Wki Holding Co Inc – ‘10-Q’ for 7/1/01

On:  Monday, 8/13/01, at 5:10pm ET   ·   For:  7/1/01   ·   Accession #:  1015402-1-502227   ·   File #:  333-57099

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Quarterly Report   —   Form 10-Q
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Document/Exhibit                   Description                      Pages   Size 

 1: 10-Q        Quarterly Report                                      24    120K 
 2: EX-10.1     Material Contract                                      2      8K 

10-Q   —   Quarterly Report
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================================================================================

 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON D.C. 20549

 FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

 WASHINGTON, DC  20549

[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES      
EXCHANGE ACT OF 1934                                            

For the quarterly period ended     July 1, 2001                                 
  ------------

[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES     
EXCHANGE ACT OF 1934                                            

For the transition period from ___________to____________                        

Commission file number 333-57099
                       ---------

 WKI HOLDING COMPANY, INC.
 -------------------------
(Registrant)

DELAWARE                                16-1403318
--------                                ----------
     (State of incorporation)           (I.R.S. Employer Identification No.)

ONE PYREX PLACE, ELMIRA NEW YORK                14902       
--------------------------------                -----       
(Address of principal executive offices)          (Zip Code)          

Registrant's telephone number, including area code:  607-377-8000               
                                      ------------

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 12 months and (2) has been subject to the filing requirements for 
at least the past 90 days.                                                      

Yes  X     No   
     ---       ---

Indicate the number of shares outstanding of each of the issuer's classes of    
common stock, as of the latest practicable date:                                

67,410,716 shares of WKI Holding Company, Inc.'s, $0.01 Par Value, were         
outstanding as of August 13, 2001.                                              

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ITEM 1 - FINANCIAL STATEMENTS                                                   

                                                        [Enlarge/Download Table]

                                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)                               
                                            WKI HOLDING COMPANY, INC.                                           
                               (In thousands, except share and per share amounts)                               

                                                    FOR THE 91      FOR THE 91     FOR THE 182     FOR THE 184  
                                                    DAYS ENDED      DAYS ENDED      DAYS ENDED     DAYS ENDED   
                                                   JULY 1, 2001    JULY 2, 2000    JULY 1, 2001   JULY 2, 2000  
                                                  --------------  --------------  --------------  --------------
                                                                                                                
Net sales                                         $     162,842   $     174,293   $     333,639   $     362,150 

Cost of sales                                           120,572         122,393         242,806         249,698 
Selling, general and administrative expenses             41,760          53,678          91,032         106,115 
Provision for restructuring and rationalization                                                                 
  costs                                                  14,994              --          37,125              -- 
Integration related expenses                                 --           9,464              --          14,088 
Other expense                                             3,246           3,560           6,008           6,399 
                                                  --------------  --------------  --------------  --------------

Operating loss                                          (17,730)        (14,802)        (43,332)        (14,150)
Interest expense                                         18,867          19,291          37,467          36,169 
                                                  --------------  --------------  --------------  --------------

Loss before taxes on income                             (36,597)        (34,093)        (80,799)        (50,319)
Income tax expense (benefit)                                425              --           1,114          (6,049)
                                                  --------------  --------------  --------------  --------------

Loss before minority interest                           (37,022)        (34,093)        (81,913)        (44,270)
Minority interest in earnings of subsidiary                 (39)            (66)            (77)           (109)
                                                  --------------  --------------  --------------  --------------

Net loss                                                (37,061)        (34,159)        (81,990)        (44,379)
                                                  --------------  --------------  --------------  --------------

Preferred stock dividends                                (3,792)         (3,284)         (7,449)         (6,452)
                                                  --------------  --------------  --------------  --------------

NET LOSS APPLICABLE TO COMMON STOCK               $     (40,853)  $     (37,443)  $     (89,439)  $     (50,831)
                                                  ==============  ==============  ==============  ==============

BASIC AND DILUTED LOSS PER COMMON SHARE           $       (0.61)  $       (0.56)          (1.33)          (0.76)
                                                  ==============  ==============  ==============  ==============

Weighted average number of common shares                                                                        
outstanding during the period                        67,410,716      66,857,143      67,405,273      66,857,143 

The accompanying notes are an integral part of these statements.                

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                               CONSOLIDATED BALANCE SHEETS                                
                                WKI HOLDING COMPANY, INC.                                 
                                      (In thousands)                                      

                                                                   JULY 1,                
                                                                     2001     DECEMBER 31,
                                                                  (UNAUDITED)    2000     
                                                                  ----------  ----------  
                                                                                          
ASSETS                                                                                    
CURRENT ASSETS                                                                            
     Cash and cash equivalents                                    $   5,384   $   7,913   
     Accounts receivable (net of allowances of $24,079 in 2001                            
        and $25,567 in 2000)                                         94,750     146,040   
     Inventories:                                                                         
        Finished and in-process goods                               191,061     188,011   
        Raw materials and supplies                                   20,690      18,571   
     Other current assets                                            20,273      17,017   
                                                                  ----------  ----------  
        Total current assets                                        332,158     377,552   
                                                                  ----------  ----------  

OTHER ASSETS                                                                              
     Other assets (net of accumulated amortization of $29,359 in                          
        2001 and $23,399 in 2000)                                    54,235      55,706   
                                                                  ----------  ----------  
                                                                     54,235      55,706   
                                                                  ----------  ----------  
PROPERTY AND EQUIPMENT                                                                    
     Land                                                             4,076       4,076   
     Buildings                                                       86,527      89,789   
     Machinery and equipment                                        295,881     305,576   
                                                                  ----------  ----------  
                                                                    386,484     399,441   
                                                                  ----------  ----------  
     Less accumulated depreciation                                 (271,186)   (257,985)  
                                                                  ----------  ----------  
                                                                    115,298     141,456   
                                                                  ----------  ----------  

INTANGIBLES                                                                               
     Trademarks and patents (net of accumulated amortization                              
        of $12,870 in 2001 and $9,852 in 2000)                      145,690     148,708   
     Goodwill (net of accumulated amortization of $17,125 in                              
        2001 and $14,373 in 2000)                                   202,796     205,798   
                                                                  ----------  ----------  
                                                                    348,486     354,506   
                                                                  ----------  ----------  
TOTAL ASSETS                                                      $ 850,177   $ 929,220   
                                                                  ==========  ==========  

The accompanying notes are an integral part of these statements.      

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                                 CONSOLIDATED BALANCE SHEETS                                 
                                  WKI HOLDING COMPANY, INC.                                  
                      (In thousands, except share and per share amounts)                     

                                                                   JULY 1,      DECEMBER 31, 
                                                                     2001           2000     
LIABILITIES AND STOCKHOLDERS' DEFICIT                            (UNAUDITED)                 
                                                                 ------------  --------------
                                                                                             
CURRENT LIABILITIES                                                                          
     Accounts payable                                            $    45,627   $      62,418 
     Note payable to Borden                                            9,296           6,100 
     Debt payable within one year                                      3,307           3,635 
     Reserve for restructuring and rationalization                    15,646              -- 
     Other current liabilities                                        82,485         104,085 
                                                                 ------------  --------------
                                                                     156,361         176,238 
                                                                 ------------  --------------

OTHER LIABILITIES                                                                            
     Note payable to Borden                                           22,704              -- 
     Long-term debt                                                  763,298         766,528 
     Non-pension post-employment benefit obligations                  43,168          42,545 
     Other long-term liabilities                                      24,848          17,041 
                                                                 ------------  --------------
                                                                     854,018         826,114 
                                                                 ------------  --------------

MINORITY INTEREST IN SUBSIDIARY                                        1,296           1,219 

STOCKHOLDERS' DEFICIT                                                                        
Preferred Stock - 5,000,000 shares authorized;                                               
     3,200,000 shares issued                                          94,056          91,527 
Common Stock - $0.01 par value, 80,000,000 shares authorized;                                
     68,147,145 and 67,397,028 shares issued in 2001 and 2000,                               
     respectively                                                        681             674 
Treasury Stock (736,429 and 280,000 shares held in treasury in                               
     2001 and 2000, respectively)                                     (2,105)           (940)
Contributed capital                                                  606,604         604,911 
Accumulated deficit                                                 (857,023)       (767,584)
Accumulated other comprehensive income                                (3,711)         (2,939)
                                                                 ------------  --------------
     Total stockholders' deficit                                    (161,498)        (74,351)
                                                                 ------------  --------------
     TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                 $   850,177   $     929,220 
                                                                 ============  ==============

The accompanying notes are an integral part of these statements.          

