##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

|                         |  |          
|------------------------ |  | ---------
|COMMISSION FILE NUMBERS: |  | 333-44473
|                        
|                        
|                        
|                        
|                         |  | 333-77905

THE HOLMES GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|MASSACHUSETTS                                                  |  | 04-2768914                          
|                                                              
|                                                              
|                                                              
|                                                              
|(STATE OR OTHER JURISDICTION
OF INCORPORATION OR ORGANIZATION) |  | (I.R.S. EMPLOYER
IDENTIFICATION NO.)
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |  |                                     
|                                                              
|                                                              
|                                                              
|                                                              
|ONE HOLMES WAY, MILFORD MASSACHUSETTS                          |  | 01757                               
|                                                              
|                                                              
|                                                              
|                                                              
|(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                       |  | (ZIP CODE)                          

(508) 634-8050
(REGISTRANTS TELEPHONE NUMBER)

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.

|    |  |   
|--- |  | --
|YES |  | NO
|   
|   
|   
|   
|x   |  | o 





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TABLE OF CONTENTS



|                              |                                                                                               |                                            |  |  |  |  |  | 
|----------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION
|                              | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                              |                                                                                               | CONSOLIDATED BALANCE SHEETS               
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF OPERATIONS     
|                              |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS     
|                              |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|                              | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                              | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                              | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II. OTHER INFORMATION   
|                              | ITEM 1. LEGAL PROCEEDINGS                                                                    
|                              | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS                                            
|                              | ITEM 3. DEFAULTS UPON SENIOR SECURITIES                                                      
|                              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                              | ITEM 5. OTHER INFORMATION                                                                    
|                              | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                   



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##### Table of Contents



THE HOLMES GROUP, INC.

FORM 10-Q

QUARTER ENDED SEPTEMBER 30, 2002

TABLE OF CONTENTS

|                                    |  |                                                                                                                     |  |      
|----------------------------------- |  | ------------------------------------------------------------------------------------------------------------------- |  | -----
|                                    |  |                                                                                                                     |  | PAGE 
|PART I.                             |  | FINANCIAL INFORMATION:                                                                                              |  |      
|                                   
|                                   
|                                   
|                                   
|ITEM 1.                             |  | FINANCIAL STATEMENTS                                                                                                |  |      
|                                   
|                                   
|                                   
|                                   
|                                    |  | CONSOLIDATED BALANCE SHEETS AT SEPTEMBER 30, 2002
(UNAUDITED), DECEMBER 31, 2001 AND SEPTEMBER 30, 2001 (UNAUDITED) |  | 3    
|                                   
|                                   
|                                   
|                                   
|                                    |  | CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE AND NINE MONTHS
ENDED SEPTEMBER 30, 2002 AND 2001   |  | 4    
|                                   
|                                   
|                                   
|                                   
|                                    |  | CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2002 AND 2001             |  | 5    
|                                   
|                                   
|                                   
|                                   
|                                    |  | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                                                          |  | 6-19 
|                                   
|                                   
|                                   
|                                   
|ITEM 2.                             |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS                               |  | 20-26
|                                   
|                                   
|                                   
|                                   
|ITEM 3.                             |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                          |  | 26   
|                                   
|                                   
|                                   
|                                   
|ITEM 4.                             |  | CONTROLS AND PROCEDURES                                                                                             |  | 26   
|                                   
|                                   
|                                   
|                                   
|PART II.                            |  | OTHER INFORMATION:                                                                                                  |  |      
|                                   
|                                   
|                                   
|                                   
|ITEM 1.                             |  | LEGAL PROCEEDINGS                                                                                                   |  | 27   
|                                   
|                                   
|                                   
|                                   
|ITEM 2.                             |  | CHANGES IN SECURITIES AND USE OF PROCEEDS                                                                           |  | 27   
|                                   
|                                   
|                                   
|                                   
|ITEM 3.                             |  | DEFAULTS UPON SENIOR SECURITIES                                                                                     |  | 27   
|                                   
|                                   
|                                   
|                                   
|ITEM 4.                             |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                                 |  | 27   
|                                   
|                                   
|                                   
|                                   
|ITEM 5.                             |  | OTHER INFORMATION                                                                                                   |  | 27   
|                                   
|                                   
|                                   
|                                   
|ITEM 6.                             |  | EXHIBITS AND REPORTS ON FORM 8-K                                                                                    |  | 27   
|                                   
|                                   
|                                   
|                                   
|SIGNATURES AND OFFICER CERTIFICATES |  | 28-32                                                                                                              
|                                   
|                                   
|                                   
|                                   
|                                    |  |                                                                                                                     |  |      

2



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##### Table of Contents






PART I. FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS




THE HOLMES GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)

|                                               |  |                                                                                                          |         |   |               |   |              |   |               |   |         |   |         |   | 
|---------------------------------------------- |  | -------------------------------------------------------------------------------------------------------- | ------- | - | ------------- | - | ------------ | - | ------------- | - | ------- | - | ------- | - | 
|                                               |  |                                                                                                          |         |   | SEPTEMBER 30, |   | DECEMBER 31, |   | SEPTEMBER 30,
|                                               |  |                                                                                                          |         |   | 2002          |   | 2001         |   | 2001         
|                                               |  |                                                                                                          |         |   | (UNAUDITED)   |   |              |   | (UNAUDITED)  
|                                               |  |                                                                                                          |         |   |               |   |              |   |              
|ASSETS                                         |  |                                                                                                          |         |   |               |   |              |   |               |   |         |  
|                                              
|                                              
|                                              
|                                              
|Current assets:                                |  |                                                                                                          |         |   |               |   |              |   |               |   |         |  
|                                              
|                                              
|                                              
|                                              
|                                               |  | Cash and cash equivalents                                                                                |         | $ | 4,686         |   |              | $ | 10,115        |   |         | $ | 5,461   |  
|                                              
|                                              
|                                              
|                                              
|                                               |  | Accounts receivable, net                                                                                 |         |   | 110,570       |   |              |   | 144,249       |   |         |   | 123,910 |  
|                                              
|                                              
|                                              
|                                              
|                                               |  | Inventories                                                                                              |         |   | 138,766       |   |              |   | 103,195       |   |         |   | 133,585 |  
|                                              
|                                              
|                                              
|                                              
|                                               |  | Prepaid expenses and other current assets                                                                |         |   | 9,935         |   |              |   | 5,317         |   |         |   | 3,788   |  
|                                              
|                                              
|                                              
|                                              
|                                               |  | Deferred income taxes                                                                                    |         |   | 13,643        |   |              |   | 13,643        |   |         |   | 14,749  |  
|                                               |  |                                                                                                          |         |   |               |   |              |   |               |   |         |  
|Total current assets                           |  |                                                                                                          | 277,600 |   |               |   | 276,519      |   |               |   | 281,493 |  
|                                              
|                                              
|                                              
|                                              
|Assets held for sale                           |  |                                                                                                          | 5,659   |   |               |   | 86           |   |               |   | 261     |  
|                                              
|                                              
|                                              
|                                              
|Property, plant and equipment, net             |  |                                                                                                          | 61,038  |   |               |   | 69,096       |   |               |   | 67,782  |  
|                                              
|                                              
|                                              
|                                              
|Goodwill, net                                  |  |                                                                                                          | 79,838  |   |               |   | 79,838       |   |               |   | 81,597  |  
|                                              
|                                              
|                                              
|                                              
|Deposits and other assets                      |  |                                                                                                          | 4,395   |   |               |   | 4,985        |   |               |   | 6,213   |  
|                                              
|                                              
|                                              
|                                              
|Debt issuance costs, net                       |  |                                                                                                          | 12,023  |   |               |   | 13,071       |   |               |   | 14,090  |  
|                                               |  |                                                                                                          |         |   |               |   |              |   |               |   |         |  
|                                               |  | $                                                                                                        | 440,553 |   |               | $ | 443,595      |   |               | $ | 451,436 |  
|                                               |  |                                                                                                          |         |   |               |   |              |   |               |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |  |                                                                                                          |         |   |               |   |              |   |               |   |         |  
|                                              
|                                              
|                                              
|                                              
|Current liabilities:                           |  |                                                                                                          |         |   |               |   |              |   |               |   |         |  
|                                              
|                                              
|                                              
|                                              
|                                               |  | Accounts payable                                                                                         |         |   | 58,107        |   |              |   | 36,743        |   |         |   | 61,863  |  
|                                              
|                                              
|                                              
|                                              
|                                               |  | Current portion of Credit Facility                                                                       |         |   | 8,928         |   |              |   | 8,476         |   |         |   | 8,076   |  
|                                              
|                                              
|                                              
|                                              
|                                               |  | Accrued income taxes                                                                                     |         |   | 9,705         |   |              |   | 6,457         |   |         |   | 8,440   |  
|                                              
|                                              
|                                              
|                                              
|                                               |  | Accrued expenses and other current liabilities                                                           |         |   | 46,304        |   |              |   | 43,159        |   |         |   | 37,157  |  
|                                               |  |                                                                                                          |         |   |               |   |              |   |               |   |         |  
|Total current liabilities                      |  |                                                                                                          | 123,044 |   |               |   | 94,835       |   |               |   | 115,536 |  
|                                              
|                                              
|                                              
|                                              
|Long-term portion of Credit Facility           |  |                                                                                                          | 181,825 |   |               |   | 209,406      |   |               |   | 195,225 |  
|                                              
|                                              
|                                              
|                                              
|Long-term debt                                 |  |                                                                                                          | 99,523  |   |               |   | 135,298      |   |               |   | 135,269 |  
|                                              
|                                              
|                                              
|                                              
|Other long-term liabilities                    |  |                                                                                                          | 7,645   |   |               |   | 7,485        |   |               |   | 7,698   |  
|                                              
|                                              
|                                              
|                                              
|Deferred income taxes                          |  |                                                                                                          | 5,657   |   |               |   | 5,954        |   |               |   | 4,704   |  
|                                              
|                                              
|                                              
|                                              
|Commitments and contingencies                  |  |                                                                                                          |         |   |               |   |              |   |               |   |         |  
|                                              
|                                              
|                                              
|                                              
|Stockholders equity (deficit):                |  |                                                                                                          |         |   |               |   |              |   |               |   |         |  
|                                              
|                                              
|                                              
|                                              
|                                               |  | Common
stock, $.001 par value. Authorized - 28,500,000 shares;Issued and outstanding - 20,302,995 shares |         |   | 20            |   |              |   | 20            |   |         |   | 20      |  
|                                              
|                                              
|                                              
|                                              
|                                               |  | Additional paid in capital                                                                               |         |   | 68,874        |   |              |   | 68,874        |   |         |   | 68,874  |  
|                                              
|                                              
|                                              
|                                              
|                                               |  | Accumulated other comprehensive income (loss)                                                            |         |   | (159          | ) |              |   | (2            | ) |         |   | (281    | )
|                                              
|                                              
|                                              
|                                              
|                                               |  | Treasury stock, at cost (18,627,450 shares)                                                              |         |   | (62,076       | ) |              |   | (62,076       | ) |         |   | (62,076 | )
|                                              
|                                              
|                                              
|                                              
|                                               |  | Retained earnings (deficit)                                                                              |         |   | 16,200        |   |              |   | (16,199       | ) |         |   | (13,533 | )
|                                               |  |                                                                                                          |         |   |               |   |              |   |               |   |         |  
|Total stockholders equity (deficit)           |  |                                                                                                          | 22,859  |   |               |   | (9,383       | ) |               |   | (6,996  | )
|                                               |  |                                                                                                          |         |   |               |   |              |   |               |   |         |  
|                                               |  | $                                                                                                        | 440,553 |   |               | $ | 443,595      |   |               | $ | 451,436 |  
|                                               |  |                                                                                                          |         |   |               |   |              |   |               |   |         |  

The accompanying notes are an integral part of these consolidated financial statements

3



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##### Table of Contents






THE HOLMES GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS)

|                                                                                                |                                 |   |                    |        |                    |   |                    |        |                    |   |         |        |   |   |         |        |  
|----------------------------------------------------------------------------------------------- | ------------------------------- | - | ------------------ | ------ | ------------------ | - | ------------------ | ------ | ------------------ | - | ------- | ------ | - | - | ------- | ------ | -
|                                                                                                |                                 |   | THREE MONTHS ENDED |        | NINE MONTHS ENDED 
|                                                                                                |                                 |   |                    |        |                   
|                                                                                                |                                 |   | SEPTEMBER 30, 2002 |        | SEPTEMBER 30, 2001 |   | SEPTEMBER 30, 2002 |        | SEPTEMBER 30, 2001
|                                                                                                |                                 |   |                    |        |                    |   |                    |        |                   
|Net sales                                                                                       |                                 | $ | 153,549            |        |                    | $ | 158,309            |        |                    | $ | 402,803 |        |   | $ | 412,175 |       
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Cost of goods sold                                                                              |                                 |   | 111,320            |        |                    |   | 118,726            |        |                    |   | 299,811 |        |   |   | 314,304 |       
|                                                                                                |                                 |   |                    |        |                    |   |                    |        |                    |   |         |        |   |   |         |       
|Gross profit                                                                                    |                                 |   | 42,229             |        |                    |   | 39,583             |        |                    |   | 102,992 |        |   |   | 97,871  |       
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Operating expenses:                                                                             |                                 |   |                    |        |                    |   |                    |        |                    |   |         |        |   |   |         |       
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Selling and administrative      |   |                    | 27,626 |                    |   |                    | 25,336 |                    |   |         | 79,667 |   |   |         | 76,344 |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Restructuring and plant closing |   |                    | 1,350  |                    |   |                    | 550    |                    |   |         | 3,137  |   |   |         | 1,995  |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Amortization of goodwill        |   |                    |       |                    |   |                    | 649    |                    |   |         |       |   |   |         | 1,949  |  
|                                                                                                |                                 |   |                    |        |                    |   |                    |        |                    |   |         |        |   |   |         |       
|                                                                                                |                                 |   | 28,976             |        |                    |   | 26,535             |        |                    |   | 82,804  |        |   |   | 80,288  |       
|                                                                                                |                                 |   |                    |        |                    |   |                    |        |                    |   |         |        |   |   |         |       
|Operating income                                                                                |                                 |   | 13,253             |        |                    |   | 13,048             |        |                    |   | 20,188  |        |   |   | 17,583  |       
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Other income and expense:                                                                       |                                 |   |                    |        |                    |   |                    |        |                    |   |         |        |   |   |         |       
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Interest expense                |   |                    | 7,286  |                    |   |                    | 8,548  |                    |   |         | 22,384 |   |   |         | 29,264 |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Other income, net               |   |                    | (591   | )                  |   |                    | (393   | )                  |   |         | (9,959 | ) |   |         | (671   | )
|                                                                                                |                                 |   |                    |        |                    |   |                    |        |                    |   |         |        |   |   |         |       
|                                                                                                |                                 |   | 6,695              |        |                    |   | 8,155              |        |                    |   | 12,425  |        |   |   | 28,593  |       
|                                                                                                |                                 |   |                    |        |                    |   |                    |        |                    |   |         |        |   |   |         |       
|Income (loss) before income taxes, equity in earnings
from joint venture and extraordinary gain |                                 |   | 6,558              |        |                    |   | 4,893              |        |                    |   | 7,763   |        |   |   | (11,010 | )     
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Income tax expense (benefit)                                                                    |                                 |   | 3,180              |        |                    |   | 1,324              |        |                    |   | (254    | )      |   |   | 3,755   |       
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Equity in earnings from joint venture                                                           |                                 |   | (653               | )      |                    |   | (516               | )      |                    |   | (1,994  | )      |   |   | (1,876  | )     
|                                                                                                |                                 |   |                    |        |                    |   |                    |        |                    |   |         |        |   |   |         |       
|Income (loss) before extraordinary item                                                         |                                 |   | 4,031              |        |                    |   | 4,085              |        |                    |   | 10,011  |        |   |   | (12,889 | )     
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Extraordinary gain                                                                              |                                 |   |                   |        |                    |   |                   |        |                    |   | 22,388  |        |   |   |        |       
|                                                                                                |                                 |   |                    |        |                    |   |                    |        |                    |   |         |        |   |   |         |       
|Net income (loss)                                                                               |                                 | $ | 4,031              |        |                    | $ | 4,085              |        |                    | $ | 32,399  |        |   | $ | (12,889 | )     
|                                                                                                |                                 |   |                    |        |                    |   |                    |        |                    |   |         |        |   |   |         |       

The accompanying notes are an integral part of these consolidated financial statements.

