UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

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

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

For the fiscal year ended DECEMBER 31, 2001
--------------------------

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, P.O. Box 1555, Elmira, New York 14902-1555
------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)

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

SECURITIES REGISTERED PURSUANT TO SECTION 12 (b) OF THE ACT: NONE

SECURITIES REGISTERED PURSUANT TO SECTION 12 (g) OF THE ACT: NONE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to the filing requirements for
at least the past 90 days. Yes X No
--- ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in any information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K

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

68,910,716 shares of WKI Holding Company, Inc.'s, $0.01 Par Value, were
outstanding as of March 28, 2002.

Documents incorporated by reference in this annual report - See the Exhibit
index in Item 14.

PART I

ITEM 1 - BUSINESS
- -----------------

GENERAL DEVELOPMENT OF THE BUSINESS

WKI Holding Company Inc. (the Company or WKI) is a leading manufacturer and
marketer of consumer bakeware, dinnerware, kitchen and household tools, rangetop
cookware and cutlery product categories. 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, and Latin America. 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 coupled with localized
distribution and marketing capabilities.

The Company's business began as an unincorporated division of Corning
Incorporated (Corning) in 1915 with the invention of the heat-resistant glass
that has become known as Pyrex(R) glassware. In 1958, Corning introduced
Corningware(R) bakeware, a versatile glass-ceramic cookware product. Corelle(R)
dinnerware, a proprietary three-layer, two-glass product with high mechanical
strength properties and designed for everyday use was launched in 1970.
Visions(R) cookware, a lower cost, clear glass-ceramic cookware line was
introduced in 1982. In 1988, Corning supplemented its cookware product lines
with the acquisition of the Revere business, which distributes stainless steel
and aluminum cookware and rangetop products known as Revere Ware(R).

On March 2, 1998, Corning, the Company, Borden, Inc. (Borden), and CCPC
Acquisition Corp. (CCPC) entered into a Recapitalization Agreement pursuant to
which on April 1, 1998 (Closing Date) CCPC acquired 92% of the outstanding
shares of common stock, par value $0.01 per share of WKI from Corning for $110.4
million (Recapitalization). The stock acquisition was financed by an equity
investment in CCPC by BW Holding LLC, an affiliate of Kohlberg, Kravis Roberts &
Co., L.P. (KKR), the parent company of Borden and CCPC. Pursuant to the
Recapitalization, the Company paid Corning a dividend of $482.8 million, which
was financed through borrowings under senior facilities and the issuance of 9
5/8% Series B Senior Subordinated Notes (9 5/8% Notes) due 2008.

The Company completed the acquisitions of EKCO Group, Inc. (EKCO) effective
September 13, 1999 and General Housewares Corp. (GHC) on October 21, 1999, in
two separate transactions. EKCO was a manufacturer and marketer of branded
consumer products including household items such as bakeware, kitchen and
household tools, cleaning products, brooms, brushes and mops. The Company
exited its cleaning product line in 2000. GHC manufactured and marketed
consumer durable goods with principal lines of business consisting of kitchen
and household tools, precision cutting tools, kitchen cutlery and cookware. The
Company financed these acquisitions through the issuance of $150 million in
common stock to CCPC, $50 million in junior cumulative preferred stock to Borden
and additional borrowings under the Company's existing credit facilities.
Additional information regarding the Company's acquisitions can be found in Note
4 to the Consolidated Financial Statements.

Since the completion of these acquisitions, the Company has been involved in
various business redesign activities associated with restructuring and
rationalizing processes and headcount to improve the overall efficiency,
effectiveness and responsiveness of the organization.

During 2000, the Company dedicated extensive resources to the integration of the
acquired businesses of EKCO and GHC. The integration included the consolidation
of acquired distribution facilities into a new 700,000 square foot distribution
center in Monee, Illinois, redesigning the Company's enterprise-wide computer
system to accommodate the acquired facilities and new business lines, as well as
combining sales, marketing, finance, executive administration, human resources
and information technology efforts. By the end of 2000, most integration
activities were complete. The integration process contributed to the Company's
substantial increase in indebtedness in 2000, and for the period ended December
31, 2000, the Company failed to satisfy certain covenants under its existing
credit facility.

In January 2001, the Company announced Steven G. Lamb as its new President and
Chief Executive Officer. In addition, in 2001, the WKI Board of Directors
approved plans to restructure several aspects of the Company's manufacturing and
distribution operations and consolidate certain administrative functions. These
measures resulted in a restructuring charge of $51.9 million and rationalization
expenses of $18.5 million in 2001. (See Item 7 - Management Discussion and
Analysis, Restructuring and Rationalization Programs). Additional information
on the Company's restructuring and rationalization programs is included in Note
13 to the Consolidated Financial Statements. On April 12, 2001, the Company
entered into the Amended and Restated Credit Agreement (the "Amended Credit
Agreement"), which provided for an additional secured revolving credit facility
of $25.0 million maturing on March 31, 2004.

The Company has incurred substantial losses applicable to common shares in each
of the last three fiscal years, has had operating losses in each of the last
three fiscal years, has had negative cash flow from operations in fiscal years
2000 and 1999 and has a significant stockholders' deficit at December 31, 2001.
These losses and cash flow deficiencies were caused by interest expense on
substantial indebtedness, restructuring and rationalization expenses,
integration and transaction related expenses resulting from the 1999
acquisitions of EKCO and GHC, issues arising from the 1999 enterprise-wide
systems implementation and consolidation of distributions centers and a weak
U.S. economy in the latter part of 2000 and 2001. The general U.S. economic
downturn experienced during 2001 significantly impacted consumer confidence
which adversely impacted customer purchase behavior in several of the Company's
key channels. This economic downturn has affected and is expected to continue
to negatively impact the financial condition and results of operations of the
Company. In addition, Kmart, a key WKI customer, declared bankruptcy in January
2002. As a result, the Company assessed the collectibility of its receivable
from Kmart and recorded an $8.3 million charge in December 2001.

At December 31, 2001, the Company was not in compliance with certain financial
covenants contained in the Amended Credit Agreement. The Company, and the
covenants within its credit facilities,measures operating results using earnings
before interest, taxes, depreciation and amortization as adjusted for certain
restructuring, rationalization, integration and transaction costs (Adjusted
EBITDA). The Company did not meet the minimum Adjusted EBITDA, ratio of debt to
Adjusted EBITDA and ratio of Adjusted EBITDA to cash interest expense covenants.
The default under the senior credit facility as of December 31, 2001, also
results in a default under the Borden facility. Accordingly, the holders of the
Company's senior credit facilities and Borden have the right to accelerate the
maturity of all of the outstanding indebtedness under the respective agreements,
which together totals approximately $609.0 million. The holders of the $200.0
million aggregate principal amount of 9 5/8% Notes have the right to accelerate
the maturity of their notes if the banks and/or Borden accelerate their
payments. The Company does not presently have the ability to fund or refinance
the accelerated maturity of this indebtedness. (See Item 7 - Management's
Discussion and Analysis, Liquidity and Capital Resources). In light of the

above, the Company has reclassified the long term portion of the senior credit
facilities, the Borden facility and the 9 5/8% Notes to short term debt on the
Consolidated Balance Sheet as of December 31, 2001.

On March 28, 2002 the Company obtained temporary waivers of these and other
covenant defaults from its bank syndicate and Borden. By their terms, these
waivers terminate on the earliest of (i) May 30, 2002, (ii) the date on which
the cash level falls below $20.0 million or the Company delivers to the agent
for the bank syndicate a certificate indicating that it projects its cash level
to fall below $20 million, (iii) the date on which the Company makes any payment
in respect of interest or principal on the 9 5/8% Notes, (iv) the date on which
the Company informs its agent for the bank syndicate that the Company intends to
make such a payment on the 9 5/8% Notes, and (v) the date the Company prepays
any loans under the Borden Facility. In addition, the Borden waiver terminates
on the first date the lenders or the Administrative Agent under the Amended
Credit Agreement take any action to accelerate the loans thereunder or to
exercise any other remedies under the "Loan Documents."

The next scheduled interest payment on the 9 5/8% Notes is due May 1, 2002. The
Company currently does not anticipate making this payment as making the payment
would cause the waiver of the bank covenant defaults to expire. If the Company
does fail to make the interest payments, a new event of default will occur under
the senior credit facility and the Borden Facility after the expiration of the
applicable grace period. The Company has engaged financial advisors and is
discussing various options with its bank syndicate to develop a long-term
financial restructuring plan, including resolution of the defaults under the
Amended Credit Agreement that will exist after the expiration of the waiver. As
part of those discussions, the Company is pursuing opportunities for
restructuring its indebtedness and its capital structure. In the event the
Company and its lenders are unable to reach an agreement on a restructuring plan
that enables the Company to meet its debt obligations, including the interest
payment on the 9 5/8% Notes, the Company would need to explore other
alternatives, which could include a potential reorganization or restructuring
under the bankruptcy laws.

FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

For financial reporting purposes, the Company operates in the consumer
kitchenware products segment, with principal products as described below. The
Company measures operating results using a calculation of earnings before
interest, taxes, depreciation and amortization as adjusted for certain
restructuring, rationalization, integration and transaction costs (Adjusted
EBITDA). The banks use certain profitability measures, including targeted
Adjusted EBITDA, to measure compliance with certain covenants within the senior
credit facility.

NARRATIVE DESCRIPTION OF THE BUSINESS

PRODUCTS

The Company processes basic raw materials and partially formed materials, such
as stainless steel, into products which are close to or in their end use form.
The Company manufactures some products at its own facilities and outsources
manufacturing of a number of key brands to third party overseas vendors.

In 2001, the Company reported net sales of $745.9 million and Adjusted EBITDA of
$63.2 million. The Company's products are sold primarily in the bakeware,
dinnerware, kitchen and household tools, rangetop cookware and cutlery and other
similar product categories in the consumer kitchenware products segment.
Principal brands related to each product category are listed below:

BAKEWARE
Corningware(R). Corningware products are available in a variety of sizes and
shapes including round, oval, square and rectangle. They are appropriate for
baking or microwaving as well as serving and storing. Glass and plastic covers
are included with the following product lines: Corningware French White(TM),
Corningware Classics(TM) and Corningware Pop-Ins(TM). Corningware products are
currently produced at the Company's Martinsburg, West Virginia facility, which
is scheduled to close in the first quarter of 2002. The Company has outsourced
production of these products to overseas vendors.

Pyrex(R). Pyrex products are made of tempered soda lime glass and are available
in a number of colors, shapes and sizes for a variety of cooking functions. The
Company's Pyrex products comprise six sub-brands: Pyrex Bakeware, Pyrex
Prepware, Pyrex Storage, Pyrex Storage Deluxe, Pyrex Portables and Pyrex
Servware. The Pyrex brands are currently manufactured at the Company's
Charleroi, Pennsylvania facility.

EKCO(R). EKCO products consist of a broad line of uncoated bakeware products
including cookie sheets, muffin tins, brownie pans, loaf pans and similar items.

Baker's Secret(R). Baker's Secret products consist of a broad line of metal
non-stick coated and insulated "no burn" bakeware items. These products are
produced at the Company's Massillon, Ohio facility.

DINNERWARE
Corelle(R). Corelle, the Company's dinnerware product line developed in 1971,
is produced using a proprietary manufacturing process. This manufacturing
process combines three layers of glass and allows the Company to manufacture a
dinnerware that is durable and break/chip resistant, as well as light, thin and
stackable. Corelle products are produced in the Company's Corning, New York
facility.

Other Dinnerware. Corelle(R) cups and mugs are produced in a process which
involves pressing and glazing the shapes.

The Company also manufactures a glass tableware product through a pressing
process sold in channels similar to those of the Corelle line. Corelle mugs are
also produced from a glass ceramic substrate through a pressing process to yield
a durable and aesthetically pleasing product.

RANGETOP COOKWARE
Revere Ware(R). The Company's Revere Ware brand products include stainless
steel, hard anodized and aluminum non-stick cookware that is sourced from global
manufacturers.

The Company's Revere Ware stainless steel cookware products comprise a number of
lines including the traditional Revere Copper Clad(TM) and TriPly Bottom(TM),
Revere Copper Cuisine(TM), Revere Chef's Supreme(TM), Revere Gourmet
Solutions(TM) and ProLine(TM) by Revere sub brands. Certain Revere Gourmet
Solutions(TM) products feature patented double pour spouts and colander covers
for convenient pouring and straining. ProLine(TM) by Revere Cookware is a
professional quality, stainless steel product that competes at higher price
points. Other Revere product lines include Revere Chef's Preference(TM), Revere
Liberation(TM), and Revere Culinary Advantage(TM), which all include non-stick
aluminum construction, pour spouts and straining lids, and Ultra Glide(TM) by
Revere, which is a line of non-stick aluminum skillets.

EKCO(R). EKCO brand products include stainless steel and aluminum cookware that
is sourced from third-party manufacturers. The Company's EKCO brand of
stainless steel products are comprised of the EKCO Endura(TM), the EKCO Eterna

line, EKCO Copperelle(TM) and EKCO. The Company's EKCO brand of non-stick
aluminum products comprise the EKCO Resolutions(TM) line, the EKCO Radiance(TM)
line and the EKCO Generations(TM) line. The EKCO product lines are marketed
through multiple channels of distribution.

Visions(R). Introduced in the United States in 1982, Visions products are made
with a translucent pyroceram material that allows customers to see what they are
cooking. The Company manages Visions as a specialty line and markets Visions
products in areas where water-based cooking and simmering are relevant to a
market's or community's culture. The Visions product line is currently being
phased out in the United States and will be marketed largely in Asia in 2002.

Magnalite. The Company's Magnalite brand products consist of a line of cast
aluminum cookware, Magnalite Classic, that is sourced from global manufacturers.
Magnalite Classic couples the benefit of even heat distribution with
extraordinary durability.

KITCHEN AND HOUSEHOLD TOOLS
The Company markets and sells a broad line of kitchenware products, which it
sources from third parties. The products include the following: kitchen tools
and gadgets such as spoons, spatulas, ladles, peelers, corkscrews, whisks, can
openers and similar cooking accessories items, marketed under the EKCO, Baker's
Secret and Revere trademarks; stainless steel and porcelain-on-steel kettles and
carafes under the EKCO and Corelle Coordinates trademarks; and cookware under
the EKCO trademark. The Company's marketing program employs a "good, better,
best" strategy, which the Company feels clearly defines packaging and product
design. EKCO products are classified as "good", EKCO PRO products are
classified as "better", and Revere products are classified as "best".

OXO(R). The Company markets a broad line of kitchen and household tools under
the OXO Good Grips(R), OXO Softworks(TM), OXO Touchables(TM), OXO Basics(TM) and
OXO Grind IT brand names. The OXO brand products are developed in the United
States and sourced from global manufacturers. WKI has been expanding its
assortment of OXO brand products from kitchen tools to household cleaning tools,
gardening tools, hand tools and automotive cleaning tools. Many of the
kitchen/household tools sold by WKI under the OXO brand utilize a proprietary
handle, which is covered by patents owned by the Company that run through
December 2007. OXO brand products are distributed primarily in the United
States through department stores, gourmet and specialty outlets and mass
merchants.

CUTLERY
The company markets four brands of Cutlery; Chicago Cutlery(R), Revere(R),
Regent Sheffield(R) and Wiltshire(R).

The Chicago Cutlery brand has a multi-channel marketing strategy and is sold to
consumers through most trade channels ranging from department specialty stores
to mass-channel retailers. Key differentiating features such as the exclusive
Taper Grind(R) edge allows for maximum sharpness and easy blade maintenance.
This feature combined with unique ergonomic handle designs enables Chicago
Cutlery to also compete and market a full line of commercial food processing
knives for the meat and poultry processing industries. In September 2001, the
Wauconda manufacturing facility, which produced some of the Chicago Cutlery
brands, was closed and all manufacturing and packaging was outsourced.

Revere Cutlery was introduced in 2001. This new line is targeted to mass channel
retailers. The product assortment is positioned and sold as a "Good & Better"
alternative to department specialty and mass channel retailers.

Regent Sheffield and Wiltshire are licensed brand names from Richardson
Sheffield LTD for distribution in the United States, South America and Canada.
These two brands have their primary distribution base in the Canadian market
where they are sold through all class channels with a broad positioning
strategy.

OTHER
The Company's "Other" sales include selected kitchen accessories manufactured by
third parties that are primarily sold through the Company-operated factory
stores. Also included in "Other" are OLFA precision cutting tools and
accessories that are sold to industrial users and through distributors as well
as directly to hobby, craft, hardware and fabric stores. "Other" also includes
the cleaning products line which the Company decided to exit in 1999.

NEW PRODUCT DEVELOPMENT
New products are developed using a cross functional process of both internal
company resources as well as external design and manufacturing firms. New
products are funded based upon a comprehensive business plan that incorporates
qualitative and quantitative research to leverage the brands' core equity from
the consumer's perspective. New product programs are executed using cross
functional teams and a disciplined management review process.

MARKETING AND DISTRIBUTION
The Company's products are sold in the United States and in over 90 foreign
countries. In the United States (which accounted for approximately 80% of the
Company's net sales in 2001), 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.

DOMESTIC WHOLESALE
In the United States, the Company sells to approximately 2,800 customers
consisting of mass merchants, department stores and specialty retailers, as
well as through other channels, including retail food stores, hardware
stores, drug stores and catalog showrooms.

DOMESTIC RETAIL
The Company operates 140 factory stores in 40 states, located primarily in
outlet malls. The Company's factory stores, which carry an extensive range
of the Company's products, enable the Company to participate in broader
distribution and to profitably sell slower-moving inventory. The Company
believes that its factory stores, which also sell complementary kitchen
accessories, have developed marketing and pricing strategies that generate
sales that supplement, rather than compete with, its wholesale customers.
The Company-operated factory stores also promote and strengthen the
Company's brands, enabling the Company to provide customers a broader
assortment of products beyond those that are commonly stocked by third
party retailers.

INTERNATIONAL
The Company's international sales force, together with localized
distribution and marketing capabilities, have allowed the Company to become
an established marketer of bakeware and dinnerware in Canada, Korea,
Australia, Japan, Singapore, Taiwan, Hong Kong and Mexico. Internationally,
the Company sells through a network of distributors as well as directly to
customers made up primarily of mass merchants, supermarkets, hypermarkets,
department stores and specialty retailers, informal and traditional markets
as well as it's own Company-operated factory stores in Australia and
Canada.

SALES
The Company's domestic customers are served by a combination of Company
salespeople and independent, commissioned representatives. The Company's top
100 accounts are serviced by the Company's direct sales force teams, each
consisting of four or five salespeople which are organized (i) by account, for
the Company's most significant customers and (ii) by four channel teams,
focusing on department stores, specialty stores, regional mass merchandisers,
and clubs, hardware and food/continuity. The teams are directly accountable for
revenues, allowances and promotional spending Members of the sales teams
regularly call on the Company's customers to develop an in-depth understanding
of each customer's competitive environment and opportunities. Smaller wholesale
accounts are serviced by approximately 40 independent, commissioned sales
representatives. The Company's international sales force, with personnel
located in twelve countries, work with local retailers and distributors to
optimize product assortment, consumer promotions and advertising for local
preferences.

MARKETING SUPPORT
The Company provides its customers with marketing support. The Company conducts
research on housewares industry trends, including consumer demographics. The
Company is also known for its category management skills in determining the
optimal planogram layout.

COMPETITION
The market for the Company's products is highly competitive and the housewares
industry is trending toward consolidation. Competition in the United States is
affected not only by domestic manufacturers but also by the large volume of
foreign imports. The Company has experienced increased competition in the U.S.
from low-cost Far-Eastern competitors and expects this trend to continue in the
future. The market for housewares outside the U.S. and Europe is relatively
fragmented and differs by country and region. Internationally, depending on the
country or region, the Company competes with other U.S. companies operating
abroad, locally manufactured goods and international companies competing in the
worldwide bakeware, dinnerware and rangetop cookware categories.

A number of factors affect competition in the sale of the Company's products,
including, but not limited to quality, price competition and price point
parameters established by the Company's various distribution channels. Shelf
space is a key factor in determining retail sales of bakeware, dinnerware and
rangetop cookware products. A competitor that is able to maintain or increase
the amount of retail space allocated to its product may gain a competitive
advantage for that product. In addition, new product introductions are an
important factor in the categories in which the Company's products compete.
Other important competitive factors are brand identification, style, design,
packaging and the level of service provided to customers.

The Company has, from time to time, experienced price and market share pressure
from certain competitors in certain product lines, particularly in the bakeware
category where metal products of competitors have created retailer price and
margin pressures, and in the rangetop cookware category where non-stick aluminum
products have increased their share of rangetop cookware sales at the expense of
stainless steel products due to the durability and ease of cleaning of new
non-stick coatings.

The importance of these competitive factors varies from customer to customer and
from product to product.

SEASONAL BUSINESS
While seasonal variation in demand is not a large factor in the Company's
business, there is a general increase in sales demand in the second half of the
year. The fourth quarter typically accounts for approximately 40% of the

Company's earnings as a result of increased consumer spending during the holiday
shopping season. This trend was less evident in 2001 due to the economic
downturn in the fourth quarter.

CUSTOMERS
In the United States, the Company sells to approximately 2,800 customers made up
primarily of mass merchants, department stores and specialty retailers, as well
as through other channels, including retail food stores, hardware stores, drug
stores, catalog showrooms and its Company-operated factory stores. For 2001,
sales to the largest five customers accounted for over 36% of the Company's
gross sales. In 2001, 2000 and 1999, Wal-Mart Stores, Inc. accounted for
approximately 21%, 15% and 16%, respectively, of the Company's gross sales.

