UNITED STATES 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, 1998

                                       OR

[   ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
        For the transition period from __________ to __________

                         Commission File Number 1-13066

                                  MIKASA, INC.
            (Exact name of Registrant as specified in its charter)

              Delaware                              33-0099676
       ------------------------------           -------------------
      (State or other jurisdiction of           (I.R.S. Employer
       incorporation or organization)            Identification No.)

          One Mikasa Drive, Secaucus, New Jersey              07096
         ----------------------------------------           ---------
         (Address of principal executive offices)           (Zip Code)

       Registrant's telephone number, including area code: (310) 886-3700

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

        Title of each class            Name of each exchange on which registered
-------------------------------------- -----------------------------------------
Common Stock par value $0.01 per share            New York Stock Exchange, Inc.

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K 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. [ ]


                                         Page 1 of 71


<PAGE>

     Aggregate market value of the voting stock (based on the closing price
       of such stock as reported on the New York Stock Exchange Composite
             Transactions) held by non-affiliates of the Registrant
                       As of March 5, 1999 -- $66 million

  Number of Shares of Common Stock outstanding as of March 5, 1999 - 17,701,895

                       DOCUMENTS INCORPORATED BY REFERENCE
                        (To The Extent Indicated Herein)

Portions of the Definitive Proxy Statement for the 1999 Annual Meeting
(in Part III)








                            Exhibit Index on Page 54


                                  Page 2 of 71
<PAGE>


                                  MIKASA, INC.
                           Annual Report on Form 10-K
                                December 31, 1998

                                TABLE OF CONTENTS

                                                                    Page
                                     PART I

Item 1.  Business                                                      4
Item 2.  Properties                                                   13
Item 3.  Legal Proceedings                                            13
Item 4.  Submission of Matters to a Vote of Security Holders          14

                                     PART II

Item 5.  Market for Registrant's Common Equity and Related            14
         Stockholder Matters
Item 6.  Selected Consolidated Financial and Operations Data          15
Item 7.  Management's Discussion and Analysis of Financial            17
         Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risks  25
Item 8.  Financial Statements and Supplementary Data                  25
Item 9.  Changes in and Disagreements With Accountants on             48
         Accounting and Financial Disclosure

                                    PART III

Item 10. Directors and Executive Officers of the Registrant           48
Item 11. Executive Compensation                                       48
Item 12. Security Ownership of Certain Beneficial Owners and          48
         Management
Item 13. Certain Relationships and Related Transactions               48

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports          48
         on Form 8-K





                                         Page 3 of 71


<PAGE>



                                     PART I
Item 1.     BUSINESS

General

Mikasa, Inc. ("Mikasa" or the "Company") is a leading designer, developer and
marketer of quality tabletop and decorative home products. The Company's wide
range of products includes ceramic dinnerware, crystal stemware, crystal
serveware, stainless steel flatware, table linens, gifts and decorative
accessories for the home. The Company develops product designs through its
internal staff, independent designers and jointly through certain of its varied
factory relationships.

The Company was originally incorporated in California in 1936 and during its
early years was primarily a trading company. In the 1950's, the Company entered
the dinnerware market and the Mikasa trademark was adopted. Over the past 20
plus years, the Company's product lines have been gradually broadened to include
other tabletop items as well as decorative and other products for the home.
During that period, as the Company owns no manufacturing facilities, it
diversified its sources of supply, which traditionally had been based in Japan.
Today, the Company's products are manufactured in 23 countries, including the
United States. The Company distributes its products in the United States and
Canada through both retail accounts and direct consumer channels.
Internationally the Company sells its products through subsidiary companies or
authorized distributors primarily in selected countries.

The Company was reincorporated in Delaware in March 1994. The principal
executive offices of the Company are located at One Mikasa Drive, Secaucus,
New Jersey 07096


Products

The Company offers a broad line of casual and formal dinnerware, crystalware and
glassware, stainless steel flatware, gifts and decorative accessories for the
home. Styles range from traditional designs to fashion-oriented, contemporary
patterns. The Company's products consist of:

        o Dinnerware, which includes plates, bowls, cups, saucers and mugs;

        o Crystalware (or glassware), which includes crystal stemware, crystal
          serveware, drinking glasses and barware;

        o Flatware, which includes stainless steel knives, forks and spoons; and

        o Gift and decorative accessories, which include natural extensions to
          the Company's product lines such as serving platters, bowls and
          pitchers, special ceramic or crystal gift items, and accessories such
          as linens, candlestick holders, salt and pepper shakers, candles, and
          other household items.

The Company supports its product mix by offering different proprietary brand
names for different target markets.


                                         Page 4 of 71


<PAGE>

Mikasa Brand

The Mikasa brand is positioned as an upscale product line which is typically
sold in the "upstairs" china and crystal departments of department stores and in
specialty stores. Mikasa products include dinnerware, crystalware, flatware and
giftware. Mikasa dinnerware is separated into four basic classifications: bone
china, fine china, semi-porcelain and earthenware. Within each classification,
dinnerware is primarily sold by pattern. Once a pattern becomes popular, the
Company may introduce dinnerware accessories in that pattern and may also
introduce coordinating stemware, dinnerware, stainless flatware and table
linens. Place settings are also made for children's use. Mikasa crystalware
includes a range of products extending from full lead (24% or more lead oxides)
to unleaded glassware. These products include stemware, barware, serving
platters and bowls, salt and pepper shakers, vases, candlestick holders, picture
frames, clocks and paper weights. Mikasa flatware is available in several
configurations, including all stainless steel, gold and stainless steel or
plastic with stainless steel. Mikasa giftware products include vases, serving
trays, carafes, picture frames, mugs and children's products.

Studio Nova Brand

Studio Nova products are similar to Mikasa products, but are designed with a
more casual feel for everyday entertaining and personal use. Studio Nova
products are developed to be sold in the "downstairs" housewares department of
department stores and in specialty stores, and include dinnerware, crystalware,
flatware and giftware. Studio Nova dinnerware is primarily sold by pattern in
prepackaged sets such as 20-piece starter sets and 5-piece accessory completer
sets. As patterns gain in popularity, accessories are added to the line. Studio
Nova crystalware products typically include unleaded products which are mass
produced. These products include serveware, stemware, drinkware and tabletop
accessories. Studio Nova flatware is stainless steel or plastic with stainless
steel. Patterns are designed to coordinate with dinnerware. Studio Nova giftware
items are generally geared toward kitchen use and include storage items and
other kitchen items such as wicker baskets, wood and marble cutting boards and
cookware.

Other Brands

Home Beautiful products are similar in nature to those of the Studio Nova brand,
except that they are developed for sale to mass merchants, warehouse clubs and
retail drug chains. These products include dinnerware, crystalware, flatware and
giftware.

Christopher Stuart products are limited to dinnerware, crystalware and giftware.
These products are developed to meet promotional price points for the "upstairs"
china and crystal departments of department stores.

Product Development

The Company commits a significant amount of its resources to product design. As
a marketing, distribution and retail operation, rather than a manufacturing
concern, the Company is able to design products to meet consumer preference,
rather than the capabilities of specific manufacturing equipment. To research
and confirm consumer preference trends, the Company's product development team
travels extensively in Europe, Asia, and major American markets, and attends
major fashion and design shows around the world.


                                         Page 5 of 71


<PAGE>




The product development team includes Company staff designers, as well as a
number of independent designers. The Company's independent designers are located
around the world and are utilized on a contract or royalty basis. The Company
maintains agreements with its independent designers for the purchase of
exclusive rights to specific tabletop patterns originating in whole or in part
from those designers.

The Company utilizes its retail store network to test market new products before
committing to substantial production. All products within the Company's retail
store network are identified on a stock keeping unit basis by bar code labels
which are read at the point of sale. Daily sales records are polled
electronically at the end of each business day and sales and profitability
information for new product introductions are analyzed to determine consumer
acceptance.

Generally, the Company introduces new products on a limited item basis. In the
case of dinnerware, the basic 5-piece place setting with minimal serving pieces
is offered to the consumer at introduction. As product lines gain consumer
acceptance, the Company looks for natural product extensions, such as
coordinating gift items, carafes and cookware.

Supply and Manufacturing

The Company does not own or operate any manufacturing facilities, but contracts
out production to the geographically diverse group of manufacturers with which
the Company maintains business relationships.

More than 90% of the Company's products are manufactured outside the United
States. The Company sources its products through approximately 193 factories, in
24 countries, including the United States. Until the early 1970's, the Company
sourced its products almost exclusively from Japan, and the Company's product
lines were limited to ceramic dinnerware. Over the past 20 plus years, the
Company has gradually broadened the countries from which it sources products.
Approximately 23% of the Company's products are purchased from Japan and
approximately 24% are purchased from Germany and Austria combined, approximately
14% are purchased from Malaysia and approximately 10% are purchased from
Slovenia. No other country accounts for more than 10% of the Company's products.

The Company monitors the quality of the products produced in the factories of
its suppliers. The Company's quality control assurance program has four key
elements: (i) Selecting manufacturers which have appropriate quality control
procedures which facilitate the production of products at a consistent quality
level; (ii) Selecting manufacturers that are committed to maintaining a level of
technology in their manufacturing to remain competitive over time; (iii)
Limiting the products sourced from a new supplier until that supplier has proven
to be capable of consistently producing products at a quality level which meets
the Company's expectations; and (iv) Where the Company deems it appropriate,
inspection by Company representatives of products at the manufacturer's factory.
Such product inspections continue until the factory earns the confidence of the
Company, at which time inspections become periodic or are made as the Company
perceives a need.



                                         Page 6 of 71


<PAGE>



Generally, the Company does not maintain long-term contractual relationships
with its suppliers. Most product purchases are made on the basis of purchase
orders of less than one year's duration. A large percentage of the Company's
products, however, are manufactured by companies with long-standing
relationships with the Company, certain of which have existed for more than 30
years. As a result of these relationships, the Company is able to select from a
number of manufacturers with which it has had significant experience when
ordering its products. If, however, none of these companies are suitable for the
manufacture of a particular product, or do not offer competitive terms, the
Company will evaluate other suppliers. The Company's two principal suppliers
provided products which accounted for an aggregate of approximately 31% of the
Company's purchases in 1998. Each of such suppliers accounted for more than 10%
of the Company's 1998 purchases. Of the Company's two principal suppliers, one
is a Japanese manufacturer of ceramic products and the other is a German
manufacturer of crystal products. The Company has maintained beneficial
relationships with these suppliers for more than 10 years without interruption
and has no reason to believe that these relationships will not continue in the
future. Management believes that sufficient accessible worldwide manufacturing
capacity exists to reduce the risk to the Company of product shortages or
unfavorable pricing terms.

Sales and Marketing

The Company distributes its products in the United States through both retail
accounts and direct consumer channels and outside the United States primarily to
retail accounts. Within the United States, the Company sells its products to
department and specialty stores, mass merchants, warehouse clubs, catalog
showrooms, corporate incentive markets, military base exchanges, home shopping
television, hotels and fine restaurants. The Company also sells a significant
portion of its product line through its own retail store network. No single
customer or retail account buying group accounted for more than 10% of the
Company's consolidated net sales. In 1998, the domestic direct consumer and
retail accounts distribution channels accounted for 58% and 34%, respectively,
of the Company's total net sales, with the balance attributable to international
sales.

Retail Accounts

The Company sells its proprietary branded products to various retailers that
resell the products to the consumer and to other institutional customers. The
Mikasa(R), Studio Nova(R) and Christopher Stuart(R) brands are sold primarily to
department stores, independent specialty retailers and catalog showrooms. The
Home Beautiful(R) brand is sold primarily to warehouse clubs and mass merchants.

The Company's management has divided the United States into selling regions by
channel of distribution and brand. A sales manager is responsible for each
selling region. Each sales manager will use as many independent sales
representatives ("representatives") or independent sales organizations
("organizations") as are required to adequately service a selling region. A
representative or organization sells one or more of the Company's brands to
certain channels of distribution in a specific market area. Currently, there are
12 selling regions with approximately 65 representatives or organizations in the
Company's United States retail accounts operations.



                                         Page 7 of 71


<PAGE>


Consumer

The Company's consumer channel of distribution is primarily through its Company
owned and operated retail store network. The Company's consumer sales also
include its semi-annual warehouse sales made through its distribution centers
and consumer direct sales made through its service center. The Company's retail
stores represent an opportunity for the Company to raise consumer awareness of
the Mikasa and other brands owned by the Company. Retail stores provide a
testing laboratory for new products where consumer behavior can be more closely
monitored. They also serve as outlets for selling discontinued products at
margins higher than would be obtained by selling these products through
traditional department and specialty retailers, discounters or liquidators.
Minimizing the use of liquidators allows the Company to dispose of surplus
inventories in a fashion which is non-disruptive to major market areas. The
additional sales volume provided by the retail stores, when combined with the
retail accounts volume, also provides the Company with additional purchasing
power.

The Company opened its first retail store under the Mikasa brand name at its
east coast distribution center in Secaucus, New Jersey in 1978. At December 31,
1998, the Company operated 158 factory stores in 41 states and three Canadian
provinces. In 1998, 10 stores were opened, including 2 in Canada; and 4 stores
were closed. The Company presently intends to open 10 new retail stores in 1999,
including one Canadian store and two stores in Puerto Rico. The Company's
ability to open additional retail stores, however, is contingent upon several
factors, including the construction of retail centers by developers, the
availability of retail space and the appropriateness of a particular location as
a site for one of the Company's retail stores. The Company is selective about
the sites for its retail stores and evaluates the location, the developer and
the quality of other tenants as well as the tenant mix in the center, among
other factors.

The Company uses a standardized format for its retail stores opened under the
Mikasa brand name, including lighting, fixtures and signage. A new store will
range from approximately 5,000 to 10,000 square feet and require an initial
investment in the range of $200,000 to $800,000 (exclusive of pre-opening store
expenses which have averaged approximately $210,000), much of which is
inventory. Mikasa retail stores feature a broad line of Mikasa products, and
also sell products under the Company's other brand names.

International

Internationally, the Company sells its products through authorized distributors
primarily in eight countries. In addition, the Company has historically used its
Japanese buying agency to facilitate the development and acquisition of products
from Japanese and other Asian suppliers. The Company acquired full ownership of
the buying agency in 1993 from a director and stockholder of the Company. The
acquisition provided the Company with a presence in Asia to handle existing
business and, as Asian markets evolve, take advantage of opportunities that may
arise in the future in manufacturing, design developments and distribution.

In 1991, the Company formed Mikasa Europe Distribution GmbH & Co. KG ("Mikasa
Europe"), a joint marketing venture in Germany to develop the potential market
for the Company's products in Western Europe. The original partners in Mikasa
Europe included the Company and two of its major suppliers. In 1993, the Company
acquired the interest of one of its partners and became the two-thirds
controlling partner.


                                         Page 8 of 71


<PAGE>


In October 1995, the Company acquired the assets and operations of its Canadian
distributor. This company distributed Mikasa and other Company brands in Canada
through retail accounts. In June 1996, the Company opened its first retail store
in Canada and at the end of 1997 had three stores in operation in three
provinces. In 1998 the Company opened two new retail stores in Canada and
continues investigating other retail marketing opportunities in Canada.

Advertising and Promotion

The Company's advertising program seeks to reinforce recognition of the
Company's brands and to project a quality image. This advertising program
includes:

        o Cooperative advertising efforts with key accounts.

        o Direct advertising of the Company's retail stores.

        o Print advertising of the Mikasa brand in national bridal magazines.

        o Promotional brochures which are produced by the Company and
          provided to its department store and specialty accounts which,
          in turn, provide them directly to consumers.


Distribution and Warehousing

At the close of 1998, the Company operated three primary distribution facilities
in the United States to service its retail account customers, retail stores and
certain international sales. In Long Beach, California, the Company occupies an
aggregate of 271,000 square feet of warehouse space in two locations. In
Secaucus, New Jersey, the Company has an aggregate of 485,000 square feet of
warehouse space in two locations. These Secaucus warehouses closed in March 1999
with their operations transferred to the Charleston, South Carolina facility.
This facility occupies 580,000 square feet of warehouse space. The Company
receives virtually all of its imported products at these distribution facilities
via ocean freight. These distribution centers are located in areas which allow
them ready access to the ports of Los Angeles and Long Beach, California, and
Charleston, South Carolina.

Because of its broad product line and need to service its retail accounts as
well as its own retail store network, the Company maintains a large inventory
base. Approximately 26,000 stock keeping units are inventoried in the Company's
domestic distribution facilities.

