<PAGE>

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

                            ______________________

                                   FORM 10-K

[ X ]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934

       For the Fiscal Year Ended December 31, 2000

                                      OR

[   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

                        Commission File Number 0-27222

                            ______________________

                            CFC INTERNATIONAL, INC.
            (Exact name of Registrant as specified in its charter)

                    Delaware                               36-3434526
         (State or other jurisdiction of                (I.R.S. Employer
          incorporation or organization)              Identification Number)

   500 STATE STREET, CHICAGO HEIGHTS, ILLINOIS                60411
     (Address of Principal Executive Offices)               (Zip Code)

      Registrant's telephone number, including area code: (708) 891-3456

                            ______________________

       Securities registered pursuant to Section 12(b) of the Act:  None
          Securities registered pursuant to Section 12(g) of the Act:

                              Title of Each Class
                              -------------------

                    Common Stock, par value $.01 per share

                            ______________________

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 of 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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate market value of the voting stock of the registrant held by
stockholders who were not affiliates (as defined by regulations of the
Securities and Exchange Commission) of the registrant was approximately,
$18,620,369 at March 12, 2001 (based on the closing sale price on the Nasdaq
National Market on March 12, 2001.  At March 12, 2001, the registrant had issued
and outstanding an aggregate of 4,053,193 shares of Common Stock and 512,989
shares of Class B non-voting Common Stock.

                      Documents Incorporated by Reference

Those sections or portions of the registrant's proxy statement for the Annual
Meeting of Stockholders to be held in 2000, described in Part III hereof, are
incorporated by reference in this report.

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                                       1
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                                    PART I


ITEM 1.  BUSINESS

General

CFC International, Inc.  ("CFC" or the "Company") formulates, manufactures, and
sells chemically-complex, multi-layered functional coatings, which provide
superior performance under a wide range of operating conditions.  The Company
applies its proprietary coatings to rolls of plastic film from which its
customers transfer the coatings to their products for protective and informative
purposes.  The Company produces five primary types of coating products:
holographic products such as authentication seals used principally to certify
and protect the authenticity of proprietary products and documents susceptible
to counterfeiting and tampering and eye-catching holographic packaging; printed
coatings such as simulated wood grains for furniture and manufactured home
interiors; pharmaceutical pigmented coatings used as heat transfer printing
approved by the FDA for pharmaceutical products such as intravenous solution
bags; and security products such as magnetic stripes and signature panels for
credit cards and intaglio printing for stocks, bonds, and gift certificates. The
fifth type of product is specialty pigmented and simulated metal coatings used
on products such as beverage cases and cosmetics.  CFC is a leading supplier in
many of the worldwide markets it serves.

In March 1999, CFC acquired German specialty chemical coatings manufacturer
Oeserwerk KG, now called CFC Oeserwerk GmbH, together with its wholly-owned
French subsidiary, Oeser France S.A.R.L. now called CFC Oeser France S.A.R.L.
References in this report to "CFC Oeserwerk" are to these acquired businesses.

The Company's coatings are produced by milling pigments, solvents, and resins
into proprietary formulations, which combine multiple layers of custom coatings.
These coatings are designed to react with each other to create a composite solid
coating on a plastic film and are transferred off that film and onto the
customers' products.  The coatings are produced with a wide range of physical
and chemical characteristics and in a broad array of colors, patterns, and
surface finishes that are designed to meet specific customer functional
requirements.  The Company's research and development capabilities enable it to
create products specifically tailored to meet customers' requirements, such as
resistance to specific chemicals or abrasion, and to satisfy exacting design
criteria, such as sophisticated overt and covert (conspicuous and hidden)
holograms and simulated woodgrain and other patterns.  By using the Company's
products, customers also are able to address many of the problems manufacturers
confront in complying with increasingly restrictive environmental laws and
regulations because the customers avoid the use of liquid solvents and adhesives
otherwise needed to apply coatings to their products.

The Company is one of the leading designers and producers of holograms, which
are used to protect and authenticate brand name software and merchandise,
transportation and event tickets, and other similar applications requiring
protection against unauthorized copying or counterfeiting. The Company provides
eye-catching holographic packaging to major consumer product manufacturers. On
January 3, 2000 the Company acquired from Applied Holographics PLC, its previous
joint venture partner, the worldwide rights to certain holography technology
(see "-- Holographic Products"). Previously, the Company's market was limited to
North America. The Company also announced the formation of a division called CFC
Holographics on January 24, 2000 to focus resources on opportunities in the
worldwide holographic market. CFC is one of only a few companies worldwide with
the ability to serve all stages of the holographic production process, from
design to manufacturing, and is a supplier to Intel Corporation and Lucent
Technologies of holograms used to authenticate their respective products.  Sales
of products in this market represented approximately 19% of the Company's net
sales in 2000. See "-- Holographic Products."

A principal market which the Company serves is printed coatings for engineered
wood products ("Engineered Board") used to produce ready-to-assemble ("RTA")
furniture, kitchen cabinets, manufactured home interiors, value-priced
furniture, and picture frames.  The Company's coatings are designed to match or
improve on the appearance, texture, durability, and scratch, moisture, and stain
resistance of natural or painted wood.  The Company is one of only two
significant suppliers of printed coatings for the Engineered Board market.  This
market is growing rapidly throughout the world, as the environmental problems
associated with paints and stains and the cost and environmental consequences of
using solid wood are becoming more significant.  Sales of products in this
market represented approximately 26% of the Company's net sales in 2000.  See "-
- Chemical Coatings -- Printed Products."

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Another significant area for the Company's products is the pharmaceutical
industry, which includes heat transfer printing for intravenous solution bags
and other medical supplies.  The Company's products provide the pharmaceutical
industry with a reliable, environmentally-safe method of conveying crucial
medical information on surfaces on which printing is difficult.  The Company's
coatings for this market are used on FDA-approved products and are able to
survive the sterilization process without degradation.  The Company is one of
the most significant suppliers to this stable and growing market and is the sole
supplier to Baxter Healthcare Corporation for these products.  Sales of products
in this market represented approximately 13% of the Company's net sales in 2000.
See "-- Chemical Coatings -- Pharmaceutical Products."

The Company is also focusing its efforts on the market for security products for
transaction cards, which include credit cards, debit cards, identification
cards, and ATM cards.  The Company manufactures chemically reactive signature
panels and multi-coercivity magnetic stripes for transaction cards and other
documents and abrasion resistant tipping foils used to highlight the embossed
lettering of transaction cards.  The Company's coating products are used on
credit cards for MasterCard, VISA, and Diners Club International, to enhance the
security and processing speed of transaction cards. The Company also has ability
to manufacture intaglio printed documents such as stock certificates, bonds,
gift certificates and certificates of authenticity.  Sales of products in this
market represented approximately 12% of the Company's net sales in 2000. See "--
Chemical Coatings -- Security Products."

The Company also serves a variety of other consumer and industrial markets,
which take advantage of the special functional capabilities of the Company's
coatings.  These markets include the automobile battery and cosmetics markets,
which require acid and solvent resistant markings, and the consumer electronics
and appliances markets, which require special surface durability and resistance
to ultra-violet light degradation.  A new product offering in this area is a
foil, that is very receptive for printing inks for label and high-speed
printers.  This product category has grown as a result of the CFC Oeserwerk
acquisition.  Sales of products in this market represented approximately 30% of
the Company's net sales in 2000.  See "-- Chemical Coatings -- Specialty
Pigmented and Simulated Products."

CFC's products are sold to more than 5,000 customers worldwide.  The Company
generated approximately 49.0% of its 2000 revenues from sales outside of the
United States and has sales, warehousing, and finishing operations in the United
Kingdom, Germany and France.  The Company's margins and operating income result
from the Company's proprietary technologies and from the Company's focus on
quality. The Company received its International Standards Organization ("ISO")
9001 registration in June 1995, and was recently recertified in June 1999.  The
Company also passed its annual surveillance audit in July 2000.  The Company's
ISO 9001 certification provides assurance to the Company's customers that its
quality systems are consistently capable of providing products that meet the
customers' requirements.  The Company has demonstrated its commitment to quality
by providing zero-defect products.  The Company has continually emphasized the
importance of quality since successful implementation by the Company in 1989 of
the Phillip Crosby Total Quality Management ("TQM") Program. See "--
Manufacturing and Production."

The Company's executive offices are located at 500 State Street, Chicago
Heights, Illinois  60411 and its telephone number is (708) 891-3456.  References
to the Company in this report mean CFC International, Inc. and its consolidated
subsidiaries, unless the context requires otherwise.

Business Strategy

The Company plans to continue its "Growth Performance Program."  The objectives
of this program are to obtain a leading worldwide share in its markets, to be
the lowest cost producer, to continually improve efficiencies and quality, and
to deliver products that meet customers' requirements.  The Company seeks to
attain these goals and to increase its worldwide sales and profitability through
a strategy based on the following key elements:

Globalization.  Because the Company's existing and potential customers have
expanded the geographic markets in which they manufacture and sell their
products, management of the Company is increasing its focus on the international
demand for the Company's products.  Accordingly, the Company intends to increase
its worldwide sales distribution and manufacturing capabilities through
alliances with foreign manufacturing organizations in order to benefit from the
increasing globalization of the markets for the Company's products. In
furtherance of this strategy, in March 1999, the Company acquired CFC Oeserwerk,
based in Germany, and its French subsidiary, to penetrate the European market
with its products.  Also, in January 2000, the Company acquired worldwide rights
to manufacture and market certain holographic technology from an English joint
venture partner, expanding rights previously limited to North America.

Low-Cost Producer.  The Company plans to maintain and enhance its position as a
low-cost producer of transferable coatings by reducing and limiting its
manufacturing costs and by increasing the efficiency of the Company's
operations.  In this regard, the Company has an Employee Gain-Sharing Program
whereby employees are paid a portion of the annual cost savings that the Company
realizes.  The Company also continually modifies its manufacturing processes and
equipment to utilize more

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<PAGE>

efficiently the Company's production facilities and limit waste. During this
year, the Company continued to implement a Visual Process Control (VPC) system
to minimize non-productive areas, to minimize work in process between
manufacturing steps, which will result in decreasing the cycle time and
improving delivery to our customers. The Company began this project in the
fourth quarter of 1999.

Quality Products.  One of the Company's goals is to become a preferred supplier
for all of its customers, and management of the Company believes that
maintaining the highest levels in product and service quality are integral to
the achievement of that goal.  The Company strives to provide its customers with
zero-defect products.  In addition, the Company has obtained ISO 9001
registration from an approved ISO 9001 accreditation firm, which permits the
Company to offer certification programs to its customers, thereby eliminating
the need for the customers to make incoming inspections of the Company's
products.

Development of New Technology.  Management of the Company believes that a major
factor contributing to the Company's growth has been continued investment in
research and development.  Continued development of new products and processes
will be critical to keep abreast of the technology-driven changes in the needs
of the Company's customers and to maintain a competitive advantage over the
Company's competitors.  The Company's Research and Development department has
contributed to the development of formulae, proprietary know-how, modifications
to existing equipment, and specifications for both new equipment and new raw
materials.  Tangible results have included improved ease of coating application,
abrasion resistance, functionality and the expansion of the market for the
Company's holographic products.  The proprietary technology INFRAPRINT offers
significant advantages and improvement to allow credit cards to accept printing
inks for small custom runs.  The Company has also introduced an Inmold product
that permits for decorating in the mold while a part is being molded.  In 2000,
the Company introduced new products used in the cosmetic industry, which was a
combination of its existing technology with technology acquired with the CFC
Oeserwerk acquisition.

Overview of Products

The Company's principal product types include the following:

 .    Holographic Products include the Company's high-technology holograms used
     as security markings on products such as software packages and merchandise,
     transportation and event tickets, and other products susceptible to
     counterfeiting or tampering, as well as holographic images for packaging
     and other visual markets. The Company also has a patented, computer-
     generated dot-matrix process which produces minute juxtaposed holographic
     gratings resulting in a composite image with up to 60,000 individual
     holograms per square inch and which can include overt and covert data. The
     Company has also introduced AEGIS(TM) (Anti-Counterfeit Encrypted Graphic
     Image System), the Company's latest holographic development, a computer-
     based imaging system that offers significant advances and improvements over
     what the industry calls dot matrix holography.

 .    Printed Products include specialized functional coatings used primarily as
     an alternative to painting or using liquid laminates on wood substitutes
     and plastics. The most important markets for these products include
     engineered board products used in the RTA furniture market, kitchen and
     bath cabinets, factory-constructed housing interiors, value-priced
     furniture, window trim and moldings, picture frames, and the consumer
     electronics, automotive, and appliance markets. FLEXRITE(TM), our new
     value-added coating, applied by a membrane press adheres to the various
     surface elevations of profiled edges of medium-density fiberboard
     applications such as panel doors, and helps round out our offering to the
     furniture market. Its finish is comparable to wood, and it is less
     expensive and easier to apply than vinyl products, which saves our
     customers significant labor costs. FLEXWRAP(TM) wraps around arms, legs and
     pedestal parts of furniture parts made with medium density fiberboard.

 .    Pharmaceutical Products consist of specialized functional coatings for heat
     transfer printing on pharmaceutical products, such as intravenous solution
     bags, syringes, and other uses requiring non-toxic ingredients, adhesion
     during the sterilization process, and FDA approval.

 .    Security Products include tamper-evident signature panels and abrasion
     resistant tipping foils for transaction cards, as well as specialized
     multi-coercivity magnetic stripe products applied to both plastic
     transaction cards and disposable fibrous substrates, such as driver's
     licenses, student identification cards, airline tickets, mass-transit
     tickets, and telephone debit cards. This product line also includes
     intaglio printing used on documents such as stock certificates, bonds,
     birth certificates, gift certificates and certificates of authenticity.

 .    Specialty Pigmented and Simulated Metal Products. Specialty Pigmented
     Products include automobile batteries, cosmetics containers, industrial
     signage, and other markets requiring a particularly durable specialized
     functional coating. Specialty Simulated Metal Products include bright-
     simulated metal and reflective coatings used in the appliance, automotive,
     and cosmetic markets. Most of these coatings are produced with a state-of-
     the-art ultra-violet curing process,

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     which results in higher abrasion and chemical resistance. A new offering in
     this product category is foil which permits high-speed inkjet and laser
     printing to the surface foil.

Markets

The Company and its subsidiaries operate in a single business segment, which is
the formulating and manufacturing of chemically-complex, multi-layered
functional coatings.  The following table summarizes the Company's principal
markets and product applications:

<TABLE>
<CAPTION>
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                                                                                              % of CFC
                                                                                                Sales
       Market                         Application                Selected Customers              2000       Key Product Features
===================================================================================================================================
<S>                        <C>                                <C>                             <C>         <C>
Holographic Products       Authentication seals, trophies,    Intel, Xerox, AquaFresh,            19%     . Fully integrated
(product authentication,   point-of-purchase packaging,       Colgate, Crest, Keebler                       manufacturing process
high-end eye-catching      security labels                                                                . Authenticates products
packaging)                                                                                                . AEGIS
                                                                                                          . Patented dot matrix
-----------------------------------------------------------------------------------------------------------------------------------
Printed Products           RTA furniture (bedroom, office,    Sauder Woodworking, Hart            26%     . Superior lead times
(Engineered Board,         entertainment centers),            Furniture, LEA Industries,                  . Scratch/mar resistant
building products,         promotional furniture (hotel and   Charleswood, Cana, Inc.,                      finishes (Armorite
consumer electronics,      office), cabinets, manufactured    National Picture and Frame,                   Plus(TM)
home decorating,           home interiors, picture frames,    Ditta Manetti (Italy), Ashley               . Match to any pattern
trophies/awards)           award plaques, trophy bases        Furniture, Progressive                        or color
                                                              Furniture                                   . FLEXRITE(TM)
                                                                                                          . FLEXWRAP(TM)
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Pharmaceutical Products    Intravenous solution bags,         Baxter Healthcare, Abbott           13%     . Used on FDA approved
                           drainage bags, renal bags,         Labs, Sherwood Davise & Geck,                 products
                           syringes, pipettes, tubing         B. Braun Medical, C.R. Bard,                . Passes stringent
                                                              Fresenius, Bieffe Medital                     sterilization process
                                                                                                          . Does not offset
-----------------------------------------------------------------------------------------------------------------------------------
Security Products          Magnetic stripes, signature        Visa, MasterCard, Diners            12%     . High coercivity
(transaction cards,        panels, and indent and tipping     Club, Discover Card,                          magnetic stripe is
identification cards)      foils for credit cards, debit      Eurocard, American Express,                   durable (exceeds life
                           cards, ATM cards, access cards,    Sears, Novice, Pier One,                      of card)
                           driver's licenses, passports,      Brinker                                     . Reliable, few errors
                           intaglio printed security                                                      . Signature panels are
                           documents                                                                        tamper evident
                                                                                                          . Intaglio printed
                                                                                                            stocks, bonds birth
                                                                                                            certificates and
                                                                                                            gift certificates
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Specialty Pigmented        Beverage cases, industrial         Rubbermaid, Delco, Johnson          30%     . Scratch/mar resistant
and Simulated Metal        safety signs, battery cases,       Controls, Mattel, Revlon,                   . Chemical resistant
Products (injection        vent caps, spark plugs,            Gillette, Bic                               . Low-cost alternative
molded and extruded        dashboard inserts, tail lenses,                                                . Variety of colors
plastics)                  toys, cosmetic containers                                                      . Non-toxic
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Chemical Coatings

The manufacture of the Company's chemical functional coatings is a multi-step
process that involves pigments, solvents, and resins which are blended into one
of more than 2,500 proprietary formulations.  The first step in production is
the application

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of a release agent to a roll of plastic film carrier. The release agent allows
the coating to separate from the plastic film carrier during the application of
the coating by the customer to the customer's product. The plastic film carrier
is then deposited with either pigments or dyes to achieve the desired color,
pattern, and physical characteristics. These characteristics include resistance
to general abrasion, ultra-violet light exposure, contact with alcohol, exposure
to solvents and reactive household chemicals, contact with acids, size of area
to which the coating is applied, overstamping and adhesion characteristics, and
the surface to which the specialty coating is applied. The number and type of
coatings required are determined by the functional and visual requirements of
the product. Woodgrain products undergo a more extensive manufacturing process
because of the intricacies involved in aligning the patterns to create a design
during the coating process. Plated and simulated metal coatings require
additional treatment in a vacuum deposition chamber, in which a microscopically
thin coating of aluminum is deposited on the coating to give it its reflective
and bright metallic appearance.