In January 2002, Kmart Corporation (Kmart), one of the Company's top five
customers, filed a voluntary petition for reorganization under Chapter 11 of the
U.S. Bankruptcy Code. In its filings, the Company indicated that it will
reorganize on a fast track basis and has targeted emergence from Chapter 11 in
2003. As a result of this action, the Company evaluated its current exposure
and recorded an $8.3 million bad debt reserve based on an estimate of the
collectibility of pre-petition accounts receivable. In addition, the Company
has re-established new credit terms with Kmart and is managing its exposure
closely on a go-forward basis. Company sales to Kmart in 2001 totaled
approximately $57 million. Of this amount, approximately 36% of WKI products
sold through an arrangement with Martha Stewart Living Omnimedia LLC. Under
this contract, the Company can sell its Martha Stewart line only to specified
vendors, which currently includes Kmart. Kmart has announced the closure of
approximately 280 stores as part of its reorganization program. The Company
continues to monitor these initiatives but cannot estimate the ultimate impact
they will have on future results of operations.

MANUFACTURING AND RAW MATERIALS
Sand, soda ash, borax, limestone, lithia-containing spars, alumina, cullet,
stainless steel, plastic compounds, hardwood products, tin plate steel-copper
and corrugated packaging materials are the principal raw materials used by the
Company. The Company purchases its raw materials on the spot market and through
long-term contracts with suppliers. All of these materials are available from
various suppliers and the Company is not limited to any single supplier for any
of these materials. Management believes that adequate quantities of these
materials are and will continue to be available from various suppliers. The
Company's molded plastic products and certain components of its kitchenware and
household tools products are manufactured from plastic resin, which is produced
from petroleum-based raw materials. Plastic resin prices may fluctuate as a
result of changes in natural gas and crude oil prices and the capacity, supply
and demand for resin and the petrochemical intermediates from which it is
produced.

The melting units operated by the Company require either electric or natural gas
energy input. Back-up procedures and systems to replace the primary source of
these energy inputs are in place in each of the Company's relevant facilities.
Ongoing programs exist within each of the Company's glass melting facilities to
reduce energy consumption. Furthermore, rates for electric and natural gas
energy have been fixed contractually in many of the Company's plants to avoid
the negative impact of market fluctuations in prices. The Company does not
engage in any hedging activities for commodity trading relating to its supply of
raw materials.

The Company currently manufactures its finished goods in its own facilities and
purchases finished goods from various vendors in Asia, Europe and Mexico. A
trend towards outsourcing of manufactured products will continue into 2002, most
significantly with the outsourcing of the Corningware and Visions product lines
after the closure of the Company's Martinsburg, West Virginia facility. The

Company believes that alternative sources of supply at competitive prices are
available from other manufacturers of substantially identical products.

The replacement of finished goods suppliers could give rise to certain
transition risks, such as interruptions in supply and quality issues that are
outside of the Company's control and could have a temporary adverse effect on
the Company's operations and financial performance. In addition, significant
increases in the cost of any of the Company's principal raw materials could have
a material adverse effect on results of operations.

PATENTS AND TRADEMARKS
The Company owns numerous United States and foreign trademarks and trade names
and has applications for the registration of trademarks and trade names pending
in the United States and abroad. The Company's most significant owned
trademarks and/or trade names include Corelle(R), Revere(R), Revere Ware(R),
Visions(R), EKCO(R), Baker's Secret(R), Chicago Cutlery(R), Good Grips(R) and
OXO(R). Other significant trademarks used by the Company are Corningware(R),
Pyrex(R), Farberware(R), and Regent Sheffield(R). Upon the consummation of the
Recapitalization on April 1, 1998, Corning granted to the Company fully paid,
royalty-free licenses to use the Corningware(R) trademark, servicemark and
tradename and the Pyroceram(R) trademark in the field of housewares and to use
the Pyrex(R) and Visions(R) trademark in the fields of housewares and durable
consumer products. These exclusive licenses provide for indefinite renewable
ten-year terms. Pyrex(R) licenses are subject to the prior exclusive licenses
granted to Newell, a significant competitor of the Company in the United States,
and certain of its subsidiaries to distribute in Europe, Russia, the Middle East
and Africa. In addition, in connection with the Recapitalization, the Company
entered into a license agreement with Corning under which the Company was able
to use "Corning" in connection with the Company's business until April 1,
2001(or up to five years in the case of certain molds used in the manufacturing
process). The Company has extended this license for one year, expiring April 1,
2002, as it relates to the use of the name "Corning Revere Factory Stores". At
this time the Company will begin to use the name "Corningware Corelle Revere
Factory Stores."

The Company also owns and has the exclusive right to use numerous United States
and foreign patents, and has patent applications pending in the United States
and abroad. In addition to its patent portfolio, the Company possesses a wide
array of un-patented proprietary technology and knowledge. The Company also
licenses certain intellectual property rights to or from third parties.

Concurrent with the Recapitalization, Corning granted to the Company a fully
paid, royalty-free license of patents and know-how (including evolutionary
improvements) owned by Corning that pertain to or have been used in the
Company's business. Furthermore, the Company and Corning entered into a
five-year technology support agreement (renewable at the option of the Company
for an additional five years), pursuant to which Corning will provide to the
Company (at the Company's option) engineering, manufacturing technology, and
research and development services, among others, at Corning's standard internal
rates.

The Company believes that its patents, trademarks, trade names, service marks
and other proprietary rights are important to the development and conduct of its
business and the marketing of its products. As such, the Company vigorously
protects its intellectual property rights.

ENVIRONMENTAL MATTERS
The Company's facilities and operations are subject to certain federal, state,
local and foreign laws and regulations relating to environmental protection and
human health and safety, including those governing wastewater discharges, air
emissions, and the use, generation, storage, treatment, transportation and
disposal of hazardous and non-hazardous materials and wastes and the remediation
of contamination associated with such disposal. Because of the nature of its

business, the Company has incurred, and will continue to incur, capital and
operating expenditures and other costs in complying with and resolving
liabilities under such laws and regulations.

Certain of the Company's facilities have lengthy manufacturing histories and,
over such time, have used or generated and disposed of substances, which are or
may be considered hazardous. Pursuant to the terms and conditions of the
Recapitalization, Corning has agreed to indemnify the Company for certain costs
and expenses that may be incurred in the future by the Company arising from
pre-Recapitalization environmental events, conditions or matters and as to which
notice is provided within specified time periods. Corning has agreed to
indemnify the Company for (i) 80% of such costs and expenses up to an aggregate
of $20.0 million and (ii) 100% of such costs and expenses in excess of $20.0
million. The indemnification agreement expires on April 1, 2005.

The Company has announced its intention to shut down the Martinsburg facility as
part of a broader program of restructuring activities (See Item 7 -
Restructuring and Rationalization) and intends to sell the building and assets
related to this property. The Company is currently working with environmental
experts and representatives from state agencies to assess potential remediation
requirements. The Company has also contacted Corning seeking reimbursement of
its share of proposed expenditures under the environmental indemnification
agreement mentioned above.

In 1999, the Ohio Environmental Protection Agency (Ohio EPA) notified the
Company that its Massillon, Ohio manufacturing facility was in violation of
certain federal and state clean air act regulations. In December 2000, the
Company submitted a proposal listing pollution control alternatives for review
by the state. The Company is currently in discussion with the State regarding
various proposals and believes it is in compliance with current regulations.
Should the Company be required to implement the control regulations proposed by
the Ohio EPA, the Company estimates the cost of certain capital improvements to
be approximately $1.2 million.

It is the Company's policy to accrue for remediation costs when it is probable
that such costs will be incurred and when a range of loss can be reasonably
estimated. The Company has accrued approximately $3.8 million at December 31,
2001 for probable environmental remediation and restoration liabilities. This
is management's best estimate of these liabilities. Based on currently
available information and analysis, the Company believes that it is reasonably
possible that costs associated with such liabilities or as yet unknown
liabilities may exceed current reserves in amounts or a range of amounts that
cannot be estimated as of December 31, 2001. There can be no assurance that
activities at these or any other facilities or future facilities may not result
in additional environmental claims being asserted against the Company or
additional investigations or remedial actions being required.

GOVERNMENTAL REGULATIONS
The Company is subject to various federal, state and local laws affecting its
business, including various environmental, health, fire and safety standards.
See "Environmental Matters." The Company is also subject to the Fair Labor
Standards Act and various state laws governing such matters as minimum wage
requirements, overtime and other working conditions and citizenship
requirements. The Company believes that its operations are in material
compliance with applicable laws and regulations.

EMPLOYEES
At December 31, 2001, the Company had approximately 4,200 employees worldwide,
approximately 40% of which were covered by collective bargaining agreements.
Approximately 6% of international employees are covered by union contracts. All
collective bargaining agreements expire after December 31, 2002.

OTHER
Additional information in response to Item 1 relating to geographic information
is found in Note 14 to the Consolidated Financial Statements.

FORWARD-LOOKING AND CAUTIONARY STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
and other intangibles 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, including the Company's ability to obtain a waiver of default
under the terms of its existing credit facilities; the Company's ability to
obtain additional sources of liquidity; a continuance of the 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; continuing weakness
in the retail sector, such as the bankruptcy of Kmart; loss of shelf space at a
key customer; 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 basic raw materials and energy
inputs at stable pricing levels; 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, the
continuation of the current economic downturn; 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;
acceptance of product changes by the consumer; 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-K 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.

ITEM 2 - PROPERTIES
- -------------------

WKI utilizes five primary manufacturing facilities (four in the United States
and one outside of the United States) and nine principal packaging and
distribution centers (five in the United States and four outside of the United
States). The Company's facilities are generally well maintained. The table
below summarizes certain data for each of the Company's principal properties,
including its manufacturing and distribution facilities:

LOCATION (1) PRIMARY USE FACILITY
- ---------------------------------- ---------------------------- ----------------------
SQ. FEET OWN/LEASE
--------- -----------

DOMESTIC:
Bolingbrook, Illinois (4) Distribution/Warehouse 260,000 Leased
Charleroi, Pennsylvania Manufacturing 585,710 Own
Chambersburg, Pennsylvania Administrative 22,000 Leased
Corning, New York Manufacturing 347,000 Own/Leased
Elmira, New York Administrative 80,900 Leased
Franklin Park, Illinois Administrative 150,000 Leased
Greencastle, Pennsylvania Distribution 1,365,500 Own/Leased
Hamilton, Ohio (2) Dormant 100,000 Leased
Plainfield, Indiana (3) Distribution/Warehouse 131,000 Leased
Martinsburg, West Virginia (2) (3) Manufacturing 451,000 Own
Massillon, Ohio Manufacturing 230,000 Own
Miami, Florida Administrative 4,000 Leased
Monee, Illinois Distribution/Warehouse 700,000 Leased
Monroe, Ohio (4) Dormant 158,000 Leased
New York, New York Administrative 8,000 Leased
Reston, Virginia Corporate Offices 22,661 Leased
Terre Haute, Indiana Administrative 20,000 Leased
Waynesboro, Virginia (3) Distribution 155,000 Own/Leased

INTERNATIONAL:
Chepstow, Gwent, U.K. (3) Admin/Warehouse/Distribution 46,000 Leased
Johor, Malaysia (5) Manufacturing/Distribution 58,000 Own
Johor, Malaysia Warehouse 66,134 Own/Leased
Mexico City, Mexico Administrative 3,229 Leased
Mumbia, India Administrative 531 Leased
Niagara Falls, Ontario, Canada Admin/Warehouse/Distribution 122,000 Own
Niagara Falls, Ontario, Canada Distribution 68,000 Leased
Seoul, Korea Administrative 6,000 Leased
Shanghai, China Administrative 438 Leased
Singapore Administrative/Warehouse 16,440 Leased
St. Laurent, Quebec, Canada (3) Administrative/Warehouse 33,000 Leased
Sydney, Australia Distribution 75,000 Leased
Taipei, Taiwan Administrative 1,280 Leased
Tokyo, Japan Administrative 2,000 Leased

<FN>
(1) In addition, the Company leases 720,034 sq. ft. of retail space in
approximately 140 factory outlet malls with initial lease terms ranging from
3 to 7 years.

(2) The Company intends to sell this property in 2002.
(3) The Company announced that the facility will be closing in early 2002.
(4) The Company is currently subleasing a portion of this facility to a third
party.
(5) The building housing the Malaysia facility is owned by CIM, a subsidiary that
is 80% owned by the Company. The land on which the facility is located is
leased pursuant to a 60-year lease expiring in 2048.

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

Litigation

WKI has been engaged in, and will continue to be engaged in, the defense of
product liability claims related to products, particularly the 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 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. It is
reasonably possible, however, that some matters could be decided unfavorably to
the Company and could require the Company to pay damages, or make other
expenditures in amounts or a range of amounts that cannot be estimated as of
December 31, 2001.

Environmental Matters

The Company's facilities and operations are subject to certain federal, state,
local and foreign laws and regulations relating to environmental protection and
human health and safety, including those governing wastewater discharges, air
emissions, and the use, generation, storage, treatment, transportation and
disposal of hazardous and non-hazardous materials and wastes and the remediation
of contamination associated with such disposal. Because of the nature of its
business, the Company has incurred, and will continue to incur, capital and
operating expenditures and other costs in complying with and resolving
liabilities under such laws and regulations.

The Company has announced its intention to shut down the Martinsburg facility as
part of a broader program of restructuring activities (See Item 7 -
Restructuring and Rationalization) and intends to sell the building and assets
related to this property. The Company is currently working with environmental
experts and representatives from state agencies to assess potential remediation
requirements. The Company has also contacted Corning indicating it will seek
reimbursement of proposed expenditures under the environmental indemnification
agreement mentioned above.

In 1999 the Ohio Environmental Protection Agency (Ohio EPA) notified the Company
that its Massillon, Ohio manufacturing facility was in violation of certain
federal and state clean air act regulations. In December 2000, the Company
submitted a proposal listing pollution control alternatives for review by the
state. The Company is currently in discussion with the State regarding various
proposals and believes it is in compliance with current regulations. Should the
Company be required to implement the control regulations proposed by the Ohio
EPA, the Company estimates the cost of certain capital improvements to be
approximately $1.2 million.

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

On February 7, 2001, the Company's Board of Directors was elected in its
entirety by majority vote of the Company's shareholders.

PART II

ITEM 5 - MARKET FOR THE REGISTRANTS' COMMON STOCK AND RELATED STOCKHOLDER
- -------------------------------------------------------------------------
MATTERS
- -------

The Company's authorized common stock consists of 80,000,000 shares with a par
value of $0.01 per share, 68,910,716 of which were issued and outstanding at
December 31, 2001. As of March 28, 2002 there were approximately 22 holders of
record of the Company's common stock. No shares of such common stock trade on
any exchange or are quoted on any automated quotation system. No dividends were
declared on common stock during 2001. Moreover, the Company would not currently
be permitted to make dividend payments under its credit facilities.

ITEM 6 - SELECTED FINANCIAL DATA
- --------------------------------

FIVE YEAR SELECTED FINANCIAL DATA
(In thousands, except per share data)

2001 2000 1999 1998 1997
------------ ------------ ------------ ------------ ------------

SUMMARY OF OPERATIONS
- ---------------------
Net sales (1) $ 745,872 $ 827,581 $ 633,534 $ 543,441 $ 584,538
(Loss) income before extraordinary
charge (1) (2) (132,993) (150,088) (28,058) (33,312) 13,694
Net (loss) income applicable to
common stock (1) (2) (148,451) (163,472) (40,099) (36,094) 13,694
- ----------------------------------------------------------------------------------------------------------------------
Basic and diluted loss before
extraordinary charge per common
share (1) (2) $ (2.17) $ (2.45) $ (1.08) $ (1.50) $ 0.57
Basic and diluted loss per common
share (1) (2) (2.17) (2.45) (1.29) (1.50) 0.57
Preferred dividends per preferred
share 4.83 4.18 3.68 2.32 N/A
- ----------------------------------------------------------------------------------------------------------------------
Average number of common shares
outstanding during the year (3) 68,382,691 66,827,488 31,142,857 24,000,000 24,000,000
------------ ------------ ------------ ------------ ------------

CASH FLOW INFORMATION
- ---------------------
EBITDA (1) (2) (4) $ (7,268) $ 25,098 $ 7,434 $ 35,016 $ 70,910
Adjusted EBITDA (1) (5) 63,159 71,781 85,575 68,654 70,910

Cash flow from operating activities 39,488 (46,141) (32,396) 58,841 67,419
Cash flow from investing activities (18,179) (58,424) (421,509) (23,237) (26,208)
Cash flow from financing activities 37,583 104,110 453,216 (30,892) (44,957)

FINANCIAL POSITION
- ------------------
Total assets $ 831,838 $ 929,220 $ 979,679 $ 495,259 $ 480,623
Total debt 818,483 776,263 672,903 437,642 95,427
Net debt (6) 751,678 768,350 664,535 428,585 91,082
- ----------------------------------------------------------------------------------------------------------------------

<FN>
(1) (Loss) income, EBITDA, Adjusted EBITDA and per share data for 1997, have
been reclassified to reflect the change from LIFO to FIFO method of
accounting for inventories. The reclassification increased earnings by
$1,502 in 1997. In addition, net sales have been reclassified to exclude
shipping and handling costs in accordance with EITF 00-10. The Company
adopted EITF 00-10, "Accounting for Shipping and Handling Fees and Costs"
in 2001. Application of this EITF resulted in the restatement of prior
period financial results to reflect shipping and handling fees billed to
customers as revenue. These amounts were previously recorded in cost of
sales. The impact of this change increased net sales by $22.1 million,
$16.0 million and $10.4 million for the years ended December 2000, 1999 and
1998, respectively.
(2) Includes restructuring charges of $51.9 million, $69.0 million and $4.8
million in 2001, 1999 and 1998, respectively; integration and transaction
related expenses of $26.6 million, $9.2 million and $28.9 million in 2000,
1999 and 1998, respectively; and provision for closeout of inventories of
$20.0 million in 2000. The amount also includes $18.5 million for
rationalization charges in 2001, of which $13.2 million is included in
selling, general and administrative expenses and $5.3 million in cost of
sales.
(3) Share data for 1997 reflects the 24,000-for-1 stock split in March 1998.
(4) EBITDA represents operating income (loss) plus depreciation and
amortization. EBITDA is presented because management understands that such
information is considered by certain bond holders to be an additional basis
for evaluating the Company's ability to pay interest and repay debt. EBITDA
should not be considered an alternative to measures of operating
performance as determined in accordance with generally accepted accounting
principles, including net income, as a measure of the Company's operating
results and cash flows or as a measure of the Company's liquidity. Because
all companies do not calculate EBITDA identically, the presentation herein
may not be comparable to other similarly titled measures of other
companies.
(5) Adjusted EBITDA represents EBITDA before restructuring costs,
rationalization, integration and transaction related expenses and a year
2000 provision for the write-down of certain inventories under an inventory
management program. Adjusted EBITDA is a key measure used by the Company to
determine its compliance with the Amended Credit Agreement dated April 12,
2001. (See Note 8 - Borrowings in the Notes to the Consolidated Financial
Statements) The Amended Credit Agreement allows for the exclusion of
certain costs related to the Company's restructuring and rationalization
activities in determining the achievement of quarterly EBITDA targets.
Under this definition, the Company did not achieve target EBITDA and other
financial ratio covenants for the year ended December 31, 2001.

2001 2000 1999 1998 1997
------------ ------------ ------------ ------------ ------------

EBITDA $ (7,268) $ 25,098 $ 7,434 $ 35,016 $ 70,910
Restructuring charges (7) 51,888 -- 68,984 4,772 --
Rationalization charges (7) 18,539 -- -- -- --
Integration and transaction related
expenses (7) -- 26,643 9,157 28,866 --

Provision for close-out of inventories (8) -- 20,040 -- -- --
------------ ------------ ------------ ------------ ------------
Adjusted EBITDA $ 63,159 $ 71,781 $ 85,575 $ 68,654 $ 70,910
============ ============ ============ ============ ============

<FN>
(6) Net debt represents total debt less cash and cash equivalents.

(7) See Note 13 - Restructuring and Rationalization in the Notes to the
Consolidated Financial Statements.

(8) See discussion of inventory close-out program in Item 7 - Management's
Discussion and Analysis.

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

This discussion and analysis should be read in conjunction with the Company's
consolidated financial statements and related notes included elsewhere in this
report.

BACKGROUND
- ----------

WKI Holding Company Inc. (the Company or WKI) 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, and Latin America. 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 coupled with localized distribution and marketing capabilities.

In January 2001, the Company announced Steven G. Lamb as its new President and
Chief Executive Officer. In addition, in 2001, the WKI Board of Directors
approved plans to restructure several aspects of the Company's manufacturing and
distribution operations and consolidate certain administrative functions. These
measures resulted in a restructuring charge of $51.9 million and rationalization
expenses of $18.5 million in 2001. (See Restructuring and Rationalization
Programs). On April 12, 2001, the Company entered into the Amended and Restated
Credit Agreement (the "Amended Credit Agreement"), which provided for an
additional secured revolving credit facility of $25.0 million maturing on March
31, 2004.

The general U.S. economic downturn experienced during 2001 significantly
impacted consumer confidence which adversely impacted customer purchase behavior
in several of the Company's key channels. This economic downturn has affected
and is expected to continue to negatively impact the financial condition and
results of operations of the Company. In addition, Kmart, a key WKI customer,
declared bankruptcy in January 2002. As a result, the Company assessed the
collectibility of its receivable from Kmart and recorded an $8.3 million charge
in December 2001.

