1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996

TRANSITION PERIOD PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ___________________

COMMISSION FILE NUMBER: 1-12624

SYRATECH CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 13-3354944
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

175 MCCLELLAN HIGHWAY
EAST BOSTON, MASSACHUSETTS 02128-9114
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE - 617-561-2200

INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
--- ---

NUMBER OF SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE, OUTSTANDING AT JUNE
30, 1996- 8,676,631.
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INDEX

PART I - FINANCIAL INFORMATION PAGE NO.
--------

Item 1. Financial Statements:

Condensed Consolidated Balance Sheets at June 30, 1996
and December 31, 1995 1

Condensed Consolidated Income Statements for the six month
periods ended June 30, 1996 and 1995 2

Condensed Consolidated Statements of Cash Flows for the
six month periods ended June 30, 1996 and 1995 3

Notes to Condensed Consolidated Financial Statements 4

Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8

PART II - OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders 13

Item 6. Exhibits and Reports on Form 8-K 14

Signature 15

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PART I - FINANCIAL INFORMATION

SYRATECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

June 30, December 31,
1996 1995
--------------- --------------
(unaudited)
ASSETS

Current assets:
Cash and equivalents ......................................$ 3,409 $ 78,493
Marketable securities ..................................... 30,561
Accounts receivable, net .................................. 55,430 31,893
Insurance receivable ...................................... 20,468
Inventories ............................................... 109,061 41,151
Deferred income taxes ..................................... 6,112 5,105
Prepaid expenses and other ................................ 2,816 1,602
Net assets of discontinued operations ..................... 105 1,834
--------------- --------------
Total current assets .................................. 197,401 190,639

Property, plant and equipment, net ........................... 60,404 29,560
Purchase price in excess of net assets acquired .............. 6,047
Other assets ................................................. 437 367
--------------- --------------
Total .................................................$ 264,289 $ 220,566
=============== ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving loan facilities and notes payable ...............$ 56,396 $ 51,735
Accounts payable........................................... 11,294 6,438
Accrued expenses........................................... 12,443 4,436
Accrued compensation....................................... 2,080 2,478
Accrued advertising........................................ 2,949 1,991
Income taxes payable....................................... 2,522 1,511
--------------- --------------
Total current liabilities ............................. 87,684 68,589

Deferred income taxes ........................................ 18,758 3,657
Deferred compensation......................................... 2,354 1,724
Commitments and contingencies ................................

Stockholders' equity:
Preferred stock; $.10 par value, 500,000 shares
authorized; no shares issued or outstanding
(135,000 shares designated Series A Preferred Stock)
Common stock, $.01 par value, 20,000,000 shares
authorized; 8,676,849 and 8,667,249 shares issued in
1996 and 1995, respectively.............................. 87 87
Additional paid-in capital ................................ 9,819 9,699
Retained earnings ......................................... 145,441 136,728
Cumulative translation adjustment ......................... 149 85
Less: Treasury stock; 218 shares, at cost ................. (3) (3)
--------------- --------------
Total stockholders' equity ............................ 155,493 146,596
--------------- --------------
Total .................................................$ 264,289 $ 220,566
=============== ==============

See notes to condensed consolidated financial statements.

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SYRATECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS (unaudited)
(in thousands, except per share data)

Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------

Net sales ........................................................$ 38,592 $ 29,357 $ 69,858 $ 56,269
Cost of sales .................................................... 28,414 21,040 50,632 40,419
------------ ------------ ------------ ------------
Gross profit ................................................ 10,178 8,317 19,226 15,850

Selling, general and administrative expenses ..................... 11,417 6,795 20,755 14,266
Other operating income ........................................... 3,422 3,422
------------ ------------ ------------ ------------
Income from operations ...................................... 2,183 1,522 1,893 1,584