In light of its large number of stock keeping units, the Company utilizes its
information systems to quickly locate each item in its distribution centers.
This system is designed to permit efficient order picking and stock
replenishment. In a similar manner, the Company has established a bar code
tracking system within its distribution centers which allows the Company to
track paperwork, at various stages of completion, as each order is processed.
The state of the art distribution technology in the new Charleston facility is
more advanced with its paperless on-line system.


                                         Page 9 of 71


<PAGE>


Information Technology

The Company's management information systems are designed to serve the Company's
needs for customer service, order processing, retail test marketing, inventory
control, accounting and distribution functions. The Company has four IBM AS400
computers located at each of its distribution centers and its Canadian
distribution center, which are connected via leased telecommunication lines.
Additionally, the Company has the ability to connect authorized personnel and
each of its retail store locations to one of its main computers on a "dial-up"
basis for any number of purposes, including order inquiry and stock inquiry.
Most members of the Company's management and independent sales force carry a
lap-top or notebook personal computer with communications capability. With this
personal computer, they are able to access, after proper security clearance, the
Company's data regarding stock availability and order status information, as
well as other essential information. The new facility in Charleston, South
Carolina was constructed with a state of the art distribution technology that is
a paperless on-line computer system.

The Company has committed to support the electronic data interchange ("EDI")
function of many of its principal retail account customers. This has had two
major effects on the Company. First, as customers have reduced their inventory
levels, the Company has had to increase its inventory levels in order to assure
its ability to meet the specified delivery time frames. Second, in the past,
shipments to stores typically were made in several bulk shipments prior to the
main selling seasons, and during the selling seasons a number of small fill-in
shipments would be made. In the new EDI environment, however, the Company
typically makes smaller bulk shipments just prior to the primary selling seasons
and many subsequent fill-in shipments during these seasons. The Company intends
to continue to assist its customers by converting as much of its business as
practicable to EDI.

The Company's point-of-sale cash registers within its own stores allow the
Company to scan bar codes for items upon purchase. This information is polled at
the end of each business day, allowing the Company to maintain a perpetual
inventory of store stocks, review sales results on new test products, adjust
factory orders for fast and/or slow moving products, review stock for possible
replenishment from distribution centers or retail store inventories, analyze
slow moving inventories, monitor inventory shrinkage and take any necessary
mark-down action.

Intellectual Property

The Company is the exclusive owner in the United States of its proprietary brand
names, including Mikasa(R), Studio Nova(R), Home Beautiful(R) and Christopher
Stuart(R), as used in connection with the Company's most significant products.
The Company has registered these proprietary brand names with the United States
Patent and Trademark Office, and has similarly registered or applied for
trademark registration of certain brand names in most major markets throughout
the world. The Company is also the exclusive owner of many of the designs used
in the conduct of its business and, with respect to the remaining designs, owns
such designs jointly with certain key manufacturers or outside designers, or has
the right to use such designs. The Company has many of its designs registered,
or pending registration, with the United States Copyright Office. Periodically,
the Company files additional applications for trademark and copyright
registration as the Company deems appropriate. On occasion, the Company obtains
licenses to use the names and/or designs of others.

                                         Page 10 of 71


<PAGE>


Competition

Competition in the better tabletop market is primarily based on quality, product
selection, design, price and service. The tabletop market in which the Company
competes includes hundreds of suppliers, the majority of which compete in only
part of one of the three principal product segments (dinnerware, crystalware and
flatware). The fragmentation and overlap of market segments and lack of publicly
available information within the industry make it extremely difficult to obtain
reliable statistics on industry size, growth, market share and comparative data.
Certain of the Company's competitors are larger and have greater financial,
marketing and other resources than the Company.

The better dinnerware market is normally divided into two segments, formal and
casual. The Company believes that it is the market share leader in the casual
segment of the domestic market. In the formal segment of the domestic market,
management believes that it is fifth in market share.

The Company also believes it is the market share leader in the portion of the
domestic crystal stemware market that is sold through the "upstairs" crystal
department of department stores and through specialty stores. Management further
believes that the Company has the second largest market share in the "upstairs"
crystal serveware category.

The Company's direct to consumer distribution network is subject to competition
from other suppliers with retail stores. Certain of the Company's competitors
have established, or have begun to establish, retail store networks. Expansion
of those networks, or the establishment of retail store networks by additional
competitors, may result in increased competition for the Company's retail store
network.

Governmental Regulation

Imports into the United States are affected by import duties, quotas, tariffs
and other restrictions. Currently, tabletop product duties are based on a
percentage of the value of the product and range from 1% for plastic products to
30% for certain inexpensive, mass-produced glassware. These duties are collected
by the United States Customs Service in the normal course of business. At the
present time there are no quotas, tariffs or other restrictions that would
prevent the Company from importing products at its present, or increased,
levels. There can be no assurance that restrictions on imports that would
adversely affect the Company will not be imposed in the future.

The manufacture of ceramic tabletop products, in particular those with
pigmentation or a hard high-gloss finish, generally requires the use of lead,
and sometimes cadmium, as raw materials. The manufacture of leaded crystal
requires the use of lead oxide as a raw material. The Federal Drug
Administration ("FDA") has established maximum acceptable levels for the
potential leaching of lead and cadmium from ceramic tableware into food or
liquids. The FDA has also established a formal, standardized test protocol for
ceramic tableware. The Company has established its own standards, which it
imposes upon its manufacturers, that are more stringent than those established
by the FDA and requires its manufacturers to test their products and certify the
results of such tests in writing. An industry organization in which the Company
participates monitors the progress of research to eliminate the requirement for
lead and cadmium in the manufacture of ceramic dinnerware. An international

                                         Page 11 of 71


<PAGE>
industry organization for crystal, of which the Company is also a member, has
established maximum lead leaching standards for leaded crystalware. This
organization monitors the progress of research to eliminate the requirement for
lead oxide in the manufacture of leaded crystal. The Company cannot predict
when, if ever, it will be possible to eliminate the use of lead and/or cadmium
from the manufacture of ceramic dinnerware or the use of lead oxide from the
manufacture of leaded crystal. If more rigorous standards are set by the FDA,
there can be no assurance that the Company's products will be able to meet the
new standards.

In addition, the State of California has passed the Safe Drinking Water and
Toxic Enforcement Act of 1986 ("Proposition 65"), which requires manufacturers
to post a warning notification regarding possible exposure to lead as a result
of the use of certain products, including ceramic tableware and leaded
crystalware. Two different types of warnings are required, one relating to
potential reproductive or birth defect risks associated with exposure to lead,
and one relating to the potential carcinogenic effects of exposure to lead. The
State of California has published its own warning standards for lead exposure,
which are more stringent than both the FDA and the California sale standards for
lead exposure. The warning standards relate to the posting requirement regarding
reproductive or birth defect risks. These warning standards were the subject of
two lawsuits, described below, involving the Company and most of its principal
competitors. In the case of the warning notice requirements with respect to the
possible carcinogenic effects of exposure to lead, Proposition 65 initially
provided a safe harbor for products which met the FDA standards. In December
1993, however, this safe harbor was repealed. As a result, manufacturers of
products containing lead are now subject to Proposition 65's cancer warning
requirements, unless they can demonstrate that their products do not expose
consumers to a level of lead which is 1,000 times less than that at which any
observable effect would occur. The State of California has undertaken to set
warning standards for lead levels which will be deemed to pose no significant
risk of cancer, but no such warning standards have yet been announced. Although
the Company's products meet the FDA and California sale standards for lead
exposure, no assurance can be given that the State of California will not adopt
more stringent warning standards, or that the Company's products will not
require the posting of warnings in the future.

Legislation has been introduced in several states that is similar to Proposition
65. The Company monitors this legislation through its participation in various
industry groups.

In December 1992, the Company, along with most of its principal competitors,
including Lenox, Noritake, Royal Doulton and Waterford-Wedgwood, reached an
agreement with the State of California and the Environmental Defense Fund
regarding litigation concerning Proposition 65 and the alleged failure of these
companies to post a warning notification regarding possible exposure to lead as
a result of the use of certain ceramic tableware products. As part of the
settlement, each agreed: (i) To a specified testing protocol that is more
extensive than the federal requirement; (ii) To make a payment for past alleged
violations; and (iii) To institute a system for the future posting of warning
notifications for products with test results above a specified level, as set by
California.

In June 1993, the Company and most of its principal competitors in the sale of
leaded crystal products settled a similar action which had been brought against
them under Proposition 65 by a private litigant. This suit related to the
application of the warning requirements of Proposition 65 to leaded crystalware.
The settlement was approved by the California State Attorney General and
required a payment for past violations and the establishment of a system for the
posting of warning notifications by the settling defendants.

                                         Page 12 of 71

<PAGE>



Employees

As of December 31, 1998, the Company had 3,483 employees, of which 2,832 were
employed in the Company's domestic retail operations, 495 were employed in
domestic wholesale and corporate support operations and 156 were employed in
international operations. The 90 employees at the Company's Secaucus, New Jersey
warehouse are represented by the International Longshoremen's Association. The
Secaucus warehouse closed in March 1999 with its remaining operations
transferred to Charleston, South Carolina.

Seasonality

Historically, the Company's operations have been seasonal, with higher sales and
net income occurring in the third and fourth quarters, reflecting increased
demand during the year-end holiday selling season. For a discussion of the
seasonality of the Company's business, see "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Seasonality and Quarterly
Fluctuations."


Item 2.  PROPERTIES

The Company leases all of its facilities, including distribution offices,
showrooms, corporate headquarters and stores, with the exception of the
Company-owned facilities in Secaucus, New Jersey and Charleston, South Carolina.
Of the 421,000 square foot Company owned facility in Secaucus, 37,000 square
feet are used for office space with the remainder used as warehouse space. Total
warehouse space of the facility is 485,000 square feet when combined with one
offsite building which is Company-owned. These Secaucus warehouses closed in
March 1999 with their operations transferred to the Charleston, South Carolina
facility, of approximately 580,000 square feet, which is Company owned. The
Company is evaluating its alternatives regarding the utilization of the Secaucus
facility post consolidation. The facility in Long Beach, California of
approximately 175,000 square feet is leased pursuant to a lease expiring in
January 2000. This facility houses 22,000 square feet of office space with the
remainder used for the Company's west coast distribution center. With the
inclusion of a second off-site building the combined west coast warehouse space
is approximately 271,000 square feet. The Company's other leases extend over an
average period of five to ten years with various renewal options. These other
leases consist of showrooms and primarily of an aggregate of 1,564,000 square
feet for Company operated retail stores in the United States and Canada. See
Note 9 of Notes to Consolidated Financial Statements for information with
respect to the Company's lease obligations.


Item 3.     LEGAL PROCEEDINGS

The Company is a party to various actions and proceedings incident to its normal
business operations. The Company believes that the outcome of such litigation
and proceedings, individually and in the aggregate, will not have a material
adverse effect on the business or financial condition of the Company.




                                         Page 13 of 71


<PAGE>



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

No matters were submitted to a vote of security holders during the fourth
quarter of fiscal year 1998.


                                            PART II

Item 5.     MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
            STOCKHOLDER MATTERS

MARKET INFORMATION FOR COMMON STOCK

The Company's common stock trades on the New York Stock Exchange (ticker symbol
MKS). The following table sets forth, for the periods indicated, the high and
low closing sales prices of the common stock as reported on the New York Stock
Exchange (in dollars).


                              1998                       1997
                    ------------------------    -----------------------
Quarter                High           Low            High          Low
----------          ----------    ------------    ----------    ----------
First               14-7/8        13-1/4          11-3/8        9-7/8
Second              13-13/16      12-13/16        14-1/4        11-
Third               15-           11-             14-9/16       11-1/4
Fourth              12-3/4        10-5/16         14-7/8        13-1/4

On March 5, 1999, the closing price of the Company's common stock, as reported
on the New York Stock Exchange, was $9.75. As of such date, the Company
estimates that there were approximately 1,200 holders of record or represented
through accounts held by clearing agencies. The Company declared a quarterly
dividend of $0.05 on its common stock to stockholders of record on April 2, 1999
payable on April 13, 1999. The Company paid regular quarterly dividends of $0.05
per share on its common stock during fiscal years 1998 and 1997. The Company has
loan agreements with its senior note holders and revolving credit lenders which
could limit the Company's future ability to pay dividends. See Note 7 of Notes
to Consolidated Financial Statements.




                                         Page 14 of 71


<PAGE>

Item 6.     SELECTED CONSOLIDATED FINANCIAL AND OPERATIONS DATA

                      (In thousands, except per share and operations data)

                                      For The Years Ended December 31,
                                      --------------------------------
                                 1998      1997      1996      1995      1994
                                 ----      ----      ----      ----      ----
Income Statement Data:

Net sales                       $410,665  $397,217  $372,331  $362,453  $331,609
Cost of sales                    216,157   208,833   205,016   200,399   187,086
                                --------  --------  --------  --------  --------

Gross profit                     194,508   188,384   167,315   162,054   144,523
Selling, general and             161,442   150,497   130,347   112,845    95,191
administrative expenses
Restructuring charge               2,400      --        --        --        --
Store closure charge                --        --       4,100      --        --
                                --------  --------  --------  --------  --------

Income from operations            30,666    37,887    32,868    49,209    49,332
Interest expense, net              6,956     2,205     1,437       510     2,279
                                --------  --------  --------  --------  --------

Income before income taxes        23,710    35,682    31,431    48,699    47,053
Income tax provision               9,447    14,018    12,381    18,927    18,254
                                --------  --------  --------  --------  --------
Net income                      $ 14,263  $ 21,664  $ 19,050  $ 29,772  $ 28,799
                                ========  ========  ========  ========  ========

Basic and diluted net income per
  share of common stock         $   0.78  $   1.18  $   0.91  $   1.34  $   1.34

Weighted average number of shares
  of common stock outstanding
  and dilutive securities         18,324    18,445    20,934    22,298    21,536

Cash dividend per share of 
 common stock                   $   0.20  $   0.20  $   --    $   --    $  --

Net Sales by Channel of Distribution:

Direct to consumers             $238,774  $223,459  $197,463  $177,222  $150,100
Retail accounts                  137,794   145,669   149,901   165,527   163,719
International                     34,097    28,089    24,967    19,704    17,790
                                --------  --------  --------  --------  --------
Total                           $410,665  $397,217  $372,331  $362,453  $331,609
                                ========  ========  ========  ========  ========
Operations Data:

Stores at end of year (1)            158       152       134       119       100
Percentage increase (decrease)
   in total comparable store
   net sales (2)                     0.4%      0.2%     (0.7%)    (1.4%)    1.9%


                                         Page 15 of 71


<PAGE>


                                             As of December 31,
                                 --------------------------------------------
                                 1998      1997      1996      1995      1994
                                 ----      ----      ----      ----      ----
Balance Sheet Data:

Working capital                 $171,195  $183,430  $162,385  $219,267  $192,813
Total assets                     364,742   370,433   283,981   299,012   261,646
Long-term debt                   100,000   110,000    60,000    60,000    60,000
Total stockholders' equity       201,373   196,092   178,572   200,068   170,544

---------
(1)  Includes 4 stores planned for closure which were in operation at the end
     of 1998.

(2)  A store is considered to be comparable only if it is open for all of both
     periods being compared.



                                         Page 16 of 71


<PAGE>



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

Results of Operations

The following table sets forth certain financial and operations data for the
years indicated:

                                                Years Ended December 31,
                                        ----------------------------------------

                                            1998            1997        1996
                                         ------------   ----------- ------------

                                                 (Sales dollars in thousands)

Net Sales by Channel of Distribution:
Direct to consumers                       $   238,774   $  223,459  $  197,463
Retail accounts                               137,794      145,669     149,901
International                                  34,097       28,089      24,967
                                          -----------   ----------  ----------
     Total                                $   410,665   $  397,217  $  372,331
                                          ===========   ==========  ==========

Operations Data:
Stores open at end of the year                    158          152         134

Percentage increase (decrease) in
  comparable store net sales                      0.4%         0.2%       (0.7%)

Total U.S. store gross square footage
   at end of the year                       1,502,000    1,459,000   1,258,000

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

Net Sales. Net sales in 1998 were $410.7 million, an increase of $13.5 million
or 3.4% over 1997 net sales of $397.2 million. This increase in net sales in
1998 was attributable to a combination of factors. First, the Company's direct
to consumers channel of distribution, where sales are generally at higher price
levels than in the retail account channel, provided an increase of $15.3 million
of sales over 1997. This increase in net sales was primarily attributable to an
increase in number of units sold rather than in prices. The Company opened a
total of 10 new retail stores during 1998 which consisted of 8 stores in the
U.S. and 2 stores in Canada. The 8 stores in the U.S. accounted for $3.8 million
or 24.8% of the retail sales growth. Comparable store sales increased by $0.8
million or 0.4% compared to 1997 comparable store sales. Second, the Company's
international business contributed $34.1 million in net sales in 1998, an
increase of $6.0 million or 21.4% over 1997 net sales of $28.1 million. This
increase was primarily due to both the retail accounts business and the opening
of two new Company-owned stores in Canada. These increases were partially offset
by a $7.9 million decrease of sales through the retail accounts channel of
distribution. This decrease was primarily due to sales forgone as a result of
the Company's decision to place certain customers on credit watch.


