SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                           --------------------------

                                    FORM 10-Q

|X|   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

      For the quarterly period ended September 30, 2001

                                       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 1-13612

                              CONGOLEUM CORPORATION
             (Exact name of Registrant as specified in Its Charter)

DELAWARE                                                              02-0398678
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)

                             3500 Quakerbridge Road
                                  P.O. Box 3127
                           Mercerville, NJ 08619-0127
          (Address of Principal Executive Offices, including Zip Code)
                        Telephone number: (609) 584-3000
              (Registrant's telephone number, including area code)

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES |X| NO |_|

      Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

           Class                             Outstanding at October 26, 2001
   ------------------------                 ----------------------------------
     Class A Common Stock                              3,651,190
     Class B Common Stock                              4,608,945

                                  Page 1 of 19

<PAGE>

                              CONGOLEUM CORPORATION

                                      Index

                                                                            Page
                                                                            ----
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements:

            Balance Sheets as of September 30, 2001
            (unaudited) and December 31, 2000..................................3

            Statements of Operations for the three and nine months
            ended September 30, 2001 and 2000 (unaudited)......................4

            Statements of Changes in Stockholders' Equity for the year
            ended December 31, 2000 and the nine months ended September 30,
            2001 (unaudited)...................................................5

            Statements of Cash Flows for the nine months
            ended September 30, 2001 and 2000 (unaudited)......................6

            Notes to Unaudited Condensed Financial Statements .................7

Item 2. Management's Discussion and Analysis of Financial Condition
            and Results of Operations.........................................14

Item 3. Quantitative and Qualitative Disclosures About Market Risk............17

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.....................................................18

Item 2. Changes in Securities.................................................18

Item 3. Defaults Upon Senior Securities.......................................18

Item 4. Submission of Matters to a Vote of Security Holders...................18

Item 5. Other Information.....................................................18

Item 6. Reports on Form 8-K...................................................18

Signatures....................................................................19


                                       2
<PAGE>

PART I.  FINANCIAL INFORMATION
Item 1.  Financial Statements

                              CONGOLEUM CORPORATION
                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                   September 30,  December 31,
                                                                                       2001           2000
                                                                                       ----           ----
                                                                                   (Unaudited)
                                                                                     (Dollars in thousands)
<S>                                                                                  <C>            <C>
ASSETS
Current assets:
     Cash and cash equivalents................................................       $  5,299       $ 12,637
     Short-term investments...................................................          2,704         12,097
     Accounts and notes receivable, net.......................................         24,269         25,527
     Inventories..............................................................         54,267         53,296
     Prepaid expenses and other current assets................................          2,145          3,966
     Deferred income taxes....................................................          6,108          3,637
                                                                                     --------       --------
         Total current assets.................................................         94,792        111,160
Property, plant and equipment, net............................................         97,046         99,410
Goodwill, net.................................................................         10,631         10,955
Deferred income taxes.........................................................            223          1,530
Other assets..................................................................         16,445         15,996
                                                                                     --------       --------
         Total assets.........................................................       $219,137       $239,051
                                                                                     ========       ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable.........................................................       $ 15,949       $ 19,617
     Accrued expenses.........................................................         25,477         38,844
     Accrued taxes............................................................            350            440
     Deferred income taxes....................................................          3,389          3,211
                                                                                     --------       --------
         Total current liabilities............................................         45,165         62,112
Long-term debt................................................................         99,662         99,625
Other liabilities.............................................................         26,921         26,817
Pension liability.............................................................         11,302         11,858
Accrued postretirement benefit obligation.....................................          9,129          9,329
                                                                                     --------       --------
         Total liabilities....................................................        192,179        209,741

STOCKHOLDERS' EQUITY
Class A common stock, par value $0.01 per share; 20,000,000 shares
     authorized; 4,736,950 shares issued as of September 30, 2001 and
     December 31, 2000 .......................................................             47             47
Class B common stock, par value $0.01 per share; 4,608,945 shares
     authorized, issued and outstanding as of September 30, 2001 and
     December 31, 2000........................................................             46             46
Additional paid-in capital....................................................         49,105         49,105
Retained deficit..............................................................        (10,933)        (8,581)
Accumulated minimum pension liability adjustment..............................         (3,494)        (3,494)
                                                                                     --------       --------
                                                                                       34,771         37,123
Less common stock held in Treasury, at cost; 1,085,760 shares at
     September 30, 2001 and December 31, 2000.................................          7,813          7,813
                                                                                     --------       --------
         Total stockholders' equity...........................................         26,958         29,310
                                                                                     --------       --------
         Total liabilities and stockholders' equity...........................       $219,137       $239,051
                                                                                     ========       ========
</TABLE>

                   The accompanying notes are an integral part
                     of the condensed financial statements.


