##### 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 September 30, 2010
 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
    
    22-1815337
(I.R.S. Employer Identification Number)incorporation or organization)1800 Valley Road, Wayne, New Jersey
(Address of principal executive offices)
    
    07470
(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 o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ
  CLASS
    
    SHARES OUTSTANDINGCommon Stock, $0.10 stated value
    
    21,547,174




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##### 



KID BRANDS, INC.
 INDEX
 PART I  FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)a) Consolidated Balance Sheets as of September 30, 2010 and December 31, 2009
    
    
    3b) Consolidated Statements of Operations for the three and nine months ended September 30, 2010 and 2009
    
    
    4c) Consolidated Statements of Cash Flows for the nine months ended September 30, 2010 and 2009
    
    
    5d) Notes to Unaudited Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    30Item 4. Controls and Procedures
    
    
    30PART II  OTHER INFORMATIONItem 1A. Risk Factors
    
    
    30Item 6. Exhibits
    
    
    30Signatures
    
    
    31Exhibit Index
    
    
    32Exhibit 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)
 September 30, 2010
    
    
    December 31, 2009AssetsCurrent assets:Cash and cash equivalents
    
    $
    1,406
    
    
    $
    1,593Accounts receivable- trade, less allowances of $8,141 in 2010 and $7,101 in 2009
    
    
    47,719
    
    
    
    42,940Inventories, net
    
    
    48,226
    
    
    
    37,018Prepaid expenses and other current assets
    
    
    3,063
    
    
    
    2,950Income tax receivable
    
    
    411
    
    
    
    241Deferred income taxes, net
    
    
    1,424
    
    
    
    2,607Total current assets
    
    
    102,249
    
    
    
    87,349Property, plant and equipment, net
    
    
    4,707
    
    
    
    4,251Intangible assets
    
    
    78,281
    
    
    
    80,352Deferred income taxes, net
    
    
    22,419
    
    
    
    30,993Other assets
    
    
    3,310
    
    
    
    3,933Total assets
    
    $
    210,966
    
    
    $
    206,878Liabilities and Shareholders EquityCurrent liabilities:Current portion of long-term debt
    
    $
    13,519
    
    
    $
    13,533Short-term debt
    
    
    14,970
    
    
    
    15,100Accounts payable
    
    
    21,239
    
    
    
    17,420Accrued expenses
    
    
    9,813
    
    
    
    8,684Income taxes payable
    
    
    18
    
    
    
    3,630Total current liabilities
    
    
    59,559
    
    
    
    58,367Deferred taxes
    
    
    111
    
    
    
    Income taxes payable
    
    
    572
    
    
    
    1,065Long-term debt
    
    
    44,250
    
    
    
    54,492Other long-term liabilities
    
    
    1,557
    
    
    
    1,860Total liabilities
    
    
    106,049
    
    
    
    115,784Commitments and contingenciesShareholders equity:Common stock: $0.10 stated value; authorized 50,000,000 shares; issued
26,727,780 shares at September 30, 2010 and December 31, 2009
    
    
    2,674
    
    
    
    2,674Additional paid-in capital
    
    
    90,729
    
    
    
    89,756Retained earnings
    
    
    112,281
    
    
    
    100,377Accumulated other comprehensive income
    
    
    479
    
    
    
    458Treasury stock, at cost 5,180,606 and 5,227,985 shares at September 30, 2010
and December 31, 2009, respectively
    
    
    (101,246
    )
    
    
    (102,171
    )Total shareholders equity
    
    
    104,917
    
    
    
    91,094Total liabilities and shareholders equity
    
    $
    210,966
    
    
    $
    206,878
 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 September 30,
    
    
    Nine Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net sales
    
    $
    71,128
    
    
    $
    60,085
    
    
    $
    200,523
    
    
    $
    176,329Cost of sales
    
    
    50,490
    
    
    
    41,613
    
    
    
    140,511
    
    
    
    122,289Gross profit
    
    
    20,638
    
    
    
    18,472
    
    
    