                                         Page 17 of 71


<PAGE>

Gross Profit. Gross profit in 1998 was $194.5 million, an increase of $6.1
million or 3.2% over 1997 gross profit of $188.4 million. Gross profit as a
percentage of net sales was 47.4% in 1998 and 1997. Excluding the Company's
international business, gross profit as a percentage of net sales was 48.5% in
1998, up from 48.3% in 1997.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses in 1998 were $161.4 million, an increase of $10.9
million or 7.3% over 1997 selling, general and administrative expenses of $150.5
million. As a percentage of net sales, such expenses increased to 39.3% in 1998
from 37.9% in 1997. During 1998, $2.2 million in expenses were added for ongoing
operating expenses of the 8 new stores opened in the United States during 1998
and certain pre-opening expenses for these stores and other stores expected to
open in 1999. This follows the Company's practice to expense all costs
associated with new store openings at the time incurred. Additionally, the full
year operations in 1998 of the 19 new stores opened during 1997 in the United
States added $6.5 million in expenses in 1998 compared to 1997 when those stores
were only in operation for varying portions of the year. Operating expenses were
also impacted by the incremental and transitional cost of $6.9 million of
bringing the Charleston facility on line while maintaining the New Jersey
distribution facility.

Restructuring Charge. A restructuring charge of $2.4 million was accrued during
1998 for expenses expected in connection with the consolidation of the Company's
east coast warehousing operations, credit and customer service functions into
its Charleston, South Carolina facility.

Income from Operations. Income from operations in 1998 was $30.7 million, a
decrease of $7.2 million or 19.0% compared to 1997 income from operations of
$37.9 million. This represented a decrease as a percentage of net sales to 7.5%
in 1998 compared to 9.5% in 1997. This decrease was the result of the increase
in selling, general and administrative expenses in 1998, the incremental and
transitional cost related to bringing the Charleston facility on line while
maintaining the Company's New Jersey distribution facility and the non-recurring
restructuring charge accrued in 1998 for the Charleston transition.

Interest Expense, Net. Net interest expense was $7.0 million in 1998, an
increase of $4.8 million from 1997 net interest expense of $2.2 million. This
increase was primarily due to recognition of interest expense beginning April 1,
1998 attributable to the Company's Charleston, South Carolina facility which
interest had been previously capitalized during construction. The increase also
reflects short-term borrowings to support the Company's inventory levels during
the year. For a discussion of the Company's use of capital resources, see
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources.

Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

Net Sales. Net sales in 1997 were $397.2 million, an increase of $24.9 million
or 6.7% over 1996 net sales of $372.3 million. This increase in net sales in
1997 was attributable to a combination of factors. First, the Company's direct
to consumers channel of distribution, where sales are generally consummated at
higher price levels than in the retail account channel, provided an increase of
$26.0 million of sales over 1996. This increase in net sales was primarily
attributable to an increase in number of units sold rather than in prices. The


                                         Page 18 of 71


<PAGE>

Company opened a total of 21 new retail stores during 1997 which consisted of 19
stores in the U.S. and 2 stores in Canada. The 19 stores in the U.S. accounted
for $15.6 million or 60.0% of the retail sales growth. Comparable store sales
increased by $0.4 million or 0.2% compared to 1996 comparable store sales.
Second, the Company's international business contributed $28.1 million in net
sales in 1997, an increase of $3.2 million or 12.5% over 1996 net sales of $24.9
million. This increase was primarily due to the opening of two new Company-owned
stores in Canada. These increases were partially offset by a $4.2 million
decrease of sales through the retail accounts channel of distribution. This
decrease was primarily due to weakness in the catalog showroom sector.

Gross Profit. Gross profit in 1997 was $188.4 million, an increase of $21.1
million or 12.6% over 1996 gross profit of $167.3 million. Gross profit as a
percentage of net sales was 47.4% in 1997 up from 44.9% in 1996. The gross
profit increase as a percentage of net sales was primarily due to increased
volume and higher margins in 1997 over 1996 from all channels of distribution.
Excluding the Company's international business, gross profit as a percentage of
net sales was 48.3% in 1997, up from 45.9% in 1996.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses in 1997 were $150.5 million, an increase of $20.2
million or 15.4% over 1996 selling, general and administrative expenses of
$130.3 million. As a percentage of net sales, such expenses increased to 37.9%
in 1997 from 35.0% in 1996. During 1997, $11.7 million in expenses were added
for ongoing operating expenses of the 19 new stores opened in the United States
during 1997 and certain pre-opening expenses for these stores and other stores
expected to open in 1998. This follows the Company's practice to expense all
costs associated with new store openings at the time incurred. In addition, the
full year of operations in 1997 for the 16 stores newly opened during 1996 in
the U.S. added $6.2 million in expenses in 1997 compared to 1996 when those
stores were only in operation for varying portions of the year. Operating
expenses were also impacted by the increased distribution costs associated with
department stores and mass merchants' shift to planned inventories through
electronic data interchange which increased the per order distribution costs.
Operating expenses were also impacted by the startup costs of $2.1 associated
with the Company's new Charleston, South Carolina distribution facility.

Income from Operations. Income from operations in 1997 was $37.9 million, an
increase of $5.0 million or 15.3% compared to 1996 income from operations of
$32.9 million. This represented an increase as a percentage of net sales to 9.5%
in 1997 compared to 8.8% in 1996. This increase was the net result of the
increase in gross profit, partially offset by the increase in selling, general
and administrative expenses in 1997 and the non-recurring store closure
provision recognized in 1996 of $4.1 million.

Interest Expense, Net. Net interest expense was $2.2 million in 1997, an
increase of $0.8 million from 1996 net interest expenses of $1.4 million. The
increase was primarily due to increased debt levels in 1997. For a discussion of
the Company's use of capital resources, see Management's Discussion and Analysis
of Financial Conditions and Results of Operations - Liquidity and Capital
Resources.

Liquidity and Capital Resources

Historically, the Company has used cash from operations, an equity offering and
debt financing to fund working capital requirements and capital expenditures. In
June 1997, the Company placed $60.0 million in unsecured, senior notes with a

                                         Page 19 of 71


<PAGE>



group of insurance companies at an interest rate of 7.38% per annum, payable
semi-annually, which mature on June 4, 2007. Principal payments of $15.0 million
per year will be due annually commencing in June 2004. The Company also has
outstanding $50.0 million in unsecured senior notes with a group of insurance
companies which bear interest at the rate of 6.66% per annum, payable
semi-annually, which mature in May 2003. Principal payments on these notes of
$10.0 million per year will be due annually in May each year until May 2003. The
Company also has a $50.0 million unsecured revolving credit facility provided by
two banks. The maturity date of the revolving credit facility is May 19, 2001,
subject to automatic extensions in one year increments at the end of each
commitment year, unless either bank delivers a notice of intention not to extend
the maturity date. As of December 31, 1998, $4.6 million had been used for
letters of credit under the revolving credit facility and $45.4 million was
unused and available. For a discussion of certain restrictive covenants
contained in the senior note and revolving credit facility loan agreements,
including restrictions on the payment of dividends, see Note 7 of Notes to
Consolidated Financial Statements.

The Company had working capital of $171.2 million at December 31, 1998, and
working capital of $183.4 million at December 31, 1997. Net cash provided by
operating activities was $16.2 million, $12.3 million and $49.4 million in 1998,
1997 and 1996, respectively. The increase in net cash provided by operating
activities in 1998 compared to 1997 was primarily attributable to a lower
increase in the Company's inventories of $6.4 million in 1998 from 1997,
compared to an increase in inventories of $18.6 million in 1997 from 1996.

Net cash used in investing activities was $19.2 million, $49.7 million and $30.9
million in 1998, 1997 and 1996, respectively. Cash used during 1998 and 1997 was
primarily attributable to investment in capital expenditures which was mainly
for the Charleston, South Carolina distribution facility. Cash used during 1996
was primarily attributable to investments in capital expenditures and partially
offset by the change in investments of available cash to cash equivalents from
short-term investments. See note 2 of Notes to Consolidated Financial Statements
for definition of cash equivalents and short-term investments. The Company had
capital expenditures of $19.2 million, $49.7 million and $40.9 million in 1998,
1997 and 1996, respectively (consisting primarily of the construction of the new
distribution center in South Carolina, new retail stores' fixtures and leasehold
improvements, distribution facilities' fixtures and renovation of existing
retail stores).

Net cash provided by (used in) financing activities was $(18.5) million, $56.6
million and ($39.6) million in 1998, 1997 and 1996, respectively. During 1998
net cash was used for payment of long-term debt, repurchases of common stock and
payment of cash dividends. Pursuant to the Company's previously announced
program to repurchase up to $10 million of its common stock, the Company
purchased 427,400 shares in 1998 at a total cost of $5.1 million. During 1997,
net cash was provided by a new $60.0 million debt placement. During 1996, the
Company utilized its revolving credit facility to partially finance its capital
expenditures, working capital needs and repurchases of common stock. The stock
repurchases consisted of 2,234,637 shares of common stock from the Company's
Chairman at $8.95 per share through a private purchase and 1,686,658 shares of
common stock from stockholders (excluding executive officers and directors) at
$11.25 per share through a "Dutch Auction" tender offer. The aggregate cost of
the repurchases in 1996 was $39.7 million.

                                         Page 20 of 71


<PAGE>



Certain monetary assets and liabilities of the Company are in foreign currencies
and may be subject to foreign exchange risk. Foreign currency exchange losses
have not in the past had a material effect on the Company's financial condition
since these assets and liabilities are not material to its consolidated monetary
assets and liabilities. As such, these items have not been hedged by the
Company. See Note 2 of Notes to Consolidated Financial Statements.

The Company's inventory purchases in 1998 were approximately 23% from Japanese
factories and approximately 24% from German and Austrian factories combined. The
significant portion of inventory purchases in foreign currencies exposes the
Company to foreign currency fluctuations which can affect the Company's gross
profit margin. To hedge against potential foreign currency swings, the Company
has strategies in place which are intended to minimize the adverse impact of
foreign currency fluctuations on its business. These strategies are: (i)
Currency risk sharing arrangements with the Company's Japanese suppliers; (ii)
Forward exchange contract coverage on part of its German mark related purchases;
(iii) Sourcing of products from countries other than Japan and Germany where
feasible; and (iv) Converting certain purchases from foreign currency to U.S.
dollar denominations. The currency risk sharing arrangements minimize the impact
of currency swings by the equal sharing of currency exposures against inventory
purchases denominated in Japanese yen between the suppliers and the Company.
Future fluctuations of the U.S. dollar in relation to foreign currencies can
impact earnings in future periods.

At the close of 1998, the Company had three primary distribution centers in the
United States, located in Charleston, South Carolina; Secaucus, New Jersey; and
Long Beach, California. While the Charleston and Secaucus facilities are owned,
the Long Beach facility is leased pursuant to a lease expiring in January 2000.
The Company also leases additional off-site warehouse space in separate
buildings to augment the Long Beach facility. The Company's remaining warehouse
operations in Secaucus, New Jersey transferred to the Charleston, South Carolina
facility in March 1999. The Company is evaluating its alternatives regarding the
utilization of the Secaucus facility post consolidation. The Company's 580,000
square foot distribution facility in Charleston, South Carolina became fully
operational during the latter part of 1998. The Company believes that the use of
state of the art distribution technology in the new Charleston facility and
relief from inefficiencies resulting from overcrowding of existing facilities
should provide long term benefits. The Company incurred certain transition costs
in 1998 and 1997 that impacted earnings. It also anticipates certain such costs
in the short-term which may impact earnings at that time. The Company began
depreciating this facility in 1998.

During 1998 the Company opened 10 new retail stores, including 2 stores in
Canada, and closed 4 stores. As of December 31, 1998, total retail store count
increased to 158, including the 5 Canadian stores. The number of states in which
the Company operates retail stores decreased to 41 and the number of Canadian
provinces is 3. The Company plans to pursue continued expansion of its store
network in the United States and Canada. Present plans include opening up to 10
new retail stores in each of 1999 and 2000. Each store requires a commitment of
inventory, fixtures, equipment and pre-opening store expenses. Additionally, as
the Company expands its international operations, working capital will be
required to fund increased inventories and accounts receivable.


                                         Page 21 of 71


<PAGE>

The Company currently estimates that its aggregate capital expenditures in 1999
and 2000 will approximate up to $20 million. This includes the expansion of the
Company's retail store network and expansion of its international operations. In
each of these cases, there can be no assurance that the Company's capital
expenditures will not exceed this estimated amount.

Future Developments

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Instruments and Hedging Activities. This Statement establishes accounting and
reporting standards for derivatives and hedging activities. In accordance with
this Statement, all derivatives must be recognized as assets or liabilities and
measured at fair value. This Statement will be effective for the Company's
fiscal year 2000. The Company is currently evaluating the requirements of SFAS
133.


Year 2000 Compliance

Like most companies, the Company is affected by Year 2000 issues. The Company
has developed a program to evaluate and respond to these issues. This program
has been designed to minimize risk to the Company's business and its customers
using a standard five phase approach. The five phases include assessment,
planning, remediation, testing and validation.

The Company has completed its assessment of internal systems and has concluded
that its hardware and software are Year 2000 compliant. The Company has
concluded that it will not be necessary to replace its retail point of sale
hardware. As customers convert to new Year 2000 compliant EDI versions, the
Company will convert them to its new EDI software.

The Company has expensed approximately $240,000 in costs related to Year 2000
compliance including the cost of upgrading internally generated software. Based
on information available at this time, management believes that the remaining
costs to implement the program will not be material.

Communication with respect to Year 2000 issues with the Company's customers and
suppliers is ongoing. While not expected, the Company may experience delays in
receipt of product which could adversely affect sales and earnings. The Company
cannot currently estimate to what extent future operating results might be
adversely affected by the possible failure of these third parties to
successfully address their Year 2000 issues. However, the Company's program
includes actions designed to identify and minimize, where possible, any third
party exposures.

The costs to implement the program are based on management's estimates, which
were derived utilizing numerous assumptions related to future events. There can
be no guarantee that additional costs will not be incurred, or that the
objective of the program, will be achieved. However, the Company continues to
monitor activities related to the program designed to insure Year 2000
readiness. Contingency plans have been internally developed with respect to
alternative sources of supply if a given supplier develops an inability to
deliver. The need for additional plans will be reviewed during 1999.



                                         Page 22 of 71


<PAGE>

Seasonality and Quarterly Fluctuations

Historically, the Company's operations have been seasonal, with higher sales and
net income occurring in the third and fourth quarters, reflecting increased
demand during the year-end holiday selling season. Since the biggest retail
selling season is the year-end holiday season, and as more of the Company's
principal department store customers adopt electronic data interchange which
allows them to defer shipments until later in the selling season, future sales
are expected to be more heavily weighted toward the third and fourth quarters.
In addition, the Company's retail stores experience a similar seasonal selling
pattern, however, sales are more heavily weighted toward the fourth quarter. As
a result, as the Company increases the number of stores, the shift of sales
volume toward the latter part of the year is expected to continue.

The Company's results of operations may also fluctuate from quarter to quarter
in the future as a result of the amount and timing of sales contributed by, and
expenses related to the opening of, new retail stores and the integration of
such stores into the operations of the Company, as well as other factors. The
addition of a significant number of retail stores, as is anticipated with the
Company's store expansion program, can therefore significantly affect results of
operations on a quarter-to-quarter basis. As the addition of new stores
continues, operating income for the first and second quarters will be more
impacted by the combination of seasonally lower sales volumes during this period
and increased operating expenses. The increase in operating expenses is
principally due to an increased percentage of fixed expenses that relate to
retail stores and the additional incremental expense from new developing stores.

The following table shows certain unaudited quarterly consolidated financial
information, and such information as a percentage of net sales, for the Company
during the fiscal years 1998 and 1997. The unaudited quarterly consolidated
financial information includes all adjustments (consisting only of normal
recurring adjustments) that the Company considers necessary for a fair
presentation of the information shown. The operating results are not necessarily
indicative of results for any future period.





