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

                                    FORM 10-Q

[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
    Securities Exchange Act of 1934

    For the Quarter Ended June 29, 2003, or

[ ] Transition Report Pursuant to Section 13 or 15(d) of the
    Securities Exchange Act of 1934

    For the transition period from          to
                                   --------    ----------

    Commission File Number 1-9298


                               RAYTECH CORPORATION
                 ----------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

         Delaware                                       06-1182033
-------------------------------                      ----------------
(State or other Jurisdiction of                     (I.R.S. Employer
Incorporation or Organization)                      Identification No.)


Suite 295, Four Corporate Drive
      Shelton, Connecticut                                06484
---------------------------------------                   -----
(Address of Principal Executive Offices)                (Zip Code)

                                  203-925-8023
                         (Registrant's Telephone Number)

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

Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports) and (2) has been subject to such filing requirements for
the past 90 days.

                       Yes   X              No
                           -----               -----

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).

                       Yes                  No  X
                           ---                 ---

Indicate by check mark whether the Registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

                       Yes  X               No
                           ---                 -----

As of August 4, 2003, 41,737,306 shares of common stock were outstanding and the
aggregate market value of these shares (based upon the closing price of Raytech
common stock on the New York Stock Exchange) on such date held by non-affiliates
was approximately $23.2 million.


                                 Page 1 of 31
<PAGE>
                               RAYTECH CORPORATION
                                      INDEX

<TABLE>
<CAPTION>
                                                                   Page
                                                                  Number
                                                                  ------
<S>       <C>                                                     <C>
PART I.   FINANCIAL INFORMATION:

Item 1.   Financial Statements

          Condensed Consolidated Balance
          Sheets at June 29, 2003 (Unaudited)
          and December 29, 2002                                      3

          Condensed Unaudited Consolidated Statements of
          Operations for the thirteen weeks ended
          June 29, 2003 and June 30, 2002                            4

          Condensed Unaudited Consolidated Statements of
          Operations for the twenty-six weeks ended
          June 29, 2003 and June 30, 2002                            5

          Condensed Unaudited Consolidated Statements
          of Cash Flows for the twenty-six weeks
          ended June 29, 2003 and June 30, 2002                      6

          Condensed Unaudited Consolidated Statements of
          Changes in Shareholders' Equity for the twenty-six
          weeks ended June 29, 2003 and June 30, 2002                7

          Notes to Condensed Unaudited Consolidated
          Financial Statements                                       8

Item 2.   Management's Discussion and Analysis of
          Financial Condition and Results of Operations             20

Item 3.   Quantitative and Qualitative Disclosures
          About Market Risk                                         26

Item 4.   Controls and Procedures                                   26


PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings                                         27

Item 4.   Submission of Matters to a Vote of Security Holders       28

Item 6.   Exhibits and Reports on Form 8-K                          28

          Signature                                                 29

          Certifications                                            30
</TABLE>


                                      -2-
<PAGE>
RAYTECH CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                              June 29, 2003       December 29,
At                                                             (unaudited)           2002
---------------------------------------------------------------------------------------------
<S>                                                           <C>               <C>
ASSETS
Current assets
  Cash and cash equivalents                                       $ 14,995         $ 19,983
  Restricted cash                                                    4,028            2,027
  Trade accounts receivable, less allowance
    of $890 and $824                                                31,245           26,640
  Inventories, net                                                  33,159           34,057
  Income taxes receivable                                            1,826            4,793
  Other current assets                                               5,420            5,078
-------------------------------------------------------------------------------------------
      Total current assets                                          90,673           92,578
-------------------------------------------------------------------------------------------
Property, plant and equipment                                      138,353          131,378
  Less accumulated depreciation                                    (33,463)         (25,257)
-------------------------------------------------------------------------------------------
      Net property, plant and equipment                            104,890          106,121
-------------------------------------------------------------------------------------------
Intangible assets, net                                              69,449           70,562
Deferred income taxes                                               21,921           21,906
Other assets                                                         2,956            3,054
-------------------------------------------------------------------------------------------
Total assets                                                      $289,889         $294,221
===========================================================================================
LIABILITIES
Current liabilities
  Notes payable and current portion of long-term debt             $ 13,582         $ 15,091
  Current portion of pension obligation                              8,030            8,030
  Accounts payable                                                  15,309           15,089
  Accrued liabilities                                               24,700           26,258
  Payable to the PI Trust                                            3,823            4,793
-------------------------------------------------------------------------------------------
      Total current liabilities                                     65,444           69,261
-------------------------------------------------------------------------------------------
Long-term debt                                                       4,645            4,293
Pension obligation                                                  11,529           12,815
Postretirement benefits other than pension                          14,309           13,800
Deferred payable to the PI Trust                                    42,356           42,356
Other long-term liabilities                                            867              827
-------------------------------------------------------------------------------------------
Total liabilities                                                  139,150          143,352
-------------------------------------------------------------------------------------------
Minority interest                                                    9,251            8,759
Commitments and contingencies
SHAREHOLDERS' EQUITY
Capital stock
  Cumulative preferred stock, no par value,
    5,000,000 shares authorized, none issued and
    outstanding                                                         --               --
  Common stock, par value $1.00, 50,000,000 shares
    authorized, 41,737,306 and 41,701,554 issued and
    outstanding                                                     41,737           41,701
Additional paid in capital                                         117,574          117,458
Accumulated deficit                                                (10,014)          (8,402)
Accumulated other comprehensive loss                                (7,809)          (8,647)
-------------------------------------------------------------------------------------------
      Total shareholders' equity                                   141,488          142,110
-------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                       $ 289,889      $   294,221
===========================================================================================
</TABLE>


The accompanying notes are an integral part of these statements.


                                      -3-
<PAGE>
                               RAYTECH CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 -----------------------------------------------
                        (in thousands, except share data)
                                   (unaudited)


<TABLE>
<CAPTION>
For the 13 Weeks Ended                        June 29, 2003   June 30, 2002
                                                               (as revised)
---------------------------------------------------------------------------
<S>                                           <C>             <C>
Net sales                                      $ 54,093          $ 55,305
Cost of sales                                   (45,957)          (44,219)
-------------------------------------------------------------------------
  Gross profit                                    8,136            11,086
Selling, general and
  administrative expenses                        (8,565)           (8,180)
-------------------------------------------------------------------------
  Operating (loss) profit                          (429)            2,906
Interest expense                                   (278)             (179)
Other income (expense), net                         563              (396)
-------------------------------------------------------------------------
(Loss) income before provision for environmental
  claims, income taxes and minority interest       (144)            2,331
Provision for environmental claims               (1,762)               --
-------------------------------------------------------------------------
(Loss) income before provision for income
 taxes and minority interest                     (1,906)            2,331
Benefit (provision) for income taxes                586              (897)
-------------------------------------------------------------------------
(Loss) income before minority interest           (1,320)            1,434
Minority interest                                  (219)             (364)
-------------------------------------------------------------------------
Net (loss) income                               $(1,539)          $ 1,070
=========================================================================
Basic (loss) earnings per share                 $  (.04)          $   .03
=========================================================================
Diluted (loss) earnings per share               $  (.04)          $   .03
=========================================================================
</TABLE>


The accompanying notes are an integral part of these statements.


                                      -4-
<PAGE>
                               RAYTECH CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 -----------------------------------------------
                        (in thousands, except share data)
                                   (unaudited)


<TABLE>
<CAPTION>
For the 26 Weeks Ended                      June 29, 2003     June 30, 2002
                                                               (as revised)
----------------------------------------------------------------------------
<S>                                         <C>               <C>
Net sales                                      $ 109,828         $108,014
Cost of sales                                    (92,807)         (86,403)
-------------------------------------------------------------------------
  Gross profit                                    17,021           21,611
Selling, general and
  administrative expenses                        (16,844)         (15,774)
-------------------------------------------------------------------------
  Operating profit                                   177            5,837
Interest expense                                    (515)            (456)
Other income (expense), net                          578             (217)
-------------------------------------------------------------------------
Income before provision for environmental
  claims, income taxes and minority interest         240            5,164
Provision for environmental claims                (1,762)              --
-------------------------------------------------------------------------
(Loss) income before provision for income
 taxes and minority interest                      (1,522)           5,164
Benefit (provision) for income taxes                 402           (1,988)
-------------------------------------------------------------------------
(Loss) income before minority interest            (1,120)           3,176
Minority interest                                   (492)            (776)
-------------------------------------------------------------------------
Net (loss) income                               $ (1,612)         $ 2,400
=========================================================================
Basic (loss) earnings per share                 $   (.04)         $   .06
=========================================================================
Diluted (loss) earnings per share               $   (.04)         $   .06
=========================================================================
</TABLE>


The accompanying notes are an integral part of these statements.


