SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                ----------------

                                   Form 10-Q

                    quarterly Report Pursuant to Section 13
                    or 15 (d) of the Securities Act of 1934

                  For the quarterly report ended June 30, 2001
                        --------------------------------

                       Commission File Number: 333-76683

                              Formica Corporation

             (Exact name of registrant as specified in its charter)

         Delaware                                    34-1046753
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
incorporation or organization)



                           15 Independence Boulevard
                                Warren, NJ 07059
                                 (908) 647-8700
              (Address, including zip code, and telephone number,
       including area code, of registrant's principal executive offices)

                               David T. Schneider
    Vice President, Chief Financial Officer and Principal Accounting Officer
                           15 Independence Boulevard
                                Warren, NJ 07059
                                 (908) 647-8700
           (Name, address, including zip code, and telephone number,
                  including area code, of agent for service)



Indicate by checkmark 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, and (2) has been subject to such filing
requirements for the past 90 days.

                         YES        X         NO
                                  -------          --------



             Title                        Shares Outstanding as of June 30, 2001
             -----                        --------------------------------------

Common Stock, $.01 par value per share          100 Shares Outstanding



<PAGE>


                              FORMICA CORPORATION

                                     Index

                                                                            Page
Part I. Financial Information
Item 1.      Financial Statements
             Condensed Consolidated Balance Sheets as of June 30,
               2001 and December 31, 2000                                      1
             Condensed Consolidated Statements of Operations for
               the three- and six-months ended June 30, 2001 and
                 2000                                                          2
             Condensed Consolidated Statements of Cash Flows for
                the six-months ended June 30, 2001
                  and 2000                                                     3
             Notes to the Condensed Consolidated Financial Statements          4
Item 2.      Management's Discussion and Analysis of Financial
               Condition and Results of Operations                            10
Item 3.      Quantitative and Qualitative Disclosure of Market Risk           17

Part II. Other Information
Item 1.       Legal Proceedings                                               17
Item 2.       Changes In Securities and Use of Proceeds                       17
Item 3.       Defaults Upon Senior Securities                                 17
Item 4.       Submission of Matters to a Vote of Security Holders             17
Item 5.       Other Information                                               17
Item 6.       Exhibits and Reports on Form 8-K                                17

Signatures                                                                    18




<PAGE>


Part I. Financial Information
Item 1: Financial Statements

                              FORMICA CORPORATION
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                        (in millions, except share data)
<TABLE>

                                                                  June 30,            December 31,
                                                                    2001                  2000
                                                              -----------------     -----------------
                                                                (Unaudited)            (Audited)
                                     ASSETS
CURRENT ASSETS:
<S>                                                                 <C>                   <C>
   Cash and cash equivalents                                        $  35.7               $    3.4
   Accounts receivable, net                                           121.2                  112.2
   Inventories                                                        156.4                  157.2
   Prepaid expenses and other current assets                           20.4                   19.1
   Deferred income taxes                                               23.5                   24.0
                                                              -----------------     -----------------
                Total current assets                                  357.2                  315.9

PROPERTY, PLANT AND EQUIPMENT, net                                    344.5                  370.3

OTHER ASSETS:
   Intangible assets, net                                             152.9                  168.6
   Other noncurrent assets                                             20.3                   24.6
                                                              -----------------     -----------------
                Total assets                                         $874.9                 $879.4
                                                              =================     =================

                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Current maturities of long-term debt                              $313.4               $   29.7
   Accounts payable                                                    69.9                   68.3
   Accrued expenses                                                    64.6                   79.5
                                                              -----------------     -----------------
                Total current liabilities                             447.9                  177.5

LONG-TERM DEBT                                                        221.5                  440.9
DEFERRED INCOME TAXES                                                 120.8                  130.0
OTHER LIABILITIES                                                      32.9                   39.7
                                                              -----------------     -----------------
                Total liabilities                                     823.1                  788.1

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
   Preferred stock - par value $.01 per share -
     authorized 1,000 shares, none
     issued or outstanding                                               -                     -
   Common stock - par value $.01 per share -
     authorized 2,000 shares, issued and
     outstanding 100 shares                                             0.1                    0.1
   Additional paid-in capital                                         217.0                  217.0
   Accumulated deficit                                               (111.3)                 (91.9)
   Accumulated other comprehensive loss                               (54.0)                 (33.9)
                                                              -----------------     -----------------
                Total stockholders' equity                             51.8                   91.3
                                                              -----------------     -----------------
                Total liabilities and stockholders' equity           $874.9                 $879.4
                                                              =================     =================
</TABLE>


         See notes to the condensed consolidated financial statements.

                                    Page 1
<PAGE>


                              FORMICA CORPORATION
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)
                                 (in millions)
<TABLE>

                                                         Three-Months Ended             Six-Months Ended
                                                              June 30,                      June 30,
                                                    -----------------------------  ----------------------------
                                                         2001           2000          2001           2000
                                                    ---------------  ------------  ------------  --------------

<S>                                                     <C>              <C>           <C>           <C>
NET SALES                                               $194.4           $221.1        $388.5        $367.4

COST OF PRODUCTS SOLD                                    148.9            163.6         296.0         270.3

INVENTORY MARKDOWN FROM RESTRUCTURING                     --               --            --             1.9
                                                    ---------------  ------------  ------------  --------------

                Gross profit                              45.5             57.5          92.5          95.2

SELLING, GENERAL AND
 ADMINISTRATIVE EXPENSES                                  48.1             56.3          94.7          96.0

PROVISION FOR RESTRUCTURING                                0.1              3.1           0.3           7.2

COST OF TERMINATED ACQUISITIONS                           --               --            --             0.4
                                                    ---------------  ------------  ------------  --------------

                Operating loss                            (2.7)            (1.9)         (2.5)         (8.4)

INTEREST EXPENSE                                         (13.3)           (12.1)        (26.4)        (22.1)

OTHER INCOME                                               1.3              1.7           3.4           2.3
                                                    ---------------  ------------  ------------  --------------

LOSS BEFORE BENEFIT (PROVISION) FOR INCOME TAXES
                                                         (14.7)           (12.3)        (25.5)        (28.2)

INCOME TAX BENEFIT (PROVISION)                             3.3             (2.0)          6.1          (2.9)
                                                    ---------------  ------------  ------------  --------------

                Net loss                               $ (11.4)         $ (14.3)      $ (19.4)      $ (31.1)
                                                    ===============  ============  ============  ==============

</TABLE>



         See notes to the condensed consolidated financial statements.

                                    Page 2
<PAGE>


                              FORMICA CORPORATION
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
                                 (in millions)

<TABLE>
                                                                    Six-Months Ended
                                                                        June 30,
                                                           -----------------------------------
                                                                 2001               2000
                                                           -----------------    --------------

<S>                                                            <C>                    <C>
CASH (USED IN) PROVIDED BY OPERATIONS                          $ (27.6)               $ 17.7



INVESTING ACTIVITIES:
   Capital expenditures and investments, net                     (10.4)                 (8.6)
   Acquisitions, net of cash acquired                             --                  (175.5)
                                                           -----------------    --------------
                Net cash used in investing activities            (10.4)               (184.1)



FINANCING ACTIVITIES:
   Proceeds from borrowings, net of financing fees                --                   133.2
   Net borrowings under lines of credit                           77.0                  --
   Equity contribution                                            --                    80.0
   Repayments of debt                                             (8.2)                (36.3)
                                                           -----------------    --------------
                Net cash provided by financing activities         68.8                 176.9



EFFECTS OF EXCHANGE RATE CHANGES ON CASH                           1.5                  (0.7)
                                                           -----------------    --------------


INCREASE IN CASH AND CASH EQUIVALENTS                             32.3                   9.8


CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD               3.4                   7.8
                                                           -----------------    --------------


CASH AND CASH EQUIVALENTS AT THE END OF PERIOD                 $  35.7              $   17.6
                                                           =================    ==============
</TABLE>



         See notes to the condensed consolidated financial statements.

