##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2011
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number: 1-8681
 
 KID BRANDS, INC.
  New Jersey
(State of or other jurisdiction of 
incorporation or organization)
    
    22-1815337
(I.R.S. Employer Identification Number)One Meadowlands Plaza, 8thFloor, East Rutherford, New Jersey
    
    07073(Address of principal executive offices)
    
    (Zip Code)
 (201) 405-2400
 (Former name, former address and former fiscal year, if changed since last report)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o
 o þ
  CLASS
    
    SHARES OUTSTANDINGCommon Stock, $0.10 stated value
    
    21,652,345




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##### 



KID BRANDS, INC.
 INDEX
 PART I  FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)a) Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010
    
    
    3b) Consolidated Statements of Operations for the three and six months ended June 30, 2011 and 2010
    
    
    4c) Consolidated Statements of Cash Flows for the six months ended June 30, 2011 and 2010
    
    
    5d) Notes to Unaudited Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    27Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    43Item 4. Controls and Procedures
    
    
    43PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    44Item 1A. Risk Factors
    
    
    46Item 6. Exhibits
    
    
    47Signatures
    
    
    48Exhibit Index
    
    
    49Exhibit 10.48Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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PART 1  FINANCIAL INFORMATION
 
 ITEM 1.
    
    FINANCIAL STATEMENTS
 KID BRANDS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 (In Thousands, Except Share and Per Share Data)
 (UNAUDITED)
 June 30, 2011
    
    
    December 31, 2010AssetsCurrent assets:Cash and cash equivalents
    
    $
    1,712
    
    
    $
    1,075Accounts receivable- trade, less allowances of $6,082 in 2011 and $6,934 in 2010
    
    
    44,578
    
    
    
    55,270Inventories, net
    
    
    53,277
    
    
    
    48,564Prepaid expenses and other current assets
    
    
    3,137
    
    
    
    3,843Income tax receivable
    
    
    1,091
    
    
    
    307Deferred income taxes, net
    
    
    6,176
    
    
    
    6,372Total current assets
    
    
    109,971
    
    
    
    115,431Property, plant and equipment, net
    
    
    4,973
    
    
    
    5,030Intangible assets
    
    
    75,776
    
    
    
    77,154Note receivable, net of allowance of $14,955 in 2011 and $16,648 in 2010
    
    
    
    
    
    
    Deferred income taxes, net
    
    
    37,746
    
    
    
    41,626Other assets
    
    
    2,448
    
    
    
    3,255Total assets
    
    $
    230,914
    
    
    $
    242,496Liabilities and Shareholders EquityCurrent liabilities:Current portion of long-term debt
    
    $
    
    
    
    $
    13,526Short-term debt
    
    
    
    
    
    
    18,595Accounts payable
    
    
    18,239
    
    
    
    22,940Accrued expenses
    
    
    18,964
    
    
    
    16,954Income taxes payable
    
    
    696
    
    
    
    207Total current liabilities
    
    
    37,899
    
    
    
    72,222Income taxes payable non-current
    
    
    37
    
    
    
    37Deferred income taxes
    
    
    346
    
    
    
    332Long-term debt
    
    
    66,415
    
    
    
    41,000Other long-term liabilities
    
    
    1,293
    
    
    
    923Total liabilities
    
    
    105,990
    
    
    
    114,514Commitments and contingenciesShareholders equity:Common stock: $0.10 stated value; authorized 50,000,000 shares; issued
26,727,780 shares at June 30, 2011 and December 31, 2010
    
    
    2,674
    
    
    
    2,674Additional paid-in capital
    
    
    90,129
    
    
    
    90,645Retained earnings
    
    
    130,874
    
    
    
    135,049Accumulated other comprehensive income
    
    
    471
    
    
    
    503Treasury stock, at cost 5,077,135 and 5,162,354 shares at June 30, 2011 and
December 31, 2010, respectively
    
    
    (99,224
    )
    
    
    (100,889
    )Total shareholders equity
    
    
    124,924
    
    
    
    127,982Total liabilities and shareholders equity
    
    $
    230,914
    
    
    $
    242,496
 The accompanying notes are an integral part of these unaudited consolidated financial statements.
  3