    60,012
    
    
    
    54,040Selling, general and administrative expenses
    
    
    13,710
    
    
    
    12,069
    
    
    
    38,533
    
    
    
    35,686Impairment and valuation reserve
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,620Income from operations
    
    
    6,928
    
    
    
    6,403
    
    
    
    21,479
    
    
    
    2,734Other (expense) income:Interest expense, including amortization
and write-off of deferred financing
costs
    
    
    (887
    )
    
    
    (1,559
    )
    
    
    (2,951
    )
    
    
    (5,452
    )Interest and investment income
    
    
    3
    
    
    
    
    
    
    
    10
    
    
    
    10Other, net
    
    
    105
    
    
    
    (67
    )
    
    
    370
    
    
    
    136(779
    )
    
    
    (1,626
    )
    
    
    (2,571
    )
    
    
    (5,306
    )Income (loss) before income tax
provision (benefit)
    
    
    6,149
    
    
    
    4,777
    
    
    
    18,908
    
    
    
    (2,572
    )Income tax provision (benefit)
    
    
    2,189
    
    
    
    1,909
    
    
    
    7,004
    
    
    
    (1,087
    )Net income (loss)
    
    $
    3,960
    
    
    $
    2,868
    
    
    $
    11,904
    
    
    $
    (1,485
    )Net income (loss) per share:Basic
    
    $
    0.18
    
    
    $
    0.13
    
    
    $
    0.55
    
    
    $
    (0.07
    )Diluted
    
    $
    0.18
    
    
    $
    0.13
    
    
    $
    0.54
    
    
    $
    (0.07
    )Weighted average shares:Basic
    
    
    21,546,000
    
    
    
    21,371,000
    
    
    
    21,545,000
    
    
    
    21,370,000Diluted
    
    
    21,999,000
    
    
    
    21,770,000
    
    
    
    21,951,000
    
    
    
    21,370,000
 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)
 Nine Months Ended September 30,2010
    
    
    2009Cash flows from operating activities:Net income (loss)
    
    $
    11,904
    
    
    $
    (1,485
    )Adjustments to reconcile net income (loss) to net cash provided by operating activities:Depreciation and amortization
    
    
    2,704
    
    
    
    2,838Amortization of deferred financing costs
    
    
    693
    
    
    
    1,190Provision for impairment and valuation reserve
    
    
    
    
    
    
    15,620Provision for customer allowances
    
    
    28,086
    
    
    
    22,743Provision for inventory reserve
    
    
    129
    
    
    
    751Share-based compensation expense
    
    
    1,668
    
    
    
    1,413Deferred income taxes
    
    
    9,868
    
    
    
    1,351Change in assets and liabilities:Accounts receivable
    
    
    (32,751
    )
    
    
    (21,430
    )Income tax receivable
    
    
    (170
    )
    
    
    11Inventories
    
    
    (11,215
    )
    
    
    6,843Prepaid expenses and other current assets
    
    
    (111
    )
    
    
    1,193Other assets
    
    
    (53
    )
    
    
    (31
    )Accounts payable
    
    
    3,784
    
    
    
    (8,711
    )Accrued expenses
    
    
    996
    
    
    
    (5,393
    )Income taxes payable
    
    
    (4,339
    )
    
    
    (3,152
    )Net cash provided by operating activities
    
    
    11,193
    
    
    
    13,751Cash flows from investing activities:Capital expenditures
    
    
    (1,088
    )
    
    
    (472
    )Other
    
    
    
    
    
    
    (4
    )Net cash used in investing activities
    
    
    (1,088
    )
    
    
    (476
    )Cash flows from financing activities:Proceeds from issuance of common stock
    
    
    229
    
    
    
    80Excess tax benefit from share-based compensation
    
    
    2
    
    
    
    Repayment of long-term debt
    
    
    (10,256
    )
    
    
    (19,437
    )Payment of deferred financing fees
    
    
    
    
    
    
    (1,646
    )Net (payment) borrowing on revolving credit facility
    
    
    (130
    )
    