                                 Page 23 of 71
<PAGE>
<TABLE>
<CAPTION>
                                 QUARTERLY FINANCIAL SUMMARY (UNAUDITED)
                              (Dollars in thousands, except per share data)

                                                       Three Months Ended
                                --------------------------------------------------------------
                                   March 31       June 30       September 30    December 31
                                -------------- --------------  --------------  ---------------
1998:
<S>                             <C>       <C>   <C>       <C>   <C>       <C>   <C>       <C> 
Net sales                       $76,210   100%  $83,292   100%  $104,053  100%  $147,110  100%
Gross profit                     34,332   45.1   40,513   48.6    49,932  48.0    69,731  47.4
Selling, general and
  administrative expenses        37,870   49.7   39,239   47.1    40,117  38.6    44,216  30.1
Restructuring charge               --             2,400    2.9      --               --
Income from operations           (3,538)  (4.6)  (1,126)  (1.4)    9,815   9.4    25,515  17.3
Net income                       (2,543)  (3.3)  (1,906)  (2.3)    4,571   4.4    14,141   9.6
Basic and diluted net income
  per share of common stock      $(0.14)         $(0.10)           $0.25           $0.78

1997:
     Net sales                  $73,108   100%  $83,142   100%  $100,689  100%   $140,278  100%
Gross profit                     32,772   44.8   37,900   45.6    48,297  48.0     69,415  49.5
Selling, general and
  administrative expenses        32,061   43.9   34,891   42.0    36,276  36.0     47,269  33.7
Income from operations              711    1.0    3,009    3.6    12,021  12.0     22,146  15.8
Net income                          304    0.4    1,574    1.9     6,846   6.8     12,940   9.2
Basic and diluted net income
  per share of common stock       $0.02           $0.09            $0.37           $0.71
</TABLE>

Forward-Looking Information

   We believe that certain statements or assumptions contained in Management's
Discussion and Analysis constitute "forward-looking" information (as defined in
the Private Securities Litigation and Reform Act of 1995). These forward-looking
statements involve risks, uncertainties and other factors that may cause our
actual results, performance or achievements to vary materially from our
predicted results, performance or achievements. Our factors include, among
others, the impact on future sales and profitability of the effort to bring the
Company's new distribution facility on line, foreign exchange and foreign
purchasing risks, planned expansion of the Company's retail store network,
capital expenditure levels associated with planned projects, year 2000
compliance issues, future trends relating to seasonality, competition from the
expansion of retail store networks by our competitors, increased governmental
quotas, tariffs or other restrictions on products the Company imports, and
various other factors referenced in this Annual Report on Form 10-K. We will not
update the forward-looking information to reflect actual results or changes in
factors affecting the forward-looking information. The forward-looking
information referred to above includes, but is not limited to: (a) expectations
regarding the Company's financial condition and liquidity, as well as future
cash flows; (b) expectations regarding capital expenditures; and (c)
expectations regarding sales growth, gross margins, and selling, general and
administrative expenses. In addition to the risks, uncertainties and other


                                         Page 24 of 71


<PAGE>


factors referred to above which may cause the actual results, performance or
achievements to vary from predicted results, these estimated amounts are based
on various factors and were derived using numerous important assumptions,
including: the Company's successful performance of internal plans; its ability
to control inventory levels; customer changes in short range and long range
plans; domestic and international competition in the Company's product areas;
whether the Company will be able to accomplish store closures within the current
time table for closure and within the parameters of the loss provision (which
are based on current estimates of closure costs), whether unanticipated year
2000 problems will impact the Company's operations; future performance of the
Company's new distribution facility and successful completion of programs to
improve efficiency of the new facility; continued acceptance of existing
products and the development and acceptance of new products; performance issues
with key suppliers; changes in government import and export policies; risks
related to international transactions and hedging strategies; and general
economic risks and uncertainties.


Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

         None.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                                         Page 25 of 71


<PAGE>


                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Stockholders
Mikasa, Inc.


In our opinion, the accompanying consolidated balance sheets and related
consolidated statements of income, stockholders' equity, and cash flows present
fairly, in all material respects, the financial position of Mikasa, Inc. and
Subsidiaries at December 31, 1998 and 1997, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
1998 in conformity with generally accepted accounting principles. These
consolidated financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.





PricewaterhouseCoopers LLP

Newport Beach, California
March 2, 1999



                                         Page 26 of 71
<PAGE>
<TABLE>
<CAPTION>
                          MIKASA, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                      (In thousands, except per share data)
                                                                                December 31,
                                                                            -------------------
                                                                            1998         1997
                                                                            ----         ----
                                    ASSETS:
<S>                                                                      <C>          <C>      
Current assets:
  Cash and cash equivalents                                              $  39,792    $  61,218
  Accounts receivable trade, net (Note 3)                                   25,436       25,594
  Inventories (Note 4)                                                     156,931      150,417
  Deferred income taxes (Note 8)                                             4,042        2,339
  Prepaid expenses and other current assets                                  3,966        5,220
                                                                         ---------    ---------
       Total current assets                                                230,167      244,788
  Property and equipment, net (Note 5)                                     129,054      119,723
  Other assets                                                                 774          886
  Intangible assets, net (Note 6)                                            4,747        5,036
                                                                         ---------    ---------
       Total assets                                                      $ 364,742    $ 370,433
                                                                         =========    =========
                     LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
  Short-term borrowings (Note 7)                                         $  11,690    $  11,632
  Accounts payable                                                          11,572       22,084
  Accrued expenses                                                          27,883       23,126
  Income taxes payable (Note 8)                                              7,827        4,516
                                                                         ---------    ---------
       Total current liabilities                                            58,972       61,358
Deferred income taxes (Note 8)                                               4,397        2,983
Notes payable (Note 7)                                                     100,000      110,000
                                                                         ---------    ---------
       Total liabilities                                                   163,369      174,341
                                                                         ---------    ---------
Commitments and contingencies (Note 9)
Stockholders' equity:
Preferred stock, undesignated, $0.01 par value;
    Authorized 20,000 shares; none issued and
    outstanding (Note 12)                                                     --           --
Common stock, $0.01 par value; authorized 80,000 shares; Issued
    and outstanding 17,950 shares at 1998 and 18,359 at 1997 (Note 12)      49,719       49,532
Accumulated other comprehensive income                                        (745)      (1,205)
Retained earnings                                                          197,183      187,470
                                                                         ---------    ---------
                                                                           246,157      235,797
Less treasury stock, 4,349 and 3,921 shares at cost at 1998 and 1997
  respectively
                                                                           (44,784)     (39,705)
                                                                         ---------    ---------
       Total stockholders' equity                                          201,373      196,092
                                                                         ---------    ---------
       Total liabilities and stockholders' equity                        $ 364,742    $ 370,433
                                                                         =========    =========

The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
                                         Page 27 of 71


<PAGE>

                          MIKASA, INC. AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME
                      (In thousands, except per share data)

                                            For The Years Ended December 31,
                                            --------------------------------
                                              1998        1997      1996
                                              ----        ----      ----

Net sales (Note 2)                          $410,665   $397,217   $372,331
Cost of sales                                216,157    208,833    205,016
                                            --------   --------   --------

      Gross profit                           194,508    188,384    167,315
Selling, general and administrative
  expenses                                   161,442    150,497    130,347
Restructuring charge                           2,400
Store closure charge                            --         --        4,100
                                            --------   --------   --------
      Income from operations                  30,666     37,887     32,868
Interest expense, net (Note 7)                 6,956      2,205      1,437
                                            --------   --------   --------
      Income before income taxes              23,710     35,682     31,431
Income tax provision (Note 8)                  9,447     14,018     12,381
                                            --------   --------   --------

      Net income                            $ 14,263   $ 21,664   $ 19,050
                                            ========   ========   ========

Basic and diluted net income per share of
  common stock (Note 15)                    $   0.78   $   1.18   $   0.91
                                            ========   ========   ========

Weighted average number of shares of
  common stock outstanding and 
  dilutive securities                         18,324     18,445     20,934
                                            ========   ========   ========

Cash dividend per share of common stock     $   0.20   $   0.20   $   --
                                            ========   ========   ========


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


                                         Page 28 of 71

<PAGE>


                          MIKASA, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
              For The Years Ended December 31, 1998, 1997 And 1996
                                 (In thousands)


                                              Accumulated
                                                 Other
                             Common Stock     Comprehensive Retained   Treasury
                            Shares   Amount   Income (loss) Earnings    Stock
                            ------   ------   ------------- --------    -----

Balance, January 1, 1996    22,280   $49,532      $1,026    $149,510  $      0
Translation adjustment        --        --          (841)       --        --
Net income                    --        --          --        19,050      --
Treasury stock purchased    (3,921)     --          --          --     (39,705)
                           -------   -------      ------    --------  -------- 
Balance, December 31, 1996  18,359    49,532         185     168,560   (39,705)
Translation adjustment        --        --        (1,390)       --        --
Net income                    --        --          --        21,664      --
Dividends paid                --        --          --        (2,754)     --
                           -------   -------      ------    --------  -------- 
Balance, December 31, 1997  18,359    49,532      (1,205)    187,470   (39,705)
Translation adjustment        --        --           460        --        --
Net income                    --        --          --        14,263      --
Dividends paid                --        --          --        (4,550)     --

Stock options exercised         18       187        --          --        --
Treasury stock purchased      (427)      --         --          --      (5,079)
                           -------   -------      ------    --------  -------- 

Balance, December 31, 1998 $17,950   $49,719      $ (745)   $197,183  $(44,784)
                           =======   =======      ======    ========  ======== 

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




















                                         Page 29 of 71

<PAGE>
<TABLE>
<CAPTION>
                          MIKASA, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                                     For The Years Ended December 31,
                                                     --------------------------------
                                                         1998      1997        1996
                                                         ----      ----        ----
<S>                                                   <C>        <C>         <C>     
Cash flows from operating activities:
 Net income                                           $ 14,263   $ 21,664    $ 19,050

 Adjustments to reconcile net income to net cash
  provided by operating activities:
  Depreciation and amortization                         10,502      6,777       5,000
  Increase (decrease) in allowance for
   uncollectible accounts                                   50        (23)        149
  Decrease (increase) in accounts receivable, trade        561     (1,893)     (1,034)
  (Increase) decrease in inventories                    (6,387)   (18,631)     20,234
  Decrease (increase) in prepaid expenses, other
    current assets and other assets                      1,386        (33)        567
  (Decrease) increase in accounts payable and
    accrued expenses                                    (7,142)     4,328       5,682
  Increase (decrease) in income taxes payable            3,272     (1,390)        886
  (Decrease) increase in deferred income taxes            (290)     1,506      (1,156)
                                                      --------   --------    --------
   Net cash provided by operating activities            16,215     12,305      49,378
                                                      --------   --------    --------
Cash flows from investing activities:
 Capital expenditures                                  (19,239)   (49,671)    (40,858)
 Sales of short-term investments                          --         --        10,000
                                                      --------   --------    --------
   Net cash used in investing activities               (19,239)   (49,671)    (30,858)
                                                      --------   --------    --------
Cash flows from financing activities:
 Long-term (payments) borrowings under note agreements (10,000)    60,000        --
 Net borrowing (payments) of short-term borrowings          57       (179)         73
 Increase in debt issuance costs                          --         (422)       --
 Purchase of treasury stock                             (5,079)      --       (39,705)
 Dividends paid                                         (3,653)    (2,754)       --
 Exercise of common stock options                          187       --          --
                                                      --------   --------    --------
   Net cash (used in) provided by financing activities (18,488)    56,645     (39,632)
                                                      --------   --------    --------
   Effect of exchange rate  changes on cash
       and cash equivalents                                 86       (348)       (327)
                                                      --------   --------    --------
   Net (decrease) increase in cash and
     cash equivalents                                  (21,426)    18,931     (21,439)
Cash and cash equivalents, beginning of year            61,218     42,287      63,726
                                                      --------   --------    --------
Cash and cash equivalents, end of year                $ 39,792   $ 61,218    $ 42,287
                                                      ========   ========    ========
Supplemental cash flow disclosures:
 Interest paid                                        $  8,563   $  5,706    $  3,484
 Income taxes paid                                    $  5,670   $ 13,635    $ 10,831

The accompanying notes are an integral part of these consolidated financial
statements.
</TABLE>
                                         Page 30 of 71


<PAGE>


                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   General:

Mikasa, Inc. ("Mikasa" or the "Company") is a leading designer, developer and
marketer of quality tabletop products. The Company's wide range of products
includes ceramic dinnerware, crystal stemware, stainless steel flatware, gifts
and decorative accessories for the home. The Company markets its products in the
United States and internationally to retail accounts, including department
stores, specialty retail stores and mass merchants, and through Company-owned
retail stores.

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

2.  Summary Of Significant Accounting Policies:

Principles Of Consolidation: The consolidated financial statements include the
accounts of Mikasa, Inc., holding company of American Commercial, Incorporated
and its wholly-owned and majority-owned subsidiaries (collectively the
"Company"). All significant intercompany accounts and transactions have been
eliminated in consolidation.

Cash Equivalents and Short-Term Investments: Cash equivalents are highly liquid
investments with a maturity of ninety days or less when purchased. Short-term
investments consist of instruments with original maturities of six months or
less. These investments are classified as short-term investments
held-to-maturity. The carrying amounts for cash equivalents and short-term
investments approximate their fair values.

Intangible Assets: The excess of the purchase price over the fair market value
of the net assets acquired in the 1985 acquisition of the Common Stock of the
Company has been allocated to goodwill. Goodwill is amortized using the
straight-line method over its estimated useful life of 40 years.

Other intangible assets consist of loan costs to obtain financing and are
amortized over the terms of the related loans using the straight-line method
which approximates the interest method.

The Company assesses whether there has been a permanent impairment in the value
of intangible assets by considering factors such as expected future operating
income, trends and prospects, as well as the effects of demand, competition and
other economic factors. Management believes no permanent impairment has
occurred.

Inventories: Inventories are stated at the lower of cost or market. Cost is
determined on a first-in, first-out basis.

Property And Equipment: Property and equipment are stated at cost. Depreciation
is computed using the straight-line method over the estimated useful lives of
the related assets as follows:

                                         Page 31 of 71


<PAGE>

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.  Summary Of Significant Accounting Policies, Continued:

                                                  Useful Life
                                                  -----------
          Buildings                     31 to 40 years
          Building improvements         15 years
          Furniture and fixtures        4-15 years
          Leasehold improvements        Lesser of lease term or estimated useful
                                        life of asset

Expenditures for repairs and maintenance are charged to expense as incurred. The
cost and related accumulated depreciation and amortization of property and
equipment sold or retired are removed from the accounts and resulting gains or
losses are included in income.

Stock-Based Compensation: The Company follows the disclosure requirements of
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation." This statement sets forth alternative standards of
recognition of the cost of stock-based compensation and requires that a
company's financial statements include certain disclosures about stock-based
employee compensation arrangements regardless of the method used to account for
them. As allowed in this statement, the Company continues to apply Accounting
Principles Board Opinion (APB) No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in recording compensation related to its
plans. The supplemental disclosure requirements and further information related
to the Company's stock option plans are presented in Note 14 to the Company's
financial statements.

Income Taxes: The Company follows the provisions of SFAS No. 109, "Accounting
for Income Taxes," which requires the recognition of deferred income tax
liabilities and assets for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Under this
method, deferred income tax liabilities and assets are determined based on the
difference between the financial statement and the tax basis of assets and
liabilities using enacted rates in effect for the year in which the differences
are expected to reverse.

Revenues: Revenues are recognized upon shipment of product to customers. Sales
allowances, including cooperative advertising allowances, of $5,814,000,
$7,143,000 and $8,223,000 in 1998, 1997 and 1996, respectively, are accounted
for as a reduction of sales.

Pre-Opening Store Expenses: Pre-opening store expenses are charged to selling,
general and administrative expenses as incurred.

Foreign Currency Translation: Assets and liabilities of foreign subsidiaries are
translated at year-end rates of exchange; income and expenses are translated at
the weighted average rates of exchange during the year. The resultant cumulative
translation adjustments are included as a separate component of stockholders'
equity. Foreign currency transaction gains and losses are included in net income
and were not significant in any period presented.




                                         Page 32 of 71


<PAGE>

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2.  Summary Of Significant Accounting Policies, Continued:

The Company periodically hedges against foreign currency exposures using forward
exchange contracts to cover identified inventory purchase commitments. Realized
and unrealized gains and losses are deferred and recognized as the related
transactions are settled. At December 31, 1998, approximately $6,000,000 of
forward exchange contracts hedging such commitments were outstanding.