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                       CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)                       
                                   WKI HOLDING COMPANY, INC.                                   
                                         (In thousands)                                        

                                                                  FOR THE 182     FOR THE 184  
                                                                   DAYS ENDED      DAYS ENDED  
CASH FLOWS (USED IN) PROVIDED BY OPERATING ACTIVITIES:            JULY 1, 2001    JULY 2, 2000 
                                                                 --------------  --------------
                                                                                               
     Net loss                                                    $     (81,990)  $     (44,379)
     Adjustments to reconcile net loss to net cash (Used in)                                   
        Provided by operating activities:                                                      
        Depreciation and amortization                                   25,348          23,098 
        Amortization of deferred financing fees                          1,597           1,082 
        Minority interest in income of subsidiary                           77             110 
        Deferred tax provision                                              --          (8,552)
        Provision for restructuring and rationalization costs,                                 
           net of cash paid                                             33,123              -- 
        Sale of accounts receivable                                         --          50,000 
        Provision for post-retirement benefits, net of cash                                    
           paid                                                          4,693              -- 
     Changes in operating assets and liabilities:                                              
        Accounts receivable                                             51,290          53,223 
        Inventories                                                     (5,619)        (42,674)
        Prepaid expenses and other current assets                       (3,256)         (3,683)
        Accounts payable and accrued expenses                          (33,767)        (37,338)
        Other assets/liabilities                                        (1,027)         10,639 
                                                                 --------------  --------------
           NET CASH (USED IN) PROVIDED BY OPERATING                                            
             ACTIVITIES                                                 (9,531)          1,526 
                                                                 --------------  --------------

CASH FLOWS USED IN INVESTING ACTIVITIES:                                                       
     Additions to property and equipment and other assets              (11,251)        (28,743)
                                                                 --------------  --------------
           NET CASH USED IN INVESTING ACTIVITIES                       (11,251)        (28,743)
                                                                 --------------  --------------

CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:                                                   
     Borrowings on Borden revolving credit facility, net                25,900              -- 
     Borrowing on revolving credit facility                                 --          27,900 
     Repayment of long-term debt, other than revolving                                         
          credit facility                                               (3,558)         (3,335)
     Issuance of common stock                                            1,700              -- 
     Treasury stock purchases                                           (1,165)           (630)
     Deferred financing fees                                            (4,624)             -- 
                                                                 --------------  --------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                               18,253          23,935 
                                                                 --------------  --------------

Net change in cash and cash equivalents                                 (2,529)         (3,282)
Cash and cash equivalents at beginning of year                           7,913           8,368 
                                                                 --------------  --------------

CASH AND CASH EQUIVALENTS AT END OF YEAR                         $       5,384   $       5,086 
                                                                 ==============  ==============

The accompanying notes are an integral part of these statements.          

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          CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)
                            WKI HOLDING COMPANY, INC.                  
                                 (In thousands)                        

                                           FOR THE 182    FOR THE 184  
                                           DAYS ENDED     DAYS ENDED   
                                          JULY 1, 2001   JULY 2, 2000  
                                          -------------  ------------- 
                                                                       
SUPPLEMENTAL DATA:                                                     
Cash paid during the year for:                                         
     Income taxes, net                    $       2,463  $       1,521 
     Interest                                    42,334         34,906 

Non-cash activity:                                                     
     Preferred stock dividends            $       7,449  $       6,452 

The  accompanying  notes  are  an  integral  part  of  these  statements.       

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                         CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (UNAUDITED)                                 
                                                 WKI HOLDING COMPANY, INC.                                                       
                                                       (In thousands)                                                            

                                                                                                    ACCUMULATED                  
                                                                                                       OTHER           TOTAL     
                                   PREFERRED   COMMON    TREASURY    CONTRIBUTED    ACCUMULATED    COMPREHENSIVE    STOCKHOLDERS 
                                     STOCK      STOCK     STOCK        CAPTIAL        DEFICIT         INCOME          DEFICIT    
                                   ----------  -------  ----------  -------------  -------------  ---------------  --------------
                                                                                                                                 
BALANCE, DECEMBER 31, 2000         $   91,527  $   674  $    (940)  $    604,911   $   (767,584)  $       (2,939)  $     (74,351)

NET LOSS                                                                                (81,990)                         (81,990)
FOREIGN CURRENCY TRANSLATION                                                                                                     
     ADJUSTMENT                                                                                             (255)           (255)
CUMULATIVE EFFECT OF CHANGE                                                                                                      
     IN ACCOUNTING FOR DERIVATIVE                                                                                                
     FINANCIAL INSTRUMENTS                                                                                  (189)           (189)
DERIVATIVE FAIR VALUE                                                                                       (328)           (328)
                                                                                                                   --------------
     ADJUSTMENT                                                                                                                  
TOTAL COMPENSATIVE INCOME                                                                                                (82,762)
                                                                                                                   --------------
ISSUANCE OF COMMON STOCK                             7                     1,493                                           1,500 
COLLECTION OF RECEIVABLE FOR                                                 200                                             200 
     STOCK SOLD                                                                                                                  
REPURCHASE OF COMMON STOCK                                 (1,165)                                                        (1,165)
PREFERRED STOCK DIVIDENDS               2,529                                            (7,449)                          (4,920)
                                   ----------  -------  ----------  -------------  -------------  ---------------  --------------
BALANCE, JULY 1, 2001              $   94,056  $   681  $  (2,105)  $   (606,604)  $   (857,023)  $       (3,711)  $     161,498 
                                   ==========  =======  ==========  =============  =============  ===============  ==============

The accompanying notes are an integral part of these statements.                

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 WKI HOLDING COMPANY, INC.

(1)     NATURE OF OPERATIONS AND BASIS OF PRESENTATION                          
WKI Holding Company, Inc. (the Company or WKI) is a leading manufacturer and    
marketer of housewares, including bakeware, dinnerware, rangetop cookware,      
kitchen and household products, cutlery and precision cutting tools.  The       
Company believes that its brands, including Corningware(R), Pyrex(R),           
Corelle(R), Revere Ware(R), Visions(R), EKCO(R), Via(R), Baker's Secret(R),     
Chicago Cutlery(R), OLO(R), OXO(R), Grilla Gear(R), Farberware(R), and          
Cuisinart(R), constitute one of the broadest and best recognized collection of  
brands in the housewares industry.                                              

Pursuant to Regulation 15(d) of the Securities Act of 1934, WKI is filing herein
its quarterly report on Form 10-Q, which includes the second fiscal quarter of  
the year ended December 31, 2001.  The consolidated financial statements reflect
all adjustments, which, in the opinion of management, are necessary for a fair  
statement of the results of operations and financial position for the interim   
periods presented.  All such adjustments are of a normal recurring nature. The  
consolidated financial statements have been compiled without audit and are      
subject to such year-end adjustments as may be considered appropriate by the    
registrant and should be read in conjunction with the Company's Form 10-K for   
the year ended December 31, 2000 which has been filed with the Securities and   
Exchange Commission.                                                            

Certain 2000 amounts have been reclassified to conform with 2001 presentation.  

