<PAGE>   1
                                                                      EXHIBIT 13


                      SELECTED CONSOLIDATED FINANCIAL DATA

     The selected consolidated financial data of the Company shown below for the
five-year period ended December 28, 1997 are derived from the consolidated
financial statements of the Company audited by independent certified public
accountants. The information set forth below is qualified in its entirety by the
more detailed financial statements and the notes thereto included elsewhere
herein. The following table should be read in conjunction with Management's
Discussion and Analysis of Results of Operations and Financial Condition and the
Company's audited Consolidated Financial Statements and Notes thereto appearing
elsewhere herein.

<TABLE>
<CAPTION>
                                                                                         FISCAL YEARS
                                                              -----------------------------------------------------------------
                                                                1997          1996          1995          1994           1993
                                                              --------      --------      --------      --------       --------
                                                                        (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                           <C>           <C>           <C>           <C>            <C>     

CONSOLIDATED BALANCE SHEET DATA
Current assets                                                $150,142      $139,377      $139,425      $145,290       $124,220
Total assets                                                   300,805       292,076       301,058       312,518        303,332
Current liabilities                                             49,674        49,734        54,618        45,973         59,595
Long-term obligations, less current portion                    124,270       124,182        96,700       124,460        111,820
Series B ESOP Convertible Preferred Stock, net                   4,399         4,098         3,458         3,096          2,686
Stockholders' equity                                           109,994       102,515       135,925       129,116        116,864
Common shares outstanding                                       19,066        18,580        18,414        18,069         17,844

CONSOLIDATED STATEMENT OF OPERATIONS DATA

Net revenues from continuing operations                       $270,536      $249,870      $247,004      $233,527       $215,145
Cost of sales                                                  181,307       164,505       160,933       148,935        139,736
Selling, general and administrative expenses                    60,915        59,737        49,152        48,286         45,847
Special charges (1)                                                783         9,877            --            --         11,000
EBITDA before special charges (2)                               40,875        39,609        50,896        48,511         40,730
Amortization of excess of cost over fair value                   3,631         3,636         3,636         3,637          3,394
Net interest expense                                            11,636        12,416        13,493        12,491         12,206
Income (loss) from continuing operations before
  income taxes                                                  12,264          (301)       19,790        20,178          2,962
Income taxes                                                     6,247         2,370         9,828         9,102          2,637
Income (loss) from continuing operations before
  extraordinary charges and cumulative effect of
  accounting changes (3)(4)                                      6,017        (2,671)        9,962        11,076            325
Earnings (loss) from continuing operations per
  common share before extraordinary charges
  and cumulative effect of accounting changes (3)(4)(5)
  Basic                                                            .32          (.14)          .54           .62            .02
  Diluted                                                          .29          (.14)          .49           .54            .01
Cash dividends per common share and Series B ESOP
  Convertible Preferred share                                       --           .02           .08            --             --

</TABLE>


<PAGE>   2


(1)  See Note 17 of Notes to Consolidated Financial Statements for information
     on special charges.
(2)  EBITDA before special charges represents earnings from continuing
     operations before special charges, interest, taxes, depreciation,
     amortization of excess of cost over fair value and other amortization.
(3)  During Fiscal 1996, the Company recorded an extraordinary charge of $3.2
     million (net of income taxes of $2.1 million) for the early extinguishment
     of long-term obligations.
(4)  During Fiscal 1993, the Company recorded a charge of $3.2 million (net of
     income taxes of $2.0 million) to reflect the cumulative effect of changes
     in the method of accounting for post-retirement and post-employment
     benefits.
(5)  In December 1997 retroactive to January 1, 1997, the Company adopted
     Financial Accounting Standards Board Statement No. 128, "Earnings Per
     Share" ("FAS 128"). All previously reported earnings per share information
     has been restated to reflect the impact of adopting FAS 128.



                                       2
<PAGE>   3

COMMON STOCK PRICE RANGE AND DIVIDENDS

     The Company's common stock, $.01 par value per share ("Common Stock"), is
traded on the New York Stock Exchange under the ticker symbol "EKO". The
following table sets forth the high and low sale prices per share as reported on
the New York Stock Exchange Composite Tape during the calendar periods
indicated:

<TABLE>
<CAPTION>

                                               LOW                    HIGH
<S>                                           <C> <C>                <C>  <C>
1997
First Quarter                                 3 7/8                  6  1/8
Second Quarter                                4 5/8                  5  7/8
Third Quarter                                 5 9/16                 8  1/8
Fourth Quarter                                6 1/16                 8  1/4

1996
First Quarter                                 5 5/8                  6 1/4
Second Quarter                                5 1/8                  6 3/8
Third Quarter                                 4 5/8                  5 7/8
Fourth Quarter                                3 1/4                  4 7/8

</TABLE>

     On February 25, 1998, the Company had 1,987 stockholders of record. The
Company has suspended the payment of a quarterly dividend and does not
anticipate paying cash dividends for the foreseeable future. In order for the
Company to pay a dividend, its arrangement with holders of its 9.25% Senior
Notes due 2006 ("Senior Notes") would need to be amended and the payment of the
dividend would have to be permitted under certain covenants in its bank credit
facility.




                                       3
<PAGE>   4

                           EKCO GROUP AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


RESULTS OF OPERATIONS

     The following discussion of the consolidated results of operations for the
fiscal years ended December 28, 1997 ("Fiscal 1997"), December 29, 1996 ("Fiscal
1996"), and December 31, 1995 ("Fiscal 1995") and the discussion of financial
condition at December 28, 1997 should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto.

         The Company is a manufacturer and marketer of multiple categories of
branded housewares for everyday home use. The following table summarizes the
changes in the components of the Company's net revenues from continuing
operations by product category over the last three fiscal years:

<TABLE>
<CAPTION>
                                               FISCAL 1997                 FISCAL 1996                 FISCAL 1995
                                               -----------                 -----------                 -----------
                                                            (AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<S>                                        <C>            <C>          <C>            <C>          <C>             <C>  

Bakeware ................................  $ 85,206       31.5%        $ 84,537       33.8%        $ 81,261        32.9%
Kitchenware..............................    80,003       29.6%          65,846       26.4%          73,006        29.6%
Cleaning products........................    56,043       20.7%          54,248       21.7%          55,191        22.3%
Pest control and small animal
  care and control products..............    35,564       13.1%          34,617       13.9%          34,034        13.8%
VIA products.............................    13,720        5.1%          10,622        4.2%           3,512         1.4%
                                           --------      -----         --------      -----         --------       -----
         Total net revenues..............  $270,536      100.0%        $249,870      100.0%        $247,004       100.0%
                                           ========      =====         ========      =====         ========       =====
</TABLE>

FISCAL 1997 VS. FISCAL 1996

NET REVENUES
     Net revenues for Fiscal 1997 increased approximately $20.7 million (8.3%)
from the prior year. The increase was primarily due to higher sales of
kitchenware and growth of the Company's line of VIA(TM) products. The increase
in kitchenware net revenues was principally due to the rollout of new
plan-o-grams at several key customers and a high level of acceptance of new
products introduced during Fiscal 1996 and 1997. The growth in VIA(TM) products
sales includes $2.3 million of bakeware sold under the Farberware(R) brand name.
In Fiscal 1996, net revenues for pest control and small animal care and control
products included approximately $3.6 million of net revenues from the Company's
wireforming business, which was divested in the fourth quarter of Fiscal 1996.
Without including the wireforming business' revenues for Fiscal 1996, Fiscal
1997 net revenues from the Company's pest control and small animal care and
control products increased approximately $4.5 million (14.7%) from the prior
year. This increase was principally the result of increased sales of the
Company's Victor(R) pest control products, which were largely driven by sales of
newer products, including Roach Magnet(TM), quick set mousetraps and glue trays,
and increases in sales to key customers.

GROSS PROFIT
     The Company's gross profit margin declined from 34.2% in Fiscal 1996 to
33.0% in Fiscal 1997. The decline in gross profit margin from the prior year
level was primarily due to costs associated with the consolidation of the
Company's cleaning products manufacturing facilities (approximately $2.4
million), costs associated with increased levels of inventory and the effect of
intensive competition across all of the Company's product lines.




                                       4
<PAGE>   5

                           EKCO GROUP AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
     Selling, general and administrative expenses for Fiscal 1997 increased
approximately $1.2 million (2.0%) from the prior year. The increase in selling,
general and administrative expenses was due primarily to increased investment in
new packaging, costs associated with new display fixtures, increased costs of
maintaining current customers and acquiring new distribution in a competitive
marketplace, and increased expenditures associated with the growth of the
Company's subsidiary in the United Kingdom. In addition, selling expenses
increased as a result of higher year-over-year sales volume.

SPECIAL CHARGES
     The special charge for Fiscal 1997 relates to the exercise of stock
appreciation rights granted to the Company's former chief executive officer
pursuant to a December 1996 severance arrangement.

     The special charges of $9.9 million in Fiscal 1996 relate to the following:
the adjustment to the carrying value of certain real property located in
Chicago, Illinois ($2.0 million) recorded in the third quarter; the severance
arrangement for the Company's former chief executive officer ($3.0 million)
recorded in the fourth quarter; and the consolidation of the Company's cleaning
products manufacturing facilities ($4.9 million) recorded in the fourth quarter.
This consolidation was completed in 1997 and combined the cleaning products
manufacturing operations located in Easthampton, Massachusetts with the cleaning
products manufacturing facility in Hamilton, Ohio. Additional expenses of
approximately $2.4 million associated with the transition of manufacturing
activities to the Hamilton, Ohio facility was included in cost of sales for
Fiscal 1997. The estimated annualized pre-tax savings from this consolidation is
expected to be approximately $2.3 million.

NET INTEREST EXPENSE
     Net interest expense for Fiscal 1997 declined to $11.6 million from the
Fiscal 1996 level of $12.4 million. The decline in net interest expense was
primarily due to higher average invested cash.

INCOME TAXES
     The effective income tax rate decreased to 50.9% in Fiscal 1997 from 787%
in Fiscal 1996. The Fiscal 1997 effective rate is essentially the same as the
Fiscal 1995 rate (50%). The unusual effective rate for Fiscal 1996 occurred
primarily because amortization of goodwill and certain special charges, which
are not deductible for income tax purposes, represented a significant percentage
of income from continuing operations before income taxes. See Note 7 of Notes to
Consolidated Financial Statements for the reconciliation of the provision for
income taxes from continuing operations to the statutory income tax rate applied
to income from continuing operations before income taxes.





                                       5
<PAGE>   6

                           EKCO GROUP AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION

EXTRAORDINARY CHARGE
     On March 25, 1996, the Company sold $125.0 million of its 9.25% Senior
Notes due 2006 ("Senior Notes") at a price of 99.291% of face value in a private
offering to institutional investors. The Company used the net proceeds of the
Senior Note offering to (i) repurchase its outstanding 12.7% Notes due 1998 and
7.0% Convertible Subordinated Note due 2002 and (ii) repay substantially all
amounts outstanding under its credit facility. The early extinguishment of the
12.7% Notes and 7% Convertible Subordinated Note resulted in an extraordinary
pre-tax charge of $5.3 million and an after tax charge of $3.2 million.

FISCAL 1996 VS. FISCAL 1995

NET REVENUES
     Net revenues from continuing operations for Fiscal 1996 increased
approximately $2.9 million (1.2%) from the prior year. The increase was
primarily due to sales of the Company's new insulated bakeware and growth of the
Company's new line of VIA(TM) products. This increase was substantially offset
by a decline in sales of the Company's kitchenware and cleaning products. Sales
of kitchenware were heavily affected earlier in Fiscal 1996 by the high year-end
inventories held by the Company's retail customers and weak consumer demand in a
category that is highly dependent on impulse purchases. In addition, the
Company's net revenues were negatively affected by: (i) its strategic decision
to re-focus the J-Hook program to improve profitability, (ii) the loss of
kitchenware sales to customer-direct import programs and (iii) a reduction in
customer shelf space allotted for the Company's products.

GROSS PROFIT
     The Company's gross profit margin of 34.2% for Fiscal 1996 was slightly
lower than the Fiscal 1995 level of 34.8%. The gross margin decline was
primarily attributable to manufacturing inefficiencies in the Company's bakeware
products line as a result of customer demand for the new insulated bakeware
products which significantly exceeded expectations and a shift in customer mix
for cleaning products, with more sales to home-center customers where margins
are typically lower.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
     Selling, general and administrative expenses for Fiscal 1996 increased
approximately $10.6 million (21.5%) from the prior year. The increase was
primarily due to increased expenditure on product development of $3.3 million
and higher levels of advertising and promotion in expectation of additional
sales which did not materialize. In addition, the Fiscal 1995 results included
the favorable impact from the collection of a previously written off receivable
($1.1 million) relating to a 1987 real estate transaction. The remainder of the
increase relates to a number of individually insignificant items, including
severance unrelated to severance of the Company's former chief executive
officer, legal and professional fees and expenditures associated with the growth
of the Company's VIA(TM) product line.

