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, 2001                               1-1553
------------------------------------       -------------------------------------

                         THE BLACK & DECKER CORPORATION
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


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


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

Registrant's telephone number, including area code: 410-716-3900
                                                    ----------------------------


Securities registered pursuant to Section 12(b) of the Act:

                                                   Name of each exchange
          Title of each class                      on which registered
------------------------------------       -------------------------------------
          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 28, 2002, was $3,099,865,148.

The number of shares of Common Stock  outstanding  as of January 28,  2002,  was
79,860,683.

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 2002 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 household  products,
principally  in Europe and Brazil.  Power tools include both corded and cordless
electric power tools, such as drills,  screwdrivers,  saws,  sanders,  grinders,
pneumatic nailers,  and laser products;  Workmate(R) project centers and related
products;  air  compressors;  generators;  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; VERSAPAK;  NAVIGATOR;  SCORPION;  PIVOT DRIVER;  SANDSTORM;
WORKMATE;  FIRESTORM;  MOUSE; RTX; QUANTUM PRO; QUATTRO;  ALLIGATOR;  POWERFILE;
TWISTLOK; VERSA-CLUTCH; ORANGE AND BLACK COLOR SCHEME; TOOL FINDER; GIFT FINDER;
TOOL SCHOOL; CUT SAW; XRT; XRP; SCRUGUN;  HOLGUN; WILDCAT; EMGLO; MOMENTUM; ELU;
YELLOW AND BLACK COLOR SCHEME; GROOM 'N' EDGE; AFS AUTOMATIC FEED SPOOL; VAC 'N'
MULCH; LEAFBUSTER;  STRIMMER;  REFLEX; HEDGE HOG; GRASS HOG; LEAF HOG; EDGE HOG;
LAWN HOG; DUSTBUSTER; SCUMBUSTER; FLOORBUSTER; SNAKELIGHT; SPOTLITER; SAFELITER;
B&D; PIRANHA; BULLET; SCORPION ANTI-SLIP;  SERIES 20; SERIES 40; SERIES 60; ROCK
CARBIDE;  PILOT POINT;  MAGNETIC  DRILL AND DRIVE SYSTEM;  RAPID LOAD; and TOUGH
CASE.
   The composition of the Corporation's  sales by product groups for 2001, 2000,
and 1999 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 2001, 2000, or 1999.
   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,
2001,  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.
   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.


                                      -1-
<PAGE>

   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 2001, 2000, and 1999. 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.
   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 and
assembly 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 Maltby,  England;  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.
   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,
electronic  keyless  entry  systems,  exit devices,  and master keying  systems.
Plumbing products consist of a variety of conventional and decorative  lavatory,
kitchen,  and  tub  and  shower  faucets,  bath  and  kitchen  accessories,  and
replacement parts.
   Security  hardware  products are marketed  under a variety of trademarks  and
trade names,  including,  without  limitation,  KWIKSET;  KWIKSET  PLUS;  TITAN;
KWIKSET SECURITY;  KWIKSET MAXIMUM SECURITY;  KWIKSET ULTRAMAX SECURITY; SOCIETY
BRASS COLLECTION;  BLACK & DECKER; BLACK & DECKER PLUS; BLACK & DECKER PRO; GEO;
PROTECTO LOCK; SAFE LOCK; TYLO; POLO; KWIK INSTALL;  EZ INSTALL;  DOM;  DIAMANT;
ELS; NEMEF;  and CORBIN CO. Plumbing  products are marketed under the trademarks
and trade names PRICE PFISTER;  CLASSIC  SERIES BY PRICE PFISTER;  PRICE PFISTER
PROFESSIONAL SERIES; BACH; SOLO; CONTEMPRA;  MARIELLE;  TWISTPFIT;  MATCHMAKERS;
GENESIS; CARMEL; PARISA; SAVANNAH; and GEORGETOWN.
   The composition of the Corporation's  sales by product groups for 2001, 2000,
and 1999 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 2001, 2000, or 1999.


                                      -2-
<PAGE>

   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 2001,
2000, and 1999. 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,  2001,  the amount of product  under  commodity  hedges was not
material to the Corporation.
   Principal  manufacturing  and  assembly  facilities  of the Hardware and Home
Improvement  segment  in the  United  States  are  located  in  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,  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 TEKNOLOGIES; EMHART FASTENING TEKNOLOGIES;
EMHART; DODGE; GRIPCO; GRIPCO ASSEMBLIES;  HELI-COIL;  NPR;  PARKER-KALON;  POP;
POP-LOK; POWERLINK;  T-RIVET; ULTRA-GRIP;  TUCKER; WARREN; DRIL-KWICK; JACK NUT;
KALEI;  PLASTIFAST;   PLASTI-KWICK;   POPMATIC;  POPNUT;  POP-SERT;   SWAGEFORM;
WELDFAST; SWS; SPLITFAST; NUT-FAST; WELL-NUT; F-SERIES; MENTOR; POINT & SET; and
ULTRASERT.
   The composition of the Corporation's  sales by product groups for 2001, 2000,
and 1999 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 2001, 2000, or 1999.
   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.


                                      -3-
<PAGE>

   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."
   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; Maltby 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 Lake Forest,  California;  Bruhl,  Germany;  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,  2001,  the  Corporation  employed  approximately  22,700
persons in its operations worldwide. Approximately 1,200 employees in the United
States  are  covered by  collective  bargaining  agreements.  During  2001,  two
collective  bargaining  agreements in the United States were negotiated  without
material disruption to operations.  Two agreements are scheduled for negotiation
during 2002. 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. As more fully
described under the caption "Restructuring  Actions" in Management's  Discussion
and Analysis of Financial  Condition and Results of Operations  included in Item
7, and in Note 18 of Notes to Consolidated Financial Statements included in Item
8 of Part II of this report,  the Corporation  recently announced the closure of
two power tools and accessories  facilities and a plumbing products plant in the
United States.  Additional  restructuring  actions taken by the Corporation will
also result in the transfer of production  from the United States and England to
low-cost  facilities in Mexico and China and a new leased  facility in the Czech
Republic.   Such  closures   and/or   production   transfers  may  result  in  a
deterioration  of employee  relations at the impacted  locations or elsewhere in
the Corporation.
   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, 2001, the  Corporation had
been  identified as a  potentially  responsible  party (PRP) in connection  with
approximately  25 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


                                      -4-
<PAGE>

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,  2001,  the  Corporation's  aggregate
probable exposure with respect to environmental liabilities,  for which accruals
have  been  established  in the  Consolidated  Financial  Statements,  was $25.2
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.

(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 - 58
   Chairman, President, and Chief Executive Officer,
     January 1990 - present.

o  Paul A. Gustafson - 59
   Executive Vice President of the Corporation and President -
     Fastening and Assembly Systems Group,
     December 1996 - present.

o  Paul F. McBride - 45
   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 - 53
   Senior Vice President and General Counsel,
     December 1996 - present.

o  Barbara B. Lucas - 56
   Senior Vice President - Public Affairs and Corporate Secretary,
     December 1996 - present.

o  Michael D. Mangan - 45
   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 - 56
   Senior Vice President - Human Resources,
     December 1996 - present.

o  Ian Carter - 40
   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 - 37
   Vice President of the Corporation and Managing Director -
     Commercial Operations, Europe, Power Tools and Accessories Group,
     November 2001 - present;

   Vice President of the Corporation and Vice President and
     General Manager - DEWALT Professional Power Tools,
     North America, Power Tools and Accessories Group,
     January 2001 - November 2001;

   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.


                                      -5-
<PAGE>

o  Thomas D. Koos - 38
   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  Carl C. Liebert - 54
   Vice President of the Corporation and Vice President -
     Supply Chain, Power Tools and Accessories Group,
     October 2001 - present;

   Vice President - Supply Chain, Power Tools and Accessories Group,
     November 1999 - October 2001;

   Vice President - Six Sigma,
     October 1998 - November 1999;

   General Manager - Manufacturing, GE Plastics, General Electric Company,
     August 1995 - October 1998.

o  Christina M. McMullen - 46
   Vice President and Controller,
     April 2000 - present;

   Controller,
     January 2000 - April 2000;

   Assistant Controller,
     April 1993 - January 2000.

o  Christopher T. Metz - 36
   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.

o  Stephen F. Reeves - 42
   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.

o  Mark M. Rothleitner - 43
   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.

o  Edward J. Scanlon - 47
   Vice President of the Corporation and President -
     Commercial Operations, North America, 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.


                                      -6-
<PAGE>

o  John W. Schiech - 43
   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.

o  Robert B. Schwarz - 53
   Vice President of the Corporation and Vice President - Manufacturing,
     DEWALT Professional Products, Power Tools and Accessories Group,
     October 2001 - present;

   Vice President - Manufacturing, DEWALT Professional Products,
     Power Tools and Accessories Group,
     December 1995 - October 2001.

(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  risks  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,
Canada, Asia, and Australia.  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 The Corporation's  ability to maintain mutually beneficial  relationships with
key customers and to penetrate new channels of distribution. The Corporation has
a number  of  significant  customers,  including  five  customers  that,  in the
aggregate,  constituted  nearly 38% of its consolidated sales for 2001. 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  its  business.  The  Corporation's  inability  to  continue
penetrating  new  channels  of  distribution  may have a negative  impact on its
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 2001 and scheduled for
introduction  in 2002,  as well as the level of sales  generated  from these new
products relative to expectations,  based on existing  investments in productive
capacity and  commitments  of the  Corporation to fund  advertising  and product
promotions in connections with the introduction of these new products.

o The  Corporation's  ability to develop and introduce new products at favorable
margins.  Numerous  uncertainties  are inherent in  successfully  developing and
introducing  new products on a consistent  basis.

o Adverse changes in currency  exchange rates or raw material  commodity prices,
both  in  absolute  terms  and  relative  to  competitors'  risk  profiles.  The
Corporation has a number of  manufacturing  sites throughout the world and sells
its products in more than 100 countries. As a result, the Corporation 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.

o Increased competition.  Worldwide,  the markets in which the Corporation sells
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. Competition from
certain of these  manufacturers has been intense in recent years and is expected
to continue.

o Changes in consumer preference or loyalties.

o 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.


                                      -7-
<PAGE>

o The Corporation's ability to achieve projected levels of efficiencies and cost
reduction  measures  and to  avoid  delays  in or  unanticipated  inefficiencies
resulting  from  manufacturing  and  administrative  reorganization  actions  in
progress or contemplated.

o  Foreign   operations   may  be   affected   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.

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, share repurchase  program,  and general
operation  activities,   and  the  Corporation's  ability  to  obtain  necessary
financing at favorable interest rates.

o The ability of certain subsidiaries of the Corporation to generate future cash
flows  sufficient to support the recorded  amounts of goodwill  related to those
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.

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 the
Corporation  has correctly  identified  and  appropriately  assessed all factors
affecting its business or that the publicly available and other information with
respect  to  these  matters  is  complete  and  correct.  Additional  risks  and
uncertainties  not  presently  known  to the  Corporation  or that it  currently
believes to be immaterial also may adversely impact the Corporation.  Should any
risks and uncertainties  develop into actual events,  these  developments  could
have  material  adverse  effects  on  the  Corporation's   business,   financial
condition,  and results of operations.  For these reasons, you are cautioned not
to place undue reliance on the Corporation's forward-looking statements.

ITEM 2. PROPERTIES

The Corporation operates 39 manufacturing facilities around the world, including
18  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:  Maltby,  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.
   As  more  fully  described  in  Item  7 of  this  report  under  the  caption
"Restructuring  Actions",  during the fourth  quarter of 2001,  the  Corporation
commenced actions on a restructuring plan that will, among other matters, reduce
its manufacturing footprint. 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,  2001,  the  Corporation  had no known
probable but inestimable exposures for awards and assessments in connection with
environmental  matters and litigation and  administrative  proceedings  that are
expected to have a material adverse effect on the Corporation.

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

Not applicable.


                                      -8-
<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                                      2001                           2000
--------------------------------------------------------------------------------
January to March               $46.950 to $34.500             $52.375 to $29.750
April to June                  $42.500 to $36.310             $43.938 to $34.000
July to September              $43.150 to $28.260             $42.563 to $33.375
October to December            $39.880 to $29.740             $40.375 to $27.563
--------------------------------------------------------------------------------

(b)  Holders of the Corporation's Capital Stock
As of January 28, 2002, there were 15,923 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                                                         2001        2000
--------------------------------------------------------------------------------
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, 79,829,641 and 80,343,094 shares
outstanding as of December 31, 2001 and 2000, respectively.

Preferred Stock:
5,000,000  shares  authorized,  without par value,  no shares  outstanding as of
December 31, 2001 and 2000.

(d)  Changes in Securities and Use of Proceeds
Settlement  of forward  purchase  contracts  resulted  in the  issuance of 3,349
shares of common  stock  during  2001.  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 2002 Annual Meeting of  Stockholders  of the  Corporation is scheduled to be
held on April 30, 2002, at 8:30 a.m. at the Radisson  Prince Charles Hotel,  450
Hay Street, Fayetteville, North Carolina 28301.