(2) RECENT ACCOUNTING PRONOUNCEMENTS                                            
In April 2001, the Emerging Issues Task Force (EITF) reached a consensus on     
Issue No. 00-25, "Accounting for Consideration from a Vendor to a Retailer in   
connection with the Purchase or Promotion of the Vendor's Products."  This issue
requires that consideration paid from a vendor to a purchaser be classified as a
reduction of revenue in the vendor's income statement unless it can be          
determined that an identifiable benefit will be received by the vendor and the  
fair value of the benefit exceeds the consideration provided to the purchaser.  
In that case, the consideration should be characterized as a cost.  This EITF is
effective for quarters beginning after December 15, 2001.  The Company is in the
process of determining the impact of this consensus but does not expect reported
financial results will be significantly impacted.                               

In June 2001, the Financial Accounting Standards Board issued Statement of      
Financial Accounting Standard (SFAS) No. 142, "Goodwill and Other Intangible    
Assets". This standard requires that amortization of goodwill and other         
intangible assets with indefinite lives be discontinued. Instead, goodwill and  
other intangible assets with indefinite lives will be assessed, at least        
annually, for impairment by applying a fair-value-based test. However, an       
intangible asset acquired through contractual or other legal rights or that can 
be sold, transferred, licensed, rented or exchanged will still be amortized over
its useful life, which is no longer capped at 40 years. SFAS No. 142 may have an
impact on the carrying value of goodwill and will be implemented as of January  
1, 2002.  The Company is in the process of determining the impact of            
implementing SFAS No.142.                                                       

(3) RESTRUCTURING AND RATIONALIZATION                                           
In 2001, the Company implemented an initiative to restructure and rationalize   
several aspects of the Company's manufacturing, distribution and administrative 
operations.   The initiatives include the following:                            

     (1)  Exit  from  the  Martinsburg, West Virginia facility by the end of the
          first quarter of 2002, where the Corningware(R) and Visions(R) product
lines  are  manufactured.                                   
     (2)  Consolidation  of distribution operations at Waynesboro, Virginia into
          the  Company's  existing  distribution  centers at Monee, Illinois and
          Greencastle,  Pennsylvania. Waynesboro is expected to cease operations
during  the  first  quarter  of  2002.                      
 (3)  Significant  restructuring  of  metal  bakeware  manufacturing  at
Massillon,  Ohio  to  reduce  costs.                        

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     (4)  Exit from the Wauconda, Illinois facility by the end of the year 2001,
  where  Chicago  Cutlery(R)  product  lines  are  manufactured.
     (5)  Business  redesign  activities associated with rationalizing processes
       and  headcount  throughout  the  organization  to  improve  overall
          efficiency,  effectiveness  and  responsiveness  of  the organization.

The initiatives have resulted in $37.1 million of expenses and $4.0 million of  
cash paid through the second quarter of 2001.                                   

Details of the program initiatives are presented below (in thousands):          

                                                        [Enlarge/Download Table]

                                                                                              ACCRUAL REMAINING IN                
                                                                                --------------------------------------------------
                                                        TOTAL                                                                     
                                                   RESTRUCTURING                                           OTHER                  
                 RESTRUCTURING   RATIONALIZATION         AND           CASH                   FIXED       CURRENT        OTHER    
                     CHARGE           CHARGE       RATIONALIZATION     PAID     INVENTORY     ASSETS    LIABILITIES   LIABILITIES 
                 --------------  ----------------  ----------------  ---------  ----------  ----------  ------------  ------------
                                                                                                                                  
DISPOSAL OF      $       15,011  $          4,318  $         19,329         --  $      450  $   14,661  $      4,218           -- 
     ASSETS                                                                                                                       

EMPLOYEE                 12,278                --            12,278        820          --          --         9,092         2,366
  TERMINATION                                                                                                                     

OTHER EXIT                1,585                --             1,585        404          --          --         1,181            --
     COSTS                                                                                                                        

BUSINESS                     --             3,933             3,933      2,778          --          --         1,155            --

  REDESIGN COSTS                                                                                                                  
                 --------------  ----------------  ----------------  ---------  ----------  ----------  ------------  ------------
                 $       28,874  $          8,251  $         37,125  $   4,002  $      450  $   14,661  $     15,646  $      2,366
                 ==============  ================  ================  =========  ==========  ==========  ============  ============

Disposal of Assets                                                              
------------------                                                              
As part of the restructuring initiative to close or streamline manufacturing,   
distribution and administrative locations the tangible assets of the            
Martinsburg, Waynesboro, Massillon, Wauconda and certain administrative         
facilities have been written down to fair value.  Management judgment is        
involved in estimating the tangible assets' fair value; accordingly, actual     
results could vary significantly from such estimates. Rationalization charges   
primarily consist of environmental expenditures associated with the closure and 
anticipated sale of Martinsburg.  Management is continuing to evaluate the      
necessity of additional asset disposals through additional restructuring        
measures.                                                                       

Employee termination                                                            
--------------------                                                            
As part of the restructuring initiative approximately 500 employees have been   
notified of their release from employment, generating a $12.3 million           
restructuring charge through the second quarter of 2001.  As of July 1, 2001    
approximately 70 employees have been terminated.  Included in the charge        
is a net pension and post retirement benefit charge of $2.4 million, which      
resulted from the terminations.  Severance and other benefits are recorded once 
the affected employees are notified of their status.                            

Other exit costs                                                                
----------------                                                                
Other exit costs primarily consist of legal costs associated with the closure   
and anticipated sale of facilities.                                             

Business redesign costs                                                         
-----------------------                                                         
The Company is in the process of realigning its administrative, manufacturing   
and sourcing strategies to be more competitive.  The business redesign costs    
primarily include consulting expenses associated with process redesign work     
required to support the restructuring initiatives, and such costs are expensed  
as incurred.                                                                    

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Restructuring and rationalization charges generated from these initiatives are  
expected to increase to approximately $47.0 million by the end of 2001.  In     
addition, management is continuing to evaluate the necessity of additional      
restructuring programs.                                                         

(4) SUPPLEMENTAL BALANCE SHEET DATA                                             

                                                                [Download Table]

                                                   (IN THOUSANDS)          
                                         JULY 1, 2001    DECEMBER 31, 2000 
                                        ---------------  ------------------
                                                                           
Other current liabilities                                                  
     Wages and employee benefits        $        22,863  $           30,254
     Accrued advertising and promotion           23,793              28,277
     Accrued interest                             9,728              11,601
     Other accrued expenses                      26,101              33,953
                                        ---------------  ------------------
                                        $        82,485  $          104,085
                                        ===============  ==================

(5) BORROWINGS                                                                  
On April 12, 2001, the Company entered into an amended and restated credit      
agreement, which amended and restated the senior credit agreement dated April 9,
1998 (1998 Credit Agreement), under which $292.0 million of term loans remain   
outstanding and the $275.0 million revolving credit facility remains in effect. 
The Amended and Restated Credit Agreement also provides for the following       
significant changes from the 1998 Credit Agreement: a first priority lien on    
substantially all of the Company's assets and its subsidiaries' assets; a pledge
of 100% of the stock of all of the Company's domestic subsidiaries and 65% of   
the stock of certain foreign subsidiaries; an additional secured revolving      
credit facility of $25.0 million, maturing on March 31, 2004; amended financial 
covenants; an additional financial covenant; increased pricing on the credit    
facilities; and changes in the restrictions affecting indebtedness, investments,
acquisitions, dispositions and prepayment of subordinated indebtedness.         

