UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark One)x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                     EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2010 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                     EXCHANGE ACT OF 1934 For the transition period from___________to___________  Commission File No. 1-13082KENNETH COLE PRODUCTIONS, INC.(Exact name of registrant as specified in its charter)New York
                           
                           
                           13-3131650(State or other jurisdiction of
                           
                           
                           (I.R.S. Employerincorporation or organization)
                           
                           
                           Identification No.)603 West 50th Street, New York, NY 10019(Address of principal executive offices)(212) 265-1500(Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act:Class A common stock, par value $.01 per share Securities registered pursuant to Section 12 (g) of the Act:None Indicate by check mark if the registrant is a well-known seasoned
                  issuer, as defined in Rule 405 of the Securities Act. Yes o No x Indicate by check mark if the registrant is not required to file
                  reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x 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 o Indicate by checkmark whether the registrant has submitted
                  electronically and posted on its corporate Website, if any, every
                  Interactive Data File required to be submitted and posted pursuant to
                  Rule 405 of Regulation S-T during the preceding 12 months (or for
                  such shorter period that the registrant was required to submit and
                  post such files.) Yes o No o 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 the 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. o 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. (Check one): Large accelerated filer o Accelerated filer x Non-accelerated filer o Smaller reporting company o Indicate by check mark whether the registrant is a shell company (as
                  defined in Rule 12b-2 of the Act). Yes o No x The aggregate market value of voting and non-voting stock held by
                  non-affiliates of the registrant as of the close of business on June
                  30, 2010: $104,905,185 Number of shares of Class A Common Stock, $.01 par value, outstanding
                  as of the close of business on March 1, 2011: 10,217,881 Number of shares of Class B Common Stock, $.01 par value, outstanding
                  as of the close of business on March 1, 2011: 8,010,497 DOCUMENTS INCORPORATED BY REFERENCE The information required by Part III of Form 10-K is incorporated
                     herein by reference to the Registrant's definitive proxy statement to
                     be mailed to the shareholders of the Registrant by April 30, 2011.


Kenneth Cole Productions, Inc.TABLE OF CONTENTSPagePART IItem 1
                           
                           
                           Business
                           
                           
                           3Item 1A
                           
                           
                           Risk Factors
                           
                           
                           16Item 1B
                           
                           
                           Unresolved Staff Comments
                           
                           
                           23Item 2
                           
                           
                           Properties
                           
                           
                           23Item 3
                           
                           
                           Legal Proceedings
                           
                           
                           23Item 4
                           
                           
                           Submission of Matters to a Vote of Security Holders
                           
                           
                           23PART IIItem 5
                           
                           
                           Market for Registrant's Common Equity, Related Stockholder Matters
                                 and Issuer Purchases of Equity Securities
                           
                           
                           24Item 6
                           
                           
                           Selected Financial Data
                           
                           
                           27Item 7
                           
                           
                           Management's Discussion and Analysis of Financial Condition and
                                 Results of Operations
                           
                           
                           28Item 7A
                           
                           
                           Quantitative and Qualitative Disclosures About Market Risk
                           
                           
                           36Item 8
                           
                           
                           Financial Statements and Supplementary Data
                           
                           
                           36Item 9
                           
                           
                           Changes in and Disagreements with Accountants on Accounting and
                                 Financial Disclosure
                           
                           
                           36Item 9A
                           
                           
                           Controls and Procedures
                           
                           
                           36Item 9B
                           
                           
                           Other Information
                           
                           
                           37PART IIIItem 10
                           
                           
                           Directors, Executive Officers and Corporate Governance
                           
                           
                           38Item 11
                           
                           
                           Executive Compensation
                           
                           
                           38Item 12
                           
                           
                           Security Ownership of Certain Beneficial Owners and Management and
                                 Related Stockholder Matters
                           
                           
                           38Item 13
                           
                           
                           Certain Relationships and Related Transactions, and Director Independence
                           
                           
                           38Item 14
                           
                           
                           Principal Accounting Fees and Services
                           
                           
                           38PART IVItem 15
                           
                           
                           Exhibits, Financial Statement Schedules
                           
                           
                           38
 2


Item 1. Business Important Factors Relating to Forward Looking Statements The Private Securities Litigation Reform Act of 1995 (the "Reform
                  Act") and Section 21E of the Securities Exchange Act of 1934, as
                  amended, (the "Exchange Act") provide a safe harbor for
                  forward-looking statements made by or on behalf of Kenneth Cole
                  Productions, Inc. (the "Company"). The Company and its
                  representatives may from time to time make written or oral statements
                  that are "forward-looking," including statements contained in this
                  report and other filings with the Securities and Exchange Commission
                  (the "SEC") and in reports to the Company's shareholders.
                  Forward-looking statements generally refer to future plans and
                  performance and are identified by the words "believe," "expect,"
                  "anticipate," "plan," "intend," "will," "estimate," "project," or
                  similar expressions. All statements that express expectations and
                  projections with respect to future matters, including, but not
                  limited to, the launching or prospective development of new business
                  initiatives, future licensee sales growth, gross margins, store
                  expansion, openings and closings, changes in distribution centers and
                  implementation of management information systems, are forward-looking
                  statements within the meaning of the Reform Act. These statements are
                  made on the basis of management's views and assumptions, as of the
                  time the statements are made, regarding future events and business
                  performance and are subject to certain risks and uncertainties.
                  Should one or more of these risks or uncertainties materialize or
                  should underlying assumptions prove incorrect, actual results may
                  vary materially from those anticipated, estimated or projected. While the Company does communicate from time to time with securities
                  analysts, it is against Company policy to disclose to them any
                  material non-public information. Shareholders should not assume that
                  the Company agrees with any statement or report issued by an analyst,
                  regardless of the content of such statement or report. To the extent
                  that reports issued by securities analysts contain any projections,
                  forecasts or opinions, they are not the responsibility of the Company. There can be no assurance that management's expectations will
                  necessarily come to pass. A number of factors affecting the Company's
                  business and operations could cause actual results to differ
                  materially from those contemplated by the forward-looking statements.
                  Those factors include, but are not limited to, changes in domestic
                  economic conditions or in political, economic or other conditions
                  affecting foreign operations and sourcing, demand and competition for
                  the Company's products, risks associated with uncertainty relating to
                  the Company's ability to implement its growth strategies or its
                  ability to successfully integrate acquired business, risks arising
                  out of litigation or trademark conflicts, changes in customer or
                  consumer preferences on fashion trends, delays in anticipated store
                  openings and changes in the Company's relationship with its suppliers
                  and other resources. This list of factors that may affect future
                  performance and the accuracy of forward-looking statements are
                  illustrative, but by no means exhaustive. Accordingly, readers of
                  this annual report should consider these facts in evaluating the
                  information and are cautioned not to place undue reliance on the
                  forward-looking statements contained herein. The Company undertakes
                  no obligation to update or revise publicly any forward-looking
                  statements, whether as a result of new information, future events or
                  otherwise. General The Company 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 Le Tigre brand names, as well as footwear under the proprietary trademark Gentle Souls. 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 modern fashion conscious consumers
                  who seek accessible designer fashion that reflects a metropolitan
                  lifestyle. 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 5,200 domestic
                  department and specialty store locations, the Company's full-priced
                  retail stores, Company Stores ("outlets" or "outlet stores"), and its
                  e-commerce website, as well as internationally through its licensee
                  partners and international retailers. 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, 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, socks,
                  underwear, belts, business cases, small leather goods,
 3


sunglasses, prescription eyewear, watches, jewelry and fragrance.
                  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 and fragrance. In addition, the Company licenses luggage and
                  children's apparel. In October 2010, the Company announced that it
                  had made the strategic decision to terminate the licensing agreement
                  with its women's sportswear licensee effective June 1, 2011, and will
                  be bringing the business in-house starting with the Fall 2011 season. Business Strategies To accelerate growth and increase long-term shareholder value, the
                  Company is focused on six strategic initiatives:  1)
                           
                           
                           CREATING COMPELLING PRODUCT that represents the metropolitan
                              lifestyle of the Kenneth Cole brand and offers customers modern
                              styling, innovative design elements and a strong price-value
                              relationship.2)
                           
                           
                           ENERGIZING THE BRAND through creative marketing and advertising that
                              is consistent across consumer touch points to ensure that Kenneth
                              Cole is known as the quintessential metropolitan lifestyle brand for
                              modern men and women.3)
                           
                           
                           ACCELERATING RETAIL to showcase the full product assortment of the
                              Kenneth Cole brand through Company-owned stores and its e-commerce
                              website and provide customers with an engaging shopping experience.4)
                           
                           
                           EVOLVING WHOLESALE by working closely with retail partners to
                              leverage the power of our brands across multiple categories and
                              provide targeted assortments that meet the needs of individual
                              retailers.5)
                           
                           
                           GOING GLOBAL by focusing on increasing penetration in existing
                              markets and selectively entering new territories with high growth
                              potential.6)
                           
                           
                           BUILDING A WINNING, CONSUMER-DRIVEN CULTURE with an emphasis on
                              building strong talent and improving operating capabilities. Products The Company designs, markets, distributes and licenses a broad range
                  of lifestyle products including footwear, apparel and accessories for
                  men, women and children. Footwear, handbags and men's sportswear are
                  developed in-house and all other categories are licensed. In-House Categories Footwear: Products include a broad selection of men's, women's, and
                  children's footwear across multiple categories and wear occasions. Handbags: Handbag collections include a broad range of leather and
                  non-leather styles suitable for multiple end uses. Sportswear: Assortment includes an extensive collection of men's sportswear
                  including knits, wovens, pants, sweaters, and jackets, as well as a
                  limited assortment of women's ready-to-wear that is sold exclusively
                  through the Company's owned retail stores and website.
 4


Licensed Categories Working closely with its licensee partners, the Company has been able
                  to extend its brands into a wide variety of categories including
                  jewelry, fragrance, watches, luggage, small leather goods, swimwear,
                  hosiery, eyewear, women's sportswear, men's tailored clothing and
                  neckwear, outerwear, and sleepwear among others. Brands The Company has a strong portfolio of well-known and differentiated
                  brands including Kenneth Cole New York, Kenneth Cole Reaction, Unlisted, Gentle Souls,and Le Tigre. Each of these brands has a distinct positioning and appeals to
                  targeted consumer groups, as described below. The Company believes
                  that further segmentation and development of the brands affords
                  significant growth potential within each of the Company's business
                  segments. Kenneth Cole New York Kenneth Cole New Yorkis modern, day-to-night, work-to-weekend fashion for men and women 25
                  - 44 aspiring to live the metropolitan dream. The collection is
                  designed for a sophisticated, modern consumer looking for accessible
                  designer fashion. Kenneth Cole New York has evolved into a full lifestyle collection with broad appeal, and
                  offers a strong balance of fashion-forward styles and core basics
                  across men's and women's footwear, apparel, and accessories. Kenneth Cole New York is both aspirational and authentic, offering consumers a glimpse
                  into Kenneth Cole's chic metropolitan lifestyle, and competes with
                  contemporary designer collections generally at bridge price points.
                  As a result of strong brand recognition and a reputation for style,
                  quality and value, the Company believes that Kenneth Cole New York is an important resource for better department and specialty stores,
                  both within the United States and internationally. Kenneth Cole New York is also sold within the Company's owned retail stores and online at
                  www.kennethcole.com. Kenneth Cole Reaction Kenneth Cole Reaction is a full lifestyle brand that offers cool, casual, modern style
                  with an energetic, downtown sensibility. The brand provides
                  well-priced designer fashion, with unique design details principally
                  to young men and women 18 - 35. Kenneth Cole Reaction offers a broad range of men's, women's, and children's footwear,
                  apparel and accessories generally at better price points. The brand
                  emphasizes versatility, contemporary styling, and value, and is ideal
                  for a broad range of wearing occasions including work, weekend, and
                  evenings out. Kenneth Cole Reaction is primarily sold in department stores nationwide, in the Company's
                  owned retail stores, online at www.kennethcole.com, and
                  internationally. In March 2010 the Company entered into an exclusive relationship with
                  Macy's to market and distribute Kenneth Cole Reaction men's sportswear. Upon its launch in fall 2010, Kenneth Cole Reaction sportswear is now sold exclusively at Macy's in 210 stores. Unlisted The Unlistedbrand offers trendy, affordable footwear and accessories for children
                  as young as one year old and for young men and women 15 - 25. The Unlisted brand provides modern styling at more moderate prices, and enables
                  the Company to target a younger consumer base. The brand offers men's
                  footwear, women's footwear, and women's handbags for a range of
                  casual and dressier occasions, and is primarily sold in mid-tier
                  department stores and national chains. Gentle Souls Gentle Souls organic women's footwear combines extraordinary comfort with
                  everyday style for smart, sophisticated women 35 - 50. Gentle Souls offers patented comfort technology and high-quality materials across
                  a range of women's footwear for work and everyday wear. Gentle Soulsis sold at a limited selection of specialty stores, in better
                  department stores, in the Company's owned retail stores and online at
                  www.kennethcole.com.
 5


Le Tigre Le Tigre is a preppy, casual lifestyle brand targeting young men and women 18
                  - 30. The brand offers consumers colorful, retro-inspired,
                  all-American apparel, footwear, and accessories for the weekend and
                  casual workplace. In November 2007, the Company entered into a two
                  and a half year agreement with JC Penney ("JCP") to relaunch the
                  brand within JCP stores. The Company and JCP mutually agreed not to
                  renew the agreement upon expiration in July 2010. Le Tigre is currently distributed through several domestic Kenneth Coleoutlet stores, e-commerce and has select licensed distribution in
                  Asia and the United Kingdom. Business Segments The Company has three business segments, Wholesale, Consumer Direct
                  and Licensing. The table below presents each business segment as a
                  percentage of net revenues:  For the Year Ended December 31,2010
                           
                           
                           2009
                           
                           
                           2008Wholesale
                           
                           
                           48
                           %
                           
                           49
                           %
                           
                           54
                           %Consumer Direct
                           
                           
                           42
                           
                           
                           41
                           
                           
                           37Licensing
                           
                           
                           10
                           
                           
                           10
                           
                           
                           9Total
                           
                           
                           100
                           %
                           
                           100
                           %
                           
                           100
                           % Wholesale The wholesale channel represents roughly half of total net revenues
                  and includes sales to department stores, independent specialty
                  stores, national chains and mass market retailers. The Company
                  continues to reinforce the segmentation of its brands in wholesale by
                  clarifying brand positioning and developing unique product
                  assortments for key retail partners. This segmentation approach
                  provides opportunities to increase market penetration, attract new
                  customers and further enables the Company to address a wider variety
                  of customers' needs, both domestically and internationally. To
                  develop this channel, the Company leverages its aspirational,
                  lifestyle marketing, and works with retail partners to ensure the
                  in-store experience is memorable and engaging. The Company employs a
                  sales force, as well as corporate account specialists, to sell its
                  products and to manage its relationships with its wholesale
                  customers. The Company continues to tightly manage inventory in this
                  channel given current market conditions. Domestic The Company's products are distributed to approximately 1,100
                  wholesale accounts for sale in approximately 4,700 store locations
                  domestically. The Company markets its branded products to major
                  department stores, such as Macy's and Dillard Department Stores, and
                  upscale specialty retailers, including Bloomingdales and Nordstrom.
                  In addition, the Company sells its products to independent retail
                  stores and footwear chains throughout the country. The Company sells
                  out-of-season branded products and overruns to off-price retailers. The Company markets its product lines and introduces new styles at
                  separate industry-wide footwear, handbag and apparel tradeshows that
                  occur several times throughout the year in New York, Las Vegas,
                  Milan, Italy and at various domestic regional shows. These tradeshows
                  also afford the Company the opportunity to assess preliminary demand
                  for its products. After each show, the Company's sales force and
                  corporate account specialists visit customers to review the Company's
                  product lines and to secure purchase commitments. The Company's
                  products are also displayed at showrooms in New York as well as in
                  various showrooms of its licensees for their specific product
                  category. International The Company commenced international wholesale distribution in 2007.
                  Currently, the Company is partnering with retailers in Europe,
                  Australia, Malaysia and the Middle East. The Company manages its
                  Canadian footwear and handbag operations from its New York City
                  headquarters with a sales staff and third-party distribution center
                  in Canada.  The Company markets its branded products in Canada to
                  independent specialty retailers and large department stores,
                  including Hudson Bay and Sears Canada.
 6


Private Label The Company designs, develops and sources private label footwear and
                  handbags for selected retailers. These private label customers
                  include major retailers that do not purchase the Company's existing
                  brands. The Company's private label business requires minimal
                  overhead and capital because the Company does not typically incur any
                  costs related to importing, shipping or warehousing of inventory, all
                  of which are usually borne by the private label customer. Consumer Direct The Company's Consumer Direct segment, which operates full-priced
                  retail stores and outlets, as well as e-commerce ("Internet"),
                  affords significant growth potential and provides the ability to
                  control the retail and brand experience for consumers. Retail stores
                  and the e-commerce site provide a showcase for the brand, typically
                  carrying a full lifestyle assortment of footwear, apparel, and
                  accessories for both men and women. The Company believes that the
                  Consumer Direct segment increases awareness of the Company's brands,
                  reinforces the Company's image, and builds brand equity. As of December 31, 2010, the Company operated 105 full-priced retail
                  stores and outlets as compared to 110 stores as of December 31, 2009. Retail Operations The Company continues to pursue opportunities to optimize its retail
                  operations through select store openings, closings, and
                  right-sizings. At December 31, 2010, the Company operated 33 Kenneth Colefull-priced retail stores and 72 outlet stores under the Kenneth Cole name. The Company opened 5 outlets in 2010 under the Kenneth Colename and one Kenneth Cole full-priced retail store. In addition, the Company closed 6
                  full-priced retail stores in 2010, one outlet store under the Kenneth Cole name and 4 outlet stores under the Le Tigre name. Subsequent to December 31, 2010, the Company has closed an
                  additional seven full-priced retail stores, including its Rockefeller
                  Center location, and plans to close two additional stores in the
                  first half of 2011. A portion of the products sold in the Company's full-priced retail
                  stores are sourced exclusively for those stores to differentiate the
                  product mix from that of its wholesale customers. Similarly, a
                  portion of the products sold in outlets are sourced exclusively for
                  those stores to differentiate their product mix from that of
                  full-priced retail stores and wholesale customers, and to enhance
                  merchandising and improve gross margins. To drive real estate productivity in all of its stores, the Company
                  is focused on enhanced merchandising and assortments, improving the
                  price-value of its products, creating a memorable and engaging
                  customer experience, maximizing conversion opportunities, and
                  improving core processes including inventory planning and
                  fulfillment. The Company believes that its retail stores represent an
                  opportunity for future revenue and earnings growth. Internet The Company maintains a website to provide information regarding the
                  Company and its products, as well as to conduct online business. The
                  Company believes that its website not only serves as an alternative
                  distribution channel and source of incremental revenue, but is also a
                  key communications vehicle to build brand equity, raise consumer
                  awareness, and drive traffic to Kenneth Cole retail stores and the stores of wholesale partners. The Company
                  continues to invest in enhancing its website, www.kennethcole.com,to improve navigation, visual presentation, and the overall customer experience. The Company also maintains two toll-free telephone numbers
                  (1-800-KEN-COLE and 1-800-UNLISTED), which provide customer service
                  and answers to product-related questions. In July 2008, the Company
                  outsourced customer care, fulfillment and website functionality
                  responsibilities related to its internet business to a third party
                  that provides direct-to-customer e-commerce services. Licensing The Company believes its strategic licensing relationships are
                  essential to the growth of the Company both domestically and abroad.
                  Many of the existing licensee businesses are still relatively small
                  in their individual product classifications and the Company believes
                  they hold growth potential. The Company chooses its licensing
                  partners with care, considering many factors, including the strength
                  of their design, sourcing and distribution abilities, thereby
                  attempting to maintain the same value and style that Kenneth Cole customers have come to expect.
 7


Domestic Licensing The strength of the Company's brands, Kenneth Cole New York,Kenneth Cole Reaction,Unlisted, and Le Tigre provides opportunities, through licensing agreements, to expand into
                  new product categories and broaden existing distribution channels.
                  The Company views its licensing agreements as a vehicle to meet the
                  needs of consumers without compromising on price, value or style. The
                  Company considers entering into licensing and distribution agreements
                  with respect to certain products if such agreements provide more
                  effective design, sourcing, marketing and distribution of such
                  products than could be achieved internally. The Company continues to
                  pursue opportunities in new product categories that it believes to be
                  complementary to its existing product lines. Licensees range from medium-sized manufacturers to companies that are
                  among the industry leaders in their respective product categories.
                  The Company selects licensees that it believes can produce and
                  service quality fashion products consistent with the Kenneth Cole New York, Kenneth Cole Reaction, Unlisted,andLe Tigre brand images. The Company communicates its design direction and coordinates all
                  marketing efforts with its licensees. The Company generally grants
                  licenses for three to five year terms with renewal options, limits
                  licensees to certain territorial rights and retains the right to
                  terminate the licenses if certain specified sales levels are not
                  attained. Each license provides the Company with the right to review,
                  inspect and approve all product designs and quality and approve any
                  use of its trademarks in packaging, distribution, advertising and
                  marketing. The Company plans to continue to draw upon the creative
                  strength of its founder, Kenneth D. Cole, and its design team, as
                  well as its marketing resources to ensure brand integrity with its
                  licensing partners. The following table summarizes the Company's product categories being
                  retailed under its licensing agreements at the end of 2010 for the Kenneth Cole New York, Kenneth Cole Reaction,Unlistedand Le Tigrebrands:  Kenneth Cole
                           
                           
                           Kenneth ColeProduct Category
                           
                           
                           New York
                           
                           
                           Reaction
                           
                           
                           Unlisted
                           
                           
                           Le TigreMen's Tailored Clothing
                           
                           
                           X
                           
                           
                           XMen's Sportswear
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           XMen's Outerwear
                           
                           
                           X
                           
                           
                           XMen's Underwear
                           
                           
                           
                           
                           
                           XMen's Neckwear
                           
                           
                           X
                           
                           
                           XMen's Dress Shirts
                           
                           
                           X
                           
                           
                           XMen's Casual Pants
                           
                           
                           
                           
                           
                           XMen's Small Leather Goods
                           
                           
                           X
                           
                           
                           XMen's Belts
                           
                           
                           X
                           
                           
                           XMen's Socks
                           
                           
                           XMen's Jewelry
                           
                           
                           X
                           
                           
                           XMen's Luggage/Briefcases
                           
                           
                           X
                           
                           
                           XWomen's Apparel
                           
                           
                           X
                           
                           
                           
                           
                           
                           
                           
                           
                           XWomen's Outerwear
                           
                           
                           X
                           
                           
                           XWomen's Underwear
                           
                           
                           
                           
                           
                           XWomen's Small Leather Goods
                           
                           
                           
                           
                           
                           XWomen's Jewelry
                           
                           
                           XWomen's Swimwear
                           
                           
                           X
                           
                           
                           XWomen's Luggage/Briefcases
                           
                           
                           X
                           
                           
                           XMen's/Women's Sleepwear
                           
                           
                           
                           
                           
                           XMen's/Women's Watches
                           
                           
                           X
                           
                           
                           
                           
                           
                           XMen's/Women's Optical Frames
                           
                           
                           X
                           
                           
                           XMen's/Women's Sunglasses
                           
                           
                           X
                           
                           
                           XMen's/Women's Fragrances
                           
                           
                           X
                           
                           
                           XChildren's Apparel
                           
                           
                           
                           
                           
                           X The Company's licensees of the Kenneth Cole New York, Kenneth Cole Reaction, and Unlistedbrands are required to contribute to the Company a percentage of
                  their net sales of licensed products, subject to minimum amounts, for
                  the ongoing marketing of the Kenneth Colebrands. The Company currently has a corporate gift program, whereby corporate
                  customers are sold Kenneth Cole items for award and recognition programs through a third-party
                  provider. Orders are drop-shipped from the Company's licensees or its
                  warehouses. The Company believes this is another avenue to enhance
                  customer awareness and strengthen market position of its various
                  brands.
 8


International Licensing At December 31, 2010, the Company, through its licensees, operated 69
                  freestanding stores and 64 shop-in-shops around the world. In 2010,
                  the Company opened 24 shop-in-shops in the Asian and Middle Eastern
                  markets. In 2009, Le Tigrewas launched in Taiwan and the Company expects further expansion into
                  Asia and Latin America. The Company sells its products through distributors and licensees to
                  wholesale customers and direct retailers in international markets
                  including Canada, Mexico, South America, Central America, the
                  Caribbean Islands, Europe, the Middle East, and Asia. The Company is
                  also committed to expanding its product classifications
                  internationally to leverage the capabilities of its licensing
                  partners, particularly in watches, fragrance and eyewear. The Company's Latin American licensee agreement covers Mexico,
                  Central America, South America and the Caribbean, with the exception
                  of Brazil, Argentina and Uruguay. Currently, the Company's licensee
                  operates 45 stores and various shop-in-shops in this region. Within
                  the Middle East and Asia, the Company's licensees maintain 24 retail
                  stores and numerous shop-in-shops at local department stores. The
                  stores are located in the United Arab Emirates, Israel, Bahrain,
                  Kuwait, Oman, the Philippines, Thailand and Taiwan. In Europe, the
                  Company's licensee sells footwear to department stores within the
                  United Kingdom and has also entered into an exclusive arrangement
                  with a leading department store to sell men's tailored clothing,
                  apparel, dress shirts and neckwear, as well as women's apparel and
                  accessories in the United Kingdom. In Canada, the Company also
                  continues to sell and market its products through its licensing
                  partners excluding footwear and handbags which is distributed
                  directly by the Company. The Company is planning the expansion of its international licensing
                  programs as a means of developing a truly global brand, and believes
                  that international markets represent an opportunity for future
                  revenue and profit growth. The Company believes its international
                  licensing partners will play a critical role in its go forward
                  strategy, and takes significant care to align itself with viable
                  business partners around the world. Design Kenneth D. Cole founded Kenneth Cole Productions in 1982, and today
                  is the Company's Chairman, Interim Chief Executive Officer and Chief
                  Creative Officer. The Company's success is largely attributed to Mr.
                  Cole's creative vision, from footwear, fashion and accessory design,
                  to his marketing and advertising prowess. He remains actively
                  involved in driving the creative vision of the Company, including the
                  design of all product categories and brands. In 2009, Mr. Cole hired
                  the Company's first Creative Director to oversee product design on a
                  daily basis, including managing a team of in-house designers as well
                  as directing external licensees. Reporting into Mr. Cole, the
                  Company's Creative Director is charged with creating compelling and
                  cohesive lifestyle collections for modern men and women that satisfy
                  their wardrobing needs from day-to-night and work-to-weekend. Great product is essential to the Company's success. The Company's
                  design team dedicates time to monitoring fashion trends to ensure the
                  collections are always modern and relevant. Select members of the
                  design team travel globally to assess fashion trends in Europe, the
                  United States and Asia, while searching for new inspiration. The team
                  also partners with the internal merchandising team and external
                  retail partners to stay aware of constantly shifting consumer
                  preferences. In order to reduce the impact of changes in fashion trends on the
                  Company's product sales and to increase the Company's profitability,
                  the Company modified its product assortments to provide a more
                  balanced mix of core and fashion items. The Company shifted its
                  assortment strategy so that core product is now roughly half of the
                  mix. It also introduced a number of products to address more casual
                  wear occasions and initiated good, better, best pricing tiers to
                  capture opening price points while maintaining high fashion content
                  at the top of the pyramid. With a greater assortment of core,
                  season-less styles the Company is able to capitalize on retailers'
                  strategies to maintain and reorder these styles throughout the year,
                  primarily through electronic data interchange ("EDI"). Product innovation has also been a key area of focus for the Company.
                  The Company has been reinventing its business classification by
                  classification, with the first major initiative being the re-launch
                  of Kenneth Cole New York ladies footwear, featuring its patented "9-2-5" comfort technology.
                  The Company re-engineered the comfort technology from its Gentle Souls footwear brand into attractive high-heeled shoes, which is a
                  classification of women's footwear that until now has never been able
                  to be made truly comfortable. This re-launch has generated excitement
                  across the entire business.
 9


