UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003
		OR
		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FROM TO

(Mark One)


[X]		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003

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

Commission File Number 0-5888

WAXMAN INDUSTRIES, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware		34-0899894

(State of Incorporation)		(I.R.S. Employer Identification Number)


24460 Aurora Road
Bedford Heights, Ohio		44146

(Address of Principal Executive Offices)		(Zip Code)

(440) 439-1830

(Registrant’s Telephone Number Including Area Code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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 ninety (90) days.

~~Yes x~~ Yes X No o

~~1,003,990~~Indicate ~~shares~~by ofcheck ~~Common~~mark ~~Stock,~~whether ~~$.01~~the ~~par~~registrant ~~value,~~is ~~and 214,189 shares of Class B~~an ~~Common~~accelerated ~~Stock,~~filer ~~$.01~~(as ~~par~~defined ~~value,~~in ~~were~~Rule ~~outstanding~~12b-2 as of ~~April 27,~~the ~~2003~~Exchange Act).

Yes No X

1,003,990 shares of Common Stock, $.01 par value, and 214,189 shares of Class B Common Stock, $.01 par value, were outstanding as of October 27, 2003.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
		CONDENSED CONSOLIDATED BALANCE SHEETS
		CONDENSED CONSOLIDATED BALANCE SHEETS
		CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
PART II. OTHER INFORMATION
~~Item 5. Other Information~~	Item 5. Other Information
~~Item 6. Exhibits and Reports on Form 8-K~~	Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
CERTIFICATIONS
Exhibit Index
Exhibit 99.1 Certification
EX-31.1 Certification: Chief Financial Officer
EX-31.2 Certification: Co-Chief Executive Officer
EX-31.3 Certification: Co-Chief Executive Officer
EX-32.1 Certification Pursuant to 18 U.S.C.

WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q

		PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
	Condensed Consolidated Statements of Operations - Three and Nine Months Ended March 31, 2003 and 2002		3
	Condensed Consolidated Balance Sheets – March 31, 2003 and June 30, 2002		4 -5
	Condensed Consolidated Statements of Cash Flows - Nine Months Ended March 31, 2003 and 2002		6
	Notes to Condensed Consolidated Financial Statements		7 – 11
Item 2. Management’s Discussion and Analysis of Financial
	Condition and Results of Operations		12 - 16
Item 3. Quantitative and Qualitative Disclosures About Market Risk			16
Item 4. Controls and Procedures			16 - 17
PART II. OTHER INFORMATION
Item 5. Other Information			18
Item 6. Exhibits and Reports on Form 8-K			18
SIGNATURES			18
CERTIFICATIONS			19 - 21
EXHIBIT INDEX			22

PAGE


PART I. FINANCIAL INFORMATION
















Item 1.	Financial Statements (Unaudited)
















		Condensed Consolidated Statements of Operations - Three Months Ended September 30, 2003 and 2002	3
















		Condensed Consolidated Balance Sheets – September 30, 2003 and June 30, 2003.	4 -5
















		Condensed Consolidated Statements of Cash Flows - Three Months Ended September 30, 2003 and 2002.	6
















		Notes to Condensed Consolidated Financial Statements	7 – 11
















Item 2.	Management’s Discussion and Analysis of Financial
















		Condition and Results of Operations	12 – 15
















Item 3.	Quantitative and Qualitative Disclosures About Market Risk		15 – 16
















Item 4.	Controls and Procedures		16
















PART II. OTHER INFORMATION
















Item 5.	Other Information		17
















Item 6.	Exhibits and Reports on Form 8-K		17
















SIGNATURES			17
















EXHIBIT INDEX			18

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the Three Months Ended September 30, 2003 and 2002 (In Thousands, Except Per Share Data)

For the Three and Nine Months Ended March 31, 2003 and 2002 (In Thousands, Except Per Share Data)


	Three Months

	2003		2002

Net sales	$	17,526	$	18,208












Cost of sales		11,235		12,283

Gross profit		6,291		5,925












Selling, general and administrative expenses		5,710		5,346

Operating income		581		579




Other income		6		3




Interest expense, net		139		124

Income before income taxes		448		458




Provision for income taxes		61		109

Net income	$	387	$	349

Other comprehensive income:




Foreign currency translation adjustment		130		(218	)

Comprehensive income	$	517	$	131

Net income per share (basic and diluted)	$	0.32	$	0.29

Weighted average shares and equivalents		1,218		1,218

	Three Months						Nine Months
	2003			2002			2003			2002
Net sales	$	15,217		$	15,552		$	49,441		$	52,401
Cost of sales		10,074			10,107			32,988			35,295
Gross profit		5,143			5,445			16,453			17,106
Selling, general and administrative expenses		5,390			5,279			16,070			15,388
Operating (loss) income		(247	)		166			383			1,718
Interest expense, net		128			142			394			564
(Loss) income before income taxes		(375	)		24			(11	)		1,154
(Benefit) provision for income taxes		(476	)		(649	)		(207	)		(487	)
Net income	$	101		$	673		$	196		$	1,641
Other comprehensive income:
Foreign currency translation adjustment		80			6			(108	)		(55	)
Comprehensive income	$	181		$	679		$	88		$	1,586
Net income per share (basic and diluted)	$	0.08		$	0.55		$	0.16		$	1.35
Weighted average shares and equivalents		1,218			1,218			1,218			1,214

The accompanying Notes to Condensed Consolidated Financial Statements
are an integral part of these statements.

WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

~~March~~September 3130, 2003 and June 30, ~~2002~~2003

(In Thousands)

ASSETS

				March 31,				June 30,
					September 30,				June 30,
				~~2003~~	2003			~~2002~~	2003
				~~(Unaudited)~~	(Unaudited)			~~(Audited)~~	(Audited)
Current Assets:
	~~Cash and cash equivalents~~	Cash and cash equivalents		$	~~1,867~~$	3,217		$	~~1,420~~$	1,507
	~~Trade receivables, net~~	Trade receivables, net			~~9,500~~	11,401			~~11,529~~	12,129
	~~Other receivables~~	Other receivables			~~907~~	1,201			~~1,979~~	1,236
	~~Inventories~~	Inventories			~~10,627~~	9,729			~~10,497~~	10,119
	~~Prepaid expenses~~	Prepaid expenses			~~957~~	1,321			~~1,902~~	1,299
		Total current assets			23,858				27,327
		Net assets held for sale				996				—
Property and Equipment:
		Total current assets				27,865				26,290
	Land				543				554
Property and Equipment:
	Buildings				4,570				4,662
		Land				299				542
	quipment				12,109				11,427
		Buildings				3,665				4,645
					17,222				16,643
		Equipment				12,133				12,043
	Less accumulated depreciation and amortization				( 9,057	)			(8,302	)
						16,097				17,230
	Property and equipment, net				8,165				8,341
		Less accumulated depreciation and amortization				(9,123	)			(9,080	)
Receivable from Officer’s Life Insurance Policies					3,405				3,265
			Property and equipment, net			6,974				8,150
Unamortized Debt Issuance Costs, Net					242				315
Receivable from Officer’s Life Insurance Policies						3,405				3,405
Notes Receivable from Related Parties					499				574
Unamortized Debt Issuance Costs, Net						176				209
Other Assets					658				474
Notes Receivable from Related Parties						459				476
				$	36,827			$	40,296
Other Assets						672				639
					$	39,551			$	39,169

The accompanying Notes to Condensed Consolidated Financial Statements
are an integral part of these statements.

WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

~~March~~September 3130, 2003 and June 30, ~~2002~~2003

(In Thousands, Except Per Share Data)

LIABILITIES AND STOCKHOLDERS’ EQUITY

					March 31,				June 30,
				September 30,				June 30,
				2003	~~2003~~			2003	~~2002~~
				(Unaudited)	~~(Unaudited)~~			(Audited)	~~(Audited)~~
Current Liabilities:
	Short-term borrowings			$	$7,114	~~6,608~~		$	$7,529	~~7,596~~
	Current portion of long-term debt				195	~~172~~			195	~~235~~
	Accounts payable				5,270	~~4,675~~			5,904	~~6,754~~
	Accrued liabilities				4,568	~~3,677~~			3,605	~~3,975~~
	Total current liabilities	~~Total current liabilities~~			17,147	~~15,132~~			17,233	~~18,560~~
Term Debt – Long-Term Portion					729	~~811~~			770	~~935~~
Other Long-Term Debt, Net of Current Portion					118	11			126	15
Stockholders’ Equity:
	Preferred stock, $.01 par value per share:
		Authorized and unissued 200 shares and 2,000 shares at March 31, 2003 and June 30, 2002, respectively				—				—
		Authorized and unissued 200 shares at September 30, 2003 and June 30, 2003			—				—
	Common Stock, $.01 par value per share:
		Authorized 8,000 shares and 22,000 shares and issued 1,004 shares and 1,004 shares at March 31, 2003 and June 30, 2002, respectively				99				99
		Authorized 8,000 shares and issued 1,004 shares at September 30, 2003 and June 30, 2003			99				99
	Class B common stock, $.01 par value per share:
		Authorized 1,500 shares and 6,000 shares and issued 214 shares and 214 shares at March 31, 2003 and June 30, 2002, respectively				21				21
		Authorized 1,500 shares and issued 214 shares at September 30, 2003 and June 30, 2003			21				21
	Paid-in capital	~~Paid-in capital~~			21,760	~~21,760~~			21,760	~~21,760~~
		Retained earnings (deficit)				73				(123	)
	Retained earnings				685				298
						21,953				21,757
					22,565				22,178
	Accumulated other comprehensive income	~~Accumulated other comprehensive income~~			(1,008	~~(1,080~~)	)		(1,138	~~( 971~~)	)
	Total stockholders’ equity		~~Total stockholders’ equity~~		21,557	~~20,873~~			21,040	~~20,786~~
				$	$39,551	~~36,827~~		$	$39,169	~~40,296~~

The accompanying Notes to Condensed Consolidated Financial Statements
are an integral part of these statements.

WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the ~~Nine~~Three Months Ended ~~March~~September 3130, 2003 and 2002 (In Thousands)

				2003			2002
Cash Flows from Operating Activities:
	~~Net income~~	Net income		$	~~196~~387		$	~~1,641~~349
	~~Adjustments to reconcile net income to net cash provided by operating activities:~~	Adjustments to reconcile net income to net cash provided by operating activities:
		Non-cash interest			97			78
			Amortization of financing costs		33			31
		~~Depreciation and amortization~~	Depreciation and amortization		~~1,237~~365			~~856~~355
	Changes in assets and liabilities:
			Loss on retirement of fixed assets		3			5
		Trade receivables, net			2,029			2,724
			Bad debt provision		33			36
		Inventories			(130	)		2,073
		Changes in assets and liabilities:
		Other assets			1,768			(851	)
			Trade and other receivables		730			(124	)
		Accounts payable			(2,079	)		(2,130	)
			Inventories		390			64
		Accrued liabilities			(298	)		(17	)
			Prepaid expenses and other assets		(38	)		953
		Other, net			(52	)		(55	)
			Accounts payable		(634	)		(329	)
			Net Cash Provided by Operating Activities		2,768			4,319
			Accrued liabilities		963			(59	)
			Other, net		92			(154	)
			Net Cash Provided by Operating Activities		2,324			1,127
Cash Flows from Investing Activities:
	~~Capital expenditures, net~~	Capital expenditures, net			(~~1,118~~150	)		(~~748~~628	)
			Net Cash Used in Investing Activities		(~~1,118~~150	)		(~~748~~628	)
Cash Flows from Financing Activities:
	~~Net change in short-term borrowings~~	Net change in short-term borrowings			(~~988~~415	)		(31,~~351~~060	)
	~~Debt issuance costs~~	Debt issuance costs			~~(24~~—	)		—(9	)
	Issuance of common stock							8
		Repayment of long-term debt			(49	)		(73	)
	Proceeds from long-term debt				—			1,155
			Net Cash Used in Financing Activities		(464	)		(1,142	)
	Repayment of long-term debt				(191	)		(318	)
Net increase (decrease) in cash and cash equivalents					1,710			(643	)
			Net Cash Used in Financing Activities		(1,203	)		(2,506	)
Balance, beginning of period					1,507			1,420
Net (decrease) increase in cash and cash equivalents					447			1,065
Balance, end of period				$	3,217		$	777
Balance, beginning of period					1,420			740
Balance, end of period				$	1,867		$	1,805

The accompanying Notes to Condensed Consolidated Financial Statements
are an integral part of these statements

.WAXMAN INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

~~March~~September 3130, 2003

Note 1 – Significant Accounting Policies

Basis of Presentation

The condensed consolidated financial statements include the accounts of Waxman Industries, Inc. (“Waxman”) and its wholly-owned subsidiaries (collectively, the “Company”). All significant intercompany transactions and balances are eliminated in consolidation. Certain reclassifications have been made to the prior year statements in order to conform to the current year presentation.

The condensed consolidated statements of operations for the three ~~and nine~~ months ended ~~March~~September 3130, 2003 and 2002, the condensed balance sheet as of ~~March~~September 3130, 2003 and the condensed statements of cash flows for the ~~nine~~three months ended ~~March~~September 3130, 2003 and 2002 have been prepared by the Company without audit, ~~while~~ while the condensed balance sheet as of June 30, ~~2002~~2003 was derived from audited financial statements. In the opinion of management, these financial statements include all adjustments, all of which are normal and recurring in nature, necessary to present fairly the financial position, results of operations and cash flows of the Company as of ~~March~~September 3130, 2003 and for all periods presented. Certain information and footnote disclosures normally included in ~~audited~~ audited financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. The Company believes that the disclosures included herein are adequate and provide a fair presentation of interim period results. Interim financial statements are not necessarily indicative of financial position or operating results for an entire year or other interim periods. It is suggested that these condensed interim financial statements be read in conjunction with the audited financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K and the Company’s Form 10-KA for the fiscal year ended June 30, ~~2002~~2003.

Accounting Estimate

The consolidated financial statements of the Company are prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management of the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period presented. Actual amounts could differ from these estimates and different amounts could be reported using different assumptions and estimates.

Revenue Recognition

Revenue is recognized as risk and title to the product transfers to the customer, which usually occurs at the time shipment is made. In December 1999, the Securities and Exchange Commission (the “SEC”) issued Staff Accounting Bulletin (SAB) 101, “Revenue Recognition in Financial Statements,” which summarizes the SEC’s views in applying generally accepted accounting principles to revenue recognition. The Company has determined that SAB 101’s revenue recognition guidelines are consistent with the Company’s existing revenue recognition policies; therefore, SAB 101 did not have a material impact on the Company’s consolidated financial statements.

Stock-Based Compensation

The Company utilizes the intrinsic value-based method of accounting prescribed by APB Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB 25”), to measure compensation costs for its stock-based compensation plan and had adopted the disclosure-only provisions of Statement of Financial Accounting Standards (SFAS) No. 123 — “Accounting for Stock-Based Compensation” (“FAS 123”). FAS 123 was amended in December 2002, with enhanced annual and interim disclosure requirements that were issued in Financial Accounting Standard No. 148 – “Accounting for Stock-Based Compensation – Transition and Disclosure” (“FAS 148”). Compensation costs for fixed price awards are measured by the excess, if any, of the fair market price of the underlying stock over ~~the amount the~~ ~~individual is required to pay, which is established on the grant date. See Note~~ ~~7 for a further description of the assumptions used for preparing the pro forma disclosures as prescribed by FAS 148.~~

Shipping and Handling Fees

In May 2000, the Emerging Issues Task Force (“EITF”) of the Financial Accounting Standards Board (“FASB”) reached a consensus with respect to EITF Issue 00-10, “Accounting for Shipping and Handling Fees and Costs.” EITF 00-10 recognizes the inconsistencies in practice of the recording of shipping and handling costs incurred by most companies that sell goods. The Company has historically recorded freight and any directly related associated cost of transporting finished product to customers as a component of its selling, general and administrative expenses. The amounts of $1.9 million and $1.7 million for the nine months ended March 31, 2003 and 2002, respectively, and $0.6 million and $0.5 million for the quarters ended March 31, 2003 and 2002, respectively, are recorded in selling, general and administrative expenses.

Note 2 – Business

The Company’s common stock is quoted on the Over-The-Counter Bulletin Board (“OTCBB”) under the symbol “WAXM”. The Company is a supplier of specialty plumbing, floor and surface protection and other hardware products to the repair and remodeling market in the United States. The Company distributes its products to approximately 770 customers, including a wide variety of large national and regional retailers, independent retail customers and wholesalers.

The Company conducts its business through its wholly-owned subsidiaries, Waxman Consumer Products

~~Group~~the ~~Inc.~~amount ~~(“Consumer~~the ~~Products”),~~individual ~~WAMI~~is ~~Sales,~~required ~~Inc. (“WAMI~~to ~~Sales”) and TWI~~pay, ~~International,~~which ~~Inc.~~is ~~(“TWI”).~~established ~~Consumer~~on ~~Products,~~ the ~~Company’s~~ ~~largest operation, is a supplier of specialty plumbing, floor and~~grant ~~surface~~date. ~~protection~~See ~~and~~Note ~~other~~7 ~~hardware~~for ~~products to~~ a ~~wide~~further ~~variety~~description of ~~large retailers.~~the ~~WAMI~~assumptions ~~Sales~~used ~~distributes galvanized, black, chrome and brass pipe~~for ~~nipples~~preparing ~~and fittings to industrial and wholesale distributors. TWI includes~~ the ~~Company’s~~ ~~foreign~~pro ~~operations,~~forma ~~including~~disclosures ~~manufacturing,~~as ~~packaging~~prescribed ~~and~~by ~~sourcing operations~~FAS ~~in China and Taiwan~~148. ~~Consumer Products and WAMI Sales utilize the~~ ~~Company’s and non-affiliated foreign suppliers.~~

~~Note~~Shipping 3and –Handling ~~Income Taxes~~Fees

In May 2000, the Emerging Issues Task Force (“EITF”) of the Financial Accounting Standards Board (“FASB”) reached a consensus with respect to EITF Issue 00-10, “Accounting for Shipping and Handling Fees and Costs.” EITF 00-10 recognizes the inconsistencies in practice of the recording of shipping and handling costs incurred by most companies that sell goods. The Company has historically recorded freight and any directly related associated cost of transporting finished product to customers as a component of its selling, general and administrative (“SG&A”) expenses. Included in SG&A expense are approximately $653,000 and $598,000 in shipping and handling costs for the three months ended September 30, 2003 and 2002, respectively.

Split Dollar Life Insurance Policies

Split-dollar life insurance policies are maintained for the following officers and directors: (1) three policies for Melvin Waxman providing for total death benefits of $8,535,000; (2) two policies for Armond Waxman providing for total death benefits of $12,000,000; (3) one policy for Laurence Waxman providing for death benefits of $1,274,000; and (4) one policy for John Peters providing for death benefits of $1,250,000. In the event of the death of any of the above-referenced insureds, the Company will be repaid for the aggregate premiums paid by the Company for such policies from the insurance proceeds paid to the split-dollar life insurance trusts which own such policies. During fiscal 2003, the Company made payments of $140,871, but suspended payments for the split dollar policies in March 2003, pending further information regarding the impact the Sarbanes-Oxley Act of 2002 will have on split dollar policies for executive officers.

Note 2 — Business

The Company’s common stock is quoted on the Over-The-Counter Bulletin Board (“OTCBB”) under the symbol “WAXM.” The Company is a supplier of specialty plumbing, floor and surface protection and other industrial products to the consumer and industrial markets.. The Company distributes its products to approximately 700 customers, including a wide variety of large national and regional retailers, independent retail customers and wholesalers.