4



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##### Table of Contents






THE HOLMES GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)

|                                                     |                                                                                          |                                                                |        |                    |         |                    |       |         |        |  
|---------------------------------------------------- | ---------------------------------------------------------------------------------------- | -------------------------------------------------------------- | ------ | ------------------ | ------- | ------------------ | ----- | ------- | ------ | -
|                                                     |                                                                                          |                                                                |        | NINE MONTHS ENDED 
|                                                     |                                                                                          |                                                                |        |                   
|                                                     |                                                                                          |                                                                |        | SEPTEMBER 30, 2002 |         | SEPTEMBER 30, 2001
|                                                     |                                                                                          |                                                                |        |                    |         |                   
|Cash flows from operating activities:                |                                                                                          |                                                                |        |                    |         |                    |       |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net income (loss)                                                                        |                                                                | $      | 32,399             |         |                    | $     | (12,889 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |                                                                |        |                    |         |                    |       |         |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                          | Depreciation and amortization                                  |        |                    | 10,236  |                    |       |         | 11,934 |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                          | Amortization of debt related costs and other non-cash interest |        |                    | 5,151   |                    |       |         | 4,630  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                          | Provision for doubtful accounts                                |        |                    | 1,532   |                    |       |         | 894    |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                          | Gain on disposal of assets                                     |        |                    | (386    | )                  |       |         | (559   | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                          | Gain on sale of business                                       |        |                    | (9,088  | )                  |       |         |       |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                          | Extraordinary gain                                             |        |                    | (22,388 | )                  |       |         |       |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                          | Deferred income taxes                                          |        |                    |        |                    |       |         | (24    | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                          | Restructuring and asset impairment charges                     |        |                    | 2,971   |                    |       |         | 718    |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Changes in operating assets and liabilities:                                             |                                                                |        |                    |         |                    |       |         |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                          | Accounts receivable                                            |        |                    | 30,328  |                    |       |         | (305   | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                          | Inventories                                                    |        |                    | (40,069 | )                  |       |         | (2,535 | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                          | Prepaid expenses and other current assets                      |        |                    | (4,618  | )                  |       |         | 2,863  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                          | Deposits and other assets                                      |        |                    | (590    | )                  |       |         | (4,163 | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                          | Accounts payable                                               |        |                    | 21,364  |                    |       |         | 31,456 |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                          | Accrued expenses and other current liabilities                 |        |                    | (2,180  | )                  |       |         | 2,957  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                          | Accrued income taxes                                           |        |                    | 3,248   |                    |       |         | 3,723  |  
|                                                     |                                                                                          |                                                                |        |                    |         |                    |       |        
|                                                     | Net cash provided by operating activities                                                |                                                                |        | 27,910             |         |                    |       | 38,700  |       
|                                                    
|                                                    
|                                                    
|                                                    
|Cash flows from investing activities:                |                                                                                          |                                                                |        |                    |         |                    |       |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from sale of business and assets held for sale                                  |                                                                |        | 15,100             |         |                    |       | 2,053   |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Distribution of earnings from joint venture                                              |                                                                |        | 1,819              |         |                    |       | 1,360   |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchases of property, plant and equipment                                               |                                                                |        | (9,843             | )       |                    |       | (11,095 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cash received from joint venture partner                                                 |                                                                |        |                   |         |                    |       | 700     |       
|                                                     |                                                                                          |                                                                |        |                    |         |                    |       |        
|                                                     | Net cash provided by (used for) investing activities                                     |                                                                |        | 7,076              |         |                    |       | (6,982  | )     
|                                                    
|                                                    
|                                                    
|                                                    
|Cash flows from financing activities:                |                                                                                          |                                                                |        |                    |         |                    |       |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Repayments of Credit Facility, net of issuance costs                                     |                                                                |        | (27,129            | )       |                    |       | (29,124 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Redemption of long-term debt                                                             |                                                                |        | (11,550            | )       |                    |       |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Debt issuance costs                                                                      |                                                                |        | (1,579             | )       |                    |       |        |       
|                                                     |                                                                                          |                                                                |        |                    |         |                    |       |        
|                                                     | Net cash used for financing activities                                                   |                                                                |        | (40,258            | )       |                    |       | (29,124 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|Effect of exchange rate changes on cash              |                                                                                          |                                                                | (157   | )                  |         |                    | (150  | )      
|                                                     |                                                                                          |                                                                |        |                    |         |                    |       |        
|Net increase (decrease) in cash and cash equivalents |                                                                                          |                                                                | (5,429 | )                  |         |                    | 2,444 |        
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and cash equivalents, beginning of period       |                                                                                          |                                                                | 10,115 |                    |         |                    | 3,017 |        
|                                                     |                                                                                          |                                                                |        |                    |         |                    |       |        
|Cash and cash equivalents, end of period             |                                                                                          | $                                                              | 4,686  |                    |         | $                  | 5,461 |        
|                                                     |                                                                                          |                                                                |        |                    |         |                    |       |        
|Supplemental disclosure of cash flow information:    |                                                                                          |                                                                |        |                    |         |                    |       |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cash paid for interest                                                                   |                                                                | $      | 15,224             |         |                    | $     | 21,967  |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cash paid for income taxes                                                               |                                                                | $      | 920                |         |                    | $     | 143     |       

The accompanying notes are an integral part of these consolidated financial statements.

5



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##### Table of Contents






THE HOLMES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002



|1. |  | UNAUDITED INTERIM FINANCIAL STATEMENTS
|-- |  | --------------------------------------

The financial information included in this Form 10-Q of The Holmes Group, Inc.
(THG or the Company) for the periods ended September 30, 2001 and 2002 is
unaudited and subject to year-end adjustments. However, such information
includes all adjustments (including all normal recurring adjustments) which, in
the opinion of management, are considered necessary for a fair presentation of
the consolidated results for those periods. The results of operations for the
periods ended September 30, 2001 and 2002 are not necessarily indicative of the
results of operations that may be expected for the complete fiscal year. The
year-end condensed balance sheet data was derived from audited financial
statements, but does not include all disclosures required by generally accepted
accounting principles. The Company filed audited consolidated financial
statements for the year ended December 31, 2001 on Form 10-K which included all
information and footnotes necessary for such presentation.

The Companys 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
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
respective periods. The most significant estimates included in these financial
statements include valuation allowances and reserves for accounts
receivable and customer sales incentive programs,
inventory and income taxes. Actual results could differ from those estimates.

Certain amounts in the financial statements for prior periods have been
reclassified to conform to the current period presentation.



|2. |  | RECENTLY ISSUED ACCOUNTING STANDARDS
|-- |  | ------------------------------------

In June 2001, the Financial Accounting Standards Board (the FASB) issued
Statement of Financial Accounting Standards No. 141, Business Combinations
(FAS 141) and No. 142, Goodwill and Other Intangible Assets (FAS 142). FAS
141 supersedes Accounting Principles Board Opinion (APB) No. 16, Business
Combinations. The provisions of FAS 141 (i) require that the purchase method
of accounting be used for all business combinations initiated after June 30,
2001, (ii) provide specific criteria for the initial recognition and
measurement of intangible assets apart from goodwill, and (iii) require that
unamortized negative goodwill be written off immediately as an extraordinary
gain instead of being deferred and amortized. FAS 141 also requires that upon
adoption of FAS 142 the Company reclassify the carrying amounts of certain
intangible assets into or out of goodwill, based on certain criteria.

FAS 142 supersedes APB No. 17, Intangible Assets, and is effective for fiscal
years beginning after December 15, 2001. FAS 142 primarily addresses the
accounting for goodwill and intangible assets subsequent to their initial
recognition. The provisions of FAS 142 (i) prohibit the amortization of
goodwill and indefinite-lived intangible assets, (ii) require that goodwill and
indefinite-lived intangibles assets be tested annually for impairment (and in
interim periods if certain events occur indicating that the carrying value of
goodwill and/or indefinite-lived intangible assets may be impaired), (iii)
require that reporting units be identified for the purpose of assessing
potential future impairments of goodwill, and (iv) remove the forty-year
limitation on the amortization period of intangible assets that have finite
lives.

The Companys application of the non-amortization provisions of FAS 142 will
result in an increase in net earnings of approximately $2.5 million for the
year ending December 31, 2002. For the three and nine months ended September
30, 2001, the Companys net income (loss), adjusted for $0.6 million and $1.9
million of amortization expense recorded in the consolidated statement of
operations, which is no longer being amortized in accordance with the
provisions of FAS 142, was approximately $4.7 million and $(10.9) million,
respectively. FAS 142 requires that goodwill be tested annually for impairment
using a two-step process. The first step is to identify a potential impairment
and, in transition, this step must be measured as of the beginning of the
fiscal year. Under the implementation provisions of FAS 142, the Company had
until June 30, 2002 to complete step one. The second step of the goodwill
impairment test measures the amount of the impairment loss, if any, and must be
completed as soon as possible, but no later than the end of fiscal 2002. The
Company completed step one of the goodwill impairment test during the second
quarter of 2002 and determined that goodwill associated with the Kitchen and
Home Environment reporting units is significantly impaired under FAS 142. This
impairment loss will be reflected as a cumulative effect of a change in
accounting principle as of January 1, 2002. Impairment losses recognized
subsequent to the initial adoption of FAS 142 will be recorded as a charge to
current period earnings.

6



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##### Table of Contents



THE HOLMES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)

As of September 30, 2002, the Company had goodwill of approximately $80 million
related to its Kitchen and Home Environment reporting units, which is subject
to the transitional goodwill impairment test. These reporting units are
recorded within the Consumer Durables segment as reported in Note 7. Because of
the level of effort needed to comply with adopting FAS 142, it is not
practicable to reasonably estimate the impairment charge that the Company will
record upon finalization of the FAS 142 implementation provisions.
However, the Company expects to write off a material amount of
goodwill upon adoption of the new standard.

In July 2001, the FASB issued Statement of Financial Accounting Standards No.
143, Accounting for Asset Retirement Obligations (FAS 143). FAS 143 requires
entities to record the fair value of a liability for an asset retirement
obligation in the period in which it is incurred. When the liability is
initially recorded, the entity is required to capitalize the cost by increasing
the carrying amount of the related long-lived asset. Over time, the liability
is accreted to its present value each period, and the capitalized cost is
depreciated over the useful life of the related asset. FAS 143 is effective for
fiscal years beginning after June 15, 2002 and will be adopted by the Company
effective fiscal 2003. The Company is currently evaluating the effect of
implementing FAS No. 143.

In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144, Accounting for the Impairment or Disposal of Long-lived Assets (FAS
144), which supersedes Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-lived Assets and for Long-lived Assets
to Be Disposed Of (FAS 121), and the accounting and reporting provisions of
APB Opinion No. 30, Reporting the Results of Operations  Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions (APB 30), for the disposal of a
segment of a business. Because FAS 121 did not address the accounting for a
segment of a business accounted for as a discontinued operation under APB 30,
two accounting models existed for long-lived assets to be disposed. FAS 144
establishes a single accounting model, based on the framework established in
FAS 121, for long-lived assets to be disposed. It also addresses certain
significant implementation issues under FAS 121. The provisions of FAS 144 were
adopted by the Company as of the beginning of fiscal year 2002 with no material
effect on the consolidated financial statements.

In November 2001, the FASB Emerging Issues Task Force (EITF) reached a
consensus on Issue No. 01-9 (formerly EITF Issue 00-25), Accounting for
Consideration Given to a Customer or a Reseller of the Vendors Products. This
issue addresses the recognition, measurement and income statement
classification of consideration from a vendor to a customer in connection with
the customers purchase or promotion of the vendors products. This consensus
only impacts revenue and expense classifications and does not change reported
net income. In accordance with the consensus, the Company adopted the required
accounting as of January 1, 2002, and reclassified approximately $4.8 million
and $9.1 million of cooperative advertising expenses as deductions from net
sales for the three and nine months ended September 30, 2001, respectively.
These costs were previously classified as selling and administrative expenses
in the consolidated statement of operations.

The FASB issued Statement No. 145, Rescission of FASB Statements No. 4, 44 and
64, Amendment of FASB Statement No. 13, and Technical Corrections (FAS No.
145) in April 2002. This statement updates, clarifies and simplifies existing
accounting pronouncements. Specifically, the statement rescinds FASB Statement
No. 4, Reporting Gains and Losses from Extinguishment of Debt (FAS No. 4),
FASB Statement No. 64, Extinguishment of Debt Made to Satisfy Sinking Fund
Requirements (FAS No. 64) and FASB Statement No. 44, Accounting for
Intangible Assets of Motor Carriers. This statement also amends FASB Statement
No. 13, Accounting for Leases (FAS No. 13) and certain other existing
authoritative pronouncements to make technical corrections or clarifications.
FAS No. 145 will be effective for THG related to the rescission of FAS No. 4
and FAS No. 64 on January 1, 2003. FAS No. 145 will be effective related to the
amendment of FAS No. 13 for all transactions occurring after
May 15, 2002. The Company is currently evaluating the effect of
implementing FAS No. 17.

In July 2002, the FASB issued Statement of Financial Accounting Standards No.
146, Accounting for Costs Associated with Exit or Disposal Activities (FAS
146), which nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). FAS 146 requires a liability for a cost associated with an
exit or disposal activity be recognized and measured initially at its fair
value in the period in which the liability is incurred. If fair value cannot be
reasonably estimated, the liability shall be recognized initially in the period
in which fair value can be reasonably estimated. The provisions of FAS 146 will
be effective for the Company prospectively for exit or disposal activities
initiated after December 31, 2002. The Company is in the process of assessing
the impact of FAS 146 on its consolidated financial statements.

7



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##### Table of Contents



THE HOLMES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)



|3. |  | RESTRUCTURING CHARGES AND OTHER BUSINESS DIVESTITURES
|-- |  | -----------------------------------------------------

Subsequent to the acquisition of the Rival business on February 5, 1999, the
Company initiated certain restructuring actions to effectively integrate and
consolidate Rivals operations into THG. As part of the actions taken in fiscal
2000, the Company announced the closure of Rivals Warrensburg, Missouri
facility. This facility was subsequently sold during the first quarter of 2001
for $1,965,000, resulting in a net gain of $559,000. This gain was included in
other income in the consolidated statement of operations for the nine months
ended September 30, 2001.

In June 2001, the Company announced the closure of Rivals Sedalia, Missouri
manufacturing facility. The activities of this plant were moved to the other
existing plants in Clinton, Missouri and Jackson, Mississippi, resulting in the
elimination of approximately 300 manufacturing, engineering and office
positions. In connection with the closure, the Company recorded a
restructuring charge of $727,000 to cover severance and other employee related
costs. The Company also recorded $467,000 in restructuring charges related to
the Sedalia plant closure, including asset write-downs of redundant property,
plant and equipment of $417,000 and facility exit costs of $50,000. The
remaining net book value of the Sedalia plant is included in assets held for
sale in the consolidated balance sheet. For the nine months ended September
30, 2001, operating costs also included $550,000 of plant closing costs, which
are expensed as incurred.

In January 2002, the Company announced that its Sedalia, Missouri distribution
center would be closed. The activities of this facility were moved to the other
existing distribution centers in Clinton, Missouri and in California. In
connection with this facility closure, the Company recorded a restructuring
charge of $1,787,000, which included $1,687,000 of asset write-downs of
redundant property, plant and equipment to the estimated net realizable value
and facility exit costs of $100,000. During the third quarter of 2002, the
Company recorded additional restructuring charges of $1,350,000 related to the
Sedalia distribution center closing. The additional restructuring costs in the
third quarter of 2002 included $66,000 in severance payments for employees who
elected not to transfer to other facilities and $1,284,000 of additional
reserves to further reduce the carrying value of the redundant assets to
estimated net realizable value. The remaining net book value of the facility
is included in assets held for sale in the consolidated balance sheet as of
September 30, 2002.

