SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549

                                    FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 ( d )

                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2001     Commission file number  1-8689
                          ------------------                            -------


                            DIXON TICONDEROGA COMPANY
--------------------------------------------------------------------------------
               (Exact name of Company as specified in its charter)
Form 10-K

 X    Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
---   Act of 1934 (Fee Required) for the fiscal year ended September 30, 2001.

---   Transition Report Pursuant to Section 13 or 15 (d) of the Securities
      Exchange Act of 1934 (No Fee Required) for the transaction period from
      _____ to _____ .

                  Delaware                                 23-0973760
---------------------------------------------  ---------------------------------
      (State or other jurisdiction of                   (I.R.S. Employer
       incorporation or organization)                Identification Number)

  195 International Parkway, Heathrow, FL                     32746
---------------------------------------------  ---------------------------------
  (Address of principal executive offices)                 (Zip Code)

Registrant's telephone number, including area code    (407) 829-9000
                                                      --------------

         Title of each class           Name of each exchange on which registered

    Common Stock, $1.00 par value              American Stock Exchange
    -----------------------------              -----------------------

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

Based on the closing sales price on December 3, 2001, the aggregate market value
of the voting stock held by non-affiliates of the Company was $3,806,686.

Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of December 3, 2001:  3,177,462  shares of common stock,  $1.00
Par Value.

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 Form 10-K or any amendment to this Form
10-K. [ ]

Documents  Incorporated  by  Reference:  Proxy  statement  to  security  holders
incorporated into Part III for the fiscal year ended September 30, 2001.




<PAGE>
                                     PART I
                                     ------

ITEM 1. BUSINESS
----------------
                          RECENT EVENTS AND STRATEGIES
                          ----------------------------

     In fiscal 2001,  Dixon  Ticonderoga  Company  (hereinafter  the  "Company")
refocused its efforts on its core Consumer Group while continuing its aggressive
restructuring and cost reduction efforts begun in 1999. As a result, the Company
had significantly improved operating performance, reporting pro forma net income
from continuing operations in 2001 of $1.2 million or $0.38 per share (exclusive
of the net  effects of  restructuring  and related  costs) as compared  with pro
forma net income from  continuing  operations  of $271,000 or $0.08 per share in
the prior year.  Operating income (exclusive of restructuring and related costs)
grew $2.2 million or 55% in fiscal 2001.  Including the effects of restructuring
and related costs and results from discontinued operations, net loss in 2001 was
($480,000)  or ($0.15) per share,  as compared  with  ($798,000)  or ($0.25) per
share in the prior year.
     The Company  successfully  completed  its Mexico  consolidation  into a new
300,000 square foot modern facility as well as further  personnel  reductions in
manufacturing,  sales,  marketing and  corporate  activities.  In addition,  the
Company   continued  its  working  capital  reduction  program  begun  in  2000,
emphasizing enhanced inventory control, improved accounts payable management and
strict  Mexico  accounts  receivable   collection  efforts.   These  initiatives
contributed  to net cash provided by operating  activities of over $4 million in
the past two years,  as compared  with net cash used by operating  activities of
approximately $16 million in the two years ended 1999.
     In 2001, the Company also increased its production of wood slats for pencil
manufacturing at its wholly-owned  China  subsidiary,  Beijing Dixon Ticonderoga
Stationery  Company,   Ltd.  The  subsidiary  also  expanded  its  sourcing  and
distribution  activities,  providing  certain new and  innovative  products  for
international sale by the Company.
     To further focus its efforts,  the Company formalized its decision to offer
for  sale  its New  Castle  Refractories  division,  the  last  business  of its
Industrial  Group,  on  September  17,  2001.  The Company  had  disposed of its
Graphite and Lubricants division in 1999. These operations have been reported as
discontinued  operations  and the  Company's  Consumer  Group is now its  single
business segment.
     The Company is also continuing to negotiate with its lenders to restructure
its various debt  agreements as it continues its efforts (with the assistance of
its outside  advisors) to pursue an infusion of some form of new equity  capital
or a secondary financing source.
     Further  information  regarding these matters is included elsewhere in this
Annual Report on Form 10-K.

<TABLE>
<CAPTION>

                                 COMPANY ORGANIZATION
                                 --------------------
                              Dixon Ticonderoga Company
                                       (Parent)
<S>                    <C>             <C>                   <C>              <C>

       -----------------------------------------------------------------------
       |               |                |                    |                |
       |               |                |                    |                |
       |               |                |                    |                |
     Dixon           Dixon        Dixon Industrial      Beijing Dixon     Ticonderoga
 Ticonderoga,    Europe, Ltd.   Mexico, S.A. de C.V.     Ticonderoga       Graphite,
  Inc. Canada   (Wholly-Owned)    (Wholly-Owned)        Stationery      Inc./Inactive
(Wholly-Owned)                                          Company, Ltd.    (Wholly-Owned)
                                                       (Wholly-Owned)
       |
       |
 Grupo Dixon,
 S.A. de C.V.
and subsidiaries
 (97% Owned)
</TABLE>




                                        2
<PAGE>


                                INDUSTRY SEGMENTS
                                -----------------

     The Company has one principal  continuing  business  segment:  its Consumer
Group. This segment's primary operations are the manufacture and sale of writing
and drawing  pencils,  pens,  artist  materials,  felt tip  markers,  industrial
markers, lumber crayons, correction materials and allied products.
     Certain financial information regarding net revenues, operating profits and
identifiable  assets for the years ended  September 30, 2001,  2000 and 1999, is
contained in Note 11 to Consolidated Financial Statements.


CONSUMER GROUP
--------------

     The Company  manufactures its leading brand  Ticonderoga(R) and a full line
of pencils  in  Versailles,  Missouri.  The  Company  manufactures  and  markets
advertising specialty pencils, pens and markers through its promotional products
division. The Company also manufactures and markets Wearever(R) and Dixon(R) pen
writing  products  as well as  Prang(R)  and  Ticonderoga(R)  lines of  markers,
mechanical pencils and allied products.
     In Sandusky,  Ohio, the Company  manufactures  (mainly for wholesale school
suppliers and  retailers)  its Prang(R) brand of soy-bean based and wax crayons,
chalks,  dry and liquid tempera,  water colors and art materials.  This division
also manufactures  special markers for industrial use, all of which are marketed
and sold  together  with the  products  discussed  above,  by the U.S.  Consumer
division.
     Under an agreement with Warner Bros.  Consumer  Products,  the Company also
markets  in Canada  and  Mexico a line of  pencils,  pens and  related  products
featuring the famous Looney Tunes(R) and Scooby Doo(R) characters.
     Dixon  Ticonderoga  Inc., a  wholly-owned  subsidiary  with a  distribution
center in Newmarket,  Ontario,  and a manufacturing plant in Acton Vale, Quebec,
Canada,  is engaged in the sale in Canada of black and color writing and drawing
pencils, pens, lumber crayons,  correction materials,  erasers, rubber bands and
allied products.  It also  distributes  certain of the school product lines. The
Acton Vale plant also  produces  eraser  products and  correction  materials for
distribution by the U.S. Consumer group.
     Grupo Dixon,  S.A. de C.V., a majority-owned  subsidiary (97%), is engaged,
through its  subsidiaries,  in the  manufacture  and sale in Mexico of black and
color writing and drawing  pencils,  correction  materials,  lumber  crayons and
allied products.  Grupo Dixon also  manufactures and sells in Mexico,  under its
Vinci(R)  brand,  certain  products  of the type  manufactured  at the  Sandusky
facility, as well as marker products and modeling clay.
     Dixon Europe, Limited, a wholly-owned subsidiary of the Company, is engaged
in the  distribution  of many Dixon consumer  products in the United Kingdom and
other European countries.
     Beijing  Dixon  Ticonderoga   Stationery  Company,   Ltd.,  a  wholly-owned
subsidiary  of the  Company,  is  engaged in the  manufacture  of wood slats for
pencil  manufacturing  and the sourcing  and  distribution  of certain  consumer
products for international sale by the Company.
     The  Company's  international  operations  are  subject  to  certain  risks
inherent  in  carrying  on  business  abroad,  including  the  risk of  currency
fluctuations,   currency  remittance   restrictions  and  unfavorable  political
conditions.  It is the  Company's  opinion that there are  presently no material
political  risks  involved  in doing  business in the  foreign  countries  (i.e.
Mexico, Canada and Europe) in which its operations are being conducted.