The Company conducts its business through its wholly-owned subsidiaries, Waxman Consumer Products Group Inc. (“Consumer Products”), WAMI Sales, Inc. (“WAMI Sales”) and TWI, International, Inc. (“TWI”). Consumer Products, the Company’s largest operation, is a supplier of specialty plumbing, floor and surface protection and other hardware products to a wide variety of large retailers. WAMI Sales distributes galvanized, black, chrome and brass pipe nipples and fittings to industrial and wholesale distributors. TWI includes the Company’s foreign operations, including manufacturing, packaging and sourcing operations in China and Taiwan. Consumer Products and WAMI Sales utilize the Company’s and non-affiliated foreign suppliers.

Note 3 — Income Taxes

The Company accounts for income taxes in accordance with the provisions of SFAS No. 109, “Accounting for Income Taxes.” SFAS No. 109 utilizes the asset and liability method, where deferred tax assets and liabilities are recognized for the future tax consequences attributable to net operating loss carryforwards and to differences between the financial statement carrying amounts of assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which these temporary differences are expected to be recovered or settled.

SFAS No. 109 requires the Company to assess the realizability of its deferred tax assets based on whether it is more likely than not that the Company will realize the benefit from these deferred tax assets in the future. If the Company determines the more likely than not criteria is not met, SFAS No. 109 requires the deferred tax assets be reduced by a valuation allowance. In assessing the realizability of its net deferred tax asset, the Company considered its historic performance and the uncertainty of it being able to generate enough domestic taxable income to utilize these assets. At June 30, 2003 and 2002, the Company’s net deferred tax assets were fully offset by a ~~valuation~~ valuation allowance, and the Company ~~continues~~believes ~~to believe~~ that the Company’s net deferred tax assets should continue to be offset by a valuation allowance. The Company will continue to analyze the trends in the operating results of its domestic ~~operations to assess the realizability of its deferred tax asset in fiscal~~ ~~2003.~~

In the fiscal 2003 third quarter and nine month periods, the Company recorded a tax benefit of $0.5 million and $0.2 million, respectively, which represents the reversal of a $0.55 million tax reserve for a state tax assessment that was favorably resolved during the quarter, partially offset by various state and foreign taxes. In the fiscal 2002 three and nine month periods, the Company recorded a net tax benefit of $0.6 million and $0.5 million, respectively, which represents a tax benefit of $0.8 million for a change in tax law related to the carryforward of an alternative minimum tax net operating loss to fiscal 2001 and a provision for various state and foreign taxes.

At June 30, 2002, the Company had $17.5 million of available domestic net operating loss carryforwards for income tax purposes, which will expire in 2010 through 2022.

Note 4 – Supplemental Cash Flow Information

Cash interest payments for the three and nine month periods ended March 31, 2003 amounted to $0.1 million and $0.3 million, respectively. Cash interest for the three and nine month periods ended March 31, 2002 amounted to $0.1 million and $0.5 million, respectively. The Company made no federal income tax payments in the three and nine month periods ended March 31, 2003 and 2002; however, the Company received a federal tax refund of $0.8 million in the quarter ended September 30, 2002 relating to the change in tax law that allowed the Company to file an amended return for an earlier fiscal year to use an alternative minimum tax net operating loss carryforward. In the fiscal 2003 three and nine month periods ended March 31, 2003, the Company paid approximately $13,000 and $41,000 in state taxes and $11,000 and $183,000 in foreign taxes, respectively. In the fiscal 2002 three and nine month periods ended March 31, 2002, the Company paid approximately $69,000 and $73,000 in state taxes. In addition, no foreign taxes were paid in the fiscal 2002 third quarter, but $0.1 million in foreign taxes were paid for the nine months ended March 31, 2002.

Note 5 – Earnings Per Share

Basic earnings per share represents net income divided by the weighted average number of common shares outstanding. Diluted earnings per share utilizes the weighted average number of common stock and common stock equivalents, which include stock options and warrants. For the quarter and nine month periods ended March 31, 2003 and 2002, the impact of the options and warrants was anti-dilutive as the price of the Company’s stock was below the exercise prices of those instruments.

operations to assess the realizability of its deferred tax asset in fiscal 2004. At June 30, 2003, the Company had $18.5 million of available domestic net operating loss carryforwards for income tax purposes, which will expire in 2010 through 2023.

In the fiscal 2004 first quarter ended September 30, 2003, the Company recorded a tax provision of $0.1 million, which is comprised of a provision for various state and foreign taxes. In the same quarter last year, the Company reported a tax provision of $0.1 million for various state and foreign taxes.

Note 4 — Supplemental Cash Flow Information

Cash interest payments for each of the three months ended September 30, 2003 and 2002 amounted to $0.1 million. The Company made no federal income tax payments in the three months ended September 30, 2003 and 2002; however, the Company received a federal tax refund of $0.8 million in the quarter ended September 30, 2002 relating to the change in tax law that allowed the Company to file an amended return for an earlier fiscal year to use an alternative minimum tax net operating loss carryforward. The Company paid approximately $2,000 and $4,000 in state taxes and $23,000 and $18,000 in foreign taxes for the three months ended September 30, 2003 and 2002, respectively.

Note 5 — Earnings Per Share

Basic earnings per share represents net income divided by the weighted average number of common shares outstanding. Diluted earnings per share utilizes the weighted average number of common stock and common stock equivalents, which include stock options and warrants. For the quarters ended September 30, 2003 and 2002, the impact of the options and warrants was anti-dilutive as the price of the Company’s stock was below the exercise prices of those instruments.

The number of common shares used to calculate basic and diluted earnings per share, along with a reconciliation of such shares, is as follows (in thousands):

Three months

~~Nine months~~

ended

~~ended~~

March 31,

September 30,

2003

2002

~~2003~~

~~2002~~

Basic

1,218

~~1,218~~

~~1,214~~

Diluted

1,218

~~1,218~~

~~1,214~~

Basic

1,218

~~1,218~~

~~1,214~~

Dilutive effect of:

Stock options

—

Warrants

—

Diluted

1,218

~~1,218~~

~~1,214~~

Note 6 –— Segment Information

The Company’s businesses distribute specialty plumbing products, floor and surface protection products, galvanized, black, brass and chrome pipe nipples, imported malleable fittings, and other products. AsProducts ~~the~~are ~~foreign~~sold ~~sourcing and manufacturing operations sell a significant portion of their products through the Company’s other wholly-owned operations, which~~ primarily ~~sell~~ to ~~retailers,~~ ~~and~~two tocustomer ~~a commercial distributor~~categories, ~~the~~including ~~Company has classified its business segments into retail and non-retail categories. Products are sold to~~ (i) retail operations, ~~including~~which ~~large~~ includes national and regional retailers, ~~do-it-yourself (“~~D-I-Y”) home centers and smaller independent retailers in the United States, and (ii) ~~non-retail~~industrial operations, including wholesale and industrial supply distributors which are primarily located in the United States. ~~Sales~~There were no retail sales outside of the United States, ~~are not~~and ~~significant.~~sales to foreign countries accounted for less than 5 percent of total sales. Set forth below is certain financial data relating to the Company’s business segments (in thousands of dollars).

					Corporate
Period ending March 31	Retail		Non-Retail		And Other			Elimination			Total
Reported net sales:
Fiscal 2003 three months	$	11,282	$	5,756		—		$	(1,821	)	$	15,217
Fiscal 2002 three months		12,589		5,154		—			(2,191	)		15,552
Fiscal 2003 nine months		35,089		20,082		—			(5,730	)		49,441
Fiscal 2002 nine months		39,365		19,173		—			(6,137	)		52,401
Operating income (loss):
Fiscal 2003 three months	$	378	$	117	$	(742	)		—		$	(247	)
Fiscal 2002 three months		765		251		(850	)		—			166
Fiscal 2003 nine months		1,875		633		(2,125	)		—			383
Fiscal 2002 nine months		3,138		761		(2,181	)		—			1,718
Identifiable assets:
March 31, 2003	$	22,397	$	9,483	$	4,947			—		$	36,827
June 30, 2002		24,474		9,892		5,930			—			40,296

The Company’s foreign operations manufacture, assemble, source and package products that are distributed by the Company’s wholly-owned operations, retailers and other non-retail customers. Net sales for those foreign operations amounted to $7.7 million and $26.0 million for the fiscal 2003 third quarter and nine month periods, and $7.6 million and $26.2 million for the fiscal 2002 third quarter and nine month periods, respectively. Of these amounts, intercompany sales amounted to approximately $1.8 million and $5.7 million for the fiscal 2003 third quarter and nine month periods and $2.2 million and $6.1 million for the fiscal 2002 third quarter and nine month periods, respectively. Identifiable assets for the foreign operations were $12.1 million and $13.5 million at March 31, 2003 and June 30, 2002, respectively.

Note 7 – Stock-Based Compensation


					Corporate
Period ending September 30	Retail		Industrial		And Other			Elimination			Total

Reported net sales:




Fiscal 2004 three months	$	14,195	$	6,120		—		$	(2,789	)	$	17,526




Fiscal 2003 three months		12,187		7,748		—			(1,727	)		18,208









Operating income (loss):




Fiscal 2004 three months	$	1,289	$	41	$	(749	)		—		$	581




Fiscal 2003 three months		987		340		(748	)		—			579









Identifiable assets:




September 30, 2003	$	23,890	$	10,638	$	5,023			—		$	39,551




June 30, 2003		24,189		9,886		5,094			—			39,169

InThe ~~December~~Company’s ~~2002,~~foreign ~~the~~operations ~~Financial~~manufacture, ~~Accounting~~assemble, ~~Standards~~source ~~Board~~and ~~(“FASB”)~~package ~~released~~products ~~FAS~~that ~~148~~are todistributed ~~encourage~~by ~~more companies to adopt~~ the ~~fair~~Company’s ~~value~~wholly-owned ~~method of~~operations, ~~accounting~~retailers and ~~amends~~industrial ~~the~~customers. ~~disclosure~~Net ~~requirements~~sales offor ~~FAS~~those ~~123~~foreign ~~to require more~~operations ~~prominent~~amounted ~~disclosure~~to in$9.2 million ~~both annual~~ and ~~interim financial statements~~$9.7 million ~~Although FAS~~for ~~148~~the ~~does~~first ~~not~~quarter ~~require~~of ~~companies~~fiscal to2004 and ~~adopt~~2003, ~~the~~respectively. ~~fair~~Of ~~value~~these ~~method~~amounts, ~~the~~approximately ~~new~~$2.8 million and $1.7 ~~rules~~million ~~are~~were ~~effective~~intercompany ~~beginning~~sales infor the first quarter of fiscal 2004 and 2003, respectively. Identifiable assets for ~~those~~the ~~companies~~foreign operations were $14.1 ~~that~~million ~~follow~~and ~~the~~$13.5 million ~~“disclosure~~at ~~only”~~September 30, ~~provisions~~2003 ofand ~~FAS~~June 30, ~~123~~2003, respectively.