                                       3
<PAGE>

                              CONGOLEUM CORPORATION
                            STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                       Three Months Ended               Nine Months Ended
                                                                         September 30,                    September 30,
                                                                   -------------------------         -----------------------
                                                                     2001              2000            2001           2000
                                                                                      (In thousands, except
                                                                                        per share amounts)

<S>                                                                <C>               <C>             <C>            <C>
Net sales.......................................................   $57,881           $60,979         $166,598       $173,109
Cost of sales...................................................    41,631            45,470          124,903        132,609
Selling, general and administrative expenses....................    12,773            11,771           40,535         40,871
                                                                   -------           -------         --------       --------
         Income (loss) from operations..........................     3,477             3,738            1,160           (371)
Other income (expense):
     Interest income............................................       181               452              612          1,363
     Interest expense...........................................    (2,058)           (1,835)          (6,215)        (5,458)
     Other income...............................................       302               296            1,130          1,156
                                                                   -------           -------         --------       --------
         Income (loss) before income taxes......................     1,902             2,651           (3,313)        (3,310)
     Provision (credit) for income taxes........................       732               926             (961)          (898)
                                                                   -------           -------         --------       --------
         Net income (loss)......................................   $ 1,170           $ 1,725         $ (2,352)      $ (2,412)
                                                                   =======           =======         ========       ========

         Net income (loss) per common share, basic & diluted....   $   .14           $   .21         $   (.28)      $   (.29)
                                                                   =======           =======         ========       ========
         Weighted average number of common and
           equivalent shares outstanding
               Basic shares.....................................     8,260             8,260            8,260          8,269
                                                                   =======           =======         ========       ========
               Diluted shares...................................     8,260             8,265            8,260          8,269
                                                                   =======           =======         ========       ========
</TABLE>

                   The accompanying notes are an integral part
                     of the condensed financial statements.


                                       4
<PAGE>

                              CONGOLEUM CORPORATION
                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                             (Dollars in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>

                                           Common Stock
                                          par value $0.01   Additional
                                         -----------------   Paid-in      Retained
                                         Class A   Class B   Capital       Deficit
                                         -------   -------  ----------    --------
<S>                                        <C>      <C>      <C>          <C>
Balance, December 31, 1999 ..........      $47      $46      $49,105      $   (452)
Purchase of treasury stock ..........
Minimum pension liability adjustment,
    net of tax benefit of $1,434 ....
Net loss ............................                                       (8,129)

Net comprehensive loss ..............
                                           ---      ---      -------      --------
Balance, December 31, 2000 ..........       47       46       49,105        (8,581)
Net loss ............................                                       (2,352)
Net comprehensive loss ..............
                                           ---      ---      -------      --------
Balance, September 30, 2001 .........      $47      $46      $49,105      $(10,933)
                                           ===      ===      =======      ========
</TABLE>

<TABLE>
<CAPTION>
                                         Accumulated
                                           Minimum
                                           Pension
                                          Liability      Treasury                 Comprehensive
                                          Adjustment      Stock         Total         Loss
                                         ------------    --------      -------    -------------
<S>                                        <C>           <C>           <C>          <C>
Balance, December 31, 1999 ..........      $(1,000)      $(7,616)      $40,130
Purchase of treasury stock ..........                       (197)         (197)
Minimum pension liability adjustment,
    net of tax benefit of $1,434 ....       (2,494)                     (2,494)     $ (2,494)
Net loss ............................                                   (8,129)       (8,129)
                                                                                    --------
Net comprehensive loss ..............                                               $(10,623)
                                           -------       -------       -------      ========
Balance, December 31, 2000 ..........       (3,494)       (7,813)       29,310
Net loss ............................                                   (2,352)     $ (2,352)
                                                                                    --------
Net comprehensive loss ..............                                               $ (2,352)
                                           -------       -------       -------      ========
Balance, September 30, 2001 .........      $(3,494)      $(7,813)      $26,958
                                           =======       =======       =======
</TABLE>
                   The accompanying notes are an integral part
                     of the condensed financial statements.


