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The following is an excerpt from a 10-K SEC Filing, filed by WKI HOLDING CO INC on 4/13/2001.
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WKI HOLDING CO INC - 10-K - 20010413 - PART_I

PART I

ITEM 1--BUSINESS

GENERAL

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

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-Registered Trademark- glassware. In 1958, Corning introduced Corningware-Registered Trademark- bakeware, a versatile glass-ceramic cookware product evolved from materials originally developed for a U.S. ballistic missile program. Corelle-Registered Trademark- dinnerware, a proprietary three-layer, two-glass product with high mechanical strength properties and designed for everyday use was launched in 1970. Visions-Registered Trademark- 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-Registered Trademark-.

The Company was formed in 1991 when Corning, in an effort to expand the international sales of its consumer products, entered into a joint venture with Vitro S.A., the leading glass manufacturer in Mexico. In connection with that joint venture (which was unwound in 1993 when it did not achieve its strategic and financial objectives), Corning contributed or licensed to the Company substantially all of its assets used in Corning's consumer products business. In November 1994, Corning and the Company sold their European, Russian, Middle Eastern and African consumer products businesses to Newell, a significant competitor of the Company. Currently Newell serves as the exclusive distributor for certain of the Company's products in the stated regions. These sales represent less than 1% of the Company's net sales in 2000.

On March 2, 1998, Corning, the Company, Borden, Inc. (Borden), and CCPC Acquisition Corp. (CCPC Acquisition) entered into a Recapitalization Agreement pursuant to which on April 1, 1998 (Closing Date) CCPC Acquisition 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 Acquisition by BW Holding LLC, an affiliate of Kohlberg, Kravis Roberts & Co., L.P. (KKR), the parent company of Borden and CCPC Acquisition. Pursuant to the Recapitalization, WKI paid a cash dividend to Corning of $472.6 million prior to the consummation of the Recapitalization. On July 10, 1998, post-closing adjustments to the cash dividend were agreed upon by WKI and Corning, and the Company distributed $10.2 million to Corning. As a result of the Recapitalization, Corning continues to hold 2.8% of the outstanding shares of common stock of WKI.

In 1999, the Company initiated a plan to restructure its manufacturing and supply organization as part of a program designed to reduce costs through the elimination of under-utilized capacity, unprofitable product lines and increased utilization of the remaining facilities. The 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. Additionally, the Company has discontinued manufacturing and distributing rangetop cookware at its facility in Clinton, Illinois. The supply of rangetop cookware is being sourced from third party manufacturers.

In addition, in 1999, the Company completed the acquisition of EKCO Group, Inc. effective September 13,1999 (EKCO) and General Housewares Corp. (GHC) on October 21, 1999 in two separate transactions. The acquisitions were accounted for under the purchase method of accounting.

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The results of operations of the acquired companies have been included in results of operations for the Company from their dates of acquisition.

The EKCO transaction was closed by the Company on October 24, 1999 following EKCO's initial purchase by CCPC Acquisition Corp (the Company's parent), on September 13, 1999. Throughout this filing the Company's purchase is considered to have occurred on September 13, 1999. The Company acquired EKCO for approximately $239 million, including the assumption of debt, transaction fees and a purchase price adjustment. The Company financed this acquisition through the issuance of $150 million in common stock to the Company's parent and a short term borrowing from an affiliate of the Company's parent.

EKCO is a manufacturer and marketer of branded consumer products. EKCO's products include household items such as bakeware, kitchen and household tools, cleaning products, brooms, brushes and mops. The Company exited its cleaning product line in 2000.

The Company acquired GHC for approximately $159 million, including the repayment of debt and transaction fees. The Company financed the acquisition through the issuance of $50 million Junior Cumulative Preferred Stock to Borden and additional borrowings under the Company's existing credit facilities.

GHC manufactures and markets consumer durable goods with principal lines of business consisting of kitchen and household tools, precision cutting tools, kitchen cutlery and cookware.