                                        3
<PAGE>

INDUSTRIAL GROUP (DISCONTINUED OPERATIONS)
------------------------------------------

     On September  17, 2001,  the Company  formalized  its decision to offer for
sale its New Castle Refractories  division,  the last business of its Industrial
Group.  This  division,  with  plants  located  in Ohio,  Pennsylvania  and West
Virginia,  manufactures various types of non-graphitic refractory kiln furniture
used by the  ceramic and glass  industries;  firebrick,  silicon-carbide  brick,
various types and designs of non-graphitic refractory special shapes for ferrous
and  nonferrous  metal  industries;  refractory  shapes for furnace  linings and
industrial  furnace  construction;  various  grades of insulating  firebrick and
graphite stopper heads.
     Prior to the sale of the  Company's  Graphite  and  Lubricants  division in
March 1999, the Industrial Group also  manufactured  and sold processed  natural
and synthetic bulk graphite,  graphite oil,  solvent and water-based  lubricants
and colloidal graphitic suspensions.

                                  DISTRIBUTION
                                  ------------

     Consumer  products  manufactured  in  the  Company's  U.S.  facilities  are
distributed  nationally  through  wholesale,  commercial and retail  stationers,
school supply  houses,  industrial  supply  houses,  blueprint and  reproduction
supply firms, art material  distributors and retailers.  In an effort to enhance
service levels  (especially with large retail  customers),  the Company leases a
central   distribution   center  in  Macon,   Georgia.   The  consumer  products
manufactured  at the Canadian and Mexican plants are  distributed  nationally in
these  countries  through  wholesalers,  distributors,  school supply houses and
retailers.  The Mexico subsidiary has recently moved its distribution operations
to a new facility in Mexico City.

                                  RAW MATERIALS
                                  -------------

     Wood slats for pencil  manufacturing  can be  considered  a  strategic  raw
material for the Company's  business and are purchased from various suppliers in
the U.S.,  Indonesia  and China  (including  the  Company's  wholly-owned  China
subsidiary). There were no significant raw material shortages of any consequence
during 2001 nor are any expected in the near future.

                       TRADEMARKS, PATENTS AND COPYRIGHTS
                       ----------------------------------

     The Company  owns a large  number of  trademarks,  patents  and  copyrights
related to products  manufactured  and  marketed by it,  which have been secured
over many  years.  These  have been of value in the growth of the  business  and
should  continue  to be of value in the future.  However,  in the opinion of the
Company,  its business  generally is not  dependent  upon the  protection of any
patent or patent application or the expiration of any patent.

                        SEASONAL ASPECTS OF THE BUSINESS
                        --------------------------------

     Greater portions  (approximately  60% in 2001) of the Company's sales occur
in the third and fourth  fiscal  quarters of the year due to shipments of school
orders to its distribution  network.  This practice,  which is standard for this
industry,  usually causes the Company to incur additional bank borrowings during
the period between shipment and payment.

                                   COMPETITION
                                   -----------

     The Company is engaged in a highly  competitive  business  with a number of
competitors,  some of whom  are  larger  and  have  greater  resources  than the
Company.  Important  to the  Company's  market  position  are  the  quality  and
performance  of its products,  its marketing  and  distribution  systems and the
reputation developed over the many years that the Company has been in business.


                                        4
<PAGE>

                            RESEARCH AND DEVELOPMENT
                            ------------------------

     The Company employs  approximately 16 full-time  professional  employees in
the area of quality control and product development. The Company has established
a  centralized  research  and  development  laboratory  in  its  Sandusky,  Ohio
facility. For accounting purposes, research and development expenses in any year
presented in the accompanying  Consolidated  Financial Statements represent less
than 1% of revenues.

                                    EMPLOYEES
                                    ---------

     The total number of persons employed by the Company was approximately 1,479
of which 512 were employed in the United States.


ITEM 2. PROPERTIES
------------------

     The properties of the Company,  set forth in the following  table are owned
and are  collateralized  or pledged under the Company's  loan  agreement  with a
consortium  of lenders  (First  Union  Capital  Corporation  as agent),  and its
Heathrow,  Florida,  property, is subject to a separate mortgage agreement.  See
Notes 3 and 4 to Consolidated Financial Statements. Most of the buildings are of
steel frame and masonry or concrete construction.

                                                                  SQUARE FEET
                             LOCATION                           OF FLOOR SPACE
  ------------------------------------------------------------- --------------
  Heathrow, Florida (Corporate Headquarters)                        33,000
  Sandusky, Ohio (Consumer)                                        276,000
  Versailles, Missouri (Consumer)                                  120,000
  New Castle, Pennsylvania
   (Refractories division/discontinued operations)                 131,000
  Newell, West Virginia
   (Refractories division/discontinued  operations)                 45,000
  Massillon, Ohio
   (Refractories division/discontinued   operations)               113,000
  Acton Vale, Quebec, Canada (Dixon Ticonderoga Inc.) (Consumer)    32,000
  Beijing, China
    (Beijing Dixon Ticonderoga Stationery Company, Ltd.) (Consumer) 25,000

     The Company leases approximately  100,000 square feet in Macon, Georgia for
its U.S. Consumer central  distribution  center. The Company's Mexico subsidiary
leases a 300,000  square-foot  facility near Mexico City, used for  distribution
and certain manufacturing operations, as well as its corporate headquarters. The
Company's Canada subsidiary leases 12,000 square feet in Newmarket, Ontario used
for distribution and office space.