Interest expense ................................................. (866) (89) (993) (142)
Interest income .................................................. 44 1,704 604 1,705
Other income ..................................................... 11,900 11,900
------------ ------------ ------------ ------------
Income before provision for income taxes .................... 13,261 3,137 13,404 3,147

Provision for income taxes ....................................... 4,638 1,051 4,691 1,054
------------ ------------ ------------ ------------
Income from continuing operations ........................... 8,623 2,086 8,713 2,093

Discontinued operations:
Income from discontinued operations
of Syroco, Inc., net of income taxes of
$1,645 ..................................................... 2,572
Gain on sale of Syroco, Inc. net of
income taxes of $16,599 .................................... 30,451 30,451
------------ ------------ ------------ ------------
Net income ..................................................$ 8,623 $ 32,537 $ 8,713 $ 35,116
============ ============ ============ ============

Earnings per share:
Continuing operations .........................................$ 0.98 $ 0.18 $ 0.99 $ 0.18
Discontinued operations ....................................... 2.58 2.79
------------ ------------ ------------ ------------
Net income ..................................................$ 0.98 $ 2.76 $ 0.99 $ 2.97
============ ============ ============ ============

Weighted average common and common
equivalent shares outstanding ................................. 8,793 11,805 8,786 11,817
============ ============ ============ ============

See notes to condensed consolidated financial statements.

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SYRATECH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
(in thousands)

Six Months Ended June 30,
----------------------------
1996 1995
------------ ------------

Cash flows from operating activities:
Net income ...................................................$ 8,713 $ 35,116
Adjustments to reconcile net income to net
cash provided by (used in) operations:
Depreciation and amortization ............................. 2,160 1,653
Deferred income taxes ..................................... 1,124 (432)
Acquisition of Farberware assets .......................... (9,500)
Net proceeds on disposal of Farberware assets ............. 13,600
Other ..................................................... 650 304
Increase (decrease) in cash, net of effect of businesses
acquired:
Marketable securities ................................. 30,561
Accounts receivable ................................... (13,818) 6,943
Inventories ........................................... (44,849) (10,026)
Prepaid expenses and other ............................ 269 (1,228)
Accounts payable and accrued expenses ................. (2,910) 418
Income taxes payable .................................. (654) (3,082)
Discontinued operations ................................... 1,729 (48,081)
------------ ------------
Net cash used in operations .................................. (12,925) (18,415)
------------ ------------
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired ............. (47,440)
Insurance claim proceeds ..................................... 3,303
Net proceeds on sale of Syroco, Inc. ......................... 155,530
Purchases of property, plant and equipment ................... (8,651) (1,302)
Other ........................................................ 51 217
------------ ------------
Net cash (used in) provided by investing activities .......... (52,737) 154,445
------------ ------------
Cash flows from financing activities:
Change in revolving loan facilities .......................... (9,224) (12,488)
Repayment of borrowings ...................................... (300) (586)
Other ........................................................ 102 (136)
------------ ------------
Net cash used in financing activities......................... (9,422) (13,210)
------------ ------------
Net (decrease) increase in cash and equivalents .............. (75,084) 122,820

Cash and equivalents, beginning of period .................... 78,493 1,866
------------ ------------
Cash and equivalents, end of period...........................$ 3,409 $ 124,686
============ ============

See notes to condensed consolidated financial statements.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(in thousands)

1. FINANCIAL INFORMATION

The accompanying unaudited interim condensed consolidated financial statements
of Syratech Corporation and Subsidiaries (the "Company") have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These interim condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes included in the Company's 1995 Annual Report to
Stockholders.

In the opinion of management, the interim condensed consolidated financial
statements reflect all adjustments, which consist only of normal and recurring
adjustments, necessary for a fair presentation of the interim periods. The
results of operations for the interim periods are not necessarily indicative of
the results of operations for the full year.

2. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Six Months Ended June 30,
----------------------------
1996 1995
------------ ------------

Cash paid during the period for:
Interest.............................. $ 714 $ 176
------------ ------------
Income taxes.......................... $ 3,950 $ 6,495
------------ ------------

3. ACQUISITION OF PRODUCT LINES

The purchase price, including costs of the transaction, of the Company's
recent purchase of Rauch Industries, Inc. approximated $48,526. In the three
months ended March 31, 1996, the Company recorded a preliminary purchase price
allocation. During the three month period ended June 30, 1996, the Company
reached a final settlement agreement on the insurance claim related to a fire at
Rauch's manufacturing warehouse and distribution facility in 1994 and
accordingly adjusted its allocation of purchase price. The adjustments were to
record an insurance receivable of $20,468, to reduce purchase price in excess of
net assets acquired by $17,034 and record related deferred income taxes of
$9,502. The purchase price in excess of net assets acquired of $6,124 is being
amortized on the straight line basis over 30 years. The results of operations of
Rauch have been included with the results of the Company from February 15, 1996.
The acquisition was accounted for under the purchase method of accounting.

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3. ACQUISITION OF PRODUCT LINES (Continued)

The following summarized pro forma (unaudited) information assumes the
acquisition had occurred on January 1, 1995.

Six Months Ended June 30,
----------------------------
1996 1995
------------ ------------

Net sales ..................................$ 70,467 $ 63,162
------------ ------------
Income from continuing operations ..........$ 8,198 $ 1,084
------------ ------------
Net income..................................$ 8,198 $ 34,197
------------ ------------
Earnings per share:
Continuing operations....................$ 0.93 $ 0.09
------------ ------------
Net income...............................$ 0.93 $ 2.89
------------ ------------

On April 2, 1996, the Company through its indirect wholly-owned subsidiary,
Far-B Acquisition Corp. ("Far-B") together with Lifetime Hoan Corporation
("Lifetime") acquired certain assets from Farberware Inc. ("Farberware") a
subsidiary of U. S. Industries, Inc. Lifetime and the Company are not affiliates
of each other.

Farberware was a manufacturer of aluminum clad, stainless steel cookware and
bakeware and small electric kitchen appliances. The aggregate consideration paid
by Far-B and Lifetime was $45,771. The assets acquired by the Company included
the inventory, tradename, other intellectual property that related to cookware
and bakeware and small electric kitchen appliances, and certain tools, dies,
machinery and equipment, but excluded accounts receivable. The consideration
paid by Far-B was approximately $32,611. Effective April 2, 1996, the Company
through Far-B, entered into a Manufacturing Services Agreement (the "Agreement")
with Farberware for transitional manufacturing services for certain finished
goods previously produced by Farberware. The Company entered into the Agreement
to provide continuity of product during a transition period in order to protect
the strength of the Farberware name in the marketplace. The Agreement will
terminate on August 29, 1996.

Upon disposal of the existing inventory and additional inventory manufactured
pursuant to the Agreement, the Company will not manufacture or sell Farberware
cookware and bakeware products. Accordingly, net sales for the three and six
months ended June 30, 1996 exclude sales of Farberware inventory and income of
$3,422, net of certain selling, general and administrative expenses, from these
sales has been recorded as other operating income.

In a separate transaction, the Company and Far-B entered into a joint venture
agreement with Lifetime. The joint venture provided for the assumption of
certain license agreements between Farberware and third parties for use on a
variety of products including cutlery, flatware, dinnerware, glass
giftware/serveware, and glass beverageware.

On May 3, 1996, the Company and Far-B entered into an agreement with Meyer
Marketing Co. Ltd. ("Meyer") to grant and transfer certain rights in the
Farberware name and certain of the intellectual property relative to cookware
and bakeware products to Meyer, an existing licensee, for certain Farberware
products. On June 27, 1996, Meyer was granted additional exclusive rights and
license to use and exploit the Farberware name and related trademarks and
certain non-exclusive rights to use and exploit other intellectual property
rights in connection with the sourcing, manufacturing and distribution of
cookware and bakeware products until April 30, 2196. The Company recognized
non-recurring income of $11,900 from Meyer the license agreement.