The restructuring reserve activity for fiscal 2002 is as follows (in
thousands):

|                              |  |           |      |             |  |               |     |  |  |   |      |  
|----------------------------- |  | --------- | ---- | ----------- |  | ------------- | --- |  |  | - | ---- | -
|                              |  | Employee  |      | Facility    |  | Total        
|                              |  | Severance |      | Exit and    |  | Accrued      
|                              |  | Costs     |      | Other Costs |  | Restructuring
|                              |  |           |      |             |  |              
|Balance at December 31, 2001  |  | $         | 396  |             |  | $             | 50  |  |  | $ | 446  |  
|                             
|                             
|                             
|                             
|Restructuring charges         |  |           | 66   |             |  |               | 100 |  |  |   | 166  |  
|                             
|                             
|                             
|                             
|Cash payments                 |  |           | (462 | )           |  |               |    |  |  |   | (462 | )
|                              |  |           |      |             |  |               |     |  |  |   |      |  
|Balance at September 30, 2002 |  | $         | 0    |             |  | $             | 150 |  |  | $ | 150  |  
|                              |  |           |      |             |  |               |     |  |  |   |      |  

On January 14, 2002, the Company sold substantially all of the assets of its
Pollenex® division, which marketed personal care products, for approximately
$15.1 million. The cash proceeds received in this transaction exceeded the net
assets of the business, which consisted primarily of inventory and equipment,
by approximately $9.1 million, resulting in a gain which has been recorded as
other income in the consolidated statement of operations for the nine months
ended September 30, 2002.

8



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##### Table of Contents



THE HOLMES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)



|4. |  | INVENTORIES
|-- |  | -----------

All inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out (FIFO) method on approximately 80% of the
inventories and the last-in, first-out method (LIFO) for the remaining 20% of
the inventory. Inventories are as follows (in thousands):

|                                  |  |                    |         |                   |  |                    |         |   |  |   |         |  
|--------------------------------- |  | ------------------ | ------- | ----------------- |  | ------------------ | ------- | - |  | - | ------- | -
|                                  |  | September 30, 2002 |         | December 31, 2001 |  | September 30, 2001
|                                  |  |                    |         |                   |  |                   
|Finished goods                    |  | $                  | 116,373 |                   |  | $                  | 80,212  |   |  | $ | 103,589 |  
|                                 
|                                 
|                                 
|                                 
|Raw materials and Work-in-process |  |                    | 23,043  |                   |  |                    | 23,183  |   |  |   | 30,296  |  
|                                  |  |                    |         |                   |  |                    |         |   |  |   |         |  
|                                  |  |                    | 139,416 |                   |  |                    | 103,395 |   |  |   | 133,885 |  
|                                 
|                                 
|                                 
|                                 
|LIFO allowance                    |  |                    | (650    | )                 |  |                    | (200    | ) |  |   | (300    | )
|                                  |  |                    |         |                   |  |                    |         |   |  |   |         |  
|                                  |  | $                  | 138,766 |                   |  | $                  | 103,195 |   |  | $ | 133,585 |  
|                                  |  |                    |         |                   |  |                    |         |   |  |   |         |  



|5. |  | LONG-TERM DEBT
|-- |  | --------------

Long-term debt consists of the following (in thousands):

|                                                                                     |  |                    |         |                   |  |                    |         |   |  |   |         |  
|------------------------------------------------------------------------------------ |  | ------------------ | ------- | ----------------- |  | ------------------ | ------- | - |  | - | ------- | -
|                                                                                     |  | September 30, 2002 |         | December 31, 2001 |  | September 30, 2001
|                                                                                     |  |                    |         |                   |  |                   
|Revolving Credit Facility                                                            |  | $                  | 97,208  |                   |  | $                  | 111,500 |   |  | $ | 95,200  |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Term Loan A due February 4, 2005                                                     |  |                    | 17,365  |                   |  |                    | 24,777  |   |  |   | 26,343  |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Term Loan B due February 4, 2007                                                     |  |                    | 76,180  |                   |  |                    | 81,605  |   |  |   | 81,758  |  
|                                                                                     |  |                    |         |                   |  |                    |         |   |  |   |         |  
|Total Credit Facility                                                                |  |                    | 190,753 |                   |  |                    | 217,882 |   |  |   | 203,301 |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|9 7/8% Senior Subordinated Notes, net of
unamortized discount, due November 15, 2007 |  |                    | 99,523  |                   |  |                    | 135,298 |   |  |   | 135,269 |  
|                                                                                    
|                                                                                    
|                                                                                    
|                                                                                    
|Less current maturities of Credit Facility                                           |  |                    | (8,928  | )                 |  |                    | (8,476  | ) |  |   | (8,076  | )
|                                                                                     |  |                    |         |                   |  |                    |         |   |  |   |         |  
|                                                                                     |  | $                  | 281,348 |                   |  | $                  | 344,704 |   |  | $ | 330,494 |  
|                                                                                     |  |                    |         |                   |  |                    |         |   |  |   |         |  

Credit Facility

On March 22, 2002, the Company and its lending group agreed to a Fifth
Amendment to the Companys Credit Facility. The Fifth Amendment revised certain
of the financial ratio covenants for the periods ending December 31, 2001
through June 30, 2004. Under the Fifth Amendment, the lenders have committed
to a Revolving Credit Loan A of $131 million and a Revolving Credit Loan B of
$40 million. The Revolving Credit Loan B of the Credit Facility is supported
by the guarantee of two investment funds affiliated with Berkshire Partners,
the Companys majority shareholder (Berkshire Partners). The Berkshire
Partners guarantee was established in connection with the Fourth Amendment of
the Credit Facility in May 2001. Actual availability under these Revolving
Credit Facilities is subject to a borrowing base formula based on inventory and
accounts receivable. Under the Fifth Amendment, the maturity date of the
Revolving Credit Loan B was extended from July 1, 2002 to July 1, 2004. The
maturity date of the Revolving Credit Loan A and the Term Loan A remained
February 5, 2005, although the availability under the Revolving Credit Loan A
commitment will terminate on July 1, 2004 unless otherwise approved by a
majority of the lenders. The maturity date of the Term Loan B remained
February 5, 2007. As part of the Fifth Amendment, the applicable interest rate
margins on the Revolving Credit Loan B were reduced, while the margins on the
Revolving Credit Loan A and Term Loans A and B were increased.

Effective May 7, 2001, the Company agreed to pay Berkshire Partners a fee of
$1.1 million as consideration for their guarantee of up to $43.5 million of the
obligations under the Credit Facility. As amended effective March 22, 2002,
the guarantee fee arrangement provides for a fee of 2.25% per annum, compounded
annually, on the $40.0 million Revolving Credit Loan B commitment, less the
portion of this facility designated as subordinated debt funding loans (which
portion is subordinated to the other obligations under the Credit Facility).
The guarantee fee related to the subordinated debt funding loans is calculated
at 20% per annum, compounded annually. Payment of these fees is subordinated to
the Companys obligations under the Credit Facility.

As of September 30, 2001,
December 31, 2001 and September 30, 2002, the
Companys availability was $67.4 million,
$63.7 million and $63.5 million, respectively, net of outstanding letters of
credit totaling $8.1 million, $4.8 million and $10.7 million, respectively. The Credit
Facility bears interest at variable rates based on either the prime rate or
eurodollar rate at the Companys option, plus a margin which, in the case of
the Term Loan A and a portion of the Revolving Credit Facility, varies
depending upon certain financial ratios. The weighted average interest rate of
borrowings under the Credit Facility was 5.8% at September 30, 2002, 6.2% at
December 31, 2001 and 8.5% at September 30, 2001.

9



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##### Table of Contents



THE HOLMES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)

Senior Subordinated Notes

The Companys Senior Subordinated Notes were issued as part of a
recapitalization transaction in 1997 ($105 million) and to partially finance
the Rival acquisition in 1999 ($31.3 million). The Notes, which are due
November 15, 2007, are subordinated to the Companys other debt, including the
Credit Facility.

In conjunction with the Fifth Amendment of the Credit Facility, as described
above, the Company repurchased from the two Berkshire Partners investment
funds an aggregate principal amount of approximately $36.2 million of the
Senior Subordinated Notes. The purchase price of the Notes, representing
Berkshire Partners cost, was $11.5 million plus accrued interest, which was
funded with proceeds of the Revolving Credit Loan B described above. The Notes
repurchased were retired and cancelled. This transaction resulted in an
extraordinary gain on the early retirement of debt totaling $22.4 million,
which has been reflected in the consolidated statement of operations for the
nine months ended September 30, 2002. This gain is net of approximately $1.9
million of debt issuance costs and $0.3 million of debt issuance discount
associated with the Senior Subordinated Notes and $0.1 million of transaction
fees. A provision for income taxes has not been recorded in connection with
this transaction as the Company expects to offset the gain with
domestic operating losses. The Company may consider repurchases of
additional Notes in the future, and may utilize the proceeds of the Credit
Facility for this purpose.



|6. |  | COMPREHENSIVE INCOME
|-- |  | --------------------

Comprehensive income consists of net earnings and foreign currency translation
adjustments as presented in the following table (in thousands):

|                                         |  |                    |       |                    |  |                    |       |                    |  |   |        |   |  |   |         |  
|---------------------------------------- |  | ------------------ | ----- | ------------------ |  | ------------------ | ----- | ------------------ |  | - | ------ | - |  | - | ------- | -
|                                         |  | Three months ended |       | Nine months ended 
|                                         |  |                    |       |                   
|                                         |  | September 30, 2002 |       | September 30, 2001 |  | September 30, 2002 |       | September 30, 2001
|                                         |  |                    |       |                    |  |                    |       |                   
|Net income (loss)                        |  | $                  | 4,031 |                    |  | $                  | 4,085 |                    |  | $ | 32,399 |   |  | $ | (12,889 | )
|                                        
|                                        
|                                        
|                                        
|Foreign currency translation adjustments |  |                    | (702  | )                  |  |                    | (213  | )                  |  |   | (157   | ) |  |   | (522    | )
|                                         |  |                    |       |                    |  |                    |       |                    |  |   |        |   |  |   |         |  
|Comprehensive income (loss)              |  | $                  | 3,329 |                    |  | $                  | 3,872 |                    |  | $ | 32,242 |   |  | $ | (13,411 | )
|                                         |  |                    |       |                    |  |                    |       |                    |  |   |        |   |  |   |         |  

10



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##### Table of Contents



THE HOLMES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)



|7. |  | BUSINESS SEGMENTS
|-- |  | -----------------

The Company currently manages its operations through three business segments:
Consumer Durables, International and Far East Manufacturing. The Consumer
Durables segment sells products including fans, heaters, humidifiers, air
purifiers, lighting products, Crock-Pot ® slow cookers and other small kitchen
electric appliances to retailers throughout the United States. The Consumer
Durables segment is made up of home environment products and kitchen electric
products, which are considered one business segment due to the similar customer
base and distribution channels. The International segment sells the Companys
products outside the United States, predominantly in Canada, Latin America and
Europe. The Far East Manufacturing segment represents the Companys
manufacturing and sourcing operations located primarily at Holmes Products (Far
East) Limited (HPFEL).

Summary financial information for each reportable segment for the three and
nine month periods ended September 30, 2002 and 2001 is as follows (in
thousands):

|                    |  |                        |  |          |         |               |  |              |         |       |  |   |        |  |  |   |         |              |  |   |         | 
|------------------- |  | ---------------------- |  | -------- | ------- | ------------- |  | ------------ | ------- | ----- |  | - | ------ |  |  | - | ------- | ------------ |  | - | ------- | 
|                    |  |                        |  | Consumer |         |               |  |              |         |       |  |   |        |  |  |   |         | Consolidated
|THREE MONTHS ENDED  |  | Durables               |  | Far East |         | International |  | Eliminations |         | Total
|                    |  |                        |  |          |         |               |  |              |         |      
|September 30, 2002: |  |                        |  |          |         |               |  |              |         |       |  |   |        |  |  |   |         |              |  |  
|                   
|                   
|                   
|                   
|                    |  | Net sales              |  | $        | 132,054 |               |  | $            | 100,252 |       |  | $ | 16,270 |  |  | $ | (95,027 | )            |  | $ | 153,549 | 
|                   
|                   
|                   
|                   
|                    |  | Operating income(loss) |  |          | 2,873   |               |  |              | 7,921   |       |  |   | 3,029  |  |  |   | (570    | )            |  |   | 13,253  | 
|                   
|                   
|                   
|                   
|September 30, 2001: |  |                        |  |          |         |               |  |              |         |       |  |   |        |  |  |   |         |              |  |  
|                   
|                   
|                   
|                   
|                    |  | Net sales              |  | $        | 140,542 |               |  | $            | 104,323 |       |  | $ | 13,159 |  |  | $ | (99,715 | )            |  | $ | 158,309 | 
|                   
|                   
|                   
|                   
|                    |  | Operating income(loss) |  |          | 5,590   |               |  |              | 6,576   |       |  |   | 962    |  |  |   | (80     | )            |  |   | 13,048  | 
|                   
|                   
|                   
|                   

|                    |                        |  |   |         |   |  |   |         |  |  |   |        |  |  |   |          |   |  |   |         |  | 
|------------------- | ---------------------- |  | - | ------- | - |  | - | ------- |  |  | - | ------ |  |  | - | -------- | - |  | - | ------- |  | 
|NINE MONTHS ENDED   |                        |  |   |         |   |  |   |         |  | 
|                   
|                   
|                   
|                   
|                    | September 30, 2002:    |  |   |         |   |  |   |         |  |  |   |        |  |  |   |          |   |  |   |         | 
|                   
|                   
|                   
|                   
|                    | Net sales              |  | $ | 349,278 |   |  | $ | 252,193 |  |  | $ | 39,619 |  |  | $ | (238,287 | ) |  | $ | 402,803 | 
|                   
|                   
|                   
|                   
|                    | Operating income(loss) |  |   | (864    | ) |  |   | 19,371  |  |  |   | 3,441  |  |  |   | (1,760   | ) |  |   | 20,188  | 
|                   
|                   
|                   
|                   
|September 30, 2001: |                        |  |   |         |   |  |   |         |  |  |   |        |  |  |   |          |   |  |   |        
|                   
|                   
|                   
|                   
|                    | Net sales              |  | $ | 360,440 |   |  | $ | 232,323 |  |  | $ | 35,489 |  |  | $ | (216,077 | ) |  | $ | 412,175 | 
|                   
|                   
|                   
|                   
|                    | Operating income(loss) |  |   | (3,235  | ) |  |   | 18,356  |  |  |   | 1,807  |  |  |   | 655      |   |  |   | 17,583  | 

The following information is summarized by geographic area (in thousands):

|                   |                                       |  |               |         |          |  |               |        |       |  |   |        |  |  |              |         | 
|------------------ | ------------------------------------- |  | ------------- | ------- | -------- |  | ------------- | ------ | ----- |  | - | ------ |  |  | ------------ | ------- | 
|                   |                                       |  |               |         |          |  |               |        |       |  |   |        |  |  | Consolidated
|                   |                                       |  | United States |         | Far East |  | International |        | Total
|                   |                                       |  |               |         |          |  |               |        |      
|Net sales:         |                                       |  |               |         |          |  |               |        |       |  |   |        |  |  |              |        
|                  
|                  
|                  
|                  
|                   | Three months ended September 30, 2002 |  | $             | 132,054 |          |  | $             | 5,225  |       |  | $ | 16,270 |  |  | $            | 153,549 | 
|                  
|                  
|                  
|                  
|                   | Three months ended September 30, 2001 |  |               | 140,542 |          |  |               | 4,608  |       |  |   | 13,159 |  |  |              | 158,309 | 
|                  
|                  
|                  
|                  
|                   | Nine months ended September 30, 2002  |  |               | 349,278 |          |  |               | 13,906 |       |  |   | 39,619 |  |  |              | 402,803 | 
|                  
|                  
|                  
|                  
|                   | Nine months ended September 30, 2001  |  |               | 360,440 |          |  |               | 16,246 |       |  |   | 35,489 |  |  |              | 412,175 | 
|                  
|                  
|                  
|                  
|Long-lived assets: |                                       |  |               |         |          |  |               |        |       |  |   |        |  |  |              |        
|                  
|                  
|                  
|                  
|                   | September 30, 2002                    |  |               | 37,727  |          |  |               | 32,854 |       |  |   | 511    |  |  |              | 71,092  | 
|                  
|                  
|                  
|                  
|                   | December 31, 2001                     |  |               | 41,159  |          |  |               | 32,443 |       |  |   | 565    |  |  |              | 74,167  | 
|                  
|                  
|                  
|                  
|                   | September 30, 2001                    |  |               | 35,202  |          |  |               | 32,241 |       |  |   | 600    |  |  |              | 68,043  | 

Net sales are grouped based on the geographic origin of the transaction. Net
sales in the United States include direct export sales to Europe. The
Companys manufacturing entities in the Far East sell completed products to THG
in the United States at intercompany transfer prices which reflect managements
estimate of amounts which would be charged by an unrelated third party. These
sales are eliminated in consolidation. The remaining Far East sales are to
unrelated third parties.