    
    6,211Net cash used in financing activities
    
    
    (10,155
    )
    
    
    (14,792
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (137
    )
    
    
    (197
    )Net decrease in cash and cash equivalents
    
    
    (187
    )
    
    
    (1,714
    )Cash and cash equivalents at beginning of period
    
    
    1,593
    
    
    
    3,728Cash and cash equivalents at end of period
    
    $
    1,406
    
    
    $
    2,014Cash paid during the period for:Interest
    
    $
    2,936
    
    
    $
    5,310Income taxes
    
    $
    1,862
    
    
    $
    1,059
 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
 Share-Based Compensation
    6




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Impact on Net Income
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Stock option expense
    
    $
    425
    
    
    $
    193
    
    
    $
    743
    
    
    $
    577Restricted stock expense
    
    
    134
    
    
    
    170
    
    
    
    333
    
    
    
    510Restricted stock unit expense
    
    
    53
    
    
    
    5
    
    
    
    120
    
    
    
    13SAR expense
    
    
    172
    
    
    
    66
    
    
    
    373
    
    
    
    197ESPP expense
    
    
    33
    
    
    
    34
    
    
    
    99
    
    
    
    116Total share-based payment expense
    
    $
    817
    
    
    $
    468
    
    
    $
    1,668
    
    
    $
    1,413
   Stock Options
    All Stock Options OutstandingWeighted AverageShares
    
    
    Exercise PriceOptions Outstanding as of December 31, 2009
    
    
    880,615
    
    
    $
    13.14Options Granted
    
    
    
    
    
    
    Options Forfeited/Cancelled*
    
    
    (156,640
    )
    
    $
    11.59Options Outstanding as of September 30, 2010
    
    
    723,975
    
    
    $
    13.48Option price range at September 30, 2010
    
    $
    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, 2009
    
    
    499,400
    
    
    $
    12.28Granted
    
    
    
    
    
    $
    Vested
    
    
    (65,200
    )
    
    $
    10.68Forfeited/cancelled*
    
    
    (60,000
    )
    
    $
    8.38Unvested options at September 30, 2010
    
    
    374,200
    
    
    $
    13.19
 *
    
    See disclosure below regarding forfeitures. Restricted Stock
    Weighted Average GrantUnvested Restricted Stock
    
    Restricted Stock
    
    
    Date Fair ValueUnvested at December 31, 2009
    
    
    56,980
    
    
    $
    15.84Vested
    
    
    (2,080
    )
    
    $
    13.95Forfeited/cancelled*
    
    
    
    
    
    $
    Unvested restricted stock at September 30, 2010
    
    
    54,900
    
    
    $
    15.91
 *
    
    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, 2009
    
    
    41,120
    
    
    $
    5.23Granted
    
    
    157,750
    
    
    $
    5.20Vested
    
    
    (1,000
    )
    
    $
    5.34Forfeited/cancelled*
    
    
    (2,160
    )
    
    $
    5.13Unvested at September 30, 2010
    
    
    195,710
    
    
    $
    5.21
 *
    
    See disclosure below regarding forfeitures.  Stock Appreciation Rights
 provided
  Nine Months Ended September 30,2010
    
    
    2009Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %Risk-free interest rate
    
    
    2.24
    %
    
    
    1.64
    %Volatility
    
    
    0.832
    %
    
    
    0.836
    %Expected term (years)
    
    
    5
    
    
    
    4.2Weighted-average fair value of SARs granted
    
    $
    3.78
    
    
    $
    0.90
  9




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  Weighted-Average GrantShares
    
    
    Date Value Per ShareUnvested at December 31, 2009
    
    
    579,400
    
    
    $
    3.21Granted
    
    
    536,250
    
    
    $
    5.67Vested
    
    
    (67,000
    )
    
    $
    1.64Forfeited*
    
    
    (7,560
    )
    