NET INTEREST EXPENSE
     Net interest expense for Fiscal 1996 declined to $12.4 million from the
Fiscal 1995 level of $13.5 million. The decline in net interest expense was
primarily due to lower average interest rates.




                                       6
<PAGE>   7

                           EKCO GROUP AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


DISCONTINUED OPERATIONS
     Discontinued operations consisted of the following:

<TABLE>
<CAPTION>
                                                 FISCAL 1996             FISCAL 1995
                                                 -----------             -----------
                                                       (AMOUNTS IN THOUSANDS)

       <S>                                         <C>                      <C>   

       Loss from operations                        $26,648                  $3,851
       Income tax benefits                           1,928                   1,934
                                                   -------                  ------
       Net loss from operations                    $24,720                  $1,917
                                                   =======                  ======
       Loss on disposal, net of income
         taxes ($1,925)                            $ 3,575                  $   --
                                                   =======                  ======
</TABLE>

     The Company recorded a $5.5 million pre-tax charge in the fourth quarter of
Fiscal 1996 for the estimated costs associated with its decision to dispose of
its molded plastics business operations. The fourth quarter charge included a
pre-tax provision of $1.2 million for anticipated operating losses in Fiscal
1997 until the estimated date of disposition, a $3.3 million estimated loss on
the disposition of the molded plastics business operations and a provision for
other disposal costs of $1.0 million. In the third quarter of Fiscal 1996 the
Company recorded a pre-tax charge of approximately $22.7 million to reduce the
carrying value of the molded plastics business assets (principally goodwill). As
this goodwill is not deductible for income tax purposes, there was no related
tax benefit.


LIQUIDITY AND CAPITAL RESOURCES

     During Fiscal 1997, the Company sold all of the assets of its molded
plastic products business for cash proceeds of approximately $17.6 million and a
$2.0 million promissory note. The Company has reported the results of the
operations of the molded plastic products business and the loss on disposal as
discontinued operations.

     The $17.6 million in cash generated from the sale of the assets of the
Company's molded plastic products business along with a portion of the $15.7
million of cash on hand at December 29, 1996 was used to fund capital
expenditures of approximately $8.6 million and operations, including an increase
of $26.7 million in the Company's inventories, resulting in a $14.6 million cash
balance at December 28, 1997. The inventory growth was principally due to a
planned increase in inventories to facilitate higher service levels, an
accumulation of safety stock relating to the consolidation of the Company's
cleaning products manufacturing facilities and an increase in new products.

     On January 16, 1998, the Company completed the acquisition (the
"Acquisition") of all of the outstanding equity securities of APP Holding
Corporation ("APP"), the parent corporation and sole stockholder of Aspen Pet
Products, Inc. ("Aspen"), a marketer of dog and cat supplies and accessories, as
well as other pet products. Pursuant to the Stock Purchase and Sale Agreement,
the Company paid approximately $24.5 million in cash and refinanced APP's
outstanding bank debt of approximately $9.1 million. In addition, if Aspen
achieves certain predetermined financial results during fiscal 1998, 1999, 2000,
2001 and 2002, the Company will make additional annual payments to certain
former APP stockholders equal, in the aggregate, to 25% of the amount by which
Aspen's Gross Profit (as defined) of each such year exceeds the Base Profit
Amount (as defined). The


                                       7

<PAGE>   8

                           EKCO GROUP AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  RESULTS OF OPERATIONS AND FINANCIAL CONDITION


LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

Acquisition will be accounted for under the purchase method of accounting and
goodwill of approximately $24 million will be amortized over 40 years. At
December 31, 1997, APP's total assets were $21 million and total liabilities
were $12 million. For the year ended December 31, 1997, APP had net sales of
approximately $30 million and operating income of approximately $3 million.

     On December 15, 1997, the Company and its lender bank agreed to certain
modifications to its amended and restated credit agreement (as so amended, the
"Credit Facility"). Effective upon the consummation of the Acquisition, the
Credit Facility was increased to include a maximum revolving credit line of $55
million, up from a level of $35 million under the previous agreement, and an
additional $10 million was made available under a term loan credit facility. The
principal of the term loan is required to be repaid at the rate of approximately
$357,000 on the last day of each quarter, commencing March 31, 1998. The maximum
outstanding balance of the revolving credit line may not exceed 80% of eligible
accounts receivable and 50% of eligible inventory, provided that the amount
attributable to eligible inventory may not exceed $35 million, as determined at
the end of each calendar month. The Credit Facility provides for a commitment
fee of three-eighths of one percent on the unused portion of the commitment.
Borrowings under the Credit Facility bear interest at the bank's prime rate or
at LIBOR plus 1.25% or 1.5%, depending on the Company's borrowing strategy and
the ratio of total debt to cash flow, as defined. Borrowings under the Credit
Facility mature in November 2002 and are collateralized by substantially all of
the assets of the Company. The Credit Facility contains certain financial and
operating covenants, of which the most restrictive requires the Company to
maintain a minimum level of cash flow. The Senior Notes, as well as the Credit
Facility, contain certain financial covenants that may restrict the sale of
assets, payment of dividends, the incurrence of additional indebtedness and
certain investments and acquisitions by the Company. The Company has suspended
the payment of quarterly dividends and does not anticipate paying cash dividends
for the foreseeable future. In order for the Company to pay a dividend, its
arrangements with holders of its Senior Notes would need to be amended and the
payment of the dividend would have to be permitted under certain covenants of
the Credit Facility. On January 16, 1998 the Company used its cash balance plus
proceeds from the $10 million term loan and borrowings of approximately $4.6
million to fund the acquisition of Aspen. After the acquisition of Aspen, $38.2
million was available for general corporate purposes under the Credit Facility,
less approximately $12.2 million in outstanding letters of credit.

     The Company believes it has sufficient borrowing capacity to finance its
ongoing operations for the foreseeable future. The Company, however, may require
additional funds to finance acquisitions.

     The Company has a recorded liability of approximately $2.8 million for
environmental remediation and ongoing operation, maintenance and ground water
monitoring costs associated with facilities owned or occupied by the Company's
cleaning products operations. The Company believes the provision is adequate but
will continue to monitor and adjust the provision, as appropriate, should
additional sites be identified or further remediation measures be required or
undertaken or interpretation of current laws or regulations be modified.




                                       8
<PAGE>   9


                        EKCO GROUP, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)


     In June 1997, The Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standard No. 130 "Reporting Comprehensive Income" ("FAS
130") that establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
The Company will adopt FAS 130 commencing with the first quarter of fiscal 1998.

     Also in June 1997, the FASB issued Financial Accounting Standards No. 131
"Disclosure about Segments of an Enterprise and Related Information" ("FAS 131")
that requires companies to determine segments based on how management makes
decisions about allocating resources to the segments and measuring their
performance. The Company will adopt FAS 131 in fiscal 1998.

YEAR 2000 DATE CONVERSION
     The Company's management has initiated a company-wide program to prepare
the Company's computer systems for the year 2000. A comprehensive review of the
Company's computer systems has been conducted to identify the systems that could
be affected by this issue. An implementation plan to resolve this issue is
currently being developed and implemented. The Company presently believes that
with modifications to existing software and the conversion to new software, the
year 2000 problem will not pose a significant operational problem to the
Company. The Company expects the year 2000 modifications and conversions to be
completed on a timely basis and to cost approximately $300,000 to $500,000,
which will be expensed in 1998. However, there can be no assurance that the
systems of other parties upon which the Company's business also relies,
including, but not limited to, the Company's customers and suppliers, will be
converted on a timely basis. The Company's business, financial condition, or
results of operations could be materially adversely affected by the failure of
its systems and applications of those operated by other parties to properly
operate or manage dates beyond 1999.

INFLATION
     Inflation in general was not considered to be a significant factor in the
Company's operations during the periods discussed above.

BUSINESS OUTLOOK
     This Annual Report, including "Letter to Shareholders" and "Management's
Discussion and Analysis of Results of Operations and Financial Condition,"
contains forward-looking statements within the meaning of the safe harbor
provision of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Such statements are based on management's
current expectations and are subject to a number of factors and uncertainties
which could cause actual results to differ materially from those described in
the forward-looking statements. Such factors and uncertainties include, but are
not limited to: the impact of the level of the Company's indebtedness;
restrictive covenants contained in the Company's various debt documents; general
economic conditions and conditions in the retail environment; the Company's
dependence on a few large customers; price fluctuations in the raw materials
used by the Company; competitive conditions in the Company's markets; the timely
introduction of new products; the impact of competitive products and pricing;
certain assumptions related to consumer purchasing patterns; the seasonal nature
of the Company's business; and the impact of federal, state and local
environmental requirements (including the impact of current or future




                                       9
<PAGE>   10

                        EKCO GROUP, INC. AND SUBSIDIARIES
                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED)


environmental claims against the Company). As a result, the Company's operating
results may fluctuate, especially when measured on a quarterly basis. These
forward-looking statements represent the Company's best estimate as of the date
of this Annual Report. The Company assumes no obligation to update such
estimates except as required by the rules and regulations of the Securities and
Exchange Commission.




                                       10
<PAGE>   11

                        EKCO GROUP, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                          DECEMBER 28,      DECEMBER 29,
                                                                             1997              1996
                                                                          -----------          --------
                                                                             (AMOUNTS IN THOUSANDS,
                                                                             EXCEPT PER SHARE DATA)
<S>                                                                        <C>               <C>     
                                     ASSETS
Current assets
   Cash and cash equivalents                                               $ 14,565          $ 15,706
   Accounts receivable, net of allowance for
      doubtful accounts of $957 and $760, respectively                       45,529            42,182
   Inventories                                                               74,150            47,422
   Prepaid expenses and other current assets                                  9,021             6,180
   Deferred income taxes                                                      6,877            10,857
   Net assets of discontinued operations                                         --            17,030
                                                                           --------          --------
      Total current assets                                                  150,142           139,377

Property and equipment, net                                                  35,678            34,998
Other assets                                                                  7,563             6,569
Excess of cost over fair value of net assets acquired,
   net of accumulated amortization of $32,321 and $28,690,
   respectively                                                             107,422           111,132
                                                                           --------          --------
      Total assets                                                         $300,805          $292,076
                                                                           ========          ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
   Accounts payable                                                        $ 14,040          $ 18,395
   Accrued expenses                                                          29,290            28,688
   Income taxes                                                               6,344             2,651
                                                                           --------          --------
      Total current liabilities                                              49,674            49,734
                                                                           --------          --------
Long-term obligations, less current portion                                 124,270           124,182
                                                                           --------          --------
Other long-term liabilities                                                  11,974            11,052
                                                                           --------          --------
Series B ESOP Convertible Preferred Stock, net; 
   outstanding 1,315 shares and 1,439 shares, 
   respectively, redeemable at $3.61 per share                                4,399             4,098
                                                                           --------          --------
Commitments and contingencies                                                    --                --
                                                                           --------          --------
Minority interest                                                               494               495
                                                                           --------          --------
Stockholders' equity
   Common stock, $.01 par value; outstanding 
     19,066 shares and 18,580 shares, respectively                              191               186
   Capital in excess of par value                                           109,462           107,622
   Cumulative translation adjustment                                            636               869
   Retained earnings (deficit)                                                4,665            (1,352)
   Unearned compensation                                                     (2,787)           (2,963)
   Pension liability adjustment                                              (2,173)           (1,847)
                                                                           --------          --------
                                                                            109,994           102,515
                                                                           --------          --------
        Total liabilities and stockholders' equity                         $300,805          $292,076
                                                                           ========          ========
</TABLE>




          See accompanying notes to consolidated financial statements.


