UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K
                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


        FOR THE FISCAL YEAR ENDED            COMMISSION FILE NUMBER

            December 31, 2000                        1-1553
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                         THE BLACK & DECKER CORPORATION
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             (Exact name of registrant as specified in its charter)


             Maryland                                   52-0248090
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     (State of Incorporation)            (I.R.S. Employer Identification Number)


       Towson, Maryland                                    21286
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(Address of principal executive offices)                 (Zip Code)


Registrant's telephone number, including area code:       410-716-3900
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Securities registered pursuant to Section 12(b) of the Act:

  Title of each class                  Name of each exchange on which registered
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  Common Stock,                                   New York Stock Exchange
  par value $.50 per share                        Pacific Stock Exchange


Securities registered pursuant to Section 12(g) of the Act: None
                                                            --------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding  twelve months (or for such shorter period that the registrant was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No ___

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant as of January 26, 2001, was $3,360,843,959.

The number of shares of Common Stock  outstanding  as of January 26,  2001,  was
80,740,996.

The exhibit  index as required by Item 601(a) of  Regulation  S-K is included in
Item 14 of Part IV of this report.

Documents  Incorporated by Reference:  Portions of the  registrant's  definitive
Proxy Statement for the 2001 Annual Meeting of Stockholders  are incorporated by
reference in Part III of this Report.

<PAGE>

                                    PART I

ITEM 1.  BUSINESS

(a)  General Development of Business
The  Black  &  Decker  Corporation  (collectively  with  its  subsidiaries,  the
Corporation), incorporated in Maryland in 1910, is a leading global manufacturer
and  marketer  of power tools and  accessories,  hardware  and home  improvement
products,  and  technology-based  fastening systems.  With products and services
marketed in over 100 countries,  the Corporation enjoys worldwide recognition of
strong brand names and a superior  reputation for quality,  design,  innovation,
and value.
     The  Corporation  is one of the world's  leading  producers of power tools,
power tool accessories, and residential security hardware, and the Corporation's
product  lines hold leading  market share  positions  in these  industries.  The
Corporation  is a major global  supplier of  engineered  fastening  and assembly
systems.  The  Corporation  is one of the leading  producers of faucets in North
America.  These  assertions  are  based on  total  volume  of sales of  products
compared to the total  market for those  products  and are  supported  by market
research  studies  sponsored by the Corporation as well as independent  industry
statistics  available  through  various  trade  organizations  and  periodicals,
internally generated market data, and other sources.

(b)  Financial Information About Business Segments
The Corporation operates in three reportable business segments:  Power Tools and
Accessories,  including  consumer and professional  power tools and accessories,
electric lawn and garden tools,  electric  cleaning and lighting  products,  and
product service; Hardware and Home Improvement,  including security hardware and
plumbing   products;   and  Fastening  and  Assembly  Systems.   For  additional
information about these segments, see Note 16 of Notes to Consolidated Financial
Statements  included  in Item 8 of Part  II,  and  Management's  Discussion  and
Analysis of Financial  Condition and Results of Operations included in Item 7 of
Part II of this report.

(c)  Narrative Description of the Business
The following is a brief  description  of each of the  Corporation's  reportable
business segments.

POWER TOOLS AND ACCESSORIES
The Power Tools and  Accessories  segment has worldwide  responsibility  for the
manufacture  and sale of consumer  (home use) and  professional  power tools and
accessories,  outdoor products (composed of electric lawn and garden tools), and
electric  cleaning and lighting  products,  as well as for product  service.  In
addition,  the Power Tools and Accessories  segment has  responsibility  for the
sale  of  security  hardware  to  customers  in  Mexico,  Central  America,  the
Caribbean,  and South  America;  for the sale of plumbing  products to customers
outside of the United States and Canada;  and for sales of the retained  portion
of the household products  business,  which is principally in Europe and Brazil.
Power tools  include both corded and  cordless  electric  power  tools,  such as
drills,  screwdrivers,  saws, sanders,  grinders, and laser levels;  Workmate(R)
project centers and related products; air compressors;  and bench and stationary
machinery.  Accessories  include  accessories  and  attachments for power tools.
Outdoor products include a variety of both corded and cordless electric lawn and
garden tools,  such as hedge and yard (string)  trimmers,  lawn mowers,  edgers,
blower/vacuums,  power  sprayers,  and  related  lawn  and  garden  accessories.
Electric  cleaning and lighting  products include cordless upright and hand-held
vacuums, flexible flashlights, and wet scrubbers.
     Power tools, electric lawn and garden tools, electric cleaning and lighting
products,  and related accessories are marketed around the world under the BLACK
& DECKER name as well as other  trademarks and trade names,  including,  without
limitation,  DEWALT;  ELU;  EMGLO;  VERSAPAK;  CUT SAW; PIVOT DRIVER;  XRT; XRP;
SANDSTORM;  WORKMATE;  FIRESTORM;  MOUSE;  RTX;  QUANTUM PRO;  SCRUGUN;  HOLGUN;
WILDCAT; MOMENTUM; QUATTRO; ALLIGATOR; POWERFILE; TWISTLOK; VERSA-CLUTCH; YELLOW
AND BLACK COLOR SCHEME; ORANGE AND BLACK COLOR SCHEME; TOOL FINDER; GIFT FINDER;
TOOL SCHOOL; GROOM `N' EDGE; AFS AUTOMATIC FEED SPOOL; VAC `N' MULCH; MASTERVAC;
LEAFBUSTER;  STRIMMER;  REFLEX;  HEDGE HOG;  GRASS HOG; LEAF HOG; EDGE HOG; LAWN
HOG;  LOG  HOG;  DUSTBUSTER;  SCUMBUSTER;  FLOORBUSTER;  SNAKELIGHT;  SPOTLITER;
SAFELITER;  SERIES 20; SERIES 40; SERIES 60; B&D; PIRANHA; ROCK CARBIDE; BULLET;
PILOT POINT;  SCORPION ANTI-SLIP;  MAGNETIC DRILL AND DRIVE SYSTEM;  RAPID LOAD;
and TOUGH CASE.
     The  composition  of the  Corporation's  sales by product  groups for 2000,
1999,  and  1998 is  included  in Note 16 of  Notes  to  Consolidated  Financial
Statements  included in Item 8 of Part II of this  report.  Within each  product
group shown, there existed no individual product that accounted for greater than
10% of the Corporation's consolidated sales for 2000, 1999, or 1998.
     The  Corporation's  product  service  program  supports  its  power  tools,
electric lawn and garden  tools,  and electric  cleaning and lighting  products.
Replacement parts and product repair services are available through a network of
company-operated  service  centers,  which are  identified and listed in product
information  material generally  included in product packaging.  At December 31,
2000,  there were  approximately  130 such  service  centers,  of which  roughly
two-thirds were located in the United States. The remainders were located around
the world, primarily in Canada, Asia and Europe. These company-operated  service
centers are supplemented by several hundred  authorized service centers operated
by  independent  local owners.  The  Corporation  also  operates  reconditioning
centers in which power  tools,  electric  lawn and garden  tools,  and  electric
cleaning  and  lighting  products are  reconditioned  and then  re-sold  through
numerous company-operated factory outlets and service centers.


                                       1
<PAGE>

     Most of the  Corporation's  consumer power tools,  electric lawn and garden
tools,  and electric  cleaning and lighting  products  sold in the United States
carry a two-year  warranty,  pursuant to which the consumer can return defective
products  during  the  two  years  following  the  purchase  in  exchange  for a
replacement  product  or  repair  at no  cost  to  the  consumer.  Most  of  the
Corporation's  professional  power  tools  sold  in the  United  States  carry a
one-year warranty with similar  provisions.  Products sold outside of the United
States generally have similar warranty  arrangements.  Such  arrangements  vary,
however, depending upon local market conditions and laws and regulations.
     The  Corporation's  product  offerings  in the Power Tools and  Accessories
segment are sold primarily to retailers, wholesalers, distributors, and jobbers,
although  some  discontinued  or  reconditioned  power tools,  electric lawn and
garden  tools,  and electric  cleaning  and  lighting  products are sold through
company-operated  service  centers  and factory  outlets  directly to end users.
Sales to The Home Depot, one of the segment's  customers,  accounted for greater
than 10% of the Corporation's  consolidated  sales for 2000, 1999, and 1998. For
additional  information  regarding sales to The Home Depot, see Note 16 of Notes
to  Consolidated  Financial  Statements  included  in  Item 8 of Part II of this
report.
     The principal  materials used in the manufacturing of products in the Power
Tools and Accessories segment are plastics,  aluminum,  copper,  steel,  certain
electronic components, and batteries. These materials are used in various forms.
For example,  aluminum or steel may be used in the form of wire, sheet, bar, and
strip stock.
     The materials used in the various manufacturing  processes are purchased on
the open market, and the majority are available through multiple sources and are
in  adequate  supply.  The  Corporation  has  experienced  no  significant  work
stoppages to date as a result of shortages of  materials.  The  Corporation  has
certain  long-term  commitments for the purchase of various  component parts and
raw  materials  and believes  that it is unlikely  that any of these  agreements
would be  terminated  prematurely.  Alternate  sources of supply at  competitive
prices  are  available  for most,  if not all,  materials  for  which  long-term
commitments exist. The Corporation believes that the termination of any of these
commitments would not have a material adverse effect on operations. From time to
time, the Corporation enters into commodity hedges on certain raw materials used
in the manufacturing process to reduce the risk of market price fluctuations. As
of December  31,  2000,  the amount of product  under  commodity  hedges was not
material to the Corporation.
     As a global marketer and manufacturer,  the Corporation purchases materials
and  supplies  from  suppliers  in many  different  countries  around the world.
Certain  of the  finished  products  and  component  parts  are  purchased  from
suppliers  that  have  manufacturing  operations  in  China.  In  addition,  the
Corporation carries on manufacturing  operations in that country. China has been
granted  permanent  Normal  Trade  Relations  (NTR) status  contingent  upon its
acceptance into the World Trade  Organization  (WTO), and currently there are no
significant  trade  restrictions or tariffs imposed on products from China.  The
Corporation  has  investigated   alternate  sources  of  supply  and  production
arrangements  in case the NTR status is not maintained.  Alternative  sources of
supply are  available,  or can be  developed,  for many of these  products,  and
alternative  production  arrangements  can be made  available  at certain of the
Corporation's other  manufacturing  facilities.  The Corporation  believes that,
although  there  could be some  disruption  in the  supply of  certain  of these
finished products and component parts if China's NTR status is not maintained or
if significant trade  restrictions or tariffs are imposed,  the impact would not
have a material  adverse  effect on the operating  results of the Power Tool and
Accessories segment over the long term. However,  the Corporation believes that,
in the event that  China's NTR status is not  maintained  or  significant  trade
restrictions or tariffs are imposed,  the impact would likely have a significant
negative  effect on the  operating  results  of the Power  Tool and  Accessories
segment,  and therefore the  Corporation,  over the short term.  For purposes of
evaluating  the  impact  on  the  operating  results  of  the  Power  Tools  and
Accessories  segment in the event that China's NTR status is not  maintained  or
that  significant  trade  restrictions  or tariffs are imposed,  the Corporation
defines  the long  term as an  estimated  period  of time in  excess of 18 to 24
months from  inception of such action and the short term as an estimated  period
of time from inception of such action extending for the next 18 to 24 months.
     Principal  manufacturing  and  assembly  facilities  of  the  power  tools,
electric lawn and garden tools,  electric  cleaning and lighting  products,  and
accessories  businesses in the United States are located in Fayetteville,  North
Carolina;  Fort Mill,  South  Carolina;  and  Easton,  Maryland.  The  principal
distribution  facility  in the United  States,  other than those  located at the
manufacturing   facilities   listed  above,  is  located  in  Rancho  Cucamonga,
California.
     Principal  manufacturing  and  assembly  facilities  of  the  power  tools,
electric lawn and garden tools,  electric  cleaning and lighting  products,  and
accessories  businesses  outside of the United  States are located in Buchlberg,
Germany;  Perugia,  Italy;  Spennymoor  and  Rotherham,  England;  Mexicali  and
Reynosa,  Mexico; Uberaba, Brazil; and Suzhou, China. The principal distribution
facilities  outside  of the  United  States,  other  than  those  located at the
manufacturing   facilities   listed   above,   consist  of  a   central-European
distribution  center  in  Tongeren,  Belgium,  and a  facility  in  Northampton,
England.
     For additional information with respect to these and other properties owned
or leased by the Corporation, see Item 2, "Properties."
     The Corporation  holds various patents and licenses on many of its products
and processes in the Power Tools and Accessories segment. Although these patents
and licenses are important,  the Corporation is not materially dependent on such
patents or licenses with respect to its operations.
     The  Corporation  holds  various   trademarks  that  are  employed  in  its
businesses  and operates  under  various  trade names,  some of which are stated
above.  The  Corporation  believes  that these  trademarks  and trade  names are
important to the marketing and distribution of its products.


                                       2
<PAGE>

     A  significant  portion of the  Corporation's  sales in the Power Tools and
Accessories  segment is derived from the  do-it-yourself  and home modernization
markets,  which generally are not seasonal in nature.  However, sales of certain
consumer  and  professional  power  tools  tend to be higher  during  the period
immediately  preceding the Christmas gift-giving season, while the sales of most
electric  lawn and garden  tools are at their  peak  during the winter and early
spring period. Most of the Corporation's other product lines within this segment
generally  are not seasonal in nature,  but may be  influenced  by other general
economic trends.
     The  Corporation  is one of the world's  leaders in the  manufacturing  and
marketing  of  portable  power  tools,  electric  lawn  and  garden  tools,  and
accessories.  Worldwide,  the  markets  in which  the  Corporation  sells  these
products are highly competitive on the basis of price,  quality,  and after-sale
service.  A number of  competing  domestic  and  foreign  companies  are strong,
well-established  manufacturers  that compete on a global  basis.  Some of these
companies  manufacture  products  that  are  competitive  with a  number  of the
Corporation's  product lines.  Other  competitors  restrict their  operations to
fewer  categories,  and some offer only a narrow range of competitive  products.
Competition from certain of these manufacturers has been intense in recent years
and is expected to continue.

HARDWARE AND HOME IMPROVEMENT
The Hardware and Home Improvement  segment has worldwide  responsibility for the
manufacture  and sale of  security  hardware  products  (except  for the sale of
security hardware in Mexico, Central America, the Caribbean, and South America).
It also has responsibility for the manufacture of plumbing products, and for the
sale of plumbing products to customers in the United States and Canada. Security
hardware products consist of residential and commercial door locksets, including
high-security and electronic locks and locking devices; door closers, hinges and
exit devices; and master keying systems.  Plumbing products consist of a variety
of conventional and decorative  lavatory,  kitchen,  and tub and shower faucets,
bath accessories, and replacement parts.
     Security  hardware  products are marketed under a variety of trademarks and
trade names, including, without limitation,  KWIKSET; KWIKSET PLUS; TITAN; TITAN
COMMERCIAL SERIES; ACCESSONE; LOCKMINDER;  NIGHTSIGHT; SOCIETY BRASS COLLECTION;
BLACK & DECKER;  BLACK & DECKER PLUS; GEO; DOM; DIAMANT;  ELS; NEMEF; and CORBIN
CO.  Plumbing  products are marketed  under the trademarks and trade names PRICE
PFISTER;  BLACK  &  DECKER;  CONTEMPRA;   PFOREVER  WARRANTY;  PFILTER  PFAUCET;
TWISTPFIT;  JOB PACK; GENESIS; CARMEL; TRIBECA;  PARISA;  GEORGETOWN;  SAVANNAH;
EUROSTYLE; and MATCHMAKERS.
     The  composition  of the  Corporation's  sales by product  groups for 2000,
1999,  and  1998 is  included  in Note 16 of  Notes  to  Consolidated  Financial
Statements  included in Item 8 of Part II of this  report.  Within each  product
group shown, there existed no individual product that accounted for greater than
10% of the Corporation's consolidated sales for 2000, 1999, or 1998.
     Most of the  Corporation's  security  hardware  products sold in the United
States carry a warranty,  pursuant to which the  consumer  can return  defective
product  during the warranty  term in exchange for a  replacement  product at no
cost to the consumer. Warranty terms vary by product and range from a 10-year to
a lifetime warranty with respect to mechanical operations and from a 5-year to a
lifetime  warranty  with respect to finish.  Products sold outside of the United
States for residential use generally have similar  warranty  arrangements.  Such
arrangements vary, however,  depending upon local market conditions and laws and
regulations.  Most of the  Corporation's  plumbing  products  sold in the United
States carry a lifetime  warranty with respect to function and finish,  pursuant
to which the consumer can return defective product in exchange for a replacement
product or repair at no cost to the consumer.
     The  Corporation's  product  offerings in the Hardware and Home Improvement
segment are sold primarily to retailers, wholesalers, distributors, and jobbers.
Certain security  hardware products are sold to commercial,  institutional,  and
industrial  customers.  Sales to The Home Depot, one of the segment's customers,
accounted for greater than 10% of the Corporation's consolidated sales for 2000,
1999, and 1998. For additional  information  regarding  sales to The Home Depot,
see Note 16 of Notes to Consolidated  Financial Statements included in Item 8 of
Part II of this report.
     The  principal  materials  used in the  manufacturing  of  products  in the
Hardware and Home  Improvement  segment are plastics,  aluminum,  steel,  brass,
zamak, and ceramics.
     The materials used in the various manufacturing  processes are purchased on
the open market, and the majority are available through multiple sources and are
in  adequate  supply.  The  Corporation  has  experienced  no  significant  work
stoppages to date as a result of shortages of  materials.  The  Corporation  has
certain  long-term  commitments for the purchase of various  component parts and
raw  materials  and believes  that it is unlikely  that any of these  agreements
would be  terminated  prematurely.  Alternate  sources of supply at  competitive
prices  are  available  for most,  if not all,  materials  for  which  long-term
commitments exist. The Corporation believes that the termination of any of these
commitments would not have a material adverse effect on operations. From time to
time, the Corporation enters into commodity hedges on certain raw materials used
in the manufacturing process to reduce the risk of market price fluctuations. As
of December  31,  2000,  the amount of product  under  commodity  hedges was not
material to the Corporation.
     As a global marketer and manufacturer,  the Corporation purchases materials
and  supplies  from  suppliers  in many  different  countries  around the world.
Certain  of the  finished  products  and  component  parts  are  purchased  from
suppliers  that have  manufacturing  operations in China.  As previously  noted,
China has been granted  permanent NTR status contingent upon its acceptance into
the WTO, and currently  there are no significant  trade  restrictions or tariffs
imposed on products  from China.  The  Corporation  has  investigated  alternate
sources  of supply  and  production  arrangements  in case the NTR status is not
maintained.  Alternative  sources of supply



                                       3
<PAGE>

are available, or can be developed,  for many of these products, and alternative
production  arrangements  can be made available at certain of the  Corporation's
other manufacturing  facilities.  The Corporation  believes that, although there
could be some disruption in the supply of certain of these finished products and
component parts if China's NTR status is not maintained, or if significant trade
restrictions  or  tariffs  are  imposed,  the  impact  would not have a material
adverse  effect on the  operating  results of the Hardware and Home  Improvement
segment.
     Principal  manufacturing  and assembly  facilities of the Hardware and Home
Improvement  segment in the United  States are located in  Pacoima,  California;
Denison, Texas; Waynesboro, Georgia; and Bristow, Oklahoma.
     Principal  manufacturing  and assembly  facilities of the Hardware and Home
Improvement segment outside of the United States are located in Bruhl,  Germany;
Mexicali, Mexico; and Apeldoorn, Netherlands.
     For additional information with respect to these and other properties owned
or leased by the Corporation, see Item 2, "Properties."
     The Corporation  holds various patents and licenses on many of its products
and  processes in the  Hardware and Home  Improvement  segment.  Although  these
patents and licenses are important,  the Corporation is not materially dependent
on such patents or licenses with respect to its operations.
     The  Corporation  holds  various   trademarks  that  are  employed  in  its
businesses  and operates  under  various  trade names,  some of which are stated
above.  The  Corporation  believes  that these  trademarks  and trade  names are
important to the marketing and distribution of its products.
     A significant  portion of the Corporation's  sales in the Hardware and Home
Improvement  segment is derived from the  do-it-yourself  and home modernization
markets,  which  generally are not seasonal in nature,  but may be influenced by
trends in the residential and commercial  construction markets and other general
economic trends.
     The  Corporation  is one of the world's  leading  producers of  residential
security  hardware  and is one of the  leading  producers  of  faucets  in North
America.  Worldwide,  the markets in which the Corporation  sells these products
are highly competitive on the basis of price, quality, and after-sale service. A
number of competing domestic and foreign companies are strong,  well-established
manufacturers   that  compete  on  a  global  basis.  Some  of  these  companies
manufacture  products that are  competitive  with a number of the  Corporation's
product lines. Other competitors  restrict their operations to fewer categories,
and some offer only a narrow range of  competitive  products.  Competition  from
certain of these  manufacturers has been intense in recent years and is expected
to continue.

FASTENING AND ASSEMBLY SYSTEMS
     The  Corporation's  Fastening  and Assembly  Systems  segment has worldwide
responsibility  for the  manufacture  and sale of an extensive line of metal and
plastic fasteners and engineered fastening systems for commercial  applications,
including blind riveting,  stud welding and assembly systems,  specialty screws,
prevailing  torque  nuts and  assemblies,  insert  systems,  metal  and  plastic
fasteners,  and  self-piercing  riveting  systems.  The  fastening  and assembly
systems  products are marketed  under a variety of  trademarks  and trade names,
including,  without limitation,  EMHART FASTENING  TEKNOLOGIES;  EMHART;  DODGE;
GRIPCO;  GRIPCO  ASSEMBLIES;   HELI-COIL;   NPR;  PARKER-KALON;   POP;  POP-LOK;
POWERLINK;  T-RIVET;  ULTRA-GRIP;  TUCKER; WARREN;  DRIL-KWIK;  JACK NUT; KALEI;
PLASTIFAST;  PLASTI-KWICK; POPMATIC; POPNUT; POP-SERT; SWAGEFORM; WELDFAST; SWS;
SPLITFAST;  NUT-FAST;  WELL-NUT;  F-SERIES;  MENTOR;  POINT  &  SET;  PARS;  and
ULTRASERT.
     The  composition  of the  Corporation's  sales by product  groups for 2000,
1999,  and  1998 is  included  in Note 16 of  Notes  to  Consolidated  Financial
Statements  included in Item 8 of Part II of this  report.  Within each  product
group shown, there existed no individual product that accounted for greater than
10% of the Corporation's consolidated sales for 2000, 1999, or 1998.
     The  principal   markets  for  these  products   include  the   automotive,
transportation,   construction,   electronics,   aerospace,  machine  tool,  and
appliance  industries.  Substantial  sales are made to automotive  manufacturers
worldwide.
     Products are marketed  directly to customers and also through  distributors
and representatives.  These products face competition from many manufacturers in
several countries. Product quality, performance,  reliability,  price, delivery,
and technical and application  engineering  services are the primary competitive
factors.  Except  for  sales to  automotive  manufacturers,  which  historically
schedule plant  shutdowns  during July and August of each year,  there is little
seasonal variation.
     The  Corporation  owns a number  of  United  States  and  foreign  patents,
trademarks,  and license rights  relating to the fastening and assembly  systems
business. While the Corporation considers those patents, trademarks, and license
rights to be  valuable,  it is not  materially  dependent  upon such  patents or
license rights with respect to its operations.
     Principal  manufacturing  facilities of the Fastening and Assembly  Systems
segment in the United  States are located in Danbury,  Connecticut;  Montpelier,
Indiana;  Campbellsville and Hopkinsville,  Kentucky; and Mt. Clemens, Michigan.
Principal  facilities  outside of the United  States are located in  Birmingham,
England; Giessen, Germany; and Toyohashi, Japan. For additional information with
respect to these and other properties  owned or leased by the  Corporation,  see
Item 2, "Properties."


                                       4
<PAGE>

     The raw  materials  used in the  fastening  and assembly  systems  business
consist  primarily  of ferrous and  nonferrous  metals in the form of wire,  bar
stock,  and strip and sheet metals;  plastics;  and rubber.  These materials are
readily available from a number of suppliers.

OTHER INFORMATION
The  Corporation's   product   development  program  for  the  Power  Tools  and
Accessories  segment  is  coordinated  from the  Corporation's  headquarters  in
Towson,  Maryland, in the United States and from Slough, England, outside of the
United States.  Additionally,  product  development  activities are performed at
facilities  in  Hampstead,   Maryland,  in  the  United  States;  Rotherham  and
Spennymoor,  England;  Brockville,  Canada;  Perugia,  Italy;  and Buchlberg and
Idstein, Germany.
     Product  development  activities  for the  Hardware  and  Home  Improvement
segment are  performed at  facilities  in Pacoima,  California;  and  Apeldoorn,
Netherlands.
     Product  development  activities  for the  Fastening  and Assembly  Systems
segment  are  currently   performed  at  various   product  or  business   group
headquarters or at principal manufacturing locations as previously noted.
     Costs  associated with  development of new products and changes to existing
products  are  charged  to  operations  as  incurred.  See  Note 1 of  Notes  to
Consolidated  Financial  Statements included in Item 8 of Part II of this report
for amounts of expenditures for product development activities.
     As of December 31, 2000,  the  Corporation  employed  approximately  23,600
persons in its operations worldwide. Approximately 1,200 employees in the United
States  are  covered by  collective  bargaining  agreements.  During  2000,  one
collective  bargaining  agreement in the United  States was  negotiated  without
material disruption to operations.  Two agreements are scheduled for negotiation
during 2001. Also, the Corporation has government-mandated collective bargaining
arrangements  or  union  contracts  with  employees  in  other  countries.   The
Corporation's  operations have not been affected significantly by work stoppages
and, in the opinion of management, employee relations are good.
     The  Corporation's  operations  worldwide  are subject to certain  foreign,
federal,  state, and local  environmental  laws and  regulations.  Many foreign,
federal, state and local governments also have enacted laws and regulations that
govern the  labeling  and  packaging  of products and limit the sale of products
containing certain materials deemed to be environmentally  sensitive. These laws
and  regulations  not only limit the  acceptable  methods for the  discharge  of
pollutants  and the disposal of products  and  components  that contain  certain
substances,  but also  require  that  products be designed in a manner to permit
easy recycling or proper disposal of environmentally  sensitive  components such
as nickel cadmium  batteries.  The Corporation  seeks to comply fully with these
laws and regulations. Although compliance involves continuing costs, the ongoing
costs of compliance with existing  environmental  laws and regulations  have not
had,  nor are  they  expected  to  have,  a  material  adverse  effect  upon the
Corporation's capital expenditures or financial position.
     Pursuant  to  authority  granted  under  the  Comprehensive   Environmental
Response,  Compensation  and Liability Act of 1980  (CERCLA),  the United States
Environmental  Protection Agency (EPA) has issued a National Priority List (NPL)
of sites  at which  action  is to be  taken by the EPA or state  authorities  to
mitigate the risk of release of hazardous  substances into the environment.  The
Corporation is engaged in continuing  activities with regard to various sites on
the NPL and other sites  covered  under  CERCLA.  As of December 31,  2000,  the
Corporation  had been  identified  as a potentially  responsible  party (PRP) in
connection with  approximately  24 sites being  investigated by federal or state
agencies under CERCLA.  The Corporation  also is engaged in site  investigations
and  remedial  activities  to  address  environmental  contamination  from  past
operations at current and former  manufacturing  facilities in the United States
and abroad.
     To minimize  the  Corporation's  potential  liability  with  respect to the
sites, when appropriate,  management has undertaken,  among other things, active
participation in steering committees  established at the sites and has agreed to
remediation through consent orders with the appropriate government agencies. Due
to  uncertainty  over  the  Corporation's  involvement  in  some  of the  sites,
uncertainty  over the  remedial  measures  to be adopted  at  various  sites and
facilities, and the fact that imposition of joint and several liability with the
right of contribution  is possible under CERCLA and other laws and  regulations,
the  liability of the  Corporation  with  respect to any site at which  remedial
measures have not been completed  cannot be established  with certainty.  On the
basis of periodic reviews  conducted with respect to these sites,  however,  the
Corporation has established  appropriate  liability accruals. As of December 31,
2000,   the   Corporation's   aggregate   probable   exposure  with  respect  to
environmental  liabilities,  for which  accruals  have been  established  in the
Consolidated  Financial Statements,  was $25.9 million. The Corporation does not
believe that its liability with respect to any individual site will exceed $10.0
million. In the opinion of management,  the Corporation's liability with respect
to these sites has been adequately accrued, and the ultimate resolution of these
matters will not have a material adverse effect on the Corporation.