The Company's amended and restated credit agreement contains numerous financial 
and operating covenants that limit the discretion of the Company's management   
with respect to certain business matters.  These covenants place significant    
restrictions on, among other things, the ability of the Company to incur        
additional indebtedness, pay dividends and other distributions, prepay          
subordinated indebtedness, enter into sale and leaseback transactions, create   
liens or other encumbrances, make capital expenditures, make certain investments
or acquisitions, engage in certain transactions with affiliates, sell or        
otherwise dispose of assets and merge or consolidate with other entities and    
otherwise restrict corporate activities.  In addition, the credit facilities    
also require the Company to meet certain financial ratios and tests, including a
minimum EBITDA, a ratio of debt to EBITDA and a ratio of EBITDA to cash interest
expense (where EBITDA represents adjusted cash flow as described more fully in  
the credit facilities).  The amended and restated credit agreement contains     
customary events of default.                                                    

During the third quarter of 2000, the Company negotiated with Borden, Inc., an  
affiliate of the Company's parent, to provide a $40.0 million temporary credit  
facility to assist in meeting working capital requirements, capital             
expenditures, interest payments and scheduled principal payments.  The original 
maturity date of the Borden agreement of December 31, 2000 was extended to      
August 16, 2001, the date that is 91 days after the perfection of the collateral
under the Amended and Restated Credit Agreement.  Effective July 2, 2001, Borden
increased its line of credit to the Company from $40.0 million to $50.0 million.
On August 16, 2001, Borden will provide to the Company a $25.0 million revolving
credit facility, maturing on March 30, 2004.  This credit facility will have    
substantially the same terms as the Borden credit facility dated as of August   
25, 2000, and, in addition, will be secured by a security interest on the       
Company's assets that is second in priority behind the security interests       

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securing the Amended and Restated Credit Agreement.  At August 13, 2001, $6.3   
million was available under the Borden credit facility.                         

(6)     RELATED PARTY TRANSACTIONS                                              
The following transactions with related parties are included in the consolidated
statements of operations for the quarters ended July 1, 2001 and July 2, 2000.  

                                                        [Enlarge/Download Table]

                                                    (IN THOUSANDS)                      
                              ----------------------------------------------------------
                               FOR THE 91     FOR THE 91     FOR THE 182    FOR THE 184 
                               DAYS ENDED     DAYS ENDED     DAYS ENDED     DAYS ENDED  
                              JULY 1, 2001   JULY 2, 2000   JULY 1, 2001   JULY 2, 2000 
                              -------------  -------------  -------------  -------------
                                                                                        
Management fees and services  $         908  $         625  $       1,764  $       1,250
  to Borden                                                                             
Interest expense to Borden              671             --          1,062             --

The Company incurs management fees and expenses for services provided by Borden.
See Note 5 regarding the Company's line of credit with Borden.                  

During the first six months of 2001, the Company had accrued $7.4 million in    
preferred stock dividends which are payable to Borden and the Company's parent  
in the amounts of $4.9 million and $2.5 million, respectively.  Dividends       
payable to Borden are recorded in other long-term liabilities.  The dividends   
payable to the Company's parent will be paid in additional shares and are       
accrued in preferred stock.                                                     

The Company and/or affiliates of the Company, including entities related to KKR,
from time to time have purchased, and may in the future purchase, depending on  
market conditions, senior subordinated notes and other debt obligations         
previously issued by the Company in the open market or by other means.  As of   
July 1, 2001, affiliates have purchased an aggregate of $76.7 million of senior 
subordinated notes in open market transactions.                                 

(7)  COMMITMENTS                                                                
The Company is a defendant or plaintiff in various claims and lawsuits arising  
in the normal course of business.  The Company believes, based upon information 
it currently possesses, and taking into account established reserves for        
estimated liabilities and its insurance coverage, that the ultimate outcome of  
the proceedings and actions is unlikely to have a material adverse effect on the
Company's financial statements.                                                 

(8)  DERIVATIVES                                                                
Effective January 1, 2001, the Company adopted SFAS No. 133, 137 and 138 related
to "Accounting for Derivative Instruments and Hedging Activities".  At that time
the Company had a $15 million notional amount interest rate swap with a fair    
value of $(0.2) million.  In accordance with these statements, the Company      
recorded a transition adjustment to other comprehensive income and other        
liabilities of $0.2 million.  At July 1, 2001, the swap had a fair value of     
$(0.5) million.  Other comprehensive income and other liabilities have been     
adjusted accordingly.  A 1% increase or decrease in market interest rates would 
result in a $0.3 million increase/(decrease) in the fair value of the interest  
rate swap.  The swap expires on July 29, 2003.                                  

(9)  SEGMENT  INFORMATION                                                       
The Company believes its business units have similar economic characteristics   
and that it meets the aggregation criteria of SFAS No. 131, "Disclosures about  
Segments of an Enterprise and Related Information."                             

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--------------------------------------------------------------------------------
OF OPERATIONS                                                                   
-------------                                                                   

The following discussion should be read in conjunction with the consolidated    
financial statements and related notes included elsewhere herein.               

Background                                                                      
----------                                                                      

WKI Holding Company Inc. (WKI or the Company) is a leading manufacturer and     
marketer of bakeware, rangetop cookware, kitchen and household tools, tabletop  
dinnerware, cutlery, and precision cutting tools.  The Company has strong       
positions in major channels of distribution for its products in North America   
and has also achieved a significant presence in certain international markets,  
primarily Asia, Australia, Latin America and the United Kingdom.  In North      
America the Company sells both on a wholesale basis to retailers, distributors  
and other accounts that resell the Company's products, and on a retail basis,   
through Company-operated factory stores.  In the international market the       
Company has established its presence on a wholesale basis through an            
international sales force along with localized distribution and marketing       
capabilities.                                                                   

In the first quarter of 2001, the Company began the process of realigning by    
major product line and product category as part of an overall strategy to       
improve financial and customer service performance. The product categories as   
defined by the Company are Oven/Bakeware which includes the Corningware(R),     
Pyrex(R), EKCO(R) metal bakeware, Farberware(R) and Cuisinart(R) brands;        
Rangetop Cookware which includes the Revere(R), Visions(R) and EKCO(R) Cookware 
brands; Kitchenware which includes kitchen tools and gadgets sold under the     
EKCO(R) and Grilla Gear(R) brands; Tabletop which includes Corelle(R)           
dinnerware; Cutlery which includes the Chicago Cutlery(R) and Regent Sheffield  
brands; OXO(R) which includes kitchen and household tools under the OXO Good    
Grips(R), OXO Softworks(TM), OXO Touchables(TM) and OXO Basics(TM) brand names; 
and "Other" which includes cleaning products, precision cutting tools sold under
the OLFA and OLO(R) brands, and other kitchen accessories that are manufactured 
by third parties and are sold primarily through the Company-operated factory    
stores.                                                                         

In 2001, the Company implemented an initiative to restructure and rationalize   
several aspects of the Company's manufacturing, distribution and administrative 
operations.  The program will result in charges of approximately $47.0 million  
and cash payments, including capital expenditures, of approximately $18.0       
million in 2001.  The program includes five major components:                   

     (1)  Exit  from  the  Martinsburg, West Virginia facility by the end of the
          first quarter of 2002, where the Corningware(R) and Visions(R) product
lines  are  manufactured.                                   
     (2)  Consolidation  of distribution operations at Waynesboro, Virginia into
          the  Company's  existing  distribution  centers at Monee, Illinois and
          Greencastle,  Pennsylvania. Waynesboro is expected to cease operations
during  the  first  quarter  of  2002.                      
 (3)  Significant  restructuring  of  metal  bakeware  manufacturing  at
Massillon,  Ohio  to  reduce  costs.                        
     (4)  Exit from the Wauconda, Illinois facility by the end of the year 2001,
  where  Chicago  Cutlery(R)  product  lines  are  manufactured.
     (5)  Business  redesign  activities associated with rationalizing processes
       and  headcount  throughout  the  organization  to  improve  overall
          efficiency,  effectiveness  and  responsiveness  of  the organization.

