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, 1996                                              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 executive offices)                (Zip Code)

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

Securities registered pursuant to Section 12(b) of the Act:
      Title of each class                         Name of each exchange on which
                                                           registered
Common Stock, par value $.50 per share            New York Stock Exchange
                                                  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. ( )

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant as of January 31, 1997, was $3,169,660,087.

The number of shares of Common Stock  outstanding  as of January 31,  1997,  was
94,264,984.

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 1997 Annual Meeting of Stockholders  are incorporated by
reference in Part III of this Report.






                                       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 global marketer and
       manufacturer  of  quality  products  used in and  around the home and for
       commercial applications.  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 the world's  leading  producer 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 household products business is the North American leader
       and is among the major global competitors in the small electric household
       appliance  industry.  The  Corporation  is the  worldwide  leader  in the
       manufacturing of steel golf club shafts and glass  container-forming  and
       inspection  equipment  and is the largest  global  supplier of engineered
       fastening and assembly systems to the markets it serves. 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.
            During 1995, the Corporation  sold PRC Realty  Systems,  Inc. (RSI),
       and PRC Environmental  Management,  Inc. (EMI), for aggregate proceeds of
       approximately $100 million. In late 1995, the Corporation  announced that
       it had  signed  a  definitive  agreement  to  sell  PRC  Inc.  to  Litton
       Industries, Inc., for approximately $425 million. Together, PRC Inc., RSI
       and EMI composed the  Corporation's  former  information  technology  and
       services (PRC) segment.  On February 16, 1996, the Corporation  completed
       the sale of PRC Inc. For additional  information  about the  discontinued
       PRC  segment,   see  the  discussion  under  the  caption   "Discontinued
       Operations"  and  Note 2 of Notes to  Consolidated  Financial  Statements
       included in Item 8 of Part II of this report.
            In  April  1996,  the  Corporation  replaced  its  former  unsecured
       revolving credit facility,  which was scheduled to expire in 1997, with a
       new unsecured revolving credit facility (the Credit Facility), which will
       expire  in  2001.  Under  the  Credit  Facility,  which  consists  of two
       individual facilities, the Corporation may borrow up to $1.0 billion. For
       additional information about the Credit Facility, see Note 10 of Notes to
       Consolidated  Financial  Statements included in Item 8 of Part II of this
       report.
           Under  terms  established  upon  the  original  sale of its  Series B
       Cumulative  Convertible  Preferred  Stock (Series B), the Corporation had
       the option, after September 1996, to require the conversion of the Series
       B stock into  shares of Common  Stock  under  certain  circumstances.  On
       October 14,  1996,  the  Corporation  exercised  its  conversion  option,
       issuing  6,350,000  shares of Common Stock in exchange for all previously
       outstanding  shares of Series B stock. For additional  information  about
       the  conversion of the Series B stock and certain  related  matters,  see
       Note 15 of Notes to Consolidated  Financial Statements included in Item 8
       of Part II of this report.
           During 1996, the Corporation  commenced a restructuring of certain of
       its  operations  and  recorded a  restructuring  charge of $91.3  million
       ($74.8  million  after tax).  The major  component  of the  restructuring
       charge relates to the  Corporation's  elimination of approximately  1,500
       positions.  As a result,  an  accrual  of $74.6  million  for  severance,
       principally  associated with the European  businesses in the Consumer and
       Home  Improvement  Products  segment,  is included  in the  restructuring
       charge.  For additional  information about the restructuring  charge, see
       Notes 3 and 17 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.

(b)    DISCONTINUED OPERATIONS
       On February 16, 1996, the Corporation announced that it had completed the
       previously  announced  sale of PRC Inc.,  the  remaining  business in the
       discontinued PRC segment, for $425.0 million.  Earnings from discontinued
       operations  of  $70.4  million  for the year  ended  December  31,  1996,
       consisted  primarily  of  the  gain  on the  sale  of  PRC  Inc.,  net of
       applicable  income taxes of $55.6 million and related  selling  expenses.
       Revenues and operating  income of PRC Inc. for the period from January 1,
       1996,  through February 15, 1996, were not significant.  The terms of the
       sale of PRC Inc.  provide for an adjustment to the sales price,  expected
       to be finalized in 1997,  based upon the changes in the net assets of PRC
       Inc. through February 15, 1996.
           The   Corporation   acquired  the  former  PRC  segment  through  its
       acquisition  of Emhart  Corporation  in April  1989.  The sale of the PRC
       segment  has  allowed  the  Corporation  to  reduce  its debt  level  and
       concentrate on its more strategic businesses.
           Operating results, net assets, and cash flows of the discontinued PRC
       segment have been reported  separately from the continuing  operations of
       the Corporation in the Consolidated Financial Statements included in Item
       8 of Part II of this report.
           Net earnings of the discontinued PRC segment were $70.4 million ($.73
       per share on a fully  diluted  basis) in 1996,  $38.4  million  ($.41 per
       share on a fully  diluted  basis) in 1995,  and $37.5  million  ($.44 per
       share on a fully diluted basis), in 1994. The results of the discontinued
       PRC  segment do not reflect any  expense  for  interest  allocated  by or
       management fees charged by the Corporation.

(c)    FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS
       Unless  otherwise  indicated,  the following  discussion  pertains to the
       continuing  operations of the  Corporation  and excludes any matters with
       respect to the discontinued PRC segment.
           The Corporation operates in two business segments:  Consumer and Home
       Improvement Products, including consumer and professional power tools and
       accessories,  household  products,  security  hardware,  outdoor products
       (composed of electric lawn and garden tools and  recreational  products),
       plumbing  products,  and product  service;  and Commercial and Industrial
       Products,   including   fastening   and   assembly   systems   and  glass
       container-forming  and  inspection  equipment.  See  Note 17 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.
 .
          Sales from  continuing  operations  by product  group within  business
       segments are presented in the following table.

                1996 SALES BY PRODUCT GROUP WITHIN BUSINESS SEGMENTS
                               (Millions of Dollars)

                                                              Year Ended
                                                           December 31, 1996
                                                           -----------------
                                                           Amount        %
                                                           ------       ---
       Consumer and Home Improvement Products
          Power Tools and Product Service ..............   $1,948       40%
          Household Products ...........................      788       16
          Security Hardware ............................      567       11
          Accessories ..................................      337        7
          Outdoor Products .............................      333        7
          Plumbing Products ............................      239        5
                                                           ------      ---
          Total Consumer and Home Improvement Products..    4,212       86%
       Commercial and Industrial Products ..............      702       14%
                                                           ------      ---
       Total Sales .....................................   $4,914      100%
                                                           ======      === 

           There is no single class of product  within the product groups listed
       in the above  table that  represents  more than 10% of the  Corporation's
       consolidated sales from continuing operations.

(d)    NARRATIVE DESCRIPTION OF THE BUSINESS
       Unless  otherwise  indicated,  the following  discussion  pertains to the
       continuing  operations of the  Corporation  and excludes any matters with
       respect to the discontinued PRC segment.
           The  following  is a  brief  description  of  each  of  the  business
       segments.

       Consumer and Home Improvement Products Segment
       ----------------------------------------------
       The  Consumer  and Home  Improvement  Products  segment  is  composed  of
       consumer  (home  use)  and  professional  power  tools  and  accessories,
       household  products,  security  hardware,  outdoor products  (composed of
       electric  lawn and  garden  tools and  recreational  products),  plumbing
       products,  and  product  service.  Power  tools  include  both corded and
       cordless  electric  portable power tools,  such as drills,  screwdrivers,
       saws, sanders, and grinders; car care products;  Workmate(R)  workcenters
       and related  products;  bench and stationary tools; and cordless lighting
       products.  Accessories  include  accessories  and  attachments  for power
       tools,  and a  variety  of  consumer-use  fastening  products,  including
       stapling  products.  Household  products include a variety of both corded
       and cordless small electric  household  appliances,  including  hand-held
       vacuums; irons; lighting products; food mixers,  processors and choppers;
       can openers; blenders; coffeemakers; kettles; toasters and toaster ovens;
       wafflebakers;  knives; breadmakers; and wet scrubbers.  Security hardware
       includes  both  residential  and  commercial  door  hardware,   including
       locksets,  high-security  and electronic locks and locking devices;  door
       closers,  hinges and exit  devices,  and master keying  systems.  Outdoor
       products include a variety of both corded and cordless  electric lawn and
       garden products,  such as hedge and yard (string) trimmers,  lawn mowers,
       edgers, blower/vacuums,  and related lawn and garden accessories. Outdoor
       products also include recreational  products,  which consist of a variety
       of steel and composite golf club shafts and bicycle and specialty tubing.
       Plumbing  products  include  a variety  of  conventional  and  decorative
       faucets, shower heads, and bath accessories.
           Power tools, household products,  electric lawn and garden tools, 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, Black & Decker Industry & Construction,  Elu,
       VersaPak, Proline, Macho, TimberWolf, Cyclone, Trimcat, Scrugun, Wildcat,
       Versa-Clutch,  Workmate,  ShopBox,  Alligator,  Air Station,  Dustbuster,
       SnakeLight,  Toast-R-Oven, Handy Steamer, FloorBuster,  ScumBuster, Quick
       `N' Easy,  Groom `N' Edge, Hedge Hog, Vac `N' Mulch,  Reflex,  MasterVac,
       B&D,  Piranha,  Piranha Pro,  Bullet,  Pilot-Point,  Scorpion  Anti-Slip,
       Master  Series,  PowerShot,  EasyShot,  Build-a-Set,  and  POP.  Security
       hardware  products are marketed  under a variety of trademarks  and trade
       names,  including,  without limitation,  Kwikset, TITAN, TITAN Commercial
       Series,   Black  &  Decker,   Geo,  Lane,  NEMEF,  DOM,  and  Corbin  Co.
       Recreational  products are marketed  under the trademarks and trade names
       True Temper, Dynamic, Dynamic Gold, Dynalite,  EI-70, Comet, Rocket, True
       Lite,  SensiCore,  TT Lite, Release,  Assailant,  Endurance,  and others.
       Plumbing products are marketed under the trademarks and trade names Price
       Pfister,  Black & Decker,  The  Pfabulous  Pfaucet  With The Pfunny Name,
       Pforever  Pfaucet,  Genesis,  Society Brass Collection,  Verve,  Windsor,
       Georgetown, Jet Setter, Society Finishes, and others.
           The  Corporation's  product service program supports its power tools,
       electric lawn and garden  products,  and household  products  businesses.
       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,  1996,  there were  approximately  170 such
       service  centers,  of which  roughly  one-half were located in the United
       States. The remainder were located around the world, primarily in Europe,
       Mexico,  Australia,  Canada,  and Latin America.  These  company-operated
       service centers are  supplemented by several hundred  authorized  service
       centers  operated by  independent  local  owners.  The  Corporation  also
       operates  a  reconditioning  center in which  power  tools and  household
       appliances  are   reconditioned   and  then  re-sold   through   numerous
       company-operated factory outlets and service centers.
           Most of the Corporation's consumer 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.
       Consumer  products sold outside the United States  generally have similar
       warranty  arrangements.  Such arrangements vary, however,  depending upon
       local market conditions and laws and regulations.
           The  Corporation's   product  offerings  in  the  Consumer  and  Home
       Improvement   Products   segment  are  sold   primarily   to   retailers,
       wholesalers, distributors, and jobbers, although some reconditioned power
       tools and household  products are sold through  company-operated  service
       centers  and factory  outlets  directly  to end users.  Certain  security
       hardware products are sold to commercial,  institutional,  and industrial
       customers.
           The principal  materials used in the manufacturing of products in the
       Consumer and Home Improvement  Products  segment are plastics,  aluminum,
       copper,  steel, bronze, zinc, brass, certain electronic  components,  and
       batteries.  These  materials  are used in  various  forms.  For  example,
       aluminum or steel may be used in wire, sheet, bar, and strip stock form.
           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, 1996,
       the amount of product  under  commodity  hedges was not  material  to the
       Corporation.
           As a global  marketer and  manufacturer,  the  Corporation  purchases
       materials and supplies from suppliers in many different  countries around
       the world.  Certain of the  finished  products  and  component  parts are
       purchased from suppliers that have  manufacturing  operations in mainland
       China.  In  addition,   through  an  affiliate  in  mainland  China,  the
       Corporation  carries on manufacturing  operations in that country.  China
       has been granted Most Favored  Nation (MFN) status  through July 3, 1997,
       and currently  there are no  significant  trade  restrictions  or tariffs
       imposed on such products.  The  Corporation  has  investigated  alternate
       sources of supply and production  arrangements  in case the MFN status is
       not  extended.  Alternative  sources of supply are  available,  or can be
       developed,  for  many  of  these  products;  and  alternative  production
       arrangements can be made available at certain of the Corporation's  other
       manufacturing  facilities.  The Corporation believes that, although there
       could be some  disruption  in the  supply of  certain  of these  finished
       products and component  parts if China's MFN status is not extended or if
       significant trade  restrictions or tariffs are imposed,  the impact would
       not have a  material  adverse  effect  on the  operating  results  of the
       Corporation over the long term. However,  the Corporation  believes that,
       in the event that China's MFN status is not extended or significant trade
       restrictions  or tariffs  are  imposed,  the  impact  would  likely  have
       significant  negative effect on the operating  results of the Corporation
       over the short term.
           Principal  manufacturing and assembly facilities in the United States
       are located in  Fayetteville  and Asheboro,  North  Carolina;  Easton and
       Hampstead,  Maryland;  Anaheim and Pacoima,  California;  Denison, Texas;
       Amory and Olive Branch,  Mississippi;  and Bristow,  Oklahoma.  Principal
       distribution facilities in the United States, other than those located at
       the  manufacturing  facilities  listed  above,  are located in Fort Mill,
       South Carolina, and Rancho Cucamonga, California.
           Principal  manufacturing and assembly  facilities  outside the United
       States are located in Buchlberg and Bruhl, Germany;  Molteno and Perugia,
       Italy; Spennymoor and Rotherham,  England; Brockville,  Canada; Queretaro
       and  Mexicali,   Mexico;  Jurong  Town,  Singapore;   Kuantan,  Malaysia;
       Newcastle,  Australia;  Uberaba,  Brazil;  and  Apeldoorn,   Netherlands.
       Principal  distribution  facilities outside the United States, other than
       those located at the  manufacturing  facilities listed above, are located
       in Dardilly, France, and Idstein, Germany.
            For  additional   information   with  respect  to  these  and  other
       properties owned or leased by the Corporation, see Item 2, "Properties."
           In 1996, the Corporation  commenced a restructuring of certain of its
       operations and recorded a restructuring charge of $91.3 million, of which
       $87.7  million  relates to the  Consumer  and Home  Improvement  Products
       segment. For additional  information about the restructuring  charge, see
       Notes 3 and 17 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.
           The  Corporation  holds  various  patents and licenses on many of its
       products and  processes in the  Consumer  and Home  Improvement  Products
       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 Consumer and
       Home Improvement  Products segment is derived from the do-it-yourself and
       home modernization  markets,  which generally are not seasonal in nature.
       However,  sales of household  products and certain  consumer  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 are not
       generally  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  leaders in the  manufacturing
       and  marketing  of  portable  power  tools,   small  electric   household
       appliances,  electric lawn and garden tools, security hardware,  plumbing
       products,   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.

       Commercial and Industrial Products Segment
       ------------------------------------------
       The Corporation's fastening and assembly systems business manufactures an
       extensive line of metal and plastic  fasteners and  engineered  fastening
       systems for  commercial  applications,  including  blind  riveting,  stud
       welding, and assembly systems;  specialty screws;  prevailing torque nuts
       and assemblies;  and insert systems.  The fastening and assembly  systems
       products  are  marketed  under  the  trademarks  and trade  names  Emhart
       Fastening Teknologies,  Dodge, Gripco, Gripco Assemblies,  HeliCoil, NPR,
       POP,   Tucker,   Warren,   Dril-Kwik,   Jack  Nut,   KALEI,   Plastifast,
       PLASTI-KWICK, POP-matic, POP NUT, WELL-NUT, Parker-Kalon, and others.
           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. Some of these products are also sold through the
       Corporation's Consumer and Home Improvement Products segment.
           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,  the  Corporation is not
       materially  dependent upon such patents or license rights with respect to
       its operations.
           Principal  manufacturing  facilities  for the  fastening and assembly
       systems business in the United States are located in Danbury and Shelton,
       Connecticut;   Montpelier,   Indiana;  Campbellsville  and  Hopkinsville,
       Kentucky;  and Mt. Clemens,  Michigan.  Principal  facilities outside 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, strip and sheet metals, and chemical compounds,  plastics, and
       rubber. These materials are readily available from a number of suppliers.
           The  Corporation  manufactures  a variety  of  automatic,  high-speed
       machines for the glass container-forming industry, including machines for
       supplying  molten  glass  for  the  feeding  and  forming  processes  and
       electronic  inspection  equipment for monitoring  quality  levels.  These
       machines are used in producing bottles,  jars, tumblers,  and other glass
       containers  primarily for food, beverage,  pharmaceutical,  and household
       products packaging. The Corporation also provides replacement parts and a
       variety of engineering,  repairing, rebuilding, and other services to the
       glass   container-making   industry   throughout  the  world,  and  these
       activities  generate  nearly  two-thirds  of the sales in this  business.
       These products and services are marketed principally under the trademarks
       and trade names Emhart,  Emhart Glass, Powers,  FLEX-LINE,  T-600 Forming
       Control System, Verti-Flow Cooling Systems, PowerNET, QualiTrac, TIM, and
       Total Inspection Machine.
           The  Corporation   sells  glass   container-forming   and  inspection
       equipment and  replacement  parts  primarily  through its own sales force
       directly  to glass  container  manufacturers  throughout  the world.  The
       business is not  dependent on one or a few  customers,  the loss of which
       would  have  a  material  adverse  effect  on  operating  results  of the
       business.
           Some  domestic  manufacturers  and a number of foreign  manufacturers
       compete with the Corporation in the manufacture and sale of various types
       of  glass  container-forming  and  inspection  equipment.   However,  the
       Corporation  believes that it is the leading supplier and offers the most
       complete line of glass container-forming and inspection machinery, parts,
       and service. In recent years, the glass  container-forming and inspection
       equipment  business has experienced the effects of increased  competition
       with packaging  applications of plastic and other  non-glass  containers.
       Important  competitive  factors  are  price,  technological  and  machine
       performance features, product reliability,  and technical and application
       engineering  services.   There  is  little  seasonal  variation  in  this
       business.
           In 1996, the Corporation  commenced a restructuring of certain of its
       operations and recorded a restructuring charge of $91.3 million, of which
       $3.6  million  relates to the  Commercial  and  Industrial  segment.  For
       additional information about the restructuring charge, see Notes 3 and 17
       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.
           The Corporation  owns a number of United States and foreign  patents,
       trademarks,  and license rights  relating to the glass  container-forming
       and inspection equipment business.  While the Corporation considers those
       patents,  trademarks, and license rights to be valuable, this business is
       not materially dependent upon such patents or license rights with respect
       to its operations.
           The  principal  glass   container-forming  and  inspection  equipment
       manufacturing  facility  in the  United  States is  located  in  Windsor,
       Connecticut. Principal manufacturing facilities outside the United States
       are located in Orebro and Sundsvall,  Sweden. For additional  information
       with  respect  to these  and  other  properties  owned or  leased  by the
       Corporation, see Item 2, "Properties."
           The principal raw materials required for the glass  container-forming
       and  inspection   equipment   business  are  steel,   iron,   copper  and
       copper-based materials, aluminum and refractory materials, and electronic
       components.  Manufactured parts are purchased from a number of suppliers.
       All such  materials and  components  are generally  available in adequate
       quantities.

       Backlog
       -------
       The  following  is a summary of total  backlog by business  segment as of
       the referenced dates.

       (Millions of Dollars)                                  December 31,
                                                            1996       1995
                                                            ----       ----
       Consumer and Home Improvement Products .........     $ 71       $ 96
       Commercial and Industrial Products .............      145        134
                                                            ----       ----
                Total Backlog .......................       $216       $230
                                                            ====       ====

           None of the backlog at December  31,  1996,  or at December 31, 1995,
       included unfunded amounts. At December 31, 1996, approximately 84% of the
       backlog of the Commercial and Industrial segment is expected to be filled
       in 1997, with the balance expected to be filled in 1998.