                                    Pagew 3
<PAGE>


                              FORMICA CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


(1)   BASIS OF PRESENTATION:
      ---------------------
      The accompanying unaudited condensed consolidated financial statements
      have been prepared in accordance with generally accepted accounting
      principles for interim financial information and with the instructions to
      Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
      include all of the information and footnotes required by generally
      accepted accounting principles for complete financial statements. In the
      opinion of management, the interim financial statements reflect all
      material adjustments of a normal recurring nature considered necessary
      for a fair presentation of the financial position, results of operations
      and cash flow. In addition, management is required to make estimates and
      assumptions that affect the amounts reported and related disclosures.
      Estimates, by their nature, are based on judgments and available
      information. Operating results reported for the interim periods are not
      necessarily indicative of the results that may be expected for the entire
      year and any other subsequent interim periods.

      Earnings per share data are not presented because the common stock of
      Formica Corporation ("Formica" or the "Company") is not publicly traded
      and the Company is a wholly-owned subsidiary of FM Holdings, Inc.
      ("Holdings"). Holdings is a wholly-owned subsidiary of Laminates
      Acquisition Co. ("Laminates"), thereby Laminates is the ultimate parent
      of Formica.

      Certain reclassifications have been made to prior period amounts to
      conform with the current period presentation. For further information,
      refer to the audited consolidated financial statements and footnotes
      thereto for the year ended December 31, 2000 included in the Company's
      Form 10-K filed with the Securities and Exchange Commission (the "SEC").

      Prior year sales and cost of products sold have been reclassified in
      accordance with the Emerging Issues Task Force Issue 00-10 "Accounting
      for Shipping and Handling Fees and Costs." For the three- and six-months
      ended June 30, 2000, $6.9 million and $12.1 million, respectively, has
      been reclassified from net sales to cost of products sold for the cost of
      shipping and handling. The impact of these reclassifications did not have
      any effect on operating loss, EBITDA, or net loss.

      The Company recognizes revenue when the earnings process is complete.
      This generally occurs when products are shipped to the customer in
      accordance with the terms of the agreement, title and risk of loss have
      been transferred, collectibility is considered probable, pricing is fixed
      and determinable and the customer is invoiced. Accruals are made for
      sales returns and other allowances based on the Company's experience. The
      Company accounts for sales incentives or customer rebates as a reduction
      in revenue at the time revenue is recorded.

(2)   ACQUISITION:
      ------------
      On March 31, 2000, Decorative Surfaces Holding AB ("DSH") acquired
      Perstorp Surface Materials AB ("PSM") from Perstorp AB (Sweden) for
      approximately $177.5 million (including approximately $2.0 million of
      transaction costs). DSH was a wholly-owned subsidiary of Holdings (the
      parent company of Formica) whose sole asset was its investment in PSM. On
      May 26, 2000, Holdings contributed all of the stock of DSH to Formica.
      The acquisition was accounted for on an as-if pooling basis because it
      was a combination of entities under common control. Accordingly,
      Formica's results of operations reflect the acquisition and related
      purchase accounting by DSH on March 31, 2000 for all periods beginning
      April 1, 2000 and thereafter.

      The following unaudited pro forma consolidated results of operations for
      the six-months ended June 30, 2001 and 2000 assume the acquisition had
      occurred at the beginning of 2000:

                                                       Six-months ended
                                                 June 30,            June 30,
                                                   2001                2000
                                              ----------------    --------------
                                                         (in millions)
                                                 (actual)           (pro forma)

             Net sales                           $  388.5            $  422.5
             Net loss                               (19.4)              (34.2)

      In management's opinion, the unaudited pro forma combined results of
      operations are not indicative of the actual results that would have
      occurred had the acquisition been consummated at the beginning of 2000,
      or of future results.

                                    Page 4
<PAGE>

                              FORMICA CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


(3)   INVENTORIES:
      -----------
      Major classes of inventories are as follows:

                                           June 30,           December 31,
                                             2001                 2000
                                        ----------------    ------------------
                                                    (in millions)
       Finished goods                      $  84.5                 $ 88.2
       Work-in-process                        15.7                   14.4
       Raw materials                          56.2                   54.6
                                        ----------------    ------------------
       Total                                  $156.4               $157.2
                                        ================    ==================

 (4)  LONG-TERM DEBT:
      --------------
      As of June 30, 2001, Formica had $534.9 million of indebtedness
      outstanding compared to $470.6 million as of December 31, 2000. The
      increase of $64.3 million was primarily the result of additional
      borrowings under the Company's revolving credit facility during the
      six-months ended June 30, 2001. The Company's credit facility contains
      financial covenants requiring the Company to maintain minimum EBITDA,
      minimum coverage of interest expense and fixed charges and a maximum
      leverage ratio. At June 30, 2001, the Company was not in compliance with
      certain financial covenants contained in the Company's Credit Agreement.
      The Company has requested and received a waiver to the loan covenants.
      The Company will incur a waiver fee and additional interest during the
      Waiver Period. The waiver imposes additional limitations on our ability
      to incur debt during the Waiver Period. This waiver is effective through
      November 9, 2001 (the "Waiver Period"). As a result of this waiver
      expiration date, $274.8 million of debt has been classified as current
      maturities of long-term debt. During the Waiver Period, the Company and
      its equity owners will be in discussions with its banks to amend the
      covenants in the credit facility. While the Company anticipates obtaining
      an amendment to the covenants, there can be no assurance that the Company
      will be successful or that the result of these negotiations will not have
      an adverse impact on the Company. The Company's compliance with debt
      covenants is dependent upon future economic performance, which may be
      affected by economic, financial, competitive, regulatory and other
      factors beyond the Company's control.

      In the event that an amendment or a waiver to the Credit Agreement is not
      obtained, the senior debt holders have the right to accelerate payment on
      the credit facility. This acceleration would also constitute an event of
      default under the Subordinated Notes, therefore, the Subordinated Notes
      would then be classified as current. This event would have a material
      adverse effect on the Company.

 (5)  RESTRUCTURING:
      -------------
      Prior to May 1, 1998, the management of the Company formulated a plan to
      restructure certain operations and provided a restructuring provision of
      $6.6 million included as part of its purchase accounting. The remaining
      balance of this restructuring provision, related to severance payments,
      is $0.2 million at June 30, 2001 and will be substantially completed in
      2001.

      On March 1, 2000, the Company's management committed to a formal plan to
      restructure certain operating activities in North America and provided
      for a restructuring provision of $6.0 million of which approximately $0.6
      million was remaining at December 31, 2000, consisting of $0.3 million of
      facility closing costs and $0.3 million of severance and severance
      related items. During the six-months ended June 30, 2001, the Company
      utilized $0.1 million of its restructuring reserve for facility closing
      costs. The Company's management evaluated the restructuring reserve
      balance and determined that approximately $0.3 million of the reserve
      balance for severance related costs was not needed. The change in
      estimate was attributable to lower than anticipated severance-related
      costs. Accordingly, the $0.3 million was reversed and included in income
      as an offset to the original provision for restructuring. In addition,
      the Company incurred an additional $0.1 million and $0.3 million of
      restructuring-related expenses for the North America operations during
      the three- and six-months ended June 30, 2001. Under the current
      timetable, the Company projects the restructuring plan will be completed
      by the end of the third quarter of 2001.