                                       11
<PAGE>   12



                        EKCO GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                  FISCAL YEARS ENDED
                                                      DECEMBER 28,     DECEMBER 29,   DECEMBER 31,
                                                         1997             1996            1995
                                                      -----------      -----------    -----------
                                                     (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                    <C>              <C>             <C>     

Net revenues                                           $270,536         $249,870        $247,004
                                                       --------         --------        --------
Costs and expenses
   Cost of sales                                        181,307          164,505         160,933
   Selling, general and administrative                   60,915           59,737          49,152
   Special charges                                          783            9,877              --
   Amortization of excess of cost over fair value         3,631            3,636           3,636
                                                       --------         --------        --------
                                                        246,636          237,755         213,721
                                                       --------         --------        --------
Income before interest and income taxes                  23,900           12,115          33,283
                                                       --------         --------        --------
Net interest expense
   Interest expense                                      12,446           12,565          13,590
   Investment income                                       (810)            (149)            (97)
                                                       --------         --------        --------
                                                         11,636           12,416          13,493
                                                       --------         --------        --------
Income (loss) from continuing operations
  before income taxes and extraordinary charges          12,264             (301)         19,790
Income taxes                                              6,247            2,370           9,828
                                                       --------         --------        --------
Income (loss) from continuing operations
  before extraordinary charge                             6,017           (2,671)          9,962
Discontinued operations
      Loss from operations of discontinued 
        operations, net of tax benefits of 
        $1,928, and $1,934, respectively                     --          (24,720)         (1,917)
      Loss on disposal, net of tax
        benefit of $1,925                                    --           (3,575)             --
                                                       --------         --------        --------
Income (loss) before extraordinary charge                 6,017          (30,966)          8,045
Extraordinary charge for early retirement
      of debt, net of tax benefit of $2,139                  --           (3,208)             --
                                                       --------         --------        --------
Net income (loss)                                      $  6,017         $(34,174)       $  8,045
                                                       ========         ========        ========

</TABLE>



                                       12
<PAGE>   13

                        EKCO GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                                FISCAL YEARS ENDED
                                                                     DECEMBER 28,    DECEMBER 29,   DECEMBER 31,
                                                                         1997           1996           1995
                                                                     -----------     -----------    -----------
                                                                   (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                                     <C>            <C>            <C>   

Earnings (loss) per common share Basic:
      Income (loss) from continuing operations
        before extraordinary charge                                     $  .32         $ (.14)        $  .54
      Loss from operations of discontinued operations                       --          (1.34)          (.10)
      Loss on disposal of business                                          --           (.19)            --
                                                                        ------         ------         ------
      Income (loss) before extraordinary charge                            .32          (1.67)           .44
      Extraordinary charge                                                  --           (.18)            --
                                                                        ------         ------         ------
      Earnings (loss) per common share                                  $  .32         $(1.85)        $  .44
                                                                        ======         ======         ======
   Diluted:
      Income (loss) from continuing operations before
        extraordinary charge                                            $  .29         $ (.14)        $  .49
      Loss from operations of discontinued operations                       --          (1.34)          (.09)
      Loss on disposal of business                                          --           (.19)            --
                                                                        ------         ------         ------
      Income (loss) before extraordinary charge                            .29          (1.67)           .40
      Extraordinary charge                                                  --           (.18)            --
                                                                        ------         ------         ------
      Earnings (loss) per common share                                  $  .29         $(1.85)        $  .40
                                                                        ======         ======         ======
Weighted average number of shares
        used in computation of per share data
      Basic                                                             18,907         18,489         18,354
                                                                        ======         ======         ======
      Diluted                                                           20,849         18,489         22,413
                                                                        ======         ======         ======
</TABLE>


          See accompanying notes to consolidated financial statements.











                                       13
<PAGE>   14
                        EKCO GROUP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                        COMMON     CAPITAL IN   CUMULATIVE    RETAINED                   PENSION
                                                      STOCK, PAR    EXCESS OF   TRANSLATION   EARNINGS     UNEARNED     LIABILITY
                                             SHARES   VALUE $.01    PAR VALUE   ADJUSTMENT    (DEFICIT)  COMPENSATION   ADJUSTMENT
                                             ------   ----------   ----------   -----------   ---------  ------------   ----------
                                                                               (AMOUNTS IN THOUSANDS)
<S>                                          <C>         <C>        <C>             <C>        <C>           <C>         <C>     

Beginning balance, January 1, 1995           18,069      $181       $105,448        $771       $27,172       $(2,968)    $(1,488)
Shares issued under common stock purchase
 and option plans and dividend re-
 investment plan                                226         2            769          --            --            --          --
Net shares issued under restricted common
 stock purchase plans                           243         2          1,515          --            --        (1,437)         --
Income tax reductions relating to stock
 plans                                           --        --             74          --            --            --          --
Shares issued upon preferred stock
 conversion                                      80         1            288          --            --            --          --
Purchases of treasury stock                    (204)       (2)        (1,178)         --            --            --          --
Net income for the year                          --        --             --          --         8,045            --          --
Dividends paid                                   --        --             --          --        (1,603)           --          --
Foreign currency translation adjustment          --        --             --         158            --            --          --
Amortization of unearned compensation            --        --             --          --            --           435          --
Pension liability adjustment                     --        --             --          --            --            --        (260)
                                             ------      ----       --------        ----       -------       -------     -------
Balance, December 31, 1995                   18,414       184        106,916         929        33,614        (3,970)     (1,748)
Shares issued under employee common
  stock purchase and option plans and
  dividend reinvestment plan                     90         1            360          --            --            --          --
Net shares issued under restricted
  common stock purchase plans                    27        --            171          --            --          (168)         --
Shares issued upon preferred stock
  conversion                                     49         1            175          --            --            --          --
Net loss for the year                            --        --             --          --       (34,174)           --          --
Dividends paid                                   --        --             --          --          (792)           --          --
Foreign currency translation adjustment          --        --             --         (60)           --            --          --
Amortization of unearned compensation            --        --             --          --            --         1,175          --
Pension liability adjustment                     --        --             --          --            --            --         (99)
                                             ------      ----       --------        ----       -------       -------     -------
Balance, December 29, 1996                   18,580       186        107,622         869        (1,352)       (2,963)     (1,847)

</TABLE>



                                       14
<PAGE>   15


                        EKCO GROUP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                        COMMON     CAPITAL IN   CUMULATIVE    RETAINED                   PENSION
                                                      STOCK, PAR    EXCESS OF   TRANSLATION   EARNINGS     UNEARNED     LIABILITY
                                             SHARES   VALUE $.01    PAR VALUE   ADJUSTMENT    (DEFICIT)  COMPENSATION   ADJUSTMENT
                                             ------   ----------   ----------   -----------   ---------  ------------   ----------
                                                                               (AMOUNTS IN THOUSANDS)
<S>                                          <C>         <C>        <C>             <C>        <C>           <C>         <C>     

Shares issued under common stock 
  purchase and option plans and 
  dividend reinvestment plan                    372         4          1,005          --            --            --          --
Net shares issued under restricted
 common stock purchase plans                      3        --             19          --            --           (18)         --
Shares issued upon preferred stock
 conversion                                     111         1            400          --            --            --          --
Compensatory options issued                      --        --             50          --            --           (50)         --
Income tax reductions relating to
 stock plans                                     --        --            366          --            --            --          --
Net income for the year                          --        --             --          --         6,017            --          --
Foreign currency translation adjustment          --        --             --        (233)           --            --          --
Amortization of unearned compensation            --        --             --          --            --           244          --
Pension liability adjustment                     --        --             --          --            --            --        (326)
                                             ------      ----       --------       -----        ------       -------     -------
Balance, December 28, 1997                   19,066      $191       $109,462       $ 636        $4,665       $(2,787)    $(2,173)
                                             ======      ====       ========       =====        ======       =======     =======

</TABLE>





See accompanying notes to consolidated financial statements














                                       15
<PAGE>   16


                        EKCO GROUP, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                             FISCAL YEARS ENDED
                                                                DECEMBER 28,     DECEMBER 29,       DECEMBER 31,
                                                                   1997              1996              1995
                                                                -----------      -----------        -----------
                                                                           (AMOUNTS IN THOUSANDS)
<S>                                                               <C>              <C>               <C>     

Cash flows from operating activities
  Net income (loss)                                               $ 6,017          $(34,174)         $  8,045
  Adjustments to reconcile net income (loss)
    to net cash provided by operations
      Depreciation                                                  7,197             7,374             7,018
      Amortization of excess of cost over fair value                3,631             3,636             3,636
      Amortization of deferred finance costs                          578               517               590
      Other amortization                                            5,364             6,607             6,959
      Special charges                                                 783             9,877                --
      Loss from discontinued operations, net                           --            28,295             1,917
      Extraordinary charges, net                                       --             3,208                --
      Deferred income taxes                                         5,666            (5,837)            3,388
      Other                                                           651                82              (201)
      Change in certain assets and liabilities, net 
        of effects from acquisition and dispositions of 
        businesses, affecting cash provided by operations
        Accounts receivable                                        (3,612)           (3,704)              895
        Inventories                                               (26,853)           (6,364)              504
        Prepaid marketing costs                                    (5,548)           (4,413)           (4,877)
        Other assets                                                 (725)              506              (908)
        Accounts payable and accrued expenses                      (7,622)            7,636            (2,871)
        Income taxes payable                                        3,686             2,114            (3,395)
                                                                  -------          --------          --------
  Net cash provided by (used in) operating activities
      Continuing operations                                       (10,787)           15,360            20,700
      Discontinued operations                                        (570)            4,823             1,020
                                                                  -------          --------          --------
      Net cash provided by (used in) operating activities         (11,357)           20,183            21,720
                                                                  -------          --------          --------
Cash flows from investing activities
Proceeds from sale of property and equipment                          
  Proceeds from sale of property and equipment                        148             3,306             3,300
  Capital expenditures for continuing operations                   (8,567)           (8,320)           (8,566)
  Proceeds from sale of discontinued operations                    17,600                --                --
  Capital expenditures for discontinued operations                     --            (1,490)           (4,086)
                                                                  -------          --------          --------
      Net cash provided(used in) investing activities               9,181            (6,504)           (9,352)
                                                                  -------          --------          --------
Cash flows from financing activities
  Proceeds from issuance of note payable and
    long--term obligations                                             --           125,101            35,183
  Proceeds from sale of investment held as collateral                  --                --             3,600
  Payments of dividends                                                --              (792)           (1,603)
  Purchases of treasury stock                                          --                --            (1,180)
  Payments of note and long--term obligations                          --          (122,781)          (48,627)
  Other                                                             1,042               361               259
                                                                  -------          --------          --------
      Net cash provided by (used in)financing activities            1,042             1,889           (12,368)
Effect of exchange rate changes on cash                                (7)               (4)               13
                                                                  -------          --------          --------
Net increase (decrease) in cash and cash equivalents               (1,141)           15,564                13
Cash and cash equivalents at beginning of year                     15,706               142               129
                                                                  -------          --------          --------
Cash and cash equivalents at end of year                          $14,565          $ 15,706          $    142
                                                                  =======          ========          ========
Cash paid during the year for
  Interest                                                        $ 5,942          $  9,851          $ 12,557
  Income taxes                                                     (3,479)              184             7,912
</TABLE>


  See accompanying notes to consolidated financial statements.



                                       16
<PAGE>   17


                        EKCO GROUP, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



(1)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
     The consolidated financial statements include the accounts of the Company
and its subsidiaries (the "Company"). The Company's principal operating
subsidiaries are wholly-owned Ekco Housewares, Inc. ("Housewares"), wholly-owned
Ekco Cleaning, Inc. and subsidiaries ("Cleaning"), and majority-owned Woodstream
Corporation ("Woodstream"). All significant intercompany accounts and
transactions have been eliminated.

BASIS OF PRESENTATION
     The Company uses a 52-53 week fiscal year ending on the Sunday nearest
December 31. Accordingly, the accompanying consolidated financial statements
include the fiscal years ended December 28, 1997 ("Fiscal 1997"), December 29,
1996 ("Fiscal 1996"), and December 31, 1995 ("Fiscal 1995").

CASH AND CASH EQUIVALENTS 
     The Company considers all short-term investments which have an original
maturity of 90 days or less to be cash equivalents.

MARKET EXPANSION PROGRAMS AND ADVERTISING COSTS
     The Company incurs certain costs in connection with maintaining and
expanding its market position. These costs are deferred and amortized using the
straight-line method over the lesser of the period of benefit or the program
period. Program periods currently range from one to three years. It is the
Company's policy to periodically review and evaluate whether the benefits
associated with these costs are expected to be realized and that continued
deferral and amortization is justified. Approximately $4.1 and $2.9 million of
these costs are included in prepaid expenses at December 28, 1997 and December
29, 1996, respectively.

     The Company expenses all advertising costs as incurred.