Holographic Products

In early 1992, the Company entered into a joint venture partnership with Applied
Holographics PLC called "CFC Applied Holographics" (of which the Company now
owns 100.0%), to manufacture and market holographic products to customers based
in North America.  In January 2000 the Company purchased the worldwide rights to
this holographic technology for $3.6 million.

CFC Applied Holographics has given the Company the unique ability to produce
holographic art origination that involves a patented, computer-generated dot
matrix technology. The Company's proprietary holographic technology, AEGIS,
further enhances this dot matrix holography.  In addition, CFC Applied
Holographics has provided the Company with the capability to develop and compete
in a growing market for holographic coatings, which is a specialized type of
transferable coating embossed with a holographic image.  These holographic
products are used primarily for security-sensitive products for authentication,
anti-counterfeiting purposes, and for eye-catching point-of-purchase displays
and consumer packaging.

The Company originates its holograms at its holographic laboratory in
Countryside, Illinois, by creating a master image through a process utilizing
laser beams, mirrors, and lenses.  To produce a holographic master image, the
subject of the hologram, which can be either a live image, a three-dimensional
model, or flat artwork, is photographed using light from a laser beam that is
split and refracted at differing angles and reunited in an interference pattern
on a photographic plate.  The Company then uses this photographic plate to
create a metal plate or "shim" that is electro-magnetically grown from the
master image.  These metal plates are used to replicate the hologram by
embossing the holographic image on specially formulated transferable coatings
manufactured by the Company.

When a hologram is viewed from different angles, features of the depicted object
can be seen that would not be visible in a photograph.  Depending on the model
and technique used to make the master image, the holographic image can be made
to appear three-dimensional and to move as the viewing angle changes.

Holographic products represented approximately 17.4%, 15.8% and 19.4% of the
Company's net sales in the years ended December 31, 1998, 1999 and 2000
respectively.

Holograms and Security or "Product Authentication"

Holograms, which cannot be color-copied and are not readily made except by a
properly equipped holographic house, have established themselves as a premier
technology for defending against unauthorized copying or counterfeiting of
products.  Identification of an authentic hologram, when used as a security
device, is convenient and inexpensive and can also be done by sight without any
special machinery.  The Company is able to produce holograms that contain covert
images that are visible only with the aid of special devices and which are more
difficult to reproduce.  The high degree of technical skill and capital
investment required to replicate holograms acts as an obstacle to unauthorized
duplication, thereby making holograms useful as anti-counterfeiting and security
devices.  Holograms are widely used as a security device by computer software
and hardware companies, and entertainment event marketers, in addition to other
industries. For example, the Company supplies holograms used to authenticate
Intel Corp.'s Pentium(R) microprocessor.

CFC Applied Holographics' patented computer-generated dot matrix holographic
origination process is capable of producing tiny "dot" holograms at a coverage
rate of up to 60,000 dots per square inch.  Each individual dot hologram can be
oriented at any one of 256 different angles, thus creating juxtaposed
holographic cells that change when the viewing angle changes.  The Company has
discovered how to produce computer-developed overlapping images so that these
images appear as the viewer's angle-of-view changes.  The flexibility created by
the dot matrix process provides the Company with state-of-the-art

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holographic products that are both cost-effective and extremely intricate and,
as a result, difficult for competitors to generate products of comparable
quality and security orientation. The Company's proprietary holographic
technology, AEGIS, further enhances this dot matrix holography. AEGIS allows
micro precision dot placement, and varying dot sizes and shapes to be mixed
together to create very smooth, fine lines and extremely complicated arcs and
curves. AEGIS puts advanced security into dots-type holography, producing
features that are difficult to reproduce at any resolution.

Holographic Packaging Products

The visual appeal and uniqueness of holograms make them ideal for applications
on consumer products and point-of-purchase displays.  These include ribbons and
paper for gift packaging, and paper and plastic wrapping for packaging of food
and other products.  The Company's dot matrix technology results in holograms
with a brighter appearance and an enhanced depth of image.  In addition, the
Company's 60" wide coating and embossing capabilities give the Company a lower
cost structure, making holograms economically practical for these and additional
applications, and give the Company a broader market for holographic products.
An example of this type of product application is the Company's development of
holographic promotional packaging for Keebler and, on a continuing basis,
Aquafresh Whitening Toothpaste and Colgate Total toothpaste.

Printed Products

The Company's printed coatings are featured on numerous consumer products
manufactured by companies such as Ashley, Cana, Ditta Manetti (Italy), Hart, and
Sauder. Printed Products include Engineered Board coatings for RTA and
promotional furniture, picture frames, manufactured housing, and window
treatments. These products represented approximately 35.8%, 26.5% and 25.6% of
the Company's net sales in the years ended December 31, 1998, 1999 and 2000
respectively.

Engineered Board Coatings.  Engineered Board coatings are functional and
simulated patterned coatings including woodgrains, marbles, and granites used to
coat particleboard and medium density fiberboard.  A broad range of global
consumer markets utilize engineered wood for RTA furniture and other products
like trophies, awards, and plaques.  RTA furniture is designed to provide an
inexpensive alternative to traditional furniture and is a market which has
experienced especially strong growth in recent years.  It is shipped unassembled
from the factory to the store and is either assembled at the store before
purchase or later by the consumer.  RTA furniture products include home
entertainment centers, home theater systems, TV and VCR stands, bookcases, and
furniture designed to hold home-office equipment.  The Company recently
introduced FLEXRITE(TM), a new value-added coating for paneled cabinet doors and
products with profiled, rounded edges.  The Company is introducing a new
product, FLEXWRAP(TM).  This product wraps around arms, legs and pedestals of
furniture made from medium density fiberboard.

The Company's proprietary product Armorite Plus(TM) is an innovative coating
technology used in certain of the Company's printed products that provides
exceptional scratch and mar resistance while allowing the customer greater
manufacturing efficiency by increasing application speeds.  In addition,
Armorite Plus(TM) has provided customers with cost savings due to a reduction in
handling and shipping damage to their products.

Plastic Substrate Coatings.  Plastic substrate coatings manufactured by the
Company are used for similar visual and functional purposes as its Engineered
Board coatings and are used on appliances, windows, doors, vinyl sidings,
specialty window coatings and picture frames.

The fastest growing market for plastic substrate coatings is the plastic
building products market, which uses plastics for windows, doors, and vinyl
siding.  Plastics can be more cost effective than wood, especially in Asia and
Europe, and plastic exterior building products do not shrink or warp to the
degree that wood does and they are not susceptible to insect damage.  The two
principle challenges facing coatings for the plastic building products industry
are fade resistance and adequate adhesion.  CFC utilizes an erosion resistant
polyvinylidene fluoride polymer ("PVFP") system to produce one of the most fade
resistant coatings used in the industry.  The PVFP system also produces flexible
coatings, which allows for vacuum forming on plastics or post-forming on metal
treated surfaces without visible cracking of the coating.  CFC has also
developed unique adhesion characteristics, which have improved acceptance of
this coating in the marketplace.

Argents are a substitute for paint that is most recognizable as the metallic
black coating on many consumer electronics and the grillwork on automobiles.
Although this market is expanding worldwide, many of the Company's customers
have moved their manufacturing operations of these products offshore.  The
Company intends to take advantage of this trend by distributing these products
globally.

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Specialty window treatment coatings simulate the appearance of fabric rather
than wood or plastic.  CFC offers a wide variety of solid pigmented coatings and
printed patterns used by manufacturers of window treatments.  Use of the
Company's products allows the application of the specialty coating to be made at
the site of the plastic extrusion process, thereby reducing the manufacture of
specialty blinds from a multi-location process to a one-step process.  Use of
the Company's coatings also allows the manufacturers of window treatments to run
their production equipment at higher speeds and without the use of solvent-based
paints.

Pharmaceutical Products

A significant portion of the Company's pigmented coatings are designed for use
on pharmaceutical products.  Pigmented coatings used in the pharmaceutical
industry must meet rigid quality specifications, including use of non-toxic
ingredients, adhesion during the sterilization process, and FDA approval.  The
Company's attention to exacting standards, technology, industry expertise,
dedication to research and development, and quality assurance commitment has
ensured its position as the market leader of transferable pharmaceutical
coatings.

Typical applications for pharmaceutical coatings include intravenous solution
bags, blood bags, renal bags, drainage bags, tubing and disposable syringes.
CFC currently has highly detailed certification programs in place with large
pharmaceutical companies, which provide the Company with their specific
substrates and their exact usage requirements.  CFC establishes quality control
testing procedures to meet or exceed the customers' incoming quality control
requirements, and, therefore, saves its pharmaceutical customers considerable
time and labor costs on incoming inspections.

CFC is a "preferred supplier" to Baxter Healthcare Corporation worldwide.  This
means that CFC is one of only fifteen of Baxter's suppliers (out of 750 approved
suppliers) that meets Baxter's stringent standards for such designation.  In
order to attain "preferred supplier" status with Baxter, the Company was
required to deliver products to Baxter for a three-year period free of defects
in product quality, delivery procedures, and paperwork.  The Company has an
exclusive supplier's contract with Baxter, and Baxter has a majority market
share of the intravenous solution bags sold worldwide. This contract was renewed
for three years in March 2001.  It is one of the goals of CFC to achieve a
similar supplier relationship with other pharmaceutical companies that require
transferable coatings.  In this regard, the Company was named a "preferred
supplier" to Abbott Laboratories' Hospital Products Division ("Abbott") in 1994,
and has maintained that distinction.  The Company was also named a "certified
supplier" to Abbott's Montreal location in 1998.  Other manufacturers of
pharmaceutical products that the Company currently supplies include C.R. Bard,
Inc., B. Braun Medical, Kendall - Davise & Geck, Bieffe Medital and Fresenius.

Pigmented coatings used on pharmaceutical products represented approximately
17.5%, 13.8% and 13.0% of the Company's net sales in the years ended December
31, 1998, 1999 and 2000 respectively.

Security Products

Security Products are divided into four categories within CFC's core coatings
product line.  These are tamper-evident signature panels, multi-coercivity
magnetic stripe, high-abrasion indent and tipping foils, and intaglio printed
documents.

Signature panels are formulated for credit and transaction cards and are
designed to accept ballpoint pen ink directly on the signature panel.  If
tampering with the signature occurs, either through erasure or chemical
treatment, the coating on the signature panel will discolor.  This is a security
feature requested by companies such as American Express, Diners Club, Eurocard,
MasterCard, VISA, and Discover Card.

The market for these products is strong and is expected to continue to
experience growth.  The increasing use of promotional cards by VISA and
MasterCard, including airline mileage cards, automobile discount cards, and
other branded cards, is contributing to continued growth in the industry.  The
Company has been a major producer of tamper-evident signature panels since this
market first emerged and has developed and maintains its own library of print
cylinders for the signature panels for several companies.  CFC is a specified
supplier to VISA, MasterCard, Discover Card, Diners Club, and other leading
sponsors of transaction cards.

Multi-coercivity magnetic stripe products are coatings applied to plastic
transaction cards, either by a conventional heat transfer process, or by a
laminating process.  The Company's magnetic stripe product offers improved ease
of application and multi-coercivity (the amount of energy needed to encode
information onto the stripe).  The coercivity of a magnetic stripe determines
the resistance of the stripe to extraneous energy sources.  Magnetic stripes may
also be used in combination with "smart chips" to further enhance card security,
and not require a costly changeover in all reading device technology by
retailers.

                                       8
<PAGE>

Magnetic stripes increasingly are being used in new applications that require
both the conveyance of information and speed of processing, such as airline
tickets, mass-transit tickets, building access cards, passports, driver's
licenses, and telephone debit cards.  Because magnetic stripes are relatively
inexpensive, they can be applied to paper products and do not present the
environmental issues associated with solvent-based printing inks.  They are an
attractive alternative for disposable product applications.

High-abrasion tipping foils are coatings used to provide contrast between the
embossed letters and the surface on plastic cards.  They are offered in both
pigmented and metallized colors and enhance the readability and general
aesthetics of the card.

CFC-Northern Bank Note is an intaglio printer of high security documents such as
stock certificates, bonds, gift certificates, and certificates of authenticity.
In the intaglio printing process, ink is built onto the surface upon which the
printing is applied, and the ink is evident to the touch.

Security products represented approximately 19.7%, 13.2% and 11.6% of the
Company's net sales in the years ended December 31, 1998, 1999 and 2000
respectively.

Specialty Pigmented and Simulated Metal Products

The Company manufactures simulated metal coatings, which are used primarily on
plastic substrates.  They are produced in a wide array of bright metallic and
reflective colors such as gold, silver, chrome, bronze, copper, green, and other
colors.  The production of simulated metal coatings for plastics is a specialty
niche business because these coatings require enhanced abrasion and chemical
resistance characteristics.  CFC has developed an ultra-violet curing process
for simulated metal coatings that have demonstrably improved abrasion and
chemical resistance.  The Company has developed this process to meet the
increasing demand for higher abrasion and chemical resistant simulated metal
applications.

Key markets for the Company's simulated metal coatings include appliances,
automotive, cosmetics, specialty advertising, and they are used in improving
point-of-purchase sales.  These coatings are highly specialized and must be
specifically developed for the product or container on which they are to be
used.  For example, a coating used on a lipstick container may not be usable on
a perfume bottle.  Product applications that utilize the Company's pigmented
coatings include credit cards, blow molded bottles, automobile batteries,
automotive gauges, copier panels, garbage cans, industrial signage, golfing
accessories, housewares, lipstick tubes, mud flaps, pens, personal care
products, recycle bins, squeeze tube, and toys.

Specialty pigmented and simulated products represented approximately 9.6%, 30.7%
and 30.3% of the Company's net sales in the years ended December 31, 1998, 1999
and 2000 respectively.  The CFC Oeserwerk acquisition accounted for the
significant increase in sales of these products in 1999.  The market for
simulated metal coatings, particularly for use in graphics, is highly
competitive and has been experiencing generally declining gross margins.
Accordingly, the Company has determined to not actively pursue low margin
graphics business in this market.  Notwithstanding this decision, with the CFC
Oeserwerk acquisition this product line's volume has increased substantially
because the majority of CFC Oeserwerk's sales were in this category,
representing 25.2% of specialty pigmented and simulated metal sales for 2000.
The Company's strategy is to add technology to the Oeserwerk product line and
enhance the value of these products.

International Sales

The Company maintains offices, warehouse space, and finishing operations in the
United Kingdom, Germany and France.  In addition to sales made directly to
international customers by the Company's Regional Managers covering Europe,
Japan, Latin America, and Asia, the Company makes sales to customers around the
world through a network of fifty-two distributors.  The Company's markets have
seen a new globalization, and the Company plans to continue its emphasis on the
worldwide requirements of its customers and expanding overseas demand.