    $
    5.50Unvested at September 30, 2010
    
    
    1,041,090
    
    
    $
    4.56
 *
    
    See disclosure below regarding forfeitures.   Option/SAR Forfeitures
  Restricted Stock/RSU Forfeitures
  Employee Stock Purchase Plan
   Nine Months Ended September 30,2010
    
    
    2009Dividend yield
    
    
    0
    %
    
    
    0
    %Risk-free interest rate
    
    
    0.45
    %
    
    
    0.40
    %Volatility
    
    
    89.20
    %
    
    
    129.0
    %Expected term (years)
    
    
    1.0
    
    
    
    1.0
  10




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  NOTE 3  WEIGHTED AVERAGE COMMON SHARES
    Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Weighted average common shares outstanding-Basic
    
    
    21,546
    
    
    
    21,371
    
    
    
    21,545
    
    
    
    21,370Dilutive effect of common shares issuable upon
exercise of stock options, RSUs and SARs
    
    
    453
    
    
    
    399
    
    
    
    406
    
    
    
    Weighted average common shares outstanding assuming
dilution
    
    
    21,999
    
    
    
    21,770
    
    
    
    21,951
    
    
    
    21,370
  NOTE 4  DEBT
  September 30,
    
    
    December 31,2010
    
    
    2009Term Loan (Credit Agreement)
    
    $
    57,250
    
    
    $
    67,000Note Payable (CoCaLo purchase)
    
    
    519
    
    
    
    1,025Total
    
    
    57,769
    
    
    
    68,025Less current portion
    
    
    13,519
    
    
    
    13,533Long-term debt
    
    $
    44,250
    
    
    $
    54,492
   11




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  At September 30, 2010LIBOR Loans
    
    
    Base Rate LoansRevolving Loan
    
    
    3.06
    %
    
    
    5.00
    %Term Loan
    
    
    3.16
    %
    
    
    5.00
    %
 Credit Agreement Summary
       12




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      NOTE 5  INTANGIBLE ASSETS
  Weighted Average
    
    September 30,
    
    
    December 31,Amortization Period
    
    2010
    
    
    2009Sassy trade name
    
    Indefinite life
    
    $
    5,400
    
    
    $
    5,400Kids Line customer relationships
    
    20 years
    
    
    27,990
    
    
    
    29,156Kids Line trade name
    
    Indefinite life
    
    
    5,300
    
    
    
    5,300LaJobi trade name
    
    Indefinite life
    
    
    18,600
    
    
    
    18,600LaJobi customer relationships
    
    20 years
    
    
    11,113
    
    
    
    11,589LaJobi royalty agreements
    
    5 years
    
    
    1,384
    
    
    
    1,712CoCaLo trade name
    
    Indefinite life
    
    
    6,100
    
    
    
    6,100CoCaLo customer relationships
    
    20 years
    
    
    2,363
    
    
    
    2,464CoCaLo foreign trade name
    
    Indefinite life
    
    
    31
    
    
    
    31Total intangible assets
    
    
    
    $
    78,281
    
    
    $
    80,352
  ®
  13




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  NOTE 6  CONCENTRATION OF RISK
  Three Months ended September 30,
    
    
    Nine Months ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net salesNet domestic sales
    
    $
    68,603
    
    
    $
    58,075
    
    
    $
    193,126
    
    
    $
    170,067Net foreign sales
(Australia and United
Kingdom)*
    
    
    2,525
    
    
    
    2,010
    
    
    
    7,397
    
    
    
    6,262Total net sales
    
    $
    71,128
    
    
    $
    60,085
    
    
    $
    200,523
    
    
    $
    176,329
 September 30,
    
    
    December 31,2010
    
    
    2009AssetsDomestic assets
    
    $
    206,784
    
    
    $
    203,155Foreign assets (Australia and United Kingdom)
    
    
    4,182
    
    
    
    3,723Total assets
    
    $
    210,966
    
    
    $
    206,878
 *
    
    Excludes export sales from the United States.  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Functional Soft Goods
    