At December 31, 2001, the Company was not in compliance with certain financial
covenants contained in the Amended Credit Agreement. The Company, and the
covenants within its credit facilities, measures operating results using
earnings before interest, taxes, depreciation and amortization as adjusted for
certain restructuring, rationalization, integration and transaction costs
(Adjusted EBITDA). The Company did not meet the minimum Adjusted EBITDA, ratio
of debt to Adjusted EBITDA and ratio of Adjusted EBITDA to cash interest expense
covenants. The default under the senior credit facility as of December 31,
2001, also results in a default under the Borden facility. Accordingly, the
holders of the Company's senior credit facilities and Borden have the right to
accelerate the maturity of all of the outstanding indebtedness under the
respective agreements, which together totals approximately $609.0 million. The
holders of the $200.0 million aggregate principal amount of 9 5/8% Notes have
the right to accelerate the maturity of their notes if the banks and/or Borden
accelerate their payments. The Company does not presently have the ability to
fund or refinance the accelerated maturity of this indebtedness. (See Liquidity
and Capital Resources). In light of the above, the Company has reclassified the

long term portion of the senior credit facilities, the Borden facility and the 9
5/8% Notes to short term debt on the Consolidated Balance Sheet as of December
31, 2001.

At December 31, 2001, the Company had fully utilized its $300.0 million senior
revolving credit facility and $25.0 million Borden revolving credit facility and
had cash available of $66.8 million.

Due to the Company's continuing inability to comply with its covenants under the
Amended Credit Agreement, the temporary nature of the waiver the Company
obtained from its bank syndicate, the Company's history of losses and
stockholders' deficit, there is substantial doubt as to the Company's ability to
continue as a going concern. The accompanying financial statements have been
prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business and do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or liabilities, other than the
reclassification of debt to short term, that may result from the outcome of
these uncertainties.

RESTRUCTURING, RATIONALIZATION AND INTEGRATION PROGRAMS
- -------------------------------------------------------

Over the last three years, the Company has taken a number of initiatives to
restructure its manufacturing and supply organization as part of its effort to
reduce costs. This included the integration of EKCO and GHC into the Company.

1999

In 1999, the Company initiated a plan to restructure its manufacturing and
supply chain organization to reduce costs through the elimination of
under-utilized capacity, unprofitable product lines and increased utilization of
the remaining facilities. The changes improved the Company's ability to compete
by opening up diverse sources of supply both in the United States and
internationally. The 1999 restructuring included the discontinuation of the
commercial tableware product line and closure of the related portion of the
Company's manufacturing facility in Charleroi, Pennsylvania. In order to
improve the utilization of the Charleroi facility, the Company moved Corelle cup
production to its Martinsburg, West Virginia facility and to third party
suppliers. The Company terminated its supply contract with Corning's
Greenville, Ohio facility and Pyrex(R) production was consolidated at the
Charleroi facility. Additionally, the Company discontinued manufacturing and
distributing rangetop cookware and closed its manufacturing and distribution
center in Clinton, Illinois. The Company's supply of rangetop cookware is being

sourced from third party manufacturers. In 1999, cash and non-cash elements of
the restructuring charge approximated $18.2 million and $50.8 million,
respectively. The Company spent $3.9 million in 2000 and $10.2 million in 1999
on the program.

In addition, the Company began the integration of EKCO and GHC into its existing
business to gain administrative efficiencies and eliminate redundant costs. The
Company recorded $9.2 million of expense in 1999 related to legal fees, tax and
accounting services, employee compensation arrangements, facility consolidation
and other integration costs.

2000

Integration and transaction activities continued on into 2000. Integration
related expenses of $26.6 million were recorded. These expenses consisted
primarily of systems implementation costs, employee compensation arrangements
and other benefits (such as severance, retention, outplacement, etc.),
consulting services and other integration costs.

2001

In 2001, the WKI Board of Directors approved a plan to restructure several
aspects of the Company's manufacturing and distribution operations. In
addition, the Company implemented several employee headcount reduction
initiatives as part of the continuing business realignment and integration
efforts begun in 1999 with the acquisitions of EKCO and GHC.

These programs resulted in a restructuring charge of $51.9 million, which was
recorded during 2001.

In addition, $18.5 million of rationalization and other charges were recorded
related to the implementation of these programs. These charges arise as a
result of the Company's restructuring programs and are excluded in the
computation of the Company's Adjusted EBITDA under the Amended Credit Agreement
that provides for the achievement of quarterly Adjusted EBITDA targets.
Generally, these costs were recorded as incurred in operating income ($13.2
million in selling, general and administrative expenses and $5.3 million in cost
of sales.)

The restructuring programs include the following initiatives:

(1) The outsourcing of Corningware and Visions product lines in an effort
to reduce costs while maintaining and enhancing product quality and
customer satisfaction. This program will require the shutdown of the
Martinsburg, West Virginia facility (Martinsburg) that is scheduled to
occur in the first quarter of 2002. Closing this facility will
eliminate under-utilized assets and reduce fixed costs while improving
the Company's leverage buying opportunities.

(2) The outsourcing of the Chicago Cutlery product lines in an effort to
reduce costs while maintaining and enhancing product quality and
customer satisfaction. This product was previously produced at the
Company's Wauconda, Illinois facility (Wauconda), which was idled at
the end of September 2001 and sold in December 2001.

(3) The consolidation of warehousing and distribution operations at
Waynesboro, Virginia and Plainfield, Indiana into the Company's state
of the art distribution centers located in Monee, Illinois and
Greencastle, Pennsylvania. This consolidation is expected to occur in
the second quarter of 2002. This project will also reduce fixed costs
as well as improve inventory management and customer service levels.

(4) The realignment of the production process at the metal bakeware
manufacturing facility at Massillon, Ohio. The Company determined that
streamlining the manufacturing and converting processes would improve
productivity and reduce headcount.

(5) The consolidation of certain international sales and marketing and
distribution operations in Canada and the United Kingdom, which
occurred at the end of 2001 and in January 2002, respectively.

(6) The continuation of organizational redesign activities led to
significant employee headcount reductions as a result of rationalizing
staff and business support functions, upgrading key capabilities and
centralizing executive administrative offices in Reston, Virginia.

The Company plans to spend approximately $15 million (net of estimated proceeds
related to asset sales on closed facilities) in 2002, to pay for accrued
severance and environmental costs and to fund the remaining rationalization
expenses related to outsourced product development and office relocation.

CRITICAL ACCOUNTING POLICIES
- ----------------------------

Management's Discussion and Analysis of Financial Condition and Results of
Operations discusses the consolidated financial statements of World Kitchen,
which have been prepared in conformity with accounting principles generally
accepted in the United States. The application of these principles requires
that in certain instances management make estimates and assumptions regarding
future events that impact the reported amount of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Predicting future events is inherently an imprecise
activity and as such requires the use of judgment. On an ongoing basis,
management reviews the basis for its estimates and will make adjustments based
on historical experience or other factors that it considers to be reasonable
under the circumstances. There can be no assurance that actual results will not
differ from those estimates.

The most significant accounting estimates inherent in the preparation of the
Company's consolidated financial statements include estimates related to testing
for the impairment of assets, recording of sales adjustments, including returns
and allowances and bad debts, and quantifying and reserving for excess and
obsolete inventories. In addition, a significant amount of judgment exists in
defining income tax valuation allowances, restructuring charges and
post-retirement and welfare plan valuations. The process of determining
estimates is based on several factors, including historical experience, current
and anticipated economic conditions, customer profiles and accepted actuarial
valuation techniques. The Company continually reevaluates these key factors and
makes adjustments to estimates where appropriate.

Management believes that the following critical accounting policies, among
others, inherently require significant judgment in the estimation process.

Impairment of long-lived and intangible assets and goodwill

Under the requirements of Statement of Financial Accounting Standards (SFAS)
No.121, the Company assesses the potential impairment of identifiable
intangibles, long-lived assets and acquired goodwill whenever events or changes
in circumstances indicate that the carrying value may not be recoverable. In
performing this evaluation, the Company evaluated current and future economic
and business trends to develop business forecasts of future performance and
related cash flows. Such estimates require the use of judgment and numerous
subjective assumptions. On January 1, 2002, the Company adopted SFAS No. 142,
"Goodwill and Other Intangible Assets," and will be required to analyze its
goodwill for impairment using a new methodology, during the first six months of
fiscal 2002, and then on a periodic basis thereafter. The Company has not
determined the impact of implementing FAS 142 and there can be no assurance that
at the time the review is completed a material impairment charge will not be
recorded. During the year ended December 31, 2001, the Company did not record

any impairment losses related to goodwill and other intangible assets, but
recorded an impairment charge of $26.5 million to reflect the net realizable of
fixed assets to be sold or scrapped under its restructuring programs.

Sales returns and allowances, bad debts

The estimation of product returns and deductions for customer allowances,
including rebates, incentives and other promotional payments, requires that the
Company make estimates regarding the amount and timing of future returns and
deductions. These estimates are based on historical return rates, current
economic trends and changes in customer demand and product acceptance.
Significant management judgment is used in establishing accruals for sales
returns and other allowances in any given accounting period. In addition, the
Company uses estimates in determining the collectibility of its accounts
receivable and must rely on its evaluation of historical bad debts, customer
concentration, customer credit ratings, current economic trends and changes in
customer payment terms to arrive at appropriate reserves. Material differences
may result in the amount and timing of earnings if actual experience differs
significantly from management estimates.

Excess and obsolete inventory reserves

The Company records inventory on a first-in, first-out basis and records
adjustments to the value of this inventory in situations where it appears that
the Company will not be able to recover the cost of the product. This lower of
cost or market analysis is based on the Company's estimate of forecasted demand
by customer by product. A decrease in product demand due to changing customer
tastes, consumer buying patterns or loss of shelf space to competitors could
significantly impact the Company's evaluation of its excess and obsolete
inventories.

The above listing is not intended to be a comprehensive list of all of the
Company's accounting policies. In many cases, the accounting treatment of a
particular transaction is specifically dictated by accounting principles
generally accepted in the United States. There are also areas in which the
Company's judgment in selecting an available accounting alternative would not
produce a materially different result. The Company's accounting policies are
more fully described in Item 8 - Financial Statements and Supplementary Data,
Notes to the Consolidated Financial Statements, Note 2.

RESULTS OF OPERATIONS
- ---------------------
Management believes that the following commentary and tables appropriately
discuss and analyze the comparative results of the operations and the financial
condition of the Company for the periods covered. The Company measures
operating results using Adjusted EBITDA. Results for the three years ended
December 31, 2001, 2000 and 1999, using generally accepted accounting principles
and reconciling to the proforma Adjusted EBITDA measure are summarized as
follows:

($ IN THOUSANDS)
YEAR ENDED DECEMBER 31,

% of net % of net % of net
2001 Sales 2000 Sales 1999 Sales
---------- --------- ---------- ---------- --------- ----------

Net Sales $ 745,872 100.0% $ 827,581 100.0% $633,534 100.0%
Cost of sales 558,515 74.9 601,460 72.7 424,370 67.0
---------- --------- ---------- ---------- --------- ----------
Gross Profit 187,357 25.1 226,121 27.3 209,164 33.0

Selling, general and
administrative expense 179,682 24.1 210,630 25.5 160,857 25.4
Provision for restructuring
costs 51,888 7.0 -- -- 68,984 10.9
Integration and transaction
related expenses -- -- 26,643 3.2 9,157 1.4
Other expense (income), net 13,786 1.8 12,237 1.5 (2,870) (0.5)
---------- --------- ---------- ---------- --------- ----------

Operating loss (57,999) (7.8) (23,389) (2.8) (26,964) (4.3)
Interest expense 73,173 9.8 74,981 9.1 48,136 7.6
---------- --------- ---------- ---------- --------- ----------

Loss before income taxes (131,172) (17.6) (98,370) (11.9) (75,100) (11.9)
Income tax expense
(benefit) 1,600 0.2 51,456 6.2 (47,254) (7.5)
---------- --------- ---------- ---------- --------- ----------

Loss before minority
interest (132,772) (17.8) (149,826) (18.1) (27,846) (4.4)
Minority interest in earnings
of subsidiary (221) -- (262) -- (212) --
---------- --------- ---------- ---------- --------- ----------

Net loss before
extraordinary charge (132,993) (17.8) (150,088) (18.1) (28,058) (4.4)

Early extinguishment of
debt, net of $4,298 tax
benefit -- -- -- -- (6,393) (1.0)
---------- --------- ---------- ---------- --------- ----------

Net loss $(132,993) (17.8)% $(150,088) (18.1)% $(34,451) (5.4)%
========== ========= ========== ========== ========= ==========

EBITDA $ (7,268) (1.0)% $ 25,098 3.0% $ 7,434 1.2%
---------- --------- ---------- ---------- --------- ----------

Restructuring 51,888 -- 68,984
Rationalization and other
charges 18,539 -- --
Integration and transaction
related expenses -- 26,643 9,157
Provision for close-out
inventories -- 20,040 --
---------- --------- ---------- ---------- --------- ----------

Adjusted EBITDA $ 63,159 8.5% $ 71,781 8.7% $ 85,575 13.5%
========== ========= ========== ========== ========= ==========

YEAR ENDED DECEMBER 31, 2001 COMPARED WITH YEAR ENDED DECEMBER 31, 2000 AND YEAR
- --------------------------------------------------------------------------------
ENDED DECEMBER 31, 2000 COMPARED WITH YEAR ENDED DECEMBER 31, 1999
- ------------------------------------------------------------------

NET SALES
Net sales for 2001 were $ 745.9 million, representing a decrease of $81.7
million or 9.9% from $827.6 million in 2000. Excluding the impact of exiting
the cleaning products line, net sales for 2001 declined $67.9 million or 8.3 %
compared to 2000. The Company experienced a near term volume decline
attributable to weak consumer spending in certain channels in the second half of
2001 and inventory management by key customers in response to the economic
slowdown. These declines were felt most heavily in the Company's U.S.
manufactured bakeware and tabletop product lines sold in grocery, regional mass,
department store and international channels, partially offset by strength in
certain segments of the mass merchant channel. In addition, volumes were
impacted by the Company closure of 30 unprofitable factory stores and lower
sales to customers going through liquidation or bankruptcy proceedings. Modest
price declines due to competitive pressures in the grocery and department store
outlets also impacted sales.

Net sales for 2000 were $ 827.6 million, representing an increase of $194.1
million or 30.6% from $633.5 million in 1999. On a pro forma basis, assuming
the acquisition of EKCO and GHC occurred on January 1, 1999, net sales decreased
$18.4 million or 2.2% from $846.0 million in 1999. The decrease was
attributable to the Company's exit of its cleaning products and commercial
tableware business in 2000 and 1999, respectively, coupled with a loss of shelf
space for the Company's Corelle products at certain key customers, pricing
pressures particularly in the EKCO brands and lower sales in the Company's
factory store outlets, partly due to closure of certain under performing stores
and partly due to shortages of several key products. The overall sales decrease
was partially mitigated by strength in the Company's international operations
and strong performance of the OXO brands through new product introductions.

GROSS PROFIT
Gross profit for the year ended December 31, 2001, was $187.4 million, or 25.1%
of net sales, compared to gross profit during the same period in 2000 of $226.1
million, or 27.3% of net sales. The decrease of $38.7 million is primarily
driven by reduced volume and pricing as a result of current economic conditions,
the short term negative impacts of the Company's inventory management process,
and rationalization charges related to the Company's restructuring programs.
(See Restructuring and Rationalization Programs).

The Company implemented an inventory management program at the beginning of
2001. The first element of the inventory management program led to the
reduction of certain excess inventories that were identified at the end of 2000.
At that time, the Company recorded a lower of cost or market provision of $20.0
million to cover the eventual sale of these excess inventories. Gross margin was
negatively impacted during 2001, as these discontinued items were subsequently
sold at lower than normal prices.

The second element of the program included a comprehensive analysis of the total
supply chain, which resulted in production curtailments at various manufacturing
facilities in order to reduce inventory levels. In the short term, these
curtailments increase the cost of inventories as fixed costs within the
manufacturing process are spread over fewer units of volume, and as a result,
gross margins were negatively impacted. In the future, however, these actions
should reduce overall carrying costs and improve customer service levels.

As the Company continues to improve its supply chain, lower costs through
outsourcing of production and provide quality customer service, it also
continues to assess the rate at which excess inventories are being created,
given the long lead times with foreign vendors and continually changing product
requirements from mass merchandisers. The Company will continue to upgrade its
demand forecasting capabilities to reduce excess inventory wherever possible,
although a certain amount of excess is probable given the "fashion" nature of
certain products and the pressure from retailers to update products and
packaging.

Gross profit for the year ended December 31, 2000 was $226.1 million, or 27.3%
of net sales, compared to gross profit during the same period in 1999 of $209.2
million, or 33.0% of net sales. The fluctuation is primarily attributable to
inventory close out programs resulting in a $20.1 million charge, start-up
operational inefficiencies relating to a new distribution center, approximately
$9.0 million in distribution and manufacturing-related costs which were not
capitalized into inventory due to their non-recurring nature, and pricing
pressures experienced with certain EKCO products. The majority of the inventory
charge relates to the Company's efforts to increase cash flow and reduce
warehousing costs by liquidating certain excess inventories at below cost during
2001. The distribution cost increase related to operational inefficiencies with
the consolidation of EKCO distribution center functions into Monee and the start
up of a new distribution center computer system in Greencastle.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $179.7 million for the year
ended December 31, 2001, a decrease of $30.9 million, or 14.7%, from $210.6
million in 2000. As a percentage of net sales, selling, general and
administrative expenses decreased to 24.1% compared to 25.5% in 2000. This
decrease is the result of the Company's emphasis on managing costs and
streamlining support functions. This included the integration of EKCO and GHC
into the Company at the end of 2000. In addition, the Company has implemented
new cost control measures leading to reductions in discretionary advertising and
product development spending, lower overall employee expenses and further
headcount reductions from the prior year. Part of this year over year savings
was offset by the accrual of $8.3 million bad debt reserve associated with the
announced bankruptcy of Kmart, one of the Company's largest customers and $13.2
million of administrative expenses related to the Company's rationalization
programs. The rationalization costs consisted largely of consulting fees
directed towards establishing best in class practices throughout the Company's
manufacturing facilities and other expenses related to the consolidation of
business and executive headquarters locations.

Selling, general and administrative expenses were $210.6 million for the year
ended December 31, 2000, an increase of $49.7 million over selling, general and
administrative expenses for the comparable period in 1999 of $160.9 million.
The increase was primarily a result of the acquisition of the EKCO and GHC
businesses. As a percentage of net sales, 2000 selling, general and
administrative expenses were 25.5% compared to 25.4% in 1999. Synergies
realized from the integration of the EKCO and GHC businesses into the Company
were offset by increases in brand development expenses and expenses associated
with severance and benefit-related expenses for former WKI employees.

PROVISION FOR RESTRUCTURING COSTS
During 2001, the WKI Board of Directors approved plans to restructure several
aspects of the Company's manufacturing and distribution operations, resulting in
restructuring charges of $51.9 million with total cash payments of $7.3 million
in 2001.

In 1999, the Company recorded a $69.0 million charge related to the
restructuring of the Company's manufacturing and supply organization, which was
designed to reduce costs through the elimination of under-utilized capacity and
unprofitable product lines.

INTEGRATION AND TRANSACTION RELATED EXPENSES
Integration and transaction related expenses consist of cash and non-cash
charges related to the integration of EKCO's and GHC's operations into those of
the Company. Integration related expenses were $26.6 million in 2000. These
expenses primarily consist of systems implementation costs, employee
compensation arrangements and other benefits (such as severance, retention and
out-placement), consulting services and other integration costs.

Integration and transaction related expenses were $9.2 million in 1999. These
expenses primarily consist of legal fees, accounting and tax services, employee
compensation arrangements and other benefits, facility consolidation and other
integration costs.

OTHER EXPENSE, NET
Other expense was $13.8 million in 2001 compared to $12.2 million in 2000. The
$1.6 million increase is attributable to a $0.7 million investment gain in 2000
that did not occur in 2001 and a reduction in brand licensing programs. Other
expense was $12.2 million in 2000 compared to income of $2.9 million in 1999.
The $15.1 million change is primarily due to the amortization of trademarks,
patents and goodwill resulting from the acquisitions of EKCO and GHC. In
addition, royalty expenses increased as a result of pre-existing royalty
agreements in the newly acquired EKCO business. The 1999 income included a $3.5
million state grant that the Company did not receive in 2000.

INTEREST EXPENSE, NET
Interest expense decreased $1.8 million to $73.2 million in 2001 compared to
$75.0 million in 2000. This decrease is a result of lower average interest
rates partially offset by higher average debt. In 2000 interest expense
increased $26.8 million to $75.0 million. The increase is primarily
attributable to higher debt levels related to the acquisitions of EKCO and GHC
late in 1999 and an increase in variable rate interest costs.

INCOME TAXES
Income tax expense of $1.6 million in 2001 is a $49.9 million decrease from
$51.5 million in 2000. Income tax expense primarily arises from international
income taxes as the Company expects no U.S. income tax due to large current
period losses and net operating loss carryforwards. The significant decline is
attributable to the fact that the company provided a full valuation allowance of
$48.9 million in 2000 on the domestic income tax benefit relating to pre-tax
losses incurred during the period and preceding years. The Company concluded
that it was more likely than not that it would not generate sufficient income to
realize its net deferred tax assets.

Prior to 2000, the Company believed it would generate sufficient income in
future periods to realize existing deferred tax benefits. As such, the Company
recorded a benefit associated with operating losses incurred during 1999 that it
believed would be available to offset such future taxable income.

EARLY EXTINGUISHMENT OF DEBT
In connection with the acquisition of EKCO, the Company recorded an
extraordinary loss of $6.4 million, net of $4.3 million tax benefit, as a result
of the early retirement of debt.

LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------

OPERATING ACTIVITIES
In 2001, net cash provided by operating activities was $39.5 million compared to
$46.1 million of cash used in operating activities in 2000. Significant
inventory reduction and lower restructuring and rationalization spending in 2001
compared to integration spending in 2000 largely drove the improvement over the
prior year. Cash used for restructuring and rationalization programs in 2001
was $7.3 million and $10.7 million, respectively. Integration-related cash
expenditures related to the acquisitions of EKCO and GHC operations were $32.7
million in 2000. Accounts receivable decreased as a result of lower year over
year fourth quarter sales. In addition, cash collections improved as evidenced
by improved days sales outstanding in 2001. Inventory levels decreased by $45.5
million in 2001 compared to an increase of $4.0 million in 2000. This was the
result of the Company's emphasis on managing inventory production and reducing
existing inventories.

