<PAGE>   1
                                                                      EXHIBIT 13

                              FINANCIAL STATEMENTS

                                      INDEX




                 Selected Consolidated Financial Data

                 Common Stock Price Range and Dividends

                 Management's Discussion and Analysis of Results
                   of Operations and Financial Condition

                 Consolidated Balance Sheets

                 Consolidated Statements of Operations

                 Consolidated Statements of Stockholders' Equity

                 Consolidated Statements of Cash Flows

                 Notes to Consolidated Financial Statements

                 Report of Independent Auditors

                 
                                        1
<PAGE>   2
                      SELECTED CONSOLIDATED FINANCIAL DATA

         The selected consolidated financial data of the Company shown below for
the five-year period ended December 31, 1995 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
                                                     1995(1)(2)  1994(1)(2)  1993(1)(2)    1992(2)    1991
                                                     ----------  ----------  ----------    -------    ----
                                                          (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                  <C>         <C>         <C>          <C>       <C>
CONSOLIDATED BALANCE SHEET DATA

Current assets                                        $102,610    $111,627   $ 89,831     $ 79,679  $ 64,808
Total assets                                           304,375     317,783    307,961      255,081   211,484
Current liabilities                                     57,935      51,118     64,062       41,113    45,173
Long-term obligations, less current portion             74,700     102,580     89,982       71,264    71,644
7% Convertible Subordinated Note                        22,000      22,000     22,000       22,000         -
Series B ESOP Convertible Preferred Stock, net           3,458       3,096      2,686        2,111     1,649
Stockholders' equity                                   135,925     129,116    116,864      110,567    86,841
Common shares outstanding                               18,414      18,069     17,844       17,148    14,676

CONSOLIDATED STATEMENT OF OPERATIONS DATA

Net revenues                                          $277,995    $267,048   $246,428     $206,628  $166,717
Cost of sales                                          191,343     175,451    161,349      129,085    99,130
Consolidation and restructuring charge                       -           -     11,000            -         -
Selling, general and administrative                     52,783      53,433     50,841       46,581    43,220
EBITDA (3)                                              50,062      52,261     35,753       39,627    31,008
Amortization of excess of cost over fair value           4,437       4,438      4,195        3,557     2,770
Net interest expense                                    13,493      12,491     12,206       10,680     9,594
Income before income taxes                              15,939      21,235      6,837       16,725    12,003
Income taxes                                             7,894       9,812      4,578        8,078     6,109
Income before cumulative effect of accounting
  changes                                                8,045      11,423      2,259(4)     8,647     5,894
Earnings per common share before cumulative effect
 of accounting changes                                     .40         .57        .11(4)       .46       .35
Cash dividends per common share and Series B ESOP
  Convertible Preferred share                              .08           -          -            -         -
<FN>
(1)   Includes operations of Kellogg Brush Manufacturing Co. and subsidiaries acquired on April 1, 1993.
(2)   Includes operations of Frem Corporation acquired on January 8, 1992.
(3)   EBITDA represents earnings before interest, taxes, depreciation, amortization of excess of cost over
      fair value and other amortization.
(4)   During Fiscal 1993, the Company recorded a charge of $3,247,000 (net of income taxes of $1,954,000) to
      reflect the cumulative effect of changes in the method of accounting for post-retirement and
      post-employment benefits.
</FN>
</TABLE>

                                       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>
1995
First Quarter                                       5 7/8                  6 3/4
Second Quarter                                      5 5/8                  6 3/8
Third Quarter                                       5 7/8                  6 7/8
Fourth Quarter                                      5 3/8                  6 1/2

1994
First Quarter                                       6 1/2                  8 1/8
Second Quarter                                      6 1/2                  7 3/8
Third Quarter                                       6 1/2                  7 3/4
Fourth Quarter                                      5 7/8                  7 1/8
</TABLE>

         On March 6, 1996, the Company had 2,090 stockholders of record. The
Company's bank credit facilities and certain debt instruments restrict dividends
and payments that the Company's operating subsidiaries may make to the Company.


                                       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 31, 1995 ("Fiscal 1995"), January 1, 1995
("Fiscal 1994") and January 2, 1994 ("Fiscal 1993") and the discussion of
financial condition at December 31, 1995 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 Company operates in one industry
segment, with revenues derived from sales in five principal product categories:
(i) bakeware, (ii) kitchenware, (iii) cleaning products, (iv) pest control and
small animal care and control products and (v) molded plastic products. The
following table summarizes the changes in the components of the Company's net
revenues by product category over the last three fiscal years:

                        NET REVENUE BY PRODUCT CATEGORY
                   (AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)

<TABLE>
<CAPTION>
                                                     FISCAL 1995       FISCAL 1994       FISCAL 1993
                                                     -----------       -----------       -----------
<S>                                                <C>       <C>     <C>       <C>     <C>       <C>
Bakeware.........................................  $ 81,261   29.2%  $ 76,557   28.7%  $ 67,104   27.2%
Kitchenware......................................    73,006   26.3     72,022   27.0     68,114   27.6
Cleaning products (a)............................    55,191   19.9     53,003   19.8     36,922   15.0
Pest control and small animal
  care and control products......................    34,034   12.2     31,943   12.0     29,693   12.1
Molded plastic products..........................    30,991   11.1     33,523   12.5     31,277   12.7
VIA! (b).........................................     3,512    1.3          -      -          -      -
Other (c)........................................         -      -          -      -     13,318    5.4
                                                   --------  -----   --------  -----   --------  -----

         Total net revenues......................  $277,995  100.0%  $267,048  100.0%  $246,428  100.0%
                                                   ========  =====   ========  =====   ========  =====
<FN>
(a)  The Company acquired its cleaning products business on April 1, 1993.
(b)  The Company introduced its VIA! line of products in January 1995, substantially all revenues from
     the sale of VIA! products occurred in the second half of Fiscal 1995.
(c)  The Company sold its plastic sporting goods business in January 1994.
</FN>
</TABLE>

FISCAL 1995 VS. FISCAL 1994

NET REVENUES

         Net revenues for Fiscal 1995 increased approximately $10.9 million
(4.1%) from the prior year. Sales increased for four of the Company's five
product categories in Fiscal 1995 despite a weak retail sales environment. The
increase in net revenues was principally due to increases in revenues in the
Company's bakeware, pest control and cleaning products businesses, as well as
from the introduction of the Company's new line of VIA! products. The increase
was partially offset by a decline in revenues from molded plastic products. The
increase in bakeware revenues was primarily due to increased distribution,
higher levels of promotions and the Company placing the promotions with
retailers earlier than in prior years. The increase sales of pest control
products was principally due to new product introductions, including Roach
Magnet(TM), and increased distribution. Increased sales of cleaning products
resulted from increased distribution and the substantial growth of several
hardware/home-center customers. Net revenues from the Company's new line of VIA!
products were approximately $3.5 million, substantially all of which were
recognized in the second half of Fiscal 1995. Revenues from the sale of molded
plastic products declined because retailers reduced planned promotions in
response to consumer resistance to increased retail selling prices resulting
from significant increases in plastic resin prices.


                                       4
<PAGE>   5
                          EKCO GROUP AND SUBSIDIARIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

RESULTS OF OPERATIONS (CONTINUED)

GROSS PROFIT

         The Company's gross profit margin declined from approximately 34.3% for
Fiscal 1994 to approximately 31.2% for Fiscal 1995. The primary factors
contributing to this decline were (i) the significant year-over-year increase in
the prices of plastic resin and other raw materials, (ii) increases in
manufacturing and distribution costs incurred in anticipation of a higher than
realized volume of sales, (iii) a shift in customer mix, resulting from the
substantial growth of several hardware/home-center customers and (iv) increased
promotional discounting in the fourth quarter of Fiscal 1995. These factors were
partially offset by price increases initiated during the beginning of Fiscal
1995.

SELLING, GENERAL AND ADMINISTRATIVE

         Selling, general and administrative expenses in Fiscal 1995 decreased
approximately $650,000 (1.1%) from the prior year. Selling, general and
administrative expense as a percentage of net revenues declined from 20.0% in
Fiscal 1994 to 19.0% in Fiscal 1995, as a result, in part, of efficiencies
realized from the Company's restructuring plan. The decrease included the
collection of an amount due relating to a 1987 real estate transaction ($1.1
million) which had previously been written off. The increase in expenses of
approximately $450,000 excluding this transaction reflects increased product
placement and advertising costs as well as costs associated with the growth of
VIA!.

NET INTEREST EXPENSE

         Net interest expense increased $1.0 million from the Fiscal 1994 level
of $12.5 million. The higher year-over-year expense was attributable to higher
average borrowings and higher interest rates.