~~The~~Note ~~Company~~7 ~~has~~— ~~adopted the disclosure only provisions of FAS 123, which allows a company to continue to measure compensation costs for those plans using the intrinsic value~~Stock-~~based~~Based ~~method of accounting prescribed by APB 25. The Company has elected to follow APB 25 and related interpretations in accounting for its stock options.~~ Compensation ~~cost for stock based awards is measured by~~ ~~the excess, if any, of the fair market value price at the grant date of the~~ ~~underlying stock over the amount the individual is required to pay for~~ exercising the stock based award. Compensation cost for fixed based awards is measured at the grant date, and the Company uses the Black-Scholes option pricing model to determine the fair value estimates for disclosure purposes. The Black-Scholes option pricing model requires the use of subjective assumptions which can materially affect the value estimates. Therefore, the model does not necessarily provide a reliable single measure of the fair value of the Company’s stock options.

AtIn ~~the~~ December 2002, ~~Annual~~the ~~Meeting~~FASB ofreleased ~~Stockholders,~~FAS ~~stockholders~~148 ~~approved a~~to ~~new~~encourage ~~stock~~more ~~incentive~~companies ~~plan~~to adopt (the ~~“2002~~fair ~~Stock~~value ~~Incentive~~method ~~Plan”) that reserves 250,000 shares~~ of ~~Common~~accounting ~~Stock~~for ~~to replace various~~ stock based ~~awards~~compensation ~~that were~~plans ~~voluntarily~~and ~~terminated~~amends inthe ~~January~~disclosure ~~2002.~~requirements ~~In July 2002, 176,655 stock options were granted at an exercise price~~ of ~~$5.91,~~FAS ~~all~~123 ofto ~~which~~require ~~were~~more ~~outstanding at~~prominent ~~March 31,~~disclosure ~~2003.~~in ~~The~~both ~~stock~~annual ~~options~~and ~~are~~interim ~~fully~~financial ~~vested,~~statements. ~~and~~Although ~~none~~FAS ~~have been~~148 ~~exercised~~does ornot ~~cancelled.~~require Incompanies ~~performing~~to ~~the~~adopt ~~computation of~~ the fair value ~~of each option grant~~method, ~~which is estimated on~~ the ~~date~~new ofrules ~~grant using the~~are ~~Black-Scholes~~effective ~~option~~beginning ~~pricing~~in ~~model,~~ the ~~following~~first ~~assumptions~~quarter ~~were~~of ~~used~~2003 for ~~these~~ ~~grants:~~those nocompanies ~~dividends; expected volatility of 84.7%; average risk-free~~that ~~interest~~follow ~~rate~~the of“disclosure ~~6.0%;~~only” ~~and~~provisions ~~expected life~~ of ~~10 years~~FAS 123.

NoThe ~~option~~Company ~~based~~has ~~employee~~adopted ~~compensation~~the ~~has~~disclosure ~~been~~only ~~recognized~~provisions inof ~~reported~~FAS ~~net~~123, and has ~~income~~elected to follow APB 25 and ~~all~~related ofinterpretations ~~the~~in accounting for its stock options. ~~granted~~Compensation ~~had~~cost anfor ~~exercise~~stock ~~price~~based ~~equal~~awards tois ~~the~~measured ~~market~~by the ~~price~~excess, if any, of the ~~underlying~~fair ~~common~~market ~~stock~~value onprice at the grant date of ~~grant.~~the underlying Asstock over the ~~options~~amount the individual is required to pay for ~~granted~~exercising ~~were~~the ~~fully~~stock ~~vested,~~based award. Compensation cost for ~~pro~~fixed ~~forma~~based ~~purposes~~awards is measured at the grant date, and the ~~estimated~~Company uses the Black-Scholes option pricing model to determine the fair value ofestimates for disclosure purposes. ~~the~~The ~~options~~Black-Scholes ~~was~~option ~~expensed~~pricing inmodel requires the ~~fiscal~~use ~~2003~~of ~~first~~subjective assumptions ~~quarter,~~which ~~when~~can materially affect the ~~options were~~value ~~granted~~estimates. ~~The~~Therefore, ~~Company’s~~the model ~~pro~~does ~~forma~~not ~~information~~necessarily ~~follows~~provide ~~(in~~a ~~thousands~~reliable ~~except for~~single ~~earnings~~measure ~~per~~of ~~share~~the ~~and~~fair ~~per~~value of ~~share~~the ~~data)~~Company’s stock options.

Pro forma net income and earnings per share
for the periods ended March 31, 2003	Nine Months			Quarter
Net income (loss) as reported	$	196		$	101
Deduct: Total stock-based compensation expense determined under fair value based method for all awards granted since January 1, 1995, net of related tax effects		(475	)		—
Pro forma net (loss) income	$	(279	)	$	101
Basic and diluted income per share as reported	$	0.16		$	0.08
Pro forma basic and diluted (loss) income per share	$	(0.23	)	$	0.08

At the December 2002 Annual Meeting of Stockholders, stockholders approved a new stock incentive plan (the “2002 Stock Incentive Plan”) that reserves 250,000 shares of Common Stock to replace various stock based awards that were voluntarily terminated in January 2002. In July 2002, 176,655 stock options were granted at an exercise price of $5.91, all of which were outstanding at September 30, 2003. The stock options are fully vested, and none have been exercised or cancelled. In performing the computation of the fair value of each option grant, which is estimated on the date of grant using the Black-Scholes option pricing model, the following assumptions were used for these grants: no dividends; expected volatility of 87.7%; average risk-free interest rate of 6.0%; and expected life of 10 years.

~~Pro~~There ~~forma~~were ~~net~~no stock option grants in the fiscal 2004 first quarter ended September 30, 2003, therefore, pro forma income and earnings per share for the ~~prior~~ fiscal ~~year nine month and~~ quarter ended ~~March~~September 3130, ~~2002~~2003 are not presented. asIn the quarter ended September 30, 2002, the Company granted all of its currently outstanding stock options. No option based employee compensation ~~plans~~was ~~previously~~recognized ~~adopted~~in byreported net income and all of the ~~Company~~options ~~were~~granted ~~terminated~~had ~~prior~~an exercise price equal to the market ~~March 31,~~price ~~2002~~of ~~and~~the underlying common stock on the ~~current~~date ~~options~~of ~~outstanding~~grant. ~~were~~As ~~not~~the options granted ~~until~~were fully vested, for pro forma purposes, the estimated fair value of the options was expensed in the fiscal 2003 first quarter, when the options were granted. The Company’s pro forma information follows (in thousands except for earnings per share and per share data).

Note 8 – Authorized Shares

The Company’s Certificate Of Incorporation originally authorized the issuance of 22,000,000 shares of Common Stock, 6,000,000 shares of Class B Common Stock and 2,000,000 shares of Preferred Stock. In February

2001, the stockholders of the Company approved a 1-for-10 reverse stock split, thereby reducing the outstanding number of shares of the Company. At that time, the number of authorized shares was not reduced.



Pro forma net income and earnings per share	September 30,
for the quarter ended September 30, 2002	2002

Net income (loss) as reported	$	349




Deduct: Total stock-based compensation expense determined under fair value based method for all awards granted since January 1, 1995, net of related tax effects		(475	)

Pro forma net (loss) income	$	(126	)




Basic and diluted income per share as reported	$	0.29




Pro forma basic and diluted (loss) income per share	$	(0.10	)

Note 8 – Authorized Shares

The Company’s Certificate of Incorporation originally authorized the issuance of 22,000,000 shares of Common Stock, 6,000,000 shares of Class B Common Stock and 2,000,000 shares of Preferred Stock. In February 2001, the stockholders of the Company approved a 1-for-10 reverse stock split, thereby reducing the outstanding number of shares of the Company. At that time, the number of authorized shares was not reduced.

The Company determined that it was not likely to need more than 8,000,000 authorized shares of Common Stock, 1,500,000 shares of Class B Common Stock and 200,000 shares of Preferred Stock for issuance in the future. Accordingly, at a meeting of the Company’s Board of Directors on August 27, 2002, it approved an amendment to the Certificate of Incorporation of the Corporation to reduce the number of the Company’s authorized shares of common stock, Class B common stock, and preferred stock, and to place the proposed amendment on the ballot to be considered at the annual meeting of the stockholders on December 3, 2002. The reduction in authorized shares was approved at the December 3, 2002 Annual Meeting of Stockholders.

Note 9 – Subsequent Event – Sale of Building

In October 2003, the Company finalized the sale of the land and building in Taichung, Taiwan, used for the offices and warehouse of TWI, for approximately $2.0 million. During the quarter ended September 30, 2003, the Company received a deposit of $1.8 million on the sale, with the final $0.2 million being paid in October 2003 when the sale was completed. At September 30, 2003, the net book value of this asset was approximately $1.0 million. TWI has signed a four-year lease for approximately 33,000 square feet of the 55,000 square feet of space in this facility, which it believes reflects market rates. The Company will sublease approximately 11,000 square feet of that space to one of its joint venture operations. Since the facility will be partially occupied by TWI, the Company will defer approximately $0.3 million of the gain on the sale of this facility, which will be amortized over the term of the lease.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on the beliefs of the Company and its management. When used in this document, the words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “goal,” “may,” “objective,” “optimistic,” “should,” “will,” and similar expressions are intended to identify forward-looking statements. Such designed statements reflect the current view of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions, including, but not limited to , risks associated with currently unforeseen competitive pressures and risks affecting the Company’s industry, such as decreased consumer spending, customer ~~concentration~~ concentration issues and the effects of general economic conditions. In addition, the Company’s business, operations and financial condition are subject to the risks, uncertainties and assumptions which are described in the Company’s reports and statements filed from time to time with the Securities and Exchange Commission, including this Report. Should one or more of those risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein.