In 2000, the Company's operating activities consumed $46.1 million of cash
compared to $32.4 million in 1999. The increase of $13.7 million is primarily
attributable to an increase in interest paid and cash spent on the integration
of the EKCO and GHC businesses into the Company, partially offset by
improvements in working capital.

In June and September 2000, the Company sold $50.0 million and $40.0 million of
accounts receivable, respectively, to Borden. The Company incurred $0.8 million
of costs associated with these transactions.

INVESTING ACTIVITIES
Investing activities used cash of $18.2 million in 2001 compared to $58.4
million in 2000. The significant decrease from 2000 is attributable to the lack
of the $10.6 million additional payment for the EKCO business and costs
associated with the systems implementation in the acquired EKCO and GHC
businesses.

Investing activities of the Company used cash of $58.4 million in 2000 compared
to $421.5 million in 1999. Cash used in 2000 and 1999 includes the purchase of
the EKCO and GHC businesses. Capital expenditures in 2000 increased by $12.1
million over 1999 as a result of the integration of the EKCO and GHC businesses
into WKI's enterprise-wide business system and the start up of a new
distribution center in Monee, Illinois.

Capital spending for 2001 was $22.0 million compared to $47.8 million in 2000
and $35.7 million in 1999. The Company anticipates cash outlays of
approximately $25 million for capital expenditures in 2002.

FINANCING ACTIVITIES
Net cash provided by financing activities totaled $37.6 million in 2001 compared
to $104.1 million in 2000. In 2001,the Company borrowed additional amounts to
fund capital expenditures, restructuring and rationalization programs and for
funding future working capital requirements. Cash provided by financing
activities in 2000 was used to fund working capital requirements, integration of
the EKCO and GHC businesses and capital requirements noted above.

Net cash provided by financing activities totaled $104.1 million in 2000
compared to $453.2 million in 1999. The decrease of $349.1 million primarily
represents the absence of long-term debt borrowings and the issuance of
preferred and common stock associated with the 1999 acquisitions of EKCO and
GHC.

FINANCIAL CONDITION
The Company's capital requirements have arisen principally in connection with
financing working capital needs, servicing debt obligations, funding
restructuring and rationalization costs, financing acquisitions and integrating
such acquisitions, and funding capital expenditures. The Company's
restructuring and rationalization programs resulted in cash payments in 2001 of
$7.3 million and $10.7 million, respectively. The Company plans to spend
approximately $15 million (net of proceeds related to asset sales on closed
facilities) in 2002, to pay for accrued severance and environmental costs and to
fund remaining rationalization expenses related to outsourced product
development and office relocation.

On April 12, 2001, the Company entered into the Amended and Restated Credit
Agreement (the "Amended Credit Agreement"), which provided for an increase in
commitments under the secured revolving credit facility by $25.0 million
maturing on March 31, 2004. The Amended Credit Agreement increased pricing on
the credit facilities and provides for a first priority lien on substantially
all of the Company's assets and its subsidiaries' assets. This agreement waived
the defaults under the coverage ratio and leverage ratio covenants for the
quarter ended December 31, 2000, and amended future financial covenants
beginning March 31, 2001. These covenants place significant additional
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 Adjusted EBITDA, a ratio of debt to Adjusted EBITDA and Adjusted EBITDA
to cash interest expense.

During the third quarter of 2000, Borden agreed to provide the Company a $40.0
million temporary revolving credit facility to assist in meeting working capital

requirements, capital expenditures, interest payments and scheduled principal
payments. The original maturity date of the Borden facility of December 31,
2000 was extended to March 31, 2004. Effective July 2, 2001, Borden increased
its line of credit to the Company from $40.0 million to $50.0 million and then
decreased the commitment to $25.0 million on August 16, 2001. The facility is
secured with an interest on the Company's assets that is second in priority
behind the interests securing the Amended Credit Agreement.

At December 31, 2001, the Company was not in compliance with certain financial
covenants contained in the Amended Credit Agreement. The Company did not meet
the minimum Adjusted EBITDA, ratio of debt to Adjusted EBITDA and ratio of
Adjusted EBITDA to cash interest expense covenants for the year ended December
31, 2001. Accordingly, the holders of the Company's senior credit facilities
have the right to accelerate the maturity of all of the outstanding indebtedness
under these agreements, which together totals approximately $584.0 million. The
Company does not have the ability to fund or refinance the accelerated maturity
of this indebtedness.

In addition, the default under the senior credit facility as of December 31,
2001, also results in a default under the Borden facility. Accordingly, Borden
has the right to accelerate the maturity of its $25.0 million credit facility.
The Company does not have the ability to fund or refinance the accelerated
maturity of this indebtedness.

The holders of the $200.0 million aggregate principal amount of 9 5/8% Series B
Senior Subordinated Notes have the right to accelerate the maturity of their
notes if the banks and/or Borden accelerate their payments. The Company does
not have the ability to fund or refinance the accelerated maturity of this
indebtedness.

At December 31, 2001, the Company had fully utilized its $300.0 million senior
revolving credit facility and $25.0 million Borden revolving credit facility and
had cash available of $66.8 million. In addition, the Company had current lease
obligations of $24.9 million and long-term lease obligations of $75.5 million at
December 31, 2001.

RISK MANAGEMENT
- ---------------

The Company primarily has market risk in the areas of foreign currency and
floating 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.

From time to time 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
December 31, 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. At December 31, 2001, the Company had one contract outstanding.

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 December 31, 2001, the swap had a fair value of
$(0.8) million. Other comprehensive income and other liabilities have been
adjusted accordingly. A 1% increase or decrease in market interest rates would
result in a $0.2 million increase/(decrease) in the fair value of the interest
rate swap. The swap expires on July 29, 2003.

A summary of all the Company's outstanding debt follows. Fair values are
determined from quoted market prices or quoted market interest rates at December
31, 2001 and 2000.

2001 2000
---------------------------------- --------------------------------
Weighted Weighted
Average Fair Average Fair
Debt Interest Value Debt Interest Value
Year (in 000's) Rate (in 000's) (in 000's) Rate (in 000's)
- ---- ---------------------------------- --------------------------------

2001 $ -- --% $ -- $ 9,735 11.15% $ 8,492
2002 809,643 7.71 465,099 3,643 8.82 2,425
2003 497 3.49 479 3,537 9.00 2,325
2004 140 4.76 136 3,150 9.73 1,959
2005 4,060 6.26 4,188 271,860 9.09 183,471
2006 2,953 9.19 3,077 190,049 9.45 119,122
2007 and thereafter 1,190 7.10 1,263 294,289 9.96 98,644
---------- ---------- ---------- ----------
Total debt 818,483 474,242 776,263 416,438
Current maturities (809,643) (465,099) (9,735) (8,492)
---------- ---------- ---------- ----------
Long-term debt $ 8,840 $ 9,143 $ 766,528 $ 407,946
========== ========== ========== ==========

RECENTLY ISSUED ACCOUNTING STANDARDS
- ------------------------------------

In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets", which is effective for fiscal years beginning after December 15, 2001.
SFAS No. 142 requires, among other things, the discontinuance of goodwill
amortization. In addition, the standard includes provisions upon adoption for
the reclassification of certain existing recognized intangibles as goodwill,
reassessment of the useful lives of existing recognized intangibles,
reclassification of certain intangibles out of previously reported goodwill and
the testing for impairment of existing goodwill and other intangibles. 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. In addition, the Company
will be required to perform an impairment review of its goodwill and other
intangible asset balances upon the initial adoption of SFAS No. 142. The
impairment review will involve a two-step process as follows:

- - Step 1 -Compare the fair value of the reporting units, as defined by SFAS
No. 142, to the carrying value, including goodwill and other intangible
assets of each of those units. For each reporting unit where the carrying
value, including goodwill and other intangible assets, exceeds the unit's
fair value, the Company will perform step 2. If a unit's fair value exceeds
the carrying value, no further work is performed and no impairment charge
is necessary.

- - Step 2 -Allocation of the fair value of the reporting unit to its
identifiable tangible and non-goodwill intangible assets and liabilities.
This will derive an implied fair value for the reporting unit's goodwill.
The Company will then compare the implied fair value of the reporting
unit's goodwill with the carrying amount of reporting unit's goodwill. If
the carrying amount of the reporting unit's goodwill is greater than the
implied fair value of its goodwill, an impairment loss must be recognized
for the excess.

The Company expects to complete this review during the first half of 2002. The
Company has not yet determined the impact of implementing FAS 142 and there can
be no assurance that at the time the review is completed a material impairment
charge will not be recorded.

In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations". SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. SFAS No. 143 is effective for fiscal years
beginning after June 15, 2002. The Company is in the process of evaluating the
impact of implementing SFAS No. 143.

In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 addresses significant issues
relating to the implementation of SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and develops
a single accounting method under which long-lived assets that are to be disposed
of by sale are measured at the lower of book value or fair value less costs to
sell. Additionally, SFAS No. 144 expands the scope of discontinued operations
to include all components of an entity with operations that (1) can be
distinguished from the rest of the entity and (2) will be eliminated from the
ongoing operations of the entity in a disposal transaction. SFAS No. 144 is
effective for financial statements issued for fiscal years beginning after
December 15, 2001 and its provisions are to be applied prospectively. The
Company is currently assessing the impact of SFAS No. 144 on our financial
position and results of operations.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -----------------------------------------------------

CONSOLIDATED STATEMENTS OF OPERATIONS
WKI HOLDING COMPANY, INC.
(In thousands, except share and per share amounts)
YEAR ENDED DECEMBER 31,
----------------------------------------
2001 2000 1999
------------ ------------ ------------

Net sales $ 745,872 $ 827,581 $ 633,534
Cost of sales 558,515 601,460 424,370
------------ ------------ ------------
Gross profit 187,357 226,121 209,164

Selling, general and administrative expenses 179,682 210,630 160,857
Provision for restructuring costs 51,888 -- 68,984
Integration and transaction related expenses -- 26,643 9,157
Other expense (income), net 13,786 12,237 (2,870)
------------ ------------ ------------

Operating loss (57,999) (23,389) (26,964)
Interest expense, net 73,173 74,981 48,136
------------ ------------ ------------

Loss before income taxes (131,172) (98,370) (75,100)
Income tax expense (benefit) 1,600 51,456 (47,254)
------------ ------------ ------------

Loss before minority interest (132,772) (149,826) (27,846)
Minority interest in earnings of subsidiary (221) (262) (212)
------------ ------------ ------------

Net loss before extraordinary charge (132,993) (150,088) (28,058)
Extraordinary charge-early extinguishment of debt,
net of $4,298 tax benefit -- -- (6,393)
------------ ------------ ------------

Net loss (132,993) (150,088) (34,451)
Preferred stock dividends (15,458) (13,384) (5,648)
------------ ------------ ------------

Net loss applicable to common stock $ (148,451) $ (163,472) $ (40,099)
============ ============ ============

Basic and diluted loss before extraordinary charge
per common share $ (2.17) $ (2.45) $ (1.08)
============ ============ ============

Basic and diluted loss per common share $ (2.17) $ (2.45) $ (1.29)
============ ============ ============

Weighted average number of common shares
outstanding during the year 68,382,691 66,827,488 31,142,857
============ ============ ============

The accompanying notes are an integral part of these statements.

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

ASSETS December 31, 2001 December 31, 2000
------------------- -------------------

Current Assets
Cash and cash equivalents $ 66,805 $ 7,913
Accounts receivable (less allowances of $25,346 and
$25,567 in 2001 and 2000, respectively) 93,042 146,040
Inventories, net 157,660 206,582
Prepaid expenses and other current assets 9,531 17,017
------------------- -------------------
Total current assets 327,038 377,552

Other assets 58,929 55,706
Property, plant and equipment, net 103,197 141,456
Trademarks and patents (less accumulated amortization of
$15,861 and $9,852 in 2001 and 2000, respectively) 142,380 148,708

Goodwill (less accumulated amortization of $19,878 and
$14,373 in 2001 and 2000, respectively) 200,294 205,798

------------------- -------------------
TOTAL ASSETS $ 831,838 $ 929,220
=================== ===================

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 49,115 $ 62,418
Current portion of long-term debt 784,643 3,635
Note payable - Borden 25,000 6,100
Other current liabilities 96,768 104,085
------------------- -------------------
Total current liabilities 955,526 176,238

Long-term debt 8,840 766,528
Preferred dividends payable to Borden 20,527 10,286
Pension and post-employment benefit obligations 69,785 42,748
Other long-term liabilities 350 6,552
------------------- -------------------

Total liabilities 1,055,028 1,002,352
------------------- -------------------

Minority interest in subsidiary 1,439 1,219
------------------- -------------------

STOCKHOLDERS' DEFICIT
Preferred Stock - 5,000,000 shares authorized;
3,200,000 shares issued (liquidation preference of
$100,527 and $90,286 in 2001 and 2000, respectively) 96,740 91,527
Common Stock - $0.01 par value; 80,000,000 shares
authorized; 69,647,145 and 67,397,028 shares issued and
outstanding in 2001 and 2000, respectively 696 674
Common stock held in treasury at cost (736,429 and
360,000 shares in 2001 and 2000, respectively) (2,155) (940)
Contributed capital 607,783 604,911
Accumulated deficit (916,035) (767,584)
Accumulated other comprehensive loss (11,658) (2,939)
------------------- -------------------
Total stockholders' deficit (224,629) (74,351)
------------------- -------------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 831,838 $ 929,220
=================== ===================

The accompanying notes are an integral part of these statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS
WKI HOLDING COMPANY, INC.
(In thousands)
YEAR ENDED DECEMBER 31,
----------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES: 2001 2000 1999
---------- ---------- ----------

Net loss $(132,993) $(150,088) $ (34,451)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization 50,731 48,487 34,398
Amortization of deferred financing fees 3,380 2,164 1,744
Minority interest in earnings of subsidiary 221 262 211
Loss on disposition of plant and equipment 2,683 -- --
Professional services contributed by Borden 441 -- --
Provision for deferred income taxes -- 48,886 (49,418)
Provision for restructuring costs 51,888 -- 68,984
Cash paid for restructuring charges (7,325) (3,907) (10,184)
Provision for rationalization costs 18,539 -- --
Cash paid for rationalization charges (10,659) -- --
Provision for integration-related costs -- 21,453 --
Cash paid for integration-related costs -- (32,651) --
Sales of accounts receivable -- 90,000 --
Provision for close-out inventories -- 20,040 --
Changes in operating assets and liabilities:
Accounts receivable 52,998 (94,732) (20,409)
Inventories 45,482 (4,011) 3,754
Prepaid expenses and other current assets 5,915 3,799 (13,002)
Accounts payable and accrued liabilities (44,319) 13,464 (6,019)
Provision for post-retirement benefits, net of cash paid 8,695 4,135 3,125
Other assets/liabilities (6,189) (13,442) (11,129)
---------- ---------- ----------
Net cash provided by (used in) operating activities 39,488 (46,141) (32,396)
---------- ---------- ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (21,976) (47,824) (35,694)
Net proceeds from sale of assets 3,797 -- --
Acquisition of businesses, net of cash acquired -- (10,600) (385,815)
---------- ---------- ----------
Net cash used in investing activities (18,179) (58,424) (421,509)
---------- ---------- ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt -- -- 100,000
Borrowing on revolving credit facility, net 27,200 100,800 160,344
Borrowings on Borden revolving credit facility, net 18,900 6,100 --
Borrowing from affiliate -- -- 71,500
Payments to affiliate -- -- (71,500)
Repayment of long-term debt, other than revolving credit facility (3,881) (3,540) (4,031)
Issuance of preferred stock -- -- 50,000
Issuance of common stock and stock subscriptions 2,453 1,690 150,000
Purchase of treasury stock (1,215) (940) --
Deferred financing fees (5,874) -- (3,097)
---------- ---------- ----------
Net cash provided by financing activities 37,583 104,110 453,216
---------- ---------- ----------

Increase (Decrease) in Cash and Cash Equivalents 58,892 (455) (689)
---------- ---------- ----------

Cash and Cash Equivalents - Beginning of Year 7,913 8,368 9,057

---------- ---------- ----------
Cash and Cash Equivalents - End of Year $ 66,805 $ 7,913 $ 8,368
========== ========== ==========

The accompanying notes are an integral part of these statements.

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

YEAR ENDED DECEMBER 31,
----------------------------------
2001 2000 1999
---------- ---------- ----------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the year for:
- ------------------------------
Interest $ 71,198 $ 70,662 $ 41,099
========== ========== ==========
Income taxes, net of refunds $ (681) $ 1,282 $ 4,290
========== ========== ==========

Non-Cash Information:
- --------------------

Preferred stock dividends $ 15,458 $ 13,384 $ 5,648
========== ========== ==========

The accompanying notes are an integral part of these statements.

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

Accumulated Total
Other Stockholders
Preferred Common Treasury Contributed Accumulated Comprehensive (Deficit)
Stock Stock Stock Capital Deficit Loss Equity
------------- -------------- ---------- ------------ ------------- --------------- ----------

Balance, December 31, 1998 $ 32,782 $ 240 $ -- $ 453,655 $ (564,013) $ (2,161) $ (79,497)

Net loss (34,451) (34,451)
Foreign currency translation
adjustment 375 375
----------
Total comprehensive loss (34,076)
Issuance of common stock 429 149,571 150,000
Issuance of preferred stock 50,000 50,000
Preferred stock dividends 5,648 (5,648) --
------------- -------------- ---------- ------------ ------------- --------------- ----------
Balance, December 31, 1999 88,430 669 -- 603,226 (604,112) (1,786) 86,427

Net loss (150,088) (150,088)
Foreign currency translation
adjustment (1,153) (1,153)
----------
Total comprehensive loss (151,241)
Issuance of common stock 5 1,885 1,890
Repurchase of common
stock (940) (940)
Notes receivable for stock
sold (200) (200)
Preferred stock dividends 3,097 (13,384) (10,287)
------------- -------------- ---------- ------------ ------------- --------------- ----------
Balance, December 31, 2000 91,527 674 (940) 604,911 (767,584) (2,939) (74,351)

Net loss (132,993) (132,993)
Foreign currency translation
adjustment 305 305
Cumulative effect of change
in accounting principle for
derivative financial
instruments (189) (189)
Derivative fair value
adjustment (590) (590)
Minimum pension liability
adjustment (8,245) (8,245)
----------
Total comprehensive loss (141,712)
Professional services
contributed by Borden 441 441
Issuance of common stock 22 2,231 2,253
Collection of receivable for
stock sold 200 200
Repurchase of common
stock (1,215) (1,215)
Preferred stock dividends 5,213 (15,458) (10,245)
------------- -------------- ---------- ------------ ------------- --------------- ----------
Balance, December 31, 2001 $ 96,740 $ 696 $ (2,155) $ 607,783 $ (916,035) $ (11,658) $(224,629)
============= ============== ========== ============ ============= =============== ==========

The accompanying notes are an integral part of these statements.

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 consumer bakeware, dinnerware, kitchen and household tools, rangetop
cookware and cutlery product categories. 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, and Latin America. 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 coupled with localized
distribution and marketing capabilities.

In January 2001, the Company announced Steven G. Lamb as its new President and
Chief Executive Officer. In addition, in 2001, the WKI Board of Directors
approved plans to restructure several aspects of the Company's manufacturing and
distribution operations and consolidate certain administrative functions. These
measures resulted in a restructuring charge of $51.9 million and rationalization
expenses of $18.5 million. (See Note 13 - Restructuring and Rationalization
Programs). On April 12, 2001, the Company entered into the Amended and Restated
Credit Agreement (the "Amended Credit Agreement"), which provided for an
additional secured revolving credit facility of $25.0 million maturing on March
31, 2004.

At December 31, 2001, the Company was not in compliance with certain financial
covenants contained in the Amended Credit Agreement. The Company, and the
covenants within its credit facilities, measures operating results using
earnings before interest, taxes, depreciation and amortization as adjusted for
certain restructuring, rationalization, integration and transaction costs
(Adjusted EBITDA). The Company did not meet the minimum Adjusted EBITDA, ratio
of debt to Adjusted EBITDA and ratio of Adjusted EBITDA to cash interest expense
covenants. The default under the senior credit facility as of December 31,
2001, also results in a default under the Borden facility. Accordingly, the
holders of the Company's senior credit facilities and Borden have the right to
accelerate the maturity of all of the outstanding indebtedness under the
respective agreements, which together totals approximately $609.0 million. The
holders of the $200.0 million aggregate principal amount of 9 5/8% Notes have
the right to accelerate the maturity of their notes if the banks and/or Borden
accelerate their payments. The Company does not presently have the ability to
fund or refinance the accelerated maturity of this indebtedness. In light of the
above, the Company has reclassified the long term portion of the senior credit
facilities, the Borden facility and the 9 5/8% Notes to short term debt on the
Consolidated Balance Sheet for the year ended December 31, 2001.

At December 31, 2001, the Company had fully utilized its $300.0 million senior
revolving credit facility and $25.0 million Borden revolving credit facility and
had cash available of $66.8 million.

make such a payment on the 9 5/8% Notes, and (v) the date the Company prepays
any loans under the Borden Facility. In addition, the Borden waiver terminates
on the first date the lenders or the Administrative Agent under the Amended
Credit Agreement take any action to accelerate the loans thereunder or to
exercise any other remedies under the "Loan Documents."