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3. ACQUISITIONS OF PRODUCT LINES (Continued)

On April 16, 1996, the Company acquired finished goods inventory and
intangible assets of the Silvestri product line ("Silvestri") from FFSC, Inc.
for approximately $8,600. Prior to the Company's acquisition, FFSC, Inc., its
parent, its subsidiaries and affiliated companies had filed for protection under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the
Northern District of Texas (the "Bankruptcy Court"). The Bankruptcy Court
approved this acquisition by the Company. Silvestri products include Christmas
ornaments, collectibles, lighting and trim as well as other seasonal and
non-seasonal giftware and decorative accessories.

On May 8, 1996, the Company, through one of its subsidiaries, acquired all of
the outstanding common stock of C. J. Vander Limited., a manufacturer of
sterling silver and silverplated flatware and holloware in Sheffield and London,
England. The acquisition was accounted for under the purchase method of
accounting.

4. INVENTORIES

Inventories consisted of the following:

June 30, December 31,
1996 1995
------------ ------------

Raw material......................................... $ 17,356 $ 3,908
Work-in-process...................................... 12,602 1,744
Finished goods....................................... 79,103 35,499
------------ ------------
Total........................................... $ 109,061 $ 41,151
============ ============

5. INCOME TAXES

The provision for income tax expense for the six month period ended June 30,
1996 has been computed using an estimated effective tax rate for the year ended
December 31, 1996.

6. NOTES PAYABLE

The Company's Amended and Restated Loan and Security Agreement (the
"Agreement") provides for maximum permitted borrowings of $60,000. As a result
of the Rauch acquisition, the Company assumed the borrowings of Rauch (the
"Rauch Loan"). The Rauch Loan is from the same lender as the Company's
Agreement. The Rauch Loan allowed long-term borrowings up to $12,800 and
short-term borrowings up to $40,000. The Company is presently negotiating a new
revolving loan and security agreement that combines the two financing
arrangements. The Company and the lender have agreed to a date of October 31,
1996 to have a new revolving loan and security agreement in place.

The revolving credit facility of one of the Company's Puerto Rican
subsidiaries expired on May 31, 1996. During the three month period ended June
30, 1996, the Company received a letter of commitment increasing the line from
$4,000 to $10,000 and extending it to May 31, 1997. As of June 30, 1996 the
Company was negotiating the final details of the line of credit. As of June 30,
1996, the amount of outstanding borrowings under the line was $651.

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7. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS

Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting For Stock-Based Compensation"
("Statement 123"). The Company has continued to account for its stock-based
transactions to employees in accordance with Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" and will include the pro
forma disclosures required by Statement 123, if material, in its annual
financial statements for 1996. For stock option grants to non-employees, the
Company follows the provisions of Statement 123, calculates compensation expense
using a fair value based method and amortizes compensation expense over the
vesting period. During the six months ended June 30, 1996, the Company did not
grant any options to purchase shares of common stock to non-employees.

Also, effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of" ("Statement 121"). Statement
121 requires that long-lived assets held and used by an entity be reviewed for
impairment whenever circumstances indicate that the carrying amount of an asset
may not be recoverable. It also requires that long-lived assets to be disposed
of be reported at the lower of the carrying amount or fair value less the cost
to sell. The adoption of Statement 121 did not have a material effect on the
Company's financial position or results of operations for the six months ended
June 30, 1996.

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SYRATECH CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Some of the information presented in this Management's Discussion and Analysis
of Financial Condition and Results of Operations constitutes forward looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Although the Company believes its expectations are based on reasonable
assumptions within the bounds of its knowledge of its business and operations,
there can be no assurance that actual results will not differ materially from
its expectations. Factors which could cause actual results to differ from
expectations include, the timing of orders received from customers, the gain or
loss of significant customers, changes in the mix of products sold, competition
from other manufacturers or distributors, seasonal changes in the demand for the
Company's products, increases in the cost of raw materials and changes in the
retail market for housewares products in general. For additional information
concerning these and other important factors which may cause the Company's
actual results to differ materially from expectations and underlying
assumptions, please refer to the reports filed by the Company with the
Securities and Exchange Commission.