       Other Information
       -----------------
       The Corporation's  product  development  program in the United States for
       the Consumer and Home  Improvement  Products  segment is coordinated from
       the Corporation's  headquarters in Towson,  Maryland, for power tools and
       accessories;  from Shelton,  Connecticut,  for household  products;  from
       Anaheim, California, for residential security hardware; and from Pacoima,
       California,  for plumbing  products.  Outside the United States,  product
       development  activities  for power tools and  accessories  and  household
       products  are  coordinated  from Slough,  England,  and are carried on at
       facilities in Spennymoor, England; Brockville, Canada; Civate, Italy; and
       Idstein, Germany.
           Product  development  activities  for the  Commercial  and Industrial
       Products segment are currently  carried on 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,  1996,  the  Corporation  employed  approximately
       29,200 persons in its operations worldwide. Approximately 2,000 employees
       in the United  States are covered by  collective  bargaining  agreements.
       During  1996,  several  collective  bargaining  agreements  in the United
       States were  negotiated  without  material  disruption to  operations.  A
       number of other  agreements  are scheduled for  negotiation  during 1997.
       Also,  the  Corporation  has  government-mandated  collective  bargaining
       arrangements  or union contracts with employees in other  countries.  The
       Corporation's  operations  have not been affected  significantly  by work
       stoppages and, in the opinion of management, employee relations are good.
           The  Corporation's   operations  worldwide  are  subject  to  certain
       foreign, federal, state, and local environmental laws and regulations. In
       recent  years,  many state and local  governments  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 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, it has not materially  increased
       capital  expenditures  and has not had a material  adverse  effect on the
       Corporation.
           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, 1996, the Corporation had been identified as a
       potentially  responsible party (PRP) in connection with  approximately 22
       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,  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,  the  liability  of the  Corporation  with respect to any site at
       which  remedial  measures have not been  completed  cannot be established
       with certainty.  On the basis of periodic reviews  conducted with respect
       to  these  sites,  however,  appropriate  liability  accruals  have  been
       established   by  the   Corporation.   As  of  December  31,  1996,   the
       Corporation's  aggregate  probable exposure with respect of environmental
       liabilities, for which accruals have been established in the Consolidated
       Financial  Statements,  was $51.5 million.  With respect to environmental
       liabilities,  unless  otherwise  noted below,  the  Corporation  does not
       believe  that its  liability  with  respect to any  individual  site will
       exceed $10.0 million.
           Pursuant  to the  terms of the  Corporation's  agreement  to sell the
       Bostik chemical  adhesives business to Orkem S.A., the Corporation agreed
       to indemnify  Orkem against costs incurred or claims made with respect to
       environmental  matters at Bostik  facilities  within  four years from the
       date of sale to the extent that the aggregate  costs and claims  exceeded
       $5.0 million;  provided,  however, that the Corporation's total liability
       to Orkem for all environmental  matters with respect to Bostik facilities
       shall not exceed  $10.0  million.  By letter  dated  November  22,  1993,
       Orkem's  successor in interest  ("Total,  S.A.") notified the Corporation
       that within the  four-year  period  following the closing it had incurred
       costs of approximately $5.4 million and demanded payment of the amount in
       excess of $5.0 million.  Total, S.A. also demanded  indemnification for a
       number of environmental  conditions identified in its letter, the cost of
       which it  estimated  would  exceed the $10.0  million  limitation  of the
       Corporation's indemnification obligation. The Corporation and Total, S.A.
       continue to review the  indemnification  claims  and, as of December  31,
       1996, the Corporation had paid $3.6 million of the claims.
           In  1985,  as  a  consequence  of  investigations  stemming  from  an
       underground storage tank leak from a nearby gas station,  the Corporation
       discovered certain  groundwater  contamination at its facility located in
       Hampstead, Maryland. Upon discovery of the groundwater contamination, the
       Corporation,  in  cooperation  with the  Department of Environment of the
       State of Maryland (MDE),  embarked on a program to remediate  groundwater
       contamination  and to prevent the  migration of  contaminants,  including
       installation of an air stripping  system designed to remove  contaminants
       from  groundwater.  The Corporation,  in cooperation with MDE,  conducted
       extensive  investigations  as to  potential  sources  of the  groundwater
       contamination.  Following submission of the results of its investigations
       to MDE, the Corporation  proposed to expand its  groundwater  remediation
       system and also proposed to excavate and remediate  soils in the vicinity
       of the plant that appear to be a source  area for certain  contamination.
       The  Corporation  has  received  all  permits  necessary  to operate  its
       expanded  groundwater  treatment facility at the Hampstead facility,  and
       the system is fully operational.
           In October 1994,  suit was filed in the United States  District Court
       for the District of Maryland  against the  Corporation by the owners of a
       farm that is adjacent to the  Hampstead  facility  (Leister et al. v. The
       Black & Decker  Corporation  (No. JFM  94-2809)).  Plaintiffs  claim that
       contamination,  allegedly  emanating  from the facility,  has migrated in
       groundwater and has adversely affected plaintiffs'  property.  Plaintiffs
       have alleged various claims for relief,  including causes of action under
       the Federal Resource Conservation and Recovery Act, CERCLA, and the Clean
       Water Act, as well as various  state tort  claims,  including  claims for
       negligence,   nuisance,  intentional  misrepresentation,   and  negligent
       misrepresentation.  Plaintiffs  seek various  forms of relief,  including
       compensatory  damages of $20.0  million  and  punitive  damages of $100.0
       million.
           The Corporation filed various motions to, among other things, dismiss
       plaintiffs'  claims,  and the Court granted the  Corporation's  motion to
       dismiss all but one claim.  Following that ruling,  both the  Corporation
       and plaintiffs filed motions for summary judgment on the remaining claim,
       and the  Corporation's  motion  was  granted.  Plaintiffs  have  filed an
       appeal,  which is pending  before the United  States Court of Appeals for
       the Fourth Circuit.
           Pending  plaintiffs' appeal before the United States Court of Appeals
       for the Fourth  Circuit,  plaintiffs  filed a state action in the Circuit
       Court for Baltimore  County,  Maryland  (Leister et al. v. Black & Decker
       (U.S.)  Inc.  (03-C-96-005347))  alleging  common  law  claims for strict
       liability,  negligence, trespass, nuisance, intentional misrepresentation
       and negligent misrepresentation arising from the same facts as alleged in
       the federal court action.  The  Corporation  filed a motion for dismissal
       and/or summary  judgment of the state court claims,  and summary judgment
       was granted on December 23, 1996. Plaintiffs have filed an appeal of this
       decision.
           The Corporation  believes that plaintiffs' claims in both the federal
       and state court  actions  involving  the  Hampstead  facility are without
       merit and intends to defend  vigorously  against the allegations  made in
       those actions.  Management is of the opinion that the ultimate resolution
       of  those  actions  will  not  have  a  material  adverse  effect  on the
       Corporation.
           In  December   1992,   Price  Pfister  and  numerous  other  plumbing
       manufacturers  were sued by the State of California in the Superior Court
       for the City and  County of San  Francisco.  On the same day,  a separate
       suit was filed by the Natural  Resources  Defense  Council (NRDC) and the
       Environmental  Law  Foundation  (ELF).  The  suits  filed by the State of
       California  and the  NRDC  and the ELF  included  substantially  the same
       allegations,  namely that lead leaches from brass  faucets into tap water
       in violation of California's  lead discharge  prohibitions of Proposition
       65, that the manufacture and sale of brass faucets exposes individuals to
       lead  without a proper  "clear  and  reasonable  warning,"  and that such
       violations of Proposition 65 also constitute  unfair  business  practices
       under  California  law. The NRDC and the ELF suit also alleged  breach of
       warranty  and breach of contract  claims  against  Price  Pfister and the
       other  plumbing  manufacturers.  The State of California and the NRDC and
       the ELF generally  sought the following  relief:  (a) elimination of lead
       from brass faucets;  (b) improved public  disclosure  programs  regarding
       lead in brass faucets;  (c) commencement of a public information campaign
       regarding   alleged  health  risks  arising  from  lead   exposure;   (d)
       restitution  to  purchasers  of  faucets;  (e)  statutory  penalties  and
       punitive damages in unstated  amounts;  and (f) attorneys' fees and other
       costs.
           Subsequent  to the  filing  of their  complaints  and the  filing  by
       plaintiffs and the Corporation of numerous  motions,  in May 1994,  Judge
       Bea of the  California  Superior  Court  for the City and  County  of San
       Francisco  issued an order rejecting the Attorney  General's  claims that
       lead which  leaches from faucets  constitutes  a prohibited  discharge of
       lead into  water or onto or into land where lead will pass or is at least
       likely to pass into a source of drinking water. Judge Bea's order granted
       the Attorney  General 20 days to amend his  complaint to state a cause of
       action under  Proposition  65. In the companion  case  involving  similar
       claims by the NRDC and the ELF, Judge Cahill of the  California  Superior
       Court  for the  City  and  County  of San  Francisco  denied  defendants'
       challenges  to the standing of the NRDC and the ELF to bring these claims
       and refused to stay the proceedings  pending  resolution of the claims by
       the Attorney General.
           Subsequent  to Judge Bea's order  rejecting  the  Attorney  General's
       claims and granting the Attorney  General 20 days to amend his  complaint
       to state a cause of action under  Proposition  65, the  Attorney  General
       filed an  appeal of Judge  Bea's  order.  Prior to a final  ruling on the
       appeal  in  the  case  involving  the  Attorney   General's  claims,  the
       Corporation  entered  into a settlement  agreement  pursuant to which the
       Corporation  agreed to take  certain  actions  with respect to the future
       sale of its products in California and agreed to the payment of specified
       amounts to the State of California and the attorneys for the NRDC and the
       ELF.
           Following  the  settlement  of these cases the Court of Appeal of the
       State of California affirmed the decision of the trial court in rejecting
       the Attorney  General's  claim and in concluding  that lead which leaches
       from  faucets  is not a  prohibited  discharge  of lead into a "source of
       drinking  water."  Subsequent to this  decision,  the NRDC and the ELF as
       well as a number of other  environmental  interest  groups filed  motions
       requesting  leave to intervene in the case for purposes of appealing  the
       decision  of the Court of  Appeal to the  California  Supreme  Court.  In
       December 1996, the California Supreme Court reversed the decisions of the
       trial  court and the Court of Appeal  and  concluded  that a faucet was a
       source  of  drinking  water  within  the  meaning  of   Proposition   65.
       Notwithstanding this decision,  in light of the previous settlements with
       the Attorney  General and the NRDC and ELF,  management is of the opinion
       that the  resolution  of this  matter  will not have a  material  adverse
       effect on the Corporation.
           In 1988, J.C. Rhodes, a former subsidiary of Emhart Industries, Inc.,
       was notified by both the EPA and the State of  Massachusetts  that it was
       considered a PRP with regard to the Sullivan's Ledge site in New Bedford,
       Massachusetts.  Emhart  and 11  other  companies  formed  a PRP  group to
       respond to the EPA's and Massachusetts'  demands, and, in September 1990,
       executed a Consent Order to perform the remedial  action  recommended  by
       the EPA in its Record of Decision. The remedial action is now underway.
           A second area of the  Sullivan's  Ledge site,  known as Middle Marsh,
       was  investigated  by the EPA,  and a Record of  Decision  was  issued in
       September 1991. In September 1992,  Emhart,  11 other companies,  and the
       City of New Bedford,  Massachusetts,  executed a Consent Order to perform
       the remediation required in the Middle Marsh section of the site. At this
       time, Emhart's estimated liability for remediation cost at the Sullivan's
       Ledge site is estimated at $2.0 million.
           The Corporation has been investigating  certain environmental matters
       at its NEMEF security  hardware  facility in the  Netherlands.  The NEMEF
       facility has been a manufacturing  operation since 1921.  During building
       construction in 1990, soil and groundwater  contamination  was discovered
       on the  property.  Investigations  to  understand  the full extent of the
       contamination were undertaken at that time, and those  investigations are
       continuing.  The  Corporation is continuing to work with  consultants and
       local  authorities  to  develop  a  comprehensive   remediation  plan  in
       conjunction with neighboring property owners.
           In the opinion of management, the costs of compliance with respect to
       the matters set forth above and other remedial costs have been adequately
       accrued,  and the ultimate  resolution  of these  matters will not have a
       material  adverse  effect  on  the  Corporation.  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.

(e)    FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC
       OPERATIONS
       Reference  is  made  to  Note  17  of  Notes  to  Consolidated  Financial
       Statements,  entitled "Business Segments and Geographic Areas",  included
       in Item 8 of Part II and to the section entitled  "Business  Segments" in
       Management's  Discussion and Analysis of Financial  Condition and Results
       of Operations included in Item 7 of Part II of this report.

(f)    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 is set forth below.

       Nolan D. Archibald - 53
       Chairman, President, and Chief Executive Officer,
           January 1990 - present.

       Joseph Galli - 38
       Executive Vice President and President - Power Tools and Accessories,
           December 1996 - present;
       Group Vice President and President - Power Tools and Accessories,
           March 1996 - December 1996;
       Group Vice President and President - Power Tools,
           October 1995 - March 1996;
       Vice President and President - North American Power Tools,
           October 1993 - October 1995;
       President - U.S. Power Tools,
           February 1993 - October 1993;
       Vice President Sales and Marketing - U.S. Power Tools,
           May 1991 - February 1993.

       Paul A. Gustafson - 54
       Executive  Vice  President  and  President - Fastening  and 
           Assembly Systems Group,
           December 1996 - present;
       Group Vice President and President - Emhart Fastening Teknologies,
           July 1996 - December 1996;
       President - Emhart Fastening Teknologies, 
           April 1990 - July 1996.

       Dennis G. Heiner - 53
       Executive Vice President and President - Security Hardware Group, 
           January 1992 - present.

       Michael P. Hoopis - 45
       Executive Vice President and President - Household Products Group,
           December 1996 - present;
       Group Vice President and President - Worldwide Household Products Group,
           July 1996 - December 1996;
       President - Price Pfister,
           May 1992 - July 1996;
       President - Kwikset, 
           July 1991 - May 1992.

       Charles E. Fenton - 48
       Senior Vice President and General Counsel,
           December 1996 - present;
       Vice President and General Counsel,
           May 1989 - December 1996.

       Barbara B. Lucas - 51
       Senior Vice President - Public Affairs and Corporate Secretary,
           December 1996 - present;
       Vice President  - Public  Affairs  and  Corporate  Secretary,  
           July 1985 - December 1996.

       Thomas M. Schoewe - 44
       Senior Vice President and Chief Financial Officer,
           December 1996 - present;
       Vice President and Chief Financial Officer,
           October 1993 - December 1996;
       Vice President - Finance,
           January 1990 - October 1993.

       Leonard A. Strom - 51
       Senior Vice President - Human Resources,
           December 1996 - present;
       Vice President - Human Resources,
           May 1986 - December 1996.

       T. Tracy Bilbrough - 40
       Vice  President and  President - Eastern  Hemisphere  Group,  
           Power Tools and Accessories,
           December 1996 - present;
       President - Eastern Hemisphere,
           October 1995 - December 1996;
       Vice President Marketing and Sales, Professional Products - North 
           American Power Tools,
           September 1992 - October 1995;
       Director of  Marketing, Professional Products - North American
           Power Tools,
           August 1990 - September 1992.

       Ronald B. Cooper - 42
       Vice President and President - Plumbing Products,
           December 1996 - present;
       President - Price Pfister,
           August 1996 - December 1996;
       President - Accessories,
           March 1996 - August 1996;
       President and Chief Executive Officer - Interrealty Company,
           March 1995 - September 1995;
       President, Commercial Systems Group - PRC,
           August 1992 - March 1995;
       President and Chief Executive Officer - GE Consulting Services Division,
           October 1990 - August 1992.

       Scott C. Hennessy - 37
       Vice President and President - Recreational Products,
           December 1996 - present;
       General Manager and President - True Temper Sports,
           January 1996 - December 1996;
       Vice President Sales and Marketing - True Temper Sports,
           August 1994 - January 1996;
       Vice President Sales and Marketing - North American Accessories, 
           October 1990 - August 1994.

       Kathleen W. Hyle - 38
       Vice President and Treasurer,
           May 1994 - present;
       Assistant Treasurer, Domestic,
           December 1992 - May 1994;
       Director, Domestic Finance,
           February 1990 - December 1992.
       Effective  as of  February  28,  1997,  Mrs.  Hyle  will be  leaving  the
       Corporation.

       Stephen F. Reeves - 37
       Vice President and Controller,
           September 1996 - present;
       Corporate Controller,
           May 1994 - September 1996; 
       Senior Manager - Ernst & Young LLP,
           October 1988 - April 1994.

       James J. Roberts - 38
       Vice President, Vice President/General Manager - U.S. Accessories,
           December 1996 - present;
       Vice President and General Manager - U.S. Accessories,
           August 1996 - December 1996;
       Vice President and General Manager - Professional Power Tools, Europe,
           April 1994 - August 1996;
       Vice President Sales and Marketing - U.S. Consumer Power Tools,
           April 1993 - April 1994;
       Vice President Marketing - U.S. Power Tools,
           June 1991 - April 1993.

       Kurt E. Siegenthaler - 54
       Vice  President  and  President - Glass Container-Forming and  
           Inspection Equipment,
           December 1996 - present;
       President - Emhart Glass,
           July 1993 - December 1996;
       President - Packaging Technology Division SIG, Schweizerische
           Industrie-Gesellschaft,
           April 1989 - June 1993.

       Ian Stuart - 46
       Vice  President and President - Latin American Group, Power Tools 
           and Accessories,
           December 1996 - present;
       President - Latin American Group,
           March 1995 - December 1996;
       Vice President and General Manager - Latin American Caribbean Area,
           July 1992 - March 1995;
       Vice President Marketing - International Group, 
           January 1991 - July 1992.


ITEM 2.   PROPERTIES

The Corporation and its subsidiaries operate 48 manufacturing  facilities around
the  world,  including  25  located  outside  the  United  States in 13  foreign
countries. The major properties associated with each business segment are listed
in Narrative Description of the Business in Item 1(d) 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; Amory,  Mississippi;  Shelton,
Connecticut; and Towson, Maryland.
     Outside  the  United  States: Rotherham, England; Kuantan,  Malaysia;   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 which is located on leased land in Jurong Town, Singapore.
     The Corporation's average utilization rate for its manufacturing facilities
for 1996 was in the range of 75% to 85%. The  Corporation  continues to evaluate
its worldwide  manufacturing cost structure to identify opportunities to improve
capacity utilization and will take appropriate action as deemed necessary.
     Management  believes that its owned and leased  facilities are suitable and
adequate to meet the Corporation's anticipated needs.