Due to the Company's continuing inability to comply with its covenants under the
Amended Credit Agreement, the temporary nature of the waiver the Company
obtained from its bank syndicate, the Company's history of losses and
stockholders' deficit, there is substantial doubt as to the Company's ability to
continue as a going concern. The accompanying financial statements have been
prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business and do not
include any adjustments to reflect the possible future effects on the
recoverability and classification of assets or liabilities that may result from
the outcome of these uncertainties.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements were prepared in accordance with
accounting principles generally accepted in the United States of America, the
most significant of which include:

Principles of Consolidation

The consolidated financial statements present the operating results and
financial position of WKI and the accounts of all entities controlled by the
Company. All significant intercompany accounts and transactions have been
eliminated. Minority interest in the income of a consolidated subsidiary
represents the minority stockholder's share of the income of the consolidated
subsidiary. The minority interest in the consolidated balance sheets reflect
the original investment by the minority stockholder in the consolidated
subsidiary, along with its proportional share of the accumulated earnings or
losses, together with its share of any capital transactions.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported herein. Actual
results could differ from those estimates.

Reclassifications

Certain prior year amounts have been reclassified to conform with 2001
presentation.

Cash and Cash Equivalents

The Company considers all highly liquid investments, primarily government
securities, with an original maturity of three months or less to be cash
equivalents.

Inventories

Inventories are stated at the lower of cost or market and include raw materials,
labor, manufacturing overhead and cost to purchase outsourced products. The
first-in, first-out method is used for valuing all inventories. The Company
evaluates obsolete and excess inventories and records appropriate reserves based
on expected demand.

Property, Plant and Equipment

Property, plant and equipment are recorded at cost, less accumulated
depreciation. Depreciation is calculated using straight-line and accelerated
methods based on the estimated useful lives of the assets as follows:
buildings, 8-30 years; equipment 3-25 years; and leasehold improvements, over
the lease periods. Capitalized interest costs relate to the purchase and
construction of long-term assets and are amortized over the respective useful
lives of the related assets. The Company capitalized interest of $1.0 million,
$0.7 million and $1.9 million in 2001, 2000 and 1999, respectively.

Other Assets

Other assets primarily consist of precious metals, capitalized computer software
costs and deferred financing fees. Precious metals, which are recorded at cost
and consist of platinum, rhodium, and palladium, are used in the Company's
manufacturing processes and are expensed to operations based on utilization.
Capitalized computer software costs consist of costs to purchase and develop
software. The Company capitalizes internally developed software costs based on
a project-by-project analysis of each project's significance to the Company and
its estimated useful life. All capitalized software costs are amortized on a
straight-line basis over a period between three and seven years. Amortization
expense for computer software was $8.1 million, $5.3 million and $2.3 million in
2001, 2000 and 1999, respectively. Deferred financing fees associated with the
Company's credit facilities are amortized to interest expense on a straight-line
basis over the term of the related credit facility.

Goodwill, Trademarks and Patents

The cost of goodwill represents the excess of cost over identifiable net assets
of businesses acquired. The amortization period assigned to goodwill is 40
years. Trademarks and patents are amortized over the estimated economic useful
lives, which range from 20 to 35 years. Goodwill and other intangibles are
carried at cost, less accumulated amortization. Amortization expense of $11.5
million, $9.6 million, and $1.5 million was recorded in 2001, 2000, and 1999,
respectively. (See "New Accounting Standards" below on the issuance of SFAS
142, "Goodwill and Other Intangible Assets", for changes in fiscal year 2002.)

Impairment Accounting

In accordance with SFAS 121, "Accounting for the Impairment of Long-lived Assets
and for Long-lived Assets to be Disposed of," the Company reviews the
recoverability of its long-lived assets, including goodwill and other intangible
assets, when events or changes in circumstances occur that indicate that the
carrying value of the asset may not be recoverable. The assessment of possible
impairment is based on the Company's ability to recover the carrying value of
the asset from the expected future pre-tax cash flows (undiscounted and without
interest charges) of the related operations. If the expected undiscounted
pre-tax cash flows are less than the carrying value of such assets, an
impairment loss is recognized for the difference between estimated fair value
and carrying value. In 2001, the Company determined that certain assets,

associated with facilities that are being closed, were impaired as a result of
the Company's restructuring initiatives that amounted to $26.5 million. No
other assets were impaired as of December 31, 2001. (See "New Accounting
Standards" below on the issuance of SFAS 142, "Goodwill and Other Intangible
Assets" and SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" for changes in fiscal year 2002).

Other Comprehensive Loss

Other comprehensive loss consists of minimum pension liabilities associated with
the underfunding of the Company's pension plans, adjustments to the fair value
of the Company's derivative and foreign currency translation adjustments
associated with the Company's foreign subsidiaries.

Stock Based Compensation

Certain employees of the Company participate in the stock compensation plans of
the Company. The Company accounts for compensation cost under these plans using
the intrinsic value method of accounting prescribed by Accounting Principles
Board Opinion No. 25 "Accounting for Stock Issued to Employees." Compensation
expense is recorded for awards of shares over the period earned. The Company
follows the disclosure provisions of Statement of Financial Accounting Standards
No. 123 "Accounting for Stock-Based Compensation" (SFAS No. 123), which defines
a fair value-based method of accounting for stock-based compensation.

Revenue Recognition

Revenue is recognized when products are shipped to customers and when all
substantial risk of ownership have transferred. A provision is recorded for
uncollectible accounts and an allowance is recorded for anticipated discounts,
promotional incentives and returned products.

In January 2002, Kmart Corporation (Kmart), one of the Company's top five
customers, filed voluntary petitions for reorganization under Chapter 11 of the
U.S. Bankruptcy Code. As a result of this action, the Company evaluated its
current exposure and recorded an $8.3 million bad debt reserve based on an
estimate of the collectibility of pre-petition accounts receivable.

Advertising and Promotion Costs

Production costs of future media advertising are deferred until the advertising
first occurs. Advertising costs, other than cooperative advertising, are
charged to selling, general and administrative expenses as incurred.
Cooperative advertising is accrued at the time of sale in the financial
statements as a reduction of sales because it is viewed as part of the
negotiated price of its products sold. Advertising and promotional expenses for
2001, 2000 and 1999 were $6.0 million, $15.8 million and $13.4 million,
respectively.

Research and Development Costs

Research and development costs are expensed as incurred. Such costs were $2.0
million, $1.3 million and $0.6 million in 2001, 2000 and 1999, respectively.

Income Taxes

The Company uses the asset and liability approach to account for income taxes.
Under this method, deferred tax assets and liabilities are recognized for the
expected future tax consequences of differences between the carrying amounts of
assets and liabilities and their respective tax bases using enacted tax rates in
effect for the year in which the differences are expected to reverse. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period when the change is enacted. Deferred tax

assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized.

Translation of Foreign Currencies

The accounts of most foreign subsidiaries and affiliates are measured using
local currency as the functional currency. For those operations, assets and
liabilities are translated into U.S. dollars using period-end exchange rates and
income and expense accounts are translated at average monthly exchange rates.
Net changes resulting from such translations are excluded from net loss and are
recorded as a separate component of accumulated other comprehensive loss in the
consolidated financial statements. Gains and losses from foreign currency
transactions are included in net income in the period in which they arise.

Derivative Financial Instruments

The Company primarily uses two types of derivatives: interest rate swaps, which
effectively convert a portion of the Company's variable rate obligations to
fixed; and forward exchange contracts, which reduce the Company's cash flow
exposure to changes in foreign exchanges rates. 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 specific intervals, the
difference between fixed rate and floating rate interest amounts calculated by
reference to an agreed notional principal amount. Interest rate swaps that are
in excess of outstanding obligations are marked to market through other income
and expense. At December 31, 2001 and 2000, the Company had $15.0 million
notional amount of an interest rate swap outstanding with a fair value of $(0.8)
million and $(0.2) million, respectively. The fair value of forward exchange
contracts that hedge firm third party commitments are deferred and recognized as
part of the underlying transactions as they occur, while those that hedge
existing assets and liabilities are recognized in income currently and offset
gains and losses of transactions being hedged. At December 31, 2000, the
Company had $2.6 million of notional value of forward exchange contracts
outstanding with no associated unrealized gain or loss on the contracts.

Loss Per Share

Basic loss per share is computed by dividing net loss, less dividends on
preferred stock, by the weighted average number of common shares outstanding
during each period. Diluted loss per share is computed by dividing net income,
less dividends on preferred stock, by the weighted average number of common
shares outstanding during the period after giving effect to dilutive stock
options.

Fair Value of Financial Instruments

The fair value of the Company's debt is estimated using discounted cash flow
analysis based on the incremental borrowing rates currently available to the
Company and for loans with similar loan terms and maturities. See Note 7. The
estimated fair value of cash and cash equivalents, receivables, and trade
payables approximate their carrying value due to the short maturity of these
instruments. The Company is not aware of any factors that would significantly
affect the estimated fair values.

Recently Issued Accounting Standards

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. In addition the Company
will be required to perform an impairment review of its goodwill and other
intangible asset balances upon the initial adoption of SFAS No. 142. The
impairment review will involve a two-step process as follows:

(3) RECAPITALIZATION

On March 2, 1998, Corning Incorporated (Corning), the Company, Borden, Inc.
(Borden) and CCPC Acquisition Corp. (CCPC) entered into a Recapitalization
Agreement (the Recapitalization). On April 1, 1998, CCPC acquired 22,080,000,
or 92%, of the outstanding shares of common stock of the Company from Corning
for $110.4 million. The Company then borrowed $471.6 million and paid a cash
dividend to Corning of $472.6 million. Corning retained 1,920,000, or 8%, of
the outstanding shares of common stock of the Company. Also on April 1, 1998,
the Company issued and sold 1,200,000 shares of cumulative junior preferred
stock to CCPC for $30.0 million. The Company paid an additional $10.2 million
to Corning in July 1998 relating to certain provisions of the Recapitalization.

The Company recorded the assets and liabilities of the predecessor at historical
cost upon execution of the Recapitalization. A significant change in holders of
common stock and bonds of the Company could precipitate the push down of
purchase accounting adjustments from CCPC to the Company.

(4) ACQUISITIONS

Effective September 13, 1999 and October 21, 1999, the Company acquired the
outstanding stock of EKCO and GHC, respectively. The financial statements
include the results of EKCO's and GHC's operations from the dates of the
acquisitions. The acquisitions were accounted for under the purchase method of
accounting. The Company acquired EKCO for an initial value of approximately
$229 million. The Company financed this acquisition through the issuance of
$150.0 million in common stock to the Company's parent, a $71.5 million
short-term borrowing from an affiliate of the Company's parent and borrowing
under the Company's existing credit facility. In December 2000, the Company
paid CCPC an additional $10.6 million for the EKCO business, pursuant to a
clause related to CCPC's sale of certain assets and liabilities not purchased by
the Company in the original EKCO acquisition. The Company acquired GHC for
approximately $159 million. The Company financed the acquisition through the
issuance of $50.0 million in cumulative junior preferred stock to an affiliate
of the Company's parent and borrowings under the Company's existing revolving
credit facilities.

The following unaudited pro forma results of operations give effect to the EKCO
and GHC acquisitions as if they had occurred on January 1, 1999.

(In thousands,
(Unaudited) except per share amounts)
- ------------------------------------------- --------------------------

1999
--------------------------
Net sales $ 846,026
Loss before extraordinary losses (47,897)
Net loss applicable to common stock (68,046)
Loss per share before extraordinary losses (0.72)
Loss per share after extraordinary losses (1.02)

The pro forma information provided does not purport to be indicative of actual
results of operations if the EKCO and GHC acquisitions had occurred on January
1, 1999, and is not intended to be indicative of future results or trends.

In connection with the acquisition of EKCO, the Company recorded an
extraordinary loss of $6.4 million, net of $4.3 million tax benefit, as a result
of the early retirement of debt.

(5) SUPPLEMENTAL BALANCE SHEET DATA

DECEMBER 31,
----------------------
Inventories (in thousands): 2001 2000
- -------------------------- ---------- ----------

Finished and in-process goods $ 137,965 $ 188,011
Raw materials and supplies 19,695 18,571
---------- ----------
$ 157,660 $ 206,582
========== ==========

Property, plant and equipment DECEMBER 31,
- ----------------------------- ----------------------
(in thousands): 2001 2000
- --------------- ---------- ----------
Land $ 3,145 $ 4,076
Buildings 91,512 89,789
Machinery and Equipment 327,250 305,576
---------- ----------
421,907 399,441
Accumulated Depreciation (318,710) (257,985)
---------- ----------
$ 103,197 $ $141,456
========== ==========

DECEMBER 31,
----------------------
Other current liabilities (in thousands): 2001 2000
- ----------------------------------------- ---------- ----------
Wages and employee benefits $ 17,117 $ 30,254
Accrued advertising and promotion 17,400 28,277
Accrued interest 9,345 11,601
Restructuring reserve 19,647 --
Other accrued expenses 33,259 33,953
---------- ----------
$ 96,768 $ 104,085
========== ==========

(6) RELATED PARTY TRANSACTIONS

The following transactions with related parties are included in the consolidated
statements of operations for the years ended December 31, 2001, 2000, and 1999
(in thousands):

YEAR ENDED DECEMBER 31,
------------------------
2001 2000 1999
------- ------- ------

Services provided by Corning, Inc. $ 2,570 $ 4,078 $7,210
Interest expense to Borden and an affiliate of the
Company's parent 2,117 1,489 358
Management fees and services paid to Borden 928 3,847 1,500
Professional services contributed by Borden 441 -- --
Loss on sale of receivables and related fees paid to
Borden -- 823 --
Preferred dividends payable to Borden 10,241 8,753 1,533
Preferred dividends payable to CCPC 5,214 4,631 4,114

Prior to April 1, 1998, the Company operated as a wholly-owned subsidiary of
Corning. In connection with the Recapitalization, Corning and the Company
entered into several agreements relating whereby Corning would provide goods and
services to the Company and would share certain facilities with the Company at
terms specified in the agreements. As of December 31, 2001, the Company has
assumed or outsourced a significant portion of the functions previously
performed by Corning. Management believes that the methodology used by Corning
to charge these costs is reasonable, but may not necessarily be indicative of
the costs that would have been incurred had these functions been performed by
the Company.

See Note 9 - Commitments and Contingencies regarding Corning's agreement to
indemnify the Company for certain environmental liabilities.

See Note 4 - Acquisitions regarding the Company's issuance of $150.0 million in
common stock to the Company's parent, payment of $10.6 million to the Company's
parent relating to the parent's sale of a portion of the EKCO businesses that
were not originally purchased by the Company, and a $71.5 million short-term
borrowing from an affiliate of the Company's parent to finance the EKCO
acquisition.

During the third quarter of 2000, Borden agreed to provide the Company a $40.0
million temporary revolving credit facility to assist in meeting working capital
requirements, capital expenditures, interest payments and scheduled principal
payments. The original maturity date of the Borden facility of December 31,
2000 was extended to March 31, 2004. Effective July 2, 2001, Borden increased
its line of credit to the Company from $40.0 million to $50.0 million and then
decreased the commitment to $25.0 million on August 16, 2001. The facility is
secured with an interest on the Company's assets that is second in priority
behind the interests securing the Amended and Restated Credit Agreement. The
default under the senior credit facility at December 31, 2001, also results in a
default under the Borden facility. Accordingly, Borden has the right to
accelerate the maturity of the $25.0 million credit facility. The Company does
not have the ability to fund or refinance the accelerated maturity of this
indebtedness (see Note 1, Nature of Operations and Basis of Presentation). The
1999 interest expense paid to Borden related to short-term interim financing of
$71.5 million at 9.4%, which was borrowed and repaid in the fourth quarter of
1999.

In connection with the Recapitalization, the Company and Borden entered into an
agreement pursuant to which Borden would provide management, consulting and
financial services to the Company. In the third quarter of 2001, the Company
and Borden amended the management agreement to provide for a variable payout,
not to exceed $2.5 million annually, based on Adjusted EBITDA. Under the
amended management agreement, no fee was due in 2001 as the Adjusted EBITDA
targets were not met. However, the Company recorded an expense of $0.4 million
related to the fair value of professional services contributed by Borden during
2001. The value of the contributed services is included in additional paid-in
capital in the accompanying financial statements. In 2000 and 1999, the
management fee was fixed at $2.5 and $1.5 million respectively. At December
31, 2001 and 2000, additional payables to Borden for expenses and other
contracted services of $3.6 million and $2.2 million, respectively, are included
in accounts payable.

On June 29, 2000, the Company entered into a receivables purchase agreement with
Borden. Under the agreement, the Company sold $50.5 million and $40.3 million
of net receivables in June and September, respectively, to Borden. The Company
recognized a loss on the sale of receivables and transaction related fees in the
amount of $0.8 million.

In the fourth quarter of 1999, the Company issued $50.0 million in 16%
cumulative junior preferred stock to Borden. The cumulative junior preferred
stock consists of two million shares with each share having a liquidation
preference of $25.00. The cumulative junior preferred stock provides for the
payment of cash dividends of $1.00 per share per quarter whether or not declared
by the Company and if certain financial ratios are satisfied. At December 31,
2001 and 2000, the Company had accrued $20.5 million and $10.3 million,
respectively, in preferred stock dividends. The dividends payable are recorded
as other long-term liabilities.

In conjunction with the Recapitalization on April 1, 1998, the Company issued
$30.0 million in 12% cumulative junior pay-in-kind stock to CCPC. The
cumulative junior preferred stock consists of 1.2 million shares with each share
having a liquidation preference of $25. The cumulative junior preferred stock
provides for the payment of dividends in cash, additional shares of junior
preferred stock or a combination thereof of $0.75 per share per calendar
quarter, if and when declared by the Company's board of directors. At December
31, 2001 and 2000, the Company had accrued $16.7 million and $11.5 million,
respectively, in preferred stock dividends. The Company intends to settle these
accrued dividends by issuing additional preferred shares. As such, the dividends
are recorded in preferred stock in the accompanying balance sheets.

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 previously issued by the Company in
the open market or by other means. As of December 31, 2001 and 2000, affiliates
have purchased an aggregate of $80.5 and $39.4 million of senior subordinated
notes in open market transactions. Additionally an affiliate of KKR acquired
$25.7 million of loans under the Company's senior credit facility during 2001.

The debt was purchased at a discount causing the Company to incur cancellation
of indebtedness income, for tax purposes only, of $38.2 million and $28.4
million ($13.4 million and $10.0 million tax effected) in 2001 and 2000,
respectively. This income was fully offset by current period losses in the
Company's income tax expense.

(7) STOCKHOLDERS' DEFICIT

In the fourth quarter of 1999, the Company's Board of Directors approved an
increase to the number of common shares authorized from 45 million to 75 million
and subsequently in the third quarter of 2000 increased the number to 80
million. At December 31, 2001, 2000, and 1999 the Company had 69.6 million,
67.4 million, and 66.9 million shares of common stock outstanding, respectively.

To finance the acquisition of EKCO and GHC, the Company issued 42.9 million
additional shares of common stock in the fourth quarter of 1999. The $0.01 par
common shares were issued at $3.50 to CCPC resulting in proceeds of $150
million.

In the third quarter of 2000, 540,000 additional shares of common stock were
issued to the Company's management. The $0.01 par common shares were issued at
$3.50, resulting in proceeds of $1.9 million.

In 2000, the Company sold shares of common stock to certain members of the
Company's management in exchange for notes secured by the shares. The
outstanding principal balances of these notes amounted to $0.2 million at
December 31, 2000 and are recorded as a reduction of stockholders' deficit. In
2001, 2.2 million additional shares of common stock were issued to the Company's
management. The $0.01 par common shares were issued at an average of $1.00, per
share, resulting in proceeds of $2.2 million.

In 2001 and 2000, the Company repurchased 376,000 and 360,000 common shares for
$1.2 million and $0.9 million, respectively, from prior members of the Company's
management upon their termination of employment. The shares were repurchased at
rates as defined in the management equity option plan. Repurchased shares are
classified as common stock held in treasury on the balance sheet.

At December 31, 2001 and 2000, the Company had 3.2 million shares of preferred
stock outstanding and had recorded $15.5 million and $13.4 million,
respectively, in preferred stock dividends, none of which have been paid.
Dividends required to be settled in cash totaling $20.5 million and $10.3
million in 2001 and 2000, respectively, are accrued as other long-term
liabilities. Dividends that will be paid in preferred stock totaling $16.7
million and $11.5 million in 2001 and 2000, respectively, have been accrued in
preferred stock.

(8) BORROWINGS

Debt outstanding at December 31, 2001 and 2000 is as follows:

(IN THOUSANDS)
-----------------------------------------------
2001 2000
----------------------- ----------------------
DUE WITHIN DUE WITHIN
LONG-TERM ONE YEAR LONG-TERM ONE YEAR
----------- ---------- --------- -----------

Senior credit facility, term loan, at an average rate of
8.79% and 9.88%, $194,000 originally due 2006,
$98,000 originally due 2007 $ -- $ 292,000 $ 292,000 $ 3,000

Senior credit facility, revolving line of credit, at an
average rate of 7.67% and 9.13%, originally due
2005 -- 292,000 264,800 --

Borden revolving credit facility, at an average rate of
8.34% and 12.5%, originally due 2004 -- 25,000 -- 6,100

9 5/8% Series B Senior Subordinated Notes, originally
due 2008 -- 200,000 200,000 --

9 1/4% Series B Senior Subordinated Notes due 2006 2,877 -- 2,877 --

Industrial Revenue Bonds, at an average rate of 5.81%
and 5.69% 5,963 643 6,848 571

Other debt -- -- 3 64
----------- ---------- --------- -----------

Total Debt $ 8,840 $ 809,643 $ 766,528 $ 9,735
=========== ========== ========= ===========

On April 12, 2001, the Company entered into the Amended and Restated Credit
Agreement (the "Amended Credit Agreement"), which provided for an additional
secured revolving credit facility of $25.0 million maturing on March 31, 2004.
The Amended Credit Agreement increased pricing on the credit facilities and
provides for a first priority lien on substantially all of the Company's assets
and its subsidiaries' assets. This agreement waived the defaults under the
coverage ratio and leverage ratios covenants for the quarter ended December 31,
2000, and amended future financial covenants beginning March 31, 2001. 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 Adjusted EBITDA, a ratio of debt to Adjusted EBITDA
and Adjusted EBITDA to cash interest expense.