INCOME TAXES

         The effective income tax rate increased to 49.5% in Fiscal 1995 from
46.2% in Fiscal 1994. The increase occurred primarily because amortization of
goodwill, which is not deductible for income taxes, represents a higher
percentage of income before income taxes.

FISCAL 1994 VS. FISCAL 1993

NET REVENUES

         Net revenues for Fiscal 1994 increased approximately $20.6 million
(8.4%) from the prior year. Net revenues for Fiscal 1994 included first-quarter
revenues of $12.7 million from the Company's cleaning products business, which
was acquired by the Company on April 1, 1993. Net revenues for Fiscal 1993
included $13.3 million associated with the Company's plastic sporting goods
business; the assets of which were sold in January 1994. Excluding the foregoing
acquisition and divestiture, net revenues for Fiscal 1994 increased
approximately $21.2 million (8.6%) over net revenues for Fiscal 1993. Each of
the Company's business units contributed to the growth in net revenues.
Retailers, while continuing to adhere to stringent inventory controls, remained
committed to maintaining high service levels for their customers. As a result,
retailers kept their shelves stocked, contributing to the Company's growth in


                                       5
<PAGE>   6
                          EKCO GROUP AND SUBSIDIARIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

RESULTS OF OPERATIONS (CONTINUED)

NET REVENUES (CONTINUED)

revenues. Approximately $9.5 million of the increase resulted from increased
sales of the Company's bakeware products, which benefited from the introduction
of new products such as Crisp It(TM) pizza pans and Healthy Cooking broiler and
meat loaf pans, along with strong growth in Baker's Secret(R) bakeware products.
Approximately $4.0 million of the increase resulted from increased sales of the
Company's kitchen tool and gadget products, which benefitted from a store aisle
merchandising program introduced in the second half of Fiscal 1993. The
remaining increase of approximately $8.0 million was a result of increases in
the Company's other businesses, including molded plastic products, pest control
and small animal care and control products.

GROSS PROFIT

         The Company's gross profit margin in Fiscal 1994 remained essentially
unchanged from the 34.5% in Fiscal 1993. The Company was able to maintain its
gross profit margin despite increases in raw material costs and warehousing and
distribution costs through improved utilization of facilities, primarily at the
Company's cleaning product business, and changes in product mix. Although the
cost of raw materials increased in general, the majority of the increase
resulted from the approximate doubling of prices of plastic resin, the primary
raw material used in the Company's molded plastic products business.

SELLING, GENERAL AND ADMINISTRATIVE

         Selling, general and administrative expenses for Fiscal 1994 increased
$2.6 million, (5.0%) from the prior year. Selling, general and administrative
expense as a percentage of net revenues declined from 20.6% for Fiscal 1993 to
20.0% for Fiscal 1994. Selling, general and administrative expense for Fiscal
1993 included $2.6 million associated with the Company's plastic sporting goods
business. Additionally, selling, general and administrative expense for Fiscal
1994 included first quarter expenses of $1.9 million from the Company's cleaning
products business. Excluding the above acquisition and divestiture, selling,
general and administrative expense for Fiscal 1994 increased approximately $3.3
million (6.7%). The increase was primarily due to increased display and sales
promotion costs associated with the Company's 1994 bakeware media campaign and
costs associated with the start-up of VIA!. The increase was partially offset by
benefits associated with implementation of the Company's restructuring plan.

NET INTEREST EXPENSE

         Net interest expense for Fiscal 1994 increased $285,000 from the prior
year. The increase was primarily due to the additional debt associated with the
acquisition of the Company's cleaning products business on April 1, 1993.

INCOME TAXES

         The effective income tax rate declined to 46% in Fiscal 1994 from 67%
in Fiscal 1993. The decline occurred primarily because amortization of goodwill
for Fiscal 1994 represents a lower percentage of income before income taxes.


                                       6
<PAGE>   7
                          EKCO GROUP AND SUBSIDIARIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

RESTRUCTURING/REORGANIZATION AND EXCESS FACILITIES CHARGE

         The Company recorded an $11.0 million charge ($6.6 million after income
taxes) for restructuring/reorganization and excess facilities during the fourth
quarter of Fiscal 1993. The restructuring was the result of management's
analysis of the Company's operations and future strategy. The items covered by
the charge were (i) severance and other costs related to a reduction in
personnel;(ii) costs arising from the consolidation of different distribution
and information systems (including the closing of facilities and write-off of
equipment no longer relevant to the Company's operating strategy); and (iii)
costs associated with excess facilities currently classified as held for sale.
Of this $11.0 million charge, approximately $2.7 million was non-cash, and $8.3
million was cash. Of the $8.3 million cash portion of the charge, $5.0 million
was expended in Fiscal 1994 and $3.3 million was expended in Fiscal 1995. See
Note 17 to the Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

         During Fiscal 1995, the Company generated approximately $21.7 million
in cash from operations. Such cash, together with proceeds of $3.3 million from
the sale of property and equipment and proceeds of $3.6 million from investments
previously pledged as collateral, was used for capital expenditures of
approximately $12.7 million, dividend payments of approximately $1.6 million,
the reduction of debt of approximately $13.4 million and net
repurchases/issuances of Common Stock of $900,000.

         On March 25, 1996, the Company sold $125.0 million of its 9.25% Senior
Notes due 2006, 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 12.70% Notes due 1998 and 7.0%
Subordinated Convertible Note due 2002 and (ii) to repay substantially all
amounts outstanding under the Revolving Credit Facility. Concurrently with
closing the sale of the 9.25% Senior Notes, the Company entered into an
amendment to its Revolving Credit Facility, which amendment consolidated the
outstanding debt and borrowing capacity of Housewares and Frem with that of the
Company and revised certain financial covenants. Borrowings under the amended
Revolving 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. The Revolving Credit Facility provides for a
commitment fee of three-eighths of one percent on the unused portion of the
commitment amount and a $60,000 annual agency fee. Borrowings under the
Revolving Credit Facility mature in December 1998. The Senior Notes, as well as
the Revolving Credit Facility, will contain certain financial covenants that
will restrict the sale of assets, the incurrence of additional indebtedness and
certain investments and acquisitions by the Company. The early extinguishment
of the 12.70% Notes and 7% Convertible Subordinated Note will result in an
extraordinary charge against first quarter 1996 earnings of approximately $6.0
million (before income taxes).

                                       7
<PAGE>   8
                       EKCO GROUP, INC. AND SUBSIDIARIES
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

RESULTS OF OPERATIONS (CONTINUED)

         The Company believes that the net proceeds from the Senior Note
offering, together with borrowing capacity under the amended Revolving Credit
Facility will provide sufficient borrowing capacity to finance its ongoing
operations for the foreseeable future. The Company may, however, require
additional funds to finance any further acquisitions.

         A facility located in Hudson, New Hampshire classified as held for sale
was sold on October 5, 1995 for $2.8 million in cash. Proceeds from the sale
were used to repay borrowings under the Revolving Credit Facility. The Company's
remaining properties held for sale include a former manufacturing facility
located in Chicago, Illinois and a warehouse located in Lititz, Pennsylvania.
The Company is actively pursuing the sale or lease of these properties, and has
leased the Lititz warehouse facility. The Company plans to sell these properties
within the next two years. The aggregate carrying values of such properties $2.8
million at December 31, 1995, are periodically reviewed and are stated at the
lower of cost or market.

         The Company has provided approximately $3.5 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
business. 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.

RECENT ACCOUNTING PRONOUNCEMENTS

         In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 121 "Accounting For The
Impairment Of Long-Lived Assets And For Long-Lived Assets To Be Disposed Of"
("FAS 121"). The Company will adopt FAS 121 in fiscal 1996 and does not expect
it to have a material impact on the financial statements.

         The Company has not adopted the recently issued Statement of Financial
Accounting Standard No. 123 "Accounting for Stock-based Compensation" ("FAS
123") which is required to be adopted in fiscal 1996. The Company currently
intends to continue to record compensation based on the provisions of Accounting
Principles Board Opinion 25, "Accounting for Stock Issued to Employees," as
allowed by FAS 123. Although the Company has not determined the ultimate impact
of adopting FAS 123 on its present accounting disclosure, it does not believe,
based on the number of options previously granted, that adoption of FAS 123 will
have a material impact on its current accounting disclosure.

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 the "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" provisions of the Private Securities Litigation Reform Act of
1995. 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 seasonal nature of the
Company's businesses; and the impact of federal, state and local environmental
requirements (including the impact of current or future environmental claims
against the Company). As a result, the Company's operating results may
fluctuate, especially when measured on a quarterly basis.