Net Income Per Share Available to Common Stockholders: The Company adopted the
provisions of SFAS No. 128, Earnings Per Share effective December 31, 1997. This
statement requires the presentation of basic and diluted earnings per share.
Basic net income per share is calculated by dividing net income available to
common stockholders, adjusted for any cumulative dividends on preferred stock
earned during the year, by the weighted average number of common shares
outstanding for the period. Diluted net income per share is calculated giving
effect to all dilutive potential common shares that were outstanding during the
period. Dilutive potential common shares consist of the incremental common
shares issuable upon the conversion of convertible preferred stock (using the
"if converted" method), convertible debt and exercise of stock options and
warrants for all periods. See Note 15 "Net Income Per Share."

Comprehensive Income: The Company adopted SFAS No. 130, Reporting Comprehensive
Income during the year ended December 31, 1998. This Statement requires the
Company to report all changes in equity from non-owner sources, including
unrealized gains and losses on certain investments in debt and equity securities
and foreign currency translation adjustments, as components of other
comprehensive income. Such amounts are presented as a separate component of
equity entitled "Accumulated Other Comprehensive Income" in the Statement of
Financial Position. The individual components of other comprehensive income are
also reported with net income (loss) as "Comprehensive Income" in the results of
operations. Financial statements for earlier periods have been reclassified for
comparative purposes.

Segment Reporting: The Company adopted SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information during the year ended December 31,
1998. This Statement supercedes substantially all the reporting requirements
previously required under SFAS No. 14, Financial Reporting for Business Segments
of an Enterprise and establishes certain disclosures about products and
services, geographic areas and major customers. Under SFAS No. 131, the
determination of segments to be reported in the financial statements is to be
consistent with the manner in which management organizes and evaluates the
internal organization to make operating decisions and assess performance. The
adoption of this Statement did not have an impact upon the Company's operating
results or financial position as this Statement's provisions affect only the
disclosure of certain segment information in the financial statements.

Reclassifications: To conform to the 1998 presentation, certain
reclassifications were made to the prior years' consolidated financial
statements.

                                         Page 33 of 71


<PAGE>



                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.  Accounts Receivable, Trade:

Receivables are net of allowances for uncollectible accounts of $790,000 and
$740,000 at December 31, 1998 and 1997, respectively.

4.  Inventories:
      Inventories consist of the following (in thousands):


                                                          December 31,
                                                          ------------
                                                        1998          1997
                                                        ----          ----
     Merchandise inventory:
       United States                                  $ 130,584     $ 115,576
       International                                     13,654        12,210
     Inventory in-transit                                12,693        22,631
                                                      ---------     ---------
                                                      $ 156,931     $ 150,417
                                                      =========     =========

5.  Property and Equipment:

      Property and equipment, at cost, consist of the following (in thousands):

                                                          December 31,
                                                          ------------
                                                        1998          1997
                                                        ----          ----
     Buildings and improvements                       $ 56,985      $ 56,668
     Furniture and fixtures                             77,792        63,430
     Leasehold improvements                             25,084        20,354
                                                     ---------      --------
                                                       159,861       140,452
      Less, accumulated depreciation and amortization  (39,988)      (29,775)
                                                       119,873       110,677
     Land                                                9,181         9,046
                                                      --------      ---------
                                                      $129,054      $119,723
                                                      ========      ========

Depreciation and amortization expense for property and equipment amounted to
$10,213,000, $6,511,000 and $4,753,000 for the years ended December 31, 1998,
1997 and 1996, respectively. The Company capitalized interest related to
construction of the new distribution center in South Carolina at its cost of
funds. The capitalized interest amounted to $981,000, $2,994,000 and $711,000
for the years ended December 31, 1998, 1997 and 1996, respectively, and will be
depreciated over the estimated useful lives of the distribution center's assets.

In accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to Be Disposed Of, long-lived assets are reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.

                                         Page 34 of 71


<PAGE>


                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6.  Intangible Assets:

      Intangible assets consist of the following (in thousands):

                                                          December 31,
                                                          ------------
                                                        1998          1997
                                                        ----          ----
     Goodwill                                         $   5,949     $  5,949
     Other intangible assets                              1,488        1,488
                                                      ---------     --------
                                                          7,437        7,437
       Less, accumulated amortization                    (2,690)       2,401)
                                                      ---------     --------
                                                      $   4,747     $  5,036
                                                      =========     =========

Amortization expense for intangible assets amounted to $289,000, $266,000 and
$247,000 for the years ended December 31, 1998, 1997 and 1996, respectively.

7.  Notes Payable:

      Notes payable consist of the following (in thousands):

                                                          December 31,
                                                          ------------
                                                        1998          1997
                                                        ----          ----
     Short-term borrowings                            $  1,690      $  1,632
     Senior notes                                      110,000       120,000
                                                      --------      --------
                                                       111,690       121,632
     Less current portion                               11,690        11,632
                                                      --------      --------
     Non-current portion                              $100,000      $110,000
                                                      ========      ========

In May 1993, the Company entered into an unsecured revolving credit agreement
with two banks in the amount of $50,000,000. The maturity date is May 19, 2001,
subject to automatic extensions of one year beyond the current maturity date at
the end of each year unless either bank delivers a notice of intention not to
extend the maturity date. At December 31, 1998, there were no acceptances
payable and $4,600.000 of this credit facility was used for open letters of
credit and $45,400,000 of the line of credit was unused and available.
Borrowings in the form of loans bear interest at the higher of the lead bank's
"Base Rate" or the Federal Funds Rate plus 0.5%. At December 31, 1998, the
interest rate in effect was 7.75%. Borrowings in the form of acceptances bear
interest at the lead bank's quoted treasury rate for comparable time periods and
amounts plus 0.5%. The interest rate in effect at December 31, 1998 was 5.25%.

In May 1993, the Company concurrently entered into Senior Note agreements in the
amount of $60,000,000 through a private placement of debt which bears interest
at 6.66% per annum and is unsecured. The principal is due in equal annual
installments of $10,000,000 from 1998 through 2003.

                                         Page 35 of 71


<PAGE>

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7.  Notes Payable, Continued:

In June 1997, the Company entered into Senior Note agreements in the amount of
$60,000,000 through a private placement of debt which bears interest at 7.38%
per annum and is unsecured. The principal is due in equal annual installments of
$15,000,000 from 2004 through 2007.

Under the terms of the unsecured revolving credit and Senior Note agreements,
the Company is required to maintain certain financial ratios. The most
restrictive covenant requires the Company to maintain a minimum ratio of income
before interest, income taxes and fixed charges to interest and fixed charges of
1.5 to 1.0. The Company's revolving credit and Senior Note agreements contain
restrictive covenants regarding cash distributions to stockholders, including
the payment of dividends. Such cash distributions made or authorized since
December 31, 1996 shall not exceed $35,000,000 plus 65% of the aggregate
consolidated net income (or in the case of a consolidated net loss, minus 100%
of such net loss) for the period commencing on December 31, 1996 and ending on
the date such a distribution would be made, provided no event of default exists
or otherwise would exist.

At December 31, 1998, a subsidiary of the Company had a line of credit, which
was unused and available, expiring in November 1999, unless renewed, totaling
approximately $6,200,000. The interest rate at December 31, 1998, was 1.5% and
any borrowings would be collateralized primarily by buildings and land.

Another subsidiary of the Company had unsecured short-term borrowings of
$1,690,000 and $1,632,000 at December 31, 1998 and 1997, respectively, under a
line of credit totaling approximately $1,900,000. The borrowings bear interest
at 6.0% at December 31, 1998 and expiring in December 31, 1999.

The fair values of the Company's notes payable were estimated based on current
rates offered to the Company for similar debt of the same remaining maturity and
approximate market at December 31, 1998 and 1997.

      Maturities of notes payable for the years ended December 31 are as follows
(in thousands):

             1999                                  $   11,690
             2000                                      10,000
             2001                                      10,000
             2002                                      10,000
             2003                                      10,000
             Thereafter                                60,000
                                                    ---------
                                                    $ 111,690
                                                    =========

Interest expense for the periods presented is net of interest income of
$6,657,000, $4,456,000 and $2,776,000 for the years ended December 31, 1998,
1997 and 1996, respectively. The weighted average interest rate on short-term
notes payable to banks was 6.8%, 7.0%, and 6.2% for the years ended December 31,
1998, 1997 and 1996, respectively.


                                         Page 36 of 71


<PAGE>

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.  Income Taxes:

Income tax provision consists of (in thousands):

                                        For The Years Ended December 31,
                                        --------------------------------
                                          1998          1997         1996
                                          ----          ----         ----
     Current:
       Federal                           $  7,335    $   9,475    $  11,114
       State                                  909        1,347        1,394
       Foreign                              1,493        1,690        1,029
                                         --------     --------    ---------
                                            9,737       12,512       13,537
                                         --------     --------    ---------
     Deferred:
       Federal                                279        1,379       (1,019)
       State                                   24          127         (137)
       Foreign                               (593)        --           --
                                         --------     --------    ---------
                                             (290)       1,506       (1,156)
                                         --------     --------    ---------
          Income tax provision           $  9,447     $ 14,018    $  12,381
                                         ========     ========    =========


      The components of the provision for deferred income taxes are as follows
(in thousands):


                                         For The Years Ended December 31,
                                         --------------------------------
                                           1998         1997         1996
                                           ----         ----         ----
     Allowance for doubtful accounts     $    (25)    $     15    $     (58)
     Capitalized inventory costs             (153)         (29)           9
     Book/tax difference in depreciation    1,414        1,310          208
     Pension and other accrued expenses      (930)         198       (1,490)
     Foreign and State taxes, net of
      federal benefit                        (596)          12          175
                                         --------     --------    ---------
                                         $   (290)    $  1,506    $  (1,156)
                                         ========     ========    ========= 



                                         Page 37 of 71


<PAGE>

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8.  Income Taxes, continued:

The tax effects of temporary differences which give rise to deferred income tax
assets and liabilities at December 31, are as follows (in thousands):

                                                1998         1997
                                                ----         ----
     Property and equipment                 $  (4,397)   $  (2,983)
     Foreign and State income taxes               727          131
     Accounts receivable                          308          283
     Inventories                                  775          622
     Pension and other accrued liabilities      2,232        1,303
                                            ---------    --------- 
                                            $    (355)   $    (644)
                                            =========    ========= 

The Company did not record a valuation allowance against its deferred income tax
assets in 1998 and 1997.

The provision for income taxes differs from the amount that would result from
applying the federal statutory rate as follows:

                                               For The Years Ended December 31,
                                               --------------------------------
                                                 1998         1997         1996
                                                 ----         ----         ----
     Tax provision at the federal statutory rate 35.0%       35.0%        35.0%
     State tax provision, net of federal income
      tax benefit                                 2.7%        3.0          2.8
     Other                                        2.1         1.3          1.6
                                                 ----        ----         ---- 
     Effective income tax rate for the year      39.8%       39.3%        39.4%
                                                 ====        ====         ==== 

9.  Commitments And Contingencies:

Leases: The Company is a lessee under long-term noncancellable operating lease
agreements for rental of office, warehouse, showroom and retail space. These
operating leases expire at various dates and are subject to various renewal
options and escalation clauses. The following is a tabulation of fixed minimum
rental commitments, not including real estate taxes and other maintenance costs
which are to be paid by the Company (in thousands):

                                           Minimum      Minimum
                                           Rental      Sublease
 Years Ending December 31,                Payments      Income         Net
 -------------------------                --------      ------         ---
           1999                           $  28,506     $  1,313    $  27,193
           2000                              26,174        1,294       24,880
           2001                              24,138        1,267       22,871
           2002                              23,047        1,267       21,780
           2003                              21,536        1,267       20,269
           Thereafter                        53,972        2,746       51,226
                                           --------      -------     --------
                                           $177,373      $ 9,154     $168,219
                                           ========      =======     ========

                                         Page 38 of 71

<PAGE>


                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.  Commitments And Contingencies, Continued:

      Total rent expense under leases is comprised of the following (in
thousands):


                                         For The Years Ended December 31,
                                         --------------------------------
                                           1998         1997         1996
                                           ----         ----         ----
     Total rent expense                  $  24,543    $  23,455    $  20,526
     Sublease income                        (1,313)      (1,313)      (1,321)
                                           -------    ---------    ---------
       Net rent expense                    $23,230    $  22,142    $  19,205
                                           =======    =========    =========

Pension Plan: The Company has a noncontributory defined benefit pension plan
covering substantially all United States employees. The benefits are based on
years of service and compensation during the employee's highest compensated five
consecutive years of employment. The Company's funding policy is to pay at least
the minimum funding requirement under the Employee Retirement Income Security
Act of 1974. The following table sets forth the plan's funded status, the
pension liability and the net pension cost recognized in the Company's
consolidated statements of income for the years ended December 31, 1998, 1997,
1996, which have been calculated in accordance with Statement of Financial
Accounting Standards No. 87, "Employers' Accounting for Pensions."

The funded status of the plan at December 31, was (in thousands):


                                                           1998         1997
                                                           ----         ----

     Accumulated benefit obligation                     $ (10,108)   $ (8,337)
                                                        =========    ========

    Projected benefit obligation for services
      rendered to date                                  $ (14,513)   $(11,921)
    Plan assets at fair value, primarily stocks
      and U.S. government notes                            16,116       15,306
                                                        ---------    --------- 
    Projected benefit obligation less than plan assets      1,603        3,385
    Unrecognized (gain) loss                               (2,407)      (3,076)
    Prior service cost not yet recognized in net
      periodic pension cost                                  (350)        (380)
    Unrecognized net assets as of January 1, 1988, being
      amortized over 15 years                                  (4)          (5)
                                                        ---------    --------- 
    Prepaid pension cost                                $  (1,158)   $     (76)
                                                        =========    ========= 



                                         Page 39 of 71

<PAGE>


                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9.  Commitments And Contingencies, Continued:

      Net pension cost includes the following components (in thousands):


                                               For The Years Ended December 31,
                                               --------------------------------
                                                 1998         1997         1996
                                                 ----         ----         ----
    Benefits earned during the year             $ 1,520    $ 1,174     $ 1,443
    Interest cost on projected benefit obligation   857        689         675
    Actual return on plan assets                 (1,541)    (2,382)     (1,458)
    Net amortization and deferral                   246      1,316         614
                                                -------    -------      -------
       Net pension cost                         $ 1,082     $   797     $ 1,274
                                                =======     =======     =======

      The following assumptions were used to develop the pension information:

                                                    1998         1997       1996
                                                    ----         ----       ----
    Discount rate                                   6.75%        7.00%     7.50%
    Rate of increase in future compensation levels  5.00%        5.00%     5.00%
    Expected long-term rate of return on assets     7.50%        7.50%     7.00%

Profit-Sharing Plan/401(k): The profit-sharing plan/401(k) (the "Plan") is a
discretionary plan covering substantially all United States employees of the
Company. The Plan is a defined contribution plan in which eligible employees may
voluntarily elect to contribute "before-tax" dollars (deferred employee
compensation) up to the lesser of 10% of their compensation or $10,000, the
Internal Revenue Service's maximum, for the year ended December 31, 1998. The
Company contributes an amount equal to 25% of the first 6% of each employee's
contribution.

The Company's cost of the Plan was $384,000, $339,000 and $322,000 in 1998, 1997
and 1996, respectively.

Concentration of Credit Risk: The Company's financial instruments that are
exposed to concentrations of credit risk consist primarily of its cash deposits
and other cash equivalents that are in excess of federally insured limits. The
Company's cash equivalents and short-term investments are placed with a wide
array of institutions with high credit ratings or governmental agencies. This
investment policy limits the Company's exposure to concentrations of credit
risk.

Legal Proceedings: The Company is not a party to any pending legal proceedings
which it believes will have a material adverse effect on its consolidated
financial position or consolidated results of operations.

Letters of Credit: At December 31, 1998, the Company was contingently liable for
open letters of credit of approximately $4,600,000.


                                         Page 40 of 71


<PAGE>


                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10.  Store Closures Charge:

During the quarter ended June 30, 1996, the Company elected to close ten stores
that were not performing up to its expectations. The Company recognized an
estimated $4,100,000 in nonrecurring pre-tax charges related to these
anticipated store closures in the quarter ended June 30, 1996. The store closure
charges consisted primarily of the estimated costs to terminate the related
leases of the stores selected for closure.

11.  Restructuring Charge:

During the quarter ended June 30, 1998, the Company recognized an estimated
restructuring charge of $2,400,000 related to the consolidation of its east
coast warehousing operations, credit and customer service functions with the
Company's Charleston, South Carolina facility. The consolidation is anticipated
to be completed by the end of the first quarter 1999. The restructuring charge
consisted primarily of the estimated costs for employee separations, termination
of the related warehouse lease and fixed asset impairment. At December 31, 1998,
$1,300,000 of the restructuring charge is included in Accrued expenses.

12.  Stockholders' Equity:

The authorized capital stock of the Company includes 80,000,000 shares and
20,000,000 shares of common stock and preferred stock, respectively, at a par
value of $.01 per share. The Company's Board of Directors has not authorized any
series of this undesignated preferred stock to be issued.