                                       5
<PAGE>


                              CONGOLEUM CORPORATION
                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                                              Nine Months Ended
                                                                                                 September 30,
                                                                                       ------------------------------
                                                                                           2001              2000
                                                                                               (In thousands)
<S>                                                                                       <C>              <C>
Cash flows from operating activities:
     Net loss .....................................................................       $(2,352)         $(2,412)
     Adjustments to reconcile net loss to net cash used
        by operating activities:
           Depreciation............................................................         8,725            8,043
           Amortization............................................................           613              613
           Deferred income taxes...................................................          (986)            (571)
           Changes in certain assets and liabilities:
              Accounts and notes receivable........................................         1,258           (7,414)
              Inventories..........................................................          (971)           7,340
              Prepaid expenses and other current assets............................         1,980            2,177
              Accounts payable.....................................................        (3,668)          (2,177)
              Accrued expenses.....................................................       (13,457)          (5,139)
              Other liabilities....................................................        (1,512)            (938)
                                                                                          -------          -------
                   Net cash used by operating activities...........................       (10,370)            (478)
                                                                                          -------          -------
     Cash flows from investing activities:
           Capital expenditures....................................................        (6,361)         (11,862)
           Purchase of short-term investments......................................        (4,175)         (17,535)
           Maturities of short-term investments....................................        13,568           25,534
                                                                                          -------          -------
                   Net cash provided (used) by investing activities................         3,032           (3,863)
                                                                                          -------          -------
     Cash flows from financing activities:
           Purchase of treasury stock..............................................            --             (197)
                                                                                          -------          -------
                   Net cash used by financing activities...........................            --             (197)
                                                                                          -------          -------
Net decrease in cash and cash equivalents..........................................        (7,338)          (4,538)
Cash and cash equivalents:
     Beginning of period...........................................................        12,637           18,768
                                                                                          -------          -------
     End of period ................................................................       $ 5,299          $14,230
                                                                                          =======          =======
</TABLE>

                   The accompanying notes are an integral part
                     of the condensed financial statements.


                                       6
<PAGE>

                              CONGOLEUM CORPORATION
                NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

1. Basis of Presentation

      The condensed financial statements have been prepared in accordance with
accounting principles generally accepted in the United States for interim
financial information and with Rule 10-01 of Regulation S-X and have not been
audited by the Company's independent accountants. Certain information and note
disclosures normally included in annual financial statements prepared in
accordance with accounting principles generally accepted in the United States
required for complete financial statements have been condensed or omitted in
accordance with the rules and regulations of the Securities and Exchange
Commission. The preparation of condensed financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities and
the reported amounts of revenues and expenses during the reporting period. In
the opinion of management, all adjustments (consisting of normal and recurring
adjustments) considered necessary for a fair presentation of the Company's
financial position have been included. The results of operations for the three
and nine months ended September 30, 2001 are not necessarily indicative of the
results to be expected for a full year. These condensed financial statements
should be read in conjunction with the Company's audited financial statements
which appear in the Company's Annual Report to Stockholders for the year ended
December 31, 2000.

      Based upon the nature of the Company's operations facilities and
management structure, the Company considers its business to constitute a single
segment for financial reporting purposes.

2. Pending Adoption of Financial Accounting Standards

      In July 2001, the Financial Accounting Standards Board issued SFAS No.
141, "Business Combinations" ("SFAS No. 141") and SFAS No. 142. SFAS No. 141
applies to all business combinations completed after June 30, 2001 and requires
the use of the purchase method of accounting. SFAS No. 141 also establishes new
criteria for determining whether intangible assets should be recognized
separately from goodwill. SFAS No. 142 is effective for fiscal years beginning
after December 15, 2001, however, companies with fiscal years beginning after
March 15, 2001 may elect to adopt the statement early. SFAS No. 142 provides
that goodwill and intangible assets with indefinite lives will not be amortized,
but rather will be tested for impairment on an annual basis. SFAS No. 141 is not
expected to have a significant impact on the results of operations or financial
position of Congoleum Corporation. SFAS 142 will be effective for the Company as
of January 1, 2002. While Congoleum has not fully evaluated the impact of
adopting SFAS 142, adoption of this standard is expected to result in the
elimination of approximately $0.4 million of goodwill amortization expense per
year.

