<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

                                       OR

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

                         Commission File Number 1-10177

                         WINDMERE-DURABLE HOLDINGS, INC.
             (Exact name of Registrant as specified in its charter)

               Florida                              59-1028301
    (State or other jurisdiction of      (I.R.S. Employer Identification
     incorporation or organization)                  Number)

5980 Miami Lakes Drive, Miami Lakes, Florida          33014
(Address of principal executive offices)            (Zip Code)

Registrant's telephone number, including area code: (305) 362-2611

Securities registered pursuant to Section 12(b) of the Act:

Title of each class                Name of each exchange on which registered
-------------------                -----------------------------------------
Common Stock $.10 Par Value        New York Stock Exchange
Special Preferred Stock Rights     New York Stock Exchange
Common Stock Purchase Rights       New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

         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


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for the past 90 days. Yes  X  No
                          ---     ---

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]

         As of March 24, 1997, the aggregate market value of the voting stock
(based on the closing price as reported by NYSE of $14.375) held by
non-affiliates of the Registrant was approximately $213,387,800.

         APPLICABLE ONLY TO CORPORATE REGISTRANTS: Indicate the number of shares
outstanding of each of the Registrant's classes of common stock, as of the
latest practicable date.

                        17,475,038 Shares of Common Stock
                 (as of the close of business on March 24, 1997)

                       DOCUMENTS INCORPORATED BY REFERENCE

1.       Windmere-Durable Holdings, Inc. 1996 Annual Report to
         Shareholders (for the fiscal year ended December 31, 1996).
         Information contained in this document has been incorporated
         by reference in PARTS I and II.

2.       Windmere-Durable Holdings, Inc. Proxy Statement for its 1997
         Annual Meeting of Shareholders (dated April 18, 1997).
         Information contained in this document has been incorporated
         by reference in PART III.





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                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL

Windmere-Durable Holdings, Inc. (the "Company") is engaged principally in
manufacturing and distributing a wide variety of personal care, kitchen electric
and seasonal products. The Company designs and manufactures its products for
sale to retail stores, distributors and professional beauty supply customers
located primarily in the United States, Canada and Europe, with additional
distribution in Latin America and the Far East. The Company's products are sold
largely under its Windmere trade name, as well as under other trade names,
trademarks and private labels. The Company also manufactures products on a
contract basis for others.

The Company's products are primarily manufactured by Durable Electrical Metal
Factory, Ltd. ("Durable"), its wholly-owned Hong Kong subsidiary, in Bao An
County, Guandong Province of the People's Republic of China ("People's
Republic"), which is approximately 60 miles northwest of central Hong Kong, and
other unrelated factories in the People's Republic. Approximately 85% to 90% of
the Company's products are manufactured by Durable.

NEW DEVELOPMENTS

During the year ended December 31, 1996, the Company made several acquisitions:

In March 1996, the Company acquired certain assets and marketing rights,
including patents and the trademark, to the LitterMaid computerized, infrared,
automatic self-cleaning cat litter box.

In April 1996, the Company purchased a 50-percent interest in New M-Tech
Corporation,( "New M-Tech") a manufacturer and distributor of consumer
electronic products. New M-Tech distributes consumer electronic products under
the Admiral, NewTech and White Westinghouse brand names.

In July 1996, the Company acquired a 50-percent interest in Salton/Maxim
Housewares, Inc. ("Salton"). Salton designs and markets a broad range of small
kitchen appliances and personal care appliances under the Salton, Maxim,
Breadman, Juiceman, Salton Creations, Block China,

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Farberware, Salton Time and White Westinghouse brand names. Salton sells its
products primarily to department store chains, gourmet and lifestyle merchants,
specialty stores and direct mail catalogs.

In December 1996, the Company acquired the remaining 50-percent of its seasonal
products joint venture.

The Company was incorporated under the laws of the State of Florida in 1963. As
used herein, the term "Company" refers to Windmere-Durable Holdings, Inc. (Prior
to June 21, 1996, Windmere Corporation) and its subsidiaries, unless the context
indicates otherwise. The Company's executive offices are located at 5980 Miami
Lakes Drive, Miami Lakes, Florida 33014, (see Item 2. Properties), and its
telephone number is (305) 362-2611.

PRODUCTS

The major portion of the Company's revenues are generated by the sale of
personal care products and appliances. The Company's personal care products
include hair dryers, curling irons, curling brushes, hairsetters, combs and
brushes, shears, mirrors and electric shavers. Appliances include toasters,
toaster ovens, can openers, blenders, hand mixers, waffle irons, steam irons,
electronic air cleaners, fans and air fresheners.

In 1996, 1995 and 1994, net sales of personal care products and appliances
represented approximately 59% and 41%, 63% and 37%, and 70% and 30%,
respectively, of the Company's total net sales. The increase in the percentage
of appliance sales reflects the Company's growth in both the manufacture and
distribution of kitchen electrics. Kitchen electric products comprised 31%, 25%
and 7% of total sales in 1996, 1995 and 1994, respectively.

MARKETING AND DISTRIBUTION

The Company's products are sold principally by independent sales
representatives. The Company utilizes media advertising, cooperative advertising
and collateral materials to promote its products.

The Company's distribution business includes the sale of consumer products and
professional salon products primarily in the United States, Canada and Europe.
Consumer products are primarily sold under the Windmere brand and professional
salon products are sold under the Belson


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Products and Comare brands. In addition, private label and controlled label
sales are made by the Company.

A kitchen electric appliance distributor and a national retail beauty supply
chain accounted for 10.9% and 10.3%, respectively, of 1996 sales.

The Company's products are sold under various federal trademarks and
registrations, some of which include: Windmere, Jumbo Curl, Belson Pro,
Curlmaster, Design Pro, First Class Gourmet, Solid Gold, Windmere Salon, Air
Moves, ESP, Electric Shock Protection, VIP Pro, Setting Pretty, Skinni Mini,
Clothes Shaver, Easy Styler, Four Way Curls, Set Up, All Curl Trio, Mirror Go
Lightly, Jerdon, First Class, Plak Trac, Litter Maid, Smoke Catcher, Prelude,
High Fashion, Belson, Pro Touch, Pro Star, Hot Silver, Golden Touch, Profiles,
Comare, Salon Designs, Premiere, Espree, Gold'n Hot, Color Magic, Colossal Curl,
Jumbo Air, Express Air, Euro Sport, Magnum, Superaire, Healthy Vibes, Health
Zone and Gentle Air. The Company believes that its business has not been
materially dependent on any one such trademark.

In the United States, the Company wholesales its line of consumer products
nationwide to retailers, including department stores, drug chains, catalog
stores and discount and variety stores. The Company also markets its consumer
and professional salon appliances, hair pieces and a wide variety of brushes and
other hair care accessories to beauticians, barbers and stylists through
distributors. In addition, certain items, including the Company's hair dryers,
curling irons and other personal care appliances, are sold through professional
beauty and barber retail store outlets.

In 1996, the Company acquired the exclusive world-wide rights to use the
Farberware brand name on a broad range of small electric products. The Company
has entered into an agreement with Salton, whereby, Salton is to be the
exclusive distributor of such products.

In January 1997, the Company through its 50-percent interests in Salton and New
M-Tech entered into supply contracts with the Kmart Corporation for Kmart to
purchase, distribute, market and sell certain products under the
White-Westinghouse brand name licensed to Salton and New M-Tech. Under the
terms of the contract, Salton and New M-Tech will supply Kmart, either through
the Company or through other manufacturers, with a broad range of small
electrical appliances, consumer electronics and telephone products under the
White-Westinghouse brand name. Kmart will be the exclusive discount department
store to market these White-Westinghouse products.


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MANUFACTURING:

The Company's manufacturing business is conducted by Durable. Durable, through
its twenty-five year relationship with the Company, has produced an extensive
product line, which includes not only the appliances sold to the Company and its
customers and oscillating fans for a joint venture which was acquired by the
Company in December 1996, but it has also become a contract manufacturer for a
range of products, such as toasters, steam irons, toaster ovens, can openers,
blenders, hand mixers and waffle irons, which it sells primarily to customers in
the United States, Canada and Europe. Some of its customers are Rival, Salton
and Sunbeam.

Durable has begun to manufacture a number of the White-Westinghouse products to
be supplied by Salton to Kmart under the recently signed supplier contract. It
is also involved in the construction of a factory to begin to supply some of the
consumer electronic products to be sold by New M-Tech.

The LitterMaid product is currently being manufactured by both Durable and a
third party contract manufacturer. Production of the product by Durable is
expected to increase in 1997.

SUPPLIES

The Company's foreign sales and operations are subject to the usual risks
incident to operating abroad, including currency fluctuations, political
conditions and changes in foreign laws. A weakening or strengthening of the
United States dollar may result in higher or lower cost of goods for the Company
from suppliers in countries whose exchange rate does not parallel the United
States dollar, unlike Hong Kong the currency of which to date has fluctuated
substantially parallel to the United States dollar.

The Company generates approximately 85% to 90% of its revenues from products
manufactured by Durable in the People's Republic. Such products utilize raw
materials available from at least two and as many as nine or more independent
suppliers. The Company has no material dependence on any single foreign source
for such materials.



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FOREIGN CONDITIONS

The supply and cost of the products manufactured by Durable can be adversely
affected, among other reasons, by changes in foreign currency exchange rates,
increased import duties, imposition of tariffs, imposition of import quotas,
interruptions in sea or air transportation and political or economic changes.
The Company has a significant amount of its assets in the People's Republic,
primarily consisting of inventory, equipment and molds. From time to time, the
Company explores opportunities to diversify its sourcing and/or production of
certain products to other low-cost locations or with other third parties or
joint venture partners in order to reduce its dependence on production in the
People's Republic and/or reduce Durable's dependence on the Company's existing
distribution base. However, at the present time, the Company intends to continue
its production in the People's Republic.

In June 1989, the People's Republic experienced civil disturbances. Although
such disturbances have dissipated since that time, there continues to be
pressure for political reform. No assurance can be given, however, that civil
disturbances will not recur. If it becomes necessary to relocate the Company's
manufacturing facilities from the People's Republic as a result of civil
disturbances in that country or otherwise, the Company believes the production
currently conducted in the People's Republic could be relocated to other Far
East locations, including Hong Kong, or other low-cost manufacturing locations,
with only temporary disruption and delay in such production and possible
short-term operating and capital losses, provided that the Company is able to
move substantially all of its manufacturing equipment and other assets currently
in the People's Republic to another location. If the Company is unable to remove
such assets, due to confiscation, expropriation, nationalization, embargoes or
governmental restrictions, it would incur substantial operating and capital
losses, including losses resulting from business disruption and delays in
production. In addition, as a result of a relocation of its manufacturing
equipment and certain other assets, the Company would likely incur relatively
higher manufacturing costs. A relocation could also adversely affect the
Company's revenues if the demand for the Company's products currently
manufactured in the People's Republic decreases due to a disruption in the
production and delivery of such products or due to higher prices which might
result from increased manufacturing costs. Furthermore, earnings could be
adversely affected due to reduced sales and/or the Company's inability to
maintain its current margins on the products currently manufactured in the
People's Republic.


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Hong Kong is undergoing a transfer to the control of the People's Republic and
in July 1997, the initial transfer of governmental rights is scheduled to occur.
Durable is incorporated in Hong Kong and its executive, sales offices and its
senior executives are located or reside there. The Company also conducts
significant trading activities through subsidiaries incorporated in Hong Kong.
Although the Company believes that its operations will not be materially
affected by the governmental changes occurring in Hong Kong, no assurance can be
given that such changes will be benign.

In 1996, President Clinton extended the People's Republic's most-favored-nation
(MFN) trading status for an additional year. The President announced in 1994
that the United States would, in the future, permanently de-link MFN renewal
from human rights issues, other than freedom of emigration provisions. Under
U.S. law, MFN status means that products are subject to the relatively low duty
rates set forth in Column 1 of the Harmonized Tariff Schedules of the United
States (HTSUS), that have resulted from several rounds of reciprocal tariff
negotiations conducted under the auspices of the General Agreement on Tariffs
and Trade (GATT) since 1945. Products from countries not eligible for MFN
treatment are subject to much higher rates of duty, averaging 30 percent ad
valorem, as set forth in Column 2 of the HTSUS. If MFN status for goods produced
in the People's Republic were removed, there would be a substantial increase in
tariffs imposed on goods of Chinese origin entering the United States, including
those manufactured by the Company, which could have a material adverse impact on
the Company's revenues and earnings.

SEASONALITY

The Company's business is generally seasonal. The Company has historically
experienced higher revenues in the third and fourth quarters of each fiscal year
primarily due to increased demand by customers for the Company's products in the
late summer for "back to school" sales and in the fall for Christmas sales. In
typical years, the Company begins to accumulate inventory for its major selling
season in June and July and it continues to purchase products at accelerated
rates until November. The Company's major sales occur during August through
November. Sales are generally made on 60 to 90 day terms. Heaviest collections
on its open accounts receivable are received from November through March, at
which time the Company is in its most liquid state. The seasonal patterns of
Salton and New M-Tech are similar to those of the Company.

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BACKLOG

The Company's backlog of orders as of December 31, 1996, 1995 and 1994 was
approximately $32.1 million, $22.2 million and $20.1 million, respectively,
which orders are generally shipped within the next succeeding year.

COMPETITION

The Company encounters significant competition with respect to substantially all
of its products. Although the Company's prices for products distributed under
its labels are in general below or competitive with those of many nationally
advertised brands, the Company also competes through quality of product,
attractive packaging, breadth of product lines, speed of delivery and
maintenance of good customer relations. Many of the Company's major competitors
are substantially larger, have greater financial and other resources and spend
more for national advertising. Some of the Company's competitors include Conair,
Helen of Troy and Remington.

REGULATION

In the United States, Canada and Europe, most federal, state, provincial and
local authorities require Underwriters Laboratory, Inc. ("UL") or other safety
regulation certification prior to marketing electrical appliances in those
jurisdictions. All of the non-professional salon appliances marketed by the
Company have such certifications. The Company endeavors to have most of its
products designed to meet those requirements and to be so certified, although
there can be no assurance that those products, or additional electrical
appliances which may be developed by the Company, will meet such specifications.
Certain of the products sold by the Company in the United States are subject to
the cosmetic purity and labelling provisions of the Fair Packaging and Labelling
Act. The Company believes that in addition to complying with the Fair Packaging
and Labelling Act, it complies with the applicable rules and regulations of the
Federal Trade Commission and other federal and state agencies with respect to,
among other things, the content of advertising and other trade practices.

PATENTS

Although the Company does not believe that its business is materially dependent
upon patents and patent protection, from time to time, new

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products have been introduced with unique features for which the Company has
filed or obtained licenses for patents and design registrations in the United
States and in several foreign countries.

EMPLOYEES

At March 14, 1997, the Company's distribution business in the United States,
Canada, Europe and Hong Kong employed approximately 250 persons. Durable's
operations in Hong Kong and the People's Republic of China employed
approximately 12,300 persons. The Company enjoys satisfactory working relations
with these employees. The Company is not a party to any collective bargaining
agreement.

GEOGRAPHIC AREA FINANCIAL INFORMATION

Incorporated by reference to the Company's 1996 Annual Report to Shareholders,
under the caption, "Note N to Consolidated Financial Statements, Geographic Area
Information". Included as part of Exhibit 13.

ITEM 2.  PROPERTIES

The executive offices of the Company, from which a significant amount of its
business activities are conducted, are currently located at 5980 Miami Lakes
Drive, Miami Lakes, Florida. All of the space in this approximately 140,000 sq.
ft., two-story office and warehouse facility is owned and occupied by the
Company. The Company also utilizes the services of public warehouses located in
Reno, Nevada and Memphis, Tennessee pursuant to short-term contracts.

Durable owns approximately 40,000 sq. ft. of office space in Hong Kong,
of which 24,000 sq. ft. is used for its and the Company's trading
companies' headquarters.  Durable also utilizes facilities of 2,000,000
sq. ft. in the People's Republic which it operates under contracts with
the local government.  The contracts require such periodic adjustments
that terms of between one and five years exist at all times.  Certain
facilities have contract terms extending beyond five years.

