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April 2018 Global Supply Chain Michael Prado, Chief Purchasing Officer

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  • April 2018

    Global Supply ChainMichael Prado, Chief Purchasing Officer

  • Cautionary Statements

    This presentation contains “forward-looking statements,” that is, statements that address future, not past events. In this context,

    forward-looking statements often address our expected future business and financial performance and financial condition, and often

    contain words such as: “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” or “will.” Forward- looking statements by their nature

    address matters that are, to different degrees, uncertain. These statements are based on assumptions of future events that may not

    prove accurate. They are also based on our current plans and strategy and such plans and strategy could change in the future. Actual

    results may differ materially from those projected or implied in any forward-looking statements. Please refer to our most recent SEC

    filings, including our 2017 Annual Report on Form 10-K, subsequently filed Quarterly reports on Form 10-Q, as well as our other filings

    with the SEC, for detailed information regarding factors that could cause or contribute to actual results differing materially from those

    expressed or implied in such forward-looking statements. We do not undertake to update our forward-lookingstatements.

    This presentation also contains non-GAAP financial information, including CFROI. CFROI is defined as cash flow from operations

    plus after-tax interest expense divided by a 2-point average of debt and equity. CFROI is considered important as it is a cash-based

    measure of value creation that ties our strategic focus to returns. Reconciliations of other non-GAAP measures are provided in our

    annual SEC filings announcing financial results, and may be found in the accompanying appendix. We use this information in our

    internal analysis of results and believe that this information may be informative to investors.

    Global Supply Chain |2

  • Dividend Paid Consecutively For 141 Years; Increased For Past 50 Consecutive Years

    A Diversified Global Leader

    Tools & Storage

    Industrial

    Security

    Industrial $2.0B • STANLEY Engineered Fastening

    • Infrastructure

    Tools & Storage $9.0B• Power Tools & Equipment

    • Hand Tools, Accessories & Storage

    Security $2.0B• Commercial Electronic Security

    • Mechanical Access*

    STANLEY BLACK & DECKER (NYSE: SWK)

    2017 Revenue: ~$13.0B Market Cap: $26.1B Cash Dividend Yield: 1.4%

    Social ResponsibilityContinued Top Quartile PerformanceKnown For Innovation

    Market Cap & Dividend Yield Are As Of Market Close 12/29/2017 $169.69

    Revenue Is Adjusted For The 1Q’18 Adoption Of New Revenue Recognition & Retirement Benefit Accounting Standards Global Supply Chain |3

  • Continue Organic Growth Momentum

    Be Selective And Operate In Markets Where

    Pursue Acquisitive Growth

    Consistent, Rigorous & Disciplined Strategic Framework Executed Over The Last Decade

    • Utilize SFS 2.0 As A Catalyst• Mix Into Higher Growth. Higher Margin Businesses• Increase SBD Weighting of Emerging Markets (Goal = 20% +)

    • Brand Is Meaningful• Innovation Drives Definable & Sustainable Value Proposition• Global Cost Leadership Is Achievable

    • Build Upon Global Tools Platform• Expand Industrial Platform (Engineered Fastening | Infrastructure)• Commercial Electronic Security Acquisitions• Pursue Industrial Adjacency Opportunities

    Strategic Framework

    Global Supply Chain |4

    Accelerate Progress Via Stanley Fulfillment System

  • FY2017

    $13B Revenue

    Tools &Storage

    $9B69%

    Security$2B15%

    Industrial$2B15%

    ~12%Total Revenue CAGR

    ~$5-7BAcquired Revenue

    ~4-6%Organic

    Revenue GrowthAssumptions

    2022 Vision

    ~$22B Revenue

    Tools &Storage

    ~$12-14B59%

    Security~$3-4B

    16%

    Industrial~$5-6B

    25%

    Financial Vision

    Global Supply Chain |5

    Our Long Term Financial Goals

  • Peer Group Includes DHR, DOV, EMR, GE, HON, IR, ITW, MM, SPXC, TXT And UTX

    We Continue To Perform In The Same League As Elite Industrials

    794%

    S & P

    500158%

    394%Peer Group

    Average

    Data From: Jan 2000 – Dec 2017

    >620%

    380% - 620%

    280% - 380%

  • A Company That Has Built Well Established, Global Franchises…

    Business Value Drivers

    …Around Powerful Brands That Supports A Consistent Strategic Framework

    In Tools &

    Storage

    A Global Leader

    In Engineered

    Fastening

    In Commercial

    Electronic

    Security

    #1

    #2

    Global Franchises

    Global Supply Chain |7

  • Core SFS

    S&OP

    Global Supply

    Management

    S1R1

    Commercial Excellence

    Functional Transformation

    Core SFS

    BreakthroughInnovation

    Digital Excellence

    Our Commitment To Drive Operational Efficiency & Strong Free Cash Flow Generation Continues…

