Financial Highlights**

(MILLIONS OF DOLLARS, EXCEPT PER-SHARE AMOUNTS) 2011 (1) 2010 (1) 2009 2008 2007
SWK          
Revenue $ 10,376.4 $ 8,343.9 $ 3,682.6 $ 4,354.1 $ 4,291.3
Gross Margin $ 3,830.3 $ 3,130.2 $ 1,492.4 $ 1,647.6 $ 1,631.7
Gross Margin % 36.9 % 37.5 % 40.5 % 37.8 % 38.0 %
Working Capital Turns 6.7 5.7 7.9 5.9 5.3
Free Cash Flow* $ 1,004 $ 936 $ 443 $ 422 $ 457
Diluted EPS from $ 5.24 $ 4.15 $ 2.81 $ 2.67 $ 3.76
Continuing Operations          
CDIY          
Revenue $ 5,236.5 $ 4,368.2 $ 1,258.1 $ 1,608.4 $ 1,715.2
Segment Profit $ 701.4 $ 585.2 $ 141.0 $ 174.2 $ 254.2
Segment Profit % 13.4 % 13.4 % 11.2 % 10.8 % 14.8 %
Working Capital Turns 8.5 8.4 7.7 5.6 5.0
Security          
Revenue $ 2,638.5 $ 2,084.0 $ 1,543.3 $ 1,478.6 $ 1,381.7
Segment Profit $ 430.6 $ 351.7 $ 305.0 $ 267.1 $ 237.2
Segment Profit % 16.3 % 16.9 % 19.8 % 18.1 % 17.2 %
Working Capital Turns 5.4 5.6 7.3 7.0 5.6
Industrial          
Revenue $ 2,501.4 $ 1,891.7 $ 881.2 $ 1,267.1 $ 1,194.4
Segment Profit $ 415.7 $ 285.6 $ 101.1 $ 174.2 $ 179.3
Segment Profit % 16.6 % 15.1 % 11.5 % 13.7 % 15.0 %
Working Capital Turns 5.5 4.7 5.2 4.8 4.2

(1) Excludes merger and acquisition-related charges/payments.

* Free Cash Flow = Net cash provided by operating activities minus capital expenditures. In 2011 and 2010, free cash flow excludes $307 million and $382 million of merger and acquisition-related charges and payments incurred primarily in connection with the Black & Decker merger and acquisition of Niscayah. Such normalized free cash flow is considered a meaningful metric to aid the understanding of the Company's cash flow performance aside from the material impact of these merger and acquisition-related charges/payments. In 2008, free cash flow also excludes income taxes paid on the gain from the CST/Berger divesture due to the fact the taxes are non-recurring and the related gross cash proceeds are classified as investing inflows. Refer to page 28 in the enclosed 10-K for the reconciliation of operating cash flow to free cash flow.

** The results from 2007-2010 were recast for certain discontinued operations for comparability.

2011 Scorecard

2011 Scorecard

(a) "EBITDA" (earnings before interest, taxes, depreciation and amortization) is a non-GAAP measurement. Management believes it is important for the ability to determine the earnings power of the Company and to properly value the Company, due to current high levels of non-cash expenses related to recent acquisitions. In 2011 and 2010, EBITDA excludes merger and acquisition-related charges of $256 million and $538 million, respectively, primarily associated with the Black & Decker merger and Niscayah acquisition. In 2008, EBITDA excludes the restructuring charge of $67 million pertaining to cost actions taken in response to weakened economic conditions. A full reconciliation with the relevant GAAP measurement, net earnings from continuing operations, follows:

(MILLIONS OF DOLLARS) 2011 2010 2009 2008 2007
Adjusted EBITDA $1,559 $1,228 $544 $617 $671
Net earnings from
continuing operations
$691 $202 $228 $215 $318
Interest income (27) (9) (3) (9) (5)
Interest expense 140 110 64 92 93
Income taxes 89 38 55 71 106
Depreciation and amortization 410 349 200 181 159
EBITDA from continuing
operations
$ 1,303 $ 690 $ 544 $ 550 $ 671
Merger and acquisition-related charges 256 538 - - -
2008 Restructuring charge(b) - - - 67 -