Management is continuing to evaluate the necessity of additional restructuring  
measures.                                                                       

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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)                                                       

RESULTS OF OPERATIONS                                                           
---------------------                                                           

SECOND QUARTER 2001 VERSUS SECOND QUARTER 2000                                  
----------------------------------------------                                  

                                                        [Enlarge/Download Table]


                                                          (IN THOUSANDS)                    

                                       FOR THE 91    FOR THE 91                             
                                       DAYS ENDED     % OF NET      DAYS ENDED    % OF NET  
                                      JULY 1, 2001      SALES      JULY 2, 2000     SALES   
                                     --------------  -----------  --------------  --------- 
                                                                                            
Net Sales                            $     162,842        100.0 % $     174,293      100.0 %
Cost of sales                              120,572         74.0         122,393       70.2  
                                     --------------  -----------  --------------  --------- 
Gross profit                                42,270         26.0          51,900       29.8  
                                     --------------  -----------  --------------  --------- 

Selling, general and administrative         41,760         25.6          53,678       30.8  
Restructuring and rationalization                                                           
     expenses                               14,994          9.2              --         --  
Integration related expenses                    --           --           9,464        5.4  
Other expenses                               3,246          2.0           3,560        2.0  
                                     --------------  -----------  --------------  --------- 

Operating loss                             (17,730)       (10.9)        (14,802)      (8.5) 
Interest expense                            18,867         11.6          19,291       11.1  
                                     --------------  -----------  --------------  --------- 

Loss before taxes on income                (36,597)       (22.5)        (34,093)     (19.6) 
Income tax expense                             425          0.3              --         --  
                                     --------------  -----------  --------------  --------- 

Loss before minority interest              (37,022)       (22.7)        (34,093)     (19.6) 
Minority interest in subsidiary                (39)          --             (66)        --  
                                     --------------  -----------  --------------  --------- 

Net loss                             $     (37,061)       (22.8)% $     (34,159)     (19.6)%
                                     ==============  ===========  ==============  ========= 

EBITDA                                      (5,004)        (3.1)%        (3,512)      (2.0)%
Integration related expenses                    --           --           9,464        5.4  
Provision for close-out of                                                                  
  inventories                                   --           --           2,900        1.7  
Restructuring and rationalization                                                           
     expenses                               14,994          9.2              --         --  
                                     --------------  -----------  --------------  --------- 
     Adjusted EBITDA                 $       9,990          6.1 % $       8,852        5.1% 
                                     ==============  ===========  ==============  ========= 

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                                                        [Enlarge/Download Table]


ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS                
OF OPERATIONS (CONTINUED)                                                                       

YEAR TO DATE JULY 1, 2001 VERSUS YEAR TO DATE JULY 2, 2000                                      
----------------------------------------------------------                                      

                                                               (IN THOUSANDS)                   

                                        FOR THE 182    FOR THE 184                              
                                         DAYS ENDED      % OF NET      DAYS ENDED     % OF NET  
                                        JULY 1, 2001      SALES       JULY 2, 2000     SALES    
                                       --------------  ------------  --------------  ---------- 
                                                                                                
Net Sales                              $     333,639         100.0 % $     362,150       100.0% 
Cost of sales                                242,806          72.8         249,698        68.9  
                                       --------------  ------------  --------------  ---------- 
Gross profit                                  90,833          27.2         112,452        31.1  
                                       --------------  ------------  --------------  ---------- 

Selling, general and administrative           91,032          27.3         106,115        29.3  
Restructuring and rationalization                                                               
     expenses                                 37,125          11.1              --          --  
Integration related expenses                      --            --          14,088         3.9  
Other expenses                                 6,008           1.8           6,399         1.8  
                                       --------------  ------------  --------------  ---------- 

Operating loss                               (43,332)        (13.0)        (14,150)       (3.9) 
Interest expense                              37,467          11.2          36,169        10.0  
                                       --------------  ------------  --------------  ---------- 

Loss before taxes on income                  (80,799)        (24.2)        (50,319)      (13.9) 
Income tax expense (benefit)                   1,114           0.3          (6,049)       (1.7) 
                                       --------------  ------------  --------------  ---------- 

Loss before minority interest                (81,913)        (24.6)        (44,270)      (12.2) 
Minority interest in subsidiary                  (77)           --            (109)         --  
                                       --------------  ------------  --------------  ---------- 

Net loss                               $     (81,990)        (24.6)%     $ (44,379)      (12.3)%
                                       ==============  ============  ==============  ========== 

EBITDA                                       (17,984)         (5.4)%         8,948         2.5 %
Integration related expenses                      --                        14,088         3.9  
Provisions for close-out inventories              --            --           2,900         0.8  
Restructuring and rationalization                                                               
     expenses                                 37,125          11.1              --          --  
                                       --------------  ------------  --------------  ---------- 
     Adjusted EBITDA                   $      19,141           5.7 % $      25,936         7.2 %
                                       ==============  ============  ==============  ========== 

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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND       
RESULTS OF OPERATIONS (CONTINUED)                                               

NET SALES BY PRODUCT CATEGORIES:                                                
(IN MILLIONS)                                                                   

                                                                [Download Table]

                                    SECOND QUARTER                     
                    -------------------------------------------------  
                     FOR THE 91     FOR THE 91                         
                     DAYS ENDED     DAYS ENDED                         
                    JULY 1, 2001   JULY 2, 2000   $CHANGE   % CHANGE   
                    -------------  -------------  --------  ---------  
                                                                       
Oven Bakeware       $        48.9  $        52.8  $  (3.9)      (7.5) %
Tabletop                     41.5           40.5      1.0        2.4   
Rangetop Cookware            19.8           18.0      1.8       10.0   
OXO                          17.8           15.0      2.8       18.5   
Kitchenware                  17.2           15.4      1.8       11.2   
Cutlery                       7.3            5.8      1.5       26.5   
Other                        10.3           21.8    (11.5)     (52.1)  
                    -------------  -------------  --------             
  Sub-Total                 162.8          169.3     (6.5)      (3.8)  
                    -------------  -------------  --------             
Cleaning (1)                   --            5.0     (5.0)    (100.0)  
                    -------------  -------------  --------             
  Total             $       162.8  $       174.3  $ (11.5)      (6.6) %
                    =============  =============  ========             

                                                                [Download Table]

                                     YEAR-TO-DATE                               
                    -------------------------------------------------           
                     FOR THE 182    FOR THE 184                                 
                     DAYS ENDED     DAYS ENDED                                  
                    JULY 1, 2001   JULY 2, 2000   $CHANGE   % CHANGE            
                    -------------  -------------  --------  ---------           
                                                                                
Oven Bakeware       $       100.0  $       115.1  $ (15.1)     (13.1) %         
Tabletop                     82.5           83.4     (0.9)      (1.1)           
Rangetop Cookware            45.0           38.3      6.7       17.6            
OXO                          34.2           29.5      4.7       16.2            
Kitchenware                  33.0           29.6      3.4       11.5            
Cutlery                      14.7           12.3      2.4       19.9            
Other                        24.2           44.3    (20.1)     (45.6)           
                    -------------  -------------  --------                      
  Sub-Total         $       333.6  $       352.5  $ (18.9)      (5.4)           
                    -------------  -------------  --------                      
Cleaning (1)                   --            9.7     (9.7)    (100.0)           
                    -------------  -------------  --------                      
  Total                     333.6          362.2    (28.6)      (7.9) %         
                    =============  =============  ========                      
<FN>                                                                            

     (1)  The  Company exited the cleaning products line in the third quarter of
          2000.                                                                 

NET SALES                                                                       

Net sales for the second quarter of 2001 were $162.8 million, a decrease of     
$11.5 million or 6.6% versus the second quarter of 2000 net sales of $174.3     
million.  Excluding the impact of exiting the cleaning products line, net sales 
for the second quarter of 2001 declined $6.5 million or 3.8% versus the second  
quarter of 2000.                                                                

Year to date net sales for the first half of 2001 were $333.6 million, a        
decrease of $28.6 million or 7.9% versus the first half of 2000 net sales of    
$362.2 million.  Excluding the impact of exiting the cleaning products line, net
sales for the first half of 2001 declined $18.9 million or 5.4% versus the first
half of 2000.                                                                   

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Sales declines were primarily attributable to the exit of the cleaning product  
line as well as lower volumes in certain international markets and the          
factory stores.                                                                 

Oven Bakeware                                                                   

Net sales for the Oven Bakeware category in the second quarter of 2001 were     
$48.9 million, a decrease of $3.9 million or 7.5% versus the second quarter of  
2000 net sales of $52.8 million.  Year to date net sales for the first half of  
2001 for Oven Bakeware were $100.0 million, a decrease of $15.1 million or 13.1%
versus the first half of 2000 net sales of $115.1 million.  These decreases are 
primarily attributable to the loss of a Corningware original                    
equipment-manufacturing program, fewer promotional events in the Supermarket    
channel and softness in certain International markets.                          

