1998 was a year of growth for Oneida in terms of our sales as well as our market share. We expanded into new product lines, launched exciting new ventures and acquired companies which fit our business strategy of being a complete tabletop supplier.

With the extensive launches and expanded new product lines that we entered into during 1998, we did experience growing pains which affected our profitability. These new products are now flowing smoothly to all of our customers in all markets served. We now believe that we have all the fundamentals in place for extended prosperity. Our outlook is reflected in this annual report's theme, "Foundation for Success" - we feel we have positioned your company to succeed for years to come.

Operating Performance
For the fiscal year ended January 30, 1999, our earnings from continuing operations were $1.35 per diluted share prior to a restructuring charge of 19 cents per diluted share, which resulted in per-share earnings of $1.16. Without the special charge, our results were in line with our October announcement that earnings were expected to be 10-15% below 1997 earnings from continuing operations of $1.55 per diluted share. In addition to those continuing operations, the 1997 results included a 1997 first quarter non-operational gain of $2.6 million, equal to an additional 16 cents per share, as a result of the sale of the Camden Wire subsidiary on February 12, 1997.

Our sales of $466 million were up by 5.2%. Our 1998 income from continuing operations was $22.9 million prior to the restructuring charge, or $19.8 million including the charge. This compares to 1997 income of $26.1 million on sales of $443 million. For the fourth quarter alone, earnings were 39 cents per diluted share prior to the charge, or 20 cents including the charge, compared to 50 cents for the same period a year ago. Fourth quarter income from continuing operations was $6.5 million prior to the charge, or $3.4 million including the charge, on sales of $126 million. This compares to 1997 fourth quarter income of $8.5 million on sales of $127 million over a 14-week quarter, as opposed to our typical 13-week quarter.

The fourth quarter restructuring charge of $5 million covered expenses associated with an overhead personnel reduction program, which is expected to enhance our cash flow. The program is expected to generate annual pre-tax cost savings of approximately $4 million beginning this year. We will continue to explore additional opportunities to improve the profitability of your company.

Our 1998 results were affected by several factors - delays in launching new dinnerware and glassware lines, thus adding to our costs for inventory, warehousing and interest; inventory reductions by major retailers; turmoil in the Asian economy; and stiffer import competition due to foreign exchange rates. We believe we have undertaken effective counter-measures for those factors.

New Lines and Business Growth
Our new casual consumer dinnerware is entering its first full year on the market following its introduction during 1998. Our initial start-up delays are largely behind us, and we anticipate it will begin generating benefits for Oneida this year. Similarly, our new glassware for both the consumer and foodservice markets is ready to contribute to our results after a 1998 unveiling. Both the dinnerware and glassware have received very positive receptions from the trade, and they represent outstanding extensions of the Oneida name.

We already are enjoying significant growth from our 1997 licensing agreement with Robinson Knife Co. for Oneida-branded kitchen gadgets and accessories. In 1999 this line is expected to dramatically increase its volume by expanding into mass market channels. Another recent business addition, our Encore Promotions subsidiary, generated a large sales increase with its supermarket redemption programs for a variety of tableware. This year we will be improving the profitability of this rapidly growing business.

Direct physical growth was seen in 1998 at our Buffalo China subsidiary, which completed a 203,000-square-foot expansion for warehousing and a new decorating facility. This investment will result in improved customer service and considerable logistical savings for foodservice.

New Ventures and Acquisitions
Several new business agreements will enable us to round out our assortments this year in selected lines, as well as explore dynamic new venues for our products.

1999 will see a major expansion of our fine quality consumer crystal products, thanks to an exclusive marketing and distribution agreement with CALP SpA of Italy. In addition, Oneida is set to penetrate the lucrative designer tabletop market by designing, supplying and selling a full line of tableware under the Guess Home Collection name. In a distinct extension of our tabletop coverage, we are licensing our Oneida brand name to Trendex Home Designs for a variety of tabletop linens and textiles which Trendex will begin marketing this year.

In the direct marketing field, meanwhile, two new flatware patterns are being exposed to a huge potential customer audience via Oneida's agreement with the Amway company. Also in the directmarketing field, our overall market penetration will be enhanced by a tableware supply agreement with International Masters Program (IMP), which specializes in high-end collectibles and continuity programs.

Internationally, we became a market leader in Australia and New Zealand as a result of our 1998 acquisition of two Australia-based businesses, Stanley Rogers & Son and Westminster China.This is part of our ongoing strategy to build market share through acquisitions in countries where our products have earned a high perceived value.

Stockholder Value
In mid-1998 we were very pleased to declare a special dividend of 10 cents per share on our common stock, in order to recognize the milestone of reaching our 250th consecutive quarterly dividend paid since the first quarter of 1936. The special dividend, paid in addition to the regular dividend, was in keeping with our long-standing policy to reward our stockholders' confidence in the company as conditions permit.

Also in mid-year, we completed the repurchase program for 500,000 shares of our common stock under a board authorization from May 1997. Subsequently, your Board of Directors approved an additional program in August 1998 to repurchase up to 500,000 more shares of common stock. At fiscal year end, 122,800 shares had been repurchased under that authorization. We anticipate these buybacks will bolster stockholder value by improving earnings per share and the return on stockholders' equity.

Ready for 1999
Our efforts have focused on promising new directions while also taking advantage of Oneida's greatest strengths. Consistent with the "Foundation for Success" theme, we anticipate that our recent accomplishments coupled with upcoming plans will show rewarding results in 1999 and well beyond.

Management Changes
We would like to welcome three new members of your Board of Directors in 1998 who were elected to vacated seats at the Annual Meeting on May 27:

• J. Peter Fobare
  Senior Vice President and General Manager of the Consumer Retail Division of Oneida Ltd., he was elected to a one-year term to fill the remainder of an expired term.

• Gregory M. Harden
  President and Chief Executive Officer of Harden Furniture Co., Inc., in McConnellsville, N.Y., he was elected to a three-year term.

• Catherine H. Suttmeier
  Vice President, Secretary and General Counsel of Oneida Ltd., she was elected to a three-year term.

In Memoriam:
Walt Stewart
Walter A. Stewart, our retired Senior Vice President of Manufacturing and Engineering who was with Oneida for 46 years overall, passed away on September 27, 1998.

Walt, who retired in 1996, was in charge of Oneida Silversmiths' factory operations during a period of tremendous growth in our manufacturing. He also served on the Board of Directors for 20 years before retiring in May 1998. Walt's manufacturing knowledge was respected by everyone, and he was beloved by all his friends and associates. He will be deeply missed.