scrap costs. We believe that our Six Sigma-based drive for quality and cost improvement, coupled with our emphasis on new product innovation and brand promotion, will continue to give Power Tools and Accessories a competitive advantage in its markets. HARDWARE AND HOME IMPROVEMENT GROUP Sales in the Kwikset security hardware and Price Pfister plumbing products businesses were significantly affected during 2001 by the slowing economy and increased pressure from low-cost imported products. Operating margins were reduced as a result of lower sales, lower production levels to manage inventory, and price pressure. Despite declines in sales and operating income of 7% and 48%, respectively, Hardware and Home Improvement posted several strategic accomplishments.      In the fourth quarter, Kwikset launched a major repositioning of its brand and products, replacing existing Kwikset®, Kwikset PlusTM, and TITAN® lines with Kwikset SecurityTM, Kwikset Maximum SecurityTM, and the Kwikset Ultramax SecurityTM line that features the industry's only Grade 1 (highest security) residential deadbolt. Price Pfister, historically a mid price-point brand, is expanding into the high price-point range with its BachTM faucets and the low price-point range with a line of products for wholesale channels.      Focusing intently on cost reduction, we closed a Kwikset plant in California, generated substantial Six Sigma savings, reduced material costs by consolidating purchases with a smaller set of qualified suppliers, and implemented a 10% reduction in salaried headcount. FASTENING AND ASSEMBLY SYSTEMS GROUP The Fastening and Assembly Systems Group, known as Emhart TeknologiesTM , serves the automotive and other industries with value-added, technology-based fastening solutions. New technologies, such as self-piercing riveting for aluminum-based automobile frames, reinforce Emhart's industry-leading position, and its Virtual Innovation Center and Mobile Innovation Center make this business easily accessible to global customers.      Automobile production was down significantly, despite consumer incentives, and computer and electronics equipment makers cut production dramatically during 2001. The acquisition of Bamal Corporation's automotive division in the second quarter of the year, however, expanded our ability to serve automotive companies by coordinating their purchases from all fastener suppliers.      Sales declined 2%, as the effect of the acquisition helped to offset decreased revenues from other business areas. Although we achieved significant cost reductions in this group, operating income declined 15% due to lower sales, pricing pressure, and lower margins inherent in the acquired distribution business. LOOKING FORWARD BLACK & DECKER IS IN AN EXCELLENT POSITION TO WITHSTAND A WEAK ECONOMIC ENVIRONMENT AND BENEFIT SIGNIFICANTLY FROM A FUTURE RECOVERY: OUR TOP BRAND NAMES, INNOVATIVE NEW PRODUCTS, INTENSE END-USER FOCUS, AND UNMATCHED CUSTOMER RELATIONSHIPS ARE REINFORCING OUR LEADERSHIP PRESENCE IN OUR MARKETS; OUR SUPPLY CHAIN INITIATIVES ARE CONTRIBUTING TO BETTER WORKING CAPITAL MANAGEMENT, STRONG FREE CASH FLOW, AND IMPROVED SERVICE LEVELS; AND OUR WORLDWIDE RESTRUCTURING IS UNDERWAY TO ENSURE OUR CONTINUING ABILITY TO DELIVER INNOVATIVE, HIGH-QUALITY PRODUCTS AT WORLD-CLASS COSTS.      We intend to work aggressively to capitalize on each of these strengths, and we remain committed to a vision of market leadership, operating excellence, and superior financial results. Nolan D. Archibald CHAIRMAN, PRESIDENT, AND CHIEF EXECUTIVE OFFICER February 21, 2002 <<< PREVIOUS PAGE | HOME | NEXT PAGE >>>