                                        5
<PAGE>

ITEM 3. LEGAL PROCEEDINGS
-------------------------

     In March 1986, The Dixon Venture ("Venture") (an unrelated company) filed a
civil action in the New Jersey  Superior  Court seeking  recovery of damages and
costs  allegedly  incurred  by  Venture  in  connection  with  the  clean-up  of
industrial  property  acquired  from the Company in Jersey  City,  New Jersey in
February,  1984.  Venture's  claims  were  brought  pursuant  to the New  Jersey
Environmental  Clean-up  Responsibility Act ("ECRA"), an environmental  remedial
statute dealing with the transfer of industrial property.
     On April 24, 1996,  a decision  was  rendered by the Superior  Court of New
Jersey in Hudson  County  finding the Company  responsible  for $1.94 million in
certain  environmental  clean-up costs relating to this matter. In January 1998,
the  Company  paid $3.6  million to satisfy  this claim in full,  including  all
accrued interest.  The Company continued to pursue other responsible parties for
indemnification  and/or contribution to the payment of this claim (including its
insurance  carriers) and in fiscal 2000 the Company reached settlements with its
various insurers for reimbursement of legal costs in the amount of $653,000.  In
2001, a pending  malpractice  suit against its former  attorneys was settled and
the  Company  received  $575,000.  Also  see Note 13 to  Consolidated  Financial
Statements.
     Additionally,  in May  2000 a news  article  alleged  that  the talc in all
domestic brands of crayons, including the Company's,  contained trace amounts of
a fiber  resembling  asbestos.  In response to these  allegations,  all domestic
crayon  manufacturers,  including the Company,  the talc supplier and the United
States  Consumer  Product  Safety   Commission  (CPSC)  engaged  in  independent
laboratory  testing for asbestos fibers in crayons.  All test results  reflected
the unequivocal absence of asbestos in domestically made crayons,  including the
test  results  from the  Government's  own OSHA  laboratory.  In any event,  all
domestic  crayon  manufacturers,  including the Company,  voluntarily  agreed to
reformulate  their  crayons and  discontinue  the use of talc to  eradicate  any
persistent  public  concerns  regarding  crayon safety.  The Company  released a
reformulated crayon in 2001.
     Each of the domestic crayon  manufacturers,  including the Company, and the
CPSC released press statements  verifying the safety and non-toxicity of crayons
both on store and consumer  shelves.  Nevertheless,  the Company became aware of
seven  legal  actions  threatened  against  itself  and  other  domestic  crayon
manufacturers as a result of the erroneous report. Of the seven threatened legal
actions,  six were filed  against the Company and four were  dismissed.  The two
remaining legal actions involve a class action suit and a misleading advertising
claim. The Company settled these two legal actions for an immaterial net cost.
     The Company  believes  that there are no pending  actions which will have a
material  adverse  effect on the  Company's  financial  condition  or results of
operations.


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

      None.




                                        6
<PAGE>

                                     PART II
                                     -------

ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK
---------------------------------------------
        AND RELATED SECURITY HOLDER MATTERS
        -----------------------------------

     Dixon  Ticonderoga  Company  common stock is traded on the  American  Stock
Exchange under the symbol "DXT".  The following table sets forth the low ad high
per share  prices as per the  American  Stock  Exchange  closing  prices for the
applicable quarter.

                                FISCAL 2001        FISCAL 2000
           QUARTER ENDING       LOW    HIGH        LOW    HIGH
        --------------------   -----  ------      -----  ------
         December 31           $2.13  $5.00      $5.88  $10.00
         March 31               2.75   5.50       3.88    7.13
         June 30                3.35   4.50       2.88    4.19
         September 30           2.15   4.10       2.75    5.44


     Since  fiscal  1990,  the  Board of  Directors  has  suspended  payment  of
dividends.  The Board will continue to review the Company's  future  performance
and determine the dividend policy on a  quarter-to-quarter  basis. The Company's
debt  agreements  restrict  the  amount of  dividends,  which can be paid in the
future. (See Note 4 to Consolidated Financial Statements).
     The number of record  holders of the Company's  common stock at December 3,
2001 was 419.


                                        7
<PAGE>


ITEM 6. SELECTED FINANCIAL DATA
-------------------------------
<TABLE>
<CAPTION>

                         DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                         FOR THE FIVE YEARS ENDED SEPTEMBER 30, 2001
                         (in thousands, except per share amounts)

<S>                               <C>          <C>         <C>         <C>          <C>
                                  2001         2000        1999        1998         1997
                               ----------   ----------  ----------  ----------   ----------
REVENUES                        $ 90,492     $ 91,691    $ 97,372    $ 99,874     $ 89,416
                               ==========   ==========  ==========  ==========   ==========
INCOME (LOSS) FROM
  CONTINUING OPERATIONS         $    620     $   (733)   $    399    $  2,279     $  2,509

INCOME (LOSS) FROM
  DISCONTINUED OPERATIONS         (1,100)         (65)      6,283         857        1,092
                               ----------   ----------  ----------  ----------   ----------

NET INCOME (LOSS)               $   (480)    $   (798)   $  6,682    $  3,136     $  3,601
                               ==========   ==========  ==========  ==========   ==========

EARNINGS (LOSS) PER
  COMMON SHARE (BASIC):
  CONTINUING OPERATIONS         $    .20     $   (.23)   $    .12    $    .67     $    .75


  DISCONTINUED OPERATIONS           (.35)        (.02)       1.83         .26          .33
                               ----------   ----------  ----------  ----------   ----------

  NET INCOME (LOSS)             $   (.15)    $   (.25)   $   1.95    $    .93     $   1.08
                               ==========   ==========  ==========  ==========   ==========

EARNINGS (LOSS) PER
  COMMON SHARE (DILUTED):
  CONTINUING OPERATIONS         $    .20     $   (.23)   $    .11    $    .62     $    .73

  DISCONTINUED OPERATIONS           (.35)        (.02)       1.76         .23          .32
                               ----------   ----------  ----------  ----------   ----------

  NET INCOME (LOSS)             $   (.15)    $   (.25)   $   1.87    $    .85     $   1.05
                               ==========   ==========  ==========  ==========   ==========

TOTAL ASSETS                    $ 86,412     $ 86,718    $ 92,888    $ 92,630     $ 84,161
                               ==========   ==========  ==========  ==========   ==========

LONG-TERM DEBT                  $  2,018 2   $ 30,210    $ 39,400 1  $ 21,927     $ 23,556
                               ==========   ==========  ==========  ==========   ==========

DIVIDENDS PER
  COMMON SHARE                  $    -       $    -      $    -      $    -       $    -
                               ==========   ==========  ==========  ==========   ==========
</TABLE>

1The increase in long-term debt in 1999 is  attributable  to the  refinancing of
the Company's  previous  revolving credit agreement under a five-year  facility.
(See Note 4 to Consolidated Financial Statements.)

2The  reduction in long-term  debt is due to  reclassification  of the Company's
senior credit facility and subordinated notes to current maturities of long-term
debt. (See Notes 4 and 15 to Consolidated Financial Statements.)


                                        8
<PAGE>

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

SUMMARY OF RESULTS OF OPERATIONS
--------------------------------

Discontinued operations:
------------------------

     In order to focus on its core Consumer Group  businesses,  on September 17,
2001 the  Company  formalized  its  decision  to offer  for sale its New  Castle
Refractories  division,  the last business of its Industrial  Group. The Company
had disposed of its Graphite and Lubricants  division in 1999.  These businesses
had revenues of $9,529,000,  $11,188,000 and $17,317,000 in 2001, 2000 and 1999,
respectively.   Income  (loss)  from  discontinued   operations  was  ($56,000),
($65,000)  and  $6,280,000  in 2001,  2000 and  1999,  respectively,  (including
pre-tax gains on sales of assets of  $1,202,000 in 2001 and  $9,636,000 in 1999,
and income tax benefit  (expense) of $29,000,  $23,000 and ($3,987,000) in 2001,
2000 and  1999,  respectively).  Interest  expense  of  $427,000,  $597,000  and
$603,000 has been allocated to  discontinued  operations in 2001, 2000 and 1999,
respectively.
     The Company  reported an  anticipated  loss on disposal of  $1,570,000  (or
$1,044,000 after tax benefit) including provisions for a loss on the sale of the
New Castle Refractories division of $468,000, for the wind-up of that division's
pension plans of $432,000 and for operating  losses through the expected date of
disposal  of  $670,000.   For  financial  reporting  purposes,  the  Company  is
accounting  for the  disposition  of its  Industrial  Segment as a  discontinued
operation and, accordingly,  its statements of operations present the results of
the discontinued  Industrial  Segment  separately from the results of continuing
operations.  Since a discussion of the results of the Industrial  Segment is not
meaningful  to  an  understanding  of  the  continuing  Consumer  business,  all
discussions  comparing  the  results  of  operations  refer  to  the  continuing
operations  of  the  Consumer   Group.   (For  further   information   regarding
discontinued operations, see Note 12 to Consolidated Financial Statements.)

