Free Writing Prospectus
Filed pursuant to Rule 433
Registration Number 333-153646
September 4, 2009
The Stanley Works is providing you with the following materials in connection with the Company’s public offering of common stock. The following materials were presented at the Morgan Stanley Global Industrials CEOs Unplugged Conference.
The issuer has filed a registration statement, including a prospectus and a prospectus supplement dated as of July 31, 2009 with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement, the prospectus supplement and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request it by calling collect 1-860-827-3833.
 THE
STANLEY WORKS Investor Overview |
  1
Cautionary Statements Certain statements contained in this presentation are forward looking. These are based on assumptions of future events which may not prove to be accurate. They involve risk and uncertainty. Actual results may differ materially from those expected or implied. We direct you to the cautionary statements detailed in our recent 1934 Act SEC filings. |
 2 The Stanley Works Investor Highlights Business Segments NYSE: SWK / S&P500 $3.2B Market Cap 3.2% Cash Dividend Yield - Increased for 42 years 79.9M Shares Outstanding Security $1.5B Industrial $1.3B CDIY $1.6B Financial Highlights (’03-’08) 12% Revenue CAGR (2% Organic) 11% EPS CAGR $379M Annualized Cash Flow (Avg.) Valuation (1) 8.7X EV/LTM EBITDA 15.9X 2009E P/E (2) 9.6% LTM FCF/Market Cap (1) Market Cap data as of July 31th, 2009 (2) Based on First Call Average 2009 EPS estimates |
 3 3 Transition Has Resulted In Stronger, More Diversified Company… Largest Customer U.S. Home Ctrs. & MMs 2002 22% 40% CDIY Industrial Security 2002 = $2.2B (1) …With Security Rapidly Approaching CDIY In Size Portfolio Transition 2008 ~6% ~13% 13% 29% 58% 34% 29% 37% (1) Adjusted for Acquisitions & Divestitures 2008 = $4.4B 3 |
 4 Be a consolidator of the tool industry Increase relative weighting of emerging markets Brand is meaningful (Stanley or sub-brand) Value proposition is definable and sustainable through innovation Global cost leadership is achievable Building on existing growth platforms Developing new growth platforms over time Strategy Overview Maintain Portfolio Transition Momentum Be Selective and Operate In Markets Where: Pursue Growth On Multiple Fronts Through: Accelerate Progress Via Stanley Fulfillment System (SFS) Strategy Focused On Profitable Growth, Asset Efficiency 4 |
 5 Long-Term Financial Objectives In Place Since 2004 3-5% organic ~10% total Core Financial Objectives Mid-teens % EPS growth FCF Net Income ROCE in the range of 12-15% Sales Growth Financial Performance Dividend Continued growth Credit Rating Upper tier investment grade 5 |
 6 Long Standing Strategy To Remain A /A3/A, A1/P2/F1 Serving SWK Well Early & Decisive Actions Taken To Ensure Ample Liquidity Debt to capital ratio is 35% - 37% -$400 -$300 -$200 -$100 $0 $100 $200 $300 $400 $500 $600 2009 2010 2011 2012 2013 … 2045 Focus On Strong Cash Flow, Conservative Financial Position And Proactive Liquidity Management Creates… 6 Debt Picture …Strong Company With Solid Foundation |
 7 Two Security Growth Platforms Created Security Builders Hardware Automatic Doors Systems Integration & Monitoring Product Sales Mechanical Locking Systems 7 Convergent Security ~$800M/Yr. Run Rate Revenues Mechanical Access ~$800M/Yr. Run Rate Revenues |
 8 8 10% 41% 45% 4% Electronic/Convergent Security Today 2008 Revenue Mix Time & Materials N. America Asia/ANZ 2008 Geographic Mix Europe Product Installation Recurring Financial/Business Profile • ~$800M/Yr. Run Rate Revenues • OM ~17% • 110 Offices Globally
& 6 Monitoring Centers,
3,000+ Employees And 450K+ Customers • Current Market Share Of 2%+ Globally Key Competitive Differentiators • Reputation For Service Excellence • Ability To Provide Real-Time Data/Video Services To Customer Base…Unique To The Industry 8 45% Recurring Revenue 1Q’09 Organic Op. Profit up 10% Y-O-Y |