ITEM 3.  LEGAL PROCEEDINGS

In April 1994, Kabushiki Kaisha Izumi Seiki Seisakusho, a Japanese corporation
("Izumi"), filed an action against the Company, David M. Friedson, the President
and Chief Executive Officer of the Company, U.S.

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Philips Corporation, North American Philips Corporation and N.V. Philips
Gloellampenfabrieken (together, "Philips"). This action concerns the 1992
settlement (the "Philips Settlement") of certain claims, primarily a Federal
antitrust claim, made by the Company against Philips, which resulted in an
$89,644,257 judgment in favor of the Company. Pursuant to the Philips
Settlement, Philips paid the Company $57,000,000 in May 1992. As part of the
Philips Settlement, the Company and Philips agreed that the Company's money
judgment against Philips in connection with such antitrust litigation would be
vacated. Izumi is claiming, among other things, that the Philips Settlement,
including the agreement with Philips to cooperate to vacate the related judgment
in favor of the Company, constitutes a breach by the Company of a customary
indemnification agreement between Izumi (as seller of goods) and the Company (as
buyer of goods) dated February 20, 1984. This indemnification agreement covered
certain claims against the Company and was entered into more than eight months
prior to the commencement of the Philips litigation in connection with the
routine purchase by the Company of goods from Izumi. Izumi advanced certain
legal fees and costs to the Company in connection with the Philips litigation.
Izumi is further claiming that it is entitled to recover from the Company an
unspecified portion of the Philips Settlement, punitive damages and
reimbursement of litigation and other related costs and expenses. A pre-answer
motion by the Company resulted in the dismissal of some of Izumi's claims,
and the Company answered the remaining claims. A mediation was held on
February 27, 1997 to consider settlement of the case. In March 1997, after
evaluating the potential costs of continuing litigation, the Company paid
$4,500,000 to settle the dispute.

The Company, its 50-percent owned joint venture partners Salton/Maxim
Housewares, Inc. and New M-Tech Corporation, White Consolidated Industries, Inc.
("White Consolidated"), and certain other parties have been named as defendants
in litigation filed by Westinghouse Electric Corporation ("Westinghouse") in the
United States District Court for the Western District in Pennsylvania on
December 18, 1996. The action arises from a dispute between Westinghouse and
White Consolidated over rights to use the "Westinghouse" trademark for consumer
products based on transactions between Westinghouse and White Consolidated in
the 1970's and the parties' subsequent conduct. Prior to the filing of
Westinghouse's Complaint against the Company, White Consolidated, on November
14, 1996, filed a Complaint in the United States District Court for the Northern
District of Ohio against Westinghouse and another corporation for trademark
infringement, dilution, false designation or origin and false advertisement,
seeking both injunctive relief and damages. Procedural motions concerning the
jurisdiction in which the dispute should be heard have

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been filed by the parties. The action by Westinghouse seeks, among other things,
a preliminary injunction enjoining the defendants from using the trademark,
un-specified damages and attorneys' fees. Pursuant to the Indemnification
Agreement dated January 23, 1997 by and among White Consolidated, Kmart
Corporation, and the Company, White Consolidated is defending and indemnifying
the Company for all costs and expenses for claims, damages, and losses,
including the costs of litigation. Pursuant to the license agreements with
White Consolidated, White Consolidated is defending and indemnifying
Salton/Maxim and New M-Tech for all costs and expenses for claims, damages,
and losses, including the costs of litigation. On January 29, 1997, on joint
motion of the parties, the court issued an order staying future proceedings
for sixty (60) days in order to give the parties an opportunity to pursue
settlement discussions.

The Company is also subject to other legal proceedings, product liability and
other claims which arise in the ordinary course of its business. In the opinion
of management, the amount of ultimate liability, if any, in excess of applicable
insurance coverage, is not likely to have a material effect on the financial
position of the Company. However, as the outcome of litigation or other legal
claims is difficult to predict, significant changes in the estimated exposures
could occur.

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

None.

                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
         STOCKHOLDER MATTERS

Incorporated by reference to the Company's 1996 Annual Report to Shareholders
under the caption "Quarterly Stock Quotations and Dividends per Share." (Exhibit
13)









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ITEM 6.  SELECTED FINANCIAL DATA

(Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                             1996         1995            1994
                                             ----         ----            ----
<S>                                       <C>           <C>            <C>
Net sales                                 $ 197,004     $ 187,777      $ 181,112
Equity in net earnings (loss)
 of joint ventures                        $   2,299     $    (393)     $      91
Earnings (loss) before taxes,
 minority interest
 and extraordinary item                   $  (3,672)    $  (3,165)     $  23,131
Provision for taxes
 (benefits)                               $    (280)    $  (1,281)     $   2,595
Effective tax rate                             (7.6)%       (40.5)%         11.2%
Net earnings (loss)                       $     451*    $  (1,884)**   $  20,537***
Working capital                           $ 105,565     $ 127,626      $ 129,281
Current ratio                              3.1 to 1      7.5 to 1       7.0 to 1
Property, plant and
 equipment, net                           $  32,760     $  30,485      $  28,449
Total assets                              $ 237,279     $ 188,012      $ 197,124
Long-term debt, deferred
 liabilities and minority
 interest                                 $  20,132     $   3,519      $   4,932
Stockholders' equity                      $ 167,695     $ 164,931      $ 170,625

Per share data:

Net earnings (loss)                       $     .02*    $    (.11)**   $    1.17***
Cash dividends paid                       $     .20     $     .20      $     .15
Book value at year end                    $    9.61     $    9.87      $   10.20
Return on average equity                        2.4%         --             12.9%

</TABLE>


*Includes extraordinary charge for the settlement of Izumi litigation
of $3,500,000 or $.20 per share.

**Includes a non-recurring loss on the sale of an other asset of
$5,280,000, or $.31 per share.

***Includes a non-recurring gain on the sale of Hong Kong office space of
$7,810,500, or $.45 per share.

****Includes cumulative effect of accounting change benefit of
$1,731,100, or $.11 per share.

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*****Includes extraordinary credit from litigation settlement of
$29,648,800, or $1.82 per share.

<TABLE>
<CAPTION>
                                              1993            1992
                                              ----            ----
<S>                                       <C>              <C>
Net sales                                 $ 170,661        $ 175,450
Equity in net earnings (loss)
 of joint ventures                        $    (504)       $    (848)
Earnings (loss) before taxes
 and minority interest                    $  12,305        $   6,531
Provision for taxes
 (benefits)                               $   1,365        $     805
Effective tax rate                             11.0%            10.9%
Net earnings (loss)                       $  11,469****    $  34,335*****
Working capital                           $ 117,961        $ 104,139
Current ratio                              5.8 to 1         4.8 to 1
Property, plant and
 equipment, net                           $  25,022        $  24,546
Total assets                              $ 180,479        $ 172,974
Long-term debt, deferred
 liabilities and minority
 interest                                 $   9,492        $  12,291
Stockholders' equity                      $ 146,587        $ 132,922

Per share data:

Net earnings (loss)                       $     .71****    $    2.09*****
Cash dividends paid                       $    --          $    --
Book value at year end                    $    9.29        $    8.65
Return on average equity                        8.2%            29.4%



</TABLE>

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ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

Results of Operations

Year Ended December 31, 1996 compared with Year Ended December 31, 1995

Net Sales

Net sales were $197.0 million and $187.8 million for the years ended December
31, 1996 and 1995, respectively. Manufacturing sales increased by $10.4 million
due primarily to increased shipments of kitchen electric appliances. A kitchen
electric appliance distributor and a national retail beauty supply chain
accounted for 10.9% and 10.3%, respectively, of the Company's 1996 sales.

Set forth below is a table indicating the revenues that the Company derived from
its distribution and manufacturing operations for the periods indicated:

<TABLE>
<CAPTION>

                                          Year Ended December 31,
                                     1996                        1995
                                     ----                        ----
<S>                         <C>             <C>         <C>              <C>
Distribution                $146,431,800       74%      $147,576,000       79%
Manufacturing                 50,571,800       26         40,200,900       21
                            ------------   ------       ------------   ------
  Total Sales               $197,003,600      100%      $187,776,900      100%
                            ============   ======       ============   ======

</TABLE>

Gross Profit Margin

The Company's gross margin percentage decreased in 1996 to 20.2% of sales from
the 21.8% level in the prior year. The decrease is primarily attributed to the
continued effect of remaining higher cost raw material inventories and a greater
concentration of manufacturing sales. Lower margin kitchen electric products
which comprised 82% of manufacturing sales in both 1996 and 1995, accounted for
31% and 25% of the Company's total sales in those years, respectively.

Selling, General and Administrative Expenses

Selling, general and administrative expenses as a percentage  of sales
were 20.0% in both 1996 and 1995.  Commencement of operations at the
Company's newly acquired LitterMaid, Inc. and Bay Books & Tapes, Inc.
businesses resulted in a $1.6 million increase in expenses. Travel,


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legal and selling expenses increased by $1.2 million and advertising costs
decreased by $1.0 million.

Unusual or Non-Recurring Items

In 1995, the Company incurred a non-recurring pre-tax loss of $8.0 million on
the sale of an other asset. This transaction reduced 1995 net earnings by $5.3
million, or $.31 per share, on an after-tax basis.

Equity in Net Earnings (Loss) of Joint Ventures

The Company's equity in net earnings (loss) of joint ventures was $2.3 million
and $(.4) million in 1996 and 1995, respectively. The increase in 1996 primarily
reflects the results of operations of the Company's newly acquired interests in
Salton/Maxim Housewares, Inc. ("Salton") and New M-Tech Corporation ("New
M-Tech"). The Company's equity in the net earnings of Salton and New M-Tech
totaled $3.2 million for 1996 which was partially offset by losses of $.9
million at certain of the Company's other joint ventures.

Interest Expense

Interest expense increased by $.8 million to $1.4 million in 1996. The increase
is the result of the amounts paid on notes payable issued in conjunction with
the Salton and New M-Tech acquisitions as well as the increased level of
borrowing under the Company's line of credit facility.

Taxes

The Company's tax expense is based on the earnings of each of its foreign and
domestic operations and it includes such additional U.S. taxes as are applicable
to the repatriation of foreign earnings. Foreign earnings, other than in Canada,
are generally taxed at rates lower than in the United States. The Company made a
provision in its 1995 second quarter of $.4 million, or $.02 per share, as a
result of its settlement of a Hong Kong tax audit.

Extraordinary Item

On March 27, 1997, the Company paid $4,500,000 to settle the lawsuit filed in
April 1994 by Izumi. An accrual of $5,300,000, including $800,000 in estimated
legal expenses has been recorded as of December

                                       16

<PAGE>   17



31, 1996. The transaction resulted in an after tax charge of $3,500,000 or $.20
per share and has been recorded as an extraordinary item.

Earnings Per Share

The average number of common shares and common equivalent shares used in
computing per share results was 17,620,000, in 1996 as compared to 17,227,000 in
1995. The decrease was primarily due to the non-inclusion of the dilutive effect
of stock options and warrants in those 1996 quarters in which the Company
sustained losses, offset by the additional shares issued upon the acquisition of
Salton/Maxim and upon the exercise of stock options and warrants.

Supplier Contract

In January 1997, the Company through its 50-percent interests in Salton and New
M-Tech entered into supply contracts with the Kmart Corporation for Kmart to
purchase, distribute, market and sell certain products under the
White-Westinghouse brand name licensed to Salton and New M-Tech. Under the
terms of the contract, Salton and New M-Tech will supply Kmart, either through
the Company or other manufacturers, with a broad range of small electrical
appliances, consumer electronics and telephone products under the
White-Westinghouse brand name. Kmart will be the exclusive discount department
store to market these White-Westinghouse products.

Year Ended December 31, 1995 compared with Year Ended December 31, 1994

Net Sales

Net sales were $187.8 million and $181.1 million for the years ended December
31, 1995 and 1994, respectively. Manufacturing sales increased by $14.4 million
due to increased shipments of kitchen electric appliances. Distribution sales
declined by $7.7 million primarily due to the weak U.S. retailing environment in
1995. Wal-Mart Stores, Inc. and a kitchen electric appliance distributor
accounted for 13.1% and 11.4%, respectively, of the Company's 1995 sales.






                                       17

<PAGE>   18



Set forth below is a table indicating the revenues that the Company derived from
its distribution and manufacturing operations for the periods indicated:

                          Year Ended December 31,
                       1995                     1994

Distribution   $147,576,000   79%        $155,320,600    86%
Manufacturing    40,200,900   21           25,791,600    14
                -----------  ---          -----------   ---
  Total Sales  $187,776,900  100%        $181,112,200   100%
                ===========  ===          ===========   ===


Gross Profit Margin

The Company's gross margin percentage decreased in 1995 to 21.8% of sales from
the 27.0% level in the prior year due to higher raw materials costs which could
not be passed on to customers and the greater concentration of lower-margin
manufacturing sales.

Selling, General and Administrative Expenses

Selling, general and administrative expenses as a percentage of sales were 20.0%
and 19.6% in 1995 and 1994, respectively. The Company's higher aggregate
operating expenses were primarily a result of increased bad debt expense and
inventory storage costs.

Unusual or Non-Recurring Items

In 1995, the Company incurred a non-recurring pre-tax loss of $8.0 million on
the sale of an other asset. This transaction reduced 1995 net earnings by $5.3
million, or $.31 per share, on an after-tax basis.

Equity in Net Earnings (Loss) of Joint Venture

The Company's equity in net earnings (loss) of joint ventures was $(.4) million
and $.1 million in 1995 and 1994, respectively. Lower gross margins in 1995, due
to higher raw materials costs, produced the decline in the joint venture's
earnings.





                                       18

<PAGE>   19

Taxes

The Company's tax expense is based on the earnings of each of its foreign and
domestic operations and it includes such additional U.S. taxes as are applicable
to the repatriation of foreign earnings. Offshore earnings generally are taxed
at rates lower than in the United States. The Company made a provision in its
1995 second quarter of $.4 million, or $.02 per share, as a result of its
settlement of a Hong Kong tax audit.

Earnings Per Share

The average number of common shares and common equivalent shares used in
computing per share results was 2.1% lower in 1995 primarily as a result of a
lower dilutive effect from unexercised stock options and warrants, due both to a
decline in the quoted market price of the Company's common stock during the year
and the Company's fourth quarter loss.

Liquidity and Capital Resources

At December 31, 1996, the Company's working capital was $105.6 million, a
decrease of $22.0 million since the end of 1995. At the end of 1996 and 1995,
the Company's current ratio was 3.1 to 1 and 7.5 to 1, respectively, and its
quick ratio was 1.3 to 1 and 3.5 to 1, respectively.

Cash and cash equivalents decreased by $9.0 million during 1996. Cash of $9.6
million was provided by operating activities. The Company utilized $35.1 million
in investing activities, of which $18.7 million was for the acquisition of
equity interests in joint ventures and new businesses and for loans to its joint
venture partners. The Company invested $8.6 million in capital expenditures
primarily at its factory in the People's Republic of China and anticipates
incurring an additional $9.0 million in 1997.

The Company entered into the following significant investing transactions in
1996:

PX DISTRIBUTORS, INC.("PX")

In December 1995, the Company purchased, for a nominal amount, a 50-percent
interest in PX Distributors, Inc., a distributor of home automation/security
devices. The Company and the other owners have agreed to lend PX certain amounts
from time to time to meet working

                                       19
<PAGE>   20

capital requirements. Loans made by the Company bear interest at the prime rate,
are payable upon PX achieving sufficient cash flow, and are secured by the
assets of PX.

SALTON/MAXIM HOUSEWARES, INC.

In February 1996, the Company entered into a stock purchase agreement with
Salton providing for the issuance and sale by Salton to the Company of 6,508,572
shares of its common stock, representing 50-percent of Salton's outstanding
common stock after issuance.

On July 11, 1996, Windmere completed its acquisition of 50-percent of Salton.
The Company received 6,508,572 shares of Salton common stock (market value at
date of acquisition of approximately $36.2 million) in exchange for a cash
payment of $3.3 million, a $10.8 million promissory note and 748,112 shares of
Windmere stock (market value at date of agreement of approximately $6.1
million). The total cost in excess of net assets acquired is not deemed to be
material.