During 1998, the Company repurchased 427,000 shares of common stock in the open
market at an aggregate cost of $5,079,000.

During the third quarter ended September 30, 1996, the Company repurchased
2,235,000 shares of common stock from its Chairman at $8.95 per share through a
private purchase and 1,686,000 shares of common stock from stockholders
(excluding executive officers and directors) at $11.25 per share through a
"Dutch Auction" tender offer. The aggregate cost of $39,705,000 for the
repurchases was treated as a reduction of stockholders' equity. Costs of
approximately $731,000 associated with these transactions have been included as
a component of equity.

13.  Related Party Transactions:

The Company leases a retail store from two of its officers and directors. The
lease expires on August 31, 2009, with no renewal options. The Company paid
these officers and directors $155,000, $154,000 and $148,000 in lease costs
during 1998, 1997 and 1996, respectively.

14.  Stock Option Plans:

On May 27, 1998, the stockholders approved the 1998 Long-Term Stock Incentive
Plan (the "1998 Incentive Plan") which had been adopted by the Board in April
1998. The 1998 Incentive Plan replaced the Mikasa Long-Term Incentive Plan (the
"Incentive Plan") adopted on March 17, 1994 as amended on December 18,1996. The


                                         Page 41 of 71

<PAGE>

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.  Stock Option Plans, Continued:

1998 Incentive Plan provides that the number of shares of common stock of the
Company available for issuance under this plan may not exceed the sum of
1,000,000 shares plus any shares available for future awards under the Incentive
Plan as of the effective date of the 1998 Incentive Plan. The total number of
shares of the Company's common stock under both plans to be granted or subject
to options or rights may not exceed 3,225,000. Under the 1998 Incentive Plan, no
participant may be granted, in the aggregate, awards totaling more than 450,000
shares of common stock. The plan provides that the exercise price shall not be
less than the fair market value of the shares on the date of grant and that no
portion of the option may be exercised beyond 10 years from that date. Options
vest at a rate of 50% one year from the date of grant and the remaining 50% two
years from the date of grant for options granted during 1994 through 1998.

The range of per share exercise prices for options outstanding as of December
31, 1998 is $10.375 to $16.00. A summary of the status of the Company's stock
options as of December 31, 1998, 1997 and 1996 and changes during the years
ended on those dates is presented below:

<TABLE>
<CAPTION>
                                            1998                    1997                   1996
                                            ----                    ----                   ----
                                               Wgtd. Avg               Wgtd. Avg              Wgtd. Avg
                                     Shares    Exer. Price   Shares    Exer. Price   Shares   Exer. Price
                                     ------    -----------   ------    -----------   ------   -----------
<S>                                <C>           <C>          <C>        <C>      <C>           <C>   
Outstanding at beginning of year   1,360,500     $12.74       1,051,000  $12.36      482,000    $14.81
Granted                              313,000      10.38         330,000   14.00      585,000     10.38
Exercised                            (18,000)     10.38            --       --          --        --
Canceled                             (57,000)     14.23         (20,500)  13.38      (16,000)    13.92
                                   ---------     ------       ---------   -----    ---------    ------

Outstanding at end of year         1,598,500     $12.25       1,360,500   12.74    1,051,000    $12.36
                                   =========     ======       =========   =====    =========    ======
Options exercisable at year-end    1,127,000     $12.52         741,750   13.10      279,25     $14.97
                                   =========     ======       =========   =====    =========    ======

Options available for future grant 1,608,500                    864,500           1,174,000
                                   =========                  =========            =========          

Weighted average fair value of
options granted during the year    $    4.33                  $    5.39           $    3.93
                                   =========                  =========            =========          
Weighted average remaining
contractual life in years                  8                          9                   9
                                   =========                  =========            =========          
</TABLE>

On May 25, 1995, the Company adopted and approved its Non-Employee Directors
Stock Option Plan. Under this plan, the number of shares of common stock of the
Company to be granted or subject to options or rights may not exceed 100,000.
Each non-employee director shall automatically receive an option at each annual
shareholders' meeting to purchase all or part of 2,500 shares of common stock.

                                         Page 42 of 71


<PAGE>

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

14.  Stock Option Plans, Continued:

The plan provides that the exercise price of the options shall be 100% of the
fair market value of the common stock on the date of grant. Options expire 10
years after the date of grant. During 1998, 1997 and 1996, options to purchase
5,000 shares of common stock were granted at a per share exercise price of
$12.75, $11.875 and $11.875, respectively. Options issued under this plan vest
at a rate of 50% one year from the date of grant and the remaining 50% two years
from the date of grant. At December 31, 1998, 80,000 shares were available for
the granting of additional options. During 1998, 1997, and 1996, no options were
exercised or surrendered.

The Company applies APB Opinion 25, "Accounting for Stock Issued to Employees,"
and related interpretations to account for the plans. Under SFAS No. 123,
compensation cost would be recognized for the fair value of the employee's
option rights. Had compensation cost for the Company's grants for stock-
based compensation plans been determined consistent with SFAS No. 123, the
Company's net income and earnings per share would have been reduced to the
pro-forma amounts indicated below (in thousands, except per share data). In
determining the fair value, the Company used the Modified Black-Scholes American
model, assumed a per share dividend of $0.20 per year beginning with quarterly
payments in April 1998, an expected life of eight years for all grants, an
expected volatility of 29.3% and a risk free interest rate of 6.5% for all
years, (in thousands, except per share data):

                                          1998       1997       1996
                                          ----       ----       ----

     Net income as reported               $ 14,263   $ 21,664   $ 19,050
                                          ========   ========   ========

     Proforma                             $ 12,194   $ 19,857   $ 16,962
                                          ========   ========   ========

     Diluted net income per share as
       reported                               0.78       1.18       0.91
                                          ========   ========   ========

     Proforma                             $   0.67       1.08       0.81
                                          ========   ========   ========


                                         Page 43 of 71


<PAGE>

                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15.  Net Income Per Share:

Net income per share includes the following components (in thousands):

                                                1998        1997         1996
                                                ----        ----         ----
Basic net income per share:
Numerator:
Net income available to common stockholders   $ 14,263     $ 21,664    $ 19,050
                                              ========     ========    ========
Denominator:
  Average common shares outstanding             18,221       18,359      20,894
                                              ========     ========    ========

Diluted net income per share:
Numerator:
  Net income available to common shareholders $ 14,263     $ 21,664    $ 19,050
                                              ========     ========    ========
Denominator:
  Denominator - Basic net income per share      18,221       18,359      20,894
  Effect of dilutive securities
    Common stock options                           103           86          40
                                              --------     --------    --------
                                                18,324       18,445      20,934
                                              ========     ========    ========

    16.   Segment Information:

The Company's reportable segments are based on channels of distribution and
geographic operations. The accounting policies of the reportable segments are
the same as those described in Note 2 of the Notes to the Consolidated Financial
Statements except certain of the information reported herein is reported upon
the basis of the Company's internal management reporting systems rather than
under generally accepted accounting principles. Specifically, if the Company
were to adjust its accounting to generally accepted accounting principles, the
result would be to increase cost of sales for its Retail Accounts Group and
decrease cost of sales by the identical amount for its Direct to Consumers Group
to adjust for inter-company profits (i.e. for internal reporting and management
purposes, amounts related to all inter-company inventory profit eliminations
result in a higher cost of sales to the Direct to Consumers Group). Furthermore,
since part of the mission of the Company's Direct to Consumers Group is to
liquidate slow moving or out of season products within the Company's
inventories, the allocation of related mark downs for this activity is
inherently subjective and virtually impossible to account for on the basis of
generally accepted accounting principles within segments. The Company evaluates



                                         Page 44 of 71

<PAGE>


                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16.  Segment Information, Continued:

the performance of its operating segments based on direct operating income or
losses. Each segment records direct expenses related and allocable to its
employees and its operations. The Company does not allocate income taxes,
interest or certain corporate overhead expenses to operating segments.
Identifiable assets are primarily those directly used in the operations of each
segment which consist of inventories. No individual customer accounted for
greater than 10% of consolidated net sales for any period presented.

Summarized financial information concerning the Company's reportable segments as
of December 31, is shown in the following table (in thousands):

<TABLE>
<CAPTION>

                                                             1 9 9 8
                                     ---------------------------------------------------------

                                     Direct to   Retail     Total
                                     Consumers  Accounts     U.S.   International Consolidated
                                     ---------  --------     ----   --------------------------
<S>                                  <C>        <C>        <C>        <C>         <C>     
Net sales                            $238,774   $137,794   $376,568   $ 34,097    $410,665
                                     ========   ========   ========   ========    ========
  Direct operating income            $ 32,309   $ 25,048   $ 57,357   $  3,606    $ 60,963
                                     ========   ========   
U.S. corporate overhead
  expenses                                                   27,897       --        27,897
Restructuring charge                                          2,400       --         2,400
                                                           --------   --------    --------
  Operating income                                           27,060      3,606      30,666
Interest expense, net                                         6,265        691       6,956
                                                           --------   --------    --------
  Income before income taxes                               $ 20,795   $  2,915    $ 23,710
                                                           ========   ========    ========
Long lived assets                                          $129,143   $  5,432    $134,575
                                                           ========   ========    ========
Inventories                          $ 45,765   $ 97,512   $143,277   $ 13,654    $156,931
                                     ========   ========   ========   ========    ========
</TABLE>

                                         Page 45 of 71


<PAGE>
                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
                                                             1 9 9 7
                                     ---------------------------------------------------------
                                     Direct to   Retail     Total
                                     Consumers  Accounts     U.S.   International Consolidated
                                     ---------  --------     ----   --------------------------
<S>                                  <C>        <C>        <C>        <C>         <C>     
Net sales                            $223,459  $145,669    $369,128   $ 28,089    $397,217
                                     ========   ========   ========   ========    ========
  Direct operating income            $ 32,879   $ 33,013   $ 65,892   $  4,835    $ 70,727
                                     ========   ========   
U.S. corporate overhead
  expenses                                                   32,840       --        32,840
Restructuring charge                                           --         --          --
                                                           --------   --------    --------
  Operating income                                           33,052      4,835      37,887
Interest expense, net                                         1,775        430       2,205
                                                           --------   --------    --------
  Income before income taxes                               $ 31,277   $  4,405    $ 35,682
                                                           ========   ========    ========
Long lived assets                                          $121,978   $  3,667    $125,645
                                                           ========   ========    ========
Inventories                          $ 46,448   $ 91,759   $138,207   $ 12,210    $150,417
                                     ========   ========   ========   ========    ========
</TABLE>


<TABLE>
<CAPTION>
                                                             1 9 9 6
                                     ---------------------------------------------------------
                                     Direct to   Retail     Total
                                     Consumers  Accounts     U.S.   International Consolidated
                                     ---------  --------     ----   --------------------------
<S>                                  <C>        <C>        <C>        <C>         <C>     
Net sales                            $197,463   $149,901   $347,364   $ 24,967    $372,331
                                     ========   ========   ========   ========    ========
  Direct operating income            $ 32,332   $ 31,322     63,654      2,990      66,644
                                     ========   ========                                  
U.S. corporate overhead
  Expenses                                                   29,676       --        29,676
Store closure charge                                          4,100       --         4,100
                                                           --------   --------    --------
  Operating income                                           29,878      2,990      32,868
Interest expense, net                                         1,322        115       1,437
                                                           --------   --------    --------
  Income before income taxes                               $ 28,556   $  2,875    $ 31,431
                                                           ========   ========    ========
</TABLE>




                                         Page 46 of 71

<PAGE>


                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

17.   Comprehensive Income:

The following table reflects comprehensive income as of December 31 (in
thousands):


                                               1998         1997         1996
                                               ----         ----         ----
Net income                                  $  14,263    $  21,664    $  19,050
                                            =========    =========    =========

Other comprehensive income (loss)
  Foreign currency translation adjustment         460       (1,390)        (841)
                                            ---------    ---------    ---------
Comprehensive income                        $  14,723    $  20,274    $  18,209
                                            =========    =========    =========



                                         Page 47 of 71


<PAGE>
Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE

         None.

                                    PART III

Certain information required by Part III is omitted from this Report in that the
Registrant will file a definitive proxy statement pursuant to Regulation 14A
(the "Proxy Statement") not later than 120 days after the end of the fiscal year
covered by this Report, and certain information included therein is incorporated
herein by reference. Only those sections of the Proxy Statement which
specifically address the items set forth herein are incorporated by reference.

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information concerning the Company's directors and executive officers
required by this Item is set forth in the Proxy Statement under the caption
"Directors" and in the Notes to the "Summary Compensation Table" under the
caption "Executive Compensation" and is incorporated herein by reference.

The information concerning compliance with section 16 of the Securities and
Exchange Act of 1934 required by this Item is set forth in the Proxy Statement
under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" and
is incorporated herein by reference.

Item 11. EXECUTIVE COMPENSATION

The information required by this Item is set forth in the Proxy Statement under
the caption "Executive Compensation" and is incorporated herein by reference.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT

The information required by this Item is set forth in the Proxy Statement under
the caption "Security Ownership of Certain Beneficial Owners and Management" and
is incorporated herein by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this Item is set forth in the Proxy Statement under
the caption "Compensation Committee Interlocks and Insider Participation" and
also under the caption "Certain Transactions" and is incorporated herein by
reference.

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

   (a)The following documents are filed as a part of this Report:

      (1)Financial Statements:

         Report of Independent Accountants
         Consolidated Balance Sheets at December 31, 1998 and 1997
         Consolidated Statements of Income For The Years Ended
           December 31, 1998, 1997 and 1996
         Consolidated Statements of Stockholders' Equity For The Years
           Ended December 31, 1998, 1997 and 1996

                                         Page 48 of 71
<PAGE>
         Consolidated Statements of Cash Flows For The Years Ended
           December 31, 1998, 1997 and 1996
         Notes to Consolidated Financial Statements

      (2)Financial Statement Schedules:

         The following financial statement schedule of Mikasa, Inc. and
         Subsidiaries for the years ended December 31, 1998, 1997 and 1996 is
         filed as part of this Report and should be read in conjunction with the
         Consolidated Financial Statements of Mikasa, Inc. and Subsidiaries.

      Schedule                                                    Page
      --------                                                    ----
         II    Valuation and Qualifying Accounts                   53

      Schedules not listed above have been omitted because they are not
      applicable or are not required or the information required to be set forth
      therein is included in the Consolidated Financial Statements or Notes
      thereto.

     (3) Exhibits:

         The Exhibits listed on the accompanying Index to Exhibits immediately
         following the financial statement schedules are filed as part of, or
         incorporated by reference into, this Report.