Sourcing The Company does not own or operate any manufacturing facilities.
                  Instead, it sources its branded and private label products directly
                  or indirectly through independently-owned manufacturers primarily in
                  Italy and China, among other European and Asian locations. The
                  Company maintains an office in Dongguan, China and has long-standing
                  relationships with several independent buying agents to monitor the
                  production, quality and timely distribution of the Company's products
                  from its manufacturers. In 2009, the Company hired a Chief Supply
                  Chain Officer to oversee these operations while focusing on
                  cost-effective sourcing, quality, margin and speed-to-market
                  initiatives. The Company believes it has sufficient manufacturing sources
                  available to meet its current and future production requirements in
                  the event the Company is required to change current manufacturers or
                  current manufacturers are unavailable to fulfill the Company's
                  production needs however, there can be no assurance that, in the
                  event the Company is required to change its current manufacturers,
                  alternative suppliers will be available on terms comparable to the
                  Company's existing arrangements. In advance of the fall and spring selling seasons, the Company works
                  with its manufacturers to develop product prototypes for industry
                  tradeshows. During this process, the Company works with the
                  manufacturers to determine production costs, materials, break-even
                  quantities and component requirements for new styles. Based on
                  indications from the tradeshows and initial purchasing commitments
                  from wholesalers, the Company will place production orders with the
                  manufacturers. In addition, the Company has initiated a "test and
                  react," program whereby prototypes are rushed to its own retail
                  stores immediately after completion to determine initial consumer
                  response and purchase behavior. Successful styles are used to adjust
                  factory production and line development prior to initial season
                  shipping. As a result of the need to maintain in-stock inventory positions, the
                  Company places manufacturing orders for open stock and certain
                  fashion products prior to receiving firm commitments from its
                  customers. Once an order has been placed, the manufacturing and
                  delivery time ranges from three weeks to four months depending on
                  whether the product is new or is currently in production. Throughout
                  the production process, the Company monitors product quality through
                  inspections at both the factories and upon receipt at its warehouses.
                  To control inventory levels, the Company monitors sell-through data
                  on a weekly basis and seeks input on product demand from wholesale
                  customers and its retail stores to adjust production as needed.
                  Please refer to Footnote 15 for the Company's concentration risk. Advertising and Marketing The Company believes that marketing and advertising have been
                  integral in establishing the Kenneth Cole brand for almost three
                  decades, and are an essential part of its long-term growth strategy.
                  The Company also believes that its advertising campaigns have
                  differentiated and enhanced the brands, and that its unique social
                  voice has brought the Company global recognition for its timely focus
                  on current events and social issues. In 2010, the Company's campaigns continued to evolve to more clearly
                  communicate its fashion identity while retaining its unique social
                  voice. Over the past couple of years the campaigns have become
                  aspirational and fashion focused, featuring a selection of stylish
                  products for men and women that broaden the Company's lifestyle
                  appeal. The Company believes the creative concepts clearly depict its
                  position as the quintessential metropolitan lifestyle brand for
                  modern men and women who are confident, clever and cool. To best reach today's sophisticated audience, the Company employs a
                  comprehensive marketing strategy, including a strong focus on media,
                  public relations and channel marketing. The Company's media strategy
                  includes a traditional print and outdoor advertising plan as well as
                  a strong focus on digital and social media initiatives. The year 2010
                  marked the brand's foray into mobile commerce and mobile marketing,
                  as well as an intensified focus on social networking through the
                  Kenneth Cole Facebook and Twitter communities, which continue to
                  actively engage a rapidly growing group of followers and strengthen
                  the Company's connection with its consumer. In addition, the Company
                  believes public relations programs including feature stories, fashion
                  editorial, blogger coverage, special events, and personal appearances
                  by Kenneth D. Cole further enhance the Company's brand awareness
                  and equity. In order to continue to strengthen brand awareness, grow its consumer
                  base, and increase sales of its products, the Company actively
                  develops marketing programs for its Consumer Direct channels and
                  Wholesale partners. In 2010 the Company's marketing strategies
                  focused on further developing some of the new and successful
                  initiatives from 2009, including more targeted direct mail and mass
                  e-mail campaigns, in-store and online events, compelling windows and
                  in-store environments, signage and cash wrap programs, and
                  cooperative advertising, each of which feature a variety of branded
                  products marketed by the Company and its licensees. The Company
                  continues to focus on its consistency of messaging by aligning the
                  campaigns
 10


across all channels, geographies, and media, which it believes has
                  been instrumental in capturing greater share of mind. As a result of
                  these efforts, the Company believes that there is a more unified
                  focus, strong synergy and consistency in all of the Company's
                  communications. An additional aspect of the Company's marketing efforts is the
                  creation and placement of branded enhancements and shop-in-shops in
                  key department and specialty store locations. These focus areas are
                  achieved through the placement of branded fixtures, point of purchase
                  displays, logos and graphics, and create an environment that is
                  consistent with the Company's image. In 2010 the Company rolled out
                  210 new shop-in-shops for the launch of the Reaction men's sportswear brand at Macy's locations across the country and
                  plans to expand shop-in-shops to 350. The Company believes that these
                  in-store enhancements enable the retailer to display and stock a
                  greater volume of the Company's products per square foot of retail
                  space, and encourage longer-term commitment by retailers to the
                  Company's products while heightening consumer brand awareness. Another important component of the Company's marketing strategy is Awearness, the Kenneth Cole Foundation. Heavily promoted in 2008 with the publication of the "Awearness" book, Awearness, the Kenneth Cole Foundation is a philanthropic, not-for-profit entity that raises awareness,
                  increases prevention, supports education and eradicates stigma in the
                  fight against HIV/AIDS. The Company believes the initiative
                  differentiates and enhances the Kenneth Cole brand, while heightening awareness of the Company, its brands,
                  products and social issues. The Company utilizes its in-house staff for marketing, advertising
                  and public relations efforts, enabling the Company to maintain the
                  integrity of its brands. It utilizes outside agencies periodically to
                  assist in the development of public relations, social media and
                  marketing campaigns as well as to coordinate its international
                  efforts. The majority of the Company's licensees are required to
                  contribute to the Company a percentage of their net sales of licensed
                  products, subject to minimums, for the advertising and promotion of
                  the image of the Company's brands Distribution To facilitate distribution, the Company's products are inspected, bar
                  coded, packed and shipped from manufacturers by ocean or air to the
                  Company's distribution facilities located in the United States and
                  Canada. The Company utilizes fully-integrated information systems and
                  bar code technology to facilitate the receipt, processing and
                  distribution of products through third-party warehouse distribution
                  centers. The products are then shipped to the Company's wholesale and
                  direct customers either in predetermined sizes, in case packs or
                  under its open stock program. The Company's open stock program allows
                  its wholesale customers to reorder, typically via EDI, core basic
                  styles in a range of colors and sizes as well as many fashion styles,
                  for immediate shipment. While the open stock program requires an
                  increased investment in inventories, the Company believes this
                  program is an important service for its wholesale customers by
                  allowing them to manage inventory levels more effectively. The
                  Company expects that affording customers improved flexibility in
                  ordering specific stock keeping units ("SKUs") in smaller quantities
                  will ultimately reduce the incidence of markdowns and allowances. The Company has capitalized on its centralized distribution
                  facilities to provide additional support to its retail store
                  operations on daily shipments of footwear, handbags and apparel to
                  improve speed to market. The Company's EDI program is also used to
                  re-supply its retail stores on a variety of products, thereby
                  enhancing its service to the Company's retail operations through
                  improved inventory management and customer response. To facilitate
                  distribution, the Company has third-party public warehouses located
                  on both the east and west coasts of the United States, as well as in
                  Canada, to accommodate merchandise imported from Asia, Europe and
                  South America. The Company uses a third-party internet service
                  provider to handle distribution and warehousing as part of the
                  fulfillment agreement, while the Company supplies merchandise to the
                  provider based on customer demand. Information Technologies The Company believes that sophisticated information systems are
                  essential to maintain its competitive position and to support
                  continued growth. The Company's management information systems were
                  designed to provide, among other things, comprehensive order
                  processing, production, accounting and management information for the
                  sourcing, importing, distribution and marketing aspects of the
                  Company's business. The Company continues to update and enhance its
                  distribution and financial systems with newer technology that offers
                  greater functionality and reporting capabilities. The Company also
                  utilizes an EDI system that provides a computer link between the
                  Company and many of its wholesale customers, as well as its retail
                  operations, that enable the Company to receive online orders and to
                  accumulate sales information on its products shipped to its wholesale
                  customers, retail stores and internet customers. The Company's EDI
                  system also improves the efficiency of responding to customer needs
                  and allows both the customer and the Company to monitor purchases,
                  shipments and invoicing. In its retail stores, the Company uses
                  point-of-sale registers to capture sales data, track inventories,
                  monitor traffic and generate EDI replenishment orders.
 11


The Company regularly evaluates the adequacy of its information
                  technologies and upgrades such systems to support its growth. The
                  Company has an integrated business platform across the Company's
                  full-priced retail stores and outlet stores. The Company believes
                  that continuous upgrading and enhancements to its management
                  information systems to support growth and expansion, in both its
                  internal systems and in systems of third parties, is vital in
                  protecting the Company's financial condition and its operations. In
                  2008, the Company outsourced website responsibilities, customer care,
                  and fulfillment to GSI Commerce Inc. ("GSI"). The GSI e-commerce
                  platform improved functionality and was interfaced with the Company's
                  retail store system. Trademarks The Company, through its wholly-owned subsidiary, Kenneth Cole
                  Productions (LIC), LLC, owns federal registrations for its principal
                  trademarks Kenneth Cole, Kenneth Cole New York, Kenneth Cole Reaction, Reaction,and Unlistedas well as several other ancillary and derivative trademarks.  Also,
                  the subsidiary owns the Le Tigre trademark and other intellectual property associated with the Le Tigre brand and the Gentle Souls trademark, patent, certain other trade secrets and proprietary
                  processes, and other intellectual property associated with the Gentle Souls brand.  Each of the federal registrations is currently in full force
                  and effect.  In addition, the Company has several federal
                  applications pending in the United States Patent and Trademark office
                  for trademarks and service marks.  Moreover, the Company continues to
                  expand its current international registrations in numerous countries
                  throughout the world.  The Company regards its trademarks and other
                  proprietary rights as valuable assets in the marketing and
                  distribution of its products, and fully intends to maintain, renew
                  and protect the registrations, where appropriate and consistent with
                  pertinent law, as well as vigorously defend all of its trademarks
                  against infringements. Competition Competition in the footwear, handbag and apparel industries is
                  intense and these product classifications are subject to rapidly
                  changing consumer demands. The Company competes with numerous
                  designers, brands and manufacturers of footwear, handbags, apparel
                  and accessories, some of which are larger, have achieved greater
                  recognition for their brand names, have captured greater market share
                  and/or have substantially greater financial, distribution, marketing
                  and other resources than the Company. The Company also competes for
                  the limited shelf-space available for the display of its products to
                  consumers, and the Company's licensed apparel and accessories also
                  compete with a substantial number of designer and non-designer
                  brands. Moreover, the general availability of contract manufacturing
                  capacity allows access by new market entrants. The Company believes
                  the success of its business depends on its ability to stimulate and
                  respond to changing consumer preferences by producing innovative and
                  attractive products, brands and marketing, while remaining
                  competitive in quality and price. Foreign Operations The Company's business is subject to the risks of doing business
                  abroad, such as fluctuations in currency exchange rates, local market
                  conditions, labor unrest, political instability, actions of a public
                  enemy, military or other government intervention, priorities,
                  restrictions or allocations and the imposition of additional
                  regulations relating to imports, including quotas, duties or taxes
                  and other charges on imports. There can be no assurance that these
                  factors will not have a material adverse effect on the Company's
                  operations in the future. In order to reduce the risk of exchange rate fluctuations, the
                  Company may enter into forward exchange contracts to protect the
                  future purchase price of inventory denominated in foreign currencies.
                  These foreign currency forward exchange contracts are used to reduce
                  the Company's exposure to changes in foreign exchange rates and are
                  not held for the purpose of trading or speculation. Import Restrictions Although most of the goods sourced by the Company are not currently
                  subject to quotas, countries in which the Company's products are
                  manufactured may, from time to time, impose new or adjust prevailing
                  quotas or other restrictions on exported products. In addition, the
                  United States may impose new duties, tariffs and other restrictions
                  on imported products, any of which could have a material adverse
                  effect on the Company's operations and its ability to import its
                  products at current or increased quantity levels. In accordance with
                  the Harmonized Tariff Schedule, a fixed duty structure in effect for
                  the United States, the Company pays import duties on its products.
                  The majority of its products have import duties that primarily fall
                  within a range of approximately 6% to 37.5%, depending on the
                  category and the principal component of the product. Other
                  restrictions on the importation of footwear, apparel, and other
                  products are periodically considered by the United States government
                  and no assurance can be given that tariffs or duties on the Company's
                  goods may not be raised, resulting in higher costs to the Company, or
                  that import quotas restricting such goods may not be imposed or made
                  more restrictive.
 12


Seasonality The Company's products are marketed primarily for fall and spring
                  seasons, with slightly higher volume of wholesale products sold
                  during the first and third quarters. The Company's retail business
                  follows the general seasonal trends that are characteristic of the
                  retail industry, with sales and earnings highest in the fourth
                  quarter and weakest in the first quarter. Because the timing of
                  wholesale shipments of products for any season may vary from year to
                  year and retail's highest sales and earnings are in the fourth
                  quarter, the results for any one quarter may not be indicative of the
                  results for the full year. Customers The Company's department store customers include major United States
                  retailers, several of which are under common ownership. In 2010 and
                  2009, the Company had no customer or group under common ownership
                  account for more than 10% of consolidated sales. The Company's ten
                  largest customers represented 34.3% and 36.7% of the Company's net
                  sales for the years ended December 31, 2010 and 2009, respectively. Backlog The Company had unfilled wholesale customer orders through the end of
                  the second quarter of $62.0 million and $52.0 million as of March 2,
                  2011 and 2010, respectively. The Company's backlog at a particular
                  time is affected by a number of factors, including seasonality,
                  timing of market weeks and wholesale customer purchases of its core
                  products through the Company's open stock program. Accordingly, a
                  comparison of backlog from period to period may not be indicative of
                  eventual shipments. Sales Returns and Allowances The Company's chargebacks for deductions taken by its customers for
                  returns, discounts and allowances as well as potential future
                  customer deductions is significant to its operations. The Company
                  reserves against known chargebacks as well as potential future
                  customer deductions based on a combination of historical activity and
                  current market conditions. Actual results may differ from these
                  estimates under different assumptions or conditions, which may have a
                  significant impact on the Company's results. Employees At December 31, 2010, the Company had approximately 1,800 employees
                  (which include approximately 1,100 part-time employees), none of whom
                  are covered under a collective bargaining agreement. The Company
                  considers its relationship with its employees to be satisfactory.
 13


Executive Officers and Directors  Name
                           
                           
                           Age
                           
                           
                           Present PositionKenneth D. Cole
                           
                           
                           56
                           
                           
                           Chairman of the Board of Directors, Interim Chief Executive Officer
                              and Chief Creative OfficerJill Granoff
                           
                           
                           48
                           
                           
                           Chief Executive Officer, departed from the Company effective February 28, 2011David P. Edelman
                           
                           
                           49
                           
                           
                           Chief Financial Officer and TreasurerMichael F. Colosi
                           
                           
                           45
                           
                           
                           Senior Vice President and General Counsel and Corporate SecretaryPeter Charles
                           
                           
                           46
                           
                           
                           Chief Supply Chain OfficerMichael DeVirgilio
                           
                           
                           42
                           
                           
                           President of Licensing and InternationalDanesha Dixon Smith
                           
                           
                           38
                           
                           
                           Senior Vice President, Human ResourcesKristen Dykstra
                           
                           
                           39
                           
                           
                           Senior Vice President, Chief Marketing OfficerCarol Massoni
                           
                           
                           45
                           
                           
                           President of Consumer DirectChris Nakatani
                           
                           
                           47
                           
                           
                           President of WholesaleIngo Wilts
                           
                           
                           45
                           
                           
                           Senior Vice President, Creative DirectorMichael J. Blitzer
                           
                           
                           61
                           
                           
                           DirectorMartin E. Franklin
                           
                           
                           46
                           
                           
                           DirectorRobert C. Grayson
                           
                           
                           65
                           
                           
                           DirectorDenis F. Kelly
                           
                           
                           61
                           
                           
                           DirectorPhilip R. Peller
                           
                           
                           71
                           
                           
                           Director Kenneth D. Cole has served as the Company's Chairman of the Board since its
                  inception in 1982 and was also President until February 2002 and
                  Chief Executive Officer until May 2008. As of February 28, 2011, Mr.
                  Cole became the Company's Interim Chief Executive Officer. Prior to
                  founding Kenneth Cole Productions, Inc., Mr. Cole was a founder and,
                  from 1976 through 1982, a senior executive of El Greco, Inc., a shoe
                  manufacturing and design company which manufactured Candies women's
                  shoes. Mr. Cole is the Chairman of the Board of Directors of the
                  Foundation for AIDS Research ("amfAR"). In addition, he is on the
                  Board of Trustees of the Sundance Institute and the Council of
                  Fashion Designers of America. Jill Granoffserved as the Company's Chief Executive Officer from May 2008 until
                  her departure on February 28, 2011. Ms. Granoff was previously
                  Executive Vice President of Liz Claiborne Inc. ("Liz Claiborne")
                  where she had global responsibility for Juicy Couture, Lucky Brand
                  Jeans, Kate Spade and its Outlet and E-Commerce businesses. Prior to
                  joining Liz Claiborne, Ms. Granoff was President and Chief Operating
                  Officer of Victoria Secret Beauty, a division of Limited Brands,
                  where she worked from 1999 to 2006. From 1990 to 1999, Ms. Granoff
                  held various executive positions at The Estee Lauder Companies. Ms.
                  Granoff is a member of the Board of Governors of Cosmetic Executive
                  Women and The Women's Forum. David P. Edelman was appointed as the Chief Financial Officer in July 2004. He joined
                  the Company in January 1995 and served as the Company's Senior Vice
                  President of Finance since April 2000. Before joining the Company,
                  Mr. Edelman was Chief Financial Officer of a women's suit wholesaler,
                  and he was employed for 10 years as a Certified Public Accountant
                  with Ernst & Young ("E&Y") in various specialty groups including
                  E&Y's National Consulting Office and its Retail and Apparel Audit
                  Group. Mr. Edelman serves on the Board of Directors of the American
                  Apparel and Footwear Association. Michael F. Colosihas been the Company's Senior Vice President, General Counsel and
                  Corporate Secretary since March 2007. Mr. Colosi previously served as
                  Corporate Vice President and General Counsel for the Company from
                  July 2000 to February 2007 and as Corporate Secretary since July
                  2004. Prior to joining the Company, Mr. Colosi was the Associate
                  General Counsel and Assistant Secretary for The Warnaco Group, Inc.
                  from 1996 to 2000. After clerking for Judge J. Edward Lumbard of the
                  U.S. Court of Appeals for the Second Circuit, he was associated with
                  major law firms from 1992 to 1996. Peter J. Charles joined the Company as its Chief Supply Chain Officer in August 2009.
                  Mr. Charles was previously Executive Vice President of Sourcing and
                  Production at The Nine West Footwear Group where he was responsible
                  for a portfolio of over 15 brands such as Nine West, Anne Klein, Enzo
                  Angiolini, Joan and David and 9&Co. Prior to The Nine West Footwear
                  Group, Mr. Charles spent eight years at The Striderite Corporation in
                  the role of Senior Vice President and General Manager for Striderite
                  Sourcing International. Prior to The Striderite Corporation, Mr.
                  Charles worked for The Timberland Company in the role of Vice
                  President of Footwear Sourcing. From 1985 to 1996, Mr. Charles held
                  various leadership positions at Clarks Shoes.
 14


Michael DeVirgilio was named President of Licensing and International in February 2009.
                  Mr. DeVirgilio previously served as Executive Vice President of
                  Business Development from January 2006 to February 2009. He served as
                  Senior Vice President of Licensing from May 2005 to January 2006. 
                  Prior to that, he served as Corporate Vice President of Licensing and
                  Design Services from March 2002 to May 2005. From 1999 to 2001, Mr.
                  DeVirgilio served as Divisional Vice President of Licensing. Mr.
                  DeVirgilio joined the Company as Director of Licensing in 1997. Prior
                  to joining the Company, Mr. DeVirgilio was Director of Merchandising
                  for the Joseph & Feiss Company (a division of Hugo Boss, USA). Danesha Dixon Smith joined the Company as Senior Vice President of Human Resources in
                  October 2008. She previously worked at Liz Claiborne, Inc. in
                  positions of increasing responsibility culminating in her appointment
                  as Senior Vice President, Human Resources. From April 2005 to April
                  2007, Ms. Smith was the Vice President of Human Resources at Cendant
                  Corporation where she worked in the company's real estate division.
                  Ms. Smith also held numerous leadership positions at the Home Depot. Kristen Dykstra joined the Company as Senior Vice President, Chief Marketing Officer
                  in August 2008. Ms. Dykstra was previously employed by BCBG Max Azria
                  Group, Inc. from October 1997 to July 2008, where she most recently
                  served as Senior Vice President of Global Marketing and Public
                  Relations. Prior to BCBG, Ms. Dykstra worked at various public
                  relations and advertising agencies including Orsi Public Relations
                  and Lord Dentsu & Partners, a division of Young & Rubicam. Carol Massoni joined the Company as President of Consumer Direct in February
                  2011.  Ms. Massoni most recently served as Senior Vice President,
                  Merchandising and Operations at Li & Fung USA with responsibility for
                  footwear design, merchandising, pricing, sourcing and production.
                  Prior to Li & Fung USA, Ms. Massoni worked at Nine West Group for
                  nearly 13 years where she most recently served as President of Jones
                  Retail Corporation.  In that role, Ms. Massoni successfully operated
                  nine different retail concepts as well as three web businesses. Ms.
                  Massoni had responsibility for over 1,100 stores and was instrumental
                  in building the retail business to over $800 million in sales.  Ms.
                  Massoni began her career in the Macy's Executive Training Program,
                  which culminated in numerous roles at Macy's in both merchandising
                  and operations. Chris Nakatanijoined the Company as President of Wholesale in March 2009. Mr.
                  Nakatani was most recently employed with Perry Ellis International
                  where he was the Corporate EVP Strategic Planning, responsible for
                  three separate wholesale divisions. From 1998 to 2006, Mr. Nakatani
                  was employed by Tommy Hilfiger in roles of increasing responsibility
                  including his last position as President of Sales & Planning. Prior
                  to Tommy Hilfiger, Mr. Nakatani was employed by Polo Ralph Lauren
                  from 1989 to 1998 where he served in roles of increasing
                  responsibility including those in sales and merchandising. He started
                  his career at Nordstrom. Ingo Wilts joined the Company as its Senior Vice President, Creative Director
                  in August 2009. Mr. Wilts was most recently employed with Hugo Boss,
                  where he spent nine years in roles of increasing responsibility. He
                  was most recently the SVP, Creative Director for BOSS Black, BOSS
                  Green, and the luxury brand BOSS Selection. Mr. Wilts had oversight
                  responsibility for all men's and women's product categories,
                  including apparel, footwear, and accessories. In addition, he oversaw
                  all brand image efforts for all channels of communication and store
                  visual merchandising. Prior to joining Hugo Boss, Mr. Wilts was the
                  Designer of men's sportswear at Joop!. He has additionally held
                  various design positions at Miltenberger where he worked on the
                  Lagerfeld and Daniel Hecter brands. Michael J. Blitzer is a Principal of Portsmouth Partners, LLC, an advisory firm that
                  provides operational and strategic services to private equity groups
                  that focus on retail, wholesale and consumer industries since 2005.
                  Previously, Mr. Blitzer served as the Vice Chairman of Phillips-Van
                  Heusen Corporation from September 1997 until he retired in November
                  2002. Mr. Blitzer spent over 30 years at Phillips-Van Heusen
                  Corporation and at Macy's in various executive merchandising
                  positions in Women's and Menswear, Accessories and Footwear. Mr.
                  Blitzer has also worked with a variety of companies in both apparel
                  and accessories including Neiman Marcus Group and Liz Claiborne Inc.
                  He has served as an Operating Partner with Goode Partners LLC, a New
                  York based, private equity firm, specializing in consumer industries
                  including retail, restaurants and entertainment. Mr. Blitzer has
                  served on the boards of Kate Spade, LLC, Charlotte Russe Holdings,
                  Inc. and LeSportsac Inc. and currently serves on the boards of
                  Charming Shoppes, Inc., Intermix LLC, and Modell's Sporting Goods. Martin E. Franklinhas served as the Chairman and Chief Executive Officer of Jarden
                  Corporation since 2001.  Previously Mr. Franklin served as Executive
                  Chairman of Bollé Inc. from 1997 to 2000.  He also held the position
                  of Chairman and CEO of Lumen Technologies, Inc. from 1996 to 1998,
                  and its predecessor, Benson Eyecare Corporation, from 1992 to 1996. 
                  Mr. Franklin has served as the Chairman of Liberty Acquisitions
                  Holdings, Corp from 2007 to 2010, prior to its acquisition of the
                  Phoenix Group.  He also served on the Board of Directors of GLG
                  Partners, Inc from 2007 to 2010.Mr. Franklin currently serves as a Director of GRUPO Prisa. Robert C. Graysonis the founder of Robert C. Grayson & Associates (d.b.a. The Grayson
                  Company), a broad-based consulting practice for the consumer goods
                  sector. From 1992 to 1996, Mr. Grayson served initially as an outside
                  consultant
 15


to Tommy Hilfiger Corp., a wholesaler and retailer of men's
                  sportswear and boyswear, and later accepted titles of Chairman of
                  Tommy Hilfiger Retail, Inc. and Vice Chairman of Tommy Hilfiger Corp.
                  From 1970 to 1992, Mr. Grayson served in various capacities for
                  Limited Inc., including President and CEO of Lerner New York from
                  1985 to 1992, and President and CEO of Limited Stores from 1982 to
                  1985. He has served as a director of Ann Taylor, Sunglass Hut and
                  Tommy Hilfiger. He currently serves as a director of St. John Knits,
                  Lillian August Inc. and U-Food. Denis F. Kelly is a Managing Partner at Scura Partners Securities LLC, a private
                  investment banking firm. From 1993 to 2000, he was a Managing
                  Director of Prudential Securities Inc. Previously, he served as the
                  President of Denbrook Capital Corporation, a merchant banking firm,
                  from 1991 to 1993.  From 1980 to 1991, Mr. Kelly held various
                  positions at Merrill Lynch, including Managing Director of Mergers &
                  Acquisitions and Managing Director of Merchant Banking.  Mr. Kelly
                  began his investment banking career at Lehman Brothers in 1974.  Mr.
                  Kelly is also on the Board of MSC Industrial Direct Co., Inc., a
                  director of Plymouth Financial Company, Inc., and Chairman of the
                  Board of Directors of Ashburn Hill Corporation. Philip R. Pellerwas employed by Arthur Andersen LLP for 39 years. Prior to his
                  retirement from Arthur Andersen in 1999, he served as Managing
                  Partner of Practice Protection and Partner Matters for Andersen
                  Worldwide SC, the coordinating entity for the activities of Arthur
                  Andersen and Andersen Consulting, from 1996 to 1999. Prior to that
                  appointment, Mr. Peller served as the Managing Director - Quality,
                  Risk Management and Professional Competence for the worldwide audit
                  practice. Mr. Peller joined Arthur Andersen in 1960 and was promoted
                  to Audit Partner in 1970. Mr. Peller is a Certified Public
                  Accountant. Mr. Peller is currently a member of the Board of
                  Directors and Chair of the Audit Committee of MSC Industrial Direct
                  Co., Inc. Available Information The Company files its annual, quarterly and current reports and other
                  information with the SEC. The certifications required under Section
                  302 of the Sarbanes-Oxley Act of 2002 are filed as exhibits to the
                  annual and quarterly reports on Form 10-K and Form 10-Q,
                  respectively. In addition, the Company has provided the annual
                  certification to the New York Stock Exchange. The Company's annual
                  reports on Form 10-K, quarterly reports on Form 10-Q, current reports
                  on Form 8-K and amendments to those reports filed or furnished
                  pursuant to Section 13(a) or 15(d) of the Exchange Act are available
                  free of charge in the "Investors" section under the subheading
                  "Corporate Info" on the Company's website, www.kennethcole.com. These
                  reports, and any amendments to these reports, are made available on
                  the Company's website as soon as reasonably practicable after such
                  reports are filed with or furnished to the SEC. The public may read
                  and copy any materials filed by the Company with the SEC at the SEC's
                  Public Reference Room at 100 F Street, NE, Washington, DC 20549. The
                  public may also obtain information on the operation of the Public
                  Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the
                  SEC maintains an Internet site that contains reports, proxy and
                  information statements and other information regarding the Company,
                  which is available at www.sec.gov. In addition, the Company's website, www.kennethcole.com,includes, free of charge, items related to corporate governance
                  matters, including the Company's Corporate Governance Guidelines,
                  charters of various committees of the Company's Board of Directors
                  and the Company's Code of Business Conduct and Ethics applicable to
                  employees, officers and directors. A printed copy of the Company's
                  Form 10-K, Corporate Governance Guidelines and Code of Business
                  Conduct and Ethics is available without charge by sending a written
                  request to: Investor Relations, Kenneth Cole Productions, Inc., 400
                  Plaza Drive, 3rd Floor, Secaucus, NJ 07094. Item 1A. Risk Factors The Company operates in a changing environment that involves numerous
                  known risks and uncertainties that could materially adversely affect
                  its operations. The risks described below highlight some of the
                  factors that have affected and in the future could affect the
                  Company's operations. Additional risks that the Company does not yet
                  know of or that it currently thinks are immaterial may also affect
                  business operations. If any of the events or circumstances described
                  below actually occurs, the Company's business, financial condition or
                  results of operations could be materially adversely impacted. The Company may not be able to respond to changing fashion and
                     consumer demands in a timely manner. The footwear, apparel and accessory industries are subject to
                  changing consumer demands and fashion trends. The Company believes
                  that its success depends in large part upon its ability to identify
                  and interpret fashion trends and to anticipate and respond to such
                  trends in a timely manner. The Company has generally been successful
                  in this regard but there can be no assurance that the Company will be
                  able to continue to meet changing consumer demands or to develop
                  successful styles in the future. If the Company misjudges the market
                  for a particular product or product line, it may result in an
                  increased inventory of unsold and outdated finished goods, which may
                  have an adverse effect on the Company's financial condition and
                  results of operations. In addition, any failure by the Company to
                  identify or respond to changing demands and trends could, in the long
                  term, adversely affect consumer acceptance of the Company's brand
                  names, which may have an adverse effect on the Company's
 16