In addition, the Company received an option to purchase 453,000 shares of Salton
common stock at an exercise price of $4.53 per share. The option becomes
exercisable only if and to the extent that options to purchase shares of Salton
common stock outstanding at the date of the stock purchase agreement are
exercised.

The $10.8 million promissory note bears interest at a rate of 8-percent per
annum payable quarterly and matures in July 2001. The note is subordinated to
the Company's current and future indebtedness to its senior lender and is
collateralized by certain of the Company's domestic assets.

LITTERMAID(TM)

In 1996, the Company purchased certain assets and marketing rights, including
patents, for the LitterMaid(TM) computerized, infrared, automatic self-cleaning
cat litter box. The purchase price of the assets includes $2,200,000 in cash and
options to purchase 150,000 shares of the Company's common stock. The total fair
value of the options as determined under SFAS 123, is $549,000 and has been
included in the cost of the assets acquired.



                                       20

<PAGE>   21

New M-Tech Corporation

In April 1996, the Company acquired a 50-percent interest in New M-Tech
Corporation, a consumer electronics company for $10 million. Payment consisted
of $3.0 million in cash and $7.0 million in unsecured promissory notes. The
promissory notes bear interest at 8% per annum and consist of a $3,000,000
promissory note maturing in 1998, and two $2,000,000 promissory notes maturing
in 2001, one of which is convertible into shares of the Company's common stock
at a price of $15 per share. Conversion may occur at any time during the term of
the convertible promissory note, and may be required under certain
circumstances. The notes are subordinated to the Company's current and future
indebtedness to its senior lender. The total cost in excess of net assets
acquired of $5.3 million has resulted in goodwill and is being amortized over 20
years on a straight-line basis.

BREAKROOM OF TENNESSEE, INC.

In May 1996, the Company agreed to contribute and/or purchase inventory valued
at $250,000 in exchange for a 50-percent interest in Breakroom of Tennessee,
Inc., a joint venture formed to market and distribute office products. The
Company's investment as of December 31, 1996 consists of $240,390 in inventory
purchased on behalf of the joint venture.

BAY BOOKS & TAPES, INC.

In June 1996, the Company acquired the assets of the books and video publishing
division of KQED, Inc., consisting mostly of inventory, for $1,180,000 in cash.
Bay Books & Tapes, Inc. publishes public television companion books and videos.

ANASAZI PARTNERS, L.P.

In June 1996, the Company entered into an agreement to acquire a 50-percent
interest in an investment partnership for $1.2 million. Payments as of December
31, 1996 include a $1.2 million capital contribution to the partnership and
loans totaling $1.2 million to the partnership's other equity partner. Such
loans bear interest at a rate of 8-percent per annum, are unsecured and are
payable upon demand.

The partnership's investments include privately traded securities whose values
have been estimated by the General Partner in the absence of readily
ascertainable market values. Fair value for these securities is considered to be
cost which may differ significantly from the values

                                       21

<PAGE>   22



that would have been used had a ready market for the securities
existed.

Cash flows from financing activities generated $16.5 million in cash. The
borrowings under the Company's line of credit facilities of $21.8 million and
the $2.6 million generated from the exercise of stock options and warrants
offset the $3.3 million used to pay cash dividends on the Company's common stock
and the $3.8 million used to purchase and retire 463,000 shares of the Company's
common stock. The purchase of the 463,000 shares completed the Company's
purchase of 1,000,000 shares of its common stock under the 1994 stock purchase
program for a total cost of $8.7 million. In 1996, the Company's Board of
Directors authorized a new stock purchase program, whereby, the Company may
purchase up to 10-percent of its outstanding shares (approximately 1.6 million
shares). No shares have been purchased under the new program.

The Company's foreign subsidiaries (the "subsidiaries") have $6.4 million in
trade finance lines of credit, payable on demand, which are secured by the
subsidiaries' tangible and intangible property located in Hong Kong and in the
People's Republic of China, as well as a Company guarantee. At December 31,
1996, the subsidiaries were utilizing, including letters of credit,
approximately $2.5 million of these credit lines, leaving a remaining funding
capacity of $3.9 million. These subsidiaries also have available an additional
$5.0 million line of credit which is supported by a domestic standby letter of
credit of which $3.2 million was outstanding at December 31, 1996.

The Company has a $30.0 million demand line of credit from a domestic bank,
which is secured by domestic accounts receivable and inventory. At December 31,
1996, outstanding borrowings under this credit line totaled $18.0 million.

No provision for U.S. taxes has been made on undistributed earnings of the
Company's foreign subsidiaries and joint ventures because management plans to
reinvest such earnings in their respective operations or in other foreign
operations. Repatriating those earnings or using them in some other manner which
would give rise to a U.S. tax liability would reduce after tax earnings and
available working capital.

The Company believes that its cash on hand and internally generated funds,
together with its credit lines, will provide sufficient funding

                                       22

<PAGE>   23



to meet the Company's capital requirements and its operating needs for
the foreseeable future.

Legal Proceedings

In April 1994, Kabushiki Kaisha Izumi Seiki Seisakusho, a Japanese corporation
("Izumi"), filed an action against the Company, David M. Friedson, the President
and Chief Executive Officer of the Company, U.S. Philips Corporation, North
American Philips Corporation and N.V. Philips Gloellampenfabrieken (together,
"Philips"). This action concerns the 1992 settlement (the "Philips Settlement")
of certain claims, primarily a Federal antitrust claim, made by the Company
against Philips, which resulted in an $89,644,257 judgment in favor of the
Company. Pursuant to the Philips Settlement, Philips paid the Company
$57,000,000 in May 1992. As part of the Philips Settlement, the Company and
Philips agreed that the Company's money judgment against Philips in connection
with such antitrust litigation would be vacated. Izumi is claiming, among other
things, that the Philips Settlement, including the agreement with Philips to
cooperate to vacate the related judgment in favor of the Company, constitutes a
breach by the Company of a customary indemnification agreement between Izumi (as
seller of goods) and the Company (as buyer of goods) dated February 20, 1984.
This indemnification agreement covered certain claims against the Company and
was entered into more than eight months prior to the commencement of the Philips
litigation in connection with the routine purchase by the Company of goods from
Izumi. Izumi advanced certain legal fees and costs to the Company in connection
with the Philips litigation. Izumi is further claiming that it is entitled to
recover from the Company an unspecified portion of the Philips Settlement,
punitive damages and reimbursement of litigation and other related costs and
expenses. A pre-answer motion by the Company resulted in the dismissal of some
of Izumi's claims, and the Company answered the remaining claims. A mediation
was held on February 27, 1997 to consider settlement of the case. In March 1997,
after evaluating the potential costs of continuing litigation, the Company paid
$4,500,000 to settle the dispute.

The Company, its 50-percent owned joint venture partners Salton/Maxim
Housewares, Inc. and New M-Tech Corporation, White Consolidated
Industries, Inc. ("White Consolidated"), and certain other parties have

                                       23
<PAGE>   24



been named as defendants in litigation filed by Westinghouse Electric
Corporation ("Westinghouse") in the United States District Court for the Western
District in Pennsylvania on December 18, 1996. The action arises from a dispute
between Westinghouse and White Consolidated over rights to use the
"Westinghouse" trademark for consumer products based on transactions between
Westinghouse and White Consolidated in the 1970's and the parties' subsequent
conduct. Prior to the filing of Westinghouse's Complaint against the Company,
White Consolidated, on November 14, 1996, filed a Complaint in the United States
District Court for the Northern District of Ohio against Westinghouse and
another corporation for trademark infringement, dilution, false designation or
origin and false advertisement, seeking both injunctive relief and damages.
Procedural motions concerning the jurisdiction in which the dispute should be
heard have been filed by the parties. The action by Westinghouse seeks, among
other things, a preliminary injunction enjoining the defendants from using the
trademark, un-specified damages and attorneys' fees. Pursuant to the
Indemnification Agreement dated January 23, 1997 by and among White
Consolidated, Kmart Corporation, and the Company, White Consolidated is
defending and indemnifying the Company for all costs and expenses for claims,
damages, and losses, including the costs of litigation. Pursuant to the license
agreements with White Consolidated, White Consolidated is defending and
indemnifying Salton/Maxim and New M-Tech for all costs and expenses for claims,
damages, and losses, including the costs of litigation. On January 29, 1997, on
joint motion of the parties, the court issued an order staying future
proceedings for sixty (60) days in order to give the parties an opportunity to
pursue settlement discussions.

The Company is also subject to other legal proceedings, product liability and
other claims which arise in the ordinary course of its business. In the opinion
of management, the amount of ultimate liability, if any, in excess of applicable
insurance coverage, is not likely to have a material effect on the financial
position of the Company. However, as the outcome of litigation or other legal
claims is difficult to predict, significant changes in the estimated exposures
could occur.

Manufacturing Operations

The Company's products are primarily manufactured by Durable, its wholly-owned
Hong Kong subsidiary, in Bao An County, Guandong Province of the People's
Republic of China, which is approximately 60 miles northwest of central Hong
Kong. The Company has a significant amount of its assets in the People's
Republic, primarily consisting of inventory, equipment and molds. Substantially
all of the Company's products are manufactured by Durable and unrelated
factories in the People's Republic. Approximately 85-percent to 90-percent of
the Company's revenues are currently derived from products manufactured by

                                       24

<PAGE>   25



Durable. The supply and cost of these products, as well as finished products,
can be adversely affected, among other reasons, by changes in foreign currency
exchange rates, increased import duties, imposition of tariffs, imposition of
import quotas, interruptions in sea or air transportation and political or
economic changes. From time to time, the Company explores opportunities to
diversify its sourcing and/or production of certain products to other low-cost
locations or with other third parties or joint venture partners in order to
reduce its dependence on production in the People's Republic and/or reduce
Durable's dependence on the Company's existing distribution base. However, at
the present time, the Company intends to continue its production in the People's
Republic.

In June 1989, the People's Republic experienced civil disturbances. Although
such disturbances have dissipated since that time, there continues to be
pressure for political reform. No assurance can be given, however, that civil
disturbances will not recur. If it becomes necessary to relocate the Company's
manufacturing facilities from the People's Republic as a result of civil
disturbances in that country or otherwise, the Company believes the production
currently conducted in the People's Republic could be relocated to other Far
East locations, including Hong Kong, or other low-cost manufacturing locations,
with only temporary disruption and delay in such production and possible
short-term operating and capital losses, provided that the Company is able to
move substantially all of its manufacturing equipment and other assets currently
in the People's Republic to another location. If the Company is unable to remove
such assets, due to confiscation, expropriation, nationalization, embargoes or
governmental restrictions, it would incur substantial operating and capital
losses, including losses resulting from business disruption and delays in
production. In addition, as a result of a relocation of its manufacturing
equipment and certain other assets, the Company would likely incur relatively
higher manufacturing costs. A relocation could also adversely affect the
Company's revenues if the demand for the Company's products currently
manufactured in the People's Republic decreases due to a dis ruption in the
production and delivery of such products or due to higher prices which might
result from increased manufacturing costs. Furthermore, earnings could be
adversely affected due to reduced sales and/or the Company's inability to
maintain its current margins on the products currently manufactured in the
People's Republic.



                                       25

<PAGE>   26
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Incorporated by reference to the Company's 1996 Annual Report to Shareholders
(Exhibit 13). See also PART IV, ITEM 14(a)1 of this report.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE

None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Incorporated by reference to the Company's Proxy Statement for its 1997 Annual
Meeting of Shareholders under the captions "Election of Directors" and
"Executive Officers".

ITEM 11. EXECUTIVE COMPENSATION

Incorporated by reference to the Company's Proxy Statement for its 1997 Annual
Meeting of Shareholders under the captions "Executive Compensation" and "Certain
Transactions".

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT

Incorporated by reference to the Company's Proxy Statement for its 1997 Annual
Meeting of Shareholders under the caption "Security Ownership".

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Incorporated by Reference to the Company's Proxy Statement for its 1997 Annual
Meeting of Shareholders under the captions "Executive Compensation" and "Certain
Transactions".

                                     PART IV

ITEM 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
              8-K

(a)1.  FINANCIAL STATEMENTS


                                       26

<PAGE>   27



         The following consolidated financial statements of Windmere-
         Durable Holdings, Inc. and subsidiaries are incorporated by
         reference in PART II, ITEM 8:


         AUDITOR'S REPORT                             Exhibit 13


         CONSOLIDATED BALANCE SHEETS AS OF
         DECEMBER 31, 1996 AND 1995                   Exhibit 13

         CONSOLIDATED STATEMENTS OF OPERATIONS
         YEARS ENDED DECEMBER 31, 1996, 1995
         AND 1994                                     Exhibit 13

         CONSOLIDATED STATEMENTS OF
         STOCKHOLDERS' EQUITY - THREE YEARS ENDED
         DECEMBER 31, 1996                            Exhibit 13

         CONSOLIDATED STATEMENTS OF
         CASH FLOWS - YEARS ENDED
         DECEMBER 31, 1996, 1995 AND 1994             Exhibit 13

         NOTES TO CONSOLIDATED FINANCIAL
         STATEMENTS                                   Exhibit 13

2.       FINANCIAL STATEMENT SCHEDULES

         AUDITOR'S REPORT                             Filed herewith

         SCHEDULE II -  VALUATION AND QUALIFYING
                        ACCOUNTS AND RESERVES -
                        YEARS ENDED DECEMBER 31,
                        1996, 1995 AND 1994           Filed herewith

Individual financial statements of the Company have been omitted since
consolidated financial statements have been presented, and all subsidiaries
included in the consolidated financial statements are wholly-owned. All other
schedules have been omitted since the required information is not present or not
present in amounts sufficient to require submission of the schedule or because
the information required is included in the consolidated financial statements or
the notes thereto.

                                       27

<PAGE>   28



3.       EXHIBITS

(3)      Articles of Incorporation and By-Laws.

3.1      Amended and Restated Articles of Incorporation of the Company filed
         with the Florida Secretary of State on May 17, 1984. Incorporated by
         reference to the Company's Annual Report on Form 10-K for the year
         ended December 31, 1984.

3.2      Articles of Amendment to the Articles of Incorporation of the Company
         filed with the Florida Secretary of State on May 16, 1986. Incorporated
         by reference to the Company's Annual Report on Form 10-K for the year
         ended December 31, 1986.

3.3      Articles of Amendment to the Articles of Incorporation of the Company
         filed with the Florida Secretary of State on June 23, 1986.
         Incorporated by reference to the Company's Annual Report on Form 10-K
         for the year ended December 31, 1987.

3.4      By-Laws as amended through October 11, 1991. Incorporated by reference
         to the Company's Annual Report on Form 10-K for the year ended December
         31, 1991.

3.5      Amendment to October 11, 1991 By-Laws. Incorporated by reference to the
         Company's Annual Report on Form 10-K for the year ended December 31,
         1992.

3.6      Articles of Amendment to the Amended and Restated Articles of
         Incorporation of the Company filed with the Florida Secretary of State
         on June 21, 1996. Filed herewith.

(10)     Material Contracts

     EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS

10.1     Employment Agreement dated as of January 27, 1983, between Belvin
         Friedson and the Company. Incorporated by reference to the Company's
         Annual Report on Form 10-K for the year ended December 31, 1982.

10.2     Employment Agreement, First Amendment, dated as of February 27, 1987,
         between Belvin Friedson and the Company. Incorporated by


                                       28

<PAGE>   29



         reference to the Company's Annual Report on Form 10-K for the year
         ended December 31, 1986.

10.3     Employment Agreement, Second Amendment, dated as of December 16, 1992,
         between Belvin Friedson and the Company. Incorporated by reference to
         the Company's Annual Report on Form 10-K for the year ended December
         31, 1992.

10.4     Employment Agreements dated as of July 18, 1983, between David M.
         Friedson, Barbara Friedson Garrett and Arnold Thaler, respectively, and
         the Company. Incorporated by reference to the Company's Annual Report
         on Form 10-K for the year ended December 31, 1983.