~~Recent~~Forward-Looking ~~Developments~~ Statements

~~The~~Statements ~~Company~~that ~~has~~are ~~been~~not ahistorical ~~supplier~~facts, toincluding ~~Kmart~~statements ~~for~~about ~~approximately~~our confidence ~~15 years.~~in ~~For~~our prospects and strategies and our expectations about growth of ~~fiscal~~existing ~~2002,~~markets ~~Kmart~~and ~~accounted~~our ~~for~~ability ~~$6.3 million~~to expand into new markets and to attract new sources of financing, orare ~~approximately~~forward-looking ~~8.9 percent~~statements that involve risk and 13uncertainties.~~6 percent~~ In addition to statements which are forward-looking by reason of context, the ~~Company’s~~words ~~and~~“anticipate,” ~~Consumer~~“believe,” ~~Products’~~“continue,” ~~net sales~~“design,” ~~respectively.~~“estimate,” On“expect,” ~~January 22~~“intend,” ~~2002~~“goal,” ~~Kmart~~“may,” ~~filed~~“objective,” ~~for~~“optimistic,” ~~Chapter 11~~“should,” ~~bankruptcy~~“will,” and ~~protection~~other similar expressions identify forward-looking statements. ~~The~~In light of ~~Company~~the ~~had~~risks ~~adequate~~and ~~reserves~~uncertainties toinherent ~~account~~in ~~for~~all ~~the~~future ~~loss~~projections, the inclusion of ~~its~~forward-looking ~~outstanding~~statements should not be regarded as a representation by us ~~account~~or ~~receivable~~any other person that ~~were~~our ~~not~~objectives ~~covered~~or byplans ~~credit~~will ~~insurance~~be atachieved. ~~the~~Many ~~time~~factors could ofcause our actual results to differ materially and adversely from those in ~~Kmart’s~~the ~~Chapter 11~~forward-looking ~~filing.~~statements, including the following:

In• ~~connection~~the ~~with~~increasing ~~the~~cost ~~Chapter 11~~associated ~~filing,~~with ~~Kmart~~being ~~reviewed~~a ~~its~~public ~~vendor relationships~~company, including ~~the~~external ~~financial~~and ~~commitments~~internal ~~required~~costs to comply with the Sarbanes-Oxley Act of ~~suppliers.~~2002, ~~The Company~~additional ~~also~~costs ~~assessed~~to ~~the~~be ~~issues~~incurred ~~associated~~to comply with ~~maintaining~~the ~~certain~~internal audit control requirements of ~~its supply~~Section ~~arrangements~~404 ~~with~~– ~~Kmart,~~internal ~~including~~control ~~the~~requirements ~~cost~~and all of ~~retaining~~the ~~and~~other ~~supporting these~~public ~~programs~~reporting ~~and~~requirements. • the ~~cash~~continuity ~~flow~~of ~~implications~~business relationships with major customers and a high concentration of ~~such~~business ~~programs,~~with several customers • the ~~risk/reward profile~~competitive nature of ~~each~~other ofsuppliers ~~such~~in ~~programs~~our business and ~~the~~pricing ~~potential~~pressure ~~opportunities~~from ~~with~~retailers and other customers. ~~The~~• ~~Company~~the ~~continues~~limited ability to ~~provide~~push ~~Kmart~~pricing ~~with~~pressure ~~approximately~~from ~~$1.2 million~~customers ~~annually~~through into ~~floor~~our ~~and~~vendors ~~surface~~or ~~protection~~absorb ~~products~~these inpressures ~~fiscal~~within ~~2003.~~our ~~The Company~~own isoperations ~~working~~• the ability of the Company to expand ~~its~~into ~~sales~~new markets, attract new customers and develop new products, including access to ~~Kmart~~sufficient working capital to ~~include~~fund ~~some~~such ~~products~~actions ~~in plumbing~~• ~~repair,~~any alarge ~~program~~or unusual cash outlay that ~~ended~~would instrain ~~June~~our ~~2002.~~relatively ~~Although~~modest positive operating cash flow and available financing • the ~~Company’s revenues~~effect ~~declined~~of ~~due~~competition by businesses developing sourcing or manufacturing operations in Asia and other low cost markets • our ability to continue to meet the ~~loss~~terms of our debt and bank credit facilities which include certain financial covenants and other restrictions • a ~~portion~~continuation of the ~~Kmart~~economic ~~business~~slowdown in the domestic retail economy and / or financial failure, ~~it believes~~closure ~~that~~or ~~increases~~sale of one of our larger customers • the effect on our international operations of unexpected changes in ~~sales~~regulatory ~~with~~requirements, export restrictions, currency controls, tariffs and other ~~customers~~trade ~~will~~barriers, ~~ultimately~~difficulties ~~offset any~~in ~~loss~~staffing and managing foreign operations, political and economic instability, fluctuations in currency exchange rates and potential adverse tax consequences • a significant amount of ~~Kmart~~product ~~revenue.~~is ~~However~~purchased from our own operations in Asia, ~~there~~which ~~can~~could because notemporary ~~assurances~~supply asproblems toif ~~whether~~ the ~~Company~~ability ~~will~~for ~~continue~~those operations to ~~supply~~provide ~~Kmart~~products ~~with~~were ~~all~~impaired of• the ~~existing~~effect ~~product lines,~~of ~~the~~any ~~level~~interruption in supply of material, ifincluding any, ofwork ~~future~~slowdowns ~~purchases~~such oras the ~~terms~~one ~~and~~caused ~~conditions applicable~~by tothe ~~any~~Longshoreman’s ~~future~~strike ~~supply~~in ~~relationship~~the fiscal year 2003.

The Company continues to develop its sales programs with other retailers, original equipment manufacturers and industrial supply customers. The combination of a soft economy and loss of the Kmart plumbing program has resulted in weak sales for the quarter ended March 31, 2003. The Company believes that increases in sales with other customers will ultimately offset the loss of Kmart revenue; however, in the short term it will not be able to absorb all of the expenses due to this revenue loss, the seasonal reduction in sales and the general weakness in the economy.

A. Results of Operations

For the Three Months Ended March 31, 2003 and 2002

Net Sales

Net sales for the fiscal 2003 third quarter ended March 31, 2003 totaled $15.2 million, a decrease of $0.4 million as compared to $15.6 million for the same period in the prior fiscal year. Increases in net sales with several large retailers and industrial sales were offset by a larger reduction in sales to Kmart in the fiscal 2003 third quarter. Sales to Kmart have decreased since they reflect only sales of floor and surface protection products and a decrease in the number of Kmart stores. Accordingly, sales to Kmart amounted to $0.2 million in the fiscal 2003 third quarter as compared to approximately $1.4 million in the same quarter in the prior year.

~~Net~~You ~~sales~~must toconsider ~~retailers~~these ~~amounted~~risks toand ~~$11.3 million~~others ~~and~~that ~~$12.6 million~~are ~~for~~detailed ~~the quarters~~in ~~ended~~this ~~March~~Form ~~31,~~10-Q ~~2003 and 2002, respectively. As discussed above, the~~in ~~decrease~~deciding iswhether ~~due~~ to ~~lower~~invest sales to Kmart, which was partially offset by increased sales to other retail customers. The Company continues to develop its retail programs but is increasing its efforts to develop its non-retail industrial sales program, which includes sales to wholesalers, industrial and ~~OEM~~ ~~customers~~in toassessing ~~balance~~any ~~its~~existing ~~market~~investment ~~dependency.~~in ~~Non-retail sales amounted to $5.8 million for~~ the ~~quarter ended March 31, 2003, as compared to $5.2 million~~ ~~for the same quarter last year~~Company.

Results of Operations

For the Three Months Ended September 30, 2003 and 2002

Net Sales

Net sales for the fiscal 2004 first quarter ended September 30, 2003 totaled $17.5 million, a decrease of $0.7 million as compared to $18.2 million for the same period in the prior fiscal year. Net sales to retailers amounted to $14.2 million and $12.2 million for the quarters ended September 30, 2003 and 2002, respectively. The Company’s sales to most industrial customers also improved, with the exception of sales to Barnett which decreased by over $2 million and offset the increases to the other industrial and retail customers mentioned above. As a result of the large decrease in sales to Barnett, industrial sales amounted to $6.1 million for the quarter ended September 30, 2003, as compared to $7.7 million for the same quarter last year.

Gross Profit

Gross profit and gross margins for the fiscal ~~2003~~2004 and ~~2002~~2003 ~~third~~first quarters were $56.13 million, or 3335.89%, and $5.49 million, or 3532.05%, respectively. ~~The~~ ~~reduction~~Although innet ~~gross profit is due to the~~ sales ~~decrease~~decreased, ~~while~~gross ~~the~~profit ~~reduction~~and ~~in the~~ gross margin ~~percentage~~improved indue ~~comparison~~ to ~~the prior year second quarter was~~ ~~due~~decreased ~~to the~~ sales ~~mix,~~to ~~which~~customers ~~included~~with ~~a higher percentage of~~ lower ~~margin products~~margins, ~~being~~such ~~sold~~as ~~in the current fiscal quarter~~Barnett.