11



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##### Table of Contents



THE HOLMES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)



|8. |  | CONTINGENCIES
|-- |  | -------------

The Company is involved in litigation and is the subject of claims arising in
the normal course of its business. In the opinion of management, based upon
discussions with legal counsel, no existing litigation or claims will have a
materially adverse effect on the Companys financial position or results of
operations or cash flows.



|9. |  | CONDENSED CONSOLIDATING INFORMATION
|-- |  | -----------------------------------

The Companys Senior Subordinated Notes are guaranteed by Rival and its
domestic subsidiary and Holmes Manufacturing Corp. (Manufacturing), Holmes
Motor Corp. (Motor) and Holmes Air (Taiwan) Corp. (Taiwan), but are not
guaranteed by THGs other subsidiary, HPFEL, or Rivals five foreign
subsidiaries. The guarantor subsidiaries are directly or indirectly
wholly-owned by THG, and the guarantees are full, unconditional and joint and
several. The following condensed consolidating financial information presents
the financial position, results of operations and cash flows of (i) THG, as
parent, as if it accounted for its subsidiaries on the equity method, (ii)
Rival (on a consolidated basis following its acquisition by THG, Manufacturing,
Motor and Taiwan, the guarantor subsidiaries, and (iii) HPFEL, Bionaire
International B.V., The Holmes Group Canada, Ltd., Waverly Products Company,
Ltd., and Rival de Mexico S.A. de C.V., the non-guarantor subsidiaries. There
were no transactions between Rival, Manufacturing, Motor and Taiwan during any
of the periods presented. Taiwan and Manufacturing had no revenues or
operations during the periods presented. As further described in Note 15 of the
Companys audited financial statements for the year ended December 31, 2001,
certain of HPFELs subsidiaries in China have restrictions on distributions to
their parent companies.

12



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##### Table of Contents



THE HOLMES GROUP, INC.
CONSOLIDATING BALANCE SHEET AT DECEMBER 31, 2001 (IN THOUSANDS)

|                                               |                                           |   |         |         |   |              |         |              |   |               |         |              |   |   |          |          |   |   |         |         |   | 
|---------------------------------------------- | ----------------------------------------- | - | ------- | ------- | - | ------------ | ------- | ------------ | - | ------------- | ------- | ------------ | - | - | -------- | -------- | - | - | ------- | ------- | - | 
|                                               |                                           |   |         |         |   |              |         | Guarantor    |   | Non-Guarantor |         |              |   |   |          |          |   |  
|                                               |                                           |   |         | Parent  |   | Subsidiaries |         | Subsidiaries |   | Eliminations  |         | Consolidated
|                                               |                                           |   |         |         |   |              |         |              |   |               |         |             
|ASSETS                                         |                                           |   |         |         |   |              |         |              |   |               |         |              |   |   |          |          |   |   |         |        
|                                              
|                                              
|                                              
|                                              
|Current assets:                                |                                           |   |         |         |   |              |         |              |   |               |         |              |   |   |          |          |   |   |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Cash and cash equivalents                 |   | $       | 4,083   |   |              | $       | 1,312        |   |               | $       | 4,720        |   |   |          |          |   |   | $       | 10,115  |  
|                                              
|                                              
|                                              
|                                              
|                                               | Accounts receivable, net                  |   |         | 39,173  |   |              |         | 82,725       |   |               |         | 22,351       |   |   |          |          |   |   |         | 144,249 |  
|                                              
|                                              
|                                              
|                                              
|                                               | Inventories                               |   |         | 34,042  |   |              |         | 49,055       |   |               |         | 24,922       |   |   | $        | (4,824   | ) |   |         | 103,195 |  
|                                              
|                                              
|                                              
|                                              
|                                               | Prepaid expenses and other current assets |   |         | 2,136   |   |              |         | 42           |   |               |         | 3,139        |   |   |          |          |   |   |         | 5,317   |  
|                                              
|                                              
|                                              
|                                              
|                                               | Deferred income taxes                     |   |         | 8,578   |   |              |         | 5,065        |   |               |         |              |   |   |          |          |   |   |         | 13,643  |  
|                                              
|                                              
|                                              
|                                              
|                                               | Due from affiliates                       |   |         | 191,656 |   |              |         | 89           |   |               |         | 71,859       |   |   |          | (263,604 | ) |   |         |         |  
|                                               |                                           |   |         |         |   |              |         |              |   |               |         |              |   |   |          |          |   |   |         |         |  
|Total current assets                           |                                           |   | 279,668 |         |   |              | 138,288 |              |   |               | 126,991 |              |   |   | (268,428 | )        |   |   | 276,519 |        
|                                              
|                                              
|                                              
|                                              
|Assets held for sale                           |                                           |   |         |         |   |              | 86      |              |   |               |         |              |   |   |          |          |   |   | 86      |        
|                                              
|                                              
|                                              
|                                              
|Property, plant and equipment, net             |                                           |   | 7,585   |         |   |              | 28,503  |              |   |               | 33,008  |              |   |   |          |          |   |   | 69,096  |        
|                                              
|                                              
|                                              
|                                              
|Goodwill, net                                  |                                           |   |         |         |   |              | 79,838  |              |   |               |         |              |   |   |          |          |   |   | 79,838  |        
|                                              
|                                              
|                                              
|                                              
|Deposits and other assets                      |                                           |   | 20,139  |         |   |              | 2,229   |              |   |               | 579     |              |   |   | (4,891   | )        |   |   | 18,056  |        
|                                              
|                                              
|                                              
|                                              
|Investments in consolidated subsidiaries       |                                           |   | 59,423  |         |   |              |         |              |   |               | 3,700   |              |   |   | (63,123  | )        |   |   |         |        
|                                               |                                           |   |         |         |   |              |         |              |   |               |         |              |   |   |          |          |   |   |         |         |  
|                                               |                                           | $ | 366,815 |         |   | $            | 248,944 |              |   | $             | 164,278 |              |   | $ | (336,442 | )        |   | $ | 443,595 |        
|                                               |                                           |   |         |         |   |              |         |              |   |               |         |              |   |   |          |          |   |   |         |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |                                           |   |         |         |   |              |         |              |   |               |         |              |   |   |          |          |   |   |         |        
|                                              
|                                              
|                                              
|                                              
|Current liabilities:                           |                                           |   |         |         |   |              |         |              |   |               |         |              |   |   |          |          |   |   |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Accounts payable                          |   | $       | 3,906   |   |              | $       | 6,945        |   |               | $       | 30,783       |   |   | $        | (4,891   | ) |   | $       | 36,743  |  
|                                              
|                                              
|                                              
|                                              
|                                               | Current portion of Credit Facility        |   |         | 8,476   |   |              |         |              |   |               |         |              |   |   |          |          |   |   |         | 8,476   |  
|                                              
|                                              
|                                              
|                                              
|                                               | Accrued expenses                          |   |         | 19,112  |   |              |         | 16,672       |   |               |         | 7,375        |   |   |          |          |   |   |         | 43,159  |  
|                                              
|                                              
|                                              
|                                              
|                                               | Accrued income taxes                      |   |         |         |   |              |         | 2,600        |   |               |         | 3,857        |   |   |          |          |   |   |         | 6,457   |  
|                                              
|                                              
|                                              
|                                              
|                                               | Due to affiliates                         |   |         |         |   |              |         | 230,535      |   |               |         | 36,669       |   |   |          | (267,204 | ) |   |         |         |  
|                                               |                                           |   |         |         |   |              |         |              |   |               |         |              |   |   |          |          |   |   |         |         |  
|Total current liabilities                      |                                           |   | 31,494  |         |   |              | 256,752 |              |   |               | 78,684  |              |   |   | (272,095 | )        |   |   | 94,835  |        
|                                              
|                                              
|                                              
|                                              
|Credit Facility                                |                                           |   | 209,406 |         |   |              |         |              |   |               |         |              |   |   |          |          |   |   | 209,406 |        
|                                              
|                                              
|                                              
|                                              
|Long-term debt                                 |                                           |   | 135,298 |         |   |              |         |              |   |               |         |              |   |   |          |          |   |   | 135,298 |        
|                                              
|                                              
|                                              
|                                              
|Other long-term liabilities                    |                                           |   |         |         |   |              |         |              |   |               | 7,485   |              |   |   |          |          |   |   | 7,485   |        
|                                              
|                                              
|                                              
|                                              
|Deferred income taxes                          |                                           |   |         |         |   |              | 3,861   |              |   |               | 2,093   |              |   |   |          |          |   |   | 5,954   |        
|                                              
|                                              
|                                              
|                                              
|Stockholders equity (deficit):                |                                           |   |         |         |   |              |         |              |   |               |         |              |   |   |          |          |   |   |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Common stock, $.001 par value             |   |         | 20      |   |              |         | 2            |   |               |         |              |   |   |          | (2       | ) |   |         | 20      |  
|                                              
|                                              
|                                              
|                                              
|                                               | Common stock, $1 par value                |   |         |         |   |              |         |              |   |               |         | 3,800        |   |   |          | (3,800   | ) |   |         |         |  
|                                              
|                                              
|                                              
|                                              
|                                               | Additional paid in capital                |   |         | 68,874  |   |              |         |              |   |               |         |              |   |   |          |          |   |   |         | 68,874  |  
|                                              
|                                              
|                                              
|                                              
|                                               | Accumulated other comprehensive income    |   |         | (2      | ) |              |         |              |   |               |         | (160         | ) |   |          | 160      |   |   |         | (2      | )
|                                              
|                                              
|                                              
|                                              
|                                               | Treasury stock                            |   |         | (62,076 | ) |              |         |              |   |               |         |              |   |   |          |          |   |   |         | (62,076 | )
|                                              
|                                              
|                                              
|                                              
|                                               | Retained earnings (deficit)               |   |         | (16,199 | ) |              |         | (11,671      | ) |               |         | 72,376       |   |   |          | (60,705  | ) |   |         | (16,199 | )
|                                               |                                           |   |         |         |   |              |         |              |   |               |         |              |   |   |          |          |   |   |         |         |  
|                                               | Total stockholders equity (deficit)      |   |         | (9,383  | ) |              |         | (11,669      | ) |               |         | 76,016       |   |   |          | (64,347  | ) |   |         | (9,383  | )
|                                               |                                           |   |         |         |   |              |         |              |   |               |         |              |   |   |          |          |   |   |         |         |  
|                                               |                                           | $ | 366,815 |         |   | $            | 248,944 |              |   | $             | 164,278 |              |   | $ | (336,442 | )        |   | $ | 443,595 |        
|                                               |                                           |   |         |         |   |              |         |              |   |               |         |              |   |   |          |          |   |   |         |         |  

13



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##### Table of Contents



THE HOLMES GROUP, INC.
CONSOLIDATING BALANCE SHEET AT SEPTEMBER 30, 2002 (IN THOUSANDS)
(UNAUDITED)

|                                               |                                           |   |         |         |              |   |              |         |               |   |              |        |   |   |          |          |   |   |         |         |  
|---------------------------------------------- | ----------------------------------------- | - | ------- | ------- | ------------ | - | ------------ | ------- | ------------- | - | ------------ | ------ | - | - | -------- | -------- | - | - | ------- | ------- | -
|                                               |                                           |   |         |         |              |   | Guarantor    |         | Non-Guarantor |   |              |        |   |   |          |          |  
|                                               |                                           |   | Parent  |         | Subsidiaries |   | Subsidiaries |         | Eliminations  |   | Consolidated
|                                               |                                           |   |         |         |              |   |              |         |               |   |             
|ASSETS                                         |                                           |   |         |         |              |   |              |         |               |   |              |        |   |   |          |          |   |   |         |        
|                                              
|                                              
|                                              
|                                              
|Current assets:                                |                                           |   |         |         |              |   |              |         |               |   |              |        |   |   |          |          |   |   |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Cash and cash equivalents                 |   | $       | 2,811   |              |   | $            | (489    | )             |   | $            | 2,364  |   |   | $        |          |   |   | $       | 4,686   |  
|                                              
|                                              
|                                              
|                                              
|                                               | Accounts receivable, net                  |   |         | 23,545  |              |   |              | 60,628  |               |   |              | 26,397 |   |   |          |          |   |   |         | 110,570 |  
|                                              
|                                              
|                                              
|                                              
|                                               | Inventories                               |   |         | 43,486  |              |   |              | 69,464  |               |   |              | 32,641 |   |   |          | (6,825   | ) |   |         | 138,766 |  
|                                              
|                                              
|                                              
|                                              
|                                               | Prepaid expenses and other current assets |   |         | 4,361   |              |   |              | 2,743   |               |   |              | 2,831  |   |   |          |          |   |   |         | 9,935   |  
|                                              
|                                              
|                                              
|                                              
|                                               | Deferred income taxes                     |   |         | 8,994   |              |   |              | 4,649   |               |   |              |        |   |   |          |          |   |   |         | 13,643  |  
|                                              
|                                              
|                                              
|                                              
|                                               | Due from affiliates                       |   |         | 178,418 |              |   |              | 89      |               |   |              | 98,231 |   |   |          | (276,738 | ) |   |         |         |  
|                                               |                                           |   |         |         |              |   |              |         |               |   |              |        |   |   |          |          |   |   |         |         |  
|Total current assets                           |                                           |   | 261,615 |         |              |   | 137,084      |         |               |   | 162,464      |        |   |   | (283,563 | )        |   |   | 277,600 |        
|                                               |                                           |   |         |         |              |   |              |         |               |   |              |        |   |   |          |          |   |   |         |         |  
|Assets held for sale                           |                                           |   |         |         |              |   | 5,659        |         |               |   |              |        |   |   |          |          |   |   | 5,659   |        
|                                              
|                                              
|                                              
|                                              
|Property, plant and equipment, net             |                                           |   | 9,471   |         |              |   | 19,248       |         |               |   | 32,319       |        |   |   |          |          |   |   | 61,038  |        
|                                              
|                                              
|                                              
|                                              
|Goodwill, net                                  |                                           |   |         |         |              |   | 79,838       |         |               |   |              |        |   |   |          |          |   |   | 79,838  |        
|                                              
|                                              
|                                              
|                                              
|Deposits
and other assets                      |                                           |   | 18,257  |         |              |   | 2,006        |         |               |   | 1,046        |        |   |   | (4,891   | )        |   |   | 16,418  |        
|                                              
|                                              
|                                              
|                                              
|Investments in consolidated subsidiaries       |                                           |   | 107,031 |         |              |   |              |         |               |   | 3,701        |        |   |   | (110,732 | )        |   |   |         |        
|                                               |                                           |   |         |         |              |   |              |         |               |   |              |        |   |   |          |          |   |   |         |         |  
|                                               |                                           | $ | 396,374 |         |              | $ | 243,835      |         |               | $ | 199,530      |        |   | $ | (399,186 | )        |   | $ | 440,553 |        
|                                               |                                           |   |         |         |              |   |              |         |               |   |              |        |   |   |          |          |   |   |         |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |                                           |   |         |         |              |   |              |         |               |   |              |        |   |   |          |          |   |   |         |        
|                                              
|                                              
|                                              
|                                              
|Current liabilities:                           |                                           |   |         |         |              |   |              |         |               |   |              |        |   |   |          |          |   |   |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Accounts payable                          |   |         | 8,585   |              |   |              | 6,395   |               |   |              | 48,018 |   |   |          | (4,891   | ) |   |         | 58,107  |  
|                                              
|                                              
|                                              
|                                              
|                                               | Current portion of Credit Facility        |   |         | 8,928   |              |   |              |         |               |   |              |        |   |   |          |          |   |   |         | 8,928   |  
|                                              
|                                              
|                                              
|                                              
|                                               | Accrued expenses                          |   |         | 19,344  |              |   |              | 20,606  |               |   |              | 6,354  |   |   |          |          |   |   |         | 46,304  |  
|                                              
|                                              
|                                              
|                                              
|                                               | Accrued income taxes                      |   |         | (859    | )            |   |              | 2,765   |               |   |              | 7,799  |   |   |          |          |   |   |         | 9,705   |  
|                                              
|                                              
|                                              
|                                              
|                                               | Due to affiliates                         |   |         | 55,754  |              |   |              | 193,443 |               |   |              | 31,243 |   |   |          | (280,440 | ) |   |         |         |  
|                                               |                                           |   |         |         |              |   |              |         |               |   |              |        |   |   |          |          |   |   |         |         |  
|Total current liabilities                      |                                           |   | 91,752  |         |              |   | 223,209      |         |               |   | 93,414       |        |   |   | (285,331 | )        |   |   | 123,044 |        
|                                               |                                           |   |         |         |              |   |              |         |               |   |              |        |   |   |          |          |   |   |         |         |  
|Credit Facility                                |                                           |   | 181,825 |         |              |   |              |         |               |   |              |        |   |   |          |          |   |   | 181,825 |        
|                                              
|                                              
|                                              
|                                              
|Long-term debt                                 |                                           |   | 99,523  |         |              |   |              |         |               |   |              |        |   |   |          |          |   |   | 99,523  |        
|                                              
|                                              
|                                              
|                                              
|Other long-term liabilities                    |                                           |   |         |         |              |   |              |         |               |   | 7,645        |        |   |   |          |          |   |   | 7,645   |        
|                                              
|                                              
|                                              
|                                              
|Deferred income taxes                          |                                           |   | 416     |         |              |   | 3,443        |         |               |   | 1,798        |        |   |   |          |          |   |   | 5,657   |        
|                                              
|                                              
|                                              
|                                              
|Stockholders equity (deficit):                |                                           |   |         |         |              |   |              |         |               |   |              |        |   |   |          |          |   |   |         |        
|                                              
|                                              
|                                              
|                                              
|                                               | Common stock, $.001 par value             |   |         | 20      |              |   |              | 2       |               |   |              |        |   |   |          | (2       | ) |   |         | 20      |  
|                                              
|                                              
|                                              
|                                              
|                                               | Common stock, $1 par value                |   |         |         |              |   |              |         |               |   |              | 3,800  |   |   |          | (3,800   | ) |   |         |         |  
|                                              
|                                              
|                                              
|                                              
|                                               | Additional paid in capital                |   |         | 68,874  |              |   |              |         |               |   |              |        |   |   |          |          |   |   |         | 68,874  |  
|                                              
|                                              
|                                              
|                                              
|                                               | Accumulated other comprehensive income    |   |         | (159    | )            |   |              |         |               |   |              | (320   | ) |   |          | 320      |   |   |         | (159    | )
|                                              
|                                              
|                                              
|                                              
|                                               | Treasury stock                            |   |         | (62,076 | )            |   |              |         |               |   |              |        |   |   |          |          |   |   |         | (62,076 | )
|                                              
|                                              
|                                              
|                                              
|                                               | Retained earnings (deficit)               |   |         | 16,199  |              |   |              | 17,181  |               |   |              | 93,193 |   |   |          | (110,373 | ) |   |         | 16,200  |  
|                                               |                                           |   |         |         |              |   |              |         |               |   |              |        |   |   |          |          |   |   |         |         |  
|Total stockholders equity (deficit)           |                                           |   | 22,858  |         |              |   | 17,183       |         |               |   | 96,673       |        |   |   | (113,855 | )        |   |   | 22,859  |        
|                                               |                                           |   |         |         |              |   |              |         |               |   |              |        |   |   |          |          |   |   |         |         |  
|                                               |                                           |   | 396,374 |         |              | $ | 243,835      |         |               | $ | 199,530      |        |   | $ | (399,186 | )        |   | $ | 440,553 |        
|                                               |                                           |   |         |         |              |   |              |         |               |   |              |        |   |   |          |          |   |   |         |         |  