         Exhibit
            No.                           Description
            ---                           -----------
           * 3.1 -- Restated Certificate of Incorporation of Registrant
           * 3.2 -- By-laws of the Registrant
           * 4.1 -- Specimen certificate for shares of Common Stock of the
                    Registrant
             4.2 -- Note Purchase Agreements dated as of June 4, 1997 by and
                    among Mikasa, Inc., American Commercial, Incorporated and
                    various Noteholders with Notes issued thereunder,
                    incorporated by reference to exhibit 4.2 filed with the
                    Registrant's Form 10-Q filed May 14, 1997
             4.3 -- Amendment dated June 4, 1997 to Note Purchase Agreements
                    dated May 1, 1993 by and among Mikasa, Inc., American
                    Commercial, Incorporated and various Noteholders with Notes
                    issued thereunder, incorporated by reference to exhibit 4.3
                    filed with the Registrant's Form 10-Q filed November 14,
                    1997
           *10.2 -- Management Agreement dated December 31, 1992 by
                    and between American Commercial, Incorporated and Mikasa
                    Nagoya Holdings, Inc.
           *10.4 -- Partnership Agreement for Mikasa Europe Distribution GmbH &
                    Co. KG (German copy and English translation)
           *10.5 -- Note Purchase Agreements dated as of May 1, 1993 by and
                    among Mikasa, Inc., American Commercial, Incorporated and
                    various Noteholders with Notes issued pursuant thereto
           *10.6 -- Revolving Credit Agreement dated May 19, 1993 by and among
                    Mikasa, Inc., American Commercial, Incorporated, The First
                    National Bank of Boston and The Tokai Bank, Ltd. with Notes
                    issued pursuant thereto

                                         Page 49 of 71

<PAGE>
          Exhibit
            No.                           Description
            ---                           -----------
           10.7  -- Mikasa, Inc. Long-Term Incentive Plan (Amended and Restated
                    as of December 18, 1996) incorporated by reference to
                    exhibit 10.7 filed with the Registrant's Form 10-K filed
                    March 31, 1997
          *10.8  -- Lease between The Equitable Life Assurance Society of the
                    United States and American Commercial, Incorporated for the
                    lease of premises at 20633 South Fordyce Street, Long Beach,
                    California
          *10.10 -- Lease between Main Street Associates and Tabletop
                    Merchandisers, Inc. for lease of premises at 93-95 Main
                    Street, Flemington, New Jersey
         **10.12 -- Mikasa, Inc. Non-Employee Directors Stock Option Plan
           10.13 -- Stock Purchase Agreement dated August 6, 1996, between
                    Alfred J. Blake and Mikasa, Inc., incorporated by reference
                    to exhibit (c) (1) filed with the Registrant's Issuer Tender
                    Offer Statement on Schedule 13E-4 filed August 8, 1996
           10.14 -- Employment and Consulting Agreement dated August 6, 1996,
                    between Alfred J. Blake and American Commercial,
                    Incorporated and Mikasa, Inc., incorporated by reference to
                    exhibit (c) (2) filed with the Registrant's Issuer Tender
                    Offer Statement on Schedule 13E-4 filed August 8, 1996
           10.15 -- Mikasa, Inc. 1998 Long-Term Stock Incentive Plan
                    incorporated by reference to exhibit A filed with the
                    Registrant's Proxy Statement filed April 22, 1998
           10.16 -- Amendment dated May 29, 1998 to Revolving Credit Agreement
                    dated May 19, 1993 by and among Mikasa, Inc., American
                    Commercial, Incorporated, BankBoston and The Tokai Bank,
                    Ltd. With Notes issued pursuant thereto
           10.17 -- Amendment dated March 16, 1999 to Lease dated September 1,
                    1989 between Main Street Associates and Tabletop
                    Merchandisers, Inc. dba Mikasa Factory Store
           21.1  -- Subsidiaries of the Registrant
           23.1  -- Consent of PricewaterhouseCoopers LLP
           27    -- Financial Data Schedule
           99    -- Offer to Purchase, dated August 8, 1996, incorporated by
                    reference to exhibit (a) (1) filed with the Registrant's
                    Issuer Tender Offer Statement on Schedule 13E-4 filed August
                    8, 1996

      * Incorporated by reference to the exhibit filed with the Registrant's
      Registration Statement on Form S-1 (No. 33-76708) filed March 21, 1994 and
      amended on May 3, 1994 and May 24, 1994 as the same numbered exhibit,
      which Registration Statement became effective May 25, 1994.

      ** Incorporated by reference to the exhibit filed with the Registrant's
      Registration Statement on Form S-8 (No. 33-93936) filed June 23, 1995.

   (b)Reports on Form 8-K:

      No reports on Form 8-K were filed by the Company during the fiscal quarter
      ended December 31, 1998

                                         Page 50 of 71

<PAGE>


                                           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 on the 31st day of March
1999.


                                    MIKASA, INC.


                                    By:/s/ Raymond B. Dingman
                                       --------------------------
                                       Raymond B. Dingman
                                       President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on the 31st day of March 1999.


            Signature                                 Title(s)
            ---------                                 --------

/s/ Alfred J. Blake                  Chairman of the Board
---------------------------------
Alfred J. Blake

/s/ Raymond B. Dingman               President, Chief Executive Officer and
---------------------------------    Director (Principal Executive Officer)
Raymond B. Dingman                   

/s/ Brenda W. Flores                 Vice President, and Chief Financial Officer
---------------------------------   (Principal Financial and Accounting Officer)
Brenda W. Flores                    

/s/ George T. Aratani                Director
---------------------------------
George T. Aratani

/s/ Norman R. Higo                   Director
---------------------------------
Norman R. Higo

/s/ Joseph S. Muto                   Director
---------------------------------
Joseph S. Muto

/s/ Anthony F. Santarelli            Director
---------------------------------
Anthony F. Santarelli


                                         Page 51 of 71


<PAGE>


                               REPORT OF INDEPENDENT ACCOUNTANTS



To The Board of Directors and Stockholders
Mikasa, Inc.


Our report on the consolidated financial statements of Mikasa, Inc. and
Subsidiaries is included on page 26 of this Form 10-K. In connection with our
audits of such consolidated financial statements, we have also audited the
related consolidated financial statement schedule listed in the index on page 54
of this Form 10-K.

In our opinion, the consolidated financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.





PricewaterhouseCoopers LLP

Newport Beach, California
March 2, 1999

                                         Page 52 of 71


<PAGE>

<TABLE>
<CAPTION>


                        SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
                                         (In thousands)



                                                                 Additions
                                                    Balance at    Charged                Balance
                                                    Beginning     to Costs               at End of
             Description                            of Period       and      Deductions   Period
                                                                 Expenses
--------------------------------------              ---------   ---------    ----------  ---------
                                                                                 (a)
<S>                                                    <C>       <C>           <C>         <C>   
Year Ended December 31, 1996
Reserves deducted from assets to which they apply:
  Allowance for uncollectible accounts receivable      $  614    $  460        $  311      $  763

Year Ended December 31, 1997
Reserves deducted from assets to which they apply:
  Allowance for uncollectible accounts receivable      $  763    $  750        $  773      $  740

Year Ended December 31, 1998                             $740      $225          $175        $790
Reserves deducted from assets to which they apply:
  Allowances for uncollectible accounts receivable

<CAPTION>
</TABLE>


(a)  Accounts written off, net of recoveries


                                         Page 53 of 71


<PAGE>



                                          MIKASA, INC.
                                   Annual Report on Form 10-K
                                       December 31, 1998

                                       INDEX TO EXHIBITS


                                                                    Sequentially
Exhibit                                                                Numbered
  No.                           Description                              Page
  ---                           -----------                              ----

10.16 -- Amendment dated May 29, 1998 to Revolving Credit Agreement
         dated May 19, 1993 by and among Mikasa, Inc., American Commercial,
         Incorporated, BankBoston and The Tokai Bank, Ltd.
         With Notes issued pursuant thereto                                  55

10.17 -- Amendment dated March 16, 1999 to Lease dated September 1,
         1989 between Main Street Associates and Tabletop Merchandisers,
         Inc. dba Mikasa Factory Store                                       63

21.1 --  Subsidiaries of the Registrant                                      66

23.1 --  Consent of PricewaterhouseCoopers LLP                               70

27   --  Financial Data Schedule                                             71



                                         Page 54 of 71


<PAGE>

Exhibit 10.16

                         FIRST AMENDMENT AGREEMENT

      FIRST AMENDMENT AGREEMENT dated as of May 29, 1998 (this "Amendment") by
and among MIKASA, INC., a California corporation ("Mikasa"), AMERICAN COMMERCIAL
INCORPORATED (the "Borrower" and together with Mikasa, the "Obligors"),
BANKBOSTON, N.A., formerly known as The First National Bank of Boston ("BKB"),
THE TOKAI BANK, LTD. ("Tokai" and together with BKB, the "Banks"), and
BANKBOSTON, N.A., formerly known as The First National Bank of Boston, as agent
(the "Agent"), amending the Revolving Credit Agreement dated as of May 19, 1993
(as amended and in effect, the "Agreement") among the Obligors, the Banks and
the Agent.

      WHEREAS, the Company has requested that the Agent and the Banks amend
certain provisions of the Agreement; and

      WHEREAS, upon the terms and subject to the conditions contained herein,
the Agent and the Banks are willing to amend such provisions;

      NOW THEREFORE, in consideration of the mutual agreements contained in the
Agreement, the other Loan Documents and this Amendment and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:

      Section 1. AMENDMENT OF REFERENCES TO "FNBB". The Agreement is hereby
amended by deleting all references to "FNBB" contained therein and substituting
in lieu of each such reference the text "BKB".

      Section 2. AMENDMENT OF SECTION 1 OF THE AGREEMENT. Section 1 of the
Agreement is hereby amended by inserting the following new definitions in the
places required by alphabetical order:

      "NEW NOTE PURCHASE AGREEMENT. The several Note Purchase Agreements dated
June 4, 1997 pursuant to which Mikasa and the Borrower issued $60,000,000 of
7.38% Senior Notes due June 4, 2007 to the purchasers thereof, in the form
delivered to the Agent and the Banks prior to May 29, 1998."

      "TOTAL SUBSIDIARY DEBT/PREFERRED STOCK:  At any time, the aggregate amount
of Total Domestic Subsidiary/Preferred Stock PLUS the aggregate amount of Total
Foreign Subsidiary Debt/Preferred Stock."

      Section 3.  AMENDMENT OF SECTION 2.6 OF THE AGREEMENT.  Section 2.6 of the
Agreement is hereby amended by inserting, at the end thereof, the following
text: "In connection with the joint and several liability which each of the


                                    1

                                 Page 55 of 71
<PAGE>


Co-Debtors is accepting pursuant to this Section 2.6, each of the Co-Debtors
hereby waives any and all suretyship and like defenses which might otherwise be
available to it, whether as a secondary obligor or otherwise."

      Section 4. AMENDMENT OF SECTION 9(A)(VII) OF THE AGREEMENT. Section
9(a)(vii) of the Agreement is hereby deleted in its entirety, and the following
new subparagraph (vii) is hereby substituted in lieu thereof:

      "(vii) comply in all material respects with its covenants and agreements
contained in Section 7 of the Note Purchase Agreement (as amended from time to
time) unless compliance is waived thereunder and Sections 9 and 10 of the New
Note Purchase Agreement (as amended from time to time) unless compliance is
waived thereunder; and".

      Section 5.  AMENDMENTS OF 9(B) OF THE AGREEMENT.  Section 9(b) of the
Agreement is hereby amended by:

                  (a) deleting subparagraph (i) thereof in its entirety and
      substituting in lieu thereof the following text:

                  "(i) (A) create, incur, issue, guarantee, assume or otherwise
            become liable for any Indebtedness other than (1) Indebtedness of
            Mikasa or the Borrower, PROVIDED THAT at the time of incurrence
            thereof no Default or Event of Default has then occurred and is
            continuing or would result from such incurrence, (2) Indebtedness of
            the Borrower's Subsidiaries (whether Domestic Subsidiaries or
            Foreign Subsidiaries) to Persons other than Mikasa or any of its
            Subsidiaries; PROVIDED THAT (x) immediately after giving effect
            thereto, Total Subsidiary Debt/Preferred Stock does not exceed
            twelve percent (12%) of Consolidated Net Worth at such time and (y)
            no Default or Event of Default has occurred and is then continuing
            or would result from the incurrence of such Indebtedness, and (3)
            Indebtedness of the Borrower's Subsidiaries to Mikasa or any of its
            Subsidiaries; or

                      (B) permit any of the Borrower's Subsidiaries (whether
            Domestic Subsidiaries or Foreign Subsidiaries) to issue any
            preferred stock unless (1) such preferred stock is to be held by
            Mikasa, the Borrower or a wholly-owned Subsidiary of the Borrower or
            (2) such preferred stock constitutes preferred stock which is not
            convertible into Voting Stock and which is to be held by Persons
            other than Mikasa, the Borrower or a wholly-owned Subsidiary of the
            Borrower and (x) after giving effect to the issuance of such
            nonconvertible preferred stock, Total Subsidiary Debt/Preferred
            Stock shall not exceed twelve percent (12%) of Consolidated Net



                                    2

                                 Page 56 of 71
<PAGE>



            Worth at such time and (y) immediately prior to and immediately 
            after the consummation of such transaction, and after giving effect
            thereto, no Default or Event of Default exists or would exist.

            In connection with the foregoing, Mikasa and the Borrower agree as
      follows:

            If Mikasa, the Borrower or any of their subsidiaries shall sell or
      otherwise dispose of any Indebtedness of any Subsidiary or any preferred
      stock of any Subsidiary to any Person other than to Mikasa, the Borrower
      or a wholly-owned Subsidiary of the Borrower, such Indebtedness or such
      preferred stock shall be deemed, for purposes of this Section 9(b), to
      have been issued at such time and such sale or other disposition shall not
      be consummated if it shall breach any of the requirements of this Section
      9(b). Except as permitted under Section 9(b) hereof, Mikasa and the
      Borrower will not, and neither of them will permit any of their
      Subsidiaries to, sell or otherwise dispose of any Indebtedness or
      preferred stock of any such Subsidiary to any Person other than to Mikasa,
      the Borrower or a wholly owned Subsidiary of the Borrower. Furthermore,
      anything contained herein to the contrary notwithstanding, neither Mikasa
      nor the Borrower shall permit MLI to incur any Indebtedness or issue any
      preferred stock except (i) Indebtedness owing to, or preferred stock to be
      owned by, the Borrower (which Indebtedness or preferred stock the Borrower
      will not transfer or otherwise dispose of) and (ii) other unsecured
      Indebtedness necessary for the operation of MLI's retail sales business in
      Nevada in an aggregate amount not to exceed One Hundred Thousand Dollars
      ($100,000) at any time."

                  (b) deleting clause (H) of subparagraph (iii) thereof in its
      entirety and substituting in lieu thereof the text "intentionally
      omitted;"

                  (c) deleting clause (I) of subparagraph (iii) thereof in its
      entirety and substituting in lieu thereof the text "intentionally
      omitted"; and

                  (d) deleting from clause (K) of subparagraph (iii) thereof the
      text "ten percent (10%)" and substituting in lieu thereof the text "twelve
      percent (12%)";

                  (e) deleting clause (A) of subparagraph (iv) thereof in its
      entirety and substituting in lieu thereof the following text:

                              (A) "distributions by Mikasa in respect of its
                  capital stock and immediately after giving effect thereto,



                                    3

                                 Page 57 of 71
<PAGE>


                  (I) the aggregate amount of all distributions (other than the
            distributions referred to in clause (E) and clause (F) below) made
            or authorized after January 1, 1997 does not exceed the sum of-

                        (1) sixty-five percent (65%) of the aggregate
            Consolidated Net Income (or, in case such aggregate Consolidated Net
            Income shall be a deficit, MINUS one hundred percent 100% of such
            deficit) for the period commencing on January 1, 1997 and ending on
            the date such distribution is to be made; PLUS

                        (2)   $35,000,000; and

                  (II) no Default or Event of Default then exists or would
            result therefrom;"

                  (f) deleting the text of clauses (B), (C) and (D) of
      subparagraph (iv) thereof and substituting in lieu thereof, in each such
      clause, the text "intentionally omitted;".

      Section 6.  AMENDMENTS OF SECTION 9(C) OF THE AGREEMENT.  Section 9(c) of
the Agreement is hereby amended by:

                  (a) deleting the text "they will not:" at the end of the
      introductory text thereto and substituting in lieu thereof the text "they
      will not do any of the following:";

                  (b) inserting, at the end of subparagraph (ii) thereof, the
      text "or";

                  (c) (i) deleting the dollar amount "$70,000,000" from clause
      (A) of subparagraph (iii) thereof and substituting in lieu thereof the
      dollar amount "$140,000,000"; (ii) deleting the text "the Closing Date"
      from clause (B) of subparagraph (iii) thereof and substituting in lieu
      thereof the text "December 31, 1996"; and (iii) deleting the text "; or"
      at the end of subparagraph (iii) thereof and substituting in lieu thereof
      a period ("."); and

                  (d) deleting subparagraph (iv) thereof in its entirety.

      Section 7. AMENDMENT OF SECTION 10(E) OF THE AGREEMENT. Section 10(e) of
the Agreement is hereby deleted in its entirety, and the following new
subparagraph (e) is hereby substituted in lieu thereof:



                                    4

                                 Page 58 of 71
<PAGE>



            "(e) The Borrower or any of its Subsidiaries shall be in default
      under the Note Purchase Agreement, the New Note Purchase Agreement or any
      other agreement or agreements evidencing Indebtedness owing to any Bank or
      any affiliate of any Bank or in excess of $2,000,000 in aggregate
      principal amount, or shall fail to pay such Indebtedness when due, or
      within any applicable period of grace;".

      Section 8. AMENDMENT OF SECTION 14.2 OF THE AGREEMENT. Section 14.2 of the
Agreement is hereby amended by inserting, in clause (b) of the fourth sentence
thereof, immediately after the text "which is shown with its signature below 
("and immediately before the text "unless such party has...", the text "or, in 
the case of any Bank, its address set forth on SCHEDULE 1-A hereto or".

      Section 9. AMENDMENT OF SCHEDULE 1-A TO THE AGREEMENT. SCHEDULE 1-A to the
Agreement is hereby amended by deleted in its entirety and SCHEDULE 1-A attached
hereto is hereby substituted in lieu thereof.

      Section 10. CONDITIONS TO EFFECTIVENESS. This Amendment shall be deemed to
be effective as of May 29, 1998 (the "Effective Date") upon the Agent's receipt
on or before July 1, 1998, of facsimile copies of original counterparts (to be
followed promptly by original counterparts) or original counterparts of this
Amendment, duly executed by each of the Obligors, the Agent and the Banks.

