UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549  Form
10-Q  (X)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934  For
the quarterly period ended September 30, 2009 or  (
 )  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934  Commission File Number 1-13082  KENNETH COLE PRODUCTIONS, INC. (Exact name of registrant as specified in its charter)  New York
13-3131650(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)  603 West 50th Street, New York, NY
10019(Address of principal executive offices)
(Zip Code)  (212)
265-1500 (Registrants telephone number, including area code)  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 whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit
and post such files).  Yes ( ) No ( )  Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company.  See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule
12b-2 of the Exchange Act.  Large accelerated filer ( )
  Accelerated filer (X) Non-accelerated filer ( ) (Do not check if a
smaller reporting company) Smaller reporting company ( ).  Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 Yes ( ) No (X)  Indicate the number of shares outstanding
of each of the issuers classes of common stock, as of the latest practicable
date:  Class
November 4, 2009Class A Common Stock ($.01 par
value)
10,077,732Class B Common Stock ($.01 par
value)
8,010,497     Kenneth Cole Productions, Inc. Index
to Form 10-Q  Part
I.
FINANCIAL
INFORMATIONItem
1.
Financial
Statements (Unaudited)Condensed Consolidated Balance
Sheets as of September 30, 2009 and
December
31, 2008
3Condensed
Consolidated Statements of Operations for the three and nine months ended September 30, 2009 and 2008
5Condensed
Consolidated Statement
of Changes in Shareholders Equity
for
the nine months ended September 30,
2009
6Condensed
Consolidated
Statements of Cash Flows for the nine months  ended September 30,
2009 and 2008
7Notes
to Condensed Consolidated Financial Statements
8Item
2.
Managements
Discussion and Analysis of Financial Condition and
Results
of Operations
16Item
3.
Quantitative
and Qualitative Disclosures about Market Risk
23Item
4.
Controls
and Procedures
23Part
II.
OTHER
INFORMATIONItem
1.
Legal
Proceedings
24Item
1A.
Risk
Factors
24Item
2.
Unregistered
Sales of Equity Securities and Use of Proceeds
24Item
3.
Defaults
Upon Senior Securities
24Item
4.
Submission
of Matters to a Vote of Security Holders
24Item
5.
Other
Information
24Item
6.
Exhibits
24Signatures
25   2       Part I. FINANCIAL
INFORMATION  Item 1.
 Financial Statements     Kenneth
Cole Productions, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited)   September 30,
2009
December 31,
2008AssetsCurrent
assets:Cash
and cash equivalents
$
50,036,000
$
64,704,000Due
from factors
1,610,000
9,190,000Accounts
receivable, net
39,081,000
32,018,000Inventories,
net
36,397,000
43,342,000Prepaid
expenses and other current assets
5,026,000
2,738,000Deferred
taxes, net
4,889,000
5,645,000Total
current assets
137,039,000
157,637,000Property
and equipment, at cost, less accumulateddepreciation
and amortization
61,374,000
57,790,000  Other
assets:Intangible
assets, net
20,228,000
19,842,000Deferred
taxes, net
38,381,000
33,541,000Investments
and other
8,220,000
7,280,000Deferred
compensation plans assets
40,819,000
37,345,000Total
other assets
107,648,000
98,008,000Total
Assets
$306,061,000
$313,435,000    See
accompanying notes to condensed consolidated financial statements.   3     Kenneth
Cole Productions, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (continued) (Unaudited)  September 30,
2009
December 31,
2008Liabilities
and Shareholders EquityCurrent
liabilities:Accounts
payable and accrued expenses
$
44,869,000
$
42,935,000Other
current liabilities
6,734,000
11,669,000Deferred
income
4,144,000
5,512,000Total
current liabilities
55,747,000
60,116,000Accrued
rent and other long-term liabilities
17,577,000
17,842,000Deferred
compensation plans liabilities
39,060,000
35,715,000Commitments
and contingenciesShareholders
Equity:Series
A Convertible Preferred Stock, par value
$1.00,
1,000,000 shares authorized,
none
outstanding
--
--Class
A Common Stock, par value $.01,
40,000,000
shares authorized; 15,863,749
and
15,726,672 issued as of September 30, 2009 and December 31, 2008,
respectively
159,000
157,000Class
B Convertible Common Stock, par value $.01,
9,000,000
shares authorized; 8,010,497 issued
and
outstanding as of September 30, 2009
and
December 31, 2008, respectively
80,000
80,000Additional
paid-in capital
107,088,000
103,318,000Accumulated
other comprehensive (loss)/income
(24,000)
650,000Retained
earnings
211,295,000
220,478,000318,598,000
324,683,000Class
A Common Stock in treasury, at cost,  5,855,550 shares as of
September 30, 2009 and December 31, 2008, respectively
(124,921,000)
(124,921,000)Total
shareholders equity
193,677,000
199,762,000Total
Liabilities and Shareholders Equity
$306,061,000
$313,435,000   See
accompanying notes to condensed consolidated financial statements.  4      Kenneth
Cole Productions, Inc. and Subsidiaries  Condensed Consolidated Statements of Operations (Unaudited)   Three Months Ended
September 30,
Nine Months Ended
September
30,2009
2008

2009
2008Net
sales
$ 93,336,000
$120,161,000

$272,458,000
$333,669,000Royalty
revenue
10,416,000
11,947,000

28,569,000
32,087,000Net
revenues
103,752,000
132,108,000

301,027,000
365,756,000Cost
of goods sold
58,871,000
77,757,000

181,261,000
215,134,000Gross
profit
44,881,000
54,351,000

119,766,000
150,622,000Selling,
general and administrative expenses
44,595,000
51,896,000

137,233,000
150,113,000Operating
income/(loss)
286,000
2,455,000

(17,467,000)
509,000Interest
income, net
94,000
395,000

414,000
1,637,000Impairment
of investments
(287,000)
(3,282,000)

(727,000)
(4,114,000)Income/(loss)
before (benefit from)/provision for income taxes
93,000
(432,000)

(17,780,000)
(1,968,000)(Benefit
from)/provision for income taxes
(93,000)
1,122,000

(6,532,000)
831,000Net
income/(loss)
$    186,000
$
(1,554,000)

$(11,248,000)
$(2,799,000)Earnings/(loss)
per share:Basic
$0.01
$(0.09)

$(0.63)
$(0.15)Diluted
$0.01
$(0.09)

$(0.63)
$(0.15)Dividends
declared per
share
--
$0.09

--
$0.27Shares
used to compute earnings/(loss) per share:Basic
18,018,000
17,903,000

17,954,000
18,604,000Diluted
18,423,000
17,903,000

17,954,000
18,604,000     See
accompanying notes to condensed consolidated financial statements.  5


Kenneth
Cole Productions, Inc. and Subsidiaries  Condensed Consolidated Statement of Changes in Shareholders
Equity (Unaudited)   Class A
Common Stock
Class B
Common Stock
Additional
Accumulated
Other

Treasury StockNumber
of
shares
Amount
Number
of
shares
Amount
Paid-in
Capital
Comprehensive
Income/(Loss)
Retained
Earnings
Number of
Shares
Amount
TotalShareholders
equity
January
1, 2009
15,726,672
$157,000
8,010,497
$80,000
$103,318,000
$650,000
$220,478,000
(5,855,550)
$(124,921,000)
$199,762,000Adjustment
for non-credit component of impaired securities





(2,298,000)
2,298,000


--Net loss






(11,248,000)


(11,248,000)Translation
adjustment for foreign currency, net of taxes of $(206,000)





355,000



355,000Unrealized
gain on available-for-sale securities, net of taxes of $(225,000)





1,269,000



1,269,000Comprehensive
loss









(9,624,000)Stock-based
compensation expense




5,263,000




5,263,000Issuance
of restricted stock and related tax benefits
185,969
2,000


(1,142,000)




(1,140,000)Shares
surrendered by employees to pay taxes on restricted stock
(69,704)