14



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##### Table of Contents



THE HOLMES GROUP, INC.
CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2001 (IN THOUSANDS)
(UNAUDITED)

|                                                                            |                                 |   |         |        |              |   |              |       |               |   |              |       |   |   |         |   |  |   |         |        |  
|--------------------------------------------------------------------------- | ------------------------------- | - | ------- | ------ | ------------ | - | ------------ | ----- | ------------- | - | ------------ | ----- | - | - | ------- | - |  | - | ------- | ------ | -
|                                                                            |                                 |   |         |        |              |   | Guarantor    |       | Non-Guarantor |   |              |       |   |   |         |   | 
|                                                                            |                                 |   | Parent  |        | Subsidiaries |   | Subsidiaries |       | Elimination   |   | Consolidated
|                                                                            |                                 |   |         |        |              |   |              |       |               |   |             
|Net sales                                                                   |                                 | $ | 66,363  |        |              | $ | 74,179       |       |               | $ | 117,482      |       |   | $ | (99,715 | ) |  | $ | 158,309 |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Cost of goods sold                                                          |                                 |   | 51,950  |        |              |   | 61,343       |       |               |   | 105,068      |       |   |   | (99,635 | ) |  |   | 118,726 |       
|                                                                            |                                 |   |         |        |              |   |              |       |               |   |              |       |   |   |         |   |  |   |         |       
|Gross profit (loss)                                                         |                                 |   | 14,413  |        |              |   | 12,836       |       |               |   | 12,414       |       |   |   | (80     | ) |  |   | 39,583  |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Operating expenses:                                                         |                                 |   |         |        |              |   |              |       |               |   |              |       |   |   |         |   |  |   |         |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Selling and administrative      |   |         | 16,485 |              |   |              | 3,975 |               |   |              | 4,876 |   |   |         |   |  |   |         | 25,336 |  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Restructuring and plant closing |   |         |        |              |   |              | 550   |               |   |              |       |   |   |         |   |  |   |         | 550    |  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Amortization of goodwill        |   |         |        |              |   |              | 649   |               |   |              |       |   |   |         |   |  |   |         | 649    |  
|                                                                            |                                 |   |         |        |              |   |              |       |               |   |              |       |   |   |         |   |  |   |         |       
|                                                                            |                                 |   | 16,485  |        |              |   | 5,174        |       |               |   | 4,876        |       |   |   |         |   |  |   | 26,535  |       
|                                                                            |                                 |   |         |        |              |   |              |       |               |   |              |       |   |   |         |   |  |   |         |       
|Operating profit (loss)                                                     |                                 |   | (2,072  | )      |              |   | 7,662        |       |               |   | 7,538        |       |   |   | (80     | ) |  |   | 13,048  |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Other income and expense:                                                   |                                 |   |         |        |              |   |              |       |               |   |              |       |   |   |         |   |  |   |         |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Interest expense                |   |         | 5,689  |              |   |              | 2,861 |               |   |              | (2    | ) |   |         |   |  |   |         | 8,548  |  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Other expense (income), net     |   |         | 251    |              |   |              | 51    |               |   |              | (695  | ) |   |         |   |  |   |         | (393   | )
|                                                                            |                                 |   |         |        |              |   |              |       |               |   |              |       |   |   |         |   |  |   |         |       
|                                                                            |                                 |   | 5,940   |        |              |   | 2,912        |       |               |   | (697         | )     |   |   |         |   |  |   | 8,155   |       
|                                                                            |                                 |   |         |        |              |   |              |       |               |   |              |       |   |   |         |   |  |   |         |       
|Income (loss) before income taxes and
equity in earnings from joint venture |                                 |   | (8,012  | )      |              |   | 4,750        |       |               |   | 8,235        |       |   |   | (80     | ) |  |   | 4,893   |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Income tax expense                                                          |                                 |   | 594     |        |              |   |              |       |               |   | 730          |       |   |   |         |   |  |   | 1,324   |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Equity in earnings from joint venture                                       |                                 |   | (516    | )      |              |   |              |       |               |   |              |       |   |   |         |   |  |   | (516    | )     
|                                                                            |                                 |   |         |        |              |   |              |       |               |   |              |       |   |   |         |   |  |   |         |       
|Income (loss) before equity in income
of consolidated subsidiaries          |                                 |   | (8,090  | )      |              |   | 4,750        |       |               |   | 7,505        |       |   |   | (80     | ) |  |   | 4,085   |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Equity in income of consolidated
subsidiaries                               |                                 |   | (12,175 | )      |              |   |              |       |               |   |              |       |   |   | 12,175  |   |  |   |         |       
|                                                                            |                                 |   |         |        |              |   |              |       |               |   |              |       |   |   |         |   |  |   |         |       
|Net income (loss)                                                           |                                 | $ | 4,085   |        |              | $ | 4,750        |       |               | $ | 7,505        |       |   | $ | (12,255 | ) |  | $ | 4,085   |       
|                                                                            |                                 |   |         |        |              |   |              |       |               |   |              |       |   |   |         |   |  |   |         |       

15



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##### Table of Contents



THE HOLMES GROUP, INC.
CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2002 (IN THOUSANDS)
(UNAUDITED)

|                                                                            |                             |   |        |       |              |   |              |        |               |   |              |       |   |   |         |   |  |   |         |        |  
|--------------------------------------------------------------------------- | --------------------------- | - | ------ | ----- | ------------ | - | ------------ | ------ | ------------- | - | ------------ | ----- | - | - | ------- | - |  | - | ------- | ------ | -
|                                                                            |                             |   |        |       |              |   | Guarantor    |        | Non-Guarantor |   |              |       |   |   |         |   | 
|                                                                            |                             |   | Parent |       | Subsidiaries |   | Subsidiaries |        | Eliminations  |   | Consolidated
|                                                                            |                             |   |        |       |              |   |              |        |               |   |             
|Net sales                                                                   |                             | $ | 54,997 |       |              | $ | 77,058       |        |               | $ | 116,521      |       |   | $ | (95,027 | ) |  | $ | 153,549 |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Cost of goods sold                                                          |                             |   | 43,034 |       |              |   | 62,330       |        |               |   | 100,413      |       |   |   | (94,457 | ) |  |   | 111,320 |       
|                                                                            |                             |   |        |       |              |   |              |        |               |   |              |       |   |   |         |   |  |   |         |       
|Gross profit (loss)                                                         |                             |   | 11,963 |       |              |   | 14,728       |        |               |   | 16,108       |       |   |   | (570    | ) |  |   | 42,229  |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Operating expenses:                                                         |                             |   |        |       |              |   |              |        |               |   |              |       |   |   |         |   |  |   |         |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Selling and administrative  |   |        | 5,659 |              |   |              | 16,810 |               |   |              | 5,157 |   |   |         |   |  |   |         | 27,626 |  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Restructuring               |   |        |       |              |   |              | 1,350  |               |   |              |       |   |   |         |   |  |   |         | 1,350  |  
|                                                                            |                             |   |        |       |              |   |              |        |               |   |              |       |   |   |         |   |  |   |         |       
|                                                                            |                             |   | 5,659  |       |              |   | 18,160       |        |               |   | 5,157        |       |   |   |         |   |  |   | 28,976  |       
|                                                                            |                             |   |        |       |              |   |              |        |               |   |              |       |   |   |         |   |  |   |         |       
|Operating profit (loss)                                                     |                             |   | 6,304  |       |              |   | (3,432       | )      |               |   | 10,951       |       |   |   | (570    | ) |  |   | 13,253  |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Other income and expense:                                                   |                             |   |        |       |              |   |              |        |               |   |              |       |   |   |         |   |  |   |         |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Interest expense (income)   |   |        | 7,282 |              |   |              | 15     |               |   |              | (11   | ) |   |         |   |  |   |         | 7,286  |  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Other expense (income), net |   |        | (774  | )            |   |              | 812    |               |   |              | (629  | ) |   |         |   |  |   |         | (591   | )
|                                                                            |                             |   |        |       |              |   |              |        |               |   |              |       |   |   |         |   |  |   |         |       
|                                                                            |                             |   | 6,508  |       |              |   | 827          |        |               |   | (640         | )     |   |   |         |   |  |   | 6,695   |       
|                                                                            |                             |   |        |       |              |   |              |        |               |   |              |       |   |   |         |   |  |   |         |       
|Income (loss) before income taxes and equity
in earnings from joint venture |                             |   | (204   | )     |              |   | (4,259       | )      |               |   | 11,591       |       |   |   | (570    | ) |  |   | 6,558   |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Income tax expense (benefit)                                                |                             |   |        |       |              |   | (127         | )      |               |   | 3,307        |       |   |   |         |   |  |   | 3,180   |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Equity in earnings from joint venture                                       |                             |   | (653   | )     |              |   |              |        |               |   |              |       |   |   |         |   |  |   | (653    | )     
|                                                                            |                             |   |        |       |              |   |              |        |               |   |              |       |   |   |         |   |  |   |         |       
|Income (loss) before equity in income of
consolidated subsidiaries          |                             |   | 449    |       |              |   | (4,132       | )      |               |   | 8,284        |       |   |   | (570    | ) |  |   | 4,031   |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Equity in income of consolidated subsidiaries                               |                             |   | (3,582 | )     |              |   |              |        |               |   |              |       |   |   | 3,582   |   |  |   |         |       
|                                                                            |                             |   |        |       |              |   |              |        |               |   |              |       |   |   |         |   |  |   |         |       
|Net income (loss)                                                           |                             | $ | 4,031  |       |              | $ | (4,132       | )      |               | $ | 8,284        |       |   | $ | (4,152  | ) |  | $ | 4,031   |       
|                                                                            |                             |   |        |       |              |   |              |        |               |   |              |       |   |   |         |   |  |   |         |       

16



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##### Table of Contents



THE HOLMES GROUP, INC.
CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2001 (IN THOUSANDS)
(UNAUDITED)

|                                                                            |                                 |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |        |  
|--------------------------------------------------------------------------- | ------------------------------- | - | ------- | ------ | ------------ | - | ------------ | ------ | ------------- | - | ------------ | ------ | - | - | -------- | - |  | - | ------- | ------ | -
|                                                                            |                                 |   |         |        |              |   | Guarantor    |        | Non-Guarantor |   |              |        |   |   |          |   | 
|                                                                            |                                 |   | Parent  |        | Subsidiaries |   | Subsidiaries |        | Eliminations  |   | Consolidated
|                                                                            |                                 |   |         |        |              |   |              |        |               |   |             
|Net sales                                                                   |                                 | $ | 171,343 |        |              | $ | 189,097      |        |               | $ | 267,812      |        |   | $ | (216,077 | ) |  | $ | 412,175 |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Cost of goods sold                                                          |                                 |   | 146,773 |        |              |   | 151,189      |        |               |   | 233,074      |        |   |   | (216,732 | ) |  |   | 314,304 |       
|                                                                            |                                 |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |       
|Gross profit (loss)                                                         |                                 |   | 24,570  |        |              |   | 37,908       |        |               |   | 34,738       |        |   |   | 655      |   |  |   | 97,871  |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Operating expenses:                                                         |                                 |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Selling and administrative      |   |         | 45,812 |              |   |              | 15,957 |               |   |              | 14,575 |   |   |          |   |  |   |         | 76,344 |  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Restructuring and plant closing |   |         |        |              |   |              | 1,995  |               |   |              |        |   |   |          |   |  |   |         | 1,995  |  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Amortization of goodwill        |   |         |        |              |   |              | 1,949  |               |   |              |        |   |   |          |   |  |   |         | 1,949  |  
|                                                                            |                                 |   |         |        |              |   |              |        |               |   |             
|                                                                            |                                 |   | 45,812  |        |              |   | 19,901       |        |               |   | 14,575       |        |   |   |          |   |  |   | 80,288  |       
|                                                                            |                                 |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |       
|Operating profit (loss)                                                     |                                 |   | (21,242 | )      |              |   | 18,007       |        |               |   | 20,163       |        |   |   | 655      |   |  |   | 17,583  |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Other income and expense:                                                   |                                 |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Interest expense (income)       |   |         | 21,266 |              |   |              | 8,029  |               |   |              | (31    | ) |   |          |   |  |   |         | 29,264 |  
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|                                                                            | Other expense (income), net     |   |         | 590    |              |   |              | (152   | )             |   |              | (1,109 | ) |   |          |   |  |   |         | (671   | )
|                                                                            |                                 |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |       
|                                                                            |                                 |   | 21,856  |        |              |   | 7,877        |        |               |   | (1,140       | )      |   |   |          |   |  |   | 28,593  |       
|                                                                            |                                 |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |       
|Income (loss) before income taxes and
equity in earnings from joint
venture |                                 |   | (43,098 | )      |              |   | 10,130       |        |               |   | 21,303       |        |   |   | 655      |   |  |   | (11,010 | )     
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Income tax expense                                                          |                                 |   | 1,535   |        |              |   |              |        |               |   | 2,220        |        |   |   |          |   |  |   | 3,755   |       
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Equity in earnings from joint venture                                       |                                 |   | (1,876  | )      |              |   |              |        |               |   |              |        |   |   |          |   |  |   | (1,876  | )     
|                                                                            |                                 |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |       
|Income (loss) before equity in
income of
consolidated subsidiaries          |                                 |   | (42,757 | )      |              |   | 10,130       |        |               |   | 19,083       |        |   |   | 655      |   |  |   | (12,889 | )     
|                                                                           
|                                                                           
|                                                                           
|                                                                           
|Equity in income of consolidated
subsidiaries                               |                                 |   | (29,868 | )      |              |   |              |        |               |   |              |        |   |   | 29,868   |   |  |   |         |       
|                                                                            |                                 |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |       
|Net income (loss)                                                           |                                 | $ | (12,889 | )      |              | $ | 10,130       |        |               | $ | 19,083       |        |   | $ | (29,213  | ) |  | $ | (12,889 | )     
|                                                                            |                                 |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |       