The purchase price, including costs of the transaction, of the Company's
recent purchase of Rauch Industries, Inc. approximated $48.5 million. In the
three months ended March 31, 1996, the Company recorded a preliminary purchase
price allocation. During the three month period ended June 30, 1996, the Company
reached a final settlement agreement on the insurance claim related to a fire at
Rauch's manufacturing warehouse and distribution facility in 1994 and
accordingly adjusted its allocation of purchase price. The adjustments were to
record an insurance receivable of $20.5 million, to reduce purchase price in
excess of net assets acquired by $17.0 million and record related deferred
income taxes of $9.5 million. The purchase price in excess of net assets
acquired of $6.1 million is being amortized on the straight line basis over 30
years. The results of operations of Rauch have been included with the results of
the Company from February 15, 1996. The acquisition was accounted for under the
purchase method of accounting. During the fiscal year ended December 31, 1995
net sales of Rauch were $58.9 million. The purchase was funded primarily with
the net proceeds remaining from the sale of Syroco.

Farberware was a manufacturer of aluminum clad, stainless steel cookware and
bakeware and small electric kitchen appliances. The aggregate consideration paid
by Far-B and Lifetime was $45.8 million. The assets acquired by the Company
included the inventory, tradename, other intellectual property that related to
cookware and bakeware and small electric kitchen appliances, and certain tools,
dies, machinery and equipment, but excluded accounts receivable. The
consideration paid by Far-B was approximately $32.6 million. Effective April 2,
1996, the Company through Far-B, entered into a Manufacturing Services Agreement
(the "Agreement") with Farberware for transitional manufacturing services for
certain finished goods previously produced by Farberware. The Company entered
into the Agreement to provide continuity of product during a transition period
in order to protect the strength of the Farberware name in the marketplace. The
Agreement will terminate on August 29, 1996.

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inventory and income of $3.4 million net of certain selling, general and
administrative expenses, from these sales has been recorded as other operating
income.

On April 16, 1996, the Company purchased finished goods inventory and
intangible assets of the Silvestri product line ("Silvestri") from FFSC, Inc.
for approximately $8.6 million. Prior to the Company's acquisition, FFSC, Inc.,
its parent, its subsidiaries and affiliated companies had filed for protection
under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court
for the Northern District of Texas (the "Bankruptcy Court"). The Bankruptcy
Court approved this acquisition by the Company. Silvestri products include
Christmas ornaments, collectibles, lighting and trim as well as other seasonal
and non-seasonal giftware and decorative accessories.

THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995

Net sales increased 31.5% to $38.6 million in the second quarter ended June
30, 1996 from $29.4 million in the second quarter of 1995. Net sales included
the impact of the acquisitions of Rauch, C. J. Vander and the product line of
Silvestri. However, net sales do not include Farberware products that were sold
during the quarter.

Gross profit for the second quarter ended June 30, 1996 increased 22.4% to
$10.2 million from $8.3 million in the second quarter of 1995. As a percentage
of net sales, the gross profit margin declined from 28.3% to 26.4% reflecting
extra warehouse costs for Rauch due to the fire it experienced in 1994 and
additional costs assumed in the acquisition of Silvestri.

Selling, general and administrative expenses increased to 29.6% as a
percentage of net sales to $11.4 million in the second quarter of 1996 from
23.1% as a percentage of net sales or $6.8 million in the same period of the
prior year. This increase primarily reflects selling, general and administrative
costs of companies acquired, selling, general and administrative costs of
disposal of Farberware inventory and additional product and systems development
costs which will benefit future periods. The Company's operations have become
more seasonal as a result of the acquisition of Rauch and the Silvestri product
line.