(472,000)




(472,000)Issuance
of Class A Common Stock from Employee Stock Purchase Plan
20,812



121,000




121,000Prior
year dividends associated with vesting of restricted stock






(233,000)


(233,000)Shareholders
equity
September
30, 2009
15,863,749
$159,000
8,010,497
$80,000
$107,088,000
$(24,000)
$211,295,000
(5,855,550)
$(124,921,000)
$193,677,000 See
accompanying notes to condensed consolidated financial statements.   6    Kenneth Cole
Productions, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited) Nine
Months Ended
September 30,2009
2008Cash
flows used in operating activitiesNet
loss
$(11,248,000)
$(2,799,000)Adjustments
to reconcile net loss to net cash used in operating activities:Depreciation
and amortization
7,173,000
6,892,000Provision
for doubtful accounts
527,000
250,000Benefit
from deferred taxes
(6,417,000)
(971,000)Unrealized
gain from available-for-sale securities
(1,494,000)
(296,000)Writedown
of investments
727,000
4,114,000Stock-based
compensation expense
5,270,000
3,745,000Tax
benefit from stock option exercises and restricted stock vestings
(485,000)
(917,000)Changes
in operating assets and liabilities:Decrease/(increase)
in due from factors
7,580,000
(6,410,000)Increase
in accounts receivable
(7,590,000)
(1,851,000)Decrease/(increase)
in inventories
6,945,000
(8,454,000)Increase
in prepaid expenses and other current assets
(2,943,000)
(1,281,000)Decrease
in other assets
669,000
2,549,000Increase
in accounts payable and accrued expenses
1,934,000
5,368,000Decrease
in deferred income and other current liabilities
(6,032,000)
(278,000)Increase
in income taxes payable
--
39,000Increase/(decrease)
in other long-term liabilities
3,080,000
(556,000)Net
cash used in operating activities
(2,304,000)
(856,000)Cash
flows used in investing activitiesAcquisition
of property and equipment
(10,493,000)
(5,246,000)Purchase
of intangible assets
(640,000)
(3,387,000)Net
cash used in investing activities
(11,133,000)
(8,633,000)Cash
flows used in financing activitiesShares
surrendered by employees to pay taxes on restricted stock
(472,000)
(774,000)Excess tax
benefit from stock options
--
8,000Proceeds
from exercise of stock options
--
63,000Proceeds
from employee stock purchase plan
121,000
169,000Payments
of financing costs
(724,000)
--Acquisition
of treasury shares
--
(24,376,000)Prior
year dividends associated with vesting of restricted stock
(233,000)
(163,000)Dividends
paid to shareholders
--
(5,053,000)Net
cash used in financing activities
(1,308,000)
(30,126,000)Effect
of exchange rate changes on cash
77,000
(46,000)Net
decrease in cash
(14,668,000)
(39,661,000)Cash
and cash equivalents, beginning of period
64,704,000
90,653,000Cash
and cash equivalents, end of period
$
50,036,000
$
50,992,000Supplemental
disclosures of cash flow informationCash
paid during the period for:Interest
$
      30,000
$
      30,000Income
taxes, net
$
 1,664,000
$
 3,628,000 See
accompanying notes to condensed consolidated financial statements. 7


Kenneth Cole Productions, Inc. and Subsidiaries Notes to
Consolidated Financial Statements (Unaudited)   1.  Basis of Presentation  The accompanying unaudited condensed consolidated financial
statements have been prepared by Kenneth Cole Productions, Inc. (the Company)
in accordance with accounting principles generally accepted in the United States
for interim financial information.  Accordingly, they do not include all of
the information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements.  Certain
items contained in these financial statements are based on estimates.  In
the opinion of the Companys management, the accompanying unaudited condensed
consolidated financial statements reflect all significant adjustments,
consisting of only normal and recurring adjustments, necessary for a fair
presentation of the financial position and results of operations and cash flows
for the periods presented.  All significant intercompany transactions have
been eliminated.  Operating results for the nine months ended September 30, 2009 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2009.  These unaudited condensed consolidated financial
statements should be read in conjunction with the financial statements and
footnotes included in the Companys Annual Report on Form 10-K for the year
ended December 31, 2008.  The Companys consolidated Balance Sheet at December 31, 2008, as
presented, was derived from the audited financial statements included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2008.
 Certain amounts in the Companys previous financial statements have been
reclassified to conform to the 2009 presentation. (See Note 7.)  2.  Stock-Based Compensation  The Company has stock-based compensation plans under which
directors, officers and other eligible employees receive stock options,
restricted stock, and other equity-based awards.  Stock options are granted with an exercise price equal to the
market value of a share of common stock on the date of grant.  Stock option
grants expire within 10 years and generally vest on a graded basis within two to
five years from the date of grant.  Restricted stock unit awards generally
vest on a graded basis over a two to four year period or cliff vest after three
years.  During the nine months ended September 30, 2009 and 2008, the
Company granted 708,656 and 841,500 stock options, respectively. The Company
granted 151,272 shares of restricted stock during the nine months ended
September 30, 2009, as compared to 127,462 shares granted during the nine months
ended September 30, 2008.  Stock options outstanding and unvested
restricted stock amounted to 2,900,186 and 463,081 shares, respectively, as of
September 30, 2009.


8


Kenneth Cole Productions, Inc. and Subsidiaries Notes to
Consolidated Financial Statements (Unaudited)  2.  Stock-Based Compensation (continued)  The following table summarizes the components of stock-based
compensation expense for the three and nine months ended September 30, 2009 and
2008, all of which is included in Selling, general, and administrative expenses
in the Condensed Consolidated Statements of Operations:  Three months ended
September 30,
Nine months ended
September 30,2009
2008
2009 (1)
2008Stock
options
$   330,000
$   277,000
$2,103,000
$   637,000Restricted
stock units and employee stock purchase plan
770,000
900,000
3,167,000
3,108,000Total
stock-based compensation expense
$1,100,000
$1,177,000
$5,270,000
$3,745,000 (1)  In the first quarter of 2009, the Companys Chairman and
CEO elected to receive 100% and 50%, respectively, of their 2008 annual bonuses
in stock options in lieu of cash which amounted to $1,167,000 during the nine
months ended September 30, 2009.  These amounts were accrued within payroll
expense as of December 31, 2008.  The fair value of stock options was estimated using the
Black-Scholes option-pricing model.  The following table summarizes the
assumptions used to compute the weighted-average fair value of stock option
grants for the three and nine months ended September 30, 2009 and 2008:  Three months ended
September 30,
Nine months ended
September 30,2009
2008 (1)
2009
2008 (1)Weighted-average
volatility
61.2%
--
55.0%
38.4%Risk-free
interest rate
3.7%
--
3.0% to 3.7%
4.0% to 4.1%Weighted-average
dividend yield
0%
--
0%
2.4%Expected
term
3 years
--
3-9 years
4-9 years (1)  No stock options were granted in the first and third
quarters of 2008.  The weighted-average volatility for the current period was
developed using historical volatility for periods equal to the expected term of
the options.  The risk-free interest rate was developed using the U.S.
Treasury yield curve for periods equal to the expected term of the options on
the grant date.  The dividend yield is calculated by using the dividends
declared per share and the Companys stock price on the date of grant.  The
expected term of stock option grants was developed after considering vesting
schedules, life of the option, historical experience and estimates of future
exercise behavior patterns.  The fair value of restricted stock was calculated by multiplying
the Companys stock price on the date of grant by the number of shares granted
and is being amortized on a straight-line basis over the vesting periods.
 Stock-based compensation is recognized for the number of awards that are
ultimately expected to vest.  As a result, for most awards, recognized
stock compensation expense was reduced for estimated forfeitures prior to
vesting primarily based on historical annual forfeiture rates by employee
classification.  Estimated forfeitures will continue to be reassessed in
subsequent periods and may change based on new facts and circumstances.  As of September 30, 2009, approximately $6.3 million of
unrecognized stock compensation expense related to unvested stock options and
restricted stock awards, net of estimated forfeitures, is expected to be
recognized over a weighted-average period of 2.1 years compared to approximately
$10.1 million of unrecognized stock compensation expense as of September 30,
2008.