                                       8
<PAGE>   9
                       EKCO GROUP, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                             DECEMBER 31,   JANUARY 1,
                                                                 1995          1995
                                                             -----------    ----------
                                                               (AMOUNTS IN THOUSANDS,
                                                               EXCEPT PER SHARE DATA)
<S>                                                          <C>            <C>
                                     ASSETS

Current assets
   Cash and cash equivalents                                   $    142      $    129
   Accounts receivable, net of allowance for
      doubtful accounts of $1,048 and $1,739, respectively       43,823        46,030
   Inventories                                                   47,565        48,242
   Prepaid expenses and other current assets                      6,719         6,296
   Deferred income taxes                                          4,361         7,330
   Investments pledged as collateral                                  -         3,600
                                                               --------      --------
      Total current assets                                      102,610       111,627

Property and equipment, net                                      56,380        52,361
Property held for sale or lease, net of
   accumulated depreciation of $2,830 and $8,323,
   respectively                                                   2,830         7,373
Other assets                                                      5,955         5,440
Excess of cost over fair value of net assets acquired,
   net of accumulated amortization of $27,727 and
   $23,290, respectively                                        136,600       140,982
                                                               --------      --------
      Total assets                                             $304,375      $317,783
                                                               ========      ========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
   Note payable                                                $      -      $  3,643
   Current portion of long-term obligations                      18,079            36
   Accounts payable                                              15,607        15,652
   Accrued expenses                                              23,711        27,843
   Income taxes                                                     538         3,944
                                                               --------      --------
      Total current liabilities                                  57,935        51,118
                                                               --------      --------
Long-term obligations, less current portion                      74,700       102,580
                                                               --------      --------
Other long-term liabilities                                       9,859         9,375
                                                               --------      --------
7% Convertible Subordinated Note                                 22,000        22,000
                                                               --------      --------
Series B ESOP Convertible Preferred Stock, net;
   outstanding 1,488 shares and 1,568 shares, respectively
   redeemable at $3.61 per share                                  3,458         3,096
                                                               --------      --------
Commitments and contingencies                                         -             -
                                                               --------      --------
Minority interest                                                   498           498
                                                               --------      --------
Stockholders' equity
   Common stock, $.01 par value; outstanding
      18,414 shares and 18,069 shares, respectively                 184           181
   Capital in excess of par value                               106,916       105,448
   Cumulative translation adjustment                                929           771
   Retained earnings                                             33,614        27,172
   Unearned compensation                                         (3,970)       (2,968)
   Pension liability adjustment                                  (1,748)       (1,488)
                                                               --------      --------
                                                                135,925       129,116
                                                               --------      --------
        Total liabilities and stockholders' equity             $304,375      $317,783
                                                               ========      ========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       9
<PAGE>   10
                       EKCO GROUP, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                             FISCAL YEARS ENDED
                                               DECEMBER 31,       JANUARY 1,      JANUARY 2,
                                                   1995              1995            1994
                                               ------------       ----------      ----------
                                               (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                            <C>                <C>             <C>
Net revenues                                     $277,995          $267,048        $246,428
                                                 --------          --------        --------

Costs and expenses
   Cost of sales                                  191,343           175,451         161,349
   Selling, general and administrative             52,783            53,433          50,841
   Restructuring/reorganization and
      excess facilities charge                          -                 -          11,000
   Amortization of excess of cost over
      fair value                                    4,437             4,438           4,195
                                                 --------          --------        --------
                                                  248,563           233,322         227,385
                                                 --------          --------        --------

Income before interest and income taxes            29,432            33,726          19,043
                                                 --------          --------        --------

Net interest expense
   Interest expense                                13,590            12,824          12,755
   Investment income                                  (97)             (333)           (549)
                                                 --------          --------        --------
                                                   13,493            12,491          12,206
                                                 --------          --------        --------

Income before income taxes and
      cumulative effect of accounting changes      15,939            21,235           6,837

Income taxes                                        7,894             9,812           4,578
                                                 --------          --------        --------

Income before cumulative effect of
      accounting changes                            8,045            11,423           2,259

Cumulative effect of changes in method
      of accounting for post-retirement
      and post-employment benefits (net of
      income taxes of $1,954)                           -                 -          (3,247)
                                                 --------          --------        --------

Net income (loss)                                $  8,045          $ 11,423        $   (988)
                                                 ========          ========        ========

Per share data
   Earnings before cumulative effect of
     accounting changes                          $    .40          $    .57        $    .11
   Cumulative effect of accounting changes              -                 -            (.19)
                                                 --------          --------        --------
   Net income (loss)                             $    .40          $    .57        $   (.08)
                                                 ========          ========        ========

Weighted average number of shares used
      in computation of per share data
   Earnings before cumulative effect
     of accounting changes                         20,318            20,115          19,999
   Cumulative effect of accounting changes              -                 -          17,148
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       10
<PAGE>   11
                       EKCO GROUP, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                   COMMON      CAPITAL IN  CUMULATIVE                           PENSION
                                                   STOCK, PAR  EXCESS OF   TRANSLATION  RETAINED  UNEARNED      LIABILITY
                                           SHARES  VALUE $.01  PAR VALUE   ADJUSTMENT   EARNINGS  COMPENSATION  ADJUSTMENT
                                           ------  ----------  ----------  -----------  --------  ------------  ----------
                                                                        (AMOUNTS IN THOUSANDS)
<S>                                        <C>     <C>         <C>         <C>          <C>       <C>           <C>
Balance, January 3, 1993                   17,148     $171      $ 96,651     $1,094     $16,737     $(2,883)     $(1,203)
Shares issued under employee common
 stock purchase and option plans               89        1           594          -           -           -            -
Net shares issued under restricted common
 stock purchase plans                          11        -            13          -           -         (12)           -
Shares issued upon preferred stock
  conversions                                  31        -           110          -           -           -            -
Treasury shares issued for acquisition        565        6         6,516          -           -           -            -
Income tax reductions relating to stock
  plans                                         -        -           318          -           -           -            -
Net loss for the year                           -        -             -          -        (988)          -            -
Foreign currency translation adjustment         -        -             -         (3)          -           -            -
Amortization of unearned compensation           -        -             -          -           -         443            -
Pension liability adjustment                    -        -             -          -           -           -         (701)
                                           ------     ----      --------     ------     -------     -------      -------
Balance, January 2, 1994                   17,844      178       104,202      1,091      15,749      (2,452)      (1,904)
</TABLE>



                                       11
<PAGE>   12
                        EKCO GROUP, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY



<TABLE>
<CAPTION>
                                                   COMMON      CAPITAL IN  CUMULATIVE                           PENSION
                                                   STOCK, PAR  EXCESS OF   TRANSLATION  RETAINED  UNEARNED      LIABILITY
                                           SHARES  VALUE $.01  PAR VALUE   ADJUSTMENT   EARNINGS  COMPENSATION  ADJUSTMENT
                                           ------  ----------  ----------  -----------  --------  ------------  ----------
                                                                        (AMOUNTS IN THOUSANDS)
<S>                                        <C>     <C>         <C>         <C>          <C>       <C>           <C>
Shares issued under employee common
 stock purchase and option plans              148        2           643          -           -           -            -
Income tax reductions relating to
 stock plans                                    -        -           327          -           -           -            -
Treasury shares issued upon preferred
 stock conversions                             77        1           276          -           -           -            -
Net income for the year                         -        -             -          -      11,423           -            -
Foreign currency translation adjustment         -        -             -       (320)          -           -            -
Unearned compensation relating to
 common stock purchases by employee
 stock ownership plan                           -        -             -          -           -        (950)           -
Amortization of unearned compensation           -        -             -          -           -         434            -
Pension liability adjustment                    -        -             -          -           -           -          416
                                           ------     ----      --------      -----     -------     -------      -------
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                                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)
                                           ======     ====      ========      =====     =======     =======      =======
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       12
<PAGE>   13
                       EKCO GROUP, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                FISCAL YEARS ENDED
                                                       DECEMBER 31,  JANUARY 1,  JANUARY 2,
                                                           1995         1995        1994
                                                       -----------   ----------  ----------
                                                              (AMOUNTS IN THOUSANDS)
<S>                                                    <C>           <C>         <C>
Cash flows from operating activities
  Net income (loss)                                     $  8,045      $ 11,423    $   (988)
  Adjustments to reconcile net income (loss)
   to net cash provided by operations
       Depreciation                                        9,234         9,227       9,545
       Restructuring/reorganization and excess
        facilities charge                                      -             -       2,677
       Amortization of excess of cost over fair value      4,437         4,438       4,195
       Amortization of deferred finance costs                590           499         467
       Other amortization                                  6,959         4,870       2,970
       Deferred income taxes                               3,388         1,679        (554)
       Cumulative effect of accounting change                  -             -       3,247
       Other                                                (353)         (102)        586
  Change in certain assets and liabilities, net
   of effects from acquisition and dispositions
   of businesses, affecting cash provided by
   operations
       Accounts and note receivable                        2,666       (10,313)     (4,431)
       Inventories                                           719       (15,231)     (6,622)
       Prepaid marketing costs                            (4,877)       (4,127)     (5,490)
       Other assets                                         (951)        4,319      (2,453)
       Accounts payable and accrued expenses              (4,742)       (3,348)      6,885
       Income taxes payable                               (3,395)         (931)       (361)
                                                        --------      --------    --------
           Net cash provided by operations                21,720         2,403       9,673
                                                        --------      --------    --------
Cash flows from investing activities
  Proceeds from sale of property and equipment             3,300         5,219         194
  Capital expenditures                                   (12,652)      (11,106)    (15,111)
  Acquisition of business                                      -             -     (26,428)
                                                        --------      --------    --------
           Net cash used in investing activities          (9,352)       (5,887)    (41,345)
                                                        --------      --------    --------
Cash flows from financing activities
  Proceeds from issuance of note payable and
   long-term obligations                                  35,183        32,118      30,274
  Proceeds from sale of investment held as
    collateral                                             3,600             -           -
  Payments of dividends                                   (1,603)            -           -
  Purchases of treasury stock                             (1,180)            -           -
  Purchase of common stock for Employee Stock
   Ownership Plan                                              -          (950)          -
  Payments of note and long-term obligations             (48,627)      (29,417)    (17,049)
  Other                                                      259         1,484       1,663
                                                        --------      --------    --------
           Net cash provided by financing
            activities                                   (12,368)        3,235      14,888