ITEM 6.  SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
FIVE-YEAR SUMMARY
------------------------------------------------------------------------------------------------------------------------------------
(Millions of Dollars Except Per Share Data)                      2001(a)         2000(b)         1999          1998(c)         1997
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>             <C>             <C>           <C>             <C>
Sales                                                        $4,333.1        $4,560.8        $4,520.5      $4,559.9        $4,940.5
Net earnings (loss)                                             108.0           282.0           300.3        (754.8)          227.2
Net earnings (loss) per common share - basic                     1.34            3.37            3.45         (8.22)           2.40
Net earnings (loss) per common share - assuming dilution         1.33            3.34            3.40         (8.22)           2.35
Total assets                                                  4,014.2         4,089.7         4,012.7       3,852.5         5,360.7
Long-term debt                                                1,191.4           798.5           847.1       1,148.9         1,623.7
Redeemable preferred stock of subsidiary (d)                    196.5           188.0              --            --            42.3
Cash dividends per common share                                   .48             .48             .48           .48             .48
------------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) Earnings for 2001  include a restructuring  charge of $99.8  million  before
    taxes ($70.6 million after taxes).
(b) Earnings 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 before taxes ($13.1 million after tax).
(c) Earnings 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.
(d) Included in other long-term liabilities.
</FN>
</TABLE>


                                      -9-
<PAGE>

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

Overview
The Corporation reported net earnings of $108.0 million, or $1.33 per share on a
diluted basis, for the year ended December 31, 2001, compared to net earnings of
$282.0  million,  or $3.34  per  share on a diluted  basis,  for the year  ended
December 31, 2000.
   Net  earnings  for the year  ended  December  31,  2001,  included  a pre-tax
restructuring  charge of $99.8 million  ($70.6 million net of tax). 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 the 2001 and 2000 restructuring charges and the
2000 gain,  net earnings for the year ended  December 31, 2001,  would have been
$178.6 million, or $2.20 per share on a diluted basis,  compared to net earnings
of $296.5  million,  or $3.51 per share on a diluted  basis,  for the year ended
December 31, 2000.
   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, 2001, 2000, and 1999.
--------------------------------------------------------------------------------
                                                 Year Ended December 31,
                                         ---------------------------------------
(Dollars in millions)                        2001           2000          1999
--------------------------------------------------------------------------------
Total sales                              $4,333.1       $4,560.8      $4,520.5
--------------------------------------------------------------------------------
Unit volume - existing (a)                     (1)%            6%           10%
Unit volume - disposed (b)                     --             --            (8)%
Price                                          (2)%           (2)%          (1)%
Currency                                       (2)%           (3)%          (2)%
--------------------------------------------------------------------------------
Change in total sales                          (5)%            1%           (1)%
================================================================================
(a) Represents   change  in  unit  volume  for  businesses  where   year-to-year
    comparability exists.
(b) Represents   change  in  unit  volume  for  businesses  that  were  sold  or
    recapitalized in 1998.

   Total  consolidated sales for the year ended December 31, 2001, were $4,333.1
million,  which  represented a 5% decrease from 2000 sales of $4,560.8  million.
Total unit volume had a 1% negative  impact on sales during 2001 compared to the
prior year. Unit volume was negatively  affected by weak economic conditions and
inventory  reductions  by  retailers in the United  States.  The impact of these
negative  factors  was  partially  offset  by  incremental  sales of  businesses
acquired by the Corporation.  The Corporation anticipates that the effect of the
economic  slowdown in the United  States and Europe will  continue to negatively
impact its sales into 2002.  Pricing  actions  taken in response to customer and
competitive pressures,  as well as to reduce the Corporation's inventory levels,
had a 2% negative  effect on sales for 2001 as compared  to 2000.  The  negative
effects of a stronger dollar compared to other foreign currencies,  particularly
the euro,  pound  sterling,  and  Brazilian  real,  caused a 2%  decrease in the
Corporation's consolidated sales during 2001 from the prior year level.
   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.

Earnings
The  Corporation  reported  consolidated  operating  income of $247.8 million on
sales of $4,333.1 million in 2001 compared to operating income of $503.3 million
on sales of $4,560.8  million in 2000 and to operating  income of $536.3 million
on sales of $4,520.5 million in 1999.
   Consolidated  operating  income  for 2001  included  a pre-tax  restructuring
charge of $99.8  million.  Consolidated  operating  income  for 2000  included a
pre-tax  restructuring  charge of $39.1  million  and a pre-tax  gain on sale of
business of $20.1 million.  That gain was recognized in connection with the sale
during 2000 of a $25.0 million senior increasing rate discount note,  payable by
True  Temper  Corporation,  received  in  connection  with  the  September  1998
recapitalization  of the  Corporation's  recreational  products  business,  True
Temper Sports,  as well as the Corporation's  remaining  interest in True Temper
Corporation.  Excluding these unusual items,  consolidated operating income as a
percentage  of sales would have been 8.0% in 2001,  11.5% in 2000,  and 11.9% in
1999.
   Consolidated  gross  margin  as a  percentage  of sales  for  2001 was  34.3%
compared to 36.7% for 2000. While the results of the Corporation's Six Sigma and
other productivity  initiatives  positively impacted gross margin in 2001, other
negative factors offset that favorability.  Those negative factors included: (i)
pricing  actions  taken by the  Corporation  in  response to both  customer  and
competitive pressures,  as well as price reductions to increase sales of certain
inventories;  and (ii) lower  manufacturing  volumes,  as the  Corporation  took
actions  to  reduce  its  inventory   levels,   which  resulted  in  unfavorable
manufacturing   overhead  absorption  as  well  as  reduced  productivity.   The
Corporation  anticipates  continued  lower  gross  margins in the near term as a
result of a reduction  in  manufacturing  volumes in  response to the  worldwide
economic  slowdown,  pricing  actions,  pressure in Europe from competition from
low-cost  consumer  power tools imported from Asia and the effects of a stronger
dollar compared to other foreign currencies.
   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:


                                      -10-
<PAGE>

(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
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 were partially mitigated by
the hedge program more fully described under the caption "Hedging Activities."
   Consolidated selling, general, and administrative expenses as a percentage of
sales  were  26.3% in 2001,  compared  to 25.2% in 2000 and  25.4% in 1999.  The
increase in selling,  general,  and  administrative  expenses as a percentage of
sales from 2000 to 2001 was  primarily  due to the  favorable  impact of reduced
selling,  general, and administrative  expenses through cost containment efforts
and the impact of certain  variable  expenses offset by lower sales in 2001. 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.
   Consolidated net interest expense (interest expense less interest income) was
$84.3 million in 2001,  compared to $104.2  million in 2000 and $95.8 million in
1999. The lower net interest expense for 2001 compared to 2000 was primarily the
result of lower  interest  rates.  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.
   Other expense (income) was $8.2 million in 2001 compared to $(5.5) million in
2000 and $(.8)  million  in 1999.  The  increase  in other  expense  in 2001 was
primarily  the result of dividends on a  subsidiary's  preferred  shares as more
fully described in Note 12 of Notes to Consolidated Financial Statements.
   Consolidated income tax expense of $47.3 million,  $122.6 million, and $141.0
million was recognized on the  Corporation's  pre-tax income of $155.3  million,
$404.6  million,  and  $441.3  million  for 2001,  2000 and 1999,  respectively.
Excluding,  for 2001,  the income tax benefit of $29.2  million  relating to the
pre-tax  restructuring  charge of $99.8  million and,  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, the Corporation's  reported tax rate would
have been 30% in 2001 and 2000,  compared  to 32% in 1999.  The  decrease in the
effective tax rate (excluding the effects of the  restructuring  charge and gain
on sale of  business)  from 32% in 1999 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 $108.0 million and $282.0 million,
or $1.33 and $3.34 per share on a diluted  basis,  for the years ended  December
31,  2001  and  2000,  respectively.  Excluding  the  effects  of the  after-tax
restructuring  charge  of $70.6  million  and  $27.6  million  in 2001 and 2000,
respectively,  and the  after-tax  gain on sale of business of $13.1  million in
2000, net earnings for 2001 would have been $178.6  million,  or $2.20 per share
on a diluted basis,  compared to $296.5 million, or $3.51 per share on a diluted
basis,  for 2000. The Corporation  reported net earnings of $300.3  million,  or
$3.40 per share on a diluted  basis,  for 1999. In addition to the impact of the
operational matters and lower effective tax rate previously described,  earnings
per share for 2001 and 2000 also  benefited  from lower shares  outstanding as a
result of a stock repurchase program.

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 $1.0 million,  $14.4 million,  and $12.4 million for the
years ended December 31, 2001, 2000, and 1999,  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.
   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 $99.8 million  pre-tax  restructuring  charge  recognized in 2001,
$81.4  million  related to the  businesses  in the Power  Tools and  Accessories
segment,   $17.5  million  related  to  businesses  in  the  Hardware  and  Home
Improvement  segment, and $.9 million related to businesses in the Fastening and
Assembly  Systems  segment.  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  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 million 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 of $4.2 million of restructuring reserves established
in 1998.


                                      -11-
<PAGE>

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):
--------------------------------------------------------------------------------
Year Ended December 31,                               2001       2000       1999
--------------------------------------------------------------------------------
Sales to unaffiliated customers                   $3,121.1   $3,184.8   $3,030.0
Segment profit                                       252.4      351.8      358.2
--------------------------------------------------------------------------------
   Sales to unaffiliated  customers in the Power Tools and  Accessories  segment
during 2001 decreased 2% from the 2000 level.  In North America,  sales of power
tools and accessories  during 2001 decreased at a low single-digit rate from the
2000 level,  with sales declines  experienced in both  professional and consumer
power tools and  accessories.  Those  declines were mainly driven by unfavorable
economic  conditions  in the United  States and actions  taken by certain  major
customers to reduce  inventory  levels.  These  negative  factors were partially
offset by incremental  sales of  professional  power tools  associated  with two
businesses acquired in June and December of 2000.
   Sales in Europe  during 2001  decreased at a mid  single-digit  rate from the
2000 level,  driven by a  double-digit  rate of decline in sales of both outdoor
products and consumer power tools. These declines were partially offset by a mid
single-digit  rate of  growth in sales of  professional  power  tools.  Sales of
outdoor  products and consumer power tools were negatively  impacted during 2001
by slowing economic conditions,  particularly in Germany and the United Kingdom,
coupled with  inventory  actions by retailers  with high levels of private label
Asian products. The growth in professional power tools during 2001, resulted, in
part, from the transition from the ELU to the DEWALT brand in Europe.
   Sales in other geographic areas increased at a high single-digit rate in 2001
from the 2000 level, as higher sales were achieved in professional  power tools,
consumer power tools and outdoor products.
   Segment  profit as a percentage of sales for the Power Tools and  Accessories
segment  was 8.1% for 2001  compared to 11.0% in 2000.  The  declines in segment
profit  during 2001 were driven by lower gross  margins as a percentage of sales
resulting from the Corporation's  actions to reduce  inventory,  including price
reductions  and  lower   production   levels,   which  resulted  in  unfavorable
manufacturing   absorption   and   slightly   higher   selling,   general,   and
administrative  expenses  as a  percentage  of sales.  The higher  expenses as a
percentage of sales reflected  decreased  promotional  spending offset by higher
distribution, transportation, and information systems expenses.
   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.

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):
--------------------------------------------------------------------------------
Year Ended December 31,                               2001       2000       1999
--------------------------------------------------------------------------------
Sales to unaffiliated customers                     $784.7     $846.7     $841.0
Segment profit                                        59.1      113.5      118.8
--------------------------------------------------------------------------------
   Sales to unaffiliated  customers in the Hardware and Home Improvement segment
decreased  by 7% for 2001 from the 2000  level.  Sales of  security  hardware in
North America  decreased at a high  single-digit  rate, with sales decreasing in
both the retail and construction channels.  Sales of plumbing products decreased
at a low  double-digit  rate, with sales  decreasing more  significantly  in the
retail  channels.  Sales in the retail  channels  continue to be impacted by the
weak retail  environment  and inventory  correction  actions taken by retailers,
and, for security hardware, the continuing effects of a line review conducted in
2000 by a major  customer.  Sales of  security  hardware  in Europe were flat as
compared to the prior year level.


                                      -12-
<PAGE>

   Segment profit as a percentage of sales for the Hardware and Home Improvement
segment  was 7.5% for 2001  compared  to 13.4%  for  2000.  Segment  profit as a
percentage  of sales  in 2001  was  negatively  impacted  by a mid  single-digit
decline  in  gross  margin  and a  slight  increase  in  selling,  general,  and
administrative  expenses as a percentage of sales.  The decrease in gross margin
for 2001,  was  primarily  a result of  manufacturing  inefficiencies  and costs
associated with  manufacturing  transition issues in the North American security
hardware  business and with lower production  volumes of North American security
hardware and plumbing products. Selling, general, and administrative expenses in
the Hardware and Home Improvement  segment decreased slightly in 2001;  however,
these  expenses  increased as a percentage  of sales given the reduced  sales in
2001.
   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.

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):
--------------------------------------------------------------------------------
Year Ended December 31,                               2001       2000       1999
--------------------------------------------------------------------------------
Sales to unaffiliated customers                     $492.4     $502.6     $480.4
Segment profit                                        69.9       81.8       78.8
--------------------------------------------------------------------------------
   Sales to unaffiliated customers in the Fastening and Assembly Systems segment
for 2001 declined 2%, as compared to 2000, due to a  double-digit  rate decrease
in sales to industrial customers offset by a high single-digit rate of growth in
automotive product sales, including incremental sales associated with a business
acquired in April 2001, and a mid-single-digit rate of growth of sales in Asia.
   Segment  profit as a  percentage  of sales  for the  Fastening  and  Assembly
Systems  segment was 14.2% for 2001  compared to 16.3% for 2000.  The decline in
segment profit as a percentage of sales for 2001 was principally due to declines
in gross margin as a percentage of sales resulting from  unfavorable mix, due to
lower margins in the  distribution  business  acquired  from Bamal,  and pricing
pressure.
   Sales to unaffiliated customers in the Fastening and Assembly Systems segment
increased  5% 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 16.3% in 2000 approximated the 1999 level.