9


Kenneth Cole Productions, Inc. and Subsidiaries Notes to
Consolidated Financial Statements (Unaudited)  3. Earnings/(loss) Per Share  Basic earnings/(loss) per share is calculated by dividing net
income/(loss) by weighted-average common shares outstanding.  Diluted
earnings/(loss) per share is calculated similarly, except that it includes the
dilutive effect of the assumed exercise of securities under the Companys stock
incentive plans.  Dilutive securities, which include stock options and
restricted stock, are determined under the treasury stock method by calculating
the assumed proceeds available to repurchase stock using the weighted-average
shares outstanding for the period.  Stock options outstanding for the three
months ended September 30, 2009 in an aggregate amount of 2,223,000 have been
excluded in the diluted per share calculation as the impact would be
antidilutive.  Stock options and restricted stock outstanding for the nine
months ended September 30, 2009 and for the three and nine months ended
September 30, 2008 have been excluded in the diluted per share calculation as
the impact would be antidilutive.  Basic and diluted loss per common share
consists of the following:  Three Months Ended
Nine Months EndedSeptember  30, 2009
September 30,2008
September  30, 2009
September   30, 2008Weighted-average commonshares outstanding
18,018,000
17,903,000
17,954,000
18,604,000Effect of dilutive securities:Restricted stock & employee
    stock purchase plan
313,000
--
--
--Stock options
92,000
--
--
--Weighted-average commonshares outstanding and commonshare equivalents
18,423,000
17,903,000
17,954,000
18,604,000  4. Investments  The Company reviews its investments for other-than-temporary
impairment whenever the fair value of an investment is less than the amortized
cost and evidence indicates that an investments carrying value may not be
recoverable within a reasonable period of time.  The fair value of the
Companys auction-rate securities (marketable securities), which have maturity
dates ranging from 2025 to 2050, is determined from an independent third-party
valuation.  The primary variables used in determining fair value include
collateral, rating, insurance, credit risk and downgrade risk of the security.
 In the Companys evaluation of its investments it also considered its
ability and intent to hold the investment until the market price recovers, the
reasons for the decline in fair value, the duration of the decline in fair value
and expected future performance.  Based on this evaluation, the Company
recorded an other-than temporary impairment of investments of $0.3 million and
$0.7 million related to marketable securities during the three and nine months
ended September 30, 2009, respectively.  This charge is included within
Impairment of investments in the Condensed Consolidated Statements of Operations
for the nine months ended September 30, 2009.  The Company also recorded a
$0.2 million other-than-temporary impairment of marketable securities within
Accumulated Other Comprehensive Loss for the non-credit component of marketable
securities during the nine months ended September 30, 2009.


10


Kenneth Cole Productions, Inc. and Subsidiaries Notes to
Consolidated Financial Statements (Unaudited)  4. Investments (continued)  The following table presents gross unrealized gains on, and
estimated fair value of, the Companys long-term investments as of September 30,
2009 and December 31, 2008: September 30, 2009Historical Cost
(2)
Cost Basis
Estimated Fair Value
Other than Temporary Impairment (1)
Gross UnrealizedGains
LossesAuction-rate securities
$  8,600,000
$4,358,000
$4,490,000
$(176,000)
$   308,000
--Equity securities
5,338,000
717,000
2,261,000
--
1,544,000
--Total
$13,938,000
$5,075,000
$6,751,000
$(176,000)
$1,852,000
-- (1)  The non-credit portion of
the other-than-temporary impairment related to auction rate securities is
recorded in accumulated other comprehensive loss. (2)  The cost basis is
historical cost less other-than-temporary impairment not reflected in other
comprehensive loss.  December 31, 2008Historical Cost
Cost Basis
Estimated Fair Value
Gross UnrealizedGains
LossesAuction-rate securities
$
 8,600,000
$5,085,000
$5,085,000
$
         --
--Equity securities
5,338,000
717,000
899,000
182,000
--Total
$13,938,000
$5,802,000
$5,984,000
$182,000
--  During the quarter ended June 30, 2009, the Company recorded a
balance sheet reclassification between Retained Earnings and Accumulated Other
Comprehensive Loss of $2.3 million related to the non-credit component of
previous writedowns of auction-rate securities in the Statements of
Operations.  5. Fair Value Measurement  The Companys financial assets, measured at fair value
on a recurring basis, were as follows:  Fair Value at
September 30, 2009
Fair Value at
December 31, 
2008
HierarchyInvestments
$  2,261,000
$
    899,000
Level 1Deferred
compensation plans assets
$35,944,000
$32,909,000
Level 2Marketable
Securities
$  4,490,000
$
 5,085,000
Level 3  A Level 1 hierarchy represents a fair value that is derived from
unadjusted quoted prices in active markets for identical assets or liabilities
that the Company has the ability to access at the measurement date.  A
Level 2 hierarchy represents a fair value that is derived from inputs other than
quoted prices included within Level 1 that are observable for the asset or
liability, either directly or indirectly.  A Level 3 hierarchy represents a
fair value that is derived from inputs that are unobservable or from observable
inputs based on unobservable data in an inactive market.


11


Kenneth Cole Productions, Inc. and Subsidiaries Notes to
Consolidated Financial Statements (Unaudited)   5. Fair Value Measurement (continued)  The following table presents the reconciliation of the beginning
and ending fair value measurements of the Companys Level 3 inputs, marketable
securities, measured at fair value using observable inputs based on unobservable
data in an inactive market for the nine months ended September 30, 2009:  Beginning balance at January 1, 2009
$5,085,000Unrealized
gains recorded in other comprehensive loss
308,000Impairment
charge recorded in other comprehensive loss
(176,000)Impairment
charge included in Statement of Operations
(727,000)Ending balance
at September 30, 2009
$4,490,000  The Company recorded a $0.7 million writedown in its marketable
securities, specifically auction-rate securities, within Impairment of investments in the
Condensed Consolidated Statements of Operations during the nine months ended
September 30, 2009.  6. Comprehensive Income/Loss  Comprehensive income/loss is comprised of net income/loss, the
effect of foreign currency translation and changes in unrealized gains and
losses on available-for-sale securities.  Comprehensive income for the
three months ended September 30, 2009 amounted to $645,000 as compared to
$369,000 for the three months ended September 30, 2008.  Comprehensive loss
for the nine months ended September 30, 2009 and 2008 was $9,624,000 and
$1,996,000, respectively.  7. Segment Information  The Company has three reportable segments:  Wholesale,
Consumer Direct and Licensing.  The Wholesale segment designs and sources a
broad range of fashion footwear, handbags, accessories, and apparel and markets
its products for sale to approximately 5,700 department and specialty store
locations and to the Companys Consumer Direct segment.  The Consumer
Direct segment markets a broad selection of the Companys branded products,
including licensee products, for sale directly to the consumer through its own
channels of distribution, which include full-priced retail stores, Company
Stores (outlets) and e-commerce (at website address
www.kennethcole.com).  The Licensing segment, through
third-party licensee agreements, has evolved the Company from a footwear
resource to a diverse lifestyle brand competing effectively in approximately 30
apparel and accessories categories for men, women and children.  The
Company maintains control over quality, brand image and distribution of
licensees products.  This segment primarily consists of royalties earned
on the purchase and sale to foreign retailers, distributors, or to consumers in
foreign countries and licensee sales to third parties of the Companys
trademarks and trade names.  The Companys reportable segments are business
units that offer products to overlapping consumers through different channels of
distribution.  Each segment is managedseparately, althoughplanning, implementation and results across segments are reviewed internally
by the executive management committee.  The Company evaluates performance
of each of its segments and allocates resources based on profit or loss before
stock-based compensation expense, writedown of marketable securities,
unallocated corporate overhead, and income taxes for each segment.
 Intersegment sales between the Wholesale and Consumer Direct segments are
eliminated in consolidation.