The general U.S. economic downturn experienced during 2001 significantly
impacted consumer confidence which adversely impacted customer purchase
behavior. This economic downturn has affected and is expected to continue to
negatively impact the Company. At December 31, 2001, the Company was not in
compliance with certain financial covenants contained in the Amended Credit
Agreement. Specifically, the Company did not meet the minimum Adjusted EBITDA,
the ratio of debt to Adjusted EBITDA and the ratio of Adjusted EBITDA to cash
interest expense covenants. Accordingly, the holders of the Company's senior

credit facilities have the right to accelerate the maturity of all of the
outstanding indebtedness under the respective agreements, which together totals
approximately $584.0 million. The Company does not have the ability to fund or
refinance the accelerated maturity of this indebtedness. As a result, all of the
related debt has been classified as a current liability as of December 31, 2001
(see Note 1, Nature of Operations and Basis of Presentation).

During the third quarter of 2000, Borden agreed to provide the Company a $40.0
million temporary revolving credit facility to assist in meeting working capital
requirements, capital expenditures, interest payments and scheduled principal
payments. The original maturity date of the Borden facility of December 31,
2000 was extended to March 31, 2004. Effective July 2, 2001, Borden increased
its line of credit to the Company from $40.0 million to $50.0 million and then
decreased the commitment to $25.0 million on August 16, 2001. The facility is
secured with an interest on the Company's assets that is second in priority
behind the interests securing the Amended Credit Agreement. The default under
the senior credit facility as of December 31, 2001, also results in a default
under the Borden facility and, therefore, the Company was in default under the
Borden facility at December 31, 2001. Accordingly, Borden has the right to
accelerate the maturity of the $25.0 million credit facility. The Company does
not have the ability to fund or refinance the accelerated maturity of this
indebtedness. As a result, all of the related debt has been classified as a
current liability as of December 31, 2001.

The defaults under the senior credit facility and Borden facility as of December
31, 2001, also result in a default under the Series B Senior Subordinated Notes.
As a result, the subordinated bondholders have the right to accelerate the
maturity of all of the $200.0 million Notes. The Company does not have the
ability to fund or refinance the accelerated maturity of this indebtedness. As
a result, all of the related debt has been classified as a current liability as
of December 31, 2001.

At December 31, 2001, $0.4 million was available under the existing revolving
credit facilities, net of $7.9 million in commitments associated with
outstanding letters of credit (see Note 9 - Commitments and Contingencies).

The Company is party to an interest rate swap agreement to hedge against
interest rate exposure of variable rate debt. The notional amount of the swap
equals the face value of the bond it hedges. The agreement provides for the
payment or receipt of interest to or from a counterparty based on the spread
between a fixed rate paid by the Company (6.295% at December 31, 2001 and 2000)
and the floating LIBOR rate paid by the bank (2.31% and 6.76% at December 31,
2001 and 2000, respectively). The swap agreement is settled and the LIBOR rate
is reset on a quarterly basis. The Company recorded additional interest expense
of $0.2 million for the year ended December 31, 2001.

On October 25, 1999, the Company borrowed $71.5 million from Borden to assist in
the financing of the acquisitions of EKCO and GHC. On November 15, 1999, the
Company added a term loan of $100 million to its senior credit facilities, the
proceeds of which were used to refinance the indebtedness, including that with
Borden, incurred in connection with these acquisitions.

In connection with the acquisition of EKCO, the Company assumed $3.4 million in
9 Series B Senior Notes and $2.1 million in industrial revenue bonds. At
December 31, 2001 and 2000, the balance of the EKCO 9 Series B Senior Notes
and industrial revenue bonds were $2.9 million and $1.8 million, respectively.
With the exception of the asset sale covenant, each of the principal covenants
in the senior notes relating to the EKCO senior notes is no longer in effect.

Long-term debt maturing in each of the years subsequent to December 31, 2001 (in
thousands) is as follows:

2002 $ 809,643
2003 497
2004 140
2005 4,060
2006 2,953
2007 - 2009 1,190
----------
818,483
Less: current maturities (809,643)
----------
Long-term debt $ 8,840
==========

The above table reflects the acceleration of the debt in default as of December
31, 2001. Based on quoted market interest rates and quoted market prices
currently available to the Company for loans with similar terms and maturities,
the fair value of loans payable beyond one year was $9.1 million at December 31,
2001.

(9) COMMITMENTS AND CONTINGENCIES

OPERATING LEASES

The Company is a party to certain non-cancelable lease agreements, which expire
at various dates through 2010. Minimum rental commitments outstanding at
December 31, 2001 (in thousands) are as follows:

OPERATING LEASES CAPITAL LEASES
----------------- ---------------

2002 $ 23,755 $ 1,121
2003 18,217 373
2004 12,469 59
2005 9,005 --
2006 6,648 --
2007 and thereafter 28,753 --
----------------- ---------------
Net minimum lease commitments $ 98,847 $ 1,553
================= ===============

Rental expense was $25.4 million, $25.1 million, and $27.0 million for the years
ended December 31, 2001, 2000, and 1999, respectively. The liability for
capital lease obligations is recorded in other current and other long-term
liabilities in the Company's financial statements.

LITIGATION AND ENVIRONMENTAL MATTERS

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. It is reasonably possible, however, that some
matters could be decided unfavorably to the Company and could require the
Company to pay damages, or make other expenditures in amounts that cannot be
estimated as of December 31, 2001.

The Company has announced its intention to shut down the Martinsburg facility as
part of a broader program of restructuring activities (See Note 13-Restructuring
and Rationalization Programs) and intends to sell the building and assets
related to this property. The Company is currently working with environmental
experts and representatives from state agencies to assess potential remediation
requirements. The Company has also contacted Corning indicating it will seek
reimbursement of proposed expenditures under the environmental indemnification
agreement mentioned below.

From time to time, the Company has had claims asserted against it by regulatory
agencies or private parties for environmental matters relating to the generation
or handling of hazardous substances by the Company or its predecessors, and the
Company has incurred obligations for investigations or remedial actions with

respect to certain of these matters. The Company has accrued approximately $3.8
million at December 31, 2001 for probable environmental remediation and
restoration liabilities. This is management's best estimate of these
liabilities. Based on currently available information and analysis, the Company
believes that it is reasonably possible that costs associated with such
liabilities or as yet unknown liabilities may exceed current reserves in amounts
that cannot be estimated as of December 31, 2001. There can be no assurance
that activities at these or any other facilities may not result in additional
environmental claims being asserted against the Company or additional
investigations or remedial actions being required.

LETTERS OF CREDIT

In the normal course of business and as collateral for performance, the Company
is contingently liable under standby and import letters of credit totaling $7.9
million as of December 31, 2001. In the Company's past experience, no claims
have been made against these financial instruments. As a result, management
does not expect any material losses to result from these off-balance sheet
instruments and therefore estimates their fair value to be zero.

(10) EMPLOYEE RETIREMENT PLANS

Most U.S. employees of the Company are covered under a non-contributory defined
benefit pension plan. Pension plan benefits are generally based on years of
service and/or compensation. The Company's funding policy is to contribute
annually an amount determined jointly by management and its consulting actuaries
that is not less than the minimum amount required by the Employee Retirement
Income Security Act of 1974. Plan assets are comprised principally of publicly
traded debt and equity securities.

On July 27, 2001, the WKI Board of Directors approved a resolution to adopt a
defined contribution plan for all non-union employees. Benefit accruals under
the World Kitchen Inc. Pension Plan for the former Corning Consumer Products
Company salaried and General Housewares Corp participants were frozen as of
December 31, 2001, with the exception of those eligible for five years of
continued accruals, subject to offsets from the defined contribution plan.

The Company participates in Borden's non-qualified Supplemental Pension Plan
(Supplemental Plan), pursuant to which it will pay to certain executives,
including each of the named executive officers, amounts approximately equal to
the difference between the benefits provided for under the WKI pension plan and
benefits which would have been provided notwithstanding the limitations on
benefits which may be provided under tax-qualified plans, as set forth in the
Internal Revenue Code.

The Company's postretirement benefit plan provides certain medical and life
insurance benefits for retired employees. Substantially all U.S. employees of
the Company may become eligible for these benefits if they fulfill eligibility
requirements as specified by the plan. On July 27, 2001, the WKI Board of
Directors approved for non-union employees (1) the elimination of retiree life
insurance effective for retirements after April 1, 2003, and (2) the phase out
of company cost sharing for retiree medical by January 1, 2005.

Certain of the Company's employees also participate in a Borden sponsored
retirement savings plan. Charges to WKI's operations for matching contributions

in 2001, 2000, and 1999 amounted to $3.3 million, $3.3 million, and $3.0
million, respectively.

Relevant data for the Company's pension and postretirement medical benefit plans
at September 30, 2001 and 2000, respectively, is as follows (in thousands):

OTHER
PENSION BENEFITS POSTRETIREMENT BENEFITS
------------------- ---------------------
2001 2000 2001 2000
--------- -------- ---------- ---------

CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 71,013 $54,979 $ 42,992 $ 36,897
Service cost 5,775 5,037 1,685 2,995
Interest cost 5,241 4,229 2,999 2,864
Plan participants' contributions 113 250 120 86
Actuarial (gain) loss 944 (828) 3,625 957
Benefits paid (3,286) (5,125) (1,235) (874)
Amendments -- 12,615 (5,725) --
Curtailments -- 85 (11)
Settlements 1,100 (229) (1,000) 78
Special termination benefit (242) -- -- --
--------- -------- ---------- ---------
Benefit obligations at end of year 80,658 71,013 43,461 42,992
--------- -------- ---------- ---------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning
of year 66,187 58,895 -- --
Actual return on plan assets (9,621) 4,750 -- --
Employer contributions 398 4,265 1,115 788
Plan participants' contributions 113 250 120 86
Benefits paid (3,286) (5,125) (1,235) (874)
Changes in plan year-end -- 3,548 -- --
Divestitures and settlements (242) (396) -- --
--------- -------- ---------- ---------
Fair value of plan assets at end of year 53,549 66,187 -- --
--------- -------- ---------- ---------
FUNDED STATUS OF PLAN
Funded status (27,109) (4,826) (43,461) (42,992)
Unrecognized net actuarial (gain)/loss 11,090 (4,875) 2,460 697
Unrecognized prior service cost 8,857 12,314 (3,575) --
Unrecognized initial net benefit asset (194) -- -- --
Post September 30th contributions 110 17 36 20
--------- -------- ---------- ---------
Net amount recognized (7,246) 2,630 (44,540) (42,275)
--------- -------- ---------- ---------
AMOUNTS RECOGNIZED IN STATEMENT OF
FINANCIAL POSITION CONSIST OF
Prepaid benefit cost 897 3,103 -- --
Accrued benefit liability (25,245) (473) (44,540) (42,275)
Intangible asset 8,857 -- -- --
Accumulated other comprehensive income 8,245 -- -- --
--------- -------- ---------- ---------
Net amount recognized $ (7,246) $ 2,630 $ (44,540) $(42,275)
========= ======== ========== =========

OTHER
PENSION BENEFITS POSTRETIREMENT BENEFITS
------------------- ---------------------
2001 2000 2001 2000
--------- -------- ---------- ---------
WEIGHTED AVERAGE ASSUMPTIONS
Discount rate 7.25% 7.73% 7.25% 7.70%
Expected return on plan assets 8.25 8.51 NA NA
Rate of compensation increase 4.50 4.54 4.50 4.50
Assumed health care trend rate:
initial NA NA 8.75 7.75
ultimate NA NA 5.25 5.75

COMPONENTS OF NET PERIODIC BENEFIT COST OTHER
(IN THOUSANDS) PENSION BENEFITS POSTRETIREMENT BENEFITS
------------------- ---------------------
2001 2000 2001 2000
--------- -------- ---------- ---------
Service cost $ 5,775 $ 5,037 $ 1,685 $ 2,995
Interest cost 5,241 4,229 2,999 2,864
Expected return on plan assets (5,360) (5,278) -- --
Amortization of unrecognized transition
obligation (9) -- -- --
Amortization of prior service cost 800 300 (150) --
Recognized net actuarial loss (gain) 4 (13) -- --
Settlement/Curtailment loss (gain) 3,880 -- (2,192) --
--------- -------- ---------- ---------
Net periodic benefit cost $ 10,331 $ 4,275 $ 2,342 $ 5,859
========= ======== ========== =========

The consolidated balance sheet includes prepaid pension cost for plans in which
assets exceed accumulated benefits and accrued benefit costs for plans in which
accumulated benefits exceed assets. The funded status of the Company's plans
and the amounts of prepaid and accrued pension cost as of September 30, 2001 and
2000 are provided below.

PLANS IN WHICH PLANS IN WHICH
ASSETS EXCEED ACCUMULATED BENEFITS
ACCUMULATED BENEFITS EXCEED ASSETS
--------------------- ----------------------
2001 2000 2001 2000
--------- ---------- ---------- ----------

Accumulated
benefit obligation $ -- $ 8,515 $ 80,658 $ 62,498
Fair value of plan assets -- (8,804) (53,549) (57,383)
--------- ---------- ---------- ----------
(Prepaid) accrued pension cost $ -- $ (289) $ 27,109 $ 5,115
========= ========== ========== ==========

The consolidated postretirement benefit obligation attributable to the Company's
workforce is determined by application of the terms of health care and life
insurance plans, together with relevant actuarial assumptions and health care
cost trend rates. The annual rate of medical inflation used to determine the
year-end results was assumed to be 5.25% for pre-65 benefits and 8.75% for
post-65 benefits for 2002, decreasing gradually to a net rate of 5.25% per year
at 2008 and remaining at that level thereafter. Assumed health care cost trend
rates have a significant effect on the amounts reported for health care plans.
A one-percentage point change in the assumed health care cost trend rates would
have the following effects (in thousands):

ONE-PERCENTAGE ONE-PERCENTAGE
POINT INCREASE POINT DECREASE
--------------- ----------------

Effect on total service cost and interest cost components $ 1,052 $ (984)
Effect on postretirement benefit obligation $ 8,698 $ (6,971)

(11) STOCK COMPENSATION PLANS

Certain members of management were granted options to purchase common stock in
WKI, with exercise prices ranging from $1.00 per share to $5.00 per share under

the Amended and Restated 1998 Stock Purchase and Option Plan for Key Employees
(the "Plan"). Options granted were granted at fair value, vest over five years,
and expire ten years from the date of grant.

During 2001, certain members of management were granted 6,550,000 options to
purchase common stock in WKI, with an exercise price of $1 per share under the
Plan. Of these options 1,300,000 are considered performance options, subject
to WKI achieving certain operating metrics based upon Adjusted EBITDA
("Performance Options"), and the remaining 5,250,000 options vest over a five
year period from the date of grant ("Time Options"). At December 31, 2001, the
Company did not achieve the minimum Adjusted EBITDA level required for vesting
of the Performance Options, and 50% of the options were cancelled. The
remaining 50% of the options are subject to WKI meeting an Adjusted EBITDA
target at December 31, 2002. Both the Performance Options and the Time Options
are accounted for as variable awards and expire ten years from the date of
grant.

Had compensation cost for the Plan been determined based on the fair value at
the grant date consistent with the provisions of SFAS No. 123, WKI's net loss
applicable to common stock for the year ended December 31, 2001 and 2000 would
not have been significantly effected.

At December 31, 2001, there were 8,172,713 options outstanding and no options
available for future grants under the Plan. As of December 31, 2001 and 2000,
there were 770,143 and 603,200 options that were exercisable, respectively.
Options were forfeited upon the termination of employment of certain prior
members of the Company's management.

WKI common stock is not publicly traded and the Company has not declared
dividends on a regular basis. There were no options granted in 1999. The fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions used from
grants:

2001 2000
-------- --------

Risk-free interest rate 3.9% 5.9%
Volatility factor 54% 23%
Weighted average expected life 7 years 7 years

2001 2000
-------------------- ----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
----------- ------- ----------- ---------

Options outstanding, beginning
of year: 3,661,500 $ 4.12 2,532,000 $ 5.00
Options granted 6,550,000 1.00 2,153,500 3.50
Options forfeited (2,038,787) 3.23 (1,024,000) 5.00
----------- ------- ----------- ---------
Options outstanding, end of
year: 8,172,713 $ 1.84 3,661,500 $ 4.12
=========== ======== ========== =========

The following table summarizes information about fixed-price stock options at
December 31, 2001:

Number Weighted Average Weighted Average
Exercise Price Outstanding Remaining Life Exercise Price
- --------------- ----------- ---------------- -----------------

$ 1.00 5,900,000 9.19 years $ 1.00
3.50 1,483,713 8.75 years 3.50
5.00 789,000 6.49 years 5.00
- --------------- ----------- ---------------- -----------------
$ 1.00 - 5.00 8,172,713 8.85 years $ 1.84
- --------------- ----------- ---------------- -----------------

(12) INCOME TAXES

The Company files a consolidated U.S. federal tax return with its parent and
certain of its domestic subsidiaries.

YEAR ENDED DECEMBER 31,
---------------------------------
2001 2000 1999
---------- ---------- ---------

LOSS BEFORE TAXES ON INCOME (IN THOUSANDS)

U.S. Companies $(133,534) $(101,795) $(77,545)
Foreign companies 2,362 3,425 2,445
---------- ---------- ---------
Loss before taxes on income $(131,172) $ (98,370) $(75,100)
========== ========== =========

The components of income tax expense (benefit) consist of the following items:

YEAR ENDED DECEMBER 31,
----------------------------
2001 2000 1999
-------- ------- ---------
CURRENT AND DEFERRED TAX EXPENSE (BENEFIT): (IN THOUSANDS)

Current:
U.S. $ -- $ -- $ --
State and municipal -- -- 1,072
Foreign 1,600 2,570 1,092
Deferred:
U.S. -- 41,732 (37,775)
State and municipal -- 7,154 (11,895)
Foreign -- -- 252
-------- ------- ---------
Net tax expense (benefit) $ 1,600 $51,456 $(47,254)
======== ======= =========

The income tax provision (benefit) at the effective tax rate differs from the
income tax provision at the U.S. federal statutory tax rate in effect during the
years ended December 31, 2001, 2000, and 1999 for the following reasons:

YEAR ENDED DECEMBER 31,
-------------------------
1999 2000 1999
------- ------- -------

EFFECTIVE TAX RATE RECONCILIATION:

U.S. statutory tax rate (35.0)% (35.0)% (35.0)%
Increase (reduction) in income taxes resulting from:
State taxes, net of federal benefit (6.0) (6.0) (6.0)
Amortization of intangible assets 1.6 2.1 --
Disallowed interests expense 10.2 10.2 --
Other 0.2 -- 1.2
Valuation allowance 29.0 28.7 --
Taxes on foreign subsidiary and FSC earnings 1.2 2.6 0.6
Net change in deferred tax assets due to valuation
allowances -- 49.7 (23.7)
------- ------- -------
Effective tax rate 1.2 % 52.3% (62.9)%
======= ======= =======

For U.S. federal income tax purposes, the Company has elected to treat the
Recapitalization as an asset acquisition by making a Section 338(h)(10)
election. As a result, there is a difference between the financial reporting
and tax basis of the Company's assets. The difference results in future
deductible amounts for tax purposes, which creates a deferred tax asset for
financial reporting purposes. These assets have been fully reserved as of
December 31, 2001.

Affiliates of the Company purchased a portion of the Company's senior
subordinated notes on the open market at a discount. This purchase caused the
Company to incur cancellation of indebtedness income of $38.2 million and $28.4
million ($13.4 million and $10.0 million tax effected) in 2001 and 2000,
respectively.

As discussed in Note 4, for financial reporting purposes, the acquisitions of
EKCO and GHC were accounted for using the purchase method of accounting. As a
result, there is a difference between the financial reporting and tax basis of
the assets acquired in these companies.

The tax effects of temporary differences and carry forwards that give rise to
the deferred tax assets and liabilities at December 31, 2001and 2000 are
comprised of the following:

DECEMBER 31,
----------------------
2001 2000
---------- ----------
(in thousands)

Property and equipment and intangible assets $ 23,369 $ 40,228
Postretirement, pension and other employee benefits 19,227 16,966
Loss and tax credit carry forwards 113,233 66,153
Inventory reserves 12,696 21,852
Other
Bad debt 9,363 11,142
Restructuring reserve 14,284 --
Other 12,907 19,241
---------- ----------
Gross deferred tax assets 205,079 175,582
Deferred tax assets valuation allowance (205,079) (175,582)
---------- ----------
Deferred tax assets $ -- $ --
========== ==========

The net change in the total valuation allowance for years ended December 31,
2001 and 2000 is an increase of $29.5 million and an increase of $101.2 million,
respectively. A valuation allowance is recorded when it is more likely than not
that some or all of the deferred tax assets will not be realized. Negative
evidence, such as cumulative losses in recent years, suggests that a valuation
allowance is needed. Based upon cumulative losses in the current and immediate
two proceeding years, the Company determined that a full valuation allowance of
$205.1 million and $175.6 million was warranted in 2001 and 2000, respectively.

Net operating loss carryforwards of approximately $275 million are available to
offset domestic taxable income, if any, in future years. These net operating
losses begin to expire in 2018. The net operating losses have been fully
reserved at December 31, 2001.

The Company currently provides income taxes on the earnings of foreign
subsidiaries and associated companies to the extent they are currently taxable
or expected to be remitted. Taxes have not been provided on approximately $15.8
million of accumulated foreign unremitted earnings, which are expected to remain
invested indefinitely. If remitted, the additional tax liability on these
earnings would be approximately $0.8 million.