                                      -5-
<PAGE>
                               RAYTECH CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                 -----------------------------------------------
                                 (in thousands)
                                   (unaudited)


<TABLE>
<CAPTION>
For the 26 Weeks Ended                      June 29, 2003      June 30, 2002
                                                                (as revised)
----------------------------------------------------------------------------
<S>                                         <C>                <C>
Cash flows from operating activities:
  Net (loss) income                            $ (1,612)          $ 2,400
  Depreciation and amortization                   9,192             8,489
  Other operating activities                     (5,619)           (2,819)
-------------------------------------------------------------------------
    Net cash provided by
      operating activities                        1,961             8,070
-------------------------------------------------------------------------
Cash flow from investing activities:
  Capital expenditures                           (5,547)           (5,576)
  Proceeds on sales of property,
    plant and equipment                              --               196
-------------------------------------------------------------------------
    Net cash used in investing activities        (5,547)           (5,380)
Cash flow from financing activities:
  Net payments on short-term notes               (1,729)             (859)
  Principal payments on long-term debt           (1,188)             (552)
  Proceeds from long-term borrowings              1,146               106
  Proceeds from exercise of stock options           152               243
-------------------------------------------------------------------------
    Net cash used in financing activities        (1,619)           (1,062)
Effect of exchange rate changes on cash             217               147
Net change in cash and cash equivalents          (4,988)            1,775
Cash and cash equivalents at
  beginning of period                            19,983            14,463
-------------------------------------------------------------------------
Cash and cash equivalents at end of period     $ 14,995           $16,238
=========================================================================
</TABLE>


The accompanying notes are an integral part of these statements.


                                      -6-
<PAGE>
                               RAYTECH CORPORATION
      CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
      --------------------------------------------------------------------
                                 (in thousands)
                                   (unaudited)




<TABLE>
<CAPTION>
                                                               Accumulated
                                       Additional                 Other
                               Common   Paid in   Accumulated  Comprehensive
                                Stock   Capital     Deficit        Loss             Total
                                                 (as revised)                   (as revised)
---------------------------------------------------------------------------------------------
<S>                           <C>      <C>        <C>          <C>              <C>
Balance,
 December 30, 2001             $41,528  $116,843     $ (5,577)     $(8,711)       $ 144,083
Comprehensive income:
  Net income                        --        --        2,400           --            2,400
  Changes during
   the period                       --        --           --        1,112            1,112
-------------------------------------------------------------------------------------------
Total comprehensive
  income                            --        --        2,400        1,112            3,512
Stock options exercised             78       165                                        243
Balance,
 June 30, 2002                 $41,606  $117,008     $ (3,177)     $(7,599)       $ 147,838
===========================================================================================
Balance,
 December 29, 2002             $41,701  $117,458     $ (8,402)     $(8,647)       $ 142,110
Comprehensive income:
  Net loss                          --        --       (1,612)          --           (1,612)
  Changes during
   the period                       --        --           --          838              838
-------------------------------------------------------------------------------------------
Total comprehensive
  income                            --        --       (1,612)         838             (774)
--------------------------------------------------------------------------------------------
Stock options exercised             36       116                                        152
Balance,
 June 29, 2003                 $41,737  $117,574     $(10,014)     $(7,809)       $ 141,488
===========================================================================================
</TABLE>


The accompanying notes are an integral part of these statements.


                                      -7-
<PAGE>
                               RAYTECH CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
              ----------------------------------------------------
                 (dollars in thousands, unless otherwise noted,
                             except per share data)
                                   (Unaudited)


Note A - Summary of Significant Accounting Policies

      For a summary of all other significant accounting policies, refer to Note
A to the consolidated financial statements included with the 2002 Form 10-K.

1.    Presentation of Condensed Unaudited Consolidated Financial Statements

      These condensed unaudited consolidated financial statements have been
      prepared pursuant to the requirements of Article 10 of Regulation S-X, and
      in the opinion of management, contain all adjustments necessary to fairly
      present the consolidated financial position of Raytech as of June 29, 2003
      and the consolidated results of operations and cash flows for all interim
      periods presented. All adjustments are of a normal recurring nature. The
      year-end condensed consolidated balance sheet data was derived from
      audited financial statements but does not include all disclosures required
      by accounting principles generally accepted in the United States of
      America. The financial statements contained herein should be read in
      conjunction with the Company's financial statements and related notes
      filed on Form 10-K for the year ended December 29, 2002. Interim results
      are not necessarily indicative of the results for the full year.

2.    Stock-Based Compensation

      Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
      for Stock-Based Compensation," encourages a fair value based method of
      accounting for employee stock options and similar equity instruments,
      which generally would result in the recording of additional compensation
      expense in the Company's financial statements. The Statement also allows
      the Company to continue to account for stock-based employee compensation
      using the intrinsic value for equity instruments using APB Opinion No. 25.
      The Company has adopted the disclosure-only provisions of SFAS No. 123, as
      amended by SFAS No. 148, "Accounting for Stock-Based Compensation -
      Transition and Disclosure." Accordingly, no compensation cost has been
      recognized for the stock option plans in the accompanying financial
      statements.

      SFAS No. 123, as amended by SFAS No. 148, requires the Company to disclose
      pro forma net income and pro forma earnings per share amounts as if
      compensation expense was recognized for options granted after 1994. Pro
      forma net income and the related basic and diluted earnings per share
      amounts would be as follows:


                                      -8-
<PAGE>
Note A, continued

<TABLE>
<CAPTION>
                                             For the 13 Weeks Ended
                                         June 29, 2003     June 30, 2002
                                                            (as revised)
                                         -------------     -------------
                                                   (Unaudited)
<S>                                      <C>               <C>
Net (loss) income:
As reported                               $  (1,539)        $   1,070
Less: Total stock-based employee
  compensation expense determined
  under fair value based method                (671)               --
                                          ---------         ---------
Pro forma net (loss) income               $  (2,210)        $   1,070
                                          =========         =========
Basic (loss) earnings per share:
As reported                               $    (.04)        $     .03
Pro forma                                 $    (.05)        $     .03
Diluted (loss) earnings per share:
As reported                               $    (.04)        $     .03
Pro forma                                 $    (.05)        $     .03
</TABLE>

      During the thirteen weeks ended June 29, 2003, the Company granted options
      for 1,172,000 shares of common stock with an exercise price of $5.70 per
      share. The fair value of these options was estimated at $2.05 per common
      share on the date of grant, using the Black-Scholes option pricing model
      with the following assumptions: expected volatility of 62.30%, dividend
      yield of 0.00%, risk free interest rate of 2.84% and an expected life of
      the options of six years. Options to purchase 290,659 shares of common
      stock at $4.25 per share and options to purchase 2,773,000 shares of
      common stock at $5.70 per share were not included in the computation of
      diluted earnings per share for the thirteen weeks ended June 29, 2003
      because of their anti-dilutive effect due to the Company incurring a net
      loss for the period.

      There was no pro forma impact on net income for the thirteen weeks ended
      June 30, 2002, as all options outstanding during the period were fully
      vested in 1999.