During the years ended December 31, 1998, 1999 and 2000, net sales to Europe,
the Pacific Rim, and other customers outside of the United States were
$15,128,000, $32,762,000 and $33,431,000, respectively, and represented
approximately 29.6%, 49.5% and 49.0%, respectively, of the Company's net sales.
The substantial increase in international sales in 1999 is due to CFC Oeserwerk,
which added $17,752,000 in international sales in 1999.  See Note 6 of the Notes
to the Consolidated Financial Statements.

Research and Development

                                       9
<PAGE>

Management believes that a major factor contributing to the Company's growth has
been continued investment in research and development.  The Company's Research
and Development department has contributed to the development of formulae,
proprietary know-how, modifications to existing equipment, and specifications
for both new equipment and new raw materials.  Tangible results have included
improved ease of coating application, abrasion resistance, and functionality and
the expansion of the market for the Company's holographic products. The recent
development of FLEXRITE(TM) for printed products allows the Company's customers
using engineered board to produce more ornate products that are more competitive
to real wood products.  The Company also develops original patterns, woodgrains,
and finishes that are engineered to meet customer-specific requirements.

The Company maintains a group of personnel that is dedicated to the creation of
new patterns, designs, colors, shades, and textures, including holographic
designs.  This includes an engineering and chemistry laboratory in Chicago
Heights that employs thirteen people.  In addition, the Company maintains an art
origination studio in Countryside, Illinois, that is dedicated to holographics
and which employs three persons who perform holographic research and
development, and the holographic optical research laboratory in Ventura,
California which employs two people.  In the years ended December 31, 1998, 1999
and 2000, the Company spent approximately $1,585,000, $2,022,000 and $2,745,000,
respectively, on research and development, of which $795,000, $571,000 and
$713,000, respectively, were for holographic research.

Customers in the markets served by CFC are in the midst of their own search for
technological breakthroughs that will contribute to low cost production and
expanded markets through new products and at the same time meet environmental
standards.  The Company is making substantial on-going investments in research
and development in an effort to assist its customers in the development of new
technology and products.  Examples include Inmold products for in mold
decorating, INFRAPRINT for custom credit card runs, and a new product for the
cosmetic industry, which is taking share from the entrenched Japanese supplier.

Marketing and Sales

As of December 31, 2000, the Company had 35 full time sales people serving over
5,000 existing customers.  Sales personnel include the Senior Vice President of
Sales and Marketing, who is responsible for the Americas and Pacific Rim, eight
Product Managers, four Regional Managers and twenty-two Field Sales Engineers
who are compensated on a salary plus commission basis.  The Managing Director of
the United Kingdom is responsible for all United Kingdom and African sales.  The
German Sales Manager is responsible for all German domestic sales.  The German
Sales Manager is also responsible for Middle Eastern sales.  The German Export
Manager is responsible for all Europe export sales from Germany.  There are
three Product Managers in Germany covering printed products, Inmold products,
pipe and cable products, plastic products, and Infraprint products. The final
Regional Manager is responsible for the Pacific Rim (except Japan) and South
America.  The Company's four domestic Product Managers are responsible for
printed products, holographic films and foils, intaglio printing and security
holography and security products including magnetic stripe and signature panels.
The majority of CFC's products are sold directly to original equipment
manufacturers who incorporate the Company's products into their own products.
In addition, limited use is made of a network of four distributors who service
small accounts in the United States and fifty-two distributors who service
international markets. The Japanese General Manager is responsible for Japan;
however, most Japanese sales are through a distributor.

The Company markets a combination of standard products and specialty items on a
minimum order basis, and most of the Company's sales are not pursuant to long-
term sales contracts.  Because most customers require prompt turnaround from
order to delivery, the Company does not have a material amount of backlog and
backlog comparisons are not indicative of sales trends at any given time.

The Company's three largest customers in 2000 were Baxter Healthcare, Ty, Inc.,
and Smurfit.  Sales made to Baxter are pursuant to a three-year, exclusive
provider contract, which was renewed in February 2000.  The agreement requires
the Company to supply all of Baxter's needs for transferable coatings at
specified prices, which may be adjusted to reflect changes in certain of the
Company's costs.  Sales to Baxter for each of 1998, 1999 and 2000, were
$5,829,000, $6,136,000 and $5,558,000, respectively. Sales to Ty, Inc. for each
of 1998, 1999 and 2000 were $461,285, $2,313,973 and $3,080,700, respectively.
Sales to Ty, Inc. are made on an individual purchase order basis. Sales to
Smurfit also are made on an individual purchase order basis, which is consistent
with Smurfit's policies. Sales to Smurfit for each of 1998, 1999 and 2000 were
$1,518,959, $2,406,166 and $2,919,900, respectively.

                                       10
<PAGE>

Manufacturing and Production

Much of the Company's machinery and equipment was engineered and developed by
the Company.  Technical manufacturing efficiencies allow the Company to maintain
high quality standards while producing products efficiently.  The Company's
introduction of a 60" wide holographic embosser has given the Company a
competitive advantage over the industry norm of 6" to 30" wide capabilities.
Management of the Company believes this significantly increases the potential
applications for holographic coating.  The Company installed a third 60" wide
state-of-the-art embosser, and a 30" state-of-the-art hard embosser in 2000,
that will enable it to double capacity and provide enhanced service to security
and packaging markets.

The Company obtained ISO 9001 registration from an approved ISO 9001
accreditation firm in June 1995, which permits the Company to offer
certification programs to its customers, thereby eliminating the need for the
customers to make incoming inspections of the Company's products and also
providing just-in-time inventory, reducing customers' inventory carrying costs.
The Company successfully reregistered in June 1999, and also successfully passed
a surveillance audit in June 2000.

ISO 9001 registration requires continuing compliance with a series of generic
standards that provide quality management direction as well as quality assurance
requirements and guidelines.  These standards were originally published in 1987
by the International Standards Organization.  The same standards apply to all
service and manufacturing companies.  To maintain ISO 9001 registration, a
company must not only meet the registration standards at the time of initial
registration, but also must meet them on an ongoing basis during annual
inspections. The Company successfully reregistered in June 1999, and also
successfully passed a surveillance audit in June 2000.  Compliance with the
registration standards provides assurance to customers that a company's quality
systems are consistently capable of providing products that meet the customers'
requirements.  Management of the Company believes that registration to one of
the ISO 9001 standards will be required in the future to sell products in the
European Union.  In addition, many United States customers, including the
Company's largest client, Baxter Healthcare Corporation and others, have
acknowledged the value of registration.

Product Protection

The Company's success is heavily dependent upon its proprietary formulae and
scientific and manufacturing know-how.  Accordingly, the Company relies upon
trade secrets and other unpatented proprietary information in its product
development.  All employees are parties to an employment agreement providing for
confidentiality and the assignment of invention rights to innovations developed
by them while employed by the Company.  There can be no assurance that these
types of agreements effectively will prevent disclosure of the Company's
confidential information.  In addition, the Company owns an U.S. patent on its
holographic computer-generated dot matrix origination process, which was issued
on March 1, 1994.

Competition

CFC competes with a number of companies in the transferable chemical coatings
industry.  The Company is aware of only one competitor, Leonhard Kurz & Co.
GmbH, which competes with the Company in most of the Company's markets.
Customer criteria for purchase of products include product quality, innovation
and engineering capability, price, availability, and service.  The Company
believes that it competes favorably on these factors.

Competitors range from small enterprises to divisions or subsidiaries of large
multi-national conglomerates with greater financial and management resources
than the Company.  CFC uses a partnership approach in its relations with its
major customers.  This gives partner customers preferential scheduling, priority
research and development, and personalized customer service.  Partner customers
agree to purchase not less than 80% of their requirements from CFC and to
furnish CFC with continuing long-term procurement projections.

The transferable chemical coatings industry not only requires specialized
knowledge and technology, but also is capital intensive, requiring expensive
difficult-to-construct and difficult-to-operate machinery and equipment to apply
the specialty chemicals on to the film carrier.  A production facility must also
comply with stringent federal, state, and local environmental laws and
regulations.

The Company competes with three significant producers of holographic products in
the United  States, two of which have greater financial and management resources
than the Company.  The Company believes that the principal factors affecting
competition are the basic design of the holograms, quick turnaround on art
origination, consistency of embossing, low-cost manufacturing, the quality and
brightness of the image, and competitive pricing.  The Company believes that it
competes favorably on these factors.

                                       11
<PAGE>

Raw Materials and Supplies

The Company is not dependent on any one supplier for any single raw material.
The Company's suppliers fall into three general groups:  suppliers of plastic
film that serve as the carrier for the Company's specialty coatings; suppliers
of chemicals; and suppliers of packaging materials.

The Company purchases from suppliers on a purchase order basis and,
consequently, has no long term supply contracts.  The Company has not been
materially affected by increases in raw material prices.  Management believes
that there are sufficient suppliers of plastic films, chemicals, and packaging
materials in the market to meet its requirements.

Governmental Regulation

The Company's operations are subject to federal, state, and local environmental
laws and regulations that impose limitations on the discharge of pollutants into
the air and water and establish standards for the treatment, storage, and
disposal of solid and hazardous wastes.  The Company has installed equipment and
procedures, which the Company believes result in controls substantially in
excess of those required for full compliance with applicable state and federal
environmental requirements.  To better control airborne environmental emissions,
the Company installed a stack and afterburner in 1992, at a cost of $1,014,000,
which is currently designated by EPA standards as Maximum Achievable Control
Technology and which, in tests observed as recently as December 1997 by the
Illinois EPA, resulted in a 100% capture and 99.6% destruction rate of the
airborne pollutants generated by the Company's manufacturing processes, greatly
exceeding the 81.0% EPA standard.  Because both technology and applicable laws
and regulations are evolutionary and subject to change, the Company cannot
predict with any certainty the investments and expenditures that it will be
required to make to comply with these changing laws and regulations.

Employees

As of December 31, 2000, the Company had approximately 378 full-time employees.
These included 188 in manufacturing, 71 in support services, 56 in marketing and
sales, 33 in research and development, and 30 in administration and management.
Only the Company's manufacturing employees in Germany are covered by collective
bargaining agreements.  The Company has never experienced a significant work
stoppage and considers its employee relations to be good.

ITEM 2.  PROPERTIES

The Company owns a 150,000 square foot building at 500 State Street in Chicago
Heights, Illinois which houses its corporate headquarters and its primary
manufacturing operations, and currently utilizes approximately 85% of the
building's capacity.  The Company's other principal properties are leased and
include the following:  a 28,000 square foot intaglio printing facility in
Countryside, Illinois; a 10,000 square foot warehouse in Chicago Heights; the
Company's 7,400 square foot optical laboratory, finishing, and warehouse
facility in Ventura, California; a 10,000 square foot warehouse, finishing, and
office facility in a suburb of London, England; a 4,800 square foot warehouse,
finishing and office facility in Paris, France; and a 109,000 square foot
manufacturing, warehouse, laboratory and office facility in Goppingen, Germany.
The Company considers its properties to be adequate to conduct its business for
the foreseeable future and believes that it will be able to acquire or lease
additional property, when needed, on terms acceptable to the Company.

ITEM 3.  LEGAL PROCEEDINGS

The Company's former parent corporation, Morton International, Inc. ("Morton"),
has been named by government environmental agencies as a "potentially
responsible party" with respect to environmental liabilities at the Fisher-Calo
Superfund Site in Kingsbury, Indiana (the "Fisher-Calo Site").  Morton and other
potentially responsible parties entered into a consent agreement in 1991 with
such agencies that provides for the remediation of the site, currently estimated
to cost approximately $40 million, and which allocates approximately 0.7% of the
remediation costs to Morton.  While the Company has been named a potentially
responsible party and a third-party defendant in the litigation relating to the
clean-up of the Fisher-Calo Site, U.S. v. David B. Fisher, et al, which is
pending in the U.S. District Court for the Northern District of Indiana, Morton
and the Company have reached an agreement whereby Morton and the Company will
share equally in the remediation cost that is ultimately determined to be
attributable to waste produced by the Company's predecessor.  Based upon such
agreement, the Company estimates that its portion of the remediation costs will
be approximately 0.35% of the total cost of remediation at the Fisher-Calo Site.
There is no assurance that remediation of the Fisher-Calo site can be
accomplished for $40 million.  However, the Company has an accrued liability of
$141,000 related to these matters at December 31, 2000, it is management's
opinion, based upon investigation of the quantities and types of waste and the
other parties involved, that the Company's share of any liability should not
substantially exceed that amount.  The adequacy of this reserve is reviewed
periodically as more definitive information becomes available.

                                       12
<PAGE>

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.


                                    PART II


ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's common stock, par value $.01 per share ("Common Stock"), is traded
in the Nasdaq National Market tier of The Nasdaq Stock Market ("Nasdaq"), under
the symbol "CFCI."  On December 31, 2000, the last reported sale price of the
Common Stock on the Nasdaq National Market was $4.63 per share.  At March 12,
2001, there were approximately 147 record holders of the Common Stock.  The
table below sets forth the high and low sales prices of shares of Common Stock
on the Nasdaq National Market as reported by Nasdaq for the periods indicated.

                              Market Information

                                                  Price per Share of
                                                     Common Stock
                                                  ------------------
                                                  High          Low
                                                  ----          ---

Year Ended December 31, 1999
   1st Quarter................................    11.00         8.00
   2nd Quarter................................    10.87         9.00
   3rd Quarter................................    11.00         8.37
   4th Quarter................................     8.56         6.00
Year Ended December 31, 2000
   1st Quarter................................     7.25         4.88
   2nd Quarter................................     9.00         4.75
   3rd Quarter................................     7.75         5.25
   4th Quarter................................     7.00         3.06

The Company intends to retain its earnings to finance its growth and for general
corporate purposes and therefore does not anticipate paying any cash dividends
in the foreseeable future.  The declaration and payment of any future dividends
will be subject to the discretion of the Board of Directors of the Company.  In
addition, the Company's bank credit facility prohibits the payment of cash
dividends.  See "Item 7.  Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."  Any
determination as to the payment of dividends in the future will depend upon
results of operations, capital requirements, restrictions in loan agreements, if
any, and such other factors as the Board of Directors may deem relevant at the
time.

                                       13
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

The selected financial data set forth below has been derived from the financial
statements of the Company.  The financial statements for each of the years in
the five-year period ended December 31, 2000, have been audited by
PricewaterhouseCoopers LLP, independent accountants, whose report for the years
ended December 31, 1998, 1999 and 2000 appears elsewhere in this report. This
selected financial data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the financial statements and related notes thereto appearing elsewhere in this
report.

<TABLE>
<CAPTION>
                                                                      Year Ended December 31,
                                                                      -----------------------
                                                    1996          1997          1998          1999         2000
                                                    ----          ----          ----          ----         ----
                                                               (In thousands, except per share data)
<S>                                                <C>           <C>           <C>           <C>         <C>
Income Statement Data:
Net sales.....................................     $37,227       $42,319       $51,047       $66,147      $68,240
Cost of sales.................................      22,985        26,063        31,914        44,714       46,136
                                                   -------       -------       -------       -------      -------
Gross profit..................................      14,242        16,256        19,133        21,433       22,104
Selling, general and administrative...........       7,863         8,846        10,415        14,738       16,807
Research and development......................       1,304         1,344         1,585         2,022        2,745
International consolidation expense...........           -             -             -             -          768
                                                   -------       -------       -------       -------      -------
Operating income..............................       5,075         6,066         7,133         4,673        1,784
Interest expense..............................         229           413           570         1,030        1,336
Other (income) expense........................          17           (65)          312           476          (54)
                                                   -------       -------       -------       -------      -------
Income before taxes and minority interest.....       4,829         5,718         6,251         3,167          502
Provision for income taxes....................       1,831         2,207         2,260           922          180
Minority interest in net income of
     CFC Applied Holographics (1).............          15           290           343             -            -
                                                   -------       -------       -------       -------      -------
Income from continuing operations.............       2,983         3,221         3,648         2,245          322
                                                   -------       -------       -------       -------      -------
Net income....................................     $ 2,983       $ 3,221       $ 3,648       $ 2,245      $   322
                                                   =======       =======       =======       =======      =======

Basic earnings per share (see Note 11 in
 financial statements)........................     $  0.66       $  0.71       $  0.82       $  0.49      $  0.07
Diluted earnings per share (see Note 11 in
 financial statements)........................     $  0.66       $  0.71       $  0.80       $  0.49      $  0.07

Other Data:
Capital expenditures..........................     $ 3,862       $ 3,319       $ 2,050       $ 2,958      $ 3,758
Depreciation and amortization.................       1,535         2,093         1,976         3,233        4,130
EBITDA (2)....................................       6,578         7,934         8,454         7,430        6,665

Balance Sheet Data (at period end):
Working capital...............................     $10,635       $12,993       $15,306       $15,076      $14,940
Total assets..................................      28,206        35,498        39,280        55,362       56,401
Total debt (3)................................       5,932         8,585        10,624        21,029       24,418
Stockholders' equity..........................      15,078        18,567        20,971        23,745       23,095
</TABLE>

__________________

(1)  The Company purchased the minority partners share on October 1, 1998.
(2)  EBITDA as used herein means earnings before interest expense, interest
     income, international consolidation expense, taxes, depreciation, and
     amortization and excludes minority interests.
(3)  Includes current and long-term portions of debt.