business and prospects. The Company intends to market additional
                  lines of footwear, apparel and fashion accessories in the future. As
                  is typical with new products, demand and market acceptance for any
                  new products introduced by the Company will be subject to
                  uncertainty. Achieving market acceptance for each of these products
                  may require substantial marketing efforts and the expenditure of
                  significant funds to create customer demand. There can be no
                  assurance that the Company's marketing effort will successfully
                  generate sales or that the Company will have the funds necessary to
                  undertake such an effort. The success of the Company's business depends on its ability to
                     attract and retain key employees. The Company is heavily dependent on its current executive officers
                  and management. The loss of any of its executive officers or
                  management, including but not limited to, Kenneth D. Cole, or the
                  inability to attract and retain qualified personnel could delay the
                  development and introduction of new products, harm the Company's
                  ability to sell products, damage the image of its brands and/or
                  prevent the Company from executing its business strategy. The Company's business is subject to risks associated with sourcing
                     outside the United States. Substantially all of the Company's products are produced by
                  independent manufacturers. The Company faces the risk that these
                  third-party manufacturers with whom it contracts to produce its
                  products may not produce and deliver its products on a timely basis,
                  or at all. The Company cannot be certain that it will not experience
                  operational difficulties with its manufacturers, such as reductions
                  in the availability of production capacity, errors in complying with
                  product specifications, insufficient quality control, and failures to
                  meet production deadlines or increases in manufacturing costs. The
                  failure of any manufacturer to perform to the Company's expectations
                  could result in supply shortages for certain products and harm its
                  business. In addition, the Company's foreign manufacturers may be adversely
                  affected by additional factors such as political instability in
                  countries where contractors and suppliers are located, imposition of
                  regulations and quotas relating to imports, imposition of duties,
                  taxes and other charges on imports, significant fluctuation of the
                  value of the dollar against foreign currencies and restrictions on
                  the transfer of funds to or from foreign countries. The capacity of the Company's manufacturers to manufacture its
                  products also is dependent, in part, upon the availability of raw
                  materials. The Company's manufacturers may experience shortages of
                  raw materials, which could result in delays in deliveries of the
                  Company's products by its manufacturers or in increased costs to the
                  Company. Any shortage of raw materials or inability of a manufacturer
                  to manufacture or ship its products in a timely manner, or at all,
                  could impair the Company's ability to ship orders of its products in
                  a cost-efficient, timely manner and could cause the Company to miss
                  the delivery requirements of its customers. As a result, the Company
                  could experience cancellations of orders, refusals to accept
                  deliveries or reductions in its prices and margins, any of which
                  could harm the Company's financial performance and results of
                  operations. The Company relies on third parties for distribution and warehousing. The Company relies on warehousing and distribution facilities
                  operated by third parties in California, New Jersey and Ontario,
                  Canada. Any damage at any of these facilities due to fire,
                  earthquake, flood, terrorist attack or any other natural or man-made
                  cause, including operational or financial hardship of the provider or
                  its capacity, could impair a portion of the Company's inventory or
                  its ability to use its warehousing and distribution facilities. Implementation of management information systems may impact the
                     Company's financial results. The Company utilizes information management software in its retail
                  operations and may consider further expansion of the software as an
                  entity-wide integrated system solution. If any further implementation
                  of SAP or new system enhancements is initiated, delays or computer
                  and operational complications in connection with such implementation,
                  could have a material adverse effect on the Company's business,
                  financial condition or results of operations. Difficulties migrating
                  existing systems to any new software or enhancements could impact the
                  Company's ability to design, produce and ship its products on a
                  timely basis. Seasonality of the Company's business and the timing of store
                     openings and closings could result in fluctuations in its financial
                     performance. The Company's business is subject to seasonal fluctuations.
                  Historically, fourth quarter sales are typically higher due to
                  holiday business. Therefore, results of operations for any single
                  quarter are not necessarily indicative of the results that may be
                  achieved for a full fiscal year. Quarterly results have been, and in
                  the future will continue to be, significantly impacted by the timing
                  of new store openings and their respective pre-opening costs, as well
                  as store closings and related costs. In 2009, the financial results
                  of the Company were significantly impacted by the severe
                  deterioration of the economy which negatively impacted the full year
                  results in 2009.
 17


Adverse publicity could negatively affect public perception of the brand. The Company's results could be substantially affected by adverse
                  publicity resulting from its products or its advertising. Expiration of leases couldresult in fluctuations in the Company's financial performance. As retail store leases expire, the Company may not be able to renew
                  them on acceptable terms or secure suitable replacement locations.
                  While the Company continues to explore new markets and is always
                  evaluating new potential locations, some stores may close, and this
                  may have an adverse impact on the financial operations of the
                  Company's Consumer Direct division. The Company cannot assure the successful implementation of its
                     long-term strategic plan. The Company seeks to undertake a number of strategic initiatives,
                  including extending certain of its brands, conducting and executing a
                  strategic review of certain other of its brands, expanding its
                  geographic coverage and enhancing its operations. The success of its
                  long-term strategic plan and its ability to execute this plan are
                  subject to a variety of risks, including, but not limited to, the
                  following: The Company's strategy involves the expansion of the Company's retail
                     stores. The risks associated with that strategy are detailed above
                     under the heading "The Company's expectations of growth anticipate new store openings
                        which are subject to many factors beyond its control."
 The Company has strategically taken back its women's sportswear
                     business in-house from its licensee effective June 1, 2011. There can
                     be no assurances that the Company can transition the business to
                     continue the revenue stream and profitability from its former
                     licensee. The risks associated from its licensee strategy are also
                     detailed above under the heading "The Company relies on licensees for revenues, supply of products and
                        compliance with Company standards."
 As part of the Company's strategic plan, it designated certain brands
                     for strategic review, which includes the possible consolidation of
                     certain lines into other brands or the licensure of brands to third
                     parties. There can be no assurances that the Company will identify
                     the appropriate brands for strategic review or that the measures the
                     Company takes with respect to those brands will yield the intended
                     results.
 Part of the Company's strategic plan is the growth of the Le Tigre brand. The growth of that brand cannot be assured. In 2007, the
                     Company signed a two and a half year agreement with JC Penney to
                     relaunch the Le Tigrebrand at JC Penney. The Company and JC Penney mutually agreed not to
                     renew the agreement upon expiration in July 2010. The ability of the
                     Company to execute new or expanding licensee or distribution
                     agreements domestically and abroad for the brand, as well as ongoing
                     economic uncertainty, may negatively impact 2011 and beyond.
                     Additionally, the growth of the brand abroad may be challenged by
                     difficulties procuring the necessary trademarks and proprietary
                     rights.
 The Company has previously announced structural realignment measures
                     and other initiatives designed to yield substantial cost savings.
                     There can be no assurances that the Company can successfully execute
                     these measures or that they will produce the anticipated cost savings.
 The Company lacks the distribution channels abroad that it has in the
                     U.S., and it may have difficulty developing successful distribution
                     strategies and alliances in each of the major countries that it has
                     targeted for significant international growth. Additionally,
                     macroeconomic trends may continue to be extremely difficult, and
                     could limit the Company's ability to implement its growth strategies
                     in select geographies.
 The Company's sales are influenced by general economic cycles and the
                     current economic situation. Footwear, apparel and accessories are cyclical industries dependent
                  upon the overall level of consumer spending. The Company's wholesale
                  customers may anticipate and respond to adverse changes in economic
                  conditions and uncertainty by reducing inventories and canceling
                  orders. As a result, any of the following could reduce the Company's
                  sales and adversely affect its business and financial condition:
                  continued adverse general economic conditions, consumer confidence
                  and spending levels, consumer credit availability, global factory
                  production, commercial real estate market conditions, or credit
                  market conditions, or a substantial deterioration in any of these; a
                  substantial increase in fuel and energy costs, unemployment, or
                  interest rates; and any adverse acts of nature or political events. The current economic situation is having a significant negative
                  impact on businesses around the world, including some of the
                  Company's customers, suppliers and licensees. Although the Company
                  believes that its cash position will provide it with liquidity
                  sufficient to endure the current environment, the impact of current
                  market conditions on the Company's major customers, suppliers and
                  licensees cannot be predicted and may be severe. The inability of
                  major manufacturers to ship products could impair the Company's
                  ability to meet the delivery date requirements of the Company's
                  customers. A disruption in the ability of the Company's significant
                  customers and licensees to access liquidity could cause serious
                  disruptions or an overall deterioration of their businesses which
                  could lead to a significant reduction in their future orders of the
                  Company's products
 18


and the inability or failure on their part to meet their payment
                  obligations to the Company, any of which could have a material
                  adverse effect on the Company's results of operations. Additionally,
                  consumer demand for the Company's merchandise has been impacted by
                  consumer confidence and other economic factors currently impacting
                  consumer spending behavior. Furthermore, the Company derives a
                  relatively insignificant portion of its sales from international
                  markets, which enhances its exposure to domestic economic conditions. The footwear, apparel and accessory industries are highly
                     competitive. Any increased competition could result in reduced sales
                     or margins. Competition in the footwear, apparel and accessory industries is
                  intense. The Company's products compete with other branded products
                  within their product categories as well as with private label
                  products sold by retailers, including some of the Company's
                  customers. To varying degrees, depending on the product category
                  involved, the Company competes on the basis of style, price, quality,
                  comfort and brand prestige and recognition, among other
                  considerations. The Company also competes with numerous
                  manufacturers, importers and distributors of footwear, apparel and
                  accessories for the limited shelf space available for the display of
                  such products to the consumer. Moreover, the general availability of
                  contract manufacturing capacity allows ease of access by new market
                  entrants. Some of the Company's competitors are larger, have achieved
                  greater recognition for their brand names, have captured greater
                  market share and/or have substantially greater financial,
                  distribution, marketing and other resources than the Company. The loss of any of the Company's largest customers could have a
                     material adverse effect on its financial results. Although currently no customer comprises more than ten percent of the
                  Company's customer base, should one of its larger customers be
                  negatively impacted, it could adversely affect the Company's
                  business. In recent years the retail industry has experienced
                  consolidation and other ownership changes. In the future, retailers may continue to have financial problems,
                  consolidate, undergo restructurings or reorganizations, or realign
                  their affiliations, any of which could further increase the
                  concentration of the Company's customers. The loss of any of the
                  Company's largest customers, or the bankruptcy or material financial
                  difficulty of any customer, could have a material adverse effect on
                  its business. The Company does not have long-term contracts with any
                  of its customers, and sales to customers generally occur on an
                  order-by-order basis. As a result, customers can terminate their
                  relationships with the Company at any time or under certain
                  circumstances cancel or delay orders, which could reduce the
                  Company's sales and adversely affect its business condition. Imposition of quotas and fluctuations in exchange rates could
                     increase the Company's costs and impact its ability to source goods. The Company's business is subject to risks of doing business abroad,
                  including, but not limited to, fluctuations in exchange rates and the
                  imposition of additional regulations relating to imports, including
                  quotas, duties, taxes and other charges on imports. In order to reduce the risk of exchange rate fluctuations, the
                  Company may enter into forward exchange contracts to protect the
                  purchase price under its agreements with its manufacturers or
                  purchase products in United States dollars. The Company cannot fully
                  anticipate all of its currency needs and, therefore, cannot fully
                  protect against the effect of such fluctuations. Although the majority of the goods sold by the Company are not
                  currently subject to quotas, countries in which the Company's
                  products are manufactured may, from time to time, impose new or
                  adjust prevailing quotas or other restrictions on exported products
                  and the United States may impose new duties, tariffs and other
                  restrictions on imported products, any of which could adversely
                  affect the Company's operations and its ability to import its
                  products at the Company's current or increased quantity levels. Other
                  restrictions on the importation of footwear and the Company's other
                  products are periodically considered by the United States Congress
                  and no assurances can be given that tariffs or duties on the
                  Company's goods may not be raised. If tariffs are raised in the
                  future, they will result in higher costs to the Company, and if
                  import quotas are imposed or made more restrictive, the Company may
                  not be able to source its goods at historical factories or at similar
                  prices. War, acts of terrorism, and natural disasters could affect the
                     Company's ability to procure, sell and deliver product. In the event of actual or threatened war, acts of terrorism or the
                  escalation of existing hostilities, or in the event of a natural
                  disaster, the Company's ability to procure its products from its
                  manufacturers for sale to its customers may be negatively affected.
                  The Company imports a substantial portion of its products from other
                  countries. If it becomes difficult or impossible to import the
                  Company's products into the countries in which it sells its products,
                  the Company's sales and profit margins may be adversely affected.
                  Additionally, war, military responses to future international
                  conflicts, and possible future terrorist attacks may lead to a
                  downturn in the U.S. and/or international economies, which could have
                  a material adverse effect on the Company's results of operations.
 19


The Company relies on licensees for revenues, supply of products and
                     compliance with Company standards. The Company licenses its trademarks to third parties for
                  manufacturing, marketing, distribution and sale of various products
                  and intends to expand its licensing programs. While the Company
                  enters into comprehensive licensing agreements with its licensees
                  covering product design, product quality, sourcing, manufacturing,
                  marketing and other requirements, its licensees may not comply fully
                  with those agreements. Non-compliance could include marketing
                  products under the Company's brand names that do not meet its quality
                  and other requirements or engaging in manufacturing practices that do
                  not meet the Company's supplier code of conduct. These activities
                  could harm the Company's brand equity, its reputation and its
                  business. In addition, the Company's royalty revenues could be affected by the
                  results of its licensees or distributors, or the transition of any of
                  its licensing categories in-house. The financial difficulties of any
                  of its partners or their failure to produce and deliver acceptable
                  product could have an adverse impact on the Company's royalty
                  revenues in the future. In the event of a business failure of any
                  such partner or of the breakdown of the Company's relationship with
                  any domestic or foreign partner, there is no guarantee that the
                  Company could replace such royalty revenues or business. Failure to anticipate and maintain proper inventory levels could have
                     an adverse financial effect on the Company's business. The Company maintains an inventory of selected products that it
                  anticipates will be in high demand. The Company may be unable to sell
                  the products it ordered in advance from manufacturers or that it has
                  in its inventory. Inventory levels in excess of customer demand may
                  result in inventory write-downs or the sale of excess inventory at
                  discounted or closeout prices. These events could significantly harm
                  the Company's operating results and impair the image of the Company's
                  brands. Conversely, if the Company underestimates consumer demand for
                  its products or if manufacturers fail to supply quality products in a
                  timely manner, the Company may experience inventory shortages, which
                  may result in unfilled orders, negatively impact customer
                  relationships, diminish brand loyalty and result in lost revenues. The Company's expectations of growth anticipate new store openings
                     which are subject to many factors beyond its control. Future growth in sales and profits in the Company's Consumer Direct
                  division will depend to some extent on its ability to increase the
                  number of stores. The lease negotiation and development timeframes,
                  and the accomplishment of other milestones on which opening new
                  stores depend, vary from location to location and can be subject to
                  unforeseen delays. The number and timing of new stores actually
                  opened during any given period, and their associated contribution to
                  net income for the period, will depend on a number of factors
                  including, but not limited to: the identification and availability of
                  suitable markets, locations, and leases; the negotiation of
                  acceptable lease terms for new locations; the development of new
                  merchandise and effective management of inventory to meet the needs
                  of new and existing stores on a timely basis; the successful
                  management of its infrastructure to accommodate new store openings;
                  the fostering of current relationships and development of new
                  relationships with vendors that are capable of supplying a greater
                  volume of merchandise; the availability of suitable financing to the
                  Company and its landlords; the timing of the delivery of the leased
                  premises to the Company from its landlords in order to commence
                  build-out construction activities; the ability of the Company and its
                  landlords to obtain all necessary governmental licenses and permits
                  to construct, open, and operate its stores on a timely basis; the
                  Company's ability to manage the construction and development costs of
                  new stores, and the availability and/or cost of raw materials; the
                  avoidance of construction delays and cost overruns in connection with
                  the build-out of new stores; the rectification of any unforeseen
                  engineering or environmental problems with the leased premises;
                  adverse weather during the construction period; and the hiring and
                  training of qualified operating personnel in the local market. Any of
                  the above factors could have a material adverse impact on the
                  Company's financial condition. The Company's plans to expand its store base may not be successful
                  and may not result in an increase in its revenues even though they
                  increase costs. The Company will be required to enter into additional
                  leases, increase its rental expenses and make capital expenditures
                  for these stores. These commitments may be costly to terminate, and
                  these investments may be difficult to recapture if the Company
                  decides to close a store or alter its strategy. The Company must
                  offer a broad product assortment, appropriately manage retail
                  inventory levels, operate effective retail systems, execute effective
                  pricing strategies and integrate its stores into its overall business
                  mix. In addition, the opening of stores may divert some revenues from
                  its wholesale customers. The increased demands of operating
                  additional stores could cause the Company to operate less
                  effectively, which could cause the performance of its existing
                  operations to suffer materially. As a result, the Company's revenues
                  could decline and its profitability could be adversely affected. The worldwide apparel industry is subject to ongoing pricing
                     pressure, which could adversely affect the Company's sales
                     and margins. The apparel market is characterized by low barriers to entry for both
                  suppliers and marketers, intense competition, global sourcing through
                  suppliers located throughout the world, trade liberalization,
                  continuing movement of product sourcing to lower cost countries, the
                  ongoing emergence of new competitors with widely varying strategies
                  and resources, consolidation in the
 20


retail industry, and pressure from retailers to reduce the costs of
                  products. These factors contribute to ongoing downward pricing
                  pressure. This pressure may require the Company to: reduce wholesale
                  prices on existing products; reduce gross margins across the
                  Company's product lines; and yield to increased retailer demands for
                  allowances, incentives and other forms of economic support. If the
                  Company's sales prices decline and the Company fails to reduce its
                  product costs or operating expenses sufficiently, its losses could
                  continue or grow. This could have a material adverse effect on the
                  Company's results of operations and financial condition. The Company may experience continued contraction in its primary
                     distribution channels. In the United States, department stores are the primary distribution
                  channels for the Company's products. Sales through these distribution
                  channels could constrict, or the Company may be unable to increase
                  sales of its products through these channels, for several reasons,
                  including, but not limited to: many of the Company's primary
                  customers are reducing the number of stores they operate, thereby
                  reducing the number of doors into which the Company's products can be
                  sold; and these customers maintain - and seek to grow - substantial
                  private-label and exclusive offerings as they strive to differentiate
                  the brands and products they offer from those of their competitors.
                  The ability to maintain retail floor space, market share and sales in
                  these channels depends on the Company's ability to offer
                  differentiated and exclusive products and to increase retailer
                  profitability on its products, which could have an adverse impact on
                  the Company's margins. The Company could suffer if one of its manufacturers fails to use
                     acceptable labor practices. The Company requires its independent manufacturers to operate in
                  compliance with Company guidelines and applicable laws and
                  regulations. While the Company's internal and vendor operating
                  guidelines promote ethical business practices, the Company does not
                  control these manufacturers or their labor practices. The violation
                  of labor or other laws by an independent manufacturer used by the
                  Company, or the divergence of an independent manufacturer's labor
                  practices from those generally accepted as ethical or appropriate in
                  the U.S., could interrupt, or otherwise disrupt, the shipment of
                  finished products to the Company or damage its reputation. Any of
                  these, in turn, could have a material adverse effect on the Company's
                  financial condition and results of operations. If the Company fails to maintain the value of its brands, its sales
                     are likely to decline. The Company's success depends on the value of its brands. The brands
                  under which the Company sells products are integral to its business
                  as well as to the implementation of its strategies for expanding its
                  business. Maintaining, promoting, and positioning the Company's
                  brands will depend largely on the success of its marketing and
                  merchandising efforts and its ability to provide a consistent, high
                  quality customer experience. Its brands could be adversely affected
                  if it fails to achieve these objectives or if its public image or
                  reputation were to be tarnished by negative publicity or consumer
                  perception. Any of these events could result in decreases in sales. The Company's inability to maintain levels of comparable store sales
                     could cause earnings to decline. If the Company's future comparable store sales fail to meet market
                  expectations, losses could occur. A variety of factors affect
                  comparable store sales, including fashion trends, competition,
                  current economic conditions, pricing, inflation, the timing of the
                  release of new merchandise and promotional events, changes in
                  merchandise mix, the success of marketing programs, timing and level
                  of markdowns and weather conditions. These factors may cause
                  comparable store sales results to be materially lower than recent
                  periods or expectations, which could cause declines in quarterly
                  earnings and stock price. A reduction in the volume of traffic to the Company's stores could
                     significantly reduce sales and leave the Company with unsold
                     inventory. The Company's stores are located in premiere shopping districts and
                  shopping malls. Sales at these stores are derived, in part, from the
                  volume of traffic in those areas. The Company's mall stores benefit
                  from the ability of the malls' "anchor" tenants, generally large
                  department stores, and other area attractions to generate consumer
                  traffic in the vicinity of its stores and the continuing popularity
                  of the malls as shopping destinations. Sales volume and traffic at
                  mall stores could continue to be adversely affected by economic
                  downturns, the closing of anchor department stores and competition
                  from non-mall retailers and other malls where the Company does not
                  have stores. Any of these events, or a decline in the desirability of
                  the shopping environment of a particular mall or area or in the
                  popularity of shopping generally among the Company's customers, would
                  adversely affect the Company's results. The inability to renew certain of the Company's licenses, or to do so
                     on terms that are favorable to the Company, could have a material
                     adverse effect on its financial results. The Company has entered into licenses with numerous partners for the
                  distribution and sale of certain products domestically and around the
                  world. These licenses are for fixed terms, following which the
                  Company and the licensee decide whether they
 21


wish to extend the term of the license. There is no guarantee that
                  the Company and its partners will reach mutually agreeable terms for
                  extending a licensing relationship. Similarly, in those instances
                  where a licensee enjoys the option to extend the term of a license as
                  a result of having achieved certain conditions, there is no guarantee
                  that the licensee will avail itself of such option. The Company's
                  financial results could be adversely affected if the Company is
                  unable to extend a license agreement, if it is unable to do so on
                  terms favorable to the Company, or it if it cannot locate a suitable
                  alternative to an incumbent licensee who has decided not to renew
                  a license. Fluctuations in the price, availability and quality of raw materials
                     could cause delay and increase costs Fluctuations in the price, availability and quality of the fabrics or
                  other raw materials used to manufacture the Company's apparel,
                  footwear and accessories could have a material adverse effect on the
                  Company's cost of goods or the ability to meet customers' demands.
                  The prices for such fabrics depend largely on the market prices for
                  the raw materials used to produce them, particularly cotton, leather
                  and synthetics. The price and availability of such raw materials may
                  fluctuate significantly, depending on many factors, including crop
                  yields and weather patterns. In the future, the Company may not be
                  able to pass all or a portion of such higher raw materials prices on
                  to the Company's customers. The voting shares of the Company's stock are concentrated in one
                     majority shareholder. Currently, Kenneth D. Cole owns approximately 90% of the voting power
                  and approximately 47% of the outstanding common stock of the Company.
                  As a result, Mr. Cole has the ability to control (i) the election of
                  all of the Company's directors other than the directors who will be
                  elected by the holders of Class A Common Stock, voting separately as
                  a class, and (ii) the results of all other shareholder matters. Mr.
                  Cole's interests may differ from the interests of the other
                  stockholders. Outcomes of litigation or changes in regulatory control could impact
                     the Company's financial condition. From time to time, the Company may be a party to lawsuits and
                  regulatory actions relating to its business. Due to the inherent
                  uncertainties of litigation and regulatory proceedings, the Company
                  cannot accurately predict the ultimate outcome of any such
                  proceedings. An unfavorable outcome could have a material adverse
                  impact on the Company's business, financial condition and results of
                  operations. In addition, regardless of the outcome of any litigation
                  or regulatory proceedings, such proceedings could result in
                  substantial costs and may require that the Company devote substantial
                  resources to defend itself. Further, changes in government
                  regulations both in the United States and in the countries in which
                  the Company operates could have adverse affects on its business and
                  subject it to additional regulatory actions. The loss or infringement of the Company's trademarks and other
                     proprietary rights, or its failure to procure these rights, could
                     have a material adverse effect on its operations. The Company believes that its trademarks and other proprietary rights
                  are important to its success and competitive position. Accordingly,
                  the Company devotes substantial resources to the establishment and
                  protection of its trademarks on a worldwide basis. There can be no
                  assurances that such actions taken to establish and protect the
                  Company's trademarks and other proprietary rights will be adequate to
                  prevent imitation of its products by others or to prevent others from
                  seeking to block sales of the Company's products as violative of
                  their trademarks and proprietary rights. In addition, the laws of
                  certain foreign countries may not protect trademarks and proprietary
                  rights to the same extent as do the laws of the United States. During
                  the course of the Company's expansion of its trademark portfolio, it
                  has experienced conflicts with various third parties that have
                  acquired or claimed ownership rights in one or more of its trademarks
                  or otherwise have contested the Company's rights to its trademarks.
                  The Company has in the past endeavored to resolve certain of these
                  conflicts through both legal action and negotiated settlements. There
                  can be no assurances that the Company will be able to resolve such
                  conflicts successfully or that others will not assert rights in, or
                  ownership of, the Company's trademarks and other proprietary rights.
                  Any litigation regarding Company trademarks or other proprietary
                  rights could be time consuming and costly, and the loss of such
                  trademarks and other proprietary rights, or the loss of the exclusive
                  use of such trademarks and other proprietary rights, could have a
                  material adverse effect on the Company's operations. The effects of hurricanes and other natural disasters may increase
                     insurance costs for which the Company may take on higher deductibles
                     if losses occur. The Company has operations in flood, hurricane and earthquake zones.
                  As such, the Company has insured itself against losses from natural
                  disasters. The cost of such insurance could rise significantly as a
                  result of the effects of future natural disasters throughout the
                  United States. To offset such costs, the Company may take on larger
                  deductibles which, if aggregated through multiple disaster locations,
                  could have a material effect on its results of operations.
 22


Negative conditions in global credit markets may impair the Company's
                     marketable securities portfolio. The Company has investments in auction-rate securities with a fair
                  value of $2.5 million as of December 31, 2010 which reset every 28
                  days that are "A" through "double C" rated debt obligations, and
                  substantially all have insurers. Continuing adverse conditions in the
                  global credit markets have prevented some investors from liquidating
                  their holdings of auction-rate securities because the amount of
                  securities submitted for sale has exceeded the amount of purchase
                  orders for such securities. If there is insufficient demand for the
                  securities at the time of auction, the auction may not be completed
                  and the interest rates may not be reset to predetermined interest
                  rates. When auctions for these securities fail, the investments may
                  not be readily convertible to cash until a future auction of these
                  investments is successful or they are redeemed or mature. If a
                  decline in market value continues that is deemed other-than-temporary
                  resulting in a writedown, the result could have a material effect on
                  the Company's results of operations. The Company's ability to collect receivables could be impacted by
                     adverse economic conditions. A financial institution engaged by the Company collects and insures
                  significant receivable balances. If the global credit markets or
                  economic conditions do not improve or worsen, the Company may be
                  exposed to potential significant write-offs that could adversely
                  impact its financial results. In addition, challenging economic
                  conditions may impair the ability of the Company's customers to pay
                  for products and licensees to pay royalties. As a result, reserves
                  for doubtful accounts and write-offs of accounts receivable may
                  increase. Item 1B. Unresolved Staff Comments None. Item 2. Properties The Company's corporate headquarters building is located at 603 West 50th Street, New York, New York. The building is owned by the Company and
                  has approximately 119,000 square feet of space. The Company leases
                  51,000 square feet of office space in Secaucus, New Jersey for its
                  administrative offices. The Company also has a technical and
                  administrative office in Dongguan, China. The Company does not own or
                  operate any manufacturing facilities. As of December 31, 2010, the
                  Company leased space for all of its 33 full-priced retail stores
                  (aggregating approximately 154,000 square feet) and 72 Company Stores
                  (aggregating approximately 300,000 square feet). Generally, the
                  leases provide for an initial term of five to ten years and certain
                  leases provide for renewal options permitting the Company to extend
                  the term thereafter. In addition, certain leases have co-tenancy
                  failure options allowing the Company to terminate leases prior to
                  contractual expiration dates based on specified terms not met by the
                  landlord or the Company as defined by the lease. Item 3. Legal Proceedings The Company is, from time to time, a party to litigation that arises
                  in the normal course of its business operations.  The Company is not
                  presently a party to any litigation that it believes might have a
                  material adverse effect on its business operations. Item 4. Submission of Matters to a Vote of Security Holders None.
 23