(d)  Financial Information About Geographic Areas
Reference  is made to Note 16 of Notes  to  Consolidated  Financial  Statements,
entitled "Business Segments and Geographic  Information",  included in Item 8 of
Part II of this report.



                                       5
<PAGE>

(e)  Executive Officers and Other Senior Officers of the Corporation
The current  Executive  Officers and Other Senior  Officers of the  Corporation,
their ages, current offices or positions,  and their business  experience during
the past five years are set forth below.

o  Nolan D. Archibald - 57
   Chairman, President, and Chief Executive Officer,
      January 1990 - present.

o  Paul A. Gustafson - 58
   Executive Vice President of the Corporation and President - Fastening
      and Assembly Systems Group,
      December 1996 - present;
   Group Vice President and President - Emhart Fastening Teknologies,
      July 1996 - December 1996;
   President - Emhart Fastening Teknologies,
      April 1990 - July 1996.

o  Paul F. McBride - 44
   Executive Vice President of the Corporation and President - Power Tools
      and Accessories Group,
      April 1999 - present;
   Vice President - General Electric Company, GE Silicones,
      January 1998 - April 1999;
   President - GE Plastics Asia Pacific,
      August 1997 - January 1998;
   General Manager - GE Cycolac Resin,
      October 1995 - July 1997.

o  Charles E. Fenton - 52
   Senior Vice President and General Counsel,
      December 1996 - present;
   Vice President and General Counsel,
      May 1989 - December 1996.

o  Barbara B. Lucas - 55
   Senior Vice President - Public Affairs and Corporate Secretary,
      December 1996 - present;
   Vice President - Public Affairs and Corporate Secretary,
      July 1985 - December 1996.

o  Michael D. Mangan - 44
   Senior Vice President and Chief Financial Officer,
      January 2000 - present;
   Vice President - Investor Relations,
      November 1999 - January 2000;
   Executive Vice President and Chief Financial Officer -
      The Ryland Group, Inc.,
      November 1994 - September 1999.

o  Leonard A. Strom - 55
   Senior Vice President - Human Resources,
      December 1996 - present;
   Vice President - Human Resources,
      May 1986 - December 1996.

o  Ian Carter - 39
   Vice President of the Corporation and President - Europe,
      Power Tools and Accessories Group,
      July 2000 - present;
   Vice President and General Manager - European Professional Power Tools,
      Power Tools and Accessories Group,
      December 1999 - June 2000;
   Director - Low & Bonar PLC,
      August 1998 - December 1999;
   President - General Electric Company,  Specialty Chemicals,
      July 1995 - July 1998.

o  Les H. Ireland - 36
   Vice President of the Corporation and Vice President and General
      Manager - DEWALT Professional Power Tools, North America,
      Power Tools and Accessories Group,
      January 2001 - present;
   Vice President of the Corporation and President - Accessories,
      Power Tools and Accessories Group,
      September 2000 - January 2001;
   President - Price Pfister,
      Hardware and Home Improvement Group,
      March 1999 - September 2000;
   Vice President - Sales, Price Pfister,
      Hardware and Home Improvement Group,
      November 1998 - March 1999;
   Vice President - Sales, Industrial Construction Division,
      North American Power Tools,
      Power Tools and Accessories Group,
      October 1996 - November 1998;
   Director - Service Operations,
      Hardware and Home Improvement Group,
      October 1994 - October 1996.

                                       6
<PAGE>

o  Thomas D. Koos - 37
   Vice President of the Corporation and President -
      Black & Decker Consumer Products,
      Power Tools and Accessories Group,
      January 2001 - present;
   Vice President of the Corporation and President -
      North American Consumer Power Tools,
      Power Tools and Accessories Group,
      December 2000 - January 2001;
   President - North American Consumer Power Tools,
      Power Tools and Accessories Group,
      April 2000 - December 2000;
   Vice President - Business Development,
      Power Tools and Accessories Group,
      August 1999 - April 2000;
   President - Goody Products, Division of Newell Rubbermaid Corporation,
      January 1998 - August 1999;
   President - Bernzomatic, Division of Newell Rubbermaid Corporation,
      January 1997 - January 1998;
   Vice President -  Merchandising,  EZPaintr,
      Division of Newell  Corporation,
      April 1995 - January 1997.

o  Christina M. McMullen - 45
   Vice President and Controller,
      April 2000 - present;
   Controller,
      January 2000 - April 2000;
   Assistant Controller,
      April 1993 - January 2000.

o  Christopher T. Metz - 35
   Vice President of the Corporation and President -
      North American Hardware and Home Improvement,
      Hardware and Home Improvement Group,
      January 2001 - present;
   Vice President of the Corporation and President - Kwikset,
      Hardware and Home Improvement Group,
      July 1999 - January 2001;
   President - Kwikset,
      Hardware and Home Improvement Group,
      June 1999 - July 1999;
   Vice President and General Manager - European Professional
      Power Tools and Accessories, Power Tools and Accessories Group,
      August 1996 - May 1999;
   Director  -  North  American   Professional  Power  Tools,
      Power  Tools  and Accessories Group, July 1995 - July 1996.

o  Stephen F. Reeves - 41
   Vice President of the Corporation and Vice President - Finance,
      Power Tools and Accessories Group,
      April 2000 - present;
   Vice President - Finance and Strategic Planning,
      January 2000 - April 2000;
   Vice President and Controller,
      September 1996 - January 2000;
   Controller, May 1994 - September 1996.

o  Mark M. Rothleitner - 42
   Vice President - Investor Relations and Treasurer,
      January 2000 - present;
   Vice President and Treasurer,
      March 1997 - January 2000;
   Treasurer - Dresser Industries, Inc.,
      December 1996 - March 1997;
   Assistant Treasurer, International,
      June 1994 - December 1996.

o  Edward J. Scanlon - 46
   Vice President of the Corporation and President - Commercial Operations,
      Power Tools and Accessories Group,
      May 1999 - present;
   Vice President of the Corporation and Vice President and General
      Manager - The Home Depot Division, Power Tools and Accessories Group,
      December 1997 - May 1999;
   Senior Vice President of Sales - North American Power Tools and Accessories,
      Power Tools and Accessories Group,
      August 1995 - December 1997.

o  John W. Schiech - 42
   Vice President of the Corporation and President - DEWALT Professional
      Products, Power Tools and Accessories Group,
      January 2001 - present;
   Vice President of the Corporation and President -
      North American Professional Power Tools,
      Power Tools and Accessories Group,
      May 1999 - January 2001;
   Vice President of the Corporation and Vice President and General
      Manager - North American Professional
      Power Tools, Power Tools and Accessories Group,
      December 1997 - May 1999;
   Vice President and General Manager - North American Professional Power Tools,
      Power Tools and Accessories Group,
      October 1995 - December 1997.

                                       7
<PAGE>

(f)  Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 (the Reform Act) provides a
safe  harbor  for  forward-looking  statements  made  by or  on  behalf  of  the
Corporation.  The  Corporation and its  representatives  may, from time to time,
make  written  or  verbal  forward-looking   statements,   including  statements
contained  in  the  Corporation's  filings  with  the  Securities  and  Exchange
Commission and in its reports to stockholders.  Generally,  the inclusion of the
words  "believe,"  "expect,"  "intend,"  "estimate,"  "anticipate,"  "will," and
similar  expressions   identify  statements  that  constitute   "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 and that are intended to come
within the safe harbor  protection  provided by those  sections.  All statements
addressing operating  performance,  events, or developments that the Corporation
expects or anticipates will occur in the future,  including  statements relating
to sales  growth,  earnings or earnings per share growth,  and market share,  as
well as  statements  expressing  optimism or pessimism  about  future  operating
results,  are  forward-looking  statements within the meaning of the Reform Act.
The  forward-looking   statements  are  and  will  be  based  upon  management's
then-current  views  and  assumptions  regarding  future  events  and  operating
performance,  and are applicable  only as of the dates of such  statements.  The
Corporation  undertakes no  obligation  to update or revise any  forward-looking
statements, whether as a result of new information, future events, or otherwise.
     By  their  nature,   all   forward-looking   statements  involve  risk  and
uncertainties.  Actual results may differ materially from those  contemplated by
the  forward-looking  statements  for a number  of  reasons,  including  but not
limited  to:

o The strength of the retail economies in various parts of the world,  primarily
in the  United  States  and  Europe;  and to a lesser  extent in Latin  America,
including Mexico and Central America;  Canada; and Asia, including Australia and
New Zealand. The Corporation's business is subject to economic conditions in its
major  markets,  including  recession,  inflation,  general  weakness in retail,
automotive, and housing markets, and changes in consumer purchasing power.

o Unforeseen  difficulty in maintaining  mutually beneficial  relationships with
key customers or penetrating new channels of distribution. The Corporation has a
number of  significant  customers,  including one customer that  constituted  in
excess of 10% of the Corporation's  consolidated sales. The loss of any of these
significant  customers  or a  material  negative  change  in  the  Corporation's
relationships  with these significant  customers could have an adverse effect on
the Corporation's  business. The Corporation's inability to continue penetrating
new channels of  distribution  may have a negative  impact on the  Corporation's
future sales and business.

o Unforeseen  inventory  adjustments or changes in purchasing  patterns by major
customers  and the  resultant  impact on  manufacturing  volumes  and  inventory
levels.

o Market  acceptance  of the new products  introduced  in 2000 and scheduled for
introduction  in 2001,  as well as the level of sales  generated  from these new
products  relative  to  expectations,  based  on  the  existing  investments  in
productive  capacity and commitments of the Corporation to fund  advertising and
product promotions in connection with the introduction of these new products.

o The Corporation's  continuing ability to develop and introduce new products at
favorable margins.

o Adverse changes in currency  exchange rates or raw material  commodity prices,
both in absolute terms and relative to competitors' risk profiles.

o Increased competition and changes in consumer preferences or loyalties.

o The  impact  of price  reductions  taken by the  Corporation  in  response  to
customer and competitive pressures as well as price reductions taken in order to
drive demand that may not result in anticipated sales levels.

o Inability  to achieve  projected  levels of  efficiencies  and cost  reduction
measures.

o Delays in or unanticipated  inefficiencies  resulting from  manufacturing  and
administrative reorganization actions in progress or contemplated.

o The impact on foreign operations by factors such as tariffs,  nationalization,
exchange  controls,  interest  rate  fluctuations,  civil  unrest,  governmental
changes,  limitations  on  foreign  investment  in  local  business,  and  other
political, economic, and regulatory risks and difficulties. In addition, as more
fully  described  in  Item  1 of  Part  I of  this  report,  the  impact  on the
Corporation in the event that China's NTR status is not maintained.

o The effects of  litigation,  environmental  remediation  matters,  and product
liability exposures, as well as other risks and uncertainties detailed from time
to  time  in  the  Corporation's   filings  with  the  Securities  and  Exchange
Commission.

o The Corporation's ability to generate sufficient cash flows to support capital
expansion,  business acquisition plans, and the share repurchase program, and to
fund general operating activities.

o Inability  of the  Corporation  to obtain  necessary  financing  at  favorable
interest rates.

o The ability of certain  subsidiaries  of the  Corporation  to  maintain  their
capacity to generate  future  discounted  cash flows  sufficient  to support the
recorded amounts of goodwill related to such subsidiaries.

o Changes in laws and regulations,  including  changes in accounting  standards,
taxation requirements (including tax rate changes, new tax laws, and revised tax
law  interpretations),  and  environmental  laws,  in both  domestic and foreign
jurisdictions.

o Interest rate fluctuations and other capital market conditions.

                                       8
<PAGE>

o Adverse weather  conditions,  which could reduce demand for the  Corporation's
products.

     The foregoing  list is not  exhaustive.  There can be no assurance that all
factors  affecting the  Corporation  have been  correctly  identified  above and
appropriately assessed or that the publicly available and other information with
respect to these matters is complete and correct.

ITEM 2. PROPERTIES

The Corporation operates 40 manufacturing facilities around the world, including
19  located  outside  of the  United  States in 9 foreign  countries.  The major
properties  associated  with each  business  segment  are  listed in  "Narrative
Description of the Business" in Item 1(c) of Part I of this report.
     The  Corporation  owns most of its  facilities  with the  exception  of the
following major leased facilities:
     In the United States: Mt. Clemens, Michigan; and Towson, Maryland.
     Outside of the United States: Rotherham,  England;  Tongeren,  Belgium; and
Mexicali, Mexico.
     Additional  property  both owned and leased by the  Corporation  in Towson,
Maryland,  is used for administrative  offices.  Subsidiaries of the Corporation
lease certain  locations  primarily for smaller  manufacturing  and/or  assembly
operations,  service  operations,  sales  and  administrative  offices,  and for
warehousing and distribution  centers. The Corporation also owns a manufacturing
plant that is located on leased land in Suzhou, China.
     The Corporation's average utilization rate for its manufacturing facilities
for 2000 was in the range of 75% to 85%. The  Corporation  continues to evaluate
its worldwide  manufacturing cost structure to identify opportunities to improve
capacity utilization and will take appropriate action as deemed necessary.
     Management  believes that its owned and leased  facilities are suitable and
adequate to meet the Corporation's anticipated needs.

ITEM 3. LEGAL PROCEEDINGS

The  Corporation  is involved  in various  lawsuits  in the  ordinary  course of
business. These lawsuits primarily involve claims for damages arising out of the
use of the  Corporation's  products  and  allegations  of patent  and  trademark
infringement.  The Corporation also is involved in litigation and administrative
proceedings involving employment matters and commercial disputes.  Some of these
lawsuits  include  claims for  punitive  as well as  compensatory  damages.  The
Corporation, using current product sales data and historical trends, actuarially
calculates the estimate of its exposure for product  liability.  The Corporation
is insured for  product  liability  claims for amounts in excess of  established
deductibles and accrues for the estimated liability as described above up to the
limits of the  deductibles.  All other  claims  and  lawsuits  are  handled on a
case-by-case basis.
     As  previously  noted  under  Item  1(c)  of  Part I of  this  report,  the
Corporation  also is party to litigation  and  administrative  proceedings  with
respect to claims  involving  the  discharge  of hazardous  substances  into the
environment.  Certain of these matters assert damages and liability for remedial
investigations and clean-up costs with respect to sites at which the Corporation
has been  identified  as a PRP under  federal and state  environmental  laws and
regulations.  Other matters involve sites that the Corporation owns and operates
or previously sold.
     In the opinion of management,  amounts accrued for awards or assessments in
connection  with   environmental   matters  and  litigation  and  administrative
proceedings to which the  Corporation is a party are adequate and,  accordingly,
the ultimate resolution of these matters will not have a material adverse effect
on the  Corporation.  As of December  31,  2000,  the  Corporation  had no known
probable but inestimable exposures for awards and assessments in connection with
environmental  matters and litigation and administrative  proceedings that could
have a material adverse effect on the Corporation.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

                                       9
<PAGE>


                                     PART II

ITEM 5.  MARKET FOR THE COMPANY'S STOCK AND RELATED STOCKHOLDER MATTERS

(a)  Market Information
The Corporation's  Common Stock is listed on the New York Stock Exchange and the
Pacific Stock Exchange.
     The following table sets forth, for the periods indicated, the high and low
sale prices of the Common Stock as reported in the consolidated reporting system
for the New York Stock Exchange Composite Transactions:
--------------------------------------------------------------------------------
Quarter                                          2000                       1999
--------------------------------------------------------------------------------

January to March                $52-3/8   to $29-3/4       $60-1/16 to $47-5/8
April to June                   $43-15/16 to $34           $64-1/8  to $52-23/32
July to September               $42-9/16  to $33-3/8       $64-5/8  to $45-5/16
October to December             $40-3/8   to $27-9/16      $52-1/4  to $41
--------------------------------------------------------------------------------

(b)  Holders of the Corporation's Capital Stock
As of January 26, 2001, there were 16,646 holders of record of the Corporation's
Common Stock.

(c)  Dividends
The Corporation  has paid  consecutive  quarterly  dividends on its Common Stock
since  1937.  Future  dividends  will depend  upon the  Corporation's  earnings,
financial  condition,  and other factors.  The Credit Facility does not restrict
the  Corporation's  ability to pay regular  dividends in the ordinary  course of
business on the Common Stock.
     Quarterly  dividends  per common share for the most recent two years are as
follows:
--------------------------------------------------------------------------------
Quarter                                                          2000       1999
--------------------------------------------------------------------------------

January to March                                                 $.12       $.12
April to June                                                     .12        .12
July to September                                                 .12        .12
October to December                                               .12        .12
--------------------------------------------------------------------------------
                                                                 $.48       $.48
================================================================================
Common Stock:
150,000,000 shares authorized,  $.50 par value, 80,343,094 and 87,190,240 shares
outstanding as of December 31, 2000 and 1999, respectively.

Preferred Stock:
5,000,000  shares  authorized,  without par value,  no shares  outstanding as of
December 31, 2000 and 1999.

(d) Changes in Securities and Use of Proceeds
Settlement of forward purchase contracts resulted in the net issuance of 350,928
shares of common  stock  during  2000.  The shares were issued to an  investment
banking firm in reliance upon the exemption from registration in Section 4(2) of
the  Securities  Act  of  1933.  Reference  is  made  to  Note  13 of  Notes  to
Consolidated Financial Statements included in Item 8 of Part II of this report.

(e)  Annual Meeting of Stockholders
The 2001 Annual Meeting of  Stockholders  of the  Corporation is scheduled to be
held on April  25,  2001,  at 9:00 a.m.  at the  Sheraton Baltimore  North,  903
Dulaney Valley Road, Towson, Maryland 21204.

ITEM 6.  SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
FIVE-YEAR SUMMARY
----------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars Except Per Share Data)                     2000(a)      1999         1998(b)       1997         1996(c)
----------------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>          <C>          <C>           <C>          <C>
Sales                                                       $4,560.8     $4,520.5     $4,559.9      $4,940.5     $4,914.4
Earnings (loss) from continuing operations                     282.0        300.3       (754.8)        227.2        159.2
Earnings from discontinued operations (d)                         --           --           --            --         70.4
Net earnings (loss)                                            282.0        300.3       (754.8)        227.2        229.6
Net earnings (loss) per common share - basic:
   Continuing operations                                        3.37         3.45        (8.22)         2.40         1.69
   Discontinued operations                                        --           --           --            --          .79
Net earnings (loss) per common share - basic                    3.37         3.45        (8.22)         2.40         2.48
Net earnings (loss) per common share - assuming dilution:
   Continuing operations                                        3.34         3.40        (8.22)         2.35         1.66
   Discontinued operations                                        --           --           --            --          .73
Net earnings (loss) per common share - assuming dilution        3.34         3.40        (8.22)         2.35         2.39
Total assets                                                 4,089.7      4,012.7      3,852.5       5,360.7      5,153.5
Long-term debt                                                 798.5        847.1      1,148.9       1,623.7      1,415.8
Redeemable preferred stock of a subsidiary                     188.0           --           --          42.3         44.8
Cash dividends per common share                                  .48          .48          .48           .48          .48
----------------------------------------------------------------------------------------------------------------------------
<FN>

(a)Earnings from continuing  operations for 2000 include a restructuring  charge
   of $39.1 million  before taxes ($27.6 million after taxes) and a gain on sale
   of business of $20.1 million ($13.1 million after tax).
(b)Earnings from continuing  operations for 1998 include a restructuring  charge
   of $164.7  million before taxes ($117.3  million after taxes),  a gain on the
   sale of  businesses  of $114.5  million  before  taxes ($16.5  million  after
   taxes), and a write-off of goodwill of $900.0 million.
(c)Earnings from continuing  operations for 1996 include a restructuring  charge
   of $91.3 million before taxes ($74.8 million after taxes) and a $10.6 million
   reduction  in income tax expense as a result of the  reversal of a portion of
   the Corporation's deferred tax asset valuation allowance.
(d)Earnings  from  discontinued   operations  represent  the  earnings,  net  of
   applicable income taxes, of the Corporation's  discontinued PRC segment.  The
   earnings  of the  discontinued  PRC  segment  do not  reflect  any charge for
   interest allocated to that segment by the Corporation.
</FN>
</TABLE>

                                       10
<PAGE>


ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Overview
The Corporation reported net earnings of $282.0 million, or $3.34 per share on a
diluted basis, for the year ended December 31, 2000, compared to net earnings of
$300.3  million,  or $3.40  per  share on a diluted  basis,  for the year  ended
December 31, 1999.
     Net  earnings  for the year ended  December  31,  2000,  included a pre-tax
restructuring  charge of $39.1 million  ($27.6 million net of tax) and a pre-tax
gain  of  $20.1  million  ($13.1  million  net  of  tax)  related  to  the  1998
recapitalization  of True  Temper  Sports.  Excluding  the  impact  of both that
restructuring charge and that gain, net earnings for the year ended December 31,
2000,  would have been $296.5  million,  or $3.51 per share on a diluted  basis,
compared  to net  earnings  of $300.3  million,  or $3.40 per share on a diluted
basis, for the year ended December 31, 1999.
     In the  discussion  and  analysis  of  financial  condition  and results of
operations that follows, the Corporation generally attempts to list contributing
factors in order of significance to the point being addressed.

Sales
The following  chart provides an analysis of the  consolidated  changes in sales
for the years ended December 31, 2000, 1999, and 1998.
--------------------------------------------------------------------------------
                                                For the Year Ended December 31,
                                                --------------------------------
(Dollars in millions)                               2000       1999       1998
--------------------------------------------------------------------------------
Total sales                                     $4,560.8   $4,520.5   $4,559.9
--------------------------------------------------------------------------------
Unit volume - existing (a)                             6%        10%         2%
Unit volume - disposed (b)                            --         (8)%       (8)%
Price                                                 (2)%       (1)%       (1)%
Currency                                              (3)%       (2)%       (1)%
--------------------------------------------------------------------------------
Change in total sales                                  1%        (1)%       (8)%
================================================================================
(a)Represents   change  in  unit  volume  for  businesses   where   year-to-year
   comparability exists.
(b)Represents  change in unit volume for businesses  that were included in prior
   years results but were sold or recapitalized in 1998.

     Total  consolidated  sales  for the year  ended  December  31,  2000,  were
$4,560.8  million,  which  represented a 1% increase over 1999 sales of $4,520.5
million.  The negative  effects of a stronger  United States dollar  compared to
other foreign currencies caused a 3% decrease in the Corporation's  consolidated
sales during 2000 compared to the prior year.  Pricing actions had a 2% negative
effect on sales for the year  ended  December  31,  2000,  compared  to the 1999
level.  Those pricing actions were taken in response to customer and competitive
pressures.   Growth  in  unit  volume  during  2000  caused  a  6%  increase  in
consolidated sales over the prior year level.
     Total  consolidated sales for the first nine months of 2000 increased by 4%
over the corresponding period in 1999, as higher unit volume for the 2000 period
increased  sales by 8% and the negative  effects of pricing actions and currency
decreased sales by 1% and 3%,  respectively.  The  Corporation  experienced a 6%
decline in sales in the fourth quarter of 2000 from the corresponding quarter in
1999,  reflecting a substantial slowdown in the United States economy as well as
actions  taken  by  certain  of the  Corporation's  major  customers  to  reduce
inventory levels.  For the fourth quarter of 2000, unit volume  approximated the
prior year's level, while the negative effects of pricing actions and a stronger
United States dollar decreased  consolidated  sales by 2% and 4%,  respectively,
from the level  experienced  in the  fourth  quarter  of 1999.  The  Corporation
anticipates  that the impact of the economic  slowdown in the United States will
continue to negatively impact the Corporation's sales in 2001.
     Total  consolidated  sales  for the year  ended  December  31,  1999,  were
$4,520.5  million,  which  represented a 1% decrease from 1998 sales of $4,559.9
million.  Unit volume  growth in existing  businesses  was offset by unit volume
declines associated with the divested household products, recreational products,
and glass  container-forming and inspection equipment  businesses.  The negative
effects of a stronger United States dollar compared to other foreign  currencies
caused  a 2%  decrease  in the  Corporation's  consolidated  sales  during  1999
compared to the prior year.  Pricing  actions,  taken in response to competitive
pressures and as a result of  volume-related  price  reductions  associated with
higher unit volumes in the North American power tools and accessories  business,
had a 1% negative effect on sales for the year ended December 31, 1999, compared
to the 1998 level.