INVENTORIES
     Inventories are stated at the lower of cost or market. Cost is determined
on a first-in, first-out ("FIFO") basis for all subsidiaries except for
Cleaning, whose cost is determined on a last-in, first-out ("LIFO") basis.

PROPERTY AND EQUIPMENT
     Property and equipment are stated at cost. The Company provides for
depreciation and amortization over the estimated useful lives of assets or terms
of capital leases on the straight-line method. Improvements are capitalized,
while repair and maintenance costs are charged to operations. When assets are
retired or disposed of, the cost and accumulated depreciation thereon are
removed from the accounts, and gains or losses, if any, are included in
operations.

INTANGIBLE ASSETS
     The excess of cost over fair value of net assets acquired ("goodwill") is
being amortized over 30 to 40 year periods. It is the Company's policy to
periodically review and evaluate the recoverability of goodwill by assessing
long-term trends of profitability and undiscounted cash flows and to determine
whether the amortization of goodwill over its remaining life can be recovered
through expected future results of operations and cash flows.




                                       17
<PAGE>   18



     Favorable lease rights included in other assets are being amortized over
the life of the lease. Deferred financing costs included in other assets are
debt issuance costs which have been deferred and are being amortized over the
terms of the respective financing arrangements.

INCOME RECOGNITION
     Revenues from product sales are recognized at the time the product is
shipped. Investment income is accrued as earned.

TRANSLATION OF FOREIGN CURRENCY
     The assets and liabilities of the Company's foreign subsidiaries are
translated at year-end exchange rates. Income and expenses are translated at
exchange rates prevailing during the year. The resulting net translation
adjustment for each year is included as a separate component of stockholders'
equity.

INCOME TAXES
     Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect, if any, on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. Provision for U.S. income
taxes on the undistributed earnings of foreign subsidiaries is made only on
those amounts in excess of the funds considered to be permanently reinvested.

EARNINGS PER COMMON SHARE
     In December 1997, the Company adopted Financial Accounting Standards Board
Statement No. 128, "Earnings Per Share" ("FAS 128"). All previously reported
earnings per share information has been restated to reflect the impact of
adopting FAS 128.

USE OF ESTIMATES
     The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

RECENT ACCOUNTING PRONOUNCEMENTS
     The Financial Accounting Standards Board has recently issued Statement of
Financial Accounting Standards No. 130 "Reporting Comprehensive Income" and
Statement of Financial Accounting Standards No. 131 "Disclosure about Segments
of an Enterprise and Related Information". The Company intends on making the
required disclosures based on each statement in fiscal 1998.

(2)  DISCONTINUED OPERATIONS
     On January 31, 1997, the Company's Board of Directors approved management's
plan to dispose of the Company's molded plastic products business. Accordingly,
the Company reported the results of the operations of the molded plastic
products business and the loss on disposal as discontinued operations. During
Fiscal 1997, the Company sold all of the assets of its molded plastics products
business for cash proceeds of approximately $17.6 million and a $2.0 million
promissory note, which is included in other assets at December 28, 1997.




                                       18
<PAGE>   19


     Net assets of discontinued operations classified separately in the
consolidated balance sheets as of December 29, 1996 are as follows: (Amounts in
thousands)

<TABLE>
<S>                                                               <C>    
Accounts receivable, net                                          $ 4,210
Inventories                                                         6,138
Prepared expenses and other current assets                             67
Property and equipment, net                                        16,743
Excess of cost over fair value                                         --
Accounts payable                                                   (2,416)
Accrued expenses                                                   (2,212)
Loss on disposal                                                   (5,500)
                                                                  -------
                                                                  $17,030
                                                                  =======
</TABLE>

     Certain information with respect to statements of operations from
discontinued operations is summarized as follows:

<TABLE>
<CAPTION>
                                                  Fiscal 1996       Fiscal 1995
                                                  -----------       -----------
                                                       (Amounts in thousands)

<S>                                                <C>                <C>    
Net revenues                                       $ 26,764           $30,991
                                                   --------           -------
Cost of sales                                        26,758            30,410
Selling, general and administrative                   3,325             3,631
Special charges                                      22,728                --
Goodwill amortization                                   601               801
                                                   --------           -------
                                                     53,412            34,842
                                                   --------           -------
Loss before income taxes                            (26,648)           (3,851)
Income tax benefit                                   (1,928)           (1,934)
                                                   --------           -------
Loss from discontinued operations                  $(24,720)          $(1,917)
                                                   ========           =======
</TABLE>


     The special charge of $22.7 million (principally goodwill) was a reduction
in the third quarter of Fiscal 1996 of the carrying value of the molded plastic
products business. Under the provisions of Statement of Financial Accounting
Standard No. 121, which establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles and goodwill related to
those assets, the Company determined in the third quarter of Fiscal 1996 that an
adjustment to the carrying value of the molded plastic products business was
required.

     The charge in Fiscal 1996 for loss on disposal of the molded plastic
business includes the following: (Amounts in thousands)

<TABLE>
<S>                                                              <C>   
Carrying value of net assets in excess of
  anticipated proceeds                                           $3,300
Expenses of asset disposal and anticipated
  operating loss for the period December 29, 1996
  through the estimated date of disposal                          2,200
                                                                 ------
Loss on disposal before taxes                                     5,500
Income tax benefit                                                1,925
                                                                 ------
Loss on disposal                                                 $3,575
                                                                 ======
</TABLE>




                                       19
<PAGE>   20


(3)  INVENTORIES
     Inventories consisted of the following:

<TABLE>
<CAPTION>
                                        DECEMBER 28, 1997     DECEMBER 29, 1996
                                        -----------------     -----------------
                                              (AMOUNTS IN THOUSANDS)

    <S>                                       <C>                   <C>    
    Raw materials                             $12,984               $ 9,628
    Work in process                             3,811                 3,253
    Finished goods                             57,355                34,541
                                              -------               -------
                                              $74,150               $47,422
                                              =======               =======
</TABLE>


     At December 28, 1997, and December 29, 1996, inventories carried under the
LIFO method represented approximately 22.2% and 21.8%, respectively, of total
year-end inventories. The effect of using LIFO for these inventories for Fiscal
1997 and Fiscal 1996 was immaterial to the financial position and results of
operations of the Company.


(4)  PROPERTY AND EQUIPMENT, NET
     Property and equipment consisted of the following:

<TABLE>
<CAPTION>
                                                     DECEMBER 28, 1997    DECEMBER 29, 1996
                                                     -----------------     ----------------
                                                           (AMOUNTS IN THOUSANDS)
      <S>                                                 <C>                   <C>   
      Property and equipment at cost
        Land, buildings and improvements                  $14,598               $14,623
        Equipment, furniture and fixtures                  60,624                58,963
                                                          -------               -------
                                                           75,222                73,586
      Less accumulated depreciation and
        amortization                                       39,544                38,588
                                                          -------               -------
                                                          $35,678               $34,998
                                                          =======               =======
</TABLE>


(5)  LONG-TERM OBLIGATIONS AND OTHER LONG-TERM LIABILITIES 
     Long-term obligations consisted of the following:

<TABLE>
<CAPTION>
                                                     DECEMBER 28, 1997    DECEMBER 29, 1996
                                                     -----------------     ----------------
                                                           (AMOUNTS IN THOUSANDS)
      <S>                                                 <C>                   <C>   

     Credit Facility                                      $     --              $     --
     9.25% Senior Notes, due 2006 (net
       of unamortized discount of $730
       and $818)                                           124,270               124,182
                                                          --------              --------
                                                          $124,270              $124,182
                                                          ========              ========


     Other long-term liabilities consisted of the following:

       Accrued pension cost (see Note 8)                  $ 2,553               $ 2,327
       Deferred income taxes                                3,710                 2,028
       Other long-term liabilities                          5,711                 6,697
                                                          -------               -------
                                                          $11,974               $11,052
                                                          =======               =======

</TABLE>


                                       20
<PAGE>   21


     On March 25, 1996, the Company sold $125.0 million of its 9.25% Senior
Notes due 2006 ("Senior Notes") at a price of 99.291% of face value in a private
offering to institutional investors. Interest on the Senior Notes is payable
semi-annually on April 1 and October 1 of each year. The Company used the net
proceeds of the Senior Note offering to (i) repurchase its outstanding 12.70%
Notes due 1998 and 7.0% Convertible Subordinated Note due 2002 and (ii) to repay
substantially all amounts outstanding under its revolving credit facility.
Concurrently with closing the sale of the Senior Notes, the Company entered into
an amendment to its revolving credit facility, which amendment consolidated the
outstanding debt and borrowing capacity of the Company and its wholly-owned
subsidiaries, and revised certain financial covenants. In July 1997, the Company
and its lender bank amended and restated the credit agreement, which revised
certain financial covenants and reduced the number of lender banks to one. On
December 15, 1997, the Company and its lender bank agreed to certain
modifications to its amended and restated credit agreement (as amended, the
"Credit Facility"). Effective with the acquisition of APP Holding Corporation
(see Note 19), the Credit Facility was increased to include a maximum revolving
credit line of $55 million, up from a level of $35 million under the previous
agreement and an additional $10 million was made available under a term loan
credit facility. The maximum outstanding balance of the revolving credit line
may not exceed to 80% of eligible accounts receivable and 50% of eligible
inventory, provided that the amount attributable to eligible inventory may not
exceed $35 million, as determined at the end of each calendar month. The Credit
Facility provides for a commitment fee of three-eighths of one percent on the
unused portion of the commitment. Borrowings under the Credit Facility bear
interest at the bank's prime rate, or at LIBOR plus 1.25% or 1.5%, depending on
the Company's borrowing strategy and the ratio of total debt to cash flow, as
defined. Borrowings under the Credit Facility mature in November 2002 and are
collateralized by substantially all of the assets of the Company. The Credit
Facility contains certain financial and operating covenants, of which the most
restrictive requires the Company to maintain a minimum level of cash flow. The
Senior Notes, as well as the Credit Facility, contain certain financial
covenants that may restrict the sale of assets, payment of dividends, the
incurrence of additional indebtedness and certain investments and acquisitions
by the Company.

     The Company has suspended the payment of quarterly dividends and does not
anticipate paying cash dividends for the foreseeable future. In order for the
Company to pay a dividend, its arrangements with holders of its Senior Notes
would need to be amended and the payment of the dividend would have to be
permitted under certain covenants of the Credit Facility.

     The early extinguishment of the 12.7% Notes and 7% Convertible Subordinated
Note resulted in an extraordinary charge of $3.2 million consisting of the
following:

<TABLE>
                                                         (Amounts in thousands)

      <S>                                                       <C>    
      Premium on 12.70% Notes, due 1998                         $ 6,511
      Discount on prepayment of 7% Convertible
        Subordinated Note, due 2002                              (3,218)
      Write-off of related unamortized financing
         costs                                                    2,054
                                                                -------
      Extraordinary charge before income tax benefit              5,347
      Income tax benefit                                          2,139
                                                                -------
      Net extraordinary charge                                  $ 3,208
                                                                =======

</TABLE>

                                       21

<PAGE>   22


     Certain information with respect to credit agreements follows:

<TABLE>
<CAPTION>
                                            FISCAL 1997      FISCAL 1996     FISCAL 1995
                                            -----------      -----------     -----------
                                            (AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<S>                                           <C>              <C>             <C>    

Average interest rate of borrowings
   outstanding at end of year                    N/A               N/A            7.48%
Maximum amount of borrowings
   outstanding at any month-end               $1,242           $31,909         $56,533
Average aggregate borrowings during
  the year                                    $  176           $ 9,390         $43,392
Weighted average interest rate
  during the year                                8.5%            7.68%            8.08%

</TABLE>

(6)  ACCRUED EXPENSES
     Accrued expenses consisted of the following:

<TABLE>
<CAPTION>
                                                DECEMBER 28, 1997      DECEMBER 29, 1996
                                                -----------------      -----------------
                                                        (AMOUNTS IN THOUSANDS)
<S>                                                   <C>                    <C>    

Payroll                                               $ 2,464                $ 5,033
Compensated absences                                    1,651                  1,755
Sales and promotional allowances                        9,470                  6,393
Provisions related to consolidation of
  cleaning business                                         -                  1,697
Interest and non-income taxes                           4,168                  4,326
Insurance 3,241                                         2,516
Professional fees                                         575                    715
Provision for environmental matters                     1,738                  1,782
Other                                                   5,983                  4,471
                                                      -------                -------
                                                      $29,290                $28,688
                                                      =======                =======
</TABLE>