Restructuring Actions
The  Corporation  is  committed  to  continuous  productivity   improvement  and
continues to evaluate  opportunities to reduce fixed costs,  simplify or improve
processes, and eliminate excess capacity.
   During the fourth quarter of 2001, the Corporation formulated a restructuring
plan designed to reduce its manufacturing footprint,  variable production costs,
and selling,  general, and administrative  expenses. The Corporation anticipates
that the cost of the total  restructuring plan - expected to be completed over a
two- to three-year  period - will  approximate  $190 million.  During 2001,  the
Corporation  commenced the first phase of that restructuring plan and recorded a
pre-tax restructuring charge of $99.8 million. That $99.8 million charge was net
of $4.2 million of reversals of previously provided  restructuring reserves that
were no longer required.
   The $99.8 million pre-tax  restructuring  charge recognized in 2001 reflected
actions to reduce the Corporation's  manufacturing  cost base in its Power Tools
and Accessories and Hardware and Home Improvement  segments,  as well as actions
to reduce selling,  general,  and administrative  expenses throughout all of its
businesses.  Actions to reduce the Corporation's manufacturing cost base include
the closure of two facilities in the Power Tools and Accessories  segment in the
United  States  as well as the  closure  by the  Hardware  and Home  Improvement
segment of a plumbing  products  facility  in the United  States.  In  addition,
actions associated with the 2001 restructuring  charge will include the transfer
of certain  production and service operations in the Power Tools and Accessories
and Hardware and Home Improvement  segments from facilities in the United States
and England to  low-cost  facilities  in Mexico and China and to a new  low-cost
facility  in  the  Czech   Republic.   In  addition  to  these  changes  to  the
Corporation's manufacturing footprint, the 2001 restructuring plan also provides
for the outsourcing of certain currently  manufactured  items in instances where
cost   advantages  are  present  and  quality  can  be   maintained.   The  2001
restructuring  charge  provides  for  actions to reduce  selling,  general,  and
administrative expenses,  principally in the United States and Europe, including
consolidation  of  certain  distribution   locations  and  other  administrative
functions, as well as reductions in selling and administrative headcount.
   As indicated in Note 18 of Notes to Consolidated  Financial  Statements,  the
severance benefits accrual,  included in the $99.8 million pre-tax restructuring
charge  taken  in  2001,  related  to the  elimination  of  approximately  2,500
positions in high-cost locations. The Corporation estimates that, as a result of
increases  in   manufacturing   employee   headcount   in  low-cost   locations,
approximately 1,900 replacement  positions will be filled,  yielding a net total
of 600 positions eliminated as a result of the 2001 restructuring actions. As of
December  31,  2001,  approximately  100 of  those  600 net  positions  had been
eliminated, with the balance to be eliminated during 2002.


                                      -13-
<PAGE>

   As described above, the overall  restructuring  plan formulated in the fourth
quarter of 2001 will be completed over a two- to three-year period. Accordingly,
the remainder of that overall restructuring plan, as currently envisioned,  will
be  implemented in 2003 and 2004.  Restructuring  charges of  approximately  $90
million are expected to be  recognized in those years - in addition to the $99.8
million recognized in 2001 - bringing the total restructuring  charge associated
with the two- to three-year  program to  approximately  $190 million.  Given the
nature and duration of this restructuring plan, charges to be incurred in future
years  are  subject  to  varying  degrees  of  estimation  associated  with  key
assumptions,  such as actual  timing of  execution,  currency  impacts,  general
economic conditions, and other variables.
   In  addition  to  the  recognition  of  restructuring  and  exit  costs,  the
Corporation  also recognizes  related  expenses,  incremental to the cost of the
underlying  restructuring  actions, that do not qualify as restructuring or exit
costs under generally  accepted  accounting  principles  ("restructuring-related
expenses").  Those  restructuring-related  expenses  include  items  -  directly
related  to  the  underlying   restructuring  actions  -  that  benefit  ongoing
operations,  such as  costs  associated  with the  transfer  of  equipment  from
high-cost  to low-cost  locations.  The  Corporation  does not  anticipate  that
savings associated with the 2001  restructuring  actions will materially benefit
2002 results as those savings are expected to be offset by restructuring-related
expenses and inefficiencies inherent in the transfer of production and services.
The Corporation  expects that  incremental  pre-tax savings  associated with the
2001  restructuring  actions  will benefit  2003  results by  approximately  $60
million.
   Ultimate savings realized from restructuring actions will likely be mitigated
by such factors as continued  economic  weakness and competitive  pressures,  as
well as decisions  to increase  costs in areas such as promotion or research and
development above levels that were otherwise assumed.
   During 2000, the Corporation  recognized pre-tax restructuring and exit costs
of $39.1 million. That restructuring charge provided for the transfer of certain
power tool production in England to low-cost manufacturing  facilities in China,
including  the  facility of one of the  Corporation's  joint  ventures,  and for
manufacturing  rationalization in the Hardware and Home Improvement  segment. In
addition,   the  2000   restructuring   charge   provided  for   reductions   in
administrative functions, principally in the Power Tools and Accessories segment
in Europe, and for the integration of the accessories business in North America,
which  previously  operated on a stand-alone  basis,  into the  professional and
consumer power tools business in North America.
   A summary of restructuring activity during the three years ended December 31,
2001, is set forth below (in millions of dollars).
--------------------------------------------------------------------------------
                                             Write-Down to
                                            Net Realizable
                                                  Value of
                                     Severance     Certain     Other
                                      Benefits   Equipment   Charges      Total
--------------------------------------------------------------------------------
Restructuring reserve at
   December 31, 1998                    $ 39.9      $   --     $10.9     $ 50.8
Reserves established in 1999,
   net of gain recognized                  4.4        (4.2)      4.0        4.2
Reversal of reserves                      (4.2)         --        --       (4.2)
Utilization of reserves:
   Cash                                  (21.4)         --      (5.3)     (26.7)
   Non-cash                                 --         4.2      (5.9)      (1.7)
--------------------------------------------------------------------------------
Restructuring reserve at
   December 31, 1999                      18.7          --       3.7       22.4
Reserves established in 2000              21.4        13.9       3.8       39.1
Utilization of reserves:
   Cash                                  (10.4)         --      (2.2)     (12.6)
   Non-cash                                 --       (13.9)      (.9)     (14.8)
--------------------------------------------------------------------------------
Restructuring reserve at
   December 31, 2000                      29.7          --       4.4       34.1
Reserves established in 2001              49.3        38.9      15.8      104.0
Reversal of reserves                      (3.8)         --       (.4)      (4.2)
Utilization of reserves:
   Cash                                  (21.5)         --      (3.4)     (24.9)
   Non-cash                                 --       (38.9)     (2.7)     (41.6)
--------------------------------------------------------------------------------
Restructuring reserve at
   December 31, 2001                    $ 53.7      $   --     $13.7     $ 67.4
================================================================================
   As  indicated  in the  preceding  table,  no  net  restructuring  charge  was
recognized by the Corporation in 1999.  During 1999, the Corporation  recognized
$13.1 million of additional pre-tax restructuring and exit costs associated with
restructuring of accessories and packaging operations in North America and power
tool operations in Latin America,  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 a prior  restructuring,  that had a fair value
exceeding  its net book value at the time of the earlier  restructuring  charge,
and by the reversal of $4.2 million of severance accruals established as part of
the  previous  restructuring  charge,  which  were no  longer  required.  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.

   Adjustments to the severance  component of restructuring  reserves previously
established  related 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.
During


                                      -14-
<PAGE>

2001,  2000,  and 1999,  none of the  adjustments  to the severance  obligations
recorded in connection with restructuring actions was individually significant.
   Asset  write-downs taken as part of the 2001 and 2000  restructuring  charges
principally  related  to  manufacturing   equipment.   The  carrying  values  of
manufacturing  equipment  and  furniture and fixtures were written down to their
fair value based upon estimated salvage values, which generally were negligible,
less disposal costs.

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.
   Prior to the euro's  introduction,  the twelve participating member countries
of the European  Monetary Union established fixed conversion rates between their
legacy  currencies and the euro. On January 1, 2002, the legacy  currencies were
canceled and replaced by the euro as legal tender. The Corporation has completed
actions to ensure that  computer  systems in its  European  operation  were in a
position  to  accommodate  the  January  1,  2002  adoption  of  the  euro.  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.
   As of December 31, 2001, the Argentine peso was not actively traded. Upon the
resumption of trading in January 2002, the Argentine  peso devalued  against the
United States dollar. The Corporation reflected the results of that devaluation,
which was not material to the consolidated financial statements, in its reported
results  for 2001.  While the  Corporation  will take  actions to  mitigate  its
exposures,  there  can  be no  assurance  that  any  future  devaluation  of the
Argentine  peso,  or  the  possible   ancillary   effects  on  other  countries,
particularly in Latin America, 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 2001, translation  adjustments,
recorded  in  the   accumulated   other   comprehensive   income   component  of
stockholders' equity,  decreased  stockholders' equity by $17.7 million compared
to a decrease of $64.8 million in 2000.
   In order to minimize the volatility of reported  equity,  the Corporation may
hedge, 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 2001 and 2000,  these  activities  netted to a cash inflow of $.5 million
and $3.7  million,  respectively.  The  corresponding  gains and losses on these
hedging activities were recorded in the accumulated other  comprehensive  income
component  of  stockholders'  equity.  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 2001,
2000 or 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 elect to manage its interest  rate risk
associated with changes in the fair value of its indebtedness, or the cash flows
of its indebtedness, through the use of interest rate 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 51% at December 31, 2001, compared to 65% at December 31, 2000, and
52% at December 31, 1999.  At December 31, 2001,  average debt  maturity was 7.9
years  compared to 5.4 years at December 31, 2000, and 6.2 years at December 31,
1999.

INTEREST RATE SENSITIVITY
The following  table  provides  information  as of December 31, 2001,  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, 2001.


                                      -15-
<PAGE>

<TABLE>
<CAPTION>
Principal Payments and Interest Rate Detail by Contractual Maturity Dates
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                          Fair Value
                                                                                                 There-                    (Assets)/
(U.S. Dollars in Millions)             2002        2003        2004        2005        2006       after         Total    Liabilities
------------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>        <C>         <C>         <C>         <C>         <C>         <C>           <C>
LIABILITIES
Short-term borrowings
Variable rate (other currencies)      $12.3      $   --      $   --      $   --      $   --      $   --      $   12.3      $   12.3
   Average interest rate               4.80%                                                                     4.80%
Long-term debt
Fixed rate (U.S. dollars)             $32.3      $309.5      $   --      $   --      $154.6      $700.0      $1,196.4      $1,224.5
   Average interest rate               8.86%       7.50%                               7.00%       6.99%         7.17%
Fixed rate (other currencies)         $ 1.4      $   .6      $   --      $   --      $   --      $   --      $    2.0      $    2.0
   Average interest rate               1.48%       1.49%                                                         1.48%
Other long-term liabilities
Fixed rate (U.S. dollars)             $  --      $   --      $   --      $188.0      $   --      $   --      $  188.0      $  196.5
   Average interest rate                                                   5.69%                                 5.69%

INTEREST RATE DERIVATIVES
Fixed to Variable Rate Interest
Rate Swaps (U.S. dollars)             $  --      $125.0      $   --      $188.0      $125.0      $350.0      $  788.0      $  (21.8)
   Average pay rate (a)
   Average receive rate                            6.02%                   6.49%       6.03%       5.75%         6.01%
------------------------------------------------------------------------------------------------------------------------------------
<FN>
(a) The average pay rate is based upon 6-month forward LIBOR,  except for $350.0
    million in notional  principal  amount which matures after 2006 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, 2001, the Corporation has
hedged a portion  of its 2002  estimated  foreign  currency  transactions  using
forward exchange contracts and purchased options. The Corporation  estimated the
effect on 2002 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 2002 by approximately $15 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 2001,  inherent in
the foreign exchange hedging portfolio at December 31, 2001.

Critical Accounting Policies
The  Corporation's  accounting  policies  are more fully  described in Note 1 of
Notes to Consolidated  Financial Statements.  As disclosed in Note 1 of Notes to
Consolidated  Financial  Statements,  the preparation of financial statements in
conformity with generally accepted accounting  principles requires management to
make  estimates  and  assumptions  about  future  events that affect the amounts
reported in the financial  statements and accompanying  notes. Future events and
their effects  cannot be  determined  with absolute  certainty.  Therefore,  the
determination  of estimates  requires the exercise of judgment.  Actual  results
inevitably  will  differ  from  those  estimates,  and such  differences  may be
material to the financial statements.
   The most significant  accounting estimates inherent in the preparation of the
Corporation's   financial  statements  include  estimates  associated  with  its
evaluation  of the  recoverability  of  goodwill  as well as  those  used in the
determination of liabilities related to warranty activity,  litigation,  product
liability,  taxation,  restructuring,  and environmental  matters.  In addition,
significant estimates form the bases for the Corporation's reserves with respect
to  sales  and  pricing  allowances,   collectibility  of  accounts  receivable,
inventory valuations,  post-retirement  benefits,  post-employment benefits, and
certain benefits provided to current  employees.  Various  assumptions and other
factors underlie the determination of these significant  estimates.  The process
of  determining  significant  estimates is fact  specific and takes into account
factors such as historical experience, current and expected economic conditions,
product mix, and in some cases,  actuarial  techniques.  The Company  constantly
re-evaluates  these  significant  factors and makes  adjustments where facts and
circumstances  dictate.  Historically,  actual  results  have not  significantly
deviated from those determined using the estimates described above.


                                      -16-
<PAGE>

Impact of New Accounting Standards
As more fully described in Note 1 of Notes to Consolidated Financial Statements,
on January 1, 2002,  the  Corporation  is required  to adopt two new  accounting
standards. For a discussion of the impact of those new accounting standards upon
the Corporation, see Note 1.

