Good morning. My name is Sarah and I’ll be the conference operator today. At this time I’d like to welcome everyone to The Stanley Works third quarter 2009 results conference call. (Operator Instructions) Thank you. I’d now like to turn the call over to Kate White, Director of Investor Relations. Miss White you may begin your conference.

Thank you so much, Sarah. Good morning everyone and thank you all for joining us on The Stanley Works third quarter 2009 conference call. On the call in addition to myself is John Lundgren, Stanley’s Chairman and CEO; Jim Loree, Stanley’s Executive Vice President and COO; and Don Allan, Stanley’s Vice President and CFO. I would like to point out that our third quarter earnings release, which was issued this morning, and a supplemental presentation which we will refer to you on the call and are on the webcast are available on the brand new Investor Relations portion of our website, www.stanleyworks.com. This morning John, Jim and Don will review Stanley’s third quarter 2009 results and various other topics followed by a Q&A session. The entire call is expected to last approximately one hour and a replay of the call will be available beginning at 2:00 PM today. The replay number and access code are in our press release. And as always, please feel free to contact me with any follow up questions after today’s call at my number which is 860-827-3833. We will be making some forward-looking statements during this call. Such statements are based on assumptions of future events that may not prove to be accurate, and as such they involve risk and uncertainty. It is therefore possible that actual results may differ materially from any forward-looking statements that we might make today. And we direct you to the cautionary statements in our 8-K which we filed with today’s press release and our most recent 34-A. With that I will now turn the call over to our CEO, John Lundgren.

Thanks Kate and thanks for all of you on the phone for joining us this morning. Let me spend just a minute on the state of Stanley in terms of an overview. First of all, we reported third quarter diluted EPS from continuing operations of $0.77 a share. Regrettably in reporting our results one or two of the news agencies dropped this number, which was actually in the headline of the press release we issued this morning, so some of you may have had to search the text and our exhibits a little bit more than we intended. But it’s $0.77 EPS, very clear and straightforward which compares to $0.97 a year ago from continuing operations, 3Q ’08. And on a GAAP basis the $2.04 that we recorded last year included $1.07 gain on the sale of our CST laser measuring business. So hopefully all that’s clear and we can move forward from there. We are still experiencing mid-teens volume and revenue declines versus a year ago, but we were encouraged by modest sequential revenue growth in the third quarter given the lack of seasonality in our business. We were even more encouraged by margins, a record quarterly gross margin of 41.3% which was achieved due to good pricing discipline as well as some meaningful cost productivity initiatives. Commodity deflation which we are experiencing was essentially offset by the impact of the volume under absorption. So those in a sense offset one another on an equal basis. Cash flow was also encouraging, $158 million for the quarter. That was up $55 million versus the same period year ago as we continued to execute our Stanley Fulfillment System and that process and program gains traction. And as a consequence we’re able to raise our cash flow guidance for the year, and…

Okay. We’ll stay on the margin chart just for a minute here and I find this extremely encouraging considering the 16% volume decline and the 23% reduction in inventory. As John mentioned we closed out the quarter 41.3% gross margin and that’s an all-time record for the company as he did mention, and the first time in my ten years that we’ve been greater than 40% which is a big milestone. And this was done at a time as I mentioned when the production volumes are down greater than 30% versus last year. And to expand a little bit on some of the key drivers, the strength of our value propositions has really enabled us to achieve solid price realization. And that’s offset cumulative $440 million of inflation since 2004. The Stanley Fulfillment System is a key to this and transformational lean has been driving productivity in our factories and in our supply chain for quite some time. Business mix has also helped as Security’s become a larger part of the portfolio. And of course the $370 million of cost cuts, a portion of those were in cost of goods sold and have helped enable us to deal with the steep volume declines while protecting our margins. And all this raises the obvious question is this sustainable? And there will be some headwinds going into 2010 as tools and storage mix is up and some of the cost cuts, probably about 25% or so, come back. But it’s safe to assume that we’re now operating in the neighborhood of 40% and that’s what we expect to record for the year and I would expect that you can think of the company as a 40% gross margin company on a prospective basis. I mentioned the Stanley Fulfillment System. I want to…