PART II Item 5. Market for Registrant's Common Equity, Related Stockholder
                     Matters, and Issuer Purchases of Equity Securities The Company's Class A Common Stock is listed and traded (trading
                  symbol: KCP) on the New York Stock Exchange ("NYSE"). On February 28,
                  2011 the closing sale price for the Class A Common Stock was $13.00.
                  The following table sets forth the high and low closing sale prices
                  for the Class A Common Stock for each quarterly period for 2010 and
                  2009, as reported on the NYSE Composite Tape:  2010:
                           
                           
                           High
                           
                           
                           LowFirst Quarter
                           
                           
                           13.78
                           
                           
                           9.70Second Quarter
                           
                           
                           14.87
                           
                           
                           10.82Third Quarter
                           
                           
                           16.73
                           
                           
                           11.47Fourth Quarter
                           
                           
                           16.89
                           
                           
                           12.492009:
                           
                           
                           High
                           
                           
                           LowFirst Quarter
                           
                           
                           8.43
                           
                           
                           5.03Second Quarter
                           
                           
                           8.77
                           
                           
                           5.97Third Quarter
                           
                           
                           11.45
                           
                           
                           6.60Fourth Quarter
                           
                           
                           10.87
                           
                           
                           8.25 The number of shareholders of record of the Company's Class A Common
                  Stock on February 28, 2011 was 96. There were 8 holders of record of the Company's Class B Common Stock
                  on February 28, 2011, all of which were directly or indirectly owned
                  by Kenneth D. Cole. There is no established public trading market for
                  the Company's Class B Common Stock. The Company did not repurchase shares during 2010 and 2009. Dividend Policy The payment of any future dividends will be at the discretion of the
                  Company's Board of Directors and will depend, among other things,
                  upon future earnings, operations, capital requirements, proposed tax
                  legislation, the financial condition of the Company and general
                  business conditions. The Board of Directors suspended the Company's quarterly dividend on
                  February 26, 2009. Therefore, there were no dividend payments during
                  2010 and 2009.
 24


The Company had the following securities authorized for issuance
                  under equity compensation plans as of December 31, 2010:  Plan Category
                           
                           
                           Number of securities to be issued upon exercise of outstanding
                              options, warrants, and rights
                           
                           
                           Weighted-average exercise price of outstanding options, warrants, and rights
                           
                           
                           Number of securities remaining available for future issuance under
                              equity compensation plans (excluding securities reflected in column
                              (a))(a)
                           
                           
                           (b)
                           
                           
                           (c)Equity compensation plans approved by security holders
                           
                           
                           3,234,120
                           
                           
                           $15.94
                           
                           
                           2,727,505Equity compensation plans not approved by security holders
                           
                           
                           N/A
                           
                           
                           N/A
                           
                           
                           N/A  Stock Performance Graph The following graph compares the yearly percentage change in the
                  cumulative total shareholder return on the Class A Common Stock
                  during the period beginning on December 31, 2005 and ending on
                  December 31, 2010 with the cumulative total return on the Standard &
                  Poor's 500 Composite Index and a Peer Group. The comparison assumes
                  that $100 was invested on December 31, 2005 in the Class A Common
                  Stock in the foregoing indices and assumes the reinvestment of
                  dividends.
 25


26


Item 6. Selected Financial Data The following selected financial data has been derived from the
                  consolidated financial statements of the Company and should be read
                  in conjunction with the consolidated financial statements and notes
                  thereto that appear elsewhere in this Annual Report and in
                  "Management's Discussion and Analysis of Financial Condition and
                  Results of Operations" set forth in Item 7 of this Annual Report. (Amounts are in thousands except for per share and dividend amounts.)  2010
                           
                           
                           2009
                           
                           
                           2008
                           
                           
                           2007
                           
                           
                           2006Income Statement Data:Net sales
                           
                           $
                           411,652
                           
                           $
                           370,955
                           
                           $
                           448,578
                           
                           $
                           466,405
                           
                           $
                           492,282Royalty revenue
                           
                           
                           45,676
                           
                           
                           39,445
                           
                           
                           43,759
                           
                           
                           44,315
                           
                           
                           44,217Net revenues
                           
                           
                           457,328
                           
                           
                           410,400
                           
                           
                           492,337
                           
                           
                           510,720
                           
                           
                           536,499Cost of goods sold
                           
                           
                           261,465
                           
                           
                           239,396
                           
                           
                           293,452
                           
                           
                           287,408
                           
                           
                           304,672Gross profit (1)
                           
                           
                           195,863
                           
                           
                           171,004
                           
                           
                           198,885
                           
                           
                           223,312
                           
                           
                           231,827Selling, general and administrative expenses (2)
                           
                           
                           194,088
                           
                           
                           182,209
                           
                           
                           208,168
                           
                           
                           207,863
                           
                           
                           194,718Impairment of intangible and long-lived assets
                           
                           
                           295
                           
                           
                           19,280
                           
                           
                           3,028
                           
                           
                           10,564
                           
                           
                           121Operating income/(loss)
                           
                           
                           1,480
                           
                           
                           (30,485
                           )
                           
                           (12,311
                           )
                           
                           4,885
                           
                           
                           36,988Interest and other income, net
                           
                           
                           2,032
                           
                           
                           484
                           
                           
                           1,730
                           
                           
                           5,661
                           
                           
                           4,875Impairment of investments
                           
                           
                           (532
                           )
                           
                           (1,038
                           )
                           
                           (7,840
                           )
                           
                           (295
                           )
                           
                           --Income/(loss) before provision for/(benefit from) income taxes
                           
                           
                           2,980
                           
                           
                           (31,039
                           )
                           
                           (18,421
                           )
                           
                           10,251
                           
                           
                           41,863Provision for/(benefit from) income taxes
                           
                           
                           896
                           
                           
                           (11,404
                           )
                           
                           (6,753
                           )
                           
                           3,168
                           
                           
                           15,098Deferred tax valuation allowance
                           
                           
                           --
                           
                           
                           43,603
                           
                           
                           3,132
                           
                           
                           --
                           
                           
                           --Net income/(loss)
                           
                           $
                           2,084
                           
                           $
                           (63,238
                           )
                           $
                           (14,800
                           )
                           $
                           7,083
                           
                           $
                           26,765Earnings/(loss) per share:Basic
                           
                           $
                           0.11
                           
                           $
                           (3.52
                           )
                           $
                           (0.80
                           )
                           $
                           0.35
                           
                           $
                           1.34Diluted
                           
                           $
                           0.11
                           
                           $
                           (3.52
                           )
                           $
                           (0.80
                           )
                           $
                           0.35
                           
                           $
                           1.31Weighted-average shares outstanding:Basic
                           
                           
                           18,169
                           
                           
                           17,983
                           
                           
                           18,423
                           
                           
                           20,057
                           
                           
                           20,046Diluted
                           
                           
                           18,533
                           
                           
                           17,983
                           
                           
                           18,423
                           
                           
                           20,325
                           
                           
                           20,396Cash dividends per share
                           
                           
                           --
                           
                           
                           --
                           
                           $
                           0.36
                           
                           $
                           0.72
                           
                           $
                           0.72December 31,2010
                           
                           
                           2009
                           
                           
                           2008
                           
                           
                           2007
                           
                           
                           2006Balance Sheet Data:Working capital
                           
                           $
                           100,286
                           
                           $
                           88,611
                           
                           $
                           97,521
                           
                           $
                           139,677
                           
                           $
                           169,862Cash
                           
                           
                           83,395
                           
                           
                           68,505
                           
                           
                           64,704
                           
                           
                           90,653
                           
                           
                           105,441Marketable securities
                           
                           
                           2,516
                           
                           
                           3,529
                           
                           
                           5,085
                           
                           
                           8,305
                           
                           
                           12,250Inventory
                           
                           
                           36,539
                           
                           
                           29,080
                           
                           
                           43,342
                           
                           
                           48,033
                           
                           
                           46,274Total assets
                           
                           
                           262,969
                           
                           
                           248,257
                           
                           
                           313,435
                           
                           
                           356,122
                           
                           
                           361,113Total debt, including current maturities
                           
                           
                           --
                           
                           
                           --
                           
                           
                           --
                           
                           
                           --
                           
                           
                           --Total shareholders' equity
                           
                           $
                           146,735
                           
                           $
                           143,292
                           
                           $
                           199,762
                           
                           $
                           241,990
                           
                           $
                           257,676   (1)
                           
                           
                           Gross profit may not be comparable to other entities, since some
                              entities include the costs related to their distribution network
                              (warehousing and handling) 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.(2)
                           
                           
                           Includes warehousing and handling expenses.
 27


Item 7. Management's Discussion and Analysis of Financial Condition
                     and Results of Operations The following discussion and analysis should be read in conjunction
                  with the consolidated financial statements and the notes thereto that
                  appear elsewhere in this Annual Report. Overview The Company 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 Le Tigre brand names, as well as footwear under the proprietary trademark Gentle Souls. 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 modern fashion conscious consumers
                  who seek accessible designer fashion that reflects a metropolitan
                  lifestyle. 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 5,200 domestic
                  department and specialty store locations, the Company's full-priced
                  retail stores, outlet stores, and its e-commerce website, as well as
                  internationally through its licensee partners and international
                  retailers. 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,
                  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, socks,
                  underwear, belts, business cases, small leather goods, sunglasses,
                  prescription eyewear, watches, jewelry and fragrance. 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 and
                  fragrance. In addition, the Company licenses luggage and children's
                  apparel. In October 2010, the Company announced that it had made the
                  strategic decision to terminate the licensing agreement with its
                  women's sportswear licensee effective June 1, 2011, and will be
                  bringing the business in-house starting with the Fall 2011 season. The Company recorded net revenues of $457.3 million for the year
                  ended December 31, 2010. Diluted earnings per share were $0.11 for
                  the year ended December 31, 2010 compared to a diluted loss per share
                  of $(3.52) for the year ended December 31, 2009. As of December 31,
                  2010, the Company had $83.4 million in cash and cash equivalents up
                  $14.9 million versus a year ago and no long-term debt.
 28


Results of Operations The following table sets forth certain operating data of the Company
                  as a percentage of net revenues for the periods indicated below:  2010
                           
                           
                           2009
                           
                           
                           2008Net sales
                           
                           
                           90.0
                           %
                           
                           90.4
                           %
                           
                           91.1
                           %Royalty revenue
                           
                           
                           10.0
                           
                           
                           9.6
                           
                           
                           8.9Net revenues
                           
                           
                           100.0
                           
                           
                           100.0
                           
                           
                           100.0Cost of goods sold
                           
                           
                           57.2
                           
                           
                           58.3
                           
                           
                           59.6Gross profit (1)
                           
                           
                           42.8
                           
                           
                           41.7
                           
                           
                           40.4Selling, general and administrative expenses (2)
                           
                           
                           42.4
                           
                           
                           44.4
                           
                           
                           42.3Impairment of intangible and long-lived assets
                           
                           
                           0.1
                           
                           
                           4.7
                           
                           
                           0.6Operating income/(loss)
                           
                           
                           0.3
                           
                           
                           (7.4
                           )
                           
                           (2.5
                           )Interest and other income, net
                           
                           
                           0.1
                           
                           
                           0.1
                           
                           
                           0.4Impairment of investments
                           
                           
                           (0.1
                           )
                           
                           (0.3
                           )
                           
                           (1.6
                           )Investment gains
                           
                           
                           0.4
                           
                           
                           --
                           
                           
                           --Income/(loss) before provision for/(benefit from) income taxes
                           
                           
                           0.7
                           
                           
                           (7.6
                           )
                           
                           (3.7
                           )Provision for/(benefit from) income taxes (3)
                           
                           
                           0.2
                           
                           
                           7.8
                           
                           
                           (0.7
                           )Net income/(loss)
                           
                           
                           0.5
                           %
                           
                           (15.4
                           )%
                           
                           (3.0
                           )%  (1)
                           
                           
                           Gross profit may not be comparable to other entities, since some
                              entities include the costs related to their distribution network
                              (warehousing and handling) 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.(2)
                           
                           
                           Includes warehousing and handling expenses.(3)
                           
                           
                           Includes a $43.6 million deferred tax valuation allowance for the
                              year ended December 31, 2009. Year Ended December 31, 2010 Compared to Year Ended December 31, 2009 Net revenues increased 11.4%, or $46.9 million, to $457.3 million in
                  2010 from $410.4 million in 2009. Revenues increased in each of the
                  Company's segments contributing to the double-digit revenue growth. Wholesale net sales increased 8.9%, or $17.7 million, to $219.2
                  million in 2010 from $201.5 million in 2009. The majority of the
                  increase was the result of the launch of Reactionmen's sportswear, as well as sales growth in international markets.
                  This increase was offset by the loss of approximately $10 million of
                  sales from the Company's planned exit of the Bongofootwear line, which the Company exited in the third quarter of 2009,
                  and reductions in private label programs. Net sales in the Company's Consumer Direct segment increased 13.5%,
                  or $22.9 million, to $192.4 million for the year ended December 31,
                  2010 from $169.5 million for the year ended December 31, 2009. The
                  increase was driven by a comparable store sales increase of 9.3%, or
                  $13.4 million, and by double-digit sales growth in e-commerce.
                  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. During
                  2010, the Company opened five outlets and one full-priced retail
                  store and closed five outlets and six full-priced retail stores.
                  During 2009, the Company opened nineteen outlets and closed five
                  full-priced retail stores. Subsequent to December 31, 2010, the
                  Company has closed an additional seven full-priced retail stores,
                  including its Rockefeller Center location, and plans to close two
                  additional stores in the first half of 2011. Licensing revenue increased 15.8%, or $6.3 million, to $45.7 million
                  in 2010 from $39.4 million in 2009. The increase in licensing
                  revenues was driven primarily by sales growth in men's categories
                  including outerwear, dress shirts, tailored clothing and pants. In
                  addition, growth was recorded in women's sportswear and the
                  international markets in the United Kingdom, Latin America and
                  Canada. Contractual minimums for the Le Tigrelicense with JC Penney ceased during the third quarter of 2010 as the
                  license was not renewed through a mutual agreement. Consolidated gross profit, as a percentage of net revenues, increased
                  to 42.8% for the year ended December 31, 2010 from 41.7% for the year
                  ended December 31, 2009. The 110 basis point increase was
                  attributable to increases in both Wholesale and Consumer Direct
                  segment gross profit primarily from enhanced product and merchandise
                  assortments and better sell-throughs. This improvement was achieved
                  despite additional markdowns from clearance and liquidation activity
                  related to store closings and sourcing cost increases. In addition,
                  the increase as a percentage of net revenues was due to revenue mix
                  shifting to the Consumer Direct and Licensing segments. The Consumer
                  Direct segment, which operates at a higher gross profit level than
 29


the Wholesale segment, had increased revenues, as a percentage of
                  total net revenues, to 42.1% for the year ended December 31, 2010
                  compared to 41.3% for the year ended December 31, 2009. The Wholesale
                  segment revenues, as a percentage of total net revenues, decreased to
                  47.9% for the year ended December 31, 2010 from 49.1% for the year
                  ended December 31, 2009. The revenues in the Licensing segment, which
                  carries nominal cost of goods sold, increased, as a percentage of
                  total net revenues, to 10.0% for the year ended December 31, 2010
                  compared to 9.6% for the year ended December 31, 2009. Selling, general and administrative ("SG&A") expenses, including
                  warehousing and handling expenses, as a percentage of net revenues,
                  improved 200 basis points to 42.4% for the year ended December 31,
                  2010 compared to 44.4% for the year ended December 31, 2009. Total
                  SG&A increased $11.9 million to $194.1 million for the year ended
                  December 31, 2010 from $182.2 million for the year ended December 31,
                  2009. The increase in SG&A expenses versus the prior period was
                  primarily attributable to variable shipping costs, compensation for
                  the Company's pay-for-performance bonus incentive and $6.9 million
                  for store closing costs and professional fees for exploring strategic
                  alternatives. Impairments of intangible and long-lived assets were $0.3 million for
                  the year ended December 31, 2010 and $19.3 million for the year ended
                  December 31, 2009. Management reviewed its retail stores' fair value
                  based upon estimated undiscounted future cash flows. Based upon this
                  review, the Company recorded a charge of $0.3 million and $6.5
                  million for underperforming retail stores whose fair value was below
                  carrying value for the years ended December 31, 2010 and 2009,
                  respectively. In addition, impairments in 2009 included a $12.8
                  million charge to reduce the Le Tigretrademark to its adjusted fair value. Interest and other income, net increased $1.5 million to $2.0 million
                  for the year ended December 31, 2010 compared to $0.5 million for the
                  year ended December 31, 2009. The increase is primarily due to the
                  gain on the sale of the Company's equity investments of approximately
                  $1.7 million partially offset by lower interest rates on money market
                  funds. Impairment of investments, which were other-than-temporary
                  impairments of auction-rate securities, was $0.5 million for the year
                  ended December 31, 2010 and $1.0 million for the year ended December
                  31, 2009. The fair value of the Company's auction-rate securities was
                  determined utilizing an independent appraiser. The primary variables
                  used in determining fair value include collateral, rating, insurance,
                  credit risk and downgrade risk of the security. The Company's
               effective tax rate was a 30.1% provision for the year                    ended December 31, 2010 compared to a 103.8%
               provision for the year                    ended December 31, 2009. The change in the Company's effective tax rate is
               primarily the result of the additional $43.6 million                    valuation allowance recorded by the Company during
               2009. The Company also recorded a small increase in the valuation allowance of $0.4 million for the year ended December 31,
               2010. The income tax expense for 2010 is                    primarily taxes from state, local and foreign jurisdictions. The
               Company remains in a three-year cumulative loss position and                    continues to have a valuation allowance for
               primarily all of the                    Company's deferred tax assets. If the Company generates taxable
               income on a sustained basis, the need for a deferred tax asset                    valuation allowance could change resulting
               in the reversal of all or                    a portion of this deferred tax asset valuation allowance. As a result of the foregoing, the Company recorded net income of $2.1
                  million or 0.5% of net revenues for the year ended December 31, 2010
                  compared to a $63.2 million loss or (15.4%) of net revenues for the
                  year ended December 31, 2009. Year Ended December 31, 2009 Compared to Year Ended December 31, 2008 Net revenues decreased $81.9 million, or 16.6%, to $410.4 million in
                  2009 from $492.3 million in 2008. The decrease was due to decreases
                  in each of the Company's business segments. Wholesale net sales (excluding sales to the Company's Consumer Direct
                  business segment) decreased $65.7 million, or 24.6%, to $201.5
                  million in 2009 from $267.2 million in 2008. The decrease was
                  primarily a result of the Company's decision to streamline its
                  portfolio of brands and eliminate unprofitable businesses. Over 70%
                  of the decline was attributable to the Company's planned exit of the Tribecaand Bongofootwear lines, as well as reductions in associated private label
                  programs and sales to the Company's off-priced customers. The
                  remaining decline was attributable to a decrease in sales across the
                  majority 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 $11.9
                  million, or 6.6%, to $169.5 million for the year ended December 31,
                  2009 from $181.4 million for the year ended December 31, 2008. Sales
                  associated with fourteen net new stores opened since the prior year
                  was offset by a comparable store sales decrease of 12.8%, or $19.2
                  million. The Company chose to be less promotional in the back half of
                  the year and therefore while its sales were down the lack of
                  clearance activity resulted in higher percentage of full price sales
                  and improved gross margin. 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. During 2009, the Company opened nineteen
                  outlets and closed five full-priced retail stores as compared to
                  opening eleven outlets, opening two full-priced retail stores and
                  closing eight full-priced retail stores during 2008.
 30


Royalty revenue decreased $4.3 million, or 9.9%, to $39.4 million in
                  2009 from $43.7 million in 2008. The decrease in royalty revenues was
                  primarily attributable to a reduction in the recognition of contract
                  initiation fees and a reduction in licensee sales into the off-price
                  channel offset by improved performance in certain of its men's and
                  women's apparel categories. Consolidated gross profit, as a percentage of net revenues, increased
                  to 41.7% for the year ended December 31, 2009 from 40.4% for the year
                  ended December 31, 2008. Quarterly consolidated gross profit improved
                  quarter over quarter throughout fiscal 2009 primarily from
                  disciplined inventory management, better sell-through and less
                  promotion as follows: First Quarter 33.9%; Second Quarter 42.4%;
                  Third Quarter 43.3%; Fourth Quarter 46.8%. The increase, as a
                  percentage of net revenues for fiscal 2009, was also due to revenue
                  mix shifting to the Consumer Direct and Licensing segments as a
                  percentage of total revenue. The Consumer Direct segment, which
                  operates at a higher gross profit level than the Wholesale segment,
                  increased as a percentage of net revenues to 41.3% for the year ended
                  December 31, 2009 compared to 36.9% for the year ended December 31,
                  2008, while the Wholesale segment revenues as a percentage of net
                  revenues decreased to 49.1% for the year ended December 31, 2009 from
                  54.2% for the year ended December 31, 2008. The revenues in the
                  Licensing segment, which carries nominal cost of goods sold,
                  increased as a percentage of net revenues to 9.6% for the year ended
                  December 31, 2009 compared to 8.9% for the year ended December 31,
                  2008. SG&A, inclusive of warehousing and receiving expenses, decreased
                  $26.0 million to $182.2 million for the year ended December 31, 2009
                  from $208.2 million for the year ended December 31, 2008. The
                  decrease in SG&A expenses was primarily attributable to cost
                  reduction programs enacted during the course of the year, including
                  various cuts in payroll and discretionary spending. As a percentage
                  of net revenues, SG&A expenses increased to 44.4% for the year ended
                  December 31, 2009 compared to 42.3% for the year ended December 31,
                  2008. While SG&A as a percentage of revenues improved in the back
                  half of the year, over the annual period SG&A increased due to a loss
                  of leverage and the increased concentration of the Consumer Direct
                  Segment, which carries a higher SG&A expense level than the Wholesale
                  and Licensing segments. Impairments of intangible and assets were $19.3 million for the year
                  ended December 31, 2009 and $3.0 million for the year ended December
                  31, 2008. Impairments in 2009 included a $12.8 million charge for the Le Tigretrademark and $6.5 million for retail store long-lived assets, while
                  2008 included $1.9 million for retail store long-lived assets and
                  $1.1 million for certain shop-in-shop build-out costs. In 2009, the
                  Company opened four Le Tigre outlet stores and began expanding the Le Tigrebrand internationally; however, it also reached a mutual agreement
                  with JC Penney not to renew the exclusive license agreement for Le Tigrewhich prompted an impairment indicator. The Company, with the
                  assistance of an independent appraiser, utilized a combination of the
                  market approach and the royalty savings method under the income
                  approach to estimate fair value. Based upon the review, the Company
                  recorded a charge of $12.8 million for the year ended December 31,
                  2009. Also, management reviewed its retail stores' fair value based
                  upon estimated undiscounted future cash flows. In 2009, the Company
                  recorded a charge of $6.5 million for underperforming retail stores
                  whose fair value was below carrying value. Interest and other income, net decreased $1.2 million to
                  approximately $0.5 million for the year ended December 31, 2009 as
                  compared to $1.7 million for the year ended December 31, 2008. The
                  decrease is primarily due to lower interest rates as the majority of
                  the Company's cash balances are in government money market accounts. Impairment of investments was $1.0 million for the year ended
                  December 31, 2009 and $7.8 million for the year ended December 31,
                  2008. The Company recorded an other-than-temporary impairment of $1.0
                  million related to auction-rate securities during the year ended
                  December 31, 2009 and recorded other-than-temporary impairments of
                  $7.8 million, of which $4.6 million related to an investment in the
                  common stock of one of its licensees and $3.2 million related to
                  auction-rate securities, during the year ended December 31, 2008. The
                  fair value of the Company's auction-rate securities was determined
                  utilizing an independent appraiser. The primary variables used in
                  determining fair value include collateral, rating, insurance, credit
                  risk and downgrade risk of the security. The Company's effective tax rate was a 103.8% provision for the year
                  ended December 31, 2009 compared to a 19.7% benefit for the year
                  ended December 31, 2008. The change in the Company's tax rate is a
                  result of a $43.6 million valuation allowance against the Company's
                  deferred tax assets offset by the tax benefit from the Company's
                  net loss. The Company analyzed both positive and negative evidence in
                  determining the potential requirement for a valuation allowance on
                  its deferred tax assets. The Company reviewed its results over the
                  last three years, which resulted in a cumulative loss over such
                  period. In accordance with income tax accounting guidance, a
                  three-year historical cumulative loss is considered significant
                  negative evidence and difficult to overcome in the absence of
                  compelling positive evidence. As such, the Company recorded a
                  valuation allowance of approximately $43.6 million for the year ended
                  December 31, 2009.
 31


The establishment of the valuation allowance does not preclude the
                  Company from using the net operating loss carryforwards or other
                  deferred tax assets in the future. If the Company begins to generate
                  taxable income on a sustained basis the need for a deferred tax asset
                  valuation allowance will change resulting in the reversal of all or a
                  portion of this deferred tax asset valuation allowance. As a result of the foregoing, net loss increased by $48.4 million, to
                  $63.2 million or (15.4%) of net revenues for the year ended December
                  31, 2009 from $14.8 million or (3.0%) of net revenues for the year
                  ended December 31, 2008. The net loss includes a $43.6 million
                  valuation allowance along with $20.3 million of pre-tax asset
                  impairments. Related Party Transactions Please refer to Footnote 17 for the Company's related party
                  transactions disclosure. Liquidity and Capital Resources As of December 31, 2010, the Company had $83.4 million in cash and
                  cash equivalents, which consist primarily of money market funds. The
                  Company uses cash from operations as the primary source of financing
                  its capital expenditures and seasonal requirements. Cash needs 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 its retail stores and the
                  level of inventory and accounts receivable balances. At December 31,
                  2010 and 2009, working capital was $100.3 million and $88.6 million,
                  respectively. Net cash provided by operating activities remained flat at $17.3
                  million for the years ended December 31, 2010 and 2009. An increase
                  in net income was offset by an increase in receivables and inventory.
                  In addition, $4.1 million of tax receipts from net operating loss
                  carrybacks filed with the U.S. Treasury as part of government tax
                  legislation enacted in 2009, was offset by $3.6 million of lease
                  contract termination payments. Net cash used in investing activities totaled $1.7 million for the
                  year ended December 31, 2010 compared to $11.8 million for the year
                  ended December 31, 2009. The decrease was primarily attributable a
                  $7.9 million decrease in capital expenditures as the Company opened
                  and renovated fewer stores during the year ended December 31, 2010
                  compared to December 31, 2009. In addition, the Company had proceeds
                  of $1.7 million from the sale of equity securities during the year
                  ended December 31, 2010, while intangible asset purchases decreased
                  $0.5 million during the year ended December 31, 2010 compared to the
                  year ended December 31, 2009. Net cash used in financing activities was $0.7 million for the year
                  ended December 31, 2010 compared to $1.8 million for the year ended
                  December 31, 2009. The decrease primarily resulted from no payments
                  for financing costs during the year ended December 31, 2010 compared
                  to $0.7 million during the year ended December 31, 2009. In addition,
                  dividends associated with the vesting of restricted stock decreased
                  $0.3 million and shares surrendered for taxes on restricted stock
                  decreased $0.1 million during the year ended December 31, 2010 as
                  compared to the year ended December 31, 2009. The Company's material obligations under contractual agreements,
                  primarily commitments for future payments under operating lease
                  agreements, as of December 31, 2010 are summarized as follows:  Payment Due by PeriodTotal
                           
