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: Construction & DIY (''CDIY''), Industrial and Security. The CDIY segment manufactures and markets hand tools, storage systems, fasteners, and electronic leveling and measuring tools, 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 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 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, automatic doors, door closers, exit devices, hardware and locking mechanisms.

For several years, the Company has 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 of this strategy has entailed approximately $2.2 billion of acquisitions since the beginning of 2002, several divestitures, and increased brand investments. Additionally, the strategy reflects management's vision to build a growth platform in security while expanding 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. 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 on Form 10-K for the fiscal year ended December 29, 2007 for additional strategic discussion.

RESULTS OF OPERATIONS

Below is a summary of consolidated operating results for the three months ending March 29, 2008, followed by an overview of performance by business segment. The term ''core'' is 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 were $1.097 billion in the first quarter of 2008 as compared to $1.062 billion in the first quarter of 2007, representing an increase of $35 million or 3%. Acquisitions contributed $19 million, or 2%, of the increase in net sales. Core sales increased 1%, comprised of 2% from favorable pricing, a 5% volume decline, and 4% from favorable currency translation in all regions. The U.S. CDIY segment continues to be adversely impacted by the contraction in the residential construction market, and the U.S. economic downturn also affected the automotive repair tools business in the first quarter. The hardware business within the security segment had lower sales due to its previously anticipated loss of a major customer. Aside from hardware, the security segment showed strength in access technologies sales and to a lesser extent convergent security. Engineered storage achieved robust sales growth with government and commercial customers, and industrial Europe reflected positive sales volume.

Gross Profit: Gross profit was $415 million, or 37.8% of net sales, in the first quarter of 2008, compared to $395 million, or 37.2% of net sales, in the prior year. Acquisitions, primarily HSM, contributed $9 million of the increase. Productivity and pricing more than offset approximately $18 million of inflation, primarily related to freight and commodities. The Company anticipates the full year 2008 inflation impact will be approximately $100 million, which management plans to mitigate through various customer pricing actions and continued productivity initiatives.

SG&A expenses: Selling, general and administrative expenses (''SG&A'') were $280 million, or 25.5% of net sales, in the first quarter of 2008, compared to $259 million, or 24.4% of net sales, in the prior year. Acquisitions contributed $6 million of incremental SG&A, and the remainder of the increase arose predominantly from unfavorable foreign currency translation. The 110 basis point increase in SG&A as a percentage of net sales primarily relates to U.S.-based non-variable costs where sales declined as previously discussed, as well as investment in the development of Asian and eastern European emerging markets. The Company selectively executed restructuring actions in certain businesses in the latter part of the first quarter, and, in the event it becomes necessary to align costs with lower sales volumes, further actions will be taken.

Interest and Other-net: Net interest expense in the first three months of 2008 was $18 million compared to $20 million in the first three months of 2007. The decrease was due to lower interest rates on short-term borrowings in the current year, as well as the absence of the short-term HSM acquisition bridge loan interest in the prior year. This was partially offset by increased long-term interest expense from the convertible notes issued in March 2007 to finance the HSM acquisition.

Other-net expenses amounted to $21 million in the first quarter of 2008, slightly above $20 million incurred in the first quarter of 2007 primarily due to increased intangible asset amortization expense.

Income Taxes: The Company's effective income tax rate was 27.0% in the first quarter this year, relatively flat compared to 26.7% in the prior year's quarter. The slight increase is mainly attributable to increased earnings in certain more highly taxed jurisdictions.

Business Segment Results

The Company's reportable segments are an aggregation of businesses that have similar products and services, among other factors. The Company utilizes segment profit, which is defined as net sales minus cost of sales and SG&A (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 income tax expense. Corporate overhead is comprised of world headquarters facility expense, costs for the executive management team and for certain centralized functions that benefit the entire Company but are not directly attributable to the businesses, such as legal and corporate finance functions. The Company's operations are classified into three business segments: Construction & DIY, Industrial, and Security.

Construction & Do-It-Yourself (''CDIY''): CDIY sales were $423 million in the first quarter of 2008, essentially flat versus $424 million in the first quarter of 2007. The favorable effects of a 5% foreign currency translation impact and 2% of pricing were offset by a 7% volume decline. The U.S continues to be adversely impacted by the contraction of the residential construction market and generally deteriorating economic activity, while unit volume in Europe was affected by the timing of promotional sales that occurred earlier in 2007 than the current year.

Segment profit was $51 million, or 12.0% of net sales, for the first quarter of 2008, compared to $63 million, or 14.8% of net sales in 2007. In addition to the sales volume decline impact, segment profit was negatively affected by inflation, lower absorption of fixed costs, and spending to develop emerging markets in Europe and Asia, partially offset by the favorable effect of foreign currency translation.