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, 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 indebtedness in 2000, and for the period ended December 31, 2000, the Company failed to satisfy certain covenants under its existing credit facility.

In order to meet its funding requirements and comply with its financial covenants in the senior credit facility, the Company amended and restated its senior credit facility effective April 12, 2001 (the Amended and Restated Credit Agreement) and, has extended its $40.0 million short-term line of credit from Borden until the date 91 days after the perfection of the collateral under the Amended and Restated Credit Agreement after which Borden will provide to the Company a $25.0 million revolving credit facility. These actions have resulted in an additional $50.0 million in long-term financing commitments, which expire on March 30, 2004. The Amended and Restated Credit Agreement also waived the financial covenants for the quarter ended December 31, 2000 and amended the future financial covenants beginning March 31, 2001. (See Item 7--Management's Discussion and Analysis).

In addition, in April 2001, the Company announced a restructuring of certain manufacturing and distribution operations led by the Company's new President and Chief Executive Officer, Steven G. Lamb.

Mr. Lamb joined the Company in January 2001, bringing to the Company his extensive experience in acquisition integration, supply chain optimization, operational restructurings, customer focus and continuous improvement.

PRODUCTS

The Company's products are sold primarily in the bakeware, dinnerware, rangetop cookware, kitchen and household tools, cleaning products, cutlery and precision cutting tools categories under

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core brand names. The following table sets forth the sales of the Company's products in their primary categories from 1998 through 2000.

                                                                      (IN THOUSANDS)
                                                                 YEAR ENDED DECEMBER 31,
                                                              ------------------------------
                                                                2000     1999 (4)     1998
                                                              --------   --------   --------
NET SALES (1)
Bakeware....................................................  $286,278   $234,889   $202,649
Dinnerware..................................................   174,692    178,598    182,938
Kitchen/Household Tools.....................................   138,666     36,013         --
Rangetop Cookware...........................................   102,380     99,349    103,231
Cutlery.....................................................    32,678     10,091         --
Precision Cutting Tools.....................................    21,202      3,684         --
Cleaning Products (2).......................................    13,834      6,674         --
Other (3)...................................................    57,851     64,236     54,623
                                                              --------   --------   --------
Total.......................................................  $827,581   $633,534   $543,441
                                                              ========   ========   ========


(1) Certain 1999 and 1998 amounts have been reclassified to conform with 2000 presentation. In addition, net sales have been reclassified to exclude shipping and handling costs in accordance with newly issued accounting standards. 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. (See Note 2 to the financial statements.)

(2) Product line was exited in 2000.

(3) "Other" sales include selected kitchen accessories manufactured by third parties, which are principally sold through the Company-operated factory stores.

(4) Reflects net sales for EKCO and GHC from September 13, 1999 and October 21, 1999, respectively.

BAKEWARE

CORNINGWARE-Registered Trademark-. Corningware-Registered Trademark- cookware was introduced in 1958 as the cookware that "does it all," going from freezer to oven to stovetop to refrigerator to table. This versatility results from the Corningware-Registered Trademark- manufacturing process, which creates a glass-ceramic material with high resistance to thermal shock. This glass-ceramic material was originally fabricated for missile nose cones due to its ability to withstand thermal extremes. Corningware-Registered Trademark- products are available in a variety of sizes and shapes including round, oval, square and rectangle. They are appropriate for microwaving as well as serving. Glass and plastic covers are included with the following product lines:
Corningware-Registered Trademark- French White-TM-, Corningware-Registered Trademark- Classics-TM- and Corningware-Registered Trademark- Pop-Ins-TM-.

PYREX-Registered Trademark-. Pyrex-Registered Trademark- products are made of borosilicate and 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-Registered Trademark- products comprise six sub-brands:
Pyrex-Registered Trademark- Bakeware, Pyrex-Registered Trademark- Prepware, Pyrex-Registered Trademark- Storage, Pyrex-Registered Trademark- Storage Deluxe-TM-, Pyrex-Registered Trademark- Portables-Registered Trademark- and Pyrex-Registered Trademark- Servware.