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KID BRANDS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In Thousands, Except Share and Per Share Data)
 (UNAUDITED)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Net sales
    
    $
    60,292
    
    
    $
    67,921
    
    
    $
    120,128
    
    
    $
    129,395Cost of sales
    
    
    45,954
    
    
    
    47,215
    
    
    
    89,524
    
    
    
    90,021Gross profit
    
    
    14,338
    
    
    
    20,706
    
    
    
    30,604
    
    
    
    39,374Selling, general and administrative expenses
    
    
    14,788
    
    
    
    12,810
    
    
    
    30,158
    
    
    
    24,823TRC valuation reserve
    
    
    (2,000
    )
    
    
    
    
    
    
    (2,000
    )
    
    
    Income from operations
    
    
    1,550
    
    
    
    7,896
    
    
    
    2,446
    
    
    
    14,551Other (expense) income:Interest expense, including amortization
and write-off of deferred financing
costs
    
    
    (1,194
    )
    
    
    (883
    )
    
    
    (2,296
    )
    
    
    (2,064
    )Interest and investment income
    
    
    4
    
    
    
    4
    
    
    
    7
    
    
    
    7Other, net
    
    
    54
    
    
    
    40
    
    
    
    96
    
    
    
    265(1,136
    )
    
    
    (839
    )
    
    
    (2,193
    )
    
    
    (1,792
    )Income before income tax provision
    
    
    414
    
    
    
    7,057
    
    
    
    253
    
    
    
    12,759Income tax provision
    
    
    4,376
    
    
    
    2,581
    
    
    
    4,428
    
    
    
    4,815Net (loss) income
    
    $
    (3,962
    )
    
    $
    4,476
    
    
    $
    (4,175
    )
    
    $
    7,944Net (loss) income per share:Basic
    
    $
    (0.18
    )
    
    $
    0.21
    
    
    $
    (0.19
    )
    
    $
    0.37Diluted
    
    $
    (0.18
    )
    
    $
    0.20
    
    
    $
    (0.19
    )
    
    $
    0.36Weighted average shares:Basic
    
    
    21,650,000
    
    
    
    21,545,000
    
    
    
    21,642,000
    
    
    
    21,545,000Diluted
    
    
    21,650,000
    
    
    
    22,028,000
    
    
    
    21,642,000
    
    
    
    21,920,000
 The accompanying notes are an integral part of these unaudited consolidated financial statements.
  4




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KID BRANDS, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In Thousands)
 (UNAUDITED)
 Six Months Ended June 30,2011
    
    
    2010Cash flows from operating activities:Net (loss) income
    
    $
    (4,175
    )
    
    $
    7,944Adjustments to reconcile net (loss) income to net cash provided by operating activities:Depreciation and amortization
    
    
    1,995
    
    
    
    1,799Amortization of deferred financing costs
    
    
    437
    
    
    
    462Provision for customer allowances
    
    
    14,250
    
    
    
    17,689Provision for inventory reserve
    
    
    1,290
    
    
    
    440Share-based compensation expense
    
    
    930
    
    
    
    851TRC valuation reserve
    
    
    (2,000
    )
    
    
    Deferred income taxes
    
    
    4,090
    
    
    
    4,421Change in assets and liabilities:Accounts receivable
    
    
    (3,511
    )
    
    
    (17,893
    )Income tax receivable
    
    
    (784
    )
    
    
    (230
    )Inventories
    
    
    (5,912
    )
    
    
    (1,038
    )Prepaid expenses and other current assets
    
    
    398
    
    
    
    1,478Other assets
    
    
    495
    
    
    
    72Accounts payable
    
    
    (4,709
    )
    
    
    2,429Accrued expenses
    
    
    4,520
    
    
    
    (476
    )Income taxes payable
    
    
    489
    
    
    
    (203
    )Net cash provided by operating activities
    
    
    7,803
    
    
    
    17,745Cash flows from investing activities:Capital expenditures
    
    
    (560
    )
    
    
    (612
    )Net cash used in investing activities
    
    
    (560
    )
    
    
    (612
    )Cash flows from financing activities:Proceeds from issuance of common stock
    
