1. ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. The Company uses a 52-53 week fiscal year ending on the last Saturday in January. Results of operations include 53 weeks in 1998. The financial statements of certain foreign subsidiaries are consolidated with those of the parent on the basis of years ending in December. The financial statements reflect the acquisition of THC Systems, Inc. as of November 4, 1996. The financial statements also reflect the operations of Camden Wire Co., Inc. which have been shown as discontinued operations as of October 26, 1996. Camden was sold on February 12, 1997. The notes to the financial statements contain information pertaining to the continuing operations of the Company. See Note 2 for information pertaining to the acquisition and disposition of these subsidiaries. Certain reclassifications have been made to the financial statements for prior years to conform to the presentation for 1999.

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

Foreign Currency Translation
Assets and liabilities of certain non-U.S. subsidiaries, operating under normal economic conditions, are translated at current exchange rates, and related revenues and expenses are translated at average exchange rates in effect during the period. Resulting translation adjustments are recorded as a component of accumulated other comprehensive income. Financial results of non-U.S. subsidiaries in highly inflationary economies are translated using a combination of current and historical exchange rates and any translation adjustments are included in net earnings, along with all transaction gains and losses for the period.

Earnings Per Share
Basic and diluted earnings per share are presented for each period in which a statement of operations is presented. Basic earnings per share is computed by dividing income less preferred stock dividends by the weighted average shares actually outstanding for the period. Diluted earnings per share includes the potentially dilutive effect of shares issuable under the employee stock purchase and incentive stock option plans.

Inventories
Inventories are valued at the lower of cost or market. Approximately 26% of inventories are valued under the last-in, first-out (LIFO) method, with the remainder valued under the first-in, first-out (FIFO) method.

Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is provided over the estimated useful lives of the related assets, generally using the straight-line method.

Interest relating to the cost of acquiring certain fixed assets is capitalized and amortized over the asset's estimated useful life.

Intangible Assets
Intangible assets resulted from the allocation of the purchases price of the acquisition of certain businesses. These assets are amortized using the straight-line method over 15 years. The Company assesses the recoverability of its intangible assets by determining whether the amortization over the remaining life of its intangible assets can be recovered through undiscounted future operating cash flows and reviews for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable.

Fair Value of Financial Instruments
The estimated fair values of the Company's financial instruments, principally long-term debt, are estimated using discounted cash flows, based on current market rates for similar borrowings. The carrying amounts for short-term borrowings approximate their fair values.

Revenue Recognition
Sales are recorded when goods are shipped. The Company's general policy is not to allow customer returns unless they are specifically preauthorized.

Treasury Stock
Treasury stock purchases are recorded at cost. During 1999, 1998 and 1997 the Company purchased 363,900, and on a pre-split basis, 560,400 and 112,671 shares of treasury stock at an average cost of $23.37, $24.52 and $16.34, respectively. The Company purchases treasury stock primarily to improve stockholder value. During January 1998, 1,500,000 shares of treasury stock were retired at an average cost of $12.03. As of January 1999, the Company has been authorized by the Board of Directors to repurchase up to 377,200 additional shares.

Advertising Costs
Advertising costs are expensed as incurred. Advertising expenses amounted to $3,867,000, $3,837,000 and $3,577,000, during 1999, 1998 and 1997, respectively.

Restructuring Costs
Included in the year ended January 1999 is a charge totaling $4,980,000 related to a restructuring program that was announced on January 4, 1999. The program to lower annual overhead costs included a voluntary early retirement offer that was accepted by 60 eligible employees as well as the elimination of approximately 60 overhead positions. The costs incurred were primarily the accrual of severance and retirement benefits. The restructuring charge decreased diluted earnings by $.19 per share.

Comprehensive Income
Effective February 1, 1998, the Company adopted Statements of Financial Accounting Standard No. 130, "Reporting Comprehensive Income." This pronouncement requires the Company to report the effects of foreign currency translation adjustments on comprehensive income. See the Consolidated Statement of Changes in Stockholders' Equity for a summary of Comprehensive Income.

2. Acquisitions and disposition
Acquisition of THC Systems, Inc.
On November 4, 1996, the Company purchased the net assets of THC Systems, Inc. (Rego China), a leading importer of institutional china for the foodservice industry.