(b) The Company has excluded the 2011 and 2010 after-tax merger and acquisition-related charges of $200 million ($1.18 of diluted EPS) and $421 million ($2.80 of diluted EPS), respectively, in the calculation of diluted EPS. Additionally the Company has excluded $67 million ($0.66 of diluted EPS) in the 2008 calculation of diluted EPS. These amounts were excluded because the Company believes these are better indicators of operating trends when analyzing diluted EPS, due to the unusual large magnitude of these charges and the fact that they are non-recurring. Therefore, the Company has provided these measures both including and excluding such charges.

(c) Free Cash Flow = Net cash provided by operating activities minus capital expenditures. In 2011 and 2010, free cash flow excludes $307 million and $382 million of merger and acquisition-related charges and payments incurred primarily in connection with the Black & Decker merger and acquisition of Niscayah. Such normalized free cash flow is considered a meaningful metric to aid the understanding of the Company's cash flow performance aside from the material impact of these merger and acquisition-related charges/payments. In 2008, free cash flow also excludes income taxes paid on the gain from the CST/Berger divesture due to the fact the taxes are non-recurring and the related gross cash proceeds are classified as investing inflows. Refer to page 28 in the enclosed 10-K for the reconciliation of operating cash flow to free cash flow.

(d) Working Capital Turns are computed as year-end working capital (accounts receivable, inventory and accounts payable) divided by fourth quarter sales, annualized.

(e) Average Capital Employed is computed by dividing the 13-point average of debt and equity.

(f) ROCE is computed as net earnings from continuing operations plus after-tax expense and after-tax amortization of intangibles, divided by the 13-point average of debt and equity. For 2011 and 2010, net earnings from continuing operations exclude $200 million and $421 million of merger and acquisition-related charges incurred primarily in connection with the Black & Decker merger and Niscayah acquisition.

Comparison of 5-Year Return

Set forth below is a line graph comparing the yearly percentage change in the Company's cumulative total shareholder return for the last five years to that of the Standard & Poor's 500 Index (an index made up of 500 companies including Stanley Black & Decker) and the Peer Group. The Peer Group is a group of eight companies that serve the same markets the Company serves and many of which compete with one or more of the Company's product lines. Total return assumes reinvestment of dividends.

Comparison of 5-Year Cumulative Total Return (IN MILLIONS)
THE POINTS IN THE ABOVE TABLE ARE AS FOLLOWS 2006 2007 2008 2009 2010 2011
Stanley Black & Decker $100.00 $98.41 $74.32 $111.73 $148.37 $153.82
S&P 500 100.00 105.49 66.46 84.05 96.71 98.75
Peer Group 100.00 105.66 69.21 90.87 115.91 106.13

Assumes $100 invested on January 1, 2007, in the Company's common stock, S&P 500 Index and the Peer Group. The Peer Group consists of the following eight companies: Cooper Industries, Inc., Danaher Corporation, Illinois Tool Works, Inc., Ingersoll-Rand Company, Masco Corporation, Newell Rubbermaid, Inc., Snap-On Incorporated and The Sherwin-Williams Company. Prior to 2010, the Company included the Black & Decker Corporation in its Peer Group. Due to the merger on March 12, 2010, the results of The Black & Decker Corporation are now included in the Company's consolidated results. As a matter of consistency, the total returns of the Black & Decker Corporation have been excluded from all prior years.

Rewarding Our Shareholders

Our long-term capital allocation strategy remains to deploy approximately one-third of our free cash flow to dividends and stock buybacks. We have an impressive and unique record of returning value to our shareholders.

  • Implemented A

    $350M share repurchase
    in 2011
  • History of High Performance

    13% compound annual growth
    rate over past 8 years
    in an investment in
    Stanley stock

Dividend Record Unmatched By Any NYSE Listed Industrial

  • 20% dividend increase
    in February 2011
  • 135 consecutive years of
    annual dividend
  • 468 consecutive quarters
    of quarterly dividend
  • 44 consecutive years of
    increased dividends