Selling, General and Administrative Expenses

Selling, general and administrative expenses (“SG&A expenses”) increased to $5.47 million in the fiscal ~~2003~~2004 ~~third~~first quarter as compared to $5.3 million in the same period in the prior year. The ~~prior~~increase ~~year~~in ~~third~~SG&A ~~quarter~~expenses ~~included~~in the fiscal ~~approximately~~2004 ~~$0.2 million~~first inquarter ~~fees~~is ~~for~~attributed ~~terminating~~to the ~~bank~~Company’s ~~facility~~effort ~~with Congress~~to ~~Financial,~~expand ~~and~~its industrial ~~replacing~~sales itsegment. ~~with~~The aCompany ~~new,~~expects ~~three~~sales ~~year~~for ~~bank~~this ~~working~~segment will ~~capital~~continue to increase and ~~term~~will ~~loan~~ultimately ~~facility~~offset the increase in SG&A expenses associated with ~~PNC~~operating ~~Bank~~this segment of the business. ~~The~~Also contributing to the increase in SG&A expenses inwere foreign transaction losses of $0.1 million in the fiscal ~~2003~~2004 ~~third~~first quarter isas ~~attributed~~compared ~~primarily~~ to ~~the~~foreign ~~Company’s~~transaction ~~effort~~gains of to$0.1 million ~~expand~~in ~~its~~the ~~industrial~~same ~~and~~period ~~non-retail~~in ~~sales~~the ~~program~~prior year. The ratio of SG&A ~~expenses~~ expenses to net sales increased to 3532.46% for the fiscal ~~2003~~2004 ~~third~~first quarter from 33 29.94% in the comparable period last year, due to lower sales, combined with higher costs for the development of the industrial sales program ~~and additional costs in relocating a small office and warehouse in California~~.

Other Income

For the quarters ended September 30, 2003 and 2002, the Company reported a small amount of other income, which represents dividend distributions that were received from joint venture operations in Asia that are accounted for under the cost method of accounting. The Company reclassified these distributions, which were netted against SG&A expenses in prior years.

Interest Expense

For the quarters ended ~~March~~September 3130, 2003 and 2002, net interest expense totaled $0.1 million. Average borrowings for the current year’s quarter amounted to $78.62 million, with a weighted average interest rate of 4.87%, as compared to $8.51 million in the same prior year quarter, with a weighted average interest rate of 5.35%.

Provision ~~(Benefit)~~ for Income Taxes

The Company’s reported a net tax ~~benefit~~provision of $0.51 million for the ~~quarter~~quarters ended ~~March~~September 3130, 2003. ~~The~~and ~~tax benefit represents the reversal of a $0~~2002.~~55 million~~ ~~tax~~The ~~reserve for a state~~ tax ~~assessment~~provisions ~~that~~represent ~~was favorably resolved during the quarter, partially offset by~~ various state and foreign taxes. ~~For the~~The ~~fiscal~~differences ~~2003 third quarter, the difference~~ between the effective and statutory rates is primarily due to the effect of current losses of the domestic U.S. operations not being benefited, and foreign tax rates being lower than U.S. tax rates ~~and the impact of the favorable resolution of the state tax assessment~~. ~~In the quarter ended March 31, 2002, the Company reported a net tax~~ ~~benefit of $0.6 million, which was due to the recording of a $0.8 million tax~~ benefit from a change in tax law allowing the Company to utilize a carryforward to offset alternative minimum taxes paid by the Company in fiscal 2001, which offset the Company’s state and foreign tax provision. For the fiscal 2002 third quarter, the difference between the effective and statutory tax rates primarily is due to the utilization of domestic operating losses previously not benefited.

Net Income (Loss)

The Company reported net income of $0.1 million, or $0.08 per share, for the quarter ended March 31, 2003 as compared to net income $0.7 million, or $0.55 per basic and diluted share, for the same prior year period. As described above, net income for both periods were due primarily to tax benefits recognized, including the favorable settlement of a state tax assessment in the current year quarter and a change in tax law and tax benefit recorded in the prior year quarter.

For the Nine Months Ended March 31, 2003 and 2002

Net ~~Sales~~Income

~~Net~~The ~~sales~~Company ~~for~~reported ~~the~~net ~~fiscal~~income ~~2003~~of ~~nine month period ended March 31, 2003 totaled~~ $490.4 million, aor ~~decrease of~~ $3.0 ~~million as compared to $52~~.~~4 million for~~32 ~~the~~per ~~same~~basic ~~period in the prior fiscal year. The decrease in net sales was due~~and ~~primarily~~diluted toshare, ~~a larger reduction in sales to Kmart in the fiscal 2003 nine month period. As discussed in the results~~ for the quarter, ~~the~~ended ~~reduction in sales was due to the change in the sales program with Kmart to include only floor and surface protection products and a decrease in the number of Kmart stores served. Accordingly~~September 30, ~~sales to Kmart amounted to $1.1 million in the fiscal~~ 2003 ~~nine~~ ~~month period~~ as compared to ~~approximately~~net income $50.24 million ~~in the same period last year. In the fiscal 2003 nine month period~~, ~~the~~or ~~Company also experienced a reduction in sales to Target of approximately~~ $0.~~9 million~~29 ~~due~~per tobasic ~~the~~and ~~plumbing repair~~diluted ~~program~~share, ~~ending~~for inthe ~~July~~same ~~2002. Sales to Target are beginning to improve~~prior ~~with~~year ~~a new shower program that began in February 2003~~period.

~~Net sales to retailers amounted to $35~~B.~~1 million~~ ~~and~~Liquidity ~~$39.4 million for the nine months ended March 31, 2003~~ and ~~2002,~~Capital ~~respectively. The decrease is due to~~Resources ~~lower sales to Kmart, which was partially offset by increased sales to other~~ ~~retail customers. In order to reduce the dependence on the retail industry, the~~ Company has been developing its non-retail sales program, which includes sales to wholesalers and other industrial and OEM customers. Non-retail sales increased to $20.1 million for the nine months ended March 31, 2003, as compared to $19.2 million for the same period last year.

~~Gross~~ In ~~Profit~~February 2002, the Company refinanced the Loan and Security Agreement with Congress Financial Corporation, which was scheduled to expire on June 18, 2002 and replaced it with a working capital and term loan facility from PNC Bank, NA. The PNC Revolving Credit, Term Loan and Security Agreement (“PNC Bank Facility”) is between Waxman Industries, Inc., Consumer Products, WAMI Sales and Waxman USA, as borrowers (the “Borrowers”). The PNC Bank Facility provides, among other things, for revolving credit advances of up to $15.0 million. The Term Loan facility provided an initial loan on the Company’s corporate office building of $1,155,000, to be amortized over 7 years. As of September 30, 2003, the balance due under the Term Loan facility was $894,000 and the Company had $7.1 million in borrowings under the revolving credit line of the facility and approximately $2.9 million available under such facility.

~~Gross~~The ~~profit~~PNC ~~and~~Bank ~~gross~~Facility ~~margins~~provides for revolving credit advances of (a) up to 85.0% of the ~~fiscal~~amount ~~2003~~of eligible accounts receivable and ~~2002~~(b) up ~~nine~~to ~~month periods~~the ~~were~~lesser of (i) $167.5 million, or ~~33.3~~(ii) 60%, of the amount of eligible raw and ~~$17~~finished goods inventory.1 Revolving credit advances bear interest at a rate equal to the higher of (a) ~~million~~the PNC Bank, orNA 32base prime rate plus 0.65%, or (b) Federal Funds ~~respectively~~Rate plus 1.0%. The ~~reduction~~Term inLoan ~~gross~~advance ~~profit~~bears isinterest ~~attributed~~at a rate equal to the higher ~~reduction~~of in(a) the PNC Bank, NA base prime rate plus 1.0% or (b) Federal Funds ~~sales~~Rate plus 1.5%. The PNC Bank Facility includes a letter of credit subfacility of $1.0 million, ~~while~~with ~~the~~none ~~improvement~~outstanding inat September 30, 2003. Borrowings under the ~~gross~~PNC ~~margin~~Revolving ~~percentage~~Credit isLoan ~~due~~are tosecured aby the accounts receivable, ~~favorable~~inventories, ~~mix~~certain general intangibles, and unencumbered fixed assets of Waxman ~~products~~Industries, ~~with~~Inc., aConsumer ~~higher~~Products, ~~percentage~~WAMI Sales, and a pledge of ~~sales~~65% ~~consisting~~of the stock of various foreign subsidiaries. The PNC Bank Facility requires the ~~certain~~Borrowers ~~specialty~~to ~~products~~maintain ~~with~~cash ~~higher~~collateral ~~margins~~accounts into which all available funds are deposited and applied to service the facility on a daily basis. The PNC Bank Facility prevents dividends and distributions by the Borrowers, including the repurchase of stock, except in certain limited instances.

~~Selling~~ The financial covenants contain customary negative, ~~General~~affirmative and financial ~~Administrative~~covenants ~~Expenses~~and conditions that require the Company to maintain a certain fixed charge coverage ratio and tangible net worth and not exceed a certain amount of capital expenditures in any given period. The ratios and dollar amounts of such financial covenants vary during the term of the PNC Bank Facility and are contained in the agreement governing the PNC Bank Facility, which appears as Exhibit 10.1 to the Current Report on Form 8-K filed by the Company on February 27, 2002. The customary negative covenants contained in the PNC Bank Facility include restrictions, subject to important enumerated exceptions, on the Company’s ability to effect a merger, consolidation, acquisition or sale of its assets, create liens, enter into guarantees, acquire interests in other entities, make loans to other entities, incur indebtedness, and engage in transactions with affiliates. In August 2003, PNC and the Company retroactively amended the fixed charge covenant to utilize financial results for measuring its fixed charge coverage ratio beginning April 1, 2003. The Company was in compliance with all loan covenants at September 30, 2003. The PNC Bank Facility also contains a material adverse condition clause, which allows PNC to terminate the agreement under certain circumstances.