      On June 1, 2000, the Company's management committed to a formal plan to
      restructure certain of its operations within Europe and provided for a
      restructuring provision of $1.5 million of which approximately $1.0
      million was remaining at December 31, 2000, consisting of $0.6 million of
      severance and severance-related items and $0.4 million of facility
      closure costs. During the three- and six-months ended June 30, 2001, the
      Company utilized $0.1 million and $0.5 million of its restructuring
      reserve including translation effects for severance and severance related
      items and facility closure costs. The remaining reserve balance at June
      30, 2001 was $0.5 million consisting primarily of severance-related items
      and facility closure costs. In addition, the Company

                                    Page 5

<PAGE>

                              FORMICA CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


      incurred an additional $0.3 million of restructuring-related expenses for
      the European distribution operations as a result of the integration of
      the PSM operations during the six-months ended June 30, 2001. Under the
      current timetable, the Company projects that the restructuring plan will
      be substantially completed by the end of the third quarter of 2001.

      As a result of the PSM acquisition, management committed to a formal plan
      to restructure certain operating activities primarily in Europe with the
      purpose of formulating a structure for the combined organization. Balance
      sheet reserves of $12.7 million for organizational restructuring were
      established as part of purchase accounting, of which approximately $7.8
      million was remaining at December 31, 2000, consisting primarily of
      severance related items. During the three- and six-months ended June 30,
      2001, the Company utilized $2.3 million and $3.5 million of the reserve
      including translation effects primarily on severance-related items. The
      remaining balance of the restructuring provision was $4.3 million at June
      30, 2001 consisting primarily of severance-related items. The
      restructuring plan is expected to be substantially completed by the end
      of 2001.

      The table below is a summary of the information contained in the above
paragraphs.

<TABLE>
                                                                                        Additional
                                                                                      Restructuring
                                                                                         Related
                                                                   Restructuring       Expenses for     Utilization    Restructuring
                                                                      Reserve              the        for six-months      Reserve
                                                                Balance at December     six-months     ended June 30,     Balance at
      2001 Restructuring Charges:                                    31, 2000      ended June 30, 2001     2001        June 30, 2001
      ----------------------------                                   ---------               -----         ----        -------------
                                                                                            (in millions)
<S>                                                                    <C>                <C>             <C>              <C>
      North America Restructuring:
        Asset disposal, lease termination & facility closure           $ 0.3              $ 0.0           $(0.1)           $ 0.2
        Severance                                                        0.3               (0.3)             --              0.0
                                                                         ---                ---             ---            -----
      Total Restructuring Reserve                                      $ 0.6              $(0.3)          $(0.1)           $ 0.2
                                                                       -----              -----           -----            -----
      Additional restructuring-related expenses  (Note 1)                 --              $ 0.3           $(0.3)              --
                                                                       -----              -----           -----            -----

      Europe Restructuring:
        Severance                                                      $ 0.6                 --           $(0.3)           $ 0.3
        Facility closing costs                                           0.4                 --            (0.2)             0.2
                                                                       -----              -----           -----            -----
      Total Restructuring Reserve                                      $ 1.0                 --           $(0.5)           $ 0.5
                                                                       -----              -----           -----            -----
      Additional restructuring-related expenses  (Note 1)                 --              $ 0.3           $(0.3)              --
                                                                       -----              -----           -----            -----

      Restructuring charges related to the PSM Acquisition:
        Severance                                                      $ 5.5                 --           $(2.2)           $ 3.3
        Facility closing costs                                           2.3                 --            (1.3)             1.0
                                                                       -----              -----           -----            -----
      Total Restructuring Reserve                                      $ 7.8                 --           $(3.5)           $ 4.3
                                                                       -----              -----           -----            -----

      Total Restructuring Activity                                     $ 9.4              $ 0.3           $(4.7)           $ 5.0
                                                                       -----              -----           -----            -----
</TABLE>

      Note 1: Represents additional restructuring-related expenses, which have
      been expensed as incurred. These amounts were not included in the
      establishment of the original restructuring reserve because they were
      indeterminable at the date management approved the exit plan or the costs
      did not qualify as an exit cost for the reserve under EITF 94-3. The $0.3
      million costs in North America consisted primarily of additional asset
      disposal and facility closure costs and the $0.3 million costs in Europe
      consisted of additional costs for the restructuring of the distribution
      operations as a result of the integration of PSM operations.

 (6)  CONTINGENT MATTERS:
      ------------------
      The Company is involved in various proceedings relating to environmental
      matters. It is the Company's policy to accrue liabilities for remedial
      investigations and clean-up activities when it is probable that such
      liabilities have been incurred and when they can be reasonably estimated.
      In the ordinary course of business, the Company has been or is the
      subject of or party to various pending litigation and claims. Currently,
      the Company has been named as a potentially responsible party with the
      respect to several Superfund sites and has reserved approximately $3.6
      million and $3.8 million at June 30, 2001 and December 31, 2000,
      respectively, for these matters to recognize a reasonable estimate of the
      probable liability. While it is not possible to predict, with certainty,
      the outcome of any potential litigation or claims, the Company believes
      any known

                                    Page 6
<PAGE>

                              FORMICA CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


      contingencies, individually or in the aggregate, will not have a material
      adverse impact on its financial position or results of operations.

      Formica's operations are subject to federal, state, local and foreign
      environmental laws and regulations governing both the environment and the
      work place. The Company believes that it is currently in substantial
      compliance with such laws and the regulations promulgated thereunder.

      On April 5, 1999, the Company received a subpoena covering the period
      from January 1, 1994 until April 1, 1999 from a federal grand jury in
      connection with an investigation into possible antitrust violations in
      the United States market for high-pressure laminate. The Company produced
      documents and provided other information in response to the subpoena, and
      a number of present or former Formica employees appeared for testimony
      before the grand jury or have been interviewed by the Staff of the
      Antitrust Division of the U.S. Department of Justice in connection with
      the investigation. On May 1, 2001, the Company was informed by the Staff
      of the Antitrust Division of the U.S. Department of Justice that the
      investigation had been closed.

      Major manufacturers of high-pressure laminate ("HPL"), including the
      Company, have been named as defendants in purported class action
      complaints filed in federal and certain state courts. The complaints,
      which all make similar allegations, allege that HPL manufacturers in the
      United States engaged in a contract, combination or conspiracy in
      restraint of trade in violation of federal antitrust laws and state laws
      and seek damages of an unspecified amount. In an Order dated December 6,
      2000 and in subsequent Orders, the federal Judicial Panel on
      Multidistrict Litigation consolidated federal actions for pretrial
      purposes under the caption In re: High Pressure Laminate Antitrust
      Litigation, No. 00-MD-1368 (the "Federal Action"). Twenty-seven actions
      have been filed in thirteen state courts (the "State Actions"). The
      Federal Action has been brought purportedly on behalf of direct
      purchasers of high-pressure laminates, and the State Actions have been
      brought principally on behalf of indirect purchasers. The Company intends
      to defend vigorously against the allegations of the complaints. The
      Company is unable to determine at this time if this matter will have any
      adverse effect on its financial position, results of operations or cash
      flows.

      Formica is involved in other pending litigation in the usual course of
      business. In the opinion of management, such litigation will not have a
      material adverse effect on the Company's financial position, results of
      operations or cash flows. Formica continually evaluates its estimated
      legal liabilities as a matter of policy. The Company's estimated range of
      liability is based on known claims. There can be no assurances that
      Formica will not become involved in future proceedings, litigation or
      investigations, that such liabilities will not be material or that
      indemnification pursuant to certain indemnification rights will be
      available.