Earnings
The  Corporation  reported  consolidated  operating  income of $503.3 million on
sales of $4,560.8  million in 2000 compared to consolidated  operating income of
$536.3  million  on  sales of  $4,520.5  million  in 1999 and to a  consolidated
operating loss of $466.2 million on sales of $4,559.9 million in 1998.
     Consolidated  operating  income for 2000  included a pre-tax  restructuring
charge of $39.1 million and a pre-tax gain of $20.1 million  related to the 1998
recapitalization  of  True  Temper  Sports.  The  consolidated   operating  loss
experienced in 1998 included a pre-tax restructuring charge of $164.7 million, a
pre-tax gain on sale of businesses of $114.5, and a write-off of goodwill in the
amount of $900.0 million.  Excluding these unusual items, consolidated operating
income as a  percentage  of sales would have been 11.5% in 2000,  11.9% in 1999,
and 10.6% in 1998.
     As more fully described under the caption "Strategic Repositioning and 2000
Restructuring  Actions," operating results for the years ended December 31, 1999
and  1998,   included  $15.0  million  and  $44.4  million,   respectively,   of
restructuring-related expenses.  Restructuring-related expenses during 2000 were
not significant.  Excluding the effects of these restructuring-related  expenses
in 1999 and 1998 and,  excluding  the unusual  items  described in the preceding
paragraph,  operating  income as a percentage  of sales would have been 11.5% in
2000, compared to 12.2% and 11.6% in 1999 and 1998, respectively.
     Consolidated  gross  margin  as a  percentage  of sales  for 2000 was 36.7%
compared to 37.3% for 1999. While the results of the Corporation's Six Sigma and
other productivity  initiatives  positively impacted gross margin in 2000, other
negative factors offset that favorability.  Those negative factors included: (i)
pricing actions taken,  in response to both customer and competitive  pressures;
(ii)  currency-related  cost pressures that resulted from stronger currencies of
countries in which certain products are  manufactured  relative to

                                       11
<PAGE>

currencies of countries in which those products are sold; and (iii)  unfavorable
manufacturing overhead absorption as the Corporation curtailed production levels
late in 2000 in  response  to lower  sales  and  rising  inventory  levels.  The
currency-related   cost  pressures  previously  described  have  been  partially
mitigated by the hedge program more fully described  under the caption  "Hedging
Activities."
     Consolidated  gross  margin  as a  percentage  of sales  for 1999 was 37.3%
compared to 35.3% for 1998.  The increase in gross margin  during 1999 over 1998
primarily resulted from significantly lower restructuring-related expenses, cost
benefits from restructuring  actions taken, and Six Sigma and other productivity
improvements,  partially offset by excess capacity and product mix issues in the
Kwikset  business of the  Hardware  and Home  Improvement  segment and  negative
pricing actions.
     Consolidated selling,  general, and administrative expenses as a percentage
of sales were 25.2% for 2000 compared to 25.4% for 1999 and 24.7% for 1998.  The
decrease in selling,  general,  and  administrative  expenses as a percentage of
sales in 2000 from 1999 resulted primarily from cost containment  efforts as the
Corporation  leveraged  marginally lower selling,  general,  and  administrative
expenses over a slightly  higher sales base.  The increase in selling,  general,
and administrative expenses as a percentage of sales in 1999 over 1998 resulted,
in part, from increased promotional activities,  particularly in the power tools
and  accessories  businesses  in North  America,  which  increased the number of
end-user specialists.
     Consolidated net interest expense  (interest  expense less interest income)
was $104.2  million in 2000 compared to $95.8 million in 1999 and $114.4 million
in 1998. The higher net interest expense for 2000 compared to 1999 was primarily
the result of higher interest rates partially  offset by lower average levels of
net debt (total debt less cash and cash equivalents)  during 2000. The lower net
interest  expense for 1999  compared to 1998 was  primarily  the result of lower
average levels of net debt.
     Consolidated  income tax expense of $122.6  million was  recognized  on the
Corporation's pre-tax income of $404.6 million for 2000. Consolidated income tax
expense of $141.0 million was recognized on the Corporation's  pre-tax income of
$441.3 million for 1999.  Consolidated  income tax expense of $166.5 million was
recognized  on the  Corporation's  pre-tax  loss of  $588.3  million  for  1998.
Excluding,  for 2000,  the income tax benefits of $11.5  million  related to the
pre-tax restructuring charge of $39.1 million and the income tax expense of $7.0
million  related to the pre-tax  gain on sale of business of $20.1  million and,
for 1998,  the income  tax  benefits  of $47.4  million  related to the  pre-tax
restructuring  charge of $164.7 million, the income tax expense of $98.0 million
recognized on the $114.5  million  pre-tax gain on sale of  businesses,  and the
non-deductible  write-off  of  goodwill  in the  amount of $900.0  million,  the
Corporation's  reported tax rate would have been 30% in 2000, compared to 32% in
1999 and 1998. The decrease in the effective tax rate  (excluding the effects of
the restructuring charge, gain on sale of businesses, and write-off of goodwill)
from 32% in 1999 and 1998 to 30% in 2000 was a  result  of  higher  earnings  in
lower rate tax jurisdictions  outside the United States. An analysis of taxes on
earnings is included in Note 10 of Notes to Consolidated Financial Statements.
     The  Corporation  reported  net  earnings of $282.0  million,  or per share
earnings of $3.37 and $3.34 on a basic and a diluted  basis,  respectively,  for
the year ended  December  31,  2000.  Excluding  the  effects  of the  after-tax
restructuring charge of $27.6 million and the after-tax gain on sale of business
of $13.1 million in 2000, net earnings for 2000 would have been $296.5  million,
or $3.54 and $3.51 on a basic and diluted basis,  respectively,  compared to net
earnings for 1999 of $300.3 million, or per share earnings of $3.45 and $3.40 on
a basic and  diluted  basis,  respectively.  In  addition  to the  impact of the
operational matters and lower effective tax rate previously described,  earnings
per share for 2000 also benefited from lower shares outstanding as a result of a
stock repurchase program.
     The Corporation  reported a net loss of $754.8 million,  or $8.22 per share
both on a basic and a diluted  basis,  for the year  ended  December  31,  1998,
principally  as a result of the goodwill  write-off and  restructuring  and exit
costs,  less the gain on sale of  businesses,  recognized  in 1998.  Because the
Corporation  reported  a net loss for the year  ended  December  31,  1998,  the
calculation  of reported  earnings  per share on a diluted  basis  excludes  the
impact of stock options since their inclusion would be  anti-dilutive - that is,
decrease the per-share loss. For  comparative  purposes,  however,  the dilutive
effect  of  these  options  has  been   included  for  the   evaluation  of  the
Corporation's  performance  that follows.  Excluding the effects of the goodwill
write-off of $900.0 million,  after-tax  restructuring  and exit costs of $117.3
million,  and the after-tax  gain on sale of businesses  of $16.5  million,  net
earnings  for 1998  would  have been  $246.0  million or $2.63 per share on this
diluted basis compared to net earnings of $300.3  million,  or $3.40 per diluted
share, for 1999.

Business Segments
As  more  fully  described  in  Note  16  of  Notes  to  Consolidated  Financial
Statements,  the Corporation  operates in three  reportable  business  segments:
Power Tools and Accessories,  Hardware and Home  Improvement,  and Fastening and
Assembly Systems.
     Expenses  directly  related  to  reportable  business  segments  booked  in
consolidation  and,  thus,  excluded  from  segment  profit  for the  reportable
business segments were $14.4 million,  $12.4 million,  and $20.4 million for the
years ended December 31, 2000, 1999, and 1998,  respectively.  The $14.4 million
of  segment-related  expenses  excluded from segment profit in 2000  principally
related to reserves  established  in  consolidation  for certain  legal  matters
associated   with  the  Power  Tools  and  Accessories  and  Hardware  and  Home
Improvement  segments and for the elimination of the Power Tools and Accessories
segment's  recognition  of  profit  from a  joint  venture  until  such  time as
inventory purchased from that joint venture has been sold to external customers.
The $12.4 million of  segment-related  expenses  excluded from segment profit in
1999  primarily  related to reserves  established in  consolidation  for certain
legal matters  associated  with the Power Tools and Accessories and Hardware and
Home  Improvement  segments.  The  $20.4  million  of  segment-related  expenses
excluded  from  segment  profit  in  1998  primarily   consisted  of  unbudgeted
restructuring-related   expenses,  including

                                       12
<PAGE>

an $11.5 million write-down of cleaning and lighting inventory to net realizable
value associated with the product line  rationalization  undertaken to integrate
the retained cleaning and lighting business into the Power Tools and Accessories
operations.
     As  indicated  above  and in Note 16 of  Notes  to  Consolidated  Financial
Statements,  the determination of segment profit excludes restructuring and exit
costs. Of the $39.1 million  pre-tax  restructuring  charge  recognized in 2000,
$29.6 million related to businesses in the Power Tools and  Accessories  segment
and $9.5 million  related to  businesses  in the  Hardware and Home  Improvement
segment.
     During 1999, the Corporation recognized $13.1 million of additional pre-tax
restructuring  and exit costs  associated with  restructuring of the Power Tools
and Accessories  segment,  exiting  certain small foreign  entities in the Power
Tools and  Accessories  and  Hardware  and Home  Improvement  segments,  and the
settlement of claims  regarding a divested  business.  That $13.1 million charge
was  offset,  however,  by an $8.9 gain  realized in 1999 on the sale of a Power
Tools facility,  exited as part of the restructuring actions taken in 1998, that
had a fair value exceeding its net book value at the time of the 1998 charge and
by  the  reversal  during  1999  of  $4.2  million  of  restructuring   reserves
established in 1998.
     Of the $164.7 million  pre-tax charge taken in 1998 for  restructuring  and
exit  costs,  $97.8  million  related  to  businesses  in the  Power  Tools  and
Accessories segment, $15.4 million related to the businesses in the Hardware and
Home  Improvement  segment,  $3.3 million related to businesses in the Fastening
and Assembly Systems segment,  and $17.1 million related to divested businesses.
The balance of $31.1 million related principally to the $28.6 million charge for
the voluntary  retirement program for employees in the United States,  including
those of all three reportable business segments and of the Corporate center.

POWER TOOLS AND ACCESSORIES
Segment sales and profit for the Power Tools and Accessories segment, determined
on the basis described in Note 16 of Notes to Consolidated Financial Statements,
were as follows (in millions of dollars):
--------------------------------------------------------------------------------
For the Year Ended December 31,                      2000       1999       1998
--------------------------------------------------------------------------------

Sales to unaffiliated
   customers                                     $3,292.9   $3,135.4   $2,840.1
Segment profit                                      361.7      369.8      283.7
--------------------------------------------------------------------------------
     Sales to unaffiliated  customers in the Power Tools and Accessories segment
during  2000  increased  5% over  the 1999  level.  Sales  of  power  tools  and
accessories in North America increased at a mid-single-digit  rate over the 1999
level. This growth in North America reflected  mid-single-digit  rates of growth
in  sales  of both  professional  and  consumer  power  tools  augmented  by low
double-digit  rates of growth in sales of  outdoor  products.  That  growth  was
partially  offset by a slight  decline in sales of  accessories in North America
during 2000.
     The growth in North American sales of power tools and  accessories  for the
year  ended  December  31,  2000,  was a result  of a low  double-digit  rate of
increase  in sales in the  first  nine  months  of 2000,  partially  offset by a
mid-single-digit  rate of decrease in sales in the fourth  quarter.  That fourth
quarter  decrease  resulted  from a  substantial  slowdown in the United  States
economy as well as actions taken by certain major customers to reduce  inventory
levels. The accessories  business in North America was most strongly impacted by
these  factors in the fourth  quarter of 2000 as sales  declined  from the prior
year's fourth quarter level by a percentage in the mid-teens.
     Sales in Europe increased at a low single-digit  rate in 2000 over the 1999
level.  Sales of professional  power tools increased at a low double-digit  rate
over the prior year level due, in part, to the transition  from the ELU(R)to the
DEWALT(R)brand.   Sales  in   Europe   during   2000  also   benefited   from  a
mid-single-digit rate of increase in sales of outdoor products.  However,  those
increases  were  partially  offset  by a  mid-single-digit  decline  in sales of
consumer power tools and a slight decline in sales of accessories during 2000 as
the effects of intense competition from low-cost imports and a sluggish European
economy adversely impacted the business.
     Sales  in other  geographic  areas  increased  at a rate of  growth  in the
mid-teens in 2000 over the 1999 levels, due principally to strong gains in South
America, Central America, and Mexico.
     Segment profit as a percentage of sales for the Power Tools and Accessories
segment was 11.0% in 2000  compared to 11.8% in 1999.  Benefits  experienced  in
2000 as a result of leveraging of selling,  general, and administrative expenses
over a higher sales base were more than offset by a number of negative  factors,
including  the  impacts of slowing  economies  in the United  States and Europe,
price reductions, currency-related cost pressures, and costs associated with the
transition to a centralized distribution center in Europe.
     Sales to unaffiliated  customers in the Power Tools and Accessories segment
during 1999 increased 10% over the 1998 level despite  negative  pricing actions
taken in response to  competitive  pressures  and as a result of  volume-related
price  reductions.  Sales of power tool products in North America benefited from
double-digit rates of growth in sales of consumer and DEWALT  professional power
tools due, in part, to new product introductions.  Sales of accessories in North
America grew at a high single-digit rate during 1999 over the 1998 level.
     Sales in Europe during 1999 increased slightly over the 1998 level as solid
growth in some  countries  was offset by  weakness  in  Germany.  Sales in other
geographic  areas during 1999 increased  over the 1998 level,  but that increase
was mitigated by the impact of a currency devaluation in Brazil.
     Segment profit as a percentage of sales for the Power Tools and Accessories
segment  was  11.8% in 1999  compared  to 10.0% in 1998.  Higher  sales in 1999,
coupled with improved  gross margins  resulting from  restructuring  benefits as
well  as Six  Sigma  and  other  productivity  improvements,  more  than  offset
increased  selling,  general,  and  administrative  expenses  in 1999 to support
investments in marketing, promotion, and technical staff.

                                       13
<PAGE>

HARDWARE AND HOME IMPROVEMENT
Segment  sales  and  profit  for the  Hardware  and  Home  Improvement  segment,
determined on the basis described in Note 16 of Notes to Consolidated  Financial
Statements, were as follows (in millions of dollars):
--------------------------------------------------------------------------------
For the Year Ended December 31,                      2000       1999       1998
--------------------------------------------------------------------------------

Sales to unaffiliated customers                    $863.2     $857.7     $829.8
Segment profit                                      115.5      120.7      122.1
--------------------------------------------------------------------------------
     Sales to  unaffiliated  customers  in the  Hardware  and  Home  Improvement
segment during 2000 increased 1% over the 1999 level. Sales of plumbing products
increased  at a high  single-digit  rate of growth in 2000,  but that growth was
substantially  offset by lower sales of security  hardware in North America due,
in part, to lost listings of  TITAN(R)product  as a result of a line review by a
major customer  early in 2000 and to  competition by low-cost  imports in retail
channels. Sales of security hardware in Europe during 2000 approximated the 1999
level.
     Segment  profit  as a  percentage  of  sales  for  the  Hardware  and  Home
Improvement  segment  declined to 13.4% in 2000 from 14.1% in 1999 due, in part,
to higher costs  related to lower  manufacturing  levels and  transitional  cost
issues  at  Kwikset   that  more  than  offset   substantial   improvements   in
profitability at Price Pfister.
     Sales to  unaffiliated  customers  in the  Hardware  and  Home  Improvement
segment during 1999 increased 3% over the 1998 level as a mid-single-digit  rate
of increase  in sales by Kwikset was  mitigated  by a low  single-digit  rate of
increase in sales by Price Pfister and a slight decline in sales by the European
security hardware businesses.
     Segment  profit  as a  percentage  of  sales  for  the  Hardware  and  Home
Improvement  segment declined from 14.7% in 1998 to 14.1% in 1999. This decrease
in 1999 was driven by margin  declines  at  Kwikset,  which  experienced  excess
capacity  and  product  mix  issues,  and  European  security  hardware  but was
partially offset by significant margin  improvements at Price Pfister,  stemming
from Six Sigma and other  productivity  initiatives as well as higher-margin new
products.

FASTENING AND ASSEMBLY SYSTEMS
Segment  sales and  profit  for the  Fastening  and  Assembly  Systems  segment,
determined on the basis described in Note 16 of Notes to Consolidated  Financial
Statements, were as follows (in millions of dollars):
--------------------------------------------------------------------------------
For the Year Ended December 31,                      2000       1999       1998
--------------------------------------------------------------------------------

Sales to unaffiliated customers                    $518.0     $496.2     $461.7
Segment profit                                       86.0       82.7       75.3
--------------------------------------------------------------------------------
     Sales to  unaffiliated  customers in the  Fastening  and  Assembly  Systems
segment  increased 4% in 2000 over the 1999 level due, in part,  to the strength
of industrial  sales  worldwide and of the automotive  sector outside the United
States.
     Segment  profit as a  percentage  of sales for the  Fastening  and Assembly
Systems segment of 16.6% in 2000 approximated the 1999 level.
     Sales to  unaffiliated  customers in the  Fastening  and  Assembly  Systems
segment  during  1999 were 7%  higher  than the 1998  level as  strong  sales to
automotive customers in North America and Europe offset weakness in the European
industrial sector.
     Segment  profit as a  percentage  of sales for the  Fastening  and Assembly
Systems segment increased from 16.3% in 1998 to 16.7% in 1999.

Strategic Repositioning and 2000 Restructuring Actions
During 2000, the Corporation  completed the final elements of its  comprehensive
strategic  repositioning  plan,  recognizing a $20.1 million gain related to the
1998  recapitalization  of  True  Temper  Sports  and  recording  an  additional
restructuring  charge of $9.5  million.  In reaction to the  weakening  economic
conditions evident in late 2000, the Corporation took action to reduce costs and
recorded an additional restructuring charge of $29.6 million, bringing the total
restructuring  charge recorded by the Corporation  during 2000 to $39.1 million.
For  further  details  regarding  the  strategic  repositioning  plan  and  2000
restructuring   actions,  see  Note  19  of  Notes  to  Consolidated   Financial
Statements.
     The first element of the strategic  repositioning  plan - designed to focus
the Corporation on its strategic  businesses - was completed in 1998 through the
divestiture of non-strategic  businesses:  True Temper Sports,  its recreational
products  business;  Emhart Glass,  its glass  container-forming  and inspection
equipment  business;  and the household products  businesses (other than certain
assets  associated  with the  Corporation's  cleaning and lighting  business) in
North America, Central America, the Caribbean, South America (excluding Brazil),
and Australia.  The Corporation received proceeds of approximately $625 million,
net of selling expenses and taxes paid, in 1998 for these businesses.
     In June 1998, the Corporation  closed on the sale of its household products
businesses in North America,  Central America, the Caribbean,  and South America
(excluding  Brazil).  The  household  products  business in  Australia  was sold
earlier in 1998.
     In September 1998, the Corporation announced that it had closed on the sale
of  Emhart  Glass.  Also  in  September  1998,  the  Corporation  completed  the
recapitalization of True Temper Sports. The Corporation  retained  approximately
6% of preferred and common stock of the recapitalized company, now known as True
Temper  Corporation,  valued at  approximately  $4 million.  In addition to cash
proceeds  included in the aggregate  $625 million noted above,  the  Corporation
received a senior, increasing-rate discount note, bearing interest at a variable
rate, in an initial  accreted  amount of $25.0  million in  connection  with the
recapitalization.  Because True Temper Corporation was a highly leveraged entity
and there was no active market for the note, the Corporation  fully reserved the
$25.0 million note at the time of the  divestiture  and continued to reserve the
note through  December 31, 1999.  During 2000,

                                       14
<PAGE>

the  Corporation  sold the note,  together with its  remaining  interest in True
Temper  Corporation  for $25.0  million and  recognized  a pre-tax gain of $20.1
million ($13.1 million after tax).
     The pre-tax gain on the sale of businesses of $114.5 million ($16.5 million
net of tax)  recognized by the Corporation  during 1998  represented the gain on
the divested  Emhart  Glass,  True Temper  Sports,  and the  household  products
businesses  (excluding  certain assets associated with the cleaning and lighting
product lines) in North America,  Central America, the Caribbean,  South America
(excluding  Brazil),  and Australia.  That gain was net of an impairment loss of
approximately  $15  million  recognized  in June  1998 in  connection  with  the
then-anticipated  exit from the household  products business in Brazil. Due to a
lack  of  response  from  qualified  buyers,  the  Corporation  ceased  actively
marketing its household products business in Brazil.
     Because  True Temper  Sports,  Emhart  Glass,  and the  household  products
businesses in North  America,  Central  America,  the  Caribbean,  South America
(excluding  Brazil),  and Australia were not treated as discontinued  operations
under  generally  accepted  accounting  principles,  they remained a part of the
Corporation's  reported  results from  continuing  operations  until their sale.
Proceeds  from the  divestitures  of these  businesses  in 1998,  net of selling
expenses and taxes paid,  of  approximately  $625  million were  utilized in the
repurchase  of a  portion  of the  Corporation's  common  stock  and to fund the
restructuring program described below.
     The  second  element  of the  strategic  repositioning  plan - the  planned
repurchase of approximately 10% of its common stock over a two-year period - was
completed in 1999.  During 1999, the Corporation  repurchased  610,900 shares of
its common  stock at an  aggregate  cost of $32.1  million,  bringing  the total
repurchased under this element of the strategic  repositioning plan in both 1999
and 1998 to 9,636,300 shares at an aggregate cost of $496.4 million.
     By the close of 2000,  the  Corporation  completed the third element of the
strategic  repositioning  plan - a  restructuring  program  undertaken to reduce
fixed costs.
     As part of the  restructuring  program  undertaken  in 1998 and  1999,  the
Corporation  undertook  significant  change  in its  European  power  tools  and
accessories  businesses by  consolidating  distribution and  transportation  and
centralizing finance,  marketing,  and support services. These changes in Europe
were accompanied by investment in  state-of-the-art  information systems similar
to the  investments  made in the  North  American  business.  In  addition,  the
worldwide power tools and accessories  business  rationalized its  manufacturing
plant network, resulting in the closure of a number of manufacturing plants. The
restructuring  program  also  included  actions to improve the cost  position of
other businesses.
     This  restructuring  program resulted in a pre-tax charge of $164.7 million
during  the  year  ended   December  31,  1998  ($117.3   million   after  tax).
Restructuring  and exit costs  recognized  by the  Corporation  during 1998 were
principally  associated with severance benefits and voluntary retirement program
costs,  as well as the  write-down  to net  realizable  value of  certain  land,
buildings,  and equipment in accordance  with Statement of Financial  Accounting
Standards (SFAS) No. 121.
     In   connection   with  the   restructuring   component  of  the  strategic
repositioning  plan, the Corporation  recorded  severance  obligations  when the
liability  became  probable  under  its  established  severance  policies  or as
provided  statutorily  or,  when no policy or  statutory  provision  existed  or
applied, based on when the benefits were communicated to affected employees. The
timing  of the  charge  was  dictated  based on the later of:  (i)  approval  by
management having the ultimate authority to approve the actions; (ii) resolution
of contingencies  affecting the feasibility of, or returns from, the project; or
(iii) if applicable, notification of affected employees.
     The severance  component of the restructuring  reserve established in 1998,
as adjusted in 1999,  is net of  adjustments  that  occurred  due to: (i) actual
attrition  factors  that  differed  from those  initially  estimated;  (ii) more
cost-effective  methods of severing  employment that became probable,  typically
based on negotiations  with trade unions or local government  institutions;  and
(iii) amendments to the initial plan that were approved by the appropriate level
of management,  based primarily on changes in market  conditions that dictated a
modification  to the intended  course of action.  None of the adjustments to the
severance  obligations recorded as part of the strategic  repositioning plan was
individually material.
     A summary of restructuring  activity during 1998 is as follows (in millions
of dollars):
--------------------------------------------------------------------------------
                                        Utilization of Reserve
                           Reserve As         During 1998            Reserve at
                          Established   ----------------------     December 31,
(Dollars in Millions)         in 1998       Cash      Non-Cash             1998
--------------------------------------------------------------------------------

Severance benefits
   and cost of
   voluntary
   retirement
   program                     $121.3     $(52.8)       $(28.6)           $39.9
Write-down to
   net realizable
   value of certain
   land, buildings,
   and equipment                 29.5         --         (29.5)              --
Other charges                    13.9       (2.8)          (.2)            10.9
--------------------------------------------------------------------------------
Total                          $164.7     $(55.6)       $(58.3)           $50.8
================================================================================
     Asset  write-downs  taken  as  part  of  the  1998   restructuring   charge
principally  related to the book value of manufacturing  equipment and furniture
and fixtures net of estimated salvage, which was negligible. The carrying values
of land and  building to be  abandoned  or sold were  written down to their fair
value, generally based on third party offers, when that fair value was less than
net book value.  Gains were realized when two facilities,  exited as part of the
restructuring,  that had a fair value exceeding their net book value at the time
of the  charge,  were sold.  Those  gains,  when  realized,  were  reported as a
reduction of the 1998 restructuring charge.
     In the preceding  table,  the $28.6  million  non-cash  utilization  of the
reserve  established  for  severance  benefits and cost of voluntary  retirement
program  represents  the  present  value of payments to be made as a result of a
voluntary  retirement program for employees in the United States. Those payments
will be made from the assets of the Corporation's pension plan trust rather than
from working capital of the Corporation.