Financial Condition
Operating  activities  generated  cash of  $379.1  million  for the  year  ended
December 31, 2001,  compared to $349.9  million of cash  generated  for the year
ended December 31, 2000. The increase in cash provided from operating activities
in 2001 was  primarily  the  result of  improved  working  capital,  principally
associated  with  lower  inventory  levels,  and  $22.0  million  received  upon
termination of certain interest rate swaps, offset by lower net earnings and the
timing of payments of certain expenses,  principally income taxes. This decrease
in inventory in 2001 provided cash of $126.8  million in comparison to cash used
of $123.1 million in 2000.
   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, 2001, approximated the 2000 level. Inventory turns, during 2001,
improved  from  the  2000  level  due to the  Corporation's  focus  on  reducing
inventory levels. The Corporation's goal is to increase inventory turns in 2002.
   Investing  activities  for the year ended  December  31,  2001,  used cash of
$152.5 million  compared to $202.2 million of cash used in 2000.  Cash flow from
investing  activities  benefited from lower capital  expenditures during 2001 as
compared to 2000. This benefit was offset by the Corporation's  receipt of $25.0
million in 2000 related to the True Temper recapitalization.  On April 30, 2001,
the  Corporation  acquired  the  automotive  division  of Bamal  Corporation,  a
component of the  Fastening and Assembly  Systems  segment,  for $34.0  million.
During 2001, in connection with the Bamal purchase,  the Corporation made a cash
payment  of $30.5  million  and issued a  promissory  note in the amount of $3.5
million.  The  results  of Bamal were  included  in the  consolidated  financial
statements   from  the  date  of  acquisition  and  were  not  material  to  the
Corporation's results during 2001.
   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  (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 $15.0  million  may be
payable  based on the  income of  Momentum  in the  second  year  following  the
acquisition.
   Financing  activities  used cash of $114.7 million in 2001,  compared to cash
used  of  $150.0  million  in  2000.  The  decrease  in cash  used in  financing
activities  is  primarily  the  result  of lower  cash  expenditures  for  stock
repurchases  during 2001, the 2000 issuance of preferred  stock of a subsidiary,
and an increase in net cash  repayment of borrowings  during 2001.  During 2001,
the Corporation  repurchased  525,050 shares of its common stock at an aggregate
cost of $25.5  million  upon the  termination  of its  equity  forward  purchase
agreements,  as  more  fully  described  in  Note 13 of  Notes  to  Consolidated
Financial Statements, and repurchased 1,085,000 shares of its common stock at an
aggregate cost of $33.5 million through its share repurchase program. 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.  For further discussion
of the subsidiary's  preferred stock issued during 2000, see Note 12 of Notes to
Consolidated Financial Statements.
   As discussed further in Note 6 of Notes to Consolidated Financial Statements,
the  Corporation's  364-day $400 million  unsecured  revolving  credit  facility
expires in April 2002. The 364-day  facility  provides for annual  renewals upon
request of the  Corporation  and approval by the lending banks.  The Corporation
intends to request renewal of the facility.
   At December 31, 2001, the  Corporation had remaining  authorization  from its
Board of Directors to repurchase an  additional  1,911,595  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,
plus  proceeds  from the disposal of assets  (excluding  proceeds  from business
sales).  During the year ended December 31, 2001, the Corporation generated free
cash  flow of $256.6  million  compared  to free  cash  flow of  $154.5  million
generated in 2000.
   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.
   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, 2001, under the Corporation's revolving credit
facilities 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  facilities 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.


                                      -17-
<PAGE>

   The  following  table  provides  a summary of the  Corporation's  contractual
obligations by due date (in millions of dollars).  The Corporation's  short-term
borrowings,  long-term debt, lease commitments,  and other long-term obligations
are more fully  described in Notes 6, 7, 17, and 12,  respectively,  of Notes to
Consolidated Financial Statements.
--------------------------------------------------------------------------------
                                             Payments Due by Period
                             ---------------------------------------------------
                             Less than    1 to 2    3 to 5     After
                                1 Year     Years     Years   5 Years       Total
--------------------------------------------------------------------------------
Short-term borrowings (a)(b)    $ 12.3    $   --    $   --    $   --    $   12.3
Long-term debt                    33.7     310.1     154.6     700.0     1,198.4
Operating leases                  54.6      81.4      43.2      10.4       189.6
Other long-term obligations         --        --     188.0        --       188.0
--------------------------------------------------------------------------------
Total contractual
   cash obligations             $100.6    $391.5    $385.8    $710.4    $1,588.3
================================================================================
(a) As  more  fully  described  in Note 6 of  Notes  to  Consolidated  Financial
    Statements, the Corporation has credit facilities of $400.0 million and $1.0
    billion  that  mature in April 2002 and April 2006,  respectively.  While no
    borrowings were outstanding under these facilities at December 31, 2001, the
    Corporation had borrowings  outstanding  under these facilities  during 2001
    and anticipates that borrowings will occur in 2002.
(b) As  described  in Note 6 of  Notes  to  Consolidated  Financial  Statements,
    certain  subsidiaries of the  Corporation  outside of the United States have
    uncommitted  lines of credit of $303.6  million at December 31, 2001.  These
    uncommitted  lines of credit do not have termination  dates and are reviewed
    periodically.

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, 2001,  2000, and
   1999.

Consolidated Balance Sheet - December 31, 2001 and 2000.

Consolidated Statement of Stockholders'  Equity - years ended December 31, 2001,
   2000, and 1999.

Consolidated  Statement of Cash Flows - years ended December 31, 2001, 2000, and
   1999.

Notes to Consolidated Financial Statements.

Report of Management.

Report of Independent Auditors.


                                      -18-
<PAGE>

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


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Year Ended December 31,                                                     2001             2000             1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>              <C>              <C>
SALES                                                                   $4,333.1         $4,560.8         $4,520.5
   Cost of goods sold                                                    2,846.6          2,889.0          2,834.4
   Selling, general, and administrative expenses                         1,138.9          1,149.5          1,149.8
   Restructuring and exit costs                                             99.8             39.1               --
   Gain on sale of business                                                   --             20.1               --
-------------------------------------------------------------------------------------------------------------------
OPERATING INCOME                                                           247.8            503.3            536.3
   Interest expense (net of interest income of
      $34.7 for 2001, $44.1 for 2000, and $30.5 for 1999)                   84.3            104.2             95.8
   Other expense (income)                                                    8.2             (5.5)             (.8)
-------------------------------------------------------------------------------------------------------------------
EARNINGS BEFORE INCOME TAXES                                               155.3            404.6            441.3
   Income taxes                                                             47.3            122.6            141.0
-------------------------------------------------------------------------------------------------------------------
NET EARNINGS                                                            $  108.0         $  282.0         $  300.3
===================================================================================================================


-------------------------------------------------------------------------------------------------------------------
NET EARNINGS PER COMMON SHARE -- BASIC                                  $   1.34         $   3.37         $   3.45
===================================================================================================================
NET EARNINGS PER COMMON SHARE --
   ASSUMING DILUTION                                                    $   1.33         $   3.34         $   3.40
===================================================================================================================
See Notes to Consolidated Financial Statements.
</TABLE>


                                      -19-
<PAGE>

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


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
December 31,                                                                2001             2000
--------------------------------------------------------------------------------------------------
<S>                                                                     <C>              <C>
ASSETS
Cash and cash equivalents                                               $  244.5         $  135.0
Trade receivables, less allowances of
   $51.9 for 2001 and $51.8 for 2000                                       708.6            783.1
Inventories                                                                712.2            844.0
Other current assets                                                       227.0            199.9
--------------------------------------------------------------------------------------------------
   TOTAL CURRENT ASSETS                                                  1,892.3          1,962.0
--------------------------------------------------------------------------------------------------
PROPERTY, PLANT, AND EQUIPMENT                                             687.5            748.1
GOODWILL                                                                   710.4            717.2
OTHER ASSETS                                                               724.0            662.4
--------------------------------------------------------------------------------------------------
                                                                        $4,014.2         $4,089.7
==================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings                                                   $   12.3         $  402.9
Current maturities of long-term debt                                        33.7             47.7
Trade accounts payable                                                     312.7            367.6
Other accrued liabilities                                                  711.9            814.1
--------------------------------------------------------------------------------------------------
   TOTAL CURRENT LIABILITIES                                             1,070.6          1,632.3
--------------------------------------------------------------------------------------------------
LONG-TERM DEBT                                                           1,191.4            798.5
DEFERRED INCOME TAXES                                                      261.1            221.0
POSTRETIREMENT BENEFITS                                                    238.0            240.6
OTHER LONG-TERM LIABILITIES                                                502.1            479.8
COMMON STOCK UNDER EQUITY FORWARDS                                            --             25.1
STOCKHOLDERS' EQUITY
Common stock (outstanding: December 31, 2001 -- 79,829,641 shares;
   December 31, 2000 -- 80,343,094 shares)                                  39.9             40.2
Capital in excess of par value                                             566.6            560.0
Retained earnings                                                          333.2            264.0
Accumulated other comprehensive income                                    (188.7)          (171.8)
--------------------------------------------------------------------------------------------------
   TOTAL STOCKHOLDERS' EQUITY                                              751.0            692.4
--------------------------------------------------------------------------------------------------
                                                                        $4,014.2         $4,089.7
==================================================================================================
See Notes to Consolidated Financial Statements.
</TABLE>


                                      -20-
<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, 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
Comprehensive income:
   Net earnings                                                --         --           --        108.0             --         108.0
   Cumulative effect of accounting change
      (net of tax)                                             --         --           --           --            (.7)          (.7)
   Net gain on derivative instruments
      (net of tax)                                             --         --           --           --            (.2)          (.2)
   Minimum pension liability adjustment
      (net of tax)                                             --         --           --           --            1.7           1.7
   Foreign currency translation
      adjustments, less effect of
      hedging activities (net of tax)                          --         --           --           --          (17.7)        (17.7)
------------------------------------------------------------------------------------------------------------------------------------
Comprehensive income                                           --         --           --        108.0          (16.9)         91.1
------------------------------------------------------------------------------------------------------------------------------------
Cash dividends on common stock
   ($.48 per share)                                            --         --           --        (38.8)            --         (38.8)
Purchase and retirement of common stock                (1,085,000)       (.6)       (32.9)          --             --         (33.5)
Common stock retired under equity forwards               (765,326)       (.4)          --           --             --           (.4)
Common stock issued under
   employee benefit plans                               1,336,873         .7         39.5           --             --          40.2
------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 2001                           79,829,641      $39.9      $ 566.6      $ 333.2        $(188.7)       $751.0
====================================================================================================================================
See Notes to Consolidated Financial Statements.
</TABLE>


                                      -21-
<PAGE>

CONSOLIDATED STATEMENT OF CASH FLOWS
The Black & Decker Corporation and Subsidiaries
(Millions of Dollars)


<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
Year Ended December 31,                                                     2001             2000             1999
-------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>              <C>              <C>
OPERATING ACTIVITIES
Net earnings                                                             $ 108.0          $ 282.0          $ 300.3
Adjustments to reconcile net earnings to cash flow
   from operating activities:
   Gain on sale of business                                                   --            (20.1)              --
   Non-cash charges and credits:
      Depreciation and amortization                                        159.4            163.4            160.0
      Restructuring and exit costs                                          99.8             39.1               --
      Other                                                                 (4.4)            (9.2)           (14.1)
   Changes in selected working capital items
      (excluding the effects of acquired businesses):
      Trade receivables                                                     68.6             12.7            (57.0)
      Inventories                                                          126.8           (123.1)          (136.1)
      Trade accounts payable                                               (54.6)            13.6             21.9
   Restructuring spending                                                  (24.9)           (12.6)           (26.7)
   Other assets and liabilities                                            (99.6)             4.1            127.2
-------------------------------------------------------------------------------------------------------------------
   CASH FLOW FROM OPERATING ACTIVITIES                                     379.1            349.9            375.5
-------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from sale of business                                                --             25.0               --
Purchase of businesses                                                     (30.5)           (35.5)            (5.2)
Proceeds from disposal of assets                                            12.3              4.8             37.3
Capital expenditures                                                      (134.8)          (200.2)          (171.1)
Cash inflow from hedging activities                                         16.3            193.6            565.9
Cash outflow from hedging activities                                       (15.8)          (189.9)          (535.5)
-------------------------------------------------------------------------------------------------------------------
   CASH FLOW FROM INVESTING ACTIVITIES                                    (152.5)          (202.2)          (108.6)
-------------------------------------------------------------------------------------------------------------------
   CASH FLOW BEFORE FINANCING ACTIVITIES                                   226.6            147.7            266.9
FINANCING ACTIVITIES
Net (decrease) increase in short-term borrowings                          (390.0)           225.6              1.4
Proceeds from long-term debt
   (net of debt issue cost of $3.1 in 2001)                                393.8               --              2.6
Payments on long-term debt                                                 (48.6)          (213.8)          (122.0)
Issuance of preferred stock of subsidiary                                     --            188.0               --
Increase in long-term deposit                                                 --            (50.0)              --
Purchase of common stock                                                   (59.0)          (269.8)           (53.3)
Issuance of common stock                                                    27.9              9.9             11.5
Cash dividends                                                             (38.8)           (39.9)           (41.8)
-------------------------------------------------------------------------------------------------------------------
   CASH FLOW FROM FINANCING ACTIVITIES                                    (114.7)          (150.0)          (201.6)
Effect of exchange rate changes on cash                                     (2.4)           (10.0)            (5.9)
-------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                           109.5            (12.3)            59.4
Cash and cash equivalents at beginning of year                             135.0            147.3             87.9
-------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                 $ 244.5          $ 135.0          $ 147.3
===================================================================================================================
See Notes to Consolidated Financial Statements.
</TABLE>


                                      -22-
<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 2001.

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, 2001, approximately 27% 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.
   On a periodic  basis,  the Corporation  estimates the future  discounted cash
flows of the  businesses to which  goodwill  relates.  If such  estimates 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  is 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.

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 $98.9 million in 2001,  $95.3 million in 2000, and $91.0
million in 1999.

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 $214.0  million in 2001,  $205.6  million in 2000, and $195.7
million in 1999.

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 $222.2 million in 2001, $237.8 million in 2000,
and $223.7 million in 1999.

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.


                                      -23-
<PAGE>

   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:  Effective  January 1, 2001, the Corporation
adopted Statement of Financial  Accounting  Standards (SFAS) No. 133, Accounting
for Derivative  Instruments  and Hedging  Activities,  as amended.  SFAS No. 133
requires that the Corporation  recognize all derivatives on the balance sheet at
fair value and establishes criteria for designation and effectiveness of hedging
relationships.  At the time of its  adoption of SFAS No. 133 on January 1, 2001,
the Corporation  recognized an after-tax reduction of $.7 million to accumulated
other comprehensive income, a component of stockholders' equity, as a cumulative
effect adjustment.
   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 currency rates. The Corporation uses derivatives
principally in the management of interest rate and foreign currency exposure. It
does not utilize  derivatives  that contain  leverage  features.  On the date on
which the Corporation enters into a derivative,  the derivative is designated as
a hedge of the  identified  exposure.  The  Corporation  formally  documents all
relationships  between  hedging  instruments  and hedged  items,  as well as its
risk-management   objective   and  strategy  for   undertaking   various   hedge
transactions. In this documentation, the Corporation specifically identifies the
asset, liability,  firm commitment,  forecasted  transaction,  or net investment
that  has  been  designated  as the  hedged  item  and  states  how the  hedging
instrument  is  expected  to reduce the risks  related to the hedged  item.  The
Corporation  measures  effectiveness of its hedging  relationships both at hedge
inception and on an ongoing basis.
   For each  derivative  instrument  that is designated  and qualifies as a fair
value  hedge,  the  gain  or loss on the  derivative  instrument  as well as the
offsetting  loss or gain on the hedged item  attributable to the hedged risk are
recognized in current  earnings  during the period of the change in fair values.
For each  derivative  instrument that is designated and qualifies as a cash flow
hedge, the effective portion of the gain or loss on the derivative instrument is
reported  as  a  component  of  accumulated  other   comprehensive   income  and
reclassified into earnings in the same period or periods during which the hedged
transaction  affects  earnings.  The  remaining  gain or loss on the  derivative
instrument  in excess of the  cumulative  change in the present  value of future
cash flows of the hedged item, if any, is recognized in current  earnings during
the period of change.  For hedged forecasted  transactions,  hedge accounting is
discontinued  if the forecasted  transaction is no longer probable of occurring,
and  previously  deferred  hedging gains or losses would be recorded to earnings
immediately.  For  derivatives  that are designated and qualify as hedges of net
investments in subsidiaries  located outside the United States, the gain or loss
is reported in accumulated other comprehensive  income as part of the cumulative
translation adjustment to the extent the derivative is effective. For derivative
instruments  not  designated  as  hedging  instruments,  the  gain  or  loss  is
recognized in current earnings during the period of change.