(7)   COMPREHENSIVE LOSS:
      ------------------
      The difference between comprehensive loss and net loss results from
      foreign currency translation adjustments.
<TABLE>

                                        Three-months ended                Six-months ended
                                  -----------------------------    -------------------------------
                                    June 30,          June 30,       June 30,          June 30,
                                      2001              2000           2001              2000
                                  -------------     -----------    -------------     -------------
                                         (in millions)                    (in millions)

<S>                                  <C>               <C>            <C>               <C>
       Net loss                      $ (11.4)          $ (14.3)       $ (19.4)          $ (31.1)
       Foreign currency
       translation adjustments          (7.3)            (13.9)         (20.1)            (15.9)
                                  -------------     -----------    -------------     -------------
       Comprehensive loss            $ (18.7)          $ (28.2)       $ (39.5)          $ (47.0)
                                  =============     ===========    =============     =============
</TABLE>

(8)   RELATED PARTY TRANSACTIONS:
      --------------------------
      In order to fund normal working capital requirements, the Company has
      entered into certain borrowing arrangements with Laminates. These
      arrangements are short-term in nature and generally bear no interest. At
      June 30, 2001 and December 31, 2000, there was approximately $0.1 million
      and $0.9 million, respectively, outstanding under these arrangements.

      DLJ Capital Funding, Inc., an affiliate of DLJ Merchant Banking Partners
      II L.P. and its affiliates (DLJ Merchant Banking), has and will receive
      customary fees and reimbursement of expenses in connection with the
      arrangement and syndication of the Credit Facility and as a lender
      thereunder.

      Formica and its subsidiaries may from time to time enter into financial
      advisory or other investment banking relationships with Credit Suisse
      First Boston Corporation (an affiliate of DLJ Merchant Banking) ("CSFB")
      or one of its affiliates whereby CSFB or its affiliates will receive
      customary fees and will be entitled to reimbursement for all related
      reasonable disbursements and out-of-pocket expenses. Formica expects that
      any

                                    Page 7
<PAGE>

                              FORMICA CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


      arrangement will include provisions for the indemnification of CSFB
      against a variety of liabilities, including liabilities under the federal
      securities laws.

 (9)  CHANGES IN ACCOUNTING ESTIMATES:
      -------------------------------
      Effective January 1, 2001, the Company made certain changes in accounting
      estimates relating to its depreciable asset lives which resulted in an
      increase in depreciation expense charges totaling approximately $0.4
      million and $0.9 million for the three- and six-month period ended June
      30, 2001. The annual impact of this change for 2001 is expected to result
      in increased depreciation expenses of approximately $1.8 million. The
      change in accounting estimates resulted from a review by management of
      certain assets' depreciable lives.

(10)  SEGMENT INFORMATION:
      -------------------
      The Company is principally engaged in a single line of business: the
      design, manufacture and distribution of decorative surfacing products.
      Substantially all revenues result from the sale of decorative surfaces
      and related products through domestic and international distributors and
      direct accounts. The Company's operations are managed on a geographic
      basis and, therefore, reportable segments are based on geographic areas.
      The Company's market presence in Europe, the Americas (the United States,
      Canada, Mexico and Brazil) and Asia was increased as a result of the PSM
      acquisition. The Company measures segment results as operating income
      (loss), which is defined as income (loss) before interest expense, other
      income (expense) and income taxes. Depreciation and amortization expense
      is included in the measure of segment results. Segment revenues are
      defined as net sales to external customers of each segment. All
      intercompany sales and expenses have been eliminated in determining
      segment revenues and segment profit (loss).

<TABLE>
                                           Three-Months Ended                 Six-Months Ended
                                                June 30,                          June 30,
                                       ----------------------------      ----------------------------
                                            2001           2000              2001           2000
                                       ---------------  -----------      --------------  ------------
                                              (in millions)                     (in millions)

      Segment revenues:
<S>                                          <C>         <C>                  <C>          <C>
        United States                        $ 80.8      $   85.9             $159.3       $ 168.7
        Americas - Other                       22.1          28.3               44.3          40.0
        Europe                                 70.9          83.1              144.2         118.1
        Asia                                   20.6          23.8               40.7          40.6
                                       ---------------  -----------      --------------  ------------
               Total                         $194.4       $ 221.1             $388.5       $ 367.4
                                       ===============  ===========      ==============  ============

      Segment profit (loss):
        Americas                            $  (7.6)      $  (5.4)          $  (11.6)     $  (16.5)
        Europe                                  2.0           0.8                3.8           3.5
        Asia                                    2.9           2.7                5.3           4.6
                                       ---------------  -----------      --------------  ------------
               Total                        $  (2.7)      $  (1.9)          $   (2.5)     $   (8.4)
                                       ===============  ===========      ==============  ============

      Depreciation and amortization
      (included in segment profit
       (loss))
        Americas                           $    9.8      $    9.7            $  19.4       $  18.7
        Europe                                  4.5           4.8                9.4           7.0
        Asia                                    1.0           1.4                2.2           2.4
                                       ---------------  -----------      --------------  ------------
               Total                        $  15.3       $  15.9            $  31.0       $  28.1
                                       ===============  ===========      ==============  ============

     A reconciliation of total
       segment loss to loss before
       provision for income taxes is
       as follows:
        Segment loss                      $    (2.7)    $    (1.9)         $    (2.5)     $   (8.4)
        Interest expense                      (13.3)        (12.1)             (26.4)        (22.1)
        Other income                            1.3           1.7                3.4           2.3
                                       ---------------  -----------      --------------  ------------
               Loss before provision
                 for income taxes         $  (14.7)     $  (12.3)          $  (25.5)     $  (28.2)
                                       ===============  ===========      ==============  ============
</TABLE>

                                    Page 8
<PAGE>

                              FORMICA CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


                                               June 30,       December 31,
                                                 2001             2000
                                            ---------------  ----------------
                                                     (in millions)
      Total assets:
        United States                            $  423.7          $  418.7
        Americas - Other                             74.8              76.6
        Europe                                      295.3             301.3
        Asia                                         81.1              82.8
                                            --------------    --------------
               Total                             $  874.9          $  879.4
                                            ==============    ==============


<PAGE>



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

Overview

The Company is engaged in the design, manufacture and distribution of
decorative surfacing products. Formica was founded in 1913 and created the
world's first decorative laminate in 1927. In May 1985, a group led by
management and Shearson Lehman purchased Formica from American Cyanamid
Company. In 1989, Formica was sold to FM Acquisition Corporation in a buyout
led by Dillon, Read & Company. In January 1995, BTR Nylex Ltd., an Australian
company and a subsidiary of BTR plc, acquired Formica. In May 1998, Laminates
Acquisition Co. ("Laminates") acquired Formica.

On March 31, 2000, Decorative Surfaces Holding AB ("DSH") acquired Perstorp
Surface Materials AB ("PSM") from Perstorp AB (Sweden). DSH was a wholly-owned
subsidiary of Holdings (the parent company of Formica) whose sole asset was its
investment in PSM. On May 26, 2000, Holdings contributed all of the stock of
DSH to Formica. Accordingly, Formica's results of operations reflect the
acquisition and related purchase accounting by DSH on March 31, 2000 for all
periods beginning April 1, 2000 and thereafter.

Recent Developments

Employee Reduction Program: In July 2001, the Company implemented plans to
reduce the North American workforce by approximately 200 positions at an
approximate cost of $1.5 million, which will be substantially completed in the
third quarter of 2001. This action is expected to reduce costs in a range of
$8.0 million to $10.0 million annually for the Company.

Financial Covenants Compliance: Primarily due to the economic slowdown and its
impact on volume resulting in lower than expected results for the three-months
ended June 30, 2001 versus the planned growth that was incorporated in the
financial covenants, at June 30, 2001, the Company was not in compliance with
certain financial covenants contained in the Company's Credit Agreement. The
Company has requested and received a waiver from its banks relating to
violations of certain financial covenants contained in the Company's Credit
Agreement. This waiver is effective through November 9, 2001 (the "Waiver
Period"). During the Waiver Period, the Company and its equity owners will be
in discussions with the bank group to amend the covenants contained in the
Company's Credit Agreement. The Company will incur a waiver fee and additional
interest during the Waiver Period. The waiver imposes additional limitations on
our ability to incur debt during the Waiver Period. While the Company is
negotiating with its banks and anticipates obtaining an amendment to the
covenants, there can be no assurance that the Company will be successful or
that the result of these negotiations will not have an adverse impact on the
Company.