    
    243
    
    
    
    229Excess tax benefit from stock-based compensation
    
    
    (24
    )
    
    
    2Repayment of long-term debt
    
    
    (7,026
    )
    
    
    (7,012
    )Net borrowing (payment) on revolving credit facility
    
    
    320
    
    
    
    (9,125
    )Net cash used in financing activities
    
    
    (6,487
    )
    
    
    (15,906
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (119
    )
    
    
    24Net increase in cash and cash equivalents
    
    
    637
    
    
    
    1,251Cash and cash equivalents at beginning of period
    
    
    1,075
    
    
    
    1,593Cash and cash equivalents at end of period
    
    $
    1,712
    
    
    $
    2,844Cash paid during the period for:Interest
    
    $
    1,492
    
    
    $
    2,277Income taxes
    
    $
    603
    
    
    $
    830
 The accompanying notes are an integral part of these unaudited consolidated financial statements.
  5




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KID BRANDS, INC AND SUBSIDIARIES
 
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  INTERIM CONSOLIDATED FINANCIAL STATEMENTS
  ® ® ® ® ® ® ® ®
   NOTE 2  SHAREHOLDERS EQUITY
     6




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    Three Months Ended June 30,
    
    
    Six Months Ended June 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Stock option expense
    
    $
    137
    
    
    $
    159
    
    
    $
    253
    
    
    $
    318Restricted stock expense
    
    
    89
    
    
    
    99
    
    
    
    168
    
    
    
    199Restricted stock unit expense
    
    
    48
    
    
    
    47
    
    
    
    107
    
    
    
    67SAR expense
    
    
    156
    
    
    
    124
    
    
    
    334
    
    
    
    2012009 ESPP expense
    
    
    34
    
    
    
    33
    
    
    
    68
    
    
    
    66Total share-based payment expense
    
    $
    464
    
    
    $
    462
    
    
    $
    930
    
    
    $
    851
   Stock Options
    All Stock Options OutstandingWeighted AverageShares
    
    
    Exercise PriceOptions Outstanding as of December 31, 2010
    
    
    704,175
    
    
    $
    13.53Options Granted
    
    
    
    
    
    
    Options Forfeited/Cancelled*
    
    
    (37,200
    )
    
    $
    13.65Options Outstanding as of June 30, 2011
    
    
    666,975
    
    
    $
    13.52Option price range at June 30, 2011
    
    $
    6.63-$34.05
 *
    
    See disclosure below regarding forfeitures.  7




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   Weighted Average GrantUnvested stock options
    
    Options
    
    
    Date Fair ValueUnvested at December 31, 2010
    
    
    278,200
    
    
    $
    5.22Granted
    
    
    
    
    
    $
    Vested
    
    
    
    
    
    $
    Forfeited/cancelled*
    
    
    (16,800
    )
    
    $
    5.21Unvested stock options at June 30, 2011
    
    
    261,400
    
    
    $
    5.22
 *
    
    See disclosure below regarding forfeitures. Restricted Stock
    Weighted Average GrantUnvested Restricted Stock
    
    Restricted Stock
    
    
    Date Fair ValueUnvested at December 31, 2010
    
    
    29,270
    
    
    $
    15.91Granted
    
    
    
    
    
    $
    Vested
    
    
    
    
    
    $
    Forfeited/cancelled*
    
    
    (2,580
    )
    
    $
    13.65Unvested restricted stock at June 30, 2011
    
    
    26,690
    
    
    $
    16.13
 *
    
    See disclosure below regarding forfeitures.  Restricted Stock Units
   8




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   WeightedRestricted
    
    
    AverageStock
    
    
    Grant-DateUnits
    
    
    Fair ValueUnvested at December 31, 2010
    
    
    174,730
    
    
    $
    5.22Granted
    
    
    20,000
    
    
    $
    7.17Vested
    
    
    (26,650
    )
    
    $
    5.08Forfeited/cancelled*
    
    
    (13,400
    )
    
    $
    5.03Unvested at June 30, 2011
    
    
    154,680
    
    
    $
    5.51
 *
    
    See disclosure below regarding forfeitures.  Stock Appreciation Rights
 provided
  Six Months Ended June 30,2011
    