    …Opportunities Remain To Accelerate Progress Toward Our Vision Of 10 WCT

    Order-To-Cash

    Excellence

    Complexity

    Reduction

    Operational

    Lean

  • SFS 2.0 – Digital Excellence

    Global Supply Chain |9

  • Global Supply Management

    (GSM)

  • GSM Strategic Imperatives

    • Productivity | Working Capital

    • Acquisition/Integration | Localization | NPD

    • Continue Deployment Of Advanced Analytics

    • Artificial Intelligence, Block Chain, Robotics

    Processed Automation (RPA) & SRM

    • Capitalize On Scale & Scope

    • Buy Where We Make

    • Manage Import & FX Risk

    • Magnet & Incubator For Talent Development

    1. Aggressively Protect The Core

    2. Create Competitive Edge With Data

    3. Localization

    4. Relentless Commitment To Talent

    Global Supply Chain |11

  • GTS

    71%

    IND

    14%

    SEC

    12%

    CORP

    3%

    FG

    1.9

    COMP

    1.7

    INDIR

    1.0

    RM

    1.0

    TRANS

    0.4

    Productivity

    By

    BU

    By

    Typ

    e

    Working Capital

    ~$6B Spend

    GSM Proven Track Record Of Outperformance

    $$$$$$

    $$$

    2015 2016 2017

    $$$$$

    $$

    2015 2016 2017

    Global Supply Chain |12

    Acquisitions

    Target 3% To 5% YOY Improvement

  • Supplier Portfolio Management

    • Define Optimal Number Of Suppliers Per Category

    • Shared View Of Supply Base Across Multiple Functions

    • Asses Capability & Performance

    • Vary Relationship By Criticality.

    • Focus On Competitive Advantage With Partner Suppliers

    • Mitigate Risk For Key Availability Suppliers.

    Relationship Management Sourcing Strategy

  • Relationship

    Performance

    Human Resources

    Supply Chain Disruption

    Financial Health

    EnvironmentalIndicators

    Supplier Risk Score

    (RPI)

    Influence, Alignment, Information, Sharing, Change in Ownership

    Quality (Recall / Patent Infringement), Delivery, Capability, Service, Flexibility, Capacity, Sub-supplier

    Turnover, Union Issues, Pay Position, Health & Welfare (Pandemic)

    Market Power, Information Visibility, Concentration, Disruption Potential, Transportation, Flexibility

    Size, Asset Utilization, Capitalization, Profitability, Solvency

    Market Dynamics, Mergers, Regulatory, Disasters, Transportation, Location Risk Exposure

    1

    6

    5

    4

    3

    2

    Key Drivers Of Success

    • Standardized & Quantified Approach

    • Integrated & Aligned To SBU Operations

    • Focused On Multi-Facet Risk Factors… “Six Point” Key Focus Areas

    • Very Strong Cross Functional Reactive Engagement

    GSM Risk Management Model

    Global Supply Chain |14

    Gross Sales Value (GSV) @ RISK

    0

    50

    100

    150

    200

    250

    0 1000 2000 3000 4000 5000 6000

    AB

    CD E

    “Six Point” Risk Model Allows Predictive Versus Reaction

    F

    Quantitative Point Structure

    GSV

  • GSM – Commitment To Talent

    ASIAUS

    EMEA

    SourcingQuality

    SC

    Finance HR/Other

    30 Offices In 14 Countries GSM Global HC

  • Productivity

  • $15.5 $20.0 2.8

    ( 2.0 ) ( 0.7 )

    1.5

    5.5

    ( 1.9 ) ( 0.6 )

    Year 1 Volume Price FX Prodt'y Inf / Def Mix Other Year 2

    Sales $100 $90 11%

    Std Cost of Sales 40 37 8%

    Standard Margin (SM) $60 $53 13%SM% 60% 59% 1.1Pts

    Manufacturing (Mfg) 5 10 5% Other Cost of Sales (OCOS) 10 14 7%

    Adjusted Gross Margin (AGM) $35 $30 19%AGM% 35% 33% 2.2Pts

    Sales, General & Admin (SG&A) 15 14 7%

    Operating Margin (OM) $20 $16 29%OM% 20% 17% 2.8Pts

    Income Statement (P&L)