Industrial: Industrial sales of $336 million in the first quarter of 2008 increased 8% from $311 million in the prior year. The Innerspace acquisition within the engineered storage business generated 2% of the higher sales. Core sales increased 6% due to a favorable foreign currency impact of 7%, price

increases amounting to 2%, and a 3% volume decline. The core sales performance, aside from currency, was mainly attributable to strength in the U.S.-based engineered storage business, along with modest gains in European businesses, which were more than offset by weakness in North American automotive repair tools. The robust sales in engineered storage were driven by government spending, particularly by army and naval bases, and also strength with commercial customers. In Europe, assembly technologies had strong gains from European auto manufacturers while the Facom business was up slightly aside from currency. The decline in North American automotive repair sales pertained to the downturn in U.S. market conditions including higher gasoline prices and credit pressures on consumers, as well as mobile distributors reducing their Mac inventory levels.

Industrial segment profit was $49 million, or 14.6% of net sales, for the first quarter of 2008, compared with $46 million, or 14.6% of net sales, in 2007. The segment profit improvement was driven by favorable currency translation, in addition to margin rate expansion pertaining to favorable mix and productivity in Facom and sales leverage along with the acquisition contribution in engineered storage. These positive factors were partially offset by an unfavorable mix to lower margin products in the North American automotive repair tools and hydraulic businesses, in addition to the previously discussed Mac sales volume decline.

Security: Security sales increased 3% to $338 million during the first three months of 2008 from $328 million in the corresponding 2007 period. Acquisitions, primarily HSM, contributed 3% of the sales increase. Core sales were flat as 2% pricing gains and a 2% favorable foreign currency impact were offset by a 4% volume decline. Aside from the hardware business, which was adversely impacted by the loss of a major customer, sales volume was modestly positive primarily attributable to the access technologies and North American systems integration/monitoring businesses. The volume growth in access technologies was driven by sales to hospitals, grocers and other non-national chain customers. North American convergent security (monitoring and systems integration) benefited from strength in national accounts in the U.S., and robust Canadian sales growth.

Security segment profit amounted to $53 million, or 15.8% of net sales, for the first quarter of 2008 as compared with $46 million, or 13.9% of net sales, in the prior year. The strong segment profit, and the 190 basis-point expansion in the segment profit rate, stemmed from the reverse integration of the legacy systems integration business into HSM, yielding improved bidding and project management disciplines. In addition, productivity and customer pricing benefits exceeded cost inflation. These positive factors more than compensated for the sales volume-related decline in the hardware business.

Restructuring

At March 29, 2008, the Company's restructuring reserve balance was
$22.3 million. This will be substantially expended during 2008, aside from
approximately $7 million pertaining to the Facom acquisition for which the
timing of payments depends upon the actions of certain European governmental
agencies. A summary of the Company's restructuring reserve activity from
December 29, 2007 to March 29, 2008 is as follows:

[[Image Removed]]
[[Image Removed]]     [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]
                      [[Image Removed]] [[Image Removed]]                                                                         [[Image Removed]] [[Image Removed]]                                   Net                                   [[Image Removed]] [[Image Removed]]                                                                         [[Image Removed]] [[Image Removed]]                                                                         [[Image Removed]] [[Image Removed]]
(Millions of Dollars)                                                                    12/29/07                                                                                                    Additions                                                                                                     Usage                                                                                                     Currency                                                                                                     3/29/08
Acquisitions          [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]                   [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]                   [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]                   [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]                   [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]                   [[Image Removed]]
Severance             [[Image Removed]] [[Image Removed]] [[Image Removed]]                 $              18.8 [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]                 $                 - [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]                 $              (3.7 )                 [[Image Removed]] [[Image Removed]] [[Image Removed]]                 $               0.8 [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]                 $              15.9 [[Image Removed]]
Facility Closure      [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]               1.6 [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]                 - [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]              (0.4 )                 [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]                 - [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]               1.2 [[Image Removed]]
Other                 [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]               1.0 [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]                 - [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]              (0.2 )                 [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]               0.2 [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]               1.0 [[Image Removed]]
2008 Actions          [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]                 - [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]               3.3 [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]              (1.0 )                 [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]                 - [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]               2.3 [[Image Removed]]
Pre-2008 Actions      [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]               2.3 [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]                 - [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]              (0.5 )                 [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]               0.1 [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]               1.9 [[Image Removed]]

2008 Actions: During the first quarter of 2008, the Company initiated cost reduction initiatives in order to maintain its cost competitiveness. Severance charges of $3.3 million were recorded during the quarter relating to the reduction of approximately 100 employees. Approximately $0.8 of this charge pertained to the Construction and DIY segment; $0.4 million to the Industrial segment; and $2.1 million to the Security segment. Of these amounts, $1.0 million has been utilized to date, with $2.3 million of reserves remaining as of March 29, 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. Of this amount, $11.0 million has been utilized to date with $0.8 million of accrual remaining as of March 29, 2008. In addition, $1.1 million of reserves remain relating to pre-2007 actions.