    
    2010Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %Risk-free interest rate
    
    
    1.39
    %
    
    
    2.36
    %Volatility
    
    
    0.957
    %
    
    
    0.830
    %Expected term (years)
    
    
    3.8
    
    
    
    5.0Weighted-average fair value of SARs granted
    
    $
    4.75
    
    
    $
    3.39
  9




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  All SARs OutstandingWeighted AverageShares
    
    
    Exercise PriceSARs Outstanding as of December 31, 2010
    
    
    1,111,513
    
    
    $
    4.17SARs Granted
    
    
    85,000
    
    
    $
    7.33SARs Exercised
    
    
    (1,100
    )
    
    $
    5.54SARs Forfeited/Cancelled*
    
    
    (133,600
    )
    
    $
    2.82SARs Outstanding as of June 30, 2011
    
    
    1,061,813
    
    
    $
    4.59SAR price range at June 30, 2011
    
    $
    1.36-9.86
 *
    
    See disclosure below regarding forfeitures.   Weighted-Average GrantShares
    
    
    Date Fair Value Per ShareUnvested at December 31, 2010
    
    
    888,830
    
    
    $
    2.90Granted
    
    
    85,000
    
    
    $
    4.75Vested
    
    
    (131,750
    )
    
    $
    2.35Forfeited*
    
    
    (84,200
    )
    
    $
    2.04Unvested at June 30, 2011
    
    
    757,880
    
    
    $
    3.30
 *
    
    See disclosure below regarding forfeitures.  Option/SAR Forfeitures
  Restricted Stock/RSU Forfeitures
   10




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 Employee Stock Purchase Plan
   Six Months Ended June 30,2011
    
    
    2010Dividend yield
    
    
    0
    %
    
    
    0
    %Risk-free interest rate
    
    
    0.29
    %
    
    
    0.45
    %Volatility
    
    
    73.5
    %
    
    
    89.2
    %Expected term (years)
    
    
    1.0
    
    
    
    1.0
  NOTE 3  WEIGHTED AVERAGE COMMON SHARES
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Weighted average common shares outstanding-Basic
    
    
    21,650
    
    
    
    21,545
    
    
    
    21,642
    
    
    
    21,545Dilutive effect of common shares issuable upon
exercise of stock options, RSUs and SARs
    
    
    
    
    
    
    483
    
    
    
    
    
    
    
    375Weighted average common shares outstanding assuming
dilution
    
    
    21,650
    
    
    
    22,028
    
    
    
    21,642
    
    
    
    21,920
   11




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 NOTE 4  DEBT
    At June 30, 2011LIBOR Loans
    
    
    Base Rate LoansRevolving Loan
    
    
    3.44
    %
    
    
    5.50
    %
  Pre-Amendment and Restatement Credit Agreement Summary
      12




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     13




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      NOTE 5 INTANGIBLE ASSETS
  Weighted Average
    
    June 30,
    
    
    December 31,Amortization Period
    
    2011
    
    
    2010Sassy trade name
    
    Indefinite life
    
    $
    5,400
    
    
    $
    5,400Kids Line customer relationships
    
    20 years
    
    
    26,824
    
    
    
    27,601Kids Line trade name
    
    Indefinite life
    
    
    5,300
    
    
    
    5,300LaJobi trade name
    
    Indefinite life
    
    
    18,600
    
    
    
    18,600LaJobi customer relationships
    
    20 years
    
    
    10,636
    
    
    
    10,954LaJobi royalty agreements
    
    5 years
    
    
    1,058
    
    
    
    1,278CoCaLo trade name
    
    Indefinite life
    
    
    5,800
    
    
    
    5,800CoCaLo customer relationships
    
    20 years
    
    
    2,127
    
    
    
    2,190CoCaLo foreign trade name
    
    Indefinite life
    
    
    31
    
    
    
    31Total intangible assets
    
    
    
    $
    75,776
    
    
    $
    77,154
  14




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    NOTE 6  GEOGRAPHIC INFORMATION AND CONCENTRATION OF RISK
  Three Months ended June 30,
    