                                       14
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Overview

The Company formulates, manufactures, and sells chemically-complex, transferable
multi-layer coatings for use in many diversified markets such as furniture and
building products, pharmaceutical products, transaction cards (including credit
cards, debit cards, ATM cards, and access cards), intaglio printing and on
sophisticated embossable coatings for holographic packaging and authentication
seals.  The Company's net sales increased from $37.2 million in 1996 to $68.2
million in 2000.  Since 1996, the Company realized sales dollar growth in all of
its major product lines. The Company has experienced, and expects to continue
experiencing, shifts in the relative sales and growth of its various products
over time.  The Company believes that such shifts are in the ordinary course of
business and are indicative of its focus on specific niche markets. Holographic
products grew from 11.6% in 1996 to 19.4% of net sales in 2000, primarily due to
authentication sales and consumer products packaging. Printed products sales
declined from 39.3% in 1996 to 25.6% of net sales in 2000.  This decline as a
percentage is due to the growth in other product lines.  Sales of printed
products increased from $14.6 million in 1996 to $17.5 million in 2000, or an
increase of 19.9%.  Pharmaceutical products sales declined from 21.2% in 1996 to
13.0% of net sales in 2000 due to the growth of other product lines.  Actual
pharmaceutical product sales increased from $7.9 million in 1996 to $8.9 million
in 2000, or an increase of 12.7%.  Security products sales increased from 10.2%
in 1996 to 11.6% of net sales in 2000.  Specialty pigmented and simulated metal
products increased from $6.6 million in 1996 to $20.7 million, with the $17.2
million in sales in this category attributable to CFC Oeserwerk offset in part
by sales lost during 2000 as a result of the Company's decision not to actively
pursue smaller volume transactions.

The Company's gross profit reflects the application of all direct product costs
and direct labor, quality control, shipping and receiving, maintenance, process
engineering, plant management, and a substantial portion of the Company's
depreciation expense.  Selling, general and administrative expenses are
primarily composed of sales representatives' salaries and related expenses,
commissions to sales representatives, advertising costs, management compensation
and corporate audit and legal expense.  Research and development expenses
include salaries of technical personnel, related depreciation, and experimental
materials.

Results of Operations

The following table sets forth, for the periods indicated, certain items from
the Company's financial statements as a percentage of net sales for such
periods:

                                                        December 31,
                                                ----------------------------
                                                 1998       1999       2000
                                                 ----       ----       ----
Net sales...................................    100.0%     100.0%     100.0%
Cost of sales...............................     62.5       67.6       67.6
                                                -----      -----      -----
Gross profit................................     37.5       32.4       32.4
Selling, general and administrative.........     20.4       22.2       24.7
Research and development....................      3.1        3.1        4.0
International consolidation expense.........        -          -        1.1
                                                -----      -----      -----
Operating income............................     14.0        7.1        2.6
Interest expense and other..................      1.7        2.3        1.9
                                                -----      -----      -----
Income before taxes and minority interest...     12.2        4.8        0.7
                                                -----      -----      -----
Provision for income taxes..................      4.4        1.4        0.2
Minority interest...........................      0.7          -          -
Net income..................................      7.1%       3.4%       0.5%
                                                =====      =====      =====

                                       15
<PAGE>

2000 Compared to 1999

Net sales for the year ended December 31, 2000 increased 3.2% to $68.2 million
from $66.1 million for the year ended December 31, 1999. Holographic product
sales increased 27.0% to $13.2 million for the year ended December 31, 2000
compared to $10.4 million for the year ended December 31, 1999, primarily due to
the increase in sales of security labels to prevent counterfeiting and eye-
catching packaging.  Printed products sales decreased 0.4% to $17.46 million
from $17.53 million primarily due to a slow down in the manufactured housing
market offset partially by the Company's increase in market share.
Pharmaceutical product sales decreased 2.4% to $8.9 million from $9.1 million
primarily as a result of a competitive non-FDA approved product introduced in
Latin America and the adverse affect on sales due to weaker European currencies.
Security products (magstripe, signature panels, and tipping products for credit
cards and intaglio printed security documents) sales decreased 9.2% to $7.9
million from $8.8 million.  This decrease is due primarily to pricing pressures
in signature panel and magnetic stripes.  Sales of specialty pigmented and
simulated metal products increased 1.8% to $20.7 million from $20.3 million,
primarily due to the CFC Oeserwerk acquisition.

Gross profit for the year ended December 31, 2000 increased 3.1% to $22.1
million from $21.4 million for the year ended December 31, 1999.  The gross
profit margin for the year ended December 31, 2000 and for the year ended
December 31, 1999 was 32.4%.

Selling, general and administrative expenses for the year ended December 31,
2000 increased 14.0% to $16.8 million from $14.7 million for the year ended
December 31, 1999.  This increase is primarily due to the increase in selling,
general and administrative expenses attributable to having CFC Oeserwerk for the
full 12 months of 2000, compared to nine months in 1999. Selling, general and
administrative expenses for the year ended December 31, 2000 increased as a
percentage of net sales to 24.6% from 22.2% for the year ended December 31,
1999.

Research and development expenses for the year ended December 31, 2000 increased
35.8% to $2.7 million from $2.0 million for the year ended December 31, 1999.
The increase in research and development expense was primarily due to the CFC
Oeserwerk acquisition and additional research resources at the Company's
facility in Chicago Heights, Illinois.  Research and development expenses for
the year ended December 31, 2000 and December 31, 1999 as a percentage of net
sales were 4.0% and 3.1%, respectively.

International consolidation expense of $768,000 represents non-recurring
expense, principally severance, incurred for activities undertaken during the
third quarter of fiscal year 2000 to consolidate international operations.
Substantially all of these amounts were paid by December 31, 2000.

Operating income for the year ended December 31, 2000 decreased 61.8% to $1.8
million from $4.7 million for the year ended December 31, 1999.  Operating
income for the year ended December 31, 2000 decreased as a percentage of net
sales to 2.6% from 7.1% for the year ended December 31, 1999.  This decrease was
due to increased selling, general, and administrative expenses and non-recurring
international consolidation expense discussed above.

Interest and other expenses for the year ended December 31, 2000 decreased 14.8%
to $1.3 million from $1.5 million for the year ended December 31, 1999.  The
decrease in interest and other expense was a result of an increase in interest
expense resulted from the interest on loans outstanding to fund the CFC
Oeserwerk acquisition and interest on increased loans to fund operations offset
by non-recurring, non-operating European expenses incurred in 1999.

Income taxes for the year ended December 31, 2000 decreased 80.5% to $180,000
from $922,000 for the year ended December 31, 1999.  This was primarily the
result of a decrease in the Company's operating income.

Net income for the year ended December 31, 2000 decreased 85.7% to $322,000 from
$2.2 million for the year ended December 31, 1999.  This decrease was primarily
due to decreased gross profit as a percentage of net sales and an increase in
operating expenses discussed above.

                                       16
<PAGE>

1999 Compared to 1998

Net sales for the year ended December 31, 1999 increased 29.6% to $66.1 million
from $51.0 million for the year ended December 31, 1998. Holographic product
sales increased 17.1% to $10.4 million for the year ended December 31, 1999
compared to $8.9 million for the year ended December 31, 1998, primarily due to
the increase in sales of security labels to prevent counterfeiting.  Printed
products sales decreased 4.0% to $17.5 million from $18.2 million primarily due
to a slow down in the manufactured housing market.  Pharmaceutical product sales
increased 2.2% to $9.1 million from $8.9 million primarily as a result of Baxter
Healthcare's growth in Europe.  Security products (magstripe, signature panels,
and tipping products for credit cards and intaglio printed security documents)
sales decreased 12.9% to $8.8 million from $10.1 million.  This decrease is due
primarily to pricing pressures in signature panel and magnetic stripes, as well
as, a continued contraction in intaglio printed stocks and bonds as they are
being replaced by electronic forms of record keeping.  Sales of specialty
pigmented and simulated metal products increased 314.7% to $20.3 million from
$4.9 million, primarily due to the CFC Oeserwerk acquisition, which added $15.5
million in sales to this category.

Gross profit for the year ended December 31, 1999 increased 12.0% to $21.4
million from $19.1 million for the year ended December 31, 1998.  The gross
profit margin for the year ended December 31, 1999 decreased to 32.4% from 37.5%
for the year ended December 31, 1998.  The decrease in gross margin percentage
is primarily due to lower margins in Germany and France.  Although the Company
does not fully allocate all costs on a product line basis, the Company believes
that its gross profit margin typically is not substantially different for any of
its major product categories with the exception of the acquired CFC Oeserwerk
product line acquired in March 1999.

Selling, general and administrative expenses for the year ended December 31,
1999 increased 41.5% to $14.7 million from $10.4 million for the year ended
December 31, 1998.  This increase is primarily due to the increase in selling,
general and administrative expenses in connection with the CFC Oeserwerk
acquisition. Selling, general and administrative expenses for the year ended
December 31, 1999 increased as a percentage of net sales to 22.2% from 20.4% for
the year ended December 31, 1998.

Research and development expenses for the year ended December 31, 1999 increased
27.5% to $2.0 million from $1.6 million for the year ended December 31, 1998.
The increase in research and development expense was primarily due to the CFC
Oeserwerk research staff.  Research and development expenses for the year ended
December 31, 1999 and December 31, 1998 as a percentage of net sales were 3.1%.

Operating income for the year ended December 31, 1999 decreased 34.5% to $4.7
million from $7.1 million for the year ended December 31, 1998.  Operating
income for the year ended December 31, 1999 decreased as a percentage of net
sales to 7.1% from 14.0% for the year ended December 31, 1998.  This decrease
was due to lower gross profit as a percentage of net sales discussed above and
increased selling, general, and administrative expenses.

Interest and other expenses for the year ended December 31, 1999 increased 70.8%
to $1.5 million from $882,000 for the year ended December 31, 1998.  The
increase in interest expense resulted from the interest on loans outstanding to
fund the CFC Oeserwerk acquisition.

Income taxes for the year ended December 31, 1999 decreased 59.2% to $922,000
from $2.3 million for the year ended December 31, 1998.  This was primarily the
result of a decrease in the Company's operating income.

Net income for the year ended December 31, 1999 decreased 38.5% to $2.2 million
from $3.6 million for the year ended December 31, 1998.  This decrease was
primarily due to decreased gross profit as a percentage of net sales and an
increase in operating expenses in connection with the Oeserwerk acquisition.

                                       17
<PAGE>

Quarterly Results of Operations

The following table presents unaudited financial results for each of the eight
quarters in the period ended December 31, 2000.  This data has been prepared on
a basis consistent with the audited financial statements appearing elsewhere in
this report, and in the opinion of management, includes all necessary
adjustments (consisting only of normal recurring adjustments) required to
present fairly the unaudited consolidated quarterly results when read in
conjunction with the audited consolidated financial statements of the Company
and notes thereto appearing elsewhere in this report.  The results of operations
for any quarter are not necessarily indicative of results to be expected for any
future period.

<TABLE>
<CAPTION>
                                                                           Quarter Ended
                                       ----------------------------------------------------------------------------------
                                         Mar. 31   June 30   Sept. 30   Dec. 31   Mar. 31   June 30    Sept. 30   Dec. 31
                                           1999      1999       1999      1999      2000      2000       2000       2000
                                         -------   -------   --------   -------   -------   -------    -------    -------
<S>                                      <C>       <C>       <C>        <C>       <C>       <C>        <C>        <C>
Net sales..............................  $13,004   $17,967    $17,504   $17,672   $18,258   $17,801    $17,281    $14,900
Cost of sales..........................    8,263    12,160     11,486    12,805    11,375    11,176     12,126     11,459
                                         -------   -------    -------   -------   -------   -------    -------    -------
   Gross profit........................    4,741     5,807      6,018     4,867     6,883     6,625      5,155      3,441
Selling, general and administrative
   Expense (including R&D expense).....    3,160     4,157      4,629     4,814     5,174     5,184      4,711      4,483
International consolidation expense....        -         -          -         -         -         -        768          -
Operating income (loss)................    1,581     1,650      1,389        53     1,710     1,441       (324)    (1,042)
Interest expense.......................      150       312        313       255       294       243        301        497
Other expense (income).................       73       101        151       151       169       126         27       (376)
                                         -------   -------    -------   -------   -------   -------    -------    -------
Income (loss) before taxes and
   minority interest...................    1,358     1,237        925      (353)    1,246     1,072       (653)    (1,163)
Provision (benefit) for income taxes...      576       484        346      (484)      435       341       (210)      (386)
                                         -------   -------    -------   -------   -------   -------    -------    -------
Net income (loss)......................  $   782   $   753    $   579   $   131   $   811   $   731    $  (443)   $  (777)
                                         =======   =======    =======   =======   =======   =======    =======    =======

Percentage of Net Sales
Net sales..............................    100.0%    100.0%     100.0%    100.0%    100.0%    100.0%     100.0%     100.0%
Cost of sales..........................     63.5      67.7       65.6      72.5      62.3      62.8       70.2       76.9
                                         -------   -------    -------   -------   -------   -------    -------    -------
Gross profit...........................     36.5      32.3       34.4      27.5      37.7      37.2       29.8       23.1
Selling, general and administrative
   Expense (including R&D expense).....     24.3      23.1       26.4      27.2      28.3      29.2       31.7       30.1
                                         -------   -------    -------   -------   -------   -------    -------    -------
Operating income (loss)................     12.2       9.2        8.0       0.3       9.4       8.0       (1.9)      (7.0)
Interest expense.......................      1.2       1.7        1.8       1.4       1.6       1.4        1.7        3.3
Other expense (income).................      0.6       0.6        0.9       0.9       0.9       0.7        0.2       (2.5)
                                         -------   -------    -------   -------   -------   -------    -------    -------
Income (loss) before taxes and
   minority interest...................     10.4       6.9        5.3      (2.0)      6.8       6.0       (3.8)      (7.8)
Provision (benefit) for income taxes...      4.4       2.7        2.0      (2.7)      2.4       1.9       (1.2)      (2.6)
                                         -------   -------    -------   -------   -------   -------    -------    -------
Net income (loss)......................      6.0%      4.2%       3.3%      0.7%      4.4%      4.1%      (2.6%)     (5.2%)
                                         =======   =======    =======   =======   =======   =======    =======    =======
</TABLE>

The fourth quarter of 1999 includes a benefit for income taxes resulting from
net losses from operations, and the reversal of tax provisions previously
provided for operations incurring net losses for the year.  The third and fourth
quarters of 2000 include benefits for income taxes resulting from net losses
from operations, and the reversal of tax provisions previously provided for
operations incurring net losses for the year.

Liquidity and Capital Resources

The Company's primary sources of working capital have been net cash provided by
operating activities and net borrowings under various loan agreements.  Net cash
provided by operating activities were $6,169,000, $3,095,000 and $2,066,000 for
the years ended December 31, 1998, 1999 and 2000 respectively.  Cash at year-end
decreased $1,610,000 in the year ended December 31, 2000 as a result of cash
consumed in operations and cash used for investments in capital equipment and in
acquisition of worldwide business rights from Applied Holographics.

The Company's capital expenditures totaled approximately $2,050,000, $2,958,000
and $3,758,000 for the years ended December 31, 1998, 1999 and 2000
respectively.

                                       18
<PAGE>

The Company has used a variety of financing arrangements to fund the growth of
its business:

 .    To finance expansion of its primary production facility and related
     equipment purchases, in June 1996 the Company received $4,005,000 from the
     issuance of Illinois Industrial Development Bonds. The bonds bear interest
     at a floating rate not to exceed 12% (4.24% at December 31, 2000).
     Principal payments of $200,250 are due annually through 2007, and the
     principal balance of $1,802,250 will be due at maturity of the bonds on
     June 1, 2008.

 .    To finance the acquisition of its CFC-Northern Bank Note business, in
     September 1997 the Company issued the seller a ten year, 6% subordinated
     note in the principal amount of $3,000,000. The note is convertible into
     the Company's common stock at the option of the holder at $14.00 per share.

 .    In connection with the refinance of its owned property in November 1998,
     the Company paid off its then existing loan and mortgage and entered into a
     new five year loan and mortgage in the principal amount of $2,625,000, with
     an annual interest rate of 7.05%.

