Letter to Shareholders

Stanley Black & Decker: The Story

The thesis behind this landmark merger is compelling: to take two strong companies, combine them, and create an even stronger global enterprise, positioned for success in the years and decades to come. The merger created the global leader in hand and power tools with a stable of iconic brands, worldclass innovation processes, outstanding channel access, enormous global reach, including into high growth emerging markets, significant scale efficiencies and benefits from the Stanley Fulfillment System. At the time of the announcement, cost synergies were believed to be $350 million over three years which, when capitalized, represented an extraordinary 36% of the combined companies' market capitalization. The transaction was also expected to be highly accretive to earnings per share of the new Company with an incremental $1.00 per share expected by year three. The stocks of both companies performed well, with legacy Black & Decker and legacy Stanley Works up 31% and 10%, respectively, in the first ten days after the announcement. Stanley Black & Decker's price movement was in the top decile of all equity performances experienced in U.S. stock, for stock transactions over $500 million announced during the last decade.

We are keenly aware that this overwhelmingly positive reaction was both an endorsement of the strategic and financial logic of the merger, as well as a vote of confidence that the integration would be successful and the announced targets would be met or exceeded over time. We take this responsibility very seriously and have established the organization, operating mechanisms and governance processes to ensure success.

The integration got off to an excellent start and continues to be firmly on track. We exceeded our original calendar year 2010 announced cost synergy commitment by $45 million, bringing the total amount realized for that period up to $135 million. Further, we recently upgraded our total cost synergy commitment from $350 million to $425 million and reduced the expected time to fully realize these synergies from 36 to 33 months. We also recently announced that free cash flow, which was originally expected to total $1 billion by year three, was likely to be $1.1 billion in the first full year of the merger. (1) As a result of this financial outperformance, we were able to announce a 21% dividend increase in February 2011, signaling our high level of confidence in the Company's future trajectory of earnings and cash flow growth.

We also recently provided a first look at the quantification of revenue synergies, with the expected revenue benefit totaling between $300 and $400 million in addition to our normal organic growth initiatives over the intermediate term. These synergies result from a myriad of opportunities around the globe arising from the merger, including but not limited to brand expansion and leveraging complementary geographic and channel strengths.

Our experience thus far with melding the two companies' cultures together has been positive. The similarities are far greater than the differences, especially in the areas of growth, brand expansion, end user focus and product innovation. This is highly positive because it enables our management teams to galvanize around attributes that are most critical to serving our customers effectively, which some would say is the most energizing aspect of running a business.

The first chapter in the story of Stanley Black & Decker has been a great one and we expect that this is just the beginning of a long and fulfilling journey to create exceptional shareholder value.

Other 2010 Highlights

In a significant step in the establishment of our Infrastructure Solutions growth platform, we acquired CRC-Evans Pipeline International (CRC-Evans), a leading global supplier of specialized tools, equipment and services for the construction of oil and natural gas transmission pipelines. With 2010 revenues of approximately $250 million, nearly 60% of which were derived from emerging markets, CRC-Evans is a scalable, global growth vehicle.

We expanded our $915 million Convergent Security Solutions electronic security business with the acquisition of ADT's French operations (2009 revenues approximately $175 million), which we rebranded Stanley Solutions de Sécurité, growing our market share of the $1 billion French commercial security monitoring business to approximately 25%.

We took an important strategic step forward in evolving our Healthcare growth platform with the acquisition of InfoLogix (revenues approximately $55 million), a leading provider of mobile workstations and productivity solutions to hospitals. InfoLogix offers acute care providers with custom-designed process improvements to reduce their costs, improve safety levels and assist in compliance with growing regulatory requirements.

We also announced a majority-owned joint venture with Shanghai-based GMT hardware Enterprise Corp. (GMT), a leading manufacturer and distributor of commercial hardware in China with 2009 revenues of $40 million. This strategic partnership provides us with instant access to one of the best commercial hardware brands in China, as well as a strong and well-developed local distribution network.

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(1) Excludes merger and acquisition-related charges/payments. Refer to 2010 Scorecard.