12


Kenneth Cole Productions, Inc. and Subsidiaries Notes to
Consolidated Financial Statements (Unaudited)  7. Segment Information (continued) Financial information of the Companys reportable segments is as
follows (in thousands):  Three Months Ended

Nine Months EndedSeptember 30,
2009

September 30,
2009Consumer




ConsumerWholesale
Direct
Licensing
Totals

Wholesale
Direct
Licensing
TotalsRevenue from external customers
$51,654
$41,682
$10,416
$103,752

$159,477
$112,981
$28,569
$301,027Intersegment revenues
8,135
--
--
8,135

24,448
--
--
24,448Segment
(loss)/income (1)
(1,610)
(4,491)
8,500
2,399

(9,266)
(20,956)
22,916
(7,306)Segment assets (2)





193,868
56,885
55,308
306,061  Three Months Ended

Nine Months EndedSeptember 30, 2008

September 30, 2008Consumer




ConsumerWholesale
Direct
Licensing
Totals

Wholesale
Direct
Licensing
TotalsRevenue from external customers
$77,533
$42,628
$11,947
$132,108

$209,564
$124,105
$32,087
$365,756Intersegment revenues
10,240
--
--
10,240

30,742
--
--
30,742Segment
income/(loss) (1)
924
(4,672)
9,904
6,156

433
(13,303)
24,937
12,067Segment assets (2)





210,872
56,921
63,531
331,324 _________________ (1) Segment (loss)/income excludes stock-based compensation expense,
writedown of marketable securities, unallocated corporate overhead and income
taxes.  In 2009, the Company reclassified the writedown of marketable
securities from the Wholesale segment to an unallocated corporate charge.
 Amounts in 2008 have been reclassified to conform to the 2009
presentation. (2) The Wholesale segment includes corporate assets.  The
reconciliation of the Companys reportable segment revenues and loss are as
follows (in thousands):  Three Months Ended
Nine Months EndedSeptember 30,
2009
September 30,  2008
September 30,  
2009
September 30, 2008RevenuesRevenues for reportable
segments
$103,752
$132,108
$301,027
$365,756Intersegment revenues
8,135
10,240
24,448
30,742Elimination of intersegment
revenues
(8,135)
(10,240)
(24,448)
(30,742)Total consolidated
revenues
$103,752
$132,108
$301,027
$365,756Income/(Loss)Total income/(loss) for reportable
segments (1)
$    2,399
$    6,156
$  (7,306)
$  12,067Elimination of unallocated corporate overhead,
stock-based compensation expense and writedown of marketable
securities
(2,306)
(6,588)
(10,474)
(14,035)Total income/(loss) before income taxes
$
       93
$
    (432)
$(17,780)
$  (1,968) (1) Total income/(loss) for reportable segments excludes stock-based
compensation expense, writedown of marketable securities, unallocated corporate
overhead and income taxes.  Revenues from international customers were approximately 7.1% and
4.3% of the Companys consolidated revenues for the three months ended September
30, 2009 and 2008, respectively, and approximately 5.2% and 3.9% of the
Companys consolidated revenues for the nine months ended September 30, 2009 and
September 30, 2008, respectively.


13


Kenneth Cole Productions, Inc. and Subsidiaries Notes to
Consolidated Financial Statements (Unaudited)   8. Income Taxes  Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.  The Company reviews its historical and projected taxable income
quarterly and considers its prior period cumulative results and other available
objective evidence to determine if it is more likely than not that the deferred
tax assets will be realized.  The Company currently has $43.3 million of
net deferred tax assets as of September 30, 2009 inclusive of $12.4 million of
net operating loss carryforwards that expire between 2028 and 2029 and valuation
allowances of $3.1 million for unrealized tax losses on available for sale
securities.  9. Related Party Transactions  The Company had an exclusive license agreement with Iconix Brand
Group, Inc. and its trademark holding company, IP Holdings, LLC (Iconix), to
use the Bongo trademark in connection with the manufacture, sale and
distribution of womens, mens and childrens footwear in certain territories.
 The Chairman and Chief Executive Officer of Iconix is the brother of the
Companys Chairman and Chief Creative Officer.  The term of the agreement
was through December 31, 2010.  In April 2009, the Company terminated the
agreement effective December 31, 2009 which eliminates any future obligation for
2010.  Management believes that the license agreement with Iconix was
entered into at arms length.  The Company was obligated to pay Iconix a
percentage of net sales based upon the terms of the agreement.  The Company
recorded approximately $10,000 of income related to an advertising allowance per
the license agreement for the three months ended September 30, 2009.  The
Company recorded approximately $247,000 in aggregate royalty and advertising
expense under the agreement for the nine months ended September 30, 2009. The
Company recorded approximately $284,000 and $857,000 in aggregate royalty and
advertising expense under the agreement for the three and nine months ended
September 30, 2008, respectively.  The Company recorded expenses of approximately$49,000and$255,000for the three and nine months ended September
30, 2009, respectively, to a third-party aviation company which hires and
uses an aircraft partially owned by Emack LLC, a company which is wholly owned
by the Companys Chairman and Chief Creative Officer.  During the three and
nine months ended September 30, 2008, the Company recorded expenses of
approximately $161,000 and $427,000, respectively, for hire and use of aircraft
partially owned by Emack LLC.  Management believes that all transactions
were made on terms and conditions similar to or more favorable than those
available in the marketplace from unrelated parties.  10. Common Stock Repurchase  No shares were repurchased by the Company during the three and
nine months ended September 30, 2009.  During the three months ended
September 30, 2008, the Company repurchased 337,200 of its shares at an
aggregate price of $4,409,000.  During the nine months ended September 30,
2008, the Company repurchased 1,619,200 of its shares at an aggregate price of
$24,376,000.


14


Kenneth Cole Productions, Inc. and Subsidiaries Notes to
Consolidated Financial Statements (Unaudited)   11. Intangible Asset Purchase  In 2007, the Company acquired the Le Tigretrademark and
other intellectual property associated with the Le Tigre brand from Le
Tigre, LLC (the Seller).  During 2008, pursuant to two amendments to the
Asset Purchase Agreement, the Company paid the Seller an additional $5.5
million.  The Company recorded the intellectual property in Intangible
Assets on the accompanying Condensed Consolidated Balance Sheets at fair value.
 Based on an independent third party valuation, management allocated the
majority of the $18.5 million paid as an indefinite lived intangible asset and a
nominal amount as a finite lived intangible asset.  12. New Accounting Pronouncement  Effective July 1, 2009, the Financial Accounting Standards Boards
(FASB) Accounting Standards Codification (ASC) became the single official
source of authoritative U.S. generally accepted accounting principles (GAAP)
recognized by the FASB to be applied by nongovernmental entities.  Rules
and interpretive releases of the Securities and Exchange Commission (SEC)
under authority of federal securities laws are also sources of authoritative
GAAP for SEC registrants.  The ASC supersedes all existing non-SEC
accounting and reporting standards.  All other nongrandfathered non-SEC
accounting literature not included in the ASC became nonauthoritative.  The
Companys accounting policies were not affected by the conversion to ASC.  13. Subsequent Event  The Company evaluated subsequent events through November 6, 2009,
the date the financial statements were issued and determined that there were no
subsequent events to disclose except as follows:  On November 1, 2009, CIT Group Inc. (CIT) entered into a
prepackaged plan of reorganization.  The Company has a Receivables
Management Agreement with The CIT Group/Commercial Services, Inc. (Operating
Sub), an operating subsidiary of CIT.  The Operating Sub acts as a
collection agent for the Companys assigned receivables without transfer of
ownership and as a credit grantor for those receivables subject to credit
approval.  Customer payments for these receivables are remitted directly to
a Company lockbox. Accordingly, the Company believes that the CIT reorganization
plan has no direct exposure to the Companys operations.