 .    To finance its acquisition of CFC Oeserwerk in March 1999, the Company
     entered into a term loan, and revolving loans in the aggregate principal
     amount of $9,525,000, with an annual interest rate of 5.0% - 8.0%.

 .    To finance the acquisition of the CFC Applied Holographic worldwide
     technology rights in January 2000, the Company entered into a term loan in
     the amount of $3,200,000, with an annual interest rate of 9.09%.

The Company and its subsidiaries have various revolving credit arrangements that
provide for maximum borrowings of approximately $16,000,000 as of December 31,
2000.  Under these revolving credit arrangements, interest is payable at either
the respective banks prime rate (9.50% and 8.50% at December 31, 2000 and 1999,
respectively) or 2% over the Bank of England's sterling base rate (5.50% at
December 31, 2000 and 1999, respectively).  The revolving credit arrangements
expire at various dates beginning in 2002.  The Company is required to pay a
quarterly fee for the unused portion on one of its facilities at an amount equal
to .25% times the daily average of the unused portion.  Those payments in 2000,
1999 and 1998 were not significant.

The Company believes that the net cash provided by operating activities and
amounts available under the Credit Facility are sufficient to finance the
Company's growth.  Additionally, the Company has been able to obtain financing
on normal commercial terms to fund acquisitions or major equipment purchases,
and anticipates it will continue to do so in the future.

Seasonality and Impact of Inflation

Historically, the Company has experienced lower net sales levels during the
fourth quarter and increased net sales levels during the following first
quarter.  This is due to typical year-end depletion of inventories by the
Company's customers.  It is also due in large part to the holidays at the end of
the year, as the Company's customers have an increased number of holiday plant
closings.  In addition, fourth quarter pharmaceutical product sales generally
are lower as a result of the postponement of elective surgeries during holiday
periods.  However, due to the strong growth of printed products for use in the
ready-to-assemble furniture market, fourth quarter sales have been generally
greater than third quarter sales in each of the previous years.  This is not
true this year because of the general softness in this market.

Inflation has not had a material impact on the Company's net sales or income to
date.  However, there can be no assurance that the Company's business will not
be affected by inflation in the future.

Recent Accounting Pronouncements

In 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities" which requires
recognition of all derivative instruments in the statement of financial position
as either assets or liabilities, measured at fair value, and is effective for
all fiscal quarters of fiscal years beginning after June 15, 2000.  This
statement additionally requires changes in the fair value of derivatives to be
recorded each period in current earnings or comprehensive income depending on
the intended use of the derivatives.  The Company is currently assessing the
impact of this statement on its results of operations, financial position and
cash flows.

                                       19
<PAGE>

Special Note on Forward-Looking Statements

The Company believes that certain statements contained in this report and in the
future filings by the Company with the Securities and Exchange Commission and in
the Company's written and oral statements made by or with the approval of an
authorized executive officer that are not historical facts constitute "forward-
looking statements" within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934, and the Company
intends that such forward-looking statements be subject to the safe harbors
created thereby.

The words and phrases "looking ahead," "is confident," "should be," "will,"
"predicted," "believe," "plan," "intend," "estimates," "likely," "expect" and
"anticipate" and similar expressions identify forward-looking statements.

These forward-looking statements reflect the Company's current views with
respect to future events and financial performance, but are subject to many
uncertainties and factors relating to the Company's operations and business
environment which may affect the accuracy of forward-looking statements and
cause the actual results of the Company to be materially different from any
future results expressed or implied by such forward-looking statements.  As a
result, in some future quarter the Company's operating results may fall below
the expectations of securities analysts and investors. In such an event, the
trading price of the Company's common stock would likely be materially and
adversely affected. Many of the factors that will determine results of
operations are beyond the Company's ability to control or predict.

Some of the factors that could cause or contribute to such differences include:

 .    Changes in economic and market conditions that impact market growth trends
     or otherwise impact the demand for the Company's products and services;

 .    Risks inherent in international operations, including possible economic,
     political or monetary instability and its impact on the level and
     profitability of foreign sales;

 .    Uncertainties relating to the Company's ability to consummate its business
     strategy, including the unavailability of suitable acquisition candidates,
     or the Company's inability to finance future acquisitions or successfully
     realize synergies and cost savings from the integration of acquired
     businesses;

 .    Changes in raw material costs and the Company's ability to adjust selling
     prices;

 .    The Company's reliance on existing senior management and the impact of the
     loss of any of those persons or its inability to continue to identify, hire
     and retain qualified management personnel;

 .    Uncertainties relating to the Company's ability to develop and distribute
     new proprietary products to respond to market needs in a timely manner and
     the Company's ability to continue to protect its proprietary product
     information and technology;

 .    The Company's reliance on a small number of significant customers;

 .    Uncertainties relating to the Company's ability to continue to compete
     effectively with other producers of specialty transferable coatings and
     producers of alternative products with greater financial and management
     resources; and

 .    Control of the Company by a principal stockholder.

The risks included here are not exhaustive. Other sections of this report may
describe additional factors that could adversely impact our business and
financial performance. Moreover, we operate in a very competitive and rapidly
changing environment. New risk factors emerge from time to time and it is not
possible for us to predict all such risk factors, nor can we assess the impacts
of all such risk factors on our business or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statements. Given these risks and
uncertainties, investors should not place undue reliance on forward-looking
statements as a prediction of actual results.

We have no obligation to revise or update these forward-looking statements to
reflect events or circumstances that arise after March 20, 2001 or to reflect
the occurrence of anticipated events.

                                       20
<PAGE>

Investors should also be aware that while we do, from time to time, communicate
with securities analysts, it is against our policy to disclose to them any
material non-public information or other confidential commercial information.
Accordingly, investors should not assume that we agree with any statement or
report issued by any analyst irrespective of the content of the statement or
report. Thus, to the extent that reports issued by securities analysts contain
any projections, forecasts or opinions, such reports are not our responsibility.

Quantitative and Qualitative Disclosures about Market Risk

The Company does not use derivative financial instruments to address interest
rate, currency, or commodity pricing risks.    The following methods were used
to estimate the fair value of each class of financial instruments held by the
Company for which it is practicable to estimate that value. The carrying amount
of cash equivalents approximates fair value because of the short maturity of
those instruments.  The estimated fair value of accounts receivable approximated
its carrying value at December 31, 2000 and 1999 based upon analysis of their
collectibility and net realizable value.  The estimated fair value of the
Company's long-term debt approximated its carrying value at December 31, 2000
and 1999 based upon market prices for the same or similar type of financial
instrument.

                                       21
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                         Page
                                                                                                         -----
<S>                                                                                                      <C>
Report of Independent Accountants.....................................................................    23

Consolidated Balance Sheets at December 31, 2000 and 1999.............................................    24

Consolidated Statements of Income for the years ended December 31, 2000, 1999 and 1998................    25

Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998............    26

Consolidated Statements of Stockholders' Equity for the years ended December 31, 2000, 1999 and 1998..    27

Notes to Consolidated Financial Statements............................................................    28-37

Financial Statement Schedule

Schedule II -- Valuation and Qualifying Accounts......................................................    43
</TABLE>

                                       22
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Shareholders
CFC International, Inc.

In our opinion, the consolidated financial statements listed in the accompanying
index on page 22 present fairly, in all material respects, the financial
position of CFC International, Inc., and its subsidiaries at December 31, 2000
and 1999, and the results of their operations and their cash flows, for each of
the three years in the period ended December 31, 2000, in conformity with
accounting principles generally accepted in the United States of America.  In
addition, in our opinion, the financial statement schedule listed in the
accompanying index on page 22 presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.  These financial statements and the financial
statement schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and the
financial statement schedule based on our audits.  We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.


PricewaterhouseCoopers LLP


Chicago, Illinois
February 15, 2001

                                       23
<PAGE>

                            CFC INTERNATIONAL, INC.
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                                 -----------------------------
                                                                                    2000              1999
                                                                                    ----              ----
<S>                                                                              <C>               <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..................................................      $   298,871       $ 1,908,989
Accounts receivable, less allowance for doubtful accounts
    of $537,000 and $1,209,000 respectively................................       10,522,503        11,263,452
Employee receivable........................................................           37,083            37,083
Inventories (Note 1):
    Raw materials..........................................................        3,379,534         2,556,769
    Work in process........................................................        1,442,497         1,576,822
    Finished goods.........................................................        6,251,791         6,253,805
                                                                                 -----------       -----------
                                                                                  11,073,822        10,387,396
Prepaid expenses and other current assets..................................          276,788         1,778,477
Deferred income taxes......................................................        2,806,060         1,437,266
                                                                                 -----------       -----------
    Total current assets...................................................       25,015,127        26,812,663
                                                                                 -----------       -----------
Property, plant and equipment, net (Notes 1 and 3).........................       26,402,365        26,558,177
Other assets (Note 2)......................................................        4,983,729         1,991,158
                                                                                 -----------       -----------
Total assets...............................................................      $56,401,221       $55,361,998
                                                                                 ===========       ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt (Note 4).................................      $ 3,384,173       $ 3,112,681
Accounts payable...........................................................        2,563,536         2,545,831
Accrued environmental liability (Note 13)..................................          140,011           244,937
Accrued bonus..............................................................          141,921           177,809
Accrued vacation...........................................................          654,665           617,752
Accrued expenses and other current liabilities.............................        3,190,682         5,037,582
                                                                                 -----------       -----------
    Total current liabilities..............................................       10,074,988        11,736,592
                                                                                 -----------       -----------
Deferred income taxes......................................................        2,197,160         1,963,346
Long-term debt (Note 4)....................................................       21,033,717        17,916,770
                                                                                 -----------       -----------
    Total liabilities......................................................       33,305,865        31,616,708
                                                                                 -----------       -----------

CONTINGENCIES (Note 13)....................................................
STOCKHOLDERS' EQUITY:
Voting Preferred Stock, par value $.01 per share, 750 shares authorized,
    no shares issued and outstanding.......................................                -                 -
Common stock, $.01 par value, 10,000,000 shares authorized; 4,423,595
    and 4,392,700 shares issued at December 31, 2000 and 1999
    respectively...........................................................           44,039            43,927
Class B common stock, $.01 par value, 750,000 shares authorized;
    512,989 shares issued and outstanding at December 31, 2000
    and 1999...............................................................            5,130             5,130
Additional paid-in capital.................................................       11,784,084        11,607,695
Retained earnings..........................................................       14,547,001        14,225,154
Accumulated other comprehensive income.....................................       (1,513,407)         (503,445)
                                                                                 -----------       -----------
                                                                                  24,866,847        25,378,461
Less 374,746 and 353,346 treasury shares of common stock, at cost at
    December 31, 2000 and 1999 respectively................................       (1,771,491)       (1,633,171)
                                                                                 -----------       -----------
                                                                                  23,095,356        23,745,290
                                                                                 -----------       -----------
    Total liabilities and stockholders' equity.............................      $56,401,221       $55,361,998
                                                                                 ===========       ===========
</TABLE>

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

                                       24
<PAGE>

                            CFC INTERNATIONAL, INC.

                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                                                 December 31,
                                                               ------------------------------------------------
                                                                  2000               1999              1998
                                                                  ----               ----              ----
<S>                                                            <C>                <C>               <C>
Net sales..................................................    $68,239,646        $66,147,299       $51,047,399
Cost of goods sold.........................................     46,136,094         44,714,285        31,914,511
                                                               -----------        -----------       -----------
Gross profit...............................................     22,103,552         21,433,014        19,132,888
                                                               -----------        -----------       -----------
Marketing and selling expenses.............................      7,953,221          7,048,868         5,544,129
General and administrative expenses........................      8,853,295          7,689,424         4,871,277
Research and development expenses..........................      2,744,787          2,021,555         1,585,458
International consolidation expense........................        768,000                  -                 -
                                                               -----------        -----------       -----------
                                                                20,319,303         16,759,847        12,000,864
Operating income...........................................      1,784,249          4,673,167         7,132,024
Other expenses (income):
     Interest..............................................      1,336,022          1,029,755           569,573
     Miscellaneous expense (income)........................        (53,609)           475,881           311,823
                                                               -----------        -----------       -----------
                                                                 1,282,413          1,505,636           881,396
                                                               -----------        -----------       -----------
Income before income taxes and minority interest...........        501,836          3,167,531         6,250,628
Provision for income taxes (Note 5)........................        179,989            922,219         2,259,607
                                                               -----------        -----------       -----------
                                                                   321,847          2,245,312         3,991,021
Minority interest in income of CFC Applied Holographics....              -                  -          (343,029)
                                                               -----------        -----------       -----------
Net income.................................................    $   321,847        $ 2,245,312       $ 3,647,992
                                                               ===========        ===========       ===========
Basic earnings per share (Note 11):
     Net income per share..................................    $      0.07        $      0.49       $      0.82
Diluted earnings per share (Note 11):
     Net income per share..................................    $      0.07        $      0.49       $      0.80
</TABLE>


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

                                       25
<PAGE>

                            CFC INTERNATIONAL, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                             December 31,
                                                                           ------------------------------------------------
                                                                               2000              1999              1998
                                                                               ----              ----              ----
<S>                                                                        <C>               <C>               <C>
Cash flow from operating activities:
     Net income.....................................................       $   321,847       $ 2,245,312       $ 3,647,992
       Adjustments to reconcile net income to net cash provided
         by operating activities:
           Depreciation and amortization............................         4,129,701         3,233,021         1,976,173
           Deferred income taxes....................................        (1,134,980)         (715,218)          (91,667)
           Minority interest in CFC Applied Holographics............                 -                 -           343,029
           Changes in assets and liabilities:
             Accounts receivable....................................           (43,514)          868,925        (1,204,670)
             Inventories............................................        (1,230,074)        1,248,918         1,139,256
             Employee receivable....................................                 -            (2,937)          108,367
             Prepaid expenses and other current assets..............         1,605,694        (1,112,672)         (178,732)
             Accounts payable.......................................            55,346        (2,255,535)         (906,094)
             Accrued bonus..........................................           (24,185)         (371,779)          476,446
             Accrued vacation.......................................            36,913            58,462           254,684
             Accrued expenses and other current liabilities.........        (1,650,641)         (101,028)          603,856
                                                                           -----------       -----------       -----------
Net cash provided by operating activities...........................         2,066,107         3,095,469         6,168,640
                                                                           -----------       -----------       -----------
Cash flows from investing activities:
     Additions to property, plant and equipment.....................        (3,757,789)       (2,957,717)       (2,049,902)
     Cash invested in acquired business.............................                 -        (4,090,210)                -
     Cash paid to acquire worldwide holographic business rights.....        (3,532,659)                -                 -
                                                                           -----------       -----------       -----------
Net cash used in investing activities...............................        (7,290,448)       (7,047,927)       (2,049,902)
                                                                           -----------       -----------       -----------
Cash flows from financing activities:
     Proceeds from Oeser term loan..................................                 -         4,457,100                 -
     Repayments of Oeser term loan..................................                 -        (8,055,000)                -
     Proceeds from revolving credit agreements......................         2,650,000         5,321,313           127,530
     Repayments of revolving credit agreements......................        (1,150,000)                -                 -
     Proceeds from term loans.......................................         3,938,816                 -         2,625,000
     Repayment of term loans........................................        (1,750,577)         (811,008)       (1,991,005)
     Repayment of IRB...............................................          (200,250)         (200,250)         (200,250)
     Repayment of capital lease.....................................           (42,065)         (187,601)          (70,596)
     Minority interest payments.....................................                 -                 -                99
     Proceeds from issuance of common stock.........................            64,514            72,049            86,369
     Distributions to stockholders..................................                 -                 -          (645,495)
     Repurchase of shares...........................................          (138,320)         (242,000)         (445,120)
                                                                           -----------       -----------       -----------
Net cash provided (used in) by financing activities.................         3,372,118           354,603          (513,468)
                                                                           -----------       -----------       -----------
Effect of exchange rate changes on cash and cash equivalents........           242,105            72,249           (11,745)
                                                                           -----------       -----------       -----------

Increase (decrease) in cash and cash equivalents....................        (1,610,118)       (3,525,606)        3,593,525

Cash and cash equivalents:
     Beginning of period............................................         1,908,989         5,434,595         1,841,070
                                                                           -----------       -----------       -----------
     End of period..................................................       $   298,871       $ 1,908,989       $ 5,434,595
                                                                           ===========       ===========       ===========
</TABLE>


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

                                       26
<PAGE>

                            CFC INTERNATIONAL, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                         Accumu-
                                                                                         lated
                                                                                          other                        Total
                                                   Class B    Additional                 compre-                       stock
                                          Common    common     paid-in     Retained      hensive        Treasury      holders'
                                           stock    stock      capital     earnings       income          stock       equity
                                           -----    -----      -------     --------       ------          -----       ------
<S>                                       <C>      <C>       <C>          <C>          <C>            <C>           <C>
Balance at December 31, 1997..........    $42,182   $5,182   $10,464,985  $ 8,331,850  $   (86,160)   $  (190,713)  $18,567,326