17



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##### Table of Contents



THE HOLMES GROUP, INC.
CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2002 (IN THOUSANDS)
(UNAUDITED)

|                                                                                                |                             |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |        |  
|----------------------------------------------------------------------------------------------- | --------------------------- | - | ------- | ------ | ------------ | - | ------------ | ------ | ------------- | - | ------------ | ------ | - | - | -------- | - |  | - | ------- | ------ | -
|                                                                                                |                             |   |         |        |              |   | Guarantor    |        | Non-Guarantor |   |              |        |   |   |          |   | 
|                                                                                                |                             |   | Parent  |        | Subsidiaries |   | Subsidiaries |        | Eliminations  |   | Consolidated
|                                                                                                |                             |   |         |        |              |   |              |        |               |   |             
|Net sales                                                                                       |                             | $ | 130,743 |        |              | $ | 218,536      |        |               | $ | 291,811      |        |   | $ | (238,287 | ) |  | $ | 402,803 |       
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Cost of goods sold                                                                              |                             |   | 113,194 |        |              |   | 168,914      |        |               |   | 254,230      |        |   |   | (236,527 | ) |  |   | 299,811 |       
|                                                                                                |                             |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |       
|Gross profit (loss)                                                                             |                             |   | 17,549  |        |              |   | 49,622       |        |               |   | 37,581       |        |   |   | (1,760   | ) |  |   | 102,992 |       
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Operating expenses:                                                                             |                             |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |       
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Selling and administrative  |   |         | 36,035 |              |   |              | 28,864 |               |   |              | 14,768 |   |   |          |   |  |   |         | 79,667 |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Restructuring               |   |         |        |              |   |              | 3,137  |               |   |              |        |   |   |          |   |  |   |         | 3,137  |  
|                                                                                                |                             |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |       
|                                                                                                |                             |   | 36,035  |        |              |   | 32,001       |        |               |   | 14,768       |        |   |   |          |   |  |   | 82,804  |       
|                                                                                                |                             |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |       
|Operating profit (loss)                                                                         |                             |   | (18,486 | )      |              |   | 17,621       |        |               |   | 22,813       |        |   |   | (1,760   | ) |  |   | 20,188  |       
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Other income and expense:                                                                       |                             |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |       
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Interest expense            |   |         | 22,351 |              |   |              | 50     |               |   |              | (17    | ) |   |          |   |  |   |         | 22,384 |  
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                                | Other expense (income), net |   |         | (206   | )            |   |              | (8,897 | )             |   |              | (856   | ) |   |          |   |  |   |         | (9,959 | )
|                                                                                                |                             |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |       
|                                                                                                |                             |   | 22,145  |        |              |   | (8,847       | )      |               |   | (873         | )      |   |   |          |   |  |   | 12,425  |       
|                                                                                                |                             |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |       
|Income (loss) before income taxes,
equity in earnings from joint
venture and extraordinary item |                             |   | (40,631 | )      |              |   | 26,468       |        |               |   | 23,686       |        |   |   | (1,760   | ) |  |   | 7,763   |       
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Income tax expense (benefit)                                                                    |                             |   | (2,583  | )      |              |   | (2,385       | )      |               |   | 4,714        |        |   |   |          |   |  |   | (254    | )     
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Equity in earnings from joint venture                                                           |                             |   | (1,994  | )      |              |   |              |        |               |   |              |        |   |   |          |   |  |   | (1,994  | )     
|                                                                                                |                             |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |       
|Income (loss) before equity in
income of consolidated subsidiaries
and extraordinary item       |                             |   | (36,054 | )      |              |   | 28,853       |        |               |   | 18,972       |        |   |   | (1,760   | ) |  |   | 10,011  |       
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Equity in income of consolidated
subsidiaries                                                   |                             |   | (46,065 | )      |              |   |              |        |               |   |              |        |   |   | 46,065   |   |  |   |         |       
|                                                                                                |                             |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |       
|Income before extraordinary item                                                                |                             |   | 10,011  |        |              |   | 28,853       |        |               |   | 18,972       |        |   |   | (47,825  | ) |  |   | 10,011  |       
|                                                                                               
|                                                                                               
|                                                                                               
|                                                                                               
|Extraordinary gain                                                                              |                             |   | 22,388  |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   | 22,388  |       
|                                                                                                |                             |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |       
|Net income (loss)                                                                               |                             | $ | 32,399  |        |              | $ | 28,853       |        |               | $ | 18,972       |        |   | $ | (47,825  | ) |  | $ | 32,399  |       
|                                                                                                |                             |   |         |        |              |   |              |        |               |   |              |        |   |   |          |   |  |   |         |       

18



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##### Table of Contents



THE HOLMES GROUP, INC.
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001 (IN THOUSANDS)
(UNAUDITED)

|                                                     |                                                       |   |         |         |              |   |              |         |               |   |        |         |   |   |         |         |  
|---------------------------------------------------- | ----------------------------------------------------- | - | ------- | ------- | ------------ | - | ------------ | ------- | ------------- | - | ------ | ------- | - | - | ------- | ------- | -
|                                                     |                                                       |   |         |         |              |   | GUARANTOR    |         | NON-GUARANTOR |   |        |         |  
|                                                     |                                                       |   | PARENT  |         | SUBSIDIARIES |   | SUBSIDIARIES |         | CONSOLIDATED 
|                                                     |                                                       |   |         |         |              |   |              |         |              
|NINE MONTHS ENDED SEPTEMBER 30, 2002                 |                                                       |   |         |         |              |   |              |         |               |   |        |         |   |   |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|Net
cash provided by (used for) operating activities |                                                       | $ | (17,190 | )       |              | $ | 3,090        |         |               | $ | 42,010 |         |   | $ | 27,910  |        
|                                                    
|                                                    
|                                                    
|                                                    
|Cash flows from investing activities:                |                                                       |   |         |         |              |   |              |         |               |   |        |         |   |   |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from assets held for sale                    |   |         |         |              |   |              | 15,100  |               |   |        |         |   |   |         | 15,100  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Distribution of earnings from joint venture           |   |         | 1,819   |              |   |              |         |               |   |        |         |   |   |         | 1,819   |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchases of property, plant and equipment            |   |         | (3,635  | )            |   |              | (744    | )             |   |        | (5,464  | ) |   |         | (9,843  | )
|                                                     |                                                       |   |         |         |              |   |              |         |               |   |        |         |   |   |         |        
|Net cash used for investing activities               |                                                       |   | (1,816  | )       |              |   | 14,356       |         |               |   | (5,464 | )       |   |   | 7,076   |        
|                                                    
|                                                    
|                                                    
|                                                    
|Cash flows from financing activities:                |                                                       |   |         |         |              |   |              |         |               |   |        |         |   |   |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Repayments of Credit Facility, net of issuance costs  |   |         | (27,129 | )            |   |              |         |               |   |        |         |   |   |         | (27,129 | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other activity with Parent, net                       |   |         | 57,990  |              |   |              | (19,247 | )             |   |        | (38,743 | ) |   |         |         |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Redemption of long-term debt                          |   |         | (11,550 | )            |   |              |         |               |   |        |         |   |   |         | (11,550 | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Debt issuance costs                                   |   |         | (1,579  | )            |   |              |         |               |   |        |         |   |   |         | (1,579  | )
|                                                     |                                                       |   |         |         |              |   |              |         |               |   |        |         |   |   |         |        
|                                                     | Net cash provided by (used for ) financing activities |   |         | 17,732  |              |   | $            | (19,247 | )             |   | $      | (38,743 | ) |   | $       | (40,258 | )
|                                                    
|                                                    
|                                                    
|                                                    
|Effect of exchange rate changes on cash              |                                                       |   |         |         |              |   |              |         |               |   | (157   | )       |   |   | (157    | )      
|                                                     |                                                       |   |         |         |              |   |              |         |               |   |        |         |   |   |         |        
|Net increase (decrease) in cash and cash equivalents |                                                       |   | (1,274  | )       |              |   | (1,801       | )       |               |   | (2,354 | )       |   |   | (5,429  | )      
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and cash equivalents, beginning of period       |                                                       |   | 4,083   |         |              |   | 1,312        |         |               |   | 4,720  |         |   |   | 10,115  |        
|                                                     |                                                       |   |         |         |              |   |              |         |               |   |        |         |   |   |         |        
|Cash and cash equivalents, end of period             |                                                       | $ | 2,809   |         |              | $ | (489         | )       |               | $ | 2,366  |         |   | $ | 4,686   |        
|                                                     |                                                       |   |         |         |              |   |              |         |               |   |        |         |   |   |         |        
|NINE MONTHS ENDED SEPTEMBER 30, 2001                 |                                                       |   |         |         |              |   |              |         |               |   |        |         |   |   |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|Net cash provided by operating activities            |                                                       | $ | 1,314   |         |              | $ | 35,188       |         |               | $ | 2,198  |         |   | $ | 38,700  |        
|                                                    
|                                                    
|                                                    
|                                                    
|Cash flows from investing activities:                |                                                       |   |         |         |              |   |              |         |               |   |        |         |   |   |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Distribution of earnings from joint venture           |   |         | 1,360   |              |   |              |         |               |   |        |         |   |   |         | 1,360   |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cash received from joint venture partner              |   |         |         |              |   |              |         |               |   |        | 700     |   |   |         | 700     |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from assets held for sale                    |   |         | 2,053   |              |   |              |         |               |   |        |         |   |   |         | 2,053   |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchases of property, plant and equipment            |   |         | (1,952  | )            |   |              | (2,048  | )             |   |        | (7,095  | ) |   |         | (11,095 | )
|                                                     |                                                       |   |         |         |              |   |              |         |               |   |        |         |   |   |         |        
|Net cash provided by (used for) investing activities |                                                       |   | 1,461   |         |              |   | (2,048       | )       |               |   | (6,395 | )       |   |   | (6,982  | )      
|                                                    
|                                                    
|                                                    
|                                                    
|Cash flows from financing activities:                |                                                       |   |         |         |              |   |              |         |               |   |        |         |   |   |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Repayments of Credit Facility, net of issuance costs  |   |         | (29,124 | )            |   |              |         |               |   |        |         |   |   |         | (29,124 | )
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other net activity with Parent                        |   |         | 27,590  |              |   |              | (33,863 | )             |   |        | 6,273   |   |   |         |         |  
|                                                     |                                                       |   |         |         |              |   |              |         |               |   |        |         |   |   |         |        
|Net
cash provided by (used for) financing activities |                                                       |   | (1,534  | )       |              |   | (33,863      | )       |               |   | 6,273  |         |   |   | (29,124 | )      
|                                                    
|                                                    
|                                                    
|                                                    
|Effect of exchange rate changes on cash              |                                                       |   |         |         |              |   |              |         |               |   | (150   | )       |   |   | (150    | )      
|                                                     |                                                       |   |         |         |              |   |              |         |               |   |        |         |   |   |         |        
|Net increase (decrease) in cash and cash equivalents |                                                       |   | 1,241   |         |              |   | (723         | )       |               |   | 1,926  |         |   |   | 2,444   |        
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and cash equivalents, beginning of period       |                                                       |   | 175     |         |              |   | 959          |         |               |   | 1,883  |         |   |   | 3,017   |        
|                                                     |                                                       |   |         |         |              |   |              |         |               |   |        |         |   |   |         |        
|Cash and cash equivalents, end of period             |                                                       | $ | 1,416   |         |              | $ | 236          |         |               | $ | 3,809  |         |   | $ | 5,461   |        
|                                                     |                                                       |   |         |         |              |   |              |         |               |   |        |         |   |   |         |        

19



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##### Table of Contents



THE HOLMES GROUP, INC.




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

OVERVIEW

The Holmes Group, Inc., is a leading developer, manufacturer and marketer of
quality, branded home appliances, including home environment and small kitchen
electric appliances. Our home environment products include fans, heaters,
humidifiers and air purifiers. We believe that we have a leading market share
in the United States for each of these product categories. Our kitchen
appliances include Crock-Pot® slow cookers, roaster ovens, skillets, and deep
fryers, where we believe we hold the number one or two market share, and other
similar small kitchen electric appliances. We believe that our strong market
position is attributable to our continuous product innovation, engineering and
manufacturing expertise, close customer partnerships, breadth of product
offerings, reputation for quality, and our manufacturing presence and
experience in the Far East.

Our products are sold under the Holmes®, Rival®, Crock-Pot®, White Mountain®,
Bionaire®, Patton®, Family Care® and Titan® brand names. We also sell products
to certain retailers under licensed brand names, including General Electric®,
Sunbeam® and Halls®. Our products are sold to consumers through major retail
chains, including mass merchants, do-it-yourself home centers, warehouse clubs,
hardware, department and specialty stores and national drug store chains. We
believe that the strength, scope and visibility of our retail account base
provide a competitive advantage with respect to brand recognition, access to
shelf space and penetration of the consumer market.

Sales of most of our products follow seasonal patterns that affect our results
of operations. In general, sales of fans occur predominantly from January
through June, and sales of heaters and humidifiers occur predominantly from
July through December. Although kitchen electrics, air purifiers, lighting
products and accessories generally are used year-round, these products tend to
draw increased sales during the winter months when people are indoors and, as a
result, sales of these products tend to be greatest in advance of the winter
months from July through December. Additionally, many of our kitchen products
are given as gifts and, as such, sell at larger volumes during the holiday
season. When holiday shipments are combined with seasonal products, our sales
during the months of August through November are generally at a higher level
than during the other months of the year. In addition to the seasonal
fluctuations in sales, we experience seasonality in gross profit, as margins
realized on fan products tend to be lower than those realized on other home
environment and kitchen electric products.

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 and Section 21E of the
Securities Exchange Act of 1934. We caution investors that any forward-looking
statements presented in this report and presented elsewhere by management from
time to time are based on managements beliefs and assumptions made by, and
information currently available to, management. When used, the words
anticipate, believe, expect, intend, may, might, plan,
estimate, project, should, will be, will result and similar
expressions, which do not relate solely to historical matters, are intended to
identify forward-looking statements. Such statements are subject to risks,
uncertainties and assumptions and are not guaranties of future performance,
which may be affected by known or unknown risks, trends, uncertainties and
factors that are beyond our control. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated or
projected. We expressly disclaim any responsibility to update forward-looking
statements. Accordingly, past results and trends should not be used by
investors to anticipate future results or trends.