                                       15
<PAGE>

     During 1999, the Corporation recognized $13.1 million of additional pre-tax
restructuring  and exit costs  associated with  restructuring  of North American
accessories and packaging  operations and Latin American power tool  operations,
exiting certain small foreign entities, and the settlement of claims regarding a
divested  business.  That $13.1 million charge was offset,  however,  by an $8.9
million gain  realized in 1999 on the sale of a facility,  exited as part of the
restructuring  actions  taken in 1998,  that had a fair value  exceeding its net
book  value at the time of the  charge and by the  reversal  of $4.2  million of
severance accruals  established as part of the 1998 charge, which will no longer
be required.
     A summary of  restructuring  activity  during  1999 is set forth  below (in
millions of dollars):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                            Reserves
                                                         Established
                                             Reserve at     in 1999,                    Utilization of Reserve     Reserve at
                                           December 31,  Net of Gain  Reversal of       ----------------------   December 31,
                                                   1998   Recognized     Reserves         Cash        Non-Cash           1999
------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>          <C>          <C>         <C>              <C>            <C>
Severance benefits                                $39.9        $ 4.4        $(4.2)      $(21.4)          $   -          $18.7
Write-down to net realizable value of
   certain land, buildings, and equipment             -         (4.2)           -            -             4.2              -
Other charges                                      10.9          4.0            -         (5.3)           (5.9)           3.7
------------------------------------------------------------------------------------------------------------------------------
Total                                             $50.8        $ 4.2        $(4.2)      $(26.7)          $(1.7)         $22.4
==============================================================================================================================
</TABLE>
     In the preceding table, the negative $1.7 million of non-cash reserve usage
in 1999  represents  $7.2  million  of  non-cash  reserve  usage,  including  an
additional  $4.7 million  write-down  of property to its net  realizable  value,
offset  by  the  $8.9  million  gain  on the  sale  of  the  facility  described
previously.
     During  2000,  the  Corporation  recorded  a  restructuring  charge of $9.5
million  to  rationalize  manufacturing  in the  Hardware  and Home  Improvement
segment,  completing the  restructuring  element of the strategic  repositioning
plan.
     Also during 2000, the Corporation  took action to reduce costs in its Power
Tools and Accessories segment and recorded an additional restructuring charge of
$29.6  million,   bringing  the  total  restructuring  charge  recorded  by  the
Corporation  during  2000 to  $39.1  million.  As part  of that  cost  reduction
initiative,  certain  power  tools  production  in the  United  Kingdom  will be
transferred  to  lower-cost  manufacturing  facilities  in China,  including the
facilities of one of the  Corporation's  joint ventures.  In addition,  the cost
reduction   initiative   includes   reductions  in   administrative   functions,
principally in Europe, and the integration of the Accessories  business in North
America,  previously  operated  on a  relatively  stand-alone  basis,  into  the
professional and consumer power tools businesses in North America.
     A summary of  restructuring  activity  during  2000 is set forth  below (in
millions of dollars):
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                          Reserve at      Reserves      Utilization of Reserve     Reserve at
                                                        December 31,   Established      ----------------------   December 31,
                                                                1999       in 2000         Cash      Non-Cash            2000
------------------------------------------------------------------------------------------------------------------------------

<S>                                                            <C>           <C>         <C>           <C>              <C>
Severance benefits                                             $18.7         $21.4       $(10.4)       $    -           $29.7
Write-down to net realizable value of
   certain land, buildings, and equipment                          -          13.9            -         (13.9)             -
Other charges                                                    3.7           3.8         (2.2)          (.9)            4.4
------------------------------------------------------------------------------------------------------------------------------
Total                                                          $22.4         $39.1       $(12.6)       $(14.8)          $34.1
==============================================================================================================================
</TABLE>
     In addition to the  restructuring  and exit costs recognized as part of the
strategic  repositioning plan, the Corporation also recognized related expenses,
incremental to the cost of the restructuring  plans being  implemented,  that do
not qualify as restructuring or exit costs under generally  accepted  accounting
principles  ("restructuring-related  expenses").  Restructuring-related expenses
for 2000 were not  significant.  Operating  results for the years ended December
31, 1999 and 1998,  included $15.0 million and $44.4 million,  respectively,  of
restructuring-related    expenses.    Included   in   the   $44.4   million   of
restructuring-related   expenses  recognized  in  1998  were  $11.5  million  of
inventory  write-downs  associated  with  products in the retained  cleaning and
lighting business that were being discontinued.
     Incremental benefits realized during 2000 from the restructuring element of
the strategic  repositioning plan were approximately $10 million. Those savings,
together with the incremental savings realized in 1999 and 1998 of approximately
$40 million and $30 million, respectively,  brought the estimated annual savings
in 2000 from the restructuring  element of the strategic  repositioning  plan to
$80 million.  The Corporation  estimates that incremental savings of $10 million
in 2001  and  $20  million  in 2002  will be  realized  upon  completion  of the
additional  restructuring  actions  undertaken  in  2000,  both  as  part of the
strategic repositioning plan and in order to reduce costs in its Power Tools and
Accessories segment.
     As indicated in Note 19 of Notes to Consolidated Financial Statements,  the
severance  and  voluntary  retirement  accrual  included  in the $164.7  million
restructuring  charge  taken in  1998,  as  adjusted  in  1999,  related  to the
elimination of approximately 5,000 positions. The Corporation estimates that, as
a result of shifting  certain  production  and replacing  certain  employees who
retired under the United States voluntary  retirement  plan,  2,200  replacement
positions were filled,  yielding a net total of 2,800 positions  eliminated as a
result of the 1998 and 1999  restructuring  actions.  The restructuring  actions
undertaken in 2000 reflect the net elimination of  approximately  400 positions.
The Corporation's estimate of savings from the restructuring actions taken, both
in connection with the strategic  repositioning  plan as well in connection with
planned  cost  reduction  efforts in the Power  Tools and  Accessories  segment,
reflects  estimated  savings  from  a  net  reduction  of  approximately   3,200
positions.


                                       16
<PAGE>

     Ultimate  savings  realized  from  restructuring  actions  will  likely  be
mitigated  by such  factors as continued  economic  deterioration  in the United
States  and  Europe as well as  decisions  to  increase  costs in areas  such as
promotion and research and development above levels that were otherwise assumed.
     As a  consequence  of the strategic  repositioning  plan,  the  Corporation
elected  to  change  its  method  of  measuring  goodwill   impairment  from  an
undiscounted  cash flow approach to a discounted  cash flow approach,  effective
January 1, 1998.  The  Corporation  believes  that  measurement  of the value of
goodwill  through the discounted cash flow approach,  as more fully described in
Note 19 of Notes to Consolidated Financial Statements, is preferable in that the
discounted  cash flow  measurement  facilitates  the  timely  identification  of
impairment of the carrying  value of  investments  in businesses  and provides a
more  current  - and  with  respect  to the  businesses  sold,  provided  a more
realistic -  valuation  than the  undiscounted  approach.  The  adoption of this
discounted  cash  flow  approach,   however,  may  result  in  greater  earnings
volatility  because  decreases  in  projected  discounted  cash flows of certain
businesses will result in timely recognition of future impairment.
     In  connection   with  this  change  in  accounting  with  respect  to  the
measurement  of goodwill  impairment,  a non-cash  charge of $900.0  million was
recognized  in January 1998 ($9.80 per share both on a basic and a diluted basis
for the year ended  December 31, 1998).  The $900.0  million  write-down,  which
related to goodwill  associated with the Fastening and Assembly  Systems segment
and the  Hardware  and Home  Improvement  segment and  included a $40.0  million
write-down  of  goodwill  associated  with  one  of  the  divested   businesses,
represented  the amount  necessary to reduce the carrying values of goodwill for
those businesses to the Corporation's  best estimate,  as of January 1, 1998, of
those businesses'  future discounted cash flows using the methodology  described
in Note 19 of Notes to Consolidated Financial Statements.

Hedging Activities
The Corporation  has a number of  manufacturing  sites  throughout the world and
sells its  products in more than 100  countries.  As a result,  it is exposed to
movements in the exchange rates of various  currencies against the United States
dollar and against the  currencies  of countries in which it  manufactures.  The
major foreign currencies in which foreign currency risks exist are the euro (and
its legacy currencies, including the deutsche mark, Dutch guilder, French franc,
and Italian lira), pound sterling, Canadian dollar, Swedish krona, Japanese yen,
Australian  dollar,  Mexican  peso,  and  Brazilian  real.  Through  its foreign
currency  activities,  the Corporation  seeks to reduce the risk that cash flows
resulting from the sales of products  manufactured in a currency  different from
that of the selling subsidiary will be affected by changes in exchange rates.
     At the time of the euro's  introduction  on  January  1,  1999,  the eleven
participating  member countries of the European Monetary Union established fixed
conversion  rates  between  their  legacy  currencies  and the  euro.  During  a
three-year  phase-in period  in which special conversion rules apply, the legacy
currencies  will  continue to be used as legal tender.  On January 1, 2002,  the
legacy currencies will be canceled and replaced by the euro as legal tender. The
Corporation  has  initiated  actions  to ensure  that  computer  systems  in its
European operation will be in a position to accommodate the adoption of the euro
by no later than January 1, 2002. The Corporation believes that the introduction
of the euro has  resulted in  increased  competitive  pressures  in  continental
Europe due to the heightened transparency of intra-European pricing structures.
     From time to time,  currency  devaluations  may occur in countries in which
the Corporation  sells or manufactures  its product.  While the Corporation will
take actions to mitigate the impacts of any future currency devaluations,  there
is  no  assurance  that  such   devaluations   will  not  adversely  affect  the
Corporation.
     Assets and liabilities of subsidiaries located outside of the United States
are  translated  at rates of exchange  at the  balance  sheet date as more fully
explained in Note 1 of Notes to Consolidated Financial Statements. The resulting
translation  adjustments  are included in the  accumulated  other  comprehensive
income component of stockholders' equity. During 2000, translation  adjustments,
recorded  in  the   accumulated   other   comprehensive   income   component  of
stockholders' equity,  decreased  stockholders' equity by $64.8 million compared
to a decrease of $10.2 million in 1999.
     In order to minimize the  volatility of reported  equity,  the  Corporation
hedges, on a limited basis, the exposure to foreign currency fluctuations on its
net investments in subsidiaries located outside of the United States through the
use of currency swaps, forward contracts,  and options. These hedging activities
generate  cash  inflows and  outflows  that offset the  translation  adjustment.
During 2000 and 1999, these  activities  netted to a cash inflow of $3.7 million
and $30.4 million,  respectively.  The  corresponding  gains and losses on these
hedging activities were recorded in the accumulated other  comprehensive  income
component of stockholders' equity. The lower cash inflow from hedging activities
in 2000  compared to 1999 resulted  from the  maturation  during 1999 of certain
interest  rate swaps that  swapped  from fixed  United  States  dollars to fixed
foreign currencies.  Also included in the accumulated other comprehensive income
component were the costs of maintaining the hedge portfolio of foreign  exchange
contracts. These hedge costs were not significant in 2000 and 1999.
     As more  fully  explained  in Note 8 of  Notes  to  Consolidated  Financial
Statements,  the Corporation seeks to issue debt  opportunistically,  whether at
fixed or variable rates, at the lowest possible costs. Based upon its assessment
of the future interest rate  environment  and its desired  variable rate debt to
total debt ratio,  the  Corporation  may later  convert  such debt from fixed to
variable  or from  variable  to fixed  interest  rates,  or from  United  States
dollar-based  rates to rates  based upon  another  currency,  through the use of
interest rate and currency swap agreements.
     In order to meet  its  goal of  fixing  or  limiting  interest  costs,  the
Corporation  maintains  a  portfolio  of interest  rate hedge  instruments.  The
variable rate debt to total debt ratio,  after taking  interest rate hedges into
account, was 65% at December 31, 2000, compared to 52% at December 31, 1999, and
47% at December 31, 1998.  At December 31, 2000,  average debt  maturity was 5.4
years  compared to 6.2 years at December 31, 1999, and 6.7 years at December 31,
1998.

                                       17
<PAGE>

INTEREST RATE SENSITIVITY
The following  table  provides  information  as of December 31, 2000,  about the
Corporation's  derivative financial  instruments and other financial instruments
that are sensitive to changes in interest rates,  including  interest rate swaps
and debt obligations.  For debt obligations,  the table presents  principal cash
flows and related  average  interest rates by contractual  maturity  dates.  For
interest  rate  swaps,  the  table  presents  notional   principal  amounts  and
weighted-average  interest rates by contractual maturity dates. Notional amounts
are used to  calculate  the  contractual  payments  to be  exchanged  under  the
interest rate swaps.  Weighted-average variable rates are generally based on the
London  Interbank  Offered Rate (LIBOR) as of the reset dates. The cash flows of
these  instruments are denominated in a variety of currencies.  Unless otherwise
indicated, the information is presented in U.S. dollar equivalents, which is the
Corporation's reporting currency, as of December 31, 2000.

<TABLE>
<CAPTION>
Principal Payments and Interest Rate Detail by Contractual Maturity Dates
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                                       Fair Value
                                                                                                                        (Assets)/
(U.S. Dollars in Millions)           2001        2002        2003        2004       2005    Thereafter       Total    Liabilities
----------------------------------------------------------------------------------------------------------------------------------
<S>                                <C>          <C>        <C>         <C>        <C>           <C>         <C>            <C>
LIABILITIES
Short-term borrowings
Variable rate (U.S. dollars)       $364.9       $  --      $   --      $   --     $   --        $   --      $364.9         $364.9
   Average interest rate             6.72%                                                                    6.72%
Variable rate (other currencies)   $ 38.0       $  --      $   --      $   --     $   --        $   --      $ 38.0         $ 38.0
   Average interest rate             5.59%                                                                    5.59%
Long-term debt
Fixed rate (U.S. dollars)          $ 35.8       $32.3      $309.5      $   --     $   --        $454.5      $832.1         $825.5
   Average interest rate             8.95%       8.86%       7.50%                                6.87%       7.27%
Fixed rate (other currencies)      $  4.4       $ 1.5      $   .7      $   --     $   --        $   --      $  6.6         $  6.6
   Average interest rate             5.40%       1.48%       1.49%                                            4.09%
Variable rate (U.S. dollars)       $  7.5       $  --      $   --      $   --     $   --        $   --      $  7.5         $  7.5
   Average interest rate            L+.70%(a)
Other long-term liabilities
Fixed rate (U.S. dollars)          $   --       $  --      $   --      $   --     $188.0        $   --      $188.0         $188.0
   Average interest rate                                                            5.69%                     5.69%
INTEREST RATE DERIVATIVES
Fixed to Variable Rate Interest
Rate Swaps (U.S. dollars)          $   --       $  --      $125.0      $   --     $188.0        $275.0      $588.0         $  4.2
   Average pay rate (b)
   Average receive rate                                      6.02%                  6.49%         6.01%       6.17%
----------------------------------------------------------------------------------------------------------------------------------
<FN>
(a)Variable rate  specified is based upon LIBOR plus the  specified  margin over
   LIBOR.
(b)The average pay rate is based upon 6-month  forward LIBOR,  except for $150.0
   million in notional  principal  amount which  matures after 2005 and is based
   upon 3-month forward LIBOR.
</FN>
</TABLE>

FOREIGN CURRENCY EXCHANGE RATE SENSITIVITY
As discussed  above,  the  Corporation  is exposed to market risks  arising from
changes in foreign  exchange rates. As of December 31, 2000, the Corporation has
hedged a portion  of its 2001  estimated  foreign  currency  transactions  using
forward exchange contracts and purchased options. The Corporation  estimated the
effect on 2001 gross profits,  based upon a recent estimate of foreign  exchange
exposures,  of a uniform  10%  strengthening  in the value of the United  States
dollar and a uniform 10% weakening in the value of the United States dollar. The
larger loss computed was that under an assumed uniform 10%  strengthening of the
United States dollar,  which the Corporation  estimated would have the effect of
reducing gross profits for 2001 by approximately $35 million.
     In addition to their direct effects,  changes in exchange rates also affect
sales volumes and foreign currency sales prices as competitors'  products become
more or less attractive.  The sensitivity  analysis of the effects of changes in
foreign  currency  exchange  rates  previously  described  does  not  reflect  a
potential  change in sales levels or local  currency  prices nor does it reflect
higher exchange rates,  compared to those experienced  during 2000,  inherent in
the foreign exchange hedging portfolio at December 31, 2000.

IMPACT OF NEW ACCOUNTING STANDARD WITH RESPECT TO DERIVATIVES
As more fully described in Note 1 of Notes to Consolidated Financial Statements,
the  Corporation  is required to adopt SFAS No. 133,  Accounting  for Derivative
Instruments  and  Hedging  Activities,  effective  January  1,  2001.  While the
Corporation does not expect the adoption of this new accounting standard to have
a significant impact on its financial  condition and earnings,  it believes that
the  adoption  of SFAS No. 133 will  result in a number of changes  from that of
prior  accounting  standards.  These  changes  include the  "grossing up" of the
Corporation's balance sheet and the potential for greater earnings volatility on
a quarterly  basis,  particularly  with respect to the  Corporation's  purchased
foreign currency options.
     While prior accounting standards permitted many derivatives to be accounted
for on an "off-balance sheet" basis, SFAS No. 133 requires all derivatives to be
recognized on the balance sheet at fair value.  Derivatives  that do not qualify
as hedges under SFAS No. 133 must be adjusted to fair value through income. If a
derivative  qualifies as a fair value hedge -- as do the Corporation's  fixed to
variable rate interest rate swaps as of December 31, 2000 -- changes in the fair
value of the derivative are recognized  through earnings.  SFAS No. 133


                                       18
<PAGE>

requires that, subject to certain limitations,  changes in the fair value of the
underlying  debt be  recognized  through  earnings,  providing  an offset to the
earnings recognition related to the derivative's changes in fair value.
     If a derivative  qualifies as a cash flow hedge -- as do the  Corporation's
foreign  currency  options  as of  December  31,  2000,  which  generally  hedge
forecasted  intercompany inventory purchases -- changes in the fair value of the
derivative are recognized in accumulated other comprehensive income, a component
of  stockholders'  equity,  until  such  time  as  the  underlying   transaction
ultimately affects earnings.  In the case of the Corporation's  foreign currency
options as of December 31, 2000,  changes in fair value of the options  would be
recognized  in  accumulated  other  comprehensive  income until such time as the
underlying hedged inventory is sold to a third party. The ineffective portion of
a derivative's  change in fair value must be immediately  recognized in earnings
under  SFAS No.  133.
     The  Corporation  believes  that the  adoption  of SFAS No. 133 will afford
greater  flexibility  in hedging  the  foreign  currency  risk  inherent  in its
forecasted  intercompany  inventory  purchases.  In order to  qualify  for hedge
accounting   under   prior   accounting   standards,   forecasted   intercompany
transactions were required to be hedged with purchased foreign currency options,
rather than with less expensive foreign currency forward contracts. SFAS No. 133
eliminated  this  restriction  and permits the use of foreign  currency  forward
contracts  in  hedging  the  foreign   currency   risk  inherent  in  forecasted
intercompany transactions.


Financial Condition
Operating  activities  generated  cash of  $349.9  million  for the  year  ended
December 31, 2000,  compared to $375.5  million of cash  generated  for the year
ended December 31, 1999. Cash from  operations  during 2000 benefited from lower
cash usage for working capital, which was mainly driven by decreases in accounts
receivable  as a result of lower sales in the fourth  quarter.  This decrease in
accounts receivable in 2000 provided cash of $12.7 million in comparison to cash
used of $57.0 million in 1999.
     As part of its capital management,  the Corporation reviews certain working
capital metrics. For example, the Corporation  evaluates its accounts receivable
and inventory  levels  through the  computation  of days sales  outstanding  and
inventory turnover ratio, respectively.  The number of days sales outstanding as
of December 31, 2000,  approximated the 1999 level.  Inventory  turns,  however,
decreased  during  2000 due to an increase  in  inventory  levels as a result of
lower than  anticipated  sales in the fourth quarter of 2000. The  Corporation's
goal is to increase inventory turns in 2001.
     Investing  activities  for the year ended  December 31, 2000,  used cash of
$202.2 million  compared to $108.6 million of cash used in 1999. The increase in
cash usage was partially  driven from higher  capital  expenditures  during 2000
compared  to  the  corresponding  period  in  1999.  Cash  flow  from  investing
activities during 2000 also was impacted by lower cash from hedging  activities.
During  1999,  net  cash  inflow  from  hedging  activities  benefited  from the
maturation of certain  interest rate swaps that swapped from fixed United States
dollars to fixed  foreign  currencies.  In  addition,  cash flow from  investing
activities  was impacted by lower cash  proceeds  from disposal of assets during
2000 than in 1999.  Benefiting  cash flow from investing  activities in 2000 was
the  Corporation's   receipt  of  $25.0  million  related  to  the  True  Temper
recapitalization  more  fully  described  in Note 19 of  Notes  to  Consolidated
Financial Statements.
     Investing  activities  for the year ended  December 31,  2000,  included an
aggregate payment of $35.5 million related to the purchases of two businesses by
the Power Tools and  Accessories  segment in the United  States.  The businesses
acquired were Emglo Products, L.P. (Emglo),  purchased in mid-December 2000, and
Momentum  Laser  (Momentum),  purchased  in June 2000.  The results of Emglo and
Momentum,  included in the  consolidated  financial  statements from the date of
acquisition,  were  not  material.  Under  the  terms of the  Momentum  purchase
agreement,  additional  purchase  consideration  of up to $7.0 million and $15.0
million,  respectively,  may be payable  based on the income of  Momentum in the
first and second years following the acquisition.
     Financing  activities used cash of $150.0 million in 2000, compared to cash
used of $201.6  million  in 1999.  The  decrease  in cash  used  from  financing
activities  principally  resulted from increased cash from borrowing  activities
and the issuance of preferred stock of a subsidiary  partially  offset by higher
cash  expenditures  for stock  repurchases  during  2000.  During the year ended
December 31, 2000, the Corporation  repurchased  7,454,000  shares of its common
stock at an  aggregate  cost of $269.8  million.  During 1999,  the  Corporation
repurchased  1,015,900  shares of its common stock at an aggregate cost of $53.3
million.  For further  discussion  of the  subsidiary's  preferred  stock issued
during 2000, see Note 12 of Notes to Consolidated Financial Statements.
     At December 31, 2000, the Corporation had remaining  authorization from its
Board of Directors to repurchase an  additional  2,996,595  shares of its common
stock.
     In addition to measuring its cash flow  generation and usage based upon the
operating, investing, and financing classifications included in the Consolidated
Statement of Cash Flows,  the Corporation also measures its free cash flow. Free
cash flow, a measure commonly  employed by credit  providers,  is defined by the
Corporation as cash flow from operating activities, less capital expenditures of
continuing  operations,  plus  proceeds  from the disposal of assets  (excluding
proceeds  from business  sales).  During the year ended  December 31, 2000,  the
Corporation  generated  free cash flow of $154.5  million  compared to free cash
flow of $241.7 million generated in 1999.
     The  ongoing  costs of  compliance  with  existing  environmental  laws and
regulations  have not had,  and are not  expected  to have,  a material  adverse
effect on the Corporation's capital expenditures or financial position.
     As  discussed  further  in  Note  6  of  Notes  to  Consolidated  Financial
Statements,  the Corporation's $1.0 billion revolving credit facility expires in
April 2001. The  Corporation  intends to replace the expiring  revolving  credit
facility with a new revolving  credit  facility,  and  discussions are currently
underway with prospective lenders.


                                       19
<PAGE>

     The Corporation will continue to have cash requirements to support seasonal
working  capital needs and capital  expenditures,  to pay  interest,  to service
debt,  and to complete  the  restructuring  actions  previously  described.  For
amounts available at December 31, 2000, under the Corporation's revolving credit
facility  and  under  short-term  borrowing  facilities,  see Note 6 of Notes to
Consolidated Financial Statements.  In order to meet its cash requirements,  the
Corporation  intends to use internally  generated  funds and to borrow under its
existing and future  unsecured  revolving  credit  facility or under  short-term
borrowing  facilities.  The Corporation  believes that cash generated from these
sources will be adequate to meet its cash requirements over the next 12 months.


ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Information required under this Item is contained in Item 7 of this report under
the caption  "Hedging  Activities" and in Item 8 of this report in Notes 1 and 8
of Notes to Consolidated  Financial  Statements,  and is incorporated  herein by
reference.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The  following  consolidated  financial  statements of the  Corporation  and its
subsidiaries are included herein as indicated below:

Consolidated Financial Statements

Consolidated  Statement of Earnings - years ended  December 31, 2000,  1999, and
   1998.

Consolidated Balance Sheet - December 31, 2000 and 1999.

Consolidated Statement of Stockholders'  Equity - years ended December 31, 2000,
   1999, and 1998.

Consolidated  Statement of Cash Flows - years ended December 31, 2000, 1999, and
   1998.

Notes to Consolidated Financial Statements.

Report of Independent Auditors.



                                       20
<PAGE>




CONSOLIDATED STATEMENT OF EARNINGS

The Black & Decker Corporation and Subsidiaries
(Dollars in Millions Except Per Share Data)


<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Year Ended December 31,                                                2000              1999             1998
----------------------------------------------------------------------------------------------------------------
<S>                                                                <C>               <C>               <C>
Sales                                                              $4,560.8          $4,520.5          $4,559.9
   Cost of goods sold                                               2,889.0           2,834.4           2,951.0
   Selling, general, and administrative expenses                    1,149.5           1,149.8           1,124.9
   Restructuring and exit costs                                        39.1                --             164.7
   Gain on sale of businesses                                          20.1                --             114.5
   Write-off of goodwill                                                 --                --             900.0
----------------------------------------------------------------------------------------------------------------
Operating Income (Loss)                                               503.3             536.3            (466.2)
   Interest expense (net of interest income of
      $44.1 for 2000, $30.5 for 1999, and $30.9 for 1998)             104.2              95.8             114.4
   Other income (expense)                                               5.5                .8              (7.7)
----------------------------------------------------------------------------------------------------------------
Earnings (Loss) Before Income Taxes                                   404.6             441.3            (588.3)
   Income taxes                                                       122.6             141.0             166.5
----------------------------------------------------------------------------------------------------------------
Net Earnings (Loss)                                                $  282.0          $  300.3          $ (754.8)
================================================================================================================

----------------------------------------------------------------------------------------------------------------
Net Earnings (Loss) Per Common Share -- Basic                      $   3.37          $   3.45          $  (8.22)
================================================================================================================
Net Earnings (Loss) Per Common Share --
   Assuming Dilution                                               $   3.34          $   3.40          $  (8.22)
================================================================================================================
See Notes to Consolidated Financial Statements.
</TABLE>




                                       21
<PAGE>



CONSOLIDATED BALANCE SHEET

The Black & Decker Corporation and Subsidiaries
(Millions of Dollars)


<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------
December 31,                                                           2000          1999
------------------------------------------------------------------------------------------
<S>                                                                <C>           <C>
ASSETS
Cash and cash equivalents                                          $  135.0      $  147.3
Trade receivables, less allowances of
   $51.8 for 2000 and $53.3 for 1999                                  783.1         823.2
Inventories                                                           844.0         751.0
Other current assets                                                  199.9         189.9
------------------------------------------------------------------------------------------
   TOTAL CURRENT ASSETS                                             1,962.0       1,911.4
------------------------------------------------------------------------------------------
PROPERTY, PLANT, AND EQUIPMENT                                        748.1         739.6
GOODWILL                                                              717.2         743.4
OTHER ASSETS                                                          662.4         618.3
------------------------------------------------------------------------------------------
                                                                   $4,089.7      $4,012.7
==========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings                                              $  402.9      $  183.2
Current maturities of long-term debt                                   47.7         213.2
Trade accounts payable                                                367.6         367.3
Other accrued liabilities                                             814.1         809.0
------------------------------------------------------------------------------------------
   TOTAL CURRENT LIABILITIES                                        1,632.3       1,572.7
------------------------------------------------------------------------------------------
LONG-TERM DEBT                                                        798.5         847.1
DEFERRED INCOME TAXES                                                 221.0         243.8
POSTRETIREMENT BENEFITS                                               240.6         246.3
OTHER LONG-TERM LIABILITIES                                           479.8         301.7
COMMON STOCK UNDER EQUITY FORWARDS                                     25.1           --
STOCKHOLDERS' EQUITY
Common stock (outstanding: December 31, 2000-- 80,343,094 shares;
   December 31, 1999-- 87,190,240 shares)                              40.2          43.6
Capital in excess of par value                                        560.0         843.3
Retained earnings                                                     264.0          21.9
Accumulated other comprehensive income                               (171.8)       (107.7)
------------------------------------------------------------------------------------------
   TOTAL STOCKHOLDERS' EQUITY                                         692.4         801.1
------------------------------------------------------------------------------------------
                                                                   $4,089.7      $4,012.7
==========================================================================================
See Notes to Consolidated Financial Statements.
</TABLE>








                                       22
<PAGE>


CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

The Black & Decker Corporation and Subsidiaries
(Dollars in Millions Except Per Share Data)