Comprehensive income:
   Net income.........................                                      3,647,992                                 3,647,992
   Foreign currency translation
     adjustment.......................                                                    (130,692)                    (130,692)
                                          -------   ------   -----------  -----------  -----------    -----------   -----------
Total comprehensive income............                                      3,647,992     (130,692)                   3,517,300
Employee stock purchases..............         82                 86,281                                                 86,363
Exercise of options...................         17                     88                                                    105
Repurchase of shares..................                                                                 (1,200,458)   (1,200,458)
                                          -------   ------   -----------  -----------  -----------    -----------   -----------
Balance at December 31, 1998..........     42,281    5,182    10,551,354   11,979,842     (216,852)    (1,391,171)   20,970,636

Comprehensive income:
   Net income.........................                                      2,245,312                                 2,245,312
   Foreign currency translation
     adjustment.......................                                                    (286,593)                    (286,593)
                                          -------   ------   -----------  -----------  -----------    -----------   -----------
Total comprehensive income............                                      2,245,312     (286,593)                   1,958,719
Employee stock purchases..............         94                 71,955                                                 72,049
Shares issued for Oeser acquisition...      1,000                876,600                                                877,600
Restricted shares issued..............        500                107,786                                                108,286
Repurchase of shares..................                                                                   (242,000)     (242,000)
Reclassify shares.....................         52      (52)                                                                   -
                                          -------   ------   -----------  -----------  -----------    -----------   -----------
Balance at December 31, 1999..........     43,927    5,130    11,607,695   14,225,154     (503,445)    (1,633,171)   23,745,290
Comprehensive income:
   Net income.........................                                        321,847                                   321,847
   Foreign currency translation
     adjustment.......................                                                  (1,009,962)                  (1,009,962)
                                          -------   ------   -----------  -----------  -----------    -----------   -----------
Total comprehensive income............                                        321,847   (1,009,962)                    (688,115)
Employee stock purchases..............        112                 64,402                                                 64,514
Repurchase of shares..................                                                                   (138,320)     (138,320)
Vesting of restricted shares issued...                           111,987                                                111,987
                                          -------   ------   -----------  -----------  -----------    -----------   -----------
Balance at December 31, 2000..........    $44,039   $5,130   $11,784,084  $14,547,001  $(1,513,407)   $(1,771,491)  $23,095,356
                                          =======   ======   ===========  ===========  ===========    ===========   ===========
</TABLE>


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

                                       27
<PAGE>

                            CFC INTERNATIONAL, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1.  Nature of Business and Significant Accounting Policies

Nature of business and principles of consolidation.  CFC International, Inc.
(the "Company") formulates, manufactures and sells chemically complex, multi-
layered functional coatings and sophisticated holographic technologies.  Its
customers are primarily companies in the consumer products and medical supply
industries.  One pharmaceutical customer accounted for approximately 9, 8, and
11 percent of net sales during 2000, 1999 and 1998, respectively.  The Company
has no significant concentrations of credit risk.

All significant intercompany transactions have been eliminated.  For purposes of
description, all financial statements are referred to as "consolidated."
Certain prior year amounts have been reclassified to conform to current year
presentation.

Cash and cash equivalents.  The Company considers all highly liquid investments
with an original maturity of three months or less which are readily convertible
into cash to be cash equivalents.

Inventories.   Inventories are stated at the lower of cost or market, cost being
determined on the first-in, first-out (FIFO) basis.  Inventory cost includes
cost of raw material, labor and overhead.

Property, plant, and equipment.  Property, plant, and equipment are recorded at
cost.  The straight-line method is used to compute depreciation for financial
reporting purposes.  Major improvements and betterments are capitalized while
maintenance and repairs that do not extend the useful life of the applicable
assets are expensed as incurred.  If the carrying value of an asset, including
associated intangibles, exceeds the sum of estimated undiscounted future cash
flows, then an impairment loss is recognized for the difference between the
estimated fair value and carrying value.

Research and development costs.  All research and development costs are expensed
as incurred.

Revenue recognition.  Revenue is recognized when products are shipped.

Foreign currency translation.  The functional currencies of all foreign
operations are their local currencies.  The balance sheets of these entities are
translated at year-end rates of exchange and their results of operations at
weighted average rates of exchange for the year. Translation adjustments
resulting from this process are recorded directly in stockholders' equity and
will be included in the determination of net income only upon sale or
liquidation of the entities, which is not contemplated at this time.

Earnings per share. See Note 11 for computation of basic and diluted earnings
per share.

SFAS No. 123. The Company has adopted the "disclosure method" provisions of
Statement of Financial Accounting Standards (SFAS No. 123) "Accounting for
Stock-Based Compensation."  As permitted by SFAS No. 123, the Company continues
to recognize stock-based compensation costs under the intrinsic value base
method prescribed by Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," and related Interpretations.

Fair value of financial instruments.  As of December 31, 2000, 1999, and 1998,
the carrying amount of the Company's financial instruments approximates their
estimated fair value based upon market prices for the same or similar type of
financial instrument.

Comprehensive income. In accordance with Statement of Financial Accounting
Standards SFAS No. 130, the Company reports comprehensive income and its
components in the Statement of Stockholders' Equity.

Pervasiveness of estimates.  The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements, as well as the reported amounts of revenues and
expenses during the reporting period.  Actual results could differ from these
estimates.

                                       28
<PAGE>

Other Assets.  Other assets include $1.5 million which represents the excess of
cost over the fair value of net assets of businesses acquired at December 31,
2000 and 1999, and $3.6 million represents the acquisition of certain
holographic worldwide rights at December 31, 2000 (Note 2).  Accumulated
amortization amounted to $895,301 and $529,954 at December 31, 2000 and 1999,
respectively.  Amortization expense was $365,347, $159,837, and $160,117 in
2000, 1999, and 1998, respectively. Intangibles are amortized on a straight-line
basis over periods of up to 15 years.

Statement of cash flows.


                           SUPPLEMENTAL DISCLOSURES

<TABLE>
<CAPTION>
                                                        For Year Ended December 31,
                                                  ----------------------------------------
                                                     2000            1999         1998
                                                     ----            ----         ----
<S>                                               <C>            <C>
Cash paid during the year for:
  Interest paid................................   $1,336,529     $ 1,088,092    $  471,270
  Income taxes paid............................    1,005,580       2,180,755     1,511,000
Non-cash investing and financing activities:
  Assumption of debt and issuance of
   securities for acquisition..................            -      16,800,000             -
</TABLE>

Note 2.  Acquisitions

On March 19, 1999, the Company acquired substantially all of the assets and
assumed substantially all of the liabilities of Oeserwerk KG for approximately
$20.8 million including cash, issuance of common shares, direct costs and
assumption of debt.  Oeserwerk formulates and manufactures chemically complex,
multi-layered functional coatings including printed woodgrain patterns,
simulated metal and pigmented products for the graphics and bookbinding
industries.  The total purchase price, plus liabilities assumed was allocated
$9.4 million to property, plant, and equipment and $11.4 million to net current
assets.  Severance liabilities of $0.6 million were recorded in connection with
the Oeser acquisition, all of which have been paid. The Company financed the
acquisition with $4.1 million cash and the issuance of 100,000 shares of
restricted common stock.  In addition, the Company assumed approximately $10.0
million of Oeserwerk's debt.  The Company also incurred approximately $800,000
of fees associated with the acquisition.  The results of operations of Oeserwerk
have been included in the accompanying consolidated financial statements since
March 19, 1999.

The following summarized unaudited pro forma financial information for the
twelve months ended December 31, 1999 assumes the acquisition had occurred on
January 1 (in 000's).

                                              1999
                                              ----
          Net sales.....................     $69,480
          Net income....................       1,193
          Earnings per share:
            Diluted.....................     $  0.27

The pro forma data does not purport to be indicative of the results that would
have been obtained had these events actually occurred at the beginning of the
periods presented, does not reflect any benefits for actions taken subsequent to
the acquisition, and is not intended to be a projection of future results.

Additionally, during fiscal year 2000, the Company acquired the worldwide rights
of the holographic technology of its former joint venture partner Applied
Holographics PLC for $3.6 million.  The acquisition of these rights was financed
by a nine-month non-interest installment note issued by the Company, and
$400,000 in cash.  The note was paid in September 2000.  The rights are being
amortized on a straight-line basis over a 15-year period.

                                       29
<PAGE>

Note 3.  Property, Plant and Equipment

Property, plant and equipment consist of the following:

<TABLE>
<CAPTION>
                                                    December 31,
                                            ----------------------------
                                                                            Estimated
                                                2000            1999       Useful Life
                                                ----            ----       -----------
<S>                                         <C>             <C>            <C>
Land.....................................   $  2,481,650    $  3,233,422
Building.................................      6,125,560       5,800,835     25 years
Machinery and manufacturing equipment....     32,580,025      29,071,085     10 years
Furniture and office equipment...........      4,199,716       3,941,089     10 years
Construction in process..................        532,599         392,831
                                            ------------    ------------
                                              45,919,550      42,439,262
Less - Accumulated depreciation..........    (19,517,185)    (15,881,085)
                                            ------------    ------------
                                            $ 26,402,365    $ 26,558,177
                                            ============    ============
</TABLE>

Note 4.  Long-Term Debt and Other Liabilities

Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                 December 31,
                                        -----------------------------
                                            2000             1999
                                            ----             ----
<S>                                     <C>               <C>
Revolver............................    $ 1,500,000       $         -
Illinois Revenue Bonds..............      3,205,000         3,395,297
Term Loan "A".......................      2,492,762         2,543,542
Term Loan "B".......................     13,270,685        10,919,438
Convertible Subordinated Note.......      2,000,000         2,333,333
Capital Leases......................        224,692           518,834
Note Payable........................        774,052         1,117,613
Other...............................        950,699           201,394
                                        -----------       -----------
                                         24,417,890        21,029,451
Less - Current portion..............      3,384,173         3,112,681
                                        -----------       -----------
                                        $21,033,717       $17,916,770
                                        ===========       ===========
</TABLE>

Illinois Industrial Development Revenue Bonds.  The Company received $4,005,000
of proceeds from the issuance of the bonds on June 20, 1996. The proceeds were
used to fund the Company's 15,000 square foot addition to its primary production
facility and the purchase of a new printing press for printed products.

The bonds bear interest at rates, which are determined by the market and are
reset weekly by the remarketing agent for the bonds.  The maximum annual rate of
interest that the bonds will bear is 12%.  The annual rate of interest was 4.24%
and 3.65% at December 31, 2000 and December 31, 1999.  Annual principle payments
of $200,250 began in 1997 and will continue through 2007.  The balance of
$1,802,250 is due and payable when the bonds mature on June 1, 2008.

Term Loans.  Term Loan "A" is payable in monthly principal and interest
installments of $20,431 with a final principal payment of $2,287,412 due at
maturity.  Interest is payable monthly at a fixed rate of 7.05%.  This term loan
matures on November 1, 2003.

Term Loan "B" consists of a revolver and several loans, all associated with the
Company's acquisition of Oeserwerk KG (see Note 2).  The revolver expires on
April 15, 2004, and interest is payable monthly at a fixed rate of 6.0%.  The
various loans have quarterly interest payable at their respective fixed interest
rates ranging from 5.0% to 9.0%.  These loans contain covenants that include
financial tests.

Additionally, included in Term Loan "B" are proceeds of a $3.2 million note
received on September 6, 2000 associated with the Company's purchase from its
former joint venture partner the of the worldwide rights to market holographic
products (see Note 2).  This loan is payable in monthly principal and interest
installments of $77,573.  Interest is payable monthly at a fixed rate of 9.09%.
This portion of Term Loan "B" matures on September 18, 2005.

                                       30
<PAGE>

Convertible Subordinated Debt.  On September 3, 1997, the Company issued a ten-
year, 6% convertible subordinated note in the principal amount of $3,000,000
with annual principal payments commencing in 1998 of $333,333.  The Note was
issued to the seller in the Company's acquisition of Northern Bank Note Company
(see Note 2).  The Note is convertible, in whole or in part, at the option of
the holder beginning after the first anniversary of the Note, into Common Stock
of the Company at a conversion price of $14.00 per share.  The Note is non-
callable for three years from the date of issuance.  Thereafter, the Note is
callable at premiums starting at 102% of face value and declining in subsequent
years.  In addition, the Note is callable by the Company ten days after the
first anniversary of the Note if the Company's stock price exceeds 110% of the
conversion price for twenty consecutive days. The Note bears interest at 6% per
year, which is payable quarterly, and matures September 3, 2006.  The Note
agreement contains covenants that include certain financial tests, including
restrictions on indebtedness.

Note Payable. Effective October 1, 1998, CFC bought the remaining 25% owned by
the joint venture partner of CFC Applied Holographics.  CFC agreed to pay the
joint venture partner it's minority interest in the amount of $1,548,103 on a
quarterly basis over 4 years.

Revolving Credit Arrangements.  The Company and its subsidiaries have various
revolving credit arrangements that provide for maximum borrowings of
approximately $16 million. Interest under the credit agreements range from prime
to 2.0% over certain bank established base rates.  The revolving credit
arrangements expire at various dates beginning in 2001.  Under the main credit
line, the Company is required to pay a quarterly fee for the unused portion at
an amount equal to .25% times the daily average of the unused portion.  Such
payments in 2000, 1999, and 1998 were not significant.

The credit agreements contain covenants which, among other things, restrict new
indebtedness and dividend declarations, and prohibit net losses.  The borrowings
are collateralized by substantially all of the Company's assets.

Other.  Other includes $738,616 representing the settlement of a sales tax
dispute reached in the fiscal year ended December 31, 2000.  Such amount is
payable in sixty monthly installments of $12,313 through December 31, 2005, plus
interest at 9.0%.

Aggregate minimum principal payments for all long-term debt, excluding capital
lease obligations, as of December 31, 2000 are as follows:

          2001.............................     $ 3,384,173
          2002.............................       4,455,147
          2003.............................       5,258,347
          2004.............................       1,046,625
          2005.............................         849,206
          Thereafter.......................       9,424,392
                                                -----------
                                                $24,417,890
                                                ===========

Note 5.  Income Taxes

The income tax provision (benefit) consists of the following:

                                     For Year Ended December 31,
                              ------------------------------------------
                                 2000           1999            1998
                                 ----           -----           ----
Current:
  Federal................     $   724,332     $1,266,583      $1,742,970
  State..................         153,576        255,097         406,356
  Foreign................         437,062        115,757         201,948
Deferred.................      (1,134,981)      (715,218)        (91,667)
                              -----------     ----------      ----------
                              $   179,989     $  922,219      $2,259,607
                              ===========     ==========      ==========

                                       31
<PAGE>

The provisions for income taxes differ from the amount of income tax determined
by applying the applicable U.S. statutory federal income tax rate to income
before income taxes and minority interest as a result of the following
differences:

                                          2000      1999      1998
                                         Actual    Actual    Actual
                                         ------    ------    ------
Statutory U.S. tax rates                  34.0%     34.0%     34.0%
Differences in rates resulting from:
  State and local taxes                    4.8%      4.4%      4.3%
  Effect of foreign tax rates             (4.8%)    (4.6%)     0.0%
  Other, net                               2.0%     (4.7%)    (2.1%)
                                          ----      ----      ----
Effective tax rate                        36.0%     29.1%     36.2%
                                          ====      ====      ====

Deferred tax liabilities (assets) result from the following:

                                                         December 31,
                                                         ------------
                                                     2000           1999
                                                     ----           ----
Depreciation..................................    $ 2,199,995    $1,940,637
Other, net (primarily reserves and accruals)..     (1,261,256)     (795,675)
Foreign net operating loss carryforward.......     (1,547,639)     (618,882)
                                                  -----------    ----------
                                                  $  (608,900)   $  526,080
                                                  ===========    ==========

Foreign net operating loss carryforwards may be carried forward indefinitely.