EKCO-REGISTERED TRADEMARK-. EKCO-Registered Trademark- 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-Registered Trademark-. Baker's Secret-Registered Trademark- products consist of a broad line of non-stick coated and insulated "no burn" bakeware items.

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FARBERWARE-Registered Trademark-. Farberware-Registered Trademark- brand name products consist of non-stick coated and uncoated bakeware items, which are sourced and sold under a sublicense with Meyer Marketing Co. Ltd.

CUISINART-Registered Trademark-. Cuisinart-Registered Trademark- brand name products consist of premium non-stick coated bakeware items, which are sourced and sold under a license with Conair Corporation.

VIA-Registered Trademark-. Via-Registered Trademark- products include baking equipment such as cooling racks, cookie cutter sets and cast aluminum ovenware.

DINNERWARE

CORELLE-Registered Trademark-. Corelle-Registered Trademark-, 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.

OTHER DINNERWARE. Corelle-Registered Trademark- 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 that is sold in similar channels as the Corelle-Registered Trademark- line. Corelle-Registered Trademark- 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-Registered Trademark-. The Company's Revere Ware-Registered Trademark- brand products include stainless steel, hard anodized and aluminum non-stick cookware that is sourced from global manufacturers.

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

EKCO-Registered Trademark-. EKCO-Registered Trademark- brand products include stainless steel and aluminum cookware that is made by other manufacturers. The Company's EKCO-Registered Trademark- brand of stainless steel products are comprised of the EKCO-Registered Trademark- Endura-TM-, the EKCO-Registered Trademark- Enterna-Registered Trademark- line, EKCO-Registered Trademark- Copperelle-TM- and EKCO-Registered Trademark-. The Company's EKCO-Registered Trademark- brand of non-stick aluminum products are comprised of the EKCO-Registered Trademark- Resolutions-TM- line, the EKCO-Registered Trademark- Radiance-TM- line and the EKCO-Registered Trademark- Generations-TM- line. The EKCO product lines are marketed through all channels of distribution.

VISIONS-Registered Trademark-. Introduced in the United States in 1982, Visions-Registered Trademark- products are made with a translucent pyroceram material that allows customers to see what they are cooking. The Company manages Visions-Registered Trademark- as a specialty line focused on promotional programs and markets Visions-Registered Trademark- products in areas where water-based cooking and simmering are relevant to a market's or community's culture.

KITCHEN AND HOUSEHOLD TOOLS

EKCO-Registered Trademark- AND VIA-Registered Trademark-. The Company markets and sells a broad line of kitchenware products which it sources from third parties, including the following: kitchen tools and gadgets such as spoons, spatulas,

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ladles and other cooking accessories, and peelers, corkscrews, whisks, can openers and similar items, marketed under the EKCO-Registered Trademark-, EKCO PRO-TM-, Baker's Secret-Registered Trademark- and Via-Registered Trademark- trademarks; stainless steel and porcelain-on-steel kettles and carafes under the EKCO-Registered Trademark- and Via-Registered Trademark- trademarks; cookware under the EKCO-Registered Trademark- trademark; and more than 130 tools, gadgets and bakeware items under the Cuisinart-Registered Trademark- brand name, which is licensed from Conair Corporation. The Company also markets stainless steel flatware, mixing bowls and colanders. The Company markets more than 1000 kitchenware items, including multiple colors of the same item and various packaging combinations particularly in its line of kitchen tools and gadgets, using what the Company believes to be one of the most extensive merchandising and promotional programs in the industry. The program employs a "good, better, best" strategy, which the Company feels, clearly defines packaging and product design. EKCO-Registered Trademark- products are classified as good, EKCO PRO products (including the sub-brands, Fresh Catch and Barworks) are classified as better and Softsides-TM- products are classified as best.