15


Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS  Forward-Looking Statements Disclosure  The statements contained in this report which are not historical
facts, including, without limitation, statements that relate to future
performance and/or statements regarding the Companys anticipated results or
level of business for 2009 or any other future period, may be deemed to
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995.  Such statements are based on
current expectations only, and actual future results might differ materially
from those projected in such statements due to a number of risks and
uncertainties, including, but not limited to, demand and competition for the
Companys products, the ability to enter into new licensee agreements, to
maintain and renew existing licensing agreements, and to open new stores,
changes in consumer preferences or fashion trends, events causing disruption in
product shipment, change in import regulations, dependence on certain large
customers, changes in the Companys relationships with vendors and other
resources, the launching or prospective development of new business initiatives,
future licensee sales growth, gross margins, store expansion, renovation and
openings, changes in distribution centers, and the implementation of management
information systems.  The forward-looking statements contained herein are
also subject to other risks and uncertainties that are described in the
Companys reports and registration statements filed with the Securities and
Exchange Commission.  The Company undertakes no obligation to publicly
update or revise any forward-looking statement, whether as a result of new
information, future results or otherwise.  Update on Critical Accounting Policies and Estimates  The Companys consolidated financial statements are prepared in
accordance with accounting principles generally accepted in the United States,
which require the Company to make estimates in the application of its accounting
policies based on the best assumptions, judgments and opinions of management.
 There have been no changes to the Companys significant accounting
policies from the policies previously disclosed in the Companys Consolidated
Financial Statements included in the Companys Annual Report on Form 10-K for
the year ended December 31, 2008 except the additional details described within
the income tax policy below:  Income Taxes  Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.  Deferred
taxes are evaluated for future realization and reduced by a valuation allowance
to the extent that management believes a portion will not be realized.  The
Companys assessment of deferred tax assets is performed quarterly and many
factors are considered when assessing the likelihood of future realization of
deferred tax assets, including the recent earnings experience and expectations
of future taxable income by taxing jurisdiction, the carryforward periods
available for tax reporting purposes, tax planning strategies and other relevant
factors.  The actual realization of deferred tax assets may differ
significantly from the amounts the Company has recorded.  The Companys income taxes are routinely under audit by federal,
state or local authorities.  These audits include questioning of the timing
and amount of deductions and the allocation of income among various tax
jurisdictions.  Based on its quarterly evaluations of tax positions, the
Company believes it has appropriately accrued for probable exposures.  To
the extent the Company is required to pay amounts in excess of recorded income
tax liabilities, the Companys effective tax rate in a given financial statement
period could be materially impacted.  The Company also measures tax
position taken or expected to be taken in a return and records them in the
financial statements.


16


Overview  Kenneth Cole Productions, Inc. designs, sources and markets a
broad range of fashion footwear, handbags and apparel and, through license
agreements, designs and markets apparel and accessories under its Kenneth
Cole New York, Kenneth Cole Reaction, Unlistedand Gentle Souls brand
names.  The Company also designs, sources and markets sportswear, footwear,
handbags and other accessories under the Le Tigrebrand name.  In
addition, the Company designs, develops and sources private label footwear and
handbags for selected retailers.  The Companys products are targeted to
appeal to fashion conscious consumers and reflect a metropolitan lifestyle
uniquely associated with Kenneth Cole.  These products include core
basics that generally remain in demand from season to season and fashion
products that are designed to establish or capitalize on market trends.
 The combination of core products and fashion styles provides freshness in
assortments and maintains a fashion-forward image, while a multiple brand
strategy helps diversify business risk.  The Company markets its products to approximately 5,700 department
and specialty store locations, as well as through its Consumer Direct business,
which includes full-priced retail stores, Company Stores (outlets) and
e-commerce.  The Company believes the diversity of its product offerings
distinguishes the Company from its competitors in terms of product
classifications (mens, womens and childrens footwear, handbags, apparel and
accessories), prices (bridge, better and moderate) and styling.  The
Company believes the diversity of its product mix provides balance to its
overall sales and increases opportunities in all channels of distribution.  The popularity of the Kenneth Cole brand names, including
Kenneth Cole New York, Kenneth Cole Reaction and Unlisted,among
consumers has enabled the Company to expand its product offerings and channels
of distribution through licensing agreements.  The Company offers, through
these agreements, a lifestyle collection of mens product categories, including
tailored clothing, dress shirts, dress pants, neckwear, outerwear, sleepwear,
underwear, socks, belts, sunglasses, prescription eyewear, watches, fragrance,
jewelry, luggage, business cases and small leather goods.  Womens product
categories currently being sold pursuant to license agreements include
sportswear, outerwear, swimwear, sleepwear, small leather goods, belts,
sunglasses, prescription eyewear, watches, jewelry, fragrance and luggage.
 In addition, the Company licenses its childrens apparel.  Our opportunities for long-term growth are accompanied by
challenges and risks, particularly in the current steep recessionary
environment.  Our results are dependent on consumer demand for our products
and factors such as general economic and business conditions, unemployment
rates, consumer credit availability, interest rate fluctuations, energy costs,
geo political stability, retail traffic, tax law, stock market activity and
other consumer impacting conditions.  The recent unprecedented volatility
that has disrupted capital and consumer markets has also reduced incomes and
employment and reduced consumer confidence to levels that have not been seen in
decades.  Since fashion and fashion related products are viewed as
discretionary spending, the economic environment has reduced customer spending
dramatically.  The Company cannot predict the duration of the current
economic downturn.  The macroeconomic environment and related factors could
have a material adverse effect on the Companys results of operations and
financial condition.  The Company recorded net revenues of $103.8 million for the three
months ended September 30, 2009.  Diluted earnings per share was $0.01 for
the three months ended September 30, 2009 as compared to a diluted loss per
share of $(0.09) for the three months ended September 30, 2008.  As of
September 30, 2009, the Company had $50.0 million in cash and cash equivalents
and no long-term debt.


17


Results of Operations  The following table sets forth the Companys Condensed
Consolidated Statements of Operations in thousands of dollars and as a
percentage of net revenues for the three and nine months ended September 30,
2009 and September 30, 2008.  Three Months Ended September 30,

Nine Months Ended September 30,2009
2008

2009
2008Net sales
$ 93,336
90.0%
$120,161
91.0%

$272,458
90.5%
$333,669
91.2%Royalty revenue
10,416
10.0
11,947
9.0

28,569
9.5
32,087
8.8Net revenues
103,752
100.0
132,108
100.0

301,027
100.0
365,756
100.0Gross profit (1)
44,881
43.3
54,351
41.1

119,766
39.8
150,622
41.2Selling, general
and administrative
expenses
44,595
43.0
51,896
39.3

137,233
45.6
150,113
41.1Operating
income/(loss)
286
0.3
2,455
1.8

(17,467)
(5.8)
509
0.1Interest income,
net
94
0.1
395
0.3

414
0.1
1,637
0.5Impairment of
investments
(287)
(0.3)
(3,282)
(2.5)

(727)
(0.2)
(4,114)
(1.2)Income/(loss) before income
taxes
93
0.1
(432)
(0.4)