Income from operations increased 43.4% to $2.2 million from $1.5 million in
the second quarter of 1995. Included in income from operations for the 1996
second quarter was income, before certain selling, general and administrative
expenses, of $3.4 million from the disposal of Farberware inventory. The Company
expects the disposal of the Farberware inventory to continue for the remainder
of 1996 and into 1997.

Net interest expense for the three months ended June 30, 1996 was $822,000
compared to net interest income of $1.6 million in the same period a year ago.
This change resulted from a

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reduction in invested cash used to purchase and retire 3,064,751 shares of the
Company's common stock and for recent acquisitions.

Income before the provision for income taxes for the 1996 second quarter
totaled $13.3 million which included non-recurring income from the license
agreement entered into with Meyer of $11.9 million, net of costs, compared to
income before the provision for income taxes of $3.1 million in the 1995 second
quarter. The provision for income taxes was $4.6 million for the quarter ended
June 30, 1996 compared to $1.1 million for the same period of the prior year.
The effective tax rate was 35% for the 1996 second quarter compared to 33.5%
for the 1995 second quarter. The increase in income tax rate in 1996 is due to
the proportion of income earned in tax jurisdictions with higher income tax
rates.

Net income for the three months ended June 30, 1996 was $8.6 million or $0.98
per share on 8,793,000 shares. This compares with income from continuing
operations for the 1995 second quarter of $2.1 million or $0.18 per share and
net income of $32.5 million or $2.76 per share, which included a non-recurring
gain of $30.5 million, or $2.58 per share from the sale of Syroco, Inc. on
11,805,000 shares.

SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995

Net sales increased 24.2% to $69.9 million for the six months ended June 30,
1996 from $56.3 million for the six months ended June 30, 1995. This increase
reflects the acquisition of Rauch, C. J. Vander and the Silvestri product line
and increased demand for the Company's sterling and giftware products.

Gross profit increased 21.3% to $19.2 million for the six months ended June
30, 1996 from $15.9 million for the six months ended June 30, 1995. Gross profit
as a percentage of sales was 27.5% for the six months ended June 30, 1996
compared to 28.2% for the six months ended June 30, 1995. The decrease in the
gross profit percentage was primarily a result of extra warehouse costs for
Rauch due to the fire it experienced in 1994 and additional costs assumed in the
acquisition of the Silvestri product line. The Company expects pressure on its
gross profit percentage during 1996 due to the acquisition of Rauch, whose
products have a gross profit margin which is lower than that of certain other
product lines.

Selling, general and administrative expenses increased to 29.7% as a
percentage of net sales or $20.8 million for the six months ended June 30, 1996
from 25.4% or $14.3 million for the comparable period of 1995. The increase in
selling, general and administrative expenses is due primarily to inclusion of
selling, general and administrative expenses of the acquisitions; selling,
general and administrative expenses related to the disposal of Farberware
inventory and increased costs related to the growth in sales volume including
personnel related costs, royalties, and product and systems development costs.

Interest expense, net was $0.4 million for the six months ended June 30, 1996
compared to net interest income of $1.6 million for the six months ended June
30, 1995.

The provision for income taxes was $4.7 million for the six months ended June
30, 1996 compared to $1.1 million for the six months ended June 30, 1995. The
effective tax rate was 35% for the six month period ended June 30, 1996,
compared to 33.5% for the same six month period of 1995. The increase in the
income tax rate in 1996 is due to the proportion of income earned in tax
jurisdictions with higher income tax rates.

Net income for the six months ended June 30, 1996 was $8.7 million or $0.99
per share compared to income from continuing operations of $2.1 million or $0.18
per share for the same period last year. The six months ended June 30, 1996
included non-recurring income of $11.9 million, net of costs, resulting from a
license agreement. Net income for the six months ended June 30, 1995 was $35.1
million or $2.97 per share. The six months of 1995 included income from
discontinued operations net of income taxes of $2.6 million and the gain on sale
of Syroco, Inc. of $30.5 million totaling $2.79 per share.