OXO-Registered Trademark-. The Company markets a broad line of kitchen and household tools under the OXO Good Grips-Registered Trademark-, OXO Softworks-TM-, OXO Touchables-TM- and OXO Basics-TM- brand names. The OXO brand products are developed in the United States and produced by Original Equipment Manufacturers (OEM) in Asia according to WKI's specifications. 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.

GRILLA GEAR-Registered Trademark-. Grilla Gear is a line of barbecue tools and accessories under the Grilla Gear-TM- brand. This product line consists of high quality, design-oriented products related to outdoor dining and home entertainment, such as grilling tools, aprons, mitts, timers, magnets, etc.

CLEANING PRODUCTS

EKCO-Registered Trademark- AND CLEAN RESULTS-Registered Trademark-. The Company marketed a line of cleaning products for home use, including brooms, brushes and mops, marketed under the EKCO-Registered Trademark- and Clean Results-Registered Trademark- trademarks. The Company exited the product line in 2000.

CUTLERY

CHICAGO CUTLERY-Registered Trademark-. The Company markets under the Chicago Cutlery-Registered Trademark- brand, fifteen retail product lines and three commercial product lines. Eight of these product lines, including the commercial lines, are manufactured in the Wauconda, Illinois manufacturing facility and feature the exclusive Taper Grind-Registered Trademark- edge for maximum sharpness. These knives, individually crafted by hand, are made with special high-carbon stainless steel making them easy to re-sharpen and better able to maintain a sharp edge. The Company's Chicago Cutlery-Registered Trademark- product lines include Walnut Tradition-TM--Registered Trademark-, 440A-TM-, Legacy-TM-, Precedent-TM-, American Pride-TM-, Cherrywood-TM-, Walnut Forged-TM-, Basics-TM-, Performa-TM-, Premier-TM-, Paradigm-TM-, Essentials-TM-, Classic Chef-TM-, American Carver-TM-, and Chef's Professional-TM-. Commercial product lines marketed to the meat and poultry processing industries include Chicago Blue-TM-, Straight Molded-TM- and Biocurve-TM-lines.

REGENT SHEFFIELD-REGISTERED TRADEMARK-. Regent

Sheffield-Registered Trademark- and Wiltshire-Registered Trademark- are licensed brand names from Regent Sheffield LTD and McPherson's LTD for distribution in the United States, South America and Canada. The product lines are positioned up-market and distributed to both traditional retail and department stores trade channels. All product lines except for Infinity Edge and Titanium Edge, are manufactured in Asia. The Company markets under the Regent Sheffield-Registered Trademark- name in the United States and South America and the Wiltshire-Registered Trademark- and Regent Sheffield-Registered Trademark- names in Canada. The Company markets nine complete lines of knives for consumers. The Company's Regent Sheffield-Registered Trademark- and Wiltshire-Registered Trademark- product lines

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include Laser-TM-, Classic Series, StaySharp-TM-, SoftSides-TM-, Titanium Edge-TM-, Forged, Forged Commercial, Infinity Edge-TM- and Forme-TM-.

PRECISION CUTTING TOOLS

OLFA. The Company and OLFA Corporation of Osaka, Japan, executed a ten-year agreement naming the Company's OLFA Products Group as the exclusive distributor, in the United States and Canada, of precision cutting tools and accessories manufactured by OLFA Corporation. The agreement expires in 2004. The Company believes that relations with OLFA Corporation are strong and that a long-term relationship will continue. Products of the OLFA Products Group are sold to industrial users, and through distributors as well as directly to hobby, craft, hardware and fabric stores.

OLO. The OLO business consists of rolling scissors and carton openers. The OLO products are manufactured domestically by a third party and are purchased as finished goods by the Company. OLO products are sold to industrial users, and distributors as well as directly to hobby, craft, hardware and fabric stores.