Thank you Jim. Page 16 is a new page we added this quarter which is a way for us to help communicate some of the key trends in the three different segments, both historical, and then some of our thoughts going forward here in the short term. So if we start with the Security segment, which is on the left side of the chart, the top part of the chart gives a historical trend of the segment profit rate which is the line and then the bar graphs are the unit volume declines that we’ve experienced in each segment. So as we dive a little bit deeper into Security and start with the convergent business, convergent revenues as you know from installations has been down but we believe its likely bottomed out in the second quarter. And we also think that attrition peaked in the second quarter as well. And we’re beginning to experience some stabilization in our order rates in the convergent business which is a positive sign. One thing that we’ve discussed in previous calls is commercial construction and some of the delayed and abandoned projects that we’ve seen. That continues to be a headwind. But the good news in that particular story is that it’s still more of a delayed situation versus an abandonment of projects. And as long as that continues, that trend, then we believe that we’ll be able to continue to show modest declines and eventually growth in this segment over time. Focusing on commercial construction as an impact to our company, as many of you know from the end market charts that we provided in the past, it’s important to remind you that commercial construction is only 15% of our Security segment and only slightly greater than 10% of the total company. So…

Sarah we’re ready for questions whenever you are.

(Operator Instructions) Your first question comes from Peter Lisnic.

I guess first question on CDIY is if you look at it in dollar terms, $100 million decline in revenue and operating income only down $6 or $7 million, can you give us some color commentary on exactly how that’s occurring in terms of the structuring savings, mix and price? Because that would seem like you know things are holding up a lot better than I thought they would be in that volume pressure.

Yes, Pete, things are holding up better than you might think in terms of the volume pressure. The biggest driver, Jim touched on it and didn’t get much more granular than we intend to. The biggest driver is improvement within the Bostitch business. We talked about you know our intent when we started a massive improvement effort on Stanley Bostitch to take it up maybe 100 basis points a quarter for eight quarters to get it back to double-digit operating margins. We were well on the way a year-and-a-half ago with that program when Bostitch was the business within Stanley hit the hardest by the both Industrial and the domestic housing downturn. We made the decision this time last year to basically combine the CDIY and Bostitch business, excuse me the CT&S, our consumer tools and storage, and Bostitch business which in retrospect was a good decision and we knew it was. Not only because we took a lot of cost out, you know business running separately that we were running as part of a CT&S business but it really reinvigorated the product development program, the focus on margin, added some rhythms to a business and both at the customer level and internally. That’s had a tremendous impact. We don’t intend to get in the margin by business because we found that you know all that by sub-segment, all that really does is creates more questions than it raises. But we have Bostitch back to historically I’ll say high or it’s [wide] average profitability level. That in and of itself is 70% of the improvement. Jim may want to add a little more granularity to it.

Think Bostitch improvement within CDIY, Pete, and that’s the big one.

And I’ll just address the other 30%, and its really a combination of all the things I talked about extensively on that gross margin page. You know the Stanley Fulfillment System, the transformational lean, the price inflation recovery and all of those elements. As well as there may be some minor mix in CDIY as well with the Bostitch improvement.

And I’ll just follow up so you can get in your follow without getting cut off. We’ve talked about SFS. We’ve talked about it a lot because our consumer tools and storage business was a large, well managed, global business with a global platform. They were 12 to 18 months ahead of the rest of Stanley in terms of truly implementing SFS. The S1R1 to which Jim referred. And so we’ve gained more traction quicker in that business and of course the Bostitch business has benefited from that as well.

A follow up question on pricing, again a plus to this quarter and plus all year. How sustainable is that? You know what piece of that is just related to unrecovered commodity costs that you’ve incurred in the past versus new products and you know proactive pricing policies, I guess?

Most of the 2 points is carryover. If you recall we had a big surge in inflation in the middle of last year. It was in third quarter of last year that we really aggressively implemented price increases to cover that inflation and we’ve benefited from those in the fourth quarter of last year and the first three quarters of this year. But we’re going to start to see the price realization kind of adding back to a more normalized level. It may be up 0 to 1%, something like that. And most of that will be in all likelihood in the businesses that incur some sort of commodity inflation. And we have a mixed bag there with different businesses. And as you can imagine, with all the different commodity fluctuations that go on, if steel goes up you know the nail business is affected more dramatically than say the Security business. So you can’t really predict which segment it might occur in. But we will continue to price to our value proposition and continue to price to recover inflation as and if it occurs.