Effect of exchange rate changes on cash                       13            51         113
                                                        --------      --------    --------
           Net increase (decrease) in cash and
            cash equivalents                                  13          (198)    (16,671)

Cash and cash equivalents at beginning of year               129           327      16,998
                                                        --------      --------    --------
Cash and cash equivalents at end of year                $    142      $    129    $    327
                                                        ========      ========    ========
Cash paid during the year for
  Interest                                              $ 12,557      $ 12,050    $ 12,181
  Income taxes                                             7,912         9,061       4,753
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       13
<PAGE>   14
                       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"), Frem
Corporation ("Frem"), Kellogg Brush Manufacturing Co. and subsidiaries
("Kellogg"), 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 31, 1995 ("Fiscal 1995"), January 1,
1995 ("Fiscal 1994") and January 2, 1994 ("Fiscal 1993").

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 expanding its
market position at retail. 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 $3.5 million and $4.4
million of these costs are included in prepaid expenses at December 31, 1995 and
January 1, 1995, 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 Kellogg, whose cost is determined on a last-in, first-out ("LIFO") basis.

INVESTMENTS

         Investments are carried at cost which approximates market.

PROPERTY AND EQUIPMENT

         Property and equipment are stated at cost. Assets acquired through
business combinations accounted for under the purchase method are recorded at
appraised value determined as of the acquisition date. 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.

PROPERTY HELD FOR SALE OR LEASE

         It is the Company's policy to make available for sale or lease property
considered no longer necessary for the operations of the Company. The aggregate
carrying values of such property are periodically reviewed and are stated at the
lower of cost or market.


                                       14
<PAGE>   15
INTANGIBLE ASSETS

         The excess of cost over fair value of net assets acquired ("goodwill")
is being amortized over 12 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 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.

         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 Canadian and United Kingdom
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.

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 issued two Statements of
Financial Accounting Standards, "Accounting For The Impairment Of Long-Lived
Assets And For Long-Lived Assets To Be Disposed Of" No. 121 ("FAS 121") and
"Accounting for Stock-based Compensation" No. 123 ("FAS 123"). The Company will
adopt both these standards in fiscal 1996; it does not expect the adoption of
either FAS 121 or FAS 123 to have a material effect on the financial statements.


                                       15
<PAGE>   16
(2)  INVENTORIES

         The components of inventory were as follows:

<TABLE>
<CAPTION>
                                           DECEMBER 31, 1995     JANUARY 1, 1995
                                           -----------------     ---------------
                                                   (AMOUNTS IN THOUSANDS)
         <S>                               <C>                   <C>
         Raw materials                          $11,489              $15,229
         Work in process                          3,097                4,047
         Finished goods                          32,979               28,966
                                                -------              -------
                                                $47,565              $48,242
                                                =======              =======
</TABLE>


         At December 31, 1995, and January 1, 1995, inventories carried under
the LIFO method represented approximately 16.9% and 17.4%, respectively, of
total year-end inventories. The effect of using LIFO for these inventories for
Fiscal 1995 and Fiscal 1994 was immaterial to the assets and gross profit of the
Company. During Fiscal 1995 and Fiscal 1994, there was no effect on net income
from liquidation of LIFO layers.

(3)  PROPERTY AND EQUIPMENT, NET

         Property and equipment consisted of the following:

<TABLE>
<CAPTION>
                                             DECEMBER 31, 1995   JANUARY 1, 1995
                                             -----------------   ---------------
                                                    (AMOUNTS IN THOUSANDS)
         <S>                                 <C>                 <C>
         Property and equipment at cost
           Land, buildings and improvements       $22,856            $22,261
           Equipment, furniture and fixtures       71,922             59,839
                                                  -------            -------
                                                   94,778             82,100
         Less accumulated depreciation and
           amortization                            38,398             29,739
                                                  -------            -------
                                                  $56,380            $52,361
                                                  =======            =======
</TABLE>

(4)  NOTE PAYABLE

         The note payable, which represented borrowings of the Company's
Employee Stock Ownership Plan (the "ESOP") guaranteed by the Company (the "ESOP
Loan") was paid on March 30, 1995. Interest expense charged to operations for
Fiscal 1995, Fiscal 1994 and Fiscal 1993 relating to the ESOP Loan was $52,000,
$131,000 and $148,000, respectively.

(5)  LONG-TERM OBLIGATIONS AND OTHER LONG-TERM LIABILITIES

         Long-term obligations consisted of the following:

<TABLE>
<CAPTION>
                                            DECEMBER 31, 1995    JANUARY 1, 1995
                                            -----------------    ---------------
                                                   (AMOUNTS IN THOUSANDS)
         <S>                                <C>                  <C>
         Revolving Credit Facility               $32,693             $ 42,424
         12.70% Notes, due 1998                   60,000               60,000
         Other                                        86                  192
                                                 -------             --------
                                                  92,779              102,616
         Less current portion                     18,079                   36
                                                 -------             --------
                                                 $74,700             $102,580
                                                 =======             ========

         7% Convertible Subordinated Note,
         due 2002                                $22,000             $ 22,000
                                                 =======             ========
</TABLE>


                                       16
<PAGE>   17
       Other long-term liabilities consisted of the following:

<TABLE>
         <S>                                                <C>           <C>
         Accrued pension cost (see Note 8)                  $1,950        $1,408
         Deferred income taxes                               1,369           948
         Other long-term liabilities                         6,540         7,019
                                                            ------        ------
                                                            $9,859        $9,375
                                                            ======        ======
</TABLE>


         During Fiscal 1995, the Company entered into a bank credit agreement
(the "Revolving Credit Facility") which provides a total line of credit of $75
million allocated among the Company ($30.0 million), Housewares ($35.0 million)
and Frem ($10.0 million). The proceeds from the Revolving Credit Facility were
used to retire certain loans under previous agreements. As of December 31, 1995,
$34.4 million was available for general corporate purposes under the Revolving
Credit Facility, net of approximately $6.9 million in outstanding letters of
credit. The facility matures on December 1, 1998.

         Loans under the Revolving Credit Facility bear interest at the bank's
prime rate or the prime rate plus 0.25% or the LIBOR rate plus 1.25% to 1.75%,
depending on the Company's borrowing strategy and the ratio of total debt to
cash flow, as defined. The Revolving Credit Facility provides for a commitment
fee of three-eighths of one percent on the unused portion of the commitment
amount and a $60,000 annual agency fee.

         Borrowings under the Revolving Credit Facility are collateralized by
substantially all of the assets of the Company. The Revolving Credit Facility
contains certain financial and operating covenants. The most restrictive
covenant requires the Company to maintain a minimum level of cash flow.