      In August 2001, Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No.
144") was issued. Congoleum will adopt SFAS No. 144 effective January 1, 2002
when adoption is mandatory. Among other things,


                                       7
<PAGE>

SFAS No. 144 significantly changes the criteria that would have to be met to
classify an asset as held-for-sale. This statement supersedes Statement of
Financial Standards No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of" and the provisions of Accounting
Principles Board Opintion 30, "Reporting the Results of Operations - Reporting
the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual
and Infrequently Occurring Events and Transactions" that relate to reporting the
effects of a disposal of a segment of a business. The Company is currently
assessing the impact of adopting SFAS No. 144 on its combined financial
statements.

3. Changes in Accounting Principles

      In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133, as amended by SFAS 138), which
requires that an entity recognize all derivatives as either assets or
liabilities in the balance sheet and measure those instruments at fair value.
The Company adopted SFAS 133 in the first quarter of fiscal 2001. Adoption of
this pronouncement did not have a significant effect on the Company's
consolidated financial position or results of operations.

4. Inventories

      A summary of the major classifications of inventories stated at the lower
of LIFO cost or market is as follows:

                                         September 30,       December 31,
     (Dollars in thousands)                  2001                2000
                                         ------------        ------------
     Finished goods......................  $41,953             $42,268
     Work-in-process.....................    4,421               3,600
     Raw materials and supplies..........    7,893               7,428
                                           -------             -------
                                           $54,267             $53,296
                                           =======             =======

5. Distributor Transition Costs

      During the third quarter of 2000, the Company announced t he appointment
of Mohawk Industries, Inc. as a national distributor. At the same time, the
Company announced it was terminating its distribution arrangements with
LDBrinkman & Co., who had been its exclusive distributor in much of the
southwestern United States, accounting for 21% of the Company's sales in 1999.
LDBrinkman & Co. contested the Company's right to terminate its distributor
agreement and the matter went to arbitration in the fourth quarter of 2000. The
parties signed a final settlement agreement in February 2001.

      The Company recorded a charge of $7.7 million in the fourth quarter of
2000 to provide for the nonrecurring costs associated with the transition.
Included in this charge were certain costs incurred


                                       8
<PAGE>

by the Company for establishing Mohawk as a distributor. The Company also agreed
to subsidize a portion of the costs of merchandising materials for Mohawk such
as samples and displays. Also, included in the charge are certain termination
payments to be made to LDBrinkman pursuant to the terms of the settlement
agreement. These costs have all been paid as of September 30, 2001.

      The Company also re-evaluated its allowance for doubtful accounts in light
of the settlement agreement and concluded it should be reduced by $1.8 million,
which was recorded as a credit to bad debt expense in the fourth quarter of
2000.

      The Company provided right-of-return provisions to LDBrinkman in the
termination agreement whereby LDBrinkman could return certain unsold inventory
purchased from the Company that met minimum size and quality requirements. The
Company deferred the recognition of revenue for its estimate of returns of
inventory under this right-of-return agreement. Inventory was returned pursuant
to this agreement during the third quarter of 2001 and the Company has no
further obligations under this provision. The resolution of this matter did not
have a material effect on the results of operations for the three or nine months
ended September 30, 2001.

6. Income (Loss) Per Share

      Income (loss) per share is calculated by dividing net income (loss) by the
weighted average number of shares of common stock outstanding.

7. Commitments and Contingencies

      The Company is subject to federal, state and local environmental laws and
regulations and certain legal and administrative claims are pending or have been
asserted against the Company. Among these claims, the Company is a named party
in several actions associated with waste disposal sites, asbestos-related claims
and general liability claims. These actions include possible obligations to
remove or mitigate the effects on the environment of wastes deposited at various
sites, including Superfund sites and certain of the Company's owned and
previously owned facilities. The contingencies also include claims for personal
injury and/or property damage. The exact amount of such future costs and timing
of payments are indeterminable due to such unknown factors as the magnitude of
clean-up costs, the timing and extent of the remedial actions that may be
required, the determination of the Company's liability in proportion to other
potentially responsible parties and the extent to which costs may be recoverable
from insurance.

      The Company records a liability for environmental remediation,
asbestos-related claim costs and general liability claims when a clean-up
program or claim payment becomes probable and the costs can be reasonably
estimated. As assessments and clean-ups progress, these liabilities are adjusted
based upon progress in determining the timing and extent of remedial actions and
the related costs and damages. The extent and amounts of the liabilities can
change substantially due to factors such as the nature or extent of
contamination, changes in remedial requirements and technological improvements.
The recorded liabilities are not discounted for delays in future payments and
are not reduced by the amount of estimated insurance recoveries. Such estimated
insurance recoveries are considered probable of recovery.