In the event that an amendment or a waiver to the Credit Agreement is not
obtained, the senior debt holders have the right to accelerate payment on the
credit facility. This acceleration would also constitute an event of default
under the Subordinated Notes, therefore, the Subordinated Notes would then be
classified as current. This event would have a material adverse effect on the
Company.

Results of Operations:
The table below compares the Company's components for EBITDA and Adjusted
EBITDA for the three- and six-months ended June 30, 2001 compared to the 2000
period. Management believes that the presentation of Adjusted EBITDA is
meaningful to the readers of the Company's financial statements, as it presents
a more normalized level of EBITDA.

<TABLE>
                                                      Three-months ended                   Six-months ended
                                                 ------------------------------     -------------------------------
                                                   June 30,         June 30,          June 30,         June 30,
                                                     2001             2000              2001             2000
                                                 -------------    -------------     -------------    --------------
                                                       (in millions)                       (in millions)

<S>                                                 <C>              <C>               <C>              <C>
Net loss                                            $ (11.4)         $ (14.3)          $ (19.4)         $ (31.1)
Add back:
   Depreciation and amortization                       15.3             15.9              31.0             28.1
   Interest expense (not net of interest income)       13.3             12.1              26.4             22.1
   Income tax (benefit)/expense                        (3.3)             2.0              (6.1)             2.9
                                                 -------------    -------------     -------------    --------------
EBITDA                                                 13.9             15.7              31.9             22.0
Adjustments to EBITDA
   Restructuring related expenses                       0.1              3.1               0.3              9.1
   Acquisition related expenses                         ---              2.5               0.3              2.5
   Cost of terminated acquisition                       ---              ---               ---              0.4
                                                 -------------    -------------     -------------    --------------
Adjusted EBITDA                                      $ 14.0            $21.3            $ 32.5           $ 34.0
                                                 =============    =============     =============    ==============
</TABLE>

                                    Page 10

<PAGE>

Six-Months Ended June 30, 2001 Compared Six-Months Ended June 30, 2000

     Net Sales: Net sales for 2001 were $388.5 million, compared to net sales
of $367.4 million for 2000, an increase of $21.1 million, or 5.7%. This
increase is primarily due to the inclusion of PSM sales in 2001, partially
offset by lower volumes and a $20.3 million unfavorable foreign exchange impact
on sales. Net sales in the Americas decreased to $203.6 million in 2001 from
$208.7 million in 2000, a decrease of $5.1 million. This decrease is primarily
due to lower laminate and flooring volumes, which are the result of the
continuing effect of the economic slowdown and customer de-stocking activity,
partially offset by the inclusion of PSM sales in the 2001 period. Net sales in
Europe increased $26.1 million to $144.2 million in 2001 from $118.1 million in
2000. This increase is primarily due to the inclusion of PSM sales and higher
selling prices, offset by lower volumes and the unfavorable effects of a
stronger U.S. dollar. Net sales in Asia increased slightly to $40.7 million in
2001 from $40.6 million in 2000. This increase is due to the inclusion of PSM
in the 2001 period, primarily offset by the unfavorable impact of foreign
exchange.

     Gross Profit: Gross profit for 2001 was $92.5 million, compared to gross
profit of $95.2 million for 2000, a decrease of $2.7 million. Gross profit as a
percentage of net sales in 2001 decreased to 23.8% from 25.9% in 2000. The 2000
period includes $1.9 million related to the markdown in inventory from the
restructuring of the North American operations and excludes the impact of PSM
for the first quarter of 2000.

Gross Profit in the Americas decreased $5.6 million to $45.9 million in 2001
from $51.5 million in 2000, reflecting largely the impact of lower laminate and
flooring volumes. The 2000 period includes a $1.9 million charge related to the
markdown in inventory from the restructuring of the North American operations.
Gross profit, as a percentage of net sales for the Americas, decreased to 22.5%
in 2001 compared to 24.7% in 2000, principally as a result of lower volumes,
higher costs for raw materials and labor, and increased transportation and
energy costs. Gross profit in Europe and Asia increased $2.9 million to $46.6
million in 2001 from $43.7 million in 2000. As a percentage of net sales, gross
profit in Europe and Asia decreased to 25.2% in 2001 from 27.5% in 2000,
primarily the result of the unfavorable impact of foreign exchange translations
and higher raw material and energy costs.

     Selling, General and Administrative Expenses: Selling, general and
administrative expenses for 2001 were $94.7 million compared to $96.0 million
for 2000, a decrease of $1.3 million. Selling, general and administrative
expenses, as a percent of net sales, were 24.4% in the 2001 period compared to
26.1% in the 2000 period. The decrease is the result of a decrease in
discretionary spending and lower warehousing and administrative expenses and
the impact of the restructuring programs started in 2000, in both North America
and Europe, partially offset by the inclusion of PSM for the first quarter of
2001.

     Restructuring Charge: (See Note 5 to the Condensed Consolidated Financial
Statements) The provision for restructuring for 2001 totaled $0.3 million
compared to $7.2 million in 2000. During the six-months ended June 30, 2001,
the Company incurred $0.3 million of restructuring-related expenses for the
North American operations offset by approximately $0.3 million relating to the
reversal of the North American restructuring reserve balance accruals due to
lower than anticipated severance-related costs. In addition, the Company
incurred in 2001 an additional $0.3 million of restructuring-related expenses
for the European distribution operations. In the 2000 period, the Company
provided for a restructuring provision of $7.4 million, inclusive of a $1.9
million markdown of inventory discussed above for the North American operations
and $1.4 million of indirect restructuring-related charges. The 2000 period
also included a restructuring provision of $1.5 million for the European
distribution operations and $0.2 million related to the restructuring of PSM.

     Cost of Terminated Acquisitions: During the six-month period ended June
30, 2000, the Company incurred a $0.4 million charge relating to expenses from
the cost of a terminated acquisition, primarily for legal and other
professional fees.

     Operating Loss: The operating loss for 2001 was $2.5 million compared to
$8.4 million for 2000, resulting primarily from the decline in gross margins.
Included in the 2001 period are restructuring charges of $0.3 million. The 2000
period includes a restructuring charge of $9.1 million and the cost of a
terminated acquisition of $0.4 million. After taking into account the 2001 and
2000 charges, the operating loss was $2.2 million in 2001 compared to operating
income of $1.1 million in 2000, for the reasons stated above.

     EBITDA: EBITDA increased to $31.9 million in 2001 compared to $22.0
million in 2000. After taking into account the 2001 and 2000 periods
restructuring costs and cost of terminated acquisitions (described above), and
PSM-related acquisition expenses, EBITDA, as adjusted, was $32.5 million in
2001 compared to $34.0 million in 2000.

     Interest Expense: Interest expense increased $4.3 million to $26.4 million
in 2001 from $22.1 million for 2000. The increase in interest expense is
primarily due to the additional debt incurred in the second quarter of 2000 for
the acquisition of PSM, including additional borrowing in 2001 on the revolving
credit facility, partially offset by a decrease in effective interest rates.

                                    Page 11
<PAGE>

     Income Taxes: In the 2001 period, the Company recognized an income tax
benefit of $6.1 million compared to an income tax expense of $2.9 million in
2000. The increased income tax benefit is the result of the Company no longer
providing for a valuation allowance against its net operating losses.

     Net Loss: The 2001 net loss was $19.4 million compared to $31.1 million in
2000, due to the reasons described above.