10.5     Employment Agreement, First Amendment, dated as of January 17, 1985,
         between David M. Friedson and the Company. Incorporated by reference to
         the Company's Annual Report on Form 10-K for the year ended December
         31, 1984.

10.6     Employment Agreement, Second Amendment and Nonqualified Stock Option,
         dated as of September 30, 1985, between David M. Friedson and the
         Company. Incorporated by reference to the Company's Annual Report on
         Form 10-K for the year ended December 31, 1985.

10.7     Employment Agreement (Third Amendment) and Nonqualified Stock Option
         (First Amendment) dated as of October 28, 1987, between David M.
         Friedson and the Company. Incorporated by reference to the Company's
         Annual Report on Form 10-K for the year ended December 31, 1987.

10.8     Employment Agreement (Fourth Amendment) and Nonqualified Stock Option
         (Second Amendment) dated as of October 26, 1987, between David M.
         Friedson and the Company. Incorporated by reference to the Company's
         Annual Report on Form 10-K for the year ended December 31, 1987.

10.9     Employment Agreement (Fifth Amendment) dated as of December 16, 1992,
         between David M. Friedson and the Company. Incorporated by reference to
         the Company's Annual Report on Form 10-K for the year ended December
         31, 1992.


                                       29

<PAGE>   30



10.10    Nonqualified Stock Option dated as of January 5, 1987, granted by the
         Company to Barbara Friedson Garrett. Incorporated by reference to the
         Company's Annual Report on Form 10-K for the year ended December 31,
         1986.

10.11    Employment Agreement (First Amendment) and Nonqualified Stock Option
         (First Amendment) dated as of October 26, 1987, between Barbara
         Friedson Garrett and the Company. Incorporated by reference to the
         Company's Annual Report on Form 10-K for the year ended December 31,
         1987.

10.12    Employment Agreement (Second Amendment) and Nonqualified Stock Option
         (Second Amendment) dated as of October 26, 1987 between Barbara
         Friedson Garrett and the Company. Incorporated by reference to the
         Company's Annual Report on Form 10-K for the year ended December 31,
         1987.

10.13    Employment Agreement (Third Amendment) dated as of December 16, 1992,
         between Barbara Friedson Garrett and the Company. Incorporated by
         reference to the Company's Annual Report on Form 10-K for the year
         ended December 31, 1992.

10.14    Nonqualified Stock Option dated as of January 5, 1987, granted by the
         Company to Arnold Thaler. Incorporated by reference to the Company's
         Annual Report on Form 10-K for the year ended December 31, 1986.

10.15    Employment Agreement (First Amendment) and Nonqualified Stock Option
         (First Amendment) dated as of October 26, 1987 between Arnold Thaler
         and the Company. Incorporated by reference to the Company's Annual
         Report on Form 10-K for the year ended December 31, 1987.

10.16    Employment Agreement (Second Amendment) and Nonqualified Stock Option
         (Second Amendment) dated as of October 26, 1987 between Arnold Thaler
         and the Company. Incorporated by reference to the Company's Annual
         Report on Form 10-K for the year ended December 31, 1987.

10.17    Employment Agreement (Third Amendment) dated as of December 16, 1992,
         between Arnold Thaler and the Company. Incorporated by reference to the
         Company's Annual Report on Form 10-K for the year ended December 31,
         1992.

                                       30

<PAGE>   31



10.18    Employment Agreement dated May 31, 1987, between Robert Gorman and the
         Company. Incorporated by reference to the Company's Annual Report on
         Form 10-K for the year ended December 31, 1987.

10.19    Employment Agreement (First Amendment) dated as of December 16, 1992,
         between Robert Gorman and the Company. Incorporated by reference to the
         Company's Annual Report on Form 10-K for the year ended December 31,
         1992.

10.20    1982 Employees Incentive Stock Option Plan. Incorporated by reference
         to Exhibit 4 to Post-Effective Amendment No. 1 to the Company's Form
         S-8 Registration Statement No. 2-92540.

10.21    Amendment to 1982 Employees Incentive Stock Option Plan. Incorporated
         by reference to the Company's Annual Report on Form 10-K for the year
         ended December 31, 1987.

10.22    1992 Employees Incentive Stock Option Plan. Incorporated by reference
         to the Company's Annual Report on Form 10-K for the year ended December
         31, 1992.

10.23    Employment Agreement dated as of October 26, 1987 between Burton A.
         Honig and the Company. Incorporated by reference to the Company's
         Annual Report on Form 10-K for the year ended December 31, 1987.

10.24    Employment Agreement (First Amendment) dated as of December 16, 1992,
         between Burton A. Honig and the Company. Incorporated by reference to
         the Company's Annual Report on Form 10-K for the year ended December
         31, 1992.

10.25    Consulting Agreement dated January 1, 1989 between Mr. Lai Kin,
         Chairman of Durable, and the Company. Incorporated by reference to the
         Company's Annual Report on Form 10-K for the year ended December 31,
         1988.

10.26    Employment Agreement dated January 3, 1989, between Harry Schulman and
         the Company. Incorporated by reference to the Company's Annual Report
         on Form 10-K for the year ended December 31, 1988.


                                       31

<PAGE>   32



10.27    Employment Agreement (First Amendment) dated as of June 4, 1990,
         between Harry Schulman and the Company. Incorporated by reference to
         the Company's Annual Report on Form 10-K for the year ended December
         31, 1992.

10.28    Employment Agreement (Second Amendment) dated as of December 16, 1992,
         between Harry Schulman and the Company. Incorporated by reference to
         the Company's Annual Report on Form 10-K for the year ended December
         31, 1992.

10.29    1988 Director Stock Option Plan. Incorporated by reference to the
         Company's Annual Report on Form 10-K for the year ended December 31,
         1988.

10.30    1989 Employees 401(k) Profit Sharing Plan and Trust. Incorporated by
         reference to the Company's Annual Report on Form 10-K for the year
         ended December 31, 1989.

10.31    Consulting Agreement, dated March 30, 1987, between Paragon Industries,
         Paragon Sales, Inc., William Weber, Jacqueline K. Weber and the
         Company. Incorporated by reference to the Company's Annual Report on
         Form 10-K for the year ended December 31, 1990.

10.32    Amendment to Consulting Agreement, dated May 29, 1990, between Paragon
         Industries, Paragon Sales, Inc., William Weber, Jacqueline K. Weber and
         the Company. Incorporated by reference to the Company's Annual Report
         on Form 10-K for the year ended December 31, 1990.

10.33    Second Amended and Restated Employment Agreement dated January 1, 1991,
         between David O'Neill and the Company. Incorporated by reference to the
         Company's Annual Report on Form 10-K for the year ended December 31,
         1991.

10.34    Second Amended and Restated Employment Agreement (First Amendment)
         dated December 16, 1992, between David O'Neill and the Company.
         Incorporated by reference to the Company's Annual Report on Form 10-K
         for the year ended December 31, 1992.





                                       31

<PAGE>   33



OTHER MATERIAL CONTRACTS

10.35    Installment Purchase Contract dated as of May 1, 1985, between the Dade
         County Industrial Development Authority and the Company. Incorporated
         by reference to the Company's Annual Report on Form 10-K for the year
         ended December 31, 1985.

10.36    Asset Purchase Agreement dated September 30, 1988 between Sally Beauty
         Company, Alberto-Culver Company, the Company and certain of the
         Company's affiliates. Incorporated by reference to the Company's Annual
         Report on Form 10-K for the year ended December 31, 1988.

10.37    Joint Venture Agreement, dated March 30, 1987, between Paragon Sales,
         Inc., William Weber, Jacqueline K. Weber and the Company. Incorporated
         by reference to the Company's Annual Report on Form 10-K for the year
         ended December 31, 1990.

10.38    Amendment to Joint Venture Agreement, dated May 29, 1990, between
         Paragon Sales, Inc., William Weber, Jacqueline K. Weber and the
         Company. Incorporated by reference to the Company's Annual Report on
         Form 10-K for the year ended December 31, 1990.

10.39    Exclusive Sales Agreement dated May 29, 1992 among the Company,
         American International Industries and Zvi and Betty Ryzman.
         Incorporated by reference to the Company's Form S-2 Registration
         Statement No. 33-51776.

10.40    Settlement Agreement dated May 6, 1992 between North American Philips
         Corporation and the Company. Incorporated by reference to the Company's
         Form S-2 Registration Statement No. 33-51776.

10.41    Letter of Credit Agreement dated July 31, 1992 between NationsBank and
         the Company. Incorporated by reference to the Company's Form S-2
         Registration Statement No. 33-51776.

10.42    Agreement dated May 28, 1991, between Xingiao Economic Development
         Corporation and Durable. Incorporated by reference to the Company's
         Annual Report on Form 10-K for the year ended December 31, 1991.


                                       33

<PAGE>   34



10.43    Agreement dated May 28, 1991, between Bogang Economic Development
         Company and Durable. Incorporated by reference to the Company's Annual
         Report on Form 10-K for the year ended December 31, 1991.

10.44    Agreement dated May 28, 1991, between Wanfeng Economic Development
         Corporation and Durable. Incorporated by reference to the Company's
         Annual Report on Form 10-K for the year ended December 31, 1991.

10.45    Warrant Agreement dated October 1, 1992, between American Stock
         Transfer and Trust Company and the Company. Incorporated by reference
         to the Company's Form S-2 Registration Statement No. 33-51776.

10.46    Stock Purchase Agreement dated May 29, 1992 between Glamour Industries,
         Inc. and the Company. Incorporated by reference to the Company's Form
         S-2 Registration Statement No. 33-51776.

10.47    Trademark Licensing Agreement dated January 11, 1994, between Helene
         Curtis, Inc. and the Company. Incorporated by reference to the
         Company's Annual Report on Form 10-K for the year ended December 31,
         1993.

10.48    Stock Acquisition Agreement dated April 1, 1994, between Durable, PPC
         Industries 1980 Limited, Ourimbah Investment, Limited and the Company.
         Incorporated by reference to the Company's Annual Report on Form 10-K
         for the year ended December 31, 1994.

10.49    1995 Common Stock Purchase Rights Agreement dated March 6, 1995 between
         American Stock Transfer and Trust Company and the Company. Incorporated
         by reference to the Company's Form 8-A Registration Statement filed
         March 7, 1995.

10.50    Facility Letter dated June 3, 1995, from the Bank of East Asia, Limited
         to Durable, Durable Electric Limited and PPC Industries 1980 Limited.
         Incorporated by reference to the Company's Form 10-Q dated June 30,
         1995.

10.51    Amended and Restated Letter Agreement dated July 28, 1995, between
         NationsBank and the Company. Incorporated by reference to the Company's
         Form 10-Q dated June 30, 1995.

                                       34

<PAGE>   35



10.52    Credit Agreement dated October 11, 1996, between Windmere Corporation,
         NationsBank National Association (South) and National Bank of Canada.
         Filed herewith.

10.53    Amendment No. 1 to Amended and Restated Letter Agreement, dated March
         1, 1996, between NationsBank and the Company. Incorporated by reference
         to the Company's Annual Report on Form 10-K for the year ended December
         31, 1995.

10.54    Amendment Agreement No. 1 to the Credit Agreement (October 11, 1996)
         dated January 31, 1997. Filed herewith.

(13)     Annual Report to Security Holders for the year ended December 31, 1996.
         Exhibit 13.

(21)     Subsidiaries of the Registrant. Filed herewith.

(23)     Consents of experts and counsel. Filed herewith.

   (b)   REPORTS ON FORM 8-K

         None.












                                       35

<PAGE>   36



                         REPORT OF INDEPENDENT CERTIFIED
                               PUBLIC ACCOUNTANTS


Board of Directors and Stockholders
Windmere-Durable Holdings, Inc.

We have audited the accompanying consolidated balance sheets of Windmere-Durable
Holdings, Inc. and Subsidiaries (the "Company") as of December 31, 1996 and
1995, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Windmere-Durable
Holdings, Inc. and Subsidiaries at December 31, 1996 and 1995, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.

We have also audited Schedule II of Windmere-Durable Holdings, Inc. and
Subsidiaries for each of the three years in the period ended December 31, 1996.
In our opinion, this schedule presents fairly, in all material respects, the
information required to be set forth therein.

GRANT THORNTON LLP

Miami, Florida
February 7, 1997 (except for Notes K and R
as to which the date is March 27, 1997)












                                       36

<PAGE>   37




                      WINDMERE CORPORATION AND SUBSIDIARIES

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS



CHANGES IN ALLOWANCE FOR POSSIBLE
LOSSES ON ACCOUNTS RECEIVABLE:

                                           Years Ended December 31,
                                      1996           1995           1994
                                      ----           ----           ----
Balance at beginning
 of period                         $ 1,158,000    $ 1,338,100    $ 1,424,600

Addition - Charged to
 costs and expenses                    930,000        894,700        231,400

Addition - Charged to
 other accounts (a)                      4,000         31,600         31,300

Deductions (b)                        (963,000)    (1,106,400)      (349,200)
                                   -----------    -----------    -----------


Balance at end
 of period                         $ 1,129,000    $ 1,158,000    $ 1,338,100
                                   ===========    ===========    ===========


(a)  Recoveries of amounts previously written off against the reserve.

(b)  Write-off of accounts receivable against the reserve.










                                       37

<PAGE>   38




PART IV.  ITEM 3.  (21).

SUBSIDIARIES OF THE REGISTRANT

NAME                                           INCORPORATED IN
----                                           ---------------
Consumer Products Americas, Inc.                Florida

EDI Masters, Inc.                               Florida

Fortune Products, Inc.                          Florida

Jerdon Products, Inc.                           Florida

Windmere Fan Products, Inc.                     Florida

Bay Books & Tapes, Inc.                         Florida

LitterMaid, Inc.                                Florida

Windmere Corporation                            Florida

Windmere Holdings Corporation                   Delaware

Windmere Holdings Corporation II                Delaware

Goal Making Company Limited                     British Virgin Islands

Remdale Investments Limited                     British Virgin Islands

PPC Industries, Ltd.                            British Virgin Islands

Windmere Consumer Products, Inc.                Canada

Durable Electric, Ltd.                          Hong Kong

Durable Electrical Metal Factory, Ltd.          Hong Kong

PPC Industries (1980) Ltd.                      Hong Kong

Sandgate Services, Ltd.                         Hong Kong

Parawind, Ltd.                                  Hong Kong

PPC Product Services, Ltd.                      Hong Kong


Each of the above subsidiaries is wholly-owned and is included in the
consolidated financial statements as of December 31, 1996.







                                       38

<PAGE>   39




                                AUDITOR'S CONSENT



We have issued our report dated February 7, 1997, accompanying the consolidated
financial statements and schedules incorporated by reference in the Annual
Report of Windmere-Durable Holdings, Inc. on Form 10-K for the year ended
December 31, 1996. We hereby consent to the incorporation by reference of the
aforementioned report in the Registration Statements of Windmere-Durable
Holdings, Inc. on Form S-8 (File No. 33-7681, effective September 30, 1986),
Form S-8 (File No. 33-36424, effective August 17, 1990), Form S-2 (File No.
33-51776, effective January 19, 1993), and on Form S-8 (File No. 33-58574,
effective February 22, 1993).


GRANT THORNTON LLP


Miami, Florida
March 27, 1997














                                       39

<PAGE>   40



                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

                         WINDMERE-DURABLE HOLDINGS, INC.
                                  (Registrant)

BY:  /s/ David M. Friedson                DATE:       3-27-97
    ----------------------------                ------------------------
    David M. Friedson, Chairman,
     President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the date indicated.