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
                                                                                               Accumulated
                                            Outstanding             Capital in    Retained           Other           Total
                                                 Common       Par    Excess of    Earnings   Comprehensive    Stockholders'
                                                 Shares     Value    Par Value   (Deficit)          Income          Equity
---------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>            <C>       <C>           <C>            <C>            <C>
BALANCE AT DECEMBER 31, 1997                 94,842,544     $47.4     $1,278.2      $562.0         $ (96.2)       $1,791.4
Comprehensive income (loss):
   Net loss                                          --        --           --      (754.8)             --          (754.8)
   Minimum pension liability
      adjustment (net of tax)                        --        --           --          --            (6.1)           (6.1)
   Foreign currency translation
      adjustments, less effect of
      hedging activities (net of tax)                --        --           --          --           (37.8)          (37.8)
   Write-off of accumulated foreign
      currency translation adjustments
      due to sale of businesses                      --        --           --          --            35.6            35.6
---------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss)                          --        --           --      (754.8)           (8.3)         (763.1)
---------------------------------------------------------------------------------------------------------------------------
Cash dividends on common stock
   ($.48 per share)                                  --        --           --       (43.8)             --           (43.8)
Purchase and retirement of
   common stock                              (9,025,400)     (4.5)      (459.8)         --              --          (464.3)
Common stock issued under
   employee benefit plans                     1,681,280        .8         53.0          --              --            53.8
---------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998                 87,498,424      43.7        871.4      (236.6)         (104.5)          574.0
Comprehensive income:
   Net earnings                                      --        --           --       300.3              --           300.3
   Minimum pension liability
      adjustment (net of tax)                        --        --           --          --             1.6             1.6
   Foreign currency translation
      adjustments, less effect of
      hedging activities (net of  tax)               --        --           --          --            (4.8)           (4.8)
---------------------------------------------------------------------------------------------------------------------------
Comprehensive income                                 --        --           --       300.3            (3.2)          297.1
---------------------------------------------------------------------------------------------------------------------------
Cash dividends on common stock
   ($.48 per share)                                  --        --           --       (41.8)             --           (41.8)
Purchase and retirement of common stock
   (net of 57,682 shares issued under
   forward purchase contracts)                 (958,218)      (.4)       (52.9)         --              --           (53.3)
Common stock issued under
   employee benefit plans                       650,034        .3         24.8          --              --            25.1
---------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1999                 87,190,240      43.6        843.3        21.9          (107.7)          801.1
Comprehensive income:
   Net earnings                                      --        --           --       282.0              --           282.0
   Minimum pension liability
      adjustment (net of tax)                        --        --           --          --            (1.2)           (1.2)
   Foreign currency translation
      adjustments, less effect of
      hedging activities (net of  tax)               --        --           --          --           (62.9)          (62.9)
---------------------------------------------------------------------------------------------------------------------------
Comprehensive income                                 --        --           --       282.0           (64.1)          217.9
---------------------------------------------------------------------------------------------------------------------------
Cash dividends on common stock
   ($.48 per share)                                  --        --           --       (39.9)             --           (39.9)
Purchase and retirement of common stock
   (net of 350,928 shares issued under
   forward purchase contracts)               (7,103,072)     (3.5)      (266.3)         --              --          (269.8)
Common stock under equity forwards                   --        --        (25.1)         --              --           (25.1)
Common stock issued under
   employee benefit plans                       255,926        .1          8.1          --              --             8.2
---------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 2000                 80,343,094     $40.2     $  560.0      $264.0          $(171.8)      $  692.4
===========================================================================================================================
See Notes to Consolidated Financial Statements.
</TABLE>



                                       23
<PAGE>




CONSOLIDATED STATEMENT OF CASH FLOWS

The Black & Decker Corporation and Subsidiaries
(Millions of Dollars)


<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------
Year Ended December 31,                                                2000              1999             1998
----------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>               <C>             <C>
OPERATING ACTIVITIES
Net earnings (loss)                                                  $282.0            $300.3          $ (754.8)
Adjustments to reconcile net earnings (loss) to cash flow
   from operating activities:
   Gain on sale of businesses                                         (20.1)               --            (114.5)
   Non-cash charges and credits:
      Depreciation and amortization                                   163.4             160.0             155.2
      Deferred income taxes (benefit)                                   (.4)             (5.8)             67.5
      Restructuring charges and exit costs                             39.1                --             164.7
      Goodwill write-off                                                 --                --             900.0
      Other                                                            (8.8)             (8.3)             (1.7)
   Changes in selected working capital items
      (excluding, for 2000 and 1999, effects of acquired businesses
      and, for 1998, effects of divested businesses):
      Trade receivables                                                12.7             (57.0)            (24.3)
      Inventories                                                    (123.1)           (136.1)             26.9
      Trade accounts payable                                           13.6              21.9              16.9
   Restructuring spending                                             (12.6)            (26.7)            (55.6)
   Other assets and liabilities                                         4.1             127.2             (14.0)
----------------------------------------------------------------------------------------------------------------
   CASH FLOW FROM OPERATING ACTIVITIES                                349.9             375.5             366.3
----------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from sale of businesses, net of selling expenses              25.0                --             653.6
Purchase of businesses                                                (35.5)             (5.2)              --
Proceeds from disposal of assets                                        4.8              37.3              20.4
Capital expenditures                                                 (200.2)           (171.1)           (146.0)
Cash inflow from hedging activities                                   193.6             565.9             343.5
Cash outflow from hedging activities                                 (189.9)           (535.5)           (340.1)
----------------------------------------------------------------------------------------------------------------
   CASH FLOW FROM INVESTING ACTIVITIES                               (202.2)           (108.6)            531.4
----------------------------------------------------------------------------------------------------------------
   CASH FLOW BEFORE FINANCING ACTIVITIES                              147.7             266.9             897.7
FINANCING ACTIVITIES
Net increase (decrease) in short-term borrowings                      225.6               1.4            (587.5)
Proceeds from long-term debt                                             --               2.6             325.2
Payments on long-term debt                                           (213.8)           (122.0)           (270.6)
Debt issue costs paid                                                    --                --              (2.9)
Issuance (redemption) of preferred stock of subsidiary                188.0                --             (41.7)
Increase in long-term deposit                                         (50.0)               --               --
Purchase of common stock                                             (269.8)            (53.3)           (464.3)
Issuance of common stock                                                9.9              11.5              31.3
Cash dividends                                                        (39.9)            (41.8)            (43.8)
----------------------------------------------------------------------------------------------------------------
   CASH FLOW FROM FINANCING ACTIVITIES                               (150.0)           (201.6)         (1,054.3)
Effect of exchange rate changes on cash                               (10.0)             (5.9)             (2.3)
----------------------------------------------------------------------------------------------------------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                      (12.3)             59.4            (158.9)
Cash and cash equivalents at beginning of year                        147.3              87.9             246.8
----------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                             $135.0            $147.3          $   87.9
================================================================================================================
See Notes to Consolidated Financial Statements.
</TABLE>


                                       24
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Black & Decker Corporation and Subsidiaries


NOTE 1: SUMMARY OF ACCOUNTING POLICIES
Principles of Consolidation:  The Consolidated  Financial Statements include the
accounts of the Corporation and its subsidiaries. Intercompany transactions have
been eliminated.

Reclassifications:  Certain prior years' amounts in the  Consolidated  Financial
Statements have been reclassified to conform to the presentation used in 2000.

Use of Estimates:  The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying  notes. Actual results inevitably will differ from those estimates,
and such differences may be material to the financial statements.

Revenue  Recognition:  Revenue  from sales of product is  recognized  when title
passes, which generally occurs upon shipment.

Foreign Currency  Translation:  The financial statements of subsidiaries located
outside of the United  States,  except  those  subsidiaries  operating in highly
inflationary  economies,  generally are measured using the local currency as the
functional  currency.  Assets,  including  goodwill,  and  liabilities  of these
subsidiaries  are translated at the rates of exchange at the balance sheet date.
The  resultant  translation   adjustments  are  included  in  accumulated  other
comprehensive  income, a separate component of stockholders'  equity. Income and
expense  items are  translated at average  monthly rates of exchange.  Gains and
losses from foreign currency  transactions of these subsidiaries are included in
net earnings. For subsidiaries operating in highly inflationary economies, gains
and losses  from  balance  sheet  translation  adjustments  are  included in net
earnings.

Cash and Cash  Equivalents:  Cash and  cash  equivalents  include  cash on hand,
demand deposits,  and short-term  investments with maturities of three months or
less from the date of acquisition.

Concentration  of  Credit:  The  Corporation  sells  products  and  services  to
customers in diversified  industries and geographic regions and, therefore,  has
no  significant  concentrations  of  credit  risk  other  than  with  two  major
customers. As of December 31, 2000, approximately 24% of the Corporation's trade
receivables were due from two large home improvement retailers.  The Corporation
continuously  evaluates the creditworthiness of its customers and generally does
not require collateral.

Inventories:  Inventories are stated at the lower of cost or market. The cost of
United States  inventories is based primarily on the last-in,  first-out  (LIFO)
method;  all other  inventories  are  based on the  first-in,  first-out  (FIFO)
method.

Property and  Depreciation:  Property,  plant,  and equipment is stated at cost.
Depreciation  is computed  generally on the  straight-line  method for financial
reporting purposes.

Goodwill and Other Intangibles:  Goodwill and other intangibles are amortized on
the  straight-line  method.  Goodwill is  amortized  principally  over a 40-year
period.
     As more  fully  described  in Note  19,  effective  January  1,  1998,  the
Corporation  changed its method for measuring and  recognizing  an impairment of
goodwill  from an  undiscounted  cash flow  approach to a  discounted  cash flow
approach.

Product Development Costs: Costs associated with the development of new products
and changes to existing products are charged to operations as incurred.  Product
development  costs were $95.3 million in 2000,  $91.0 million in 1999, and $90.5
million in 1998.

Shipping  and  Handling  Costs:  Shipping and  handling  costs  represent  costs
associated  with  shipping  products to customers and handling  finished  goods.
Included in selling,  general,  and  administrative  expenses  are  shipping and
handling  costs of $205.6  million in 2000,  $195.7  million in 1999, and $194.7
million in 1998.

Advertising and Promotion:  All costs  associated with advertising and promoting
products are expensed as incurred.  Advertising and promotion expense, including
expense of consumer rebates, was $237.8 million in 2000, $223.7 million in 1999,
and $211.2 million in 1998.

Postretirement  Benefits:  Pension plans,  which cover  substantially all of the
Corporation's  employees,  consist primarily of non-contributory defined benefit
plans.  The  defined  benefit  plans are funded in  conformity  with the funding
requirements of applicable government regulations. Generally, benefits are based
on age, years of service,  and the level of compensation  during the final years
of  employment.  Prior  service costs for defined  benefit  plans  generally are
amortized over the estimated remaining service periods of employees.
     Certain   employees  are  covered  by  defined   contribution   plans.  The
Corporation's contributions to these plans are based on a percentage of employee
compensation  or  employee  contributions.  These  plans are funded on a current
basis.
     In addition to pension benefits,  certain postretirement  medical,  dental,
and life  insurance  benefits are  provided,  principally  to most United States
employees.    Retirees   in   other   countries   generally   are   covered   by
government-sponsored programs.
     The  Corporation  uses the  corridor  approach in the  valuation of defined
benefit plans and other  postretirement  benefits.  The corridor approach defers
all actuarial gains and losses  resulting from variances  between actual results
and economic  estimates or actuarial  assumptions.  For defined  benefit pension
plans,  these unrecognized gains and losses are amortized when the net gains and
losses exceed 10% of the greater of the  market-related  value of plan assets or
the  projected  benefit  obligation  at the  beginning  of the  year.  For other
postretirement  benefits,  amortization  occurs  when the net gains  and  losses
exceed 10% of the accumulated postretirement benefit obligation at the beginning
of the year.  The amount in excess of the corridor is amortized over the average
remaining  service period to retirement date of active plan participants or, for
retired participants, the average remaining life expectancy.

Derivative  Financial  Instruments:  Derivative  financial  instruments are used
principally in the management of interest rate and foreign currency exposures.


                                       25
<PAGE>

     Amounts to be paid or received  under  interest  rate swap  agreements  are
accrued as interest  rates change and are  recognized  over the life of the swap
agreements as an adjustment to interest  expense.  The related amounts due to or
from the  counterparties are included in other accrued  liabilities.  Since they
are  accounted  for as  hedges,  the fair  value of the swap  agreements  is not
recognized in the Consolidated Financial Statements.
     The costs of interest rate cap agreements are included in interest  expense
ratably over the lives of the agreements. Payments to be received as a result of
the  cap  agreements  are  accrued  as a  reduction  of  interest  expense.  The
unamortized costs of the cap agreements are included in other assets.
     Gains or losses resulting from the early termination of interest rate swaps
or caps are deferred and  amortized as an adjustment to the yield of the related
debt instrument over the remaining period  originally  covered by the terminated
swaps or caps.  Were that related debt  instrument  later to be retired prior to
its scheduled  maturity,  the unamortized  gain or loss resulting from the early
termination  of the  interest  rate swap or cap would be included in the gain or
loss on the extinguishment of debt.
     Gains  and  losses on hedges of net  investments  in  subsidiaries  located
outside of the United States are reflected in the Consolidated  Balance Sheet in
accumulated other comprehensive  income, with the related amounts due to or from
the  counterparties  included in other  liabilities  or other assets.  Gains and
losses  resulting from the early  termination of hedges of net  investments  are
reflected in accumulated other comprehensive income at the time of termination.
     Gains and losses on foreign currency  transaction  hedges are recognized in
income and  offset  the  foreign  exchange  gains and  losses on the  underlying
transactions.  Deferred  gains on options  that hedge  forecasted  transactions,
generally related to inventory  purchases,  are recognized in cost of sales when
the related inventory is sold or when a hedged purchase is no longer expected to
occur.
     The carrying amounts of foreign  currency-related  derivatives with respect
to net investment and commitment hedges are included in the Consolidated Balance
Sheet in other  current  assets  and other  accrued  liabilities.  The  carrying
amounts of foreign  currency-related  derivatives  associated  with  transaction
hedges  are  included  in the  same  balance  sheet  line  item  as  the  hedged
transaction.
     Cash effects of the  Corporation's  derivative  financial  instruments  are
included  in the  Consolidated  Statement  of Cash Flows in the periods in which
they  occur.  Except  as noted  below,  the cash  effects  of the  Corporation's
interest rate swaps and caps,  foreign currency  transaction  hedges,  hedges of
foreign  currency firm  commitments,  and hedges of forecasted  transactions are
included in the Consolidated Statement of Cash Flows as cash flow from operating
activities.  The cash  effects  of hedges  of net  investments  in  subsidiaries
located outside of the United States are included in the Consolidated  Statement
of Cash Flows as cash flow from  investing  activities.  The cash effects of the
exchange of  notional  principal  amounts on interest  rate swaps that swap from
fixed United States dollars to fixed or variable foreign currencies are included
in the  Consolidated  Statement  of Cash  Flows  as  cash  flow  from  investing
activities   because  such  amounts  have  been  designated  as  hedges  of  net
investments in subsidiaries located outside of the United States.
     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities,  which is required
to be adopted for years beginning after June 15, 2000. SFAS No. 133 will require
the Corporation to recognize all derivatives on the balance sheet at fair value.
Derivatives  that do not  qualify  as  hedges  under  the new  standard  must be
adjusted to fair value  through  income.  If a derivative  qualifies as a hedge,
depending on the nature of the hedge,  changes in the fair value of  derivatives
will  either be offset  against  the change in fair value of the hedged  assets,
liabilities,  or firm  commitments  through  earnings  or  recognized  in  other
comprehensive  income  until the hedged  item is  recognized  in  earnings.  The
ineffective  portion  of a  derivative's  change  in value  will be  immediately
recognized in earnings.
     The  Corporation  will adopt SFAS No. 133,  effective  January 1, 2001, and
does not expect SFAS No. 133 to have a  significant  impact on its  earnings and
financial position.

Stock-Based  Compensation:  As described in Note 15, the Corporation has elected
to follow the  accounting  provisions  of  Accounting  Principles  Board Opinion
(APBO)  No.  25,  Accounting  for Stock  Issued to  Employees,  for  stock-based
compensation  and to furnish the pro forma  disclosures  required under SFAS No.
123, Accounting for Stock-Based Compensation.


NOTE 2: INVENTORIES
The  classification  of  inventories  at the end of each year,  in  millions  of
dollars, was as follows:
--------------------------------------------------------------------------------
                                                                2000       1999
--------------------------------------------------------------------------------
FIFO cost
Raw materials and work-in-process                             $219.6     $171.3
Finished products                                              627.9      584.5
--------------------------------------------------------------------------------
                                                               847.5      755.8
Excess of FIFO cost over
   LIFO inventory value                                         (3.5)      (4.8)
--------------------------------------------------------------------------------
                                                              $844.0     $751.0
================================================================================
   The cost of  United  States  inventories  stated  under the LIFO  method  was
approximately 56% and 48% of the value of total inventories at December 31, 2000
and 1999, respectively.


NOTE 3: PROPERTY, PLANT, AND EQUIPMENT
Property,  plant, and equipment at the end of each year, in millions of dollars,
consisted of the following:
--------------------------------------------------------------------------------
                                                                2000       1999
--------------------------------------------------------------------------------
Property, plant, and equipment at cost:
Land and improvements                                       $   56.0   $   54.1
Buildings                                                      269.2      264.0
Machinery and equipment                                      1,267.8    1,241.1
--------------------------------------------------------------------------------
                                                             1,593.0    1,559.2
Less accumulated depreciation                                  844.9      819.6
--------------------------------------------------------------------------------
                                                            $  748.1   $  739.6
================================================================================


                                       26
<PAGE>

NOTE 4: GOODWILL
Goodwill  amortization  was $25.4 million in 2000,  $25.7  million in 1999,  and
$25.2 million in 1998. Goodwill at the end of each year, in millions of dollars,
was as follows:
--------------------------------------------------------------------------------
                                                                2000       1999
--------------------------------------------------------------------------------
Goodwill                                                    $1,300.5   $1,301.3
Less accumulated amortization                                  583.3      557.9
--------------------------------------------------------------------------------
                                                            $  717.2   $  743.4
================================================================================

NOTE 5: OTHER ACCRUED LIABILITIES
Other  accrued  liabilities  at the end of each year,  in  millions  of dollars,
included the following:
--------------------------------------------------------------------------------
                                                                2000       1999
--------------------------------------------------------------------------------
Salaries and wages                                            $ 61.9     $ 67.2
Employee benefits                                               99.1      109.1
Trade discounts and allowances                                 139.8      145.9
Income taxes, including deferred taxes                          92.6       66.7
Accruals related to restructuring actions                       34.1       22.4
All other                                                      386.6      397.7
--------------------------------------------------------------------------------
                                                              $814.1     $809.0
================================================================================
     All other at December  31, 2000 and 1999,  consisted  primarily of accruals
for  advertising,  warranty  costs,  interest,  insurance,  and taxes other than
income taxes.


NOTE 6: SHORT-TERM BORROWINGS
Short-term  borrowings  in the amounts of $402.9  million and $183.2  million at
December 31, 2000 and 1999,  respectively,  consisted  primarily  of  borrowings
under  the  Corporation's   unsecured  revolving  credit  facility  (the  Credit
Facility) or under the terms of uncommitted  lines of credit or other short-term
borrowing  arrangements.   The  weighted-average  interest  rate  on  short-term
borrowings outstanding was 6.6% at both December 31, 2000 and 1999.
     Under  the terms of  uncommitted  lines of credit  at  December  31,  2000,
certain subsidiaries outside of the United States may borrow up to an additional
$318.6 million on such terms as may be mutually  agreed.  These  arrangements do
not  have  termination  dates  and  are  reviewed   periodically.   No  material
compensating balances are required or maintained.
     The  Corporation  may borrow up to $1.0 billion under the Credit  Facility,
which consists of two individual facilities.  The amount available for borrowing
under the Credit Facility at December 31, 2000, was $670.1  million.  The Credit
Facility expires in April 2001.
     Under the Credit  Facility,  the Corporation has the option of borrowing at
the London  Interbank  Offered Rate (LIBOR) plus a specified  percentage,  or at
other variable rates set forth therein.  The Credit  Facility  provides that the
interest rate margin over LIBOR,  initially set at .15% and .25%,  respectively,
for each of the two individual facilities,  will increase or decrease based upon
changes in the ratings of the Corporation's long-term senior unsecured debt. The
Corporation  also is able to  borrow  under  the  Credit  Facility  by  means of
competitive  bid rate loans made  through  an  auction  process at  then-current
market  rates.  In  addition  to  interest  payable on the  principal  amount of
indebtedness  outstanding  from time to time  under  the  Credit  Facility,  the
Corporation  is required to pay an annual  facility fee to each bank,  initially
equal to .125% of the amount of each bank's commitment,  whether used or unused.
The facility  fee changes  based on the ratings of the  Corporation's  long-term
senior unsecured debt.
     The Credit  Facility  includes  various  customary  covenants.  Some of the
covenants limit the ability of the  Corporation  and its  subsidiaries to pledge
assets or incur liens on assets.  Other  covenants  require the  Corporation  to
maintain a specified  leverage  ratio and to achieve  certain cash flow to fixed
expense  coverage  ratios.  As of December  31,  2000,  the  Corporation  was in
compliance with all terms and conditions of the Credit Facility.


NOTE 7: LONG-TERM DEBT
The  composition  of  long-term  debt at the end of each year,  in  millions  of
dollars, was as follows:
--------------------------------------------------------------------------------
                                                                2000       1999
--------------------------------------------------------------------------------
Medium Term Notes due through 2002                            $ 75.6    $  75.6
6.625% notes due 2000                                             --      208.7
7.50% notes due 2003                                           309.5      309.5
7.0% notes due 2006                                            154.6      154.6
6.55% notes due 2007                                           150.0      150.0
7.05% notes due 2028                                           150.0      150.0
Other loans due through 2003                                     6.5       11.9
Less current maturities of long-term debt                      (47.7)    (213.2)
--------------------------------------------------------------------------------
                                                              $798.5    $ 847.1
================================================================================
   As of  December  31,  2000,  $75.6  million  aggregate  principal  amount  of
unsecured Medium Term Notes was outstanding.  Of that amount, $68.1 million bear
interest at fixed rates ranging from 8.36% to 8.95%,  while the  remainder  bear
interest at variable rates.
   Indebtedness  of subsidiaries  in the aggregate  principal  amounts of $599.6
million and $435.4  million were included in the  Consolidated  Balance Sheet at
December 31, 2000 and 1999,  respectively,  in  short-term  borrowings,  current
maturities of long-term debt, and long-term debt.
   Principal  payments on  long-term  debt  obligations  due over the next three
years are as follows:  $47.7 million in 2001,  $33.8 million in 2002, and $310.2
million  in  2003.  No  principal  payments  are due in 2004 or  2005.  Interest
payments on all  indebtedness  were $145.1  million in 2000,  $140.1  million in
1999, and $160.8 million in 1998.


NOTE 8: DERIVATIVE FINANCIAL INSTRUMENTS
The  Corporation  is exposed to market  risks  arising  from changes in interest
rates.  With  products  and  services  marketed in over 100  countries  and with
manufacturing  sites in ten countries,  the Corporation also is exposed to risks
arising from changes in foreign exchange rates.

Credit  Exposure:  The  Corporation is exposed to  credit-related  losses in the
event of  non-performance  by  counterparties  to certain  derivative  financial
instruments. The Corporation monitors the creditworthiness of the counterparties
and  presently  does  not  expect  default  by any of  the  counterparties.  The
Corporation  does not  obtain  collateral  in  connection  with  its  derivative
financial instruments.


                                       27
<PAGE>

     The credit  exposure that results from  interest rate and foreign  exchange
contracts  is the fair value of contracts  with a positive  fair value as of the
reporting date. Some derivatives are not subject to credit  exposures.  The fair
value of all financial instruments is summarized in Note 9.

Interest Rate Risk Management:  The Corporation  manages its interest rate risk,
primarily through the use of interest rate swap and cap agreements,  in order to
achieve a cost-effective mix of fixed and variable rate  indebtedness.  It seeks
to issue debt  opportunistically,  whether at fixed or  variable  rates,  at the
lowest possible costs and then, based upon its assessment of the future interest
rate environment,  may convert such debt from fixed to variable or from variable
to fixed interest rates through the use of interest rate derivatives. Similarly,
the  Corporation  may, at times,  seek to limit the  effects of rising  interest
rates on its variable  rate debt through the use of interest  rate caps. It does
not utilize  derivative  financial  instruments that contain leverage  features.
Because the  Corporation's  interest rate derivative  financial  instruments are
designated  as  hedges,   are  effective  in  changing  the  tenor  of  existing
indebtedness  (e.g.,  from fixed to variable rate debt or from variable to fixed
rate debt),  and do not  contain  leverage  features,  they are  afforded  hedge
accounting treatment.
     The amounts  exchanged by the  counterparties to interest rate swap and cap
agreements  normally  are based  upon the  notional  amounts  and  other  terms,
generally related to interest rates, of the derivatives.  While notional amounts
of interest rate swaps and caps form part of the basis for the amounts exchanged
by the  counterparties,  the notional amounts are not themselves  exchanged and,
therefore,  do not represent a measure of the  Corporation's  exposure as an end
user of derivative financial instruments.
     The  Corporation's  portfolio  of  interest  rate  swap  instruments  as of
December 31, 2000,  and 1999,  consisted of $588.0 and $450.0  million  notional
amounts  of fixed to  variable  rate swaps  with a  weighted-average  fixed rate
receipt of 6.17% and 5.96%,  respectively.  The basis of the variable rates paid
is LIBOR.
     No credit exposure on the Corporation's  interest rate derivatives  existed
as of December 31, 2000 and 1999.  Gross  deferred gains and losses on the early
termination  of interest  rate swaps as of December 31, 2000 and 1999,  were not
significant.

Foreign  Currency  Management:  The  Corporation  enters  into  various  foreign
currency  contracts  in managing its foreign  exchange  risks.  The  contractual
amounts of  foreign  currency  derivative  financial  instruments  (principally,
forward exchange contracts and purchased options) generally are exchanged by the
counterparties.   The  Corporation's   foreign  currency  derivative   financial
instruments  are designated to, and generally are  denominated in the currencies
of, the underlying  exposures.  Because the derivative financial instruments are
effective in managing foreign exchange risks and are appropriately designated to
the underlying exposures, they are afforded hedge accounting treatment.
     To minimize the volatility of reported equity, the Corporation hedges, on a
limited basis, a portion of its net investment in  subsidiaries  located outside
of the United  States  through the use of foreign  currency  forward  contracts,
foreign currency swaps, and purchased foreign currency options.
     Through its foreign currency hedging  activities,  the Corporation seeks to
minimize  the  risk  that  cash  flows  resulting  from the  sales  of  products
manufactured in a currency different from that of the selling subsidiary will be
affected  by changes in  exchange  rates.  The  Corporation  responds to foreign
exchange  movements through various means,  such as pricing actions,  changes in
cost structure, and changes in hedging strategies.
     The Corporation hedges its foreign currency transaction exposures,  as well
as certain forecasted  transactions,  based on management's judgment,  generally
through options and forward exchange  contracts.  Some of the contracts  involve
the  exchange  of two  foreign  currencies  according  to the local needs of the
subsidiaries.  Some  natural  hedges also are used to mitigate  transaction  and
forecasted exposures.
     The following table summarizes the contractual  amounts of forward exchange
contracts  as of December 31, 2000 and 1999,  in millions of dollars,  including
details by major currency as of December 31, 2000. Foreign currency amounts were
translated  at  current  rates  as of the  reporting  date.  The  "Buy"  amounts
represent  the United  States  dollar  equivalent  of  commitments  to  purchase
currencies, and the "Sell" amounts represent the United States dollar equivalent
of commitments to sell currencies.
--------------------------------------------------------------------------------
As of December 31, 2000                                        Buy         Sell
--------------------------------------------------------------------------------
United States dollar                                      $  813.2    $  (647.1)
Pound sterling                                               543.9       (280.5)
Deutsche mark                                                 64.7       (122.6)
Dutch guilder                                                 21.9        (24.8)
French franc                                                    --       (105.7)
Canadian dollar                                               65.4        (96.4)
Italian lira                                                  11.3           --
Euro                                                         143.5       (228.3)
Japanese yen                                                    --        (44.6)
Other                                                         17.9       (112.3)
--------------------------------------------------------------------------------
Total                                                     $1,681.8    $(1,662.3)
================================================================================
As of December 31, 1999
--------------------------------------------------------------------------------

Total                                                     $1,363.1    $(1,344.3)
================================================================================
     The   contractual   amounts  of  purchased   options  to  buy   currencies,
predominantly  the euro, pound sterling,  and United States dollar,  were $193.4
million and $432.5  million,  at December 31, 2000 and 1999,  respectively.  The
contractual  amounts of purchased options to sell various currencies were $181.6
million and $421.6 million at December 31, 2000 and 1999, respectively.
     Credit exposure on foreign currency derivatives as of December 31, 2000 and
1999, was $43.7 million and $51.3 million, respectively.
     Deferred  realized  gains from  option  contracts  on hedges of  forecasted
transactions  were not significant at December 31, 2000 and 1999.  Substantially
all of the amounts  deferred at December 31, 2000, are expected to be recognized
in earnings during 2001, when the gains or losses on the underlying transactions
also will be recognized.