<TABLE>
<CAPTION>
                                             For the 26 Weeks Ended
                                         June 29, 2003     June 30, 2002
                                                            (as revised)
                                         -------------     -------------
                                                   (Unaudited)
<S>                                      <C>               <C>
Net (loss) income:
As reported                               $  (1,612)        $   2,400
Less: Total stock-based employee
  compensation expense determined
  under fair value based method              (1,084)               --
                                          ---------         ---------
Pro forma net (loss) income               $  (2,696)        $   2,400
                                          =========         =========
Basic (loss) earnings per share:
As reported                               $    (.04)        $     .06
Pro forma                                 $    (.06)        $     .06
Diluted (loss) earnings per share:
As reported                               $    (.04)        $     .06
Pro forma                                 $    (.06)        $     .06
</TABLE>


      During the twenty-six weeks ended June 29, 2003, the Company granted
      options for 2,773,000 shares of common stock with an exercise price of


                                      -9-
<PAGE>
Note A, continued

      $5.70 per share. Options to purchase 290,659 shares of common stock at
      $4.25 per share and options to purchase 2,773,000 shares of common stock
      at $5.70 per share were not included in the computation of diluted
      earnings per share for the twenty-six weeks ended June 29, 2003 because of
      their anti-dilutive effect due to the Company incurring a net loss for the
      period.

      There was no pro forma impact on net income for the twenty-six weeks ended
      June 30, 2002, as all options outstanding during the period were fully
      vested in 1999.

3.    Guarantees

      On November 26, 2002, FASB issued Interpretation No. 45 ("FIN 45"),
      Guarantor's Accounting and Disclosure Requirements for Guarantees,
      Including Guarantees of Indebtedness of Others. FIN 45 clarifies the
      requirements of SFAS No. 5, Accounting for Contingencies, relating to a
      guarantor's accounting for, and disclosure of, the issuance of certain
      types of guarantees. For certain guarantees issued after December 31,
      2002, FIN 45 requires a guarantor to recognize, upon issuance of a
      guarantee, a liability for the fair value of the obligations it assumes
      under the guarantee.

      The Company provides certain warranties relating to the quality and
      performance of its products. The primary product of the Company, friction
      plates, is used in manual and automatic transmissions, transfer cases and
      wet wheel brake systems for heavy duty equipment. Warranty claims have
      historically been de minimis due to the quality of the Company's products
      and the impact of other potential parts interactions in these systems,
      which may contribute to the root cause of any system failure. The Company
      does maintain product warranty insurance in the event a warranty issue
      does arise. The costs in 2003 for product warranty support have been de
      minimis.

4.    Recently Issued Accounting Pronouncements

      In April, 2003, the FASB issued Financial Accounting Standard No. 149
      (SFAS No. 149) "Amendment of Statement 133 Accounting for Derivative
      Instruments and Hedging Activities." This Statement amends and clarifies
      financial accounting and reporting for derivative instruments, including
      certain derivative instruments embedded in other contracts and for hedging
      activities under FASB Statement No. 133. SFAS No. 149 is effective for
      contracts entered into or modified after June 30, 2003, with all
      provisions applied prospectively. Amendments relating to implementation
      issues that were previously cleared by the FASB and were effective for
      fiscal quarters beginning before June 15, 2003 should continue to be
      applied in accordance with their respective effective dates. Raytech is
      evaluating the impact, if any, that this statement may have on future
      reporting. Management's initial review has determined that the statement
      is not currently applicable to Raytech.

      In May, 2003, the FASB issued Financial Accounting Standard No. 150 (SFAS
      No. 150), "Accounting for Certain Financial Instruments with
      Characteristics of both Liabilities and Equities. This Statement
      establishes standards regarding the manner in which an issuer classifies
      and measures certain types of financial instruments having characteristics
      of both liabilities and equity. SFAS No. 150 is


                                      -10-
<PAGE>
Note A, continued

      effective for financial instruments entered into or modified after May 31,
      2003 and for contracts in existence at the start of the first interim
      period beginning after June 15, 2003. Raytech currently does not have
      financial instruments with the characteristics described in the standard.

Note B - Inventories

      Inventories, net, consist of the following:

<TABLE>
<CAPTION>
                   June 29, 2003    December 29, 2002
                     (Unaudited)
                   -------------    -----------------
<S>                <C>              <C>
Raw material           $11,944        $11,049
Work in process          7,727          8,349
Finished goods          13,488         14,659
                       -------        -------
                       $33,159        $34,057
                       =======        =======
</TABLE>


Note C - Earnings Per Share


<TABLE>
<CAPTION>
                                            For the               For the
                                        13 Weeks Ended        13 Weeks Ended
                                         June 29, 2003         June 30, 2002
                                                               (as revised)
                                         -------------        --------------
                                                     (Unaudited)
<S>                                     <C>                  <C>
Basic EPS Computation
Numerator:
  Net (loss) income                       $     (1,539)        $     1,070
Denominator:
  Weighted average shares                   41,701,554          41,528,520
  Weighted average stock
    options exercised                           32,148              33,696
                                          ------------         -----------
  Adjusted weighted average shares          41,733,702          41,562,216
                                          ============         ===========
Basic (loss) earnings per share           $       (.04)        $       .03
                                          ============         ===========
Diluted EPS Computation
Numerator:
  Net (loss) income                       $     (1,539)        $     1,070
Denominator:
  Weighted average shares                   41,701,554          41,528,520
  Weighted average stock
    options exercised                           32,148              33,696
  Dilutive potential common shares                  --             124,901
                                          ------------         -----------
  Adjusted weighted average shares          41,733,702          41,687,117
                                          ============         ===========
Diluted (loss) earnings per share         $       (.04)        $       .03
                                          ============         ===========
</TABLE>


                                      -11-
<PAGE>
Note C, continued

      Options to purchase 290,659 shares of common stock at $4.25 per share and
options to purchase 2,773,000 shares of common stock at $5.70 per share were not
included in the computation of diluted earnings per share for the thirteen weeks
ended June 29, 2003 because of their anti-dilutive effect due to the Company
incurring a net loss for the period.

<TABLE>
<CAPTION>
                                            For the               For the
                                        26 Weeks Ended        26 Weeks Ended
                                         June 29, 2003         June 30, 2002
                                                               (as revised)
                                         -------------        --------------
                                                    (Unaudited)
<S>                                     <C>                   <C>
Basic EPS Computation
Numerator:
  Net (loss) income                       $     (1,612)        $     2,400
Denominator:
  Weighted average shares                   41,701,554          41,528,520
  Weighted average stock
    options exercised                           16,074              16,848
                                          ------------         -----------
  Adjusted weighted average shares          41,717,628          41,545,368
                                          ============         ===========
Basic (loss) earnings per share           $       (.04)        $       .06
                                          ============         ===========
Diluted EPS Computation
Numerator:
  Net (loss) income                       $     (1,612)        $     2,400
Denominator:
  Weighted average shares                   41,701,554          41,528,520
  Weighted average stock
    options exercised                           16,074              16,848
  Dilutive potential common shares                  --              54,155
                                          ------------         -----------
  Adjusted weighted average shares          41,717,628          41,599,523
                                          ============         ===========
Diluted (loss) earnings per share         $       (.04)        $       .06
                                          ============         ===========
</TABLE>

      Options to purchase 290,659 shares of common stock at $4.25 per share and
options to purchase 2,773,000 shares of common stock at $5.70 per share were not
included in the computation of diluted earnings per share for the twenty-six
weeks ended June 29, 2003 because of their anti-dilutive effect due to the
Company incurring a net loss for the period.

      In February 2002, lawyers claiming to represent the Committee of Equity
Holders filed a motion in U.S. Bankruptcy Court to compel Raytech to either
issue up to approximately 700,000 additional shares to the pre-reorganization
holders of shares in Raytech or their successors, or to proportionately reduce
the shareholdings of the general unsecured creditor shareholders under the Plan
of Reorganization. The ultimate outcome of this matter is unknown; however, it
is possible that its resolution could cause the Company to issue additional
shares to the original shareholder group, or to retire shares held by the
general unsecured creditor shareholder group. This might directly impact the
earnings per share calculations of the Company. The Company has filed a motion
for summary judgment asking the Court to dismiss the action, and the Court has
denied that motion.


Note D - Segment Reporting


                                      -12-
<PAGE>
      The Company's operations are categorized into three business segments
based on management structure, product type and distribution channel, as
described below.