BY:   /s/ David M. Friedson               DATE:       3-27-97
     ---------------------------                ------------------------
     David M. Friedson, Chairman,
      President and Chief Executive Officer

BY:  /s/ Harry D. Schulman                DATE:       3-27-97
     ----------------------------               ------------------------
     Harry D. Schulman, Senior Vice
      President - Finance and Administration
      and Chief Financial Officer

BY:  /s/ Burton A. Honig                  DATE:       3-27-97
     ----------------------------               ------------------------
     Burton A. Honig, Vice President -
      Finance (Principal Accounting Officer)

BY:  /s/ Bertley Sager                    DATE:       3-28-97
     ----------------------------               ------------------------
     Bertley Sager, Director

BY:  /s/ Jerald I. Rosen                  DATE:       3-27-97
     ----------------------------               ------------------------
     Jerald I. Rosen, Director

BY:  /s/ Harold Strauss                   DATE:       3-28-97
     ----------------------------               ------------------------
     Harold Strauss, Director

BY:  /s/ Lai Kin                          DATE:       3-28-97
     ----------------------------               ------------------------
     Lai Kin, Director

BY:  /s/ Raymond So                       DATE:       3-28-97
     ----------------------------               ------------------------
     Raymond So, Director

BY:  /s/ Leonard Glazer                   DATE:       3-28-97
     ----------------------------               ------------------------
     Leonard Glazer, Director

BY:  /s/ Barbara Friedson Garrett         DATE:       3-27-97
     ----------------------------               ------------------------
     Barbara Friedson Garrett, Director

BY:  /s/ Felix S. Sabates                 DATE:       3-27-97
     ----------------------------               ------------------------
     Felix S. Sabates, Director

BY:  /s/ Arnold Thaler                    DATE:       3-27-97
     ----------------------------               ------------------------
     Arnold Thaler, Director



                                       40

<PAGE>   41


BY: /s/ Thomas J. Kane                   DATE:       3-28-97
    ----------------------------               -------------------------
    Thomas J. Kane, Director

BY: /s/ Susan J. Ganz                    DATE:       3-27-97
    ----------------------------               -------------------------
    Susan J. Ganz, Director

BY: /s/ Desmond Lai                      DATE:       3-28-97
    ----------------------------               -------------------------
    Desmond Lai, Director






                                       41



<PAGE>   42
                    FINANCIAL STATEMENTS AND REPORT
                       OF INDEPENDENT CERTIFIED
                          PUBLIC ACCOUNTANTS

                   WINDMERE - DURABLE HOLDINGS, INC.
                           AND SUBSIDIARIES

                      DECEMBER 31, 1996 AND 1995



<PAGE>   43











                         REPORT OF INDEPENDENT CERTIFIED
                               PUBLIC ACCOUNTANTS



Board of Directors and Stockholders
Windmere - Durable Holdings, Inc.

We have audited the accompanying consolidated balance sheets of Windmere -
Durable Holdings, Inc. and Subsidiaries (the "Company") as of December 31, 1996
and 1995, and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Windmere - Durable
Holdings, Inc. and Subsidiaries at December 31, 1996 and 1995, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1996, in conformity
with generally accepted accounting principles.




Miami, Florida
February 7, 1997 (except for Notes K and R,
 as to which the date is March 27, 1997)



<PAGE>   44


               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                  DECEMBER 31,


                                     ASSETS
<TABLE>
<CAPTION>

                                                                                     1996               1995
                                                                                     ----               ----
<S>                                                                             <C>                <C>
CURRENT ASSETS
    Cash and cash equivalents (Note A)                                          $   8,779,500      $  17,768,100
    Accounts and other receivables, less allowances of $1,128,700
       in 1996 and $1,158,000 in 1995 (Note E)                                     37,601,200         36,597,300
    Receivables from affiliates (Notes A and C)                                    12,138,800          9,982,800
    Inventories (Notes A and E)                                                    89,514,000         79,013,600
    Prepaid expenses                                                                3,751,100          2,183,600
    Future income tax benefits (Notes A, I and R)                                   3,231,800          1,642,900
                                                                                -------------      -------------

       Total current assets                                                       155,016,400        147,188,300

INVESTMENTS IN JOINT VENTURES (Notes A, C and J)                                   35,290,800               --

PROPERTY, PLANT AND EQUIPMENT - AT COST,
   less accumulated depreciation (Notes A and D)                                   32,759,800         30,484,700

OTHER ASSETS (Notes A, I, J and P)                                                 14,211,900         10,338,900
                                                                                -------------      -------------

                                                                                $ 237,278,900      $ 188,011,900
                                                                                =============      =============


                                                LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Notes and acceptances payable (Note E)                                      $  21,882,500      $      42,300
    Current maturities of long-term debt (Note G)                                     814,800            814,800
    Accounts payable                                                               12,106,500          9,979,700
    Accrued expenses (Notes F and R)                                               14,228,700          8,127,800
    Deferred income, current portion (Note A)                                         419,400            598,100
                                                                                -------------      -------------

       Total current liabilities                                                   49,451,900         19,562,700

LONG-TERM DEBT, less current maturities (Note G)                                   19,884,700          2,851,800

DEFERRED INCOME, less current portion (Note A)                                        247,500            666,900

COMMITMENTS AND CONTINGENCIES (Note K)                                                   --                 --

STOCKHOLDERS' EQUITY (Notes A, L and M)
    Special preferred stock - authorized 40,000,000 shares
       of $.01 par value; none issued                                                    --                 --
    Common stock - authorized 40,000,000 shares of $.10 par value;
       issued 17,445,146 in 1996 and 16,713,053 in 1995                             1,744,500          1,671,300
    Paid-in capital                                                                35,765,900         30,173,000
    Retained earnings                                                             130,965,100        133,851,400
    Unrealized foreign currency translation adjustment                               (780,700)          (765,200)
                                                                                -------------      -------------

       Total stockholders' equity                                                 167,694,800        164,930,500
                                                                                -------------      -------------

                                                                                $ 237,278,900      $ 188,011,900
                                                                                =============      =============

</TABLE>



The accompanying notes are an integral part of these statements.







                                       2
<PAGE>   45


               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                            YEARS ENDED DECEMBER 31,

<TABLE>
<CAPTION>

                                                                     1996               1995              1994
                                                                     ----               ----              ----
<S>                                                             <C>                <C>                <C>
Net sales                                                       $ 197,003,600      $ 187,776,900      $ 181,112,200

Cost of goods sold                                                157,278,400        146,907,300        132,185,700
                                                                -------------      -------------      -------------

       Gross profit                                                39,725,200         40,869,600         48,926,500

Selling, general and administrative expenses                       39,425,100         37,625,100         35,531,600
Unusual or non-recurring items (Note B)                                  --            8,000,000         (7,810,500)
                                                                -------------      -------------      -------------

       Operating profit (loss)                                        300,100         (4,755,500)        21,205,400

Other (income) expense
    Interest expense                                                1,345,900            578,300            551,900
    Interest and other income                                      (2,418,800)        (2,561,800)        (2,385,800)
                                                                -------------      -------------      -------------
                                                                   (1,072,900)        (1,983,500)        (1,833,900)
                                                                -------------      -------------      -------------

       Earnings (loss) before equity in net earnings
         (loss) of joint ventures, income taxes,
         minority interest and extraordinary item                   1,373,000         (2,772,000)        23,039,300

Equity in net earnings (loss) of joint ventures
  (Notes A, C and J)                                                2,298,700           (392,600)            91,400
                                                                -------------      -------------      -------------

       Earnings (loss) before income taxes,
         minority interest and extraordinary item                   3,671,700         (3,164,600)        23,130,700

Income taxes (benefit) (Notes A and I)
    Current                                                          (716,300)        (1,242,700)         2,375,700
    Deferred                                                          436,600            (38,100)           218,800
                                                                -------------      -------------      -------------
                                                                     (279,700)        (1,280,800)         2,594,500
                                                                -------------      -------------      -------------

       Earnings (loss) before minority interest
         and extraordinary item                                     3,951,400         (1,883,800)        20,536,200

Minority interest in net loss of subsidiary                              --                 --                1,200
                                                                -------------      -------------      -------------

       Earnings (loss) before extraordinary item                    3,951,400         (1,883,800)       (20,537,400)

Extraordinary item (Note R)                                        (3,500,000)              --                 --
                                                                -------------      -------------      -------------

       Net earnings (loss)                                      $     451,400      $  (1,883,800)     $  20,537,400
                                                                =============      =============      =============

Per share data (Notes A, L and R)
    Earnings (loss) per common share and common
      equivalent shares before effect of extraordinary item     $         .22      $        (.11)     $        1.17

       Extraordinary item                                                (.20)              --                 --
                                                                -------------      -------------      -------------

       Net earnings                                             $         .02      $        (.11)     $        1.17
                                                                =============      =============      =============

    Dividends per common share                                  $         .20      $         .20      $         .15
                                                                =============      =============      =============
</TABLE>



The accompanying notes are an integral part of these statements.






                                       3
<PAGE>   46


               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                       THREE YEARS ENDED DECEMBER 31, 1996

<TABLE>
<CAPTION>
                                                                                                        Unrealized
                                                                                                         foreign
                                                                                                        currency
                                               Common             Paid-in            Retained          translation
                                               stock              capital            earnings          adjustment
                                               -----              -------            --------          ----------
<S>                                         <C>                <C>                <C>                <C>
Balance at January 1, 1994                 $   1,578,100      $  24,633,300      $ 121,086,500      $    (710,700)

Net earnings                                        --                 --           20,537,400               --
Cash dividends - $.15 per share                     --                 --           (2,535,100)              --
Acquisition of additional
  20% interest in Durable
  Electrical Metal Factory,
  Ltd. ("Durable")                               100,000          7,900,000               --                 --
Purchase and retirement of
  397,400 shares of common stock                 (39,700)        (3,858,900)              --                 --
Exercise of stock options
  and warrants                                    35,000          1,645,800               --                 --
Tax benefit resulting from
  exercise of stock options                         --              328,500               --                 --
Unrealized foreign currency
  translation adjustment                            --                 --                 --              (75,200)
                                           -------------      -------------      -------------      -------------

Balance at December 31, 1994                   1,673,400         30,648,700        139,088,800           (785,900)

Net loss                                            --                 --           (1,883,800)              --
Cash dividends - $.20 per share                     --                 --           (3,353,600)              --
Purchase and retirement of
  139,600 shares of common stock                 (14,000)          (997,400)              --                 --
Exercise of stock options
  and warrants                                    11,900            414,400               --                 --
Tax benefit resulting from
  exercise of stock options                         --              242,800               --                 --
Cost of intercompany recapitalization               --             (135,500)              --                 --
Unrealized foreign currency
  translation adjustment                            --                 --                 --               20,700
                                           -------------      -------------      -------------      -------------

Balance at December 31, 1995                   1,671,300         30,173,000        133,851,400           (765,200)

Net earnings                                        --                 --              451,400               --
Cash dividends - $.20 per share                     --                 --           (3,337,700)              --
Purchase and retirement of
  463,000 shares of common stock                 (46,300)        (3,721,800)              --                 --
Exercise of stock options and warrants            44,700          2,531,500               --                 --
Tax benefit resulting from exercise
  of stock options                                  --              183,600               --                 --
Fair value of options to non-employees              --              617,000               --                 --
Issuance of 748,112 shares -
  acquisition of 50% of Salton/Maxim
  Housewares, Inc.                                74,800          5,982,600               --                 --
Unrealized foreign currency
  translation adjustment                            --                 --                 --              (15,500)
                                           -------------      -------------      -------------      -------------

Balance at December 31, 1996               $   1,744,500      $  35,765,900      $ 130,965,100      $    (780,700)
                                           =============      =============      =============      =============

</TABLE>



The accompanying notes are an integral part of this statement.






                                       4
<PAGE>   47


               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                        FOR THE YEARS ENDED DECEMBER 31,

<TABLE>
<CAPTION>

                                                                              1996            1995              1994
                                                                              ----            ----              ----
<S>                                                                    <C>               <C>               <C>
Cash flows from operating activities
    Net earnings (loss)                                                $    451,400      $ (1,883,800)     $ 20,537,400
    Adjustments to reconcile net earnings (loss) to
     net cash provided by operating activities
       Depreciation of property, plant and equipment                      6,377,900         6,218,300         5,378,500
       Amortization of intangible assets                                    613,400           561,100           440,100
       Loss on sale of other asset (Note B)                                    --           8,000,000              --
       Net change in allowance for losses on
          accounts receivable                                               (29,300)         (180,100)          (86,500)
       Consulting expense on non-employee stock options                      68,000              --                --
       Gain on sale of fixed asset (Note B)                                    --                --          (7,810,500)
       Amortization of deferred income                                     (598,100)         (598,100)         (598,100)
       Undistributed equity in (earnings) loss of joint ventures         (2,762,700)          392,600           (91,400)
       Increase (decrease) in minority interest                                --                --              (1,200)
       Changes in assets and liabilities
          Decrease (increase) in accounts and other receivables             149,600         2,316,100        (7,378,200)
          Decrease (increase) in inventories                                534,700        (4,735,200)       (7,120,900)
          Decrease (increase) in prepaid expenses                          (709,600)        5,836,900        (1,029,600)
          Increase (decrease) in accounts payable
            and accrued expenses                                          7,714,400         1,005,800        (1,845,600)
          Increase (decrease) in current and deferred income taxes       (1,405,300)       (1,829,300)        2,695,900
          Increase in other assets                                         (783,600)       (1,073,300)         (294,800)
          Decrease (increase) in other accounts                             (14,000)           20,700           (75,200)
                                                                       ------------      ------------      ------------

               Net cash provided by operating activities                  9,606,800        14,051,700         2,719,900

Cash flows from investing activities
    Proceeds from fixed asset sales                                            --             129,600         9,442,000
    Additions to property, plant and equipment                           (8,618,200)       (8,383,500)      (10,436,900)
    (Decrease) increase in short-term investments                              --           2,500,000        (2,500,000)
    Purchase of assets - LitterMaid(TM), Inc.                            (2,246,000)             --                --
    Purchase of assets - Bay Books and Tapes, Inc.                       (1,180,000)             --                --
    Investments in joint ventures                                        (7,745,400)             --                --
    Decrease (increase) in receivable accounts and
       notes from affiliates                                            (15,301,600)        2,068,900        (3,186,300)
                                                                       ------------      ------------      ------------

               Net cash (used in) investing activities                  (35,091,200)       (3,685,000)       (6,681,200)

Cash flows from financing activities
    Net borrowings under lines of credit                                 21,840,200          (697,800)       (2,255,700)
    Payments of long-term debt                                             (814,800)         (814,900)         (836,500)
    Exercises of stock options and warrants                               2,576,200           426,300         1,680,800
    Cash dividends paid                                                  (3,337,700)       (3,353,600)       (2,535,100)
    Purchases of common stock                                            (3,768,100)       (1,011,400)       (3,898,600)
    Cost of intercompany recapitalization                                      --            (135,500)             --
                                                                       ------------      ------------      ------------

               Net cash provided by (used in) financing activities       16,495,800        (5,586,900)       (7,845,100)
                                                                       ------------      ------------      ------------

Increase (decrease) in cash and cash equivalents                         (8,988,600)        4,779,800       (11,806,400)

Cash and cash equivalents at beginning of year                           17,768,100        12,988,300        24,794,700
                                                                       ------------      ------------      ------------

Cash and cash equivalents at end of year                               $  8,779,500      $ 17,768,100      $ 12,988,300
                                                                       ============      ============      ============


</TABLE>


                                                                     (continued)


                                       5

<PAGE>   48


               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

                        FOR THE YEARS ENDED DECEMBER 31,

<TABLE>
<CAPTION>

                                                                                         1996           1995           1994
                                                                                         ----           ----           ----
<S>                                                                                  <C>            <C>            <C>
                                 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

Cash paid during the year for:
    Interest                                                                       $  1,488,200     $  488,500     $  502,200
    Income taxes                                                                   $    548,400     $2,181,800     $1,927,300

Non-cash investing and financing activities:
    Common stock issued for additional investment in
      Durable (Note A)                                                             $       --       $     --       $8,000,000
    Tax benefit resulting from exercise of stock options                           $    183,600     $  242,800     $  328,500
    Valuation of non-employee stock options under SFAS 123
    (LitterMaid(TM) acquisition)                                                   $    549,000     $     --       $     --

    In 1996, the Company purchased a 50-percent interest in New M-Tech
      Corporation in exchange for $3,000,000 in cash and $7,000,000 in long-term
      promissory notes

    In 1996, the Company purchased a 50-percent interest in Salton/Maxim
      Housewares, Inc. in exchange for $3,254,300 in cash, 748,112 shares of
      Windmere common stock (valued at $6,057,000) and a $10,847,700 promissory
      note

    In 1996, the Company acquired the remaining 50-percent of its seasonal
      products joint venture for a nominal amount. In conjunction with the
      acquisition, the Company obtained the following assets and liabilities:

          Cash                                                                     $  1,102,300
          Accounts receivable                                                         1,124,200
          Inventory                                                                  10,305,100
          Prepaid and other assets                                                       74,600
          Less liabilities assumed                                                  (13,883,600)
                                                                                   ------------

          Goodwill                                                                 $  1,277,400
                                                                                   ============

</TABLE>





The accompanying notes are an integral part of these statements.