    
    Six Months ended June 30,Net sales
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010Net domestic sales
    
    $
    58,278
    
    
    $
    65,670
    
    
    $
    115,266
    
    
    $
    124,523Net foreign sales
(Australia and United
Kingdom)*
    
    
    2,014
    
    
    
    2,251
    
    
    
    4,862
    
    
    
    4,872Total net sales
    
    $
    60,292
    
    
    $
    67,921
    
    
    $
    120,128
    
    
    $
    129,395
 June 30,
    
    
    December 31,Assets
    
    2011
    
    
    2010Domestic assets
    
    $
    224,636
    
    
    $
    237,982Foreign assets (Australia and United Kingdom)
    
    
    6,278
    
    
    
    4,514Total assets
    
    $
    230,914
    
    
    $
    242,496
 *
    
    Excludes export sales from the United States.  Three months ended June 30,
    
    
    Six months ended June 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Soft Good Basics
    
    
    41.1
    %
    
    
    38.1
    %
    
    
    38.9
    %
    
    
    39.8
    %Hard Good Basics
    
    
    34.2
    %
    
    
    39.6
    %
    
    
    34.8
    %
    
    
    38.9
    %Accessories and Décor
    
    
    11.3
    %
    
    
    10.1
    %
    
    
    11.0
    %
    
    
    10.0
    %Toys and Entertainment
    
    
    12.1
    %
    
    
    11.4
    %
    
    
    13.8
    %
    
    
    10.6
    %Other
    
    
    1.3
    %
    
    
    0.8
    %
    
    
    1.5
    %
    
    
    0.7
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
  15




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Three months ended June 30,
    
    
    Six months ended June 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Toys R Us, Inc. and Babies R Us, Inc.
    
    
    39.4
    %
    
    
    52.1
    %
    
    
    39.7
    %
    
    
    49.1
    %Walmart
    
    
    11.7
    %
    
    
    8.1
    %
    
    
    12.8
    %
    
    
    7.7
    %Target
    
    
    8.2
    %
    
    
    10.4
    %
    
    
    8.9
    %
    
    
    10.3
    %
     NOTE 7  FINANCIAL INSTRUMENTS
       16




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   Fair Value Measurements as of June 30, 2011June 30, 2011
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Interest Rate Swap Agreement
    
    $
    (56
    )
    
    $
    
    
    
    $
    (56
    )
    
    $
    
 Fair Value Measurements as of December 31, 2010December 31, 2010
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Interest Rate Swap Agreement
    
    $
    (87
    )
    
    $
    
    
    
    $
    (87
    )
    
    $
    
     Derivative Instruments
  Cash Flow Hedges
    17




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    Non-Qualifying Derivative Instruments
   NOTE 8  COMPREHENSIVE (LOSS)/INCOME
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2011
    
    
    2010
    
    
    2011
    
    
    2010Net (loss) income
    
    $
    (3,962
    )
    
    $
    4,476
    
    
    $
    (4,175
    )
    
    $
    7,944Other comprehensive income:Unrealized gain/(loss) on derivative
    
    
    15
    
    
    
    (16
    )
    
    
    31
    
    
    
    (16
    )Foreign currency translation adjustments
    
    
    (26
    )
    
    
    (97
    )
    
    
    (63
    )
    
    
    Comprehensive (loss)/ income
    
    $
    (3,973
    )
    
    $
    4,363
    
    
    $
    (4,207
    )
    
    $
    7,928
 NOTE 9  INCOME TAXES
    18




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  (in thousands)Balance at December 31, 2010
    
    $
    542Increase related to prior year tax positions
    
    
    185Balance at June 30, 2011
    
    $
    727
     NOTE 10  LITIGATION; COMMITMENTS AND CONTINGENCIES
    19




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
       20




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    Putative Class Action Shah Rahman v. Kid Brands, et al.
   Putative Shareholder Derivative Action
   21




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
        22




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
     NOTE 11  RECENTLY ISSUED ACCOUNTING STANDARDS
   NOTE
12  RELATED PARTY TRANSACTIONS
   23




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   )
       24




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   NOTE
13  SUBSEQUENT EVENT
    25




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
    plus provided minus
    26