The acquisition has been accounted for as a purchase and, accordingly, the purchase price was allocated to the net assets acquired based upon their fair values at the date of acquisition. Allocation of the cost to acquire Rego China is summarized as follows:

The financial statements include the results of operations of Rego from the date of acquisition. On a pro forma basis, assuming the acquisition had occurred at the beginning of 1997 and based on unaudited amounts for Rego for the period involved, the consolidated results of operations of the Company for 1997 would have been as follows:

Other Acquisitions and Investments
On July 1, 1998, the Company purchased substan-tially all of the net assets of Badgin Nominees Pty, Ltd for $5,000,000. Badgin operated two Australian-based businesses known as Stanley Rogers & Son and Westminster China, which were involved in the distribution of flatware and dinnerware in Australia and New Zealand. This business has been merged with Oneida's existing distribution efforts in the region to form a new subsidiary, Oneida Australia.

On January 8, 1998, the Company, through its Italian subsidiary, Sant«Andrea, S.r.l., acquired Table Top Engineering and Design, S.r.l., (TTE&D) of Vercelli, Italy for $13,000,000. TTE&D has been the primary product development and manufacturing source used by Sant«Andrea since its formation approximately 10 years ago.

On September 30, 1997, the Company acquired a 25.1% interest in Schott Zwiesel Glaswerke AG, a subsidiary of Schott Glaswerke, for a total cost of $9,000,000. Schott Zwiesel, a German corporation, is a manufacturer of tabletop glassware. Prior to this transaction, Oneida had become the North American distributor of Schott Zwiesel products. The investment is accounted for under the equity method.

Disposition of Camden Wire Co., Inc.
In October 1996, the Company adopted a plan of disposal of its Camden Wire Co., Inc. subsidiary (Camden). Accordingly, the Company reflected the operating results of Camden prior to the adoption of the plan as a discontinued operation.

On February 12, 1997, Camden was sold to an unrelated third party for $43,500,000 in cash. The sale resulted in an after tax gain of $2,566,000 (net of applicable income taxes of $3,716,000), or $.16 per share. Operating losses of Camden for the fourth quarter of fiscal 1997 and the first quarter of 1998 (subsequent to the plan of disposal) totaling $1,200,000 were deferred and deducted from the gain for financial statement purposes.

Revenues from Camden for 1997 were $137,960,000. Both basic and diluted earnings per share for discontinued operations were $.16 and $(.02) in 1998 and 1997, respectively.

3. Income Taxes
The Company accounts for taxes in accordance with Statement of Financial Accounting Standards (FAS) No. 109, "Accounting for Income Taxes," which requires the use of the liability method of computing deferred income taxes. Under the liability method, deferred income taxes are based on the tax effect of temporary differences between the financial statement and tax bases of assets and liabilities and are adjusted for tax rate changes as they occur.

The components of the deferred tax assets and liabilities are as follows:

The provision for income taxes, in continuing operations, consists of the following:

The income tax provision from continuing operations differed from the total income tax expense as computed by applying the statutory U.S. Federal income tax rate to income before income taxes. The reasons for the differences are as follows:

The following presents the U.S. and non-U.S. components of income before income taxes.

Discontinued operations are shown net of income tax (benefit) expense of $3,716,000 and $(280,000) for 1998 and 1997, respectively.

4. RECEIVABLES
Receivables by major classification are as follows:

5. INVENTORIES
Inventories by major classification are as follows:

6. LEASES
The Company leases numerous factory stores, warehouse and office facilities. Lease expense charged to operations was $6,193,000, $5,806,000, and $5,973,000 for 1999, 1998, and 1997, respectively.

Future minimum lease payments for all non-cancelable operating leases having a remaining term in excess of one year at January 1999 are as follows: Under the provisions of some leases, the Company pays taxes, maintenance, insurance and other oper- ating expenses related to leased premises.

7. SHORT-TERM DEBT AND COMPENSATING BALANCES
The Company has been granted lines of credit to borrow at interest rates up to the prime rate from various banks. Certain credit lines call for the maintenance of compensating balances of up to 1.14% of the credit line or fees in lieu thereof. Fees paid in 1999 totaled approximately $20,000. At January 1999, the Company had lines of credit of $99,067,000 of which $43,007,000 was available.