Note 6.  Business Segment and International Operations

The Company has adopted SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information."  The Company and its subsidiaries operate
in a single business segment, which is the formulating and manufacturing of
chemically-complex, multi-layered functional coatings.  The Company produces
five primary types of coating products.  Sales of these products (in millions)
were as follows:

                                  2000       1999       1998
                                  ----       ----       ----
Holographic Products.........    $13.2      $10.4      $ 8.9
Printed Products.............     17.5       17.5       18.2
Pharmaceutical Products......      8.9        9.1        8.9
Security Products............      7.9        8.8       10.1
Simulated Metal and Other
  Pigmented Products.........     20.7       20.3        4.9
                                 -----      -----      -----

Total........................    $68.2      $66.1      $51.0
                                 =====      =====      =====

The following is sales and long-lived asset information by geographic area as of
and for the years ended December 31:

<TABLE>
<CAPTION>
                                      Sales                                 Net Fixed Assets
                   --------------------------------------------       ----------------------------
                       2000           1999             1998              2000             1999
                       ----           ----             ----              ----             ----
<S>                <C>             <C>              <C>               <C>              <C>
United States      $34,808,537     $33,385,384      $35,919,399       $16,209,501      $15,509,701
Germany             12,860,017      15,045,505                -        10,016,319       10,772,735
Other Foreign       20,571,092      17,716,409       15,128,000           176,545          275,741
                   -----------     -----------      -----------       -----------      -----------
                   $68,239,646     $66,147,298      $51,047,399       $26,402,365      $26,558,177
                   ===========     ===========      ===========       ===========      ===========
</TABLE>

Foreign revenue is based on the country in which the customer is domiciled.

                                       32
<PAGE>

Note 7.  International Operations and Export Sales

The Company has divisions in Europe and Asia.  The following data in U.S.
dollars, relative to the subsidiaries, is included in the accompanying financial
statements as of and for the year ended December 31:

Europe

                           2000             1999              1998
                           ----             ----              ----
Assets...............   $15,653,695      $21,845,393       $1,997,537
Liabilities..........    12,021,024       14,686,398          410,087
Net sales............    27,407,372       24,549,859        7,118,662
Net income/(loss)....      (839,484)        (429,142)         507,238

Asia

                           2000             1999              1998
                           ----             ----              ----
Assets...............   $  914,879       $  447,881        $  140,323
Liabilities..........      179,304          176,630            33,661
Net sales............    1,225,358        1,154,671         1,024,530
Net loss.............     (382,013)        (117,673)         (207,228)

Export sales from U.S. operations amounted to $7,841,313, $7,057,142 and
$6,984,808 in 2000, 1999 and 1998, respectively.

Note 8.  Profit Sharing Plan

The Company maintains a profit sharing/401(K) plan for the benefit of all
eligible employees, as defined under the plan agreement. Eligible employees may
also contribute up to 18% of their compensation to the plan subject to the
maximum deferral limitations established by the IRS.  Employee contributions are
matched by the Company at the rate of 50% on the first 4% of the employee's
contribution.  As a part of the 401(K) the Company can determine a discretionary
profit sharing amount. The Company had no discretionary profit sharing expense
for the three years presented.  The Company incurred approximately $174,100,
$97,500 and $105,000 of 401(K) matching expense during 2000, 1999 and 1998,
respectively.

Note 9.  Stockholders' Equity

The Company has authorized 750 shares of Voting Preferred Stock, par value $.01
per share, which has no preemptive, conversion, redemption, or exchange rights.
Dividends and liquidation preference shall be applied to the purchase price per
share.  The Company's principal stockholder holds an option to purchase 534
shares of voting preferred stock, subject to anti-dilution adjustments, par
value $.01 per share, which voting preferred stock is entitled to 1,000 votes
per share, quarterly dividends at an annual rate equal to the prime rate in
effect as of the prior December 31 applied to the $500 per share exercise price
and a liquidation preference of $500 per share plus any accumulated and unpaid
dividends.  The option is currently exercisable, and is not transferable.

Common stock and Class B common stock have identical rights and privileges
except for voting and conversion rights.  Class B common stock is nonvoting, and
is convertible at any time into an equal number of shares of common stock except
that the conversion option is not available to any Class B common stockholder
affiliated with the Company's principal common stockholder. During 2000, 1999
and 1998, there were zero, 5,180, and zero shares, respectively, of Class B
common stock converted into an equal number of shares of common stock.

                                       33
<PAGE>

Note 10.  Stock Plans

Stock Option Plan.  The Company's stockholders approved a Stock Option Plan (the
"1995 Plan") in August 1995, which provides for the grant of non-qualified stock
options to employees and directors of the Company and its subsidiaries. The
Company's stockholders approved the Stock Option Plan ("2000 Plan") in April
2000.  A total of 150,000 shares of common are reserved for the 2000 Plan,
subject to anti-dilution and adjustment provisions.  A total of 400,000 shares
of common stock are reserved for issuance under both plans, subject to anti-
dilution and adjustment provisions.  No options may be granted under the 1995
Plan after August 15, 2005, and no options may be granted under the 2000 Plan
after November 6, 2009.  If an option expires or is terminated or canceled
unexercised, the shares related to such options are returned to the total shares
reserved for issuance.  The Plans are administered by a committee appointed by
the Board of Directors, which determines the term of each option, option price,
and number of shares for which each option is granted.

All options have terms of ten years, and employee options generally vest over a
period of four years.  Options granted in connection with the Executive
Performance Plan ("Performance Plan") vest at 8 years unless certain Company
performance criteria are achieved.  The range of exercise prices for options
under the 1995 Plan at December 31, 2000 is $5.25 to $15.25, with a weighted
average remaining contractual life of 7.6 years.

Stock option activity in 2000, 1999 and 1998 for the Plan is summarized below:

<TABLE>
<CAPTION>
                                                   2000                        1999                       1998
                                         ------------------------    ------------------------    ------------------------
                                                        Average                     Average                     Average
                                          Shares     Option Price     Shares     Option Price     Shares     Option Price
                                          ------     ------------     ------     ------------     ------     ------------
<S>                                      <C>         <C>             <C>         <C>             <C>         <C>
Beginning balance                         247,871       $11.11        167,571        $11.87       174,783       $11.86
Granted                                    92,000         6.28         89,800          9.43        38,810        11.47
Cancelled                                (178,777)        9.38
Forfeited                                 (11,000)        9.60         (9,500)        11.54       (44,354)       11.92
Exercised                                       -            -              -             -        (1,668)         .06
                                                                                     ------       -------
Ending Balance                            150,094       $ 7.45        247,871        $11.11       167,571       $11.87
                                         ========       ======        =======        ======       =======       ======

Options exercisable at year end            81,116       $11.32         60,404        $11.52        46,768       $11.54
                                         ========       ======        =======        ======       =======       ======
Average fair value of options
 outstanding at the end of the year                     $ 5.17                       $ 5.70                     $ 6.04
                                                        ======                       ======                     ======
</TABLE>

Director Stock Option Plan.  In August 1995, the Company's stockholders approved
a Director Stock Option Plan (the "DSOP"), which is administered by the Board of
Directors.  Options may be granted under the DSOP only to non-employee directors
of the Company.  A total of 50,000 shares of common stock are reserved for
issuance under the DSOP, subject to anti-dilution and other adjustment
provisions.  An option to purchase 10,000 shares of the Company's stock was
granted to each of the three non-employee directors of the Company effective
upon the closing of the initial public offering at an exercise price equal to
the initial public offering price of $9.50 per share. The term of each option is
ten years subject to earlier termination if the optionee's service as a director
terminates.  Each option becomes exercisable with respect to 25% of the shares
upon expiration of each successive twelve-month period after the date of grant.
The range of exercise prices for options under the DSOP at December 31, 2000 is
$5.81 to $9.50, with a weighted average remaining contractual life of 6.05
years.  In April 2000, the Company's shareholders approved a new stock option
plan for non-employee directors of the Company (the new "DSOP").  A total of
50,000 shares of common stock are reserved for issuance under the new DSOP,
subject to anti-dilution and other adjustment provisions.  Each additional non-
employee director elected to the Company's Board of Directors will be granted an
option to purchase 10,000 shares of common stock upon election, at the fair
market value at the date of such grant.  In addition, the non-employee directors
re-elected to the Board at the April 2000 annual meeting of shareholders were
granted an option to purchase 2,500 shares of common stock.  The terms of the
option granted are similar to the terms of the grants under the DSOP.  Stock
option grants may also be made to non-employee directors from time to time as
determined by the Board of Directors, provided that such grants are approved or
ratified by an affirmative vote of the majority of the Company's stockholders,
no later than the date of the next annual meeting.

                                       34
<PAGE>

Stock option activity in 2000, 1999 and 1998 for the DSOP is summarized below:

<TABLE>
<CAPTION>
                                                2000                   1999                    1998
                                         ------------------      ------------------       ------------------
                                                    Average                 Average                  Average
                                                     Option                  Option                   Option
                                          Shares     Price        Shares     Price         Shares     Price
                                          ------    -------       ------    -------        ------    -------
<S>                                      <C>        <C>          <C>        <C>           <C>        <C>
Beginning balance.....................    50,000    $  8.67       40,000    $  9.31        40,000    $  9.31
Granted...............................         -    $     -       10,000    $  6.13             -          -
                                         -------    -------      -------    -------       -------    -------
Ending balance........................    50,000    $  8.67       50,000    $  8.67        40,000    $  9.31
                                         =======    =======      =======    =======       =======    =======

Options exercisable at year end.......    40,000    $  8.67       35,000    $  9.39        25,000    $  9.43
                                         =======    =======      =======    =======       =======    =======
Average fair value of options
  outstanding at the end of the year..              $  3.93                 $  3.93                  $  3.82
                                                    =======                 =======                  =======
</TABLE>

All options granted under the Plans and the DSOPs have exercise prices equal to
the fair market value of the shares on the date of grant.

The fair value of each option granted is estimated at the date of the grant
using the Black-Scholes option-pricing model utilizing expected volatility
calculations based on historical data of companies with similar structure and
volatility over a period commensurate to the expected term of the options (25%
to 44%) and risk free rates based on U.S. government strip bonds on the date of
the grant with maturities equal to the expected option term (5.16% to 6.74%).
The expected lives were determined to be 6 years for employee options and 9.5
years for options under the Performance Plan (see above) and dividends are
assumed to be zero.

The Company applies APB 25 and related Interpretations in accounting for the
aforementioned stock plans.  Accordingly, no compensation cost has been
recognized for its stock option plans.  Had compensation cost for the Company's
fixed stock option plans been determined based upon the fair value based method,
as defined in SFAS No. 123, the Company's net earnings per share would have been
reduced to the pro-forma amounts indicated below:

                                                   2000     1999       1998
                                                   ----     ----       ----
Proforma net income (dollars in thousands)....    $ 349    $2,067    $3,500
Proforma earnings per share (basic)...........    $0.08    $ 0.45    $ 0.80
Proforma earnings per share (diluted).........    $0.08    $ 0.45    $ 0.78

The effects of applying SFAS 123 on the above pro-forma information are not
indicative of future amounts, as such amounts are likely to be affected by the
number of grants awarded.

Employee Stock Purchase Plan. In August 1995, the Company's stockholders
approved an Employee Stock Purchase Plan (the "Stock Purchase Plan") which is
administered by a committee appointed by the Board of Directors at December 31,
1999.  Pursuant to the Stock Purchase Plan, 100,000 shares of common stock are
reserved for issuance, which may be offered for sale to employees through annual
options to be granted in the five-year period commencing January 1, 1996.
During 2000, 1999 and 1998 respectively, 10,565, 9,400 and 8,243 shares of
common stock were issued pursuant to the Stock Purchase Plan.  The Stock
Purchase Plan is intended to qualify as an "employee stock purchase plan" under
Section 423 of the Internal Revenue Code.  Generally, all persons who have been
employed by the Company on a full-time basis for at least six months, except
holders of more than 5% of the Company's common stock, are eligible to
participate in the Stock Purchase Plan.  The Stock Purchase Plan permits
eligible employees to purchase common stock (which may not exceed the lesser of
$10,000 or 10% of an employee's compensation), at 95% of the fair market value
of the common stock at the grant date or purchase date, whichever is less.  The
shares are purchased automatically at the end of the quarter for such number as
may be purchased with the accumulated payroll deductions of the employee on that
date.  Employees may terminate their participation in the Stock Purchase Plan at
any time and participation automatically ends upon termination of employment
with the Company.  The Stock Purchase Plan will terminate at any time upon the
discretion of the Board of Directors or when the participating employees become
entitled to purchase a number of shares equal to the number of shares remaining.

                                       35
<PAGE>

Note 11.  Earnings per Share

<TABLE>
<CAPTION>
                                                2000                          1999                            1998
                                                ----                          ----                            ----
                                                            Per                              Per                             Per
                                     Income      Shares    Share     Income      Shares     Share     Income      Shares    Share
                                     ------      ------    -----     ------      ------     -----     ------      ------    -----
<S>                                 <C>        <C>         <C>     <C>          <C>         <C>     <C>          <C>        <C>
Basic Earnings per Share:
Income available to Common
  Stockholders...................   $321,539   4,568,318   $0.07   $2,245,312   4,546,015   $0.49   $3,647,992   4,453,870  $0.82

Effect of Dilutive Securities:
  Options exercisable............                  3,961                            2,533                            5,254
  Convertible debt...............                                      93,000     176,038              105,000     202,381
                                    --------   ---------   -----   ----------   ---------   -----   ----------   ---------  -----
Diluted Earnings per Share.......   $321,539   4,572,279   $0.07   $2,338,312   4,724,586   $0.49   $3,752,992   4,661,505  $0.80
                                    ========   =========           ==========   =========           ==========   =========
</TABLE>

Note 12.  CFC Applied Holographics

Effective October 1, 1998, the Company bought the remaining 25% owned by the
joint venture partner of CFC Applied Holographics, a partnership formed to
manufacture and market holograms.  The Company agreed to pay the joint venture
partner it's minority interest in the amount of $1,548,103 on a quarterly basis
over 4 years.

Note 13.  Commitments and Contingencies

The Company's former parent has been named by government environmental agencies
as a "potentially responsible party" with respect to a waste disposal site.  The
former parent and other potentially responsible parties have entered into a
settlement agreement with such agencies that provides for the remediation of the
site, estimated to cost approximately $40 million, based upon currently
available facts.  While the Company has been named a potentially responsible
party, the former parent and the Company have reached an agreement whereby the
former parent and the Company will share equally in 0.7% (or .35% each) of the
total cost of remediation that is ultimately determined to be attributed to
waste produced by the Company's former parent.  Additionally, the Company and
nineteen other parties were defendants in litigation filed by another party at
the same site seeking reimbursement for some portion of the $1 million spent for
clean up outside of the aforementioned settlement.  The Company paid $4,000 in
full settlement of this suit in 1995.  In 1992, the Company recorded a liability
of $300,000 related to these matters, of which approximately $50,000 was paid in
1996.  It is management's opinion, based upon investigation of the quantities
and types of waste and the other parties involved, that the Company's share of
any liability will not substantially exceed the accrual of $140,937 at December
31, 2000.  The adequacy of this reserve is reviewed periodically as more
definitive information becomes available.

During fiscal 2000, the Company reached a settlement with the State of Illinois
relating to sales tax owed on purchases for the period 1992 to 1999.  Pursuant
to the terms of the settlement, the Company agreed to pay $738,616 plus interest
evenly over a five-year period.  Accruals for this matter had been established
in prior years and under the terms of the settlement such accruals were
reclassified to long-term liabilities (Note 4).

At December 31, 2000, the Company has non-cancelable operating leases for which
future minimum rental commitments are estimated to total $1,294,316, including
$274,553 in 2001, $415,620 in 2002, $215,655 in 2003, $203,325 in 2004, and
$185,163 thereafter.  Rental expense under operating leases totaled $173,426 in
2000 and $626,850 in 1999.

                                       36
<PAGE>

Note 14.  Selected quarterly financial data (unaudited), in thousands, except
per share data

<TABLE>
<CAPTION>
                                                                     Quarter Ended
                                   ---------------------------------------------------------------------------------
                                    Dec. 31   Sept. 30    June 30   Mar. 31   Dec. 31    Sept. 30  June 30   Mar. 31
                                      2000      2000       2000       2000      1999       1999      1999      1999
                                    -------   --------    -------   -------   -------    --------  -------   -------
<S>                                <C>        <C>         <C>       <C>       <C>        <C>       <C>       <C>
Revenues.........................   $14,900    $17,281    $17,801   $18,258   $17,672    $17,504   $17,967   $13,004
Gross profit.....................     3,441      5,155      6,625     6,883     4,867      6,018     5,807     4,741
Operating income (loss)..........    (1,042)      (324)     1,441     1,710      (353)     1,389     1,650     1,581
Net income (loss)................      (777)      (443)       731       811       131        579       753       782
Basic earnings per share.........     (0.17)     (0.10)      0.16      0.18      0.03       0.13      0.17      0.17
Diluted earnings per share.......     (0.17)     (0.10)      0.15      0.18      0.03       0.13      0.16      0.17
</TABLE>

The fourth quarter of 1999 includes a benefit for income resulting from net
losses from operations, and the reversal of tax provisions previously provided
for operations incurring net losses for the year.  The third and fourth quarters
of 2000 include benefits for income taxes resulting from net losses from
operations, and the reversal of tax operations previously provided for
operations incurring net losses for the year.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE

None.