                                       28
<PAGE>

NOTE 9: FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair  value of a  financial  instrument  represents  the amount at which the
instrument could be exchanged in a current  transaction between willing parties,
other than in a forced sale or  liquidation.  Significant  differences can arise
between the fair value and  carrying  amount of financial  instruments  that are
recognized at historical cost amounts.
     The  following  methods and  assumptions  were used by the  Corporation  in
estimating fair value disclosures for financial instruments:

o Cash and cash equivalents,  trade  receivables,  certain other current assets,
short-term  borrowings,  and current  maturities of long-term  debt: The amounts
reported in the Consolidated Balance Sheet approximate fair value.

o Long-term debt:  Publicly traded debt is valued based on quoted market values.
The fair  value of other  long-term  debt is  estimated  based on quoted  market
prices for the same or similar  issues or on the  current  rates  offered to the
Corporation for debt of the same remaining maturities.

o Other  long-term  liabilities:  The fair  value of a  subsidiary's  redeemable
preferred  shares  approximates  the carrying value since those preferred shares
were recently issued.

o Interest  rate  hedges:  The fair value of interest  rate hedges  reflects the
estimated  amounts that the  Corporation  would  receive or pay to terminate the
contracts at the reporting date.

o Foreign currency  contracts:  The fair value of forward exchange contracts and
options is estimated  using prices  established  by financial  institutions  for
comparable instruments.
     The  following  table sets forth,  in millions  of  dollars,  the  carrying
amounts and fair values of the Corporation's  financial instruments,  except for
those noted above for which carrying amounts approximate fair values:

--------------------------------------------------------------------------------
Assets (Liabilities)                                        Carrying       Fair
As of December 31, 2000                                       Amount      Value
--------------------------------------------------------------------------------
Non-derivatives:
   Long-term debt                                            $(798.5)   $(791.9)
--------------------------------------------------------------------------------
Derivatives relating to:
   Debt
     Liabilities                                                (1.5)      (4.1)
   Other long-term liabilities
     Liabilities                                                  --        (.1)
   Foreign currency
     Assets                                                     43.8       43.7
     Liabilities                                               (18.7)     (19.7)
--------------------------------------------------------------------------------

Assets (Liabilities)                                        Carrying       Fair
As of December 31, 1999                                       Amount      Value
--------------------------------------------------------------------------------
Non-derivatives:
   Long-term debt                                            $(847.1)   $(810.5)
--------------------------------------------------------------------------------
Derivatives relating to:
   Debt
     Assets                                                       .1      (26.7)
   Foreign currency
     Assets                                                     43.4       51.3
     Liabilities                                               (19.0)     (22.8)
--------------------------------------------------------------------------------


NOTE 10: INCOME TAXES
Earnings (loss) before income taxes for each year, in millions of dollars,  were
as follows:
--------------------------------------------------------------------------------
                                                     2000       1999      1998
--------------------------------------------------------------------------------
United States                                      $209.3     $174.4    $(734.3)
Other countries                                     195.3      266.9      146.0
--------------------------------------------------------------------------------
                                                   $404.6     $441.3    $(588.3)
================================================================================
     Significant  components  of  income  taxes  (benefits)  for each  year,  in
millions of dollars, were as follows:
--------------------------------------------------------------------------------
                                                     2000       1999       1998
--------------------------------------------------------------------------------
Current:
   United States                                  $  93.7     $128.3    $  55.0
   Other countries                                   29.3       18.5       44.0
--------------------------------------------------------------------------------
                                                    123.0      146.8       99.0
Deferred:
   United States                                      3.5      (17.7)      92.9
   Other countries                                   (3.9)      11.9      (25.4)
--------------------------------------------------------------------------------
                                                      (.4)      (5.8)      67.5
--------------------------------------------------------------------------------
                                                   $122.6     $141.0     $166.5
================================================================================
     Income tax expense recorded directly as an adjustment to equity as a result
of hedging  activities was not  significant in 2000,  1999 and 1998.  Income tax
benefits  recorded  directly as an  adjustment to equity as a result of employee
stock options were $.9 million,  $4.9 million and $17.0  million in 2000,  1999,
and 1998, respectively.
     Income tax payments were $98.8 million in 2000,  $97.1 million in 1999, and
$95.4  million in 1998.  Deferred  tax  (liabilities)  assets at the end of each
year, in millions of dollars, were composed of the following:
--------------------------------------------------------------------------------
                                                                2000       1999
--------------------------------------------------------------------------------
Deferred tax liabilities:
   Fixed assets                                              $  (5.7)    $(19.9)
   Postretirement benefits                                    (227.8)    (224.3)
   Other                                                       (24.6)     (37.0)
--------------------------------------------------------------------------------
Gross deferred tax liabilities                                (258.1)    (281.2)
--------------------------------------------------------------------------------
Deferred tax assets:
   Tax loss carryforwards                                       57.2       53.0
   Tax credit and capital loss
     carryforwards                                              82.6       89.6
   Other                                                       109.9      116.2
--------------------------------------------------------------------------------
Gross deferred tax assets                                      249.7      258.8
--------------------------------------------------------------------------------
Deferred tax asset valuation allowance                         (50.5)     (37.0)
--------------------------------------------------------------------------------
Net deferred tax liabilities                                 $ (58.9)   $ (59.4)
================================================================================
     Deferred  income taxes are included in the  Consolidated  Balance  Sheet in
other current  assets,  other assets,  other accrued  liabilities,  and deferred
income taxes.
     Tax basis  carryforwards  at December 31, 2000,  consisted of net operating
losses expiring from 2001 to 2006.
     At December 31, 2000,  unremitted  earnings of subsidiaries  outside of the
United States were approximately  $1.6 billion,  on which no United States taxes
had been  provided.  The  Corporation's  intention is to reinvest these earnings
permanently  or to repatriate  the earnings only when tax effective to do so. It
is not  practicable  to estimate  the amount of  additional  taxes that might be
payable upon repatriation of foreign earnings; however, the Corporation believes
that United States foreign tax credits would largely eliminate any

                                       29
<PAGE>

United  States  taxes and offset any foreign  withholding  taxes not  previously
provided.
     A  reconciliation  of income  taxes at the  federal  statutory  rate to the
Corporation's income taxes for each year, in millions of dollars, is as follows:
--------------------------------------------------------------------------------
                                                     2000       1999      1998
--------------------------------------------------------------------------------
Income taxes (benefit) at
   federal statutory rate                          $141.6     $154.5    $(205.9)
Lower effective taxes on
   earnings in other countries                      (28.7)     (42.6)     (19.8)
Amortization and write-off
   of goodwill                                        9.0        9.0      386.6
Other -- net                                           .7       20.1        5.6
--------------------------------------------------------------------------------
Income taxes                                       $122.6     $141.0    $ 166.5
================================================================================


NOTE 11: POSTRETIREMENT BENEFITS
The following  table sets forth the funded status of the defined benefit pension
and  postretirement  plans, and amounts  recognized in the Consolidated  Balance
Sheet,  in millions of dollars.  Assets of the  defined  benefit  pension  plans
consist  principally of investments in equity securities,  debt securities,  and
cash equivalents.  Defined  postretirement  benefits consist of several unfunded
health care plans that provide certain postretirement medical,  dental, and life
insurance benefits for most United States employees.  The postretirement medical
benefits are contributory  and include certain  cost-sharing  features,  such as
deductibles and co-payments.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                                                   Pension Benefits           Pension Benefits        Other Postretirement
                                                     Plans in the           Plans outside of the            Benefits
                                                    United States              United States                All Plans
--------------------------------------------------------------------------------------------------------------------------
(Dollars in Millions)                              2000         1999         2000         1999         2000         1999
--------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>             <C>          <C>          <C>          <C>          <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year       $   759.7       $845.5       $414.2       $408.2       $ 132.8      $ 130.0
Service cost                                       13.2         14.8         10.9         11.6            .8           .7
Interest cost                                      53.4         53.4         23.0         23.3           9.1          8.0
Plan participants' contributions                     --           --          2.1          2.3           5.5          4.2
Actuarial (gains) losses                            4.7        (87.4)        15.8          6.6          25.2         12.4
Foreign currency exchange rate changes               --           --        (41.6)       (17.6)          (.2)          .1
Benefits paid                                     (61.9)       (67.0)       (23.3)       (22.0)        (22.7)       (22.6)
Plan amendments                                      --           --          2.0          2.3           --           --
Divestitures                                       (6.3)          --           .4           --           --           --
Settlements                                          --           --         (2.0)         (.5)          --           --
Special termination benefits                         --           .4           --           --           --           --
--------------------------------------------------------------------------------------------------------------------------
Benefit obligation at end of year                 762.8        759.7        401.5        414.2         150.5        132.8
--------------------------------------------------------------------------------------------------------------------------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year    992.3        902.7        426.4        383.3           --           --
Actual return on plan assets                      113.2        160.3         61.2         71.8           --           --
Expenses                                           (7.9)        (6.7)         (.7)        (1.1)          --           --
Benefits paid                                     (61.9)       (67.0)       (22.6)       (20.9)        (22.7)       (22.6)
Employer contributions                              3.1          3.0          2.5          2.7          17.2         18.4
Contributions by plan participants                   --           --          2.1          2.3           5.5          4.2
Divestitures                                      (11.5)          --           --           --           --           --
Settlements                                          --           --         (6.1)         (.5)          --           --
Effects of currency exchange rates                   --           --        (42.1)       (11.2)          --           --
--------------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year        1,027.3        992.3        420.7        426.4           --           --
--------------------------------------------------------------------------------------------------------------------------
Funded status                                     264.5        232.6         19.2         12.2        (150.5)      (132.8)
Unrecognized net actuarial (gain) loss            (31.5)       (19.1)         7.2         28.1          13.9        (11.4)
Unrecognized prior service cost                     7.3          7.5         18.1         20.8         (26.0)       (34.3)
Unrecognized net obligation (asset) at date
   of adoption, net of amortization                  .3           .3         (2.4)        (4.4)          --           --
--------------------------------------------------------------------------------------------------------------------------
Prepaid (accrued) benefit cost                $   240.6       $221.3       $ 42.1       $ 56.7       $(162.6)     $(178.5)
==========================================================================================================================
AMOUNTS RECOGNIZED IN THE
   CONSOLIDATED BALANCE SHEET
Prepaid benefit cost                          $   274.5       $251.9       $105.4       $123.8       $   --       $   --
Accrued benefit cost                              (46.7)       (42.5)       (63.7)       (67.4)       (162.6)      (178.5)
Intangible asset                                    4.4          5.3           --           --           --           --
Accumulated other comprehensive income              8.4          6.6           .4           .3           --           --
--------------------------------------------------------------------------------------------------------------------------
Net amount recognized                         $   240.6       $221.3       $ 42.1       $ 56.7       $(162.6)     $(178.5)
==========================================================================================================================
</TABLE>
     The total  accumulated  benefit  obligation  for unfunded  defined  benefit
pension  plans as of  December  31, 2000 and 1999,  was $46.1  million and $42.1
million,  respectively,  for plans in the United  States and $57.7  million  and
$61.6 million,  respectively,  for plans outside of the United States. The total
projected  benefit  obligation for unfunded  defined benefit

                                       30
<PAGE>

pension  plans as of  December  31, 2000 and 1999,  was $54.3  million and $50.7
million,  respectively,  for plans in the United  States and $63.9  million  and
$69.0 million, respectively, for plans outside of the United States.
     The net periodic  benefit cost related to the defined benefit pension plans
included the following components, in millions of dollars:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                                                          Pension Benefits                      Pension Benefits
                                                     Plans in the United States        Plans outside of the United States
--------------------------------------------------------------------------------------------------------------------------
                                                   2000         1999         1998         2000         1999         1998
--------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>          <C>          <C>          <C>           <C>          <C>
Service cost                                     $ 14.2       $ 15.6       $ 16.7       $ 10.9        $ 11.7       $  8.4
Interest cost                                      53.4         53.4         51.5         23.0          23.3         22.5
Expected return on plan assets                    (85.9)       (83.5)       (79.0)       (28.5)        (28.5)       (33.2)
Amortization of the unrecognized
   transition obligation or asset                   (.1)        (1.1)        (1.1)        (1.7)         (1.9)         2.7
Amortization of prior service cost                  1.1          1.0           .8          2.2           2.2         (2.4)
Curtailment (gain) loss                              --           .6           .9           .2            .3          (.3)
Amortization of net actuarial loss                  1.1          9.1          3.8          1.9           3.3          (.3)
Settlement loss                                      --           --         11.4           --           --           1.4
--------------------------------------------------------------------------------------------------------------------------
Net periodic benefit cost                        $(16.2)     $  (4.9)     $   5.0      $   8.0        $ 10.4       $ (1.2)
==========================================================================================================================
WEIGHTED-AVERAGE ASSUMPTIONS
AS OF DECEMBER 31:
Discount rate                                      7.50%        7.50%        6.50%        6.00%         6.00%        6.00%
Expected return on plan assets                     9.50%        9.75%        9.75%        8.00%         8.00%        9.50%
Rate of compensation increase                      5.00%        5.00%        5.00%        3.90%         3.90%        3.90%
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

     The net periodic benefit cost related to the defined benefit postretirement
plans included the following components, in millions of dollars:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                                     2000       1999       1998
--------------------------------------------------------------------------------
<S>                                                 <C>       <C>        <C>
Service cost                                        $  .8     $   .7     $  1.5
Interest cost                                         9.1        8.0       10.4
Amortization of
   prior service cost                                (8.3)      (8.3)      (7.9)
Amortization of
   net actuarial gain                                  --        (.9)       (.7)
--------------------------------------------------------------------------------
Net periodic benefit cost                           $ 1.6     $  (.5)    $  3.3
--------------------------------------------------------------------------------
Weighted-average discount
   rate as of December 31                            7.25%      7.25%      6.50%
================================================================================
</TABLE>
     The  health  care cost  trend  rate used to  determine  the  postretirement
benefit  obligation  was 8.0% for 2000.  This  rate  decreases  gradually  to an
ultimate rate of 5.0% in 2006, and remains at that level  thereafter.  The trend
rate  is  a  significant   factor  in  determining  the  amounts   reported.   A
one-percentage-point  change in these assumed health care cost trend rates would
have the following effects, in millions of dollars:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
One-Percentage-Point                                         Increase (Decrease)
--------------------------------------------------------------------------------
<S>                                                           <C>       <C>
Effect on total of service and
   interest cost components                                   $  .4     $  (.6)
Effect on postretirement
   benefit obligation                                           7.5       (8.9)
--------------------------------------------------------------------------------
</TABLE>
     Expense for defined  contribution  plans  amounted to $10.1  million,  $8.6
million, and $10.7 million in 2000, 1999, and 1998, respectively.

NOTE 12: OTHER LONG-TERM LIABILITIES
In December 2000, a newly created subsidiary of the Corporation issued preferred
shares to private investors.  The preferred shares are redeemable in five years,
although  redemption may be accelerated  under certain  conditions,  principally
related to changes in tax laws. Holders of the subsidiary's preferred shares are
entitled to annual cash dividends of $10.7 million.  Included in other long-term
liabilities  in the  Consolidated  Balance Sheet at December 31, 2000, is $188.0
million related to those preferred shares.

NOTE 13: STOCKHOLDERS' EQUITY AND COMMON STOCK UNDER EQUITY FORWARDS
During 1999, the Corporation  executed two agreements (the  "Agreements")  under
which the  Corporation may enter into forward  purchase  contracts on its common
stock. The Agreements provide the Corporation with two purchase alternatives:  a
standard forward purchase  contract and a forward purchase contract subject to a
cap (a "capped forward contract").
     The settlement  methods  generally  available under the Agreements,  at the
Corporation's  option,  are net  settlement,  either  in cash or in  shares,  or
physical  settlement.  To the extent that the market price of the  Corporation's
common  stock  on the  settlement  date  is  higher  (lower)  than  the  forward
purchase/strike   price,   the  net  differential  is  received  (paid)  by  the
Corporation  under  the net  settlement  alternatives,  except  in the case of a
capped forward contract under which the net differential  received is limited by
a cap price. In the case of physical settlement under a capped forward contract,
the  Corporation  must,  in addition  to  purchasing  the shares  covered by the
contract at the strike price,  pay to the  counterparty the excess of the market
price at the date of settlement, if any, over the cap price.
     The  standard   forward   contract   alternative   provides  for  quarterly
settlements  on a net share basis for  differences  between the average  forward
purchase price,  which includes carrying costs through the respective  quarterly
settlement date, and the current market value of the Corporation's common stock.
At each quarterly settlement,  the average forward purchase price is reset based
upon the then-current market price of the Corporation's common stock.


                                       31
<PAGE>

     At each settlement date under the Agreements,  the Corporation  elected net
share  settlement,  resulting in a net issuance of 350,928 and 57,682  shares of
its common stock during 2000 and 1999, respectively.
     At December 31, 2000,  capped forward  contracts  under the Agreements were
outstanding  with respect to 750,000  shares of the  Corporation's  common stock
with a weighted-average  strike price of $34.08 per share and a weighted-average
cap price of $39.20 per share;  these  contracts  settle in the first quarter of
2001.
     At December 31, 2000,  standard forward purchase  contracts with respect to
691,186 shares of the Corporation's common stock with a weighted-average forward
purchase price of $36.30 per share were outstanding under the Agreements;  these
contracts  mature in  November  2001.  At  December  31,  2000,  $25.1  million,
representing  the amount which would have been payable by the  Corporation  upon
full  physical  settlement  of those  691,186  shares as of that date,  has been
classified  as common stock under equity  forwards in the  Consolidated  Balance
Sheet.
     As more fully  described in Note 19, the  Corporation  completed  the stock
repurchase  element of its  strategic  repositioning  plan  during 1999 when the
Corporation  repurchased 610,900 shares of its common stock at an aggregate cost
of $32.1 million, supplementing the 9,025,400 shares of common stock repurchased
during 1998 at an aggregate cost of $464.3 million. The aggregate cost of $464.3
million is net of $1.4  million of  premiums  received  in  connection  with the
Corporation's  sale of put options on 800,000 shares of its common stock. No put
options were outstanding as of December 31, 2000 or 1999.
     The Corporation  repurchased an additional  7,103,072 and 347,318 shares of
its common stock (net of 350,928 and 57,682 shares issued under forward purchase
contracts) during 2000 and 1999 at an aggregate cost of $269.8 million and $21.2
million, respectively.


NOTE 14: EARNINGS PER SHARE
The  computations of basic and diluted  earnings per share for each year were as
follows:
--------------------------------------------------------------------------------
(Amounts in Millions
Except Per Share Data)                               2000       1999       1998
--------------------------------------------------------------------------------
Numerator:
   Earnings (loss)                                 $282.0     $300.3    $(754.8)
================================================================================
Denominator:
   Denominator for basic
     earnings per share--
     weighted-average shares                         83.7       87.0       91.8
   Employee stock options and
     stock issuable under
     employee benefit plans                            .7        1.4         --
--------------------------------------------------------------------------------
   Denominator for diluted
     earnings per share--
     adjusted weighted-
     average shares and
     assumed conversions                             84.4       88.4       91.8
================================================================================
Basic earnings (loss)
   per share                                       $ 3.37     $ 3.45    $ (8.22)
================================================================================
Diluted earnings (loss)
   per share                                       $ 3.34     $ 3.40    $ (8.22)
================================================================================
     The following  options to purchase shares of common stock were  outstanding
during each year, but were not included in the  computation of diluted  earnings
per share  because the effect  would be  anti-dilutive.  For 2000 and 1999,  the
options  indicated below were  anti-dilutive  because the related exercise price
was greater than the average market price of the common shares for the year. For
1998,  the  loss  experienced  by  the  Corporation  caused  all  options  to be
anti-dilutive.
--------------------------------------------------------------------------------
                                                     2000       1999       1998
--------------------------------------------------------------------------------
Number of options
   (in millions)                                      6.4        1.0        5.3
Weighted-average
   exercise price                                  $46.73     $52.54     $33.47
--------------------------------------------------------------------------------


NOTE 15: STOCK-BASED COMPENSATION
The Corporation  has elected to follow APBO No. 25,  Accounting for Stock Issued
to Employees,  and related  interpretations  in accounting  for its  stock-based
compensation  and to  provide  the  disclosures  required  under  SFAS No.  123,
Accounting for Stock-Based Compensation.
     APBO No. 25 requires no recognition of compensation expense for most of the
stock-based  compensation  arrangements  provided  by the  Corporation,  namely,
broad-based  employee  stock purchase plans and option grants where the exercise
price is equal to the market  value at the date of grant.  However,  APBO No. 25
requires  recognition of compensation  expense for variable award plans over the
vesting periods of such plans, based upon the then-current  market values of the
underlying stock. In contrast, SFAS No. 123 requires recognition of compensation
expense for grants of stock,  stock options,  and other equity  instruments over
the vesting  periods of such  grants,  based on the  estimated  grant-date  fair
values of those grants.
     Under various stock option plans,  options to purchase  common stock may be
granted  until 2006.  Options  generally are granted at fair market value at the
date of grant, are exercisable in installments  beginning one year from the date
of grant,  and  expire 10 years  after the date of grant.  The plans  permit the
issuance of either  incentive  stock  options or  non-qualified  stock  options,
which,  for  certain  of  the  plans,  may  be  accompanied  by  stock  or  cash
appreciation rights or limited stock appreciation rights. Additionally,  certain
plans  allow for the  granting  of stock  appreciation  rights on a  stand-alone
basis.
     As of  December  31,  2000,  9,540,825  non-qualified  stock  options  were
outstanding  under domestic plans.  There were 16,300 stock options  outstanding
under the United Kingdom plan.