(7)  INCOME TAXES
     Total income tax expense (benefit) for Fiscal 1997, Fiscal 1996 and Fiscal
1995 was allocated as follows:

<TABLE>
<CAPTION>
                                                     FISCAL 1997    FISCAL 1996   FISCAL 1995
                                                     -----------    -----------   -----------
                                                               (AMOUNTS IN THOUSANDS)
<S>                                                     <C>          <C>            <C>    

Income (loss) from continuing operations                $6,247       $ 2,370        $ 9,828
Income (loss) from discontinued operations                  --        (1,928)        (1,934)
Income (loss) from disposal of discontinued
  operations                                                --        (1,925)            --
Extraordinary charge for early retirement
  of debt                                                   --        (2,139)            --
Stockholders' equity, for compensation
  expense for tax purposes in excess of
  amounts recognized for financial reporting
  purposes                                                (366)           --            (74)
                                                        ------       -------        -------
                                                        $5,881       $(3,622)       $ 7,820
                                                        ======       =======        =======
</TABLE>

     A reconciliation of the provision for income taxes from continuing
operations to the statutory income tax rate applied to combined domestic and
foreign income before income taxes for Fiscal 1997, Fiscal 1996 and Fiscal 1995
was as follows:



                                       22
<PAGE>   23

<TABLE>
<CAPTION>
                                                       FISCAL 1997    FISCAL 1996   FISCAL 1995
                                                       -----------    -----------   -----------
                                                      (AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<S>                                                      <C>             <C>          <C>    
Income (loss) from continuing operations
  before income taxes
      Domestic                                           $13,704         $ (19)       $20,408
      Foreign                                             (1,440)         (282)          (618)
                                                         -------         -----        -------
                                                         $12,264         $(301)       $19,790
                                                         =======         =====        =======

Federal income tax (credit) at normal rates                   35%          (35%)           35%
State income taxes, net of federal benefit                     7%          141%             5%
Difference between foreign and
  federal effective rates                                     --            30%             1%
Amortization of excess of cost over fair value                10%          423%             6%
Special charges                                               --           227%            --
Other                                                         (1%)           1%             3%
                                                         -------         -----        -------
                                                              51%          787%            50%
                                                         =======         =====        =======
</TABLE>

         The components of the provision for income taxes for continuing
operations were as follows:

<TABLE>
<CAPTION>
                                      FEDERAL    STATE     FOREIGN     TOTAL
                                      ------     ------     -----      ------
                                              (AMOUNTS IN THOUSANDS)
<S>                                   <C>        <C>        <C>        <C>   
FISCAL 1997
-----------
Current                               $  550     $  165     $(130)     $  585
Deferred                               4,565      1,243      (146)      5,662
                                      ------     ------     -----      ------
                                      $5,115     $1,408     $(276)     $6,247
                                      ======     ======     =====      ======
FISCAL 1996
-----------
Current                               $4,189     $1,688      $ (8)     $5,869
Deferred                              (2,608)      (891)        -      (3,499)
                                      ------     ------     -----      ------
                                      $1,581     $  797      $ (8)     $2,370
                                      ======     ======     =====      ======
FISCAL 1995
-----------
Current                               $5,986     $  993      $(41)     $6,938
Deferred                               2,562        312        16       2,890
                                      ------     ------     -----      ------
                                      $8,548     $1,305      $(25)     $9,828
                                      ======     ======     =====      ======
</TABLE>


     The significant components of deferred income tax expense attributable to
income from continuing operations for Fiscal 1997, Fiscal 1996 and Fiscal 1995
were as follows:




                                       23
<PAGE>   24


<TABLE>
<CAPTION>
                                                  FISCAL 1997   FISCAL 1996    FISCAL 1995
                                                  -----------   -----------    -----------
                                                          (AMOUNTS IN THOUSANDS)

<S>                                                 <C>           <C>            <C>   
Depreciation                                        $(1,078)      $ (644)        $1,713
Inventory                                            (1,594)         516            193
Benefit plans                                           406         (167)           (72)
Accruals, provisions and other liabilities            8,520       (4,461)         1,414
Other                                                  (592)       1,257           (358)
                                                    -------      -------         ------
                                                    $ 5,662      $(3,499)        $2,890
                                                    =======      =======         ======
</TABLE>


     The tax effects of temporary differences and carry forwards that give rise
to significant portions of net deferred tax asset (liability) consisted of the
following:

<TABLE>
<CAPTION>
                                                  DECEMBER 28, 1997    DECEMBER 29, 1996
                                                  -----------------    -----------------
                                                         (AMOUNTS IN THOUSANDS)
<S>                                                   <C>                   <C>    

Receivables                                           $   962               $   244
Inventory                                               2,440                   846
Benefit plans                                           3,166                 3,572
Accruals, provisions and other liabilities              1,526                10,046
Depreciation                                           (3,927)               (5,005)
Other                                                  (1,000)                 (874)
                                                      -------               -------
                                                      $ 3,167               $ 8,829
                                                      =======               =======
</TABLE>


     The Company's federal income tax returns for all years subsequent to
December 1987 are subject to review by the Internal Revenue Service.


(8)  RETIREMENT PLANS, POST-RETIREMENT AND POST-EMPLOYMENT BENEFITS
     The Company and certain of its subsidiaries have various pension plans
which cover certain of their employees and provide for periodic payments to
eligible employees upon retirement. Benefits for non-union employees are
generally based upon earnings and years of service prior to 1989 and certain
non-union employees receive benefits from allocated accounts under a defined
contribution plan. Benefits for certain union employees are based upon dollar
amounts attributed to each year of credited service; certain other union
employees receive benefits from allocated accounts under a defined contribution
plan and from prior contributions to a multi-employer plan. The Company's policy
is to make contributions to these plans sufficient to meet the minimum funding
requirements of applicable laws and regulations, plus such amounts, if any, as
the Company's actuarial consultants determine to be appropriate. The Company
also provides supplemental retirement benefits for certain management personnel
based on earnings and years of service.

     At December 28, 1997, and December 29, 1996, the Company reported, as a
separate component of stockholders' equity, the amount of the additional
liability in excess of the unrecognized prior service costs of its pension
plans.




                                       24
<PAGE>   25


Net pension expense consisted of the following:

<TABLE>
<CAPTION>
                                                            FISCAL 1997    FISCAL 1996    FISCAL 1995
                                                            -----------    -----------    -----------
                                                                     (AMOUNTS IN THOUSANDS)
<S>                                                             <C>           <C>            <C>  
U.S. defined benefit plans
   Service cost-benefits earned during the period               $ 205         $ 232          $ 211
                                                                -----         -----          -----
   Interest accrued on projected benefit obligation               561           607            597
                                                                -----         -----          -----
   Expected return on assets
         Actual return                                           (566)         (516)          (582)
         Unrecognized gain (loss)                                   4           (32)            69
                                                                -----         -----          -----
                                                                 (562)         (548)          (513)
   Amortization of prior service cost and
     unrecognized loss                                            108           390            110
   Settlement loss                                                 30            38             89
                                                                -----         -----          -----
U.S. defined benefit plans, net                                   342           719            494
Canadian defined benefit plan                                       2             2             (2)
U.S. defined contribution plans                                   125           150            113
                                                                -----         -----          -----
Total net pension expense                                       $ 469         $ 871          $ 605
                                                                =====         =====          =====

</TABLE>

         The following sets forth the funded status of the Company's defined
benefit pension plans and amounts recognized in the consolidated balance sheets:

<TABLE>
<CAPTION>
                                              DECEMBER 28, 1997           DECEMBER 29, 1996
                                              -----------------     ---------------------------
                                                 PLANS WITH         PLANS WITH       PLANS WITH
                                                 ACCUMULATED        ASSETS           ACCUMULATED
                                                 BENEFITS           EXCEEDING        BENEFITS
                                                 EXCEEDING          ACCUMULATED      EXCEEDING
                                                 ASSETS             BENEFITS         ASSETS
                                              -----------------     -----------      ----------
                                                             (AMOUNTS IN THOUSANDS)
<S>                                                 <C>                <C>            <C>     
Accumulated benefit obligation
   Vested                                         $(8,464)           $(1,708)       $(7,294)
   Nonvested                                         (111)                (2)           (87)
                                                  -------            -------        -------
         Total                                     (8,575)            (1,710)        (7,381)

Effect of projected
  compensation increases                             (454)              (259)            --
                                                  -------            -------        -------
Projected benefit obligation                       (9,029)            (1,969)        (7,381)
Plan assets                                         6,693              2,510          5,001
                                                  -------            -------        -------
Plan assets in excess of (less than)
  projected benefit obligations                    (2,336)               541         (2,380)
Unrecognized actuarial net gain (losses)            1,905               (107)         1,865
Unrecognized prior service cost                        51                 99             35
Additional liability                               (2,173)                --         (1,847)
                                                  -------            -------        -------
Prepaid (accrued) pension cost included
  in consolidated balance sheet                   $(2,553)           $   533        $(2,327)
                                                  =======            =======        =======

</TABLE>


                                       25
<PAGE>   26


     Plan assets are invested primarily in pooled funds maintained by insurance
companies. The projected benefit obligation was determined using an assumed
discount rate of 7.0% for Fiscal 1997 and 7.5% for Fiscal 1996. The nature of
the domestic pension plans is such that an estimate of future compensation
increases is not required. The assumed long-term rate of return on plan assets
was 9%. At December 28, 1997, the various plans held an aggregate of 11,410
shares of the Company's common stock.

     The Company sponsors defined benefit post-retirement health and life
insurance plans that cover certain retired and active employees. The Company
expects to continue these benefits indefinitely, but reserves the right to amend
or discontinue all or any part of the plans at any time.

     In accordance with Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Post-retirement Benefits Other Than Pensions" ("FAS
106"), the cost of these benefits are recognized in the financial statements
during the employees' active working lives. The Company's funding policy for
these plans is on a pay-as-you-go basis.

     The following sets forth the amounts recognized in the consolidated balance
sheets for the Company's post-retirement benefit plans:

<TABLE>
<CAPTION>
                                                       DECEMBER 28, 1997     DECEMBER 29, 1996
                                                       -----------------     -----------------
                                                              (AMOUNTS IN THOUSANDS)
      <S>                                                    <C>                  <C>   
      Accumulated post-retirement benefit obligation
        Fully eligible active employees                      $  397               $  765
        Retirees                                              1,445                1,035
        Other active employees                                  483                  649
                                                             ------               ------
                                                              2,325                2,449
      Plan assets                                                 -                   -
      Unrecognized net (gain) loss                              301                  137
                                                             ------               ------
      Accrued post-retirement benefit cost                   $2,626               $2,586
                                                             ======               ======

<CAPTION>

Post-retirement benefit expense consisted of the following:

                                                           FISCAL 1997   FISCAL 1996    FISCAL 1995
                                                           -----------   -----------    -----------
                                                                 (AMOUNTS IN THOUSANDS)
      <S>                                                    <C>                  <C>   
      Service cost (benefits attributed to
       employee services during the year)                     $ 30          $ 51            $ 43
      Interest expense on the accumulated
       post-retirement benefit obligation                      159           172             182
      Amortization of gain                                     (22)            -               -
                                                              ----          ----            ----
      Net periodic post-retirement benefit
       Expense                                                $167          $223            $225
                                                              ====          ====            ====
</TABLE>

     The discount rates used in determining the accumulated post-retirement
benefit obligation as of December 28, 1997 was 7.0% and as of December 29, 1996
was 7.5%. The Company subsidy is a defined dollar amount and will not increase
in the future; therefore, no medical trend rate has been assumed and the results
of the calculation of the plan liabilities will not be affected by future
medical cost trends. The pay-as-you-go expenditures for post-retirement benefits
were $127,000, $147,000, and $484,000 for Fiscal 1997, Fiscal 1996 and Fiscal
1995, respectively.

     In accordance with Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Post-employment Benefits" ("FAS 112"), the Company
accrues benefits provided to former or inactive employees after employment but
before retirement. The ongoing impact of FAS 112 does not have a material effect
on earnings.




                                       26
<PAGE>   27


(9)  EMPLOYEE STOCK OWNERSHIP PLAN
     On February 23, 1989, the Company's Board of Directors adopted the Ekco
Group, Inc. Employees' Stock Ownership Plan (the "ESOP") for non-union United
States employees of the Company and subsidiaries designated by the Company's
Board of Directors as participants in the ESOP. The ESOP holds Company preferred
and common stock.