ITEM 3.   LEGAL PROCEEDINGS

The  Corporation  is involved  in various  lawsuits  in the  ordinary  course of
business. These lawsuits primarily involve claims for damages arising out of the
use of the  Corporation's  products  and  allegations  of patent  and  trademark
infringement.  The Corporation also is involved in litigation and administrative
proceedings involving employment matters and commercial disputes.  Some of these
lawsuits  include  claims for  punitive  as well as  compensatory  damages.  The
Corporation, using current product sales data and historical trends, actuarially
calculates the estimate of its exposure for product  liability.  The Corporation
is insured for  product  liability  claims for amounts in excess of  established
deductibles and accrues for the estimated liability as described above up to the
limits of the  deductibles.  All other  claims  and  lawsuits  are  handled on a
case-by-case basis.
     As previously noted under Item 1 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.
     On or about March 31, 1989,  a purported  class  action  complaint,  titled
Cooperman et al. v. The Black & Decker  Corporation  et al., No. 89Civ 2177 (the
Cooperman  Complaint),  was filed in the United  States  District  Court for the
Southern  District  of New  York  alleging  that  the  Corporation's  settlement
agreement  with Topper  Acquisition  Corp.  and Topper L.P.,  bidders for Emhart
Corporation, and the payments by the Corporation thereunder violated the federal
securities  laws,  particularly  sections  10(b)  and  14(d)  of the  Securities
Exchange Act of 1934, as amended, and the rules and regulations, including rules
10b-13 and 14d-10,  thereunder.  Plaintiffs  initially sought  injunctive relief
prohibiting the Corporation  from  consummating  its tender offer for Emhart and
later sought rescissory damages as well as costs, disbursements,  and reasonable
attorneys'  and other  fees.  The  Corporation's  request  for leave to move for
summary judgment was denied by the District Court, and the District Court issued
an order  directing  that  discovery be  completed by June 1, 1991.  The parties
subsequently  entered into a number of stipulations and orders amending the date
for the completion of discovery and the date before which the Corporation  could
again apply for leave to move for summary judgment.  In January 1997, plaintiffs
voluntarily withdrew the Cooperman Complaint.
     In March 1990,  the  Corporation's  former PRC subsidiary was served by the
Inspector General of the United States Department of Defense with a subpoena for
documents  from  the  period  1986  to  1990  in  connection   with  a  criminal
investigation of bid and proposal cost charging  practices of certain  divisions
of PRC.  Since that date,  PRC has been  served  with two  additional  Inspector
General subpoenas for marketing and proposal-related documents. During 1992, PRC
and some former  employees  also  received  grand jury  subpoenas  issued by the
United States District Court for the Eastern District of Virginia.  During 1993,
PRC received an additional subpoena from the grand jury directing PRC to provide
information  concerning  the  procurement  and  government  property  management
functions  of certain  divisions  of PRC.  In January  1996,  the United  States
Attorney  advised PRC that the  criminal  investigation  has  concluded  without
further  action and the  matter was  transferred  to the Civil  Division  of the
Department  of Justice.  In  connection  with the  Corporation's  sale of PRC to
Litton Industries,  Inc. in 1996, the Corporation agreed to indemnify Litton for
various  liabilities,  including  liabilities relating to the matters subject to
the foregoing subpoenas.  The Corporation cannot predict the eventual outcome of
these investigations,  but, based on currently available information, management
believes that the investigations  will not have a material adverse effect on the
Corporation.
     In June 1996,  Emerson Electric Company  ("Emerson") filed suit against the
Corporation in the United States District Court for the Southern District of New
York  (Emerson  Electric  Co. v. Black & Decker  Inc.  et al.,  No.  96Civ 4334)
alleging that the Corporation made false  representations in connection with the
sale of the  Mallory  Controls  business  to  Emerson  in 1991.  Emerson's  suit
includes claims for negligent  misrepresentation  and fraud as well as breach of
contract,  and asserts liability for contribution  relating to the settlement by
Emerson of a suit arising out of the Mallory  Controls  business.  Emerson seeks
damages in the amount of $15 million on the negligent  misrepresentation,  fraud
and breach of  contract  claims,  and damages of not less than $8 million on the
contribution  claim. The Corporation  believes that Emerson's claims are without
merit and  intends to defend  vigorously  against the  allegations  made in this
matter.  In the opinion of  management,  the ultimate  resolution of this matter
will not have a material adverse effect on the Corporation.
     In January 1996,  Liberty Mutual Insurance Company ("Liberty Mutual") filed
suit in the Superior Court in Massachusetts  against the Corporation and certain
of its  subsidiaries  seeking a  declaratory  judgment  that  various  insurance
policies issued by Liberty Mutual to the Corporation did not cover liability and
expenses relating to certain on-site and off-site  environmental  contamination.
The Corporation and subsidiary  defendants removed the case to the United States
District  Court  for the  Eastern  District  of  Massachusetts  (Liberty  Mutual
Insurance Company v. The Black & Decker  Corporation et al., No.  96-10804-DPW),
and filed a  counterclaim  asserting,  among other things,  bad faith,  unlawful
business practices and breach of contract on the part of Liberty Mutual.
     In April 1996, the  Corporation  filed a separate suit in the Circuit Court
for Baltimore County,  Maryland against Liberty Mutual and certain other primary
and excess  insurance  carriers  (Black & Decker  (U.S.) Inc. et al. v.  Liberty
Mutual  Insurance  Company  et  al.  (03-C-96-003801))  asserting  that  various
insurance  policies  issued  by  Liberty  Mutual  and the other  carriers  cover
liability and expenses associated with groundwater and soil contamination claims
alleged to have occurred at the Corporation's  Hampstead,  Maryland facility. In
December  1996,  Liberty  Mutual  filed a  counterclaim  with the Circuit  Court
incorporating  the  allegations  made in the suit  pending in the United  States
District Court for the Eastern District of Massachusetts and seeking, in effect,
to transfer the Massachusetts  litigation to Baltimore  County.  The Corporation
has filed a motion to strike the counterclaim or, in the alternative, to dismiss
or stay the counterclaim.
     In the opinion of management,  amounts accrued for awards or assessments in
connection  with the  matters  specified  above  and in Item 1 of Part I of this
report  with  respect  to   environmental   matters  and  other  litigation  and
administrative proceedings to which the Corporation is a party are adequate and,
accordingly,  ultimate  resolution  of these  matters  will not have a  material
adverse effect on the Corporation.
     As of  December  31,  1996,  the  Corporation  had no  known  probable  but
inestimable  exposures for awards and assessments in connection with the matters
specified  above  and in  Item 1 of  Part  I of  this  report  with  respect  to
environmental  matters and other litigation and administrative  proceedings that
could have a material effect on the Corporation.



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

Not applicable.





                                      PART II


ITEM 5.      MARKET FOR THE COMPANY STOCK AND RELATED SECURITY
             HOLDER 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 sales prices of the Common Stock as reported in the  consolidated
       reporting system for the New York Stock Exchange Composite Transactions:

       ------------------------------------------------------------------------
       Quarter                        1996                     1995
       January to March        $38-1/4  to $30-3/4       $29-5/8 to $22-7/8
       April to June           $44-1/4  to $35-1/8       $33     to $27-1/2
       July to September       $42-3/8  to $32-7/8       $34-5/8 to $30-1/4
       October to December     $42-1/2  to $29           $38-1/8 to $32-1/8
       -------------------------------------------------------------------------

(b)    HOLDERS OF THE CORPORATION'S CAPITAL STOCK
       As of  January  31,  1997,  there  were  18,581  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  necessarily  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                                            1996        1995
       -------                                            ----        ----
       January to March .......................           $.12        $.10
       April to June ..........................            .12         .10
       July to September ......................            .12         .10
       October to December ....................            .12         .10
                                                          ----        ----
                                                          $.48        $.40
                                                          ====        ====
      --------------------------------------------------------------------------

          For the first three  quarters in 1996 and during each of the  quarters
     in 1995, the Corporation  declared a dividend of approximately $2.9 million
     on its shares of Series B Cumulative  Convertible  Preferred  Stock (Series
     B). On October 14, 1996, the Corporation  exercised its conversion  option,
     issuing 6,350,000 shares of Common Stock in exchange for the 150,000 shares
     of Series B stock previously  outstanding.  Dividends of approximately  $.4
     million relating to the period from September 29, 1996, through October 13,
     1996, were paid to the holder of the Series B stock. During the most recent
     two years, no other dividends were declared or paid in respect of shares of
     preferred stock of the Corporation.

     Common Stock:    150,000,000 authorized, $.50 par  value; 94,248,807 shares
                      and 86,447,588 shares outstanding as of December 31, 1996
                      and 1995, respectively.

     Preferred Stock: 5,000,000 authorized, without par value; no shares 
                      outstanding as of December 31, 1996; 150,000 shares of 
                      Series B Cumulative Convertible Preferred Stock 
                      outstanding as of December 31, 1995.

<PAGE>

ITEM 6.   SELECTED FINANCIAL DATA
<TABLE>
FIVE-YEAR SUMMARY
(Millions of Dollars Except Per Share Data)
<CAPTION>
------------------------------------------------------------------------------------------------------ 
                                              1996(a)     1995(b)      1994       1993(c)     1992(d)
------------------------------------------------------------------------------------------------------
<S>                                          <C>         <C>         <C>         <C>         <C>     
Sales                                        $4,914.4    $4,766.1    $4,365.2    $4,121.5    $4,045.7
Earnings (loss) from continuing operations      159.2       216.5        89.9        64.1       (95.3)
Earnings from discontinued operations (e)        70.4        38.4        37.5        31.1        22.0
Extraordinary items                                --       (30.9)        --          --        (22.7)
Cumulative effects of changes in
     accounting principle                          --          --         --        (29.2)     (237.6)
Net earnings (loss)                             229.6       224.0       127.4        66.0      (333.6)
Earnings (loss) per common and common
     equivalent share:
     Primary: 
         Continuing operations                   1.64        2.33         .93         .63       (1.40)
         Discontinued operations                  .77         .44         .44         .37         .29
         Extraordinary items                       --        (.35)         --          --        (.30)
         Cumulative effects of
           accounting changes                      --          --          --        (.35)      (3.11)
         Net earnings (loss)                     2.41        2.42        1.37         .65       (4.52)
     Assuming full dilution:
         Continuing operations                   1.65        2.29         .93         .63       (1.40)
         Discontinued operations                  .73         .41         .44         .37         .29
         Extraordinary items                       --        (.33)         --          --        (.30)
         Cumulative effects of
           accounting changes                      --          --          --        (.35)      (3.11)
         Net earnings (loss)                     2.38        2.37        1.37         .65       (4.52)
Total assets                                  5,153.5     5,545.3     5,264.3     5,166.8     5,295.0
Long-term debt                                1,415.8     1,704.5     1,723.2     2,069.2     2,108.5
Cash dividends per common share                   .48         .40         .40         .40         .40
------------------------------------------------------------------------------------------------------
</TABLE>
(a) Earnings from continuing operations for 1996 includes a restructuring charge
    of $91.3  million  before  taxes  ($74.8  million  after  taxes) and a $10.6
    million  reduction  in income tax  expense as a result of the  reversal of a
    portion of the Corporation's deferred tax asset valuation allowance.
(b) Earnings  from  continuing  operations  for  1995  include  a $65.0  million
    reduction  in income tax expense as a result of the reversal of a portion of
    the  Corporation's  deferred tax asset  valuation  allowance.  In 1995,  the
    Corporation   recognized   a   $30.9   million   extraordinary   loss   from
    extinguishment of debt, net of income tax benefit of $2.6 million.
(c) Effective January 1, 1993, the Corporation  changed its method of accounting
    for  postemployment   benefits.   In  addition,   earnings  from  continuing
    operations  for 1993 include a  restructuring  credit of $6.3 million before
    tax ($.2 million after tax).
(d) Effective January 1, 1992, the Corporation changed its methods of accounting
    for income taxes and postretirement  benefits other than pensions.  In 1992,
    the  Corporation   recognized  a  $22.7  million   extraordinary  loss  from
    extinguishment of debt. In addition, earnings from continuing operations for
    1992 included a  restructuring  charge of $142.4  million before tax ($134.7
    million after tax).
(e) Earnings  from  discontinued  operations  represent  the  earnings,  net  of
    applicable income taxes, of the Corporation's  discontinued PRC segment. The
    earnings  of the  discontinued  PRC  segment do not  reflect  any charge for
    interest  allocated  to that  segment  by the  Corporation.  For  additional
    information about the discontinued PRC segment, see the discussion under the
    caption  "Discontinued  Operations"  included  in  Item 1 of  Part I of this
    report and Note 2 of Notes to Consolidated  Financial Statements included in
    Item 8 of Part II of this report.





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

OVERVIEW
The Corporation  reported net earnings of $229.6 million or $2.38 per share on a
fully  diluted  basis for the year ended  December  31,  1996,  compared  to net
earnings of $224.0 million or $2.37 per share on a fully diluted basis in 1995.
     During 1996, the Corporation  commenced a  restructuring  of certain of its
operations and recorded a  restructuring  charge of $91.3 million ($74.8 million
after  tax).  Excluding  the  effects of the 1996  restructuring  and of a $10.6
million  and $65.0  million  decrease  in income  tax  expense in 1996 and 1995,
respectively,  as a result of the  Corporation's  reduction  in its deferred tax
asset valuation  allowance,  earnings from continuing  operations increased from
$151.5  million  ($1.60  per share on a fully  diluted  basis) in 1995 to $223.4
million  ($2.32  per share on a fully  diluted  basis) in 1996.  This  growth in
earnings from continuing  operations in 1996 was a function of a higher level of
sales and  operating  income,  a lower  effective tax rate,  and lower  interest
expense.
     During 1996, the  Corporation  generated free cash flow (cash available for
debt  reduction  prior to the effects of cash  proceeds  received  from sales of
businesses,  issuances of equity,  and sales of  receivables) of $235.4 million,
compared to free cash flow of $34.7  million in 1995.  The increase in free cash
flow in 1996 was primarily the result of improved working capital management.
     The combination of strong operating results and free cash flow coupled with
the proceeds  received from the sale of discontinued  operations in 1996 enabled
the Corporation to reduce its ratio of debt to total  capitalization from 62% at
December 31, 1995, to 51% at December 31, 1996.

CONTINUING OPERATIONS

SALES
The following chart sets forth an analysis of the consolidated  changes in sales
for the years ended December 31, 1996, 1995, and 1994.

ANALYSIS OF CHANGES IN SALES OF CONTINUING OPERATIONS
                                               For the Year Ended December 31,
(Dollars in Millions)                            1996         1995        1994
                                              -------      -------     ------- 
Total sales                                   $ 4,914      $ 4,766     $ 4,365
                                          
Unit volume - existing (1)                          5%           6%          8%
            - disposed (2)                         --%          --%         (3)%
Price                                              (1)%          1%          1%
Currency                                           (1)%          2%         --%
                                              -------      -------     -------  
Change in total sales                               3%           9%          6%
                                              =======      =======     =======

In the  above  chart  and  throughout  the  remainder  of this  discussion,  the
following  definitions  apply: 
(1) Existing - Reflects the  change in unit  volume for businesses where period-
    to-period comparability exists.
(2) Disposed - Reflects the change in total sales of continuing  operations  for
    businesses that were included in the prior year's results,  but subsequently
    have been sold.

     Total sales for the year ended December 31, 1996, were $4.9 billion,  which
represented a 3% increase over 1995 sales of $4.8 billion. During 1996, existing
unit volume grew 5% over the sales level in 1995. The 1996 growth in unit volume
occurred both in the Consumer and Home Improvement  Products  (Consumer) segment
and in the Commercial and Industrial Products (Commercial) segment.
     Total sales for the year ended December 31, 1995, were $4.8 billion,  which
represented a 9% increase over 1994 sales of $4.4 billion, due to growth in both
the Consumer and Commercial segments.

RESTRUCTURING
The  Corporation  actively seeks to identify  opportunities  to improve its cost
structure.   These  opportunities  may  involve  the  closure  of  manufacturing
facilities or the reorganization of other operations.
     The  Corporation  has  undertaken  restructuring  actions in the past which
generated improvements in its cost structure.  Those improvements,  however, are
subject to erosion  over time as  competitive  pressures  intensify or commodity
prices  increase.  In order to  preserve  those  improvements,  the  Corporation
continuously  seeks  opportunities to further enhance its cost structure.  Based
upon a number of factors,  including the weak retail environment in Europe which
had begun to soften in the  latter  part of 1995,  the  Corporation  decided  to
intensify its cost reduction efforts and recorded a restructuring  charge in the
amount of $81.6 million ($67.0 million after tax) early in 1996. The Corporation
modified portions of the initial restructuring plan later in 1996 as a result of
changed  business  conditions  and the  insight  of new  management  in  certain
businesses.  The net effect of these  modifications  was to  increase  the total
restructuring  charge  recognized in 1996 to $91.3 million  ($74.8 million after
tax).
     The major  component of the $91.3 million  restructuring  charge relates to
the elimination of approximately  1,500 positions,  of which approximately 1,400
are in the Consumer  segment.  As a result,  severance  benefits  totaling $74.6
million,  principally  associated with the European  Consumer  businesses,  were
accrued in the restructuring  charge.  The balance of the  restructuring  charge
primarily   represented  non-cash  charges  associated  with  the  Corporation's
decision to rationalize  certain  manufacturing  operations,  principally in the
Consumer  businesses in the United  States.  Such  rationalization  includes the
outsourcing of certain  products  currently  manufactured by the Corporation and
the closure of several small  manufacturing  facilities.  The principal non-cash
charge consisted of a $6.6 million  write-down to fair value of certain land and
buildings affected by the  rationalization.  The remaining  restructuring charge
primarily  related to the write-down to fair value of equipment made obsolete or
redundant due to the decision to close certain  facilities or outsource  certain
production.
    The Corporation's restructuring activity during 1996 is summarized below:
<TABLE>
<CAPTION>
                                          Reversal
                                       of Previous
                                       Reserve and                                              Reserve
                          Reserve          Accrual            Utilization of Reserve                 at
(Dollars in          as Initially           of New                                             Dec. 31,
Millions)             Established          Reserve             Cash          Non-Cash              1996
------------------   ------------      -----------          -------          --------          --------
<S>                       <C>              <C>              <C>              <C>                <C>    
Severance benefits        $  62.8          $  11.8          $ (37.5)         $    --            $  37.1
Write-down of land  
   and buildings              8.9             (2.3)              --             (6.6)                --
Other charges                 9.9               .2             (1.7)            (7.8)                .6
                          -------          -------          -------          -------            -------                          
Total                     $  81.6          $   9.7          $ (39.2)         $ (14.4)           $  37.7
                          =======          =======          =======          =======            =======
</TABLE>
     The Corporation  anticipates  that the remaining  restructuring  reserve of
$37.7 million as of December 31, 1996,  will be  substantially  spent in 1997 as
certain severance actions taken in the European Consumer  businesses are subject
to scheduled payouts mandated by local custom or governmental regulations.
     The Corporation estimates that the implementation of the restructuring plan
resulted in savings of approximately $10.0 million in 1996 and, based on current
market conditions, will result in savings of approximately $40.0 million in 1997
and $60.0 million annually thereafter.
     The Corporation is committed to continuous productivity improvement and, as
part of its periodic strategic planning review, continues to evaluate additional
opportunities  for cost reduction.  As part of this commitment,  the Corporation
has  embarked  on  the  specific  actions  included  in the  restructuring  plan
described  above.  Many of these actions involve the relocation or consolidation
of production processes.  Realization of the savings identified above depends on
the effectiveness and timing of these actions.



EARNINGS
Operating  income from  continuing  operations as a percentage of sales was 7.3%
for 1996  compared to 8.9% and 8.1% for 1995 and 1994,  respectively.  Excluding
the  effects  of the $91.3  million  restructuring  charge  recognized  in 1996,
operating  income from  continuing  operations as a percentage of sales was 9.1%
for 1996 compared to 8.9% and 8.1% for 1995 and 1994, respectively.
     Gross margin as a percentage  of sales in 1996 was 35.8%  compared to 36.7%
for 1995 and 36.6% for 1994. The decrease in gross margin in 1996 from the prior
year's level was primarily attributable to several factors. First, actions taken
by the Corporation in 1996 to reduce  inventories from the high level at the end
of 1995  resulted in lower  production  levels during 1996,  and the  associated
lower overhead absorption negatively affected gross margin. Second,  competitive
pressures did not permit the Corporation's businesses to institute certain price
increases  and, in some cases,  caused the  businesses to reduce prices from the
prior year's level.  Gross margin also was negatively  affected by manufacturing
inefficiencies,  including those associated with new  manufacturing  facilities,
and changes in the mix of products sold in 1996.
     Gross  margin  in 1995 was  slightly  higher  than in 1994.  The  impact of
increased manufacturing productivity and cost reduction initiatives during 1995,
however, was substantially offset by rising commodity costs and by reduced gross
margin in the European  operations.  Gross margin in 1995 was adversely affected
by a softening  European retail environment in the fourth quarter of 1995 and by
residual  inefficiencies in European  operations  associated with the closure of
two manufacturing facilities in mid-1994.
     Selling, general, and administrative expenses as a percentage of sales were
26.6% for 1996 compared to 27.8% for 1995 and 28.5% for 1994.  The  improvements
in 1996  compared  to 1995 and in 1995  compared to 1994 were the result of cost
reduction  initiatives and the leverage effects of higher sales volumes on fixed
and semi-fixed costs.
     Net interest  expense  (interest  expense less interest  income) was $135.4
million in 1996 compared to $184.4  million in 1995 and $187.9  million in 1994.
Net interest expense for 1996 was significantly  lower than for 1995,  primarily
due to lower debt levels in 1996.  Those lower debt  levels  resulted  from debt
repayments,  early in 1996,  with the sales  proceeds  of the  discontinued  PRC
segment and from improved  operating cash flow during 1996. Net interest expense
for 1995 was below the 1994 level as a result of reduced borrowing levels during
the year, partially offset by higher interest rates on variable rate debt.
     Other expense for 1996, 1995, and 1994 primarily  included costs associated
with the sale of receivables program.
     As more  fully  described  in Note 13 of  Notes to  Consolidated  Financial
Statements,  during  1996 and 1995,  the  Corporation  reversed a portion of the
deferred tax asset valuation allowance based on its projection of future taxable
earnings  in  the  United  States,  including,  for  1995,  the  impact  of  the
then-pending  sale of PRC Inc. The effect of this  reduction in the deferred tax
asset  valuation  allowance  was to decrease 1996 and 1995 income tax expense by
$10.6 million and $65.0 million, respectively.
     Excluding  the effect of the $16.5  million  income tax benefit  associated
with the  restructuring  charge in 1996 and the effects of the $10.6 million and
$65.0  million  income tax benefits  that  resulted  from the  reductions of its
deferred  tax asset  valuation  allowance  in 1996 and 1995,  respectively,  the
Corporation's  reported  tax  rate  on  continuing  operations  was  24% in 1996
compared to a rate of 33% in 1995 and 40% in 1994. Contributing to the lower tax
rate both for 1996  compared  to 1995 and for 1995  compared to 1994 were higher
taxable  earnings  in the  United  States  and a change in the mix of  operating
income  outside  the  United  States  from   subsidiaries   in  higher-rate  tax
jurisdictions  to subsidiaries in lower-rate tax  jurisdictions  or subsidiaries
that  profit  from the  utilization  of net  operating  loss  carryforwards.  An
analysis of taxes on  earnings  is included in Note 13 of Notes to  Consolidated
Financial Statements.
     During  1996,  the  Corporation  fully  recognized  the benefit of domestic
deferred tax assets,  exclusive of foreign tax credits,  for financial reporting
purposes.  The benefit of the  previously  unrecognized  deferred tax assets has
lowered the  domestic  portion of tax expense for the past  several  years.  The
Corporation's effective tax rate will be significantly higher in future periods.