         Certain information with respect to credit agreements follows:

<TABLE>
<CAPTION>
                                             FISCAL 1995    FISCAL 1994   FISCAL 1993
                                             -----------    -----------   -----------
                                            (AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
      <S>                                    <C>            <C>           <C>
      Average interest rate of borrowings
         outstanding at end of year               7.48%          8.20%         6.13%
      Maximum amount of borrowings
         outstanding at any month-end          $56,533        $42,434       $47,239
      Average aggregate borrowings during
        the year                               $43,392        $38,391       $30,898
      Weighted average interest rate
        during the year                           8.08%          6.51%         6.12%
</TABLE>


         The 12.70% Notes are obligations of Housewares and its subsidiaries,
principally Ekco Canada, Inc. and Frem ("Ekco Housewares"). The principal is
payable as follows: $18 million on each of December 15, 1996 and 1997, and $24
million on December 15, 1998. In the event of a Change in Control (as defined),
each Noteholder may require Ekco Housewares to prepay the Notes held by such
Noteholder. In addition, if, after a Change in Control, Ekco Housewares fails to
perform or observe any Triggering Covenant (as defined) in stated time periods
and specified circumstances, then each Noteholder may require Ekco Housewares to
prepay the Notes held by such Noteholder and to pay a premium (approximately
$7.9 million at December 31, 1995).

         The 12.70% Notes restrict the payments Ekco Housewares can make to the
Company, and contain certain financial and operating covenants which limit or
restrict the sale of assets, additional indebtedness, and certain investments
and acquisitions. Under the most restrictive financial covenant, Ekco Housewares
must maintain a current ratio of 1.25 to 1.00. At December 31, 1995, the total
amount that could be paid to the Company by Ekco Housewares was approximately
$800,000. Total net assets (total assets less total liabilities) of Ekco
Housewares excluding intercompany items were approximately $83 million at
December 31, 1995.


                                       17
<PAGE>   18
         The 7% Convertible Subordinated Note is due November 30, 2002, and is
convertible into common stock at a conversion price of $10.50 per share subject
to certain adjustments. It is callable until December 1996 if the price of the
common stock averages $18 or more for 45 consecutive days immediately preceding
the call notice date. After four years, the Note is callable at an initial
premium of 3.5%, which declines to zero in the final year of maturity. The Note
requires the Company to maintain a minimum net worth of $84 million subject to
adjustment under certain circumstances.

         The total of long-term obligations, with the exception of the 7%
Convertible Subordinated Note, mature over the three years ending December 1998
as follows (amounts in thousands): 1996- $18,079; 1997- $18,007; 1998- $56,693.

(6)  ACCRUED EXPENSES

          Accrued expenses consisted of the following:

<TABLE>
<CAPTION>
                                                DECEMBER 31, 1995    JANUARY 1, 1995
                                                -----------------    ---------------
                                                       (AMOUNTS IN THOUSANDS)
<S>                                             <C>                  <C>
Payroll                                              $ 2,456             $ 2,145
Compensated absences                                   1,831               1,933
Sales and promotional allowances                       6,417               6,131
Provisions related to restructuring/
  reorganization and excess facilities costs               -               3,305
Interest and non-income taxes                          3,745               3,944
Insurance                                              2,562               2,509
Professional fees                                        956               1,605
Provision for environmental matters                    2,099               2,080
Other                                                  3,645               4,191
                                                     -------             -------
                                                     $23,711             $27,843
                                                     =======             =======
</TABLE>


(7)  INCOME TAXES

         Total income tax expense for Fiscal 1995, Fiscal 1994 and Fiscal 1993
was allocated as follows:

<TABLE>
<CAPTION>
                                               FISCAL 1995  FISCAL 1994   FISCAL 1993
                                               -----------  -----------   -----------
                                                       (AMOUNTS IN THOUSANDS)
<S>                                            <C>          <C>           <C>
Income from operations                           $7,894       $9,812        $4,578
Stockholders' equity, for compensation
  expense for tax purposes in excess of
  amounts recognized for financial reporting
  purposes                                          (74)        (327)         (318)
                                                 ------       ------        ------
                                                 $7,820       $9,485        $4,260
                                                 ======       ======        ======
</TABLE>


         A reconciliation of the provision for income taxes to the statutory
income tax rate applied to combined domestic and foreign income before income
taxes for Fiscal 1995, Fiscal 1994 and Fiscal 1993 was as follows:


                                       18
<PAGE>   19
<TABLE>
<CAPTION>
                                             FISCAL 1995    FISCAL 1994     FISCAL 1993
                                             -----------    -----------     -----------
                                             (AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<S>                                          <C>            <C>             <C>
Income (loss) before income taxes
   Domestic                                    $16,319        $21,543         $7,573
   Foreign                                        (380)          (308)          (736)
                                               -------        -------         ------
                                               $15,939        $21,235         $6,837
                                               =======        =======         ======

Federal income tax at normal rates                  35%            35%            35%
State income taxes, net of federal benefit           4%             4%            11%
Change in federal rate                               -              -             (3%)
Difference between foreign and
  federal effective rates                            1%             -              2%
Amortization of excess of cost over
  fair value                                        10%             7%            22%
                                               -------        -------         ------
                                                    50%            46%            67%
                                               =======        =======         ======
</TABLE>


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

<TABLE>
<CAPTION>
                                     FEDERAL      STATE       FOREIGN     TOTAL
                                     -------      -----       -------     -----
                                               (AMOUNTS IN THOUSANDS)
<S>                                  <C>          <C>         <C>         <C>
FISCAL 1995
Current                               $3,894      $  641       $ (29)     $4,506
Deferred                               2,968         404          16       3,388
                                      ------      ------       -----      ------
                                      $6,862      $1,045       $ (13)     $7,894
                                      ======      ======       =====      ======
FISCAL 1994
Current                               $7,119      $1,098       $ (84)     $8,133
Deferred                               1,324         310          45       1,679
                                      ------      ------       -----      ------
                                      $8,443      $1,408       $ (39)     $9,812
                                      ======      ======       =====      ======
FISCAL 1993
Current                               $3,640      $1,484       $   8      $5,132
Deferred                                 (38)       (372)       (144)       (554)
                                      ------      ------       -----      ------
                                      $3,602      $1,112       $(136)     $4,578
                                      ======      ======       =====      ======
</TABLE>


         The significant components of deferred income tax expense attributable
to income from operations for Fiscal 1995, Fiscal 1994 and Fiscal 1993 were as
follows:

<TABLE>
<CAPTION>
                                                   FISCAL 1995  FISCAL 1994  FISCAL 1993
                                                   -----------  -----------  -----------
                                                           (AMOUNTS IN THOUSANDS)
<S>                                                <C>          <C>          <C>
Utilization of net operating loss and tax credits    $    -       $    -       $ 2,303
Depreciation                                          2,008         (969)       (1,438)
Inventory                                               106         (527)         (173)
Benefit plans                                           (63)        (258)        1,815
Restructuring/reorganization and excess
 facilities charge                                        -            -        (4,400)
Accruals, provisions and other liabilities            1,928        3,623         1,453
Other                                                  (591)        (190)         (114)
                                                     ------       ------       -------
                                                     $3,388       $1,679       $  (554)
                                                     ======       ======       =======
</TABLE>


                                       19
<PAGE>   20
         The tax effects of temporary differences and carryforwards that give
rise to significant portions of net deferred tax asset (liability) consisted of
the following:

<TABLE>
<CAPTION>
                                              DECEMBER 31, 1995  JANUARY 1, 1995
                                              -----------------  ---------------
                                                    (AMOUNTS IN THOUSANDS)
<S>                                           <C>                <C>
Receivables                                        $   341           $   518
Inventory                                            1,322             1,428
Benefit plans                                        3,405             3,342
Accruals, provisions and other liabilities           3,385             5,313
Depreciation                                        (5,663)           (3,655)
Other                                                  202              (564)
                                                   -------           -------
                                                   $ 2,992           $ 6,382
                                                   =======           =======
</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 31, 1995 and January 1, 1995, 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.