      The Wet Friction segment produces specialty engineered products for heat
resistant, inertia control, energy absorption and transmission applications used
in an oil immersed environment. The Company markets its products to automobile
and heavy duty original equipment manufacturers ("OEM"), as well as to farm
machinery, mining, truck and bus manufacturers.

      The Dry Friction segment produces engineered friction products, which are
not used in an oil immersed environment, and are primarily used in original
equipment automobile and truck manual transmissions. The clutch facings produced
by this segment are marketed to companies who assemble the manual transmission
systems used in automobiles and trucks.

      The Aftermarket segment produces specialty engineered products used for
wet friction applications, primarily for automobile and light truck
transmissions. In addition to these products, this segment markets transmission
filters and other transmission related components. The focus of this segment is
marketing to warehouse distributors and certain retail operations in the
automotive aftermarket.

Information relating to operations by industry segment follows:

OPERATING SEGMENTS

<TABLE>
<CAPTION>
                                       For the             For the
                                   13 Weeks Ended      13 Weeks Ended
                                    June 29, 2003       June 30, 2002
                                                         (as revised)
                                    -------------      --------------
                                             (Unaudited)
<S>                                <C>                 <C>
NET SALES
Wet Friction                           $ 33,740         $ 37,303
Aftermarket                              11,290           12,106
Dry Friction                             11,401            8,437
Intersegment elimination (1)             (2,338)          (2,541)
                                       --------         --------
Net sales to external customers        $ 54,093         $ 55,305
                                       ========         ========
OPERATING (LOSS) PROFIT (2)
Wet Friction                           $ (1,233)        $  2,144
Aftermarket                               2,013            2,268
Dry Friction                              1,504              193
Corporate                                (2,428)          (2,274)
                                       --------         --------
Consolidated                           $   (144)        $  2,331
                                       ========         ========
</TABLE>


                                      -13-
<PAGE>
Note D, continued

<TABLE>
<CAPTION>
                                      For the             For the
                                   26 Weeks Ended      26 Weeks Ended
                                    June 29, 2003       June 30, 2002
                                                         (as revised)
                                    -------------      --------------
                                               (Unaudited)
<S>                                <C>                 <C>
NET SALES
Wet Friction                           $  68,412         $  71,651
Aftermarket                               22,779            24,590
Dry Friction                              23,110            16,590
Intersegment elimination (1)              (4,473)           (4,817)
                                       ---------         ---------
Net sales to external customers        $ 109,828         $ 108,014
                                       =========         =========
OPERATING (LOSS) PROFIT (2)
Wet Friction                           $  (2,427)        $   3,657
Aftermarket                                4,243             4,826
Dry Friction                               2,869               948
Corporate                                 (4,445)           (4,267)
                                       ---------         ---------
Consolidated                           $     240         $   5,164
                                       =========         =========
</TABLE>


(1)   The Company records intersegment sales at an amount negotiated between the
      segments. All intersegment sales are eliminated in consolidation.

(2)   The Company's management reviews the performance of its reportable
      segments on an operating profit basis, consisting of (loss) income before
      provision for environmental claims, income taxes and minority interest.

Note E - Income Taxes

      The effective rate for the thirteen-week period ended June 29, 2003 is a
benefit of 30.7% compared to an expense of 38.5% for the same period in the
prior year. The difference is attributable to changes in the mix of earnings and
losses in the domestic and foreign entities and the effect of permanent
differences. The effective tax rate for the twenty-six week period ended June
29, 2003 is a benefit of 26.4% compared to an expense of 38.5% for the same
period in the prior year. The effective rate for the twenty-six-week period
ended June 29, 2003 reflects the Company's anticipated annualized rate and
differs from the Federal statutory rate for several reasons. The rate for the
current period reflects a statutory federal rate adjusted for state and foreign
taxes and contributions made to the Raymark pension plans. Payments to the
Raymark pension plans create a permanent difference due to this tax benefit
inuring to the Raytech Personal Injury Trust in accordance with the Tax Benefits
Assignment and Assumption Agreement. In addition, the Company did not recognize
any tax benefits associated with the operating losses incurred by the Company's
U.K. operations due to doubts about their future recoverability.

      Pursuant to the Tax Benefits Assignment and Assumption Agreement (the
"Agreement"), all tax benefits received by the Company due to the reorganization
are to be passed onto the PI Trust as received. At June 29, 2003, the Company
has tax loss carryforwards of $74.8 million and tax credit carryforwards of $1.2
million. The net operating loss carryforwards are allocated between Raytech
Corporation and the PI Trust in the amounts of $2.8 million and $72.0 million,
respectively. The tax credit

Note E, continued
                                      -14-
<PAGE>
carryforwards all belong to the PI Trust. Additionally, future payments to the
PI Trust and others will create additional tax deductions, which will inure to
the benefit of the PI Trust in accordance with the Agreement. These include
deductions for payments to the PI Trust of tax benefits associated with the
utilization of the operating losses allocated to the PI Trust, and contributions
made to the Raymark pension plans. If Raytech Corporation generates additional
losses in future periods, exclusive of losses attributable to the payments
discussed above, those losses will be retained by the Company. The method of
allocation in utilizing current and future operating losses, if any, between the
PI Trust and Raytech Corporation has not been determined at this time.
Additional tax recoveries expected to be received in future periods are shown as
deferred tax assets and a deferred payable to the PI Trust which amounted to
$42.4 million at June 29, 2003.

      At June 29, 2003, the Company has recorded a tax receivable in the amount
of $1.8 million, net of Federal income tax, due from state governments for
returns filed in 2002. The Company has received $3.0 million, net of Federal tax
and interest, in the thirteen-week period ended June 29, 2003 as a partial
recovery of these state taxes. In accordance with the Agreement, this amount
inures to the benefit of the PI Trust. The State of Indiana has completed its
audit of Raytech for the years 1992 through 2001. As a result of the audit,
Raytech was denied refunds claimed for Indiana Gross Income tax paid in the
years 1992 through 1997 of $1.0 million and certain interest on amounts
refunded. Raytech has filed a protest with respect to these items with the
Indiana Department of Revenue, and a hearing is expected later this year.
Pursuant to the Agreement, any tax refunds received will be payable, net of tax,
to the PI Trust.

      The Company is under an IRS audit for 1996 through 2001. Any tax
assessment, up to the amount of the refunds received, arising from this audit or
any other years in the carryback period, are, pursuant to the Agreement, the
responsibility of the PI Trust and will therefore reduce the deferred tax asset
associated with, and liability payable to, the PI Trust.

      The Company owns 57% of the stock of Allomatic Products Company ("APC").
The Company has not recorded a deferred tax liability for the undistributed
earnings of APC since management expects that those earnings will be distributed
to the Company in a tax-free transaction. However, the deferred tax liability on
the undistributed earnings of APC would be approximately $1.3 million at June
29, 2003, if all of APC's earnings were to be distributed through dividends.


                                      -15-

<PAGE>

Note F - Goodwill and Other Intangible Assets

<TABLE>
<CAPTION>
                                  June 29, 2003           December 29, 2002
                               Gross                    Gross
                             Carrying   Accumulated    Carrying   Accumulated
                              Amount    Amortization    Amount    Amortization
                             --------   ------------   --------   ------------
                                   (Unaudited)
<S>                          <C>        <C>            <C>        <C>
Finite life intangible
  assets:

  Unpatented technology      $ 16,262       $4,366     $ 16,262    $  3,396
  Distribution base             5,716          643        5,716         500
                             --------       ------     --------    --------
    Sub-total                  21,978       $5,009       21,978    $  3,896
                             --------       ------     --------    --------

Indefinite life intangible
  assets:

  Trademarks                   17,713                    17,713
                             --------                  --------
Goodwill                       34,767                    34,767
                             --------                  --------

Intangible assets, net       $ 69,449                  $ 70,562
                             ========                  ========
</TABLE>

The weighted-average amortization periods for the unpatented technology and the
distribution base are 8.6 and 20.0 years, respectively. Amortization expense for
the thirteen weeks ended June 29, 2003 amounted to $557. Amortization expense
for the twenty-six weeks ended June 29, 2003 amounted to $1,113.