BUSINESS SEGMENTS
The Corporation operates in two business segments: Consumer and Home Improvement
Products,  including  consumer  and  professional  power tools and  accessories,
household  products,  security hardware,  outdoor products (composed of electric
lawn and garden tools and recreational products), plumbing products, and product
service;  and  Commercial  and  Industrial  Products,  including  fastening  and
assembly systems and glass container-forming and inspection equipment.

SALES  AND OPERATING INCOME BY BUSINESS SEGMENT

                                                 For the Year Ended December 31,
                                                 -------------------------------
(Millions of Dollars)                               1996        1995        1994
                                                 -------     -------     -------
Consumer and Home Improvement Products
Total sales ................................      $4,212      $4,076      $3,774
Operating income ...........................         273         348         294
Operating income excluding
   restructuring costs
   and goodwill amortization ...............         411         400         351
Commercial and Industrial Products
Total sales ................................         702         690         591
Operating income ...........................          76          75          53
Operating income excluding
   restructuring costs
   and goodwill amortization ...............          96          92          69
Corporate and Eliminations
Operating income ...........................           8           3           5
                                                  ------      ------      ------
Total sales ................................      $4,914      $4,766      $4,365
Total operating income .....................      $  357      $  426      $  352
Total operating income
   excluding restructuring costs
   and goodwill amortization ...............      $  515      $  495     $   425
                                                  ======      ======     =======

CONSUMER  AND HOME IMPROVEMENT PRODUCTS
The  following  chart sets forth an analysis of the change in sales for the year
ended  December 31,  1996,  compared to the year ended  December  31,  1995,  by
geographic area within the Consumer segment.

                                        United                             Total
                                        States     Europe      Other    Consumer
                                        ------     ------      -----    --------
Existing unit volume ...............        8%        --%        --%         5%
Price ..............................       (1)%       (1)%        3%        (1)%
Currency ...........................       --%        (2)%       (1)%       (1)%
                                           ---        ---        ---        --- 
Total Consumer .....................        7%        (3)%        2%         3%
                                           ===        ===        ===        ===
     
     Total sales in the  Consumer  segment for 1996 were 3% higher than in 1995,
with existing unit volume up 5% over the 1995 level.  Sales in the United States
increased  by 7% over the prior  year's  level,  reflecting  an 8%  increase  in
existing unit volume,  partially  offset by a 1% decline in price.  The 1% price
decline from the 1995 level was primarily due to price  reductions  taken in the
household products and the power tools and accessories businesses. A significant
component of the 1996 price reduction by the household products business related
to a  substantial  price  reduction  taken  in the  latter  part  of 1996 on the
SnakeLight(R) flexible flashlight,  with the balance related to price reductions
taken on various other product lines,  predominantly  to reduce levels of excess
inventory or in connection  with the exit of certain  low-margin  product lines.
The 1996  price  reduction  by the power  tools  and  accessories  business  was
primarily in response to  competitive  pressures,  but also to reduce  levels of
excess inventories.
     Unit  volume in the  United  States  increased  by 8% in 1996 over the 1995
level  principally  as a result of strong unit volume  growth in the power tools
and accessories,  security hardware, and plumbing products businesses, partially
offset by unit volume declines in the household products business. The 1996 unit
volume growth in the domestic power tools and accessories business was primarily
the result of continued strong demand for DeWALT(R) professional power tools and
accessories   as  well  as  the   successful   expansion  of  the   VersaPak(TM)
interchangeable  battery system to outdoor lawn and garden tools.  The 1996 unit
volume growth in the domestic  security  hardware business occurred in virtually
all product categories, and the 1996 unit volume growth in the plumbing products
business  occurred in both retail and professional  distribution  channels.  The
1996 unit volume decline in the household products business was in comparison to
a strong 1995,  which benefited from pent-up demand for the SnakeLight  flexible
flashlight  at the end of 1994.  While  unit  sales of the  SnakeLight  flexible
flashlight  during 1996  declined  from the 1995 level and unit volume  declines
were  experienced  in other  categories  due to the exit of  certain  low-margin
product lines, those declines were substantially offset by unit volume increases
in 1996 resulting from refinements to existing products, such as the global line
of Quick 'N Easy(TM) irons, and from  introductions  of new products,  including
the FloorBuster(TM) cordless room vacuum with full-length upright handle and the
ScumBuster(TM) cordless submersible tub and tile scrubber.
     Excluding the negative effects of changes in foreign exchange rates,  sales
in the  Consumer  businesses  in  Europe  decreased  by 1% in 1996 from the 1995
level. The 1% decline in sales in 1996 in the European  Consumer  businesses was
primarily  the  result of price  reductions  taken in  response  to  competitive
pressures  and to reduce levels of excess  inventories.  Unit volume in 1996 was
essentially  equal to the 1995 level as increased sales of power tools,  spurred
by the success of the DeWALT and Elu(R) professional  product lines, were offset
by unit volume declines in security hardware, accessories, outdoor products, and
household  products.  Excluding  the  negative  effects  of  changes  in foreign
exchange rates, some European  countries achieved good sales growth in 1996 over
1995  levels;  however,  this growth was offset by declines in other  countries,
most notably Germany and the United Kingdom.
     Excluding the negative effects of changes in foreign exchange rates,  sales
in the Consumer  businesses in other geographic  regions increased by 3% in 1996
over the 1995  level  due  largely  to price  increases  in  certain  countries,
primarily  in Latin  America to keep pace with  inflation,  partially  offset by
price  reductions in other  countries.  The 1996 sales growth,  exclusive of the
negative  effects of changes in foreign  exchange  rates,  was  experienced in a
number of countries,  most notably in Latin  American  countries such as Mexico,
Colombia, and Brazil, offset by sales declines in the Far East and certain other
countries, most notably Canada and Australia.
     Operating income as a percentage of sales for the Consumer segment was 6.5%
in 1996 compared to 8.6% in 1995. Excluding the effects of goodwill amortization
and the 1996  restructuring  charge,  operating  income as a percentage of sales
would have been 9.7% in 1996  compared  to 9.8% in 1995.  Operating  income as a
percentage of sales, excluding the effects of goodwill amortization and the 1996
restructuring  charge,  improved  in 1996  over the 1995  level in the  domestic
security hardware and plumbing products businesses;  however, those improvements
were offset by declines in the household products business,  the worldwide power
tools and accessories  business,  and the European security hardware operations.
Excluding  the  effects  of  goodwill  amortization  and the 1996  restructuring
charge,  operating income as a percentage of sales for the worldwide power tools
and  accessories  business  in  1996  was  below  the  1995  level  as  declines
experienced in the power tools and accessories  businesses in the United States,
Latin America,  Canada,  Australia, and the Far East in 1996 more than offset an
improvement  in the  power  tools  and  accessories  business  in  Europe.  That
profitability improvement in the power tools and accessories business in Europe,
however,  was  in  comparison  to an  extremely  weak  1995,  and  the  European
profitability  level in 1996 did not rebound to the 1994 level.  The declines in
operating  income as a percentage  of sales,  excluding  the effects of goodwill
amortization and the 1996 restructuring  charge, in 1996 from 1995 levels in the
power tools and  accessories  businesses in the United  States,  Latin  America,
Canada,  Australia,  and the Far  East  primarily  resulted  from  manufacturing
inefficiencies, including those associated with new manufacturing facilities and
the  businesses'  efforts  to  reduce  inventory  levels  in  1996,  competitive
pressures which adversely  affected pricing,  and higher  transportation  costs,
partially  offset by tight controls over selling,  general,  and  administrative
expenses.
     While sales of other existing products and new product introductions during
1997 may mitigate the effect, the Corporation believes that comparisons of sales
and  profitability  in 1997 to 1996 levels will be difficult  for the  household
products  business,  particularly  in the  first  half of 1997,  based  upon the
significance of SnakeLight to sales and  profitability  of the business in 1996;
reduced demand,  which is no longer expected to exceed capacity,  as the product
matures;  and the price  reductions on  SnakeLight  taken by the business in the
latter part of 1996.
     Total sales in the  Consumer  segment for 1995 were 8% higher than in 1994,
with existing  unit volume up 5% over the 1994 level.  Unit volume in the United
States  increased  by 7% in 1995 over the 1994 level as a result of strong  unit
volume  growth  in the  power  tools  and  accessories  and  household  products
businesses,  partially  offset by unit volume declines in the security  hardware
and plumbing  products  businesses.  The 1995 growth in the domestic power tools
and  accessories  business was the result of continued  strong demand for DeWALT
professional  power tools and  accessories  and the successful  expansion in the
latter  half of  1995  of a line of  consumer  products  that  use the  VersaPak
interchangeable  battery system.  During 1995, the household  products  business
achieved a  double-digit  rate of growth in unit volume  driven by the continued
success of the SnakeLight  flexible  flashlight,  which was  introduced  late in
1994.  The domestic  security  hardware and plumbing  products  businesses  each
experienced modest unit volume declines from 1994 levels during 1995.
     Excluding the substantial  positive  effects of changes in foreign exchange
rates,  sales in the Consumer  businesses in Europe increased by 4% in 1995 over
the 1994 level  despite a weak  fourth  quarter in 1995.  This 4%  increase  was
composed of increased sales of power tools and accessories,  household products,
and security hardware,  partially offset by decreased sales of outdoor products.
Exclusive of positive  effects of changes in foreign exchange rates during 1995,
some European  countries  achieved results  substantially  higher than the prior
year's level, and other countries, most notably Germany, the United Kingdom, and
France, reported results essentially equal to or below the prior year's level.
     Excluding  the  negative  effects  of changes  in  foreign  exchange  rates
principally  due  to  the  Mexican  peso  devaluation,  sales  in  the  Consumer
businesses  in other  geographic  regions  increased by 8% in 1995 over the 1994
level.  Sales growth occurred in a number of countries,  including  Canada,  and
most strongly,  in Brazil, while sales in other countries were essentially equal
to or below the prior year's level.
     Operating income as a percentage of sales for the Consumer segment was 8.6%
in 1995 compared to 7.8% in 1994. Excluding the effect of goodwill amortization,
operating  income as a percentage of sales would have been 9.8% in 1995 compared
to 9.3% in 1994. The household  products business achieved strong improvement in
operating  income  in  1995  as a  result  of  increased  sales  volume,  higher
manufacturing productivity, and actions taken either to improve profitability or
to drop certain lower-margin products from its product lines. Improved operating
income  levels in 1995 over 1994 in the  worldwide  power tools and  accessories
business  principally  resulted from  substantial  improvements  in the domestic
power tools and  accessories  business as a result of  increased  sales  volume,
higher manufacturing productivity, and the impact of cost reduction initiatives,
partially  offset  by  reduced  profitability  in  the  European  operations.  A
softening retail environment in the fourth quarter of 1995, expenses incurred in
connection with the reorganization of certain European operations,  and residual
inefficiencies  associated with the closure of two  manufacturing  facilities in
mid-1994  contributed to markedly lower profitability in the Consumer businesses
in Europe in 1995 than in 1994.  Cost reduction  initiatives  and  manufacturing
productivity improvements resulted in increased operating income as a percentage
of sales during 1995 compared to 1994 in the security hardware business, despite
year-to-year  sales  declines  in  its  domestic  operations  due  to  inventory
reductions  made by its  customers  in the  latter  part of 1995.  A decline  in
operating  income in the  plumbing  products  business in 1995  compared to 1994
resulted from reduced sales and rising material costs.

COMMERCIAL  AND INDUSTRIAL PRODUCTS
The  following  chart sets forth an analysis of the change in sales for the year
ended  December 31,  1996,  compared to the year ended  December  31,  1995,  by
geographic area within the Commercial segment.

                                      United                               Total
                                      States     Europe       Other   Commercial
                                      ------     ------       -----   ----------
Existing unit volume ............         4%         2%         10%          4%
Price ...........................         1%         1%         --%          1%
Currency ........................        --%        (3)%       (11)%        (3)%
                                         ---        ---         ---         ---
Total Commercial ................         5%         --%        (1)%         2%
                                         ===        ===         ===         ===
 
     Total sales in the Commercial segment for 1996 were 2% higher than the 1995
level.  Excluding  the negative  effects of changes in foreign  exchange  rates,
sales in the  Commercial  segment  were 5%  higher  in 1996  than in  1995.  The
fastening systems and assembly (Fastening) business achieved good growth in unit
volume  in 1996 as a result of  strong  sales in the Far East and the  continued
strength of sales to the  automotive  industry in the United  States,  partially
offset by protracted  softness in the domestic  industrial market and in Europe.
The glass  container-forming  and  inspection  equipment  (Glass)  business also
experienced solid growth in unit volume in 1996 over 1995. The backlog of orders
in the Glass  business at December 31, 1996, was  approximately  13% higher than
the 1995 level.  Approximately  75% of the Glass  backlog at December  31, 1996,
represents orders scheduled for delivery in 1997, with the balance scheduled for
delivery in 1998.
     Operating  income as a percentage of sales for the  Commercial  segment was
10.8% for both 1996 and 1995. Excluding the effects of goodwill amortization and
the 1996 restructuring  charge,  operating income as a percentage of sales would
have been 13.6% in 1996  compared to 13.3% in 1995.  Improvements  in  operating
income  as a  percentage  of sales  during  1996  were  experienced  in both the
Fastening and Glass businesses.
     Total  sales in the  Commercial  segment  for 1995 were 17% higher than the
1994 level.  Excluding the  substantial  positive  effects of changes in foreign
exchange rates,  sales in the Commercial segment were 11% higher in 1995 than in
the preceding year. The Fastening  business achieved solid unit volume growth in
1995 over the prior year's level, as softening sales to general  industry in the
United States and Europe were more than offset by increased  automotive sales in
those regions.  The Glass business  experienced a double-digit rate of growth in
unit  volume in 1995  compared  to a weak 1994  despite  volume  declines in the
United States.
     Operating  income as a percentage of sales for the  Commercial  segment was
10.8% in 1995  compared  to 8.9% in 1994.  Excluding  the  effects  of  goodwill
amortization, operating income as a percentage of sales would have been 13.3% in
1995  compared  to  11.6% in 1994.  The  Fastening  and  Glass  businesses  each
experienced improvements in operating income percentages in 1995.

DISCONTINUED OPERATIONS
Discontinued  operations consist of the results of PRC Inc., PRC Realty Systems,
Inc. (RSI), and PRC Environmental  Management,  Inc. (EMI).  Together, PRC Inc.,
RSI,  and EMI composed  the  Corporation's  former  Information  Technology  and
Services (PRC) segment.  Operating  results,  net assets,  and cash flows of the
discontinued PRC segment have been segregated in the  accompanying  Consolidated
Financial Statements. The results of the discontinued PRC segment do not reflect
any expense for interest expense  allocated by or management fees charged by the
Corporation.
     On February 16, 1996, the  Corporation  completed the sale of PRC Inc., the
remaining  business in the discontinued PRC segment.  Proceeds of $425.0 million
from the sale of PRC Inc.,  less cash  selling  expenses of $11.4  million  paid
during  1996,  were  used to reduce  indebtedness.  Earnings  from  discontinued
operations of $70.4  million  ($.73 per share on a fully diluted  basis) in 1996
primarily  consist of the gain on the sale of PRC Inc., net of applicable income
taxes of $55.6  million.  The gain is net of  provisions  for  adjustment to the
sales price and retained liabilities.  Revenues and operating income of PRC Inc.
for the  period  from  January  1,  1996,  through  the  date of sale  were  not
significant.
     Net earnings of the  discontinued  PRC segment were $38.4 million ($.41 per
share on a fully  diluted  basis) in 1995 and $37.5 million ($.44 per share on a
fully diluted  basis) in 1994. The  Corporation  sold RSI on March 31, 1995, and
EMI on September 15, 1995, for aggregate proceeds of $95.5 million.

FINANCIAL CONDITION
Operating  activities of continuing  operations  before the sale of  receivables
generated cash of $463.4 million for the year ended December 31, 1996,  compared
to $316.9  million for the year ended  December 31, 1995.  This increase in cash
generation  during 1996 was  primarily  the result of improved  working  capital
management,  principally  resulting  from  actions  taken  during 1996 to reduce
inventories from the high level that existed at the end of 1995.
     In  addition to  measuring  cash flow  generation  and usage based upon the
operating, investing, and financing classifications included in the Consolidated
Statement  of Cash Flows,  the  Corporation  monitors  free cash flow, a measure
commonly  employed by bond rating agencies and banks.  The  Corporation  defines
free  cash  flow as cash  available  for debt  reduction  (including  short-term
borrowings),  prior to the  effects  of cash  proceeds  received  from  sales of
divested  businesses,  issuances of equity, and sales of receivables.  Free cash
flow,  a more  inclusive  measure of cash flow  generation  than cash flows from
operating  activities  included  in the  Consolidated  Statement  of Cash Flows,
considers  items such as cash used for capital  expenditures  and dividends,  as
well as net cash inflows or outflows  from hedging  activities.  During the year
ended  December 31, 1996,  the  Corporation  generated  free cash flow of $235.4
million  compared to $34.7  million in 1995.  The  increase in free cash flow in
1996 from the 1995 level was  primarily the result of improved  working  capital
management.
     The total amount of receivables sold under the sale of receivables  program
at December 31, 1996, was $212.0 million  compared to $230.0 million at December
31, 1995. The sale of receivables  program provides for a seasonal  expansion of
the  amount of  receivables  that may be sold,  from  $200.0  million  to $275.0
million  during the period  from  October 1 through  January  31. The  liquidity
facility that supports the sale of  receivables  program  expires in March 1997.
The Corporation expects to be able to extend this facility beyond December 1997.
However,  due to its improved  leverage,  the Corporation  expects to reduce the
amount available under the facility to less than $200.0 million and to eliminate
the seasonal expansion feature.
     Excluding amounts related to discontinued operations,  investing activities
for 1996 used cash of $170.2 million compared to $195.5 million in 1995. Capital
expenditures of $196.3 million during 1996 approximated the 1995 level of $203.1
million. During 1996,  approximately 90% of the capital expenditures were in the
Consumer  segment,   primarily  in  support  of  new  product   initiatives  and
productivity  enhancements.  The Corporation expects capital spending in 1997 to
moderately exceed the 1996 level.
     The  ongoing  costs of  compliance  with  existing  environmental  laws and
regulations  have not had,  nor are they  expected to have,  a material  adverse
effect on the Corporation's capital expenditures or financial position.
     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.  The major foreign  currencies in which foreign  currency
risks exist are the pound  sterling,  deutsche  mark,  Dutch  guilder,  Canadian
dollar,  Swedish krona,  Japanese yen, Chinese renminbi,  French franc,  Italian
lira, Australian dollar, Mexican peso, and Brazilian real.
     Assets and liabilities of the  Corporation's  subsidiaries  located outside
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 equity  adjustment from
translation,   a  separate  component  of  stockholders'  equity.  During  1996,
translation  adjustments,  recorded in the equity  adjustment  from  translation
component  of  stockholders'  equity,  decreased  stockholders'  equity by $13.6
million compared to an increase of $44.9 million in 1995.
     As more  fully  explained  in Note 11 of  Notes to  Consolidated  Financial
Statements,  the  Corporation  historically  had  hedged  a  portion  of its net
investment in foreign  subsidiaries.  Beginning in 1995, the Corporation decided
to limit the future hedging of its net investment in foreign subsidiaries. While
this decision may increase the volatility of reported equity,  it is expected to
result in more predictable cash flows from hedging activities.
     In  hedging  the  exposure  to  foreign  currency  fluctuations  on its net
investments in subsidiaries  located outside the United States,  the Corporation
has entered into various currency forward  contracts and options.  These hedging
activities  generate  cash  inflows and  outflows  that  offset the  translation
adjustment.  During  1996,  these  activities  netted to a cash  outflow of $5.4
million  compared to a cash outflow of $4.7 million in 1995.  The  corresponding
gains  and  losses on these  hedging  activities  were  recorded  in the  equity
adjustment from translation  component of stockholders' equity. Also included in
the equity  adjustment from translation  component were the costs of maintaining
the hedge portfolio of foreign exchange contracts. These hedge costs, which were
not significant in 1996, decreased stockholders' equity by $8.7 million in 1995.
     In  late  1994,  the  Mexican  peso  was  severely  devalued.  Because  the
Corporation's  Mexican peso exposure was hedged, this devaluation did not have a
significant  effect on earnings in 1994. While the currency  situation in Mexico
had an adverse effect on the Corporation's  Mexican sales in both 1996 and 1995,
the effect on operating income was  substantially  offset by pricing actions and
changes in cost structures and by the lower relative costs of Mexican production
during  those  years.  While the  Corporation  will take actions to mitigate the
impacts of any future currency devaluations in Mexico or elsewhere,  there is no
assurance that such devaluations will not adversely affect the Corporation.
     Financing  activities  for 1996  used cash of $667.3  million  compared  to
$127.0 million of cash used in 1995. As more fully described in Note 10 of Notes
to Consolidated Financial Statements, the Corporation, during 1996, replaced its
former unsecured  revolving  credit  facility,  which was scheduled to expire in
1997, with a new unsecured  revolving  credit  facility,  expiring in 2001. Also
during  1996,  the  Corporation  reduced its  outstanding  borrowings  by $635.0
million.  This  reduction  was  funded  through  the  proceeds  from the sale of
discontinued  operations and through improved operating cash flows. During 1995,
the Corporation  recognized a $30.9 million extraordinary loss, $26.5 million of
which  was a  non-cash  charge,  as a  result  of the  early  redemption  in the
aggregate  amount of $150.0 million of the 9.25% sinking fund  debentures of its
Emhart  Corporation  subsidiary.   This  extraordinary  loss  consisted  of  the
write-off of the associated  debt discount,  plus premiums and costs  associated
with the redemption, net of related income tax benefits.
     As more  fully  described  in Note 15 of  Notes to  Consolidated  Financial
Statements,  on October 14, 1996,  the  Corporation,  pursuant to its conversion
option,  issued  6,350,000  shares of common  stock in exchange  for the 150,000
shares  of  Series  B  cumulative   convertible   preferred   stock   previously
outstanding.  Because the  dividend  rate on the common stock is lower than that
which was paid on the preferred  stock, the conversion will result in annualized
cash savings to the Corporation,  at the current dividend rate, of approximately
$8.6  million.  As more  fully  described  in Note 1 of  Notes  to  Consolidated
Financial  Statements,   the  6,350,000  shares  of  common  stock  issued  upon
conversion have been considered in the computation of primary earnings per share
through the  inclusion  of those  shares,  from their date of  issuance,  in the
determination of the weighted average shares outstanding. Those 6,350,000 shares
of common stock have been treated as  outstanding  in the  computation  of fully
diluted earnings per share for the years ended December 31, 1996 and 1995.
     As more  fully  explained  in Note 11 of  Notes to  Consolidated  Financial
Statements,  the Corporation seeks to issue debt  opportunistically,  whether at
fixed or variable rates, at the lowest possible costs. Based upon its assessment
of the future interest rate  environment  and its desired  variable rate debt to
total debt ratio,  the  Corporation  may later  convert  such debt from fixed to
variable  or from  variable  to fixed  interest  rates,  or from  United  States
dollar-based  rates to rates  based upon  another  currency,  through the use of
interest  rate swap  agreements.  In addition,  the  Corporation  may enter into
interest  rate  cap  agreements  in order to limit  the  effects  of  increasing
interest rates on a portion of its variable rate debt.
     In order to meet  its  goal of  fixing  or  limiting  interest  costs,  the
Corporation  maintains a portfolio  of interest  rate hedge  instruments.  These
interest  rate hedges could  change the mix of fixed and  variable  rate debt as
actual interest rates move outside the ranges covered by these instruments.  The
variable rate debt to total debt ratio,  after taking  interest rate hedges into
account, was 35% at December 31, 1996, compared to 43% at December 31, 1995, and
34% at December 31, 1994.  At December 31, 1996,  average debt  maturity was 4.5
years  compared to 4.0 years at December 31, 1995, and 4.9 years at December 31,
1994.
     The Corporation will continue to have cash requirements to support seasonal
working capital needs and capital expenditures,  to pay interest, and to service
debt. In order to meet these cash requirements,  the Corporation  intends to use
internally  generated funds and to borrow under its unsecured  revolving  credit
facility or under short-term borrowing facilities. Management believes that cash
generated  from these  sources will be adequate to meet the  Corporation's  cash
requirements over the next 12 months.