(17,780)
(5.9)
(1,968)
(0.6)Income tax
(benefit)/expense
(93)
(0.1)
1,122
0.8

(6,532)
(2.2)
831
0.2Net income/(loss)
$      186
0.2%
$(1,554)
(1.2)%

$(11,248)
(3.7)%
$(2,799)
(0.8)% _______________________  (1) Gross profit may not be comparable to other entities, since some
entities include the costs related to their distribution network (receiving and
warehousing) in cost of goods sold and other entities, similar to the Company,
exclude these costs from gross profit, including them instead in a line item
such as selling, general and administrative expenses.  Three Months Ended September 30, 2009 Compared to Three Months
Ended September 30, 2008  REVENUES:  Net revenues decreased $28.3 million, or 21.5%, to
$103.8 million for the three months ended September 30, 2009 from $132.1 million
for the three months ended September 30, 2008.  The decrease in revenues
occurred in each of the Companys business segments as further described below
in the sections entitled NET SALES and ROYALTY REVENUE.  NET
SALES: Wholesale net sales (excluding sales to the Companys Consumer Direct
business segment) decreased $25.9 million, or 33.4%, to $51.7 million for the
three months ended September 30, 2009 from $77.6 million for the three months
ended September 30, 2008.  Over 70% of the decline was attributable to a
decrease in our planned closures of the Companys Tribecaand Bongofootwear lines, associated private label, and the planned reductions in the
Companys off-priced business.  The remaining decline was attributable to a
decrease in sales across primarily all of the Companys wholesale businesses as
a result of factors including retailer destocking, a challenging retail
environment and continued stress in the macro-economic marketplace.  Net
sales in the Companys Consumer Direct segment decreased $0.9 million, or 2.2%,
to $41.7 million for the three months ended September 30, 2009 from $42.6
million for the three months ended September 30, 2008.  Sales associated
with 18 net new stores opened since the close of the third quarter last year
were offset by a comparable store sales decrease of 12.9%, or $4.7 million.
 Comparable stores are defined as new stores that are open for longer than
thirteen months.  A store that stops operations is included in the
comparable sales calculation through the date of closing.The Company opened five Kenneth Cole
Company Stores (outlets) during the three months ended September 30, 2009.  ROYALTY
REVENUE:  Royalty revenue decreased $1.5 million, or 12.8%, to $10.4
million for the three months ended September 30, 2009 from $11.9 million for the
three months ended September 30, 2008.  Approximately half of the decrease
in royalty revenues was due to a reduction in licensee sales into the off-price
channel, along with a decrease in contract initiation fees and the expectation
that certain licensees will exceed their contractual minimums in the fourth
quarter this year versus the third quarter last year.


18


GROSS
PROFIT:  Consolidated gross profit, as a percentage of net revenues,
increased to 43.3% for the three months ended September 30, 2009 from 41.1% for
the three months ended September 30, 2008.  The increase, as a percentage
of net revenues, was primarily the result of an increase in the Consumer Direct
segment margins as the Company better manages its inventory and improves its
product assortment, coupled with a revenue mix shifting to Consumer Direct and
Licensing as a percentage of total revenues.  The Consumer Direct segment,
which operates at a higher gross profit level than the Wholesale segment,
increased as a percentage of net revenues to 40.2% for the three months ended
September 30, 2009 compared to 32.3% for the three months ended September 30,
2008, while the Wholesale segment, as a percentage of net revenues, decreased to
49.8% for the three months ended September 30, 2009 from 58.7% for the three
months ended September 30, 2008.  The revenues in the Licensing segment,
which carries less cost of goods sold, as a percentage of revenues, increased to
10.0% for the three months ended September 30, 2009 compared to 9.0% for the
three months ended September 30, 2008.  SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:  Selling,
general and administrative (SG&A) expenses, including warehousing and
receiving expenses, decreased $7.3 million to $44.6 million for the three months
ended September 30, 2009 from $51.9 million for the three months ended September
30, 2008.  The decrease in SG&A expenses was primarily attributable to
a reduction in payroll and various cuts in discretionary spending offset by
costs associated with new stores and other expenses associated with the
Companys strategic initiatives.  Total SG&A expenses, as a percentage
of revenues, were 43.0% and 39.3% for the three months ended September 30, 2009
and 2008, respectively.  The increase was due to loss of leverage on the
decline in sales in the Wholesale and Consumer Direct segments and the greater
portion of revenues from the Consumer Direct segment which carries a higher
SG&A expense level than the Wholesale and Licensing segments due primarily
to store occupancy and payroll costs.  INTEREST INCOME, NET:  Interest income, net decreased $0.3
million to approximately $0.1 million for the three months ended September 30,
2009 as compared to $0.4 million for the three months ended September 30,
2008.  The decrease is primarily due to the Companys lower interest
rates.  IMPAIRMENT OF INVESTMENTS:  The Company recorded an
other-than-temporary impairment of auction-rate securities of approximately $0.3
million during the three months ended September 30, 2009 as compared to $3.3
million, of which $3.2 million related to an equity investment and $0.1 million
related to auction-rate securities, during the three months ended September 30,
2008.  INCOME
TAXES:The Companys effective tax rate decreased to a 100.6%
benefit for the three months ended September 30, 2009 from a provision of 259.7%
for the three months ended September 30, 2008.  The tax benefit is
primarily a result of adjustments to the Companys tax reserves for agreements
with certain tax jurisdictions offset by the provision for the Companys net
income during the three months ended September 30, 2009.  The Company
currently has $43.3 million of net deferred tax assets as of September 30, 2009
inclusive of $12.4 million of net operating loss carryforwards that expire
between 2028 and 2029 and valuation allowances of $3.1 million for unrealized
tax losses on available for sale securities.  NET
INCOME/(LOSS):  As a result of the foregoing, the Company recorded net
income of $0.2 million for the three months ended September 30, 2009 or 0.2% of
net revenues compared to a net loss of $1.6 million or (1.2)% of net revenues
for the three months ended September 30, 2008.  Nine
Months Ended September 30, 2009 Compared to Nine Months Ended September 30,
2008  REVENUES:  Net revenues decreased $64.8 million, or 17.7%, to
$301.0 million for the nine months ended September 30, 2009 from $365.8 million
for the nine months ended September 30, 2008.  The decrease in revenues
occurred in each of the Companys business segments as further described below
in the sections entitled NET SALES and ROYALTY REVENUE.


19


NET
SALES: Wholesale net sales (excluding sales to the Companys Consumer Direct
business segment) decreased $50.2 million, or 23.9%, to $159.4 million for the
nine months ended September 30, 2009 from $209.6 million for the nine months
ended September 30, 2008.  The decrease was attributable to a decline in
sales across primarily all of the Companys wholesale businesses as a result of
factors including retailer destocking, a challenging retail environment and
continued stress in the macro-economic marketplace.  In addition, the
decline included the exiting of the Companys Tribeca business and
terminating its Bongo business.  Net
sales in the Companys Consumer Direct segment decreased $11.1 million, or 9.0%,
to $113.0 million for the nine months ended September 30, 2009 from $124.1
million for the nine months ended September 30, 2008.  Sales associated
with 18 net new stores opened since the close of the third quarter last year
were offset by a comparable store sales decreased 15.9%, or $17.0 million.
 Comparable stores are defined as new stores that are open for longer than
thirteen months.  A store that stops operations is included in the
comparable sales calculation through the date of closing.The Company opened thirteen Kenneth Cole
Company Stores (outlets) and closed three full-priced retail stores during the
nine months ended September 30, 2009 as compared to opening seven Company Stores
(outlets), opening two full-priced retail stores and closing eight full-priced
retail stores during the nine months ended September 30, 2008.  ROYALTY
REVENUE:  Royalty revenue decreased $3.5 million, or 11.0%, to $28.6
million for the nine months ended September 30, 2009 from $32.1 million for the
nine months ended September 30, 2008.  The decrease in royalty revenues was
primarily attributable to a reduction in contract initiation fees and a
reduction in licensee sales into the off-price channel.  GROSS
PROFIT:  Consolidated gross profit, as a percentage of net revenues,
decreased to 39.8% for the nine months ended September 30, 2009 from 41.2% for
the nine months ended September 30, 2008.  The decrease, as a percentage of
net revenues, was primarily the result of a decrease in the Wholesale and
Consumer Direct segment margins, partially offset by the revenue mix shifting to
Consumer Direct and Licensing as a percentage of total revenues.  The
Consumer Direct segment, which operates at a higher gross profit level than the
Wholesale segment, increased as a percentage of net revenues to 37.5% for the
nine months ended September 30, 2009 compared to 33.9% for the nine months ended
September 30, 2008, while the Wholesale segment, as a percentage of net
revenues, decreased to 53.0% for the nine months ended September 30, 2009 from
57.3% for the nine months ended September 30, 2008.  The revenues in the
Licensing segment, which carries less cost of goods sold, increased as a
percentage of revenues, to 9.5%
for the nine months ended September 30, 2009 compared to 8.8% for the
nine months ended September 30, 2008.  The decrease in the Wholesale and
Consumer Direct segment margins for the nine months ended September 30, 2009
compared to the nine months ended September 30, 2008 was primarily due to a
promotional and challenging retail environment and the macro-economic
marketplace.  SELLING, GENERAL AND ADMINISTRATIVE EXPENSES:  SG&A
expenses, including warehousing and receiving expenses, decreased $12.9 million
to $137.2 million for the nine months ended September 30, 2009 from $150.1
million for the nine months ended September 30, 2008.  The decrease in
SG&A expenses was primarily attributable to a reduction in payroll and
various cuts in discretionary spending offset by costs associated with new
stores and other expenses associated with the Companys strategic initiatives.
 Total SG&A expenses, as a percentage of revenues, were 45.6% and 41.1%
for the nine months ended September 30, 2009 and 2008, respectively.  The
increase was due to loss of leverage on the decline in sales in the Wholesale
and Consumer Direct segments and the greater portion of revenues from the
Consumer Direct segment which carries a higher SG&A expense level than the
Wholesale and Licensing segments due primarily to store occupancy and payroll
costs.  INTEREST INCOME, NET:  Interest income, net decreased $1.2
million to $0.4 million for the nine months ended September 30, 2009 as compared
to $1.6 million for the nine months ended September 30, 2008.  The
decrease is primarily due to the Companys lower average cash balances and lower
interest rates.