Estimated annual amortization expense is as follows:

<TABLE>
<CAPTION>
                For the year ending:
<S>             <C>                      <C>
                    2003                 $ 2,226
                    2004                   2,226
                    2005                   2,226
                    2006                   2,226
                    2007                   1,926
</TABLE>

Trademarks and goodwill will not be amortized but will be reviewed for
impairment annually. The Company's three operating segments have been defined as
reporting units for purposes of testing goodwill for impairment. The amount of
goodwill has been assigned to each of the Company's segments. During the
thirteen weeks ended June 29, 2003, the Company performed its annual impairment
review of the reporting units in accordance with SFAS No. 142, "Goodwill and
Other Intangible Assets," as of March 31, 2003. The effort, which was performed
with assistance from a third party valuation firm, indicated that no impairment
adjustment was necessary. Accordingly, there were no changes in the carrying
amount of trademarks or goodwill during the twenty-six weeks ended June 29,
2003.

Note G - Litigation

        The Company is subject to certain legal matters that have arisen in the
ordinary course of business, and management does not expect these matters will
have a material adverse effect on the Company. In addition, the Company is
involved in the following litigation.


                                      -16-
<PAGE>
Note G, continued

        In April 1996, the Indiana Department of Environmental Management
("IDEM") advised Raybestos Products Company ("RPC"), a wholly-owned subsidiary
of the Company, that it may have contributed to the release of lead and PCB's
(polychlorinated biphenyls) found in a drainage ditch (the "Site") near its
Indiana facility. In June 1996, IDEM named RPC as a potentially responsible
party ("PRP"). RPC notified its insurers of the IDEM action and one insurer
responded by filing a complaint in January 1997 in the U.S. District Court,
Southern District of Indiana, captioned Reliance Insurance Company vs. RPC
seeking a declaratory judgment that any liability of RPC is excluded from its
policy with RPC. In January 2000, the District Court granted summary judgment to
RPC, indicating that the insurer has a duty to defend and indemnify losses
stemming from the IDEM claim. However, in June 2001, Reliance Insurance Company
was placed in rehabilitation in Pennsylvania. The Company has filed a claim for
such defense and indemnity cost reimbursement in the rehabilitation proceedings
but has not yet received any decision on its claim. Three additional insurers
have been added to the Reliance case as ordered by the District Court.

        The U.S. Environmental Protection Agency ("EPA") became involved in the
Site in December 2000 and issued a Unilateral Administrative Order under CERCLA
("Order") demanding removal of contaminated soils from the Site. RPC has
substantially completed the investigation and remediation required under the
Order. The Company has estimated that the cost to comply with the Order will be
approximately $16.2 million of which $10.5 million has been spent through June
29, 2003. The remaining balance of $5.7 million is included in accrued
liabilities. It is at least reasonably possible that the assessment of estimated
costs to comply with the Order may be modified as the project progresses and
that there may be additional assessments from the EPA. On May 6, 2003, EPA
indicated that RPC is potentially liable for PCB contamination downstream of the
Site area that is the subject of the Order. EPA has not issued an order to RPC
regarding this downstream area. However, the Company has engaged in negotiations
with the EPA concerning such possible additional remediation. Regardless of the
outcome of these negotiations, the Company might be required to do additional
remediation at the Site.

        Before EPA became involved in the Site, IDEM and RPC had entered into an
Agreed Order providing for a risk-based remediation of the contamination
different from the EPA's Order. After IDEM withdrew from the Agreed Order, an
Indiana State Superior Court ruled that IDEM's purported withdrawal from the
Agreed Order was illegal and ordered IDEM to reinstate the Agreed Order and IDEM
complied. In July 2002, RPC filed an action against IDEM for breach of contract
claiming damages based on the difference between the costs of cleanup under the
EPA Order and the IDEM Agreed Order. The outcome of this litigation is not
known.

        In February 2002, lawyers claiming to represent the Committee of Equity
Holders filed a motion in U.S. Bankruptcy Court to compel Raytech to either
issue up to approximately 700,000 additional shares to the pre-reorganization
holders of shares in Raytech or their successors or to proportionately reduce
the shareholdings of the general unsecured creditor shareholders under the Plan
of Reorganization. The ultimate outcome of this matter is unknown; however, it
is possible that its resolution could cause the Company to issue additional
shares to the original shareholder group, or to retire shares held by the
general unsecured creditor shareholder group. This might directly impact the
earnings per share calculations of the Company. The Company has


                                      -17-
<PAGE>
Note G, continued

filed a motion for summary judgment asking the Court to dismiss the action and
the court has denied that motion.

        On January 8, 2002, the Michigan Department of Environmental Quality
("MDEQ") sent the Company a letter alleging responsibility for trichloroethylene
("TCE") contamination at a Ferndale, Michigan, industrial site that Advanced
Friction Materials Company ("AFM") leased from 1974 to 1985. The Company
acquired AFM in 1998. The Company is cooperating with the MDEQ in evaluating the
subsurface of the site to obtain data concerning the alleged contamination. The
Company's liability at this site is indeterminable at this time.

Note H - Restricted Cash

        Restricted cash relates to the following:

<TABLE>
<CAPTION>
                                        June 29, 2003     December 29, 2002
                                        -------------     -----------------
                                        (Unaudited)
<S>                                     <C>               <C>
        Payable to the Trust                $1,998                $   --
        Letters of credit                    1,620                 1,617
        Other                                  410                   410
                                            ------                ------
                                            $4,028                $2,027
                                            ======                ======
</TABLE>

        The letters of credit collateralize certain obligations relating
primarily to workers' compensation.

Note I - Revision of Interim Financial Statements

        The accompanying condensed unaudited consolidated statements of
operations for the thirteen and twenty-six weeks ended June 30, 2002, and the
condensed unaudited consolidated statements of cash flows and of changes in
shareholders' equity, as well as the accompanying notes, have been revised from
those previously reported to reflect lower depreciation expense and the related
tax effects.

        The Company determined subsequent to the filing of the Form 10-Q for the
quarter ended September 29, 2002, that depreciation expense had been overstated
in both the second quarter filing, at June 30, 2002, by $475 and in the third
quarter filing, at September 29, 2002, by $368. The quarterly reporting herein
reflects the corrected amounts for the thirteen and twenty-six weeks ended June
30, 2002.


                                      -18-
<PAGE>
Note I, continued

        The effect of this revision is as follows:

<TABLE>
<CAPTION>
                                 For the 13 Weeks Ended   For the 26 Weeks Ended
                                      June 30, 2002            June 30, 2002
                                 ----------------------   ----------------------
                                 As Previously    As      As Previously    As
                                    Reported    Revised     Reported     Revised
                                 -------------  -------   -------------  -------
                                                    (Unaudited)
<S>                              <C>           <C>        <C>           <C>
Net sales                          $ 55,305    $ 55,305    $108,014     $108,014
Gross profit                         10,611      11,086      21,136       21,611
Income before income taxes
  and minority interest               1,856       2,331       4,689        5,164
Net income                              778       1,070       2,108        2,400
Basic earnings per share                .02         .03         .05          .06
Diluted earnings per share              .02         .03         .05          .06
Accumulated deficit                  (3,469)     (3,177)     (3,469)      (3,177)
</TABLE>


                                      -19-
<PAGE>
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS

        In preparing the discussion and analysis required by the Federal
Securities Laws, it is presumed that users of the interim financial information
have read or have access to the discussion and analysis for the preceding fiscal
year.

        As further discussed in Note I to the condensed unaudited consolidated
financial statements, amounts relating to the thirteen and twenty-six weeks
ended June 30, 2002 have been revised from those previously reported to reflect
lower depreciation expenses and the related tax effects.

Safe Harbor Statement

        Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995: Statements under the "Liquidity, Capital Resources and Future
Liquidity" heading and other statements herein that relate to future operating
periods are subject to important risks and uncertainties that could cause actual
results to differ materially. Forward-looking statements relating to the
Company's businesses involve certain factors that are subject to change,
including the many interrelated factors that affect consumer confidence,
including worldwide demand for automotive and heavy duty products, general
economic conditions, the environment, actions of competitors in the various
industries in which the Company competes; production difficulties, including
capacity and supply constraints; dealer practices; labor relations; interest and
currency exchange rates; technological difficulties; accounting standards, and
other risks and uncertainties. Further information, including factors that
potentially could materially affect the Company's financial results, is included
in the Company's filings with the Securities and Exchange Commission.