Risks and uncertainties that may affect future performance are detailed from
time to time in reports filed by the Company with the SEC, including Forms 10-Q
and 10-K and the Companys most recent Registration Statement on Form S-4 (File
No. 333-77095), and include, among others, the following:



| |  | Our degree of leverage and continued compliance with debt covenants.                                           
|- |  | ---------------------------------------------------------------------------------------------------------------
| 
| |  | Our dependence on major customers and key employees.                                                           
| 
| |  | Any significant decline in purchases by our larger customers or pressure from these customers to reduce prices.
| 
| |  | The bankruptcy or loss of any major retail customer or supplier.                                               
| 
| |  | Weakness in the U.S. retail market.                                                                            
| 
| |  | The financial condition of the retail industry.                                                                
| 
| |  | The infringement or loss of our rights with respect to patents and trademarks related to our products.         
| 
| |  | Fluctuations in cost and availability of raw materials and components.                                         
| 
| |  | Product recalls and product liability claims against us or other regulatory actions.                           

20



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##### Table of Contents



THE HOLMES GROUP, INC.

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   (CONTINUED)



| |  | Changes in demand for the Companys products.                                                      
|- |  | ---------------------------------------------------------------------------------------------------
| |  | Changing conditions in foreign countries.                                                          
| |  | An extended interruption in the operation of our manufacturing facilities in China.                
| |  | Changes in the political
climate in the Far East or in U.S. trade relations in the region.         
| |  | Currency fluctuations in our international operations.                                             
| |  | Difficulties in implementing and maintaining new computer systems.                                 
| |  | Changes in retailer inventory management or failure of our order processing and logistical systems.
| |  | Interruptions in data and communications systems.                                                  
| |  | Our ability to develop new and innovative products and customer acceptance of such products.       
| |  | Seasonality of our operating results.                                                              
| |  | Competition with other large companies that produce similar products.                              
| |  | The success of our marketing and promotional programs.                                             
| |  | Potential transportation delays or increased freight costs.                                        

The risks included here are not exhaustive. Other sections of this report may
include additional factors which could adversely affect the Companys business
and financial performance. Moreover, the Company operates in a very
competitive and rapidly changing environment. New risk factors emerge from
time to time and it is not possible for management to predict all such risk
factors, nor can it assess the impact of all such risk factors on the Companys
business or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in any
forward-looking statements. Given these risks and uncertainties, investors
should not place undue reliance on forward-looking statements as a prediction
of actual results.

In particular, the Company continues to closely monitor the contract
negotiations between the Pacific Maritime Association (the PMA) and the
International Longshore and Warehouse Union (the ILWU). The PMA represents
West Coast port employers and shippers, who handle a substantial amount of the
Companys import shipments from its Far East
manufacturing facilities and independent suppliers. The previous contract between the PMA and ILWU
expired on July 1, 2002, subsequent to which work stoppages and short-term
compromises have occurred intermittently. On October 8, 2002, President George W.
Bush invoked the Taft-Hartley Act, which has required that the PMA leave the
ports open and that members of the ILWU return to work. A long-term solution
has therefore not been reached. When the West Coast ports reopened in early
October, the Company had 424 containers of product (approximately $12.7 million
of inventory, at cost) in the ports or on ships in and around the harbors. As
of November 5, 2002, approximately 75% of these containers have been received
at the Companys distribution centers. The Company has experienced some
shipping delays related to the work stoppage at the West Coast ports and has
incurred additional freight costs of approximately $0.5 million due to the
delays. Further uncertainty in the relationship between the PMA and the ILWU
could cause a disruption in the U.S. transportation network, which could
adversely affect the Companys operations in the fourth quarter of 2002 and in
fiscal 2003.

COMPARISON OF THREE MONTH PERIODS ENDED SEPTEMBER 30, 2002 AND SEPTEMBER 30, 2001

Net sales during the third quarter of 2002 totaled $153.5 million, a decrease
of $4.8 million or 3% below the sales level achieved in the comparable period
of 2001. The decrease was primarily caused by the absence of sales from the
Pollenex Division, which was divested in January 2002. In the recently
completed quarterly period, the Company faced a challenging sales comparison as
the third quarter of 2001 saw a 38% increase over the comparable period of 2000
due primarily to the sell-in of a stronger kitchen product line.

Gross profit in the third quarter of 2002 was $42.2 million, an increase of
$2.6 million or 6.7% above the gross profit of $39.6 million earned in the
third quarter of 2001. As a percent of sales, gross profit improved to 27.5%
in the third quarter of 2002 compared to the gross profit rate of 25.0% in
2001. Most product categories reflected improved gross margins in 2002. This
margin improvement was partially offset by higher discounts and allowances
granted to retailers.

Operating expenses, including costs related to restructuring activities, during
the third quarter of 2002 increased $2.4 million or 10% above the costs
incurred during the comparable period of 2001. Restructuring costs, primarily
related to the closure of the Companys Sedalia distribution center, totaled
$1.4 million in 2002 compared to similar costs related to other restructuring
initiatives of $0.6 million in 2001. Operating expenses in the third quarter
of 2002 also included an additional bad debt provision of $0.7 million related
to pre-bankruptcy receivables of Kmart and $1.6 million of costs
related to the implementation of an enterprise-wide computer system. In the
fourth quarter of 2001, the Company recorded a bad debt provision of $14.1
million related to the Kmart bankruptcy filing. In 2002, operating expenses
were also favorably impacted as the Company is no longer amortizing goodwill in
accordance with the new accounting standards.

21



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##### Table of Contents



THE HOLMES GROUP, INC.

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   (CONTINUED)

Interest and other expenses reduced operating income by $6.7 million in the
third quarter of 2002 compared to $8.2 million in 2001. Interest expenses
decreased $1.3 million or 14.8% due to lower average borrowings under the
Companys Credit Facility, the March 2002 repurchase of a portion of the
Companys Senior Subordinated Notes and lower interest rates.

Income tax expense in the third quarter of 2002 increased $1.9 million
reflecting the higher pre-tax income earned in the most recent quarter. The
Companys share of the earnings from its joint venture with General Electric
increased earnings by $0.7 million in 2002 compared to income of $0.5 million
in 2001.

During the third quarter of 2002, the Companys net income decreased slightly
from the 2001 results as a higher tax provision related to foreign
operations and increased restructuring
costs offset the improved gross profit performance and the lower interest
expense in the 2002 period.

COMPARISON OF NINE MONTH PERIODS ENDED SEPTEMBER 30, 2002 AND SEPTEMBER 30, 2001

Net sales during the first nine months of 2002 totaled $402.8 million, a
decrease of $9.4 million or 2.3% below the sales level achieved in the
comparable period of 2001. Excluding 2001 sales of the Pollenex Division,
which was divested in January 2002, net sales increased $1.3 million or 0.3%
during the first nine months of 2002. Increased shipments of small kitchen
electric products offset lower sales in the home environment category during
the period. During 2002, the Company de-emphasized certain lower margin fan
products which negatively impacted home environment sales comparisons.

Gross profit during the nine months of 2002 increased $5.1 million or 5.2% from
2001 despite the lower overall sales volume. The Companys gross profit rate
improved by 1.8 percentage points during the period to 25.6% in 2002 compared
to 23.8% in 2001. Improved product gross margins and favorable sales mix
changes, especially within the home environment category, contributed to the
gross profit rate improvement. These factors offset higher unfavorable
manufacturing variances at domestic facilities and increased discounts and
allowances granted to customers during the first nine months of 2002.

Operating expenses increased $2.5 million or 3.1% during the first nine months
of 2002 as compared to the spending level in the 2001 period. After adjusting
the 2001 operating costs for $1.9 million in goodwill amortization, which is no
longer expensed under the new accounting standards, operating costs in 2002
increased by $4.5 million or 5.7% above the spending level in the first nine
months of 2001. Approximately 25% of this cost increase was due to higher
restructuring costs in the first nine months of 2002. As
restructuring costs related to the closing of the Company's Sedalia,
Missouri distribution facility totaled $3.1 million in 2002
compared to similar costs related to other restructuring activities
of $2 million in 2001. Operating costs in 2002
also included approximately $3.9 million of costs related to the implementation
of new computer systems.

Other income and expense for the nine months ended September 30, 2002 reduced
income by $12.4 million compared to a reduction of $28.6 million in the 2001
nine-month period. Interest expense in 2002 decreased by $6.9 million due to
lower average debt levels outstanding during the year. The Companys debt
levels in the first nine months of 2002 were reduced by the March 2002
repurchase of Senior Subordinated Notes, repayments of term loans and lower
working capital requirements which resulted in a 26% reduction in the average
outstanding balance of the Companys Revolving Credit Facility. The favorable
expense impact of the lower borrowings in 2002 was partially offset by a $1.4
million non-cash charge for deferred financing fees associated with the
Companys amended Credit Facility. Interest expense in the
nine-month period of 2001 also included a charge of $1 million
related to warrants which were issued as part of the Fourth Amendment
to the Credit Facility in May 2001. Other income in 2002 includes a $9.1
million gain realized on the sale of the Pollenex business in January 2002.

Income taxes for the nine months ended September 30, 2002 resulted in a net
benefit of $0.2 million compared to a tax provision of $3.8 million in 2001.
Income taxes were lower in 2002 as a benefit of $5 million related to
additional net operating loss carrybacks, which were made possible by recent
tax law changes, more than offset the tax expense related to current income
generated by foreign subsidiaries. In the first nine months of 2002, income
includes $2 million of earnings related to the Companys joint venture with
General Electric, up 6.3% from the joint venture earnings in 2001.

In March 2002, the Company repurchased $36.2 million face amount of its Senior
Subordinated Notes. The purchase price of $11.5 million plus accrued interest
was funded with proceeds from the Revolving Credit Loan B. The Notes
repurchased were retired and cancelled. This transaction resulted in an
extraordinary gain on the early retirement of debt of $22.4 million that was
recorded in the consolidated statement of operations for the nine months ended
September 30, 2002. This gain is net of the write-off of approximately $1.9
million of debt issuance costs and $0.3 million of debt issuance discount
associated with the Senior Subordinated Notes and $0.1 million of transaction
fees. A provision for income taxes has not been recorded in connection with
this transaction as the Company expects to offset the gain with domestic operating losses.

As a result of the above factors, net income for the first nine months of 2002
was $32.4 million, compared to a net loss of $12.9 million in the comparable
period of 2001.

22



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##### Table of Contents



THE HOLMES GROUP, INC.

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   (CONTINUED)

LIQUIDITY AND CAPITAL RESOURCES

Analysis of Cash Flows

Following the recapitalization transaction in November 1997 and the acquisition
of the Rival business in February 1999, we have funded our liquidity
requirements with cash flows from operations and borrowings under the Credit
Facility. Our primary liquidity requirements are for working capital and to
service our indebtedness. While there can be no assurance, we believe that
existing cash resources, cash flows from operations and borrowings under the
amended Credit Facility will be sufficient to meet our liquidity needs for the
next twelve months, during which time we will continue to carefully evaluate
our financing requirements.

The Companys cash and cash equivalents decreased to $4.7 million at September
30, 2002 from $10.1 million at December 31, 2001.
Cash provided by operations for the nine months ended September 30, 2002 and
2001 was $27.9 million and $38.7 million, respectively. For the nine months
ended September 30, 2002, operating earnings, adjusted for non-cash items,
improved to $20.1 million as compared to adjusted operating earnings of $4
million in the comparable period of 2001. Changes in other operating assets
and liabilities provided $7.8 million of cash in the nine months of 2002
compared to $34.7 million in 2001. During the 2002 nine-month
period, the Company used $40.1 million of cash to increase
inventory levels primarily due to seasonal considerations. In the
comparable period of 2001, inventories had only increased
$2.5 million from the year-end level. In the second half of
2001, the Companys efforts to better control working capital
had resulted in lower year-end inventories with the levels at
December 31, 2001 below the 2000 amount by $27.9 million or 21.3%. While inventory levels at September 30,
2002 were $5.2 million or 3.9% higher than a year ago, accounts receivable
balances decreased significantly from the year ago levels, down $13.3 million
or 10.7% from the levels at September 30, 2001. Days sales outstanding (DSO)
at September 30, 2002 stood at 65 days, 8% below the DSO statistic in September
2001.

Cash provided by investing activities for the nine months ended September 30,
2002 was $7.1 million compared to $7 million of cash used in 2001. The 2002
amount includes $15.1 million in proceeds received in connection with the sale
of the Pollenex Division. The proceeds were offset by $9.8 million invested in
capital expenditures for property, plant and equipment during 2002 compared to
capital expenditures of $11.1 million in the first nine months of 2001. The
Company expects to spend approximately $16 million on capital expenditures in
2002, primarily related to the expansion of our China manufacturing facilities,
the implementation of computer systems and on-going tooling costs to support
product development needs. In the first nine months of 2002, the Company also
received $1.8 million in earnings distributions from its joint venture with
General Electric compared to $1.4 million in the 2001 period.

Cash used for financing activities for the nine months ended September 30, 2002
and 2001 was $40.3 million and $29.1 million, respectively. Cash used for
financing in 2002 reflected repayments on the Revolving Credit Facility using
cash flow from operations, the repurchase of a portion of the outstanding
Senior Subordinated Notes and debt issuance costs associated with the March
2002 Credit Facility amendment, which is described in the next section.

23



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##### Table of Contents



THE HOLMES GROUP, INC.

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   (CONTINUED)

Financing Arrangements.

On March 22, 2002, the Company and its lending group agreed to a Fifth
Amendment to the Credit Facility. The Fifth Amendment revised certain of the
financial ratio covenants for the periods ending December 31, 2001 through June
30, 2004. Under the Fifth Amendment, the lenders have committed to a Revolving
Credit Loan A of $131 million and a Revolving Credit Loan B of $40 million.
Revolving Credit Loan B continues to be supported by the guarantee of two
investment funds affiliated with Berkshire Partners, which was entered into in
connection with the Fourth Amendment of the Credit Facility in May
2001. Actual
availability under these revolving credit facilities is subject to a borrowing
base formula based on inventory and accounts receivable. Under the Fifth
Amendment, the maturity date of the Revolving Credit Loan B was extended from
July 1, 2002 to July 1, 2004. The maturity date of the Revolving Credit Loan A
and the Term Loan A remain at February 5, 2005, although the availability under
the Revolving Credit Loan A commitment will terminate on July 1, 2004 unless
otherwise approved by a majority of the lenders. The maturity date of the Term
Loan B remains at February 5, 2007. As part of the Fifth Amendment, the
applicable interest rate margins on the Revolving Credit Loan B were reduced,
while the margins on the Revolving Credit Loan A and the Term Loans A and B
were increased.

During the first nine months of 2002, the weighted average borrowings under the
Revolving Credit Facility were $79.9 million, 26.4% lower than the average
outstanding borrowings of $108.6 million in the comparable period of 2001.
Availability under the Revolving Credit Facility is reduced by outstanding
letters of credit. As of September 30, 2002, our availability was $63.5
million, net of outstanding letters of credit totaling
$10.7 million. During the first nine months of 2002, the Term
Loan portion of the Credit Facility decreased by $12.8 million
to a total of $93.5 million at September 30, 2002 as
regular principal payments and the application of the Pollenex
proceeds reduced the outstanding balance from the 2001 year-end
amount. The
Credit Facility bears interest at variable rates based on either the prime rate
or eurodollar rate, at our option, plus a margin which, in the case of the Term
Loan A and a portion of the Revolving Credit Facility, varies depending upon
certain financial ratios. The Credit Facility, and the guaranties thereof by
our domestic subsidiaries, are secured by substantially all of our domestic and
certain foreign assets. The Credit Facility is cross-defaulted to the Notes
Indentures.

In conjunction with the Fifth Amendment, Holmes repurchased from the two
Berkshire Partners investment funds an aggregate principal amount of
approximately $36.2 million of the Senior Subordinated Notes. The purchase
price of the Notes, representing Berkshire Partners cost, was $11.5 million
plus accrued interest, which was funded with proceeds of the Revolving Credit
Loan B. The Notes repurchased were retired and cancelled. This transaction
resulted in an extraordinary gain on the early retirement of debt of $22.4
million that was recorded in the consolidated statement of operations for the
nine months ended September 30, 2002. The Company may consider repurchases of
additional Notes in the future, and we may utilize the proceeds of the Credit
Facility for this purpose. As of September 30, 2002, $99.5 million of Senior
Subordinated Notes were outstanding. At September 30, 2002, total debt
amounted to $290.3 million, down $48.3 million or 14.3% below the level of debt
outstanding at September 30, 2001.