      Section 11.  REPRESENTATIONS AND WARRANTIES; NO DEFAULT; AUTHORIZATION.
Each of the Obligors hereby represents and warrants to each of the Agent and the
Banks as follows:

                  (a) Each of the representations and warranties of each of the
      Obligors contained in the Agreement, the other Loan Documents or in any
      document or instrument delivered pursuant to or in connection with the
      Agreement, the other Loan Documents or this Amendment was true as of the
      date as of which it was made, and no Default or Event of Default has
      occurred and is continuing as of the date of this Amendment; and

                  (b) This Amendment has been duly authorized, executed and
      delivered by each of the Obligors, and shall be in full force and effect
      upon the satisfaction of the conditions set forth in Section 10 hereof,
      and the agreements of each of the Obligors, contained herein, in the
      Agreement, as herein or heretofore amended, or in the other Loan
      Documents, as heretofore amended, respectively constitute the legal, valid
      and binding obligations of each Obligor, party hereto or thereto,
      enforceable against such Obligor in accordance with their respective
      terms.




                                    5

                                 Page 59 of 71
<PAGE>



      Section 12. RATIFICATION, ETC. Except as expressly amended hereby, the
Agreement, the other Loan Documents and all documents, instruments and
agreements related thereto are hereby ratified and confirmed in an respects and
shall continue in full force and effect. All references in the Agreement or such
other Loan Documents or in any related agreement or instrument to the Agreement
or such other Loan Documents shall hereafter refer to such agreements as amended
hereby, pursuant to the provisions of the Agreement.

      Section 13. NO IMPLIED WAIVER, ETC. Except as expressly provided herein,
nothing contained herein shall constitute a waiver of, impair or otherwise
affect any of the Obligations, any other obligations of either Obligor or any
right of the Agent or the Banks consequent thereon. The waivers and consents
provided herein are limited strictly to their terms. Neither the Agent nor
either of the Banks shall have any obligation to issue any further waiver or
consent with respect to the subject matter hereof or any other matter.

       Section 14.  COUNTERPARTS.  This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but which together shall
constitute one and the same instrument.

       Section 15.  GOVERNING LAW.  THIS AMENDMENT SHALL FOR ALL PURPOSES BE 
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA
(WITHOUT REFERENCE TO CHOICE OR CONFLICTS OF LAWS).

       IN WITNESS WHEREOF, the parties hereto have executed this Amendment as a
document under seal as of the date first above written.

                           BANKBOSTON, N.A., formerly known as
                           The First National Bank of Boston, individually and
                           as Agent


                           By: /s/
                              ---------------------------------------
                              Title: Director


                           THE TOKAI BANK, LIMITED


                           By: /s/
                              ---------------------------------------
                              Title: Senior Vice President and
                                     Assistant General Manager





                                    6

                                 Page 60 of 71
<PAGE>




                           MIKASA, INC.


                           By: /s/
                              ---------------------------------------
                              Title: Vice President and Chief Financial Officer

                           By: /s/
                              ---------------------------------------
                              Title: Secretary and General Counsel


                           AMERICAN COMMERCIAL, INCORPORATED


                           By:
                              ---------------------------------------
                              Title:



                           AMERICAN COMMERCIAL, INCORPORATED


                           By: /s/
                              ---------------------------------------
                              Title: Vice President and Chief Financial Officer

                           By: /s/
                              ---------------------------------------
                              Title: Secretary and General Counsel







                                    7

                                 Page 61 of 71
<PAGE>



                               SCHEDULE 1A

BANK                         COMMITMENT AMOUNT    COMMITMENT PERCENTAGE
----                         -----------------    ---------------------
Bank Boston, N.A.              $30,000,000                60%
100 Federal Street
Mail Code: 01-09-05
Boston, MA 02110
Attn: Nancy E. Fuller

The Tokai Bank,                $20,000,000                40%
Limited
300 South Grand
Avenue, 7th Floor
Los Angeles, CA 90071
Attn: Allen Sasaki





                                    8


                                 Page 62 of 71
<PAGE>

Exhibit 10.17

                             AMENDMENT TO LEASE


                               March 16, 1999


Tabletop Merchandisers, Inc.
20633 South Fordyce Avenue
Long Beach, CA  90810

Attn: Joseph S. Muto
      Secretary and General Counsel


Re:   Lease dated September 1, 1989 (the "Lease"), between Main Street
      Associates ("Landlord") and Tabletop Merchandisers, Inc. dba
      Mikasa Factory Store ("Tenant"), concerning a 9600 square foot
      building located at 93-95 Main Street, Flemington, NJ, with
      Guaranty by American Commercial, Incorporated ("Guarantor").

Gentlemen:

For good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, Landlord, Tenant and Guarantor agree to and do hereby amend
the Lease in the following respects:

      1.    Term: Notwithstanding that the Term of the Lease is scheduled to
            expire on August 31, 1999, Landlord, Tenant and Guarantor agree that
            the Term of the Lease is hereby extended for a period of ten (10)
            years to and shall expire on August 31, 2009 ("Extended Term").

      2.    Base Rent During Extended Term: Commencing as of September 1, 1999
            and continuing through the Extended Term, Tenant shall pay to
            Landlord annual Base Rent in an amount equal to One Hundred Seventy
            Two Thousand Eight Hundred Dollars ($172,800.00), or Fourteen
            Thousand Four Hundred Dollars ($14,400.00) per month, which Base
            Rent shall be payable in accordance with the terms of Section 3.1 of
            the Lease. Provided further that the Base Rent shall be increased by
            three per cent (3%) on September 1, 2000 and each yearly anniversary
            thereafter. In connection therewith, Landlord and Tenant agree that
            (i) Section 3.3 of the Lease shall be of no force and effect during
            the Extended Term, and


                                 Page 63 of 71
<PAGE>


Tabletop Merchandisers, Inc.
March 16, 1999
Page 2


            (ii) Tenant shall continue to pay additional rent and other sums
            payable by Tenant pursuant to the terms of the Lease.

Except as expressly set forth in this Amendment, all defined terms herein shall
have the respective meanings as set forth in the Lease and the terms and
provisions of the Lease, as amended by this Amendment, and Guaranty shall be and
remain in full force and effect.

                                        Yours truly,

                                        "Landlord"
                                        Main Street Associates,
                                        a New Jersey partnership


                                        By: /s/ Anthony F. Santarelli
                                            -------------------------------
                                                Anthony F. Santarelli
                                        Title:  General Partner

The Foregoing is Accepted and Agreed To This 16 day of March, 1999:

                                        "Tenant"
                                        Tabletop Merchandisers, Inc.,
                                        a Delaware corporation


                                        By: /s/ Joseph S. Muto
                                            --------------------------------
                                                Joseph S. Muto
                                        Title:  Secretary




                                 Page 64 of 71
<PAGE>


Tabletop Merchandisers, Inc.
March 16, 1999
Page 3

                                        "Guarantor"
                                        American Commercial, Incorporated,
                                        a California corporation


                                        By: /s/ Joseph S. Muto
                                            --------------------------------
                                                Joseph S. Muto
                                        Title:  Secretary





                                 Page 65 of 71
<PAGE>
Exhibit 21.1
<TABLE>
<CAPTION>

                                                  Dated as of December 31, 1998
                                                  -----------------------------

                                  SUBSIDIARIES OF MIKASA, INC.

                                                          Percentage
                                                          of Voting            Names Under
                              State of       States of       Stock         Which Subsidiaries
        Company            Incorporation  Qualification  (Securities)         Do Business
=======================    =============  ============= ================== ====================
<S>                         <C>    <C>    <C>           <C>               <C>   
American Commercial,        California    New Jersey,   100% owned by      Mikasa
Incorporated ("ACI")                      New York      Mikasa, Inc.       Mikasa Factory Store
                                                                           Studio Nova
                                                                           Christopher Stuart
                                                                           Home Beautiful
-----------------------    -------------  ------------- ------------------ --------------------
                                      SUBSIDIARIES OF ACI

Dinnerware Plus, (AL) Inc.  Delaware      Alabama       100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    -------------  ------------- ------------------ --------------------
Dinnerware Plus, (AZ) Inc.  Delaware      Arizona       100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    -------------  ------------- ------------------ --------------------
Dinnerware Plus, (CA) Inc.  Delaware      California    100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    -------------  ------------- ------------------ --------------------
Dinnerware Plus, (CO) Inc.  Delaware      Colorado      100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    -------------  ------------- ------------------ --------------------
Dinnerware Plus, (CT) Inc.  Delaware      Connecticut   100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    -------------  ------------- ------------------ --------------------
Dinnerware Plus, (DE) Inc.  Delaware      Delaware      100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    -------------  ------------- ------------------ --------------------
Dinnerware Plus, (GA) Inc.  Delaware      Georgia       100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    -------------  ------------- ------------------ --------------------
Dinnerware Plus, (HI) Inc.  Delaware      Hawaii        100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    -------------  ------------- ------------------ --------------------
Dinnerware Plus, (ID) Inc.  Delaware      Idaho         100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    -------------  ------------- ------------------ --------------------
Dinnerware Plus, (IA) Inc.  Delaware      Iowa          100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    -------------  ------------- ------------------ --------------------
Dinnerware Plus, (IL) Inc.  Delaware      Illinois      100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    -------------  ------------- ------------------ --------------------
Dinnerware Plus, (IN) Inc.  Delaware      Indiana       100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    -------------  ------------- ------------------ --------------------


                                 Page 66 of 71
<PAGE>

                                                          Percentage
                                                          of Voting            Names Under
                              State of       States of       Stock         Which Subsidiaries
        Company            Incorporation  Qualification  (Securities)         Do Business
=======================    =============  ============= ================== ====================
Dinnerware Plus, (KS) Inc.  Delaware      Kansas        100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    -------------  ------------- ------------------ --------------------
Dinnerware Plus, (KY) Inc.  Delaware      Kentucky      100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    -------------  ------------- ------------------ --------------------
Dinnerware Plus, (LA) Inc.  Delaware      Louisiana     100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    -------------  ------------- ------------------ --------------------
Dinnerware Plus, (MA) Inc.  Delaware      Massachusetts 100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    -------------  ------------- ------------------ --------------------
Dinnerware Plus, (Maine)    Delaware      Maine         100% owned by ACI  Mikasa
Inc.                                                                       Mikasa Factory Store
-----------------------    -------------  ------------- ------------------ --------------------
Dinnerware Plus, (MD) Inc.  Delaware      Maryland      100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    -------------  ------------- ------------------ --------------------
Dinnerware Plus, (Missouri) Delaware      Missouri      100% owned by ACI  Mikasa
Inc.                                                                       Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Dinnerware Plus, (MI) Inc.  Delaware      Michigan      100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Dinnerware Plus, (MN) Inc.  Delaware      Minnesota     100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Dinnerware Plus, (MS) Inc.  Delaware      Mississippi   100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Dinnerware Plus, (N.C.) Inc.Delaware      North         100% owned by ACI  Mikasa
Inc.                                      Carolina                         Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Dinnerware Plus, (NE) Inc.  Delaware      Nebraska      100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Dinnerware Plus, (NH) Inc.  Delaware      New           100% owned by ACI  Mikasa
                                          Hampshire                        Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Dinnerware Plus, (NM) Inc.  Delaware      New Mexico    100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Dinnerware Plus, (NV) Inc.  Delaware      Nevada        100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Dinnerware Plus, (OH) Inc.  Delaware      Ohio          100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Dinnerware Plus, (OK) Inc.  Delaware      Oklahoma      100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------


                                         Page 67 of 71


<PAGE>
                                                          Percentage
                                                          of Voting            Names Under
                              State of       States of       Stock         Which Subsidiaries
        Company            Incorporation  Qualification  (Securities)         Do Business
=======================    =============  ============= ================== ====================
Dinnerware Plus, (OR) Inc.  Delaware      Oregon        100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Dinnerware Plus, (RI) Inc.  Delaware      Rhode         100% owned by ACI  Mikasa
                                          Island                           Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Dinnerware Plus, (SC) Inc.  Delaware      South         100% owned by ACI  Mikasa
                                          Carolina                         Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Dinnerware Plus, (Texas)    Delaware      Texas         100% owned by ACI  Mikasa
Inc.                                                                       Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Dinnerware Plus, (TN) Inc.  Delaware      Tennessee     100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Dinnerware Plus, (UT) Inc.  Delaware      Utah          100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Dinnerware Plus, (VA) Inc.  Delaware      Virginia      100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Dinnerware Plus, (VT) Inc.  Delaware      Vermont       100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Dinnerware Plus, (WA) Inc.  Delaware      Washington    100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Dinnerware Plus, (WI) Inc.  Delaware      Wisconsin     100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Christopher Stuart          Delaware      California,   100% owned by ACI  Mikasa
Galleries, Inc.                           New Jersey                       Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Houseware Merchandisers,    Delaware      Florida,      100% owned by ACI  Mikasa
Inc.                                      Pennsylvania                     Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Tabletop Merchandisers      Delaware      Texas         100% owned by ACI  Mikasa
(Texas), Inc.
-----------------------    ------------- ------------- ------------------ ---------------------
Mikasa Licensing, Inc.      Delaware      Nevada        100% owned by ACI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
Mikasa (CA), Inc.           California    None          100% owned by ACI
-----------------------    ------------- ------------- ------------------ ---------------------
Sinvalco Associates, Inc.   Delaware      None          100% owned by ACI
-----------------------    ------------- ------------- ------------------ ---------------------
Tabletop Merchandisers,     Delaware      New Jersey    100% owned by ACI  Mikasa
Inc. ("TMI")                                                               Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------




                                         Page 68 of 71

<PAGE>
                                                          Percentage
                                                          of Voting            Names Under
                              State of       States of       Stock         Which Subsidiaries
        Company            Incorporation  Qualification  (Securities)         Do Business
=======================    =============  ============= ================== ====================
Mikasa Nagoya Holdings,     Delaware      None          100% owned by ACI
Inc. ("MNHI")
-----------------------    ------------- ------------- ------------------ ---------------------
Mikasa International, Inc.  Delaware      None          100% owned by ACI  Mikasa
("MII")
-----------------------    ------------- ------------- ------------------ ---------------------
                                       SUBSIDIARY OF TMI

Dinnerware Plus, (NY) Inc.  Delaware      New York      100% owned by      Mikasa
                                                        TMI                Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
                                       SUBSIDIARY OF MNHI

Mikasa Corporation          Japan         None          100% owned by      Mikasa
                                                        MNHI
-----------------------    ------------- ------------- ------------------ ---------------------
                                      SUBSIDIARIES OF MII

Mikasa Europe, Inc.         Delaware      None          100% owned by MII  Mikasa
-----------------------    ------------- ------------- ------------------ ---------------------
Table Fashions              Delaware      None          100% owned by MII  Mikasa
International, Inc.
-----------------------    ------------- ------------- ------------------ ---------------------
Mikasa (Canada), Inc.       Canada        None          100% owned by MII  Mikasa
("MCI")                                                                    Studio Nova
                                                                           Christopher Stuart
                                                                           Home Beautiful
-----------------------    ------------- ------------- ------------------ ---------------------
Dinnerware Plus (PR), Inc.  Puerto Rico   None          100% owned by Mll  Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
                                       SUBSIDIARY OF MCI

Dinnerware Plus (ON), Inc.  Canada        None          100% owned by MCI  Mikasa
                                                                           Mikasa Factory Store
-----------------------    ------------- ------------- ------------------ ---------------------
                                       AFFILIATES OF ACI

Mikasa Europe Distribution  Germany       None          66-2/3%            Mikasa
GmbH ("MED")
-----------------------    ------------- ------------- ------------------ ---------------------
Mikasa Europe Distribution  Germany       None          66-2/3% (including Mikasa
GmnH & Co. KG (limited                                  indirect ownership
partnership)                                            through MED)
-----------------------    ------------- ------------- ------------------ ---------------------
</TABLE>




                                         Page 69 of 71
<PAGE>


Exhibit 23.1
                               CONSENT OF INDEPENDENT ACCOUNTANTS





We consent to the incorporation by reference in the registration statements of
Mikasa, Inc. and subsidiaries on Form S-8 (File No. 33-93936) and Form S-8 (No.
33-83250) of our reports dated March 2, 1998 on our audits of the consolidated
financial statements of Mikasa, Inc. and subsidiaries as of December 31, 1998
and 1997 and for each of the three years in the period ended December 31, 1998,
which report is included in this Annual Report on Form 10-K.





PricewaterhouseCoopers LLP

Newport Beach, California
March 29, 1999



                                         70 of 71