SERIES B ESOP CONVERTIBLE PREFERRED STOCK
     The Company sold 1.8 million shares of the Series B ESOP Convertible
Preferred Stock at a price of $3.61 per share to the ESOP trust in 1989. At
December 28, 1997, approximately 1.3 million shares of the Company's common
stock were reserved for conversion of Series B ESOP Convertible Preferred Stock.

     An unearned ESOP compensation amount is reported as an offset to the Series
B ESOP Convertible Preferred Stock amount in the consolidated balance sheets.
The unearned compensation is being amortized as shares in the Series B ESOP
Convertible Preferred Stock are allocated to employees. Shares are allocated
ratably over the life of the ESOP Loan (as defined below) or, if less, the
actual period of time over which the indebtedness is repaid. The allocation of
shares is based upon a formula equal to a percentage of the Company's payroll
costs. The percentage is determined by the Company's Board of Directors annually
and may require principal prepayments. The Company's Board of Directors approved
principal prepayments of $511,000, $522,000, and $567,000 for Fiscal 1997,
Fiscal 1996 and Fiscal 1995 to be paid in 1998, 1997 and 1996, respectively. For
Fiscal 1997, Fiscal 1996 and Fiscal 1995, $740,000, $816,000, and $652,000,
respectively, has been charged to operations. The actual cash contributions,
excluding the above mentioned prepayments, to the ESOP by the Company during
Fiscal 1997, Fiscal 1996 and Fiscal 1995 were $402,000, $402,000, and $302,000,
respectively.

     Upon retirement or termination from the Company, each employee has the
option to either convert the vested Series B ESOP Convertible Preferred Stock
into common stock of the Company or redeem the Series B ESOP Convertible
Preferred Stock for cash at a price of $3.61 per share. The change in the
principal amount of the Series B ESOP Convertible Preferred Stock from year to
year is solely due to redemptions and conversions by vested employees retiring
or leaving the Company. The Series B ESOP Convertible Preferred Stock pays a
dividend equal to any dividend on the Company's common stock.

     Series B ESOP Convertible Preferred Stock, net, consisted of the following:

<TABLE>
<CAPTION>
                                                       DECEMBER 28, 1997    DECEMBER 29, 1996
                                                       -----------------    -----------------
                                                              (AMOUNTS IN THOUSANDS)
    <S>                                                    <C>                  <C>   
    Series B ESOP Convertible Preferred Stock,
     par value $.01                                        $4,757               $ 5,196
    Unearned compensation                                    (358)               (1,098)
                                                            -----               -------
                                                           $4,399               $ 4,098
                                                           ======               =======

</TABLE>

ESOP COMMON STOCK
     In October 1990, the Company's Board of Directors authorized the Trustee of
the ESOP to purchase up to 1.0 million shares of the Company's common stock. The
Company financed the purchase through a 20-year 10% loan from the Company to the
ESOP (the "ESOP Loan"). The ESOP has purchased, in open market transactions, a
total of 1.0 million shares of the Company's common stock at a total cost of
approximately $3.3 million. Unearned compensation equal to such cost (included
as a component of stockholders' equity) is being amortized as shares of the
Company's common stock are allocated to employee accounts. Shares are allocated
ratably over the life of the loan or, if less, the actual period of time over
which the indebtedness is repaid, subject to a minimum




                                       27
<PAGE>   28


allocation of 50,000 shares each year. For each of Fiscal 1997, Fiscal 1996 and
Fiscal 1995, 50,000 shares were allocated to employees' accounts. For each of
Fiscal 1997, Fiscal 1996 and Fiscal 1995, $165,000 has been charged to
operations.


(10)  MINORITY INTEREST
     Minority interest consists of 5% cumulative preferred stock of Woodstream
Corporation, $50 par value (redeemable at Woodstream's option at $52 per share).
Dividends on the 5% cumulative preferred stock are included in interest expense.


(11)  STOCKHOLDERS' EQUITY
PREFERRED STOCK, $.01 PAR VALUE
     On February 12, 1987, the Company's stockholders authorized a class of 20
million shares of preferred stock which may be divided and issued in one or more
series having such relative rights and preferences as may be determined by the
Company's Board of Directors.

PREFERRED STOCK RIGHTS
     In 1987, the Board of Directors of the Company declared a dividend payable
to stockholders of record as of April 9, 1987, of one preferred share purchase
right ("Right") for each outstanding share of common stock. In 1988, 1989 and
1992, the Company's Board of Directors amended the preferred share purchase
rights plan and in March 1997 amended and restated the plan. The amended and
restated plan provides that each Right, when exercisable, will entitle the
holder thereof until April 9, 2007, to purchase one one-hundredth of a share of
Series A Junior Participating Preferred Stock, par value $.01 per share, at an
exercise price of $30, subject to certain anti-dilution adjustments. The Rights
will not be exercisable or transferable apart from shares of common stock until
the earlier of (i) the day on which there is a public announcement that a person
or group has acquired beneficial ownership of 15% or more of the outstanding
shares of common stock (an "Acquiring Person") or (ii) the tenth business day
after a person commences, or announces an intention to commence, a tender or
exchange offer for 15% or more of the outstanding shares of common stock. The
Rights are redeemable by the Company at $.01 per Right at any time prior to the
time that a person or group becomes an Acquiring Person. At any time after a
person becomes an Acquiring Person, the Company's Board of Directors may
exchange all or any part of the Rights for common shares at an exchange ratio of
one common share per Right. This option is extinguished when any person becomes
the beneficial owner of 50% or more of the common shares outstanding.

     In the event that the Company is a party to a merger or other business
combination transaction in which the Company is not the surviving entity, each
Right will entitle the holder to purchase, at the exercise price of the Right,
that number of shares of the common stock of the acquiring company which, at the
time of such transaction, would have a market value of two times the exercise
price of the Right. In addition, if a person or group becomes an Acquiring
Person, each Right not owned by such person or group would become exercisable
for the number of shares of common stock which, at that time, would have a
market value of two times the exercise price of the Right.

COMMON STOCK, $.01 PAR VALUE

     Share information regarding Common Stock consisted of the following:

<TABLE>
<CAPTION>
                                               DECEMBER 28, 1997   DECEMBER 29, 1996
                                               -----------------   -----------------
         <S>                                      <C>                  <C>   
         Authorized shares                        60,000,000           60,000,000
                                                  ==========           ==========
         Shares issued                            28,481,788           27,996,648
         Shares held in treasury                   9,415,361            9,417,004
                                                  ----------           ----------
         Shares outstanding                       19,066,427           18,579,644
                                                  ==========           ==========

</TABLE>





                                       28
<PAGE>   29


TREASURY STOCK
     During Fiscal 1995, the Company purchased approximately 205,000 shares of
its common stock in open-market transactions at a cost of approximately $1.2
million.

STOCK COMPENSATION PLANS
     At December 28, 1997, the Company had five stock based compensation plans
which are described below. The Company applies Accounting Principle Board
Opinion No. 25 "Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its employee stock compensation plans.
Accordingly, no compensation has been recognized for its stock option plans and
its employee stock purchase plan for options issued to employees. Compensation
costs for its restricted stock purchase plans and 1996 Performance Unit Rights
Award Plan are described below. Since the Company accounts for compensation
plans under APB 25, certain pro forma information regarding net income and
earnings per share is required by Statement of Financial Accounting Standards
Board No. 123 "Accounting for Stock Based Compensation" ("FASB 123") as if the
Company had accounted for its compensation plans under the fair value approach
of this statement. For the purposes of the pro forma disclosures, the estimated
fair value of the compensation plans is amortized to expense over the option
vesting period. The Company's pro forma information is as follows:

<TABLE>
<CAPTION>
                                                     FISCAL 1997    FISCAL 1996    FISCAL 1995
                                                     -----------    -----------    -----------
                                                  (amounts in thousands except for  per share data)

    <S>                                                 <C>           <C>            <C>   
    Net income (loss)        As reported                $6,017        $(34,174)      $8,045
                             Pro forma                  $4,961        $(35,891)      $7,869
    Basic earnings (loss)
      per share              As reported                $  .32        $  (1.85)      $  .44
                             Pro forma                  $  .26        $  (1.94)      $  .43
    Diluted earnings
      (loss) per share       As reported                $  .29        $  (1.85)      $  .40
                             Pro forma                  $  .24        $  (1.94)      $  .39

</TABLE>

     The fair value of the Company's stock option plans and 1996 Performance
Unit Rights Award Plan was estimated at the grant date using a Black-Scholes
option pricing model. The estimated weighted average assumptions under that
model for Fiscal 1997 were: volatility factor of the expected market price of
the Company's stock of 0.40; zero future dividend yield and risk free interest
rates of 5.64%, 5.66%, 5.71%, and 5.80%, based on one, two, three and six year
strip yields of U.S. Treasury Securities at December 28, 1997. It was also
assumed that the stock options have a weighted average expected life of six
years and eleven months. The estimated weighted average assumptions under that
model for Fiscal 1996 and Fiscal 1995 were: volatility factor of the expected
market price of the Company's stock of 0.45; zero future dividend yield and risk
free interest rates of 5.6%, 5.89%, 6.05% and 6.22%, based on one, two, three
and six year strip yields of U.S. Treasury Securities at December 29, 1996. It
was also assumed that the stock options had a weighted average expected life of
five years and nine months and the Performance Unit Rights Awards had a weighted
average expected life of two years and three months.

STOCK OPTION PLANS
     At December 28, 1997, approximately 450,000 shares of the Company's stock
were available for grants of options to employees, directors and consultants
under the Company's stock option plans. Options granted under the plans are
granted at prices not less than 100% of the fair market value (as defined) on
the dates the options are granted. Accordingly, under APB 25 no compensation
cost is recognized for options issued to employees. During Fiscal 1997 an option
to purchase 15,000 shares of the Company's common stock was granted to a
consultant for services rendered. Total compensation to be expensed over a five
year period will be $50,000. The pro forma net income impact under FASB 123 is
$1,029,000 for Fiscal 1997, $1,183,000 for Fiscal



                                       29
<PAGE>   30

1996 and $136,000 for Fiscal 1995. Options must be exercised within the period
described by the respective stock option plan agreements, but not later than 10
years for certain options and 11 years for others.

     A summary of the Company's stock option activity, and related information
for Fiscal 1997 and 1996 follows:

<TABLE>
<CAPTION>
                                                     FISCAL 1997                FISCAL 1996
                                                ---------------------      ---------------------
                                                             WEIGHTED                   WEIGHTED
                                                              AVERAGE                    AVERAGE
                                                               OPTION                     OPTION
                                                                PRICE                      PRICE
                                                SHARES      PER SHARE      SHARES      PER SHARE
                                                ------      ---------      ------      ---------
<S>                                              <C>          <C>           <C>            <C>  

(amounts in thousands except for per share information)

Outstanding at beginning of year                 2,809        $5.04         2,551          $6.36
Options granted                                    869         4.86         1,208           4.02
Options exercised                                 (308)        2.43           (25)          2.38
Options canceled                                  (119)        8.21          (925)          7.42
                                                ------                     ------
Options outstanding
   at end of year                                3,251         5.12         2,809           5.04
                                                ======                     ======
Options exercisable at
 end of year                                     2,987         4.96         1,840           5.11
                                                ======                     ======
Weighted-average fair
  value of options
  granted during the year                       $ 2.46                     $ 2.02

</TABLE>




                                       30
<PAGE>   31


     Exercise prices for options outstanding as of December 28, 1997 ranged from
$2.13 to $11.31. The weighted-average remaining contractual life of those
options is 6.9 years.