2001 vs. 2000:
--------------

     Income  before  taxes,   minority  interest  and  discontinued   operations
increased   $2,125,000.   Charges  for  the   Company-wide   restructuring   and
consolidation  plan  decreased  $640,000.  Restructuring  costs in 2001 included
$418,000 in U.S. costs associated with a prior phase of  restructuring,  as well
as $450,000 in Mexico for the  consolidation  of operations into a new facility.
Operating  profits  increased  primarily due to lower selling,  distribution and
administrative  expenses.  General  corporate  expenses  also  decreased  due to
continued   aggressive  cost  reduction  efforts.   Interest  expense  increased
$716,000, mainly due to higher borrowings in Mexico to finance the consolidation
of manufacturing facilities. Income taxes also increased due to pretax income in
2001, as compared to losses in the prior year.

2000 vs. 1999:
--------------

     Income  before  taxes,   minority  interest  and  discontinued   operations
decreased  $2,568,000  in 2000.  The  Company  recorded  pre-tax  provisions  of
$1,508,000 and $1,917,000 in 2000 and 1999, respectively,  for restructuring and
related costs for a Company-wide cost reduction program and plant consolidation.
Restructuring  costs in 2000  included  $1,040,000  for employee  severance  and
related costs and $468,000 for the sale or abandonment of Mexico properties.  In
fiscal  2000,  approximately  $367,000  was charged to the 2000  severance  cost
accrual and $156,000 against the accrual for property abandonment.  In addition,
$1,704,000  was charged  against the  remaining  1999  accrual.  (See Note 10 to
Consolidated  Financial  Statements.) U.S. Consumer  operating profits decreased
primarily due to lower revenue and higher  manufacturing  inefficiencies  due to
strict  inventory  reduction  efforts  and  consolidation  activities.   Foreign
Consumer  operating  profits  reflected  a decrease  in Mexico  due to  start-up
inefficiencies  relating to the  transfer of certain U.S.  production  and lower
margins  due  to  competitive  pricing  pressures.  Interest  expense  decreased
$496,000  primarily due to lower foreign  borrowings and interest rates.  Income
taxes decreased due to the decrease in pre-tax income.


                                        9
<PAGE>

REVENUES
--------

     Overall 2001 revenues decreased $1,199,000 from the prior year. The changes
are as follows:

                       Decrease             % Increase (Decrease)
                   (in thousands)        Total    Volume  Price / Mix
                   --------------        ----------------------------
      U.S.            $ (273)              -        1         (1)
      Foreign           (926)             (3)     (13)        10

     U.S. revenue  decreased  primarily in the mass market retail channels where
competitive  pressures from large suppliers and importers are the greatest.  The
decrease  in  these  channels  was  principally   offset  by  increases  in  the
traditional  educational  channel.  Foreign revenue  decreased  primarily due to
lower  demand from large  retail  customers,  partially  offset by Mexico  price
increases.
     While  the  Company  has  operations  in  Canada,   Mexico  and  the  U.K.,
historically only the operating results in Mexico have been materially  impacted
by  currency  fluctuations.  There  has been a  significant  devaluation  of the
Mexican peso at least once in each of the last three decades, the last one being
in  August  of  1998.  In the  short  term  after  such  devaluations,  consumer
confidence has been shaken, leading to an immediate reduction in revenues in the
months  following the  devaluation.  Then, after the immediate shock, and as the
peso  stabilizes,  revenues tend to grow.  Selling  prices tend to rise over the
long term to offset any  inflationary  increases in costs.  The peso, as well as
any currency  value,  depends on many  factors  including  international  trade,
investor  confidence  and  government  policy,  to name a few. These factors are
impossible for the Company to predict, and thus, an estimate of potential effect
on results of operations  for the future  cannot be made.  This currency risk in
Mexico is presently managed through  occasional  foreign currency hedges,  local
currency financing and by export sales to the U.S. denominated in U.S. dollars.
     Overall 2000 revenues decreased $5,681,000 from the prior year. The changes
are as follows:

                Increase (Decrease)        % Increase (Decrease)
                  (in thousands)         Total    Volume  Price / Mix
                -------------------      ----------------------------
      U.S.          $ (8,724)            (13)     (12)        (1)
      Foreign          3,043              10       12         (2)

     U.S.  revenue  decreased  principally in the mass retail and wholesale club
markets  reflecting  the  effects  of  reduced  customer  inventory  levels  and
increased  competition from imports.  Foreign revenue increased primarily in the
Mexico and Canada mass markets  reflecting  additional  product  distribution in
these channels.


OPERATING INCOME
----------------

     Operating  income in 2001 increased  $2,841,000  over the prior year.  U.S.
operating  income  increased  $1,812,000   (excluding   restructuring   charges)
primarily due to lower selling,  distribution and administrative  costs. Foreign
operating income decreased $340,000, primarily in Canada, due to lower revenues.
General  corporate  expenses  (excluding   restructuring   costs)  decreased  an
additional $730,000 due to lower salaries,  fringes and related costs reflecting
continued  aggressive  cost  reduction  efforts.  These  decreases  in  selling,
distribution,  administrative  and general  corporate  expenses  contributed  to
significantly  lower  consolidated  selling and  administrative  costs (30.4% of
sales as compared to 32.9% in the prior year).  Restructuring  and related costs
decreased $640,000 in 2001 as the Company finalized its efforts under the second
phase of its restructuring program.
     Operating  income in 2000 decreased  $3,064,000 from 1999.  U.S.  operating
income decreased $650,000 due principally to the decrease in revenues and higher
manufacturing  inefficiencies.  Foreign  operating income  decreased  $2,260,000
primarily due to competitive pricing pressures and start-up costs resulting from
production moving from the U.S. to Mexico. The higher manufacturing costs in the

                                       10
<PAGE>

U.S. and Mexico substantially contributed to the relative increase in total cost
of goods sold in 2000 (62.6% of sales as compared  with 60.3% in 1999).  General
corporate expenses increased $150,000 primarily due to higher  restructuring and
related personnel costs. Due to the lower revenues,  selling and  administrative
costs  increased  as a percentage  of sales (32.9% in 2000  compared to 31.9% in
1999).  However,  consolidated  selling and  administrative  expenses  decreased
$884,000 in 2000, reflecting ongoing cost reduction efforts.


MINORITY INTEREST
-----------------

     Minority  interest  represents  3% of the net  income  of the  consolidated
subsidiary,  Grupo Dixon,  S.A. de C.V., since  September,  1999 and 20.2% prior
thereto  ($31,267,   $23,938  and  $402,135  in  fiscal  2001,  2000  and  1999,
respectively),  equivalent  to the  extent  of the  investment  of the  minority
shareholders. (See Note 8 to Consolidated Financial Statements.)


CURRENT ECONOMIC ENVIRONMENT AND EVENTS
---------------------------------------

     Although  not  directly  impacted by recent  events in the U.S. and abroad,
softening  economic  conditions  could  affect the retail mass or other  markets
served by the Company's  Consumer  Group and thus could lead to reduced  overall
revenues.  In addition,  certain  expenses  (such as  insurance  costs) could be
significantly higher in the coming years than in 2001 due to recent events.


LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

     The  Company  generated  approximately  $1.4  million  in cash  flows  from
operating  activities  in 2001.  The  Company's  strict  inventory  control  and
reduction  efforts  in the U.S.  led to an  increase  in cash  flows  related to
inventories of  approximately  $500,000,  continuing a correction  begun in 2000
after a $7.3  million  decrease in cash flows  attributable  to the  build-up of
inventories  in 1999.  In  addition,  further  improvement  in accounts  payable
management in the U.S. and Mexico and strong accounts receivable  collections in
Mexico helped to partially offset the effects of higher U.S. accounts receivable
in 2001.  Overall,  in 2001 and 2000, the Company generated  approximately  $4.1
million in cash flows from operating activities,  as compared with net cash used
of $10.4 million in 1999.
     The Company's 2001 investing activities included approximately $2.2 million
in net  purchases  of property  and  equipment,  compared to $1.4 million in the
prior year.  This  reflects a higher level of purchases as compared  with recent
years,  due  to  the  Company's  expansion  of  its  Mexico   manufacturing  and
consolidation into its newly leased 300,000 square-foot facility. In 2001, these
expenditures were partially offset by approximately $1.3 million in net proceeds
on the sale of an idled  Mexico plant and other  assets.  A note  receivable  of
$3.25 million from the sale of a division was collected in 2000 and is reflected
as proceeds from investing activities. Generally, all major capital projects are
discretionary in nature and thus no material purchase commitments exist. Capital
expenditures  are usually funded from  operations and existing  financing or new
leasing arrangements.
     The  Company's  primary  financing  arrangements  are with a consortium  of
lenders, providing a total of up to $42.5 million in financing through September
2004. The financing agreements,  as amended,  include a revolving line of credit
facility in the amount of $35 million,  which bears interest at either the prime
rate plus 0.75%,  or the  prevailing  LIBOR rate plus 2.25%,  through  September
2004.  The  agreements  also  provide  for the  payment  of  various  bank  fees
approximating $20,000 per month.  Borrowings under the revolving credit facility
are based upon eligible  accounts  receivable  and  inventories of the Company's
U.S. and Canada  operations,  subject to reserves for  anticipated  subordinated
debt payments and certain other items,  as defined.  The Company has executed an
interest rate swap agreement that  effectively  fixed the rate of interest on $8
million of these  borrowings at 8.98% through August 2005. The loan and security
agreements  also include a term loan in the initial amount of $7.5 million.  The
term loan is payable in monthly installments of $125,000, plus interest, through

                                       11
<PAGE>

September  2004.  The loan bears interest  based upon the same  prevailing  rate
described above in connection with the revolving  credit  facility.  The Company
entered into the  aforementioned  interest  rate swap  agreements to balance and
manage overall interest rate exposure and minimize overall cost of borrowings.
     These  financing  arrangements  are  collateralized  by  the  tangible  and
intangible  assets  of  the  U.S.  and  Canada  operations  (including  accounts
receivable,  inventories, property, plant and equipment, patents and trademarks)
and a pledge of the capital  stock of the Company's  subsidiaries.  The loan and
security agreement contains provisions  pertaining to the maintenance of certain
financial ratios and annual capital  expenditure levels, as well as restrictions
as to payment of cash  dividends.  On September 15, 2001, a waiver of compliance
with one  provision  of the  Company's  primary  lending  agreement  expired and
shortly  thereafter its senior lenders prohibited the payment of $5.5 million in
principal due to senior  subordinated  noteholders  on September  26, 2001.  The
payment due date was later extended by the  noteholders  until November 14, 2001
and the  aforementioned  waiver  from  the  Company's  senior  lenders  was also
extended through that date.  These extensions  expired on November 15, 2001. The
senior lenders again blocked any payment to the subordinated noteholders and the
Company has  continued to negotiate  with its various  lenders since then. As of
September  30,  2001,  the  Company  was not in  compliance  with two  financial
covenants under its senior debt agreements and one financial  covenant under its
subordinated  note agreement.  The Company has received an additional  extension
and waiver of certain existing defaults under its senior debt agreements through
May 3, 2002 to allow the  Company  more time to address  its debt  issues to the
mutual  satisfaction  of all  parties  involved.  The Company has asked both its
senior  and  subordinated  lenders  to amend  various  provisions  of their debt
agreements until at least October 2002 to allow time for the Company to pursue a
longer-term  solution.  As of September 30, 2001, the Company had  approximately
$23  million of unused  lines of credit  available  under the  revolving  credit
facility.  In addition,  the Company's Mexico subsidiary has $16 million in bank
lines of credit ($9 million unused as of September 30, 2001) expiring at various
dates which bear  interest at a rate based upon either a floating U.S. bank rate
or the rate of certain Mexican government securities. The Company relies heavily
on the  availability of the lines of credit in the U.S. and Mexico for liquidity
in its operations.
     The Company also has outstanding  $16.5 million of 12% Senior  Subordinated
Notes valued at their face amount,  due 2003.  The  subordinated  note agreement
provides for a total interest rate of 13.5% through June 2002 and 12.25% through
maturity in 2003. Due to the Company's  noncompliance  under its primary lending
arrangements  discussed  above,  it  was  prohibited  from  making  a  scheduled
subordinated  note  payment of $5.5  million  due in  September  2001.  The note
agreement provides for an additional  interest charge of 2% on this amount until
payment is made. The note agreement, as amended,  contains provisions that limit
dividends and other payments,  and requires the maintenance of certain financial
covenants  and  ratios,  one of which  the  Company  did not  comply  with as of
September 30, 2001.
     The Company believes that amounts available under its lines of credit under
its senior debt and under lines of credit  available to its Mexican  subsidiary,
if funded,  are  sufficient  to fulfill all current  and  anticipated  operating
requirements of its business. The senior lenders have consistently supported the
Company and they,  as well as the  Company's  foreign  lenders,  have  continued
funding under their agreements throughout the ongoing negotiations. However, the
Company does not believe it will have excess cash flow to retire the total $16.5
million in  subordinated  notes by their due date in 2003. The Company has asked
the  subordinated  noteholders and they have expressed a willingness to consider
restructuring their scheduled principal payments to allow the Company sufficient
time to retire  the  notes  through  the  infusion  of some  form of new  equity
capital, new secondary financing and/or the sale of assets. However, the Company
cannot  assure  that its  efforts  will be  successful,  that  the  subordinated
noteholders  will amend their  scheduled  payments  and/or that it will maintain
and/or  secure  new  sources of  capital.  In  addition,  the  Company's  Mexico
subsidiary  cannot assure that its lines of credit will continue to be available
after their respective  expiration  dates, or that  replacement  lines of credit
will be secured.
     Due to the defaults described above, the subordinated and senior debts have
been classified as current maturities of long-term debt in the accompanying 2001
consolidated  balance  sheet.  Moreover,  in light of the current  circumstances
regarding the Company's various debt  arrangements,  the report of the Company's
independent  accountants  includes an  explanatory  paragraph as to  substantial
doubt about the Company's ability to continue as a going concern.

                                       12
<PAGE>

     In March 1999, the Company's Board of Directors approved a Stock Repurchase
Program  authorizing  the  acquisition of up to $3 million in Dixon  Ticonderoga
Company  stock.  Under  this  program,  which has been  concluded,  the  Company
repurchased  337,000  shares at a cost of $2.8  million  ($2  million  in fiscal
2000).  These repurchases were financed through the  aforementioned and previous
U.S. revolving line of credit facilities.
     Refer to Notes 3, 4 and 15 to Consolidated Financial Statements for further
description of the aforementioned financing arrangements.
     The  Company  has  retained  Wachovia  Securities   (formerly  First  Union
Securities)  and certain  other outside  consultants  to advise and assist it in
evaluating  certain strategic  alternatives,  including  capital  restructuring,
mergers  and  acquisitions,  and/or  other  measures  designed  to  resolve  the
Company's issues with its lenders while maximizing shareholder value.


RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------

     In July 2001,  the  Financial  Accounting  Standards  Board  (FASB)  issued
Statement  No. 141 "Business  Combinations"  and Statement No. 142 "Goodwill and
Other  Intangible  Assets".  Statement  No. 141 requires  business  combinations
initiated  after June 30, 2001 to be accounted for using the purchase  method of
accounting and broadens the criteria for recording  intangible  assets  separate
from goodwill.  Statement No. 142 requires the use of a nonamortization approach
to account for purchased  goodwill and  indefinite  lived  intangibles.  Under a
nonamortization approach,  goodwill and indefinite lived intangibles will not be
amortized  into  results  of  operations,  but  instead  would be  reviewed  for
impairment  and written  down and charged to results of  operations  only in the
periods in which the recorded value of goodwill and indefinite lived intangibles
is more than its fair value.  The  provisions of Statement No. 141 are effective
currently. The provisions of Statement No. 142 will be effective for the Company
in fiscal 2003. Management does not expect these standards, when implemented, to
have a  material  effect  on its  future  results  of  operations  or  financial
position.
     In June 2001,  the FASB  issued  Statement  No. 143  "Accounting  for Asset
Retirement  Obligations".  The  statement  addresses  financial  accounting  and
reporting for obligations  associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The statement is effective for
the  Company  in fiscal  2003.  The  Company  does not expect  the  adoption  of
Statement No. 143 to have a material  impact on the Company's  future results of
operations or financial position.
     In August  2001,  the FASB issued  Statement  No. 144  "Accounting  for the
Impairment  or  Disposal  of  Long-Lived  Assets".   This  statement  supersedes
Statement No. 121,  "Accounting for the Impairment of Long-Lived  Assets and for
Long-Lived  Assets  to  be  Disposed  of",  and  the  accounting  and  reporting
provisions of APB Opinion 30,  "Reporting  the Results of Operations - Reporting
the Effects of Disposal of a Segment of a Business,  and Extraordinary,  Unusual
and  Infrequently  Occurring  Events and  Transactions",  for the  disposal of a
segment of a business.  The  statement  is  effective  for the Company in fiscal
2003.  The Company does not expect the  adoption of Statement  No. 144 to have a
material  impact on the  Company's  future  results of  operations  or financial
position.


                                       13
<PAGE>

FORWARD-LOOKING STATEMENTS
--------------------------

     The  statements  in this  Annual  Report on Form  10-K that are not  purely
historical are "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, including statements about the Company's expectations, beliefs, intentions
or  strategies   regarding  the  future.   Forward-looking   statements  include
statements regarding,  among other things, the effects of the devaluation of the
Mexican peso; the sufficiency and continued  availability of the Company's lines
of credit  and its  ability to meet its  current  and  anticipated  obligations;
management's  inventory  reduction  plan and  expectation  for savings  from the
restructuring  and  cost-reduction  program;  the Company's  ability to increase
sales  in its  core  businesses;  and its  expectations  with  regards  to legal
proceedings.  Readers are cautioned that any such forward-looking statements are
not  guarantees  of future  performance  and involve  known and  unknown  risks,
uncertainties  and other  factors that could cause the actual  results to differ
materially from those expressed or implied by such  forward-looking  statements.
Such risks include (but are not limited to) the risk that the Company's  lenders
will not  continue  to fund the  Company  in the future as they have in the past
when  defaults  have  occurred;  the  inability  of the Company to  successfully
negotiate  a  restructuring  of its  subordinated  debt and the  exercise by its
lenders  of  various  remedies  available  to them  in the  event  of  continued
defaults;  the  cancellation  of the lines of credit  available to the Company's
Mexico  subsidiary;  the  inability  to  maintain  and/or  secure new sources of
capital;  manufacturing  inefficiencies  as a result of the inventory  reduction
plan;  difficulties   encountered  with  the  consolidation  and  cost-reduction
program;  increased  competition;  U.S. and foreign  economic  factors;  foreign
currency exchange risk and interest rate fluctuation risk, among others.


                                       14
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
         ----------------------------------------------------------

     As discussed  elsewhere,  the Company is exposed to the following principal
market risks (i.e.  risks of loss arising from adverse changes in market rates):
foreign exchange rates and interest rates on debt.
     The  Company's  exposure  to  foreign  currency  exchange  rate risk in its
international  operations  is  principally  limited to Mexico  and,  to a lesser
degree, Canada. Approximately 37% of the Company's fiscal 2001 net revenues were
derived in Mexico and Canada,  combined (exclusive of intercompany  activities).
Foreign  exchange  transaction  gains and losses arise from monetary  assets and
liabilities  denominated in currencies other than the business unit's functional
local  currency.  It is estimated that a 10% change in both the Mexican peso and
Canadian  dollar  exchange  rates  would  impact  reported  operating  profit by
approximately  $500,000.  This  quantitative  measure has  inherent  limitations
because  it does not take  into  account  the  changes  in  customer  purchasing
patterns or any adjustment to the Company's financing or operating strategies in
response to such a change in rates.  Moreover,  this  measure does not take into
account  the  possibility  that  these  currency  rates  can  move  in  opposite
directions, such that gains from one may offset losses from another.
     In addition,  the Company's  cash flows and earnings are subject to changes
in interest  rates. As of September 30, 2001,  approximately  46% of total short
and long-term debt is fixed,  at rates between 8% and 13.5%.  The balance of the
Company debt is variable,  principally based upon the prevailing U.S. bank prime
rate or LIBOR rate. An interest rate swap, which expires in 2005, fixes the rate
of  interest  on $8  million  of this  debt at 8.98%.  A change  in the  average
prevailing  interest  rates of the remaining  debt of 1% would have an estimated
impact of $200,000 upon the  Company's  pre-tax  results of operations  and cash
flows. This quantitative measure does not take into account the possibility that
the prevailing rates (U.S. bank prime and LIBOR) can move in opposite directions
and that the  Company  has,  in most  cases,  the option to elect  either as the
determining interest rate factor.


                                       15
<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
---------------------------------------------------


                   DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
             INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

                                                                   PAGE
                                                                   ----

Report of Independent Certified Public Accountants                  17

Consolidated Balance Sheets as of
  September 30, 2001 and 2000                                     18-19

Consolidated  Statements  of  Operations  For  the
Years Ended September 30, 2001, 2000 and 1999                       20

Consolidated  Statements of  Comprehensive  Income
(Loss) For the Years Ended September 30, 2001, 2000 and 1999        21

Consolidated Statements of Shareholders' Equity
  For the Years Ended September 30, 2001, 2000 and 1999             22

Consolidated  Statements  of  Cash  Flows  For the
For the Years Ended September 30, 2001, 2000 and 1999             23-24

Notes to Consolidated Financial Statements                        25-44

Schedule For the Years Ended September 30, 2001, 2000 and 1999:

      II. Valuation and Qualifying Accounts                         45

      Information required by other schedules called for under Regulation
      S-X is either not applicable or is included in the Consolidated
      Financial Statements or Notes thereto.


                                       16
<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS




Shareholders and Board of Directors of
Dixon Ticonderoga Company

In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects,  the financial position of Dixon
Ticonderoga Company and its subsidiaries at September 30, 2001 and 2000, and the
results of their  operations and their cash flows for each of the three years in
the period ended  September 30, 2001 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  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  financial  statement  schedule  are the  responsibility  of the
Company's  management;  our  responsibility  is to  express  an opinion on these
financial  statements and 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.