(13) RESTRUCTURING AND RATIONALIZATION PROGRAMS

2001 RESTRUCTURING AND RATIONALIZATION PROGRAMS

During 2001, the WKI Board of Directors approved plans to restructure several
aspects of the Company's manufacturing and distribution operations. In
addition, the Company implemented several employee headcount reduction
initiatives as part of the continuing business realignment and integration

efforts begun in 1999 with the acquisitions of EKCO and GHC. These programs
resulted in a restructuring charge of $51.9 million, which was recorded during
2001 on a separate line within operating income.

In addition, $18.5 million of rationalization and other charges were recorded
related to the implementation of these programs. These charges arise as a
result of the Company's restructuring programs and are excluded in the
computation of the Company's EBITDA under the Amended and Restated Credit
Agreement which provides for the achievement of quarterly EBITDA targets.
Generally, these costs were recorded as incurred in operating income ($13.2
million in selling, general and administrative expenses and $5.3 million in cost
of sales.)

The restructuring programs included the following initiatives:

(1) The outsourcing of Corningware and Visions product lines in an effort
to reduce costs while maintaining and enhancing product quality and
customer satisfaction. This program will require the shutdown of the
Martinsburg, West Virginia facility (Martinsburg) that is scheduled to
occur in the first quarter of 2002. Closing this facility will
eliminate under-utilized assets and reduce fixed costs while
optimizing the Company's leverage buying opportunities.

(5) The consolidation of certain international sales and marketing and
distribution operations in Canada and the UK, which occurred at the
end of 2001 and in January 2002 respectively.

RESTRUCTURING CHARGES
- ---------------------

Restructuring details are as follows (in thousands):

Liability at Restructuring Liability at
December 31, Expense Reclassifications December 31,
2000 2001 Cash Paid and Other 2001
------------- -------------- ------------------- ----------------- ------------

Disposal of assets $ -- $ 26,523 $ (1,243) $ (22,937) $ 2,343
Employee
Termination
costs -- 21,646 (5,628) (2,366) 13,652
Other exit costs -- 3,719 (454) 387 3,652
------------- -------------- ------------------- ----------------- ------------
$ -- $ 51,888 $ (7,325) $ (24,916) $ 19,647
============= ============== =================== ================= ============

DISPOSAL OF ASSETS
As part of the restructuring initiative to close or streamline manufacturing,
distribution and administrative locations, an impairment charge of $26.5 million
was recorded to reflect net realizable value for fixed assets to be sold or
scrapped of which approximately $15.4 million relates to the anticipated closure
and sale of the Martinsburg manufacturing facility. The charge represents the
difference between book value and estimated fair value of the facility less
costs to sell the facility. The Wauconda manufacturing facility was sold in
2001 for proceeds of $1.6 million resulting in a $3.2 million impairment charge.
Additionally the Company's Clinton facility was sold in 2001 for $1.8 million
resulting in an impairment charge of $1.7 million in 2001. The remainder of the
charge was largely to write down leasehold improvements and equipment to scrap
values as part of the manufacturing, distribution center and administrative
space consolidation. Management judgment is involved in estimating the tangible
assets' fair value; accordingly, actual results could vary significantly from
such estimates. At December 31, 2001, $24.1 million of the impairment charge
had either been settled through the sale of the facilities or recorded against
the specific assets involved or was paid.

EMPLOYEE TERMINATION COSTS
As part of the restructuring initiative the Company recorded $21.6 million
related to employee termination costs. The program will impact a total of
approximately 750 employees - 450 related to plant shutdowns, 75 related to
distribution center consolidation and 225 related to business and staff support
function redesign. As of December 31, 2001, approximately 350 employees have
been terminated. Included in the charge is a net pension and post retirement
benefit expense of $2.4 million, which resulted from the terminations. This
reserve was recorded in other long-term liabilities on the balance sheet. The
Company expects to pay the majority of the termination costs in 2002.

OTHER EXIT COSTS
As part of the restructuring initiative the Company recorded $3.7 million of
other exit costs primarily related to lease and contract cancellation expenses,
legal expenses and other shut down costs associated with the closure and
anticipated sale of facilities.

RATIONALIZATION AND OTHER CHARGES
- ---------------------------------

BUSINESS REDESIGN COSTS
The Company continues to realign its administrative, manufacturing and sourcing
strategies to be more competitive. In 2001, the Company incurred $10.2 million
of expenses related to consulting, outsourced product development and
relocation, of which $8.5 million has been paid in 2001 and $1.7 million remains
in other current liabilities at December 31, 2001.

OTHER PROGRAM RELATED CHARGES
The Company recorded an additional $8.3 million charge related to other
activities, which occurred relative to the decision to shutdown and consolidate
manufacturing and distribution facilities. These costs include an environmental

accrual related to clean-up activities prior to the sale of Martinsburg and the
write down of excess inventories related to the outsourcing of the manufacture
of key brands. During 2001, $2.1 million was paid and $0.2 million of excess
inventories were disposed. At December 31, 2001, $2.8 million and $3.2 million
remained in other current liabilities and inventory reserves, respectively.

2000 AND 1999 RESTRUCTURING PROGRAMS

Integration related expenses were $26.6 million and $9.2 million in 2000 and
1999, respectively. The 2000 expenses primarily consist of system
implementation costs, employee compensation arrangements and other benefits,
consulting services and other integration costs. The 1999 expenses related to
the integration of the EKCO and GHC businesses and primarily consist of legal
fees, accounting and tax services, employee compensation arrangements and other
benefits, facility consolidation and other integration costs.

In the first quarter of 1999, the Company initiated a plan to restructure its
manufacturing and supply organization as part of a program designed to reduce
costs through elimination of under-utilized capacity, unprofitable product lines
and increased utilization of the remaining facilities. The restructuring
includes the discontinuation of the commercial tableware product line and
closure of the related portion of the Company's manufacturing facility in
Charleroi, Pennsylvania. In order to optimize the utilization of the Charleroi
facility, the Company has moved Corelle(R) cup production to its Martinsburg,
West Virginia facility and third party suppliers. In addition, the Company
terminated its supply contract with Corning's Greenville, Ohio facility and
Pyrex (R) production was consolidated at the Charleroi facility. Additionally,
the Company has discontinued manufacturing and distributing rangetop cookware at
its facility in Clinton, Illinois. Future supply of rangetop cookware will be
sourced from third party manufacturers.

In 1999, the Company recorded a net charge of $69.0 million to cover the cost of
this reorganization. The majority of the charge related to asset disposals,
however, cash charges are expected to approximate $18.0 million over the life of
the plan. In the fourth quarter of 1999, the Company reversed $7.2 million of
its original $76.2 million restructuring charge taken in the first quarter of
1999. The reversal results from an increase in the anticipated proceeds from
the idle equipment, land and buildings and lower than expected exit costs
associated with the shutdown of the facility.

Restructuring details for 1999 activity are as follows (in thousands):

Balance Balance at
December 31, Restructuring Cash December 31,
1998 Expense Paid Reclassification 1999
-------------- ------------------- --------------- ------------------ --------------

Disposal of assets $ -- $ 51,400 $ -- $ -- $ --
Employee severance
& termination -- 14,658 (7,758) (2,400) 4,500
Other exit costs -- 2,926 (2,426) -- 500
-------------- ------------------- --------------- ------------------ --------------
$ -- $ 68,984 $ (10,184) $ (53,800) $ 5,000
============== =================== =============== ================== ==============

Restructuring details for 2000 activity are as follows (in thousands):

Balance Balance at
December 31, Restructuring Cash December 31,
1999 Expense Paid Reclassification 2000
-------------- ------------------- --------------- ------------------ --------------

Employee severance
& termination $ 4,500 $ -- $ (3,407) $ (1,093) $ --
Other exit costs 500 -- (500) -- --
-------------- ------------------- --------------- ------------------ --------------
$ 5,000 $ -- $ (3,907) $ (1,093) $ --
============== =================== =============== ================== ==============

The tangible assets of the Clinton, Illinois facility and the commercial
tableware product line have been adjusted to net realizable value. All
intangible asset carrying values associated with the Clinton facility and the
commercial tableware product line have been written off. The tangible and
intangible assets written off totaled $36.1 million and $12.3 million,
respectively. As part of the restructuring initiative, approximately 600
employees had their employment terminated. The termination resulted in a pension
and postretirement benefit charge of $2.4 million. The remaining $1.1 million
was reclassified to other accrued expenses.

(14) SEGMENT INFORMATION

The Company manages its business on the basis of one reportable segment-the
worldwide manufacturing and marketing of consumer kitchenware products. The
Company believes its operating segments have similar economic characteristics
and meet the aggregation criteria of SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." The Company markets its products
chiefly in the United States but also has significant business in international
markets such as Canada, Asia, Australia, and Latin America. The Company is
exposed to the risk of changes in social, political, and economic conditions
inherent in foreign operations and the value of its foreign assets are affected
by fluctuations in foreign currency exchange rates. Net sales by geographic
area are presented by attributing revenues from external customers on the basis
of where the products are sold. In 2001, 2000, and 1999, Wal-Mart Stores, Inc.,
accounted for approximately 21%, 15%, and 16%, respectively, of the Company's
gross sales. Accounts receivable from Wal-Mart Stores, Inc. was approximately
$14 million and $20 million at December 31, 2001 and 2000, respectively.

The following geographic information is presented in accordance with SFAS No.
131.

YEAR ENDED DECEMBER 31,
----------------------------
2001 2000 1999
-------- -------- --------
(IN THOUSANDS)

NET SALES:
- ----------
United States $590,243 $665,596 $511,961
Canada 68,641 67,490 40,460
-------- -------- --------
North America 658,884 733,086 552,421
Other International 86,988 94,495 81,113
-------- -------- --------
Total $745,872 $827,581 $633,534
======== ======== ========

DECEMBER 31,
------------------
2001 2000
-------- --------
(IN THOUSANDS)

LONG-LIVED ASSETS:
- ------------------
United States $472,185 $543,272
Canada 3,959 4,292
-------- --------
North America 476,144 547,564
Other International 3,604 4,104
-------- --------
Total $479,748 $551,668
======== ========

(15) SUBSEQUENT EVENTS

On March 28, 2002 the Company obtained temporary waivers of its covenant
defaults from its bank syndicate and Borden. By their terms, these waivers
terminate on the earliest of (i) May 30, 2002, (ii) the date on which the cash
level falls below $20.0 million or the Company delivers to the agent for the
bank syndicate a certificate indicating that it projects its cash level to fall
below $20 million, (iii) the date on which the Company makes any payment in
respect of interest or principal on the 9 5/8% Notes, (iv) the date on which the
Company informs its agent for the bank syndicate that the Company intends to
make such a payment on the 9 5/8% Notes, and (v) the date the Company prepays
any loans under the Borden Facility. In addition, the Borden waiver terminates
on the first date the lenders or the Administrative Agent under the Amended
Credit Agreement take any action to accelerate the loans thereunder or to
exercise any other remedies under the "Loan Documents."

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
WKI Holding Company, Inc.

We have audited the accompanying consolidated balance sheets of WKI Holding
Company, Inc. and Subsidiaries (the "Company") as of December 31, 2001 and 2000,
and the related consolidated statements of operations, changes in stockholders'
equity (deficit), and cash flows for each of the three years in the period ended
December 31, 2001. Our audits also included the financial statement schedule
listed in Item 14. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2001
and 2000, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to
the consolidated financial statements, the Company's inability to comply with
the covenants of its credit facilities, recurring losses from operations, and
stockholders' deficit raise substantial doubt about its ability to continue as a
going concern. Management's plans concerning these matters are also described
in Note 1. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

DELOITTE & TOUCHE LLP
McLean, Virginia
March 28, 2002

PART III

ITEM 16 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------------------------------

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information regarding the executive officers and
directors of the Company.

NAME AGE POSITION
- ------------------ --- --------

Steven G. Lamb 45 Director, President and Chief Executive Officer
C. Robert Kidder 57 Director and Chairman of the Board
Michael M. Calbert 39 Director
Brian F. Carroll 30 Director
William H. Carter 48 Director
Kevin M. Kelley 44 Director
Nancy A. Reardon 48 Director
Scott M. Stuart 42 Director
Joseph W. McGarr 50 Senior Vice President & Chief Financial Officer
Division and Supply Chain Management
James A. Sharman 42 Senior Vice President, Household Products
Raymond J. Kulla 55 Vice President, Secretary and General Counsel
Alex Lee 41 President, OXO International
Jeff Mei 58 Vice President, Asia Pacific

Steven G. Lamb was elected Director, President and Chief Executive Office of the
Company effective January 18, 2001. Prior to that he was President and Chief
Operating Officer of CNH Global N.V., created in November 1999 from the merger
of Case Corporation and New Holland N.V. Mr. Lamb held the same title with Case
from October 1997. Prior to that he had been Executive Vice President and Chief
Operating Officer of Case from 1995. Mr. Lamb is a member of the Executive
Committee.

C. Robert Kidder was elected a Director and Chairman of the Board of World
Kitchen, Inc. on April 1, 1998. He was elected a Director, Chairman of the
Board and Chief Executive Officer of Borden, Inc. on January 10, 1995, and
continues in those positions. Mr. Kidder is a director of Borden Chemical, Inc.
and Elmer's Products, Inc. He is also director of Electronic Data Systems
Corporation and Morgan Stanley Dean Witter & Co. Mr. Kidder is a member of the
Executive Committee.

Michael M. Calbert became a Director of the Company on August 24, 2000 and
joined Kohlberg Kravis Roberts & Co. in 2000. Prior to joining Kohlberg Kravis
Roberts & Co., he was Senior Vice President and Chief Financial Officer of
Randall's Food Markets, Inc., a portfolio company purchased by Kohlberg Kravis
Roberts & Co. in June 1997 and sold to Safeway Inc., in September 1999. He
began his career with Randall's as a Senior Vice President, Corporate
Development, where he was responsible for various initiatives including the
integration of a major acquisition, implementation of a distribution network and
the design and implementation of a comprehensive performance management system.
From 1985 to 1994, he was a management consultant with Arthur Andersen Worldwide
where he was involved in various strategic, systems and process design projects
for a broad range of industries. He is also a director of Shoppers Drug Mart.
Mr. Calbert is Chairman of the Audit Committee and is a member of the Executive
Committee

Brian F. Carroll was elected a Director of the Company in April 2000. He has
been an Executive of Kohlberg Kravis Roberts & Co. since July 1999. From
September 1997 to June 1999 he attended the Stanford University Graduate School
of Business. From March 1995 to August 1997 he was an Executive of Kohlberg
Kravis Roberts & Co. Prior thereto, he was an investment banker with Donaldson,
Lufkin & Jenrette Securities Corporation. He is a director of Borden Chemical,
Inc. and Rockwood Specialties, Inc. He is also a Director of Spalding Holdings
Corporation. Mr. Carroll is a member of the Audit Committee and the Executive
Committee.

William H. Carter has been a Director of the Company since April 1, 1998. He
was elected Executive Vice President and Chief Financial Officer of Borden, Inc.
effective April 3, 1995. Prior to that, since 1987, he was a partner in Price
Waterhouse LLP. He is a director of Borden Chemical, Inc., Elmer's Products,
Inc. and Chairman of the BCP Management, Inc. Board.

Kevin M. Kelley has been a Director of the Company since April 30, 1999. He has
served as Executive Vice President, Corporate Strategy and Development of
Borden, Inc. since April 5, 1999. Prior to that, since April 1996, he was
Managing Director of Ripplewood Holding, LLC. From January 1995 to April 1996,
he was a Managing Director with Onex Investment Corporation. He is a director
of Borden Chemical, Inc. and Elmer's Products, Inc.

Nancy A. Reardon has been a Director of the Company since April 1, 1998. She
was elected Senior Vice President, Human Resources and Corporate Affairs, of
Borden, Inc. effective March 3, 1997 and promoted to Executive Vice President in
December 2000. Previously she was Senior Vice President-Human Resources and
Communications for Duracell International, Inc. from 1991 through February 1997.
She is a director of Borden Chemical, Inc. and Elmer's Products, Inc. She is
also a member of the Compensation Committee of the Borden Board. Ms. Reardon is
a member of the Compensation Committee.

Scott M. Stuart has been a Director of the Company since February 7, 2001. He
has been a member of KKR & Co., LLC since 1996, was a General Partner of
Kohlberg Kravis Roberts & Co. and has been a General Partner of KKR Associates,
L.P. since January 1995. He began as an Executive with Kohlberg Kravis Roberts &
Co. in 1986. He is also a Director of AEP Industries, Inc., The Boyds
Collection, Ltd., DPL, Inc., and Borden, Inc. Mr. Stuart is a member of the
Executive Committee.

Joseph W. McGarr was appointed Senior Vice President & Chief Financial Officer
of the Company effective May 7, 2001. Prior to that he was Executive Vice
President and Chief Financial Officer of Fort James Corporation in Deerfield,
Illinois. During his 19-year career with Fort James, he served in a variety of
strategic finance, supply chain and marketing positions.

James A. Sharman has held the position of Senior Vice President Household
Products Division & Supply Chain Management with the company since September 7,
2001. Prior to this appointment he held the position of Senior Vice President
Supply Chain Operations effective April 9, 2001. Prior to that he was Chief
Executive Officer of Rubicon Technology, a Chicago-based manufacturing company.
Prior to that he served as Senior Vice President, Supply Chain Management of CNH
Global N.V., a company created in November 1999 from the merger of Case
Corporation and New Holland N.V.

Raymond J. Kulla was appointed Vice President, General Counsel & Secretary of
the Company on November 1, 1999. Prior to that he was the Vice President,
General Counsel & Secretary for General Housewares Corporation from October 1995
to September 1999.

Alexander Lee was appointed President of OXO International on October 14, 1999.
Prior to this appointment he was the President of OXO International Division of
the General Housewares Corporation. He held various management positions with
General Housewares Corporation from September 1994 through October 1999.

Jeffrey H. Mei was appointed Vice President - Asia Pacific of the Company
effective October 1, 1999. Prior to that he was the General Manager Asia &
Managing Director from 1991 to 1999. Prior to that he was Area Sales Manager -
Asia from 1988 to 1991.

ITEM 17 - EXECUTIVE COMPENSATION
- --------------------------------

The following tables and charts set forth information with respect to benefits
made available, and compensation paid or accrued, by the Company during the
years ended December 31, 2001, 2000 and 1999 for services by each of the chief
executive officers, the four other most highly compensated executive officers
whose total salary and bonus exceeded $100,000, and one other executive that
would have made the list had he been employed by the Company at December 31,
2001.

Annual Compensation Long-Term Compensation
------------------------- --------------------------------------
Awards Payouts
------------------------- -----------
Long-Term
Other Annual Securities Incentive All Other
Name and Salary Compensation Underlying Plan Compensation
Principal Position Year ($) Bonus ($) ($) Options Payouts ($) ($) (4)
- ---------------------------- ---- -------- --------- ------------- ---------- ----------- -------------

STEVEN G. LAMB 2001 547,692 200,000 60,000 3,000,000 1,808 --
President and 2000 N/A N/A N/A N/A N/A N/A
Chief Executive Officer 1999 N/A N/A N/A N/A N/A N/A

NATHANIEL C. STODDARD (1) 2001 62,500 -- 120,000 -- 2,404 1,029,230
Former President and 2000 437,500 386,122 60,000 514,287 -- 89,374
Chief Executive Officer 1999 N/A N/A N/A N/A N/A N/A

ALEX LEE (2) 2001 287,500 59,000 25,000 -- 2,550 --
President, 2000 300,000 250,000 6,850 300,000 5,317 18,750
OXO International 1999 240,000 379,940 6,536 -- -- 2,400

DENNIS G. BROWN (3) 2001 188,125 -- 16,667 -- 3,555 454,502
Former Senior Vice
President 2000 191,289 159,913 25,000 120,000 3,484 --
Sales and Marketing 1999 N/A N/A N/A N/A N/A N/A

RAYMOND J. KULLA (2) 2001 225,000 10,000 25,000 -- 5,400 38,123
Vice President, 2000 225,000 28,125 25,000 257,142 342 6,716
Secretary and General
Counsel 1999 187,000 313,825 6,860 -- 1,017 1,600

JOSEPH W. MCGARR 2001 250,205 50,000 35,000 1,200,000 3,120 4,523
Senior Vice President and 2000 N/A N/A N/A N/A N/A N/A
Chief Financial Officer 1999 N/A N/A N/A N/A N/A N/A

JAMES A. SHARMAN 2001 198,910 50,000 35,000 1,050,000 3,021 --
Senior Vice President 2000 N/A N/A N/A N/A N/A N/A
Household Products Division 1999 N/A N/A N/A N/A N/A N/A
and Supply Chain
Management

<FN>
(1) Nathaniel C. Stoddard resigned in the first quarter of 2001.
(2) Information relating to 1999 includes compensation earned while
employed by the General Housewares Corporation, which was acquired by
the Company in the fourth quarter of 1999
(3) Dennis G. Brown resigned in the third quarter of 2001.
(4) All other compensation includes severance and moving costs

EMPLOYEE AGREEMENTS

The Company has in place a severance practice pursuant to which it will provide
to all salaried employees upon certain terminations of employment, compensation
in amounts ranging between eight weeks of base salary (for employees with at
least one year of service) and 52 weeks of base salary (for employees with at
least 20 years of service).