Tabletop                                                                        

Net sales for the Tabletop category in the second quarter of 2001 were $41.5    
million, an increase of $1.0 million or 2.4% over the second quarter of 2000 net
sales of $40.5 million.  Year to date net sales for the first half of 2001 for  
Tabletop were $82.5 million, a decrease of $0.9 million or 1.1% versus the first
half of 2000 net sales of $83.4 million.  Strong sales growth in the            
International and Canadian markets in the second quarter of 2001 offset the     
first quarter of 2001 International sales decline resulting from a pipeline fill
in 2000.  Successful new product introductions including the Corningware        
Tabletop line, Corelle Coordinates and new Corelle patterns substantially offset
the reduction in overall sales due to competitive pressures.                    

Rangetop Cookware                                                               

Net sales for the Rangetop Cookware category in the second quarter of 2001 were 
$19.8 million, an increase of $1.8 million or 10.0% versus the second quarter of
2000 net sales of  $18.0 million.  Year to date net sales for the first half of 
2001 for Rangetop Cookware were $45.0 million, an increase of $6.7 million or   
17.6% over the first half of 2000 net sales of $38.3 million. The increase is   
primarily attributable to the successful introduction of the Martha Stewart     
products at K-Mart and the introduction of the Magnalite(R) products at         
Wal*Mart.                                                                       

OXO                                                                             

Net sales for OXO in the second quarter of 2001 were $17.8 million, an increase 
of $2.8 million or 18.5% over the second quarter of 2000 net sales of $15.0     
million.  Year to date net sales for the first half of 2001 for OXO were $34.2  
million, an increase of $4.7 million or 16.2% over the first half of 2000 net   
sales of $29.5 million. The increase is attributable to successful new product  
launches including the OXO SteeL line of stainless steel kitchen tools and      
utensils, OXO Good Grips enamel tea kettles and extensions to OXO Good Grips    
garden tools and cutlery products.                                              

Kitchenware                                                                     

Net sales for the Kitchenware category in the second quarter of 2001 were $17.2 
million, an increase of $1.8 million or 11.2% over the second quarter of 2000   
net sales of $15.4 million.  Year to date net sales for the first half of 2001  
for Kitchenware were $33.0 million, an increase of $3.4 million or 11.5% over   
the first half of 2000 net sales of $29.6 million. The increase is primarily    
attributable to the successful introduction of the Martha Stewart products at   
K-Mart. In addition, 2001 net sales reflect the addition of the Kitchenware     
product line to the Company-operated factory stores.                            

Cutlery                                                                         

Net sales for the Cutlery category in the second quarter of 2001 were $7.3      
million, an increase of $1.5 million or 26.5% over the second quarter of 2000   
net sales of $5.8 million.  Year to date net sales for the first half of 2001   

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for Cutlery were $14.7 million, an increase of $2.4 million or 19.9% over the   
first half of 2000 net sales of $12.3 million. The increase is attributable to  
successful new product introductions and additions to the Company's customer    
base.                                                                           

Other                                                                           

Net sales for the "Other" category in the second quarter of 2001 were $10.3     
million, a decrease of $11.5 million or 52.1% versus the second quarter of 2000 
net sales of $21.8 million.  Year to date net sales for the first half of 2001  
for the "Other" category were $24.2 million, a decrease of $20.1 million or     
45.6% versus the first half of 2000 net sales of $44.3 million.  These decreases
are primarily attributable to the Company liquidating a significant portion of  
kitchen accessories sold through Company-operated factory stores in the fourth  
quarter of 2000 and the first half of 2001.  The Company-operated factory stores
are in the process of replacing a portion of these products with EKCO           
kitchenware and OXO products, which are included in the Kitchenware and OXO     
product categories.                                                             

GROSS PROFIT                                                                    

Gross profit for the second quarter of 2001 was $42.3 million, a decrease of    
$9.6 million when compared to gross profit of  $51.9 million for the second     
quarter of 2000.  As a percentage of net sales, gross profit decreased to 26.0% 
in the second quarter of 2001 from 29.8% in the second quarter of 2000.         

Gross profit for the first half of 2001 was $90.8 million, a decrease of $21.7  
million when compared to $112.5 million the first half of 2000.  As a percentage
of net sales, gross profit decreased to 27.2% in the first half of 2001 from    
31.1% in the first half of 2000.                                                

The decrease in gross profit in the first half of 2001 versus the first half of 
2000 is attributable to several factors including; the decline in net sales;    
program implementation in the first quarter of 2001 to discontinue a significant
number of stock-keeping units (SKU's) across all product lines to reduce        
inventory and warehousing costs and to improve customer service-a substantial   
portion of these discontinued products were liquidated in the first half of     
2001; and a modest shift in channel mix.                                        

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES                                    

Selling, general and administrative expenses for the second quarter 2001 were   
$41.8 million, a decrease of $11.9 million or 22.2% from $53.7 million in the   
second quarter of 2000.  As a percentage of net sales, selling, general and     
administrative expenses decreased in the second quarter to 25.6% from 30.8% in  
the second quarter of 2000.                                                     

Selling, general and administrative expenses for the first half of 2001 were    
$91.0 million, a decrease of $15.1 million or 14.2% from $106.1 million for the 
first half of 2000.  As a percentage of net sales, selling, general and         
administrative expenses decreased for the first half of 2001 to 27.3% compared  
to 29.3% for the first half of 2000.                                            

These favorable decreases are the direct result of management's emphasis on     
reducing costs.  Administrative expenses have been reduced due to significant   
headcount reductions, and overall business realignment efforts including the    
integration of the EKCO and GHC operations into the Company that was completed  
by the end of 2000 and the restructuring and rationalization programs being     
implemented in 2001.  In addition, advertising costs have been reduced from     
prior year.                                                                     

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RESTRUCTURING AND RATIONALIZATION                                               

In 2001, the Company implemented an initiative to restructure and rationalize   
several aspects of the Company's manufacturing, distribution and administrative 
operations including the following:                                             

     1)   Exit  from  the  Martinsburg, West Virginia facility by the end of the
          first quarter of 2002, where the Corningware(R) and Visions(R) product
lines  are  manufactured.                                   
     2)   Consolidation  of distribution operations at Waynesboro, Virginia into
          the  Company's  existing  distribution  centers at Monee, Illinois and
          Greencastle,  Pennsylvania. Waynesboro is expected to cease operations
during  the  first  quarter  of  2002.                      
 3)   Significant  restructuring  of  metal  bakeware  manufacturing  at
Massillon,  Ohio  to  reduce  costs.                        
     4)   Exit from the Wauconda, Illinois facility by the end of the year 2001,
  where  Chicago  Cutlery(R)  product  lines  are  manufactured.
     5)   Business  redesign  activities associated with rationalizing processes
       and  headcount  throughout  the  organization  to  improve  overall
          efficiency,  effectiveness  and  responsiveness  of  the organization.

Restructuring and rationalization expenses were $37.1 million for the first half
of 2001. The charges recorded consist of asset disposals of $19.3 million;      
employee termination expenses of $12.3 million, other exit costs of $1.6 million
and business redesign expenses of $3.9 million.                                 