Significant Accounting Policies

        Preparation of the Company's financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues and expenses. Management believes the most complex and
sensitive judgments, because of their significance to the consolidated financial
statements, result primarily from the need to make estimates about the effects
of matters that are inherently uncertain. Management's Discussion and Analysis
and Note 1 to the Consolidated Financial Statements in the Company's Form 10-K
for fiscal 2002 describe the significant accounting estimates and policies used
by management in the preparation of the consolidated financial statements.
Actual results in these areas could differ from management's estimates. There
have been no changes in the Company's critical accounting estimates during the
twenty-six-week period ended June 29, 2003.

Results of Operations and Liquidity and Capital Resources

        Raytech Corporation recorded a net loss of $1.5 million for the
thirteen-week-period ended June 29, 2003 or $.04 loss per basic and diluted
share compared to net income of $1.1 million or $.03 per basic and diluted share
in the same period in the prior year. The reduction in earnings was due to lower
gross profit and an environmental charge of $1.8 million for the period. The
Company recorded a net loss for the twenty-six-week period ended June 29, 2003
of $1.6 million or $.04 loss per basic and diluted share compared to net income
of $2.4 million or $.06 per basic and diluted share, a decrease of $4.0 million
period-over-period. The decrease is due to lower gross profit and an
environmental charge taken in the


                                      -20-
<PAGE>
second quarter of 2003. The details for the quarter and the twenty-six-week
period are presented below.

Net Sales

        Raytech recorded net sales of $54.1 million for the thirteen-week period
ended June 29, 2003 compared to $55.3 million for the same period in the prior
year, a decrease of $1.2 million. The Company recorded net sales of $109.8
million for the twenty-six-week period ended June 29, 2003 compared to $108.0
million for the same period in the prior year, an increase of $1.8 million. An
analysis of the change in sales for the thirteen-week and twenty-six-week
periods compared to prior period amounts are presented below.

        The Wet Friction segment recorded sales of $33.7 million for the
thirteen-week period ended June 29, 2003 compared to $37.3 million for the same
period in the prior year, a decrease of $3.6 million period-over-period. The
decrease is divided equally between lower sales to the automotive OEM component
of the segment and lower sales to the heavy duty component of the segment. The
reduced sales to the automotive OEM's is due to lower demand in the overall
automotive market due to the poor U.S. economy, which is reflected in the 3.6%
year-to-date decline in North American car and truck production in 2003. The
lower sales to the heavy duty component of the segment reflect lower sales to
the agricultural market due to lower demand and lower sales to the construction
market due to lower demand and increased competition. The net sales for the
twenty-six-week period ended June 29, 2003 of $68.4 million compares to $71.7
million for the same period in the prior year, a decrease in sales of $3.3
million. Most of the decrease is attributable to lower sales for the period in
the heavy duty component of this segment. The automotive OEM component of the
segment recorded higher sales for the six-month period of $.2 million compared
to the same period in the prior year.

        The Aftermarket segment recorded net sales of $11.3 million for the
thirteen-week period ended June 29, 2003 compared to $12.1 million for the same
period in the prior year, a decrease of $.8 million. The reduced sales for the
quarter continues to reflect the slower aftermarket for Raytech's products from
the customer base, predominately warehouse distribution, due to the slower
economy and improved OEM quality of original equipment parts. Specifically,
sales in the transmission filter component of this segment are slower due to
reduced replacement schedules suggested by the OEM manufacturers. The net sales
for the twenty-six-week period ended June 29, 2003 of $22.8 million compare to
$24.6 million for the same period in the prior year, a decrease of $1.8 million
period-over-period. The sales for the six-month period reflect the same issues
outlined above for the quarter ended June 29, 2003.

        The Dry Friction segment recorded net sales of $11.4 million for the
thirteen-week period ended June 29, 2003 compared to $8.4 million for the same
period in the prior year, an increase of $3.0 million period-over-period. The
sales increase reflects the continued expansion through the operation in China,
which increased sales $1.0 million over 2002 results for the same period as
demand for product from the facility continues to increase. The net sales
through the German operation improved $2.2 million in the thirteen-week period
ended June 29, 2003 over net sales in the same period in the prior year. The
increase in sales through the German operation reflects a volume increase of $.6
million and a translation gain of $1.6 million due to the effects of the
exchange change in the Euro to the U.S. dollar. The Dry Friction segment
recorded net sales of $23.1 million for the twenty-six-week period ended June
29, 2003 compared to $16.6 million for the same period in the prior year, an
increase of $6.5 million. The increased sales for the six-month period reflects
improved sales of $1.7 million through the operation in China and $5.1 million
in increased sales through the German operation. The improved sales in China
reflect a volume increase due to increased demand for our


                                      -21-
<PAGE>
product. The increase in sales through the German operation reflects a volume
increase of $1.8 million and a translation gain of $3.3 million due to the
change in exchange rates period-over-period of the Euro to the U.S. dollar.

Gross Profit

        Raytech recorded gross profit for the thirteen-week period ended June
29, 2003 of $8.1 million, a gross profit percentage of 15.0% compared to $11.1
million in the same period in the prior year, a gross profit percentage of
20.0%, a decline of 5 percentage points period-over-period. The decline in
margin reflects lower margins in the Wet Friction segment of the business, which
reported a gross margin of 9.1% for the thirteen-week period ended June 29, 2003
compared to 17.1% for the same period in the prior year, a decline of 8
percentage points. The decline is due to higher costs associated with the
continued implementation of a new production line in the automotive OEM
component of this segment. Certain capital investments have been made to improve
the efficiency of the production, and improved profitability is expected over
the next quarters. In addition, certain labor, materials and overhead cost
reduction programs are in place aimed at improving profitability in light of the
lower sales in this segment. The Aftermarket and Dry Friction segments recorded
gross profit percentages of 28.9% and 27.6%, respectively, which are
substantially the same as the prior year. Raytech recorded a gross profit of
$17.0 million for the twenty-six-week period ended June 29, 2003 compared to
$21.6 million for the same period in the prior year, a decrease of $4.6 million
period-over-period. The gross profit percentage for the twenty-six-week period
of 15.5% compared to a gross profit percentage of 20.0% for the same period in
2002, a decrease of 4.5 percentage points. The decrease for the six-month period
reflects the issues detailed above for the thirteen-week period, which is
reflected in the Wet Friction segment gross profit of 9.1% for the period
compared to 16.5% for the same twenty-six-week period in 2002, a decrease of 7.4
percentage points. The Aftermarket segment recorded a gross profit percentage of
29.1% for the twenty-six-week period ended June 29, 2003, which was
substantially the same as the same period in the prior year while the Dry
Friction segment recorded a gross profit percentage of 28.5%, an increase over
the same period in the prior year of 3.2 percentage points primarily to
increased sales period-over-period.

Selling, General and Administrative

        The selling, general and administrative expenses for the
thirteen-week-period ended June 29, 2003 were $8.6 million compared to $8.2
million for the same period in the prior year, an increase of $.4 million
period-over-period. The increased SG&A for the period reflects higher selling
and administrative costs in the Dry Friction segment of $.4 million in support
of the increased sales for that segment. The SG&A costs for the twenty-six-week
period ended June 29, 2003 were $16.8 million compared to $15.8 million in the
same period in the prior year, an increase of $1.0 million. In addition to the
explanation noted above for the second quarter, the increased SG&A reflects
certain severance and new hire costs as well as increased research and
development costs in 2003 over the 2002 costs for the same period.

Interest

        Interest expense for the thirteen-week period ended June 29, 2003 of $.3
million compares to $.2 million for the same period in the prior year, an
increase of $.1 million. The interest expense for the twenty-six-week period
ended June 29, 2003 of $.5 million compares to $.5 million for the same period
in the prior year, an increase of less than $.1 million. The increased interest
expense for the


                                      -22-
<PAGE>
thirteen-week- and twenty-six-week period reflects higher average outstanding
debt of $.4 million and $2.0 million, respectively.

