructuring charges and asset impairments		—			—			10.8			10.8
Earnings from continuing operations before income taxes		90.0			69.1			(17.1	)		52.0
Income taxes		26.1			20.1			(5.5	)		14.6
		29.0	%		29.1	%					28.1	%
Net earnings from continuing operations	$	63.9		$	49.0		$	(11.6	)	$	37.4
Earnings from discontinued operations		(0.4	)		6.8			—			6.8
Income taxes on discontinued operations		(0.4	)		2.5			—			2.5
Net earnings from discontinued operations		—			4.3			—			4.3
Net earnings	$	63.9		$	53.3		$	(11.6	)	$	41.7
Average shares outstanding (diluted, in thousands)		84,384			82,126			82,126			82,126
Earnings per share (diluted)	$	0.76		$	0.65		$	(0.14	)	$	0.51
BUSINESS SEGMENTS
Net sales
Consumer products	$	296.4		$	278.5		$	—		$	278.5
Industrial tools		323.5			264.4			—			264.4
Security solutions		171.3			122.7			—			122.7
Consolidated	$	791.2		$	665.6		$	-		$	665.6
Operating profit
Consumer products	$	43.6		$	39.3		$	—		$	39.3
Industrial tools		34.7			19.1			(0.4	)		18.7
Security solutions		30.7			25.9			—			25.9
Consolidated	$	109.0		$	84.3		$	(0.4	)	$	83.9
Interest, net		8.4			7.1			—			7.1
Other, net		10.6			8.1			5.9			14.0
Restructuring charges and asset impairments		—			—			10.8			10.8
Earnings from continuing operations before income taxes	$	90.0		$	69.1		$	(17.1	)	$	52.0

(a) Includes $17.1 million of pre-tax Operation 15 restructuring costs, asset impairment charges and other exit costs. Aggregate restructuring charges of $10.8
million include the following: $7.6 million attributable to asset impairments, $2.0 million for a contract termination charge, and $1.2 million in severance and
related benefits for headcount reductions pertaining to Operation 15 initiatives. The charges within SG&A and Other, net relate to the Mac Direct retail channel
exit.

THE STANLEY WORKS AND SUBSIDIARIES
Consolidated Statements of Operations and Business Segment Information
Reconciliation to GAAP Earnings
Year to Date September 2004 versus 2003
(Unaudited, Millions of Dollars Except Per Share Amounts)

	2004			2003
								(a	)
	Reported			Excluding Charges			Charges			Reported
Net sales	$	2,364.5		$	1,950.4		$	—		$	1,950.4
Cost of sales		1,514.7			1,282.2			7.0			1,289.2
Gross margin		849.8			668.2			(7.0	)		661.2
		35.9	%		34.3	%					33.9	%
Selling, general & administrative		528.5			450.1			30.2			480.3
		22.4	%		23.1	%					24.6	%
Subtotal		321.3			218.1			(37.2	)		180.9
		13.6	%		11.2	%					9.3	%
Interest, net		25.0			21.5			—			21.5
Other, net		35.0			22.6			8.9			31.5
Restructuring charges and asset impairments		—			—			35.8			35.8
Earnings from continuing operations before income taxes		261.3			174.0			(81.9	)		92.1
Income taxes		77.5			52.6			(26.2	)		26.4
		29.7	%		30.2	%					28.7	%
Net earnings from continuing operations	$	183.8		$	121.4		$	(55.7	)	$	65.7
Earnings from discontinued operations		142.2			12.1			—			12.1
Income taxes on discontinued operations		47.2			4.5			—			4.5
Net earnings from discontinued operations		95.0			7.6			—			7.6
Net earnings	$	278.8		$	129.0		$	(55.7	)	$	73.3
Average shares outstanding (diluted, in thousands)		83,945			85,482			85,482			85,482
Earnings per share (diluted)	$	3.32		$	1.51		$	(0.65	)	$	0.86
BUSINESS SEGMENTS
Net sales
Consumer products	$	900.7		$	791.4		$	—		$	791.4
Industrial tools		961.0			812.3			—			812.3
Security solutions		502.8			346.7			—			346.7
Consolidated	$	2,364.5		$	1,950.4		$	-		$	1,950.4
Operating profit
Consumer products	$	132.1		$	102.2		$	(3.5	)	$	98.7
Industrial tools		101.3			50.2			(32.5	)		17.7
Security solutions		87.9			65.7			(1.2	)		64.5
Consolidated	$	321.3		$	218.1		$	(37.2	)	$	180.9
Interest, net		25.0			21.5			—			21.5
Other, net		35.0			22.6			8.9			31.5
Restructuring charges and asset impairments		—			—			35.8			35.8
Earnings from continuing operations before income taxes	$	261.3		$	174.0		$	(81.9	)	$	92.1

(a) Includes $81.9 million of pre-tax Operation 15 restructuring costs, asset impairment charges, other exit costs and CEO retirement costs. Aggregate charges of
$47.9 million arising from the Mac Direct retail channel exit are classified as follows: Cost of sales — $7.0 million; SG&A — $21.9 million; Other, net — $8.9 million;
and Restructuring and asset impairment charges — $10.1 million. In addition, $7.6 million in compensation and benefit costs associated with the CEO’s announced
retirement plans and $0.7 million other are classified in SG&A. Restructuring and asset impairment charges, aside from the $10.1 million for Mac Direct, are
comprised of the following: asset impairments of $10.4 million, a contract termination charge of $2.0 million and $13.3 million mainly attributable to severance
and related benefits for Operation 15 headcount reduction initiatives.