                                       6

<PAGE>   49






               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        DECEMBER 31, 1996, 1995 AND 1994



NOTE A - SUMMARY OF ACCOUNTING POLICIES

     Windmere - Durable Holdings, Inc. and Subsidiaries (the "Company") is
     principally engaged in the manufacture and sale of personal care, kitchen
     electric and seasonal products. In preparing financial statements in
     conformity with generally accepted accounting principles, management is
     required to make estimates and assumptions that affect the reported amounts
     of assets and liabilities and the disclosure of contingent assets and
     liabilities at the date of the financial statements and revenues and
     expenses during the reporting period. Actual results could differ from
     those estimates. A summary of the Company's significant accounting policies
     consistently applied in the preparation of the accompanying consolidated
     financial statements follows.

     PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of the Company
     and its wholly-owned subsidiaries. Intercompany balances and transactions
     are eliminated in consolidation. The Company reflects its investments in
     its 50%-owned joint ventures at cost plus its equity in undistributed net
     earnings.

     FOREIGN CURRENCY TRANSLATION

     Balance sheet accounts of the Company's foreign operations are translated
     at the exchange rate in effect at each year end and income statement
     accounts are translated at the average exchange rates prevailing during the
     year. Adjustments resulting from this translation process are accumulated
     in a separate component of stockholders' equity and are not included in the
     determination of net earnings. The Company's foreign manufacturing
     subsidiary utilizes the local currency as its functional currency, and the
     other foreign subsidiaries primarily utilize the U.S. dollar as their
     functional currency.

     CASH AND CASH EQUIVALENTS

     The Company considers all highly liquid investments with maturities of
     three months or less at the time of purchase to be cash equivalents. Cash
     balances at December 31, 1996 include $5,251,000 held in foreign banks by
     the Company's Hong Kong and Canadian subsidiaries.




                                                                     (continued)


                                       7



<PAGE>   50
               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 1996, 1995 AND 1994


NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued

     INVENTORIES

     Inventories are stated at the lower of cost or market; cost is determined
     by the first-in, first-out method. Inventories are comprised of the
     following:

                                             1996               1995
                                       --------------     --------------
         Raw materials                 $  13,824,300      $  16,327,900
         Work in process                  20,551,900         21,085,300
         Finished goods                   55,137,800         41,600,400
                                       --------------     --------------

                                       $  89,514,000      $  79,013,600
                                       ==============     ==============

     RECEIVABLES FROM AFFILIATES

     Receivables from affiliates include accounts receivable which arise in the
     ordinary course of business and are settled as trade obligations, as well
     as notes receivable due from certain of the Company's joint venture
     partners ("affiliates"). Notes receivable to these affiliates totaled
     $8,045,800 at December 31, 1996, are short-term and bear interest at
     prevailing market interest rates.

     PROPERTY, PLANT AND EQUIPMENT

     Depreciation and amortization are provided for in amounts sufficient to
     relate the cost of depreciable assets to their estimated operating service
     lives using accelerated and straight-line methods.

     INTANGIBLE ASSETS

     Intangible assets, consisting primarily of goodwill, are being amortized on
     a straight-line basis over periods ranging from 7-20 years. Intangible
     assets were $13,704,600 and $10,113,700 at December 31, 1996 and 1995,
     respectively, and the related accumulated amortization was $2,700,700 and
     $2,126,800, respectively.

     In December 1996, the Company acquired the remaining 50-percent of its
     seasonal products joint venture for a nominal amount. The total cost in
     excess of net assets acquired has resulted in goodwill of $1,277,400 and is
     being amortized over 7 years.

                                                                     (continued)



                                       8

<PAGE>   51
               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 1996, 1995 AND 1994



NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued

     INTANGIBLE ASSETS - CONTINUED

     On an ongoing basis, management reviews the valuation and amortization of
     goodwill. As part of this review, the Company estimates the value and
     future benefits of the net income generated by the related subsidiaries to
     determine that no impairment has occurred.

     In March 1995, the Financial Accounting Standards Board issued Statement
     121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
     Assets to Be Disposed Of." This Statement had no impact on the Company's
     results of operations or financial position upon adoption in January 1996.

     FAIR VALUE OF FINANCIAL INSTRUMENTS

     Financial instruments consist primarily of cash and cash equivalents,
     accounts receivable, notes receivable, accounts payable, notes payable and
     bank debt. At December 31, 1996, the fair value of these instruments
     approximates the carrying amount of these items.

     INCOME TAXES

     No provision has been made for U.S. taxes on undistributed earnings of
     foreign subsidiaries and joint ventures of approximately $108,000,000 at
     December 31, 1996, as it is anticipated that such earnings will be
     reinvested in their respective operations or in other foreign operations.

     Deferred taxes have been provided on temporary differences in reporting
     certain transactions for financial accounting and tax purposes.

     DEFERRED INCOME

     In 1992, the Company granted an exclusive license for the distribution of a
     product. Deferred income of $1,340,600 resulted from this transaction,
     which is being reported as other income on a straight-line basis over the
     five year license term.

     In 1988, the Company sold its Save-Way Beauty Supply stores for a gain of
     approximately $6,980,000, of which $3,300,000 was allocated to a ten-year
     covenant not to compete that is being amortized to other income on a
     straight-line basis.

                                                                     (continued)

                                       9

<PAGE>   52
               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 1996, 1995 AND 1994



NOTE A - SUMMARY OF ACCOUNTING POLICIES - Continued

     EARNINGS PER SHARE

     Earnings per share are based upon the weighted average number of common
     shares and common equivalent shares outstanding during each year, using the
     modified treasury stock method. The total number of such weighted average
     shares was 17,620,000 in 1996, 17,227,000 in 1995, and 17,589,000 in 1994.
     Stock options and warrants are considered common stock equivalents unless
     their inclusion would be antidilutive.

     RECLASSIFICATIONS

     Certain prior year amounts within the accompanying financial statements
     have been reclassified for comparability.

NOTE B - UNUSUAL OR NON-RECURRING ITEMS

     In 1995, the Company incurred a non-recurring pre-tax loss of $8,000,000 on
     the sale of an other asset. This transaction reduced 1995 net earnings by
     $5,280,000, or $.31 per share, on an after-tax basis.

     In 1994, Durable sold 60,000 square feet of office space in Hong Kong, for
     $9,500,000. This transaction generated a non-recurring profit of
     $7,810,500, or approximately $.45 per share. No taxes were provided as the
     gain was not taxable.

NOTE C - INVESTMENTS IN JOINT VENTURES

     Investments in joint ventures consist of the Company's interests in joint
     ventures, accounted for under the equity method. Included are the Company's
     50-percent interests in Salton/Maxim Housewares, Inc. ("Salton"), New
     M-Tech Corporation ("New M-Tech"), PX Distributors, Inc. ("PX"), Breakroom
     of Tennessee, Inc. and Anasazi Partners, L.P. ("Anasazi").

     In December 1996, the Company acquired the remaining 50-percent of its
     seasonal products joint venture for a nominal amount. The assets and
     liabilities of the joint venture are included in the consolidated financial
     statements of the Company and have been excluded from the summarized
     financial information below for 1996.



                                                                     (continued)

                                       10

<PAGE>   53
               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 1996, 1995 AND 1994



NOTE C - INVESTMENTS IN JOINT VENTURES - Continued

     Summarized financial information of the unconsolidated companies is as
follows:

<TABLE>
<CAPTION>

                                                              1996                  1995
                                                         -------------         --------------
<S>                                                      <C>                   <C>
         Current assets                                  $  85,536,000         $    9,657,400
         Non-current assets                                 32,524,000                 35,100
                                                         -------------         --------------

         Total assets                                    $ 118,060,000         $    9,692,500
                                                         =============         ==============

         Current liabilities                             $  65,991,000         $   11,317,100
         Non-current liabilities                               889,000                  --
                                                         -------------         --------------

         Total liabilities                               $  66,880,000         $   11,317,100
                                                         =============         ==============

         Sales                                           $ 162,368,000         $   30,171,600
                                                         =============         ==============

         Gross profit                                    $  34,312,000         $    2,346,000
                                                         =============         ==============

         Net earnings (loss)                             $   5,552,000         $     (785,200)
                                                         =============         ==============



</TABLE>

     All sales made by joint ventures, other than sales of $935,000 by Salton to
     the Company in 1996, were to entities other than members of the
     consolidated group. Included in the Company's sales are sales made to joint
     ventures of approximately $17,855,400 in 1996, including $8,537,000 to
     Salton, and $7,485,300 in 1995.

     Certain of the Company's joint venture investments at December 31, 1996 and
     1995, had negative values of approximately $375,000 and $800,000,
     respectively, which deficits have been classified as a reduction in
     receivables from affiliates.


                                       11

<PAGE>   54
               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 1996, 1995 AND 1994



NOTE D - PROPERTY, PLANT AND EQUIPMENT

     The following is a summary of property, plant and equipment:

<TABLE>
<CAPTION>
                                                         Useful Lives                 1996                1995
                                                        -------------           ---------------    ----------------
<S>                                                    <C>                       <C>                <C>
         Building                                       15 - 50 years           $     6,315,400    $      4,493,100
         Building improvements                           8 - 31 years                 2,220,200             589,700
         Computer equipment                               3 - 5 years                 5,173,300           4,697,600
         Furniture and equipment                          3 - 8 years                54,853,600          55,197,000
         Leasehold improvements                               8 years                 8,443,700           3,283,300
         Land and land improvements                     15 - 31 years                 2,660,100           2,650,600
                                                  (Improvements only)           ---------------    ----------------
                                                                                     79,666,300          70,911,300
         Less accumulated depreciation
           and amortization                                                          46,906,500          40,426,600
                                                                                ---------------    ----------------

                                                                                $    32,759,800    $     30,484,700
                                                                                ===============    ================
</TABLE>

NOTE E - NOTES AND ACCEPTANCES PAYABLE

     The Company's foreign subsidiaries (the "subsidiaries") have $6,400,000 in
     trade finance lines of credit, payable on demand, which are secured by the
     subsidiaries' tangible and intangible property located in Hong Kong and in
     the People's Republic of China, as well as a Company guarantee. At December
     31, 1996, the subsidiaries were utilizing, including letters of credit,
     approximately $2,496,300 of these credit lines. These subsidiaries also
     have available an additional $5,000,000 line of credit which is supported
     by a domestic standby letter of credit. As of December 31, 1996, $3,232,000
     was being utilized under this facility.

     The Company has a $30,000,000 line of credit from a domestic bank, which is
     secured by domestic accounts receivable and inventory. At December 31,
     1996, there was $18,000,000 outstanding under this credit line.

NOTE F - ACCRUED EXPENSES

     Accrued expenses are summarized as follows:

<TABLE>
<CAPTION>

                                                                                      1996               1995
                                                                                ---------------    ----------------
<S>                                                                             <C>                <C>
         Advertising allowances                                                 $     1,075,600    $        971,400
         Salaries and bonuses                                                         1,879,300           1,611,100
         Volume rebates                                                               1,325,600           1,022,700
         Extraordinary litigation settlement                                          5,300,000                --
         Other                                                                        4,648,200           4,522,600
                                                                                ---------------    ----------------
                                                                                $    14,228,700    $      8,127,800
                                                                                ===============    ================
</TABLE>



                                       12
<PAGE>   55
               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 1996, 1995 AND 1994



NOTE G - LONG-TERM DEBT

     Long-term debt is summarized as follows:

<TABLE>
<CAPTION>
                                                                                      1996               1995
                                                                                ---------------    ----------------
<S>                                                                             <C>                <C>
         Note payable to Salton (Note J)                                        $    10,847,700    $           --
         Notes payable to New M-Tech
           Corporation (Note J)                                                       7,000,000                --
         Industrial development revenue bonds                                         2,851,800           3,666,600
                                                                                ---------------    ----------------
                                                                                     20,699,500           3,666,600

         Less current maturities                                                        814,800             814,800
                                                                                ---------------    ----------------

         Total long-term debt                                                   $    19,884,700    $      2,851,800
                                                                                ===============    ================
</TABLE>


     In 1985, the Company received proceeds of $7,500,000 from the issuance of
     tax-exempt industrial development revenue bonds. The bonds are being paid
     off in equal quarterly principal payments of $203,700 through May 2000. At
     December 31, 1996, the interest rate on the bonds was 6.5-percent. The
     bonds include certain covenants which provide, among other things,
     restrictions relating to the maintenance of minimum levels of working
     capital, net worth and other financial ratios.

NOTE H - EMPLOYEE BENEFIT PLANS

     The Company has a 401(k) plan for its employees to which the Company makes
     discretionary contributions at rates dependent on the level of each
     employee's contributions. Contributions made by the Company are limited to
     the maximum allowable for federal income tax purposes. The amounts charged
     to earnings for this plan during the three years ended December 31, 1996
     were not significant.

     The Company does not provide any health or other benefits to retirees.


                                       13
<PAGE>   56

               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 1996, 1995 AND 1994


NOTE I - INCOME TAXES

     Income tax expense (benefit) consists of the following:

<TABLE>
<CAPTION>
                                      1996           1995               1994
                                 -----------      -----------      -----------
     <S>                         <C>              <C>              <C>
     Current
         Federal                 $  (748,200)     $(1,392,300)     $ 2,156,000
         Foreign                      (2,100)         183,800           72,900
         State                        34,000          (34,200)         146,800
                                 -----------      -----------      -----------
                                    (716,300)      (1,242,700)       2,375,700

     Deferred                        436,600          (38,100)         218,800
                                 -----------      -----------      -----------

                                 $  (279,700)     $(1,280,800)     $ 2,594,500
                                 ===========      ===========      ===========

</TABLE>


     The analysis of the deferred income tax provision (benefit) representing
     the tax effects of temporary differences between tax and financial
     reporting is as follows:

<TABLE>
<CAPTION>

                                         1996           1995           1994
                                      ---------      ---------      ---------
<S>                                   <C>            <C>            <C>
Intercompany profit in inventory      $  (2,700)     $ (72,500)     $    --
Differences in timing between
  financial and tax reporting           145,700         49,300         15,000
Utilization of net operating loss
  carryforward                          356,200        220,100        413,500
Deferred income                         224,300        224,300         55,300
Depreciation and amortization          (246,900)      (303,800)      (248,900)
Other                                   (40,000)      (155,500)       (16,100)
                                      ---------      ---------      ---------
                                      $ 436,600      $ (38,100)     $ 218,800
                                      =========      =========      =========
</TABLE>


     The United States and foreign components of earnings (loss) before income
taxes are as follows:

<TABLE>
<CAPTION>
                                 1996             1995              1994
                            ------------      ------------      ------------
<S>                         <C>               <C>               <C>
United States               $ (2,253,800)     $ (8,056,300)     $  7,449,500
Foreign                        5,925,500         4,891,700        15,681,200
                            ------------      ------------      ------------

                            $  3,671,700      $ (3,164,600)     $ 23,130,700
                            ============      ============      ============

</TABLE>

                                                                     (continued)


                                       14

<PAGE>   57

               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 1996, 1995 AND 1994


NOTE I - INCOME TAXES - Continued

     The differences between the statutory rates and the tax rates computed on
pre-tax profits are as follows:

<TABLE>
<CAPTION>
                                                  1996      1995       1994
                                                  ----      ----       ----
                                                   %          %          %
                                                  ----      ----       ----
<S>                                              <C>       <C>         <C>
Tax expense (benefit) at statutory rates         34.0%     (34.0)%     34.0%
State taxes, net of federal tax benefit            .6        (.7)        .4
Foreign (income) loss not subject to tax         (6.4)       2.6      (15.9)
Provision for prior years' Hong Kong
  income taxes                                    (.6)      12.3       (5.9)
Net tax rate differential on undistributed
  foreign earnings                              (17.3)     (25.6)      (2.0)
Equity in joint venture earnings not
  subject to U.S. tax or already taxed          (25.7)      (4.2)        .1
Effect of gross up of foreign taxes,
  net of foreign tax credit                      (4.0)      (4.1)       --
Federal withholding taxes                         6.7        7.8        --
Other                                             5.1        5.4         .5
                                                 ----       ----       ----

                                                 (7.6)%    (40.5)%     11.2%
                                                 ====       ====       ====

</TABLE>


     In the third quarter of 1995, the Company reached an agreement with the
     Hong Kong Inland Revenue Department concerning the taxes assessed against
     the Company's consolidated Hong Kong subsidiaries through 1991. The
     assessment, including interest charges and net of U.S. foreign tax credits,
     approximated $1,400,000. The Company made a provision in its 1995 second
     quarter of $400,000 or $.02 per share, to increase its contingency reserve
     to the settlement amount. Security deposits of approximately $3,000,000
     were refunded to the Company during the fourth quarter of 1995. Hong Kong
     tax returns for the fiscal years 1992 through 1995 have been audited and
     accepted as filed.