ACCOUNTING PRONOUNCEMENTS

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employees, the Company follows the provisions of Statement 123, calculates
compensation expense using a fair value based method and amortizes compensation
expense over the vesting period. During the six months ended June 30, 1996, the
Company did not grant any options to purchase shares of common stock to
non-employees.

LIQUIDITY AND CAPITAL RESOURCES

Cash used from operations for the six months ended June 30, 1996 was
approximately $12.9 million. The primary uses of cash were increases in accounts
receivable and inventories. Partially offsetting these uses was the decrease in
marketable securities as a result of the repayment of temporary borrowings used
to purchase for retirement the Company's stock held by Katy Industries, Inc.

At June 30, 1996, accounts receivable increased to $55.4 million from $31.9
million at December 31, 1995. This increase is primarily the result of sales of
Farberware inventory. The increase in inventory to $109.1 million at June 30,
1996 from $41.2 million at December 31, 1995, is due to recent acquisitions,
including purchased Farberware inventory and to a seasonal increase in the
Company's inventory in anticipation of the third and fourth quarter selling
season. Production of Farberware inventory will continue through the end of
August under the manufacturing services agreement the Company has with the
former owner of Farberware. At June 30, 1996, the insurance receivable of $20.5
million represents amounts due from the final settlement agreement for the Rauch
fire loss which occurred prior to the Company's acquisition of Rauch. This
receivable, in addition to an advance payment for the claim, was recorded as an
adjustment to goodwill, net of deferred taxes. The short-term borrowings at June
30, 1996 of $56.4 million is expected to be reduced using proceeds received from
the continued disposal of Farberware inventory, the collection of the insurance
proceeds expected in the third quarter and by third and fourth quarter
collections of Farberware receivables.

Capital expenditures were approximately $8.7 million for the six months ended
June 30 , 1996. These expenditures were primarily for a warehouse in South
Carolina, computer software and hardware, improvements at the Company's East
Boston facility and machinery, tools and dies for the Company's manufacturing
facilities. Capital expenditures were principally financed using short-term
borrowings. The Company expects capital expenditures for the year ended December
31, 1996 to approximate $18.3 million including preliminary construction costs
for a warehouse facility on the West Coast and a building and equipment for C.
J. Vander.

The Company's Amended and Restated Loan and Security Agreement (the
"Agreement") provides for maximum permitted borrowings of $60.0 million. As a
result of the Rauch acquisition, the Company assumed the borrowings of Rauch
(the "Rauch Loan"). The Rauch Loan is from the same lender as the Company's
Agreement. The Rauch Loan allowed long-term borrowings up to $12.8 million and
short-term borrowings up to $40.0 million. The Company is presently negotiating
a new revolving loan and security agreement that combines the two financing
arrangements. The Company and the lender have agreed to a date of October 31,
1996 to have a new revolving loan and security agreement in place.

The revolving credit facility of one of the Company's Puerto Rican
subsidiaries expired on May 31, 1996. During the three month period ended June
30, 1996, the Company received a letter of commitment increasing the line from
$4.0 million to $10.0 million and extending it to May 31, 1997. As of June 30,
1996 the Company was negotiating the final details of the line of credit. As of
June 30, 1996, the amount of outstanding borrowings under the line was $0.7
million.

11
14
On June 30, 1996, borrowings and credit availability under the Company's
Agreement, the Rauch Loan and the Puerto Rican subsidiary's line totaled $56.4
million and $35.3 million, respectively.

The Company believes that funds generated from operations, the Rauch insurance
proceeds and borrowings available under existing revolving loan facilities, will
be sufficient to finance the Company's working capital requirements, provide for
all known obligations of the Company (including the obligations of the Company
under its operating leases) and fund planned capital expenditures for the
foreseeable future.