INTEGRATION RELATED EXPENSES                                                    

The Company incurred costs relating to the integration of EKCO and GHC's        
operations into WKI of $9.5 million for the second quarter of 2000 and $14.1    
million for the first half of 2000.  The integration costs primarily related to 
systems implementations, employee compensation arrangements, consulting services
and other integration costs.  The integration of EKCO and GHC was completed in  
2000.                                                                           

OTHER EXPENSE                                                                   

Other operating expense for the second quarter of 2001 was $3.2 million versus  
$3.6 million for the second quarter of 2000.  Other operating expense for the   
first half of 2001 was $6.0 million versus $6.4 million for the first half of   
2000.  The decline in other operating expense is primarily attributable to the  
impact of foreign currency exchange rates.                                      

INTEREST EXPENSE                                                                

Interest expense was $18.9 million in the second quarter of 2001 compared to    
$19.3 million in the second quarter of 2000.  A decrease in interest rates was  
partially offset by higher debt balances in the second quarter of 2001 versus   
the second quarter of 2000, and higher amortization of fees incurred as a result
of the renegotiated credit agreement.                                           

Year-to-date interest expense for the first half of 2001 was $37.5 million      
versus $36.2 million for the first half of 2000.  The $1.3 million increase is  
due to the higher average outstanding debt balance in the first half 2001 versus
2000 and higher amortization of fees incurred as a result of the renegotiated   
credit agreement partially offset by lower average interest rates.              

INCOME TAX                                                                      

Income tax expense in the second quarter of 2001was $0.4 million versus no      
charge for the second quarter of 2000.   Income tax expense for the first half  
of 2001 was $1.1 million compared to an income tax benefit of $6.0 million for  
the first half of 2000.   In the first quarter of 2000 the Company did recognize
an income tax benefit on pre-tax losses.  In the third quarter of 2000, the     

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Company concluded that it was more likely than not that it would not generate   
sufficient income to realize the net deferred tax assets.  The 2001 income tax  
expense is primarily attributable to foreign income taxes. The Company provided 
a full valuation allowance on the domestic income tax benefit relating to the   
current period pre-tax losses.                                                  

LIQUIDITY AND CAPITAL RESOURCES                                                 

The Company's capital requirements arise principally in connection with         
financing working capital needs, servicing debt obligations, funding            
manufacturing restructuring costs, financing its recent acquisitions and        
completing the integration of such acquisitions, and funding capital            
expenditures.  In the third quarter of 2000, the Company's existing $275.0      
million revolving credit facility was fully utilized and the Company received a 
temporary $40.0 million credit facility from Borden to meet its working capital 
and liquidity requirements.  Effective July 2, 2001, Borden increased its line  
of credit to the Company from $40.0 million to $50.0 million.  As of August 13, 
2001, the Company had $6.3 million available under the Borden facility.         

In order to meet its funding requirements and comply with its financial         
covenants in the 1998 Credit Agreement, the Company amended and restated its    
1998 Credit agreement effective April 12, 2001 (the Amended and Restated Credit 
Agreement), providing for an additional $25.0 million of financing, which       
becomes available on August 16, 2001, the date which is 91 days after perfection
of the collateral under the Amended and Restated Credit Agreement.  The Company 
also has extended its short-term line of credit from Borden until August 16,    
2001 after which Borden will provide to the Company a $25.0 million revolving   
credit facility.  These actions have resulted in an additional $50.0 million in 
long-term financing commitments, which expire on March 31, 2004.  In addition,  
the Company may elect, within the limitations of its current debt instruments,  
to obtain additional financing commitments.                                     

The Amended and Restated Credit Agreement also waived the defaults under the    
coverage ratio and leverage ratios covenants for the quarter ended December 31, 
2000 and amended the future financial covenants beginning March 31, 2001.  In   
addition, the Amended and Restated Credit Agreement provides for a first        
priority lien on substantially all of the Company's assets and its subsidiaries'
assets; a pledge of 100% of the stock of all of the Company's domestic          
subsidiaries and 65% of the stock of certain foreign subsidiaries; increased    
pricing on the credit facilities; and changes in the restrictions affecting     
indebtedness, investments, acquisitions, dispositions and prepayment of         
subordinated indebtedness.  The Company believes that these facilities and cash 
generated from operations will be sufficient to fund operations and capital     
expenditures.  The Company's ability to fund its operations, capital            
expenditures and debt service will depend upon its future financial, business   
and other factors, some of which are beyond the Company's control.              

The Company's credit facilities contain numerous financial and operating        
covenants that limit the discretion of the Company's management with respect to 
certain business matters.  These covenants place significant restrictions on,   
among other things, the ability of the Company to incur additional indebtedness,
pay dividends and other distributions, prepay subordinated indebtedness, enter  
into sale and leaseback transactions create liens or other encumbrances, make   
capital expenditures, make certain investments or acquisitions, engage in       
certain transactions with affiliates, sell or otherwise dispose of assets and   
merge or consolidate with other entities and otherwise restrict corporate       
activities.  In addition, the credit facilities also require the Company to meet
certain financial ratios and tests, including a minimum EBITDA, a ratio of debt 
to EBITDA and EBITDA to cash interest expense (where EBITDA represents adjusted 
cash flow as described more fully in the credit facilities).  The credit        
facilities and the indenture contain customary events of default.               

CASH FLOWS                                                                      

Through the second quarter of 2001 the Company's operating activities used cash 
of $9.5 million compared to $1.5 million provided by operating activities       
during the first half of 2000.  Net cash provided by operations in 2000 includes
proceeds from the sale of accounts receivable to an affiliate totaling $50      

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million.  No such transaction occurred in 2001.  Increased inventory levels in  
the first half of 2000 primarily offset the cash provided by the sale of        
receivables.  Cash used for restructuring in 2001 was $4.0 million.             

Investing activities used cash of $11.3 million in the first half of 2001       
compared to $28.7 million in the first half of 2000.  The cash used for         
investing activities in 2000 included costs associated with the systems         
implementation in the newly acquired EKCO and GHC businesses as well as a       
scheduled tank repair at the Company's primary dinnerware manufacturing         
facility.                                                                       

The net cash provided by financing activities totaling $18.3 million for the    
first half of 2001 is comparable to the $23.9 million in the first half of 2000.

RESTRUCTURING                                                                   

In 2001, the Company implemented an initiative to restructure and rationalize   
several aspects of the Company's manufacturing, distribution and administrative 
operations.  The program will result in charges of approximately $47.0 million  
and cash payments, including capital expenditures, of approximately $18.0       
million in 2001.  The program includes five major components:                   

     (1)  Exit  from  the  Martinsburg, West Virginia facility by the end of the
          first quarter of 2002, where the Corningware(R) and Visions(R) product
lines  are  manufactured.                                   
     (2)  Consolidation  of distribution operations at Waynesboro, Virginia into
          the  Company's  existing  distribution  centers at Monee, Illinois and
          Greencastle,  Pennsylvania. Waynesboro is expected to cease operations
during  the  first  quarter  of  2002.                      
 (3)  Significant  restructuring  of  metal  bakeware  manufacturing  at
Massillon,  Ohio  to  reduce  costs.                        
     (4)  Exit from the Wauconda, Illinois facility by the end of the year 2001,
  where  Chicago  Cutlery(R)  product  lines  are  manufactured.
     (5)  Business  redesign  activities associated with rationalizing processes
       and  headcount  throughout  the  organization  to  improve  overall
          efficiency,  effectiveness  and  responsiveness  of  the organization.

RISK MANAGEMENT                                                                 

The Company primarily has market risk in the areas of foreign currency and fixed
rate debt.  The Company invoices a significant portion of its international     
sales in U.S. dollars, minimizing the effect of foreign exchange gains or losses
on its earnings.  As a result, the Company's foreign sales are affected by      
currency fluctuations versus U.S. dollar invoicing.  The Company's costs are    
predominantly denominated in U.S. dollars.  With respect to sales conducted in  
foreign currencies, increased strength of the U.S. dollar decreases the         
Company's reported revenues and margins in respect of such sales to the extent  
the Company is unable or determines not to increase local selling prices.       