Operating Profits

        The following discussion of operating results by industry segment
relates to information contained in Note D - Segment Reporting to the Unaudited
Condensed Consolidated Financial Statements. Operating profit is income before
provision for environmental claims, income taxes and minority interest.

        Raytech Corporation recorded an operating loss of $.1 million for the
thirteen-week period ended June 29, 2003 compared to operating income of $2.3
million for the same period in the prior year, a reduction of $2.4 million. The
reduced operating profit is due substantially to the lower gross profit of $3.0
million and higher SG&A costs of $.4 million. The operating profit for the
twenty-six-week period ended June 30, 2003 of $.2 million compares to an
operating profit of $5.2 million for the same period in the prior year, a
decrease of $5.0 million. The decrease in operating profits reflects a decline
in gross profit of $4.6 million and an increase in SG&A for the twenty-six-week
period of $1.0 million. The details of the changes in SG&A are outlined above in
the SG&A section of this MD&A analysis. The changes in operating profits are
detailed below by business segment.

        The Wet Friction segment recorded an operating loss of $1.2 million for
the thirteen-week period ended June 29, 2003 compared to an operating profit of
$2.1 million for the same period in the prior year, a decrease of $3.3 million
period-over-period. The operating loss for the twenty-six-week period ended June
29, 2003 of $2.4 million compares to operating profit for the same period in the
prior year of $3.7 million, a decline in operating profit of $6.1 million
compared to the twenty-six-week results for 2002. The primary reason for the
reduced operating profit in this segment is the reduced gross profits for both
the thirteen-week- and twenty-six-week periods in 2003 of $3.3 million and $5.6
million, respectively. A full discussion of the causes for the decline in gross
profit is detailed under the gross profit heading presented earlier in this MD&A
section. The SG&A costs for the segment increased $.2 million for the
thirteen-week period ended June 29, 2003 compared to the same period in the
prior year. The increase is due primarily to increased selling expense for
samples. The SG&A costs increased $.6 million for the 26-week period due
primarily to increased research and development costs and certain employee costs
for severance and new hires.

        The operating profit for the Aftermarket segment for the thirteen-week
period ended June 29, 2003 of $2.0 million compared to operating profit of $2.3
million for the same period in the prior year, a decrease of $.3 million. The
decrease is due to the lower sales for the period of $.8 million, which was the
primary reason gross profit was reduced $.4 million. The reduced gross profit
was offset by lower SG&A costs for the period of $.1 million. The operating
profit for the twenty-six-week period ended June 29, 2003 of $4.2 million
compares to operating profit for the same period in the prior year of $4.8
million, a decrease of $.6 million period-over-period. The decreased operating
profit reflects the impact of lower sales for the period of $1.8 million on the
gross profit for the period. The gross profit declined $.4 million in the
six-month period in 2003 compared to the same period in the prior year. SG&A and
other costs reflected a reduction of $.1 million compared to the 2002 results.

        The Dry Friction segment recorded operating profit of $1.5 million for
the thirteen-week period ended June 29, 2003 compared to $.2 million for the
same period in 2002, an increase in operating profit of $1.3 million. The
increased operating profit was driven by the improved sales of $3.0 million over
the second quarter results of 2002. The improved sales increased the gross
profit by $.8


                                      -23-
<PAGE>
million for the period. The segment recorded operating profit of $2.9 million
for the twenty-six-week period ended June 29, 2003 compared to $.9 million for
the same period in the prior year. The increased operating profit of $2.0
million reflects an increased gross profit of $2.4 million due to increased
sales in the segment of $6.5 million for the twenty-six-week period. Increased
selling costs of $.4 million offset certain improvements in gross profit.

Provision for Environmental Claims

        The Company recorded a charge in the second quarter of 2003 of $1.8
million for expected final remediation and administrative costs associated with
compliance with the EPA Unilateral Administrative Order, which is discussed in
Note G of this report. The work required under the Order has been completed at
this time and a final report, which documents the compliance actions, is being
prepared for submission to the EPA. During the thirteen-week period ended June
29, 2003, the cost of contaminated soil removal increased over the previously
accrued amount $1.6 million due to changes in the tonnage required to be removed
in order to comply with the Order compared to the estimate. In addition, the EPA
has estimated the administrative charge for the agency's oversight of the
execution of the Order will be approximately $.4 million. The final
determination of this cost will occur subsequent to the EPA receiving the final
report from the environmental engineering firm. Also, during the quarter, the
Company settled a disputed billing amount, which arose in the first stage of the
project from the construction company hired to do the initial cleanup. The
resolution of the dispute resulted in a reduction of $.2 million of amounts
previously recorded by the Company. The construction company was replaced prior
to the completion of the first stage.

        Although the Company has, to the best of its knowledge, complied fully
with the Order issued by the EPA, there exists the potential for additional
remediation. Further, the Company may be required to remediate additional
contiguous parcels of property not subject to the Order, subject to potential
future actions taken by the EPA. See Note G for a discussion of this potential
additional commitment.

Income Taxes

        See Note E - Income Taxes to the condensed unaudited consolidated
financial statements included in Item I of this Part I.

Liquidity, Capital Resources and Future Liquidity

        The Company's cash and cash equivalents at June 29, 2003 totaled $15.0
million compared to $20.0 million at December 29, 2002, a decrease of $5.0
million. Capital expenditures for the twenty-six-week period totaled $5.5
million which is consistent with planned expenditures and approximates capital
spending for the same period in the prior year. Net cash provided by operating
activities was $2.0 million for the twenty-six-week period ended June 29, 2003,
compared to cash provided by operating activities of $8.1 million in the prior
year period. Cash outflows for other operating activities were $5.6 million
during the current year period, which was primarily comprised of the following:
a $4.6 million increase in accounts receivable, and a $2.0 million increase in
restricted cash, partially offset by a $.9 million decrease in inventory.

        The debt and available lines of credit at June 29, 2003 and December 29,
2002 consist of the following:


                                      -24-
<PAGE>
<TABLE>
<CAPTION>
                                             (in thousands)
                          June 29, 2003 (Unaudited)          December 29, 2002
                       -----------------------------   -----------------------------
                       Current  Non-Current   Total   Current   Non-Current  Total
                       -------  ----------- --------  -------   ----------- --------
<S>                  <C>        <C>         <C>       <C>       <C>         <C>
Domestic bank debt   $  9,275    $     23   $  9,298  $ 11,306   $     --   $ 11,306
Foreign bank debt       4,151       4,466      8,617     3,609      4,095      7,704
                     --------    --------   --------  --------   --------   --------
Total bank debt        13,426       4,489     17,915    14,915      4,095     19,010
Leases                    156         156        312       176        198        374
                     --------    --------   --------  --------   --------   --------

Total borrowings     $ 13,582    $  4,645   $ 18,227  $ 15,091   $  4,293   $ 19,384
                     ========    ========   ========  ========   ========   ========
</TABLE>

Available lines of credit:

<TABLE>
<CAPTION>
                                       2003              2002
                                     -------           -------
<S>                                  <C>               <C>
Domestic                             $ 5,885           $ 5,006
Foreign                                2,632             3,829
                                     -------           -------

Total                                $ 8,517           $ 8,835
                                     =======           =======
</TABLE>

        Refer to the Management's Discussion and Analysis section and to Note M
to the consolidated financial statements, both included within the Company's
2002 Form 10-K, for information regarding the Company's obligations and
commitments by year. These obligations and commitments consist of long-term
debt, capital leases and rental agreements. During the thirteen-week period
ended June 29, 2003, the Dry Friction segment renegotiated its borrowing
agreement in China, lowering the interest rate 3.9 percentage points on the
borrowings of $1.5 million. In addition, the German subsidiary reduced its
borrowing rate on $1.0 million in borrowings by 2.1 percentage points during the
period.

        The current domestic loan agreement has a covenant requiring the
borrowing companies to maintain a rolling twelve-month earnings before interest,
taxes, depreciation and amortization (EBITDA). The Company was in compliance
with this covenant at June 29, 2003.