The Credit Facility, as amended, and the Notes Indentures include certain
financial and operating covenants which, among other things, restrict our
ability to incur additional indebtedness, make investments and take certain
other actions. Our ability to meet our debt service obligations will be
dependent upon the Companys future performance, which will be impacted by
general economic conditions and other factors.

RECENTLY ISSUED ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board (the FASB) issued
Statement of Financial Accounting Standards No. 141, Business Combinations
(FAS 141) and No. 142, Goodwill and Other Intangible Assets (FAS 142). FAS
141 supersedes Accounting Principles Board Opinion (APB) No. 16, Business
Combinations. The provisions of FAS 141 (i) require that the purchase method
of accounting be used for all business combinations initiated after June 30,
2001, (ii) provide specific criteria for the initial recognition and
measurement of intangible assets apart from goodwill, and (iii) require that
unamortized negative goodwill be written off immediately as an extraordinary
gain instead of being deferred and amortized. FAS 141 also requires that upon
adoption of FAS 142 the Company reclassify the carrying amounts of certain
intangible assets into or out of goodwill, based on certain criteria.

FAS 142 supersedes APB No. 17, Intangible Assets, and is effective for fiscal
years beginning after December 15, 2001. FAS 142 primarily addresses the
accounting for goodwill and intangible assets subsequent to their initial
recognition. The provisions of FAS 142 (i) prohibit the amortization of
goodwill and indefinite-lived intangible assets, (ii) require that goodwill and
indefinite-lived intangibles assets be tested annually for impairment (and in
interim periods if certain events occur indicating that the carrying value of
goodwill and/or indefinite-lived intangible assets may be impaired), (iii)
require that reporting units be identified for the purpose of assessing
potential future impairments of goodwill, and (iv) remove the forty-year
limitation on the amortization period of intangible assets that have finite
lives.

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##### Table of Contents



THE HOLMES GROUP, INC.

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   (CONTINUED)

The Companys application of the non-amortization provisions of FAS 142 will
result in an increase in net earnings of approximately $2.5 million per year.
For the three and nine months ended September 30, 2001, the Companys net
income (loss), adjusted for $0.6 million and $1.9 million of amortization
expense recorded in the consolidated statement of operations, which is no
longer being amortized in accordance with the provisions of FAS 142, is
approximately $4.7 million and ($10.9) million, respectively. In connection
with the adoption of FAS 142, the Company does not expect to record any
reclassifications to its goodwill balance. FAS 142 requires that goodwill be
tested annually for impairment using a two-step process. The first step is to
identify a potential impairment and, in transition, this step must be measured
as of the beginning of the fiscal year. Under the implementation provisions of
FAS 142, the Company had until June 30, 2002 to complete step one. The second
step of the goodwill impairment test measures the amount of the impairment
loss, if any, and must be completed as soon as possible but no later than the
end of fiscal 2002. The Company completed step one of the goodwill impairment
test during the second quarter of 2002 and determined that goodwill associated
with the Kitchen and Home Environment reporting units is significantly impaired
under FAS 142. This impairment loss will be reflected as the cumulative effect
of a change in accounting principle as of January 1, 2002. Impairment losses
recognized subsequent to the initial adoption of FAS 142 will be recorded as a
charge to current period earnings.

As of September 30, 2002, the Company had goodwill of approximately $80 million
related to its Kitchen and Home Environment reporting units, which is subject
to the transitional goodwill impairment test. These reporting units are
recorded within the Consumer Durables segment as reported in Note 7 of the
consolidated financial statements. Because of the level of effort needed to
comply with the adoption of FAS 142, it is not practical to reasonably estimate
the impairment charge that the Company will record upon finalization of the FAS
142 implementation provisions. However, the Company expects to
write off a material amount of goodwill upon adoption of the new
standard.

In July 2001, the FASB issued Statement of Financial Accounting Standards No.
143, Accounting for Asset Retirement Obligations (FAS 143). FAS 143 requires
entities to record the fair value of a liability for an asset retirement
obligation in the period in which it is incurred. When the liability is
initially recorded, the entity is required to capitalize the cost by increasing
the carrying amount of the related long-lived asset. Over time, the liability
is accreted to its present value each period, and the capitalized cost is
depreciated over the useful life of the related asset. FAS 143 is effective for
fiscal years beginning after June 15, 2002 and will be adopted by the Company
effective fiscal 2003. The Company is currently evaluating the effect of
implementing FAS No. 143.

In August 2001, the FASB issued Statement of Financial Accounting Standards No.
144, Accounting for the Impairment or Disposal of Long-lived Assets (FAS
144), which supersedes Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-lived Assets and for Long-lived Assets
to Be Disposed Of (FAS 121), and the accounting and reporting provisions of
APB Opinion No. 30, Reporting the Results of Operations  Reporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions (APB 30), for the disposal of a
segment of a business. Because FAS 121 did not address the accounting for a
segment of a business accounted for as a discontinued operation under APB 30,
two accounting models existed for long-lived assets to be disposed. FAS 144
establishes a single accounting model, based on the framework established in
FAS 121, for long-lived assets to be disposed. It also addresses certain
significant implementation issues under FAS 121. The provisions of FAS 144 were
adopted by the Company as of the beginning of fiscal year 2002 with no material
effect on the consolidated financial statements.

In November 2001, the FASB Emerging Issues Task Force (EITF) reached a
consensus on Issue No. 01-9 (formerly EITF Issue 00-25), Accounting for
Consideration Given to a Customer or a Reseller of the Vendors Products. This
issue addresses the recognition, measurement and income statement
classification of consideration from a vendor to a customer in connection with
the customers purchase or promotion of the vendors products. This consensus
only impacts revenue and expense classifications and does not change reported
net income. In accordance with the consensus, the Company adopted the required
accounting as of January 1, 2002, and reclassified approximately $4.8 million
and $9.1 million of cooperative advertising expenses as deductions from net
sales for the three and nine months ended September 30, 2001, respectively.
These costs were previously classified as selling and administration expenses
in the consolidated statement of operations.

The FASB issued Statement No. 145, Rescission of FASB Statements No. 4, 44 and
64, Amendment of FASB Statement No. 13, and Technical Corrections (FAS No.
145) in April 2002. This statement updates, clarifies and simplifies existing
accounting pronouncements. Specifically, the statement rescinds FASB Statement
No. 4, Reporting Gains and Losses from Extinguishment of Debt (FAS No. 4),
FASB Statement No. 64, Extinguishment of Debt Made to Satisfy, Sinking Fund
Requirements (FAS No. 64) and FASB Statement No. 44 Accounting for
Intangible Assets of Motor Carriers. This statement amends FASB Statement No.
13, Accounting for Leases (FAS No. 13) and certain other existing
authoritative pronouncements to make technical corrections or

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THE HOLMES GROUP, INC.

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   (CONTINUED)

clarifications. FAS No. 145 will be effective for the Company related to the
rescission of FAS No. 4 and FAS No. 64 on January 1, 2003. FAS No. 145 will be
effective related to the amendment of FAS No. 13 for all transactions occurring
after May 15, 2002. All other provisions of FAS No. 145 will be effective for
financial statements issued after May 15, 2002. The Company is
currently evaluating the effect of implementing FAS No. 145.

In July 2002, the FASB issued Statement of Financial Accounting Standards No.
146, Accounting for Costs Associated with Exit or Disposal Activities (FAS
146), which nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). FAS 146 requires a liability for a cost associated with an
exit or disposal activity be recognized and measured initially at its fair
value in the period in which the liability is incurred. If fair value cannot be
reasonably estimated, the liability shall be recognized initially in the period
in which fair value can be reasonably estimated. The provisions of FAS 146 will
be effective for the Company prospectively for exit or disposal activities
initiated after December 31, 2002. The Company is in the process of assessing
the impact of FAS 146 on its consolidated financial statements.




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

At September 30, 2002, the carrying value of our debt totaled $290.3 million.
The fair value of our debt approximated $250 million at the end of the third
quarter in 2002. This debt includes amounts at both fixed and variable
interest rates. For fixed rate debt, interest rate changes affect the fair
market value, but do not impact earnings or cash flows. Conversely, for
variable rate debt, interest rate changes generally do not affect the fair
market value, but do impact earnings and cash flows, assuming other factors are
held constant.

At September 30, 2002, the Company had fixed rate debt of $99.5 million and
variable rate debt of $190.8 million. Assuming a constant debt level, a one
percentage point decrease in interest rates would increase the unrealized fair
market value of fixed rate debt by approximately $5.3 million. Based on the
amounts of variable rate debt outstanding at September 30, 2002, the earnings
and cash flows impact for the next year resulting from a one percentage point
increase in interest rates would be approximately $1.9 million, holding other
variables constant.




ITEM 4. CONTROLS AND PROCEDURES



| | (a) |  | Evaluation of disclosure controls and procedures.
| | --- |  | -------------------------------------------------

Within the 90 days prior to the date of this report, the Company carried
out an evaluation under the supervision and with the participation of the
Companys management, including the Companys Chief Executive Officer and Chief
Financial Officer, of the effectiveness of the design and operation of the
Companys disclosure controls and procedures pursuant to Securities
Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive
Officer and Chief Financial Officer concluded that the Companys disclosure
controls and procedures are effective in timely alerting them to material
information relating to the Company (including its consolidated subsidiaries)
required to be included in the Companys periodic filings with the Securities
and Exchange Commission.



| | (b) |  | Changes in internal controls.
| | --- |  | -----------------------------

There have been no significant changes in the Companys internal controls
or in other factors which could significantly affect internal controls
subsequent to the date the Company carried out its evaluation.

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##### Table of Contents



THE HOLMES GROUP, INC.




PART II. OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS

The Company is involved in various legal proceedings incident to our normal
business operations, including product liability and patent and trademark
litigation. Management believes that the outcome of such litigation will not
have a material adverse effect on our business, financial condition or results
of operations. We have product liability and general liability insurance
policies in amounts management believes to be reasonable. There can be no
assurance, however, that such insurance will be adequate to cover all potential
product or other liability claims against us. We also face exposure to
voluntary or mandatory product recalls in the event that our products are
alleged to have manufacturing or safety defects. We do not maintain product
recall insurance.




ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Not applicable.




ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.




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

Not applicable.




ITEM 5. OTHER INFORMATION

Investor Conference Call

We will hold a telephone conference call on December 3, 2002 at 10 a.m.,
Eastern Standard Time, in order for investors and other interested stakeholders
to hear managements views on our results of operations during the first nine
months of 2002. If you are interested in accessing the call in listen-only
mode, please fax the following information to Kay Ford, Executive Assistant, at
508-422-1676:



| |  | Name of Participant(s)
|- |  | ----------------------
| 
| |  | Company Affiliation   
| 
| |  | Nature of Business    
| 
| |  | Address               
| 
| |  | Phone, Fax and E-mail 




ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K



|a. |  | Exhibits:
|-- |  | ---------

Not applicable.



|b. |  | Reports on Form 8-K:
|-- |  | --------------------

Not applicable.

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THE HOLMES GROUP, INC.




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

THE HOLMES GROUP, INC.
Registrant

|                  |  |                                                                    
|----------------- |  | -------------------------------------------------------------------
|                  |  |                                                                    
|                 
|                 
|                 
|                 
|November 13, 2002 |  | By: /s/ Peter J. Martin                                            
|                  |  |                                                                    
|                  |  | Peter J. Martin, President and
Chief Executive Officer             
|                 
|                 
|                 
|                 
|                  |  | (Principal Executive Officer)                                      
|                 
|                 
|                 
|                 
|                  |  |                                                                    
|                 
|                 
|                 
|                 
|November 13, 2002 |  | By: /s/ John M. Kelliher                                           
|                  |  |                                                                    
|                  |  | John M. Kelliher, Senior Vice President and Chief
Financial Officer
|                 
|                 
|                 
|                 
|                  |  | (Principal Financial and
Accounting Officer)                       
|                 
|                 
|                 
|                 
|                  |  |                                                                    

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##### Table of Contents



THE HOLMES GROUP, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, Peter J. Martin, President and Chief Executive Officer, certify that:



|1. |  | I have reviewed this Quarterly Report on Form 10-Q for the period ended
September 30, 2002 of The Holmes Group, Inc.;                                                                                                                                                                                                         
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                      



| | a. |  | Designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | Evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the Evaluation
Date); and                                                                                                  
|
| | c. |  | Presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent functions):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | All significant deficiencies in the design or operation
of internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data
and have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|      |  |                   |  |  |  |                                                       
|----- |  | ----------------- |  |  |  | ------------------------------------------------------
|      |  |                   |  |  |  |                                                       
|     
|     
|     
|     
|DATE: |  | November 13, 2002 |  |  |  | By:/s/ Peter J. Martin                                
|      |  |                   |  |  |  |                                                       
|      |  |                   |  |  |  | Peter J. Martin, President and
Chief Executive Officer
|     
|     
|     
|     
|      |  |                   |  |  |  | (Principal Executive Officer)                         

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##### Table of Contents



THE HOLMES GROUP, INC.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

Certification Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, John M. Kelliher, Senior Vice
President and Chief Financial Officer, certify
that:



|1. |  | I have reviewed this Quarterly Report on Form 10-Q for the period
ended September 30, 2002 of The Holmes Group, Inc.;                                                                                                                                                                                                         
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:                                                                                                      



| | a. |  | Designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | Evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the Evaluation
Date); and                                                                                                  
|
| | c. |  | Presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the
audit committee of registrants board of directors (or persons
performing the equivalent functions):
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. |  | All significant deficiencies in the design or operation
of internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data
and have identified for the registrants auditors any material
weaknesses in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. |  | Any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrants internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant deficiencies
and material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|      |  |                   |  |  |  |                                                                    
|----- |  | ----------------- |  |  |  | -------------------------------------------------------------------
|      |  |                   |  |  |  |                                                                    
|     
|     
|     
|     
|DATE: |  | November 13, 2002 |  |  |  | By:/s/ John M. Kelliher                                            
|      |  |                   |  |  |  |                                                                    
|      |  |                   |  |  |  | John M. Kelliher, Senior Vice President and
Chief Financial Officer
|     
|     
|     
|     
|      |  |                   |  |  |  | (Principal Financial Officer and Accounting Officer)               

30



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##### Table of Contents



THE HOLMES GROUP, INC.
FORM 10-Q
FOR THE QUARTERLY PEROD ENDED SEPTEMBER 30, 2002

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of The Holmes Group, Inc.
(the Company) on Form 10-Q for the period ended September 30, 2002,
as filed with the Securities and Exchange Commission on the date
hereof (the Report), the undersigned President and Chief
Executive Officer of the Company hereby certifies, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to my knowledge:



|(1) |  | The Report fully complies with the requirements of Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended; and                  
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of
the Company.

|                                      |  | 
|------------------------------------- |  | 
|                                      |  | 
|                                     
|                                     
|                                     
|                                     
|By:/s/ Peter J. Martin                |  | 
|                                      |  | 
|Peter J. Martin                       |  | 
|                                     
|                                     
|                                     
|                                     
|President and Chief Executive Officer |  | 
|                                     
|                                     
|                                     
|                                     
|November 13, 2002                     |  | 

31



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##### Table of Contents



THE HOLMES GROUP, INC.
FORM 10-Q
FOR THE QUARTERLY PEROD ENDED SEPTEMBER 30, 2002

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of The Holmes Group, Inc.
(the Company) on Form 10-Q for the period ended September 30, 2002,
as filed with the Securities and Exchange Commission on the date
hereof (the Report), the undersigned Senior Vice President and
Chief Financial Officer of the Company hereby certifies, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to my knowledge:



|(1) |  | The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and                  
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of
the Company.

|                                                  |  | 
|------------------------------------------------- |  | 
|                                                  |  | 
|                                                 
|                                                 
|                                                 
|                                                 
|By:/s/ John M. Kelliher                           |  | 
|                                                  |  | 
|John M. Kelliher                                  |  | 
|                                                 
|                                                 
|                                                 
|                                                 
|Senior Vice President
and Chief Financial Officer |  | 
|                                                 
|                                                 
|                                                 
|                                                 
|November 13, 2002                                 |  | 

32