                           
                           1 year or less
                           
                           
                           2-3 years
                           
                           
                           4-5 years
                           
                           
                           After 5 yearsOperating Leases
                           
                           $
                           109,942
                           
                           $
                           24,803
                           
                           $
                           42,847
                           
                           $
                           29,392
                           
                           $
                           12,900Purchase Obligations
                           
                           
                           56,877
                           
                           
                           56,877
                           
                           
                           --
                           
                           
                           --
                           
                           
                           --Total ContractualObligations
                           
                           $
                           166,819
                           
                           $
                           81,680
                           
                           $
                           42,847
                           
                           $
                           29,392
                           
                           $
                           12,900 The following is a description of the Company's material, firmly
                  committed contractual obligations as of December 31, 2010: Operating leases represent the minimum lease rental payments under
                     non-cancelable leases primarily for the Company's Consumer Direct
                     stores. The Company is also normally required to pay taxes,
                     insurance, and occupancy costs relating to its leased Consumer Direct
                     stores. Purchase obligations represent the Company's legally binding
                     agreements to purchase fixed quantities of goods at determinable
                     prices. Virtually all of these agreements are denominated in U.S.
                     dollars and at any given time the currency risk is immaterial.
 32


The Company excluded $40.6 million of liabilities associated with its
                  deferred compensation plan from the above contractual obligations
                  table because the Company cannot make a reasonable estimate as to the
                  periods during which the liabilities will be settled. The
                  corresponding asset of $40.6 million is included within Deferred
                  compensation plans' assets on the Consolidated Balance Sheet. In
                  addition, $15.9 million of accrued rent and other long-term
                  liabilities have been excluded, which is comprised of accrued rent of
                  $13.0 million and unrecognized tax liabilities of $2.9 million.
                  Accrued rent included on the Consolidated Balance Sheet represents
                  the difference between straight-line rent expense and cash
                  obligations to its landlords. The amounts for these cash payments are
                  included in the operating lease caption disclosed in the table above.
                  The other long-term liabilities are unrecognized tax liabilities for
                  which the Company cannot make a reasonable estimate as to the periods
                  during which the liabilities will be settled. Contingent rent and other charges amounted to $9.8 million and $8.5
                  million for the years ended December 31, 2010 and 2009, respectively. The Company has a revolving senior secured asset based credit
                  facility (the "Facility") which provides the Company with borrowing
                  availability of $60 million. The Facility may be increased to $85
                  million at the election of the Company upon meeting certain
                  conditions, but may not exceed a borrowing base equal to a percentage
                  of the Company's accounts receivable and inventory. The Facility terminates by its terms, and all amounts borrowed under
                  the Facility shall be due and payable, on December 20, 2011. The
                  Facility includes a $7.5 million sublimit for Swingline Loans and a
                  $35 million aggregate sublimit for letters of credit, with a further
                  sublimit of $15 million for standby letters of credit. Revolving
                  loans under the Facility may be base rate loans or Eurodollar loans,
                  at the Company's election. Base rate loans shall bear interest at a
                  rate per annum equal to the sum of (i) the greatest of (a) the Prime
                  Rate in effect on such day, (b) the Federal Funds Effective Rate in
                  effect on such day plus 1⁄2 of 1% and (c) the Adjusted LIBO Rate for a
                  one month Interest Period on such day plus 1%; plus (ii) 2.5%.
                  Eurodollar loans shall bear interest at the Adjusted LIBO Rate, plus
                  3.5%. The Facility is secured by substantially all the assets of the
                  Company and its domestic subsidiaries, including a pledge by the
                  Company of its equity interest in each of its domestic subsidiaries.
                  If availability under the Facility is less than $10,000,000, the
                  Company will be subject to a monthly fixed charge coverage ratio. The
                  Facility limits the Company's ability to incur indebtedness or liens,
                  its ability to enter into mergers or sell assets, its ability to
                  change the nature of its business, and its ability to enter into
                  certain guarantees. In addition, the Company may not declare or pay
                  dividends if availability under the Facility is less than
                  $10,000,000. The Facility also contains customary events of default.
                  Upon the occurrence of an event of default, the outstanding
                  obligations under the Facility may be accelerated and become
                  immediately due and payable. During 2010 and 2009, the Company incurred facility fees of
                  approximately $0.4 million and $0.2 million respectively, and also
                  made payments of approximately $0.7 million for financing costs
                  related to the Facility during 2009. The Company did not borrow under
                  the Facility during 2010 or 2009 and there were no outstanding
                  advances under this agreement at December 31, 2010 and 2009. Amounts
                  available under the Facility at December 31, 2010 and 2009 were
                  reduced by $2.5 million and $1.2 million, respectively, of standby
                  and open letters of credit. The Company had $29.0 million available
                  to borrow as of December 31, 2010 compared to $22.8 million as of
                  December 31, 2009. The Company believes that it will be able to satisfy its current
                  expected cash requirements for 2011, including requirements for its
                  new stores, anticipated store closing costs, expected enhancement of
                  information systems and anticipated current obligations, primarily
                  with cash flow from operations and cash on hand. Off-Balance Sheet Arrangements The Company did not have any off-balance sheet arrangements as of
                  December 31, 2010. Exchange Rates The Company may use derivative instruments, typically forward
                  contracts, to manage its risk associated with movements in foreign
                  currency exchange rates in purchasing inventory. The Company
                  recognizes all derivatives on the Consolidated Balance Sheets.
                  Derivative instruments that meet certain criteria are classified as
                  cash flow hedges, and changes in their fair value are recognized in
                  Accumulated other comprehensive (loss)/income in the accompanying
                  Consolidated Statements of Changes in Shareholders' Equity, until the
                  hedged item is recognized in earnings. Those derivatives that are not
                  classified as cash flow hedges are adjusted to fair value through
                  earnings. The Company does not hold derivative instruments for the
                  purpose of trading or speculation. The Company did not use any
                  derivative instruments during 2010 or 2009. While the Company
                  believes that its current procedures with respect to the reduction of
                  risk associated with currency exchange rate fluctuations are
                  adequate, there can be no assurance that such fluctuations will not
                  have a material adverse effect on the results of operations of the
                  Company in the future.
 33


Inventory from contract manufacturers in Asia and Central/South
                  America are purchased in United States dollars and the recent
                  fluctuations of many of these currencies against the United States
                  dollar has not had any material adverse impact on the Company.
                  However, future purchase prices for the Company's products may be
                  impacted by fluctuations in the exchange rate between the United
                  States dollar and the local currencies of the contract manufacturer,
                  which may affect the Company's cost of goods in the future. The
                  Company currently does not believe the potential effects of such
                  fluctuations would have a material adverse effect on the Company. Effects of Inflation The Company does not believe that the relatively low rates of
                  inflation experienced over the last few years in the United States,
                  where it primarily competes, have had a significant effect on
                  revenues or profitability. Critical Accounting Policies and Estimates General The Company's management's discussion and analysis of its financial
                  condition and results of operations are based upon the Company's
                  consolidated financial statements, which have been prepared in
                  accordance with accounting principles generally accepted in the
                  United States. The preparation of these financial statements requires
                  the Company to make estimates and judgments that affect the reported
                  amounts of assets, liabilities, revenues and expenses, and related
                  disclosure of contingent assets and liabilities. On an ongoing basis,
                  the Company evaluates its estimates, including those related to
                  product returns, bad debts, inventories, income taxes, financing
                  operations, contingencies and litigation. The Company bases its
                  estimates on historical experience and on various other assumptions
                  that are believed to be reasonable under the circumstances, the
                  results of which form the basis for making judgments about the
                  carrying values of assets and liabilities that are not readily
                  apparent from other sources. Actual results may differ from these
                  estimates under different assumptions or conditions. The Company believes the following critical accounting policies
                  affect its more significant judgments and estimates used in the
                  preparation of its consolidated financial statements: Inventory The Company writes down its inventory for estimated obsolescence
                  equal to the difference between the cost of inventory and the
                  estimated market value based upon assumptions about future demand and
                  market conditions. If actual market conditions are less favorable
                  than those projected by management, additional inventory write-downs
                  may be required. Sales Returns and Allowances The Company's chargebacks for deductions taken by its customers for
                  returns, discounts and allowances as well as potential future
                  customer deductions is significant to its operations. The Company
                  reserves against known chargebacks as well as potential future
                  customer deductions based on a combination of historical activity and
                  current market conditions. Actual results may differ from these
                  estimates under different assumptions or conditions, which may have a
                  significant impact on the Company's results. Allowance for Doubtful Accounts The Company maintains allowances for doubtful accounts for estimated
                  losses resulting from the inability of its customers and licensees to
                  make required payments. Customers include non-factored accounts,
                  accounts collected by the Company's factors with recourse and credit
                  card receivables from third-party service providers. If the financial
                  conditions of these customers and licensees were to deteriorate and
                  impair their ability to make payments, additional allowances may
                  be required. Impairment of Indefinite-lived Intangible Assets and Long-Lived Assets The Company performs a review of its indefinite-lived intangible
                  assets and long-lived assets for impairment on a quarterly basis or
                  whenever events or changes in circumstances indicate that the
                  carrying amount may not be recoverable.  If the total of the expected
                  future undiscounted cash flows is less than the carrying amount of
                  the asset, a loss is recognized for the difference between the fair
                  value and carrying value of the asset. Fair Value The Company's financial assets and liabilities are measured using
                  inputs from the three levels of the fair value hierarchy, which are
                  as follows:
 34


Level 1 - 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; Level 2 - 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; and Level 3 - a fair value that is derived from inputs that are
                     unobservable or from observable inputs based on unobservable data in
                     an inactive market.
 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 based on income tax accounting
                  guidance applied by management. 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 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. Litigation The Company is periodically involved in various legal actions arising
                  in the normal course of business. Management is required to assess
                  the probability of any adverse judgments as well as the potential
                  range of any losses. Management determines the required accruals
                  after a careful review of the facts of each significant legal action.
                  The Company's accruals may change in the future due to new
                  developments in these matters. Contingencies In the ordinary course of business, the Company is involved in and
                  subject to compliance and regulatory reviews and audits by numerous
                  authorities, agencies and other governmental agents and entities from
                  various jurisdictions. The Company is required to assess the
                  likelihood of any adverse outcomes of these matters. A determination
                  of the amount of reserves required, if any, for these reviews is made
                  after careful analysis of each individual issue. The reserves may
                  change in the future due to new developments or final resolution in
                  each matter, which may have a significant impact on the Company's
                  results. Stock-based Compensation The Company records all share-based payments, including grants of
                  employee stock options, to be recognized in the financial statements
                  based on their fair value. The Company measures the cost of services
                  received in exchange for stock options and similar awards based on
                  the grant-date fair value of the award and recognizes this cost in
                  the Consolidated Statements of Operations over the period during
                  which an award recipient is required to provide services in exchange
                  for the award. The Company uses the Black-Scholes model to assess the
                  fair value of non-qualified employee stock options and amortizes this
                  cost over the service period. In addition, stock compensation expense
                  is reduced for estimated forfeitures prior to vesting primarily based
                  on historical annual forfeiture rates and by employee classification.
                  Estimated forfeitures are reassessed on a quarterly basis and may
                  change based on new facts and circumstances. New Accounting Pronouncement Please refer to Footnote 18 for the Company's new accounting
                  pronouncement disclosure.
 35


Item 7A. Quantitative and Qualitative Disclosures about Market Risk The Company has auction-rate securities, that contain "A" through
                  "double C" rated debt obligations and a preferred share closed 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
                  Consolidated Balance Sheet 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 foreign currencies,
                  although greater than 95% of the transactions are in U.S. dollars.
                  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 periodically utilizing foreign exchange contracts. The
                  Company does not enter into foreign currency transactions for trading
                  or speculative purposes. At December 31, 2010, the Company had no
                  foreign exchange 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 facility would not have
                  had a material effect on the Company's 2010 or 2009 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 8. Financial Statements and Supplementary Data See page F-1 for an index to the consolidated financial statements,
                  the Report of Management and the Reports of the Registered Public
                  Accounting Firm submitted as part of this Annual Report. Item 9. Changes in and Disagreements with Accountants on Accounting
                     and Financial Disclosure None. Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures As of December 31, 2010, 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 Exchange Act 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 SEC 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. Management's Report on Internal Control over Financial Reporting The Company's management is responsible for establishing and
                  maintaining adequate internal control over financial reporting, as
                  such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange
                  Act. Under the supervision and with the participation of management,
                  including the Chief Executive Officer and Chief Financial Officer,
                  the Company conducted an evaluation of the effectiveness of its
                  internal control over financial reporting as of December 31, 2010
                  based on the framework in Internal Control-Integrated Framework
                  issued by the Committee of Sponsoring Organizations of the Treadway
                  Commission (COSO). Based on that evaluation, management concluded
                  that the Company's internal control over financial reporting was
                  effective as of December 31, 2010. The Company's internal control over financial reporting as of
                  December 31, 2010 was audited by Ernst & Young, LLP, an independent
                  registered public accounting firm, as stated in their report which is
                  included herein.
 36


Changes in Internal Control over Financial Reporting There were no changes in the Company's internal controls over
                  financial reporting during its last fiscal quarter that have
                  materially affected, or are reasonably likely to materially affect,
                  the Company's internal control over financial reporting. Item 9B. Other Information None.
 37


PART III Item 10. Directors, Executive Officers and Corporate Governance Except for the information regarding directors and executive officers
                  of the registrant, which is included in Part I of this Form 10-K, the
                  information required by this item will be contained in the Company's
                  Proxy Statement for its Annual Shareholders' Meeting to be held May
                  25, 2011 to be filed with the SEC within 120 days after December 31,
                  2010 and which is incorporated herein by reference in response to
                  this item. Item 11. Executive Compensation The information required by this item will be contained in the
                  Company's Proxy Statement for its Annual Shareholders' Meeting to be
                  held May 25, 2011 to be filed with the SEC within 120 days after
                  December 31, 2010 and which is incorporated herein by reference in
                  response to this item. Item 12. Security Ownership of Certain Beneficial Owners and
                     Management and Related Stockholder Matters The information required by this item will be contained in the
                  Company's Proxy Statement for its Annual Shareholders' Meeting to be
                  held May 25, 2011 to be filed with the SEC within 120 days after
                  December 31, 2010 and which is incorporated herein by reference in
                  response to this item. Item 13. Certain Relationships and Related Transactions, and Director
                     Independence The information required by this item will be contained in the
                  Company's Proxy Statement for its Annual Shareholders' Meeting to be
                  held May 25, 2011 to be filed with the SEC within 120 days after
                  December 31, 2010 and which is incorporated herein by reference in
                  response to this item. Item 14. Principal Accounting Fees and Services The information required by this item will be contained in the
                  Company's Proxy Statement for its Annual Shareholders' Meeting to be
                  held May 25, 2011 to be filed with the SEC within 120 days after
                  December 31, 2010 and which is incorporated herein by reference in
                  response to this item. PART IV Item 15. Exhibits, Financial Statement Schedules  (a)
                           
                           
                           (1) See page F-1 for an index to the consolidated financial
                              statements submitted as part of this Annual Report.(2) Schedule II - Valuation and Qualifying Accounts is required to be
                              filed by Item 8 of Form 10-K.All other schedules, for which provision is made in the applicable
                              accounting regulations of the SEC are not required under the related
                              instructions, are shown in the financial statements or are
                              inapplicable and therefore have been omitted.
 38


(3) The following exhibits are included in this report:  ExhibitNo.
                           
                           
                           Description3.01
                           
                           
                           Restated Certificate of Incorporation of Kenneth Cole Productions,
                              Inc.; Certificate of Merger of Cole Fifth Avenue, Inc. into Kenneth
                              Cole Productions, Inc.; Certificate of Merger of Cole Productions,
                              Inc. into Kenneth Cole Productions, Inc.; Certificate of Merger of
                              Cole Sunset, Inc. into Kenneth Cole Productions, Inc.; Certificate of
                              Merger of Cole Union Street, Inc. into Kenneth Cole Productions,
                              Inc.; Certificate of Merger of Cole West, Inc. into Kenneth Cole
                              Productions, Inc.; Certificate of Merger of Kenneth Cole Woodbury,
                              Inc. into Kenneth Cole Productions, Inc.; Certificate of Merger of
                              Kenneth Cole Leather Goods, Inc. into Kenneth Cole Productions, Inc.;
                              Certificate of Merger of Unlisted into Kenneth Cole Productions, Inc.
                              (Incorporated by reference to Exhibit 3.01 to the Company's
                              Registration Statement on Form S-1, Registration No. 33-77636).3.02
                           
                           
                           By-laws. (Incorporated by reference to Exhibit 3.02 to the Company's
                              Registration Statement on Form S-1, Registration No. 33-77636).3.03
                           
                           
                           Certificate of Amendment of the Certificate of Incorporation of
                              Kenneth Cole Productions, Inc. dated October 15, 2007 (Previously
                              filed as Exhibit 10.32 to the Registrant's Quarterly Report on Form
                              10-Q for the quarterly period ended September 30, 2007 and
                              incorporated herein by reference).4.01
                           
                           
                           Specimen of Class A Common Stock Certificate. (Incorporated by
                              reference to Exhibit 4.01 to the Company's Registration Statement on
                              Form S-1, Registration No. 33-77636).*10.01
                           
                           
                           Kenneth Cole Productions, Inc. 1994 Stock Option Plan. (Incorporated
                              by reference to Exhibit 10.04 to the Company's Registration Statement
                              on Form S-1, Registration No. 33-77636).*10.02
                           
                           
                           Amended and Restated Kenneth Cole Productions, Inc. 1994 Stock Option
                              Plan (Previously filed as an Exhibit to the Registrant's Proxy
                              Statement filed on April 22, 1997 and incorporated herein by
                              reference).10.03
                           
                           
                           Kenneth Cole Productions, Inc. Employee Stock Purchase Plan
                              (Incorporated by reference to the Company's Registration Statement on
                              Form S-8 Registration No. 33-31868, filed on March 7, 2000).10.04
                           
                           
                           Kenneth Cole Productions, Inc. 2004 Stock Incentive Plan
                              (Incorporated by reference to the Company's Registration Statement on
                              Form S-8 Registration No. 333-119101, filed on September 17, 2004).10.05
                           
                           
                           Kenneth Cole Productions, Inc. 2004 Stock Incentive Plan
                              (Incorporated by reference to the Company's Registration Statement on
                              Form S-8 Registration No. 333-131724 filed on February 10, 2006).10.06
                           
                           
                           Kenneth Cole Productions, Inc. 2004 Stock Incentive Plan (Amended and
                              Restated as of April 20, 2005) (Previously filed as Exhibit 10.26 to
                              the Registrant's Quarterly Report on Form 10-Q for the quarterly
                              period ended March 31, 2006 and incorporated herein by reference).10.07
                           
                           
                           Kenneth Cole Productions, Inc. Sample Grant Award Letter (Previously
                              filed as Exhibit 10.27 to the Registrant's Quarterly Report on Form
                              10-Q for the quarterly period ended March 31, 2006 and incorporated
                              herein by reference).10.08
                           
                           
                           Employment Agreement between Kenneth Cole Productions, Inc. and
                              Michael DeVirgilio dated March 31, 2006 (Previously filed as Exhibit
                              10.28 to the Registrant's Quarterly Report on Form 10-Q for the
                              quarterly period ended June 30, 2006 and incorporated herein by
                              reference).10.09
                           
                           
                           Credit Agreement between J.P. Morgan Securities Inc., JPMorgan Chase
                              Bank, National Association, PNC Bank, National Association, Bank of
                              America, N.A., and Wachovia Bank, National Association, and Kenneth
                              Cole Productions, Inc. dated as of December 20, 2006. (Previously
                              filed as Exhibit 10.31 to the Registrant's Annual Report on Form 10-K
                              for the year ended December 31, 2006 and incorporate herein by
                              reference).10.10
                           
                           
                           Employment Agreement between Kenneth Cole Productions, Inc. and Jill
                              Granoff dated May 5, 2008 (Previously filed as Exhibit 10.33 to the
                              Registrant's Quarterly Report on Form 10-Q for the quarterly period
                              ended March 31, 2008 and incorporated herein by reference).10.11
                           
                           
                           Receivables management agreement between The CIT Group/Commercial
                              Services, Inc. and Kenneth Cole Productions, Inc. dated November 7,
                              2008.
 39


10.12
                        
                        
                        Amendment No. 2 to the Credit Agreement between J.P. Morgan
                           Securities Inc., JPMorgan Chase Bank, National Association, PNC Bank,
                           National Association, Bank of America, N.A., and Wachovia Bank,
                           National Association, and Kenneth Cole Productions, Inc. dated as of
                           July 30, 2009. (Previously filed as Exhibit 10.01 to the Registrant's
                           Current Report on Form 8-K filed on August 6, 2009).10.13
                        
                        
                        Amended and Restated Credit Agreement between J.P. Morgan Securities
                           Inc., JPMorgan Chase Bank, National Association, PNC Bank, National
                           Association, Bank of America, N.A., and Wachovia Bank, National
                           Association, and Kenneth Cole Productions, Inc. dated as of July 30,
                           2009. (Previously filed as Exhibit 10.01 to the Registrant's Current
                           Report on Form 8-K filed on August 6, 2009).+21.01
                        
                        
                        List of Subsidiaries.+23.01
                        
                        
                        Consent of Independent Registered Public Accounting Firm.+23.02
                        
                        
                        Consent of Independent Appraisal Firm.+23.03
                        
                        
                        Consent of Independent Appraisal Firm.+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. ___________________________  *
                           
                           
                           Management contract or compensatory plan or arrangement required to
                              be identified pursuant to Item 15(a) (3) of this report.+
                           
                           
                           Filed herewith.
 40


Kenneth Cole Productions, Inc. and SubsidiariesIndex to Consolidated Financial Statements  Reports of Independent Registered Public Accounting Firm
                           
                           
                           F-2Consolidated Balance Sheets as of December 31, 2010 and 2009
                           
                           
                           F-4Consolidated Statements of Operations for the years ended December
                              31, 2010, 2009 and 2008
                           
                           
                           F-6Consolidated Statements of Changes in Shareholders' Equity for the
                              years ended December 31, 2010, 2009 and 2008
                           
                           
                           F-7Consolidated Statements of Cash Flows for the years ended December
                              31, 2010, 2009 and 2008
                           
                           
                           F-8Notes to Consolidated Financial Statements
                           
                           
                           F-9
 F-1


Report of Independent Registered Public Accounting Firm To The Board of Directors and Shareholders of Kenneth Cole Productions, Inc. We have audited the accompanying consolidated balance sheets of
                  Kenneth Cole Productions, Inc. and subsidiaries (the "Company") as of
                  December 31, 2010 and 2009, and the related consolidated statements
                  of operations, changes in shareholders' equity, and cash flows for
                  each of the three years in the period ended December 31, 2010. Our
                  audits also included the financial statement schedule listed in the
                  Index at Item 15(a). These financial statements and schedule are the
                  responsibility of the Company's management. Our responsibility is to
                  express an opinion on these financial statements and schedule based
                  on our audits. We conducted our audits in accordance with the standards of the
                  Public Company Accounting Oversight Board (United States). Those
                  standards require that we plan and perform the audit to obtain
                  reasonable assurance about whether the financial statements are free
                  of material misstatement. An audit includes examining, on a test
                  basis, evidence supporting the amounts and disclosures in the
                  financial statements. An audit also includes assessing the accounting
                  principles used and significant estimates made by management, as well
                  as evaluating the overall financial statement presentation. We
                  believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present
                  fairly, in all material respects, the consolidated financial position
                  of the Company at December 31, 2010 and 2009, and the consolidated
                  results of its operations and its cash flows for each of the three
                  years in the period ended December 31, 2010, in conformity with U.S.
                  generally accepted accounting principles. Also, in our opinion, the
                  related financial statement schedule, when considered in relation to
                  the basic financial statements taken as a whole, presents fairly in
                  all material respects the information set forth therein. As discussed in Note 4 to the consolidated financial statements, the
                  Company changed its method of accounting for other-than-temporary
                  impairment on investments with the adoption of the guidance
                  originally issued in FASB Staff Position FAS 115-2, FAS 124-2, and
                  EITF 99-20-2, Recognition and Presentation of Other-Than-Temporary
                  Impairments (codified in FASB ASC Topic 320, Investments - Debt and
                  Equity Securities) effective June 15, 2009. We also have audited, in accordance with the standards of the Public
                  Company Accounting Oversight Board (United States), the Company's
                  internal control over financial reporting as of December 31, 2010,
                  based on criteria established in Internal Control-Integrated
                  Framework issued by the Committee of Sponsoring Organizations of the
                  Treadway Commission and our report dated March 7, 2011 expressed an
                  unqualified opinion thereon.  /s/ Ernst & Young LLP New York, New YorkMarch 7, 2011
 F-2


Report of Independent Registered Public Accounting Firm To The Board of Directors and Shareholders of Kenneth Cole Productions, Inc. We have audited Kenneth Cole Productions, Inc. and subsidiaries' (the
                  "Company") internal control over financial reporting as of December
                  31, 2010 based on criteria established in Internal Control-Integrated
                  Framework issued by the Committee of Sponsoring Organizations of the
                  Treadway Commission (the "COSO criteria"). The Company's management
                  is responsible for maintaining effective internal control over
                  financial reporting, and for its assessment of the effectiveness of
                  internal control over financial reporting included in the
                  accompanying Management's Report on Internal Control over Financial
                  Reporting. Our responsibility is to express an opinion on the
                  Company's internal control over financial reporting based on
                  our audit. We conducted our audit in accordance with the standards of the Public
                  Company Accounting Oversight Board (United States). Those standards
                  require that we plan and perform the audit to obtain reasonable
                  assurance about whether effective internal control over financial
                  reporting was maintained in all material respects. Our audit included
                  obtaining an understanding of internal control over financial
                  reporting, assessing the risk that a material weakness exists,
                  testing and evaluating the design and operating effectiveness of
                  internal control based on the assessed risk, and performing such
                  other procedures as we considered necessary in the circumstances. We
                  believe that our audit provides a reasonable basis for our opinion. A company's internal control over financial reporting is a process
                  designed 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. A company's internal control over financial reporting
                  includes those policies and procedures that (1) pertain to the
                  maintenance of records that, in reasonable detail, accurately and
                  fairly reflect the transactions and dispositions of the assets of the
                  company; (2) provide reasonable assurance that transactions are
                  recorded as necessary to permit preparation of financial statements
                  in accordance with generally accepted accounting principles, and that
                  receipts and expenditures of the company are being made only in
                  accordance with authorizations of management and directors of the
                  company; and (3) provide reasonable assurance regarding prevention or
                  timely detection of unauthorized acquisition, use, or disposition of
                  the company's assets that could have a material effect on the
                  financial statements. Because of its inherent limitations, internal control over financial
                  reporting may not prevent or detect misstatements. Also, projections
                  of any evaluation of effectiveness to future periods are subject to
                  the risk that controls may become inadequate because of changes in
                  conditions, or that the degree of compliance with the policies or
                  procedures may deteriorate. In our opinion, the Company maintained, in all material respects,
                  effective internal control over financial reporting as of December
                  31, 2010, based on the COSO criteria. We also have audited, in accordance with the standards of the Public
                  Company Accounting Oversight Board (United States), the consolidated
                  balance sheets of the Company as of December 31, 2010 and 2009, and
                  the related consolidated statements of operations, changes in
                  shareholders' equity, and cash flows for each of the three years in
                  the period ended December 31, 2010, and our report dated March 7,
                  2011 expressed an unqualified opinion thereon.  /s/ Ernst & Young LLP New York, New YorkMarch 7, 2011
 F-3


Kenneth Cole Productions, Inc. and SubsidiariesConsolidated Balance Sheets (In thousands, except share and per share amounts)  December 31,2010
                           
                           
                           2009AssetsCurrent assets:Cash and cash equivalents
                           
                           $
                           83,395
                           
                           $
                           68,505Accounts receivable, less allowance for doubtful accounts of $66 and $186 respectively
                           
                           
                           35,779
                           
                           
                           30,204Inventories
                           
                           
                           36,539
                           
                           
                           29,080Prepaid expenses and other current assets
                           
                           
                           4,305
                           
                           
                           8,809Total current assets
                           
                           
                           160,018
                           
                           
                           136,598Property and equipment, at cost, less accumulated depreciation and amortization
                           
                           
                           48,862
                           
                           
                           53,952Other assets:Intangible assets, net
                           
                           
                           7,317
                           
                           
                           7,492Deferred taxes, net
                           
                           
                           528
                           
                           
                           909Investments and other
                           
                           
                           4,808
                           
                           
                           8,136Deferred compensation plans' assets
                           
                           
                           41,436
                           
                           
                           41,170Total other assets
                           
                           
                           54,089
                           
                           
                           57,707Total Assets
                           
                           $
                           262,969
                           
                           $
                           248,257 See accompanying notes to consolidated financial statements.
 F-4


Kenneth Cole Productions, Inc. and SubsidiariesConsolidated Balance Sheets (continued) (In thousands, except share and per share amounts)  December 31,2010
                           