   Interest Rate Risk  Management:  The  Corporation  has designated each of its
outstanding interest rate swap agreements as fair value hedges of the underlying
fixed rate  obligation.  The fair value of the interest rate swap  agreements is
recorded in other assets or other  long-term  liabilities  with a  corresponding
increase or decrease in the fixed rate obligation. The changes in the fair value
of the interest rate swap agreements and the underlying  fixed rate  obligations
are  recorded as equal and  offsetting  unrealized  gains and losses in interest
expense and other expense  (income) in the  Consolidated  Statement of Earnings.
The Corporation has structured all existing  interest rate swap agreements to be
100% effective.  As a result,  there is no current impact to earnings  resulting
from hedge ineffectiveness. Gains or losses resulting from the early termination
of interest  rate swaps are  deferred as an increase or decrease to the carrying
value of the related  debt and  amortized as an  adjustment  to the yield of the
related debt  instrument  over the remaining  period  originally  covered by the
swap.

   Foreign  Currency  Management:  The fair  value of foreign  currency  related
derivatives are generally  included in the  Consolidated  Balance Sheet in other
current assets and other accrued  liabilities.  The earnings impact of cash flow
hedges  relating to forecasted  purchases of inventory is generally  reported in
cost of goods sold to match the underlying  transaction  being hedged.  Realized
and unrealized gains and losses on these instruments are deferred in accumulated
other  comprehensive  income until the  underlying  transaction is recognized in
earnings. The earnings impact of cash flow hedges relating to the variability in
cash flows associated with foreign currency  denominated  assets and liabilities
is reported in cost of goods sold or other  expense  depending  on the nature of
the assets or  liabilities  being hedged.  The amounts  deferred in  accumulated
other comprehensive income associated with these instruments generally relate to
foreign currency  spot-rate to forward-rate  differentials and are recognized in
earnings  over the term of the hedge.  The discount or premium  relating to cash
flow hedges associated with foreign currency  denominated assets and liabilities
is recognized in net interest expense over the life of the hedge.


                                      -24-
<PAGE>

   Accounting Policy Prior to January 1, 2001: The  Corporation's  interest rate
derivatives  were afforded  hedge  accounting  treatment and were  designated as
hedges as they were  effective  in changing  the tenor of existing  indebtedness
(e.g.,  from fixed to  variable  rate debt or from  variable  rate to fixed rate
debt).  The amounts to be paid or received under  interest rate swap  agreements
were accrued as interest rates changed and were  recognized over the life of the
swap agreements as an adjustment of interest expense. The related amounts due to
or from the  counterparties  were included in other accrued  liabilities.  Since
they were accounted for as hedges,  the fair value of the swap  agreements  were
not  recognized  in the  Consolidated  Financial  Statements.  Gains  or  losses
resulting  from the early  termination of interest rate swaps have been deferred
and amortized as an adjustment to the yield of the related debt  instrument over
the remaining period originally covered by the terminated swaps.
   The  Corporation's  derivative  financial  instruments  relating  to managing
foreign exchange risks were appropriately designated to the underlying exposures
and were  afforded  hedge  accounting  treatment.  Gains and  losses on  foreign
currency  transaction  hedges were recognized in earnings 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,  and were recognized in cost of goods sold when the related inventory
was sold or when a hedged purchase was no longer expected to occur. The carrying
amounts  of  foreign   currency-related   derivatives   were   included  in  the
Consolidated Balance Sheet in other current assets or other accrued liabilities.

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.

New Accounting Pronouncements:  In July 2001, the Financial Accounting Standards
Board issued SFAS No. 142, Goodwill and Other Intangible  Assets,  effective for
fiscal years beginning after December 15, 2001. Under SFAS No. 142, goodwill and
intangible  assets deemed to have  indefinite  lives will no longer be amortized
but will be subject to annual  impairment  tests.  Other intangible  assets will
continue to be amortized over their useful lives. The Corporation will apply the
provisions  of SFAS No. 142  beginning  on January 1, 2002.  Application  of the
nonamortization  provisions of SFAS No. 142 is expected to result in an increase
in net  earnings  of  approximately  $26  million  per year.  During  2002,  the
Corporation will perform the first of the required  impairment tests of goodwill
using the  methodology  prescribed  by SFAS No. 142.  The  Corporation  does not
expect that goodwill will be impaired upon the initial  application  of SFAS No.
142's required impairment test.
   In November 2001, the Emerging  Issues Task Force reached  consensus on Issue
No.  01-9,  Accounting  for  Consideration  Given by a Vendor to a Customer or a
Reseller of the Vendor's  Products (EITF 01-9).  Upon adoption of this consensus
on January  1, 2002,  the  Corporation  will be  required  to  classify  certain
payments to its  customers as a reduction of sales.  The  Corporation  currently
classifies  certain of these  payments as selling  expenses in its  Consolidated
Statement of Earnings. Upon adoption, prior period amounts will be reclassified.
Because adoption of EITF 01-9 will solely result in reclassification  within the
Consolidated Statement of Earnings, there will be no impact on the Corporation's
financial  condition,  operating income, or net earnings.  Upon adoption of EITF
01-9, the  reclassification  within the Consolidated  Statement of Earnings will
not be  material  to  either  sales  or  selling,  general,  and  administrative
expenses.


NOTE 2: INVENTORIES
The  classification  of  inventories  at the end of each year,  in  millions  of
dollars, was as follows:
--------------------------------------------------------------------------------
                                                             2001          2000
--------------------------------------------------------------------------------
FIFO cost
Raw materials and work-in-process                          $192.9        $219.6
Finished products                                           527.0         627.9
--------------------------------------------------------------------------------
                                                            719.9         847.5
Excess of FIFO cost over
   LIFO inventory value                                      (7.7)         (3.5)
--------------------------------------------------------------------------------
                                                           $712.2        $844.0
================================================================================
   The cost of  United  States  inventories  stated  under the LIFO  method  was
approximately 54% and 56% of the value of total inventories at December 31, 2001
and 2000, 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:
--------------------------------------------------------------------------------
                                                             2001          2000
--------------------------------------------------------------------------------
Property, plant, and equipment at cost:
Land and improvements                                    $   48.4      $   56.0
Buildings                                                   279.1         269.2
Machinery and equipment                                   1,137.1       1,267.8
--------------------------------------------------------------------------------
                                                          1,464.6       1,593.0
Less accumulated depreciation                               777.1         844.9
--------------------------------------------------------------------------------
                                                         $  687.5      $  748.1
================================================================================


                                      -25-
<PAGE>

NOTE 4: GOODWILL
Goodwill  amortization  was $26.4 million in 2001,  $25.4  million in 2000,  and
$25.7 million in 1999. Goodwill at the end of each year, in millions of dollars,
was as follows:
--------------------------------------------------------------------------------
                                                             2001          2000
--------------------------------------------------------------------------------
Goodwill                                                 $1,320.1      $1,300.5
Less accumulated amortization                               609.7         583.3
--------------------------------------------------------------------------------
                                                         $  710.4      $  717.2
================================================================================


NOTE 5: OTHER ACCRUED LIABILITIES
Other  accrued  liabilities  at the end of each year,  in  millions  of dollars,
included the following:
--------------------------------------------------------------------------------
                                                             2001          2000
--------------------------------------------------------------------------------
Salaries and wages                                         $ 52.6        $ 61.9
Employee benefits                                            77.5          99.1
Trade discounts and allowances                              132.4         139.8
Advertising and promotion                                    65.6          60.4
Income taxes, including deferred taxes                       12.7          92.6
Accruals related to restructuring actions                    67.4          34.1
All other                                                   303.7         326.2
--------------------------------------------------------------------------------
                                                           $711.9        $814.1
================================================================================
   All other at December 31, 2001 and 2000,  consisted primarily of accruals for
warranty costs, interest, insurance, and taxes other than income taxes.


NOTE 6: SHORT-TERM BORROWINGS
Short-term  borrowings  in the amount of $12.3  million at  December  31,  2001,
consisted primarily of borrowings under the terms of uncommitted lines of credit
or other short-term borrowing arrangements.  Short-term borrowings in the amount
of $402.9 million at December 31, 2000,  consisted primarily of borrowings under
the Corporation's  former unsecured revolving credit facility (the Former 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 4.8%  and  6.6% at  December  31,  2001  and  2000,
respectively.
   In April 2001,  the  Corporation  replaced the Former Credit  Facility with a
$1.0 billion unsecured  revolving credit facility that expires in April 2006 and
a $400.0  million  364-day  unsecured  revolving  credit  facility  (the  Credit
Facilities). The 364-day unsecured revolving credit facility provides for annual
renewals upon request by the Corporation and approval by the lending banks.  The
amount available for borrowing under the Credit  Facilities at December 31, 2001
was $1.4 billion.
   Under the Credit  Facilities,  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 Facilities  provide that the
interest rate margin over LIBOR, initially set at .475% and .500%, 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. In
addition  to the  interest  payable  on the  principal  amount  of  indebtedness
outstanding  from time to time under the Credit  Facilities,  the Corporation is
required to pay an annual  facility fee to each bank,  initially  equal to .150%
and .125%, respectively,  of the amount of each bank's commitment,  whether used
or unused.  The Corporation is also required to pay a utilization fee under each
facility,  initially  equal to .125%,  applied to the  outstanding  balance when
borrowings under the respective facility exceeds 50% of the facility. The Credit
Facilities  provide  that both the  facility  fee and the  utilization  fee will
increase or  decrease  based upon  changes in the  ratings of the  Corporation's
senior unsecured debt.
   The  Credit  Facilities  include  various  customary  covenants.  Some of the
covenants  limit the ability of the  Corporation or its  subsidiaries  to pledge
assets or incur liens on assets.  Other  covenants  require the  Corporation  to
maintain a specified  interest  coverage  ratio and  certain  cash flow to fixed
expense  coverage  ratios.  As of December  31,  2001,  the  Corporation  was in
compliance with all terms and conditions of the Credit Facilities.
   Under the terms of uncommitted lines of credit at December 31, 2001,  certain
subsidiaries  outside of the United States may borrow up to an additional $303.6
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  could  borrow up to $1.0  billion  under the Former  Credit
Facility,  which  consisted  of two  individual  facilities.  The Former  Credit
Facility  expired  in  April  2001.  Under  the  Former  Credit  Facility,   the
Corporation had the option of borrowing at LIBOR plus a specified percentage, or
at other variable rates set forth therein.  The Former Credit Facility  provided
that the  interest  rate  margin  over  LIBOR,  initially  set at .15% and .25%,
respectively,  for each of the two  individual  facilities,  would  increase  or
decrease based upon changes in the ratings of the Corporation's long-term senior
unsecured  debt. The Corporation was also able to borrow under the Former Credit
Facility by means of competitive  bid rate loans made through an auction process
at then-current market rates.


NOTE 7: LONG-TERM DEBT
The  composition  of  long-term  debt at the end of each year,  in  millions  of
dollars, was as follows:
--------------------------------------------------------------------------------
                                                             2001          2000
--------------------------------------------------------------------------------
Medium Term Notes due through 2002                       $   32.3        $ 75.6
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
7.125% notes due 2011
   (including discount of $2.9)                             397.1            --
7.05% notes due 2028                                        150.0         150.0
Other loans due through 2003                                  2.0           6.5
Fair value hedging adjustment                                29.6            --
Less current maturities of long-term debt                   (33.7)        (47.7)
--------------------------------------------------------------------------------
                                                         $1,191.4        $798.5
================================================================================


                                      -26-
<PAGE>

   As of  December  31,  2001,  $32.3  million  aggregate  principal  amount  of
unsecured  Medium Term Notes was  outstanding  and bears interest at fixed rates
ranging from 8.36% to 8.91%.
   As more fully  described in Note 8, at December 31, 2001, the carrying amount
of long-term debt includes  $29.6 million  relating to outstanding or terminated
fixed-to-variable rate interest rate swaps agreements.
   Indebtedness  of subsidiaries  in the aggregate  principal  amounts of $314.4
million and $599.6  million were included in the  Consolidated  Balance Sheet at
December 31, 2001 and 2000,  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 five years
are as  follows:  $33.7  million in 2002,  $310.1  million  in 2003,  and $154.6
million  in  2006.  No  principal  payments  are due in 2004 or  2005.  Interest
payments on all  indebtedness  were $122.2  million in 2001,  $145.1  million in
2000, and $140.1 million in 1999.


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.
   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 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.  The  Corporation  may, based upon its assessment of the future
interest rate  environment,  elect to manage its interest  rate risk  associated
with  changes in the fair value of its  indebtedness,  or the future  cash flows
associated with its indebtedness, through the use of interest rate swaps.
   The amounts exchanged by the  counterparties to interest rate swap 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 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 at December 31,
2001 and 2000,  consisted of $788.0 million notional and $588.0 million notional
amounts  of  fixed-to-variable  rate swaps  with a  weighted-average  fixed rate
receipt of 6.01% and 6.17%, respectively. The basis of the variable rate paid is
LIBOR.
   Credit exposure on the  Corporation's  interest rate  derivatives at December
31, 2001, was $28.6 million.  During 2001, the Corporation  terminated  interest
rate swap  instruments  with an  aggregate  notional  amount of $300.0  million.
Deferred  gains on the early  termination  of  interest  rate  swaps  were $21.5
million at December 31,  2001.  At December 31,  2000,  the  Corporation  had no
credit  exposure on interest rate  derivatives  and deferred gains and losses on
the early termination of interest rate swaps were not material.