Your next question comes from Sam Darkatsh.

Jim in your prepared remarks you mention that in 2010 a number of the discretionary cost cuts that you made in ’09 and would likely be coming back. Can you help quantify that a little bit? And would that entirely be on the OpEx line?

Yes, it would entirely be in the OpEx line. And you know there was $370 million of total cost improvements that were implemented. And of the $370, it’s our collective view here that about $100 million or so is likely to come back you know at some point. Whether they all come back next year or not we’ll see. But there are things like discretionary cuts where we may have cut travel by pick a number 40%, and maybe we’ll let 20% of that you know come back, because we have the volume to compensate for it. But that said we’ve changed a lot of our practices related to areas and you know T&E is a good example where today we have implemented extensively Telepresence, Cisco’s Telepresence. And you know that’s providing us a structural cost reduction in T&E so we don’t expect all of the T&E cuts for example to come back. And I think there’s many other stories like that you know as we look at the cost cutting. In addition to that we’ve made several structural changes in our various businesses and John already talked at length about the Bostitch and CT&S integration. That’s not coming back. You know that’s a permanent change. We also made some changes in the Industrial business where we combined and you saw the subsets and when I was going through the Industrial page we combined the management of Focom and Proto and we combined the management of Mac, supply and services in Vidmar. And those changes aren’t coming back. So we feel very comfortable that approximately 25% or so of the cost cuts will come back in successive years. And I’m not sure they’ll all be next year but that’s the way I would think about it.

And then where you look at raw materials right now, assuming it’s essentially flat on a go forward basis, what is the 2010 versus 2009 variance look like from a raw materials standpoint?

We’ve gotten to a stage where we have some pluses and some minuses but we’re not looking at any significant deflation or inflation at this time.

And I’ll add, Sam, to Jim’s point that he made during his prepared remarks, whatever benefit or I guess it was actually my prepared remarks, we obviously do this as a pretty collaborative effort. What we benefited this year from raw materials deflation and you know us well enough that 60 to 70% of our raw materials are steel, then its non-ferrous metals, plastic resin, etc. What we benefited from we’ve more than lost in volume absorption or lack thereof. So you know what’s going to affect our margins as much or more than the inflation pricing hedge or arbitrage you know is where volumes settle out next year relative to this year. But I think we’ve gotten much better at responding quickly to inflationary pressure in terms of our pricing. Jim’s words, and they’re the right ones, were you know pricing to be paid for our value proposition. And where we don’t think we have a value proposition to shrink or get out of those businesses as quickly as we can.

Your next question comes from Nigel Coe.

You’ve talked about the CDIY margins in some length already, but just interested to get your perspective. You talked about this being sort of a mid-teen, 15% type margin business but given that Bostitch is back on track, you’ve got also some SFS coming through, if you recapture that [inaudible] volume drop, do you think margins will be sort of more towards the high teens going forward?

We’re not going to forecast margins by segment, Nigel. By now you should know that your question is a logical one and a fair one. We’ve just got a lot of history that says forecasting margins by segment and sub-segment, we’re never rewarded for it when we get it right or exceed it and we’re punished for it when we don’t. It’s not good for us internally or externally. It’s why we have three distinct segments that we think gives us some internal diversification, so your observations are logical but we’re simply not going to go there.

Then maybe just going a little bit closer to home. You know you talk about the Industrial cost savings in 4Q. Can you maybe just quantify those? And I’m assuming that they will be sufficient to get you back into the double digits in 4Q.

You’re looking for a quantification of the Industrial cost savings in the fourth quarter that might be incremental to what was in the third quarter? Is that the question?

Because of the European action.

Oh, yes. It would be difficult to put an exact number on that but you know I would say that the cost reductions we implemented were roughly distributed equivalently across the three segments. Security was a little bit less than CDIY and Industrial. So on a proportionate basis you know the $370 was allocated essentially that way. And so it’s fair to say that if Industrial is you know pick a number, 25% of the revenues roughly, then 25% of the $370 applies to Industrial and you can assume that probably about you know 10 to 20% of that is yet to be materialized.