                           
                           2009Liabilities and Shareholders' EquityCurrent liabilities:Accounts payable and accrued expenses
                           
                           $
                           43,608
                           
                           $
                           36,336Other current liabilities
                           
                           
                           13,055
                           
                           
                           7,852Deferred income
                           
                           
                           3,069
                           
                           
                           3,799Total current liabilities
                           
                           
                           59,732
                           
                           
                           47,987Accrued rent and other long-term liabilities
                           
                           
                           15,872
                           
                           
                           17,501Deferred compensation plans' liabilities
                           
                           
                           40,630
                           
                           
                           39,477Commitments 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;
                              16,070,348 and 15,933,282 issued as of December 31, 2010 and 2009,
                              respectively
                           
                           
                           160
                           
                           
                           159Class B Convertible Common Stock, par value $.01, 9,000,000 shares authorized; 8,010,497 issued and outstanding as of December 31, 2010 and 2009, respectively
                           
                           
                           80
                           
                           
                           80Additional paid-in capital
                           
                           
                           110,847
                           
                           
                           107,452Accumulated other comprehensive (loss)/income
                           
                           
                           (592
                           )
                           
                           1,346Retained earnings
                           
                           
                           161,161
                           
                           
                           159,176271,656
                           
                           
                           268,213Class A Common Stock in treasury, at cost, 5,855,550 as of December 31, 2010 and 2009, respectively
                           
                           
                           (124,921
                           )
                           
                           (124,921
                           )Total shareholders' equity
                           
                           
                           146,735
                           
                           
                           143,292Total Liabilities and Shareholders' Equity
                           
                           $
                           262,969
                           
                           $
                           248,257 See accompanying notes to consolidated financial statements.
 F-5


Kenneth Cole Productions, Inc. and SubsidiariesConsolidated Statements of Operations (In thousands, except share and per share amounts)  Year ended December 31,2010
                           
                           
                           2009
                           
                           
                           2008Net sales
                           
                           $
                           411,652
                           
                           $
                           370,955
                           
                           $
                           448,578Royalty revenue
                           
                           
                           45,676
                           
                           
                           39,445
                           
                           
                           43,759Net revenues
                           
                           
                           457,328
                           
                           
                           410,400
                           
                           
                           492,337Cost of goods sold
                           
                           
                           261,465
                           
                           
                           239,396
                           
                           
                           293,452Gross profit
                           
                           
                           195,863
                           
                           
                           171,004
                           
                           
                           198,885Selling, general and administrative expenses
                           
                           
                           194,088
                           
                           
                           182,209
                           
                           
                           208,168Impairment of intangible and long-lived assets
                           
                           
                           295
                           
                           
                           19,280
                           
                           
                           3,028Operating income/(loss)
                           
                           
                           1,480
                           
                           
                           (30,485
                           )
                           
                           (12,311
                           )Interest and other income, net
                           
                           
                           2,032
                           
                           
                           484
                           
                           
                           1,730Impairment of investments
                           
                           
                           (532
                           )
                           
                           (1,038
                           )
                           
                           (7,840
                           )Income/(loss) before provision for/(benefit from) income taxes
                           
                           
                           2,980
                           
                           
                           (31,039
                           )
                           
                           (18,421
                           )Provision for/(benefit from) income taxes
                           
                           
                           896
                           
                           
                           32,199
                           
                           
                           (3,621
                           )Net income/(loss)
                           
                           $
                           2,084
                           
                           $
                           (63,238
                           )
                           $
                           (14,800
                           )Earnings/(loss) per share:Basic
                           
                           $
                           0.11
                           
                           $
                           (3.52
                           )
                           $
                           (0.80
                           )Diluted
                           
                           $
                           0.11
                           
                           $
                           (3.52
                           )
                           $
                           (0.80
                           )Dividends declared per share
                           
                           
                           --
                           
                           
                           --
                           
                           $
                           0.36Shares used to compute earnings/(loss) per share:Basic
                           
                           
                           18,169,000
                           
                           
                           17,983,000
                           
                           
                           18,423,000Diluted
                           
                           
                           18,533,000
                           
                           
                           17,983,000
                           
                           
                           18,423,000 See accompanying notes to consolidated financial statements.
 F-6


Kenneth Cole Productions, Inc. and SubsidiariesConsolidated Statements of Changes in Shareholders' Equity(In thousands, except share amounts)  Class ACommon Stock
                           
                           
                           Class BCommon Stock
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           Treasury StockNumberof Shares
                           
                           
                           Amount
                           
                           
                           Numberof Shares
                           
                           
                           Amount
                           
                           
                           AdditionalPaid-InCapital
                           
                           
                           Accumulated OtherComprehensiveIncome/(Loss)
                           
                           
                           RetainedEarnings
                           
                           
                           Numberof Shares
                           
                           
                           Amount
                           
                           
                           TotalBalance at 12/31/07
                           
                           
                           15,604,673
                           
                           $
                           156
                           
                           
                           8,010,497
                           
                           $
                           80
                           
                           $
                           99,277
                           
                           $
                           914
                           
                           $
                           242,108
                           
                           
                           (4,236,350
                           )
                           $
                           (100,545
                           )
                           $
                           241,990Net loss
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (14,800
                           )
                           
                           
                           
                           
                           
                           
                           
                           (14,800
                           )Translation adjustment from foreign currency, net of taxes $(189)
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (773
                           )
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (773
                           )Unrealized gain on available-for-sale securities, net of
                              reclassification adjustment, net of taxes of $319
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           509
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           509Comprehensive loss
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (15,064
                           )Stock-based compensation expense
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           5,224
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           5,224Exercise of stock options and related tax benefits
                           
                           
                           5,400
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           71
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           71Issuance of restricted stock and related tax benefits
                           
                           
                           148,541
                           
                           
                           1
                           
                           
                           
                           
                           
                           
                           
                           
                           (676
                           )
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (675
                           )Shares surrendered by employees to pay taxes on restricted stock
                           
                           
                           (48,271
                           )
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (789
                           )
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (789
                           )Issuance of Class A Common Stock from Employee Stock Purchase Plan
                           
                           
                           16,329
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           211
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           211Purchase of Class A Common Stock
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (1,619,200
                           )
                           
                           (24,376
                           )
                           
                           (24,376
                           )Dividends paid on common stock
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (6,830
                           )
                           
                           
                           
                           
                           
                           
                           
                           (6,830
                           )Balance at 12/31/08
                           
                           
                           15,726,672
                           
                           $
                           157
                           
                           
                           8,010,497
                           
                           $
                           80
                           
                           $
                           103,318
                           
                           $
                           650
                           
                           $
                           220,478
                           
                           
                           (5,855,550
                           )
                           $
                           (124,921
                           )
                           $
                           199,762Cumulative adjustment for non-credit component of impaired securities
                              through Q2 2009
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (2,298
                           )
                           
                           2,298
                           
                           
                           
                           
                           
                           
                           
                           
                           --Net loss
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (63,238
                           )
                           
                           
                           
                           
                           
                           
                           
                           (63,238
                           )Other-than-temporary impairment for non-credit component of impaired securities
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (90
                           )
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (90
                           )Translation adjustment from foreign currency
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           418
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           418Unrealized gain on available-for-sale securities
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           2,252
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           2,252Comprehensive loss
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (60,658
                           )Realized loss for non-credit component of impaired securities
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           414
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           414Stock-based compensation expense
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           6,555
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           6,555Issuance of restricted stock and related tax benefits
                           
                           
                           288,917
                           
                           
                           2
                           
                           
                           
                           
                           
                           
                           
                           
                           (1,736
                           )
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (1,734
                           )Shares surrendered by employees to pay taxes on restricted stock
                           
                           
                           (107,442
                           )
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (842
                           )
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (842
                           )Issuance of Class A Common Stock for Employee Stock Purchase Plan
                           
                           
                           25,135
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           157
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           157Dividends associated with vesting of restricted stock
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (362
                           )
                           
                           
                           
                           
                           
                           
                           
                           (362
                           )Balance at 12/31/09
                           
                           
                           15,933,282
                           
                           $
                           159
                           
                           
                           8,010,497
                           
                           $
                           80
                           
                           $
                           107,452
                           
                           $
                           1,346
                           
                           $
                           159,176
                           
                           
                           (5,855,550
                           )
                           $
                           (124,921
                           )
                           $
                           143,292Net income
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           2,084
                           
                           
                           
                           
                           
                           
                           
                           
                           2,084Other-than-temporary impairment for non-credit component of impaired securities
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           90
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           90Translation adjustment for foreign currency
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (163
                           )
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (163
                           )Reduction in unrealized gain on available-for-sale securities
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (2,272
                           )
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           
                           (2,272
                           )Comprehensive loss
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (261
                        )Realized loss for non-credit component of impaired securities
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        407
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        407Stock-based compensation expense
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        3,943
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        3,943Exercise of stock options and related tax benefits
                        
                        
                        7,250
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        67
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        67Issuance of restricted stock and related tax benefits
                        
                        
                        179,810
                        
                        
                        1
                        
                        
                        
                        
                        
                        
                        
                        
                        5
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        6Shares surrendered by employees to pay taxes on restricted stock
                        
                        
                        (61,703
                        )
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (740
                        )
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (740
                        )Issuance of Class A Common Stock for Employee Stock Purchase Plan
                        
                        
                        11,709
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        120
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        120Dividends associated with vesting of restricted stock
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (99
                        )
                        
                        
                        
                        
                        
                        
                        
                        (99
                        )Balance at 12/31/10
                        
                        
                        16,070,348
                        
                        $
                        160
                        
                        
                        8,010,497
                        
                        $
                        80
                        
                        $
                        110,847
                        
                        $
                        (592
                        )
                        $
                        161,161
                        
                        
                        (5,855,550
                        )
                        $
                        (124,921
                        )
                        $
                        146,735 See accompanying notes to consolidated financial statements.
 F-7


Kenneth Cole Productions, Inc. and SubsidiariesConsolidated Statements of Cash Flows (In thousands)  For the years ended December 31,2010
                           
                           
                           2009
                           
                           
                           2008Cash flows provided by operating activitiesNet income/(loss)
                           
                           $
                           2,084
                           
                           $
                           (63,238
                           )
                           $
                           (14,800
                           )Adjustments to reconcile net income/(loss) to net cash provided by
                              operating activities:Depreciation and amortization
                           
                           
                           9,485
                           
                           
                           9,734
                           
                           
                           9,229Impairment of intangible and long-lived assets
                           
                           
                           295
                           
                           
                           19,280
                           
                           
                           3,028(Benefit from)/provision for doubtful accounts
                           
                           
                           (15
                           )
                           
                           (320
                           )
                           
                           1,309Provision for/(benefit from) deferred taxes
                           
                           
                           365
                           
                           
                           30,737
                           
                           
                           (10,371
                           )Unrealized loss/(gain) from investments
                           
                           
                           135
                           
                           
                           (2,252
                           )
                           
                           (509
                           )Realized gain from investments
                           
                           
                           (1,706
                           )
                           
                           --
                           
                           
                           --Writedown of investments
                           
                           
                           532
                           
                           
                           1,038
                           
                           
                           7,840Stock-based compensation expense
                           
                           
                           3,943
                           
                           
                           6,555
                           
                           
                           5,145Tax benefit from stock option exercises and restricted stock vested
                           
                           
                           (843
                           )
                           
                           (892
                           )
                           
                           (933
                           )Changes in operating assets and liabilities:(Increase)/decrease in accounts receivable
                           
                           
                           (5,560
                           )
                           
                           11,324
                           
                           
                           5,420(Increase)/decrease in inventories
                           
                           
                           (7,459
                           )
                           
                           14,262
                           
                           
                           4,691Decrease/(increase) in prepaid expenses and other current assets
                           
                           
                           4,504
                           
                           
                           (6,913
                           )
                           
                           2,149Decrease in other assets
                           
                           
                           9
                           
                           
                           6,305
                           
                           
                           10,168Increase/(decrease) in accounts payable and accrued expenses
                           
                           
                           7,272
                           
                           
                           (6,599
                           )
                           
                           3,965Increase/(decrease) in deferred income and other current liabilities
                           
                           
                           4,738
                           
                           
                           (5,150
                           )
                           
                           (602
                           )(Decrease)/increase in other long-term liabilities
                           
                           
                           (476
                           )
                           
                           3,421
                           
                           
                           (3,827
                           )Net cash provided by operating activities
                           
                           
                           17,303
                           
                           
                           17,292
                           
                           
                           21,902Cash flows used in investing activitiesAcquisition of property and equipment
                           
                           
                           (4,124
                           )
                           
                           (12,059
                           )
                           
                           (9,382
                           )Purchase of intangible assets
                           
                           
                           (224
                           )
                           
                           (767
                           )
                           
                           (6,567
                           )Proceeds from sale of investments
                           
                           
                           2,667
                           
                           
                           1,068
                           
                           
                           --Net cash used in investing activities
                           
                           
                           (1,681
                           )
                           
                           (11,758
                           )
                           
                           (15,949
                           )Cash flows used in financing activitiesShares surrendered by employees to pay taxes on restricted stock
                           
                           
                           (740
                           )
                           
                           (842
                           )
                           
                           (789
                           )Excess tax benefit from stock options and restricted stock
                           
                           
                           12
                           
                           
                           --
                           
                           
                           8Proceeds from exercise of stock options
                           
                           
                           61
                           
                           
                           --
                           
                           
                           63Proceeds from employee stock purchase plan
                           
                           
                           120
                           
                           
                           157
                           
                           
                           211Payments of financing costs
                           
                           
                           --
                           
                           
                           (724
                           )
                           
                           --Acquisition of treasury shares
                           
                           
                           --
                           
                           
                           --
                           
                           
                           (24,376
                           )Dividends associated with vesting of restricted stock
                           
                           
                           (99
                           )
                           
                           (362
                           )
                           
                           (168
                           )Dividends paid to shareholders
                           
                           
                           --
                           
                           
                           --
                           
                           
                           (6,662
                           )Net cash used in financing activities
                           
                           
                           (646
                           )
                           
                           (1,771
                           )
                           
                           (31,713
                           )Effect of exchange rate changes on cash
                           
                           
                           (86
                           )
                           
                           38
                           
                           
                           (189
                           )Net increase/(decrease) in cash
                           
                           
                           14,890
                           
                           
                           3,801
                           
                           
                           (25,949
                           )Cash and cash equivalents, beginning of year
                           
                           
                           68,505
                           
                           
                           64,704
                           
                           
                           90,653Cash and cash equivalents, end of year
                           
                           $
                           83,395
                           
                           $
                           68,505
                           
                           $
                           64,704Supplemental disclosures of cash flow informationCash paid during the year for:Interest
                           
                           $
                           26
                           
                           $
                           32
                           
                           $
                           175Income taxes (refunded)/paid, net
                           
                           $
                           (3,948
                           )
                           $
                           1,123
                           
                           $
                           3,664 See accompanying notes to consolidated financial statements.
 F-8


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 1 - Summary of Significant Accounting Policies A.   Description of business Kenneth Cole Productions, Inc. and its subsidiaries (the "Company")
                  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, Unlisted and Le Tigrebrand names, as well as footwear under the proprietary trademark Gentle Souls. In addition, the Company designs, develops, and sources private
                  label footwear and handbags for selected retailers. The Company
                  markets its products to approximately 5,200 domestic department and
                  specialty store locations, the Company's full-priced retail stores,
                  outlet stores, and its e-commerce website, as well as internationally
                  through its licensee partners and international retailers. B.   Principles of consolidation The consolidated financial statements include the accounts of Kenneth
                  Cole Productions, Inc. and its subsidiaries, all of which are wholly
                  owned. Intercompany transactions and balances have been eliminated in
                  consolidation. Certain amounts in the Company's previous financial
                  statements have been reclassified to conform to the 2010 presentation. C.   Use of estimates The preparation of financial statements in conformity with accounting
                  principles generally accepted in the United States requires
                  management to make estimates and assumptions that affect the reported
                  amounts of assets and liabilities and disclosure of contingent assets
                  and liabilities at the date of the financial statements, as well as
                  the reported amounts of revenues and expenses during the reporting
                  period. Actual results could differ from those estimates. D.   Cash and cash equivalents The Company considers all highly liquid investments with an original
                  maturity of three months or less at the time of purchase to be cash
                  equivalents. E.   Investments The Company has auction-rate securities that contain "A" through
                  "double C" rated debt obligations and a preferred share closed end
                  fund that are substantially all insured. Maturity dates for these
                  securities range from 2033 to 2050. The Company records the
                  securities at fair value, and has classified them as
                  available-for-sale securities. The securities are marketable through
                  a monthly auction process and the interest rate on these securities
                  is reset every 28 days. If the auction process fails a default
                  interest rate is set as defined within the investment prospectus. The
                  purchase and sale of these securities is included in the accompanying
                  Consolidated Statements of Cash Flows as an investing activity. The Company reviews its security investments to determine whether a
                  decline in fair value is other-than-temporary. Any decline in fair
                  value of an equity investment that is determined to be
                  other-than-temporary is adjusted by an impairment charge within
                  Impairment of investments in the Consolidated Statements of
                  Operations. Any decline in the fair value of an auction-rate security
                  that is determined to be other-than-temporary is adjusted by an
                  impairment charge within Impairment of investments in the
                  Consolidated Statements of Operations for the credit component of the
                  other-than-temporary impairment.
 F-9


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 1 - Summary of Significant Accounting Policies (continued) E.   Investments (continued) The non-credit component is recorded within Accumulated other
                  comprehensive (loss)/income within the Consolidated Balance Sheets.
                  The primary factors the Company considers in its determination of
                  whether an other-than-temporary impairment exists are the length of
                  time that the fair value of the investment is below the Company's
                  carrying value, the financial condition and operating performance of
                  the investee, the reason for the decline in the fair value and the
                  Company's intent and ability to hold the investment for a period of
                  time sufficient to allow for a recovery in fair value. The Company determines the gain or loss on the sale of equity and
                  auction-rate securities using the specific identification method. F.   Inventories Inventories, which consist of finished goods, are stated at the lower
                  of cost or fair market value. Cost for the Wholesale segment
                  inventory is determined by the first-in, first-out method, while the
                  Consumer Direct segment inventory is based on the moving-average
                  first-in, first-out cost method. G.   Property and equipment Property and equipment are stated at cost less accumulated
                  depreciation and amortization. Depreciation and amortization is
                  computed using the estimated useful lives of the related assets
                  ranging from three to forty years on a straight-line basis. Leasehold
                  improvements are amortized using the straight-line method over the
                  term of the related lease or the estimated useful life, whichever
                  is less. The Company reviews long-lived assets for possible impairment
                  whenever events or changes in circumstances indicate that the
                  carrying amount of an asset may not be recoverable as measured by
                  comparing the undiscounted future cash flows to the asset's net book
                  value. Impaired assets are written down to fair value which
                  represents the lesser of the related asset's net book value or the
                  discounted projected future cash flows of the asset. H.   Intangible Assets Intangible assets are recorded at cost. Intangible assets that have
                  indefinite lives are not subject to amortization while those with
                  finite lives are amortized over their estimated useful lives. The Company reviews intangible assets for possible impairment at
                  least annually or whenever events or changes in circumstances
                  indicate that an impairment indicator exists. The Company, with the
                  assistance of an independent appraiser, utilizes a combination of the
                  market approach and the royalty savings method under the income
                  approach to estimate fair value through the application of the
                  discount rate derived from the weighted average cost of capital to
                  the projected future cash flows. If the fair value is below the
                  carrying value, the Company will impair the asset. I.   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 based on income tax accounting
                  guidance applied by management. 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.
 F-10


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 1 - Summary of Significant Accounting Policies (continued) I. Income Taxes (continued) 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 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. J.   Revenue recognition Wholesale revenues are recognized upon shipment of products to
                  customers since title passes upon shipment. Consumer Direct revenues
                  from stores are recognized at the time of sale. Both Wholesale and
                  Consumer Direct revenues are shown net of returns, discounts and
                  other allowances. Reserves for estimated returns and allowances for
                  discounts are provided when sales are recorded. The Company has also
                  entered into various trade name license agreements that provide
                  revenues based on minimum royalties and additional revenues based on
                  percentage of defined sales. Minimum royalty revenue is recognized on
                  a straight-line basis over each contract period, as defined in each
                  license agreement. In circumstances whereby licensee sales exceed the
                  quarterly contractual minimums, but not the annual minimums,
                  royalties are deferred on the Consolidated Balance Sheets. As the
                  licensee sales exceed the annual contractual minimums, the royalties
                  are recognized. K.   Advertising costs Advertising costs are expensed as incurred and are included in
                  Selling, general, and administrative expenses ("SG&A") in the
                  accompanying Consolidated Statements of Operations. Included in
                  advertising expenses are costs associated with cooperative
                  advertising programs, under which the Company generally shares the
                  cost of a customer's advertising expenditures. In addition, licensee
                  contributions toward advertising are recognized when licensed
                  products are sold by the Company's licensees. Such contributions are
                  based on contractual percentages of sales and contain minimums. For
                  licensees whose sales are not expected to exceed contractual sales
                  minimums, contributions relating to advertising are recognized based
                  on the contractual minimums. In circumstances whereby licensee sales
                  exceed the quarterly contractual minimums, but not the annual
                  minimums, such contributions toward advertising are deferred on the
                  Consolidated Balance Sheets. As the licensee sales exceed the annual
                  contractual minimums, the licensee contributions toward advertising
                  are recognized. L.   Stock-based compensation The Company records all share-based payments, including grants of
                  employee stock options, based on their fair value. The Company
                  measures the cost of services received in exchange for stock options
                  and similar awards based on the grant-date fair value of the award
                  and recognizes this cost in the Consolidated Statements of Operations
                  over the period during which an award recipient is required to
                  provide service in exchange for the award. The Company uses the
                  Black-Scholes model to assess the fair value of non-qualified
                  employee stock options and amortizes this cost over the service
                  period.
 F-11


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 1 - Summary of Significant Accounting Policies (continued) L. Stock-based compensation (continued) In addition, stock compensation expense is reduced for estimated
                  forfeitures prior to vesting primarily based on historical annual
                  forfeiture rates and by employee classification. Estimated
                  forfeitures are reassessed on a quarterly basis and may change based
                  on new facts and circumstances. M. Derivative instruments and hedging activities The Company may use derivative instruments, typically forward
                  contracts, to manage its risk associated with movements in foreign
                  currency exchange rates in purchasing inventory. The Company
                  recognizes all derivatives on the Consolidated Balance Sheets.
                  Derivative instruments that meet certain criteria are classified as
                  cash flow hedges, and changes in their fair value are recognized in
                  Accumulated other comprehensive (loss)/income in the accompanying
                  Consolidated Statements of Changes in Shareholders' Equity, until the
                  hedged item is recognized in earnings. Those derivatives that are not
                  classified as cash flow hedges are adjusted to fair value through
                  earnings. The Company does not hold derivative instruments for the
                  purpose of trading or speculation. The Company did not use any
                  derivative instruments during 2010 or 2009. N. Shipping and Handling Costs The Company includes amounts billed to customers for shipping costs
                  in Net sales. The related internal and external shipping and handling
                  costs incurred by the Company are included in the Cost of goods sold
                  line item in the accompanying Consolidated Statements of Operations.
                  Such costs include inbound freight costs, purchasing costs,
                  inspection costs, internal transfer costs, and other product
                  procurement related charges. O. Cost of Goods Sold and Selling, General and Administrative Expenses Costs associated with the production and procurement of product are
                  included in the Cost of goods sold line item in the accompanying
                  Consolidated Statements of Operations, including inbound freight
                  costs, purchasing costs, inspection costs, and other product
                  procurement related charges. All other expenses associated with the
                  production and procurement of product, excluding interest and income
                  taxes, are included in SG&A, including warehousing, handling and
                  distribution expenses that are general and administrative in nature. P. Research and Development Costs The Company does not incur research and development costs. Note 2 - Earnings/(loss) Per Share Basic earnings/(loss) per share is calculated by dividing net
                  income/(loss) by the 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.
 F-12


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 2 - Earnings/(loss) Per Share (continued) Stock options and restricted stock outstanding as of December 31,
                  2010 in an aggregate amount of 2,459,000 have been excluded in the
                  diluted per share calculation as the impact would be antidilutive.
                  All stock options and restricted stock outstanding as of December 31,
                  2009 and 2008 have been excluded in the diluted per share calculation
                  as the impact would be antidilutive. The shares used to calculate
                  basic and diluted earnings/(loss) per common share consists of the
                  following:  For the Year Ended December 31,2010
                           
                           
                           2009
                           
                           
                           2008Weighted-average common shares outstanding
                           
                           
                           18,169,000
                           
                           
                           17,983,000
                           
                           
                           18,423,000Effect of dilutive securities:Restricted stock and employee stock purchase plan
                           
                           
                           152,000
                           
                           
                           --
                           
                           
                           --Stock options
                           
                           
                           212,000
                           
                           
                           --
                           
                           
                           --Weighted-average common shares outstanding and common share equivalents
                           
                           
                           18,533,000
                           
                           
                           17,983,000
                           
                           
                           18,423,000 Note 3 - Accounts Receivable The Company has a Receivables Management Agreement under which its
                  largest factor 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. At December 31, 2010
                  and 2009, the Accounts receivable balance of $35.8 million and $30.2
                  million, respectively, is net of allowances for doubtful accounts and
                  Consumer Direct sales returns of $0.8 million and $0.9 million,
                  respectively. The allowance for doubtful accounts is provided for
                  estimated losses resulting from the inability of the Company's
                  wholesale customers to make required payments, while the allowance
                  provided for sales returns is for potential future retail customer
                  merchandise returns, both of which are based on management's
                  estimates. In addition, Accounts receivable at December 31, 2010 and
                  2009 is net of allowances for chargebacks from wholesale customers
                  for returns, discounts, and other deductions of approximately $7.9
                  million and $7.3 million, respectively. The allowances are provided
                  for known chargebacks reserved for but not written off the Company's
                  financial records and for potential future customer deductions based
                  on management's estimates. Note 4 - Investments The Company reviews its investments for other-than-temporary
                  impairment whenever the fair value of an investment is less than
                  amortized cost and evidence indicates that an investment's carrying
                  value may not be recoverable within a reasonable period of time.  In
                  the Company's evaluation of its investments it also considers 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 approximately $0.5 million related to
                  auction-rate securities within Impairment of investments in the
                  Consolidated Statement of Operations for the year ended December 31,
                  2010.
 F-13


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 4 - Investments (continued) During the year ended December 31, 2010, the Company sold its equity
                  securities for $2.3 million. The book cost basis of the equity
                  securities sold were $0.7 million which resulted in a net realized
                  gain of $1.6 million, which is recorded in Interest and other income,
                  net in the Consolidated Statement of Operations. In addition, the
                  Company sold one of its auction-rate securities. The book cost basis
                  of the security sold was $0.8 million which was determined utilizing
                  the specific identification method. The proceeds from the sale were
                  $1.0 million, resulting in a net realized gain of $0.2 million, which
                  is recorded in Interest and other income, net in the Consolidated
                  Statement of Operations. The following table presents gross unrealized gains on, and estimated
                  fair value of, the Company's long-term investments as of December 31,
                  2010 and 2009 (in thousands):  December 31, 2010Other than
                           
                           
                           Gross UnrealizedHistorical Cost
                           
                           
                           (2)Cost Basis
                           
                           
                           Estimated Fair Value
                           
                           
                           Temporary Impairment (1)
                           
                           
                           Gains
                           
                           
                           LossesAuction-rate securities
                           
                           $
                           6,100
                           
                           $
                           2,424
                           
                           $
                           2,516
                           
                           
                           --
                           
                           $
                           92
                           
                           
                           --Equity securities
                           
                           
                           --
                           
                           
                           --
                           
                           
                           --
                           
                           
                           --
                           
                           
                           --
                           
                           
                           --Total
                           
                           $
                           6,100
                           
                           $
                           2,424
                           
                           $
                           2,516
                           
                           
                           --
                           
                           $
                           92
                           
                           
                           --   December 31, 2009Other than
                           
                           
                           Gross UnrealizedHistorical Cost
                           
                           
                           (2)Cost Basis
                           
                           
                           Estimated Fair Value
                           
                           
                           Temporary Impairment (1)
                           
                           
                           Gains
                           
                           
                           LossesAuction-rate securities
                           
                           $
                           7,100
                           
                           $
                           3,392
                           
                           $
                           3,529
                           
                           $
                           (90
                           )
                           $
                           227
                           
                           
                           --Equity securities
                           
                           
                           5,338
                           
                           
                           717
                           
                           
                           3,365
                           
                           
                           --
                           
                           
                           2,648
                           
                           
                           --Total
                           
                           $
                           12,438
                           
                           $
                           4,109
                           
                           $
                           6,894
                           
                           $
                           (90
                           )
                           $
                           2,875
                           