                                       9
<PAGE>

      The Company is named, together with a large number (in most cases,
hundreds) of other companies, as a potentially responsible party ("PRP") in
pending proceedings under the federal Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), as amended, and similar state laws.
In two instances, although not named as a PRP, the Company has received a
request for information. These pending proceedings currently relate to seven
disposal sites in New Jersey, Pennsylvania, Maryland, Connecticut and Delaware
in which recovery from generators of hazardous substances is sought for the cost
of cleaning up the contaminated waste sites. The Company's ultimate liability in
connection with those sites depends on many factors, including the volume of
material contributed to the site, the number of other PRP's and their financial
viability, the remediation methods and technology to be used and the extent to
which costs may be recoverable from insurance. However, under CERCLA, and
certain other laws, as a PRP, the Company can be held jointly and severally
liable for all environmental costs associated with a site.

      The most significant exposure to which the Company has been named a PRP
relates to a recycling facility site in Elkton, Maryland. Two removal actions
were substantially complete as of December 31, 1998, however the groundwater
remediation phase has not begun and the remedial investigation/feasibility study
related to the groundwater remediation has not been approved. The PRP group is
comprised of approximately 50 companies, substantially all of which are
financially solvent. This group has estimated that future costs of groundwater
remediation would be approximately $26 million. Based on waste allocations
amongst members of the PRP group in proportion to waste disposed at the site,
Congoleum's share was estimated to be approximately 5.5%. At September 30, 2001,
the Company believes its probable liability, which has been recorded in other
liabilities, based on present facts and circumstances, to be approximately $1.5
million. A corresponding insurance receivable of $1.2 million has been recorded
in other noncurrent assets. No other PRP sites are material on an individual
basis.

      The Company also accrues remediation costs for certain of the Company's
owned facilities on an undiscounted basis. Estimated total cleanup costs,
including capital outlays and future maintenance costs for soil and groundwater
remediation are primarily based on engineering studies.

      Although the outcome of these matters could result in significant expenses
or judgments, management does not believe based on present facts and
circumstances that their disposition will have a material adverse effect on the
financial position of the Company.

      The Company is one of many defendants in approximately 4,792 pending
claims (including workers' compensation cases) involving approximately 20,502
individuals as of September 30, 2001, alleging personal injury from exposure to
asbestos or asbestos-containing products. There were 1,754 claims at December
31, 2000 that involved approximately 12,079 individuals. Activity related to
asbestos claims was as follows:


                                       10
<PAGE>

                                             Nine months ended    Year ended
                                                September 30,    December 31,
                                                    2001             2000
        ------------------------------------------------------------------------
        Beginning claims................           1,754              670
        New claims......................           3,216            1,302
        Settlements.....................             (42)             (76)
        Dismissals......................            (136)            (142)
        ------------------------------------------------------------------------
        Ending claims...................           4,792            1,754
                                                   =====            =====

      The total indemnity costs incurred to settle claims during the nine months
ending September 30, 2001 and twelve months ending December 31, 2000 were $1.0
million and $3.9 million, respectively, which were paid by the Company's
insurance carriers, as were the related defense costs. Costs per claim vary
depending on a number of factors, including the nature of the alleged exposure
and the jurisdiction where the claim was litigated. As of September 30, 2001,
the Company has incurred asbestos-related claims of $11.3 million, to resolve
claims of over 33,000 claimants, all of which have been paid by the Company's
insurance carriers. The average indemnity cost per resolved claimant is $338.
Over 99% of claims incurred by the Company have settled, on average, for amounts
less than $93 per claimant.

      Nearly all claims allege that various diseases were caused by exposure to
asbestos-containing products, including sheet vinyl and resilient tile
manufactured by the Company (or, in the workers' compensation cases, exposure to
asbestos in the course of employment with the Company). The Company discontinued
the manufacture of asbestos-containing sheet vinyl products in 1983 and
asbestos-containing tile products in 1974. In general, governmental authorities
have determined that asbestos-containing sheet and tile products are nonfriable
(i.e., cannot be crumbled by hand pressure) because the asbestos was
encapsulated in the products during the manufacturing process. Thus,
governmental authorities have concluded that these products do not pose a health
risk when they are properly maintained in place or properly removed so that they
remain nonfriable. The Company has issued warnings not to remove
asbestos-containing flooring by sanding or other methods that may cause the
product to become friable.