The Company reduces foreign currency cash flow exposure due to exchange rate    
fluctuations by entering into forward foreign currency exchange contracts.  The 
use of these contracts protects cash flows against unfavorable movements in     
exchange rates, to the extent of the amount under contract.  At July 1, 2001,   
the Company had no forward foreign currency exchange contracts outstanding.     

The Company enters into interest rate swaps to lower funding costs or to alter  
interest rate exposures between fixed and floating rates on long-term debt.     
Under interest rate swaps, the Company agrees with other parties to exchange, at
specified intervals, the difference between fixed rate and floating rate        
interest amounts calculated by reference to an agreed upon notional principal   
amount.                                                                         

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Effective January 1, 2001, the Company adopted SFAS No. 133, 137 and 138 related
to "Accounting for Derivative Instruments and Hedging Activities".  At that time
the Company had a $15 million notional amount interest rate swap with a fair    
value of $(0.2) million.  In accordance with these statements, the Company      
recorded a transition adjustment to other comprehensive income and other        
liabilities of $0.2 million.  At July 1, 2001, the swap had a fair value of     
$(0.5) million.    Other comprehensive income and other liabilities have been   
adjusted accordingly.  A 1% increase or decrease in market interest rates would 
result in a $0.3 million increase/(decrease) in the fair value of the interest  
rate swap.  The swap expires on July 29, 2003.                                  

At July 1, 2001, the Company had $210.0 million in fixed rate debt outstanding. 
The fair value of the Company's fixed rate debt at July 1, 2001, was $41.8      
million.                                                                        

RECENT ACCOUNTING PRONOUNCEMENTS                                                

In April 2001, the Emerging Issues Task Force (EITF) reached a consensus on     
Issue No. 00-25, "Accounting for Consideration from a Vendor to a Retailer in   
connection with the Purchase or Promotion of the Vendor's Products."  This issue
requires that consideration paid from a vendor to a purchaser be classified as a
reduction of revenue in the vendor's income statement unless it can be          
determined that an identifiable benefit will be received by the vendor and the  
fair value of the benefit exceeds the consideration provided to the purchaser.  
In that case, the consideration should be characterized as a cost.  This EITF is
effective for quarters beginning after December 15, 2001.  The Company is in the
process of determining the impact of this consensus but does not expect reported
financial results will be significantly impacted.                               

In June 2001, the Financial Accounting Standards Board issued Statement of      
Financial Accounting Standard (SFAS) No. 142, "Goodwill and Other Intangible    
Assets". This standard requires that amortization of goodwill and other         
intangible assets with indefinite lives be discontinued. Instead, goodwill and  
other intangible assets with indefinite lives will be assessed, at least        
annually, for impairment by applying a fair-value-based test. However, an       
intangible asset acquired through contractual or other legal rights or that can 
be sold, transferred, licensed, rented or exchanged will still be amortized over
its useful life, which is no longer capped at 40 years. SFAS No. 142 may have an
impact on the carrying value of goodwill and will be implemented as of January  
1, 2002.  The Company is in the process of determining the impact of            
implementing SFAS No.142.                                                       

FORWARD-LOOKING AND CAUTIONARY STATEMENTS                                       
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"   
for certain forward-looking statements.  The factors discussed below, among     
others, could cause actual results to differ materially from those contained in 
forward-looking statements made in this report, including without limitation, in
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations," in the Company's related press releases and in oral statements made
by authorized officers of the Company.  When used in this report, any press     
release or oral statement, the words "looking forward," "estimate," "project,"  
"anticipate," "expect," "intend," "believe" and similar expressions are intended
to identify a forward-looking statement.  Forward-looking statements are not    
guarantees of future performance and are subject to risks, uncertainties and    
other factors (many of which are beyond the Company's control) that could cause 
actual results to differ materially from future results expressed or implied by 
such forward-looking statements.  The forward-looking statements regarding such 
matters are based on certain assumptions and analyses made by the Company in    
light of its experience and its perception of historical trends, current        
conditions and expected future developments, as well as other factors it        
believes are appropriate in the circumstances.  Whether actual results and      
developments will conform with the Company's expectations and predictions,      
however, is subject to a number of risks and uncertainties, in addition to the  
risk factors discussed above, including: the Company's ability to comply with   
the terms of its existing credit facilities, a global economic slowdown in any  
one, or all, of the Company's sales categories; loss of sales as the Company    
streamlines and focuses on strategic accounts; unpredictable difficulties or    
delays in the development of new product programs; increasing reliance on third 
party manufacturers, increased difficulties in obtaining a consistent supply of 

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basic raw materials such as sand, soda ash, steel or copper and energy inputs   
such as electrical power or natural gas at stable pricing levels; development by
the Company of an adequate administrative infrastructure; technological shifts  
away from the Company's technologies and core competencies; unforeseen          
interruptions to the Company's business with its largest customers resulting    
from, but not limited to, financial instabilities or inventory excesses; the    
effects of extreme changes in monetary and fiscal policies in the United States 
and abroad, including extreme currency fluctuations and unforeseen inflationary 
pressures; drastic and unforeseen price pressures on the Company's products or  
significant cost increases that cannot be recovered through price increases or  
productivity improvements; significant changes in interest rates or in the      
availability of financing for the Company or certain of its customers; loss of  
any material intellectual property rights; any difficulties in obtaining or     
retaining the management or other human resource competencies that the Company  
needs to achieve its business objectives; and other factors, many of which are  
beyond the control of the Company.  Consequently, all of the forward-looking    
statements made in this Form 10-Q are qualified by these cautionary statements, 
and there can be no assurance that the actual results or developments           
anticipated by the Company will be realized or, even if substantially realized, 
that they will have the expected consequences to or effects on the Company and  
its subsidiaries or their business or operations.                               

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 PART II - OTHER INFORMATION

ITEM 3 - LEGAL PROCEEDINGS                                                      
--------------------------                                                      

There are no pending legal proceedings, which are material in relation to the   
consolidated financial statements of WKI.                                       

WKI has been engaged in, and will continue to be engaged in, the defense of     
product liability claims related to its products, particularly its bakeware and 
cookware product lines.  The Company maintains product liability coverage,      
subject to certain deductibles and maximum coverage levels that the Company     
believes is adequate and in accordance with industry standards.                 

In addition to product liability claims, from time to time the Company is       
involved in various legal actions in the ordinary course of business.  The      
Company is not currently involved in any legal actions, which, in the belief of 
management could have a material adverse impact on the Company's financial      
statements.                                                                     

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K                                       
-----------------------------------------                                       

a)   Exhibit                                                          

          10.1 - Amendment dated July 2, 2001 to the credit facility between the
Company  and  Borden,  Inc.                                 

b)   Reports  on  Form  8-K                                           

On May 16, 2001, the registrant filed a report on Form 8-K under "Item 5-Other  
Events" to announce a press release announcing its first quarter 2001 financial 
results and a quarterly conference call with bondholders to review the financial
results.                                                                        

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SIGNATURES                                                                      
----------                                                                      

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.                           

WKI HOLDING COMPANY, INC.                                   

By   /s/ Steven G. Lamb           President and                August 13, 2001  
-----------------------------  Chief Executive Officer                    
(Steven G. Lamb)                                                

By   /s/ Joseph W. McGarr         Senior Vice President and    August 13, 2001  
-----------------------------  Chief Financial Officer                    
(Joseph W. McGarr)                                              

24

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-Q’ Filing		Date		First		Last			Other Filings
		3/31/04		10		19
		3/30/04		10					10-K
		7/29/03		11		21
		1/1/02		8		21
		12/31/01		8					10-K405
		12/15/01		8		21
		8/16/01		10		19
Filed on:		8/13/01		1		24			8-K
		7/2/01		10		23
For Period End:		7/1/01		1		21
		5/16/01		23					10-Q,  8-K
		4/12/01		10		19
		3/31/01		19
		1/1/01		11		21
		12/31/00		7		19			10-K,  NT 10-K
		8/25/00		10
		7/2/00		2		15			10-Q
		4/9/98		10
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