                           
                           --  (1)
                           
                           
                           The non-credit portion of the other-than-temporary impairment related
                              to auction-rate securities are recorded in Accumulated other
                              comprehensive (loss)/income.(2)
                           
                           
                           The cost basis is historical cost less other-than-temporary
                              impairment not reflected in Accumulated other comprehensive
                              (loss)/income. In accordance with accounting guidance issued and effective June 30,
                  2009, the Company recorded a balance sheet reclassification between
                  Retained earnings and Accumulated other comprehensive (loss)/income
                  of $2.3 million related to the non-credit component of previous
                  writedowns of auction-rate securities in the Consolidated Balance
                  Sheets. As the result of the sale of one of its auction-rate
                  securities during 2009, the Company recorded a realized loss of $0.4
                  million which had been previously reclassified to Accumulated other
                  comprehensive (loss)/income as well as a $0.1 million realized gain
                  from the proceeds of the sale. The proceeds were $1.1 million with a
                  cost basis of $1.0 million. The security was written down from a
                  historical cost of $1.5 million through other-than-temporary
                  impairments recorded prior to being sold. The Company also recorded a
                  $0.7 million other-than-temporary impairment of its remaining
                  auction-rate securities during the year-ended December 31, 2009,
                  which in aggregate resulted in the recording of a $1.0 million
                  realized loss within Impairment of investments in the Consolidated
                  Statement of Operations. In addition, the Company recorded a net
                  unrealized gain of approximately $2.7 million for the year ended
                  December 31, 2009 primarily relating to its equity securities.
                  Auction-rate securities are recorded as long-term within Investments
                  and other in the Consolidated Balance Sheets at December 31, 2010 and
                  2009 based on the lack of an active credit market for investors to
                  purchase and sell these investments.
 F-14


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 5 - Fair Value Measurement  The Company's financial assets, measured at fair value on a recurring
                              basis, were as follows (in thousands):Fair Value atDecember 31, 2010
                           
                           
                           Fair Value atDecember 31, 2009
                           
                           
                           HierarchyEquity Securities
                           
                           $
                           --
                           
                           $
                           3,365
                           
                           
                           Level 1Deferred compensation plans' assets
                           
                           $
                           36,473
                           
                           $
                           36,192
                           
                           
                           Level 2Auction-rate securities
                           
                           $
                           2,516
                           
                           $
                           3,529
                           
                           
                           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. The deferred compensation plans' assets are primarily
                  comprised of interests in limited partnerships that invest in a
                  variety of assets including publicly traded equity securities, debt
                  securities and privately-held companies. The general partners that
                  manage the limited partnerships determine the fair value of the
                  plan's investment by determining the net asset valuation in
                  accordance with applicable accounting standards. Certain of these
                  investments have short-term lockup provisions and redemption
                  restrictions which require advance notice for redemption. Management
                  does not believe that these short-term lockup provisions and
                  redemption restrictions affect the Plan's ability to transact
                  redemptions at the net asset value. 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.
                  The fair value of the Company's auction-rate securities 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. Maturity dates for
                  these auction-rate securities range from 2033 to 2050. The following table presents the reconciliation of the beginning and
                  ending fair value measurements of the Company's Level 3 assets,
                  auction-rate securities, measured at fair value using observable
                  inputs based on unobservable data in an inactive market as of
                  December 31, 2010 and 2009 (in thousands):  2010
                           
                           
                           2009Beginning balance
                           
                           $
                           3,529
                           
                           $
                           5,085Realized gain included in Statements of Operations
                           
                           
                           156
                           
                           
                           107Sale of auction-rate security
                           
                           
                           (1,000
                           )
                           
                           (1,068
                           )Unrealized (loss)/gain recorded in Accumulated other comprehensive (loss)/income
                           
                           
                           (135
                           )
                           
                           227Impairment charge recorded in other comprehensive income
                           
                           
                           --
                           
                           
                           (90
                           )Impairment charge included in Statements of Operations
                           
                           
                           (34
                           )
                           
                           (732
                           )Ending balance
                           
                           $
                           2,516
                           
                           $
                           3,529 The Company recorded a $0.5 million and $0.7 million writedown in its
                  auction-rate securities within Impairment of investments in the
                  Consolidated Statements of Operations for the years ended December
                  31, 2010 and 2009, respectively.
 F-15


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 6 - Property and Equipment Property and equipment consist of the following (in thousands):  December 31,Useful lives
                           
                           
                           
                           
                           
                           2010
                           
                           
                           2009Property and equipment-at cost:Land
                           
                           
                           
                           
                           
                           
                           
                           $
                           5,462
                           
                           $
                           5,462Building and building improvements
                           
                           
                           15-40 years
                           
                           
                           
                           
                           
                           34,283
                           
                           
                           34,254Furniture and fixtures
                           
                           
                           7 years
                           
                           
                           
                           
                           
                           31,623
                           
                           
                           33,550Machinery and equipment
                           
                           
                           3-7 years
                           
                           
                           
                           
                           
                           27,325
                           
                           
                           27,131Leasehold improvements
                           
                           
                           Up to 10 years
                           
                           
                           
                           
                           
                           32,846
                           
                           
                           38,099131,539
                           
                           
                           138,496Less accumulated depreciation and amortization
                           
                           
                           
                           
                           
                           
                           
                           
                           82,677
                           
                           
                           84,544Net property and equipment
                           
                           
                           
                           
                           
                           
                           
                           $
                           48,862
                           
                           $
                           53,952 Depreciation and amortization expense amounted to $8.9 million, $9.4
                  million and $8.9 million for the years ended December 31, 2010, 2009
                  and 2008, respectively, and are classified within SG&A in the
                  Consolidated Statements of Operations. Note 7 - Impairment of Long-Lived Assets The Company reviews long-lived assets for possible impairment
                  whenever events or changes in circumstances indicate that the
                  carrying amount of an asset may not be recoverable as measured by
                  comparing the undiscounted future cash flows to the asset's net book
                  value.  In 2010, 2009 and 2008, the Company recorded non-cash asset
                  impairment charges of $0.3 million, $6.5 million and $1.9 million,
                  respectively, related to its Consumer Direct segment stores' assets.
                   In 2008, the Company recorded a non-cash asset impairment charge of
                  $1.1 million for its Wholesale segment shop-in-shops' build out
                  costs.  These impairment charges were recorded within Impairment of
                  intangible and long-lived assets in the Consolidated Statements of
                  Operations. Note 8 - Intangible Assets Intangible assets, primarily trademarks, consist of the following (in
                  thousands):  December 31,2010
                           
                           
                           2009Indefinite lived intangible assets
                           
                           $
                           5,000
                           
                           $
                           5,000Finite lived intangible assets
                           
                           
                           4,013
                           
                           
                           3,789Less accumulated amortization
                           
                           
                           (1,696
                           )
                           
                           (1,297
                           )Net finite lived intangible assets
                           
                           
                           2,317
                           
                           
                           2,492Net intangible assets
                           
                           $
                           7,317
                           
                           $
                           7,492
 F-16


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 8 - Intangible Assets (continued) Amortization expense amounted to $0.4 million, $0.4 million and $0.3
                  million for the years ended December 31, 2010, 2009 and 2008,
                  respectively, and are classified within SG&A in the Consolidated
                  Statements of Operations. The weighted-average amortization period of
                  intangible assets acquired in 2010 and 2009 is 9.7 years and 16.5
                  years, respectively. Amortization expense for the following five
                  years is estimated to be as follows (dollars in thousands):  2011
                           
                           
                           
                           
                           $
                           3712012
                           
                           
                           
                           
                           
                           3612013
                           
                           
                           
                           
                           
                           3322014
                           
                           
                           
                           
                           
                           3102015
                           
                           
                           
                           
                           
                           306 The Company acquired the Le Tigretrademark and other intellectual property associated with the Le Tigre brand from Le Tigre, LLC for $18.5 million. The Company recorded the
                  intellectual property in Intangible assets, net on the accompanying
                  Consolidated Balance Sheets at fair value. Based on an independent
                  appraisal, management allocated the majority of the $18.5 million
                  paid as an indefinite lived intangible asset, which is not subject to
                  amortization, and a nominal amount as a finite lived intangible
                  asset, which is subject to amortization. In 2009, the Company expanded the brand internationally and
                  domestically through retail outlets; however, the Company mutually
                  agreed to not extend its two and a half year Le Tigrelicensing agreement with JC Penney which prompted an impairment
                  indicator. As such, the Company compared the fair value of the
                  trademark to the carrying value. The Company, with the assistance of
                  an independent appraiser, utilized a combination of the market
                  approach and the royalty savings method under the income approach to
                  estimate fair value. Based upon this review, the Company recorded an
                  impairment charge of $12.8 million for the year ended December 31,
                  2009 within Impairment of intangible and long-lived assets in the
                  Consolidated Statements of Operations within the Licensing segment. During 2009, the Company purchased the Gentle Souls footwear
                  technology patent for $0.5 million. During 2008, the Company paid
                  $0.5 million for the final cash payment related to the Gentle Souls
                  trademark purchased in 2006. Note 9 - Segment Reporting The Company designs and sources a broad range of fashion footwear,
                  handbags, accessories, and apparel and has three reportable segments:
                  Wholesale, Consumer Direct and Licensing. The Wholesale segment
                  markets footwear, handbags and men's apparel products for sale to
                  approximately 5,200 domestic department and specialty store
                  locations, the Company's Consumer Direct segment and international
                  retailers. 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 its e-commerce website (at website address www.kennethcole.com).
                  The Licensing segment, through third-party licensee agreements, has
                  evolved the Company from primarily a footwear resource to a diverse
                  global 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 the licensees' products. The segment consists primarily of
                  royalties earned on domestic and international licensee sales to
                  third parties of products bearing the Company's trademarks and
                  trade names.
 F-17


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 9 - Segment Reporting (continued) The Company's reportable segments are business units that offer
                  products to overlapping consumers through different channels of
                  distribution. Each segment is managed separately, while results
                  across segments are reviewed 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, impairment
                  of intangible and long-lived assets, unallocated corporate overhead
                  and income taxes for each segment. Intersegment sales between the
                  Wholesale and Consumer Direct segments are eliminated in
                  consolidation. Financial information of the Company's reportable segments is as
                  follows (dollars in thousands):  ConsumerWholesale
                           
                           
                           Direct
                           
                           
                           Licensing
                           
                           
                           TotalsYear Ended December 31, 2010Revenues
                           
                           $
                           219,256
                           
                           $
                           192,396
                           
                           $
                           45,676
                           
                           $
                           457,328Interest and other income, net
                           
                           
                           326
                           
                           
                           --
                           
                           
                           --
                           
                           
                           326Depreciation expense
                           
                           
                           2,764
                           
                           
                           6,155
                           
                           
                           --
                           
                           
                           8,919Segment (loss)/income (2) (3)
                           
                           
                           (121
                           )
                           
                           (19,558
                           )
                           
                           36,755
                           
                           
                           17,076Impairment of intangible and long-lived assets
                           
                           
                           --
                           
                           
                           295
                           
                           
                           --
                           
                           
                           295Segment assets (4)
                           
                           
                           199,752
                           
                           
                           47,839
                           
                           
                           15,378
                           
                           
                           262,969Expenditures for long-lived assets
                           
                           
                           379
                           
                           
                           3,784
                           
                           
                           185
                           
                           
                           4,348Year Ended December 31, 2009Revenues
                           
                           $
                           201,420
                           
                           $
                           169,535
                           
                           $
                           39,445
                           
                           $
                           410,400Intersegment revenues (1)
                           
                           
                           35,210
                           
                           
                           --
                           
                           
                           --
                           
                           
                           35,210Interest and other income, net
                           
                           
                           484
                           
                           
                           --
                           
                           
                           --
                           
                           
                           484Depreciation expense
                           
                           
                           2,974
                           
                           
                           6,405
                           
                           
                           --
                           
                           
                           9,379Segment (loss)/income (2) (3)
                           
                           
                           (8,807
                           )
                           
                           (19,982
                           )
                           
                           31,932
                           
                           
                           3,143Impairment of intangible and long-lived assets
                           
                           
                           --
                           
                           
                           6,518
                           
                           
                           12,762
                           
                           
                           19,280Segment assets (4)
                           
                           
                           160,270
                           
                           
                           48,007
                           
                           
                           39,980
                           
                           
                           248,257Expenditures for long-lived assets
                           
                           
                           1,081
                           
                           
                           11,023
                           
                           
                           722
                           
                           
                           12,826Year Ended December 31, 2008Revenues
                           
                           $
                           267,151
                           
                           $
                           181,427
                           
                           $
                           43,759
                           
                           $
                           492,337Intersegment revenues (1)
                           
                           
                           40,458
                           
                           
                           --
                           
                           
                           --
                           
                           
                           40,458Interest and other income, net
                           
                           
                           1,730
                           
                           
                           --
                           
                           
                           --
                           
                           
                           1,730Depreciation expense
                           
                           
                           3,048
                           
                           
                           5,873
                           
                           
                           --
                           
                           
                           8,921Segment (loss)/income (2) (3)
                           
                           
                           (8,484
                           )
                           
                           (18,662
                           )
                           
                           33,785
                           
                           
                           6,639Impairment of long-lived assets
                           
                           
                           1,111
                           
                           
                           1,917
                           
                           
                           --
                           
                           
                           3,028Segment assets (4)
                           
                           
                           196,024
                           
                           
                           55,071
                           
                           
                           62,340
                           
                           
                           313,435Expenditures for long-lived assets
                           
                           
                           2,088
                           
                           
                           7,309
                           
                           
                           6,552
                           
                           
                           15,949  (1)
                           
                           
                           Prior to 2010, the Wholesale segment purchased inventory on behalf of
                              the Consumer Direct segment. Transfer of this inventory from
                              Wholesale to Consumer Direct was recorded as intersegment revenues.
                              Beginning in 2010, inventory is purchased directly by Consumer
                              Direct; as such no intersegment revenues exist.(2)
                           
                           
                           Excludes stock-based compensation expense, writedown of marketable
                              securities, impairment of intangible and long-lived assets,
                              unallocated corporate overhead and income taxes. In 2009, the Company
                              reclassified the impairment of long-lived assets from the Consumer
                              Direct segment to an unallocated corporate charge. Amounts in 2008
                              have been reclassified to conform to the 2010 presentation.(3)
                           
                           
                           The Wholesale segment includes primarily all of the Company's
                              allocated corporate overhead.(4)
                           
                           
                           The Wholesale segment includes corporate assets.
 F-18


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 9 - Segment Reporting (continued) The reconciliation of the Company's reportable segment revenues and
                  profit and loss are as follows (dollars in thousands):  Revenues
                           
                           
                           2010
                           
                           
                           2009
                           
                           
                           2008Revenues for reportable segments
                           
                           $
                           457,328
                           
                           $
                           410,400
                           
                           $
                           492,337Intersegment revenues (1)
                           
                           
                           --
                           
                           
                           35,210
                           
                           
                           40,458Elimination of intersegment revenues (1)
                           
                           
                           --
                           
                           
                           (35,210
                           )
                           
                           (40,458
                           )Total consolidated revenues
                           
                           $
                           457,328
                           
                           $
                           410,400
                           
                           $
                           492,337Income/(loss)Total income for reportable segments (2)
                           
                           $
                           17,076
                           
                           $
                           3,143
                           
                           $
                           6,639Elimination of stock-based compensation expense, writedown of
                              marketable securities, impairment of intangible and long-lived assets
                              and unallocated corporate overhead
                           
                           
                           (14,096
                           )
                           
                           (34,182
                           )
                           
                           (25,060
                           )Total income/(loss) before provision for/(benefit from) income taxes
                           
                           $
                           2,980
                           
                           $
                           (31,039
                           )
                           $
                           (18,421
                           )  (1)
                           
                           
                           Prior to 2010, the Wholesale segment purchased inventory on behalf of
                                 the Consumer Direct segment. Transfer of this inventory from
                                 Wholesale to Consumer Direct was recorded as intersegment revenues.
                                 Beginning in 2010, inventory is purchased directly by Consumer
                                 Direct; as such no intersegment revenues exist.(2)
                           
                           
                           Excludes stock-based compensation expense, writedown of marketable
                              securities, impairment of intangible and long-lived assets,
                              unallocated corporate overhead and income taxes. Revenues from international customers were approximately 6.1%, 5.0%,
                  and 3.9% of the Company's consolidated revenues for the years ended
                  December 31, 2010, 2009 and 2008, respectively. Note 10 - Other Current Liabilities Other current liabilities consist of the following (dollars in thousands):  December 31,2010
                           
                           
                           2009Rent
                           
                           $
                           1,380
                           
                           $
                           837Compensation
                           
                           
                           9,068
                           
                           
                           4,348Customer credits
                           
                           
                           1,677
                           
                           
                           1,673Other
                           
                           
                           930
                           
                           
                           994Total other current liabilities
                           
                           $
                           13,055
                           
                           $
                           7,852 Note 11 - Benefit Plans A. 401(k) Plan The Company's 401(k) profit-sharing plan covers all domestic
                  employees, subject to certain minimum age and length of service
                  requirements who are permitted to contribute specified percentages of
                  their salary up to the maximum permitted by the Internal Revenue
                  Service. As defined in the 401(k) Plan document, the Company may make
                  a matching and/or additional discretionary contribution. The Company
                  made an additional discretionary contribution of approximately $0.2
                  million during 2010. No additional discretionary contributions were
                  made during 2009 or 2008. Contributions to the plan for the years
                  ended December 31, 2010, 2009 and 2008 were approximately $0.3
                  million, $0.2 million and $0.5 million, respectively.
 F-19


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 11 - Benefit Plans (continued) B. Deferred compensation plans The Company has three nonqualified deferred compensation plans that
                  are maintained primarily to provide deferred compensation benefits
                  for the Company's "highly compensated employees", as defined. The
                  Company accounts for the investments in the deferred compensation
                  plans as trading securities. The unrealized gains and losses on the
                  investments are recorded in Selling, general and administrative
                  expenses in the accompanying Consolidated Statements of Operations
                  offset against the related deferred compensation accounts within the
                  Consolidated Balance Sheets. The assets are included in Deferred
                  compensation plans' assets, and the related liabilities are included
                  in Deferred compensation plans' liabilities. The Company's deferred
                  compensation plans comply with regulation 409a of the Internal
                  Revenue Code which regulates deferred compensation. The Kenneth Cole Productions, Inc. Deferred Compensation Plan (the
                  "Plan") is solely for the Company's Chairman and Chief Creative
                  Officer. During 2010, the Company's Chairman and Chief Creative
                  Officer did not defer any of his salary or bonus to the plan. As of
                  December 31, 2010 and 2009, the Company has recorded the fair value
                  of the related assets and a corresponding liability of $36.5 million
                  and $36.2 million, respectively, for this plan. The assets are
                  primarily comprised of interests in limited partnerships that invest
                  in a variety of assets including publicly traded equity securities,
                  debt securities and privately-held companies. The general partners
                  that manage the limited partnerships determine the fair value of the
                  plan's investment by determining the net asset valuation in
                  accordance with applicable accounting standards. The Company records
                  the plan's assets at their fair value as of the dates of the
                  Consolidated Balance Sheets based upon the net asset valuation.
                  Certain of these investments have short-term lockup provisions and
                  redemption restrictions which require advance notice for redemption.
                  Management does not believe that these short-term lockup provisions
                  and redemption restrictions affect the Plan's ability to transact
                  redemptions at the net asset value. At December 31, 2010 and 2009
                  there are no unfunded commitments to the limited partnerships. The Kenneth Cole Productions, Inc. Nonqualified Deferred Compensation
                  Plan ("Nonqual Plan") provides for the Company, at its discretion, to
                  fund the Nonqual Plan on behalf of qualified employees. Contributions
                  by the Company are 100% vested at time of funding and the employee
                  has the right to select various investment options. The employees are
                  entitled to the assets based upon the returns of the various
                  investments that they can elect. The Company has the right to invest
                  in any funds it chooses. The Company has funded the Nonqual Plan with
                  Company owned variable life insurance contracts. Amounts deferred
                  under the plan were $0.1 million, $0.1 million and $0.3 million for
                  the years ended December 31, 2010, 2009 and 2008, respectively. As of
                  December 31, 2010 and 2009, the Company has recorded a liability of
                  $0.9 million and $0.8 million, respectively, for this plan. The Supplemental Executive Retirement Plan ("SERP") provides for the
                  Company, at its discretion, to fund the SERP on behalf of qualified
                  employees. Contributions by the Company are vested based upon the
                  respective participants' years of service, and the employee has the
                  right to select various investment options. Employees are entitled to
                  the assets based upon the returns of various investments they elect
                  from the Company's contributions that are vested. The Company has the
                  right to invest in any funds at its discretion and has funded the
                  SERP with Company owned variable life insurance contracts. As of
                  December 31, 2010 and 2009, the Company has recorded a liability of
                  $3.2 million and $2.5 million, respectively, for this plan. The cash surrender value of the Nonqual Plan and SERP investments was
                  $5.0 million both at December 31, 2010 and 2009. On January 1, 2008 the Company amended its SERP. Under the amended
                  plan, benefits earned become 30% vested after 3 years of service, 60%
                  vested after 6 years of service and 100% vested after 10 years of
                  service or termination of service resulting from retirement,
                  disability or death.
 F-20


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 11 - Benefit Plans (continued) C. Employee Stock Purchase Plan The Company sponsors a qualified employee stock purchase plan
                  ("ESPP"), the terms of which allow for qualified employees, as
                  defined, to participate in the purchase of designated shares of the
                  Company's Class A Common Stock at a price equal to 85% of the closing
                  price at the end of each quarterly stock purchase period. For the
                  years ended December 31, 2010, 2009 and 2008, employees purchased
                  11,709, 25,135, and 16,329 shares, respectively. Total shares
                  purchased through December 31, 2010 were 164,647. Note 12 - Stock-Based Compensation The Company's 2004 Stock Incentive Plan (the "Plan"), as amended,
                  authorizes the grant of options and restricted stock to employees for
                  up to 9,320,162 shares of the Company's Class A Common Stock, of
                  which 2,727,505 are available for future grants. The Plan provides
                  for the grant of stock options, restricted stock awards and other
                  stock unit awards to directors, officers and other eligible
                  employees. 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 vest on a graded basis
                  within two to four 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. All awards are expensed on a
                  straight-line basis. The Company elected to use the modified prospective transition method
                  to record stock-based compensation expense. All share-based payments
                  to employees, including grants of employee stock options, are
                  recognized as compensation expense over the service period (generally
                  the vesting period) in the consolidated financial statements based on
                  their grant-date fair value. The impact of forfeitures that may occur
                  prior to vesting is also estimated and considered in the amount
                  recognized. Additionally, the realization of tax benefits in excess
                  of amounts recognized for financial reporting purposes is recognized
                  in the Consolidated Statements of Cash Flows as a financing activity.
                  In addition, the Company's ESPP is considered compensatory, as the
                  ESPP contains a purchase price discount in excess of 5%.  Shares
                           
                           
                           Weighted- average exercise price per shareOutstanding as of December 31, 2007
                           
                           
                           1,754,779
                           
                           $
                           25.08Granted
                           
                           
                           881,500
                           
                           $
                           14.69Exercised
                           
                           
                           (5,400
                           )
                           $
                           11.71Expired
                           
                           
                           (173,949
                           )
                           $
                           24.96Forfeited
                           
                           
                           (45,667
                           )
                           $
                           14.97Outstanding as of December 31, 2008
                           
                           
                           2,411,263
                           
                           $
                           21.51Granted
                           
                           
                           838,656
                           
                           $
                           6.71Exercised
                           
                           
                           --
                           
                           
                           --Expired
                           
                           
                           (186,508
                           )
                           $
                           19.53Forfeited
                           
                           
                           (54,125
                           )
                           $
                           13.12Outstanding as of December 31, 2009
                           
                           
                           3,009,286
                           
                           $
                           17.66Granted
                           
                           
                           567,000
                           
                           $
                           11.84Exercised
                           
                           
                           (7,250
                           )
                           $
                           8.41Expired
                           
                           
                           (219,775
                           )
                           $
                           30.80Forfeited
                           
                           
                           (115,141
                           )
                           $
                           13.05Outstanding as of December 31, 2010
                           
                           
                           3,234,120
                           
                           $
                           15.94Exercisable as of December 31, 2010
                           
                           
                           2,006,882
                           
                           $
                           18.51
 F-21


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 12 - Stock-Based Compensation (continued) The weighted-average grant-date fair value of options granted during
                  the years ended December 31, 2010, 2009 and 2008 was $6.19, $3.52 and
                  $4.98, respectively. The weighted-average remaining term for stock
                  options outstanding and exercisable, as of December 31, 2010, was 6.1
                  and 4.6 years, respectively. The aggregate intrinsic value of stock
                  options outstanding and exercisable as of December 31, 2010 was $4.9
                  million and $3.0 million, respectively. The intrinsic value for stock
                  options is calculated based on the exercise price of the underlying
                  awards and the market price of the Company's common stock as of the
                  reporting date. The total fair value of options vested during the
                  years ended December 31, 2010, 2009 and 2008 was $1.1 million, $2.4
                  million and $1.5 million, respectively. The intrinsic value related to the exercise of stock options was
                  nominal for the year ended December 31, 2010, respectively, which was
                  tax deductible. For the year ended December 31, 2009 there were no
                  stock option exercises. The following table summarizes restricted stock unit activity for the
                  years ended December 31, 2010, 2009 and 2008.  SharesUnvested as of January 1, 2008
                           
                           
                           662,180Granted
                           
                           
                           329,455Vested
                           
                           
                           (148,541
                           )Forfeited
                           
                           
                           (154,236
                           )Unvested as of December 31, 2008
                           
                           
                           688,858Granted
                           
                           
                           161,272Vested
                           
                           
                           (288,917
                           )Forfeited
                           
                           
                           (191,291
                           )Unvested as of December 31, 2009
                           
                           
                           369,922Granted
                           
                           
                           73,690Vested
                           
                           
                           (179,810
                           )Forfeited
                           
                           
                           (6,302
                           )Unvested as of December 31, 2010
                           
                           
                           257,500Vested as of December 31, 2010
                           
                           
                           763,508 The weighted-average grant-date fair value of restricted stock awards
                  granted during the years ended December 31, 2010, 2009 and 2008 was
                  $11.88, $7.21 and $11.89, respectively. The total grant-date fair
                  value of restricted shares vested during the years ended December 31,
                  2010, 2009 and 2008 was $3.2 million, $7.0 million and $3.7 million,
                  respectively. The weighted-average remaining contractual term of
                  unvested shares of restricted stock as of December 31, 2010 and 2009
                  was 1.4 years and 1.6 years, respectively.
 F-22


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 12 - Stock-Based Compensation (continued) The following table summarizes the components of stock-based
                  compensation expense, which is recorded in Selling, general and
                  administrative expenses in the Consolidated Statements of Operations,
                  for the years ended December 31, 2010, 2009 and 2008 (dollars in
                  thousands).  Year ended December 31,2010
                           
                           
                           2009 (1)
                           
                           
                           2008Stock options
                           
                           $
                           1,994
                           
                           $
                           2,461
                           
                           $
                           928Restricted stock units and employee stock purchase plan
                           
                           
                           1,949
                           
                           
                           4,094
                           
                           
                           4,217Total stock-based compensation expense
                           
                           $
                           3,943
                           
                           $
                           6,555
                           
                           $
                           5,145  (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 year ended December 31, 2009. These amounts were accrued within
                              payroll expense as of December 31, 2008. Tax benefits were attributed to the stock-based compensation expense.
                  The Company elected to adopt the alternative method of calculating
                  the historical pool of windfall tax benefits. This is a simplified
                  method to determine the pool of windfall tax benefits that is used in
                  determining the tax effects of stock compensation in the results of
                  operations and cash flow reporting. The fair value of stock options was estimated using the Black-Scholes
                  option-pricing model. This model requires the input of subjective
                  assumptions that will usually have a significant impact on the fair
                  value estimate. The assumptions for the current period grants were
                  developed based on accounting guidance for share-based payments. The following table summarizes the assumptions used to compute the
                  weighted-average fair value of stock option grants:  Year Ended December 31,2010
                           