Three-Months Ended June 30, 2001 Compared Three-Months Ended June 30, 2000

     Net Sales: Net sales for 2001 were $194.4 million, compared to net sales
of $221.1 million for 2000, a decrease of $26.7 million, or 12.1%. This
decrease is primarily due to lower volume and a $9.9 million unfavorable
foreign exchange impact on sales. Net sales in the Americas decreased $11.3
million to $102.9 million in 2001 from $114.2 million in 2000. This decrease is
primarily due to lower laminate and flooring volumes, which are the result of
the sluggish economy and distributor de-stocking activity. Net sales in Europe
decreased $12.2 million to $70.9 million in 2001 from $83.1 million in 2000.
This decrease is primarily due to lower volumes and the unfavorable effects of
foreign exchange translations. Net sales in Asia decreased $3.2 million to
$20.6 million in 2001 from $23.8 million in 2000. This decrease is primarily
the result of the unfavorable impact of foreign exchange translations versus
the U.S. dollar.

     Gross Profit: Gross profit for 2001 was $45.5 million, compared to gross
profit of $57.5 million for 2000, a decrease of $12.0 million. Gross profit as
a percentage of net sales in 2001 decreased to 23.4% from 26.0% in 2000.

     Gross Profit in the Americas decreased $6.7 million to $21.6 million in
2001 from $28.3 million in 2000. Gross profit as a percentage of net sales for
the Americas decreased to 21.0% in 2001 compared to 24.8% in 2000, principally
as a result of lower volumes, higher costs for raw materials and labor,
increased transportation and energy costs and a decline in prices and margins
in flooring, partially offset by slightly higher selling prices. Gross profit
in Europe and Asia decreased $5.3 million to $23.9 million in 2001 from $29.2
million in 2000. As a percentage of net sales, gross profit in Europe and Asia
decreased to 26.1% in 2001 from 27.3% in 2000, primarily the result of lower
volumes, the unfavorable impact of foreign exchange translations and higher raw
material and energy costs.

     Selling, General and Administrative Expenses: Selling, general and
administrative expenses for 2001 were $48.1 million compared to $56.3 million
for 2000, a decrease of $8.2 million. Selling, general and administrative
expenses, as a percent of net sales, were 24.7% in the 2001 period compared to
25.5% in the 2000 period. The net decrease is the result of a decrease in
discretionary expenses and the impact of the restructuring programs started in
2000.

     Restructuring Charge: (See Note 5 to the Condensed Consolidated Financial
Statements) The provision for restructuring for 2001 totaled $0.1 million
compared to $3.1 million in 2000. During the three-months ended June 30, 2001,
the Company incurred $0.1 million of restructuring-related expenses for the
North American operations. In the 2000 period, the Company provided for a
restructuring provision of $1.4 million for indirect restructuring-related
charges related to the North American operations, a restructuring provision of
$1.5 million for the European distribution operations and $0.2 million related
to the restructuring of PSM.

     Operating Loss: The operating loss for 2001 was $2.7 million compared to
$1.9 million for 2000. Included in the 2001 period are restructuring charges of
$0.1 million. The 2000 period includes a restructuring charge of $3.1 million.
After taking into account the 2001 and 2000 charges, the operating loss was
$2.6 million in 2001 compared to operating income of $1.2 million in 2000, for
the reasons stated above.

     EBITDA: EBITDA decreased to $13.9 million in 2001 compared to $15.7
million in 2000. After taking into account the 2001 and 2000 periods
restructuring costs (described above) and PSM related acquisition expenses,
EBITDA, as adjusted, was $14.0 million in 2001 compared to $21.3 million in
2000.

     Interest Expense: Interest expense increased $1.2 million to $13.3 million
in 2001 from $12.1 million for 2000. The increase in interest expense is
primarily due to the higher debt outstanding in the second quarter of 2001,
including additional borrowing on the revolving credit facility, partially
offset by a decrease in effective interest rates.

     Income Taxes: In the 2001 period, the Company recognized an income tax
benefit of $3.3 million compared to an income tax expense of $2.0 million in
2000. The income tax benefit is the result of the Company no longer providing
for a valuation allowance against its net operating losses.

     Net Loss: The 2001 net loss was $11.4 million compared to $14.3 million in
2000, due to the reasons described above.

                                    Page 12

<PAGE>

Liquidity and Capital Resources

Formica's principal sources of liquidity are cash flows from operations and
local credit facilities obtained by some of Formica's foreign subsidiaries.
Formica's principal uses of cash will be for debt service requirements and
capital expenditures.

As of June 30, 2001, Formica had $534.9 million of indebtedness outstanding
compared to $470.6 million as of December 31, 2000. Formica's significant debt
service obligations could, under certain circumstances, have material
consequences to security holders.

In connection with our acquisition by Laminates in 1998, Formica's parent
raised approximately $137.1 million through the issuance of common and
preferred stock to the DLJMB Funds, the institutional investors and Messrs.
Langone and Schneider. The Laminates 8% Preferred Stock has an 8% cumulative
dividend that is paid in cash when, as and if declared by the Laminates board.
The Holdings 15% Senior Exchangeable Preferred Stock due 2008 has a 15%
cumulative dividend, which is not payable in cash until May 2003 and is
exchangeable at Holdings' option for 15% subordinated debentures of Holdings.
Dividends from Formica, which are restricted by the provisions of the Credit
Facility and the indenture governing the Notes described below, are the primary
source of funding for payments with respect to Holdings and Laminates
securities.

Notes

In February 1999, Formica issued $215.0 million of 10 7/8% Senior Subordinated
Notes which mature in 2009. Interest on the Notes is payable semiannually in
cash. The Notes and related indenture place certain restrictions on Formica and
its subsidiaries, including the ability to pay dividends, issue preferred
stock, repurchase capital stock, incur and pay indebtedness, sell assets and
make certain restricted investments.

Credit Facility

The Credit Facility includes a $120.0 million revolving credit facility, an
$85.0 million term loan and a $140.0 million term loan. The $120.0 million
revolving credit facility may be increased by up to $25.0 million at the
request of Formica, with the consent of the banks providing the increased
commitments, and will terminate on May 1, 2004. At June 30, 2001, $89.9 million
was outstanding against the revolving credit facility. In addition, as of June
30, 2001, Formica had outstanding approximately $28.5 million in letters of
credit under the Credit Facility to provide credit enhancement and support for
certain of its credit facilities. The $85.0 million and $140.0 million term
loans will mature in 2004 and 2006, respectively. The term loans outstanding
under the Credit Facility totaled $202.9 million at June 30, 2001 and amortize
over the life of the Credit Facility. As of June 30, 2001, the Company had $1.6
million available to borrow under the Credit Facility.

Borrowings under the Credit Facility generally bear interest based on a margin
over the base rate or, at Formica's option, the reserve-adjusted LIBO rate. The
applicable margin varies based upon Formica's ratio of consolidated debt to
EBITDA. Formica's obligations under the Credit Facility are guaranteed by
Laminates, Holdings and all existing or future domestic subsidiaries of Formica
(the "subsidiary guarantors") and are secured by substantially all of the
assets of Formica and the subsidiary guarantors, including a pledge of capital
stock of all existing and future subsidiaries of Formica (provided that, with a
single exception, no more than 65% of the voting stock of any foreign
subsidiary shall be pledged) and a pledge by Holdings of the stock of Formica
and by Laminates of the stock of Holdings.

The Credit Facility contains financial covenants requiring the Company to
maintain minimum EBITDA, minimum coverage of interest expense and fixed charges
and a maximum leverage ratio. At June 30, 2001, the Company was not in
compliance with certain financial covenants contained in the Company's Credit
Agreement. The Company has requested and received a waiver to the violations of
certain financial covenants. Pursuant to the waiver, the Company will incur a
waiver fee and additional interest expense on borrowings during the Waiver
Period. The waiver imposes additional covenants, including limitations on our
ability to incur debt, sell assets and make investments during the Waiver
Period and does not permit additional revolver borrowings. This waiver is
effective through November 9, 2001 (the "Waiver Period"). As a result of the
waiver expiration date, $274.8 million of debt has been classified as current
maturities of long-term debt. During the Waiver Period, the Company and its
equity owners will be in discussions with the banks to amend the covenants in
the credit facility. While the Company is negotiating with its banks and
anticipates obtaining an amendment to the covenants, there can be no assurance
that the Company will be successful or that the result of these negotiations
will not have an adverse impact on the Company. The Company's compliance with
debt covenants is dependent upon future economic performance which may be
affected by economic, financial, competitive, regulatory and other factors
beyond the Company's control.