      The Company regularly evaluates its estimated liability to defend and
resolve current and reasonably anticipated future asbestos-related claims. It
reviews, among other things, recent and historical settlement and trial results,
the incidence of past and recent claims, the number of cases pending against it,
and asbestos litigation developments that may impact the exposure of the
Company. One such development, the on-going declarations of bankruptcy by
companies that are typically lead defendants in asbestos-related cases, may
negatively impact the Company's claim experience. The estimates developed are
highly uncertain due to the limitations of the available data and the difficulty
of forecasting the numerous variables that can affect the range of the
liability.


                                       11
<PAGE>

      During the fourth quarter of fiscal 2000, the Company updated its
evaluation of the range of potential defense and indemnity costs for
asbestos-related liabilities and the insurance coverage in place to cover these
costs. As a result of the Company's analysis, the Company has determined that
its range of probable and estimable losses for asbestos-related claims through
the year 2049 is $35.1 million to $161.3 million before considering the effects
of insurance recoveries and before discounting to present value. As discussed
previously, it is very difficult to forecast a liability for the Company's
ultimate exposure for asbestos-related claims as there are multiple variables
that can affect the timing, severity, and quantity of claims. Therefore, the
Company has concluded that no amount within that range is more likely than any
other, and therefore has determined that the amount of the gross liability it
should record for asbestos-related claims is equal to $35.1 million in
accordance with accounting principles generally accepted in the United States.

      For a majority of the period that Congoleum produced asbestos-containing
products, the Company purchased primary and excess insurance policies that cover
bodily injury asbestos claims. The Company believes that it has in excess of $1
billion primary and excess insurance coverage available as of December 31, 2000
to cover asbestos-related claims. To date, all claims and defense costs have
been paid through insurance coverage, and the Company anticipates that insurance
coverage will continue to cover these costs in the foreseeable future.

      The same factors that affect developing forecasts of potential defense and
indemnity costs for asbestos-related liabilities also affect estimates of the
total amount of insurance that is probable of recovery, as do a number of
additional factors. These additional factors include possible uncertainties
regarding the legal sufficiency of insurance claims or solvency of insurance
carriers, the method in which losses will be allocated to the various insurance
policies and the years covered by those policies, and how legal and other loss
handling costs will be covered by the insurance policies.

      The Company has determined, based on its review of its insurance policies
and the advice of legal counsel, that approximately $20 million of the estimated
$35 million gross liability is highly probable of recovery. This determination
was made after considering the terms of the available insurance coverage and the
financial viability of the insurance companies. The Company believes that the
criteria to offset the estimated gross liability with this probable insurance
recovery, as defined by accounting principles generally accepted in the United
States, have been met. The balance of the estimated gross liability of $15
million has been reflected in the balance sheet as a long-term liability as of
December 31, 2000 and September 30, 2001. The Company has also recorded in the
balance sheet an insurance receivable of $7 million that represents an estimate
of probable insurance recoveries that do not qualify for offsetting against the
gross liability. This insurance receivable has been recorded in other long-term
assets as of December 31, 2000 and September 30, 2001.

      Since many uncertainties exist surrounding asbestos litigation, the
Company will continue to evaluate its asbestos-related estimated liability and
corresponding estimated insurance assets as well as the underlying assumptions
used to derive these amounts. It is reasonably possible that the Company's total
exposure to asbestos-related claims may be greater than the recorded liability
and that insurance recoveries may be less than the recorded asset. These
uncertainties may result in the Company incurring future charges to income to
adjust the carrying value of recorded liabilities and


                                       12
<PAGE>

assets. Congoleum does not believe, however, that asbestos-related claims will
have a material adverse effect on its financial position or liquidity.

8. Credit Facility

      The Company has a revolving credit facility which expires in 2003. This
financing agreement contains certain covenants which include the maintenance of
a minimum net worth, income and fixed charge coverage levels. During the second
quarter of 2001, the credit agreement was amended to revise certain covenants
and pricing, including the commitment fee. Shortly thereafter, the Company
reduced its revolving credit facility from $30 million to $20 million to reduce
its cost for commitment fees.


                                       13
<PAGE>

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

Results of Operations
---------------------

Three and nine months ended September 30, 2001 as compared to three and nine
months ended September 30, 2000.