OTHER

ACCESSORIES. The Company's "Other" sales include selected kitchen accessories manufactured by third parties. These products are sold primarily in the Company--operated factory stores.

NEW PRODUCT DEVELOPMENT

New products are developed using a disciplined development process adopted by the Company. This process is designed to reduce the risk associated with new product development projects through the early assessment of a product's market viability, and to compress product development cycle time through the use of the Company's proprietary design and modeling software. This new product development process leverages the Company's extensive qualitative and quantitative research knowledge and has reduced development time, focused resources on projects with high market potential and decreased large expenditures on product concepts with low market viability.

MARKETING AND DISTRIBUTION

The Company's products are sold in the United States and in over 60 foreign countries. In the United States (which accounted for approximately 80% of the Company's net sales in 2000), 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 outlet stores.

DOMESTIC WHOLESALE

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 and catalog showrooms.

DOMESTIC RETAIL

The Company operates 170 outlet stores in 40 states, located primarily in outlet malls. The Company's outlet 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 outlet stores, which also sell complementary kitchen accessories, have developed marketing and pricing strategies that generate sales which supplement, rather than compete with, its wholesale customers. The Company-operated outlet stores also promote and strengthen the

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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 60-person 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, Mexico, Brazil, and the United Kingdom. In addition to the direct sales forces, products are exported from the United States through distributors and agents who provide marketing support to supermarkets, mass merchandising stores, specialty stores and department stores.

EUROPEAN, RUSSIAN, MIDDLE EASTERN AND AFRICAN CONSUMER PRODUCTS BUSINESS

In November 1994, Corning and the Company sold to Newell all of the outstanding stock of Corning Consumer Limited (CC Limited), Corning Consumer GmbH (CC GmbH) and Corning Consumer S.A (CCSA), subsidiaries of Corning and the Company through which the Company's consumer products business was conducted in Europe, Russia, the Middle East, and Africa (collectively, the Territory). Corning and the Company granted to Newell, CC Limited, CC GmbH and CCSA the exclusive right to use certain trademarks within the Territory. Newell has the exclusive right to use the Pyrex-Registered Trademark- and Visions trademarks within the Territory.

CUSTOMER SERVICE: SALES AND MARKETING SUPPORT

Management believes that service is a key part of the Company's product offering. The close relationships and frequent contact with large customers provide the Company with sales opportunities and application ideas. The Company, through its sales team, provides its customers with sales and marketing support. In addition, as of October 1999, the Company contracted its consumer information center responsibilities with Modern Marketing Concepts, Inc. Modern Marketing Concepts, Inc. has a team dedicated to the Company's business that responds to consumer complaints, product liability claims, warranty claims, rebate programs, store referrals and special order fulfillment offers.

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. The Company's sales teams dedicate their primary focus to the largest customers. 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 60-person 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 extensive marketing support. The Company conducts extensive research on housewares industry trends, including consumer color and design preferences.

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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. Recently 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.

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. In 2000, 1999 and 1998, one customer, Wal-Mart Stores, Inc. accounted for approximately 15%, 16% and 15%, respectively, of the Company's gross sales.

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 Company sources certain products from third party suppliers. The Company believes that alternative sources of supply at competitive prices are available from other manufacturers of substantially identical products.

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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.