    
    36.6
    %
    
    
    43.1
    %
    
    
    38.7
    %
    
    
    44.5
    %Functional Hard Goods
    
    
    40.8
    %
    
    
    34.3
    %
    
    
    39.6
    %
    
    
    33.8
    %Accessories and Décor
    
    
    10.9
    %
    
    
    12.0
    %
    
    
    10.3
    %
    
    
    11.4
    %Toys and Entertainment
    
    
    10.8
    %
    
    
    9.8
    %
    
    
    10.6
    %
    
    
    9.5
    %Other
    
    
    0.9
    %
    
    
    0.8
    %
    
    
    0.8
    %
    
    
    0.8
    %Total
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Toys R Us, Inc. and Babies R Us, Inc.
    
    
    49.2
    %
    
    
    45.5
    %
    
    
    48.8
    %
    
    
    47.5
    %Target
    
    
    9.0
    %
    
    
    12.6
    %
    
    
    9.9
    %
    
    
    12.0
    %Walmart
    
    
    10.5
    %
    
    
    5.2
    %
    
    
    8.8
    %
    
    
    5.1
    %
    14




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   NOTE 7  FINANCIAL INSTRUMENTS
        Fair Value Measurements as of September 30, 2010September 30, 2010
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Interest Rate Swap Agreement
    
    $
    (32
    )
    
    $
    
    
    
    $
    (32
    )
    
    $
    
    15




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
   Derivative Instruments
  Cash Flow Hedges
      Non-Qualifying Derivative Instruments
    16




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##### Table of Contents



KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 NOTE 8  COMPREHENSIVE INCOME
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income (loss)
    
    $
    3,960
    
    
    $
    2,868
    
    
    $
    11,904
    
    
    $
    (1,485
    )Other comprehensive income:Unrealized loss on derivative
    
    
    53
    
    
    
    
    
    
    
    53
    
    
    
    Foreign currency translation adjustments
    
    
    (16
    )
    
    
    149
    
    
    
    (32
    )
    
    
    296Comprehensive income (loss)
    
    $
    3,997
    
    
    $
    3,017
    
    
    $
    11,925
    
    
    $
    (1,189
    )
 NOTE 9  INCOME TAXES
    (in thousands)Balance at December 31, 2009
    
    $
    4,470Increase related to interest expense
    
    
    32Lapse of statute of limitations
    
    
    (3,816
    )Settlements
    
    
    (96
    )Balance at September 30, 2010
    
    $
    590
      17




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KID BRANDS, INC AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
  NOTE 10  LITIGATION; COMMITMENTS AND CONTINGENCIES
      .
  18




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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
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  OVERVIEW
         20




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Strategy
  
    
    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 penetration (selling to more store
locations within each large, national retail customer); and
 (iv)
    
    expanding and diversifying of our distribution channels, with
particular emphasis on sales into international markets;
  21




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
    
    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
   SEGMENTS
  RESULTS OF OPERATIONSTHREE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 ® ®
   22




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RESULTS OF OPERATIONSNINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009
 ® ®
   ®
  23




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Liquidity and Capital Resources
       24




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Sale of Gift Business
  ® ®
  25




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Debt Financing
  September 30,
    
    
    December 31,2010
    
    
    2009Term Loan (Credit Agreement)
    
    $
    57,250
    
    
    $
    67,000Note Payable (CoCaLo purchase)
    
    
    519
    
    
    
    1,025Total
    
    
    57,769
    
    
    
    68,025Less current portion
    
    
    13,519
    
    
    
    13,533Long-term debt
    
    $
    44,250
    
    
    $
    54,492
   At September 30, 2010LIBOR Loans
    
    
    Base Rate LoansRevolving Loan
    
    
    3.06
    %
    
    
    5.00
    %Term Loan
    
    
    3.16
    %
    
    
    5.00
    %
 Credit Agreement Summary
    26




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27




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Other Events and Circumstances Pertaining to Liquidity
      Contractual Obligations
  Total
    