Acquisition Related: 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 March 29, 2008, $1.2 million has been utilized, leaving $1.8 million remaining. The Company also utilized $3.9 million of restructuring reserves during the first quarter 2008 established for various other prior year acquisitions. As of March 29, 2008, $18.1 million in accruals for restructuring remains, primarily relating to the Facom acquisition.

FINANCIAL CONDITION

Liquidity, Sources and Uses of Capital:

Operating and Investing Activities: Cash flow from operations was $108 million in the first quarter of 2008 compared to $94 million in 2007. The increase is primarily due to improved working capital performance in the current year. Proceeds from the sale of the Blick U.K. leasing receivables amounted to $25 million in the first quarter of 2008, which was offset by a $25 million pay down of the U.S. receivable securitization facility. Higher income tax payments were approximately offset by lower restructuring-related payments versus the prior year.

Capital and software expenditures were $25 million in the first quarter of 2008, relatively flat compared to $26 million in 2007, but with a higher proportion attributable to software as the Company is in the midst of a North American SAP implementation.

Free cash flow, as defined in the following table, was $83 million in the first quarter of 2008 compared to $68 million in the corresponding 2007 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.

[[Image Removed]]
[[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]

(Millions of      [[Image Removed]] [[Image Removed]]                                                                         [[Image Removed]] [[Image Removed]]
Dollars)                                                                               2008                                                                                                        2007
Net cash provided
by operating      [[Image Removed]] [[Image Removed]] [[Image Removed]]                                                       [[Image Removed]] [[Image Removed]] [[Image Removed]]
activities                                                                              $               108 [[Image Removed]]                                                                       $                94 [[Image Removed]]
Less: capital and
software          [[Image Removed]] [[Image Removed]] [[Image Removed]]                                                       [[Image Removed]] [[Image Removed]] [[Image Removed]]

For the first three months of 2008, acquisition spending totaled $0.5 million compared to 2007 acquisition spending of $546 million primarily for HSM.

Financing Activities:

Repurchases of common stock during the first quarter of 2008 amounted to $102 million due to the repurchase of 2.2 million shares, while the Company expended $7 million in the prior year's quarter. 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 and warrants during the first quarter of 2008 amounted to $3 million, versus $60 million in the prior year which reflected high levels of stock option exercises along with $19 million of proceeds from warrants sold in connection with the March, 2007 equity units offering.

Net proceeds from short-term borrowings amounted to cash inflows of $120 million in 2008 compared to $84 million in 2007, with the increase pertaining to share repurchases. There were no long-term borrowings in the first quarter of 2008, while the $530 million of proceeds in the first quarter of 2007 represents the $330 million in five-year convertible notes and $200 million in three-year term notes issued to finance the HSM acquisition.

Debt to Capital Ratio

The Company's debt to capital ratio was 49% as of March 29, 2008. Reflecting the credit protection measures that are incorporated into the terms 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 the Company is more fairly represented by apportioning 50% of the ETPS issuance and 50-75% of the Equity Units issuance to equity when making the ratio calculation. The resulting debt to capital ratio from these apportionments is 34-37% as of March 29, 2008. The equity content adjustments to reported debt are consistent 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.

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:

[[Image Removed]]
[[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]

                                                                                                                                                                                                                                                                                Equity Units
                                                                                                                                                                                                 ETPS 50%                                                                         50 - 75%                                             As Adjusted
                  [[Image Removed]] [[Image Removed]]                               Reported on                               [[Image Removed]] [[Image Removed]]                                 equity                                  [[Image Removed]] [[Image Removed]]      equity       [[Image Removed]] [[Image Removed]]    for Equity
(Millions of                                                                       Balance Sheet                                                                                                  content                                                                          content                                               Content
Dollars)                                                                              (GAAP)                                                                                                    adjustment                                                                       adjustment                                            (non-GAAP)
Debt              [[Image Removed]] [[Image Removed]] [[Image Removed]]                 $             1,622 [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]                 $              (225 )                 [[Image Removed]] [[Image Removed]]  $(165) - $(247)  [[Image Removed]] [[Image Removed]]  $1,232 - $1,150
Equity            [[Image Removed]] [[Image Removed]] [[Image Removed]]                 $             1,717 [[Image Removed]] [[Image Removed]] [[Image Removed]] [[Image Removed]]                 $               225 [[Image Removed]] [[Image Removed]] [[Image Removed]]    $165 - $247    [[Image Removed]] [[Image Removed]]  $2,107 - $2,189
. . .