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  OVERVIEW
 ® ® ® ® ® ® ® ®
 
    Currency exchange rate fluctuations could increase our expenses .
  27




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Inventory and Intangible Assets
    28




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Recent Developments
 Refinancing of Senior Indebtedness
 provided Debt
Financings
 TRC Matters
  Background.
     29




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The Settlement. provided
 LaJobi Matters
  Customs Compliance Investigation




30



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Company Outlook
  
    
    focusing on design-led and branded product development at each of our
subsidiaries to enable us to continue to introduce compelling new products;
 
    
    pursuing organic growth opportunities to capture additional market share,
including:
 (i)
    
    expanding our product offerings into related categories;
 (ii)
    
    increasing our existing product penetration (selling more products
to existing customer locations);
 (iii)
    
    increasing our existing store or online penetration (selling to
more store locations within each large, national retail customer or their
associated websites); and
 (iv)
    
    expanding and diversifying of our distribution channels, with
particular emphasis on sales into international markets and non-traditional
infant and juvenile retailers;
 
    
    growing through licensing, distribution or other strategic alliances, including
pursuing acquisition opportunities in businesses complementary to ours;
 
    
    implementing strategies to further capture synergies within and between our
confederation of businesses, through cross-marketing opportunities, consolidation of
certain operational activities and other collaborative activities; and
 
    
    continuing efforts to manage costs within and across each of our businesses.
 General Economic Conditions as they Impact Our Business
 The state of the economy may
impact our business
 Further
potential disruptions in the credit markets may adversely affect the availability and
cost of short-term funds for liquidity requirements and our ability to meet long-term
commitments, which could adversely affect our results of operations, cash flows, and financial
condition
  31




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SEGMENTS
  RESULTS OF OPERATIONSTHREE MONTHS ENDED JUNE 30, 2011 AND 2010
        32




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RESULTS OF OPERATIONSSIX MONTHS ENDED JUNE 30, 2011 AND 2010
          33




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Liquidity and Capital Resources
 Debt Financings
        34




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Earnouts with Respect to Acquisitions
     Debt Financings
    35




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At June 30, 2011LIBOR Loans
    
    
    Base Rate LoansExisting Revolving
    
    
    3.44
    %
    
    
    5.50
    %
  Existing and Refinanced Credit Agreement Summaries
    Existing Credit Agreement
    36




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37




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New Credit Agreement
 provided
    38




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plus provided,
  provided
 minus
     39




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provided
 provided
 provided
        40




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Other Events and Circumstances Pertaining to Liquidity
 ,
    41




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Contractual Obligations
  Total
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    2015
    
    
    ThereafterOperating Lease Obligations
    
    $
    14,906
    
    
    $
    1,391
    
    
    $
    3,060
    
    
    $
    3,165
    
    
    $
    1,916
    
    
    $
    1,982
    
    
    $
    3,392Purchase Obligations (1)
    
    
    38,678
    
    
    
    38,678
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Debt
Repayment Obligations (3)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest on
Debt Repayment Obligations (4)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Royalty
Obligations
    
    
    11,853
    
    
    
    2,452
    
    
    
    5,541
    
    
    
    2,661
    
    
    
    1,199
    
    
    
    
    
    
    
    Total Contractual Obligations (2)(5)
    
    $
    65,437
    
    
    $
    42,521
    
    
    $
    8,601
    
    
    $
    5,826
    
    
    $
    3,115
    
    
    $
    1,982
    
    
    $
    3,392
 
 (1)
    
    The Companys purchase obligations consist primarily of purchase orders for inventory.(2)
    
    Does not include contingent obligations under the TRC Lease (or contingent obligations under
off-balance sheet arrangements or otherwise), as the amount if any and/or timing of their potential
settlement is not reasonably estimable. See Other Events and Circumstances Pertaining to
Liquidity above and Note 10 to the Notes to Unaudited Consolidated Financial Statements. In
connection with the acquisitions of LaJobi and CoCaLo, the Company has concluded that no CoCaLo
Earnout Consideration and no LaJobi Earnout Consideration (or related finders fee) was earned or
will become payable, therefore no amounts with respect thereto are included in the table above.
(See Earnouts with respect to Acquisitions above).(3)
    