        The domestic borrowing facility matures in September 2003. The Company
is reviewing borrowing alternatives and intends to enter into a new lending
arrangement by September 2003.

        The Company is complying with a Federal Order issued by the U.S.
Environmental Protection Agency ("EPA") at its manufacturing facility in
Crawfordsville, Indiana. See Note G - Litigation. The Company spent $3.3 million
during the twenty-six weeks ended June 29, 2003 and has a remaining accrual of
$5.7 million for completion of the project, which is included in other accrued
liabilities. The Company recorded an additional accrual amount of $1.8 million
for the thirteen-week period ended June 29, 2003 and management estimates the
remaining accrual is expected to be sufficient for compliance with the order.
Refer to "Provision for Environmental Claims" on page 23 for further discussion.

        The Company assumed the liability for the Raymark pension plans as part
of the Chapter 11 reorganization. Funding for the plans in 2003 is expected to
be approximately $7.6 million of which $2.4 million was funded during the
twenty-six-week period of 2003.

        Certain tax issues are discussed in Note E - Income Taxes, which provide
details concerning the status of the current Internal Revenue Service audit and
the use of certain future tax benefits.


                                      -25-
<PAGE>
        Management believes that existing cash balances, the Company's ability
to replace the current lending facility and cash flow from operations during
2003 will be sufficient to meet all of the Company's obligations arising in the
normal course of business, including anticipated capital investments.

Financial Risks

        THE COMPANY MAINTAINS LINES OF CREDIT WITH UNITED STATES AND FOREIGN
BANKS, AS WELL AS OTHER CREDITORS. THE COMPANY IS NATURALLY EXPOSED TO VARIOUS
INTEREST RATE RISK AND FOREIGN CURRENCY RISK IN ITS NORMAL COURSE OF BUSINESS.

        THE COMPANY EFFECTIVELY MANAGES ITS ACCOUNTS RECEIVABLE AS EVIDENCED BY
THE AVERAGE DAYS SALES IN TRADE RECEIVABLES OF 52 DAYS. THIS ALLOWS FOR MINIMUM
BORROWINGS IN SUPPORTING INVENTORY AND TRADE RECEIVABLES. MANAGEMENT DOES NOT
ANTICIPATE A SIGNIFICANT CHANGE IN FISCAL POLICY IN ANY OF ITS BORROWING MARKETS
IN 2003 GIVEN CURRENT ECONOMIC CONDITIONS. FURTHER, THE COMPANY CAN REDUCE THE
SHORT-TERM IMPACT OF INTEREST RATE FLUCTUATION THROUGH DEFERRAL OF CAPITAL
INVESTMENT SHOULD THE NEED ARISE.

        THE LOCAL CURRENCIES OF THE COMPANY'S FOREIGN SUBSIDIARIES HAVE BEEN
DESIGNATED AS THEIR FUNCTIONAL CURRENCIES. ACCORDINGLY, FINANCIAL STATEMENTS OF
FOREIGN OPERATIONS ARE TRANSLATED USING THE EXCHANGE RATE AT THE BALANCE SHEET
DATE FOR ASSETS AND LIABILITIES, HISTORICAL EXCHANGE RATES FOR ELEMENTS OF
STOCKHOLDER'S EQUITY AND AN AVERAGE EXCHANGE RATE IN EFFECT DURING THE PERIOD
FOR REVENUES AND EXPENSES. WHERE POSSIBLE, THE COMPANY ATTEMPTS TO MITIGATE
FOREIGN CURRENCY TRANSLATION EFFECTS BY BORROWING IN LOCAL CURRENCIES TO FUND
OPERATIONS. THE COMPANY DOES NOT BELIEVE THAT THE FLUCTUATION IN FOREIGN
CURRENCY WILL HAVE A MATERIAL ADVERSE EFFECT ON THE COMPANY'S OVERALL FINANCIAL
CONDITION. ADDITIONALLY, THE COMPANY DOES NOT ENTER INTO AGREEMENTS TO MANAGE
ANY CURRENCY TRANSACTION RISKS DUE TO THE IMMATERIAL AMOUNT OF TRANSACTIONS OF
THIS TYPE. THE IMPACT OF THE TRANSLATION BETWEEN THE EURO AND THE U.S. DOLLAR
ARE DETAILED IN THE NET SALES SECTION OF ITEM 2 OF THE MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. SEE NOTE A -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES IN THE NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS FOR A DISCUSSION OF NEW ACCOUNTING
PRONOUNCEMENTS DURING THE PERIOD.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         See Item 2.



ITEM 4.  CONTROLS AND PROCEDURES

    (a)  Based on evaluation of the effectiveness of the design and operation of
         the Company's disclosure controls and procedures, which evaluation was
         made under the supervision and with the participation of management,
         including the Company's principal executive officer and principal
         financial officer, the Company's principal executive officer and
         principal financial officer have each concluded that such disclosure
         controls and procedures are effective in ensuring that information
         required to be disclosed by the Company in reports that it files under
         the Exchange Act is recorded, processed, summarized and reported within
         the time periods specified in Securities and Exchange Commission rules
         and forms.


                                      -26-
<PAGE>
    (b)  There has been no change during the thirteen weeks ended June 29, 2003
         in the Company's internal controls over financial reporting that has
         materially affected, or is reasonably likely to materially affect, the
         Company's internal control over financial reporting.

                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

         See Note G - Litigation.


                                      -27-
<PAGE>
    Item 4.  Submission of Matters to a Vote of Security Holders


             The Annual Shareholders' Meeting of Raytech was held June 19, 2003.
    The matters submitted to stockholder vote and the vote count on the matters
    were as follows:

       1.  Proposal to elect nine Directors for one-year terms and
           until their respective successors are elected

<TABLE>
<CAPTION>
                                      For         Withheld
                                      ---         --------
<S>                               <C>             <C>
           Albert A. Canosa       37,547,028       92,028
                                  ----------      -------
           Robert F. Carter       37,480,751      158,305
                                  ----------      -------
           Archie R. Dykes        37,539,328       99,728
                                  ----------      -------
           David N. Forman        37,539,787       99,269
                                  ----------      -------
           John H. Laeri          37,505,927      133,129
                                  ----------      -------
           Stanley J. Levy        37,480,011      159,045
                                  ----------      -------
           Richard A. Lippe       37,480,138      158,918
                                  ----------      -------
           Gene Locks             37,480,138      158,918
                                  ----------      -------
           John J. Robbins        37,480,597      158,459
                                  ----------      -------
</TABLE>

       2.  Proposal to ratify the appointment of PricewaterhouseCoopers LLP
           as auditors for 2003

           For 37,570,224   Against  67,359    Abstain  1,473

       3.  Proposal to amend Raytech's Certificate of Incorporation

           For 37,602,344   Against   32,832    Abstain  3,880

             For purposes of determining whether a proposal has received a
    majority vote, abstentions were included in the vote totals with the result
    that an abstention had the same effect as a negative vote. Under applicable
    Delaware law, "non-votes" were not included in the vote totals of proposals
    voted and, therefore, had no effect on the vote on that proposal. A
    "non-vote" would occur when a broker holding shares for a beneficial owner
    voted on one proposal but did not vote on another proposal because the
    broker did not have discretionary voting power and had not received
    instructions from the beneficial owner.

             Pursuant to the vote of shareholders, proposals 1, 2 and 3 were
    adopted and effective on June 19, 2003.

             The Director whose term of office as Director will continue from a
    term of three years beginning with an effective date of April 18, 2001 is:

                             Kevin S. Flannery

    Item 6.  Exhibits and Reports on Form 8-K


             (a)  Exhibits

                  31-1 Section 302 Certification of the Chief Financial Officer
                  31-2 Section 302 Certification of the Chief Executive Officer

             (b)  Reports on 8-K

                  None


                                      -28-
<PAGE>
                                    SIGNATURE

         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.

                                           RAYTECH CORPORATION


                                           By: /s/ JOHN B. DEVLIN
                                               ---------------------------------
                                               John B. Devlin
                                               Vice President, Treasurer
                                               and Chief Financial Officer

Date: August 13, 2003


                                      -29-