12
15
PART II-OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

The Annual Meeting of Stockholders was held on May 9, 1996, in Boston,
Massachusetts, at which three matters were submitted to a vote of the
stockholders:

(a) Votes cast for or withheld regarding the election of four
Class II directors to hold office until the 1999 Annual Meeting of Stockholders
and until their respective successors are duly elected and qualified were as
follows:

.. FOR WITHHELD

Irwin Chafetz 6,192,527 10,857
Jerry R. Jacob 6,192,526 10,858
Alan Perlman 6,192,527 10,857
Peter D. Rauch 6,192,527 10,857

(b) Votes cast for or against and the number of abstentions
regarding the proposal to approve and adopt the 1995 Key Employees' Stock Option
Plan were as follows:

6,196,786 FOR
1,004 AGAINST
5,594 ABSTAIN

(c) Votes cast for or against and the number of
abstentions regarding the ratification of the appointment of Deloitte & Touche
LLP as auditors of the financial statements of the corporation and its
consolidated subsidiaries for the fiscal year ending December 31, 1996 were as
follows:

5,439,261 FOR
65,923 AGAINST
7,643 ABSTAIN

16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits:

EX-10-1 Letter Agreement between Banco Popular de Puerto Rico and
Wallace International de PR, Inc. dated May 31, 1996.

EX-10-2 Letter Agreement between NationsBank, N.A. and Rauch
Industries, Inc. dated May 31, 1996.

EX-10-3 Fifth Modification dated as of July 1, 1996 to Amended and
Restated Loan and Security Agreement dated as of November 30,
1994.

EX-10-4 Amendment No. 1 dated as of July 1, 1996 to Loan Agreement
dated as of May 31, 1995 between Rauch Industries, Inc. and
NationsBank, N.A. (South).

EX-11 Computation of Net Income per Common Share.

EX-27 Financial Data Schedule, which is submitted electronically to
the Securities and Exchange Commission for information only
and not filed.

(b) Reports on Form 8-K:

A report on Form 8-K, reporting event dated April 2, 1996, which
described the purchase of Farberware Inc.

A report on Form 8-K, reporting event dated April 16, 1996, which
described the purchase of Silvestri.

A report on Form 8-K/A, dated April 26, 1996, reporting event dated
February 15, 1996, which included the financial statements of Rauch
Industries, Inc. and the pro forma financial information.

A report on Form 8-K, reporting event dated June 27, 1996, which
described the Meyer License Agreement.

14
17
SYRATECH CORPORATION AND SUBSIDIARIES

SIGNATURE

Pursuant to the requirements 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.

Syratech Corporation

Dated: August 14, 1996
/s/ E. Merle Randolph
--------------------------------------
E. Merle Randolph
Vice President, Treasurer, and
Chief Financial and Accounting Officer

15
18
INDEX TO EXHIBITS

FILED WITH SYRATECH CORPORATION
REPORT ON FORM 10-Q FOR THE QUARTER ENDED
JUNE 30, 1996

Exhibit No
----------
EX-10-1 Letter Agreement between Banco Popular de Puerto Rico and
Wallace International de PR, Inc. dated May 31, 1996.

EX-10-2 Letter Agreement between NationsBank, N.A. and Rauch
Industries, Inc. dated May 31, 1996.

EX-10-3 Fifth Modification dated as of July 1, 1996 to Amended and
Restated Loan and Security Agreement dated as of November 30,
1994.

EX-10-4 Amendment No. 1 dated as of July 1, 1996 to Loan Agreement
dated as of May 31, 1995 between Rauch Industries, Inc. and
NationsBank, N.A. (South).

EX-11 Computation of Net Income per Common Share.

EX-27 Financial Data Schedule, which is submitted electronically to
the Securities and Exchange Commission for information only
and not filed.