Foreign  Currency  Management:  The  Corporation  enters  into  various  foreign
currency  contracts in managing its foreign currency  exchange risk.  Generally,
the foreign currency contracts have maturity dates of less than eighteen months.
The contractual  amounts of foreign currency  derivatives,  principally  forward
exchange  contracts  and  purchased  options,  generally  are  exchanged  by the
counterparties.  The Corporation's  foreign currency  derivatives are designated
to,  and  generally  are  denominated  in  the  currencies  of,  the  underlying
exposures.  To minimize the volatility of reported  equity,  the Corporation may
hedge,  on a limited  basis,  a portion of its net  investment  in  subsidiaries
located  outside the United States through the use of foreign  currency  forward
contracts 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.


                                      -27-
<PAGE>

   The following table  summarizes the contractual  amounts of forward  exchange
contracts  as of December 31, 2001 and 2000,  in millions of dollars,  including
details by major currency as of December 31, 2001. 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, 2001                                       Buy          Sell
--------------------------------------------------------------------------------
United States dollar                                     $  808.9     $  (679.2)
Pound sterling                                              779.6        (352.4)
Canadian dollar                                              19.4         (21.3)
Euro (including legacy currencies)                          145.7        (523.7)
Australian dollar                                            24.6         (43.2)
Japanese yen                                                 12.3         (54.5)
Swedish krona                                                24.9         (53.5)
Other                                                         3.1         (75.7)
--------------------------------------------------------------------------------
Total                                                    $1,818.5     $(1,803.5)
================================================================================
As of December 31, 2000
--------------------------------------------------------------------------------
Total                                                    $1,681.8     $(1,662.3)
================================================================================
   The contractual amounts of purchased options to buy currencies, predominantly
the euro,  pound  sterling,  and United  States  dollar,  were $47.1 million and
$193.4  million,  at December 31, 2001 and 2000,  respectively.  The contractual
amounts of purchased  options to sell various  currencies were $46.0 million and
$181.6 million at December 31, 2001 and 2000, respectively.
   Credit exposure on foreign  currency  derivatives as of December 31, 2001 and
2000, was $16.4 million and $43.7 million, respectively.
   Hedge ineffectiveness and the portion of derivative gains and losses excluded
from the assessment of hedge  effectiveness  related to the  Corporation's  cash
flow hedges that were recorded to earnings during 2001 were not significant. The
amounts of gains and losses,  reclassified from accumulated other  comprehensive
income to earnings  during 2001,  that related to the January 1, 2001 transition
adjustment were not significant.
   Amounts deferred in accumulated  other  comprehensive  income at December 31,
2001, that are expected to be  reclassified  into earnings during 2002 represent
an after-tax loss of $.3 million.  The amount expected to be  reclassified  into
earnings in the next twelve months includes  unrealized gains and losses related
to open foreign currency contracts.  Accordingly,  the amount that is ultimately
reclassified into earnings may differ materially.


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 is based on the present value of the cash flows associated with
the preferred shares, discounted at current market yields.

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, 2001                                    Amount         Value
--------------------------------------------------------------------------------
Non-derivatives:
   Long-term debt                                       $(1,191.4)    $(1,192.8)
   Other long-term liabilities                             (196.5)       (196.5)
--------------------------------------------------------------------------------
Derivatives relating to:
   Debt
      Assets                                                 19.7          19.7
      Liabilities                                            (6.8)         (6.8)
   Other long-term liabilities
      Assets                                                  8.9           8.9
   Foreign currency
      Assets                                                 16.4          16.4
      Liabilities                                            (1.4)         (1.4)
--------------------------------------------------------------------------------


                                      -28-
<PAGE>

Assets (Liabilities)                                     Carrying          Fair
As of December 31, 2000                                    Amount         Value
--------------------------------------------------------------------------------
Non-derivatives:
   Long-term debt                                         $(798.5)      $(791.9)
   Other long-term liabilities                             (188.0)       (188.0)
--------------------------------------------------------------------------------
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)
--------------------------------------------------------------------------------


NOTE 10: INCOME TAXES
Earnings  before  income  taxes for each year,  in millions of dollars,  were as
follows:
--------------------------------------------------------------------------------
                                               2001          2000          1999
--------------------------------------------------------------------------------
United States                                $ 93.0        $209.3        $174.4
Other countries                                62.3         195.3         266.9
--------------------------------------------------------------------------------
                                             $155.3        $404.6        $441.3
================================================================================
   Significant  components of income taxes (benefits) for each year, in millions
of dollars, were as follows:
--------------------------------------------------------------------------------
                                               2001          2000          1999
--------------------------------------------------------------------------------
Current:
   United States                             $ 26.8        $ 93.7        $128.3
   Other countries                             18.7          29.3          18.5
--------------------------------------------------------------------------------
                                               45.5         123.0         146.8
--------------------------------------------------------------------------------
Deferred:
   United States                               16.1           3.5         (17.7)
   Other countries                            (14.3)         (3.9)         11.9
--------------------------------------------------------------------------------
                                                1.8           (.4)         (5.8)
--------------------------------------------------------------------------------
                                             $ 47.3        $122.6        $141.0
================================================================================
   Income tax expense  recorded  directly as an adjustment to equity as a result
of hedging  activities was not significant in 2001,  2000, and 1999.  Income tax
benefits  recorded  directly as an  adjustment to equity as a result of employee
stock options were $8.8 million,  $.9 million,  and $4.9 million in 2001,  2000,
and 1999, respectively.
   Income tax payments  were $74.3 million in 2001,  $98.8 million in 2000,  and
$97.1  million in 1999.
   Deferred  tax  (liabilities)  assets at the end of each year,  in millions of
dollars, were composed of the following:
--------------------------------------------------------------------------------
                                                             2001          2000
--------------------------------------------------------------------------------
Deferred tax liabilities:
   Fixed assets                                           $  (8.2)      $  (5.7)
   Postretirement benefits                                 (232.7)       (227.8)
   Other                                                    (24.2)        (24.6)
--------------------------------------------------------------------------------
Gross deferred tax liabilities                             (265.1)       (258.1)
--------------------------------------------------------------------------------
Deferred tax assets:
   Tax loss carryforwards                                    77.1          57.2
   Tax credit and capital loss
      carryforwards                                          82.8          82.6
   Other                                                    102.3         109.9
--------------------------------------------------------------------------------
Gross deferred tax assets                                   262.2         249.7
--------------------------------------------------------------------------------
Deferred tax asset valuation allowance                      (60.0)        (50.5)
--------------------------------------------------------------------------------
Net deferred tax liabilities                              $ (62.9)      $ (58.9)
================================================================================
   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, 2001,  consisted of net  operating
losses expiring from 2002 to 2007.
   At December  31, 2001,  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 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:
--------------------------------------------------------------------------------
                                               2001          2000          1999
--------------------------------------------------------------------------------
Income taxes at federal
   statutory rate                            $ 54.4        $141.6        $154.5
Lower effective taxes on
   earnings in other countries                (17.2)        (28.7)        (42.6)
Amortization of goodwill                        8.9           9.0           9.0
Other -- net                                    1.2            .7          20.1
--------------------------------------------------------------------------------
Income taxes                                 $ 47.3        $122.6        $141.0
================================================================================


                                      -29-
<PAGE>

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
                                                   ---------------------------------------------------------------------------------
                                                         2001          2000          2001          2000          2001          2000
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>           <C>            <C>           <C>          <C>           <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year              $  762.8      $  759.7        $401.5        $414.2       $ 150.5       $ 132.8
Service cost                                             14.1          13.2          11.0          10.9           1.1            .8
Interest cost                                            54.4          53.4          23.4          23.0          10.5           9.1
Plan participants' contributions                           --            --           2.0           2.1           4.6           5.5
Actuarial (gains) losses                                 49.4           4.7          (8.0)         15.8          20.6          25.2
Foreign currency exchange rate changes                     --            --          (1.9)        (41.6)          (.2)          (.2)
Benefits paid                                           (61.1)        (61.9)        (20.9)        (23.3)        (29.8)        (22.7)
Plan amendments                                            --            --           2.9           2.0            .9            --
Divestitures                                             (8.9)         (6.3)           --            .4            --            --
Settlements                                                --            --            --          (2.0)           --            --
------------------------------------------------------------------------------------------------------------------------------------
Benefit obligation at end of year                       810.7         762.8         410.0         401.5         158.2         150.5
------------------------------------------------------------------------------------------------------------------------------------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year        1,027.3         992.3         420.7         426.4            --            --
Actual return on plan assets                           (112.3)        113.2         (61.9)         61.2            --            --
Expenses                                                 (5.9)         (7.9)          (.6)          (.7)           --            --
Benefits paid                                           (61.1)        (61.9)        (20.3)        (22.6)        (29.8)        (22.7)
Employer contributions                                    3.0           3.1           2.3           2.5          25.2          17.2
Contributions by plan participants                         --            --           2.0           2.1           4.6           5.5
Divestitures                                            (14.3)        (11.5)           --            --            --            --
Settlements                                                --            --            --          (6.1)           --            --
Effects of currency exchange rates                         --            --          (1.7)        (42.1)           --            --
------------------------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year                836.7       1,027.3         340.5         420.7            --            --
------------------------------------------------------------------------------------------------------------------------------------
Funded status                                            26.0         264.5         (69.5)         19.2        (158.2)       (150.5)
Unrecognized net actuarial (gain) loss                  230.6         (31.5)         89.5           7.2          34.5          13.9
Unrecognized prior service cost                           6.2           7.3          17.2          18.1         (17.7)        (26.0)
Unrecognized net obligation (asset)
   at date of adoption                                     --            .3           (.8)         (2.4)           --            --
------------------------------------------------------------------------------------------------------------------------------------
Prepaid (accrued) benefit cost                       $  262.8      $  240.6        $ 36.4        $ 42.1       $(141.4)      $(162.6)
====================================================================================================================================
AMOUNTS RECOGNIZED IN THE
   CONSOLIDATED BALANCE SHEET
Prepaid benefit cost                                 $  300.4      $  274.5        $101.9        $105.4       $    --       $    --
Accrued benefit cost                                    (46.9)        (46.7)        (65.7)        (63.7)       (141.4)       (162.6)
Intangible asset                                          3.5           4.4            --            --            --            --
Accumulated other comprehensive income                    5.8           8.4            .2            .4            --            --
------------------------------------------------------------------------------------------------------------------------------------
Net amount recognized                                $  262.8      $  240.6        $ 36.4        $ 42.1       $(141.4)      $(162.6)
====================================================================================================================================
</TABLE>


                                      -30-
<PAGE>

   The total accumulated benefit obligation for unfunded defined benefit pension
plans as of December  31, 2001 and 2000,  was $45.4  million and $46.1  million,
respectively,  for  plans in the  United  States  and  $60.3  million  and $57.7
million,  respectively,  for  plans  outside  of the  United  States.  The total
projected  benefit  obligation for unfunded  defined benefit pension plans as of
December 31, 2001 and 2000, was $52.1 million and $54.3  million,  respectively,
for  plans  in  the  United  States  and  $66.5   million  and  $63.9   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
                                                   ---------------------------------------------------------------------------------
                                                         2001          2000          1999          2001          2000          1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>           <C>           <C>           <C>           <C>           <C>
Service cost                                           $ 15.3        $ 14.2        $ 15.6        $ 11.0        $ 10.9        $ 11.7
Interest cost                                            54.4          53.4          53.4          23.4          23.0          23.3
Expected return on plan assets                          (91.1)        (85.9)        (83.5)        (29.0)        (28.5)        (28.5)
Amortization of the unrecognized
   transition obligation or asset                          .3           (.1)         (1.1)         (1.5)         (1.7)         (1.9)
Amortization of prior service cost                        1.1           1.1           1.0           2.2           2.2           2.2
Curtailment loss                                           --            --            .6           1.6            .2            .3
Amortization of net actuarial loss                         .9           1.1           9.1           1.2           1.9           3.3
------------------------------------------------------------------------------------------------------------------------------------
Net periodic (benefit) cost                            $(19.1)       $(16.2)       $ (4.9)       $  8.9        $  8.0        $ 10.4
====================================================================================================================================
WEIGHTED-AVERAGE ASSUMPTIONS
AS OF DECEMBER 31:
Discount rate                                            7.25%         7.50%         7.50%         6.00%         6.00%         6.00%
Expected return on plan assets                           9.50%         9.50%         9.75%         8.00%         8.00%         8.00%
Rate of compensation increase                            5.00%         5.00%         5.00%         3.90%         3.90%         3.90%
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

   The net periodic cost (benefit) related to the defined benefit postretirement
plans included the following components, in millions of dollars:
--------------------------------------------------------------------------------
                                               2001          2000          1999
--------------------------------------------------------------------------------
Service cost                                  $ 1.1         $  .8         $  .7
Interest cost                                  10.5           9.1           8.0
Amortization of
   prior service cost                          (8.3)         (8.3)         (8.3)
Amortization of
   net actuarial gain                            --            --           (.9)
--------------------------------------------------------------------------------
Net periodic cost (benefit)                   $ 3.3         $ 1.6         $ (.5)
================================================================================
Weighted-average discount
   rate as of December 31                      7.50%         7.25%         7.25%
================================================================================
   The health care cost trend rate used to determine the postretirement  benefit
obligation was 8.0% for 2001. This rate decreases  gradually to an ultimate rate
of 5.0% in 2008,  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:
--------------------------------------------------------------------------------
One-Percentage-Point                                     Increase     (Decrease)
--------------------------------------------------------------------------------
Effect on total of service and
   interest cost components                                  $ .6         $ (.6)
Effect on postretirement
   benefit obligation                                         8.4          (8.1)
--------------------------------------------------------------------------------
   Expense for  defined  contribution  plans  amounted  to $8.9  million,
$10.1 million, and $8.6 million in 2001, 2000, and 1999, 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, 2001 and 2000, is
$196.5  million and $188.0  million,  respectively,  related to those  preferred
shares. The carrying value of the subsidiary's  preferred shares at December 31,
2001,  includes the effect of the fair value of the interest rate swap agreement
related to this obligation.
   Other expense (income) in the Consolidated Statement of Earnings for the year
ended December 31, 2001,  included  $10.7 million of dividends  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 could enter into forward purchase  contracts on its common
stock. The Agreements provided the Corporation with two purchase alternatives: a
standard forward purchase  contract and a forward purchase contract subject to a
cap (a capped forward contract).