     The Internal Revenue Service has completed its field work in its
     examination of the Company's 1992 tax return. To date, no adjustments have
     been proposed. Management believes that adequate provision for taxes has
     been made for the years under examination and those not yet examined.

     The Company's future income tax benefits at December 31, 1996, arise from
     Durable's and the Company's Canadian subsidiary's net operating loss
     carryforwards. Valuation allowances have not been recorded limiting such
     benefits based on management's current estimate that future profits will be
     sufficient to realize these benefits.

                                                                     (continued)




                                       15
<PAGE>   58

               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 1996, 1995 AND 1994


NOTE I - INCOME TAXES - Continued

     The primary components of future income tax benefits at December 31, 1996
are as follows:

<TABLE>
<S>                                                                  <C>
              Net operating loss carryforwards                       $  1,782,100
              Depreciation and amortization                            (1,577,600)
              Deferred income                                             289,100
              Differences in timing between financial
                and tax reporting                                       1,969,500
              Extraordinary litigation settlement                       1,800,000
              Other                                                       174,500
                                                                     ------------
                                                                        4,437,600
              Less amount included in other assets                      1,205,800
                                                                     ------------

                                                                     $  3,231,800
                                                                     ============

</TABLE>


     The tax benefits resulting from the exercise of stock options have been
     recorded as additions to paid-in capital in the amounts of $183,600 and
     $242,800 in 1996 and 1995, respectively.

NOTE J - ACQUISITIONS

     PX DISTRIBUTORS, INC.

     In December 1995, the Company purchased, for a nominal amount, a 50-percent
     interest in PX Distributors, Inc., a distributor of home
     automation/security devices. The Company and the other owners have agreed
     to lend PX certain amounts from time to time to meet working capital
     requirements. Loans made by the Company bear interest at the prime rate,
     are payable upon PX achieving sufficient cash flow and are secured by the
     assets of PX.

     SALTON/MAXIM HOUSEWARES, INC.

     In February 1996, the Company entered into a stock purchase agreement with
     Salton providing for the issuance and sale by Salton to the Company of
     6,508,572 shares of its common stock, representing 50-percent of Salton's
     outstanding common stock after issuance.

     On July 11, 1996, Windmere completed its acquisition of 50-percent of
     Salton. The Company received 6,508,572 shares of Salton common stock
     (market value at date of acquisition of approximately $36.2 million) in
     exchange for a cash payment of $3,254,300, a $10,847,700 promissory note
     and 748,112 shares of Windmere stock (market value at date of agreement of
     approximately $6,057,000). The total cost in excess of net assets acquired
     is not deemed to be material.

                                                                     (continued)


                                       16

<PAGE>   59

               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 1996, 1995 AND 1994


NOTE J - ACQUISITIONS - Continued

     In addition, the Company received an option to purchase 453,000 shares of
     Salton common stock at an exercise price of $4.53 per share. The option
     becomes exercisable only if and to the extent that options to purchase
     shares of Salton common stock outstanding at the date of the stock purchase
     agreement are exercised.

     The $10,847,700 promissory note bears interest at a rate of 8-percent per
     annum, payable quarterly, and matures in July 2001. The note is
     subordinated to the Company's current and future indebtedness to its senior
     lender and is collateralized by certain of the Company's domestic assets.

     LITTERMAID(TM)

     In 1996, the Company purchased certain assets and marketing rights,
     including patents, for the LitterMaid(TM), computerized, infrared,
     automatic self-cleaning cat litter box. The purchase price of the assets
     included $2,200,000 in cash and options to purchase 150,000 shares of the
     Company's common stock. The total fair value of the options as determined
     under SFAS 123, is $549,000 and has been included in the cost of the assets
     acquired (Note L).

     NEW M-TECH CORPORATION

     In April 1996, the Company acquired a 50-percent interest in New M-Tech
     Corporation, a consumer electronics company for $10,000,000. Payment
     consisted of $3,000,000 in cash and $7,000,000 in unsecured promissory
     notes. The promissory notes bear interest at 8% per annum and consist of a
     $3,000,000 promissory note maturing in 1998, and two $2,000,000 promissory
     notes maturing in 2001, one of which is convertible into shares of the
     Company's common stock at a price of $15 per share. Conversion may occur at
     any time during the term of the convertible promissory note, and may be
     required under certain circumstances. The notes are subordinated to the
     Company's current and future indebtedness to its senior lender. The total
     cost in excess of net assets acquired of $5,300,000 has resulted in
     goodwill and is being amortized over 20 years on a straight-line basis.

     BREAKROOM OF TENNESSEE, INC.

     In May 1996, the Company agreed to contribute and/or purchase inventory
     valued at $250,000 in exchange for a 50-percent interest in Breakroom of
     Tennessee, Inc., a joint venture formed to market and distribute office
     products. The Company's investment as of December 31, 1996 consists of
     $240,390 in inventory purchased on behalf of the joint venture.

                                                                     (continued)



                                       17

<PAGE>   60
               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 1996, 1995 AND 1994



NOTE J - ACQUISITIONS - Continued

     BAY BOOKS & TAPES, INC.

     In June 1996, the Company acquired the assets of the books and video
     publishing division of KQED, Inc., consisting mostly of inventory, for
     $1,180,000 in cash. Bay Books & Tapes, Inc. publishes public television
     companion books and videos.

     ANASAZI PARTNERS, L.P.

     In June 1996, the Company entered into an agreement to acquire a 50-percent
     interest in an investment partnership for $1,250,000. Payments as of
     December 31, 1996, include a $1,250,000 capital contribution to the
     partnership and loans totaling $1,250,000 to the partnership's other equity
     partner. Such loans bear interest at a rate of 8-percent per annum, are
     unsecured and are payable upon demand.

     The partnership's investments include privately traded securities whose
     values have been estimated by the General Partner in the absence of readily
     ascertainable market values. Fair value for these securities is considered
     to be cost which may differ significantly from the values that would have
     been used had a ready market for the securities existed.

     PRO-FORMA

     The results of operations on a pro-forma basis as though Salton and New
     M-Tech had been acquired as of the beginning of the years ended December
     31, 1996 and 1995 are as follows: (In Thousands except per share amounts)

<TABLE>
<CAPTION>
                                                                Year Ended December 31,
                                                                -----------------------
                                                                     1996        1995
                                                                     ----        ----
<S>                                                                <C>         <C>
     Equity in net earnings (loss) of joint ventures               $ 2,152     $  (905)
     Net income (loss)                                             $  (306)    $(2,482)
     Earnings (loss) per common and common
       equivalent share                                            $  (.02)    $  (.14)

</TABLE>




                                       18
<PAGE>   61
               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 1996, 1995 AND 1994



NOTE K - COMMITMENTS AND CONTINGENCIES

     LITIGATION

     In April 1994, Kabushiki Kaisha Izumi Seiki Seisakusho, a Japanese
corporation ("Izumi"), filed an action against the Company, David M. Friedson,
the President and Chief Executive Officer of the Company, U.S. Philips
Corporation, North American Philips Corporation and N.V. Philips
Gloellampenfabrieken (together, "Philips"). This action concerns the 1992
settlement (the "Philips Settlement") of certain claims, primarily a Federal
antitrust claim, made by the Company against Philips, which resulted in an
$89,644,257 judgment in favor of the Company. Pursuant to the Philips
Settlement, Philips paid the Company $57,000,000 in May 1992. As part of the
Philips Settlement, the Company and Philips agreed that the Company's money
judgment against Philips in connection with such antitrust litigation would be
vacated. Izumi is claiming, among other things, that the Philips Settlement,
including the agreement with Philips to cooperate to vacate the related judgment
in favor of the Company, constitutes a breach by the Company of a customary
indemnification agreement between Izumi (as seller of goods) and the Company (as
buyer of goods) dated February 20, 1984. This indemnification agreement covered
certain claims against the Company and was entered into more than eight months
prior to the commencement of the Philips litigation in connection with the
routine purchase by the Company of goods from Izumi. Izumi advanced certain
legal fees and costs to the Company in connection with the Philips litigation.
Izumi is further claiming that it is entitled to recover from the Company an
unspecified portion of the Philips Settlement, punitive damages and
reimbursement of litigation and other related costs and expenses. A pre-answer
motion by the Company resulted in the dismissal of some of Izumi's claims, and
the Company answered the remaining claims. A mediation was held on February 27,
1997 to consider settlement of the case. On March 27, 1997, after evaluating the
potential costs of continuing litigation, the Company paid $4,500,000 to settle
the dispute.






                                                                     (continued)


                                       19
<PAGE>   62

               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 1996, 1995 AND 1994


NOTE K - COMMITMENTS AND CONTINGENCIES - Continued

     LITIGATION - Continued

     The Company, its 50-percent owned joint venture partners Salton/Maxim
     Housewares, Inc. and New M-Tech Corporation, White Consolidated Industries,
     Inc. ("White Consolidated"), and certain other parties have been named as
     defendants in litigation filed by Westinghouse Electric Corporation
     ("Westinghouse") in the United States District Court for the Western
     District in Pennsylvania on December 18, 1996. The action arises from a
     dispute between Westinghouse and White Consolidated over rights to use the
     "Westinghouse" trademark for consumer products, based on transactions
     between Westinghouse and White Consolidated in the 1970's and the parties'
     subsequent conduct. Prior to the filing of Westinghouse's Complaint against
     the Company, White Consolidated, on November 14, 1996, filed a Complaint in
     the United States District Court for the Northern District of Ohio against
     Westinghouse and another corporation for trademark infringement, dilution,
     false designation or origin and false advertisement, seeking both
     injunctive relief and damages. Procedural motions concerning the
     jurisdiction in which the dispute should be heard have been filed by the
     parties. The action by Westinghouse seeks, among other things, a
     preliminary injunction enjoining the defendants from using the trademark,
     unspecified damages and attorneys' fees. Pursuant to the Indemnification
     Agreement dated January 23, 1997 by and among White Consolidated, Kmart
     Corporation, and the Company, White Consolidated is defending and
     indemnifying the Company for all costs and expenses for claims, damages,
     and losses, including the costs of litigation. Pursuant to the license
     agreements with White Consolidated, While Consolidated is defending and
     indemnifying Salton/Maxim and NewTech for all costs and expenses for
     claims, damages, and losses, including the costs of litigation. On January
     29, 1997, on joint motion of the parties, the court issued an order staying
     future proceedings for sixty (60) days in order to give the parties an
     opportunity to pursue settlement discussions.

     The Company is also subject to other legal proceedings, product liability
     and other claims which arise in the ordinary course of its business. In the
     opinion of management, the amount of ultimate liability, if any, in excess
     of applicable insurance coverage, is not likely to have a material effect
     on the financial position of the Company. However, as the outcome of
     litigation or other legal claims is difficult to predict, significant
     changes in the estimated exposures could occur.

     EMPLOYMENT AGREEMENTS

     The Company has entered into employment agreements with several of its
     executive officers for periods ranging from two to five years. The
     agreements provide the employees with an option to terminate their
     agreements and receive lump sum payments of up to five years compensation
     if there is a change in control of the Company.


                                                                     (continued)



                                       20

<PAGE>   63

               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 1996, 1995 AND 1994


NOTE K - COMMITMENTS AND CONTINGENCIES - Continued

     OTHER

     In April 1994, the Company purchased from Ourimbah Investment, Limited
     ("Ourimbah") the remaining 20% of the issued and outstanding capital stock
     of Durable (the "Purchased Shares") which had not, prior to such purchase,
     been owned, directly or indirectly, by the Company. In connection with such
     purchase, the Company agreed to make an additional payment to Ourimbah for
     the Purchased Shares upon the occurrence of a change of control of the
     Company on or before July 1, 1999. Any such additional payment will be in
     an amount with respect to each Purchased Share equal to the greater of (i)
     the same multiple of earnings per share of Durable as the highest multiple
     of earnings per share paid for the shares of common stock of the Company
     received in connection with such change of control or (ii) the same
     multiple of net asset value per share of Durable as the highest multiple of
     price per net asset value per share paid for the shares of common stock of
     the Company received in connection with such change of control. For
     purposes of determining whether any such additional payment is required, a
     change of control will be deemed to have occurred upon (i) the acquisition
     by any person of 50% or more of the then outstanding shares of common stock
     of the Company, (ii) a change in the majority of the members of the
     Company's board of directors who are serving as of the date of the purchase
     agreement or (iii) the approval by the Company's shareholders of (A) a
     reorganization, merger or consolidation in which the shareholders of the
     Company prior to such transaction do not, immediately thereafter, own more
     than 50% of the combined voting power of the Company following such
     transaction, (B) a liquidation of dissolution of the Company or (C) a sale
     of all or substantially all of the Company's assets. No change of control
     will be deemed to have occurred in connection with any transaction approved
     by a majority of the members of the board of directors.

NOTE L - STOCKHOLDERS' EQUITY

     STOCK OPTIONS

     The Company's 1982 and 1992 Employees' Incentive Stock Option Plans provide
     for granting of options of not more than 1,200,000 shares and 500,000
     shares, respectively, of common stock. Options granted under the plans are
     exercisable in equal annual installments during a five or six year period
     beginning one year after the date the option is granted.



                                                                     (continued)


                                       21

<PAGE>   64

               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 1996, 1995 AND 1994


NOTE L - STOCKHOLDERS' EQUITY - Continued

     The Company has also granted stock options which are classified as
     non-qualified, and which are not included in the 1982 or 1992 Employees'
     Incentive Stock Option Plans. Prior to December 31, 1995, the Company
     accounted for such options under APB Opinion 25 and related
     Interpretations. Commencing January 1, 1996, the Company accounts for
     non-qualified options issued to non-employees, under SFAS 123, Accounting
     for Stock Based Compensation.

     The exercise price of all options granted by the Company equals the market
     price at the date of grant. No compensation expense has been recognized.

     During 1996, the Company issued options to purchase 97,500 shares of common
     stock to non-employee sales representatives. These sales representatives
     included Top Sales and TJK (Note P) which received options to purchase
     25,000 shares. The options were issued with an exercise price that was
     equal to the market price on the date of the grant. The total fair value of
     the options, as determined under SFAS 123, was $357,000 which is to be
     amortized over the vesting period of the options. For 1996, the Company
     expensed $68,000 associated with these options.

     In connection with the purchase of certain assets of LitterMaid(TM), the
     Company issued options for the purchase of 150,000 shares of common stock.
     The total fair value of the options, as determined under SFAS 123, was
     $549,000 and has been included in the cost of purchasing the assets.

     Had compensation cost for the Employees' Incentive Stock Option Plans and
     non-qualified options issued to employees been determined based on the fair
     value of the options at the grant dates consistent with the method of SFAS
     123, the Company's net income (loss) and earnings (loss) per share would
     have been changed to the pro forma amounts indicated below. Disclosure of
     such amounts is not required for the fiscal year ended December 31, 1994
     and accordingly is not presented below.