And Nigel we know you’re not going to get to ask a follow up. That’s just the way the process works. But to just elaborate a little further, the other point being 50% of our business in Europe is Industrial. So some of the costs will come back as Jim referred to. But some of the cost actions we’ve taken as you understand well, it does take longer to realize the benefits of those cost actions in Europe. So there’s as large a benefit but a meaningful delay in [audio impairment]. That will provide a little bit of an offset to the costs coming back. So we’re looking for sequential improvement.

And just to be clear about my math, if we say 25% of $400 is $100, then you know 10 to 20 of that might actually be yet to be realized, you know we’re talking $10 to $20 million. That’s annualized so you’d have to divide it by 4. So that’s probably roughly ballpark what you could expect there.

Your next question comes from Eric Bosshard.

I have two questions. First of all, I understand not projecting margins by segment, but getting to that 20% margin in Security, that was a long, long ago projection so it’s nice to see that number achieved after the long ride.

Well we took a lot of heat for like four or five years which is why John said what he said.

The two questions that I have, first of all you talked bullishly about the CDIY volumes and that you saw improvement across a number of regions, the U.S. volumes I think in CDIY were identical, the year-over-year decline was identical, 3Q as it was in 2Q. And you mentioned in your script that you thought actually you could have some growth out of that segment in the first quarter, so I’d love to get a little bit more color on what’s going on in terms of the improvement there. And should we see improvement in 4Q? And then secondly, can you just talk about the incremental cost saves that you should achieve in 2010 from the programs that have been implemented over the last nine months.

If we start with the CDIY question, as I mentioned in that particular chart you know we’re clearly seeing a stabilization effect in that particular business. And even some modest improvements. And its really being driven by the two economic factors that I mentioned in the U.S. as well as in Europe. So as we look at the business going forward, you know we don’t expect a dramatic improvement in the fourth quarter around revenue. There could be a slight improvement due to some new products roll outs in that particular quarter. But at this point in time we’re not anticipating that. But in the first quarter we do expect to see some modest improvement in growth in that particular segment because we will first of all have anniversaried a lot of the significant declines. And its under the presumption that these economic conditions have stabilized around housing starts and consumer confidence in particular. And we’ll begin to see very modest growth rates there. The second question was around carryover effect I believe. As Jim mentioned you know we do have about $100 million of cost carryover into next year. And so we had $370 million of costs that were executed on, $265 are 2009 [audio impairment]. And then about $100 [audio impairment] or more [audio impairment]. The real question is how much of that will be sustained and Jim gave a lot of feedback [audio impairment]. Over time, which he was referring more to long term, 25% of that will probably creep back into the system. That does not mean in 2010 that $100 million of costs will creep back into the system to offset the carryover effect that we expect to experience. [Audio impairment] estimate for 2010 that you know we would be able to maintain anywhere from 50% to 75% of that carryover in 2010.

Sarah, we can move to the next person.

Your next question comes from Kenneth Zener.

I wonder if you could comment on Security integration, to maintain your growing share and how that relates to you know the people you’ve acquired so your feet on the street approach, your market share enhancement and if that really did impact smaller accounts.

I think I understand your question, Ken. Let’s start with we’ve made one mid-sized acquisition in the last two years and it’s going extraordinarily well. We at this stage would regard Sonitrol and HSM as fully integrated and functioning as a very cohesive unit under Brett Bontrager’s and Tony [Barley’s] direction. You know producing nice margins, doing a good job on national accounts, as you know we have a very strong presence in retail. Retailers in general are under a lot of pressure so when a retailer goes out of business the objective is to get more than our fair share of re-signs, which we are doing and doing a pretty good job at. So we’re maintaining or gaining share with national accounts and Tony’s team’s doing a real nice job with some of the smaller businesses, you know rolling them up and gaining share at the local level. In Europe, the GDP acquisition hasn’t a full year anniversary yet. I can say that’s going very well at the same time. As we’ve mentioned on previous calls, our Security business in Europe is relatively small. It was UK centric. We’ve inherited an extraordinarily capable management team with GDP, a management team that was interested in carrying on with Stanley. And they’ve done a very, very nice job leveraging their strong market position and gaining share, primarily in France and Belgium where they’re a strong number two in the marketplace as well as expanding across borders. So I hope that gets at the question you were asking.