                                      -31-
<PAGE>

   The settlement  methods  generally  available  under the  Agreements,  at the
Corporation's  option,  were 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 was  higher  (lower)  than  the  forward
purchase/strike   price,  the  net  differential  was  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 was limited by
a cap price. In the case of physical settlement under a capped forward contract,
the Corporation, in addition to purchasing the shares covered by the contract at
the strike  price,  was  required to 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 provided 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 was reset based upon
the then-current market price of the Corporation's common stock.
   During  2000  and  1999,  the  Corporation  elected  net  share  settlements,
resulting  in a net issuance of 350,928 and 57,682  shares of its common  stock,
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.
   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.  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.
   During 2001, the  Corporation  terminated  the capped  forward  contracts and
standard forward purchase  contracts,  electing full physical settlement through
its purchase of the final 525,050  shares  subject to the  Agreements  for $25.5
million.  Previously during 2001, the Corporation had received 240,276 shares of
its common stock through net share settlements under the Agreements.
   The Corporation  repurchased  1,085,000,  7,103,072 and 958,218 shares of its
common stock (net of 350,928 and 57,682  shares  issued under  forward  purchase
contracts  in 2000 and 1999,  respectively)  during 2001,  2000,  and 1999 at an
aggregate  cost  of  $33.5   million,   $269.8   million,   and  $53.3  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)                         2001          2000          1999
--------------------------------------------------------------------------------
Numerator:
   Earnings                                  $108.0        $282.0        $300.3
================================================================================
Denominator:
   Denominator for basic
      earnings per share --
      weighted-average shares                  80.7          83.7          87.0
   Employee stock options and
      stock issuable under
      employee benefit plans                     .4            .7           1.4
--------------------------------------------------------------------------------
   Denominator for diluted
      earnings per share --
      adjusted weighted-
      average shares and
      assumed conversions                      81.1          84.4          88.4
================================================================================
Basic earnings per share                     $ 1.34        $ 3.37        $ 3.45
Diluted earnings per share                   $ 1.33        $ 3.34        $ 3.40
================================================================================
   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. 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.
--------------------------------------------------------------------------------
                                               2001          2000          1999
--------------------------------------------------------------------------------
Number of options
   (in millions)                                6.9           6.4           1.0
Weighted-average
   exercise price                            $46.15        $46.73        $52.54
--------------------------------------------------------------------------------


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


                                      -32-
<PAGE>

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,  2001,  9,078,311   non-qualified  stock  options  were
outstanding  under domestic  plans.  There were 9,175 stock options  outstanding
under the United Kingdom plan.
   Under all plans,  there were  2,010,295  shares of common stock  reserved for
future grants as of December 31, 2001. Transactions are summarized as follows:
--------------------------------------------------------------------------------
                                                                      Weighted-
                                                                        Average
                                            Stock Options        Exercise Price
--------------------------------------------------------------------------------
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
Granted                                         1,276,450                 34.01
Exercised                                       1,263,275                 21.57
Forfeited                                         482,814                 44.71
--------------------------------------------------------------------------------
Outstanding at December 31, 2001                9,087,486                $41.91
================================================================================
Shares exercisable at
   December 31, 1999                            2,876,120                $27.55
================================================================================
Shares exercisable at
   December 31, 2000                            3,637,612                $32.07
================================================================================
Shares exercisable at
   December 31, 2001                            3,201,321                $39.85
================================================================================
   Exercise prices for options  outstanding as of December 31, 2001, ranged from
$18.75 to $61.00. The following table provides certain  information with respect
to stock options outstanding at December 31, 2001:
--------------------------------------------------------------------------------
                                                                      Weighted-
                                                Weighted-               Average
Range of                 Stock Options            Average             Remaining
Exercise Prices            Outstanding     Exercise Price      Contractual Life
--------------------------------------------------------------------------------
Under $28.13                   526,824             $21.28                   1.0
$28.13-$42.19                2,701,925              34.93                   7.5
Over $42.19                  5,858,737              46.98                   8.0
--------------------------------------------------------------------------------
                             9,087,486             $41.91                   7.4
================================================================================
   The  following  table  provides  certain  information  with  respect to stock
options exercisable at December 31, 2001:
--------------------------------------------------------------------------------
                                                                      Weighted-
Range of                                    Stock Options               Average
Exercise Prices                               Exercisable        Exercise Price
--------------------------------------------------------------------------------
Under $28.13                                      526,824                $21.28
$28.13-$42.19                                   1,311,775                 35.81
Over $42.19                                     1,362,722                 50.93
--------------------------------------------------------------------------------
                                                3,201,321                $39.85
================================================================================
   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,  including, if
materially different from reported results, disclosure of pro forma net earnings
and earnings per share had compensation expense relating to grants 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
2001, 2000, and 1999 were $11.96,  $16.50,  and $18.13,  respectively,  and were
estimated  using the  Black-Scholes  option  valuation  model with the following
weighted-average assumptions:
--------------------------------------------------------------------------------
                                               2001          2000          1999
--------------------------------------------------------------------------------
Expected life in years                          6.2           5.9           5.8
Interest rate                                  4.70%         6.50%         5.75%
Volatility                                     32.4%         32.2%         29.4%
Dividend yield                                 1.44%         1.12%          .95%
--------------------------------------------------------------------------------
   The  Corporation's  pro forma  information  for the years ended  December 31,
2001,  2000,  and 1999,  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.
--------------------------------------------------------------------------------
(Dollars in Millions
Except Per Share Data)                         2001          2000          1999
--------------------------------------------------------------------------------
Pro forma net earnings                        $91.9        $263.3        $293.9
Pro forma net earnings
   per common share -- basic                  $1.14        $ 3.15        $ 3.38
Pro forma net earnings
   per common share --
      assuming dilution                       $1.13        $ 3.12        $ 3.33
--------------------------------------------------------------------------------


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 household  products.  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.


                                      -33-
<PAGE>

<TABLE>
<CAPTION>
Business Segments
(Millions of Dollars)
------------------------------------------------------------------------------------------------------------------------------------
                                            Reportable Business Segments
                                    ----------------------------------------------------
                                          Power      Hardware     Fastening                   Currency      Corporate,
                                        Tools &        & Home    & Assembly                Translation    Adjustments,
Year Ended December 31, 2001        Accessories   Improvement       Systems        Total   Adjustments  & Eliminations  Consolidated
------------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>             <C>           <C>        <C>             <C>           <C>           <C>
Sales to unaffiliated customers        $3,121.1        $784.7        $492.4     $4,398.2        $(65.1)       $     --      $4,333.1
Segment profit (loss)
   (for Consolidated, operating
   income before restructuring
   and exit costs)                        252.4          59.1          69.9        381.4          (5.5)          (28.3)        347.6
Depreciation and amortization              87.2          33.6          14.7        135.5          (1.9)           25.8         159.4
Income from equity method
   investees                               13.2            --            --         13.2            --             2.1          15.3
Capital expenditures                       87.0          33.1          15.9        136.0          (2.0)             .8         134.8
Segment assets
   (for Consolidated, total assets)     1,605.9         517.2         307.6      2,430.7         (65.5)        1,649.0       4,014.2
Investment in equity method
   investees                               37.6            --            .1         37.7          (1.1)           (2.7)         33.9

Year Ended December 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers        $3,184.8        $846.7        $502.6     $4,534.1        $ 26.7        $     --      $4,560.8
Segment profit (loss)
   (for Consolidated, operating
   income before restructuring
   and exit costs and gain on sale
   of business)                           351.8         113.5          81.8        547.1           2.8           (27.6)        522.3
Depreciation and amortization              85.3          34.3          16.3        135.9           1.1            26.4         163.4
Income from equity method
   investees                               15.6            --            --         15.6            --             (.1)         15.5
Capital expenditures                      140.9          30.8          26.5        198.2           1.2              .8         200.2
Segment assets
   (for Consolidated, total assets)     1,799.3         537.0         277.4      2,613.7         (29.9)        1,505.9       4,089.7
Investment in equity method
   investees                               26.3            --            .1         26.4           (.6)           (1.7)         24.1

Year Ended December 31, 1999
------------------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers        $3,030.0        $841.0        $480.4     $4,351.4        $169.1        $     --      $4,520.5
Segment profit (loss)
   (for Consolidated,
   operating income)                      358.2         118.8          78.8        555.8          15.9           (35.4)        536.3
Depreciation and amortization              82.8          29.9          15.0        127.7           4.6            27.7         160.0
Income from equity method
   investees                               16.9            --            --         16.9            --            (2.2)         14.7
Capital expenditures                      102.6          36.3          25.4        164.3           6.5              .3         171.1
Segment assets
   (for Consolidated, total assets)     1,657.5         480.1         254.2      2,391.8          83.2         1,537.7       4,012.7
Investment in equity method
   investees                               26.6            --            .8         27.4            .1             2.3          29.8
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
   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" and "Corporate,  Adjustments, & Eliminations" are
reflected at the  Corporation's  budgeted  exchange  rates for 2001. 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.


                                      -34-
<PAGE>

   Segment profit excludes interest income and expense, non-operating income and
expense,   goodwill  amortization  (except  for  the  amortization  of  goodwill
associated with certain acquisitions made by the Power Tools and Accessories and
Fastening and Assembly Systems segments),  adjustments to eliminate intercompany
profit in  inventory,  and income  tax  expense.  In  addition,  segment  profit
excludes  restructuring  and exit  costs and the gain on sale of  business.  For
certain operations located in Brazil,  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.  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  (except for the
goodwill  associated  with  certain  acquisitions  made by the  Power  Tools and
Accessories  and  Fastening  and  Assembly  segments),  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 goodwill  amortization  (except for the
amortization of goodwill associated with certain  acquisitions made by the Power
Tools  and  Accessories  and  Fastening  and  Assembly  Systems  segments).  The
reconciliation  of segment profit to  consolidated  earnings before income taxes
for each year, in millions of dollars, is as follows:
--------------------------------------------------------------------------------
                                               2001          2000          1999
--------------------------------------------------------------------------------
Segment profit for
   total reportable
   business segments                         $381.4        $547.1        $555.8
Items excluded from segment profit:
   Adjustment of budgeted
      foreign exchange rates
      to actual rates                          (5.5)          2.8          15.9
   Depreciation of Corporate
      property and
      amortization of goodwill                (25.8)        (26.4)        (27.7)
   Adjustment to businesses'
      postretirement benefit
      expenses booked
      in consolidation                         41.3          36.4          24.8
   Adjustment to eliminate
      net interest and
      non-operating expenses
      from results of certain
      operations in Brazil,
      Venezuela, and Turkey                      .6            .5           1.2
   Other adjustments booked
      in consolidation directly
      related to reportable
      business segments                        (1.0)        (14.4)        (12.4)
Amounts allocated to businesses in
   arriving at segment profit in
   excess of (less than) Corporate
   center operating expenses,
   eliminations, and other amounts
   identified above                           (43.4)        (23.7)        (21.3)
--------------------------------------------------------------------------------
Operating income before
   restructuring and exit costs,
   and gain on sale of business               347.6         522.3         536.3
Restructuring and exit costs                   99.8          39.1            --
Gain on sale of business                         --          20.1            --
--------------------------------------------------------------------------------
   Operating income                           247.8         503.3         536.3
--------------------------------------------------------------------------------
Interest expense,
   net of interest income                      84.3         104.2          95.8
Other expense (income)                          8.2          (5.5)          (.8)
--------------------------------------------------------------------------------
Earnings before income taxes                 $155.3        $404.6        $441.3
================================================================================


                                      -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:
--------------------------------------------------------------------------------
                                               2001          2000          1999
--------------------------------------------------------------------------------
Segment assets for
   total reportable
   business segments                       $2,430.7      $2,613.7      $2,391.8
Items excluded from segment assets:
   Adjustment of budgeted
     foreign exchange rates
     to actual rates                          (65.5)        (29.9)         83.2
   Goodwill                                   655.2         689.1         735.0
   Pension assets                             406.2         380.0         377.0
Other Corporate assets                        587.6         436.8         425.7
--------------------------------------------------------------------------------
                                           $4,014.2      $4,089.7      $4,012.7
================================================================================
   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 $861.8 million,  $872.2
million,  and $755.9  million of the  Corporation's  consolidated  sales for the
years ended December 31, 2001, 2000, and 1999, respectively.
   The composition of the Corporation's sales by product group for each year, in
millions of dollars, is set forth below:
--------------------------------------------------------------------------------
                                               2001          2000          1999
--------------------------------------------------------------------------------
Consumer and professional
   power tools and
   product service                         $2,284.4      $2,363.1      $2,318.6
Consumer and professional
   accessories                                314.7         342.9         357.3
Electric lawn and
   garden products                            285.4         305.6         287.7
Electric cleaning and
   lighting products                          122.1         122.4         134.3
Household products                             47.5          50.7          44.4
Security hardware                             547.3         585.8         619.2
Plumbing products                             255.2         284.3         260.6
Fastening and assembly
   systems                                    476.5         506.0         498.4
--------------------------------------------------------------------------------
                                           $4,333.1      $4,560.8      $4,520.5
================================================================================
   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:
--------------------------------------------------------------------------------
                                               2001          2000          1999
--------------------------------------------------------------------------------
United States                              $2,796.2      $2,922.5      $2,825.2
Canada                                        140.2         149.8         137.0
--------------------------------------------------------------------------------
   North America                            2,936.4       3,072.3       2,962.2
Europe                                      1,057.4       1,138.5       1,255.5
Other                                         339.3         350.0         302.8
--------------------------------------------------------------------------------
                                           $4,333.1      $4,560.8      $4,520.5
================================================================================
   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:
--------------------------------------------------------------------------------
                                               2001          2000          1999
--------------------------------------------------------------------------------
United States                                $425.2        $466.4        $471.0
United Kingdom                                 72.1         100.5         121.2
Other countries                               190.2         181.2         147.4
--------------------------------------------------------------------------------
                                             $687.5        $748.1        $739.6
================================================================================