~~SG&A~~The ~~expenses~~Company ~~amounted~~relies toprimarily ~~$16.1 million~~on ~~and~~Consumer ~~$15~~Products for cash flow.~~4 million,~~ ~~respectively,~~Consumer ~~for~~Products’ ~~the~~customers ~~nine~~include ~~months~~D-I-Y ~~ended~~warehouse ~~March 31~~home centers, ~~2003~~home improvement centers, mass merchandisers and ~~2002~~hardware stores. ~~SG&A~~Consumer ~~expenses~~Products asmay abe ~~percentage~~adversely ofaffected ~~net~~by ~~sales~~prolonged ~~increased~~economic todownturns 32or significant declines in consumer spending.5% ~~for~~There ~~the~~can ~~fiscal~~be ~~2003~~no ~~nine~~assurance ~~month~~that any such prolonged economic ~~period~~downturn ~~from~~or ~~29.4%~~significant decline in ~~the~~consumer ~~comparable~~spending ~~period~~will ~~last~~not ~~year.~~have ~~The~~a ~~increases in~~material ~~expenses,~~adverse ~~coupled~~impact ~~with~~on ~~the~~Consumer ~~decrease~~Products’ inbusiness ~~net~~and ~~sales,~~its ~~resulted~~ability into ~~the~~generate ~~increase in~~cash ~~expenses~~flow. ~~expressed~~Furthermore, asConsumer Products has a ~~percentage~~high proportion of ~~net~~its sales. ~~SG&A~~with ~~expenses~~a concentrated ~~have~~number ~~increased, in~~of ~~part,~~customers. ~~due~~Sales to ~~the~~Consumer ~~effort~~Products’ tolarger ~~expand~~customers for the ~~non~~first quarter of fiscal 2004 and 2003, respectively, were as follows: Wal-~~retail~~Mart accounted for 32.8% and ~~industrial~~37.2% ~~sales~~and Lowe’s accounted for 20.9% and ~~program~~17.9%.

~~Interest~~ Consumer ~~Expense~~Products has been expanding its programs with certain customers and developing new retail customers to offset the impact of the loss of the Kmart plumbing repair business and lower sales to Kmart in the floor and surface protection program because of Kmart’s closure of stores and the impact of Kmart’s bankruptcy in fiscal

For the nine months ended March 31, 2003, net interest expense amounted to $0.4 million, as compared to $0.6 million in the same period in the prior fiscal year. Average borrowings for the fiscal 2003 nine month period were $7.8 million, with a weighted average interest rate of 5.2%, as compared to $9.8 million in the same period last year, with a weighted average interest rate of 6.4%. Interest expense is lower due to lower rates and debt levels from the reduction in debt in fiscal 2002.

Provision (Benefit) for Income Taxes

The Company’s tax benefit amounted to $0.2 million for the nine months ended March 31, 2003, as compared to a tax benefit of $0.5 million for the same period last year. The tax benefit for the fiscal 2003 fiscal third quarter represents the reversal of a $0.55 million tax reserve for a state tax assessment that was favorably resolved during the quarter, partially offset by various state and foreign taxes. For the fiscal 2003 nine month period, the difference between the effective and statutory rates is primarily due to the effect of current losses of the domestic U.S. operations not being benefited, foreign tax rates being lower than U.S. tax rates and the impact of the favorable resolution of the state tax assessment. For the fiscal 2002 nine month period, the tax benefit is the result of a $0.8 million tax benefit from a change in tax law enacted in March 2002, relating to the carryforward of the Company’s alternative minimum tax net operating losses to fiscal 2001, which was partially offset by various state and foreign taxes. The difference between the fiscal 2002 nine month effective and statutory tax rates is primarily due to the utilization of domestic operating losses previously not benefited.

Net Income (Loss)

2003. The Company ~~reported~~believes ~~net~~that ~~income~~the majority of the ~~$0.2 million,~~monthly orsales ~~$0.16~~loss ~~per~~has ~~basic~~been ~~and diluted~~offset ~~share,~~by ~~for~~this additional business, however, the ~~fiscal~~sales ~~2003~~reduction ~~nine~~had ~~month~~an ~~period~~impact ~~ended~~on ~~March 31,~~liquidity during fiscal 2003, and will ~~primarily~~continue ~~the~~to ~~result~~impact liquidity until all of the ~~tax~~lost ~~benefit~~revenue ~~from~~is ~~the~~replaced. ~~favorable~~The Company ~~settlement~~has ofreduced its cost structure, where possible, for the reductions in ~~state~~the ~~tax~~Kmart ~~assessment~~business, ~~described~~but ~~above.~~believes ~~The~~that ~~Company~~it ~~reported~~may ~~net~~not ~~income~~be ofappropriate ~~$1.6~~to diminish its ~~million,~~infrastructure orbeyond ~~$1.35~~a ~~per~~position ~~basic~~that ~~and~~best ~~diluted~~serves ~~share,~~all ~~for~~of its retail customers and the ~~nine~~additional ~~month~~business ~~period~~being ~~ended~~developed. The Company expects that programs ~~March 31,~~with ~~2002,~~other ~~which~~retailers ~~was~~will ~~affected~~continue ~~significantly~~to byoffset the $0loss of this business.~~8 million~~ ~~tax~~In the ~~benefit~~event ~~discussed~~Consumer ~~above.~~Products ~~Net~~were ~~income~~to ~~for~~further ~~the~~lose ~~fiscal~~any ~~2003~~of ~~nine~~its ~~month~~larger ~~period~~retail ~~was~~accounts ~~also~~as ~~affected~~a bycustomer ~~the~~or ~~increase~~one inof ~~SG&A~~its ~~expenses~~larger toaccounts ~~grow~~were ~~the~~to ~~industrial~~significantly ~~sales~~curtail its ~~program,~~purchases ~~coupled~~from ~~with~~Consumer aProducts, ~~decrease~~there inwould ~~net~~be ~~sales~~material ~~for~~short-term adverse effects until the ~~period.~~Company ~~Net~~could ~~income~~further modify Consumer Products’ cost structure to be more in line with its anticipated revenue base. Consumer ~~both~~Products ~~periods~~would ~~was~~likely ~~favorably~~incur ~~affected~~significant bycharges ~~the~~if ~~tax~~a ~~benefits~~materially ~~described~~adverse ~~above~~change in its customer relationships were to occur.

~~B. Liquidity~~ The Company paid $25,000 and ~~Capital~~$22,000 ~~Resources~~in state and foreign income taxes in the first quarter in fiscal 2004 and 2003, respectively. For regular federal tax purposes, the Company’s net operating loss carryforwards were sufficient to offset any regular federal tax liability. The Company received a tax refund of $0.8 million in September 2002. At June 30, 2003, the Company had $18.5 million of available domestic net operating loss carryforwards for income tax purposes, which will expire in 2010 through 2023.

The ~~PNC~~Company ~~Revolving~~has ~~Credit,~~total ~~Term~~future ~~Loan~~lease ~~and~~commitments ~~Security~~for ~~Agreement~~various ~~(“PNC~~facilities ~~Bank~~and ~~Facility”)~~other isleases ~~among~~totaling ~~Waxman Industries, Inc~~$3.2 million, ~~Consumer~~of ~~Products,~~which ~~WAMI~~approximately ~~Sales~~$1.0 million is due ~~and~~in ~~Waxman~~fiscal ~~USA~~2004, asof ~~borrowers~~which ~~(the~~approximately ~~“Borrowers”)~~$0.3 million ~~The~~has ~~PNC~~been ~~Bank~~paid ~~Facility~~in the fiscal ~~provides,~~2004 ~~among~~first ~~other~~quarter. ~~things,~~The ~~for~~Company ~~revolving~~does ~~credit~~not ~~advances~~have ofany upcommitments to ~~$15.0~~make capital ~~million.~~expenditures, ~~The~~but ~~Term~~expects ~~Loan~~its ~~facility~~expenditures ~~provided~~for anfiscal ~~initial~~2004 ~~loan~~to onapproximate the ~~Company’s~~ ~~corporate~~level ~~office~~in ~~building~~fiscal of2003. ~~$1,155,000,~~The tocapital beexpenditure ~~amortized~~plan ~~over~~includes ~~7 years.~~expenditures Atto ~~March 31,~~improve ~~2003,~~ the ~~balance~~efficiencies ~~due under the Term Loan facility was $976,000. As~~ of ~~March 31, 2003,~~ the Company’s ~~had~~operations, ~~$6.6 million~~to inprovide ~~borrowings~~new ~~under the~~data ~~revolving~~technology ~~credit~~and ~~line~~certain ofexpansion ~~the~~plans ~~facility~~for ~~and~~the ~~had~~Company’s ~~approximately~~foreign $2operations.~~8 million~~ ~~available under such facility.~~

The ~~PNC~~Company ~~Bank~~expects ~~Facility~~that ~~provides~~the ~~for~~costs ~~revolving~~associated ~~credit~~with ~~advances~~being ~~of (~~a~~) up~~ topublic company ~~85.0%~~will ofincrease ~~the~~significantly ~~amount~~over ~~of eligible accounts receivable and (b) up to~~ the ~~lesser~~next ~~of (i)~~several $7years.~~5 million~~ orThese ~~(ii) 60%~~additional ~~of the amount of eligible raw and finished goods~~costs ~~inventory.~~relate ~~Revolving credit advances bear interest at a rate equal~~ to, ~~the higher~~among ofother ~~(a) the PNC Bank~~things, NAexternal ~~base~~and ~~prime~~internal ~~rate~~costs ~~plus~~to ~~0.5%~~comply orwith ~~(b) Federal Funds Rate plus 1.0%. The Term Loan advance bears interest at a rate equal to~~ the ~~higher~~Sarbanes-Oxley Act of ~~(a) the PNC Bank~~2002, NAincluding ~~base~~additional ~~prime~~costs ~~rate~~to ~~plus~~be ~~1.0%~~incurred orto ~~(b) Federal Funds~~comply ~~Rate plus 1.5%. The PNC Bank Facility includes a letter of credit subfacility of $1.0 million,~~ with ~~none outstanding at March~~Section ~~31,~~404 ~~2003.~~of ~~Borrowings under~~ the ~~PNC~~ ~~Revolving~~Sarbanes-Oxley ~~Credit~~Act ~~Loan are secured by the accounts receivable, inventories, certain general intangibles,~~ and ~~unencumbered~~all ~~fixed assets~~ of ~~Waxman Industries,~~the ~~Inc.,~~other ~~Consumer Products, WAMI Sales, and a pledge of 65% of the~~public ~~stock~~reporting ~~of various foreign subsidiaries~~requirements. The ~~PNC~~Company ~~Bank~~has ~~Facility~~begun ~~requires the Borrowers~~ to ~~maintain~~obtain ~~cash~~estimates ~~collateral~~of ~~accounts into which all available funds~~certain ~~are~~costs ~~deposited~~ and ~~applied to service~~ the ~~facility~~impact onthat acompliance ~~daily~~with ~~basis.~~the ~~The~~new ~~PNC Bank~~requirements ~~Facility~~will ~~prevents~~have ~~dividends~~on ~~and distributions by~~ the ~~Borrowers except in~~ ~~certain~~Company’s ~~limited~~liquidity ~~instances including, so long as there is no default or event of default~~ and ~~the Borrowers are in compliance with certain~~ financial ~~covenants,~~ and ~~contains~~operating ~~customary negative, affirmative and financial covenants and conditions~~flexibility.