 9 Improving Mix In Electronic Security Installation Revenue Is Down Across All Lines… Large Projects 15% 30% + National Accounts 38% 20% + Core Commercial 47% 10%
100% % Of Total U.S. Install Rev. U.S. Organic Install Volume Type Of Business 0.7% 0.9% 1.0% 1.1% 1.3% 2.1% Concurrently, RMR As A % Of Install Revenue Has Been Growing… RMR Sales As A % Of Install Revenue ‘08 ‘09 …With Much Smaller Decline In Higher Margin Small Accounts …With A Marked Improvement In Core Commercial, Driving Even Higher Profitability • Increased Core Commercial sales force by 11% • Strong Emphasis On Recurring Revenue • Decreased Dependence On Lower Margin, More Cyclical Large Project Business Convergent’s Strategic Actions Are Paying Off… Total Organic RMR Segment Profit +9% +13% 2Q’09 vs. 2Q’08 |
 10 10 16% 84% Mechanical Access Today 2008 Segment Mix 43% 32% 25% Repeat New Product Sales & Service High Margin / Solid Growth Business… 2008 Revenue Mix Builders Hardware Mechanical Locking Systems Automatic Doors Financial/Business Profile • ~$800/Yr. Run Rate Revenues • OM ~20% • Current Market Share Of 3%+ Globally ( 7%+ In NA) • 60 Offices
Globally, 4000+ Employees (2,000 Sales And Service Employees) Key Competitive Differentiators • Trusted And Respected Brand • Direct Go-To-Market Strategy… National North American Footprint …With Focus On Global Expansion And LCC Sourcing Opportunities |
 11 Security Market Opportunity Market Market Size Growth Mechanical $26B
2-4% Convergent $39B
7-10% Significant Growth Potential Both Organically And Through
Acquisitions |
 12 Healthcare Growth Platform Healthcare Solutions: $150M (2009E) SWK Well Positioned to Benefit From Growing Healthcare Market • Strong toehold in Personal Security market with Xmark and Senior Technologies • InnerSpace and Scan Modul form solid global base for specialty medical storage solutions business |
 13 Industrial Industrial & Automotive Tools: $0.9B Overview • $15B Market, Growing 2-3% • 3 Year Revenue CAGR 28% • #1 Market Share Europe, #2 U.S. • Importance Of Brand Strength Very High • Attractive Emerging Markets Creating Growth Opportunities • De minimis Auto OEM Exposure |
 14 Industrial Engineered Solutions: $0.3B Financial Performance Overview 3 Year Revenue CAGR ~ 6% Organic ~13% Total 3 Year Average OM ~18% High Return Industrial Storage and Hydraulic Tools Businesses |
 15 Construction / DIY Construction / DIY: $1.6B CT&S and Bostitch Combination Leverages Operations And Resources |
 16 Snap Off Knife Hammer Tacker Chalk Belts & Pouches Markers 35’ Tape Soft Storage Construction / DIY Mar. 2007 Sept. 2007 Markers Levels Specialty Saws Mobile Storage Vise Tool Boxes Tapes Mechanic Tools Fubar Long & Short Hammers Mar. 2008 Sept. 2008 Stud Sensor Expert Range 3 in 1 Fire & Rescue Planes Chisels Max Tapes Flex Blades Cantilever Structural Foam Box FUBAR III Rechargeable Flashlight 13’ Standout Hands-free LED flashlight Water-Proof Box Cable Tacker Graphite Hammer Wood Hammer Saw FM Knife Utility Blades 100 pk blades Screwdriver Mobile Storage 2008: Over 125 New Products, $80M+ NPD Revenue |
 17 2009 Brand Reinvestment Expanded Major League Baseball Marketing Program Enabling Promotion Of All Product Lines & Generation of At Least 1 Billion Brand Impressions Continued Investment In NASCAR iPhone App A Total Of $21M In Brand Investment for 2009 |
 18 3. Industrial and Automotive Tools Industrial Capital Allocation Focused On Three Major Growth Platforms Consolidate tool industry Expand into emerging markets Intensify innovation and product development Streamline manufacturing footprint and product platforms Growth Platforms Security Grow organically Expand internationally via acquisitions 2. Mechanical Security 1. Convergent Security Accelerate organic growth Leverage successful HSM / Sonitrol platforms Expand internationally via acquisitions |