The weighted average outstanding balances of short-term debt for the fiscal years ending January 1999 and 1998 were $51,848,000 and $10,295,000; the weighted average interest rate was 6.0% for both years.

8. ACCRUED LIABILITIES
Accrued liabilities by major classification are as follows:

9. LONG-TERM DEBT
Long-term debt at January 1999 and 1998 consisted of the following:

Certain note agreements restrict borrowings, business investments, acquisition of the Company's stock and payment of cash dividends. In addition, the agreements include certain covenants, the most restrictive of which requires the Company to maintain specific quarterly levels of funded debt to tangible net worth. The estimated fair value of the Company's long-term debt at January 1999 approximates $97,225,000. The fair value estimate is based on borrowing rates available to the Company ranging from 5.87% to 6.45%. At January 1998, the carrying value of the Company's long-term debt approximated fair value.

The aggregate amounts of long-term maturities due each fiscal year are as follows:

Total interest costs incurred by the Company are presented net of capitalized interest of $1,037,000, $412,000 and $276,000 for 1999, 1998 and 1997, respectively.

10. RETIREMENT BENEFIT AND
EMPLOYEE SECURITY PLANS

Pension Plans
The Company maintains defined benefit plans covering the majority of employees in the United States and Canada. Employees of the Silversmiths Division are covered by both an Employee Stock Ownership Plan (ESOP), and a defined benefit floor plan.

Dividends on all ESOP shares are added to participant accounts. Future contributions to the ESOP will be in the form of either cash or treasury shares. The Company also maintains a salary deferral 401(k) plan covering substantially all employees.

The net periodic pension cost for the Company's various defined benefit plans for 1999, 1998 and 1997 were as follows:

Plan assets consist primarily of stocks, bonds, and cash equivalents. The following table presents a reconciliation of the funded status of the plans and assumptions used at January 1999 and 1998.

The net pension cost associated with the Company's defined contribution plans was $2,660,000, $1,881,000, $1,946,000, for 1999, 1998 and 1997, respectively.

Postretirement Health Care and
Life Insurance Benefits

The Company reimburses a portion of the health care and life insurance benefits for the majority of its retired employees who have attained specified age and service requirements.

Net periodic postretirement benefit cost for 1999, 1998 and 1997 included the following components:

The following table sets forth the status of the Company's postretirement plans, which are unfunded, at January 1999 and 1998:

The 1999 health care inflation rate was assumed to decrease gradually to 5% by the year 2003 and remain at that level thereafter. A 1% variation in the assumed health care inflation rates would cause the accumulated postretirement benefit obligation at January 1999 to increase by $5,890,000 and decrease by $5,641,000. Additionally, this would increase and decrease the net periodic postretirement benefit cost for 1999 by $571,000 and $542,000 respectively.

Employee Security Plan
The Company maintains an employee security plan which provides severance benefits for all eligible employees of the Company and its subsidiaries who lose their jobs in the event of a change in control as defined by the plan. Employees are eligible if they have one year or more of service and are not covered by a collective bargaining agreement. The plan provides two and one half months of pay for each year of service, up to twenty-four months maximum, and a continuation of health care and life insurance benefits on the same basis.

11. STOCK PLANS
Stock Purchase Plan
At January 1999, under the terms of a stock purchase plan, the Company has reserved 636,239 shares of common stock for issuance to its employees. The purchase price of the stock is the lower of 90% of the market price at the time of grant or at the time of exercise. The option price for the shares outstanding at January 30, 1999 is $12.94 based on 90% of the current market price at that date.

Rights to purchase are exercisable on date of grant. Unexercised rights expire on June 30 of each year and become available for future grants. Employees are entitled to purchase one share of common stock for each $250 of their earnings for the calendar year preceding July 1.

The consolidated statement of operations does not contain any charges as a result of accounting for this plan.

Stock Option Plan
At January 1999, under the terms of its incentive stock option plans, the Company has reserved shares of common stock for issuance to selected key employees and non-employee outside directors.