However, the replacement of certain raw material suppliers has in the past, and may in the future, have an adverse effect on the Company's operations and financial performance and significant increases in the cost of any of the principal raw materials used by the Company could have a material adverse effect on its 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-Registered Trademark-, Revere-Registered Trademark-, Revere Ware-Registered Trademark-, Visions-Registered Trademark-, EKCO-Registered Trademark-, Baker's Secret-Registered Trademark-, Via-Registered Trademark-, Good Grips-Registered Trademark- and OXO-Registered Trademark-. Other significant trademarks used by the Company are Corningware-Registered Trademark-, Pyrex-Registered Trademark- Chicago Cutlery-Registered Trademark-, Farberware-Registered Trademark-, Regent Sheffield-Registered Trademark-, Wiltshire-Registered Trademark-, OLO-Registered Trademark-, and Grilla Gear-Registered Trademark-. Upon the consummation of the Recapitalization on April 1, 1998, Corning granted to the Company fully paid, royalty-free licenses to use the Corningware-Registered Trademark- trademark, servicemark and tradename and the Pyroceram-Registered Trademark- trademark in the field of housewares and to use the Pyrex-Registered Trademark- trademark in the fields of housewares and durable consumer products. These licenses are exclusive licenses, subject to the prior exclusive licenses granted to Newell and certain of its subsidiaries and provide for renewable ten-year terms, which the Company may renew indefinitely. In addition, in connection with the Recapitalization, the Company entered into an agreement with Corning under which the Company is licensed to continue 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".

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.

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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 is also aware that at several EKCO facilities, hazardous substances and/or oil have been detected and that additional investigation will be and remedial action will or may be required. American Home Products, the prior owner of two locations, has provided indemnification to EKCO for pre-1984 conditions at those sites. The Company is also aware that three former GHC facilities are involved with private parties and state agencies in the review and evaluation, or remediation, of identified environmental contamination problems.

In addition, 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 proposal is currently under review. 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.

Accruals for environmental matters are recorded when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated. Environmental accruals are routinely reviewed on an interim basis. The Company has accrued approximately $2 million at December 31, 2000 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 may exceed current reserves by amounts that may prove insignificant, or by amounts, in the aggregate, of up to approximately $2 million.

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, 2000, the Company had approximately 5,200 employees, approximately one-third of which were covered by collective bargaining agreements. The agreement with the International

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Association of Machinists, which affects approximately 185 employees, expires September 29, 2001. All other collective bargaining agreements expire after December 31, 2002.

OTHER

Additional information in response to Item 1 is found in Item 6, Five-Year Selected Financial Data, appearing on page 15, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, appearing on pages 16 through 31, and Note 13 to the Consolidated Financial Statements appearing on pages 56 through 58.

FORWARD-LOOKING AND CAUTIONARY STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for certain forward-looking statements. The factors discussed below, among others, could cause actual results to differ materially from those contained in forward-looking statements made in this report, including without limitation, in "Management's Discussion and Analysis of Financial Condition and Results of Operations," in the Company's related press releases and in oral statements made by authorized officers of the Company. When used in this report, any press release or oral statement, the words "looking forward," "estimate," "project," "anticipate," "expect," "intend," "believe" and similar expressions are intended to identify a forward-looking statement. Forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors (many of which are beyond the Company's control) that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. The forward-looking statements regarding such matters are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate in the circumstances. Whether actual results and developments will conform with the Company's expectations and predictions, however, is subject to a number of risks and uncertainties, in addition to the risk factors discussed above, including: integration of the Company's acquisitions of General Housewares Corp. and EKCO Group, Inc.; Company's ability to comply with the terms of its existing credit facilities; a global economic slowdown in any one, or all, of the Company's sales categories; loss of sales as the Company streamlines and focuses on strategic accounts; unpredictable difficulties or delays in the development of new product programs; increasing reliance on third party manufacturers, increased difficulties in obtaining a consistent supply of basic raw materials such as sand, soda ash, steel or copper and energy inputs such as electrical power or natural gas at stable pricing levels; development by the Company of an adequate administrative infrastructure; technological shifts away from the Company's technologies and core competencies; unforeseen interruptions to the Company's business with its largest customers resulting from, but not limited to, financial instabilities or inventory excesses; the effects of extreme changes in monetary and fiscal policies in the United States and abroad, including extreme currency fluctuations and unforeseen inflationary pressures such as those recently experienced by certain Asian economies; drastic and unforeseen price pressures on the Company's products or significant cost increases that cannot be recovered through price increases or productivity improvements; significant changes in interest rates or in the availability of financing for the Company or certain of its customers; loss of any material intellectual property rights; any difficulties in obtaining or retaining the management or other human resource competencies that the Company needs to achieve its business objectives; and other factors, many of which are beyond the control of the Company. Consequently, all of the forward-looking statements made in this Form 10-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.