In the event that an amendment or a waiver to the Credit Agreement is not
obtained, the senior debt holders have the right to accelerate payment on the
credit facility. This acceleration would also constitute an event of default
under the Subordinated Notes, therefore, the Subordinated Notes would then be
classified as current. This event would have a material adverse effect on the
Company.

                                    Page 13
<PAGE>

Local Credit Facilities

Formica maintains various local credit facilities in foreign countries
(primarily in Asia) that provide for borrowings in local currencies of which
approximately $26.1 million was outstanding as of June 30, 2001. Formica may
replace the availability of these facilities (in local currencies) under the
Credit Facility and will maintain some of these credit facilities to provide
financing for its subsidiaries in these countries. Formica expects that these
facilities, together with the Credit Facility and operating cash flow in these
countries, will be sufficient to fund expected liquidity needs in these
countries, assuming the banks agree to an amendment or a waiver.

Working Capital

Working capital, excluding the effects of the debt reclass of $274.8 million,
was $184.1 million at June 30, 2001 compared to $138.4 million at December 31,
2000. Inclusive of the effects of the debt reclass, working capital was a
negative $90.7 million at June 30, 2001 compared to $138.4 million at December
31, 2000. The decrease in working capital resulted from $274.8 million of
long-term debt re-classified in the current quarter as current maturities as
described above, offset by higher accounts receivable and lower accrued
expenses and other current liabilities at June 30, 2001. Management believes
that Formica will continue to require working capital levels consistent with
past experience and continues its efforts to reduce working capital
requirements.

Capital Expenditures

Formica has spent approximately $10.4 million on capital expenditures during
the six-months ended June 30, 2001, and anticipates that it will spend
approximately an additional $7.0 million to $8.0 million during the remainder
of the year. The Credit Facility contains restrictions on its ability to make
capital expenditures. Based on present estimates, Formica believes that the
amount of capital expenditures permitted under the Credit Facility will be
adequate to maintain the properties and businesses of its current operations.

Source of Funds

With existing cash on hand, assuming the banks agree to an amendment or a
waiver, Formica anticipates that its operating cash flow will be sufficient to
meet its anticipated near term future operating expenses, capital expenditures
and debt service obligations as they become due. However, Formica's ability to
make scheduled payments of principal, to pay interest on or to refinance the
indebtedness and to satisfy its other debt obligations will depend upon its
future operating performance, which will be affected by general economic,
financial, competitive, regulatory, business and other factors beyond its
control.

Cash used in operations was $27.8 million for the six-months ended June 30,
2001, compared to cash provided by operations of $17.7 million for the
six-months ended June 30, 2000. The increase in cash used by operations is due
to an increase in accounts receivable and a decrease in accrued expenses and
other liabilities. Net cash used in investing activities was $10.4 million and
$184.1 million for the six-months ended June 30, 2001 and 2000, respectively.
The 2000 period included $177.5 million used for the acquisition of PSM. Net
cash provided by financing activities was $68.8 million and $176.9 million for
the six-months ended June 30, 2001 and 2000, respectively, which included
additional net borrowings under our credit facility discussed above.

Default of Loan Covenants

At June 30, 2001, Formica Corporation was not in compliance with certain
financial covenants of its credit facilities. As a result of these covenant
violations, Formica has requested and received a waiver from its lenders under
the credit facility. This waiver is effective through November 9, 2001. During
the Waiver Period, the Company, in conjunction with its equity owners, will be
in discussions with its banks to amend the future requirements of the covenants
under the Credit Agreement. The Company will incur a waiver fee and additional
interest during the Waiver Period. The waiver imposes additional limitations on
our ability to incur debt during the Waiver Period. While the Company is
negotiating with its banks and anticipates obtaining an amendment to the
covenants, there can be no assurance that the Company will be successful or
that the result of these negotiations will not have an adverse impact on the
Company.

In the event that an amendment or a waiver to the Credit Agreement is not
obtained, the senior debt holders have the right to accelerate payment on the
credit facility. This acceleration would also constitute an event of default
under the Subordinated Notes, therefore, the Subordinated Notes would then be
classified as current. This event would have a material adverse effect on the
Company.

Effect of Inflation; Seasonality

Formica does not believe that inflation has had a material impact on its
financial position or results of operations. Formica's operations are modestly
influenced by seasonal fluctuations on a regional basis.

                                    Page 14
<PAGE>

Common European Currency

The Treaty on European Economic and Monetary Union provides for the
introduction of a single European currency, the Euro, in substitution for the
national currencies of the member states of the European Union that adopt the
Euro. In May 1998 the European Council determined: (i) the 11 member states
that met the requirement for the Monetary Union, and (ii) the currency exchange
rates amongst the currencies for the member states joining the Monetary Union.

The transitory period for the Monetary Union started on January 1, 1999.
According to Council Resolution of July 7, 1997, the introduction of the Euro
will be made in three steps: (i) a transitory period from January 1, 1999 to
December 31, 2001, in which current accounts may be opened and financial
statements may be drawn in Euros, and local currencies and Euros will coexist;
(ii) from January 1, 2002 to June 30, 2002, in which local currencies will be
exchanged for Euros; and (iii) from July 1, 2002 after which local currencies
will disappear.

Formica cannot give assurance as to the effect of the adoption of the Euro on
its payment obligations under loan agreements for borrowings in currencies to
be replaced by the Euro or on its commercial agreements in those currencies.
However, the Company has not experienced nor does it anticipate any problems
resulting from the adoption of the Euro.

Market Risk

Interest Rate Risk

The Company utilizes both fixed and variable rate debt obligations to finance
its operations. At June 30, 2001, approximately 60% of the Company's total debt
was at variable interest rates. A one-half percentage point increase in
interest would increase the annual amount of interest paid by approximately
$1.6 million. Although the Company will continue to monitor its exposure to
interest rate fluctuations, the Company cannot assure that interest rate
fluctuations will not harm its business in the future.

Foreign Currency Exchange Rate Risk

The Company is exposed to market risk from changes in foreign currency exchange
rates, including fluctuations in the functional currencies of its foreign
operations. The functional currency of operations outside the United States is
the respective local currency. Foreign currency translation effects are
included in accumulated other comprehensive loss in stockholders' equity. Our
operating results are thus subject to significant fluctuations based upon
changes in the exchange rates of other currencies in relation to the U.S.
dollar. Forward contracts are entered into for periods consistent with
underlying exposures and do not constitute positions independent of those
exposures. We have analyzed the foreign exchange impact on our forward
contracts and have determined that it is de minimus through June 30, 2001.
Formica does not enter into contracts for speculative purposes and is not a
party to any leverage instruments. Although we will continue to monitor our
exposure to currency fluctuations, we cannot assure that exchange rate
fluctuations will not harm our business in the future.

Forward-Looking Information

This report (as well as other public filings, press releases and discussions
with Company management) contains and incorporates by reference certain
forward-looking statements. These statements are subject to risks and
uncertainties and other factors, which could cause actual results to differ
from those anticipated. Forward-looking statements include the information
concerning:

o    our future operating performance, including sales growth and cost savings
     and synergies following our acquisitions of Fountainhead, STEL and
     Perstorp Surface Materials and our related restructurings and capital
     investment program and

o    our belief that we have sufficient cash flows to support working capital
     needs, capital expenditures and debt service requirements

In addition, statements that include the words "believes," "expects,"
"anticipates," intends," "estimates," "will," "should," "may," or other similar
expressions are forward-looking statements. For those statements, the Company
claims the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995.