NOTE 17: 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 2001,  2000,  and 1999  amounted  to $84.9  million,  $83.6
million,  and $84.0 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,  2001,  in
millions of dollars, were as follows:
--------------------------------------------------------------------------------
2002                                                                     $ 54.6
2003                                                                       44.9
2004                                                                       36.5
2005                                                                       26.3
2006                                                                       16.9
Thereafter                                                                 10.4
--------------------------------------------------------------------------------
                                                                         $189.6
================================================================================


NOTE 18: RESTRUCTURING ACTIONS
During 2001, the Corporation  recorded a restructuring  charge of $99.8 million.
That  restructuring   charge  reflected  actions  to  reduce  the  Corporation's
manufacturing cost base in its Power Tools and Accessories and Hardware and Home
Improvement  segments,  as well as  actions  to  reduce  selling,  general,  and
administrative expenses throughout all of its businesses. The 2001 restructuring
plan  includes the transfer of  production  and service  operations in the Power
Tools and Accessories and Hardware and Home Improvement segments from facilities
in the United States and the United Kingdom to low-cost facilities in Mexico and
China and to a new low-cost facility in Central Europe.
   The principal  component of the 2001 restructuring  charge related to the net
elimination of approximately  500 positions.  In total,  the 2001  restructuring
actions  will  result  in the  elimination  of  approximately  2,400  positions;
however,  the  Corporation  will  increase  headcount  in low-cost  locations by
approximately 1,900 positions. The elimination of these positions relates to the
Corporation's  actions  to  reduce  its  manufacturing  cost  base and  selling,
general, and administrative  expenses. As a result, an accrual of $45.8 million,
principally  related to the Power Tool and Accessories  segment in North America
and Europe ($36.3 million), the Hardware and Home Improvement segment


                                      -36-
<PAGE>

in the United States ($8.6  million),  and the  Fastening  and Assembly  Systems
segment in Europe ($.9 million),  was included in the restructuring  charge. The
2001  restructuring   actions  will  result  in  the  closure  of  a  number  of
manufacturing  and  service  facilities,  transferring  production  to  low-cost
facilities,  and outsourcing  certain  manufactured items. As a result, the 2001
restructuring  charge also included a $38.9  million  write-down to fair value -
less, if applicable, cost to sell - of certain equipment. The write-down to fair
value was comprised of $34.0 million  related to long-lived  assets in the Power
Tools and  Accessories  segment in Europe  and North  America  and $4.9  million
relating to the Hardware and Home Improvement  segment in the United States. The
2001 restructuring  charge also includes $9.6 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
balance of the 2001 restructuring charge, or $5.5 million,  primarily related to
non-cash charges associated with the impairment of an equity method investee and
non-cash pension expense.
   During 2001, the Corporation  also  recognized $4.2 million of  restructuring
and exit costs associated with its Power Tools and Accessories segment in Europe
and its  Hardware  and  Home  Improvement  segment.  The  restructuring  actions
principally reflect the reduction of approximately 100 administrative positions.
The $4.2 million charge was offset,  however, by the reversal of $4.2 million of
severance  accruals  and  other  exit  costs  established  as part  of the  2000
restructuring charge, which will no longer be required.
   During  2000,  the  Corporation  recorded  a  restructuring  charge  of $39.1
million.  The 2000  restructuring  charge  included $9.5 million to  rationalize
manufacturing   in  its  Hardware  and  Home  Improvement   segment.   The  2000
restructuring  charge also  included  $29.6  million  relating to  restructuring
actions to reduce costs in its Power Tools and Accessories segment.  Included in
those 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.  This  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.
   During 1999, the Corporation  recognized $13.1 million of  restructuring  and
exit costs,  but those costs were offset by a gain of $8.9  million  realized in
1999 on the sale of a facility, exited as part of 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 of certain  severance  accruals that were no longer
necessary.
   During 2001,  2000, and 1999, the  Corporation  paid severance and other exit
costs of $24.9 million, $12.6 million, and $26.7 million, respectively.
   As of December 31, 2001, all facilities  exited as part of the  Corporation's
restructuring  actions  undertaken  in 2000 and  prior  had been  sold  with the
exception  of one  facility  that was sold in January  2002.  As of December 31,
2001, the carrying value of facilities to be exited as part of the Corporation's
restructuring actions that commenced in 2001 was not significant.


NOTE 19: 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  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.


                                      -37-
<PAGE>

   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
have not been  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,  2001,  the  Corporation  had  no  known  probable  but
inestimable  exposures  that  are  expected  to have a  material  effect  on the
Corporation.


NOTE 20: QUARTERLY RESULTS (UNAUDITED)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
(Dollars in Millions Except Per Share Data)                                First           Second            Third           Fourth
Year Ended December 31, 2001                                             Quarter          Quarter          Quarter          Quarter
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>              <C>              <C>              <C>
Sales                                                                   $  979.0         $1,070.4         $1,063.0         $1,220.7
Gross margin                                                               342.6            360.2            366.6            417.1
Net earnings (loss)                                                         33.1             41.7             46.2            (13.0)
====================================================================================================================================
Net earnings (loss) per common share -- basic                           $    .41         $    .52         $    .57         $   (.16)
====================================================================================================================================
Net earnings (loss) per common share -- assuming dilution               $    .40         $    .51         $    .57         $   (.16)
====================================================================================================================================
Year Ended December 31, 2000
------------------------------------------------------------------------------------------------------------------------------------
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
====================================================================================================================================
</TABLE>
   Results for the fourth  quarter of 2001  included a  restructuring  charge of
$99.8 million ($70.6 million net of tax).  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.


                                      -38-
<PAGE>

REPORT OF MANAGEMENT
To the Stockholders of The Black & Decker Corporation:

The financial  statements  included in the  Corporation's  Annual Report on Form
10-K for the year ended December 31, 2001, are the  responsibility of management
and have been  prepared  in  conformity  with  accounting  principles  generally
accepted in the United States.  In some instances,  those  financial  statements
include amounts that are based on management's best estimates and judgments. All
other  financial data in this report have been  presented on a basis  consistent
with the information included in the financial statements.
   The Corporation  maintains a system of procedures and controls over financial
reporting that is designed to provide reasonable assurance to management and the
Board of Directors regarding the integrity and the fair and reliable preparation
and  presentation,   in  all  material  respects,  of  its  published  financial
statements.  This system of  financial  controls  and  procedures  is  reviewed,
modified,  and improved as changes occur in business  conditions and operations,
and as a result of  suggestions  from the  corporate and  independent  auditors.
There are inherent  limitations in the  effectiveness  of any system of internal
control.  Even  an  effective  system  of  internal  control  can  provide  only
reasonable assurance with respect to the financial statement preparation and may
vary over time.
   As  part  of  management's  responsibility  for  monitoring  compliance  with
established  policies and  procedures,  it relies on, among other things,  audit
procedures  performed by corporate and  independent  auditors to give  assurance
that  established  policies and  procedures are observed in all areas subject to
their audits.  The Board of  Directors,  operating  through its Audit  Committee
composed solely of outside directors,  meets  periodically with management,  the
corporate auditors,  and the independent  auditors for the purpose of monitoring
their   activities   to  ensure   that   each  is   properly   discharging   its
responsibilities.  The Audit  Committee,  corporate  auditors,  and  independent
auditors have unrestricted access to one another to discuss their findings.
   Management  has assessed the  Corporation's  system of internal  control over
financial  reporting  as of December 31, 2001,  and,  based on that  assessment,
believes that the system is effective.


/s/ NOLAN D. ARCHIBALD
Nolan D. Archibald
Chairman, President, and Chief Executive Officer


/s/ MICHAEL D. MANGAN
Michael D. Mangan
Senior Vice President and Chief Financial Officer



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, 2001 and 2000, and the
related  consolidated  statements of earnings,  stockholders'  equity,  and cash
flows for each of the three years in the period ended  December  31,  2001.  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, 2001 and 2000,
and the  consolidated  results of their operations and their cash flows for each
of the three years in the period ended  December 31, 2001,  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.
   As discussed in Note 1 to the consolidated  financial  statements,  effective
January 1, 2001, the Corporation changed its method of accounting for derivative
financial instruments.



/s/ ERNST & YOUNG LLP
Baltimore, Maryland
January 29, 2002


                                      -39-
<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 30, 2002,  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 30,  2002,
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 30,  2002,
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 30,  2002,
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, 2001, 2000, and
1999.

   Consolidated Balance Sheet - December 31, 2001 and 2000.

   Consolidated  Statement of  Stockholders'  Equity - years ended  December 31,
2001, 2000, and 1999.

   Consolidated  Statement of Cash Flows - years ended December 31, 2001,  2000,
and 1999.

   Notes to Consolidated Financial Statements.

   Report of Management.

   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 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.

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 1, 2001, 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 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.


                                      -40-
<PAGE>

Exhibit 4(d)
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(e)
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.

Exhibit 4(f)
Credit  Agreement,  dated as of April 2, 2001,  among the  Corporation,  Black &
Decker Holdings,  Inc., as Initial Borrowers, the initial lenders named therein,
as Initial  Lenders,  Citibank,  N.A.,  as  Administrative  Agent,  JPMorgan,  a
division of Chase  Securities  Inc., as Syndication  Agent, and Bank of America,
N.A. and Commerzbank AG, as Co-Syndication Agents, included in the Corporation's
Quarterly  Report  on  Form  10-Q  for  the  quarter  ended  July  1,  2001,  is
incorporated herein by reference.

Exhibit 4(g)
Credit  Agreement,  dated as of April 2, 2001,  among the  Corporation,  Black &
Decker Holdings,  Inc., as Initial Borrowers, the initial lenders named therein,
as Initial  Lenders,  Citibank,  N.A.,  as  Administrative  Agent,  JPMorgan,  a
division of Chase  Securities  Inc., as Syndication  Agent, and Bank of America,
N.A. and Commerzbank AG, as Co-Syndication Agents, included in the Corporation's
Quarterly  Report  on  Form  10-Q  for  the  quarter  ended  July  1,  2001,  is
incorporated herein by reference.

Exhibit 4(h)
Indenture between the Corporation and The Bank of New York, as trustee, dated as
of June 5, 2001,  included in the Corporation's  Registration  Statement on Form
S-4 (Reg. No. 333-64790), is incorporated herein by reference.

Exhibit 4(i)
Exchange and  Registration  Rights  Agreement  among the Corporation and Banc of
America  Securities  LLC,  J.P.  Morgan  Securities  Inc. and the other  initial
purchasers  named on Schedule I thereto,  dated as of June 5, 2001,  included in
the Corporation's  Registration  Statement on Form S-4 (Reg. No. 333-64790),  is
incorporated herein by reference.

Exhibit 4(j)
Form of 7.125% Senior Note Due 2011, included in the Corporation's  Registration
Statement on Form S-4 (Reg. No. 333-64790), 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,  included in the Corporation's Annual Report on Form 10-K
for the year ended December 31, 2000, is incorporated herein by reference.

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  Quarterly Report on Form 10-Q for the quarter ended September 30,
2001, is incorporated herein by reference.

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.


                                      -41-
<PAGE>

Exhibit 10(m)
The Black & Decker Executive Long-Term Performance/Retention Plan.

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 Supplemental 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(p)(5)
Amendment No. 4 to The Black & Decker Supplemental Retirement Savings Plan dated
as of October 18, 2001,  included in the Corporation's  Quarterly Report on Form
10-Q for the  quarter  ended  September  30,  2001,  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 2, 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)
Form  of  Severance  Benefits  Agreement  by and  between  the  Corporation  and
approximately 18 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.

Exhibit 10(x)
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)
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.


                                      -42-
<PAGE>

Exhibit 10(z)
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)
Severance  Benefits  Agreement,  dated  August  2,  2000,  by  and  between  the
Corporation and Michael D. Mangan,  included in the Corporation's  Annual Report
on Form 10-K for the year ended  December 31, 2000,  is  incorporated  herein by
reference.

Exhibit 10(cc)(1)
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)(2)
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 21
List of Subsidiaries.

Exhibit 23
Consent of Independent Auditors.

Exhibit 24
Powers of Attorney.

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


                                      -43-
<PAGE>

(b)  Reports on Form 8-K
The Corporation  filed the following reports on Form 8-K during the three months
ended December 31, 2001:
   On October 23, 2001, 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 September 30, 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        Balance
                                                                      at     Charged to                       Changes         at End
                                                               Beginning      Costs and                           Add             of
Description                                                    of Period       Expenses     Deductions       (Deduct)         Period
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>            <C>            <C>            <C>            <C>
Year Ended December 31, 2001
Reserve for doubtful accounts and cash discounts                   $51.8          $71.2          $70.5(a)       $ (.6)(b)      $51.9
------------------------------------------------------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------------------------------------------------------
<FN>
(a)  Accounts written off during the year and cash discounts taken by customers.
(b)  Primarily includes currency translation adjustments.
</FN>
</TABLE>


                                      -44-
<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 28, 2002                        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 28, 2002, 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 28, 2002
----------------------                                         -----------------
Nolan D. Archibald            Chairman, President, and
                              Chief Executive Officer

Principal Financial Officer

/s/ MICHAEL D. MANGAN                                          February 28, 2002
---------------------                                          -----------------
Michael D. Mangan             Senior Vice President and
                              Chief Financial Officer

Principal Accounting Officer

/s/ CHRISTINA M. McMULLEN                                      February 28, 2002
-------------------------                                      -----------------
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                           Manuel A. Fernandez
        Barbara L. Bowles                            Benjamin H. Griswold, IV
        M. Anthony Burns                             Anthony Luiso
        Malcolm Candlish


By      /s/ NOLAN D. ARCHIBALD                          Date:  February 28, 2002
        ----------------------                                 -----------------
        Nolan D. Archibald
        Attorney-in-Fact


                                      -45-
<PAGE>