    Yr 2 Yr 1 V%

    GSM Financial Position

    Operating Margin Walk

    OM Walks Are One Of The Most Powerful Tools A GSM Business Leader Can Utilize…

    Global Supply Chain |17

  • • $ Of Net Project Execution

    • Planned Other (Unfavorable)

    • Favorable Gross Productivity

    Productivity Guidelines: 8% | 5% | 3% Rule

    Total Plant Cost (4-Wall)

    Feed Funnel

    2 Identify Project Deck:

    5% To 7%

    Green Deck (SS|SNS)

    1

    3

    4

    Project Funnel Should Include:

    Ensure Projects:

    • Target 8% To 10% Gross 5% To 7% Net Inflation 3% To 5% Rule

    • Drives YOY Organic Productivity

    Cost Categories

    Global Supply Chain |18

  • Inflation

  • Due in large part to massive demand from emerging economies, the price of major raw materials used in the manufacture of automobiles have increased considerable over the past several years. The materials include rubber, plastic, copper, steel, and aluminum. The price of these commodities have increased 45%, 20%, 23%, 66%, and 40%, respectively, since the beginning of 2010...Strong demand from emerging markets for these commodities continue to increase the price of Ford’s raw materials, and this trend will likely be long-term.

    “We just see the inflation trends creeping in on many parts of our value chain,”…The Michigan-based appliance giant projected that additional raw material costs, driven by rising prices of steel and resin, would shave as much as $250M off it’s profit this year.

    Caterpillar Inc., have pointed to rising material costs as a hurdle in the coming year.

    3M Co., the St. Paul, MN based maker of myriad products including Scotch tape and industrial films and adhesives, has signaled it may raise its prices more than expected to offset inflation if it accelerates this year.

    Harley-Davidson Inc., has benefited from a weaker dollar in recent months that has helped U.S. manufacturers boost overseas sales. But CFO John Olin told analysts last month that the help from the currency exchange will be “more than offset” by expenses including rising steel and aluminum costs this year.

    Macro Impact Of Material Inflation

    Global Inflationary Pressure Across All Sectors

    Global Supply Chain |20

  • Inflation / (Deflation) Management

    Mitigating Inflation through Pricing and Projects

    Example: Copper & Rare Earth PeakCredit Bubble

    Deflationary TroughFinancial Crash

    Aggregate Market Commodity Index

    • Price Recovery

    • Clean Sheet (Cost Analysis)

    • Stall, Deny, Delay

  • Working Capital

  • How Can We Improve WC Turns?

    Working Capital Days

    Days Sales Of A/R Outstanding (DSO)

    • Credit & Risk• Negotiated Terms• Billing Milestones• Letters of Credit• Standby Letters of Credit

    Days Of Sales Inventory (DSI)

    • Consignment & JIT• Inco Terms• MOQ & Lead Time• Plant Utilization• Make Versus Buy

    Days Of Sales Payables Outstanding (DPO)

    • Negotiated Terms• Citi Financing

    DSO DSI DPO

    Leveraging SFS 1.0 & 2.0 Strategies Maximize Working Capital Efficiency…

    Global Supply Chain |23

    minus equals

    $40 + $50 = $90 $60 $30

    Inventory Accounts Payable Working CapitalAR Current Assets

  • Return On Capital Employed

  • Focused On Building Long-Term Shareholder Value

    Return On Capital Employed (ROCE)

    Global Supply Chain |25

    MARGIN VELOCITY

    GSM Margin Tool Box GSM Velocity Tool Box

    • Clean Sheet

    • VAVE

    • Productivity

    • Inflation

    • Synergy

    • LCC Sourcing

    • Make Vs. Buy

    • Distribution

    • Inventory Turns

    • Supplier Lean

    • Term Extension

    • Consignment

    • MOQ

    • LTR

    • VMI

    • Stocking

  • THE WORLD IS CHANGING… LEADERS ADAPT

    We Have Entered A New Transformational Era…

    • Higher Volatility/Unpredictability

    • Increasing Velocity Of Change

    • Disruptive Business Models

    • Disruptive Technology

    …More Risk, More Opportunity

    Link Finance Results With Supply Chain Excellence…How do you execute in your business?

  • SBD Vision

    Global Supply Chain |27

  • Q&A

    Thank you!