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, 1996, 1995, and 1994.

      Consolidated Balance Sheet 
      - December 31, 1996 and 1995.

      Consolidated  Statement  of Cash Flows 
      - years ended December 31, 1996, 1995, and 1994.

      Notes to Consolidated Financial Statements.

      Report of Independent Auditors.



<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF EARNINGS
The Black & Decker Corporation and Subsidiaries
(Dollars in Millions Except Per Share Data)
<CAPTION>
                                                                                                   Year Ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
                                                                                       1996                 1995                1994
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                <C>                 <C>                  <C>     
Sales .....................................................................        $4,914.4            $ 4,766.1            $4,365.2
   Cost of goods sold .....................................................         3,156.6              3,016.7             2,769.7
   Selling, general, and administrative expenses ..........................         1,309.6              1,323.3             1,243.6
   Restructuring costs ....................................................            91.3                   --                  --
------------------------------------------------------------------------------------------------------------------------------------
Operating Income ..........................................................           356.9                426.1               351.9
   Interest expense (net of interest income of $4.7
     for 1996, $8.6 for 1995, and $6.9 for 1994) ..........................           135.4                184.4               187.9
   Other expense ..........................................................            18.8                 16.2                15.4
------------------------------------------------------------------------------------------------------------------------------------
Earnings From Continuing Operations Before Income Taxes ...................           202.7                225.5               148.6
   Income taxes ...........................................................            43.5                  9.0                58.7
------------------------------------------------------------------------------------------------------------------------------------
Earnings From Continuing Operations .......................................           159.2                216.5                89.9
Earnings from discontinued operations (net of income taxes of
   $55.6 for 1996, $8.7 for 1995, and $4.0 for 1994) ......................            70.4                 38.4                37.5
------------------------------------------------------------------------------------------------------------------------------------
Earnings Before Extraordinary Item ........................................           229.6                254.9               127.4
Extraordinary loss from early extinguishment of debt
   (net of income tax benefit of $2.6) ....................................              --                (30.9)                 --
------------------------------------------------------------------------------------------------------------------------------------
Net Earnings ..............................................................         $ 229.6              $ 224.0             $ 127.4
====================================================================================================================================
                                                                                                                    

                                                                                                                     
Net Earnings Applicable To Common Shares ..................................         $ 220.5              $ 212.4             $ 115.8
====================================================================================================================================
Net Earnings Per Common and Common Equivalent Share:
------------------------------------------------------------------------------------------------------------------------------------
Primary: 
   Earnings from continuing operations ....................................          $ 1.64               $ 2.33              $  .93
   Earnings from discontinued operations ..................................             .77                  .44                 .44
   Extraordinary loss from early extinguishment of debt ...................              --                 (.35)                --
------------------------------------------------------------------------------------------------------------------------------------
Primary Earnings Per Share ................................................          $ 2.41               $ 2.42              $ 1.37
------------------------------------------------------------------------------------------------------------------------------------
Shares Used In Computing Primary Earnings Per Share
    (in Millions) .........................................................            91.3                 87.9                84.3
====================================================================================================================================
Assuming Full Dilution:
   Earnings from continuing operations ....................................          $ 1.65               $ 2.29             $   .93
   Earnings from discontinued operations ..................................             .73                  .41                 .44
   Extraordinary loss from early extinguishment of debt ...................              --                 (.33)                 --
------------------------------------------------------------------------------------------------------------------------------------
Fully Diluted Earnings Per Share ..........................................          $ 2.38               $ 2.37             $  1.37
------------------------------------------------------------------------------------------------------------------------------------
Shares Used In Computing Fully Diluted
   Earnings Per Share (in Millions) .......................................            96.3                 94.7                84.3
====================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements


<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET
The Black & Decker Corporation and Subsidiaries
(Millions of Dollars)
<CAPTION>

                                                                                                                   December 31,
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                             1996              1995
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                     <C>               <C>
Assets
Cash and cash equivalents ..................................................................            $   141.8         $   131.6
Trade receivables, less allowances of $44.0 for 1996 and $43.1 for 1995 ....................                672.4             651.3
Inventories ................................................................................                747.8             855.7
Net assets of discontinued operations ......................................................                   --             302.4
Other current assets .......................................................................                242.2             165.6
------------------------------------------------------------------------------------------------------------------------------------
   Total Current Assets ....................................................................              1,804.2           2,106.6
------------------------------------------------------------------------------------------------------------------------------------
Property, Plant, and Equipment .............................................................                905.8             866.8
Goodwill ...................................................................................              2,012.2           2,142.0
Other Assets ...............................................................................                431.3             429.9
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        $ 5,153.5         $ 5,545.3
====================================================================================================================================


Liabilities and Stockholders' Equity
Short-term borrowings ......................................................................            $   235.9         $   599.2
Current maturities of long-term debt .......................................................                 54.1              48.0
Trade accounts payable .....................................................................                380.7             396.7
Other accrued liabilities ..................................................................                835.9             743.0
------------------------------------------------------------------------------------------------------------------------------------
   Total Current Liabilities ...............................................................              1,506.6           1,786.9
------------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt .............................................................................              1,415.8           1,704.5
Deferred Income Taxes ......................................................................                 67.5              52.8
Postretirement Benefits ....................................................................                310.3             307.8
Other Long-Term Liabilities ................................................................                220.9             270.1
Stockholders' Equity
Convertible preferred stock (outstanding: December 31, 1995--
   150,000 shares) .........................................................................                   --             150.0
Common stock (outstanding: December 31, 1996--94,248,807 shares;   
   December 31, 1995--86,447,588 shares) ...................................................                 47.1              43.2
Capital in excess of par value .............................................................              1,261.7           1,084.5
Retained earnings ..........................................................................                380.2             202.6
Equity adjustment from translation .........................................................                (56.6)            (57.1)
------------------------------------------------------------------------------------------------------------------------------------
   Total Stockholders' Equity ..............................................................              1,632.4           1,423.2
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                        $ 5,153.5         $ 5,545.3
====================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements



<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
The Black & Decker Corporation and Subsidiaries
(Millions of Dollars)
<CAPTION>

                                                                                                      Year Ended December 31,
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 1996          1995            1994
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                          <C>           <C>             <C>
Operating Activities
Net earnings ...........................................................................     $  229.6      $  224.0        $  127.4
Adjustments to reconcile net earnings to cash flow
 from operating activities of continuing operations:
   Non-cash charges and credits:
     Depreciation and amortization .....................................................        214.6         206.7           195.4
     Restructuring charges .............................................................         91.3            --              --
     Deferred income taxes .............................................................          2.9         (46.1)            8.9
     Extraordinary item ................................................................           --          26.5              --
     Other .............................................................................          1.2          19.5             1.9
   Earnings of discontinued operations .................................................        (70.4)        (38.4)          (37.5)
   Changes in selected working capital items:
     Trade receivables .................................................................        (10.0)         14.8           (83.5)
     Inventories .......................................................................        107.5        (138.7)           31.9
     Trade accounts payable ............................................................        (21.4)        108.1            58.3
   Restructuring .......................................................................        (39.2)           --              --
   Other assets and liabilities ........................................................        (42.7)        (59.5)            1.6
   Net (decrease) increase in receivables sold .........................................        (18.0)        (14.0)           26.0
------------------------------------------------------------------------------------------------------------------------------------
  Cash flow from operating activities of
    continuing operations ..............................................................        445.4         302.9           330.4
   Cash flow from operating activities of
    discontinued operations ............................................................        (12.4)          1.5            79.3
------------------------------------------------------------------------------------------------------------------------------------
   Cash Flow From Operating Activities .................................................        433.0         304.4           409.7
------------------------------------------------------------------------------------------------------------------------------------
Investing Activities
Proceeds from sale of discontinued operations ..........................................        413.6          95.5              --
Investing activities of discontinued operations ........................................           --         (12.9)          (15.5)
Proceeds from disposal of assets and businesses ........................................         31.5          12.3            12.0
Capital expenditures ...................................................................       (196.3)       (203.1)         (181.5)
Cash inflow from hedging activities ....................................................        392.9         485.6         1,070.4
Cash outflow from hedging activities ...................................................       (398.3)       (490.3)       (1,105.9)
------------------------------------------------------------------------------------------------------------------------------------
   Cash Flow From Investing Activities .................................................        243.4        (112.9)         (220.5)
------------------------------------------------------------------------------------------------------------------------------------
   Cash Flow Before Financing Activities ...............................................        676.4         191.5           189.2

Financing Activities
Net (decrease) increase in short-term borrowings .......................................       (360.9)         47.2           217.4
Proceeds from long-term debt (including revolving
 credit facility) ......................................................................        461.1         274.0         1,226.7
Payments on long-term debt (including revolving
 credit facility) ......................................................................       (735.2)       (425.2)       (1,622.8)
Issuance of equity interest in a subsidiary ............................................           --            --             4.3
Issuance of common stock ...............................................................         22.3          23.0             8.8
Cash dividends .........................................................................        (54.6)        (46.0)          (45.3)
------------------------------------------------------------------------------------------------------------------------------------
Cash Flow From Financing Activities ....................................................       (667.3)       (127.0)         (210.9)
Effect of exchange rate changes on cash ................................................          1.1           2.1             5.4
------------------------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents .......................................         10.2          66.6           (16.3)
Cash and cash equivalents at beginning of year .........................................        131.6          65.0            81.3
------------------------------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year ...............................................     $  141.8      $  131.6        $   65.0
====================================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements




<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 1996.
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.
FOREIGN CURRENCY  TRANSLATION:  The financial statements of subsidiaries located
outside  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 equity  adjustment from
translation,  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 original  maturities of three
months or less.
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 over periods of up to 40 years.  On a periodic basis,
the Corporation  estimates the future  undiscounted cash flows of the businesses
to which goodwill relates in order to ensure that the carrying value of goodwill
has not been impaired.
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 $101.3 million in 1996, $96.1 million in 1995, and $89.2
million in 1994.
ADVERTISING AND PROMOTION:  All costs  associated with advertising and promoting
products are expensed in the year incurred.  Advertising and promotion  expense,
including  expense  of  consumer  rebates,  was $258.5  million in 1996,  $265.1
million in 1995, and $249.9 million in 1994.
POSTRETIREMENT   BENEFITS:   The  Corporation's   pension  plans,   which  cover
substantially  all of  its  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 the plans are based on a percentage of employee
compensation or employee contributions. The plans are funded on a current basis.
     In  addition  to  pension  benefits,   the  Corporation   provides  certain
postretirement  medical,  dental,  and life insurance  benefits,  principally to
certain  United  States  employees.  Retirees in other  countries  generally are
covered by government-sponsored programs.
     The  Corporation  uses the  corridor  approach in the  valuation of defined
benefit plans and other  postretirement  benefits.  The corridor approach defers
all actuarial gains and losses  resulting from variances  between actual results
and economic  estimates or actuarial  assumptions.  For defined  benefit pension
plans,  these unrecognized gains and losses are amortized when the net gains and
losses exceed 10% of the greater of the  market-related  value of plan assets or
the  projected  benefit  obligation  at the  beginning  of the  year.  For other
postretirement  benefits,  amortization  occurs  when the net gains  and  losses
exceed 10% of the accumulated postretirement benefit obligation at the beginning
of the year.  The amount in excess of the corridor is amortized over the average
remaining  service period to retirement date of active plan participants or, for
retired participants, the average remaining life expectancy.
DERIVATIVE FINANCIAL  INSTRUMENTS:  Derivative financial instruments are used by
the  Corporation  principally in the management of its interest rate and foreign
currency  exposures.  
     Amounts to be paid or received  under  interest  rate swap  agreements  are
accrued as interest  rates change and are  recognized  over the life of the swap
agreements as an adjustment to interest  expense.  The related amounts due to or
from the  counterparties are included in other accrued  liabilities.  Since they
are  accounted  for as  hedges,  the fair  value of the swap  agreements  is not
recognized in the Consolidated Financial Statements.
     The costs of interest rate cap agreements are included in interest  expense
ratably over the lives of the agreements. Payments to be received as a result of
the  cap  agreements  are  accrued  as a  reduction  of  interest  expense.  The
unamortized costs of the cap agreements are included in other assets.
     Gains or losses resulting from the early termination of interest rate swaps
or caps are deferred and  amortized as an adjustment to the yield of the related
debt instrument over the remaining period  originally  covered by the terminated
swaps or caps.
     Gains  and  losses  on  hedges  of net  investments  are  reflected  in the
Consolidated  Balance Sheet in the equity adjustment from translation  component
of  stockholders'   equity,  with  the  related  amounts  due  to  or  from  the
counterparties included in other liabilities or other assets.
     Gains and losses on foreign currency  transaction  hedges are recognized in
income and  offset  the  foreign  exchange  gains and  losses on the  underlying
transactions.  Gains and losses on foreign  currency firm commitment  hedges and
gains on hedges of  forecasted  transactions  are  deferred  and included in the
basis of the transactions underlying the commitments.
STOCK-BASED  COMPENSATION:  As described in Note 16, the Corporation has elected
to follow the  accounting  provisions  of  Accounting  Principles  Board Opinion
(APBO)  No.  25 for  stock-based  compensation  and to  furnish  the  pro  forma
disclosures  required under Statement of Financial  Accounting  Standards (SFAS)
No. 123.
NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE:  Primary earnings per share
are  computed  by  dividing  net  earnings,   after  deducting  preferred  stock
dividends,  by the weighted average number of common shares  outstanding  during
each year plus, for 1996 and 1995, the  incremental  shares that would have been
outstanding  under certain  employee benefit plans and upon the assumed exercise
of dilutive stock options.  For 1994, these  incremental  shares were immaterial
and, accordingly, were not considered in the calculation of primary earnings per
share.
     In 1996 and 1995,  fully  diluted  earnings  per  share  were  computed  by
dividing  net  earnings  by  the  weighted   average  number  of  common  shares
outstanding  during the year plus the  incremental  shares  that would have been
outstanding  under certain employee benefit plans,  upon the assumed exercise of
dilutive stock options,  and, prior to October 1996, upon the assumed conversion
of the preferred shares. In 1994,  conversion of the preferred shares would have
been  anti-dilutive  and,  therefore,  was not considered in the  computation of
fully diluted  earnings per share.  Also, in 1994, the  incremental  shares that
would have been  outstanding  under certain  employee benefit plans and upon the
assumed  exercise of dilutive stock options were  immaterial  and,  accordingly,
were not considered in the calculation of fully diluted earnings per share. As a
result,  fully diluted earnings per share for 1994 are not materially  different
from primary earnings per share.
     As described  in Note 15, a total of 6,350,000  shares of common stock were
issued upon  conversion  of the  Corporation's  Series B Cumulative  Convertible
Preferred  Stock (Series B) in October 1996.  Those  6,350,000  shares of common
stock were reflected in the  computation  of primary  earnings per share through
the inclusion of such shares, from their date of issuance,  in the determination
of the weighted  average  number of common  shares  outstanding.  On a pro forma
basis,  assuming that the 6,350,000  shares of common stock had been issued upon
conversion  of the  shares  of Series B stock as of  January  1,  1996,  primary
earnings per share for the year ended December 31, 1996, would have been $2.38.

NOTE 2:  DISCONTINUED OPERATIONS
Earnings from the discontinued Information Technology and Services (PRC) segment
amounted to $70.4 million in 1996,  $38.4 million in 1995,  and $37.5 million in
1994, net of applicable  income taxes of $55.6 million,  $8.7 million,  and $4.0
million,  respectively.  The  results  of the  discontinued  PRC  segment do not
reflect any expense for interest  allocated by or management fees charged by the
Corporation.
     On February 16, 1996, the  Corporation  completed the sale of PRC Inc., the
remaining business in the discontinued PRC segment, for $425.0 million. Earnings
from discontinued operations in 1996 consisted primarily of the gain on the sale
of PRC Inc., net of selling expenses and applicable  income taxes.  Revenues and
operating  income of PRC Inc. for the period from  January 1, 1996,  through the
date of sale were not significant. The terms of the sale of PRC Inc. provide for
an adjustment to the sales price,  expected to be finalized in 1997,  based upon
the changes in the net assets of PRC Inc. through February 15, 1996.
     The Corporation sold PRC Realty Systems, Inc. (RSI), on March 31, 1995, and
sold PRC  Environmental  Management,  Inc.  (EMI),  on September  15, 1995,  for
proceeds of $60.0 million and $35.5 million, respectively. The aggregate gain on
the sale of RSI and EMI of $2.5 million,  net of applicable income taxes of $5.5
million,  is  included  in  earnings  from  discontinued  operations  for  1995.
Together,  PRC Inc., RSI, and EMI composed the  Corporation's  discontinued  PRC
segment.
     Revenues of the  discontinued  PRC segment were $800.1  million in 1995 and
$883.1 million in 1994.  These revenues are not included in sales as reported in
the Consolidated Statement of Earnings.
     Net  assets of the  discontinued  PRC  segment  as of  December  31,  1995,
consisted  principally of accounts receivable,  goodwill,  and other assets less
accounts payable and other liabilities.

NOTE 3:  RESTRUCTURING
In 1996, the Corporation  commenced a restructuring of certain of its operations
and recorded a restructuring charge of $91.3 million.
     The  major   component  of  the   restructuring   charge   relates  to  the
Corporation's  elimination of  approximately  1,500 positions.  As a result,  an
accrual of $74.6 million for severance, principally associated with the European
businesses in the Consumer and Home Improvement Products (Consumer) segment, was
included in the restructuring charge.
     In connection with the  restructuring  plan, the Corporation also will take
actions to  rationalize  certain  manufacturing  and  service  operations.  Such
rationalization,  principally  associated  with the Consumer  businesses  in the
United  States,  will  include the  outsourcing  of certain  products  currently
manufactured by the  Corporation and the closure of several small  manufacturing
facilities.  As a result, the restructuring  charge also included a $6.6 million
write-down  to  fair  value  of  certain  land  and  buildings.   The  remaining
restructuring  charge  primarily  related  to the  write-down  to fair  value of
equipment  made  obsolete or  redundant  due to the  decision  to close  certain
facilities or outsource certain production.