 19 19 US Europe Asia Segment Regional / Growth Breakdown 3% 47% 14% 75% 10% 19% 33% 45% 48% Security Represents Largest Growth Opportunity… CDIY Industrial Security Normalized Market Growth Rate 2 – 3% 2 – 3% 5 - 7% ROW 3% 2% 1% …With Strong Organic Growth Rate As Well As Potential For International Expansion |
 20 Financial Review Growth Track Firmly Established ‘03 – ’08 CAGR 12% $4.4B LTM Revenues $4.0B Annual Revenue Trend $4.4B $3.9B $3.2B $2.9B $2.5B 2003 2004 2005 2006 2007 2008 |
 21 Margin Trends 12.7% 13.6% 13.4% 12.3% 14.1% 11.0% 9.5% 37.8% 37.9% 36.3% 35.9% 36.7% 34.2% 33.9% 2002 2003 2004 2005 2006 2007 2008 OM GM Gross Margin Expansion… …Driven By Diversification Strategy And Execution Focus 39.9% Gross Margin in 2Q’09 |
 22 Financial Review Annual EPS Trends $2.03 $2.70 $3.06 $3.87 $3.41 $3.33 2003 2004 2005 2006 2007 2008 ‘03–’08 CAGR 11% $2.82 - GAAP (a) Ex-Restructuring $1.07 - GAAP Ex-Restructuring |
 23 Financial Review Sustained Free Cash Flow Generation… 119 172 149 425 317 359 457 422 294 233 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 $ in Millions …Places SWK In A Position Of Strength LTM FCF $310M |
 24 SWK Free Cash Flow Conversion Versus Peers Free Cash Flow Conversion Outperformance… …Driven By Execution Focus 2006 117% 110% 92% SWK Industrial Peers Security Peers 2007 131% 107% 97% SWK Industrial Peers Security Peers 2008 166% 91% 104% SWK Industrial Peers Security Peers Source: Capital IQ (1) Free Cash Flow is defined as Cash From Operations, adjusted
for extraordinary charges, less Capital Expenditures. Net Income is
adjusted for extraordinary charges. |
 25 What Is SFS? SFS: Implementation Of Stanley’s Transformational Lean TM Embedded Processes, Culture Of Continuous Improvement Simplify every aspect of the business to drive profitability and asset efficiency Standardize processes and platforms to provide scalability Implementation of Lean in all our factories, supply chains and back-offices Keep demand and supply in balance |
 26 SFS Driving Favorable Trend In Working Capital Turns… 5.9x 4.6x 4.7x 4.6x 4.5x 5.3x 2003 2004 2005 2006 2007 2008 Early Results ’03-’08 +1.3 Turns …$400M+ Working Capital Benefit Realized |
 27 2006 4.5 5.2 4.0 SWK Industrial Peers Security Peers 2007 5.3 5.1 4.3 SWK Industrial Peers Security Peers 2008 5.9 5.1 3.8 SWK Industrial Peers Security Peers Working Capital Turn Performance Versus Peers Change 2006-2008 SWK DHR CBE BDK MAS ITW SNA SHW IR NWL SWK SI DBD UTX CKP HON TYC -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2.0 Source: Capital IQ |
 28 28 Global Presence With 44% Of Revenues Outside Of The US… U.S. Europe Asia …Asia Represents Largest Growth Opportunity Geographic Breakdown 2% 29% 56% ROW 13% |
 29 29% 12% 10% 13% 8% 4% 24% Residential Construction / DIY Commercial Construction Retail Healthcare, Education, Government Automotive Repair (Mac + Facom) Industrial - Other Other End Markets A Diverse Set Of End Markets Served… …With Only 15% In U.S. Residential Construction / DIY (1) “Industrial – Other” includes manufacturing, utilities, distribution, power, rail, oil & gas, etc. |
 30 End Markets By Business *Industrial includes manufacturing, utilities, distribution, power, rail, oil & gas,
etc. End Market MAS CSS Industrial CDIY SWK Res. Const./DIY 23% 0% 8% 59% 29% Comm. Const. 13% 25% 5% 11% 12% Retail 32% 13% 0% 6% 10% Health Care 11% 15% 3% 0% 5% Education 9% 9% 0% 0% 3% Government 5% 8% 4% 1% 4% Automotive Aftermkt 0% 2% 26% 0% 8% Industrial 3% 10% 52% 20% 24% Other 4% 18% 2% 3% 5% Total 100% 100% 100% 100% 100% |
 31 Long Term Capital Allocation Objectives Capital Allocation Near Term Capital Allocation Objectives Dividends 1/6 Acquisitions 2/3 Share Repurchase 1/6 Debt reduction Dividend Limited acquisition activity Limited share repurchase activity |