                           
                           2009
                           
                           
                           2008Weighted-average volatility
                           
                           
                           56.9%
                           
                           
                           54.7%
                           
                           
                           38.3%Risk-free interest rate
                           
                           
                           2.8% to 3.7%
                           
                           
                           3.0% to 3.7%
                           
                           
                           4.0% to 4.1%Weighted-average dividend yield
                           
                           
                           --
                           
                           
                           --
                           
                           
                           2.5%Expected term
                           
                           
                           3-9 years
                           
                           
                           3-9 years
                           
                           
                           4-9 years The weighted-average volatility for the options granted during the
                  years ended December 31, 2010, 2009, and 2008 was developed using
                  historical volatility for periods equal to the expected term of the
                  options. An increase in the weighted-average volatility assumption
                  will increase stock compensation expense. The expected volatility
                  used in the calculation of the Company's stock-based compensation
                  expense for the year ended December 31, 2010 ranged from 52.1%
                  to 68.5%. 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. An increase in the risk-free interest rate will
                  increase stock compensation expense. The dividend yield is a ratio that estimates the expected dividend
                  payments to shareholders. The dividend yield is calculated by using
                  the dividends declared per share and the Company's stock price on the
                  date of grant. A decrease in the dividend yield will increase stock
                  compensation expense. There was no dividend yield used in the
                  calculation of stock-based compensation for 2010 as the Company did
                  not issue dividends during the year ended December 31, 2010. The expected term of the stock option grants was developed after
                  considering vesting schedules, life of the option, historical
                  experience and estimates of future exercise behavior patterns. An
                  increase in the expected holding period will increase stock
                  compensation expense.
 F-23


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 12 - Stock-Based Compensation (continued) 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 for the number of awards that are ultimately expected
                  to vest. As a result, for most awards, recognized stock compensation
                  was reduced for estimated forfeitures prior to vesting primarily
                  based on historical annual forfeiture rates and by employee
                  classification ranging from 0% to 100% for stock options, and 0% to
                  100% for restricted stock. Estimated forfeitures will continue to be
                  reassessed in subsequent periods and may change based on new facts
                  and circumstances. As of December 31, 2010, approximately $5.6 million of unrecognized
                  stock compensation related to unvested stock options and restricted
                  stock awards, net of estimated forfeitures, is expected to be
                  recognized over a weighted-average period of 1.9 years. Note 13 - Advertising Costs The Company incurred advertising costs, including certain in-house
                  marketing expenses, of $15.4 million, $15.9 million, and $20.7
                  million for the years ended December 31, 2010, 2009 and 2008,
                  respectively. Note 14 - Income Taxes The components of (loss)/income before provision for/(benefit from)
                  income taxes are as follows (dollars in thousands):  Year Ended December 31,
                           
                           
                           2010
                           
                           
                           2009
                           
                           
                           2008Domestic
                           
                           $
                           942
                           
                           $
                           (35,452
                           )
                           $
                           (26,328
                           )International
                           
                           
                           2,038
                           
                           
                           4,413
                           
                           
                           7,907$
                           2,980
                           
                           $
                           (31,039
                           )
                           $
                           (18,421
                           ) Significant items comprising the Company's deferred tax assets and
                  liabilities are as follows (dollars in thousands):  December 31,2010
                           
                           
                           2009Deferred tax assets:Deferred compensation
                           
                           $
                           14,567
                           
                           $
                           13,880Net operating loss carryforwards
                           
                           
                           6,137
                           
                           
                           5,840Depreciation and asset impairment
                           
                           
                           5,411
                           
                           
                           5,508Deferred rent
                           
                           
                           5,102
                           
                           
                           6,068Stock-based compensation
                           
                           
                           3,793
                           
                           
                           3,269Deferred income, customer obligations, and other
                           
                           
                           3,659
                           
                           
                           2,672Writedown of intangible asset
                           
                           
                           3,526
                           
                           
                           3,953Writedown of investments
                           
                           
                           3,323
                           
                           
                           2,645Inventory allowances and capitalization
                           
                           
                           2,104
                           
                           
                           2,576Non-deductible accruals
                           
                           
                           873
                           
                           
                           909Allowance for doubtful accounts and sales allowances
                           
                           
                           301
                           
                           
                           446Total deferred tax assets
                           
                           
                           48,796
                           
                           
                           47,766Deferred tax liabilities:Undistributed foreign earnings
                           
                           
                           (1,564
                           )
                           
                           (220
                           )Unrealized gains on available-for-sale securities
                           
                           
                           --
                           
                           
                           (511
                           )Total deferred tax liabilities
                           
                           
                           (1,564
                           )
                           
                           (731
                           )Net deferred tax assets
                           
                           
                           47,232
                           
                           
                           47,035Valuation allowances on net deferred tax assets
                           
                           
                           (46,704
                           )
                           
                           (46,126
                           )Net deferred tax assets
                           
                           $
                           528
                           
                           $
                           909
 F-24


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 14 - Income Taxes (continued) As of December 31, 2010, the Company had federal net operating loss
                  carryforwards of approximately $12.3 million that expire between 2028
                  and 2029, state net operating loss carryforwards of approximately
                  $1.8 million that expire between 2013 and 2030 and foreign net
                  operating loss carryforwards of $0.4 million that expire between 2016
                  and 2029. During 2009, newly enacted government legislation extended the
                  carryback period on losses for 2008 or 2009 to five years from two
                  years. This legislation allowed the Company to carryback all of the
                  2008 net operating losses into prior periods that it was unable to
                  previously. The Company received a Federal tax refund of
                  approximately $4.0 million during the year ended December 31, 2010
                  for the carryback of the 2008 net operating losses. As defined within income tax accounting guidance, deferred tax assets
                  are reduced by a valuation allowance, if based on all available
                  evidence, it is considered "more likely than not" that a portion or
                  all of the recorded deferred tax assets will not realized in a future
                  period. In determining "more likely than not" the Company reviews
                  positive and negative evidence to evaluate the recovery of its
                  deferred tax assets. Both positive and negative evidence was analyzed
                  in determining the potential requirement for a valuation allowance on
                  the Company's deferred tax assets. The Company reviewed taxable
                  income in prior carryback years if carryback is permitted under the
                  tax law, future reversals of existing taxable temporary differences,
                  tax planning strategies and future taxable income exclusive of
                  reversing temporary differences and carryforwards for positive
                  evidence. The Company then reviewed its results over the last three
                  years, which resulted in a cumulative loss over such period. In
                  accordance with income tax accounting guidance, a three-year
                  historical cumulative loss is considered significant negative
                  evidence and difficult to overcome in the absence of compelling
                  positive evidence. As such, the Company concluded that it did not
                  have enough positive evidence to outweigh the negative evidence of
                  the three-year cumulative loss and therefore, the Company recorded an
                  additional valuation allowance of approximately $43.6 million as of
                  December 31, 2009. The Company also has a valuation allowance related
                  to the writedown of investments due to the uncertainty of ultimately
                  realizing theses future tax benefits. The establishment of the
                  valuation allowances does not preclude the Company from using the net
                  operating loss carryforwards or other deferred tax assets in
                  the future. The provision for/(benefit from) income taxes consist of the
                  following (dollars in thousands):  December 31,2010
                           
                           
                           2009
                           
                           
                           2008Current:Federal
                           
                           $
                           --
                           
                           $
                           623
                           
                           $
                           5,988State and local
                           
                           
                           316
                           
                           
                           495
                           
                           
                           376Foreign
                           
                           
                           215
                           
                           
                           344
                           
                           
                           386531
                           
                           
                           1,462
                           
                           
                           6,750Deferred:Federal
                           
                           
                           479
                           
                           
                           25,779
                           
                           
                           (9,131
                           )State and local
                           
                           
                           75
                           
                           
                           4,965
                           
                           
                           (1,247
                           )Foreign
                           
                           
                           (189
                           )
                           
                           (7
                           )
                           
                           7365
                           
                           
                           30,737
                           
                           
                           (10,371
                           )$
                           896
                           
                           $
                           32,199
                           
                           $
                           (3,621
                           )
 F-25


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 14 - Income Taxes (continued) The reconciliation of income tax computed at the U.S. federal
                  statutory tax rate to the effective income tax rate for 2010, 2009
                  and 2008 is as follows:  2010
                           
                           
                           2009
                           
                           
                           2008Federal income tax at statutory rate
                           
                           
                           35.0
                           %
                           
                           35.0
                           %
                           
                           35.0
                           %State and local taxes, net of federal tax benefit
                           
                           
                           8.5
                           %
                           
                           (11.5
                           )%
                           
                           3.9
                           %Adjustment to unrecognized tax benefits
                           
                           
                           --
                           
                           
                           0.4
                           %
                           
                           (3.2
                           )%Valuation allowances
                           
                           
                           (15.2
                           )%
                           
                           (125.8
                           )%
                           
                           (15.4
                           )%Other permanent differences
                           
                           
                           1.8
                           %
                           
                           (1.9
                           )%
                           
                           (0.6
                           )%30.1
                           %
                           
                           (103.8
                           )%
                           
                           19.7
                           % The Company's policy on classification of interest and penalties on
                  uncertain tax positions is to include these amounts in the provision
                  for income taxes in the accompanying Consolidated Statements of
                  Operations. For the year ended December 31, 2010, the Company
                  recognized a $0.1 million tax expense for interest and penalties and
                  a nominal tax expense for the year ended December 31, 2009 and a tax
                  benefit of $0.3 million for the year ended December 31, 2008.
                  Interest and penalties accrued at December 31, 2009 and 2008 were
                  $1.2 million. The total amount of unrecognized tax benefits at
                  December 31, 2010 and 2009 and 2008 is approximately $1.5 million,
                  $1.6 million and $2.4 million respectively, of which $1.0 million,
                  $1.0 million and $1.0 million would affect the Company's effective
                  tax rate if recognized. Unrecognized tax benefits consist of the following (dollars in thousands):  2010
                           
                           
                           2009
                           
                           
                           2008Balance as of January 1
                           
                           $
                           1,591
                           
                           $
                           2,388
                           
                           $
                           2,423Additions to current period positions
                           
                           
                           --
                           
                           
                           --
                           
                           
                           267Additions for positions of prior years
                           
                           
                           --
                           
                           
                           44
                           
                           
                           1,040Reductions for positions of prior years
                           
                           
                           --
                           
                           
                           --
                           
                           
                           --Settlements with taxing authorities
                           
                           
                           (84
                           )
                           
                           (729
                           )
                           
                           (1,099
                           )Lapses of applicable statute of limitations
                           
                           
                           --
                           
                           
                           (112
                           )
                           
                           (243
                           )Balance as of December 31
                           
                           $
                           1,507
                           
                           $
                           1,591
                           
                           $
                           2,388 The Company and certain of its subsidiaries are subject to U.S.
                  federal income tax as well as income tax of multiple state, local,
                  and foreign jurisdictions. U.S. federal income tax returns have been
                  examined through 2003. In addition, audits are currently being
                  conducted for certain state and federal tax jurisdictions ranging
                  from 2003 to 2008. Note 15 - Commitments and Contingencies A. Operating leases and Other Property Agreements The Company leases 51,000 square feet of office space in Secaucus,
                  New Jersey for its administrative offices. The Company also has a
                  technical and administrative office in Dongguan, China. The Company
                  closed its office in Florence, Italy during 2008. The Company does
                  not own or operate any manufacturing facilities.
 F-26


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 15 - Commitments and Contingencies (continued) A.Operating leases and Other Property Agreements (continued) The Company leases space for all of its 33 full-priced retail stores
                  (aggregating approximately 154,000 square feet) and 72 outlets
                  (aggregating approximately 300,000 square feet). Generally, the
                  leases provide for an initial term of five to ten years and certain
                  leases provide for renewal options permitting the Company to extend
                  the term thereafter. Future minimum lease payments for non-cancelable
                  leases with initial terms of one year or more consisted of the
                  following at December 31, 2010 (dollars in thousands):  2011
                           
                           $
                           24,8032012
                           
                           
                           22,1272013
                           
                           
                           20,7202014
                           
                           
                           16,5702015
                           
                           
                           12,822Thereafter
                           
                           
                           12,900Total minimum cash payments
                           
                           $
                           109,942 In addition, certain of these leases contain rent escalation
                  provisions and require additional percentage rent payments to be
                  made. Step rent provisions and escalation clauses are taken into
                  account in computing the minimum lease payments, recognized on a
                  straight-line basis over the minimum lease term. The Company may also
                  receive capital improvement funding from landlords, primarily as an
                  incentive for the Company to lease retail and outlet store space from
                  the landlords. Such amounts are amortized as a reduction of rent
                  expense over the life of the related lease. Rent expense is as follows (dollars in thousands):  2010
                           
                           
                           2009
                           
                           
                           2008Minimum rent
                           
                           $
                           29,840
                           
                           $
                           26,269
                           
                           $
                           25,563Contingent rent and other
                           
                           
                           9,830
                           
                           
                           8,505
                           
                           
                           8,570Total rent expense (1)
                           
                           $
                           39,670
                           
                           $
                           34,774
                           
                           $
                           34,133  (1)
                           
                           
                           During the year ended December 31, 2010, the Company recorded $6.0
                              million of rent expenses, partially offset by $1.8 million of
                              deferred rent reversals, as a result of store closings prior to the
                              lease contract end date. These expenses are included within SG&A in
                              the Consolidated Statement of Operations. As of December 31, 2010,
                              the Company had a remaining accrual of $2.4 million related to these
                              expenses. B. Letters of credit The Company was contingently liable for $1.8 million and $0.5 million
                  of open letters of credit as of December 31, 2010 and 2009,
                  respectively. In addition, at December 31, 2010 and 2009, stand-by
                  letters of credit amounted to approximately $0.7 million and $0.7
                  million, respectively. C. Concentrations In the normal course of business, the Company sells to major
                  department stores and specialty retailers and believes that its broad
                  customer base will mitigate the impact that financial difficulties of
                  any such retailers might have on the Company's operations. The
                  Company had no customer account for more than 10% of consolidated net
                  sales for the years ended December 31, 2010, 2009 and 2008.
 F-27


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 15 - Commitments and Contingencies (continued) C. Concentrations (continued) The Company sources each of its product lines separately, based on
                  the individual design, styling and quality specifications of such
                  products. The Company primarily sources its products directly or
                  indirectly through manufacturers in Italy and China. However,
                  approximately 44% and 52% of total handbag purchases came from two
                  manufacturers in China during the years ended December 31, 2010 and
                  2009, respectively. Approximately 35% of Kenneth Cole and Kenneth
                  Cole Reaction men's footwear purchases were from one manufacturer in
                  China during the year ended December 31, 2010 and 41% were from one
                  manufacturer in China during the year ended December 31, 2009,
                  respectively. Approximately 60% and 62% of Kenneth Cole Reaction
                  ladies' footwear purchases were sourced through two Chinese
                  manufacturers during the years ended December 31, 2010 and 2009,
                  respectively. Approximately 78% and 74% of Unlisted ladies' footwear
                  purchases were sourced through one agent and one manufacturer in
                  China during the years ended December 31, 2010 and 2009,
                  respectively. The Company believes it has alternative manufacturing
                  sources available to meet its current and future production
                  requirements in the event the Company is required to change current
                  manufacturers or current manufacturers are unavailable to fulfill the
                  Company's production needs. D. Lines of Credit Facilities The Company has a revolving senior secured asset based credit
                  facility (the "Facility") which provides the Company with borrowing
                  availability of $60 million. The Facility may be increased to $85
                  million at the election of the Company upon meeting certain
                  conditions, but may not exceed a borrowing base equal to a percentage
                  of the Company's accounts receivable and inventory. The Facility terminates by its terms, and all amounts borrowed under
                  the Facility shall be due and payable, on December 20, 2011. The
                  Facility includes a $7.5 million sublimit for Swingline Loans and a
                  $35 million aggregate sublimit for letters of credit, with a further
                  sublimit of $15 million for standby letters of credit. Revolving
                  loans under the Facility may be base rate loans or Eurodollar loans,
                  at the Company's election. Base rate loans shall bear interest at a
                  rate per annum equal to the sum of (i) the greatest of (a) the Prime
                  Rate in effect on such day, (b) the Federal Funds Effective Rate in
                  effect on such day plus 1⁄2 of 1% and (c) the Adjusted LIBO Rate for a
                  one month Interest Period on such day plus 1%; plus (ii) 2.5%.
                  Eurodollar loans shall bear interest at the Adjusted LIBO Rate, plus
                  3.5%. The Facility is secured by substantially all the assets of the
                  Company and its domestic subsidiaries, including a pledge by the
                  Company of its equity interest in each of its domestic subsidiaries.
                  If availability under the Facility is less than $10,000,000, the
                  Company will be subject to a monthly fixed charge coverage ratio. The
                  Amended Facility limits the Company's ability to incur indebtedness
                  or liens, its ability to enter into mergers or sell assets, its
                  ability to change the nature of its business, and its ability to
                  enter into certain guarantees. In addition, the Company may not
                  declare or pay dividends if availability under the Facility is less
                  than $10,000,000. The Facility also contains customary events of
                  default. Upon the occurrence of an event of default, the outstanding
                  obligations under the Facility may be accelerated and become
                  immediately due and payable. During 2010 and 2009, the Company incurred facility fees of
                  approximately $0.4 million and $0.2 million respectively, and also
                  made payments of approximately $0.7 million for financing costs
                  related to the Facility during 2009. The Company did not borrow under
                  the Facility during 2010 or 2009 and there were no outstanding
                  advances under this agreement at December 31, 2010 and 2009. Amounts
                  available under the Facility at December 31, 2010 and 2009 were
                  reduced by $2.5 million and $1.2 million, respectively, of standby
                  and open letters of credit. The Company had $29.0 million available
                  to borrow as of December 31, 2010 compared to $22.8 million as of
                  December 31, 2009.
 F-28


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 16 - Shareholders' Equity A.   Common stock Class A Common Shareholders are entitled to one vote for each share
                  held of record and Class B Common Shareholders are entitled to ten
                  votes for each share held of record. Each share of Class B Common
                  Stock is convertible into one share of Class A Common Stock at the
                  option of the Class B Shareholder. The Class A Common Shareholders
                  vote together with Class B Common Shareholders on all matters subject
                  to shareholder approval, except that Class A Common Shareholders vote
                  separately as a class to elect 25%, but not less than two, of the
                  Board of Directors of the Company. Shares of neither class of common
                  stock have preemptive or cumulative voting rights. B.   Preferred Stock The Company's Certificate of Incorporation authorizes the issuance of
                  1,000,000 shares of preferred stock. The preferred stock may be
                  issued from time to time as determined by the Board of Directors of
                  the Company, without shareholder approval. Such preferred stock may
                  be issued in such series and with such preferences, conversion or
                  other rights, voting powers, restrictions, or limitations as to
                  dividends, qualifications or other provisions, as may be fixed by the
                  Board of Directors. C.   Common Stock Repurchase In 2008, the Company's Board of Directors increased the authorization
                  for the Company's common stock repurchase plan by approximately
                  4,000,000 shares to an aggregate of 9,388,400 of shares of Class A
                  common stock. The Company did not repurchase shares during 2010 and
                  2009. During 2008, the Company repurchased 1,619,200 of its shares at
                  an aggregate price of $24.4 million. The Company had 3,072,800 shares
                  available for repurchase as of December 31, 2010 and 2009,
                  respectively. D.   Accumulated Other Comprehensive Income/(Loss) The following table shows the notes to the financial statements for
                  the year ended December 31, 2010 (dollars in thousands).  Foreign Currency Items
                           
                           
                           Auction-rate Securities
                           
                           
                           Equity Securities
                           
                           
                           Accumulated Other Comprehensive Income/(Loss)Balance at 12/31/07
                           
                           $
                           1,311
                           
                           $
                           --
                           
                           $
                           (397
                           )
                           $
                           914Change
                           
                           
                           (773
                           )
                           
                           --
                           
                           
                           509
                           
                           
                           (264
                           )Balance at 12/31/08
                           
                           $
                           538
                           
                           $
                           --
                           
                           $
                           112
                           
                           $
                           650Change
                           
                           
                           418
                           
                           
                           (1,747
                           )
                           
                           2,025
                           
                           
                           696Balance at 12/31/09
                           
                           $
                           956
                           
                           $
                           (1,747
                           )
                           $
                           2,137
                           
                           $
                           1,346Change
                           
                           
                           (163
                           )
                           
                           362
                           
                           
                           (2,137
                           )
                           
                           (1,938
                           )Balance at 12/31/10
                           
                           $
                           793
                           
                           $
                           (1,385
                           )
                           $
                           --
                           
                           $
                           (592
                           ) Note 17 - Related Party Transactions The Company recorded expenses of approximately $0.4 million, $0.7
                  million and $0.6 million for the years ended December 31, 2010, 2009
                  and 2008, 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.
                  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.
 F-29


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 18 - New Accounting Pronouncement In January 2010, the FASB issued further guidance under ASC No. 820, Fair Value Measurements and Disclosures ("ASC 820"). ASC 820 requires disclosures about the transfers of
                  investments between levels in the fair value hierarchy and
                  disclosures relating to the reconciliation of fair value measurements
                  using significant unobservable inputs (level 3 investments). ASC 820
                  is effective for the fiscal years and interim periods beginning after
                  December 15, 2010. The Company will adopt the update on January 1,
                  2011 and expects that ASC 820 will not have a material impact on the
                  Company's consolidated financial statements. Note 19 - Quarterly Financial Data (Unaudited) Summarized quarterly financial data for 2010 and 2009 appear below
                  (in thousands, except per share and dividend data):  FirstQuarter
                           
                           
                           SecondQuarter
                           
                           
                           ThirdQuarter
                           
                           
                           FourthQuarter (1)2010Net sales
                           
                           $
                           99,393
                           
                           $
                           96,888
                           
                           $
                           107,493
                           
                           $
                           107,878Royalty revenue
                           
                           
                           10,119
                           
                           
                           11,085
                           
                           
                           11,543
                           
                           
                           12,929Net revenues
                           
                           
                           109,512
                           
                           
                           107,973
                           
                           
                           119,036
                           
                           
                           120,807Gross profit
                           
                           
                           45,550
                           
                           
                           47,188
                           
                           
                           50,625
                           
                           
                           52,500Operating (loss)/income
                           
                           
                           970
                           
                           
                           1,096
                           
                           
                           2,307
                           
                           
                           (2,893
                           )Net (loss)/income
                           
                           
                           1,832
                           
                           
                           937
                           
                           
                           2,020
                           
                           
                           (2,705
                           )(Loss)/earnings per share basic
                           
                           $
                           0.10
                           
                           $
                           0.05
                           
                           $
                           0.11
                           
                           $
                           (0.15
                           )(Loss)/earnings per share diluted
                           
                           $
                           0.10
                           
                           $
                           0.05
                           
                           $
                           0.11
                           
                           $
                           (0.15
                           )Dividends declared
                           
                           
                           --
                           
                           
                           --
                           
                           
                           --
                           
                           
                           --2009Net sales
                           
                           $
                           94,374
                           
                           $
                           84,748
                           
                           $
                           93,336
                           
                           $
                           98,497Royalty revenue
                           
                           
                           9,001
                           
                           
                           9,152
                           
                           
                           10,416
                           
                           
                           10,876Net revenues
                           
                           
                           103,375
                           
                           
                           93,900
                           
                           
                           103,752
                           
                           
                           109,373Gross profit
                           
                           
                           35,072
                           
                           
                           39,813
                           
                           
                           44,881
                           
                           
                           51,238Operating (loss)/income
                           
                           
                           (12,601
                           )
                           
                           (5,152
                           )
                           
                           286
                           
                           
                           (13,018
                           )Net (loss)/income
                           
                           
                           (8,168
                           )
                           
                           (3,266
                           )
                           
                           186
                           
                           
                           (51,990
                           )(Loss)/earnings per share basic
                           
                           $
                           (0.46
                           )
                           $
                           (0.18
                           )
                           $
                           0.01
                           
                           $
                           (2.88
                           )(Loss)/earnings per share diluted
                           
                           $
                           (0.46
                           )
                           $
                           (0.18
                           )
                           $
                           0.01
                           
                           $
                           (2.88
                           )Dividends declared
                           
                           
                           --
                           
                           
                           --
                           
                           
                           --
                           
                           
                           --  (1)
                           
                           
                           The Company recorded a $0.3 million impairment of long-lived assets
                              during the fourth quarter of 2010. The Company recorded a $19.3
                              million impairment of intangible and long-lived assets and a $43.6
                              million deferred tax valuation allowance during the fourth quarter of
                              2009. Note 20 - Subsequent Event On February 28, 2011, the Company and Chief Executive Officer Jill
                  Granoff mutually agreed that Ms. Granoff will leave her position as
                  Chief Executive Officer of the Company and resign her seat on the
                  Company's Board, effective immediately.  Pursuant to Ms. Granoff's
                  employment agreement, the Company will make cash payments of
                  approximately $3.7 million to Ms. Granoff which includes (i)
                  continuation of base salary for a period of 18 months; (ii) a lump
                  sum payment equal to her target bonus for the fiscal year prior to
                  the year of termination, (iii) a pro rata cash bonus paid in a lump
                  sum for the year in which the termination occurs, and (iv) a lump sum
                  payment equal to the target bonus award for the current year. In
                  addition, all unvested stock options fully accelerate and vest and
                  remain exercisable throughout the salary continuation period. Any
                  unvested shares of restricted stock subject to vesting within twelve
                  months of her departure date also fully vest.
 F-30


Kenneth Cole Productions, Inc. and SubsidiariesNotes to Consolidated Financial Statements Note 20 - Subsequent Event (continued) Upon Ms. Granoff's departure, Kenneth Cole, the Company's Chairman of
                  the Board and Chief Creative Officer, is acting as Interim Chief
                  Executive Officer.  F-31


Kenneth Cole Productions, Inc.Schedule IIValuation and Qualifying AccountsFor the Years Ended December 31, 2010, 2009 and 2008(dollars in thousands)  Description
                           
                           
                           Balance atBeginningof Period
                           
                           
                           Charged toCosts andExpenses
                           
                           
                           Deductions
                           
                           
                           Balanceat Endof PeriodYear ended December 31, 2010Allowance for doubtful accounts
                           
                           $
                           (186
                           )
                           $
                           15
                           
                           $
                           105
                           
                           $
                           (66
                           )Reserve for returns and sales allowances
                           
                           
                           (8,269
                           )
                           
                           (17,280
                           )
                           
                           16,206
                           
                           
                           (9,343
                           )$
                           (8,455
                           )
                           $
                           (17,265
                           )
                           $
                           16,311
                           
                           $
                           (9,409
                           )Year ended December 31, 2009Allowance for doubtful accounts
                           
                           $
                           (1,061
                           )
                           $
                           320
                           
                           $
                           555
                           
                           $
                           (186
                           )Reserve for returns and sales allowances
                           
                           
                           (10,117
                           )
                           
                           (23,619
                           )
                           
                           25,467
                           
                           
                           (8,269
                           )$
                           (11,178
                           )
                           $
                           (23,299
                           )
                           $
                           26,022
                           
                           $
                           (8,455
                           )Year ended December 31, 2008Allowance for doubtful accounts
                           
                           $
                           (230
                           )
                           $
                           (1,309
                           )
                           $
                           478
                           
                           $
                           (1,061
                           )Reserve for returns and sales allowances
                           
                           
                           (11,456
                           )
                           
                           (29,981
                           )
                           
                           31,320
                           
                           
                           (10,117
                           )$
                           (11,686
                           )
                           $
                           (31,290
                           )
                           $
                           31,798
                           
                           $
                           (11,178
                           )


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.  KENNETH COLE PRODUCTIONS, INC.By: /s/ KENNETH D. COLEKenneth D. ColeChairman of the Board, Interim Chief Executive Officer and Chief
                                 Creative OfficerDate: March 7, 2011  Pursuant to the requirements of the Securities Exchange Act of 1934,
                  this report has been signed by the following persons on behalf of the
                  registrant and in the capacities and on the dates indicated.   Signature
                           
                           
                           Title
                           
                           
                           Date/s/ KENNETH D. COLE
                           
                           
                           
                           
                           
                           Chairman of the Board, Interim Chief Executive Officer and Chief
                              Creative Officer
                           
                           
                           March 7, 2011Kenneth D. Cole/s/ DAVID P. EDELMAN
                           
                           
                           
                           
                           
                           Chief Financial Officer (Principal Financial and Accounting Officer)
                           
                           
                           March 7, 2011David P. Edelman/s/ MICHAEL J. BLITZER
                           
                           
                           
                           
                           
                           Director
                           
                           
                           March 7, 2011Michael J. Blitzer/s/ MARTIN E. FRANKLIN
                           
                           
                           
                           
                           
                           Director
                           
                           
                           March 7, 2011Martin E. Franklin/s/ ROBERT C. GRAYSON
                           
                           
                           
                           
                           
                           Director
                           
                           
                           March 7, 2011Robert C. Grayson/s/ DENIS F. KELLY
                           
                           
                           
                           
                           
                           Director
                           
                           
                           March 7, 2011Denis F. Kelly/s/ PHILIP R. PELLER
                           
                           
                           
                           
                           
                           Director
                           
                           
                           March 7, 2011Philip R. Peller See page F-1 for an index to the consolidated financial statements,
                  the Report of Management and the Reports of the Registered Public
                  Accounting Firm submitted as part of this Annual Report.