    What Factors Could Affect the Outcome of Our Forward-Looking Statements?

You should understand that the following important factors, in addition to
those discussed elsewhere in this Form 10-Q could affect the future results of
Formica and could cause those results or other outcomes to differ materially
from those expressed in our forward-looking statements.

    Industry and Market Factors

o    changes in economic conditions generally or in the markets served by the
     Company

                                    Page 15

<PAGE>

o    fluctuations in raw material and energy prices

o    product specifier preferences and spending patterns and

o    competition from other decorative surfaces producers

     Operating Factors

o    our ability to combine our recently acquired businesses while maintaining
     current operating performance levels during the integration period(s) and
     the challenges inherent in diverting our management's focus and resources
     from other strategic opportunities and from operational matters

o    our ability to implement our cost savings plans without adversely
     impacting our net sales and

o    our ability to attract, hire and retain suitable personnel

     Relating to our Debt and the Notes

We have substantial debt, which could limit our cash available for other uses
and harm our competitive position. In connection with our acquisitions, we
incurred significant indebtedness. The level of our indebtedness could have
important consequences to us, including:

o    limiting our ability to obtain additional debt financing in the future for
     working capital, capital expenditures or acquisitions

o    limiting cash flow available for general corporate purposes, including
     acquisitions, because a substantial portion of our cash flow from
     operations must be dedicated to debt service

o    limiting our flexibility in reacting to competitive and other changes in
     the industry and economic conditions generally and

o    exposing us to risks inherent in interest rate fluctuations because some
     of our borrowings may be at variable rates of interest, which could result
     in higher interest expense in the event of increases in interest rates

You should read the section called "Risk Factors" in the Registration
Statements on Form S-1 (file no. 333-76683) that we filed with the SEC, for
additional information about risks that may cause our actual results and
experience to differ materially from those contained in forward-looking
statements.

Recent Accounting Pronouncements

Statements of Financial Accounting Standards (SFAS) No. 141 and No. 142

In June 2001, the FASB issued Statements of Financial Accounting Standards No.
141, "Business Combinations" (SFAS No. 141), and No. 142, "Goodwill and Other
Intangible Assets" (SFAS No. 142). SFAS No. 141 changes the accounting for
business combinations, requiring that all business combinations be accounted
for using the purchase method and that intangible assets be recognized as
assets apart from goodwill if they arise from contractual or other legal
rights, or if they are separable or capable of being separated from the
acquired entity and sold, transferred, licensed, rented, or exchanged. SFAS No.
141 is effective for all business combinations initiated after June 30, 2001.
SFAS No. 142 specifies the financial accounting and reporting for acquired
goodwill and other intangible assets. Goodwill and intangible assets that have
indefinite useful lives will not be amortized but rather will be tested at
least annually for impairment. SFAS No. 142 is effective for fiscal years
beginning after December 15, 2001.

SFAS No. 142 requires that the useful lives of intangible assets acquired on or
before June 30, 2001 be reassessed and the remaining amortization periods
adjusted accordingly. Previously recognized intangible assets deemed to have
indefinite lives shall be tested for impairment. Goodwill recognized on or
before June 30, 2001, shall be assigned to one or more reporting units and
shall be tested for impairment as of the beginning of the fiscal year in which
SFAS No. 142 is initially applied in its entirety.

The Company has not fully assessed the potential impact of the adoption of SFAS
No. 142, which is effective for the Company as of January 1, 2002. The
reassessment of intangible assets must be completed during the first quarter of
2002 and the assignment of goodwill to reporting units, along with completion
of the first step of the transitional goodwill impairment tests, must be
completed during the first six months of 2002. A portion of the intangible
assets and goodwill recognized prior to July 1, 2001 will no longer be
amortized effective January 1, 2002. Total amortization of intangible assets
and goodwill for the year ended December 31, 2000 was $23.4 million.

Statement of Financial Accounting Standard (SFAS) No. 133

In June 1998, SFAS No. 133-"Accounting for Derivative Instruments and Hedging
Activities" was issued ("SFAS No. 133"). In June 1999, SFAS No. 137-"Accounting
for Derivative Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133" was issued which deferred the effective date of
SFAS No. 133 to

                                    Page 16

<PAGE>

all fiscal quarters of fiscal years beginning after June 15, 2000. In June
2000, SFAS No. 138 was issued, which amended SFAS No. 133. These SFAS's require
all derivatives to be measured at fair value and recognized as assets or
liabilities on the balance sheet. Changes in the fair value of derivatives
should be recognized in either net income or other comprehensive income,
depending on the designated purpose of the derivative. The Company adopted SFAS
No. 133, and the corresponding amendments of SFAS No. 138 on January 1, 2001,
and such adoption did not have a material impact on the Company's consolidated
financial position, results of operations or cash flows.

Contingent Matters

Refer to Note 6 of the Notes to Condensed Consolidated Financial Statements for
a discussion of legal contingencies.

Item 3. Quantitative and Qualitative Disclosure of Market Risk

The information called for by this item is provided under Item 2--Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Part II. Other Information
Item 1. Legal Proceedings

     o    See Note 6 of the Notes to Condensed Consolidated Financial
          Statements for a discussion of legal proceedings.

Item 2. Changes In Securities And Use Of Proceeds

     o    None to report.

Item 3. Defaults Upon Senior Securities

     o    Primarily due to the economic slowdown and its impact on volume
          resulting in lower than expected results for the three-months ended
          June 30, 2001 versus the planned growth that was incorporated in the
          financial covenants, the Company was not in compliance with certain
          financial covenants under the bank credit facility at June 30, 2001.
          The Company has requested and received a waiver from its banks
          relating to certain financial covenants contained in the Company's
          Credit Agreement. This waiver is effective through November 9, 2001
          (the "Waiver Period"). During the Waiver Period, the Company and its
          equity owners will be in discussions with its bank group to revise
          certain financial covenants contained in the Company's Credit
          Agreement. The Company will incur a waiver fee and additional
          interest during the Waiver Period. The waiver imposes additional
          limitations on our ability to incur debt during the Waiver Period.
          While the Company is negotiating with its banks and anticipates
          obtaining an amendment to the covenants, there can be no assurance
          that the Company will be successful or that the result of these
          negotiations will not have an adverse impact on the Company.

          In the event that an amendment or a waiver to the Credit Agreement is
          not obtained, the senior debt holders have the right to accelerate
          payment on the credit facility. This acceleration would also
          constitute an event of default under the Subordinated Notes,
          therefore, the Subordinated Notes would then be classified as
          current. This event would have a material adverse effect on the
          Company.

Item 4. Submission of Matters to a Vote of Security Holders

          o    None to report.

Item 5. Other Information

          o    On June 12, 2001, Messrs. Marc Boughton and James Quella were
               appointed to the Board of Directors of Formica Corporation. They
               were appointed through DLJ and CVC, as allowed by the corporate
               charter of the Company. Messrs. Boughton and Quella replace
               Messrs. Alexander Donald Mackenzie and Thompson Dean.

Item 6. Exhibits and Reports on Form 8-K

          o    Formica did not file any reports on Form 8-K during the three
               months ended June 30, 2001.

The following exhibit is included herein:

      (12) Computation of Ratio of Earnings to Fixed Charges            Page E-1

                                    Page 17

<PAGE>



Signatures

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



                                        Formica Corporation
                     ----------------------------------------------------------
                                           (Registrant)


                                      /s/ David T. Schneider
                     ----------------------------------------------------------
                                       (David T. Schneider -
                     Chief Financial Officer and Principal Accounting Officer)


                                          August 14, 2001
                     ----------------------------------------------------------
                                              (Date)