And then could you talk about the contribution from the load in or sales that you expect as the hardware reloads and how that can impact 2010 organic?

Sure. We’re happy to do that. Go ahead Jim.

Ken, you may not recall because I don’t think you were following us at the time, maybe you were, February ’07 analyst meeting we talked extensively about the loss of a major customer in the hardware business which actually cost us over $50 million of lost revenue. And we indicated at the time that we would pursue other customers because we really believe in the strong brand pull and user demand for Stanley hardware in the marketplace. And so we indicated at the time we thought for various reasons we weren’t going to recover anytime soon with the customer we lost the business with that we thought we would pursue other customers, and in fact committed at the time to replace at least 50% of the lost revenue over the coming years. And as it turns out I think this program that we’re implementing right now with about 300 stores into it and has about 1,400 to go next year, annualized it should have an impact of greater than $30 million and next year probably three-quarters of that.

So simply said we’ve replaced more than 60% of the lost business and we think in due course we will have replaced it all. But its going to take another year or so to get us there.

Your last question comes from Michael Rehaut.

The first question just and I know you don’t get into you know forecasting by segment, but more just trying to get a sense of timing if you will. You know when you look at the CDIY improvement and you know certainly a good portion of that from Bostitch but also from your you know productivity in SFS, etc., you know I would assume obviously you’re doing a lot in the industrial segment as you’ve been mentioning as well, can you give us a sense of timing in terms of perhaps when you might expect those cost saves you’ve mentioned that you would expect them to bear fruit in 4Q, but are we looking at like a 12 month or 24 month improvement? Or maybe even shorter than 12 months, given the solid improvement that we’ve seen in CDIY?

Mike, this is Don. I’ll be happy to answer that question. As I mentioned a few minutes ago, our cost programs have been fully executed except for the European actions and some small actions in our CT&S and Bostitch integration. We would expect by the end of this year 2009 that all the European actions will be complete and behind us. And Jim mentioned that you know on an annualized basis those actions in Europe probably add up to about $20, $25 million on an annualized basis. So by the end of this year those cost actions will be complete and behind us. And what I was referring to earlier for 2010, around $100 million of carryover, that would be the carryover costs of all the actions that we completed this year. And that’s specifically what I was referring to.

And just a second question, you know on the new product rollout that you’ve mentioned. You know earlier in the presentation you talked about you believe it’s going to be a very positive impact, market share gains, etc., a wave of new products and I think I heard towards the end of the presentation perhaps Don you had been talking about more of a slight improvement from new product rollouts. So I’m just trying to maybe reconcile those two comments and trying to get a sense of what actually you’re expecting in terms of a contribution to sale growth.

Mike, this is John. I guess two things. As you know because you’ve followed us a long time, we have a tried, tested and proven, steadfast, etched in stone rule. We don’t talk about or show a new product to the investment community until our customers have seen it. That’s served us well over time. And that won’t change. You’ve been invited to and hope you can make our we think very comprehensive analyst meeting on November 17 in New York where our business heads, specifically Jeff Ansell, Brett Bontrager, Justin Boswell and Jim and three of his leaders in the Industrial segment will be talking about all of their products. Then you’ll actually be able to see them because we will have presented them to the customers. We intend to have a vitality index that stays above 25%. And the reason I couldn’t answer your question even if I wanted to, you know that’s what’s new, how much of it is incremental, we were very pleasantly surprised when we introduced FatMax Xtreme as a good example, going back a year or two, that far less of the Xtreme volume cannibalized FatMax. So in fact that was a much bigger lift on a net basis than we’d anticipated. We have no way to predict that at this stage so I couldn’t answer your question if I wanted to other than historically. You know we’ve had as much as $70 million on an annual basis of revenue growth from new products. The question is that’s never 100% incremental. Its how much of its cannibalized and it remains to be seen.

There are no further questions at this time. We now turn the call back over to you, Miss White.

We want to thank everybody for participating in our call and our webcast today. As I said at the beginning of the call if you’ve any questions or need further information, please feel free to reach out to me.

This concludes today’s conference call. You may now disconnect.