As discussed in Note 1 to the financial statements, in 2001, the Company changed
its method of accounting for derivative instruments.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going  concern.  As discussed in Notes 4 and
15 to the financial statements,  the Company did not make a scheduled payment to
its  subordinated  lenders  creating  a  default  under  the  terms  of the debt
agreement.  Additionally,  the Company's debt agreements with its senior lenders
include cross-default  provisions that could result in a default under the terms
of the Company's senior debt agreement,  if the  subordinated  debt payments are
not  made  and  if  the  subordinated  lenders  declare  an  event  of  default.
Negotiations  to amend the  scheduled  subordinated  note  payments are ongoing.
These  circumstances  raise  substantial  doubt about the  Company's  ability to
continue as a going concern.  Management's  plans in regard to these matters are
also  described  in  Note  15.  The  financial  statements  do not  include  any
adjustments that result from the outcome of this uncertainty.


PricewaterhouseCoopers LLP
Tampa, Florida
December 6, 2001, except as to the
first paragraph of Note 15 for which
the date is January 10, 2002


                                       17
<PAGE>

                   DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           SEPTEMBER 30, 2001 AND 2000

<TABLE>
<CAPTION>
<S>                                                   <C>              <C>
                                                      2001             2000
                                                  ------------    -------------
         ASSETS:
         -------

CURRENT ASSETS:
   Cash and cash equivalents                       $  844,299       $  448,452
   Receivables, less allowance for doubtful
     accounts of $1,482,524 in 2001 and
     $1,418,908 in 2000                            31,647,950       30,881,626
   Inventories                                     35,583,082       36,215,931
   Other current assets                             2,227,785        4,171,064
                                                  ------------    -------------
      Total current assets                         70,303,116       71,717,073
                                                  ------------    -------------
PROPERTY, PLANT AND EQUIPMENT:

   Land and buildings                              10,608,980       10,145,872
   Machinery and equipment                         17,155,371       16,054,327
   Furniture and fixtures                           1,741,811        1,654,404
                                                  ------------    -------------
                                                   29,506,162       27,854,603
      Less accumulated depreciation               (19,022,674)     (17,572,320)
                                                  ------------    -------------
                                                   10,483,488       10,282,283
                                                  ------------    -------------
OTHER ASSETS                                        5,625,771        4,718,379
                                                  ------------    -------------
                                                  $86,412,375      $86,717,735
                                                  ============    =============
</TABLE>

                                       18
<PAGE>

      LIABILITIES AND SHAREHOLDERS' EQUITY:          2001             2000
-----------------------------------------------  -------------    -------------
CURRENT LIABILITIES:
   Notes payable                                 $ 6,294,268      $ 3,574,929
   Current maturities of long-term debt           32,598,531        7,135,198
   Accounts payable                                9,321,957        8,068,133
   Accrued liabilities                             9,132,057       10,056,935
                                                 -------------    -------------
      Total current liabilities                   57,346,813       28,835,195
                                                 -------------    -------------
LONG-TERM DEBT                                     2,018,125       30,210,410
                                                 -------------    -------------
DEFERRED INCOME TAXES AND OTHER                      984,492          177,248
                                                 -------------    -------------
MINORITY INTEREST                                    577,241          552,215
                                                 -------------    -------------
COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
   Preferred stock, par $1, authorized 100,000
     shares, none issued                                 -               -
   Common stock, par $1, authorized 8,000,000
     shares, issued 3,710,309 shares in 2001 and
     3,710,309 shares in 2000                      3,710,309        3,710,309
   Capital in excess of par value                  3,670,135        3,700,272
   Retained earnings                              25,667,675       26,147,547
   Accumulated other comprehensive loss           (4,101,681)      (3,093,577)
                                                 -------------    -------------
                                                  28,946,438       30,464,551
   Less treasury stock, at cost (532,847 shares
     in 2001 and 542,262 shares in 2000)          (3,460,734)      (3,521,884)
                                                 -------------    -------------
                                                  25,485,704       26,942,667
                                                 -------------    -------------
                                                 $86,412,375      $86,717,735
                                                 =============    =============

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

                                       19
<PAGE>
<TABLE>
<CAPTION>
                   DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
              FOR THE YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999

<S>                                                <C>            <C>             <C>
                                                   2001           2000           1999
                                               -------------  -------------  -------------
REVENUES                                       $90,492,514    $91,691,241    $97,372,466
                                               -------------  -------------  -------------
COSTS AND EXPENSES:
  Cost of goods sold                            56,732,494     57,462,598     58,788,522
  Selling and administrative expenses           27,536,687     30,204,945     31,088,434
  Provision for restructuring and related costs    867,666      1,508,481      1,916,800
                                               -------------  -------------  -------------
                                                85,136,847     89,176,024     91,793,756
                                               -------------  -------------  -------------
OPERATING INCOME                                 5,355,667      2,515,217      5,578,710

INTEREST EXPENSE                                 4,387,700      3,672,365      4,168,533
                                               -------------  -------------  -------------
INCOME  (LOSS)  FROM   CONTINUING   OPERATIONS
  BEFORE INCOME TAXES (BENEFIT)
  AND MINORITY INTEREST                            967,967    (1,157,148)      1,410,177

INCOME TAXES (BENEFIT)                             316,933      (448,087)        606,531
                                               -------------  -------------  -------------
                                                   651,034      (709,061)        803,646

MINORITY INTEREST                                   31,267        23,938         402,135
                                               -------------  -------------  -------------

INCOME (LOSS) FROM CONTINUING OPERATIONS           619,767      (732,999)        401,511
                                               -------------  -------------  -------------

INCOME (LOSS) FROM DISCONTINUED OPERATIONS,
  NET OF APPLICABLE INCOME TAXES                (1,099,639)      (65,246)      6,280,224
                                               -------------  -------------  -------------

NET INCOME (LOSS)                              $  (479,872)   $ (798,245)    $ 6,681,735
                                               =============  =============  =============

EARNINGS (LOSS) PER COMMON SHARE (BASIC):
   Continuing operations                       $       .20    $     (.23)    $       .12
   Discontinued operations                            (.35)         (.02)           1.83
                                               -------------  -------------  -------------
   Net income (loss)                           $      (.15)   $     (.25)    $      1.95
                                               =============  =============  =============

EARNING (LOSS) PER COMMON SHARE (DILUTED):
   Continuing operations                       $       .20    $     (.23)    $       .11
   Discontinued operations                            (.35)         (.02)           1.76
                                               -------------  -------------  -------------
   Net income (loss)                           $      (.15)   $     (.25)    $      1.87
                                               =============  =============  =============
</TABLE>


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

                                       20
<PAGE>
<TABLE>
<CAPTION>
                   DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
              FOR THE YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999

<S>                                            <C>             <C>              <C>
                                               2001            2000             1999
                                           -------------   -------------   -------------

NET INCOME (LOSS)                           $  (479,872)    $  (798,245)    $ 6,681,735

OTHER COMPREHENSIVE INCOME (LOSS):

  Cumulative   effect   adjustment  to
   recognize  fair value of cash flow hedge     (54,205)            -               -

  Adjustment  to recognize  fair value
   of cash flow hedge                          (451,388)            -               -

  Foreign currency translation adjustments     (502,511)       (677,102)        957,362
                                           -------------   -------------   -------------

TOTAL COMPREHENSIVE INCOME (LOSS)           $(1,487,976)    $(1,475,347)    $ 7,639,097
                                           =============   =============   =============
</TABLE>


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


                                       21
<PAGE>

<TABLE>
<CAPTION>
                                                     DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                                                  CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                               FOR THE YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999