20


IMPAIRMENT OF INVESTMENTS:  The Company recorded an
other-than-temporary impairment of auction-rate securities of $0.7 million
during the nine months ended September 30, 2009 as compared to $4.1 million, of
which $3.2 million related to an equity investment and $0.9 million related to
auction-rate securities, during the nine months ended September 30, 2008.  INCOME
TAXES:The Companys effective tax rate decreased to a 36.7%
benefit for the nine months ended September 30, 2009 from a provision of 42.2%
for the nine months ended September 30, 2008.  The tax benefit is primarily
a result of an increase in the Companys net loss and for adjustments to the
Companys tax reserves for agreements with certain tax jurisdictions.  The
Company currently has $43.3 million of net deferred tax assets as of September
30, 2009 inclusive of $12.4 million of net operating loss carryforwards that
expire between 2028 and 2029 and valuation allowances of $3.1 million for
unrealized tax losses on available for sale securities.  NET
LOSS:  As a result of the foregoing, the Company recorded a net loss of
$11.2 million for the nine months ended September 30, 2009 ((3.7%) of net
revenues) compared to a loss of $2.8 million ((0.8%) of net revenues) for the
nine months ended September 30, 2008.  New
Accounting Pronouncement  Effective July 1, 2009, the Financial Accounting Standards Boards
(FASB) Accounting Standards Codification (ASC) became the single official
source of authoritative U.S. generally accepted accounting principles (GAAP)
recognized by the FASB to be applied by nongovernmental entities.  Rules
and interpretive releases of the Securities and Exchange Commission (SEC)
under authority of federal securities laws are also sources of authoritative
GAAP for SEC registrants.  The ASC supersedes all existing non-SEC
accounting and reporting standards.  All other nongrandfathered non-SEC
accounting literature not included in the ASC became nonauthoritative.  The
Companys accounting policies were not affected by the conversion to ASC.  Related Party Transactions  The Company has an exclusive license agreement with Iconix Brand
Group, Inc. and its trademark holding company, IP Holdings, LLC (Iconix), to
use the Bongo trademark in connection with the manufacture, sale and
distribution of womens, mens and childrens footwear in certain territories.
 The Chairman and Chief Executive Officer of Iconix is the brother of the
Companys Chairman and Chief Creative Officer.  The term of the agreement
was through December 31, 2010.  In April 2009, the Company terminated the
agreement effective December 31, 2009 which eliminates any future obligation for
2010.  Management believes that the license agreement with Iconix was
entered into at arms length.  The Company was obligated to pay Iconix a
percentage of net sales based upon the terms of the agreement.  The Company
recorded approximately $10,000 of income related to an advertising allowance per
the license agreement for the three months ended September 30, 2009.  The
Company recorded approximately $247,000 in aggregate royalty and advertising
expense under the agreement for the nine months ended September 30, 2009. The
Company recorded approximately $284,000 and $857,000 in aggregate royalty and
advertising expense under the agreement for the three and nine months ended
September 30, 2008, respectively.  The Company recorded expenses of approximately $49,000 and
$255,000 for the three and nine months ended September 30, 2009, respectively,
to a third-party aviation company which hires and uses an aircraft partially
owned by Emack LLC, a company which is wholly owned by the Companys Chairman
and Chief Creative Officer.  During the three and nine months ended
September 30, 2008, the Company recorded expenses of approximately $161,000 and
$427,000, respectively, for hire and use of aircraft partially owned by Emack
LLC. Management believes that all transactions were made on terms and conditions
similar to or more favorable than those available in the marketplace from
unrelated parties.


21


Liquidity and Capital Resources  As of September 30, 2009, the Company had $50.0 million in cash
and cash equivalents, which consist primarily of government money market funds
as compared to $51.0 million as of September 30, 2008.  The Company uses
cash from operations as the primary source of financing for its capital
expenditures and seasonal requirements.  Cash requirements vary from time
to time as a result of the timing of the receipt of merchandise from suppliers,
the delivery by the Company of merchandise to its wholesale customers and the
level of inventory, accounts receivable and due from factors balances.  At
September 30, 2009 and December 31, 2008, working capital was $81.3 million and
$97.5 million, respectively.  Cash used in operating activities was $2.3 million for the nine
months ended September 30, 2009, compared to $0.9 million for the nine months
ended September 30, 2008. The decrease in cash flows provided by
operations is primarily attributable to a decrease in net income and the timings
of receivables and payables.  Net cash used in investing activities totaled $11.1 million for
the nine months ended September 30, 2009 compared to $8.6 million for the nine
months ended September 30, 2008.  The increase was primarily attributable
to a $5.2 million increase in capital expenditures during the nine months ended
September 30, 2009 compared to September 30, 2008.  Included in capital
expenditures for the nine months ended September 30, 2009 and 2008 were
approximately $9.4 million and $3.5 million, respectively, for amounts
associated with furniture, fixtures and leasehold improvements for existing and
new stores.  This was offset by a $2.7 million decrease in intangible asset
purchases during the nine months ended September 30, 2009 compared to the nine
months ended September 30, 2008.  During the nine months ended September
30, 2008, the Company paid $2.5 million for intangible assets as defined within
the Le TigreAsset Purchase Agreement Amendment.  Net cash used in financing activities was $1.3 million for the
nine months ended September 30, 2009 compared to $30.1 million used in financing
activities for the nine months ended September 30, 2008.  The decrease was
primarily attributable to no repurchases of treasury shares during the nine
months ended September 30, 2009 as compared to $24.4 million used to repurchase
1,619,200 treasury shares during the nine months ended September 30, 2008.
 The Company also did not pay a quarterly dividend for the nine months
ended September 30, 2009 compared to a $5.0 million quarterly dividend paid for
the nine months ended September 30, 2008.  Through July 30, 2009, the Company had a revolving credit facility
(the Facility) with various lenders, which provided up to $100.0 million to
finance working capital requirements, letters of credit and other general
corporate activities.  During this period the Company had no borrowing
availability under the Facility.  On July 31, 2009, the Company amended the
Facility (the Amended Facility) to convert it to a revolving senior secured
asset based credit facility.  Pursuant to the terms of the Amended
Facility, the Company may borrow based on a percentage of receivables and
inventory as defined, up to $60.0 million.  As of September 30, 2009, the
Company has $2.2 million of standby and commercial open letters of credit under
the Amended Facility.  On November 1, 2009, CIT Group Inc. ("CIT") entered into a
prepackaged plan of reorganization.  The Company has a Receivables
Management Agreement with The CIT Group/Commercial Services, Inc. (Operating
Sub) whereby Operating Sub acts as a collection agent for the Companys
assigned receivables without transfer of ownership and as a credit grantor for
those receivables subject to credit approval.  Based on this agreement the
Company records balances collected by Operating Sub as Accounts Receivable.
 Customer payments for these receivables are remitted directly to a Company
lockbox. Accordingly, the Company believes that CITs reorganization plan has no
direct exposure to the Companys operations. Prior to executing the Receivables
Management Agreement on November 7, 2008, the Company sold primarily all of its
accounts receivable to its factors and recorded these receivables in Due from
Factors.