OPTION/SAR GRANTS IN LAST FISCAL YEAR (1)

Potential Realizable
Value at Assumed
Rates of Stock Price
Appreciation for
Individual Grants Option Term (2)
----------------------------------------------- ----------------------
% of Total
Number of Options
Securities Granted To
Underlying Employees
Options In Fiscal Exercise Expiration Gain at Gain at
Name Granted (3) Year Price Date 5% 10%
- ---------------- ----------- ----------- --------- ---------- ---------- ----------

Steven G. Lamb 3,000,000 57.1% $ 1.00 01/18/11 1,886,684 4,781,227
Joseph W. McGarr 1,200,000 22.9% 1.00 06/01/11 754,647 1,912,491
James A. Sharman 1,050,000 20.0% 1.00 06/01/11 660,339 1,673,430

<FN>
(1) No SARs were granted in 2001 to any of the named executive officers.
(2) The dollar amounts set forth under these columns are the result of
calculations at 5% and at 10% rates established by the Securities and
Exchange Commission and therefore are not intended to forecast future
appreciation of WKI's stock price. The Company did not use any alternative
formula for grant date valuation, as it is unaware of any formula, which
would determine with reasonable accuracy a present value based upon future
unknown factors.
(3) During 2001, Mr. Lamb, Mr. McGarr and Mr. Sharman were granted 750,000,
300,000, and 150,000 options ("Performance Options"), respectively, subject
to WKI achieving certain operating metrics based upon Adjusted EBITDA in
fiscal years 2001 and 2002. At December 31, 2001, the Company did not
achieve the minimum Adjusted EBITDA level required for vesting of the
Performance Options and 50% of the options were cancelled. The remaining
50% of the options are subject to meeting an Adjusted EBITDA target at
December 31, 2002. These Performance Options have been excluded from the
table due to the inability of the company to place a value on the shares
due to the contingent nature.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION/SAR VALUES (1)

Number of Securities Value of
Underlying Unexercised In-the-Money Options
Options at Fiscal Year End At Fiscal Year End
-------------------------- ----------------------------------
Shares
Acquired Value
Name On Exercise Realized ($) Exercisable Unexercisable Exercisable ($) Unexercisable ($)
- ---------------- ---------- ------------ ----------- ------------- --------------- -----------------

Steven G. Lamb -- -- -- 3,000,000 -- --
Joseph W. McGarr -- -- -- 1,200,000 -- --
James A. Sharman -- -- -- 1,050,000 -- --
Dennis G. Brown -- -- 24,000 96,000 -- --
Raymond J. Kulla -- -- 51,429 205,713 -- --
Alex Lee -- -- 60,000 240,000 -- --

<FN>
(1) There are no SARs outstanding.

PENSION PLAN

Borden, Inc. maintains a non-qualified Supplemental Pension Plan (the
"Supplemental Plan"), pursuant to which it will pay to certain executives,
including each of the named executive officers, amounts approximately equal to
the difference between the benefits provided for under the WKI Pension Plan and
benefits which would have been provided there under but for limitations on
benefits which may be provided under tax-qualified plans, as set forth in the
Internal Revenue Code.

The estimated annual benefits under the Supplemental Plan upon retirement at
normal age for each of the executive officers of the Company named in the
Summary Compensation Table are:

Years of
Credited Service Total Benefit
---------------- -------------

Steve Lamb 1.00 $ 14,552
Joseph McGarr 0.65 $ 5,602
James Sharman 0.75 $ 4,576
Dennis G. Brown 1.75 $ 10,922
Raymond J. Kulla 6.25 $ 47,041
Alex Lee 7.33 $ 54,286

COMPENSATION OF MEMBERS OF BOARD

Members of the Board will receive no cash compensation for their service on the
Board or its committees. Members of the Board will receive reimbursement for
traveling costs and other out-of-pocket expenses incurred in attending Board and
committee meetings.

ITEM 18 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------

The following table sets forth information with respect to the beneficial
ownership of the Company's Common Stock as of December 31, 2001 by each person
who is known by the Company to beneficially own more than 5% of the Company's
Common Stock and each of the Company's directors.

BENEFICIAL PERCENTAGE OF
OWNERSHIP OF COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER COMMON STOCK (1) OUTSTANDING
- ---------------------------------------- ---------------- --------------

KKR Associates, L.P.(2) 64,174,143 93.1%
c/o Kohlberg Kravis Roberts & Co., L.P.
9 West 57th Street
New York, New York 10019

<FN>
(1) The amounts and percentages of common stock beneficially owned are reported
on the basis of regulations of the Commission governing the determination
of beneficial ownership of securities. Under the rules of the Commission, a
person is deemed to be a "beneficial owner" of a security if that person
has or shares "voting power," which includes the power to vote or to direct
the voting of such security, or "investment power," which includes the
power to dispose of or to direct the disposition of such security. A person
is also deemed to be a beneficial owner of any securities of which that
person has a right to acquire beneficial ownership within 60 days. Under
these rules, more than one person may be deemed to be a beneficial owner of
securities as to which such person has an economic interest. The percentage
of class outstanding is based on shares of common stock outstanding at
December 31, 2001.

(2) Shares of common stock shown as owned by KKR Associates, L.P. (KKR
Associates) are owned of record by CCPC. KKR Associates is the sole general
partner of Whitehall Associates, L.P., which is the managing member of BW
Holdings, LLC. BW Holdings, LLC owns 100% of the outstanding capital stock
of CCPC. Messrs. Todd Fisher, Edward A. Gilhuly, Perry Golkin, James H.
Greene, Jr., Johannes Huth, Henry R. Kravis, Robert I. MacDonnell,
Alexander Navab, Paul E. Raether, Neil Richardson, George R. Roberts and
Scott M. Stuart as general partners of KKR Associates, may be deemed to
share beneficial ownership of any shares beneficially owned by KKR
Associates, but disclaim any such beneficial ownership.

ITEM 19 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------

BETWEEN CORNING AND THE COMPANY

Historically, Corning has provided the Company with certain administrative,
technical and other services, as well as providing office space and
manufacturing capacity in facilities owned or leased by Corning. Additionally,
Corning has made available to the Company certain manufacturing technology and
other intellectual property, including the Pyrex(R) and Corningware(R)
trademarks. In connection with the Recapitalization, Corning and WKI entered
into several agreements relating to the provision by Corning of goods and
services to WKI, the sharing of certain facilities with WKI and the royalty-free
license to use certain trademarks, tradenames, service marks, patents and
know-how of Corning, in each case, on terms substantially as described below.

Technology Support and Shared Facility Agreement. The Company obtains certain
- -------------------------------------------------
manufacturing technology, engineering and research and development services from
Corning. The Company and Corning entered into a technology support agreement
pursuant to which Corning will continue to make these manufacturing and
technology services available to the Company. In addition, the technology
support agreement will provide for Corning and the Company to conduct an annual
technology review, for each other's benefit, relating to patents and technical
know-how in the field of the Company's products. The manufacturing technology
and engineering services to be provided by Corning are made available to the
Company at agreed upon rates that approximate market.

The Company's Corning, New York manufacturing facility is adjacent to, and
shares certain assets and infrastructure (e.g., waste disposal and utility
service facilities), with Corning's Fall Brook Plant. The Company and Corning
have entered into a shared facility agreement pursuant to which the parties have
provided for the continued use and sharing of these assets and infrastructure
facilities and the allocation of the costs associated with these items (which
costs are generally allocated according to the parties' relative use of such
shared asset) until April 1, 2008, or until such earlier time as the Company or
Corning shall have terminated its obligation to accept or provide such assets
and infrastructure facilities in accordance with the agreement. Corning has
announced its intention to close its Fall Brook plant in the fall of 2002. The
Company is currently assessing the impact of this closure on operations of its
Pressware plant in Corning, New York. The Company does not anticipate that the
closure of the adjacent plant will have a material adverse impact on the results
of operations.

License Agreements. Corning and the Company entered into certain license
- -------------------
agreements pursuant to which Corning granted to the Company exclusive licenses
to use the Corningware(R) trademark, service mark and trade name and
Pyroceram(R) trademark in the field of housewares and the Pyrex(R) trademark in
the field of durable consumer products (which the Company currently does not
sell) for ten years (each renewable at the option of the Company on the same
terms and conditions for an unlimited number of successive ten-year terms). In
addition, Corning entered into agreements with the Company providing for the
Company's continued use of the Corning name for up to three years (and up to
five years for molds and molded products with the Corning name embedded
thereon). Corning granted to the Company a fully paid, royalty free license of

patents and know-how (including evolutionary improvements) owned by Corning that
pertain to or have been used in the Company's business.

Corning Glass Center and Supply Arrangements. Pursuant to the Recapitalization
- ---------------------------------------------
Agreement, the Company will maintain its commercial arrangements with the
Corning Glass Center (the Corning employee store) for a period of ten years
ending March 31, 2008 on a pricing basis of the Company's standard costs plus
15% and will continue to sell products to Corning's manufacturing facilities for
a period of five years in substantially the same quantities and terms as during
the twelve month period prior to March 31, 1998.

BETWEEN BORDEN AND THE COMPANY

In connection with the Recapitalization, the Company and Borden entered into an
agreement pursuant to which Borden will provide management, consulting and
financial services to the Company. Services will be provided in such areas as
the preparation and evaluation of strategic, operating, financial and capital
plans and the development and implementation of compensation and other incentive
programs. In consideration for such services, Borden is entitled to an annual
fee, not to exceed $2.5 million, based on Adjusted EBITDA, plus reimbursement
for certain expenses and indemnification against certain liabilities. This
agreement is terminable by either party upon 30 days written notice. The
transaction and financing fees and expenses were included in the fees and
expenses incurred in connection with the Recapitalization. In addition, Borden
and its affiliates provided all of the interim debt financing for the
Recapitalization, a portion of which was refinanced by borrowings under the
Credit Facilities and the remainder was refinanced with the proceeds of the
credit facilities.

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 previously issued by the Company in
the open market or by other means. As of December 31, 2001, affiliates have
purchased an aggregate of $80.5 million of senior subordinated notes in open
market transactions. Additionally an affiliate of KKR acquired $25.7 million of
loans under the Company's senior credit facility during 2001.

TAX SHARING AGREEMENT

The Company and certain of its subsidiaries have entered into a tax sharing
arrangement with CCPC pursuant to which the Company and such subsidiaries will
be required to compute their provision for income taxes on a separate return
basis and pay to, or receive from, CCPC the separate U.S. federal and applicable
state and local income tax return liability or credit so computed, if any.

STOCKHOLDERS' AGREEMENT; REGISTRATION RIGHTS AGREEMENT

The Company, CCPC and Corning entered into the Stockholders' Agreement which
provides for certain restrictions and rights regarding the transfer of Common
Stock, including a right of first refusal in favor of, first, the Company and,
if the Company refuses, then CCPC with respect to the common stock owned by
Corning. In addition, the Stockholders' Agreement provides Corning with
unlimited "piggy back" registration rights and one demand registration right.

CCPC has the right, under certain circumstances and subject to certain
conditions, to require the Company to register under the Securities Act shares
of common stock held by it pursuant to the CCPC Registration Rights Agreement.
Such registration rights will generally be available to CCPC until registration
under the Securities Act is no longer required to enable it to resell the common
stock owned by it without restriction. The CCPC Registration Rights Agreement
provides, among other things, that the Company will pay all registration
expenses in connection with the first six demand registrations requested by CCPC

and in connection with any registration commenced by the Company as a primary
offering in which CCPC participates through "piggy back" registration rights
granted under the CCPC Registration Rights Agreement.

PART IV

ITEM 20 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------

14(a) List of documents filed as part of this report
- --------------------------------------------------------

1. Financial Statements

All financial statements of the registrant are set forth under Item 8,
Financial Statements and Supplementary Data of this Report on Form
10-K.

2. Schedule II Valuation accounts and reserves.

14(b) Reports on Form 8-K
- --------------------------

On April 16, 2001, the registrant filed a report on Form 8-k under "Item 5
- Other Events" to announce its annual conference call with bondholders to
review financial results for the year 2000 and a press release announcing
further steps in its restructuring program.

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.

On August 13, 2001, the registrant filed a report on Form 8-K under "Item
5-Other Events" to announce a press release announcing its quarterly
conference call with bondholders to review financial results.

On August 14, 2001, the registrant filed a report on Form 8-K under "Item
5-Other Events" to announce a press release announcing its second quarter
2001 financial results.

On November 15, 2001, the registrant filed a report on Form 8-K under "Item
5-Other Events" to announce a press release announcing its third quarter
2001 financial results.

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 March 28, 2002
------------------------- Chief Executive Officer,
(Steven G. Lamb) Director

By /s/ Joseph W. McGarr Chief Financial Officer March 28, 2002
-------------------------
(Joseph W. McGarr)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

Signature Capacity Date
--------- -------- ----

By /s/ C. Robert Kidder Director and Chairman of the March 28, 2002
------------------------- Board
(C. Robert Kidder)

By /s/ Michael M. Calbert Director March 28, 2002
-------------------------
(Michael M. Calbert)

By /s/ Brian F. Carroll Director March 28, 2002
-------------------------
(Brian F. Carroll)

By /s/ Nancy A. Reardon Director March 28, 2002
-------------------------
(Nancy A. Reardon)

By /s/ Kevin M. Kelley Director March 28, 2002
-------------------------
(Kevin M. Kelley)

By /s/ William H. Carter Director March 28, 2002
-------------------------
(William H. Carter)

By /s/ Scott M. Stuart Director March 28, 2002
-------------------------
(Scott M. Stuart)

SCHEDULE II
WKI HOLDING COMPANY, INC.
VALUATION ACCOUNTS AND RESERVES
(IN THOUSANDS)

BALANCE AT BALANCE AT
YEAR ENDED DECEMBER 31, 2001 12/31/00 ADDITIONS DEDUCTIONS 12/31/01
- -------------------------------------------- ----------- ---------- ----------- ----------

Doubtful accounts and other sales
allowances . . . . . . . . . . . . . . . $ 25,567 $ 95,601 $ (95,822) $ 25,346
Deferred tax assets valuation allowance. . . 175,582 29,497 -- 205,079
Accumulated amortization of goodwill and
other intangibles. . . . . . . . . . . . . 24,225 32,216 (20,702) 35,739
Accumulated amortization of software . . . . 17,783 8,488 (413) 25,858

BALANCE AT BALANCE AT
YEAR ENDED DECEMBER 31, 2000 12/31/99 ADDITIONS DEDUCTIONS 12/31/00
- -------------------------------------------- ----------- ---------- ----------- ----------

Doubtful accounts and other sales
allowances . . . . . . . . . . . . . . . $ 17,657 $ 50,691 $ (42,781) $ 25,567
Deferred tax assets valuation allowance. . . 74,339 101,243 -- 175,582
Accumulated amortization of goodwill and
other intangibles. . . . . . . . . . . . . 12,124 16,874 (4,773) 24,225
Accumulated amortization of software . . . . 12,755 6,227 (1,199) 17,783

BALANCE AT BALANCE AT
YEAR ENDED DECEMBER 31, 1999 12/31/98 ADDITIONS DEDUCTIONS 12/31/99
- -------------------------------------------- ----------- ---------- ----------- ----------

Doubtful accounts and other sales
allowances . . . . . . . . . . . . . . . $ 11,172 $ 17,352 $ (10,867) $ 17,657
Deferred tax assets valuation allowance. . . 92,177 -- (17,838) 74,339
Accumulated amortization of goodwill and
other intangibles. . . . . . . . . . . . . 10,658 3,219 (1,753) 12,124
Accumulated amortization of software . . . . 13,311 2,333 (2,889) 12,755

21(c) Exhibits filed as part of this report
- --------------------------------------------

Exhibit
No. Description of Exhibit
- ----- ----------------------------------------------------------------------

*2.1 Recapitalization Agreement dated as of March 2, 1998, among Corning
Consumer Products Company, Corning Incorporated, Borden, Inc. and CCPC
Acquisition Corp

*2.2 Amendment to the Recapitalization Agreement dated March 31, 1998 which
appears as Exhibit 2.2 to the Registration Statement on Form S-4,
dated June 18, 1998.

*2.3 Assignment and Assumption Agreement dated as of April 1, 1998 between
the Company and Corning.

*2.4 Stock Purchase Agreement, dated as of October 25, 1999, between CCPC
Acquisition Corp. and CCPC Holding Company, Inc

*2.5 Agreement and Plan of Merger, dated as of August 2, 1999, between CCPC
Acquisition Corp. and General Housewares Corp., is incorporated herein
by reference in this annual report on Form 10-K.

*2.6 Amendment No. 1 to the Agreement and Plan of Merger, dated as of
October 20, 1999, by and among CCPC Acquisition Corp

*2.7 Amendment No. 2 to the Agreement and Plan of Merger, dated as of
October 20, 1999, by and among CCPC Acquisition Corp., GHC Acquisition
Corp., and General Housewares Corp

*2.8 Consent and Waiver to the Agreement and Plan of Merger, dated as of
October 21, 1999, by and among CCPC Acquisition Corp., GHC Acquisition
Corp. and General Housewares Corp

*2.9 Contribution Agreement, dated as of October 21, 1999, between CCPC
Acquisition Corp. and CCPC Holding Company, Inc

*3.1 Amended and Restated Certificate of Incorporation of the Company which
appears as Exhibit 3.1 to the Registration Statement on Form S-4,
dated June 18, 1998.

*3.2 By-Laws of the Company which appears as Exhibit 3.2 to the
Registration Statement on Form S-4, dated June 18, 1998.

*3.3 Certificate of Amendment of Certificate of Incorporation which appears
as Exhibit 3.3 to Amendment No. 3 to the Registration Statement on
Form S-4, dated September 16, 1998.

*3.4 Amended and Restated Certificate of Incorporation of CCPC Holding
Company, Inc., dated November 1, 1999.

*3.5 Certificate of Amendment of the Restated Certificate of Incorporation
of CCPC Holding Company, Inc. dated July 31, 2000.

*4.1 Indenture dated as of May 5, 1998 between the Company and the Bank of
New York, as Trustee (the "Indenture").

*4.2 Form of 9 5/8% Senior Subordinated Note due 2008 (included in Exhibit
4.1).

*4.3 Form of 9 5/8% Series B Senior Subordinated Note due 2008 (included in
Exhibit 4.1).

*4.4 Form of 9 % Senior Note due 2006 (incorporated herein by reference to
Exhibit 4.2 (b) to EKCO Group, Inc. Form 10-K for the year ended
December 31, 1995.

*10.1 Credit Facility, dated as of April 9, 1998, among the Company, the
several lenders from time to time parties thereto, and the Chase
Manhattan Bank, as administrative agent.

*10.2 Stockholders' Agreement, dated as of April 1, 1998 among the Company,
CCPC Acquisition Corp. and Corning Incorporated

*10.3 Form of Management Stockholder's Agreement among the Company, CCPC
Acquisition Corp. and certain officers of the Company.

*10.4 Non-Qualified Stock Option Agreement dated as of April 1, 1998 between
the Company and certain employees of the Company.

*10.5 1998 Stock Purchase and Option Plan for Key Employees of the Company
and Subsidiaries.

*10.6 Registration Rights Agreement between the Company and CCPC Acquisition
Corp. dated as of April 1, 1998.

*10.7 Tax Sharing Agreement among the Company, CCPC Acquisition Corp. and
Revere Ware Corporation, dated as of April 30, 1998.

*10.8 Form of Sale Participation Agreement between the Company and certain
officers of the Company.

*10.9 Receivables Purchase Agreement dated June 29, 2000 between the Company
and Borden, Inc

*10.10 Credit Agreement dated August 25, 2000 between the Company and
Borden, Inc

*10.11 Credit Agreement as amended and restated as of November 15, 1999
among the Company, the lending institutions from time to time parties
thereto, and the Chase Manhattan Bank, as administrative agent.

*10.12 Pay Agreement and Release dated January 27, 2000 between the Company
and Peter F. Campanella.

*10.13 Pay Agreement and Releases dated January 19, 2001 between the Company
and Nathaniel A. Stoddard.

*10.14 Amended and Restated 1998 Stock Purchase and Option Plan for Key
Employees dated August 10, 2000.

*10.15 Credit Agreement as amended and restated as of February 28, 2001
between the Company and Borden, Inc. which appears as Exhibit 4.1 to
the Report on Form 8-K dated March 7, 2001, is incorporated herein by
reference in this Annual Report, on Form 10-K.

*10.16 Credit Agreement as amended and restated as of April 12, 2001 between
the Company and Borden, Inc.

*10.17 Amended and restated Credit Agreement, dated April 12, 2001, by and
among the Company, the several lenders party thereto. The Chase
Manhattan Bank as Administration Agent, Citibank N.A. as Syndication
Agent, and Bankers Trust Company as Documentation Agent with Chase
Securities Inc. as Arranger.

*10.18 Employment agreement between the Company and Steven G. Lamb

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

*10.20 Amendment dated September 25, 2001 to the credit facility between the
Company and Borden, Inc.

*10.21 Amendment dated October 26, 2001 to the credit facility between the
Company and Borden, Inc.

10.22 Employment agreement between the Company and Joseph McGarr dated April
16, 2001

10.23 Employment agreement between the Company and James A. Sharman dated
April 25, 2001

10.24 Waiver and Release Agreement dated April 26, 2001 between the Company
and Dennis Schneider.

10.25 Sublease made between Rolls-Royce North America Inc. and WKI Holding
Company, Inc. dated June 21, 2001

10.26 Pay Agreement and Release dated July 10, 2001 between the Company and
Craig Saline.

10.27 Pay Agreement and Releases dated August 31, 2001 between the Company
and Dennis G. Brown.

10.28 Waiver, Consent and Agreement dated as of February 25, 2002, to the
Credit Agreement dated as of April 9, 1998, as amended and restated as
of April 12, 2001, among WKI Holding Company, Inc. and JP Morgan
Chase Bank, as Administrative Agent.

10.29 Waiver No 1., dated as of March 28, 2002, with respect to the
Amended and Restated Credit Agreement, dated as of April 12, 2001,
between WKI Holding Company, Inc. and Borden Holdings, Inc.

10.30 Waiver and Agreement dated as of March 28, 2002, to the Credit
Agreement dated as of April 9, 1998, as amended and restated as of
April 12, 2001, among WKI Holding Company, Inc. and JP Morgan Chase
Bank, as Administrative Agent.

21 Subsidiaries of the registrant.

* Previously filed and incorporated by reference