Net pension expense consisted of the following:

<TABLE>
<CAPTION>
                                                      FISCAL 1995   FISCAL 1994   FISCAL 1993
                                                      -----------   -----------   -----------
                                                               (AMOUNTS IN THOUSANDS)
<S>                                                   <C>           <C>           <C>
U.S. defined benefit plans
   Service cost-benefits earned during the period        $ 211         $ 257         $ 229
                                                         -----         -----         -----
   Interest accrued on projected benefit obligation        597           559           528
                                                         -----         -----         -----
   Expected return on assets
         Actual return                                    (582)         (196)         (373)
         Unrecognized gain (loss)                           69          (368)         (183)
                                                         -----         -----         -----
                                                          (513)         (564)         (556)
   Amortization of prior service cost and
     unrecognized loss                                     110           120            54
   Settlement loss                                          89           138            38
                                                         -----         -----         -----
U.S. defined benefit plans, net                            494           510           293
Canadian defined benefit plan                               (2)           (7)           (2)
U.S. defined contribution plans                            113           127           129
                                                         -----         -----         -----
Total net pension expense                                $ 605         $ 630         $ 420
                                                         =====         =====         =====
</TABLE>


                                       20
<PAGE>   21
         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 31, 1995            JANUARY 1, 1995
                                           -------------------------   -------------------------
                                           PLANS WITH    PLANS WITH    PLANS WITH    PLANS WITH
                                           ASSETS        ACCUMULATED   ASSETS        ACCUMULATED
                                           EXCEEDING     BENEFITS      EXCEEDING     BENEFITS
                                           ACCUMULATED   EXCEEDING     ACCUMULATED   EXCEEDING
                                           BENEFITS      ASSETS        BENEFITS      ASSETS
                                           -----------   -----------   -----------   -----------
                                                           (AMOUNTS IN THOUSANDS)
<S>                                        <C>           <C>           <C>           <C>
Accumulated benefit obligation
   Vested                                    $(1,595)      $(6,938)      $(1,342)      $(6,592)
   Nonvested                                     (38)          (65)          (40)          (44)
                                             -------       -------       -------       -------
         Total                                (1,633)       (7,003)       (1,382)       (6,636)

Effect of projected
  compensation increases                        (260)            -          (233)            -
                                             -------       -------       -------       -------
Projected benefit obligation                  (1,893)       (7,003)       (1,615)       (6,636)
Plan assets                                    2,534         4,844         2,338         4,864
                                             -------       -------       -------       -------
Plan assets in excess of (less than)
  projected benefit obligations                  641        (2,159)          723        (1,772)
Unrecognized actuarial net gain (losses)        (211)        1,957          (263)        1,852
Unrecognized prior service cost                  107            42           115            47
Additional liability                               -        (1,790)            -        (1,535)
                                             -------       -------       -------       -------
Prepaid (accrued) pension cost included
  in consolidated balance sheet              $   537       $(1,950)      $   575       $(1,408)
                                             =======       =======       =======       =======
</TABLE>


         Plan assets are invested primarily in pooled funds maintained by
insurance companies. The projected benefit obligation was determined using an
assumed discount rate of 7.5% for December 31, 1995 and 8.0% for January 1,
1995. 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% for Fiscal 1995, Fiscal 1994 and Fiscal 1993. At
December 31, 1995, the various plans held an aggregate of 8,900 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.

         Effective January 4, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Post-retirement
Benefits Other Than Pensions" ("FAS 106") and recognized immediately the
cumulative effect of the change in accounting for post-retirement benefits of
$2.9 million ($1.8 million after income taxes) which represents the accumulated
post-retirement benefit obligation existing at January 1, 1993. FAS 106 requires
that the cost of these benefits be recognized in the financial statements during
the employees' active working lives. Previously, costs were recognized as claims
were incurred. The Company's funding policy for these plans remains on a
pay-as-you-go basis.


                                       21
<PAGE>   22
         The following sets forth the amounts recognized in the consolidated
balance sheets for the Company's post-retirement benefit plans:

<TABLE>
<CAPTION>
                                                 DECEMBER 31, 1995  JANUARY 1, 1995
                                                 -----------------  ---------------
                                                       (AMOUNTS IN THOUSANDS)
<S>                                              <C>                <C>
Accumulated post-retirement benefit obligation
  Fully eligible active employees                     $  778            $  649
  Retirees                                             1,103             1,518
  Other active employees                                 658               547
                                                      ------            ------
                                                       2,539             2,714
Plan assets                                                -                 -
Unrecognized net (gain) loss                             (29)               55
                                                      ------            ------

Accrued post-retirement benefit cost                  $2,510            $2,769
                                                      ======            ======
</TABLE>


Post-retirement benefit expense consisted of the following:

<TABLE>
<CAPTION>
                                         FISCAL 1995   FISCAL 1994   FISCAL 1993
                                         -----------   -----------   -----------
                                                  (AMOUNTS IN THOUSANDS)
<S>                                      <C>           <C>           <C>
Service cost (benefits attributed to
 employee services during the year)         $ 43          $ 46          $ 44
Interest expense on the accumulated
 post-retirement benefit obligation          182           199           206
                                            ----          ----          ----
Net periodic post-retirement benefit
 expense                                    $225          $245          $250
                                            ====          ====          ====
</TABLE>


         The discount rates used in determining the accumulated post-retirement
benefit obligation as of December 31, 1995 and January 1, 1995 were 7.5% and
8.0%, respectively. 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 $484,000, $415,000 and $170,000 for Fiscal 1995, Fiscal 1994 and
Fiscal 1993, respectively.

         The Company also adopted Statement of Financial Accounting Standards
No. 112, "Employers' Accounting for Post-employment Benefits" ("FAS 112")
effective January 4, 1993, resulting in an after-tax charge of $1.4 million (net
of income taxes of $900,000). The Company accrues benefits provided to former or
inactive employees after employment but before retirement. The ongoing impact of
FAS 112 is not expected to have a material effect on earnings in future years.

         There was no cash flow impact associated with either the adoption of
FAS 106 or FAS 112.

(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 31, 1995, approximately 1.5 million shares of the Company's common
stock were reserved for conversion of Series B ESOP Convertible Preferred Stock.


                                       22
<PAGE>   23
         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 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 has approved
principal prepayments of $480,000, $477,000 and $439,000 for Fiscal 1995, Fiscal
1994 and Fiscal 1993 to be paid in 1996, 1995 and 1994, respectively. For Fiscal
1995, Fiscal 1994 and Fiscal 1993, $652,000, $687,000 and $686,000,
respectively, has been charged to operations. The actual cash contributions,
excluding the above mentioned prepayments, to the ESOP by the Company during
Fiscal 1995, Fiscal 1994 and Fiscal 1993 were $302,000, $390,000 and $390,000,
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 the dividend on the Company's common stock.

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

<TABLE>
<CAPTION>
                                            DECEMBER 31, 1995    JANUARY 1, 1995
                                            -----------------    ---------------
                                                   (AMOUNTS IN THOUSANDS)
<S>                                         <C>                  <C>
Series B ESOP Convertible Preferred Stock,
 par value $.01                                  $ 5,372             $ 5,662
Unearned compensation                             (1,914)             (2,566)
                                                 -------             -------
                                                 $ 3,458             $ 3,096
                                                 =======             =======
</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 agreed to finance the purchase through a 20-year 10% loan
from the Company to the ESOP. During Fiscal 1994, the Company provided the ESOP
with approximately $950,000 to purchase approximately 137,000 shares of the
Company's common stock in the public market. As of January 1, 1995, the ESOP had
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 the minimum allocation of 50,000 shares in any one year. For each of Fiscal
1995, Fiscal 1994 and Fiscal 1993, 50,000 shares were allocated to employees'
accounts. For Fiscal 1995, Fiscal 1994 and Fiscal 1993, $165,000, $155,000 and
$136,000, respectively, have 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.


                                       23
<PAGE>   24
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. The amended plan provides that each Right, when
exercisable, will entitle the holder thereof until April 9, 1997, 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 $20, 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 tenth day after a
public announcement that a person or group has acquired beneficial ownership of
15% or more of the outstanding shares of common stock, other than, so long as
certain conditions are met, as a result of the beneficial ownership of certain
common stock or securities convertible into common stock held by The 1818 Fund,
L.P., a Delaware limited partnership (an "Acquiring Person") or (ii) the tenth
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 $.02 per Right at any time prior to the
time that a person or group becomes an Acquiring Person.

         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 31, 1995    JANUARY 1, 1995
                                            -----------------    ---------------
<S>                                         <C>                  <C>
Authorized shares                              60,000,000           60,000,000
                                               ==========           ==========
Shares issued                                  27,854,441           27,292,641
Shares held in treasury                         9,440,577            9,223,600
                                               ----------           ----------
Shares outstanding                             18,413,864           18,069,041
                                               ==========           ==========
</TABLE>


TREASURY STOCK

         During Fiscal 1993, the Company issued 564,651 shares of treasury stock
in connection with the acquisition of Kellogg. 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 OPTION PLANS

         At December 31, 1995, approximately 1.5 million shares of the Company's
common stock were available for grants of options to employees and directors
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 and, accordingly, there have been no charges
to income in connection with the options other than incidental expenses. Options
must be exercised within the period prescribed by the respective stock option
plan agreements, but not later than 10 years for certain options and 11 years
for others.