22


The Company believes that it will be able to satisfy its current
expected cash requirements for 2009 with cash flow from operations and cash on
hand.  The Company did not have any off-balance sheet arrangements as of
September 30, 2009.  The foregoing commentary should be considered to fall within the
coverage of the Safe Harbor Statement under the Private Securities
Litigation reform Act of 1995 included in this report.  Item 3.
 Quantitative and Qualitative Disclosures About Market Risk  The Company has marketable securities, specifically auction rate
securities, that contain double A and single A rated debt obligations and a
preferred share close end fund that are substantially all insured.  All of
the Companys auction rate securities have failed at auction as a result of
illiquidity and imbalance in order flow within the market.  A failed
auction is not an indication of an increased credit risk or a reduction in the
underlying collateral; however, parties wishing to sell securities could not do
so.  Based on current market conditions, it is not known when or if the
capital markets will come back into balance to achieve successful auctions for
these securities.  If these auctions continue to fail, it could result in
the Company holding securities beyond their next scheduled auction reset dates
and will limit the liquidity of these investments.  Based on the Companys
expected operating cash flows, and other sources and uses of cash, the Company
does not anticipate that the lack of liquidity on these investments will affect
its ability to execute its current business plan.  These assets have been
classified as long-term in the Companys Condensed Consolidated Balance Sheets
and have been recorded at their fair value.  The Company is exposed to currency exchange rate risks with
respect to its inventory transactions denominated in Euros.  Business
activities in various currencies expose the Company to the risk that the
eventual net dollar cash flows from transactions with foreign suppliers
denominated in foreign currencies may be adversely affected by changes in
currency rates.  The Company manages these risks by utilizing foreign
exchange contracts.  The Company does not enter into foreign currency
transactions for speculative purposes.  At September 30, 2009, the Company
had no forward contracts outstanding.  The Companys earnings may also be affected by changes in
short-term interest rates as a result of borrowings that may be made under its
credit facilities.  A two or less percentage point increase in interest
rates affecting the Companys credit facilities would not have had a material
effect on the Companys operations.  The Company sources a significant amount of product from China and
is subject to foreign currency exposure.  If the Yuan is allowed to float
freely against other foreign currency, a two percent change in exchange rates
could have a material effect on the cost of future inventory purchases to be
transacted by the Company.   Item
4.  Controls and Procedures  Evaluation of disclosure controls and procedures  The Companys Chief Executive Officer and Chief Financial Officer
have evaluated the effectiveness of the Companys disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934, as amended (the Exchange Act), as of the end of the
period covered by this quarterly report, and have concluded that the Companys
disclosure controls and procedures were effective and designed to ensure that
all material information required to be disclosed by the Company in reports
filed or submitted under the Exchange Act is (1) recorded, processed, summarized
and reported within the time periods specified in the Securities and Exchange
Commission rules and forms, and (2) accumulated and communicated to the
Companys management, including the Companys Chief Executive Officer and Chief
Financial Officer, to allow timely decisions regarding required disclosures.


23


Changes in internal control over financial reporting  There were no changes in the Companys internal controls over
financial reporting during the period covered by this report that have
materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.   Part II - OTHER
INFORMATION   Item 1. Legal Proceedings.  None   Item
1A.  Risk Factors.  There have been no material changes during
the quarterly period ended September 30, 2009 from the risk factors previously
disclosed in the Companys Annual Report on Form 10-K for the year ended
December 31, 2008.   Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.  None   Item
3. Defaults
Upon Senior Securities.  None   Item
4. Submission
of Matters to a Vote of Security Holders.  None   Item
5. Other
Information.  None  Item
6. Exhibits.  31.1
Certification of Chief Executive Officer pursuant to
Securities Exchange Act Rule 13a-14 and 15d-14, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2
Certification of Chief Financial Officer pursuant to
Securities Exchange Act Rule 13a-14 and 15d-14, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.


24


SIGNATURES   Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.   Kenneth
Cole Productions, Inc. Registrant    November
6, 2009 /s/
DAVID P. EDELMAN David
P. Edelman Chief
Financial Officer


25


Exhibit 31.1  CERTIFICATION OF CHIEF EXECUTIVE OFFICER  I, Jill
Granoff, certify that:  1.
 I have reviewed this quarterly report on Form 10-Q of Kenneth Cole
Productions, Inc.;  2.
 Based on my knowledge, the report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by the report;  3.
 Based on my knowledge, the financial statements, and other financial
information included in the report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in the report;  4.
 The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:  (a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;  (b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;  (c) Evaluated the effectiveness of the registrants disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and  (d) Disclosed in this report any change in the registrants internal
control over financial reporting that occurred during the registrants most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrants internal control over financial reporting;
and        5.
 The registrants other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrants auditors and the audit committee of the registrants board of
directors (or persons performing the equivalent functions):  (a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and  (b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal control
over financial reporting.     By: /s/
JILL GRANOFF -------------------------------------- Jill
Granoff Chief
Executive Officer    Date:  November
6, 2009                             Exhibit
31.2  CERTIFICATION OF CHIEF FINANCIAL OFFICER  I,
David P. Edelman, certify that:  1.
 I have reviewed this quarterly report on Form 10-Q of Kenneth Cole
Productions, Inc.;  2.
  Based on my knowledge, the report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by the report;  3.
 Based on my knowledge, the financial statements, and other financial
information included in the report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in the report;  4.
 The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:  (a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;  (b) Designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles;  (c) Evaluated the effectiveness of the registrants disclosure
controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and  (d) Disclosed in this report any change in the registrants internal
control over financial reporting that occurred during the registrants most
recent fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the registrants internal control over financial reporting;
and        5.
 The registrants other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrants auditors and the audit committee of the registrants board of
directors (or persons performing the equivalent functions):  (a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and  (b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants internal control
over financial reporting.     By: /s/
DAVID P. EDELMAN ---------------------------------------- David
P. Edelman Chief
Financial Officer     Date:  November
6, 2009                            Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS
ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002  In connection with the Quarterly Report of Kenneth Cole
Productions, Inc. (the Company) on Form 10-Q for the period ending September
30, 2009 as filed with the Securities and Exchange Commission on the date hereof
(the Report), I, Jill Granoff, Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the
Sarbanes-Oxley Act of 2002, that: (1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended; and (2)
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.  /s/
JILL GRANOFF  Jill
GranoffChief Executive OfficerKenneth Cole Productions, Inc November
6, 2009             Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS
ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002  In connection with the Quarterly Report of Kenneth Cole
Productions, Inc. (the Company) on Form 10-Q for the period ending September
30, 2009 as filed with the Securities and Exchange Commission on the date hereof
(the Report), I, David P. Edelman, Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the
Sarbanes-Oxley Act of 2002, that: (1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended; and (2)
The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.  /s/
DAVID P. EDELMAN  David
P. EdelmanChief Financial OfficerKenneth Cole Productions, Inc.
November 6, 2009