<TABLE>
<CAPTION>
                                                      1996              1995
                                                -------------      -------------
<S>                                             <C>                <C>
Net income (loss)
    As reported                                 $     451,400      $  (1,883,800)
    Pro forma                                   $  (2,846,351)     $  (1,935,700)

Primary earnings (loss) per share
    As reported                                 $         .02      $        (.11)
    Pro forma                                   $        (.17)     $        (.11)


</TABLE>

                                                                     (continued)

                                       22

<PAGE>   65
               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 1996, 1995 AND 1994


NOTE L - STOCKHOLDERS' EQUITY - Continued

     The above pro forma disclosures may not be representative of the effects on
     reported net income for future years as options vest over several years and
     the Company may continue to grant options to employees.

     The fair value of each option grant is estimated on the date of grant using
     the binomial option-pricing model with the following weighted-average
     assumptions used for grants in 1996 and 1995, respectively: dividend yield
     of 0.0 percent for all years; expected volatility of 43.97 percent and
     42.20 percent; risk-free interest rates of 5.56 percent and 5.34 percent;
     and expected holding periods of 6.34 and 4.06 years.

     A summary of the status of the Company's fixed stock options as of December
     31, 1996 and 1995, and changes during the years ending on those dates is as
     follows:
<TABLE>
<CAPTION>

                                                           1996                           1995
                                               ---------------------------   -------------------------
                                                             Weighted -                    Weighted -
                                               Shares        Average         Shares        Average
                                               (000)       Exercise Price    (000)      Exercise Price
                                               -----       ---------------   -----      --------------

<S>                                             <C>        <C>                <C>        <C>
     Outstanding at
       beginning of year                        1,866      $     5.95         1,967      $       5.85
     Granted                                    1,758            7.89           106              7.77
     Exercised                                   (221)           4.20          (112)             3.52
     Expired                                      --              --            (20)            17.38
     Forfeited                                    (34)           6.16           (75)             6.47
                                               ------                        ------

     Outstanding at
       end of year                              3,369            7.03         1,866              5.95
                                               ======                        ======

     Options exercisable at
       end of year                              1,563                         1,270
     Weighted-average fair value
       of options granted during
       the year                                $ 4.04                        $ 3.14

</TABLE>




                                                                     (continued)

                                       23
<PAGE>   66


               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 1996, 1995 AND 1994



NOTE L - STOCKHOLDERS' EQUITY - Continued

     The following information applies to options outstanding at December 31,
1996.

<TABLE>
<CAPTION>

                                                Options Outstanding                        Options Exercisable
                                ------------------------------------------------   -----------------------------
                                                Weighted -
                                                 Average           Weighted -                      Weighted -
           Range of               Shares        Remaining           Average           Shares         Average
       Exercise Prices             (000)     Contractual Life     Exercise Price       (000)      Exercise Price
       -----------------           -----     ----------------     --------------       -----      --------------
<S>                                    <C>         <C>              <C>                <C>         <C>
       $ 2.875 - $ 3.693             361           3.56             $ 3.25               361        $ 3.12
       $ 4.500 - $ 6.375             145          11.13               5.81               124          4.90
       $ 7.000 - $10.375           2,784          14.96               7.50             1,064          7.18
       $10.875 - $14.500              79           7.36              13.00                14         10.88
                                   -----                                               -----
       $ 2.875 - $14.500           3,369          13.39               7.03             1,563          6.10
                                   =====                                               =====

</TABLE>

     WARRANTS

     As part of a lawsuit settlement, warrants to purchase 750,423 shares of the
     Company's common stock have been issued. The warrants have an exercise
     price of $7.50 per share and are exercisable through January 19, 1998. At
     December 31, 1996, 432,997 warrants have been exercised.

     COMMON STOCK PURCHASE RIGHTS PLAN

     In March 1995, the Company implemented a Common Stock Purchase Rights Plan
     and distributed one Right for each share of the Company's common stock
     outstanding. The Rights are not exercisable or transferable, apart from the
     Company's common stock, until after a person or group acquires, or has the
     right to acquire, beneficial ownership of 15 percent or more of the
     Company's common stock (which threshold may, under certain circumstances,
     be reduced to 10 percent) or announces a tender or exchange offer to
     acquire such percentage of the Company's common stock. Each Right entitles
     the holder to purchase one quarter of one share of common stock at an
     exercise price of $25.00 per full share and contains provisions that
     entitle the holder in the event of specific transactions, to purchase
     common stock of the Company or any acquiring or surviving entity at
     one-half of market price as determined under the terms of the Rights
     Agreement. The Rights will expire in March 2005, unless previously
     exercised or redeemed at the option of the Company for $.00001 per Right.



                                                                     (continued)


                                       24
<PAGE>   67

               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 1996, 1995 AND 1994


NOTE L - STOCKHOLDERS' EQUITY - Continued

     STOCK PURCHASE PROGRAM

     The $3.8 million purchase in 1996 of 463,000 shares of the Company's common
     stock completed the Company's purchase of 1,000,000 shares of its common
     stock under the 1994 stock purchase program. In 1996, the Company's Board
     of Directors authorized a new stock purchase program, whereby, the Company
     can purchase up to 10-percent of its outstanding shares (approximately 1.6
     million shares). No shares have been purchased under the new program.

NOTE M - SPECIAL PREFERRED STOCK

     During 1986, the Company was authorized to issue 40,000,000 shares of $.01
     par value special preferred stock purchase rights for each share of common
     stock, par value $.10 per share. These rights entitled the holder to
     purchase one share of special preferred stock at a price of $.01 under
     certain conditions in connection with preserving for the Company and its
     stockholders the benefits of any recovery in the Company's lawsuit with
     North American Philips Corporation, et al. In 1992, these conditions ceased
     to apply, therefore, the special preferred stock rights remain outstanding
     but have no continuing application.

NOTE N - GEOGRAPHIC AREA INFORMATION

<TABLE>
<CAPTION>
                                                        1996                1995               1994
                                                    -------------      -------------      -------------
<S>                                                 <C>                <C>                <C>
Revenues
   United States operations                         $ 127,093,600      $ 126,959,000      $ 136,500,000
   International operations
      Sales to unaffiliated customers                  69,910,000         60,817,900         44,612,200
      Transfers between geographical
        areas                                          82,809,500         83,517,400         85,070,700
   Eliminations                                       (82,809,500)       (83,517,400)       (85,070,700)
                                                    -------------      -------------      -------------

                                                    $ 197,003,600      $ 187,776,900      $ 181,112,200
                                                    =============      =============      =============

</TABLE>

                                                                     (continued)

                                       25
<PAGE>   68
               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 1996, 1995 AND 1994



NOTE N - GEOGRAPHIC AREA INFORMATION - Continued

<TABLE>
<CAPTION>
                                                       1996               1995               1994
                                                       ----               ----               ----
<S>                                              <C>                <C>                <C>
OPERATING PROFIT
   United States operations                      $  (3,831,000)     $  (7,774,000)     $   5,799,000
   International operations                          5,020,100          1,854,500         15,853,400
   Eliminations                                       (889,000)         1,164,000           (447,000)
                                                 -------------      -------------      -------------

      Operating profit (loss)                          300,100         (4,755,500)        21,205,400

   Equity in net earnings (loss)
     of joint ventures                               2,298,700           (392,600)            91,400
   Interest expense                                 (1,345,900)          (578,300)          (551,900)
   Interest and other income                         2,418,800          2,561,800          2,385,800
                                                 -------------      -------------      -------------

      Consolidated earnings (loss)
        before income taxes,
        minority interest and
        extraordinary item                       $   3,671,700      $  (3,164,600)     $  23,130,700
                                                 =============      =============      =============

IDENTIFIABLE ASSETS
   United States operations                      $ 178,703,900      $ 101,555,700      $ 112,339,500
   International operations                        159,785,100        145,714,800        123,670,900
   Eliminations                                   (103,010,100)       (59,258,600)       (38,886,400)
                                                 -------------      -------------      -------------

      Consolidated assets                        $ 235,478,900      $ 188,011,900      $ 197,124,000
                                                 =============      =============      =============

</TABLE>

     Transfers between geographic areas are billed at negotiated prices. In
     1995, the United States operations' operating profit includes an $8,000,000
     loss on the sale of an other asset. In 1994, the international operations'
     operating profit includes a $7,810,500 gain on the sale of Hong Kong office
     space. All United States revenues are derived from sales to unaffiliated
     customers. Included in domestic revenues and operating profit are certain
     sales derived from direct product shipments from Hong Kong to customers
     located in the United States.

     International operations are conducted in Canada, Hong Kong, Europe and the
     People's Republic of China.



                                       26


<PAGE>   69

               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 1996, 1995 AND 1994


NOTE O - CONCENTRATION OF CREDIT AND OTHER RISKS

     The Company sells on credit terms to a majority of its customers, most of
     which are U.S. and Canadian retailers and distributors located throughout
     those countries.

     A kitchen electric appliance distributor and a national retail beauty
     supply chain accounted for 10.9% and 10.3%, respectively, of 1996 sales. In
     1995, Wal-Mart Stores, Inc. and a kitchen electric appliance distributor
     accounted for 13.1% and 11.4%, respectively, of the Company's sales.

     The Company's allowance for doubtful accounts is based on management's
     estimates of the creditworthiness of its customers, and, in the opinion of
     management is believed to be set in an amount sufficient to respond to
     normal business conditions. Should such conditions deteriorate or any major
     credit customer default on its obligations to the Company, this allowance
     may need to be increased which may have an adverse impact upon the
     Company's earnings.

     The Company produces the vast majority of its products in its facilities in
     the People's Republic of China ("PRC"). The Company is subject to the risk
     that political or economic upheaval in the PRC could cause production
     disruptions and/or increases to its costs, although no such events have
     occurred in over five years. Presently, products imported into the U.S.
     from the PRC are subject to favorable duty rates based on the "Most Favored
     Nation" status of the PRC ("MFN Status"). MFN Status is renewed on an
     annual basis by the President and Congress. If political or economic
     instability in the PRC develops or if higher duties were applied to imports
     into the U.S., the Company could experience a material adverse impact on
     its revenues and earnings.

NOTE P - RELATED PARTY TRANSACTIONS

     The Company has used the services of Top Sales Company, Inc. ("Top Sales"),
     an independent sales representative, since 1978. A member of the Company's
     Board of Directors is the sole shareholder and Chief Executive Officer of
     Top Sales. The Company made commission payments to Top Sales of $693,300,
     $556,400 and $719,600 in 1996, 1995 and 1994, respectively. In 1996, the
     President of TJK Sales Inc. ("TJK"), an independent sales representative,
     became a member of the Company's Board of Directors. Commission payments to
     TJK totaled $469,000 in 1996.

     Included in other assets, are a series of personal loans made by the
     Company to the President and Chief Executive Officer. The loans, which
     total $959,000 at December 31, 1996, bear interest at prevailing market
     rates and mature in 2001.


                                                                     (continued)


                                       27
<PAGE>   70

               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

                        DECEMBER 31, 1996, 1995 AND 1994


NOTE P - RELATED PARTY TRANSACTIONS - Continued

     In 1986, the Company made a non-interest bearing loan of $78,000 to a
     director of the Company. The entire amount of such loan was outstanding at
     December 31, 1996.

     The Company loaned $300,000 to Lion Redcliff Import and Export, Ltd., which
     is 50-percent owned by an entity whose President is also a Director of the
     Company. Pursuant to the note, periodic principal payments are made by the
     debtor. The remaining obligation of $253,100 at December 31, 1996, bears
     interest at the prime rate.

NOTE Q - FABERWARE LICENSE

     In the fourth quarter of 1996, the Company entered into a license
     agreement, pursuant to which, it holds the exclusive world-wide rights to
     use the Faberware name on a broad range of small electric products. Under
     the Company's marketing cooperation agreement with Salton, Salton is to be
     the exclusive distributor of the Faberware products. The license agreement
     expires December 31, 2095 and calls for quarterly royalty payments of
     10-percent of net sales as defined in the agreement.

NOTE R - EXTRAORDINARY ITEM

     On March 27, 1997, the Company paid $4,500,000 to settle the lawsuit filed
     in April 1994 by Izumi relating to the Phillips settlement in 1992 (Note
     K). An accrual of $5,300,000, including $800,000 in estimated legal
     expenses has been recorded as of December 31, 1996. The transaction
     resulted in an after tax charge of $3,500,000 and has been recorded as an
     extraordinary item, to correspond with the extraordinary gain recorded from
     the settlement in 1992.

NOTE S - SUBSEQUENT EVENT

     In January 1997, the Company through its 50-percent interests in Salton and
     New M-Tech entered into supply contracts with the Kmart Corporation for
     Kmart to purchase, distribute, market and sell certain products under the
     White-Westinghouse brand name licensed to Salton and New M-Tech. Under the
     terms of the contract, Salton and New M-Tech will supply Kmart, either
     through the Company or other manufacturers, with a broad range of small
     electrical appliances, consumer electronics and telephone products under
     the White-Westinghouse brand name. Kmart will be the exclusive discount
     department store to market these White-Westinghouse products.




                                       28

<PAGE>   71




               WINDMERE - DURABLE HOLDINGS, INC. AND SUBSIDIARIES

                           SUPPLEMENTAL FINANCIAL DATA

QUARTERLY FINANCIAL DATA (UNAUDITED)

The quarterly results for the years 1996 and 1995 are set forth in the following
tabulation. (In Thousands)

<TABLE>
<CAPTION>
                                                          Net          Earnings
                                            Gross       Earnings        (Loss)
                               Sales        Profit       (Loss)       Per Share
                             --------     --------     ---------     ----------
<S>                          <C>          <C>          <C>           <C>
1996
----
First quarter                $ 40,440     $  8,603     $    296      $     .02
Second quarter                 39,503        8,349         (442)          (.03)
Third quarter                  56,181       10,415        1,701            .10
Fourth quarter                 60,880       12,358       (1,104)          (.06)
                             --------     --------     --------      ---------
    Total                    $197,004     $ 39,725     $    451      $     .03 *
                             ========     ========     ========      =========

1995
----
First quarter                $ 37,930     $  9,136     $    305      $     .02
Second quarter                 42,102        9,074          936            .05
Third quarter                  52,681       11,221          872            .05
Fourth quarter                 55,064       11,439       (3,997)**        (.23)
                             --------     --------     --------      ---------
    Total                    $187,777     $ 40,870     $ (1,884)     $    (.11)
                             ========     ========     ========      =========
</TABLE>

*    Differs by $.01 from earnings per share for the year-ended 1996, due to the
     effect of the change in common shares and common equivalent shares
     outstanding from quarter to quarter. Includes an after tax extraordinary
     charge for the settlement of the Izumi case of $3,500,000 or $.20 per
     share.
**   Includes an after-tax non-recurring loss on the sale of an ozther asset of
     $5,280,000, or $.31 per share.

QUARTERLY STOCK QUOTATIONS AND DIVIDENDS PER SHARE

The Company's common stock is traded on the New York Stock Exchange under the
symbol WND. High and low market prices and dividends paid per share in 1996 and
1995, by quarters, are as follows:

<TABLE>
<CAPTION>
                                              Market Price
                                          --------------------           Cash
                                          High           Low           Dividends
                                          ----           ---           ---------
<S>                                       <C>            <C>           <C>
         1996
         ----
         Fourth quarter                   16-3/4        12-5/8          $   .05
         Third quarter                    15-3/8        11-1/4              .05
         Second quarter                   14-3/4         9-5/8              .05
         First quarter                    11             6-7/8              .05
                                                                        -------
                                                                        $   .20
                                                                        =======

         1995
         ----
         Fourth quarter                    7-3/8         6              $   .05
         Third quarter                     8-1/4         7-1/4              .05
         Second quarter                    9             7-5/8              .05
         First quarter                     9-3/4         7-5/8              .05
                                                                        -------
                                                                        $   .20
                                                                        =======
</TABLE>

The approximate number of holders of common stock of the Company, as of December
31, 1996, was 1,400. This number does not include any adjustment for
stockholders owning common stock in the Depository Trust name or otherwise in
"Street" name, which the Company believes represents an additional 4,300
stockholders.



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