    
    2010
    
    
    2011
    
    
    2012
    
    
    2013
    
    
    2014
    
    
    ThereafterOperating Lease Obligations
    
    $
    10,587
    
    
    $
    569
    
    
    $
    2,211
    
    
    $
    2,143
    
    
    $
    2,224
    
    
    $
    940
    
    
    $
    2,500Capitalized Leases
    
    
    3
    
    
    
    2
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Purchase Obligations (1)
    
    
    66,298
    
    
    
    35,154
    
    
    
    31,144
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Debt Repayment Obligations (2)
    
    
    57,250
    
    
    
    3,250
    
    
    
    13,000
    
    
    
    13,000
    
    
    
    28,000
    
    
    
    
    
    
    
    Note Payable (3)
    
    
    533
    
    
    
    
    
    
    
    533
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest on Debt Repayment
Obligations (4)
    
    
    3,603
    
    
    
    487
    
    
    
    1,663
    
    
    
    1,208
    
    
    
    245
    
    
    
    
    
    
    
    Royalty Obligations
    
    
    7,462
    
    
    
    487
    
    
    
    2,836
    
    
    
    2,977
    
    
    
    1,131
    
    
    
    31
    
    
    
    Total Contractual Obligations (5)
    
    $
    145,736
    
    
    $
    39,949
    
    
    $
    51,388
    
    
    $
    19,328
    
    
    $
    31,600
    
    
    $
    971
    
    
    $
    2,500
 
 (1)
    
    The Companys purchase obligations consist primarily of purchase orders for inventory.(2)
    
    Reflects repayment obligations under the Credit Agreement. See Note 4 of Notes to Unaudited
Consolidated Financial Statements for a description of the Credit Amendment, including amounts and
dates of repayment obligations and provisions that
create, increase and/or accelerate obligations thereunder. Excludes, as of September 30, 2010,
approximately $15.0 million borrowed under the Revolving Loan. The estimated 2010 interest payment
for this Revolving Loan using a 3.5% interest rate is $131,000. Such amounts are estimates only
and actual interest payments could differ materially. The Revolving Loan facility matures in April
2013, at which time any amounts outstanding are due and payable.  28




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(3)
    
    Reflects a note payable with respect to the CoCaLo acquisition (the CoCaLo Note). The present
value of the CoCaLo Note is $519,000 and the aggregate remaining imputed interest at 5.5% is
$14,000. Upon the occurrence of an event of default under the note, the holder could elect to
declare all amounts outstanding to be immediately due and payable.(4)
    
    This amount reflects estimated interest payments on the long-term debt repayment obligation as
of September 30, 2010 calculated using an interest rate of 3.5% and then-current levels of
outstanding long-term debt. Such amounts are estimates only and actual interest payments could
differ materially. This amount also excludes interest on amounts borrowed under the Revolving Loan
(discussed in footnote 3 above).(5)
    
    Does not include contingent obligations under the Lease (or contingent obligations under other
off-balance sheet arrangements described in Item 7 of the 2009 10-K), 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. In connection with the acquisitions of LaJobi and
CoCaLo, the Company has agreed to make certain potential Earnout Consideration (together with
finders fee) payments based on the performance of the acquired businesses. See Managements
Discussion and Analysis of Results of Operations and Financial ConditionLiquidity and Capital
Resources. These amounts are not included in the above table, as the amount of their potential
settlement is not reasonably estimable in accordance with applicable accounting standards.  Off Balance Sheet Arrangements
  CRITICAL ACCOUNTING POLICIES
    Recently Issued Accounting Standards
   29




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Forward-Looking Statements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
    Changes in Internal Control over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 ITEM 1A. RISK FACTORS
  
 ITEM 6. EXHIBITS
  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.
  30




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Items 1, 2, 3, 4 and 5 are not applicable and have been omitted.
 
 SIGNATURES
  KID BRANDS, INC.

(Registrant)By
    /s/ Guy A. PaglincoDate: November 3, 2010
    
    Guy A. PaglincoVice President and Chief Financial Officer(Principal Financial Officer and Principal Accounting Officer)  31




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EXHIBIT INDEX
 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.
  32