Options were granted at prices equal to the fair market value on the date of the grant and may be paid for in cash or by tendering previously held common stock of the Company at the time the option is exercised. Stock options are non-transferable other than on death, vest over five years from date of grant and expire ten years from date of grant.

Options exercisable under the plan at January 1999, 1998 and 1997 amounted to 210,538, 286,490 and 615,142, respectively. The weighted average exercise price of options exercisable at January 1999, 1998 and 1997 were $9.60, $8.88 and $8.97, respectively.

At the time options are exercised, the proceeds of the shares issued are credited to the related stockholders' equity accounts. There are no charges to income in connection with the options.

Restricted Stock Award Plan
The Company has a restricted stock award plan for key employees who are expected to have a significant impact on the performance of the Company. The stock is restricted from being sold, transferred or assigned and is forfeitable until it vests, generally over a three (3) year period. Amounts of awards are determined by the Management Development and Executive Compensation Committee of the Company's Board of Directors. Compensation expense relating to awards of restricted stock are recognized over the vesting period.

Shareholder Rights Plan
The Company maintains a shareholder rights plan. The rights were distributed to shareholders at the rate of one right per share. The rights entitle the holder to purchase one additional share of voting common stock at a substantial discount and are exercisable only in the event of the acquisition of 20% or more of the Company's voting common stock, or the commencement of a tender or exchange offer under which the offeror would own 30% or more of the Company's voting common stock. The rights will expire on December 13, 1999.

Accounting for Stock Plans
The Company has elected to continue following APB No. 25 in accounting for its stock-based compensation plans.

Application of the fair-value-based accounting provision of Statement No. 123 results in the following pro forma amounts of net income and earnings per share:

The fair value for both the Stock Purchase Plan and Stock Option Plan was estimated at the date of grant using a Black-Scholes options pricing model.

The valuation of the Stock Purchase Plan used the following weighted average assumptions for 1999 and 1998: risk-free interest rates of 5.13% and 6.03%; dividend yields of 1.64% and 2.51%; volatility factors of the expected market price of the Company's common stock of 25.9% and 29.7% and a weighted average expected life of the option of 9 months. The fair value per share for the options granted during 1999 and 1998 was $7.31 and $4.40 respectively. The estimated fair value of the options is expensed in the year of issue.

The valuation of the Stock Option Plan used the following weighted average assumptions for 1999: risk-free interest rate of 5.18% dividend yield of 2.0%, volatility factor of the expected price of the Company's common stock of 29.6% and a 5.99 year expected life. The fair value per share for the options granted during 1999 was $7.37. The estimated fair value of the options is expensed over the five-year vesting period.

12. Earnings Per Share
The following is a reconciliation of basic earnings per share to diluted earnings per share for 1999, 1998 and 1997:

13. OPERATIONS BY INDUSTRY SEGMENT
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information" in 1999. The information for 1998 and 1997 has been restated to conform to the current year presentation.

The Company's operations and assets are in one principle industry: tableware products. The Company's reportable segments are grouped around the manufacture and distribution of three major product categories: metal tableware, china dinnerware and glass tabletop products. The Company also distributes a variety of other tabletop accessories. These products are sold directly to a broad base of retail outlets including department stores, mass merchandisers, Oneida factory stores and chain stores. Additionally, these products are sold to special sales markets, which include customers who use them as premiums, incentives and business gifts. The Company also sells directly or through distributors to foodservice operations worldwide, including hotels, restaurants, airlines, schools and healthcare facilities. The Company's tableware operations are located in the United States, Canada, Mexico, Italy, Australia and the United Kingdom.

The accounting policies of the reportable segments are the same as those described in Note 1 of Notes to Consolidated Financial Statements. The Company evaluates the performance of its segments based upon operating income excluding interest, miscellaneous income/expenses, corporate expenses and income taxes. The Company does not derive more than 10% of its total revenues from any individual customer, government agency or export sales.

Segment information for the three years ended January 1999, 1998 and 1997 are as follows:

The following table reconciles segment operating income to pretax income:

Financial information relating to the Company's sales and long-lived assets by geographic area is as follows:

14. SELECTED QUARTERLY FINANCIAL DATA (Unaudited)