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ITEM 2--PROPERTIES

WKI utilizes six primary manufacturing facilities (five in the United States and one outside of the United States) and ten principal packaging and distribution centers (four in the United States and six 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:

                                                                                 FACILITY
                                                                          -----------------------
LOCATION (1)                                   PRIMARY USE                SQ. FEET     OWN/LEASE
------------                      -------------------------------------   ---------   -----------
DOMESTIC:
Bolingbrook, Illinois             Distribution/Warehouse                    260,000   Leased
Charleroi, Pennsylvania           Manufacturing                             585,710   Own
Clinton, Illinois (2)             Dormant                                   660,000   Own
Corning, New York                 Manufacturing                             434,000   Own/Leased
Elmira, New York                  Corporate Offices                          60,000   Leased
Franklin Park, Illinois           Administrative                            150,000   Leased
Greencastle, Pennsylvania         Distribution                            1,365,500   Own/Leased
Hamilton, Ohio (3)                Dormant                                   100,000   Leased
Indianapolis, Indiana             Distribution/Warehouse                    131,000   Leased
Martinsburg, West Virginia (4)    Manufacturing                             451,000   Own
Massillon, Ohio                   Manufacturing                             230,000   Own
Monee, Illinois                   Distribution/Warehouse                    700,000   Leased
Monroe, Ohio (5)                  Dormant                                   158,000   Leased
New York, New York                Administrative                             25,000   Leased
Terre Haute, Indiana              Administrative                             20,000   Leased
Wauconda, Illinois                Manufacturing                              69,400   Own/Leased
Waynesboro, Virginia (4)          Distribution                               88,000   Own

INTERNATIONAL:
Chepstow, Gwent, U.K.             Administrative/Warehouse/Distribution      35,000   Leased
Johor, Malaysia (6)               Manufacturing/Distribution                 58,000   Own
Johor, Malaysia                   Warehouse                                  68,672   Own/Leased
Mexico City, Mexico               Administrative                                500   Leased
Niagara Falls, Ontario, Canada    Administrative/Warehouse/Distribution     122,000   Own
Niagara Falls, Ontario, Canada    Distribution                               66,000   Leased
Sao Paulo, Brazil                 Distribution                                2,000   Leased
Seoul, Korea                      Administrative                              6,000   Leased
Singapore                         Administrative/Warehouse                   16,440   Leased
St. Laurent, Quebec, Canada       Administrative/Warehouse                   36,000   Leased
Sydney, Australia                 Distribution                               70,000   Leased
Taipei, Taiwan                    Administrative                              1,313   Leased
Tokyo, Japan                      Administrative                              2,000   Leased


(1) In addition, the Company leases 880,426 sq. ft. of retail space in approximately 170 factory outlet malls with initial lease terms ranging from 3 to 7 years.

(2) The Company closed this facility during 1999 and expects to sell it during 2001.

(3) The Company expects to sell this property in 2001.

(4) The Company announced that the facility will be closing in early 2002.

(5) The Company is currently subleasing a portion of this facility to a third party.

(6) 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.

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ITEM 3--LEGAL PROCEEDINGS

LITIGATION

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

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

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

ENVIRONMENTAL MATTERS

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 does not believe that any such claims asserted or obligations incurred to date will result in a material adverse effect upon the Company's financial position, results of operations or liquidity. The Company has accrued approximately $2 million at December 31, 2000 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 may exceed current reserves by amounts that may prove insignificant, or by amounts, in the aggregate, of up to approximately $2 million. 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.

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

The Company's annual Shareholders Meeting was held April 25, 2000. The Company's Board of Directors was elected in its entirety by unanimous vote of the Company's shareholders.

BROKERAGE PARTNERS