     Changes in options and option shares under the plans during the respective
fiscal years were as follows:

<TABLE>
<CAPTION>
                                FISCAL 1997                      FISCAL 1996                     FISCAL 1995
                         -------------------------      ---------------------------      ---------------------------
                         OPTION PRICE    NUMBER OF      OPTION PRICE      NUMBER OF      OPTION PRICE      NUMBER OF
                          PER SHARE       SHARES         PER SHARE         SHARES          PER SHARE        SHARES
                         ------------    ---------      ------------      ---------      ------------      ---------
<S>                      <C>             <C>            <C>              <C>            <C>              <C>      
Options outstanding,
  beginning of year      $2.13-$11.31    2,809,805      $2.13-$11.31      2,551,436      $2.13-$11.31     2,593,093
Options granted          $4.13-$ 8.19      868,977      $3.38-$ 5.94      1,207,792      $6.06-$ 6.56       340,895
Options exercised        $2.13-$ 6.31     (308,266)     $2.25-$ 2.63        (24,700)     $2.19-$ 3.38      (150,814)
Options canceled         $5.94-$11.31     (119,721)     $3.69-$11.31       (924,723)     $2.63-$11.31      (231,738)
                                         ---------                        ---------                       ---------
Options outstanding,
  end of year            $2.13-$11.31    3,250,795      $2.13-$11.31      2,809,805      $2.13-$11.31     2,551,436
                                         =========                        =========                       =========
Options exercisable,
  end of year            $2.13-$11.31    2,986,657      $2.13-$11.31      1,840,305      $2.13-$11.31     2,047,779
                                         =========                        =========                       =========
Shares reserved for
  future grants                            446,906                        1,196,162
                                         =========                        =========

</TABLE>



                                       31
<PAGE>   32


<TABLE>
<CAPTION>
                                               OPTION PRICE AND MARKET VALUE AT DATE OF GRANT
                                               ----------------------------------------------   
                                                 NUMBER
                                               OF SHARES           PER SHARE         AMOUNT
                                               ----------         -----------       ---------
<S>                                               <C>                  <C>        <C>        

Options outstanding at December 28, 1997, 
which were granted during fiscal years:

   1987                                           150,000              $ 3.69     $   553,125
   1988                                           241,428        $2.13-$ 2.25         519,999
   1989                                            31,373              $ 3.19         100,001
   1990                                            57,500              $ 2.56         147,344
   1991                                            32,600              $ 2.63          85,575
   1992                                           177,700        $7.50-$10.06       1,754,044
   1993                                           245,740        $7.44-$11.31       2,659,574
   1994                                           177,000        $7.31-$ 7.56       1,326,063
   1995                                           167,044        $6.06-$ 6.50       1,059,659
   1996                                         1,101,433        $3.38-$ 5.94       4,219,446
   1997                                           868,977        $4.13-$ 8.19       4,220,485
                                                ---------                         -----------
                                                3,250,795                         $16,645,315
                                                =========                         ===========
</TABLE>


     Of the options outstanding at December 28, 1997, options to acquire
1,605,911 shares at a weighted average exercise price of $5.10 per share became
exercisable on the grant date. Under certain circumstances, a portion of the
shares purchased pursuant to the exercise of such options are subject to
repurchase by the Company within three years of the date of grant of the option
at the option exercise price. At December 28, 1997, 324,201 of such shares were
subject to such repurchase. Additionally, outstanding and exercisable at
December 28, 1997 were options to acquire 900,000 shares at an exercise price of
$3.38 per share.

     The remaining options outstanding at December 28, 1997, which cover the
acquisition of 744,884 shares at a weighted average exercise price of $7.27 per
share, become exercisable in five equal annual installments beginning on the
first anniversary of the date of grant.

RESTRICTED STOCK PURCHASE PLANS
     Under the Company's restricted stock purchase plans, the Company may offer
to sell shares of common stock to employees of the Company and its subsidiaries
at a price per share of not less than par value ($.01) and not more than 10% of
market value on the date the offer is approved, and on such other terms as
deemed appropriate. Shares are awarded in the name of the employee, who has all
rights of a stockholder, subject to certain repurchase provisions. Restrictions
on the disposition of shares for the shares purchased expire annually, over a
period not to exceed five years, if certain performance targets are achieved,
otherwise they lapse on the tenth anniversary. Common stock reserved for future
grants under these plans aggregated approximately 700,000 shares at December 28,
1997. The following table summarizes the activity of the restricted stock
purchase plans during the respective fiscal years (fair market value determined
at date of purchase).




                                       32
<PAGE>   33


<TABLE>
<CAPTION>
                                        FISCAL 1997                FISCAL 1996           FISCAL 1995
                                    ------------------         -----------------      -----------------
                                    NUMBER       FAIR          NUMBER      FAIR       NUMBER      FAIR
                                      OF        MARKET           OF       MARKET        OF       MARKET
                                    SHARES       VALUE         SHARES      VALUE      SHARES      VALUE
                                    ------       -----         ------      -----      ------      -----
                                                             (AMOUNTS IN THOUSANDS)
<S>                                  <C>         <C>           <C>      <C>             <C>      <C>   
Unvested shares outstanding,
  beginning of year                  132         $827          257      $ 1,660         51       $  312
Shares issued                          3           19           40          232        288        1,824
Shares repurchased                     -            -          (13)         (61)       (45)        (297)
Shares vested                         (7)         (61)        (152)      (1,004)       (37)        (179)
                                     ---         ----         ----      -------        ---       ------

Unvested shares outstanding,
 end of year                         128         $785          132      $   827        257       $1,660
                                     ===         ====         ====      =======        ===       ======
</TABLE>


     The difference between the issue price and the fair market value of the
shares at the date of issuance is accounted for as unearned compensation and
amortized to expense over the lapsing of restrictions. During Fiscal 1997,
Fiscal 1996 and Fiscal 1995, unearned compensation charged to operations was
$78,000, $1.0 million (including a special charge of $482,000 pursuant to a
severance arrangement with the Company's former chief executive officer), and
$270,000, respectively. To the extent the amount deductible for income taxes
exceeds the amount charged to operations for financial statement purposes, the
related tax benefits are credited to additional paid-in-capital when realized.
The pro forma net income impact under FASB 123 is not material.

EMPLOYEE STOCK PURCHASE PLAN
     The Company has an employee stock purchase plan (the "Plan") that permits
employees to purchase up to a maximum of 500 shares per quarter of the Company's
common stock at a 15% discount from market value. During Fiscal 1997, Fiscal
1996 and Fiscal 1995, employees purchased 62,015 shares, 56,983 shares, and
72,844 shares, respectively, for a total of approximately $248,000, $255,000,
and $376,000, respectively. At December 28, 1997, approximately 1.0 million
shares were reserved for future issuances under the Plan. Under APB 25, there
have been no charges to income in connection with the Plan other than incidental
expenses. The pro forma net income impact under FASB 123 is not material.

1996 PERFORMANCE UNIT RIGHTS AWARD PLAN
     In September 1996, the Company's Board of Directors approved the 1996
Performance Unit Rights Award Plan whereby selected key employees and directors
may receive performance unit rights ("Rights") which are rights to receive an
amount based on the appreciated value of the Company's common stock over an
established base price. The maximum number of Rights that may be granted under
the plan as amended is 2,000,000. On December 4, 1996 the Company issued 525,718
Rights at a weighted average base price of $4.26 per Right with a cap on the
value of the common stock underlying the Rights on the exercise date of $6.63
per Right under a severance arrangement with the Company's former CEO. A
provision of $256,000 for Fiscal 1996 was included in special charges for these
Rights. The pro forma net income impact under FASB 123 for Fiscal 1996 was
estimated to be $507,000 in additional compensation expense. During Fiscal 1997
the Rights were fully exercised and a provision of $783,000 was included in
special charges.

INCOME TAX BENEFITS
     Income tax benefits relating to stock option plans, restricted stock plans
and employee stock purchase plan credited to additional paid-in-capital as
realized in Fiscal 1997 and Fiscal 1995 were $366,000 and $74,000, respectively.




                                       33
<PAGE>   34


(12)  EARNINGS (LOSS) PER COMMON SHARE
     Basic earnings (loss) per common share is based upon the weighted average
common stock outstanding during each period. Diluted earnings (loss) per common
share is based upon the weighted average of common stock and dilutive common
stock equivalent shares, including Series B ESOP Convertible Preferred Stock,
outstanding during each period. The weighted average number of shares used in
computation of diluted earnings per share consisted of the following for the
periods presented:


<TABLE>
<CAPTION>
                                                   FISCAL        FISCAL       FISCAL
                                                    1997          1996         1995
                                                   ------        ------       -----
                                                        (AMOUNTS IN THOUSANDS)
<S>                                                <C>           <C>         <C>   
Weighted average shares of common stock
  outstanding during the year                      18,907        18,489      18,354
Weighted average common equivalent                                anti-
  shares due to stock options                         558      dilutive         426
Shares of common stock from conversion
  of convertible debt                                  --            --       2,095
Series B ESOP Convertible                                         anti-
  Preferred Stock                                   1,384      dilutive       1,538
                                                   ------      --------      ------
                                                   20,849        18,489      22,413
                                                   ======      ========      ======
</TABLE>


The income used in determining diluted earnings per share consisted of the
following for the periods presented:

<TABLE>
<CAPTION>

                                                      FISCAL       FISCAL      FISCAL
                                                       1997         1996        1995
                                                      ------       ------      -----
                                                            (AMOUNTS IN THOUSANDS)
<S>                                                     <C>        <C>         <C>    
Income (loss) from continuing operations used
  in calculating basic earnings per share               $6,017     $(2,671)    $ 9,962
Interest savings from conversion of
  convertible debt                                          --          --       1,541
Effect of deferred financing costs                          --          --         107
Tax effect at 40%                                           --          --        (659)
                                                        ------     -------     -------
Income (loss) from continuing operations used
  in calculating diluted earnings per share             $6,017     $(2,671)    $10,951
                                                        ======     =======     =======
</TABLE>


(13)  COMMITMENTS AND CONTINGENCIES
EMPLOYMENT CONTRACTS
     The Company has employment agreements and arrangements with its executive
officers and certain management personnel. The agreements generally continue
until terminated by the executive or the Company, and provide for severance
payments under certain circumstances. The majority of the agreements and
arrangements provide the employees with certain additional rights after a Change
of Control (as defined) of the Company occurs. A portion of the Company's
obligations under certain agreements are secured by letters of credit. The
agreements include a covenant against competition with the Company, which
extends for a period of time after termination for any reason. As of December
28, 1997, if all of the employees under contract were to be terminated by the
Company without good cause (as defined) under these contracts, the Company's
liability would be approximately $4.3 million ($7.5 million following a Change
of Control).

SEVERANCE POLICY
     The Board of Directors of the Company has adopted a severance policy for
all exempt employees of the Company. In the event of a Change of Control (as
defined),



                                       34
<PAGE>   35

each exempt employee of the Company whose employment is terminated, whose duties
or responsibilities are substantially diminished, or who is directed to relocate
within 12 months after such Change of Control, will receive, in addition to all
other severance benefits accorded to similarly situated employees, salary
continuation benefits for a period of months determined by dividing his or her
then yearly salary by $10,000, limited to not more than 12 months. This policy
does not apply to any exempt employee of the Company who is a party to a
contractual commitment with the Company which provides him or her with greater
than 12 months salary, severance payment or salary continuation upon his or her
termination in the event of a Change of Control. This policy may be rescinded at
any time by the Company's Board of Directors prior to a Change of Control.

LEASES
     The Company leases offices, warehouse facilities, vehicles and equipment
under operating and capital leases. The terms of certain leases provide for
payment of minimum rent, real estate taxes, insurance and maintenance. Rents of
approximately $3.0 million, $2.6 million and $3.4 million, were charged to
operations for Fiscal 1997, Fiscal 1996 and Fiscal 1995, respectively. The
Company received rental income from properties held for sale in Fiscal 1996 and
Fiscal 1995. Rental income included in selling, general and administrative
expenses was approximately $96,000, and $154,000, for Fiscal 1996 and Fiscal
1995, respectively.

     Minimum rental payments required under leases that had initial or remaining
noncancellable lease terms in excess of one year as of December 28, 1997, were
as follows (amounts in thousands):

<TABLE>
                   FISCAL YEAR
                      <S>                                          <C>                   
                      1998                                         $2,851
                      1999                                          2,312
                      2000                                          1,771
                      2001                                          1,635
                      2002                                            905
</TABLE>


LEGAL PROCEEDINGS
     The Company is a party to several pending legal proceedings and claims.
Although the outcome of such proceedings and claims cannot be determined with
certainty, the Company's management, after consultation with outside legal
counsel, is of the opinion that the expected final outcome should not have a
material adverse effect on the Company's financial position, results of
operations or liquidity.

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 has incurred obligations for investigations or remedial actions
with respect to certain of such matters. While 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 is aware that at its facilities at
Massillon and Hamilton, Ohio; Easthampton, Massachusetts; Chicago, Illinois;
Lititz, Pennsylvania and at the previously owned facility in Hudson, New
Hampshire hazardous substances and oil have been detected and that additional
investigation will be, and remedial action will or may be, required. Operations
at these and other facilities currently or previously owned or leased by the
Company utilize, or in the past have utilized, hazardous substances. There can
be no assurance that activities at these or any other facilities owned or
operated by the Company or future facilities may not result in additional
environmental claims being asserted against the Company or additional
investigations or remedial actions being required.