~~The~~At ~~financial~~September 30, ~~covenants~~2003, ~~require~~ the Company tohad ~~maintain~~working ~~a certain fixed charge coverage ratio and tangible net worth and not exceed a certain amount of~~ capital ~~expenditures in any given period. The ratios and dollar amounts~~ of ~~such financial covenants vary during the term of the PNC Bank Facility and are contained in the agreement governing the PNC Bank Facility, which appears as Exhibit~~ $10.~~1 to the Current Report on Form~~7 ~~8-K filed by the Company on February~~million ~~27, 2002~~ and is incorporated herein by reference as Exhibit 4.10 to this Form 10-K. The customary negative covenants contained in the PNC Bank Facility include restrictions, subject to important enumerated exceptions, on the Company’s ability to effect a ~~merger,~~current ~~consolidation,~~ratio ~~acquisition or sale~~ of ~~its assets, create liens, enter into guarantees, acquire interests in other entities, make loans to other entities, incur indebtedness, and engage in transactions with affiliates~~1.6 ~~The Company was in compliance with all loan covenants at March 31, 2003, except for the fixed charge coverage. PNC has waived this covenant for this quarter; and the Company and PNC intend~~ to ~~amend the requirement in the near future~~1. ~~The PNC Bank Facility also contains a~~ ~~material adverse condition clause, which allows PNC Bank, NA to terminate the~~ ~~agreement under certain circumstances.~~

In February 2002, the PNC Bank Facility replaced the Loan and Security Agreement with Congress Financial Corporation, which was scheduled to expire in June 2002.

The Company relies primarily on Consumer Products for cash flow. Consumer Products’ customers include D-I-Y warehouse home centers, home improvement centers, mass merchandisers and hardware stores. Consumer Products may be adversely affected by prolonged economic downturns or significant declines in consumer spending. There can be no assurance that any such prolonged economic downturn or significant decline in consumer spending will not have a material adverse impact on Consumer Products’ business and its ability to generate cash flow. Furthermore, Consumer Products has a high proportion of its sales with a concentrated number of customers. Sales to Consumer Products’ larger customers for fiscal 2003 nine month period were as follows; Wal-Mart accounted for 33.8% and Lowe’s accounted for 19.7% of Consumer Products net sales.

The Company paid $225,000 and $xxx,000 in state and foreign income taxes in the nine months ended March 31, 2003 and 2002, respectively. For regular federal tax purposes, the Company’s net operating loss carryforwards were sufficient to offset any regular federal tax liability. The Company received a tax refund of $0.8 million in September 2002. At June 30, 2002, the Company had $17.5 million of available domestic net operating loss carryforwards for income tax purposes, which will expire in 2010 through 2022.

The Company has total future lease commitments for various facilities and other leases totaling $3.7 million, of which approximately $1.0 million is due in fiscal 2003, of which approximately $0.7 million has been paid in the fiscal 2003 nine month period. The Company does not have any other commitments to make substantial capital expenditures. The fiscal 2003 capital expenditure plan includes expenditures to improve the efficiencies of the Company’s operations, to provide new data technology and certain expansion plans for the Company’s foreign operations.

At March 31, 2003, the Company had working capital of $8.7 million and a current ratio of 1.6 to 1.

Discussion of Cash Flows

Net cash provided by operations amounted to $2.83 million for the ~~nine~~three months ended ~~March~~September 3130, 2003, principally due to the decrease in trade receivables, ~~other~~and ~~receivables~~inventory and ~~income~~the ~~generated~~increase ~~during~~in ~~the~~accrued ~~period~~liabilities, which was partially offset ~~the~~by ~~increase in inventories and~~ the decrease in accounts payable. The ~~reduction~~ increase in ~~other~~accrued liabilities ~~receivables~~ is due to the ~~$0.8 million~~cash ~~tax~~received ~~refund~~for ~~received~~the sale of TWI land and building, inwhich ~~September~~was ~~2002~~not finalized until October 2003. Cash flow used for investments totaled $10.1 million for capital expenditures. Cash flow used for financing activities totaled approximately $10.25 million, primarily used to reduce borrowings under the PNC Bank Facility.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The U.S. dollar is the functional currency for a significant portion of the Company’s ~~U.S.~~ operations. Intra-company transactions between Waxman Industries, Inc. and its Asian operations, TWI and CWI, are effected in U.S. dollars. The functional currency of the Company’s foreign operations is their ~~local~~ local currency. Specifically, the functional currencies relating to TWI and CWI are the New Taiwan dollar (N.T. Dollar) and the Chinese Renminbi, respectively. As a result, the Company is exposed to currency translation risks, which primarily result from fluctuations of the foreign currencies in which the Company’s foreign subsidiaries deal as compared to the U.S. dollar over time, which is a non-cash and non -profit or loss item. The foreign currency transaction risks arise from certain receivables and payables being denominated in a currency other than the functional currency. The majority of TWI’s transaction risk relates to it selling goods in U.S. dollars and the exchange rate changing in the 30 day to 60 day period that it takes to settle the receivable. TWI purchases very little goods that are not in NT Dollars. CWI has nearly no transaction risk because the Chinese Renminbi is fixed relative to the U.S. dollar. The Company does not ~~enter into foreign currency~~ ~~exchange rate risk sensitive instruments, and the Company does not hedge the~~ ~~above-referenced transactions.~~

enter into foreign currency exchange rate risk sensitive instruments, and the Company does not hedge the above-referenced transactions.

Gains and losses that result from foreign currency transactions are included in the Company’s consolidated statements of operations on a current basis and affect the Company’s reported net income (loss). Gains or losses created by the translation of the foreign company balance sheets are reported as cumulative foreign currency translation adjustments, and are included as a separate component of stockholders’ equity in the Company’s consolidated balance sheets and are also reported in comprehensive income in the Company’s consolidated statements of operations.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

to the Company’s management, including its Co-Chief Executive Officers and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

During the fiscal 2003 first quarter, the Company formed a Disclosure Committee that consists of certain key management personnel of the Company’s operations. The Disclosure Committee provides support for management and the Audit Committee and has developed a sub-certification form to be completed by key management personnel at the Company’s subsidiaries, reporting on financial information, internal control procedures and disclosure matters. The Disclosure Committee has also developed a standard Internal Control Questionnaire to be completed by management personnel at each of the Company’s subsidiaries.

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

Changes in Internal Controls

There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation.

1716

PART II. OTHER INFORMATION

Item 5. Other Information

Not applicable

Item 6. Exhibits and Reports on Form 8-K

a) Exhibits

Exhibit 99.1 — Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


31.1		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) Promulgated Under the Securities Exchange Act of 1934.




31.2		Certification of Co-Chief Executive Officer Pursuant to Rule 13a-14(a) Promulgated Under the Securities Exchange Act of 1934.




31.3		Certification of Co-Chief Executive Officer Pursuant to Rule 13a-14(a) Promulgated Under the Securities Exchange Act of 1934.




32.1		Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

b) Reports on Form 8-K

~~None~~ The Registrant filed a report on Form 8-K on August 28, 2003, incorporating by reference the August 28, 2003 press release by the Company, announcing its fiscal 2003 fourth quarter and fiscal year earnings and condensed income statements for the fiscal years ended June 30, 2003 and 2002 and condensed balance sheets for June 30, 2003 and 2002.

All other items in Part II are either inapplicable to the Company during the quarter ended ~~March~~September 3130, 2003 or the answer is negative or a response has ~~been~~ been previously reported and an additional report of the information need not be be made, pursuant to the instructions to Part II.

SIGNATURES

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

WAXMAN INDUSTRIES, INC. Registrant Date: October 30, 2003 By: /s/ Mark W. Wester Mark W. Wester Senior Vice President and Chief Financial Officer (principal financial and accounting officer)

~~Date: April 29, 2003 By: /s/ Mark W. Wester Mark W. Wester Senior Vice President and Chief Financial Officer (principal financial and accounting officer)~~17

CERTIFICATIONS

I, Mark Wester, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Waxman Industries, Inc.; 2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3) Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4) The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and c) Presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5) The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function); a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and 6) The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: April 29, 2003 By: /s/ Mark W. Wester Mark W. Wester Senior Vice President and Chief Financial Officer (principal financial and accounting officer)

CERTIFICATIONS

I, Armond Waxman, certify that:

Date: April 29, 2003 By: /s/ Armond Waxman Armond Waxman President and Co-Chief Executive Officer

CERTIFICATIONS

I, Melvin Waxman, certify that:

Date: April 29, 2003 By: /s/ Melvin Waxman Melvin Waxman Chairman of the Board and Co-Chief Executive Officer

Exhibit Index

99.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


31.1		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) Promulgated Under the Securities Exchange Act of 1934.












31.2		Certification of Co-Chief Executive Officer Pursuant to Rule 13a-14(a) Promulgated Under the Securities Exchange Act of 1934.












31.3		Certification of Co-Chief Executive Officer Pursuant to Rule 13a-14(a) Promulgated Under the Securities Exchange Act of 1934.












32.1		Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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Filing Compare · WAXMAN INDUSTRIES INC