                                       24
<PAGE>   25
         Changes in options and option shares under the plans during the
respective fiscal years were as follows:

<TABLE>
<CAPTION>
                              FISCAL 1995                FISCAL 1994                FISCAL 1993
                        -----------------------    -----------------------    -----------------------
                        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  2,593,093    $2.13-$11.31  2,484,721    $2.13-$10.06  1,857,248
Options granted         $6.06-$ 6.56    340,895    $6.81-$ 7.56    424,584    $7.44-$11.31    746,773
Options exercised       $2.19-$ 3.38   (150,814)   $2.25-$ 2.63    (59,600)   $2.25-$ 5.19    (15,100)
Options cancelled       $2.63-$11.31   (231,738)   $2.56-$11.31   (256,612)   $2.56-$11.31   (104,200)
                                      ---------                  ---------                  ---------
Options outstanding,
  end of year           $2.13-$11.31  2,551,436    $2.13-$11.31  2,593,093    $2.13-$11.31  2,484,721
                                      =========                  =========                  =========
Options exercisable,
  end of year           $2.13-$11.31  2,047,779    $2.13-$11.31  1,946,153    $2.13-$11.31  1,723,292
                                      =========                  =========                  =========
Shares reserved for
  future grants                       1,479,231                  1,588,388                  1,756,360
                                      =========                  =========                  =========
</TABLE>




                                       25
<PAGE>   26
<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 31, 1995,
 which were granted during fiscal years:

   1987                                       380,000             $ 3.69       $ 1,401,250
   1988                                       430,428       $2.13-$ 2.25           924,749
   1989                                        31,373             $ 3.38           100,001
   1990                                       159,100             $ 2.56           407,694
   1991                                        44,600             $ 2.63           117,075
   1992                                       334,950       $7.25-$10.06         3,331,372
   1993                                       497,540       $7.44-$11.31         5,266,261
   1994                                       351,550       $6.81-$ 7.56         2,625,284
   1995                                       321,895       $6.06-$ 6.56         2,057,119
                                            ---------                          -----------
                                            2,551,436                          $16,230,805
                                            =========                          ===========
</TABLE>


         Of the options outstanding at December 31, 1995, options to acquire
1,688,069 shares at a weighted average exercise price of $5.82 per share became
exercisable on the grant date. Under certain circumstances, a portion of 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 31, 1995, 377,825 of such shares were subject to
such repurchase.

         The remaining options outstanding at December 31, 1995, which cover the
acquisition of 863,367 shares at a weighted average exercise price of $7.43 per
share are exercisable from the date of grant through the date of exercise up to
one-fifth of the number of shares covered by such options on or after each of
the first five anniversaries of the date of grant. All such options will be
fully exercisable on and after the fifth such anniversary.

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 aggregated 838,520 shares at December 31, 1995. 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).

<TABLE>
<CAPTION>
                                 FISCAL 1995        FISCAL 1994       FISCAL 1993
                                 -----------        -----------       -----------
                                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               51    $  312       177   $ 654       291   $ 988
Shares issued                    288     1,824         -       -        25     184
Shares repurchased               (45)     (297)        -       -       (14)   (171)
Shares vested                    (27)     (118)     (126)   (342)     (125)   (347)
                                 ---    ------      ----   -----      ----   -----

Unvested shares outstanding,
 end of year                     267    $1,721        51   $ 312       177   $ 654
                                 ===    ======      ====   =====      ====   =====
</TABLE>


                                       26
<PAGE>   27
         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 1995,
Fiscal 1994 and Fiscal 1993, unearned compensation charged to operations was
$270,000, $279,000 and $307,000, 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.

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 1995,
Fiscal 1994 and Fiscal 1993, employees purchased 72,844 shares, 88,938 shares
and 73,880 shares, respectively, for a total of approximately $376,000, $503,000
and $545,000, respectively. At December 31, 1995, approximately 1.1 million
shares were reserved for future grants under the Plan. There have been no
charges to income in connection with the Plan other than incidental expenses.

ACCOUNTING FOR STOCK-BASED COMPENSATION

         The Company has not adopted the recently issued Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-based Compensation" ("FAS
123"), which is required to be adopted in Fiscal 1996. The Company currently
intends to continue to record compensation based on the provisions of Accounting
Principles Board Opinion No. 25. "Accounting for Stock Issued to Employees" as
allowed by FAS 123. Although the Company has not determined the ultimate impact
of adopting FAS 123 on its present disclosure, it does not believe, based on the
number of options previously granted, that the adoption will have a material
impact on its current disclosure.

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 1995, Fiscal 1994 and Fiscal 1993 were $74,000, $327,000 and
$318,000, respectively.

(12)  EARNINGS PER COMMON SHARE

         Primary earnings per common share are 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. Fully diluted
earnings per share have been omitted since they are either the same as primary
earnings per share or anti-dilutive. The weighted average number of shares used
in computation of earnings per share consisted of the following for the periods
presented.

<TABLE>
<CAPTION>
                                                        FISCAL   FISCAL   FISCAL
                                                         1995     1994     1993
                                                        ------   ------   ------
                                                         (AMOUNTS IN THOUSANDS)
<S>                                                     <C>      <C>      <C>
Weighted average shares of common stock
  outstanding during the year                           18,354   17,953   17,616
Weighted average common equivalent
  shares due to stock options                              426      545      713
Series B ESOP Convertible
  Preferred Stock                                        1,538    1,617    1,670
                                                        ------   ------   ------
                                                        20,318   20,115   19,999
                                                        ======   ======   ======
</TABLE>


(13)  COMMITMENTS AND CONTINGENCIES

EMPLOYMENT CONTRACTS

         The Company has employment agreements with certain of its executive
officers and management personnel. These agreements generally continue until
terminated by the executive or the Company, and provide for salary continuation
for a specified number of months under certain circumstances. Certain of the
agreements 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 of these agreements are secured by


                                       27
<PAGE>   28
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 31, 1995, 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 $6.6 million ($10.0
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), each exempt employee of the Company whose employment is terminated,
whose duties or responsibilities are substantially diminished, or who was
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 $3.4 million, $2.4 million and $1.9 million,
were charged to operations for Fiscal 1995, Fiscal 1994 and Fiscal 1993,
respectively.

         The Company receives rental income from properties currently held for
sale. Rental income included in selling, general and administrative expenses was
approximately $154,000, $200,000 and $1.5 million, for Fiscal 1995, Fiscal 1994
and Fiscal 1993, respectively.

         Minimum rental payments and income required under leases that had
initial or remaining noncancellable lease terms in excess of one year as of
December 31, 1995, were as follows:

<TABLE>
<CAPTION>
                                                        OPERATING         RENTAL
                                                          LEASES          INCOME
                                                        ---------         ------
                                                         (AMOUNTS IN THOUSANDS)
         <S>                                            <C>               <C>
         FISCAL YEAR
             1996                                         $2,241           $160
             1997                                          1,609            166
             1998                                          1,300            170
             1999                                          1,294              -
             2000                                            971              -
</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


                                       28
<PAGE>   29
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.

         In connection with the acquisition of Kellogg by the Company in 1993,
the Company engaged environmental engineering consultants ("Consultants") to
review potential environmental liabilities at all of Kellogg's properties.
Additional investigation and testing resulted in the identification of likely
environmental remedial actions, operation, maintenance and ground water
monitoring and the estimated costs therefore. 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 costs will be approximately $2.0 million and the
expense for the ongoing operation, maintenance and ground water monitoring will
be approximately $50,000 for fiscal 1996 and approximately $25,000 for each of
the thirty years thereafter. As of December 31, 1995, the liability recorded by
the Company was approximately $3.5 million. The Company expects to pay
approximately $325,000 of the remediation costs in fiscal 1996 with the balance
being paid out in fiscal 1997 and fiscal 1998. During Fiscal 1995, the Company
paid approximately $211,000 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 $10.0 million and $11.4 million from mass
merchandisers at December 31, 1995 and January 1, 1995, 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 31,
1995 and no retailer exceeded 10% of the Company's receivables at that date.

(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 five principal product
categories: (i) bakeware, (ii) kitchenware, (iii) cleaning products, (iv) pest
control and small animal care and control products and (v) molded plastic
products. Sales and marketing operations outside the United States are conducted
principally through a subsidiary in Canada and by direct sales. One customer
accounted for net revenues of approximately $37.3 million (13.4%) and $31.3
million (11.8%) for Fiscal 1995 and Fiscal 1994, respectively. Two customers
each accounted for 9.5% or approximately $23.0 million and $22.9 million of net
revenues for Fiscal 1993.