                                       32
<PAGE>

     Under all plans,  there were 2,846,356  shares of common stock reserved for
future grants as of December 31, 2000. Transactions are summarized as follows:
--------------------------------------------------------------------------------
                                                                      Weighted-
                                                                        Average
                                               Stock Options     Exercise Price
--------------------------------------------------------------------------------
Outstanding at December 31, 1997                   6,173,394             $26.86
Granted                                            1,101,000              53.46
Exercised                                          1,646,389              22.18
Forfeited                                            291,395              32.70
--------------------------------------------------------------------------------
Outstanding at December 31, 1998                   5,336,610              33.47
Granted                                            2,267,350              50.77
Exercised                                            551,352              27.35
Forfeited                                            447,818              41.47
--------------------------------------------------------------------------------
Outstanding at December 31, 1999                   6,604,790              39.38
Granted                                            3,892,450              42.77
Exercised                                            155,278              23.59
Forfeited                                            784,837              46.69
--------------------------------------------------------------------------------
Outstanding at December 31, 2000                   9,557,125             $40.42
================================================================================
Shares exercisable at
   December 31, 1998                               2,663,535             $23.64
================================================================================
Shares exercisable at
   December 31, 1999                               2,876,120             $27.55
================================================================================
Shares exercisable at
   December 31, 2000                               3,637,612             $32.07
================================================================================
     Exercise  prices for options  outstanding  as of December 31, 2000,  ranged
from $12.63 to $61.00.  The following table provides  certain  information  with
respect to stock options outstanding at December 31, 2000:
--------------------------------------------------------------------------------
                                                                      Weighted-
                                                 Weighted-              Average
Range of                  Stock Options            Average            Remaining
Exercise Prices             Outstanding     Exercise Price     Contractual Life
--------------------------------------------------------------------------------
Under $18.95                    772,750             $12.73                   .2
$18.95-$28.41                   566,999              21.34                  2.1
$28.42-$42.63                 1,993,776              36.04                  6.5
Over $42.63                   6,223,600              46.99                  9.0
--------------------------------------------------------------------------------
                              9,557,125             $40.42                  7.3
================================================================================
     The following  table  provides  certain  information  with respect to stock
options exercisable at December 31, 2000:
--------------------------------------------------------------------------------
                                                                      Weighted-
Range of                                     Stock Options              Average
Exercise Prices                                Exercisable       Exercise Price
--------------------------------------------------------------------------------
Under $18.95                                       772,750               $12.73
$18.95-$28.41                                      566,999                21.34
$28.42-$42.63                                    1,518,775                35.71
Over $42.63                                        779,088                51.95
--------------------------------------------------------------------------------
                                                 3,637,612               $32.07
================================================================================
     In electing  to  continue  to follow  APBO No. 25 for  expense  recognition
purposes,  the  Corporation  is  obliged  to provide  the  expanded  disclosures
required  under SFAS No. 123 for  stock-based  compensation  granted in 1995 and
thereafter, including, if materially different from reported results, disclosure
of pro forma net income and earnings per share had compensation expense relating
to grants made after  December  31,  1994,  been  measured  under the fair value
recognition provisions of SFAS No. 123.
     The  weighted-average  fair  values  at date of grant for  options  granted
during 2000, 1999, and 1998 were $16.50, $18.13, and $17.67,  respectively,  and
were estimated using the Black-Scholes option valuation model with the following
weighted-average assumptions:
--------------------------------------------------------------------------------
                                                     2000       1999       1998
--------------------------------------------------------------------------------
Expected life in years                                5.9        5.8        5.7
Interest rate                                        6.50%      5.75%      4.54%
Volatility                                           32.2%      29.4%      29.0%
Dividend yield                                       1.12%       .95%       .90%
--------------------------------------------------------------------------------
     The  Corporation's  pro forma  information for the years ended December 31,
2000,  1999,  and 1998,  prepared in accordance  with the provisions of SFAS No.
123, is provided  below.  For  purposes  of pro forma  disclosures,  stock-based
compensation is amortized to expense on a  straight-line  basis over the vesting
period.  The pro forma  effects of applying  SFAS No. 123 are not  indicative of
future amounts  because this statement does not apply to awards granted prior to
1995. Additional stock option awards are anticipated in future years.
--------------------------------------------------------------------------------
(Dollars in Millions
Except Per Share Amounts)                            2000       1999       1998
--------------------------------------------------------------------------------
Pro forma net earnings (loss)                      $263.3     $293.9    $(755.8)
Pro forma net earnings (loss)
   per common share -- basic                       $ 3.15     $ 3.38    $ (8.23)
Pro forma net earnings (loss)
   per common share --
     assuming dilution                             $ 3.12     $ 3.33    $ (8.23)
--------------------------------------------------------------------------------


Note 16: BUSINESS SEGMENTS AND GEOGRAPHIC INFORMATION
The Corporation has elected to organize its businesses  based  principally  upon
products and  services.  In certain  instances  where a business does not have a
local  presence in a  particular  country or  geographic  region,  however,  the
Corporation has assigned responsibility for sales of that business's products to
one of its other businesses with a presence in that country or region.
     The Corporation operates in three reportable business segments: Power Tools
and  Accessories,  Hardware and Home  Improvement,  and  Fastening  and Assembly
Systems.  The Power Tools and Accessories  segment has worldwide  responsibility
for the  manufacture  and sale of  consumer  and  professional  power  tools and
accessories,  electric  cleaning and lighting  products,  and electric  lawn and
garden tools, as well as for product service.  In addition,  the Power Tools and
Accessories  segment has  responsibility  for the sale of  security  hardware to
customers in Mexico, Central America, the Caribbean,  and South America; for the
sale of plumbing products to customers outside the United States and Canada; and
for sales of the  retained  portion  of the  household  products  business.  The
Hardware  and Home  Improvement  segment has  worldwide  responsibility  for the
manufacture  and sale of  security  hardware  (except  for the sale of  security
hardware in Mexico, Central America, the Caribbean,  and South America). It also
has  responsibility for the manufacture of plumbing products and for the sale of
plumbing  products to customers in the United  States and Canada.  The Fastening
and Assembly  Systems segment has worldwide  responsibility  for the manufacture
and sale of fastening and assembly systems.
     The  Corporation  also operated  several  businesses that do not constitute
reportable business segments. These businesses included the manufacture and sale
of glass container-
                                       33
<PAGE>

forming  and  inspection  equipment,  as  well  as  recreational  and  household
products.  As more fully  described  in Note 19,  during 1998,  the  Corporation
completed  the  sale or  recapitalization  of its  glass  container-forming  and
inspection equipment business, Emhart Glass; its recreational products business,
True Temper Sports;  and its household  products  businesses  (excluding certain
assets associated with cleaning and lighting products) in North America, Central
America, the Caribbean, South America (excluding Brazil), and Australia. Because
True Temper Sports, Emhart Glass, and the divested household products businesses
are not treated as discontinued  operations under generally accepted  accounting
principles,  they  remain  a part of the  Corporation's  reported  results  from
continuing operations,  and the results of operations and financial positions of
these  businesses have been included in the  consolidated  financial  statements
through  the  dates of  consummation  of the  respective  transactions.  Amounts
relating  to these  businesses  are  included in the  following  table under the
caption "All Others".  The results of the household products businesses included
under  the  caption  "All  Others"  are  based  upon  certain   assumptions  and
allocations.  The household  products  businesses  sold during 1998 were jointly
operated  with the  cleaning and lighting  products  businesses  retained by the
Corporation.  Further, the Corporation's  divested household products businesses
in Central  America,  the  Caribbean,  South  America  (excluding  Brazil),  and
Australia were operated jointly with the power tools and accessories businesses.
Accordingly,  the results of the household products  businesses  included in the
segment  table under the caption  "All  Others" were  determined  using  certain
assumptions and allocations  that the Corporation  believes are reasonable under
the circumstances.


<TABLE>
<CAPTION>
Business Segments
(Millions of Dollars)
------------------------------------------------------------------------------------------------------------------------------------
                                           Reportable Business Segments
                                   ---------------------------------------------
                                         Power    Hardware  Fastening                           Currency      Corporate,
                                       Tools &      & Home & Assembly                  All   Translation    Adjustments,    Consoli-
Year Ended December 31, 2000       Accessories Improvement    Systems      Total    Others   Adjustments  & Eliminations       dated
------------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>           <C>        <C>      <C>        <C>        <C>            <C>            <C>
Sales to unaffiliated customers       $3,292.9      $863.2     $518.0   $4,674.1   $    --    $  (113.3)     $       --     $4,560.8
Segment profit (loss)
   (for Consolidated, operating
   income before restructuring
   and exit costs and gain on sale
   of business)                          361.7       115.5       86.0      563.2        --         (6.8)          (34.1)       522.3
Depreciation and amortization             87.8        35.0       16.6      139.4        --         (2.5)           26.5        163.4
Income from equity method
   investees                              15.6          --         --       15.6        --           --             (.1)        15.5
Capital expenditures                     143.7        31.6       27.4      202.7        --         (3.3)             .8        200.2
Segment assets
   (for Consolidated, total assets)    1,863.7       547.0      284.9    2,695.6        --       (125.0)        1,519.1      4,089.7
Investment in equity method
   investees                              26.0          --         .1       26.1        --          (.2)           (1.8)        24.1
Year Ended December 31, 1999
------------------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers       $3,135.4      $857.7     $496.2   $4,489.3   $    --     $   31.2      $       --     $4,520.5
Segment profit (loss)
   (for Consolidated,
   operating income)                     369.8       120.7       82.7      573.2        --          2.9           (39.8)       536.3
Depreciation and amortization             85.4        30.6       15.3      131.3        --          1.0            27.7        160.0
Income from equity method
   investees                              16.8          --         --       16.8        --           --            (2.1)        14.7
Capital expenditures                     106.0        37.3       26.6      169.9        --           .9              .3        171.1
Segment assets
   (for Consolidated, total assets)    1,717.1       489.8      260.3    2,467.2        --         (3.6)        1,549.1      4,012.7
Investment in equity method
   investees                              26.3          --         .8       27.1        --           .4             2.3         29.8
Year Ended December 31, 1998
------------------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers       $2,840.1      $829.8     $461.7   $4,131.6    $327.6      $ 100.7      $       --     $4,559.9
Segment profit (loss)
   (for Consolidated, operating
   income before restructuring
   and  exit costs, gain on sale
   of businesses, and write-off
   of goodwill)                          283.7       122.1       75.3      481.1      16.2          7.4           (20.7)       484.0
Depreciation and amortization             84.3        26.7       13.3      124.3        --          3.3            27.6        155.2
Income from equity method
   investees                               8.8          --         --        8.8        --          --             (2.9)         5.9
Capital expenditures                      76.6        35.9       16.3      128.8      13.2          2.0             2.0        146.0
Segment assets
   (for Consolidated, total assets)    1,504.0       486.1      239.4    2,229.5        --         61.2         1,561.8      3,852.5
Investment in equity method
   investees                              22.5          --         .7       23.2        --          (.1)            2.4         25.5
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       34
<PAGE>

     The  Corporation  assesses  the  performance  of  its  reportable  business
segments based upon a number of factors,  including  segment profit. In general,
segments  follow the same  accounting  policies  as those  described  in Note 1,
except  with  respect  to  foreign  currency  translation  and except as further
indicated below. The financial statements of a segment's operating units located
outside  of  the  United  States,   except  those  units   operating  in  highly
inflationary  economies,  are generally measured using the local currency as the
functional  currency.  For these  units  located  outside of the United  States,
segment  assets and elements of segment  profit are  translated  using  budgeted
rates of exchange. Budgeted rates of exchange are established annually and, once
established,  all prior  period  segment data is restated to reflect the current
year's budgeted rates of exchange.  The amounts  included in the preceding table
under the captions "Reportable Business Segments", "All Others", and "Corporate,
Adjustments,  &  Eliminations"  are  reflected  at  the  Corporation's  budgeted
exchange rates for 2000. The amounts  included in the preceding  table under the
caption  "Currency  Translation  Adjustments"  represent the difference  between
consolidated amounts determined using those budgeted rates of exchange and those
determined  based  upon  the  rates  of  exchange  applicable  under  accounting
principles generally accepted in the United States.
     Segment profit excludes interest income and expense,  non-operating  income
and expense, goodwill amortization, adjustments to eliminate intercompany profit
in  inventory,  and income tax expense.  In addition,  segment  profit  excludes
restructuring  and  exit  costs,  gain on  sale of  businesses  and,  for  1998,
write-off  of  goodwill.  For  certain  operations  located in  Brazil,  Mexico,
Venezuela,  and Turkey,  segment  profit is reduced by net interest  expense and
non-operating  expenses.  In determining  segment profit,  expenses  relating to
pension  and other  postretirement  benefits  are based  solely  upon  estimated
service costs. Corporate expenses are allocated to each reportable segment based
upon budgeted  amounts.  No Corporate  expenses have been  allocated to divested
businesses. While sales and transfers between segments are accounted for at cost
plus a reasonable  profit,  the effects of intersegment  sales are excluded from
the computation of segment profit.  Intercompany profit in inventory is excluded
from  segment  assets and is  recognized  as a reduction of cost of sales by the
selling segment when the related inventory is sold to an unaffiliated  customer.
Because the Corporation compensates the management of its various businesses on,
among other factors, segment profit, the Corporation may elect to record certain
segment-related   expense  items  of  an  unusual  or  non-recurring  nature  in
consolidation  rather than  reflect such items in segment  profit.  In addition,
certain   segment-related  items  of  income  or  expense  may  be  recorded  in
consolidation  in one period and transferred to the various  segments in a later
period.
     Segment  assets  exclude  pension  and tax assets,  goodwill,  intercompany
profit in inventory, and intercompany receivables.
     Amounts in the preceding table under the caption "Corporate,  Adjustments &
Eliminations" on the lines entitled  "Depreciation and  amortization"  represent
depreciation of Corporate property and consolidated goodwill  amortization.  The
reconciliation  of segment profit to consolidated  earnings (loss) before income
taxes for each year, in millions of dollars, is as follows:

--------------------------------------------------------------------------------
                                                     2000       1999       1998
--------------------------------------------------------------------------------
Segment profit for
   total reportable
   business segments                               $563.2     $573.2    $ 481.1
Segment profit for all
   other businesses                                    --         --       16.2
Items excluded from segment profit:
   Adjustment of budgeted
     foreign exchange rates
     to actual rates                                 (6.8)       2.9        7.4
   Depreciation of Corporate
     property and
     amortization of goodwill                       (26.5)     (27.7)     (27.6)
   Adjustment to businesses'
     postretirement benefit
     expenses booked
     in consolidation                                36.4       24.8       24.4
   Adjustment to eliminate
     net interest and
     non-operating expenses
     from results of certain
     operations in Brazil, Mexico,
     Venezuela, and Turkey                             .4        1.2        4.9
   Other adjustments booked
     in consolidation directly
     related to reportable
     business segments                              (14.4)     (12.4)     (20.4)
Amounts  allocated to businesses in
   arriving  at  segment  profit in
   excess of (less than)  Corporate
   center    operating    expenses,
   eliminations,  and other amounts
   identified above                                 (30.0)     (25.7)      (2.0)
--------------------------------------------------------------------------------
Operating income before
   restructuring and exit costs,
   gain on sale of businesses,
   and write-off of goodwill                        522.3      536.3      484.0
Restructuring and exit costs                         39.1         --      164.7
Gain on sale of businesses                           20.1         --      114.5
Write-off of goodwill                                  --         --      900.0
--------------------------------------------------------------------------------
   Operating income (loss)                          503.3      536.3     (466.2)
Interest expense,
   net of interest income                           104.2       95.8      114.4
Other income (expense)                                5.5         .8       (7.7)
--------------------------------------------------------------------------------
Earnings (loss)
   before income taxes                             $404.6     $441.3    $(588.3)
================================================================================


                                       35
<PAGE>

     The  reconciliation  of segment assets to the consolidated  total assets at
the end of each year, in millions of dollars, is as follows:
--------------------------------------------------------------------------------
                                                     2000       1999       1998
--------------------------------------------------------------------------------
Segment assets for
   total reportable
   business segments                             $2,695.6   $2,467.2   $2,229.5
Items excluded from segment assets:
   Adjustment of budgeted
     foreign exchange rates
     to actual rates                               (125.0)      (3.6)      61.2
   Goodwill                                         717.2      743.4      768.7
   Pension assets                                   380.0      377.0      348.8
Other Corporate assets                              421.9      428.7      444.3
--------------------------------------------------------------------------------
                                                 $4,089.7   $4,012.7   $3,852.5
================================================================================
     Other Corporate assets  principally  consist of cash and cash  equivalents,
tax assets, property, and other assets.
     Sales to The Home Depot, a customer of the Power Tools and  Accessories and
Hardware and Home  Improvement  segments,  accounted for $872.2 million,  $755.9
million,  and $622.3  million of the  Corporation's  consolidated  sales for the
years ended December 31, 2000, 1999, and 1998, respectively.
     The composition of the Corporation's  sales by product group for each year,
in millions of dollars, is set forth below:
--------------------------------------------------------------------------------
                                                     2000       1999       1998
--------------------------------------------------------------------------------

Consumer and professional
   power tools and
   product service                               $2,363.1   $2,318.6   $2,123.9
Consumer and professional
   accessories                                      342.9      357.3      339.8
Electric lawn and
   garden products                                  305.6      287.7      283.6
Electric cleaning and
   lighting products                                122.4      134.3       99.0
Security hardware                                   585.8      619.2      596.3
Plumbing products                                   284.3      260.6      257.0
Fastening and assembly
   systems                                          506.0      498.4      461.0
Household products                                   50.7       44.4      197.1
Glass container-forming
   and inspection equipment                            --         --      130.3
Recreational products                                  --         --       71.9
--------------------------------------------------------------------------------
                                                 $4,560.8   $4,520.5   $4,559.9
================================================================================
     The Corporation markets its products and services in over 100 countries and
has manufacturing  sites in ten countries.  Other than in the United States, the
Corporation  does not conduct business in any country in which its sales in that
country  exceed 10% of  consolidated  sales.  Sales are  attributed to countries
based on the location of customers.  The composition of the Corporation's  sales
to unaffiliated  customers between those in the United States and those in other
locations for each year, in millions of dollars, is set forth below:
--------------------------------------------------------------------------------
                                                     2000       1999       1998
--------------------------------------------------------------------------------

United States                                    $2,922.5   $2,825.2   $2,703.7
Canada                                              149.8      137.0      137.4
--------------------------------------------------------------------------------
   North America                                  3,072.3    2,962.2    2,841.1
Europe                                            1,138.5    1,255.5    1,364.5
Other                                               350.0      302.8      354.3
--------------------------------------------------------------------------------
                                                 $4,560.8   $4,520.5   $4,559.9
================================================================================
     The composition of the Corporation's property, plant, and equipment between
those in the United  States and those in other  countries  as of the end of each
year, in millions of dollars, is set forth below:
--------------------------------------------------------------------------------
                                                     2000       1999       1998
--------------------------------------------------------------------------------
United States                                      $466.4     $471.0     $469.0
United Kingdom                                      100.5      121.2      118.3
Other countries                                     181.2      147.4      140.3
--------------------------------------------------------------------------------
                                                   $748.1     $739.6     $727.6
================================================================================


NOTE 17: OTHER INCOME (EXPENSE)
Other  income  for 2000 and 1999 was not  significant.  Other  expense  for 1998
primarily included currency losses.


NOTE 18: LEASES
The  Corporation   leases  certain   service   centers,   offices,   warehouses,
manufacturing  facilities,  and equipment.  Generally,  the leases carry renewal
provisions and require the Corporation to pay maintenance costs. Rental payments
may be adjusted for increases in taxes and insurance  above  specified  amounts.
Rental  expense  for 2000,  1999,  and 1998  amounted  to $83.6  million,  $84.0
million,  and $81.4 million,  respectively.  Capital  leases were  immaterial in
amount.  Future minimum  payments  under  non-cancelable  operating  leases with
initial or remaining  terms of more than one year as of December  31,  2000,  in
millions of dollars, were as follows:
--------------------------------------------------------------------------------
2001                                                                    $  56.2
2002                                                                       47.6
2003                                                                       37.8
2004                                                                       30.3
2005                                                                       21.7
Thereafter                                                                 21.0
--------------------------------------------------------------------------------
                                                                         $214.6
================================================================================


                                       36
<PAGE>

NOTE 19: STRATEGIC REPOSITIONING AND 2000 RESTRUCTURING ACTIONS
Overview:  During 2000,  the  Corporation  completed  the final  elements of its
comprehensive  strategic  repositioning  plan,  recognizing a $20.1 million gain
related to the 1998  recapitalization  of the True Temper  Sports  business  and
recording an  additional  restructuring  charge of $9.5  million to  rationalize
manufacturing  in its Hardware and Home Improvement  segment.  Also during 2000,
the  Corporation  took  further  actions to reduce  costs in its Power Tools and
Accessories  segment and recorded an  additional  restructuring  charge of $29.6
million,  bringing the total  restructuring  charge  recorded by the Corporation
during 2000 to $39.1 million.
     The strategic  repositioning  plan,  approved by the Corporation's Board of
Directors  on  January  26,  1998,  was  designed  to  intensify  focus  on core
operations and improve operating performance.  The strategic  repositioning plan
included  the  following  components:   (i)  the  divestiture  of  non-strategic
businesses;  (ii)  the  repurchase  of  approximately  10% of the  Corporation's
outstanding  common stock over a two-year  period;  and (iii) a restructuring of
the Corporation's  remaining businesses.  Also on January 26, 1998, the Board of
Directors  elected to authorize a change in the basis upon which the Corporation
evaluates goodwill for impairment.

Divestitures: The Corporation completed the divestiture element of its strategic
repositioning  plan  during  1998  through  the sale of its  household  products
businesses in North  America,  Central  America,  the  Caribbean,  South America
(excluding Brazil), and Australia, recapitalization of its recreational products
business,  and sale of its  glass  container-forming  and  inspection  equipment
business.  The Corporation  elected to retain the cleaning and lighting products
component of the household products businesses.
     In mid-1998,  the  Corporation  completed the sale to Applica  Incorporated
(formerly known as  Windmere-Durable  Holdings,  Inc.) of the household products
businesses  for $315.0  million.  As part of the  transaction,  the  Corporation
retained  certain  liabilities  and agreed to license the Black & Decker name to
Applica  in  existing  household  product  categories  for a  period  of six and
one-half years on a royalty-free  basis,  with extension options upon request of
Applica and at the discretion of the Corporation on a royalty-bearing  basis. At
the request of Applica,  additional  product  categories  may be licensed at the
Corporation's option on a royalty-bearing basis.
     On September  22, 1998,  the  Corporation  completed  the sale of its glass
container-forming and inspection equipment business, Emhart Glass. In connection
with the sale, the Corporation received cash of $178.7 million.
     On September 30, 1998, the Corporation  completed the  recapitalization  of
its recreational  products business,  True Temper Sports. In connection with the
transaction,  the  Corporation  received  $177.7  million  in cash and  retained
approximately 6% of preferred and common stock of the recapitalized company, now
known as True  Temper  Corporation,  valued  at  approximately  $4  million.  In
addition,  the  Corporation  received a senior  increasing  rate  discount  note
payable  by True  Temper  Corporation,  in an initial  accreted  amount of $25.0
million. Because True Temper Corporation was a highly leveraged entity and there
was no active  market for the note,  the  Corporation  fully  reserved the $25.0
million note at the time of the  divestiture  and  continued to reserve the note
through December 31, 1999. During 2000, the Corporation sold the note,  together
with its remaining  interest in True Temper  Corporation,  for $25.0 million and
recognized a gain of $20.1 million.
     Net  proceeds of $653.6  million  received in 1998 from these  divestitures
were utilized in the  repurchase of a portion of the  Corporation's  outstanding
common stock and to fund the restructuring program described below.

Repurchase of Common Stock:  The second  element of the strategic  repositioning
plan -- the planned  repurchase of approximately  10% of its common stock over a
two-year period -- was completed  during 1999 when the  Corporation  repurchased
610,900  shares  of  common  stock  at  an  aggregate  cost  of  $32.1  million,
supplementing the 9,025,400 shares of common stock repurchased during 1998 at an
aggregate  cost of  $464.3  million.  Net  proceeds  from the  sale of  divested
businesses were used to fund the stock repurchase program.

Restructuring  Charge:  During 2000, the  Corporation  recorded a  restructuring
charge of $9.5  million to  rationalize  manufacturing  in its Hardware and Home
Improvement segment, completing the third element of the strategic repositioning
plan -- a restructuring  program  undertaken to reduce fixed costs.  Also during
2000, the  Corporation  took further  actions to reduce costs in its Power Tools
and Accessories segment and recorded an additional restructuring charge of $29.6
million,  bringing the total  restructuring  charge  recorded by the Corporation
during  2000 to $39.1  million.  Included  in those  additional  cost  reduction
initiatives are the transfer of certain production from manufacturing facilities
in  the  United  Kingdom  to  lower-cost  facilities  in  China,  reductions  in
administrative  functions,  principally  in Europe,  and the  integration of the
accessories  business in North America into the  professional and consumer power
tools businesses.
     The  major  component  of the  2000  restructuring  charge  related  to the
net elimination of approximately 400 positions. As a result, an accrual of $21.4
million,  principally  related  to the Power  Tools and  Accessories  segment in
Europe,  was included in the  restructuring  charge.  The Corporation  also took
action to  rationalize  manufacturing  and  reduce  administrative  costs.  As a
result,  the  restructuring  charge  recognized  in 2000 also  includes  a $13.9
million  write-down of machinery and  equipment to fair value.  Such  write-down
primarily related to the Hardware and Home Improvement  segment's  operations in
the United States and to the European and United States  businesses of the Power
Tools and Accessories segment. The balance of the 2000 restructuring  charge, or
$3.8  million,   primarily  related  to  the  accrual  of  future  expenditures,
principally consisting of lease and other contractual obligations,  for which no
future benefit will be realized.
     The  Corporation   commenced  the  restructuring  program  and  recorded  a
restructuring charge of $164.7 million during 1998. During 1999, the Corporation
recognized $13.1 million of additional  restructuring  and exit costs, but those
additional  costs  were  offset  by a gain  realized  in 1999  on the  sale of a
facility,  exited as part of the restructuring actions taken in 1998, that had a
fair value  exceeding  its net book value at the time of the 1998  charge and by
the reversal during 1999 of certain severance  accruals,  established as part of
the 1998 restructuring charge, which were no longer necessary.


                                       37
<PAGE>

     The principal  component of the 1998  restructuring  charge, as adjusted in
1999, related to the elimination of approximately 5,000 positions.  As a result,
an accrual of $121.5  million,  principally  associated with the Power Tools and
Accessories   segment  in  Europe  and  North  America,   was  included  in  the
restructuring  charge.  Included in that accrual were costs of approximately $30
million  related to the  acceptance  of a voluntary  retirement  plan by certain
employees in the United  States.  Also included in that accrual was $8.1 million
related to severance  actions taken in the divested  businesses and with respect
to the  closure  of a  facility  in  Kuantan,  Malaysia.  The  Kuantan  facility
manufactured  household products predominantly for sale in the United States and
was not included in the assets sold with the household products business.
     To reduce fixed costs, the Corporation took actions to rationalize  certain
manufacturing, sales, and administrative operations, resulting in the closure of
a number of facilities.  As a result, the 1998 restructuring charge, as adjusted
in 1999,  also  included a $25.3  million  write-down  to fair value -- less, if
applicable, costs to sell -- of certain land, buildings, and equipment. Included
in that $25.3 million  write-down was $9.0 million related to the closure of the
Kuantan  facility  described  above. The balance of the write-down to fair value
primarily  related  to  long-lived  assets  of the Power  Tools and  Accessories
segment in Europe and North America and is net of gains of $8.9 million and $8.7
million  realized  in 1999 and 1998,  respectively,  on the sales of  facilities
exited as part of the  restructuring  plan that had fair values in excess of net
book values at the time of the restructuring charge.
     As of December 31, 2000,  all  facilities  exited as part of the  strategic
repositioning  plan had been  sold with the  exception  of two  facilities.  The
carrying value of those facilities at December 31, 2000, was not significant.
     The  remaining  1998  restructuring  charge,  as adjusted in 1999, of $17.9
million  primarily  related to the accrual of future  expenditures,  principally
consisting of lease and other contractual  obligations associated with the Power
Tools and  Accessories  segment in Europe,  for which no future  benefit will be
realized and to the settlement of claims in 1999 regarding a divested business.

Change  in  Accounting   for  Goodwill:   As  a  consequence  of  the  strategic
repositioning  plan, the  Corporation  elected to change its method of measuring
goodwill impairment from an undiscounted cash flow approach to a discounted cash
flow approach  effective  January 1, 1998. On a periodic basis,  the Corporation
estimates the future  discounted  cash flows of the businesses to which goodwill
relates.  When such  estimate of the future  discounted  cash flows,  net of the
carrying  amount of tangible  net assets,  is less than the  carrying  amount of
goodwill,  the  difference  will be  charged  to  operations.  For  purposes  of
determining the future discounted cash flows of the businesses to which goodwill
relates,  the Corporation,  based upon historical results,  current projections,
and internal  earnings  targets,  determines the projected future operating cash
flows, net of income tax payments, of the individual businesses. These projected
future  cash  flows  are  then  discounted  at  a  rate   corresponding  to  the
Corporation's  estimated cost of capital,  which also is the hurdle rate used by
the Corporation in making investment decisions. Future discounted cash flows for
the recreational products business,  the glass  container-forming and inspection
equipment  business,  and the household  products  businesses in North  America,
Latin America,  and Australia included an estimate of the proceeds from the sale
of  such  businesses,   net  of  associated  selling  expenses  and  taxes.  The
Corporation  believes  that  measurement  of the  value of  goodwill  through  a
discounted  cash  flow  approach  is  preferable  in  that  such  a  measurement
facilitates  the timely  identification  of impairment of the carrying  value of
investments in businesses and provides a more current -- and with respect to the
businesses  sold,  provided a more realistic -- valuation than the  undiscounted
approach.
     In  connection  with the  Corporation's  change in  accounting  policy with
respect to  measurement of goodwill  impairment,  $900.0 million of goodwill was
written  off  through a charge  to  operations  during  1998 and  represented  a
per-share net loss of $9.80 both on a basic and a diluted  basis for 1998.  That
write-off  of  goodwill,  which  related to the  Hardware  and Home  Improvement
segment and the Fastening  and Assembly  Systems  segment,  and included a $40.0
million write-down of goodwill  associated with one of the divested  businesses,
represented  the amount  necessary to write-down the carrying values of goodwill
for those businesses to the Corporation's best estimate,  as of January 1, 1998,
of  those  businesses'  future  discounted  cash  flows  using  the  methodology
described  in the  preceding  paragraph.  This  change  represented  a change in
accounting principle that is indistinguishable from a change in estimate.