                                       37
<PAGE>

PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors

The information appearing under the captions "Election of Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's Proxy
Statement for the Annual Meeting of Stockholders to be held in 2000 (the "Proxy
Statement"), is incorporated herein by reference.

Officers

Set forth below are the names of the executive officers and officers, of the
Company and its subsidiaries, their ages at December 31, 2000, the positions
they hold with the Company or its subsidiaries, and summaries of their business
experience.  Executive officers and officers, of the Company are elected by and
serve at the discretion of the Board of Directors of the Company.

          Name               Age                  Position
          ----               ---                  --------
Roger F. Hruby...........    65    Chairman of the Board of Directors, Chief
                                    Executive Officer

Richard L. Garthwaite....    50    President, Chief Operating Officer and
                                    Director

Dennis W. Lakomy.........    55    Executive Vice President, Chief Financial
                                    Officer, Secretary, Treasurer and Director

Scott D. Coney...........    34    Vice President of Operations

Kurt Glaser..............    44    Senior Vice President, Sales & Marketing

William A. Herring.......    53    Senior Vice President of Research and
                                    Development

Robert E. Jurgens........    59    Senior Vice President, International Sales

Mark A. Lamb.............    49    Vice President and General Manager - Security
                                    Printing

Peter C. McGillivray.....    55    Managing Director - United Kingdom Operations

Craig D. Newswanger......    48    Vice President of Research & Development -
                                    Holographics

Jeffrey E. Norby.........    44    Vice President and Controller

Florian Oeser............    40    Managing Director - German Operations

Toshio Ohnuma............    44    Managing Director - Japan Operations

David Paul...............    40    Managing Director - European Operations

Roger F. Hruby, Chairman of the Board, Chief Executive Officer, and President
and Chief Operating Officer of the Company's predecessor, Bee Chemical, from
1977 until the sale of that company to Morton Thiokol, Inc., in 1985, at which
time Mr. Hruby also became its Chief Executive Officer.  Mr. Hruby also
organized the formation of Bee Chemical's Japanese joint venture in 1970 and
supervised its growth from a start-up venture to a significant manufacturing
company with sales in excess of $40 million.  In 1986, Mr. Hruby formed the
Company, which purchased Bee Chemical's specialty transferable solid coatings
division from Morton Thiokol and has been Chairman of the Board, Chief Executive
Officer, and until June 1995, President of the Company since the date of its
incorporation.  Mr. Hruby has been involved in the specialty chemical industry
since 1958.  Mr. Hruby earned a bachelors degree in chemistry from North Central
College and a Masters of Business Administration from the University of Chicago.

                                       38
<PAGE>

Richard L. Garthwaite, President, Chief Operating Officer and a Director, joined
the Company in January 1999.  Prior to joining the Company, Mr. Garthwaite
served from 1990 as President and Chief Executive Officer of A.L. Hyde Company.
Mr. Garthwaite earned a bachelors degree from The University of Michigan cum
laude and a masters degree of business administration from Harvard Business
School.

Dennis W. Lakomy, Executive Vice President, Chief Financial Officer, Secretary,
Treasurer and a Director of the Company, joined Bee Chemical in 1975 and served
as Vice President and Controller of that company from 1982 until co-founding CFC
with Mr. Hruby in 1986.  Mr. Lakomy was elected a director of the Company in
August 1995.  Mr. Lakomy earned a bachelors degree in accounting from Loyola
University of Chicago and a Masters of Business Administration from the
University of Chicago.

Scott D. Coney, Vice President of Operations, joined the Company in August 1999.
Prior to joining the Company, Mr. Coney served from 1994 in various management
positions with Stimsonite Corporation.  Mr. Coney had been in the position of
Plant Manager with Stimsonite since 1997.  Mr. Coney earned a bachelors degree
from Purdue University and a Masters of Business Administration from Loyola
University of Chicago.

Kurt Glaser, Senior Vice President of Sales & Marketing, joined the Company in
April 2000.  Prior to joining the Company, Mr. Glaser served as President since
1999 of A.L. Hyde Company.  He also served for 8 years at A.L. Hyde Company as
Vice President, Marketing and Sales.  Mr. Glaser held various National Marketing
positions at G.E. Plastics over a six-year span from 1984 through 1990.  Mr.
Glaser earned a mechanical engineering degree from Northeastern University.

William A. Herring, Senior Vice President of Research and Development of the
Company, joined the Company in June 1996 as Vice President of Operations and on
July 1, 1999 became head of Research and Development.  Prior to joining the
Company, Mr. Herring served from 1992 as Vice President - Manufacturing and
Technology with Central Products Company, where he was responsible for three
manufacturing locations and five distribution centers.  Mr. Herring earned a
bachelors and a masters degree from the University of Missouri in Chemical
Engineering.

Robert E. Jurgens, Senior Vice President of International Sales, joined the
Company in June 1987.  Prior to joining the Company, Mr. Jurgens served in
successive senior management positions with White Graphic Systems.  Mr. Jurgens
began his career with White Graphics Systems in 1966 in sales and design.  Mr.
Jurgens earned a bachelors degree from Indiana University.

Mark A. Lamb, Vice President and General Manager of CFC-Northern Bank Note
joined Northern Bank Note in 1977, and has held various positions in production,
sales and marketing and executive management before assuming the General Manager
position in September 1997.  Mr. Lamb holds a B.S. Degree from Northern Illinois
University and graduated from the Printing Industry of America's Executive
Development Program.

Peter C. McGillivray has been Managing Director of CFC's United Kingdom
Operations since 1988.  Prior thereto, Mr. McGillivray served as a sales
representative for British Cellulose Lacquers, which was acquired by Bee
Chemical Company and later included as part of the ongoing business purchased by
the Company.

Craig D. Newswanger formed Advanced Dimensional Displays in 1984, which was
merged into Applied Holographics PLC in 1989.  In 1992, following the formation
of CFC Applied Holographics, he was named Vice President, Research and
Development - Holographics, of the Company.

Jeffrey E. Norby, Vice President, Controller joined the Company in 1995 as
Controller.  Prior to that time he held several managerial positions in
administration and accounting with Newell, Inc. and Chicago Bullet Proof
Company.  He is a Certified Public Accountant and earned a Masters of Business
Administration from the University of Illinois.

Florian E. Oeser has been Managing Director of CFC Oeserwerk since its
acquisition on March 19, 1999.  Prior to that time, he held several managerial
positions in manufacturing and research and development with the predecessor
Ernst Oeser and Sons since 1992.  Mr. Oeser holds an undergraduate degree in
Engineering Packaging and Printing from the University of Stuttgart, and a
Masters Degree in International Marketing from Reutlingen University.

Toshio Ohnuma, Managing Director of CFC Asia-Pacific joined the Company in July
12, 1999.  Prior to joining the Company, Mr. Ohnuma held several sales and
management positions with Dupont Japan, ICI Japan and Kuraray.  Mr. Ohnuma
earned an Applied Chemistry degree from Waseda University and a Masters Degree
in Applied Chemistry  at Waseda University Graduate School.

                                       39
<PAGE>

David Paul, Managing Director of CFC Europe joined the Company in November,
2000.  Prior to joining the Company, Mr. Paul held several profit and loss
senior director positions within Lyondell Europe Co., Inc. Mr. Paul earned an
Applied Chemistry degree from the University of Portsmouth, a Management degree
from Open University and a Masters of Business Administration from Open
University.

ITEM 11.  EXECUTIVE COMPENSATION

Information appearing under the caption "Management Compensation" in the Proxy
Statement is incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information appearing under the caption "Principal Stockholders" in the Proxy
Statement is incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information appearing under the caption "Certain Transactions" in the Proxy
Statement is incorporated herein by reference.


                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) (1)    Financial Statements

           Reference is made to the information set forth in Part II, Item 8 of
           this Report, which information is incorporated herein by reference.

(a) (2)    Financial Statement Schedules

           Reference is made to the information set forth in Part II, Item 8 of
           this Report, which information is incorporated herein by reference.

(a) (3)    Exhibits

           The exhibits to this report are listed in the Exhibit Index included
           elsewhere herein. Included in the exhibits listed therein are the
           following exhibits, which constitute management contracts or
           compensatory plans or arrangements.

           10.2  Stock Option Plan of the Company
           10.3  Director Stock Option Plan of the Company
           10.4  Employee Stock Purchase Plan of the Company
           10.5  2000 Stock Option Plan of the Company
           10.6  2000 Director's Stock Option Plan of the Company

(b)        Reports on Form 8-K

           The Company filed no Report on Form 8-K in the fourth quarter of
           2000.

                                       40
<PAGE>

(c)  Exhibits

   Exhibit
   Number                          Description of Exhibit
   ------                          ----------------------

    3.1        Restated Certificate of Incorporation of the Company
               (incorporated by reference to Exhibit 3.1 to the Company's
               registration statement on Form S-1, Registration No. 33-96110).

    3.2        Amended and Restated Bylaws of the Company (incorporated by
               reference to Exhibit 3.2 to the Company's registration statement
               on Form S-1, Registration No. 33-96110).

    4.1        Specimen Certificate Representing Shares of Common Stock
               (incorporated by reference to Exhibit 4.1 to the Company's
               registration statement on Form S-1, Registration No. 33-96110).

   10.1(a)     Amended and Restated Credit Agreement, dated as of March 18,
               1992, between the Company and LaSalle Northwest National Bank, as
               amended (the "Credit Agreement") (incorporated by reference to
               Exhibit 10.1 to the Company's Registration Statement on Form S-1,
               Registration No. 33-96110).

   10.1(b)     Tenth Amendment to the Credit Agreement, dated as of June 1,
               1996, and related documents (incorporated by reference to Exhibit
               10.1(b.) to the Company's Report on Form 10-K for the year ended
               December 31, 1997).

   10.1(c)     Eleventh Amendment to the Credit Agreement, dated as of February
               1, 1997, and related documents (incorporated by reference to
               Exhibit 10.1(c) to the Company's Report on Form 10-K for the year
               ended December 31, 1997).

   10.1(d)     Twelfth Amendment to the Credit Agreement, dated as of March 3,
               1997, and related documents (incorporated by reference to Exhibit
               10.1(d) to the Company's Report on Form 10-K for the year ended
               December 31, 1997).

   10.1(e)     Sixth Amendment to Mortgage and Assignment of Rents and Leases,
               dated as of November 13, 1998, and related documents
               (incorporated by reference to Exhibit 10.1(e) to the Company's
               Report on Form 10-K for the year ended December 31, 1998).

   10.1(f)     Third Amendment to Amended and Restated Loan Agreement dated July
               6, 2000 between the Company and LaSalle Bank National
               Association, and related documents (incorporated by reference to
               Exhibit 10.1(a) to the Company's Quarterly Report on Form 10-Q
               for the quarterly period ended September 30, 2000).

   10.1(g)     Fourth Amendment to Amended and Restated Loan Agreement dated
               September 5, 2000 between the Company and LaSalle Bank National
               Association, and related documents (incorporated by reference to
               Exhibit 10.1(b) to the Company's Quarterly Report on Form 10-Q
               for the quarterly period ended September 30, 2000).

   10.1(h)     Amendment to Reimbursement Agreement dated July 6, 2000 between
               CFC Europe GmbH (f/k/a Sesvenna 20. Vermogensverwaltungs GmbH)
               and LaSalle Bank National Association, and related documents
               (incorporated by reference to Exhibit 10.1(c) to the Company's
               Quarterly Report on Form 10-Q for the quarterly period ended
               September 30, 2000).

   10.2        Stock Option Plan of the Company (incorporated by reference to
               Exhibit 10.7 to the Company's registration statement on Form S-1,
               Registration No. 33-96110).

   10.3        Director Stock Option Plan of the Company (incorporated by
               reference to Exhibit 10.8 to the Company's registration statement
               on Form S-1, Registration No. 33-96110).

   10.4        Employee Stock Purchase Plan of the Company (incorporated by
               reference to Exhibit 10.9 to the Company's registration statement
               on Form S-1, Registration No. 33-96110).

   10.5        Stock Option Agreement, dated August 18, 1995, between the
               Company and Roger F. Hruby, as amended (incorporated by reference
               to Exhibit 10.10 to the Company's registration statement on Form
               S-1, Registration No. 33-96110).

   10.6        2000 Stock Option Plan of the Company (incorporated by reference
               to Appendix A to the Company's Definitive Proxy Statement filed
               with the Commission on March 24, 2000, Commission File No. 0-
               27222).

   10.7        2000 Director Stock Option Plan of the Company (incorporated by
               reference to Appendix B to the Company's Definitive Proxy
               Statement filed with the Commission on March 24, 2000, Commission
               File No. 0-27222).

                                       41
<PAGE>

   10.8(a)     CFC Applied Holographics Joint Venture Agreement dated April 1,
               1992, among the Company, CFC Management, Inc., Applied
               Holographics PLC, and Applied Holographics, Inc., as amended, and
               related Partnership Agreement, Representation Agreement, and
               License Agreement (incorporated by reference to Exhibit 10.13 to
               the Company's registration statement on Form S-1, Registration
               No. 33-96110).

   10.8(b)     CFC Applied Holographics Joint Venture Termination Agreement
               dated November 29, 1999 among the Company, CFC Management, Inc.,
               Applied Holographics PLC, and Applied Holographics Inc., filed
               herewith.

   10.8        Purchase Agreement, dated November 18, 1994, between the Company
               and Baxter Healthcare Corporation (incorporated by reference to
               Exhibit 10.14 to the Company's registration statement on Form S-
               1, Registration No. 33-96110).

   10.9        Baxter Healthcare Corporation contract renewed on February 15,
               1998 (incorporated by reference to Exhibit 10.6 to the Company's
               Report on Form 10-K for the year ended December 31, 1998).

   10.10       Form of Indemnification Agreement between the Company and each of
               its Officers and Directors (incorporated by reference to Exhibit
               10.15 to the Company's registration statement on Form S-1,
               Registration No. 33-96110).

   21.1        List of Subsidiaries of the Company

   23.1        Consent of Experts and Counsel

                                       42
<PAGE>

                            CFC INTERNATIONAL, INC.

                         FINANCIAL STATEMENT SCHEDULES
                SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                                                       Additions     Additions
                                                       Balance at        Due To      Charged To                   Balance
                                                        Beginning      Oeserwerk      Costs and                    at end
Description                                              Of Year      Acquisition     Expenses     Deductions*     Of Year
-----------                                              -------      -----------     --------     -----------     -------
                                                                                    (in thousands)
<S>                                                    <C>            <C>            <C>           <C>            <C>
Year Ended December 31, 1998 Allowance
for Doubtful Accounts..............................      $  612         $     -        $1,492        $(1,479)      $  625

Year Ended December 31, 1999 Allowance
for Doubtful Accounts..............................      $  625         $   668        $2,198        $(2,282)      $1,209

Year Ended December 31, 2000 Allowance
for Doubtful Accounts..............................      $1,209         $     -        $1,708        $(2,380)      $  537
</TABLE>

_________________________
*  Deductions represent amounts written off.

                                       43
<PAGE>

                                  SIGNATURES


Pursuant to the requirements Section 13 or 15(d) 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, on March 12, 2001.


                                        CFC INTERNATIONAL, INC.


                                        By:      /s/ ROGER F. HRUBY
                                             -----------------------------------
                                             Roger F. Hruby
                                             Chairman of the Board of Directors,
                                             Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on March 12, 2001.

               Signature                                   Title
               ---------                                   -----

       Principal Executive Officer:


   /s/ ROGER F. HRUBY                       Chairman of the Board of Directors,
----------------------------
Roger F. Hruby                                    Chief Executive Officer


       Principal Financial Officer:


   /s/ DENNIS W. LAKOMY                      Executive Vice President, Chief
----------------------------
Dennis W. Lakomy                               Financial Officer, Secretary
                                                  Treasurer, and Director


       Principal Accounting Officer:


   /s/ JEFFREY E. NORBY                          Vice President, Controller
----------------------------
Jeffrey E. Norby

                                       44
<PAGE>

               Signature                            Title
               ---------                            -----

     A Majority of the Directors:


  /s/ ROGER F. HRUBY                              Director
------------------------------
Roger F. Hruby


  /s/ WILLIAM G. BROWN                            Director
------------------------------
William G. Brown


  /s/ ROBERT B. COVALT                            Director
------------------------------
Robert B. Covalt


  /s/ DENNIS W. LAKOMY                            Director
------------------------------
Dennis W. Lakomy


  /s/ RICHARD L. GARTHWAITE                       Director
------------------------------
Richard L. Garthwaite


  /s/ RICHARD PIERCE                              Director
------------------------------
Richard Pierce


  /s/ DAVID D. WESSELINK                          Director
------------------------------
David D. Wesselink

                                       45