    Pursuant to the New Credit
Agreement, the Term Loan and required amortization thereon, has been
eliminated.(4)
    
    Required interest under the
New Credit Agreement is based on the outstanding debt and the applicable
interest spread and cannot be calculated. The 2011 interest on payment for this
Revolving Loan using an assumed 3.0% interest rate was $1.0 million. Such
amounts are estimates only and actual interest payments could differ
materially. The New Revolver is scheduled to mature in August 2016, at
which time any amounts outstanding are due and payable.(5)
    
    Excludes, as of June 30,
2011, approximately $66.4 million outstanding under the New Revolver under
the New Credit Agreement, all of which is classified as long-term debt and
matures in 2016. See “Debt Financings” for a description of the New
Credit Agreement, executed as of August 8, 2011, including amount and
dates of repayment obligations and provisions that create, increase and/or
accelerate obligations thereunder.   42




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Off Balance Sheet Arrangements
  CRITICAL ACCOUNTING POLICIES
    Recently Issued Accounting Standards
  Forward-Looking Statements
  
 ITEM 3.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4.
    
    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   43




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Changes in Internal Control over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
 Putative Class Action Shah Rahman v. Kid Brands, et al.
   Putative Shareholder Derivative Action
   44




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SEC Informal Investigation
 TRC Landlord Litigation
  TRC Bankruptcy.
  45




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ITEM 1A.
    
    RISK FACTORS
  We have received a letter regarding an informal investigation by the SEC, and such
investigation may require a significant amount of management resources and result in adverse
consequences to the Company.
   46




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ITEM 6.
    
    EXHIBITS
  10.46
    
    
    Second Amended and Restated Credit Agreement, dated as of August 8, 2011,
among Kid Brands, Inc., Kids Line, LLC, Sassy, Inc., LaJobi, Inc., I & J
Holdco, Inc. and CoCaLo, Inc., as the Borrowers, the subsidiaries of the
Borrowers identified therein as the Guarantors, Bank of America, N.A., as
Administrative Agent, Swing Line Lender and L/C Issuer, and the other Lenders
party thereto, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Sole
Lead Arranger and Book Manager, incorporated herein by reference to the
Companys Current Report on Form 8-K filed on August 10, 2011.10.47
    
    
    Second Amended and Restated Security and Pledge Agreement dated as of August
8, 2011, executed by the Borrowers and the Guarantors in favor of
the Administrative Agent, incorporated herein by reference to the Companys
Current Report on Form 8-K filed on August 10, 2011.10.48
    
    
    Employment Agreement, dated May 26, 2011, between Kid Brands, Inc. on behalf
of Sassy, Inc. and Dean Robinson*31.1
    
    
    Certification of CEO required by Section 302 of the Sarbanes Oxley Act of 2002.31.2
    
    
    Certification of CFO required by Section 302 of the Sarbanes Oxley Act of 2002.32.1
    
    
    Certification of CEO required by Section 906 of the Sarbanes Oxley Act of 2002.32.2
    
    
    Certification of CFO required by Section 906 of the Sarbanes Oxley Act of 2002.
  *
    
    Management Contract  47




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SIGNATURES
  KID BRANDS, INC.(Registrant)Date: August 15, 2011
    
    By:
    
    /s/ Guy A. Paglinco

Guy A. PaglincoVice President and Chief Financial Officer(Principal Financial Officer and
Principal Accounting Officer)
  48




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EXHIBIT INDEX
 10.48
    
    
    Employment Agreement, dated May 26, 2011, between Kid Brands, Inc. on behalf
of Sassy, Inc. and Dean Robinson*31.1
    
    
    Certification of CEO required by Section 302 of the Sarbanes Oxley Act of 2002.31.2
    
    
    Certification of CFO required by Section 302 of the Sarbanes Oxley Act of 2002.32.1
    
    
    Certification of CEO required by Section 906 of the Sarbanes Oxley Act of 2002.32.2
    
    
    Certification of CFO required by Section 906 of the Sarbanes Oxley Act of 2002.
 *
    
    Management Contract  49