NOTE 20: LITIGATION AND CONTINGENT LIABILITIES
The  Corporation  is involved  in various  lawsuits  in the  ordinary  course of
business. These lawsuits primarily involve claims for damages arising out of the
use of the  Corporation's  products  and  allegations  of patent  and  trademark
infringement.  The Corporation also is involved in litigation and administrative
proceedings  relating to employment  matters and  commercial  disputes.  Some of
these  lawsuits  include  claims for punitive as well as  compensatory  damages.
Using  current  product  sales  data  and  historical  trends,  the  Corporation
actuarially  calculates  the  estimate  of  its  current  exposure  for  product
liability.  The Corporation is insured for product  liability claims for amounts
in excess of established  deductibles and accrues for the estimated liability up
to the limits of the deductibles.  The Corporation  accrues for all other claims
and lawsuits on a case-by-case basis.
     The Corporation also is involved in lawsuits and administrative proceedings
with respect to claims involving the discharge of hazardous  substances into the
environment.  Certain of these claims assert  damages and liability for remedial
investigations  and cleanup costs with respect to sites at which the Corporation
has been identified as a potentially  responsible  party under federal and state
environmental laws and regulations (off-site).  Other matters involve sites that
the  Corporation  currently owns and operates or has previously  sold (on-site).
For off-site claims,  the Corporation  makes an assessment of the costs involved
based on  environmental  studies,  prior  experience at similar  sites,  and the
experience of other named parties. The Corporation also considers the ability of
other  parties to share costs,  the

                                       38
<PAGE>

percentage of the Corporation's  exposure relative to all other parties, and the
effects of inflation on these estimated  costs.  For on-site matters  associated
with  properties  currently  owned,  the  Corporation  makes an assessment as to
whether an  investigation  and  remediation  would be required under  applicable
federal  and  state  laws.  For  on-site  matters   associated  with  properties
previously  sold,  the  Corporation  considers  the  terms  of  sale  as well as
applicable  federal  and  state  laws  to  determine  if it  has  any  remaining
liability.  If the  Corporation  is determined to have  potential  liability for
properties  currently owned or previously sold, an estimate is made of the total
costs of investigation and remediation and other potential costs associated with
the site.
     The  Corporation's  estimate of the costs  associated  with legal,  product
liability,  and environmental exposures is accrued if, in management's judgment,
the  likelihood  of a loss  is  probable.  These  accrued  liabilities  are  not
discounted.
     Insurance recoveries for environmental and certain general liability claims
are not recognized until realized.  In the opinion of the  Corporation,  amounts
accrued for awards or assessments in connection  with these matters are adequate
and, accordingly,  ultimate resolution of these matters will not have a material
effect on the Corporation.
     As of  December  31,  2000,  the  Corporation  had no  known  probable  but
inestimable exposures that could have a material effect on the Corporation.


NOTE 21: QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
(Millions of Dollars Except Per Share Data)               First       Second           Third        Fourth
Year Ended December 31, 2000                            Quarter       Quarter        Quarter       Quarter
------------------------------------------------------------------------------------------------------------

<S>                                                    <C>            <C>           <C>            <C>
Sales                                                  $1,037.6       $1,126.4      $1,133.2       $1,263.6
Gross margin                                              363.0          426.7         425.9          456.2
Net earnings                                               60.2           83.0          86.3           52.5
============================================================================================================

Net earnings per common share -- basic                 $    .70       $    .98      $   1.04       $    .65
============================================================================================================

Net earnings per common share -- assuming dilution     $    .69       $    .97      $   1.03       $    .64
============================================================================================================

Year Ended December 31, 1999
------------------------------------------------------------------------------------------------------------

Sales                                                  $  978.5       $1,084.2      $1,110.6       $1,347.2
Gross margin                                              350.3          413.0         416.6          506.2
Net earnings                                               39.2           70.7          75.3          115.1
============================================================================================================

Net earnings per common share -- basic                 $    .45       $    .81      $    .87       $   1.32
============================================================================================================

Net earnings per common share -- assuming dilution     $    .44       $    .80      $    .85       $   1.31
============================================================================================================
<FN>

     Results for the first  quarter of 2000  included a gain on sale of business
of $20.1 million ($13.1  million net of tax).  Results for the fourth quarter of
2000  included a  restructuring  charge of $39.1 million  ($27.6  million net of
tax).
     Earnings  per  common  share  are  computed  independently  for each of the
quarters presented.  Therefore,  the sum of the quarters may not be equal to the
full year earnings per share amounts.
</FN>
</TABLE>


                                       39
<PAGE>







Report of Independent Auditors
To the Stockholders and Board of Directors
of The Black & Decker Corporation:

We have  audited  the  accompanying  consolidated  balance  sheet of The Black &
Decker  Corporation  and  Subsidiaries as of December 31, 2000 and 1999, and the
related  consolidated  statements of earnings,  stockholders'  equity,  and cash
flows for each of the three years in the period ended  December  31,  2000.  Our
audits also included the  financial  statement  schedule  listed in the Index at
Item 14(a).  These financial  statements and schedule are the  responsibility of
the  Corporation's  management.  Our  responsibility is to express an opinion on
these financial statements and schedule based on our audits.
   We conducted  our audits in  accordance  with  auditing  standards  generally
accepted in the United States.  Those standards require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.
   In our  opinion,  the  consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated financial position of
The Black & Decker  Corporation and  Subsidiaries at December 31, 2000 and 1999,
and the  consolidated  results of their operations and their cash flows for each
of the three years in the period ended  December 31, 2000,  in  conformity  with
accounting  principles  generally  accepted in the United  States.  Also, in our
opinion,  the related financial statement schedule,  when considered in relation
to the  basic  financial  statements  taken as a whole,  presents  fairly in all
material respects the information set forth therein.




/s/ Ernst & Young LLP
Baltimore, Maryland
January 25, 2001


                                       40
<PAGE>



ITEM 9. CHANGES IN AND  DISAGREEMENTS  WITH AUDITORS ON ACCOUNTING AND FINANCIAL
DISCLOSURES

Not applicable.

                                    PART III



ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS

Information  required  under this Item with respect to Directors is contained in
the  Corporation's  Proxy Statement for the Annual Meeting of Stockholders to be
held April 25, 2001,  under the captions  "Election of  Directors"  and "Section
16(a) Beneficial  Ownership Reporting  Compliance" and is incorporated herein by
reference.
   Information  required  under this Item with respect to Executive  Officers of
the Corporation is included in Item 1 of Part I of this report.

ITEM 11.  EXECUTIVE COMPENSATION

Information  required  under this Item is contained in the  Corporation's  Proxy
Statement  for the Annual  Meeting of  Stockholders  to be held April 25,  2001,
under the captions  "Board of Directors"  and  "Executive  Compensation"  and is
incorporated herein by reference.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information  required  under this Item is contained in the  Corporation's  Proxy
Statement  for the Annual  Meeting of  Stockholders  to be held April 25,  2001,
under the captions  "Voting  Securities" and "Security  Ownership of Management"
and is incorporated herein by reference.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information  required  under this Item is contained in the  Corporation's  Proxy
Statement  for the Annual  Meeting of  Stockholders  to be held April 25,  2001,
under  the  caption  "Executive  Compensation"  and is  incorporated  herein  by
reference.

                                     PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  List of Financial Statements, Financial Statement Schedules, and Exhibits

(1)  List of Financial Statements
The  following  consolidated  financial  statements of the  Corporation  and its
subsidiaries are included in Item 8 of Part II:

   Consolidated Statement of Earnings - years ended December 31, 2000, 1999, and
1998.

   Consolidated Balance Sheet - December 31, 2000 and 1999.

   Consolidated  Statement of  Stockholders'  Equity - years ended  December 31,
2000, 1999, and 1998.

   Consolidated  Statement of Cash Flows - years ended December 31, 2000,  1999,
and 1998.

   Notes to Consolidated Financial Statements.

   Report of Independent Auditors.

(2)  List of Financial Statement Schedules
The  following   financial  statement  schedules  of  the  Corporation  and  its
subsidiaries are included herein.

   Schedule II - Valuation and Qualifying Accounts and Reserves.

   All other schedules for which provision is made in the applicable  accounting
regulations of the Commission are not required under the related instructions or
are inapplicable and, therefore, have been omitted.

(3)  List of Exhibits
The following exhibits are either included in this report or incorporated herein
by reference as indicated below:

Exhibit 2
Amendment No. 4 dated as of January 6, 2000, to the Transaction  Agreement dated
as of July 12, 1998,  by and between The Black & Decker  Corporation  and Bucher
Holding AG,  included in the  Corporation's  Annual  Report on Form 10-K for the
year ended December 31, 1999, is incorporated herein by reference.

Exhibit 3(a)
Articles  of  Restatement  of the  Charter of the  Corporation,  included in the
Corporation's Quarterly Report on Form 10-Q for the quarter ended June 29, 1997,
are incorporated herein by reference.

                                       41
<PAGE>

Exhibit 3(b)
Bylaws of the Corporation,  as amended,  included in the Corporation's Quarterly
Report on Form 10-Q for the quarter ended July 2, 2000, is  incorporated  herein
by reference.

Exhibit 4(a)
Indenture  dated as of March  24,  1993,  by and  between  the  Corporation  and
Security  Trust Company,  National  Association,  included in the  Corporation's
Current  Report on Form 8-K filed  with the  Commission  on March 26,  1993,  is
incorporated herein by reference.

Exhibit 4(b)
Form of 7-1/2% Notes due April 1, 2003,  included in the  Corporation's  Current
Report on Form 8-K filed with the Commission on March 26, 1993, is  incorporated
herein by reference.

Exhibit 4(c)
Form of 6-5/8%  Notes due  November  15,  2000,  included  in the  Corporation's
Current  Report on Form 8-K filed with the  Commission  on November 22, 1993, is
incorporated herein by reference.

Exhibit 4(d)
Form of 7% Notes due  February 1, 2006,  included in the  Corporation's  Current
Report  on  Form  8-K  filed  with  the  Commission  on  January  20,  1994,  is
incorporated herein by reference.

Exhibit 4(e)
Indenture  dated as of September  9, 1994,  by and between the  Corporation  and
Marine Midland Bank, as Trustee, included in the Corporation's Current Report on
Form 8-K filed with the Commission on September 9, 1994, is incorporated  herein
by reference.

Exhibit 4(f)
Credit  Agreement  dated as of April 23, 1996,  among the  Corporation,  Black &
Decker Holdings Inc. and Black & Decker, as Initial  Borrowers,  and the initial
Lenders named therein,  as Initial Lenders,  and Citibank  International plc, as
Facility  Agent,  and  Citibank  International  plc and  Midland  Bank  plc,  as
Co-Arrangers,  included in the  Corporation's  Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996, is incorporated herein by reference.

Exhibit 4(g)
Credit  Agreement  dated as of April 23, 1996,  among the  Corporation,  Black &
Decker  Holdings Inc.,  Black & Decker,  Black & Decker  International  Holdings
B.V.,  Black & Decker G.m.b.H.,  Black & Decker (France) S.A.S.,  Black & Decker
(Nederland)  B.V. and Emhart Glass S.A., as Initial  Borrowers,  and the initial
Lenders named therein, as Initial Lenders,  and Credit Suisse, as Administrative
Agent,  and Citibank,  N.A., as Documentation  Agent, and NationsBank,  N.A., as
Syndication Agent,  included in the Corporation's  Quarterly Report on Form 10-Q
for the quarter ended March 31, 1996, is incorporated herein by reference.

Exhibit 4(h)
Indenture  dated as of June 26,  1998,  by and between  Black & Decker  Holdings
Inc., as Issuer, the Corporation,  as Guarantor,  and The First National Bank of
Chicago, as Trustee, included in the Corporation's Quarterly Report on Form 10-Q
for the quarter ended June 28, 1998, is incorporated herein by reference.
   The Corporation  agrees to furnish a copy of any other documents with respect
to long-term  debt  instruments of the  Corporation  and its  subsidiaries  upon
request.

Exhibit 10(a)
The  Black & Decker  Corporation  Deferred  Compensation  Plan for  Non-Employee
Directors, as amended.

Exhibit 10(b)
The  Black &  Decker  1986  Stock  Option  Plan,  as  amended,  included  in the
Corporation's  Quarterly  Report on Form 10-Q for the  quarter  ended  March 30,
1997, is incorporated herein by reference.

Exhibit 10(c)
The Black & Decker 1986 U.K. Approved Option Scheme, as amended, included in the
Corporation's Registration Statement on Form S-8 (Reg. No. 33-47651), filed with
the Commission on May 5, 1992, is incorporated herein by reference.

Exhibit 10(d)
The  Black &  Decker  1989  Stock  Option  Plan,  as  amended,  included  in the
Corporation's  Quarterly  Report on Form 10-Q for the  quarter  ended  March 30,
1997, is incorporated herein by reference.

Exhibit 10(e)
The  Black &  Decker  1992  Stock  Option  Plan,  as  amended,  included  in the
Corporation's  Quarterly  Report on Form 10-Q for the  quarter  ended  March 30,
1997, is incorporated herein by reference.

Exhibit 10(f)
The  Black & Decker  1995  Stock  Option  Plan for  Non-Employee  Directors,  as
amended,  included in the Corporation's  Annual Report on Form 10-K for the year
ended December 31, 1998, is incorporated herein by reference.

Exhibit 10(g)
The Black & Decker  Non-Employee  Directors Stock Plan, included as Exhibit A to
the Proxy Statement of the Corporation  dated March 3, 1998, for the 1998 Annual
Meeting of Stockholders of the Corporation, is incorporated herein by reference.

Exhibit 10(h)
The  Black &  Decker  1996  Stock  Option  Plan,  as  amended,  included  in the
Corporation's  Registration  Statement  on Form S-8  (Reg.  No.  333-51155),  is
incorporated herein by reference.

Exhibit 10(i)
The  Black &  Decker  Performance  Equity  Plan,  as  amended,  included  in the
Corporation's  Annual Report on Form 10-K for the year ended  December 31, 1996,
is incorporated herein by reference.

                                       42
<PAGE>

Exhibit 10(j)
The Black & Decker Executive  Annual Incentive Plan,  included in the definitive
Proxy  Statement for the 1996 Annual Meeting of  Stockholders of the Corporation
dated March 1, 1996, is incorporated herein by reference.

Exhibit 10(k)
The  Black  &  Decker  Management   Annual  Incentive  Plan,   included  in  the
Corporation's  Annual Report on Form 10-K for the year ended  December 31, 1995,
is incorporated herein by reference.

Exhibit 10(l)
Amended and Restated Employment Agreement,  dated as of November 1, 1995, by and
between the Corporation and Nolan D.  Archibald,  included in the  Corporation's
Annual Report on Form 10-K for the year ended December 31, 1995, is incorporated
herein by reference.

Exhibit 10(m)
Letter  Agreement,  dated February 1, 1975, by and between the  Corporation  and
Alonzo G. Decker, Jr., included in the Corporation's  Annual Report on Form 10-K
for the year ended December 31, 1990, is incorporated herein by reference.

Exhibit 10(n)(1)
The Black & Decker  Supplemental  Pension  Plan,  as  amended,  included  in the
Corporation's  Annual Report on Form 10-K for the year ended  December 31, 1991,
is incorporated herein by reference.

Exhibit 10(n)(2)
Amendment  to The Black & Decker  Supplemental  Pension Plan dated as of May 21,
1997,  included  in the  Corporation's  Annual  Report on Form 10-K for the year
ended December 31, 1997, is incorporated herein by reference.

Exhibit 10(o)(1)
The  Black &  Decker  Executive  Deferred  Compensation  Plan,  included  in the
Corporation's  Quarterly  Report on Form 10-Q for the quarter  ended  October 3,
1993, is incorporated herein by reference.

Exhibit 10(o)(2)
Amendment to The Black & Decker Executive Deferred Compensation Plan dated as of
July 17, 1996,  included in the Corporation's  Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, is incorporated herein by reference.

Exhibit 10(p)(1)
The  Black &  Decker  Supplemental  Retirement  Savings  Plan,  included  in the
Corporation's Registration Statement on Form S-8 (Reg. No. 33-65013), filed with
the Commission on December 14, 1995, is incorporated herein by reference.

Exhibit 10(p)(2)
Amendment to The Black & Decker Supplemental Retirement Savings Plan dated as of
April 22, 1997, included in the Corporation's Annual Report on Form 10-K for the
year ended December 31, 1997, is incorporated herein by reference.

Exhibit 10(p)(3)
Amendment No. 2 to The Black & Decker Supplemental Retirement Savings Plan dated
as of July 16, 1998,  included in the  Corporation's  Annual Report on Form 10-K
for the year ended December 31, 1998, is incorporated herein by reference.

Exhibit 10(p)(4)
Amendment No. 3 to The Black & Decker Supplement  Retirement  Savings Plan dated
as of July 20, 2000, included in the Corporation's Quarterly Report on Form 10-Q
for the quarter ended October 1, 2000, is incorporated herein by reference.

Exhibit 10(q)
The Black & Decker Supplemental Executive Retirement Plan, as amended,  included
in the Corporation's  Annual Report on Form 10-K for the year ended December 31,
1998, is incorporated herein by reference.

Exhibit 10(r)
The Black & Decker Executive Life Insurance Program, as amended, included in the
Corporation's Quarterly Report on Form 10-Q for the quarter ended April 4, 1993,
is incorporated herein by reference.

Exhibit 10(s)
The  Black  &  Decker  Executive  Salary  Continuance  Plan,   included  in  the
Corporation's  Quarterly  Report on Form 10-Q for the  quarter  ended  April 12,
1995, is incorporated herein by reference.

Exhibit 10(t)
Description of the Corporation's policy and procedure for relocation of existing
employees (individual transfers), included in the Corporation's Annual Report on
Form 10-K for the year  ended  December  31,  1991,  is  incorporated  herein by
reference.

Exhibit 10(u)
Description  of the  Corporation's  policy and  procedures for relocation of new
employees, included in the Corporation's Annual Report on Form 10-K for the year
ended December 31, 1991, is incorporated herein by reference.

Exhibit 10(v)
Description of certain incidental benefits provided to executive officers of the
Corporation,  included in the  Corporation's  Annual Report on Form 10-K for the
year ended December 31, 1997, is incorporated herein by reference.

Exhibit 10(w)(1)
Form of Amendment and Restatement of Severance Benefits Agreement by and between
the  Corporation  and  approximately  16 of its key  employees,  included in the
Corporation's  Annual Report on Form 10-K for the year ended  December 31, 1996,
is incorporated herein by reference.

Exhibit 10(w)(2)
Form  of  Severance  Benefits  Agreement  by and  between  the  Corporation  and
approximately 16 of its key employees,  included in the Corporation's  Quarterly
Report on Form 10-Q for the  quarter  ended  October  1, 2000,  is  incorporated
herein by reference.

                                       43
<PAGE>

Exhibit 10(x)(1)
Amendment and  Restatement  of Severance  Benefits  Agreement,  dated January 1,
1997, by and between the  Corporation  and Nolan D.  Archibald,  included in the
Corporation's  Annual Report on Form 10-K for the year ended  December 31, 1996,
is incorporated herein by reference.

Exhibit 10(x)(2)
Severance  Benefits  Agreement,  dated  August  2,  2000,  by  and  between  the
Corporation  and Nolan D.  Archibald,  included in the  Corporation's  Quarterly
Report on Form 10-Q for the  quarter  ended  October  1, 2000,  is  incorporated
herein by reference.

Exhibit 10(y)(1)
Severance  Benefits  Agreement,  dated  April  27,  1999,  by  and  between  the
Corporation and Paul F. McBride,  included in the Corporation's Quarterly Report
on Form 10-Q for the  quarter  ended July 4,  1999,  is  incorporated  herein by
reference.

Exhibit 10(y)(2)
Severance  Benefits  Agreement,  dated  August  2,  2000,  by  and  between  the
Corporation and Paul F. McBride,  included in the Corporation's Quarterly Report
on Form 10-Q for the quarter ended October 1, 2000,  is  incorporated  herein by
reference.

Exhibit 10(z)(1)
Amendment and  Restatement  of Severance  Benefits  Agreement,  dated January 1,
1997,  by and between the  Corporation  and Charles E.  Fenton,  included in the
Corporation's  Annual Report on Form 10-K for the year ended  December 31, 1996,
is incorporated herein by reference.

Exhibit 10(z)(2)
Severance  Benefits  Agreement,  dated  August  2,  2000,  by  and  between  the
Corporation  and  Charles E.  Fenton,  included in the  Corporation's  Quarterly
Report on Form 10-Q for the  quarter  ended  October  1, 2000,  is  incorporated
herein by reference.

Exhibit 10(aa)
Letter  Agreement  dated April 19, 1999, by and between the Corporation and Paul
F. McBride,  included in the Corporation's Quarterly Report on Form 10-Q for the
quarter ended July 4, 1999, is incorporated herein by reference.

Exhibit 10(bb)(1)
Severance  Benefits  Agreement,  dated  November  1, 1999,  by and  between  the
Corporation and Michael D. Mangan.

Exhibit 10(bb)(2)
Severance  Benefits  Agreement,  dated  August  2,  2000,  by  and  between  the
Corporation and Michael D. Mangan.

Exhibit 10(cc)(1)
Amendment and  Restatement  of Severance  Benefits  Agreement,  dated January 1,
1997,  by and between the  Corporation  and Paul A.  Gustafson,  included in the
Corporation's  Annual Report on Form 10-K for the year ended  December 31, 1999,
is incorporated herein by reference.

Exhibit 10(cc)(2)
Special  Deferral  Agreement,  dated  February  7,  2000,  by  and  between  the
Corporation and Paul A. Gustafson,  included in the Corporation's  Annual Report
for the year ended December 31, 1999, is incorporated herein by reference.

Exhibit 10(cc)(3)
Severance  Benefits  Agreement,  dated  August  2,  2000,  by  and  between  the
Corporation  and Paul A.  Gustafson,  included  in the  Corporation's  Quarterly
Report on Form 10-Q for the  quarter  ended  October  1, 2000,  is  incorporated
herein by reference.

Exhibit 10(dd)(1)
The Black & Decker 1996 Employee Stock Purchase Plan, included in the definitive
Proxy  Statement for the 1996 Annual Meeting of  Stockholders of the Corporation
dated March 1, 1996, is incorporated herein by reference.

Exhibit 10(dd)(2)
Amendment to The Black & Decker 1996 Employee Stock Purchase Plan, as adopted on
February 12, 1997, included in the Corporation's  Annual Report on Form 10-K for
the year ended December 31, 1996, is incorporated herein by reference.

Items 10(a) through 10(dd)(2)  constitute  management contracts and compensatory
plans and arrangements required to be filed as exhibits under Item 14(c) of this
report.

Exhibit 10(ee)
Distribution  Agreement dated September 9, 1994, by and between the Corporation,
Lehman Brothers Inc., Citicorp  Securities,  Inc., Goldman,  Sachs & Co., Morgan
Stanley & Co.  Incorporated,  NationsBanc  Capital  Markets,  Inc.  and  Salomon
Brothers Inc.,  included in the  Corporation's  Current Report on Form 8-K filed
with the Commission on September 9, 1994, is incorporated herein by reference.

Exhibit 12
Computation of Ratios.

Exhibit 21
List of Subsidiaries.

Exhibit 23
Consent of Independent Auditors.

Exhibit 24
Powers of Attorney.

   All other items are "not applicable" or "none".


                                       44
<PAGE>


(b)  Reports on Form 8-K
The Corporation  filed the following reports on Form 8-K during the three months
ended December 31, 2000:
   On October 18, 2000, the Corporation  filed a Current Report on Form 8-K with
the Securities and Exchange  Commission.  This Current Report on Form 8-K, filed
pursuant to Item 5 of that Form,  stated that the  Corporation  had reported its
earnings for the three and nine months ended October 1, 2000.
   On December 15, 2000, the Corporation filed a Current Report on Form 8-K with
the Securities and Exchange  Commission.  This Current Report on Form 8-K, filed
pursuant to Item 5 of that Form, stated that the Corporation had announced lower
earnings expectations for the fourth quarter of 2000 and for 2001.
   All other items are "not applicable" or "none".

(c)  Exhibits
The exhibits required by Item 601 of Regulation S-K are filed herewith.

(d)  Financial Statement Schedules and Other Financial Statements
The Financial Statement Schedule required by Regulation S-X is filed herewith.



SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
The Black & Decker Corporation and Subsidiaries
(Millions of Dollars)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                                                             Balance    Additions                      Other
                                                                  at   Charged to                    Changes      Balance
                                                           Beginning    Costs and                        Add       at End
Description                                                of Period     Expenses   Deductions        (Deduct)  of Period
--------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>          <C>          <C>           <C>          <C>
Year Ended December 31, 2000
Reserve for doubtful accounts and cash discounts               $53.3        $64.8        $65.4(a)      $ (.9)(b)    $51.8
--------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1999
Reserve for doubtful accounts and cash discounts               $44.3        $66.3        $55.6(a)      $(1.7)(b)    $53.3
--------------------------------------------------------------------------------------------------------------------------
Year Ended December 31, 1998
Reserve for doubtful accounts and cash discounts               $47.8        $66.8        $65.8(a)      $(4.5)(b)    $44.3
--------------------------------------------------------------------------------------------------------------------------
<FN>
(a)Accounts written off during the year and cash discounts taken by customers.
(b)Primarily  includes  currency  translation  adjustments  and,  for 1998,  the
   write-off of $4.3 million of reserves associated with divested businesses.
</FN>
</TABLE>


                                       45
<PAGE>




Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                                THE BLACK & DECKER CORPORATION

Date:  February 21, 2001                        By   /s/ NOLAN D. ARCHIBALD
       -----------------                             ----------------------
                                                     Nolan D. Archibald
                                                     Chairman, President, and
                                                     Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on February 21, 2001, by the  following  persons on behalf
of the registrant and in the capacities indicated.

Signature                        Title                               Date
--------------------------------------------------------------------------------


Principal Executive Officer

/s/ NOLAN D. ARCHIBALD                                         February 21, 2001
----------------------                                         -----------------
Nolan D. Archibald              Chairman, President, and
                                Chief Executive Officer

Principal Financial Officer

/s/MICHAEL D. MANGAN                                           February 21, 2001
--------------------                                           -----------------
Michael D. Mangan               Senior Vice President and
                                Chief Financial Officer

Principal Accounting Officer


/s/CHRISTINA M. McMULLEN                                       February 21, 2001
------------------------                                       -----------------
Christina M. McMullen           Vice President and Controller

--------------------------------------------------------------------------------

This report has been signed by the following directors,  constituting a majority
of the Board of Directors, by Nolan D. Archibald, Attorney-in-Fact.


             Nolan D. Archibald                Manual A. Fernandez
             Barbara L. Bowles                 Anthony Luiso
             M. Anthony Burns                  Mark H. Willes
             Malcolm Candlish

By   /s/ NOLAN D. ARCHIBALD                             Date:  February 21, 2001
     ----------------------                                    -----------------
     Nolan D. Archibald
     Attorney-in-Fact

                                       46
<PAGE>