      Net sales for the third quarter of 2001 were $57.9 million, as compared to
$61.0 million in the third quarter of 2000, a decrease of $3.1 million. The
decline in sales was due to the weak economic conditions coupled with the final
discontinuation of sales through LDBrinkman on June 30, 2001, which have not
been fully replaced by sales under the new distributor agreement. These factors
were partly mitigated by sales of the new product, Durastone, that was
introduced during the third quarter of 2001 and continuing popularity of the
Company's Ultima product line. Year-to-date net sales for the first nine months
of 2001 were $166.6 million, a decrease of $6.5 million or 3.8% from the first
nine months of 2000. The decline in 2001 year-to-date sales versus 2000 reflects
the pronounced decline in first quarter sales to the manufactured housing
industry, together with the factors cited for the third quarter decline,
partially offset by higher sales of the Company's Ultima product.

      Gross profit for the third quarter of 2001 was $16.3 million, up $0.8
million from $15.5 million in the third quarter of 2000. Gross profit as a
percent of net sales increased to 28.1% in the third quarter of 2001 from 25.4%
in the third quarter of 2000. The improvement in gross profit was due to
improved manufacturing efficiency and more moderate raw materials costs. Gross
profit for the first nine months of 2001 was $41.7 million (25.0% of net sales),
as compared to $40.5 million (23.4% of net sales) in the first nine months of
2000. The improvement in year-to-date gross profit margin for the first nine
months of 2001 was mitigated by higher raw material costs in the early part of
2001.

      Selling, general and administrative expenses were $12.8 million in the
third quarter of 2001, up 8.5% from the third quarter of 2000. As a percent of
net sales, selling, general and administrative expenses were 22.1% in the third
quarter of 2001, as compared to 19.3% in the third quarter of 2000. The increase
was primarily due to costs associated with launching the Company's new Durastone
product line. For the nine months ended September 30, 2001, selling, general and
administrative expenses were $40.5 million (24.3% of net sales), as compared to
$40.9 million (23.6% of net sales) in the same period one year earlier. The
decline in year-to-date selling, general and administrative expenses is due to
cost reductions initiated earlier in the year, partly offset by increased
marketing and inflationary cost increases.

      Income from operations for the third quarter of 2001 was $3.5 million, as
compared to $3.7 million in the third quarter of 2000. Income from operations
for the first nine months of 2001 was $1.2 million, compared to a loss of $0.4
million in the first nine months of 2000.

      Interest expense for the three and nine month periods ended September 30,
2001 is above the comparable period a year earlier due to less interest being
capitalized in connection with capital


                                       14
<PAGE>

projects in 2001. The provision for income taxes for the three months ended
September 30, 2001 represents an effective tax rate of 38.5%. This is due to the
impact of certain permanent differences between book and tax income, which have
a significant impact on the annualized effective tax rate at low levels of book
income. The 29.0% effective tax rate for the nine months ended September 30,
2001 is indicative of the Company estimate of its full year effective tax rate
from the annual income tax benefit.

Liquidity and Capital Resources
-------------------------------

      Cash, cash equivalents and short-term investments declined $16.7 million
for the nine months ended September 30, 2001 to $8.0 million. Working capital at
September 30, 2001 was $49.6 million, up from $49.0 million at December 31,
2000. The ratio of current assets to current liabilities at September 30, 2001
was 2.1 compared to 1.8 at December 31, 2000. The ratio of debt to total capital
at September 30, 2001 was .45 compared to .42 at December 31, 2000. Cash used by
operations was $10.4 million for the first nine months of 2001, compared to cash
used by operations of $0.5 million in the first nine months of 2000. The
increase in cash used by operations in the first nine months of 2001 versus the
first nine months of 2000 was primarily due to payment of distributor transition
costs of $7.7 million and the payment of $2.8 million to LDBrinkman for returned
inventory.

      Capital expenditures were $6.4 million for the first nine months of 2001.
Total 2001 capital spending is expected to be approximately $8.0 million.

      The Company has recorded what it believes are adequate provisions for
environmental remediation and product-related liabilities, including provisions
for testing for potential remediation of conditions at its own facilities. While
the Company believes its estimate of the future amount of these liabilities is
reasonable, that such amounts will not have a material adverse effect on the
financial position of the Company and that they will be paid over a period of
five to ten years, the timing and amount of such payments may differ
significantly from the Company's assumptions. Although the effect of future
government regulation could have a significant effect on the Company's costs,
the Company is not aware of any pending legislation which could have a material
adverse effect on its results of operations or financial position. There can be
no assurances that such costs could be passed along to its customers.

      In 1998, the Company's Board of Directors approved a new plan to
repurchase up to $5.0 million of the Company's common stock. As of September 30,
2001, the Company had repurchased 777,665 shares of its common stock for an
aggregate cost of $4.3 million pursuant to this plan. The Company is presently
restricted from making further purchases by the terms of its 8 5/8% Senior Note
indenture.