                                       35
<PAGE>   36

     In connection with the acquisition of Cleaning by the Company in 1993, the
Company engaged environmental engineering consultants ("Consultants") to review
potential environmental liabilities at all of Cleaning's properties. Such
investigation and testing resulted in the identification of likely environmental
remedial actions, operation, maintenance and ground water monitoring and the
estimated costs thereof. Management, based upon the engineering studies,
originally estimated the total remediation and ongoing ground water monitoring
costs to be approximately $6.0 million, including the effects of inflation, and
accordingly at that time, recorded a liability of approximately $3.8 million,
representing the undiscounted costs of remediation and the net present value of
future costs discounted at 6%. Based upon the most recent cost estimates
provided by the Consultants, the Company believes the total remaining
remediation and compliance costs will be approximately $1.1 million and the
expense for the ongoing operation, maintenance and ground water monitoring will
be approximately $20,500 for fiscal 1998 and for each of the thirty years
thereafter. As of December 28, 1997, the liability recorded by the Company was
approximately $2.8 million. Although the current estimated costs of remediation
are less than the liability recorded at December 28, 1997, the Company does not
consider any further adjustment to be prudent at this time given the inherent
uncertainties involved in completing the remediation processes. The Company
expects to pay approximately $145,000 of the remediation costs in fiscal 1998
with the balance being paid out in fiscal 1999. During Fiscal 1997, the Company
paid approximately $23,000 of such costs. The estimates may subsequently change
should additional sites be identified or further remediation measures be
required or undertaken or interpretation of current laws or regulations be
modified. The Company has not anticipated any insurance proceeds or third-party
payments in arriving at the above estimates.

CONCENTRATIONS OF CREDIT RISK
     Financial instruments which subject the Company to concentrations of credit
risk consist primarily of trade receivables. Mass merchandisers comprise a
significant portion of the Company's customer base. The Company had trade
receivables of approximately $12.7 million and $12.9 million from mass
merchandisers at December 28, 1997 and December 29, 1996, respectively. Although
the Company's exposure to credit risk associated with non-payment by mass
merchandisers is affected by conditions or occurrences within the retail
industry, trade receivables from mass merchandisers were current at December 28,
1997 and one mass merchandiser accounted for 13% of the Company's receivables at
that date while no other retailer accounted for more than 10% of receivables.

(14)  INDUSTRY AND GEOGRAPHIC AREA INFORMATION
     The Company is a manufacturer and marketer of multiple categories of
branded housewares products for everyday home use. The Company operates in one
industry segment, with revenues derived from sales in four principal product
categories: (i) bakeware, (ii) kitchenware, (iii) cleaning products, and (iv)
pest control and small animal care and control products. Sales and marketing
operations outside the United States are conducted principally through
subsidiaries in Canada and the United Kingdom and by direct sales. One customer
accounted for net revenues from continuing operations of approximately $35.9
million (13.3%), $27.5 million (11.0%), and $30.5 million (12.3%) for Fiscal
1997, Fiscal 1996 and Fiscal 1995, respectively.




                                       36
<PAGE>   37


     The following table shows information by geographic area from continuing
operations:

<TABLE>
<CAPTION>
                                  UNAFFILIATED        INCOME BEFORE
                                  NET REVENUES        INCOME TAXES       TOTAL ASSETS
                                  ------------        ------------       ------------
                                                  (AMOUNTS IN THOUSANDS)
     <S>                            <C>                  <C>                <C>     
     FISCAL 1997
     -----------
     United States                  $254,040             $13,842            $293,398
     Canada                           13,679                (729)              9,348
     United Kingdom                    2,817                (711)              3,678
     Eliminations                         --                (138)             (5,619)
                                    --------             -------            --------
     Consolidated                   $270,536             $12,264            $300,805
                                    ========             =======            ========

     FISCAL 1996
     -----------
     United States                  $236,901             $     6            $288,259
     Canada                           12,969                (282)              9,104
     Eliminations                         --                 (25)             (5,287)
                                    --------             -------            --------
     Consolidated                   $249,870             $  (301)           $292,076
                                    ========             =======            ========

     FISCAL 1995
     -----------
     United States                  $235,642             $20,512            $298,579
     Canada                           11,362                (618)              7,742
     Eliminations                         --                (104)             (5,263)
                                    --------             -------            --------
     Consolidated                   $247,004             $19,790            $301,058
                                    ========             =======            ========
</TABLE>

     United States revenues include approximately $12.1 million, $10.9 million,
and $9.1 million of export sales to unaffiliated customers for Fiscal 1997,
Fiscal 1996 and Fiscal 1995, respectively.


(15)  SUPPLEMENTARY INFORMATION
     The following amounts were charged to costs and expenses:

<TABLE>
<CAPTION>
                                                            FISCAL 1997    FISCAL 1996    FISCAL 1995
                                                            -----------    -----------    -----------
                                                                     (AMOUNTS IN THOUSANDS)

      <S>                                                      <C>            <C>            <C>   
      Advertising                                              $6,784         $6,971         $5,751
                                                               ======         ======         ======
      Provision for doubtful accounts                          $  183         $  130         $ (290)
                                                               ======         ======         ======
      Amortization of excess of cost over fair value           $3,631         $3,636         $3,636
                                                               ======         ======         ======
      Amortization of deferred finance costs                   $  578         $  517         $  590
                                                               ======         ======         ======
      Other amortization
         Prepaid marketing costs                               $4,308         $5,025         $5,799
         Unearned compensation                                    983          1,509          1,087
         Favorable lease rights                                    73             73             73
                                                               ------         ------         ------
                                                               $5,364         $6,607         $6,959
                                                               ======         ======         ======

</TABLE>




                                       37
<PAGE>   38


(16)  QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
     The following table presents the unaudited quarterly results of operations
for Fiscal 1997 and Fiscal 1996:

<TABLE>
<CAPTION>
                                              FIRST          SECOND           THIRD          FOURTH           TOTAL
                                             QUARTER         QUARTER         QUARTER         QUARTER           YEAR
                                             --------        --------        --------        --------        ---------
                                                         (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                          <C>             <C>             <C>             <C>             <C>      
FISCAL 1997
-----------
CONTINUING OPERATIONS
     Net revenues                            $ 53,888        $ 57,510        $ 81,818        $ 77,320        $ 270,536
     Gross profit                              17,018          18,352          29,184          24,675           89,229
     Special charges                             (294)           (320)           (169)            --              (783)
     Income (loss) before taxes                (1,950)           (578)          8,986           5,806           12,264
     Income (loss)                             (1,008)           (297)          4,536           2,786            6,017
     Basic earnings (loss) per share             (.05)           (.02)            .24             .15              .32
     Diluted earnings (loss) per share           (.05)           (.02)            .22             .13              .29

FISCAL 1996
-----------

CONTINUING OPERATIONS
     Net revenues                            $ 51,090        $ 50,606        $ 73,116        $ 75,058        $ 249,870
     Gross profit                              15,639          16,033          27,273          26,420           85,365
     Special charges                               --              --          (2,000)         (7,877)          (9,877)
     Income (loss) before taxes                  (775)         (1,333)          5,065          (3,258)            (301)
     Income (loss)                                (31)           (329)          1,579          (3,890)          (2,671)
     Basic earnings (loss) per share               --            (.02)            .09            (.21)            (.14)
     Diluted earnings (loss) per share             --            (.02)            .08            (.21)            (.14)
DISCONTINUED OPERATIONS
     Net revenues                               5,871           5,274          10,344           5,275           26,764
     Gross profit                                 233             503             284          (1,014)               6
     Special charges                             --              --           (22,728)           --            (22,728)
     Loss before taxes                           (757)           (282)        (23,657)         (1,952)         (26,648)
     (Loss)                                      (347)           (206)        (22,909)         (1,258)         (24,720)
     Loss per share                              (.02)           (.01)          (1.24)           (.07)           (1.34)
     Loss on disposal net of taxes                 --              --              --          (3,575)          (3,575)
     Loss on disposal per share                    --              --              --            (.19)            (.19)
EXTRAORDINARY CHARGE
     Charge before tax benefit                 (5,347)             --              --              --           (5,347)
     Net extraordinary charge per
       share                                   (3,208)             --              --              --           (3,208)
     Extraordinary charge per share              (.18)             --              --              --             (.18)
NET LOSS                                       (3,586)           (535)        (21,330)         (8,723)         (34,174)
     Basic net loss per share                    (.19)           (.03)          (1.15)           (.47)           (1.85)
     Diluted net loss per share                  (.19)           (.03)          (1.05)           (.47)           (1.85)


</TABLE>




                                       38
<PAGE>   39


(17) SPECIAL CHARGES
     The special charge for Fiscal 1997 relates to the exercise of stock
appreciation rights granted to the Company's former chief executive officer
("CEO") pursuant to a December 1996 severance arrangement.

     The special charges in Fiscal 1996 consisted of the following (amounts in
thousands):

<TABLE>
     <S>                                                             <C>   
     Writedown of the carrying value of
       certain real property to fair market value                    $2,000
     Severance arrangement of the Company's former CEO                2,956
     Consolidation of the Company's cleaning products
       manufacturing activities                                       4,921
                                                                     ------  
                                                                     $9,877
                                                                     ======
</TABLE>


     The components of the pre-tax charge set out above for consolidation of the
Company's cleaning products manufacturing activities are as follows (amounts in
thousands):

<TABLE>
     <S>                                                                  <C>   
     Severance and other personnel related costs                     $1,806
     Write-off of equipment                                             499
     Write-down of real property to fair market value                 2,424
     Other                                                              192
                                                                     ------
                                                                     $4,921
                                                                     ======
</TABLE>


(18) FAIR VALUE OF FINANCIAL INSTRUMENTS
     The carrying amounts of cash, accounts receivable, accounts payable, and
accrued expenses approximate fair value because of the short maturity of these
items.

     The carrying amount of the debt issued pursuant to the Company's bank
credit agreement approximates fair value because the interest rates change with
market interest rates.

     The Senior Notes are not actively traded and there was no quoted market
price at December 28, 1997. The estimated per note market price is $103.50
resulting in an aggregate fair value of $129.4 million at December 28, 1997.

     There are no quoted market prices for the Series B ESOP Preferred Stock.
Each share of Series B ESOP Preferred Stock is redeemable at a price of $3.61
per share or convertible into one share of the Company's common stock. Assuming
all shares were allocated and all employees were fully vested, the redemption
value of the ESOP Preferred Stock would be $4.7 million. Given these same
assumptions the shares could be converted into common stock having a market
value of $9.5 million at December 28, 1997.

     These fair value estimates are subjective in nature and involve
uncertainties and matters of significant judgment and therefore, cannot be
determined with precision. Changes in assumptions could significantly affect
these estimates.





                                       39
<PAGE>   40


(19) SUBSEQUENT EVENT
     On January 16, 1998, the Company completed the acquisition (the
"Acquisition") of all of the outstanding equity securities of APP Holding
Corporation ("APP"), the parent corporation and sole stockholder of Aspen Pet
Products, Inc. ("Aspen"), a marketer of dog and cat supplies and accessories as
well as other pet products. Pursuant to the Stock Purchase and Sale Agreement,
the Company paid approximately $24.5 million in cash and refinanced APP's
outstanding bank debt of approximately $9.1 million. In addition, if Aspen
achieves certain predetermined financial results during the five fiscal years
ending December 31, 1998, 1999, 2000, 2001, and 2002, the Company will make
additional annual payments to certain former APP stockholders equal, in the
aggregate, to 25% of the amount by which Aspen's Gross Profit (as defined) of
each such year exceeds the Base Profit Amount (as defined). The Acquisition will
be accounted for under the purchase method of accounting and goodwill of
approximately $24 million will be amortized over 40 years. At December 29, 1997,
APP's total assets were $21 million and total liabilities were $12 million.

     For the year ended December 31, 1997, APP had net sales of approximately
$30 million and operating income of approximately $3 million.





                                       40
<PAGE>   41


                         REPORT OF INDEPENDENT AUDITORS





Board of Directors and Stockholders
Ekco Group, Inc.


     We have audited the accompanying consolidated balance sheets of Ekco Group,
Inc. and subsidiaries as of December 28, 1997 and December 29, 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the fiscal years in the three-year period ended December 28,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Ekco Group,
Inc. and subsidiaries as of December 28, 1997 and December 29, 1996, and the
results of their operations and their cash flows for each of the fiscal years in
the three-year period ended December 28, 1997, in conformity with generally
accepted accounting principles.





Boston, Massachusetts                               /s/ KPMG PEAT MARWICK 
January 29, 1998                                                      LLP






                                       41