NOTE 4:  TRADE RECEIVABLES
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.  The  Corporation  continuously
evaluates the  creditworthiness  of its customers and generally does not require
collateral.  
SALE OF RECEIVABLES  PROGRAM:  The  Corporation's  sale of  receivables  program
provides  for a seasonal  expansion  of capacity  from $200.0  million to $275.0
million during the period from October 1 through January 31.  Receivables  under
this  program  are  sold  on a  revolving  basis  and  are  not  subject  to any
significant recourse provisions.  At December 31, 1996, the Corporation had sold
$212.0 million of receivables  under this program  compared to $230.0 million at
December 31, 1995.  The discount on the sale of receivables is included in other
expense.

NOTE 5:  INVENTORIES
The  classification  of  inventories  at the end of each year,  in  millions  of
dollars, was as follows:

                                                             1996          1995
                                                          --------     --------
FIFO cost
   Raw materials and work-in-process .................    $  211.1     $  231.6
   Finished products .................................       567.7        665.0
                                                          --------     --------
                                                             778.8        896.6
Excess of FIFO cost over LIFO inventory value ........       (31.0)       (40.9)
                                                          --------     -------- 
                                                          $  747.8     $  855.7
                                                          ========     ========

     The cost of United  States  inventories  stated  under the LIFO  method was
approximately 42% and 44% of the value of total inventories at December 31, 1996
and 1995, respectively.  

NOTE 6: PROPERTY, PLANT, AND EQUIPMENT 
Property,  plant, and equipment at the end of each year, in millions of dollars,
consisted of the following:

                                                             1996          1995
                                                         --------      --------
Property, plant, and equipment at cost:
Land and improvements ........................           $   67.2      $   69.4
Buildings ....................................              341.6         360.7
Machinery and equipment ......................            1,473.3       1,342.1
                                                         --------      -------- 
                                                          1,882.1       1,772.2
Less accumulated depreciation ................              976.3         905.4
                                                         --------      -------- 
                                                         $  905.8      $  866.8
                                                         ========      ========

NOTE 7:  GOODWILL
Goodwill at the end of each year, in millions of dollars, was as follows:

                                                             1996          1995
                                                         --------      --------
Goodwill .....................................           $2,571.5      $2,635.0
Less accumulated amortization ................              559.3         493.0
                                                         --------      --------
                                                         $2,012.2      $2,142.0
                                                         ========      ========

NOTE 8:  OTHER ACCRUED LIABILITIES
Other  accrued  liabilities  at the end of each year,  in  millions  of dollars,
included the following:

                                                             1996          1995
                                                          --------      -------
Salaries and wages ...............................        $   77.6     $   91.8
Employee benefits ................................            54.8         66.2
Trade discounts and allowances ...................            98.3         79.8
Restructuring costs ..............................            37.7           --
All other ........................................           567.5        505.2
                                                          --------      -------
                                                          $  835.9      $ 743.0
                                                          ========      ========

     All other at December  31, 1996 and 1995,  consisted  primarily of accruals
for  insurance,  warranty  costs,  advertising,  interest,  and income and other
taxes.


NOTE 9:  SHORT-TERM BORROWINGS
Short-term  borrowings  in the amounts of $120.9  million and $242.7  million at
December 31, 1996 and 1995,  respectively,  primarily consisted of borrowings by
subsidiaries  located  outside the United States under the terms of  uncommitted
lines  of  credit  or  other  short-term  borrowing   arrangements.   Short-term
borrowings  at December 31, 1996,  also  included  $115.0  million of borrowings
under the  Corporation's  unsecured  revolving  credit  facility,  as more fully
described in Note 10. Short-term  borrowings at December 31, 1995, also included
$150.0  million of  competitive-bid  rate loans under the  Corporation's  former
unsecured  revolving  credit  facility,  as more fully described in Note 10, and
$206.5 million of unsecured money market loans.  The weighted  average  interest
rate on short-term  borrowings  outstanding  at December 31, 1996 and 1995,  was
6.9% and 6.2%, respectively.
     Under  the terms of  uncommitted  lines of credit  at  December  31,  1996,
certain  subsidiaries  outside the United  States may borrow up to an additional
$427.2 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.

NOTE 10:  LONG-TERM DEBT
The  composition  of  long-term  debt at the end of each year,  in  millions  of
dollars, was as follows:

                                                              1996         1995
                                                          --------     --------
Revolving credit facility expiring 2001 ..........        $  285.9     $     --
Revolving credit facility expiring 1997 ..........              --        436.8
7.50% notes due 2003 .............................           440.7        500.0
6.625% notes due 2000 ............................           250.0        250.0
7.0% notes due 2006 ..............................           207.6        250.0
Medium Term Notes due through 2002 ...............           221.5        236.8
Other loans due through 2006 .....................            64.2         78.9
Less current maturities of long-term debt ........           (54.1)       (48.0)
                                                          --------     --------
                                                         $ 1,415.8    $ 1,704.5
                                                         =========    =========

     In 1996, the Corporation  replaced its former  unsecured  revolving  credit
facility  (the Former Credit  Facility),  which was scheduled to expire in 1997,
with a new unsecured revolving credit facility (the Credit Facility).  Under the
Credit Facility,  which consists of two individual  facilities,  the Corporation
may borrow up to $1.0 billion.  The amount  available  for  borrowing  under the
Credit Facility at December 31, 1996, was $599.1 million.
     Borrowing  options  under the Credit  Facility are at the London  Interbank
Offered Rate (LIBOR) plus a specified percentage, or at other variable rates set
forth therein.  The Credit Facility  provides that the interest rate margin over
LIBOR,  initially  set at  .15%  and  .25%,  respectively,  for  each of the two
individual  facilities,  will  increase  or decrease  based upon  changes in the
ratings of the  Corporation's  long-term  senior unsecured debt. The Corporation
also is able to borrow by means of  competitive-bid  rate loans under the Credit
Facility.  Competitive-bid  rate loans are made  through  an auction  process at
then-current  market  rates.  In addition to interest  payable on the  principal
amount of indebtedness  outstanding from time to time under the Credit Facility,
the  Corporation  is  required  to pay an  annual  facility  fee to  each  bank,
initially equal to .125% of the amount of each bank's  commitment,  whether used
or unused. The Credit Facility provides that the facility fee also will increase
or decrease  based upon  changes in the ratings of the  Corporation's  long-term
senior unsecured debt.
     The  Credit  Facility  includes  various  customary  covenants,   including
covenants limiting the ability of the Corporation and its subsidiaries to pledge
assets  or  incur  liens  on  assets,  and  financial  covenants  requiring  the
Corporation to maintain a specified  leverage ratio and to achieve  certain cash
flow to fixed expense coverage ratios.  As of December 31, 1996, the Corporation
was in  compliance  with all terms and  conditions of the Credit  Facility.  The
Corporation  expects to  continue  to meet the  covenants  imposed by the Credit
Facility  over the next 12  months.  Meeting  the cash  flow  coverage  ratio is
dependent upon the level of future  earnings and interest  rates,  each of which
can have a significant impact on the ratio.
     Under the Former  Credit  Facility,  the  interest  rate  margin over LIBOR
declined as the  Corporation's  leverage ratio  improved.  At December 31, 1994,
borrowings under the Former Credit Facility were at LIBOR plus .4375%,  declined
to LIBOR plus .325%  effective  January 1, 1995, and declined to LIBOR plus .25%
effective  January 1, 1996.  In addition to  interest  payable on the  principal
amount  of  indebtedness  outstanding  under the  Former  Credit  Facility,  the
Corporation  was  required to pay an annual  facility  fee to each bank equal to
 .175% of the amount of the bank's commitment as of December 31, 1994 and 1995.
     In 1995, the Corporation recognized a $30.9 million extraordinary loss as a
result of the early  redemption  of the 9.25%  sinking  fund  debentures  of its
subsidiary Emhart Corporation. The extraordinary loss consisted primarily of the
write-off of the  associated  debt discount  plus premiums and costs  associated
with the redemption, net of income tax benefits of $2.6 million. The Corporation
financed Emhart's  redemption of the sinking fund debentures  through internally
generated  cash and  proceeds  from  the sale  during  1995 of  portions  of the
discontinued PRC segment.
     During 1994, the Corporation filed a shelf registration  statement to issue
up to $500.0 million of debt securities, which may consist of debentures, notes,
or other  unsecured  evidences of  indebtedness  (the Medium Term Notes).  As of
December 31, 1996, $221.5 million aggregate  principal amount of the Medium Term
Notes, issued under this shelf registration statement, were outstanding. Of that
amount, $179.5 million bear interest at fixed rates ranging from 7.22% to 8.95%,
while the remainder bear interest at variable rates. At December 31, 1996, those
variable rates ranged from 6.00% to 6.33%.
     Indebtedness of subsidiaries in the aggregate  principal  amounts of $586.5
million and $759.1  million were included in the  Consolidated  Balance Sheet at
December 31, 1996 and 1995,  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:  $54.1  million in 1997,  $61.9  million  in 1998,  $59.3
million in 1999,  $253.9 million in 2000,  and $342.4 million in 2001.  Interest
payments on all  indebtedness  were $170.7  million in 1996,  $209.0  million in
1995, and $184.9 million in 1994.

NOTE 11:  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 14 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  represented  by the fair value of contracts  with a positive  fair
value as of the reporting  date, as indicated  below.  Some  derivatives are not
subject to credit  exposures.  The fair value of all  financial  instruments  is
summarized in Note 12. 
INTEREST RATE RISK MANAGEMENT:  The Corporation  manages its interest rate risk,
primarily through the use of interest rate swap and cap agreements,  in order to
achieve  a  cost-effective  mix of fixed and  variable  rate  indebtedness.  The
Corporation seeks to issue debt opportunistically,  whether at fixed or variable
rates, at the lowest  possible costs and then,  based upon its assessment of the
future interest rate  environment,  may convert such debt from fixed to variable
or from  variable to fixed  interest  rates  through  the use of  interest  rate
derivatives. Similarly, the Corporation may, at times, seek to limit the effects
of rising  interest  rates on its variable rate debt through the use of interest
rate caps.
     The amounts  exchanged by the  counterparties to interest rate swap and cap
agreements  normally  are based  upon the  notional  amounts  and  other  terms,
generally related to interest rates, of the derivatives.  While notional amounts
of interest rate swaps and caps form part of the basis for the amounts exchanged
by the  counterparties,  the notional amounts are not themselves  exchanged and,
therefore,  do not represent a measure of the  Corporation's  exposure as an end
user of derivative financial instruments.  The notional amounts of interest rate
derivatives at the end of each year, in millions of dollars, were as follows:

                                                              1996         1995
--------------------------------------------------------------------------------
Interest rate swaps:
   Fixed to variable rates .......................        $  700.0     $  700.0
   Variable to fixed rates .......................           400.0        450.0
   Rate basis swaps ..............................           100.0        150.0
   U.S. rates to foreign rates ...................           325.0        175.0
Interest rate caps purchased .....................           150.0        150.0
--------------------------------------------------------------------------------
     
     The  Corporation's  portfolio  of  interest  rate  swap  instruments  as of
December 31, 1996, included $700.0 million notional amounts of fixed to variable
rate swaps with a weighted average fixed rate receipt of 6.04%. The basis of the
variable  rates  paid is LIBOR.  The  maturities  of these  swaps,  by  notional
amounts,  are as follows:  $100.0 million in 1998, $150.0 million in 2000, $50.0
million in 2001,  and the  balance in the years 2003  through  2004.  A total of
$300.0 million of these swaps,  maturing in 2003, contain provisions that permit
the counterparties to terminate the swaps,  without penalty,  beginning in 1998.
     As of December  31,  1996,  the  portfolio  also  included  $400.0  million
notional  amounts of variable to fixed rate swaps with a weighted  average fixed
rate payment of 6.72%.  The basis of the variable  rates  received is LIBOR.  Of
these swaps to fixed rates, $150.0 million mature in 1997 and the balance mature
in 1998.
     As of December  31, 1996,  the  portfolio  also  contained  $100.0  million
notional  amounts of rate basis  swaps,  which swap to the higher of a specified
weighted average fixed rate payment of 6.26% or a weighted average variable rate
payment of LIBOR minus 1.55%. The basis of the variable rates received is LIBOR.
Rates  received  under  these rate basis swaps are  generally  reset every three
months. Of these rate basis swaps, $50.0 million mature in 1997, and the balance
mature in 1998. At December 31, 1996,  payments  under these swaps were based on
the weighted average fixed rate payment provisions of the swap agreements.
     The remainder of the interest rate swap  portfolio as of December 31, 1996,
consisted of $325.0  million  notional  amounts of interest rate swaps that swap
from United  States  dollars into  foreign  currencies.  Of that amount,  $150.0
million had been swapped from fixed rate United States  dollars (with a weighted
average  fixed  rate of 6.77%)  into fixed  rate  Japanese  yen (with a weighted
average fixed rate of 2.92%).  Of the $150.0 million  notional  amounts  swapped
into Japanese yen, $50.0 million mature in 1997, and the balance mature in 1999.
A total of $25.0 million  notional  amounts of interest  rate swaps  maturing in
1997 had been  swapped  from  variable  rate  United  States  dollars  (with the
variable  rate based on LIBOR)  into fixed  rate Swiss  francs  (with a weighted
average  fixed rate of 5.17%).  A total of $100.0  million  notional  amounts of
interest  rate swaps  maturing in 1999 had been  swapped  from fixed rate United
States  dollars  (with a weighted  average  fixed rate of 6.64%) into fixed rate
deutsche  marks (with a weighted  average  fixed rate of 4.73%).  Interest  rate
swaps  totaling  $50.0 million  notional  amount  swapped from fixed rate United
States  dollars  (with a weighted  average  fixed rate of 6.77%) into fixed rate
Dutch guilders (with a weighted average fixed rate of 4.58%); these swaps mature
in 1999.
     As of December 31, 1996, the Corporation  also had $150.0 million  notional
amounts of  interest  rate caps that  mature in 1997 and have cap rates of 7.0%.
For a total of $100.0  million  notional  amounts of the interest rate caps, the
cap rates increase from 7.0% to 9.0% for any period in which LIBOR exceeds 9.0%.
     The  Corporation's  credit exposure on its interest rate  derivatives as of
December  31, 1996 and 1995,  was $.1 million  and $3.5  million,  respectively.
Gross deferred gains and losses on the early  termination of interest rate swaps
as of December 31, 1996 and 1995, were not significant.
FOREIGN  CURRENCY  MANAGEMENT:  The  Corporation  enters  into  various  foreign
currency  contracts  in managing its foreign  exchange  risks.  The  contractual
amounts of  foreign  currency  derivative  financial  instruments  (principally,
forward  exchange   contracts  and  options)  generally  are  exchanged  by  the
counterparties.
     In order to limit  the  volatility  of  reported  equity,  the  Corporation
historically has hedged a portion of its net investment in subsidiaries  located
outside the United  States,  where  practicable,  except for those  subsidiaries
operating in highly inflationary  economies.  This has been accomplished through
the use of foreign  currency  forward  contracts,  foreign  currency swaps,  and
purchased  foreign  currency  options with little or no  intrinsic  value at the
inception of the options.  Beginning in 1995, the  Corporation  decided to limit
the future hedging of its net investment in foreign subsidiaries.
     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.  Management  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  and firm sales
commitment  exposures,  as well as  certain  forecasted  transactions,  based on
management's  judgment,  generally  through  purchased options with little or no
intrinsic  value at the inception of the options and, for  transaction  and firm
sales commitment exposures,  the use of forward exchange contracts.  Some of the
contracts involve the exchange of two foreign currencies  according to the local
needs of the  subsidiaries.  The  Corporation  utilizes  some natural  hedges to
mitigate its transaction and commitment exposures.  Deferred gains and losses on
hedged firm sales  commitments  are  recognized  when the related  sales  occur.
Deferred gains on options that hedge forecasted transactions,  generally related
to  inventory  purchases,  are  recognized  in cost of sales  when  the  related
inventory is sold or when a hedged purchase is no longer expected to occur.
     The following table summarizes the contractual amounts of the Corporation's
forward  exchange  contracts  as of December  31, 1996 and 1995,  in millions of
dollars,  including  details by major currency as of December 31, 1996.  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, 1996                                    Buy             Sell
--------------------------------------------------------------------------------
United States dollar ....................             $  962.3        $  (561.4)
Pound sterling ..........................                251.7            (65.3)
Deutsche mark ...........................                 54.3           (266.7)
Dutch guilder ...........................                 22.3            (85.1)
Japanese yen ............................                 34.1           (165.1)
French franc ............................                 60.2            (76.1)
Canadian dollar .........................                204.8           (204.0)
Italian lira ............................                 21.8           (101.4)
Swiss franc .............................                 47.1            (64.2)
Other ...................................                 95.4           (157.9)
--------------------------------------------------------------------------------
Total ...................................             $1,754.0        $(1,747.2)
================================================================================
As of December 31, 1995
--------------------------------------------------------------------------------
Total ...................................             $2,305.8        $(2,322.2)
================================================================================
    
     The contractual amounts of the Corporation's  purchased currency options to
buy currencies, predominantly the pound sterling, and to sell various currencies
were $328.5 million and $309.1 million,  respectively, at December 31, 1996. The
contractual   amounts  of  purchased   currency   options  to  buy   currencies,
predominantly  the United States  dollar,  and to sell various  currencies  were
$25.1  million and $25.6  million,  respectively,  at  December  31,  1995.  
     The Corporation's credit exposure on its foreign currency derivatives as of
December 31, 1996 and 1995, was $62.4 million and $28.9 million, respectively.
     Gross deferred  realized gains and losses on hedges of firm commitments and
forecasted  transactions  were not  significant  at December  31, 1996 and 1995.
Substantially  all of the amounts deferred at December 31, 1996, are expected to
be  recognized  in  earnings  during  1997,  when  the  gains or  losses  on the
underlying transactions also will be recognized.

NOTE 12:  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 amount reported in the  Consolidated  Balance Sheet for other long-term debt
approximates fair value, since such debt was primarily variable rate debt.
o Interest  rate  hedges:  The fair value of  interest  rate  hedges,  including
interest  rate  swaps  and  caps,   reflects  the  estimated  amounts  that  the
Corporation  would  receive or pay to terminate  the  contracts at the reporting
date,  thereby taking into account unrealized gains and losses of open contracts
as of 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 the carrying  amounts and fair values of the
Corporation's  financial  instruments,  except for those  noted  above for which
carrying amounts approximate fair values, in millions of dollars:

Assets (Liabilities)                                     Carrying          Fair
As of December 31, 1996                                    Amount         Value
--------------------------------------------------------------------------------
Non-derivatives:
   Long-term debt ..............................        $(1,415.8)    $(1,437.5)
--------------------------------------------------------------------------------
Derivatives relating to:
   Debt
     Assets ....................................               --            .1
     Liabilities ...............................               --         (21.8)
   Foreign currency
     Assets ....................................             39.7          62.4
     Liabilities ...............................            (21.1)        (19.6)
--------------------------------------------------------------------------------
As of December 31, 1995
--------------------------------------------------------------------------------
Non-derivatives:
   Long-term debt ..............................        $(1,704.5)    $(1,779.9)
--------------------------------------------------------------------------------
Derivatives relating to:
   Debt
     Assets ....................................              2.6           3.5
     Liabilities ...............................              (.5)        (16.4)
   Foreign currency
     Assets ....................................             12.6          28.9
     Liabilities ...............................            (32.6)        (46.3)
--------------------------------------------------------------------------------
  
     The  carrying  amounts of  debt-related  derivatives  are  included  in the
Consolidated Balance Sheet in other accrued liabilities. The carrying amounts of
foreign  currency-related  derivatives  related to net investment and commitment
hedges are included in the  Consolidated  Balance Sheet in other current  assets
and other accrued liabilities.  The carrying amounts of foreign currency-related
derivatives related to transaction hedges are included in the same balance sheet
line item as the hedged transaction.