      The Company's principal sources of liquidity are net cash provided by
operating activities and borrowings under its Amended and Restated Financing
Agreement. The Company believes that these sources will be adequate to fund
working capital requirements, debt service payments and planned capital
expenditures through the foreseeable future.


                                       15
<PAGE>

Pending Adoption of Financial Accounting Standards
--------------------------------------------------

      In July 2001, the Financial Accounting Standards Board issued SFAS No.
141, "Business Combinations" ("SFAS No. 141") and SFAS No. 142. SFAS No. 141
applies to all business combinations completed after June 30, 2001 and requires
the use of the purchase method of accounting. SFAS No. 141 also establishes new
criteria for determining whether intangible assets should be recognized
separately from goodwill. SFAS No. 142 is effective for fiscal years beginning
after December 15, 2001, however, companies with fiscal years beginning after
March 15, 2001 may elect to adopt the statement early. SFAS No. 142 provides
that goodwill and intangible assets with indefinite lives will not be amortized,
but rather will be tested for impairment on an annual basis. SFAS No. 141 is not
expected to have a significant impact on the results of operations or financial
position of Congoleum Corporation. SFAS 142 will be effective for the Company as
of January 1, 2002. While Congoleum has not fully evaluated the impact of
adopting SFAS 142, adoption of this standard is expected to result in the
elimination of approximately $0.4 million of goodwill amortization expense per
year.

      In August 2001, Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No.
144") was issued. Congoleum will adopt SFAS No. 144 effective January 1, 2002
when adoption is mandatory. Among other things, SFAS No. 144 significantly
changes the criteria that would have to be met to classify an asset as
held-for-sale. This statement supersedes Statement of Financial Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" and the provisions of Accounting Principles Board
Opintion 30, "Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions" that relate to reporting the effects of a
disposal of a segment of a business. The Company is currently assessing the
impact of adopting SFAS No. 144 on its combined financial statements.

      Some of the information presented in this report constitutes
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Although the Company believes that its
expectations are based on reasonable assumptions, within the bounds of its
knowledge of its business and operations, there can be no assurance that actual
results will not differ materially from its expectations. Factors that could
cause actual results to differ from expectations include: (i) increases in raw
material prices, (ii) increased competitive activity from companies in the
flooring industry, some of which have greater resources and broader distribution
channels than the Company, (iii) unfavorable developments in the national
economy or in the housing industry in general, (iv) shipment delays, depletion
of inventory and increased production costs resulting from unforeseen
disruptions of operations at any of the Company's facilities or distributors,
(v) the future cost and timing of payments associated with environmental,
product and general liability claims, and (vi) availability of insurance
coverage for resolving asbestos-related claims.


                                       16
<PAGE>

Item 3: Quantitative and Qualitative Disclosure About Market Risk

      The Company is exposed to changes in prevailing market interest rates
affecting the return on its investments but does not consider this interest rate
market risk exposure to be material to its financial condition or results of
operations. The Company invests primarily in highly liquid debt instruments with
strong credit ratings and short-term (less than one year) maturities. The
carrying amount of these investments approximates fair value due to the
short-term maturities. Substantially all of the Company's outstanding long-term
debt as of September 30, 2001 consisted of indebtedness with a fixed rate of
interest which is not subject to change based upon changes in prevailing market
interest rates. Under its current policies, the Company does not use derivative
financial instruments, derivative commodity instruments or other financial
instruments to manage its exposure to changes in interest rates, foreign
currency exchange rates, commodity prices or equity prices.


                                       17
<PAGE>

PART II. OTHER INFORMATION

      Item 1.  Legal Proceedings:  None
      Item 2.  Changes in Securities and Use of Proceeds:  None
      Item 3.  Defaults Upon Senior Securities:  None
      Item 4.  Submission of Matters to a Vote of Security Holders:  None
      Item 5.  Other Information:  None
      Item 6.  Exhibits and Reports on Form 8-K:  None


                                       18
<PAGE>

                              CONGOLEUM CORPORATION
                                    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.

                                   CONGOLEUM CORPORATION
                                        (Registrant)

Date: November 9, 2001             By: /s/  H. N. Feist III
                                       ---------------------------
                                              (signature)

                                   Howard N. Feist III
                                   Chief Financial Officer
                                   (Principal Financial & Accounting Officer)


                                       19