 32 $2.8B Has Been Invested in Acquisitions Since 2002… Capital Allocation Acquisition Price ($M) '07 HSM 545 '02 Best Access 315 '08 Sonitrol 280 '04 Blick & Frisco Bay 220 '05 National 170 '04 ISR, SGI, PHI 125 '02-'08 Various 235 '08 GdP 170 '08 Xmark 45 Sub-total 2,105 '06 Facom 480 '04 CST/Berger 60 '07 Innerspace 55 '06 Besco 40 '08 Scan Modul 20 Sub-total 655 Year Security Tools/ Other …To Advance Growth Platforms |
  33 Acquisition Integration Proprietary Integration Process Continues To Drive Significant Synergy Realization OM% 22% 15% 12% >30% >30% 15% Sonitrol X-Mark GdP Pre-Acquisition Post-Acquisition Key Features of Integration Process • 100 Day Integration Plan Finalized Prior To Close • Buy In On Integration Plan By Target Management Prior To Close • Weekly/Monthly Senior Management Meetings On Integration Progress • Experienced Integration Managers • Native/In-country Integration Team |
 34 2008 GAAP EPS Actual $2.82*
Unit Volume -18% To -20% ($3.90 - $3.40) Currency Impact (based on current rates) ($0.50) 2008 Cost Reduction Initiatives $1.75 1Q’09 Cost Reduction Initiatives (net of reinvestment)
$0.28 2Q’09 Cost Reduction Initiatives $0.24 Gross Margin Rate Improvement $0.76 Acquisitions (GdP, Sonitrol, Xmark & ScanModul) $0.10 Restructuring (lower 2009 charges vs. 2008) $0.45 $2.00 - $2.50 Gain From Debt Extinguishment $0.34 2009 GAAP EPS Guidance $2.34 - $2.84 2009 Guidance Factors * EPS prior to recast |
 35 Summary Executing a Clear Roadmap For Profitable Growth Diversified portfolio able to better withstand cyclical downturns Moving aggressively to align cost structure with current environment Three large, attractive growth platforms 1. Convergent Security 2. Mechanical Access Solutions 3. Industrial and Automotive Tools SFS playing a critical role in supporting long-term growth and asset efficiency Key Takeaways |
 36 Where is SWK? Upcoming Conferences: UBS conference in San Francisco on August 11 Morgan Stanley conference in New York on September 1st ASIS Security conference in September (21 thru 24 ) Imperial Security Conference in New York on November 5 Robert Baird Industrials Conference in Chicago on November 10 Merrill/Banc of America Conference in New York on December 8 Analyst Day at the NYSE on November 17 |
 37 Appendix |
 38 2Q’09 Summary • Well Positioned To Continue To Gain Market Share • Gross Margin Success Stories Of 1Q And 2Q Foreseen As Largely Maintainable For The Full Year • Continued Focus On Paying Down Debt • Dedicated To Ongoing Success Of SFS Both As A Source Of Cash And A Competitive Advantage |
    39 1Q 2Q Volume - 19% - 24% Price + 3% + 2% Organic - 16% - 22% Currency - 6% - 4% Acquisitions + 7% + 6% SWK - 15% - 20% 1Q Revenues $1,071 $ 913
- $158 - 15% 2Q Revenues $1,152 $ 919
- $233 - 20% Sources Of Growth 2Q’09 Revenues PY $ millions CY Segment Results 2Q Unit Volume Pressures Worsened In All Segments… …However, Security Continues To Perform Well 1Q 2Q 1Q 2Q CDIY - 25% - 28% - 22% - 26% Industrial - 29% - 40% - 26% - 37% Security +12% + 8% - 8% - 11% SWK - 15% - 20% - 19% - 24% Total Volume |
    40 EPS ( vs. Last Guidance) • Revised 2009 Unit
Volume ($1.00) (-18% To -20%) • Gross Margin Rate Improvement +$0.76 (38-39% in 2H’09) • New Restructuring Program +$0.24 • Gain on Debt Extinguishment +$0.34 All Other Factors (i.e. FX, Previous Cost Actions, Acquisitions and Restructuring Charges) Relatively Consistent With Previous Guidance Updated Guidance Factors Free Cash Flow • Expect Approximately $300M In Free Cash Flow • Predicated On Approximately 10% Improvement In Working Capital Turns From Year-End 2008 Stanley Fulfillment System Process Controls To Drive Result 2009 EPS Guidance Range of $2.34 - $2.84 |
    41 Cost Actions Summary • $50M annualized cost actions • ~50% impact in ‘09 • ~35% headcount-related • $265M cost savings • ~ 60% headcount-related • 2010 impact approximately $25M • $45M ‘09 restructuring charges ($85M booked in 2008) • Large majority of restructuring cost is cash-related July ‘09 Actions: Total ‘09 Impact ’09 Restructuring Summary |