NOTE 13:  INCOME TAXES
Earnings   (losses)  from   continuing   operations   before  income  taxes  and
extraordinary item, for each year, in millions of dollars, were as follows:

                                             1996           1995           1994
                                         --------       --------       --------
United States ....................       $  121.0       $   83.5       $  (16.6)
Other countries ..................           81.7          142.0          165.2
                                         --------       --------       --------

                                         $  202.7       $  225.5       $  148.6
                                         ========       ========       ========

     Significant  components  of  income  taxes  (benefits)  for each  year,  in
millions of dollars, were as follows:

                                                 1996        1995          1994
                                              -------      -------      -------
Current:
   United States ........................     $   4.0      $  20.2      $   4.7
   Other countries ......................        34.5         33.5         43.7
   Withholding on remittances
     from other countries ...............         2.1          1.4          1.4
                                              -------      -------      -------
                                                 40.6         55.1         49.8
                                              -------      -------      -------
Deferred:
   United States ........................       (10.6)       (50.2)        12.0
   Other countries ......................        13.5          4.1         (3.1)
                                              -------      -------      -------
                                                  2.9        (46.1)         8.9
                                              -------      -------      -------
                                              $  43.5      $   9.0      $  58.7
                                              =======      =======      =======

     During 1996,  1995, and 1994, the  Corporation  utilized  United States tax
loss carryforwards and capital loss  carryforwards  obtained in a prior business
combination.  The  effect of  utilizing  these  carryforwards  was to  recognize
deferred  income tax  expense and to reduce  goodwill by $19.0  million in 1996,
$21.0 million in 1995,  and $15.5 million in 1994. 
     In 1995,  income tax benefits of $2.6 million were  recorded in  connection
with the  extraordinary  loss on  extinguishment  of debt.  Income  tax  expense
recorded  directly as an adjustment to equity as a result of hedging  activities
in 1996, 1995, and 1994 was not significant.
     Income tax payments were $40.8 million in 1996,  $56.3 million in 1995, and
$44.5 million in 1994.
     Deferred tax assets  (liabilities)  at the end of each year, in millions of
dollars, were composed of the following:

                                                             1996          1995
                                                         --------      --------
Deferred tax liabilities:
   Fixed assets ....................................     $  (47.0)     $  (45.8)
   Postretirement benefits .........................        (39.1)        (32.5)
   Other ...........................................        (27.7)         (8.8)
                                                         --------      --------
Gross deferred tax liabilities .....................       (113.8)        (87.1)
                                                         --------      --------
Deferred tax assets:
   Tax loss carryforwards ..........................         98.5         115.9
   Tax credit and capital loss
     carryforwards .................................         72.2          58.0
   Net assets of discontinued operations ...........           --          40.0
   Other ...........................................        124.2         128.0
                                                         --------      --------
Gross deferred tax assets ..........................        294.9         341.9
                                                         --------      --------
Deferred tax asset valuation allowance .............       (111.5)       (187.7)
                                                         --------      --------
Net deferred tax assets ............................     $   69.6      $   67.1
                                                         ========      ========

     Deferred  income taxes are included in the  Consolidated  Balance  Sheet in
other current assets, other accrued liabilities, deferred income taxes, and, for
1995, net assets of discontinued operations.
     During the year ended December 31, 1996,  the deferred tax asset  valuation
allowance decreased by $76.2 million. Included in the decrease was $10.6 million
that resulted from the reversal of a portion of the deferred tax asset valuation
allowance based on the projections of estimable  taxable  earnings in the United
States.  The remaining  decrease was due to the utilization of domestic tax loss
carryforwards, offset by increased tax losses generated by foreign operations.
     During the year ended December 31, 1995,  the deferred tax asset  valuation
allowance  decreased  by $113.5  million.  Included in the  decrease  was $109.0
million that  resulted  from the reversal of a portion of the deferred tax asset
valuation allowance based on the projection of estimable taxable earnings in the
United  States,  including the effect of the  then-pending  sale of PRC Inc. The
remaining   decrease   was  due  to  the   utilization   of  domestic  tax  loss
carryforwards, offset by increased tax losses generated by foreign operations.
     Tax basis  carryforwards  at December 31, 1996,  consisted of net operating
losses  expiring  from 1997 to 2012 and other tax credits  expiring from 1998 to
2009.
     At December  31,  1996,  unremitted  earnings of  subsidiaries  outside the
United States were approximately  $1.4 billion,  on which no United States taxes
have been provided, except that deferred withholding taxes have been provided on
approximately  $300.0 million of such  unremitted  earnings.  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:

                                                       1996      1995      1994
                                                    -------   -------   -------
Income taxes at federal statutory rate ...........  $  70.9   $  78.9   $  52.0
Lower effective taxes on earnings
   in other countries ............................    (10.3)    (16.5)    (18.7)
Effect of net operating loss carryforwards .......    (52.3)    (19.4)     (2.7)
Effect of reduction in deferred tax asset
   valuation  allowance due to projection
   of estimable earnings in the United
   States, including, for 1995, the
   effect of the then-pending sale of
   PRC Inc. ......................................    (10.6)    (65.0)       --
Withholding on remittances from other
   countries .....................................     21.1       1.4       1.4
Amortization and write-off of goodwill ...........     23.6      24.6      24.5
Other-net ........................................      1.1       5.0       2.2
                                                    -------   -------   -------

Income taxes .....................................  $  43.5   $   9.0   $  58.7
                                                    =======   =======   =======


NOTE 14:  POSTRETIREMENT BENEFITS
Net pension cost (credit) for all domestic  defined  benefit plans  included the
following components for each year, in millions of dollars:

                                                  1996         1995        1994
                                               -------      -------     ------- 
Service cost ..............................    $  16.5      $  11.3     $  14.0
Interest cost on projected
   benefit obligation .....................       48.8         47.9        45.6
Actual return on assets ...................      (62.0)      (108.2)      (20.8)
Net amortization and deferral .............       (5.8)        39.3       (38.2)
                                               -------      -------     ------- 
Net pension cost (credit) .................    $  (2.5)     $  (9.7)    $    .6
                                               =======      =======     =======

     The funded status of the domestic  defined benefit plans at the end of each
year, in millions of dollars, was as follows:

                                                            1996           1995
                                                        --------       --------
Actuarial present value of benefit obligations:
   Vested benefit ...................................   $  569.8       $  585.2
                                                        ========       ========
   Accumulated benefit ..............................   $  589.4       $  611.5
                                                        ========       ========
   Projected benefit ................................   $  631.0       $  653.0
Plan assets at fair value ...........................      796.2          750.6
                                                        --------       --------
Plan assets in excess of projected benefit
  obligation ........................................      165.2           97.6
Unrecognized net loss ...............................       66.2          129.3
Unrecognized prior service cost .....................        5.3            5.6
Unrecognized net asset at date of adoption,
  net of amortization ...............................       (3.1)          (4.2)
                                                        --------       --------
Net pension asset recognized in the
  Consolidated Balance Sheet ........................   $  233.6       $  228.3
                                                        ========       ========
Discount rates ......................................        8.0%          7.75%
Salary scales .......................................    5.0-6.0%       5.0-6.0%
Expected return on plan assets ......................       10.5%          10.5%
                                                        --------       --------
     Net pension expense  (credit) for defined benefit pension plans outside the
United States was $.9 million in 1996,  $.8 million in 1995,  and $(2.0) million
in 1994. The net pension asset recognized in the Consolidated  Balance Sheet for
those plans outside the United States where assets exceeded accumulated benefits
was  $119.3   million  and  $102.0  million  at  December  31,  1996  and  1995,
respectively.  Liabilities of these plans were  discounted at rates ranging from
4.0% to 8.5% in 1996 and from  4.5% to 9.0% in 1995,  and  expected  returns  on
assets of these  plans  ranged from 5.5% to 10.0% in 1996 and from 5.5% to 10.5%
in 1995. The net pension liability  recognized in the Consolidated Balance Sheet
for those plans outside the United States where  accumulated  benefits  exceeded
assets was $71.0  million  and $71.7  million  at  December  31,  1996 and 1995,
respectively.  Liabilities of these predominantly unfunded plans were discounted
at rates ranging from 7.0% to 8.0% in 1996 and from 7.0% to 7.75% in 1995.
     Assets of  domestic  plans and plans  outside  the  United  States  consist
principally of  investments  in equity  securities,  debt  securities,  and cash
equivalents.
     The expected  returns on plan assets during 1994 for defined  benefit plans
were  10.5% for plans in the United  States  and  ranged  from 5.5% to 12.0% for
funded plans outside the United States.
     Expense for defined  contribution  plans amounted to $11.3  million,  $11.6
million, and $8.3 million in 1996, 1995, and 1994, respectively.
     The Corporation has several unfunded health care plans that provide certain
postretirement  medical,  dental,  and life  insurance  benefits for most United
States employees.  The postretirement  medical and dental plans are contributory
and include certain cost-sharing features, such as deductibles and co-payments.
     Net  periodic   postretirement   benefit  expense  included  the  following
components, in millions of dollars:

                                                 1996         1995         1994
                                              -------      -------      -------
Service expense .........................     $   1.2      $   1.6      $   1.8
Interest expense ........................        11.6         14.0         12.9
Net amortization ........................        (8.8)        (7.0)        (8.0)
                                              -------      -------      -------
Net periodic postretirement
   benefit expense ......................     $   4.0      $   8.6      $   6.7
                                              =======      =======      =======

     The reconciliation of the accumulated  postretirement benefit obligation to
the liability  recognized in the  Consolidated  Balance Sheet at the end of each
year, in millions of dollars, was as follows:

                                                            1996           1995
                                                          -------       -------
Accumulated postretirement
   benefit obligation:
     Retirees ......................................      $ 114.0       $ 129.0
     Fully eligible active
       participants ................................         14.9          15.7
     Other active participants .....................         13.5          13.5
                                                          -------       -------
     Total .........................................        142.4         158.2
                                                          -------       -------
Unrecognized prior service cost ....................         53.9          59.7
Unrecognized net loss ..............................         36.5          22.3
                                                          -------       -------
Net postretirement benefit liability
   recognized in the Consolidated
   Balance Sheet ...................................      $ 232.8       $ 240.2
                                                          =======       =======

     The  health  care cost  trend  rate used to  determine  the  postretirement
benefit obligation was 9.77% for 1996 and 9.72% for 1997, decreases gradually to
an ultimate  rate of 5.25% in 2001,  and remains at that level  thereafter.  The
trend rate is a significant  factor in  determining  the amounts  reported.  The
effect of a 1% annual  increase  in these  assumed  health care cost trend rates
would increase the accumulated postretirement benefit obligation at December 31,
1996,  by  approximately  $10.4  million.  The  effect of a 1%  increase  on the
aggregate  of  the  service  and  interest  cost   components  of  net  periodic
postretirement benefit cost is immaterial.  An assumed discount rate of 8.0% was
used to  measure  the  accumulated  postretirement  benefit  obligation  in 1996
compared to 7.75% used in 1995.


<PAGE>
NOTE 15:  STOCKHOLDERS' EQUITY
(Dollars in Millions Except Per Share Amounts)
<TABLE>
<CAPTION>

                                                                                                                Equity
                             Outstanding                 Outstanding              Capital in    Retained    Adjustment
                               Preferred                      Common        Par    Excess of    Earnings          From
                                  Shares       Amount         Shares      Value    Par Value    (Deficit)  Translation
                             ------------     -------    -----------     ------   ----------    --------   -----------    
<S>                              <C>         <C>          <C>            <C>       <C>          <C>          <C>
Balance at December 31, 1993     150,000     $  150.0     83,845,194     $ 41.9    $ 1,034.8    $  (57.5)     $ (120.3)
Net earnings                          --           --             --         --           --       127.4            --
Cash dividends:
   Common ($.40 per share)            --           --             --         --           --       (33.7)           --
   Preferred                          --           --             --         --           --       (11.6)           --
Common stock issued under
   employee benefit plans             --           --        843,609         .4         14.3          --            --
Valuation changes, less net 
   effect of hedging activities       --           --             --         --           --          --          23.7
                                  -------     -------     ----------     ------    ---------    --------      --------
Balance at December 31, 1994      150,000       150.0     84,688,803       42.3      1,049.1        24.6         (96.6)
Net earnings                           --          --             --         --           --       224.0            --
Cash dividends:
   Common ($.40 per share)             --          --             --         --           --       (34.4)           --
   Preferred                           --          --             --         --           --       (11.6)           --
Common stock issued under
   employee benefit plans              --          --      1,758,785         .9         35.4          --            --
Valuation changes, less net
   effect of hedging activities        --          --             --         --           --          --          39.5
                                  -------     -------     ----------     ------    ---------     -------      --------
Balance at December 31, 1995      150,000       150.0     86,447,588       43.2      1,084.5       202.6         (57.1)
Net earnings                           --          --             --         --           --       229.6            --
Cash dividends:
   Common ($.48 per share)             --          --             --         --           --       (42.9)           --
   Preferred                           --          --             --         --           --        (9.1)           --
Conversion of preferred shares
   into common shares            (150,000)     (150.0)     6,350,000        3.2        146.8          --            --
Common stock issued under
   employee benefit plans              --          --      1,451,219         .7         30.4          --            --
Valuation changes, less net 
   effect of hedging activities        --          --             --         --           --          --            .5
                                  -------     -------     ----------     ------    ---------    --------      --------
Balance at December 31, 1996           --     $    --     94,248,807     $ 47.1    $ 1,261.7    $  380.2      $  (56.6)
                                  =======     =======     ==========     ======    =========    ========      ========
</TABLE>
     The  Corporation  has one  class  of  $.50  par  value  common  stock  with
150,000,000  authorized shares. The Corporation has authorized  5,000,000 shares
of  preferred  stock  without  par value,  of which  1,500,000  shares have been
designated  as Series A Junior  Participating  Preferred  Stock  (Series  A) and
150,000 shares have been designated as Series B Cumulative Convertible Preferred
Stock (Series B).
     Under terms  established  upon the original sale of the Series B stock, the
Corporation  had the option,  after September 1996, to require the conversion of
the  shares  of  Series B stock  into  shares  of  common  stock  under  certain
circumstances. In accordance with the terms of the Series B stock, each share of
Series B stock was  convertible  into  42-1/3  shares  of  common  stock and was
entitled to 42-1/3 votes on matters  submitted  generally to the stockholders of
the  Corporation.  The  conversion  rate and the  number of votes per share were
subject to adjustment  under  certain  circumstances  pursuant to  anti-dilution
provisions.  On October 14,  1996,  the  Corporation  exercised  its  conversion
option,  issuing 6,350,000 shares of common stock in exchange for all previously
outstanding shares of Series B stock.
     In connection with the original sale of the Series B stock, the Corporation
and the  purchaser of Series B stock  entered into a standstill  agreement  that
included, among other things,  provisions limiting the purchaser's ownership and
voting of shares of the Corporation's capital stock, provisions limiting actions
by the  purchaser  with respect to the  Corporation,  and  provisions  generally
restricting  the purchaser's  equity interest to 15%. The standstill  agreement,
which  expires in  September  2001,  continues  to apply to the shares of common
stock issued upon conversion of the Series B stock.
     Prior to the conversion in 1996, holders of Series B stock were entitled to
dividends, payable quarterly, at an annual rate of $77.50 per share.

NOTE 16:  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  because, as discussed below, the alternative fair value accounting
provided  for under SFAS No. 123,  "Accounting  for  Stock-Based  Compensation,"
requires  use of  option  valuation  models  that  are not  appropriate  for the
valuation  of  stock-based  compensation  arrangements  provided  to  employees.
Further,  the dilutive  effects of  stock-based  compensation  arrangements  are
reflected in the Corporation's computation of earnings per share.
     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 would  require  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 the  Corporation's  various stock option  plans,  options to purchase
common stock may be granted  until 2006.  Options  generally are granted at fair
market value at the date of grant, are exercisable in installments beginning one
year from the date of grant,  and expire 10 years  after the date of grant.  The
plans permit the issuance of either  incentive  stock  options or  non-qualified
stock options,  which,  for certain of the plans, may be accompanied by stock or
cash appreciation  rights or limited stock  appreciation  rights.  Additionally,
certain  plans  allow  for  the  granting  of  stock  appreciation  rights  on a
stand-alone basis.
     As of  December  31,  1996,  5,520,518  non-qualified  stock  options  were
outstanding under domestic plans.  There were 131,961 stock options  outstanding
under the United Kingdom plan.
     Under all plans,  there were 1,680,335  shares of common stock reserved for
future grants as of December 31, 1996. Transactions are summarized as follows:

                                                                       Weighted
                                                                        Average
                                                  Stock Options        Exercise
                                                    Outstanding           Price
                                                  -------------      ----------
December 31, 1995 .................................   5,788,688       $   24.18
Granted ...........................................   1,410,050           33.92
Exercised .........................................   1,115,328           18.01
Forfeited .........................................     430,931           26.26
                                                      ---------       ---------
December 31, 1996 .................................   5,652,479       $   24.12
                                                      =========       =========

Shares exercisable at December 31, 1996 ...........   3,424,497       $   19.05
                                                      ---------       ---------

                                                  Stock Options     Price Range
                                                  -------------     -----------
Shares exercised during the year 
   ended December 31, 1995........................    1,165,152     $9.88-25.25
                                                      ---------     -----------
Shares exercised during the year 
   ended December 31, 1994........................      343,702      9.88-21.63
                                                      ---------     -----------

     Exercise  prices for options  outstanding  as of December 31, 1996,  ranged
from $9.88 to $41.00.  The following table sets forth certain  information  with
respect to those stock options outstanding at December 31, 1996:

                                                                       Weighted
                                                         Weighted       Average
                                           Stock          Average     Remaining
Range of                                 Options         Exercise   Contractual
Exercise Prices                      Outstanding            Price          Life
---------------                      -----------        ---------   -----------
Under $15.00 ...................         853,527        $   12.46           4.1
$15.00-$22.49 ..................       2,348,269            20.21           4.6
$22.50-$33.74 ..................       1,483,283            28.11           9.2
Over $33.75 ....................         967,400            37.76           9.3
                                       ---------        ---------           ---
                                       5,652,479        $   24.12           6.5
                                       =========        =========           ===

     The following  table sets forth certain  information  with respect to those
stock options exercisable at December 31, 1996:
                                                   
                                                     Stock             Weighted
Range of                                           Options              Average
Exercise Prices                                Exercisable       Exercise Price
---------------                                -------------     --------------
Under $15.00 ..........................            853,527            $   12.46
$15.00-$22.49 .........................          2,222,898                20.20
$22.50-$33.74 .........................            230,847                24.06
Over $33.75 ...........................            117,225                35.40
                                                 ---------            ---------
                                                 3,424,497            $   19.05
                                                 =========            =========

     In electing  to  continue  to follow  APBO No. 25 for  expense  recognition
purposes,  the  Corporation  is  obliged  to provide  the  expanded  disclosures
required  under SFAS No. 123 for  stock-based  compensation  granted in 1995 and
thereafter, including, if materially different from reported results, disclosure
of  the   Corporation's  pro  forma  net  income  and  earnings  per  share  had
compensation  expense  relating to 1996 and 1995 grants been measured  under the
fair value recognition provisions of SFAS No. 123.
     The  Black-Scholes   option  valuation  model  was  developed  for  use  in
estimating the fair value of traded  options which have no vesting  restrictions
and are fully  transferable.  In addition,  option  valuation models require the
input  of  highly  subjective   assumptions,   including  expected  stock  price
volatility.   The  Corporation's   stock-based  compensation  arrangements  have
characteristics  significantly  different  from  those of  traded  options,  and
changes  in the  subjective  input  assumptions  used in  valuation  models  can
materially affect the fair value estimate.  Therefore, the Corporation is of the
opinion that the existing  models do not  necessarily  provide a reliable single
measure of the fair value of its stock-based compensation.
     The weighted-average fair value at date of grant for options granted during
1996 and 1995 was $10.30 and $9.85,  respectively,  and was estimated  using the
Black-Scholes  option  valuation  model  with  the  following   weighted-average
assumptions:

                                                          1996             1995
--------------------------------------------------------------------------------
Expected life in years .......................            5.9              5.7
Interest rate ................................            6.25%            5.79%
Volatility ...................................            22.2%            22.3%
Dividend yield ...............................            1.43%            1.41%
--------------------------------------------------------------------------------

     The  Corporation's  pro forma  information  for 1996 and 1995,  prepared in
accordance with the provisions of SFAS No. 123, is set forth below. For purposes
of pro forma disclosures,  stock-based compensation is amortized to expense on a
straight-line basis over the vesting period. The following pro forma information
is not  representative  of the pro forma effect of the fair value  provisions of
SFAS No. 123 on the  Corporation's  net income in future years because pro forma
compensation  expense related to grants made prior to 1995 may not be taken into
consideration:  

(Dollars in Millions Except Per Share Amounts)            1996             1995
--------------------------------------------------------------------------------
Pro forma net income .............................     $ 227.5          $ 223.2
Pro forma  earnings  per  share:
  Primary ........................................     $  2.39          $  2.41
  Assuming full dilution .........................     $  2.36          $  2.36
--------------------------------------------------------------------------------

NOTE 17:  BUSINESS SEGMENTS AND GEOGRAPHIC AREAS
The Corporation operates in two business segments: Consumer and Home Improvement
Products,  including  consumer  and  professional  power tools and  accessories,
household  products,  security hardware,  outdoor products (composed of electric
lawn and garden tools and recreational products), plumbing products, and product
service;  and  Commercial  and  Industrial  Products,  including  fastening  and
assembly systems and glass container-forming and inspection equipment.
     Sales, operating income,  capital expenditures,  and depreciation set forth
in the  following  table  exclude the results of the  discontinued  PRC segment.
Corporate assets included in corporate and  eliminations  were $366.0 million at
December 31, 1996,  $688.1  million at December 31, 1995,  and $575.4 million at
December 31, 1994, and principally  consist of cash and cash equivalents,  other
current  assets,  property,  other sundry  assets,  and, for 1995 and 1994,  net
assets  of  the  discontinued  PRC  segment.  The  remainder  of  corporate  and
eliminations   includes   certain  pension  credits  and  amounts  to  eliminate
intercompany  items,  including accounts receivable and payable and intercompany
profit in inventory.