                                       29
<PAGE>   30
         The following table shows information by geographic area:

<TABLE>
<CAPTION>
                                   UNAFFILIATED    INCOME BEFORE
                                   NET REVENUES    INCOME TAXES     TOTAL ASSETS
                                   ------------    -------------    ------------
                                               (AMOUNTS IN THOUSANDS)
         <S>                       <C>             <C>              <C>
         FISCAL 1995
         United States               $265,535         $16,423         $301,896
         Canada                        12,460            (380)           7,742
         Eliminations                       -            (104)          (5,263)
                                     --------         -------         --------
         Consolidated                $277,995         $15,939         $304,375
                                     ========         =======         ========

         FISCAL 1994
         United States               $254,608         $21,576         $315,829
         Canada                        12,440            (308)           7,111
         Eliminations                       -             (33)          (5,157)
                                     --------         -------         --------
         Consolidated                $267,048         $21,235         $317,783
                                     ========         =======         ========

         FISCAL 1993
         United States               $232,447         $ 7,677         $303,933
         Canada                        13,981            (736)           9,152
         Eliminations                       -            (104)          (5,124)
                                     --------         -------         --------
         Consolidated                $246,428         $ 6,837         $307,961
                                     ========         =======         ========
</TABLE>


         United States revenues include approximately $9.4 million, $9.7 million
and $10.6 million of export sales to unaffiliated customers for Fiscal 1995,
Fiscal 1994 and Fiscal 1993, respectively.

(15)  SUPPLEMENTAL INFORMATION

         The following amounts were charged to costs and expenses:

<TABLE>
<CAPTION>
                                                        FISCAL 1995    FISCAL 1994    FISCAL 1993
                                                        -----------    -----------    -----------
                                                                  (AMOUNTS IN THOUSANDS)
      <S>                                               <C>            <C>            <C>
      Advertising                                         $6,475          $5,971         $4,920
                                                          ======          ======         ======
      Provision for doubtful accounts                     $ (442)         $  247         $  449
                                                          ======          ======         ======
      Amortization of excess of cost over fair value      $4,437          $4,438         $4,195
                                                          ======          ======         ======
      Amortization of deferred finance costs              $  590          $  499         $  467
                                                          ======          ======         ======
      Other Amortization
         Prepaid marketing costs                          $5,799          $3,676         $1,768
         Unearned compensation                             1,087           1,121          1,129
         Favorable lease rights                               73              73             73
                                                          ------          ------         ------
                                                          $6,959          $4,870         $2,970
                                                          ======          ======         ======
</TABLE>


                                       30
<PAGE>   31
(16)     QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

         The following table presents the unaudited quarterly results of
operations for Fiscal 1995 and Fiscal 1994:

<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 1995

Net revenues                                           $58,732            $61,691           $83,041           $74,531      $277,995
Gross profit                                            18,007             18,462            26,106            24,077        86,652
Income before income taxes                                 255              1,546             8,442             5,696        15,939
Net income                                                 134                811             4,647             2,453         8,045
Net income per share                                       .01                .04               .23               .12           .40

FISCAL 1994

Net revenues                                           $54,354            $59,199           $78,623           $74,872      $267,048
Gross profit                                            17,746             19,542            27,112            27,197        91,597
Income before income taxes                               1,849              1,989             8,321             9,076        21,235
Net income                                                 979              1,033             4,476             4,935        11,423
Net income per share                                       .05                .05               .22               .25           .57
</TABLE>


(17)     RESTRUCTURING/REORGANIZATION AND EXCESS FACILITIES CHARGE

         The Company recorded an $11.0 million charge ($6.6 million after income
taxes) for restructuring/reorganization and excess facilities during the fourth
quarter of Fiscal 1993. The restructuring was the result of management's
analysis of the Company's operations and future strategy. The items covered by
the charge were (i) severance and other costs related to a reduction in
personnel, (ii) costs arising from the consolidation of different distribution
and information systems (including the closing of facilities and write-off of
equipment no longer relevant to the Company's operating strategy); and (iii)
costs associated with excess facilities classified as held for sale. In 1995,
the combination of the Company's principal housewares business units into a
single operating division completed this restructuring/reorganization. Of the
$11.0 million charge, approximately $2.7 million was non-cash, and $8.3 million
was cash. Of the $8.3 million cash portion of the charge, $5.0 million was
expended in Fiscal 1994 and $3.3 million was expended in Fiscal 1995. The table
below shows the components of the original charge and the amounts charged
against the reserve.


                                       31
<PAGE>   32
<TABLE>
<CAPTION>
                                        PROVISION    FISCAL     RESERVE      FISCAL
                                        RECORDED      1994     BALANCE AT     1995
                                        IN FISCAL   RESERVE    JANUARY 1,   RESERVE
                                          1993      ACTIVITY      1995      ACTIVITY
                                        ---------   --------   ----------   --------
                                                   (AMOUNTS IN THOUSAND)
<S>                                     <C>         <C>        <C>          <C>
Accrued Expenses
   Severance and other related
     personnel costs                     $ 3,200     $1,135      $2,065      $2,065
   Costs associated with implementing
     distribution and operating
     strategy                              2,600      2,600           -           -
   Costs associated with excess
     facilities                            2,023        783       1,240       1,240
   Other                                     500        500           -           -
                                         -------     ------      ------      ------
Total Cash Items                           8,323     $5,018      $3,305      $3,305
                                                     ======      ======      ======
Non Cash Charges and Write-offs
   Property held for resale                1,000
   Write-off of equipment                  1,250
   Other                                     427
                                         -------
                                         $11,000
                                         =======
</TABLE>

         The Company estimates the benefit it received in Fiscal 1994 from the
restructuring at approximately $2.4 million and an additional benefit of $1.9
million during Fiscal 1995. The benefit is primarily due to lower expenses
associated with the reduction, in personnel.

(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.

         There are no quoted market prices for the 12.70% Notes, 7% Convertible
Subordinated Note or Series B ESOP Preferred Stock. Because each of these
securities contain unique terms, conditions, covenants and restrictions, there
are no identical obligations that have quoted market prices. In order to
determine the fair value of the 7% Convertible Subordinated Note, the Company
compared it to obligations which trade publicly and concluded that the fair
value of the Note is approximately its book value, $22 million. In order to
determine the fair value of the 12.70% Notes, the Company discounted the cash
payments on the Notes using discount rates ranging from 7.50% to 7.70%. Based
upon such discount rates, the fair value of the $60 million 12.70% Notes would
be approximately $65.6 million.

         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 $5.7 million. Given these
same assumptions the shares could be converted into common stock having a market
value of $10.0 million at January 1, 1995.

         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.


                                       32
<PAGE>   33
(19)     SUBSEQUENT EVENT

         On March 25, 1996, the Company sold $125.0 million of its 9.25% Senior
Notes due 2006, 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 12.70% Notes due 1998 and 7.0%
Subordinated Convertible Note due 2002 and (ii) to repay substantially all
amounts outstanding under the Revolving Credit Facility. Concurrently with
closing the sale of the 9.25% Senior Notes, the Company entered into an
amendment to its Revolving Credit Facility, which amendment consolidated the
outstanding debt and borrowing capacity of Housewares and Frem with that of the
Company and revised certain financial covenants. Borrowings under the amended
Revolving 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. The Revolving Credit Facility provides for a
commitment fee of three-eighths of one percent on the unused portion of the
commitment amount and a $60,000 annual agency fee. Borrowings under the
Revolving Credit Facility mature in December 1998. The Senior Notes, as well as
the Revolving Credit Facility, will contain certain financial covenants that
will restrict the sale of assets, the incurrence of additional indebtedness and
certain investments and acquisitions by the Company. The early extinguishment
of the 12.70% Notes and 7% Convertible Subordinated Note will result in an
extraordinary charge against first quarter earnings of approximately $6.0
million (before income taxes).

                                       33
<PAGE>   34
                         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 31, 1995 and January 1, 1995, 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 31,
1995. 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 31, 1995 and January 1, 1995, and the
results of their operations and their cash flows for each of the fiscal years in
the three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles.

         In 1993, the Company changed its method of accounting for income taxes,
post-retirement benefits other than pensions and post-employment benefits.


/s/ KPMG Peat Marwick LLP


Boston, Massachusetts
February 5, 1996, except as to Note 19,
which is as of March 25, 1996


                                       34