<PAGE>
<TABLE>
BUSINESS SEGMENTS
(Millions of Dollars)
<CAPTION>
                                                      Consumer &   Commercial &
                                                Home Improvement     Industrial      Corporate &
1996                                                    Products       Products     Eliminations     Consolidated
-----------------------------------------------------------------------------------------------------------------
<S>                                                    <C>            <C>             <C>                <C>     
Sales to unaffiliated customers                        $ 4,212.0      $   702.4       $       --         $4,914.4
Operating income                                           273.0           75.7              8.2            356.9
Operating income excluding restructuring costs
   and goodwill amortization                               410.6           95.7              8.2            514.5
Identifiable assets                                      5,002.5        1,382.0         (1,231.0)         5,153.5
Capital expenditures                                       177.5           17.3              1.5            196.3
Depreciation                                               128.6           16.0              2.8            147.4

1995
-----------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers                        $ 4,075.6       $  690.5       $       --         $4,766.1
Operating income                                           348.5           74.8              2.8            426.1
Operating income excluding goodwill amortization           399.8           91.9              2.8            494.5
Identifiable assets                                      4,929.2        1,382.8           (766.7)         5,545.3
Capital expenditures                                       184.1           15.7              3.3            203.1
Depreciation                                               115.9           15.4              4.6            135.9

1994
-----------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers                        $ 3,773.8       $  591.4       $       --         $4,365.2
Operating income                                           293.7           52.6              5.6            351.9
Operating income excluding goodwill amortization           350.6           68.7              5.6            424.9
Identifiable assets                                      4,686.2        1,390.0           (811.9)         5,264.3
Capital expenditures                                       166.5           12.4              2.6            181.5
Depreciation                                               101.5           13.9              4.0            119.4
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GEOGRAPHIC AREAS
(Millions of Dollars)
                                                     United                                 Corporate &
1996                                                 States         Europe         Other   Eliminations   Consolidated
----------------------------------------------------------------------------------------------------------------------
<S>                                               <C>            <C>            <C>          <C>              <C>     
Sales to unaffiliated customers                   $ 2,726.1      $ 1,466.8      $  721.5     $       --       $4,914.4
Sales and transfers between geographic areas          246.6          176.4         256.0         (679.0)            --
----------------------------------------------------------------------------------------------------------------------
Total sales                                       $ 2,972.7      $ 1,643.2      $  977.5     $   (679.0)      $4,914.4
======================================================================================================================
Operating income                                  $   282.3      $    67.5      $   (1.1)    $      8.2       $  356.9
Operating income excluding restructuring costs    $   317.4      $   117.2      $    5.4     $      8.2       $  448.2
Identifiable assets                               $ 3,258.5      $ 2,375.9      $  783.6     $ (1,264.5)      $5,153.5
----------------------------------------------------------------------------------------------------------------------
1995
----------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers                   $ 2,551.2      $ 1,503.6      $  711.3     $       --       $4,766.1
Sales and transfers between geographic areas          287.8          165.0         206.0         (658.8)            --
----------------------------------------------------------------------------------------------------------------------
Total sales                                       $ 2,839.0      $ 1,668.6      $  917.3     $   (658.8)      $4,766.1
======================================================================================================================
Operating income                                  $   300.2      $    96.0      $   27.1     $      2.8       $  426.1
Identifiable assets                               $ 3,216.6      $ 2,488.4      $  763.9     $   (923.6)      $5,545.3
----------------------------------------------------------------------------------------------------------------------
1994
----------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated customers                   $ 2,409.3      $ 1,279.3      $  676.6     $       --       $4,365.2
Sales and transfers between geographic areas          234.9          147.6         213.7         (596.2)            --
----------------------------------------------------------------------------------------------------------------------
Total sales                                       $ 2,644.2      $ 1,426.9      $  890.3     $   (596.2)      $4,365.2
======================================================================================================================
Operating income                                  $   217.0      $   114.6      $   14.7     $      5.6       $  351.9
Identifiable assets                               $ 3,200.0      $ 2,305.9      $  670.8     $   (912.4)      $5,264.3
----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

     In 1996, restructuring costs in the amount of $87.7 million were charged to
the Consumer and Home Improvement Products segment and $3.6 million were charged
to the Commercial and Industrial Products segment.
     In  the  Geographic  Areas  table,  United  States  includes  all  domestic
operations and several intercompany  manufacturing facilities outside the United
States that manufacture  products  predominantly  for sale in the United States.
Other includes subsidiaries located in Canada, Latin America, Australia, and the
Far East.
     Transfers  between  geographic  areas  are  accounted  for at  cost  plus a
reasonable  profit.  Transfers  between  business  segments are not significant.
Identifiable assets are those assets identified with the operations in each area
or segment, including goodwill.

NOTE 18:  OTHER EXPENSE
Other expense for 1996,  1995, and 1994 primarily  included the costs associated
with the sale of receivables program.

NOTE 19:  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  charged to earnings from continuing  operations for 1996,  1995,
and  1994  amounted  to  $71.2  million,   $68.0  million,  and  $64.9  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, 1996, in millions of dollars, were as follows:

1997 ...........................................................       $   48.7
1998 ...........................................................           41.1
1999 ...........................................................           30.6
2000 ...........................................................           22.0
2001 ...........................................................           17.5
Thereafter .....................................................           50.2
                                                                       --------
Total ..........................................................       $  210.1
                                                                       ========
                      
NOTE 20:  LITIGATION AND CONTINGENT LIABILITIES
The  Corporation  is involved  in various  lawsuits  in the  ordinary  course of
business. These lawsuits primarily involve claims for damages arising out of the
use of the  Corporation's  products  and  allegations  of patent  and  trademark
infringement.  The Corporation also is involved in litigation and administrative
proceedings  relating to employment  matters and  commercial  disputes.  Some of
these  lawsuits  include  claims for punitive as well as  compensatory  damages.
Using  current  product  sales  data  and  historical  trends,  the  Corporation
actuarially  calculates  the  estimate  of  its  current  exposure  for  product
liability.  The Corporation is insured for product  liability claims for amounts
in excess of established  deductibles and accrues for the estimated liability up
to the limits of the deductibles.  The Corporation  accrues for all other claims
and lawsuits on a case-by-case basis.
     The Corporation also is involved in lawsuits and administrative proceedings
with respect to claims involving the discharge of hazardous  substances into the
environment.  Certain of these claims assert  damages and liability for remedial
investigations  and cleanup costs with respect to sites at which the Corporation
has been identified as a potentially  responsible  party under federal and state
environmental laws and regulations (off-site).  Other matters involve sites that
the  Corporation  currently owns and operates or has previously  sold (on-site).
For off-site claims,  the Corporation  makes an assessment of the costs involved
based on  environmental  studies,  prior  experience at similar  sites,  and the
experience of other named parties. The Corporation also considers the ability of
other  parties to share costs,  the  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 the
Corporation  has any remaining  liability.  If the  Corporation is determined to
have potential  liability for properties  currently owned or previously sold, an
estimate is made of the total costs of  investigation  and remediation and other
potential costs associated with the site.
     The  Corporation's  estimate of the costs  associated  with legal,  product
liability,  and environmental exposures is accrued if, in management's judgment,
the  likelihood  of a loss  is  probable.  These  accrued  liabilities  are  not
discounted.
     Insurance recoveries for environmental and certain general liability claims
are not recognized until realized. In the opinion of management, 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,  1996,  the  Corporation  had no  known  probable  but
inestimable exposures that could have a material effect on the Corporation.

<PAGE>
NOTE 21: QUARTERLY RESULTS (UNAUDITED)
(Millions of Dollars Except Per Share Data)
<TABLE>
<CAPTION>
Year Ended December 31, 1996                       First Quarter      Second Quarter       Third Quarter     Fourth Quarter
---------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>                 <C>                <C>                 <C>     
Sales                                                   $1,065.0            $1,207.9           $1,186.7            $1,454.8
Gross margin                                               394.9               426.0              429.2               507.7
Earnings (loss) from continuing operations                 (32.4)               45.3               55.7                90.6
Earnings from discontinued operations                       70.4                  --                 --                  --
Net earnings                                                38.0                45.3               55.7                90.6
---------------------------------------------------------------------------------------------------------------------------
Net earnings per common and common equivalent share:
   Primary:
     Earnings (loss) from continuing operations         $   (.40)           $    .47           $    .59            $   .94
     Earnings from discontinued operations                   .79                  --                 --                 --
--------------------------------------------------------------------------------------------------------------------------
     Primary earnings per share                         $    .39            $    .47           $    .59            $   .94
--------------------------------------------------------------------------------------------------------------------------
   Assuming full dilution:
     Earnings (loss) from continuing operations         $   (.40)           $    .47           $    .58            $   .94
     Earnings from discontinued operations                   .79                  --                 --                 --
--------------------------------------------------------------------------------------------------------------------------
     Fully diluted earnings per share                   $    .39            $    .47           $    .58            $   .94
==========================================================================================================================

Year Ended December 31, 1995
--------------------------------------------------------------------------------------------------------------------------
Sales                                                   $1,021.4            $1,135.4           $1,168.9           $1,440.4
Gross margin                                               378.9               419.2              424.1              527.2
Earnings from continuing operations                         19.1                28.1               32.3              137.0
Earnings from discontinued operations                        6.6                 6.7               11.2               13.9
Earnings before extraordinary item                          25.7                34.8               43.5              150.9
Extraordinary loss from extinguishment of debt                --                  --                 --              (30.9)
Net earnings                                                25.7                34.8               43.5              120.0
--------------------------------------------------------------------------------------------------------------------------
Net earnings per common and common equivalent share:
   Primary:
     Earnings from continuing operations                $    .19            $    .29           $    .33           $   1.51
     Earnings from discontinued operations                   .08                 .08                .13                .16
     Extraordinary loss                                       --                  --                 --               (.35)
--------------------------------------------------------------------------------------------------------------------------
     Primary earnings per share                         $    .27            $    .37           $    .46           $   1.32
--------------------------------------------------------------------------------------------------------------------------
   Assuming full dilution:
     Earnings from continuing operations                $    .19                 .29           $    .34           $   1.43
     Earnings from discontinued operations                   .08                 .08                .12                .15
     Extraordinary loss                                       --                  --                 --               (.32)
--------------------------------------------------------------------------------------------------------------------------
     Fully diluted earnings per share                   $    .27            $    .37           $    .46           $   1.26
==========================================================================================================================
</TABLE>

<PAGE>

     Earnings from discontinued  operations of $70.4 million,  net of applicable
income taxes of $55.6 million,  in the first quarter of 1996 primarily consisted
of the gain on the sale of PRC Inc., the remaining  business in the discontinued
PRC segment.
     Results for the first  quarter of 1996 included a  restructuring  charge of
$81.6 million ($67.0 million net of tax). An additional  restructuring charge of
$9.7 million ($7.8 million net of tax) was  recognized in the fourth  quarter of
1996.
     Results for the quarter ended December 31, 1996,  included a tax benefit of
$10.6  million  ($.11 per share  both on a primary  and a fully  diluted  basis)
related to the reduction of the deferred tax asset valuation allowance. Due to a
change in the mix  between  foreign  and  domestic  earnings  during  the fourth
quarter of 1996,  the  Corporation's  effective  tax rate,  exclusive of the tax
benefits of the  restructuring  charge and the  reduction  of deferred tax asset
valuation  allowance  described  above,  was 24% for the year ended December 31,
1996,   compared  to  27%  for  each  of  the  first  three  quarters  in  1996.
Consequently,  results for the quarter ended  December 31, 1996,  included a tax
benefit of $5.6  million  ($.06 per share both on a primary and a fully  diluted
basis) reflective of the cumulative year-to-date adjustment of the effective tax
rate.
     The  extraordinary  loss  recognized in the fourth quarter of 1995 resulted
from the early  extinguishment  of debt.  Results for the quarter ended December
31, 1995,  included a tax benefit of $65.0  million ($.73 per share on a primary
basis and $.68 per share on a fully diluted  basis)  related to the reduction of
the deferred tax asset valuation allowance.
     Earnings per common and common equivalent share are computed  independently
for each of the quarters presented.  Therefore,  the sum of the quarters may not
necessarily  be equal to the full year  earnings per share  amounts due to stock
transactions  which  occurred  during 1996 and 1995 and,  with  respect to fully
diluted  earnings  per share for  periods  prior to October  1996,  whether  the
assumed conversion of preferred shares was dilutive or anti-dilutive during each
quarter.



<PAGE>


REPORT OF INDEPENDENT AUDITORS 
To the Stockholders and Board of Directors 
of The Black & Decker Corporation:

We have  audited the  accompanying  consolidated  balance  sheets of The Black &
Decker   Corporation  as  of  December  31,  1996  and  1995,  and  the  related
consolidated  statements  of earnings and cash flows for each of the three years
in the period ended  December 31, 1996.  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  generally  accepted  auditing
standards.  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  at  December  31,  1996  and  1995,  and the
consolidated  results  of its  operations  and its cash  flows for each of three
years in the period ended  December  31,  1996,  in  conformity  with  generally
accepted  accounting  principles.  Also, in our opinion,  the related  financial
statement  schedule,   when  considered  in  relation  to  the  basic  financial
statements  taken as a whole,  presents  fairly  in all  material  respects  the
information set forth therein.


/s/  ERNST & YOUNG LLP
Baltimore, Maryland
January 24, 1997






<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 22, 1997,  under the captions  "Election of Directors"  and "Board of
Directors - 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 22,  1997,
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 22,  1997,
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 22,  1997,
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 STATEMENTS 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,
                     1996, 1995, and 1994.

                 Consolidated Balance Sheet - December 31, 1996 and 1995.

                 Consolidated Statement of Cash Flows - years ended December 31,
                     1996, 1995, and 1994.

                 Notes to Consolidated Financial Statements.

                 Report of Independent Auditors.


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

                 Schedule II - Valuation and Qualifying Accounts and Reserves.

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


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


              Exhibit No.         Exhibit

              3(a)(1)             Charter  of  the   Corporation,   as  amended,
                                  included in the Corporation's Quarterly Report
                                  on Form 10-Q for the  quarter  ended  December
                                  25, 1988, is incorporated herein by reference.

              3(a)(2)             Articles Supplementary of the Corporation,  as
                                  filed with the State Department of Assessments
                                  and  Taxation  of the  State  of  Maryland  on
                                  September    5,   1991,    included   in   the
                                  Corporation's Current Report on Form 8-K dated
                                  September 25, 1991, is incorporated  herein by
                                  reference.

              3(b)                By-Laws  of  the   Corporation,   as  amended,
                                  included in the Corporation's Quarterly Report
                                  on Form 10-Q for the quarter  ended  September
                                  29, 1996, is incorporated herein by reference.

              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.

              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.

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

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

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

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

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

              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.

              10(a)              The Black & Decker Corporation Deferred Compen-
                                 sation  Plan  For  Non-Employee  Directors,  as
                                 amended,  included  in  the Corporation's Quar-
                                 terly  Report  on Form  10-Q  for  the  quarter
                                 ended October 2, 1994, is  incorporated  herein
                                 by reference.

              10(b)              The Black & Decker 1986 Stock Option  Plan,  as
                                 amended.

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

              10(d)              The  Black  & Decker 1989 Stock Option Plan, as
                                 amended.

              10(e)              The Black & Decker  1992  Stock Option Plan, as
                                 amended.

              10(f)              The Black  &  Decker 1995 Stock Option Plan for
                                 Non-Employee Directors, as amended.

              10(g)              The Black  &  Decker 1996 Stock Option Plan, as
                                 amended.

              10(h)              The  Black & Decker Performance Equity Plan, as
                                 amended.

              10(i)              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.

              10(j)              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.

              10(k)              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.

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

              10(m)              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.

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

              10(n)(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.

              10(o)              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.

              10(p)              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, 1995, is incor-
                                 porated herein by reference.

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

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

              10(s)              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.

              10(t)              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.

              10(u)              Form of Amendment and Restatement  of Severance
                                 Benefits  Agreement by and between the Corpora-
                                 tion and approximately 18 of its key employees.

              10(v)              Amendment and Restatement of Severance Benefits
                                 Agreement,  dated  January 1,  1997,   by   and
                                 between the Corporation and Nolan D. Archibald.

              10(w)              Amendment and Restatement of Severance Benefits
                                 Agreement,  dated January  1,  1997,   by   and
                                 between the Corporation and Joseph Galli.

              10(x)              Amendment and Restatement of Severance Benefits
                                 Agreement,   dated  January 1,  1997,   by  and
                                 between the Corporation and Charles E. Fenton.

              10(y)              Amendment and Restatement of Severance Benefits
                                 Agreement,  dated  January 1,  1997,   by   and
                                 between the Corporation and Dennis G. Heiner.

              10(z)              Amendment and Restatement of Severance Benefits
                                 Agreement,  dated  January 1,  1997,   by   and
                                 between the Corporation and Thomas M. Schoewe.

              10(aa)             Letter  Agreement  dated as of August 13, 1991,
                                 by and between the  Corporation and Newell Co.,
                                 included in the  Corporation's Quarterly Report
                                 on Form 10-Q for the  quarter  ended  June  30,
                                 1991, is incorporated herein by reference.

              10(bb)             Standstill  Agreement dated as of September 24,
                                 1991, between the Corporation and  Newell  Co.,
                                 included in the  Corporation's  Current  Report
                                 on Form 8-K dated September 25, 1991, is incor-
                                 porated herein by reference.

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

              10(dd)             Stock Purchase  Agreement  dated as of December
                                 13,  1995,  by  and   among   the  Corporation,
                                 PRC Investments Inc.,  PRC   Inc.  and   Litton
                                 Industries,  Inc.,  included  in  the  Corpora-
                                 tion's Annual Report on Form  10-K for the year
                                 ended  December  31,  1995,   is   incorporated
                                 herein by reference.

              10(ee)(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.

              10(ee)(2)          Amendment  to  The Black & Decker 1996 Employee
                                 Stock Purchase Plan, as adopted on February 12,
                                 1997.

              11                 Computation of Earnings Per Share.

              12                 Computation of Ratios.

              21                 List of Subsidiaries.

              23                 Consent of Independent Auditors.

              24                 Powers of Attorney.

              27                 Financial Data Schedule.

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


(b)      REPORTS ON FORM 8-K
         The  Corporation did not file any reports on Form 8-K during the twelve
         month period ended December 31, 1996.

         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
         The Financial  Statement  Schedule  required by Regulation S-X is filed
         herewith.





<PAGE>






<TABLE>

           SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                 THE BLACK & DECKER CORPORATION AND SUBSIDIARIES
                              (Millions of Dollars)

<CAPTION>

                                          Balance        Additions                             Other
                                               At         Charged                            Changes             Balance
                                        Beginning        to Costs                                Add              At End
Description                             of Period     and Expenses          Deductions        (Deduct)         of Period
-----------                             ---------     ------------          ----------       --------          ---------
<S>                                         <C>             <C>              <C>              <C>                  <C>

Year Ended December 31, 1996
----------------------------
Reserve for doubtful accounts
     and cash discounts..............       $ 43.1          $ 58.1           $ 56.7(A)         $ (.5)(B)           $ 44.0
                                            ======          ======           ======            =====               ======


Year Ended December 31, 1995
----------------------------
Reserve for doubtful accounts
     and cash discounts..............       $ 38.2          $ 56.6           $ 52.9(A)         $ 1.2(B)            $ 43.1
                                            ======          ======           ======            =====               ======



Year Ended December 31, 1994
----------------------------
Reserve for doubtful accounts
     and cash discounts.............        $ 36.6          $ 41.8           $ 41.7(A)         $ 1.5(B)            $ 38.2
                                            ======          ======           ======            =====               ======

</TABLE>



 (A) Accounts written off during the year and cash discounts taken by customers.

 (B) Primarily includes currency translation adjustments.






<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 24, 1997          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 24, 1997, 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 24, 1997
----------------------------                                   -----------------
Nolan D. Archibald               Chairman, President, and
                                 Chief Executive Officer

Principal Financial Officer

/s/ THOMAS M. SCHOEWE                                          February 24, 1997
---------------------------                                    -----------------
Thomas M. Schoewe               Senior Vice President and
                                Chief Financial Officer

Principal Accounting Officer

/s/ STEPHEN F. REEVES                                          February 24, 1997
---------------------------                                    -----------------
Stephen F. Reeves              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                          Anthony Luiso
     Barbara L. Bowles                           Lawrence R. Pugh
     Malcolm Candlish                            Mark H. Willes
     Alonzo G. Decker, Jr.                       M. Cabell Woodward, Jr.


/s/ NOLAN D. ARCHIBALD                                  Date:  February 24, 1997
---------------------------
Nolan D. Archibald
Attorney-in-Fact