                                  Common       Capital in                Accumulated Other
                                 Stock $1       Excess of     Retained     Comprehensive      Treasury
                                 Par Value      Par Value     Earnings     Income (Loss)       Stock            Total
                                ------------   ------------  ------------  ---------------  -------------    -------------
<S>                <C> <C>      <C>            <C>           <C>            <C>             <C>              <C>
BALANCE, September 30, 1998     $ 3,654,559    $ 3,327,755   $ 20,264,057   $ (3,373,837)   $  (817,295)     $ 23,055,239
   Net income                                                   6,681,735                                       6,681,735
   Other comprehensive income                                                                   957,362           957,362
   Employee stock options
     exercised (34,001 shares)       34,000        227,094                                                        261,094
   Employee Stock Purchase Plan
     (6,619 shares)                                 31,622                                       31,672            63,294
   Purchase of treasury stock
     (76,567 shares)                                                                           (789,618)         (789,618)
                                ------------   ------------  ------------  ---------------  -------------    -------------

BALANCE, September 30, 1999       3,688,559      3,586,471     26,945,792     (2,416,475)    (1,575,241)       30,229,106

   Net loss                                                      (798,245)                                       (798,245)
   Other comprehensive loss                                                                    (677,102)         (677,102)
   Employee stock options
     exercised (21,750 shares)       21,750        147,094                                                        168,844
   Employee Stock Purchase Plan
     (10,757 shares)                               (33,293)                                      69,867            36,574
   Purchase of treasury stock
     (260,230 shares)                                                                      (2,016,510)       (2,016,510)
                                ------------   ------------  ------------  ---------------  -------------    -------------

BALANCE, September 30, 2000       3,710,309      3,700,272     26,147,547     (3,093,577)    (3,521,884)       26,942,667

   Net income                                                    (479,872)                                       (479,872)
   Other comprehensive loss                                                   (1,008,104)                      (1,008,104)
   Employee Stock Purchase Plan
     (9,415 shares)                                (30,137)                                      61,150            31,013
                                ------------   ------------  ------------  ---------------  -------------    -------------

BALANCE, September 30, 2001     $ 3,710,309    $ 3,670,135   $ 25,667,675   $ (4,101,681)   $(3,460,734)     $ 25,485,704
                                ============   ============  ============  ===============  =============    =============


                                               The accompanying notes are an integral part of
                                                  the consolidated financial statements.
</TABLE>
                                                                    22
<PAGE>
<TABLE>
<CAPTION>
                         DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                   FOR THE YEARS ENDED SEPTEMBER 30, 2001, 2000 AND 1999

<S>                                                  <C>           <C>            <C>
                                                     2001          2000           1999
                                                -------------  ------------  -------------
Cash flows from operating activities:

Net income (loss) from continuing operations     $   619,767    $ (732,999)   $   401,511

Net income (loss) from discontinued operations    (1,099,639)      (65,246)     6,280,224

Adjustments to reconcile net income (loss) to net
 cash provided by (used in) operating activities:
  Depreciation and amortization                    2,398,964     2,521,400      2,607,425
  Deferred taxes                                    (534,000)     (639,000)      (889,000)
  Provision for doubtful accounts receivable         151,263       218,795        191,356
  Gain on sale of assets                          (1,202,448)          -       (9,636,318)
  Income attributable to minority interest            31,267        23,938        402,135
  (Income) loss attributable to foreign
   currency exchange                                  52,071       (78,888)      (127,299)

Changes in assets [(increase) decrease] and
 liabilities [increase (decrease)]:
  Receivables, net                                (1,252,621)   (1,994,505)     1,677,182
  Inventories                                        474,990     3,087,532     (7,279,117)
  Other current assets                               101,950        17,422       (781,505)
  Accounts payable and accrued liabilities           803,641       646,793     (1,787,274)
  Other assets                                       802,706      (228,794)    (1,480,679)
                                                -------------  ------------  -------------
Net cash  provided by (used in) operating
 activities                                        1,347,911     2,776,448    (10,421,359)
                                                -------------  ------------  -------------
Cash flows from investing activities:

  Purchases of plant and equipment, net           (2,188,773)   (1,399,403)      (638,384)
  Proceeds on sale of assets                       1,276,063     3,250,000     19,596,710
                                                -------------  ------------  -------------
Net cash  provided by (used in) investing
 activities                                         (912,710)    1,850,597     18,958,326
                                                -------------  ------------  -------------
</TABLE>

                                       23
<PAGE>
<TABLE>
<S>                                                  <C>           <C>            <C>
                                                     2001          2000           1999
                                                -------------  ------------  -------------
Cash flows from financing activities:

Principal reductions of notes payable                    -             -      (23,361,167)
Proceeds from additions to long-term debt            138,566        70,715     17,523,741
Proceeds from additions to notes payable           2,779,894     1,023,554            -
Principal reductions of long-term debt            (2,728,952)   (3,693,022)      (320,471)
Debt refinancing costs                                   -        (369,842)           -
Purchase of treasury stock                               -      (2,016,510)      (789,618)
Purchase of subsidiary stock                             -             -       (3,734,668)
Other non-current liabilities                          6,759       (42,975)      (465,169)
Employee Stock Purchase Plan                          31,013        36,574         63,294
Exercise of stock options                                -         168,844        261,095
                                                -------------  ------------  -------------
Net cash provided by (used in)financing
 activities                                          227,280    (4,822,662)   (10,822,963)
                                                -------------  ------------  -------------
Effect of exchange rate changes on cash             (266,634)     (291,344)       368,128
                                                -------------  ------------  -------------

Net decrease in cash and cash equivalents            395,847      (486,961)    (1,917,868)

Cash and cash equivalents, beginning
 of year                                             448,452       935,413      2,853,281
                                                -------------  ------------  -------------
Cash and cash equivalents, end of year           $   844,299    $  448,452    $   935,413
                                                =============  ============  =============

Supplemental disclosures:

Cash paid during the year for:
   Interest                                      $ 4,647,079    $3,148,398    $ 4,887,426
   Income taxes                                    2,434,487     1,518,291      5,100,663

Non-cash investing and financing activities:

     In fiscal 2001, the Company  accepted a note receivable due May 2006 in the
amount of $1.64  million as  consideration  for the sale of an idle  building in
Deer Lake, Pennsylvania.

     During fiscal 1999, the Company accepted a note receivable of $3,250,000 as
partial  consideration  for the sale of assets of its  Graphite  and  Lubricants
division. This note was repaid in fiscal 2000.
</TABLE>

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



                                       24
<PAGE>

                   DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
      -----------------------------------------

      Business:
      ---------

      Dixon  Ticonderoga  Company is a diversified  manufacturer and marketer of
      writing and art  products.  Its  largest  principal  customers  are school
      products  distributors and mass  merchandisers,  although none account for
      over 7% of revenues.

      Revenue recognition:
      --------------------

      Revenues  are  comprised  of gross  sales from the  shipment of product to
      customers,  less product  returns and allowances.  The Company  recognizes
      sales when the  following has  occurred:  evidence of a sales  arrangement
      exists;  delivery  of  product  to the  customer;  the  price  is fixed or
      determinable;  and  collectibility is reasonably  assured.  An estimate of
      sales  returns and  allowances  is recorded in the period that the related
      product is shipped.

      Estimates:
      ----------

      The  preparation  of financial  statements  in conformity  with  generally
      accepted  accounting  principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure  of  contingent  assets  and  liabilities  at the  dates of the
      financial  statements,  and the reported  amounts of revenues and expenses
      during the  reporting  periods.  Actual  results  could  differ from those
      estimates.

      Loss contingencies:
      -------------------

      The  Company  recognizes  loss  contingencies,   including   environmental
      liabilities,  when they become  probable  and the  related  amounts can be
      reasonably estimated.

      Principles of consolidation:
      ----------------------------

      The  consolidated  financial  statements  include  the  accounts  of Dixon
      Ticonderoga  Company  and all of its  subsidiaries  (the  "Company").  All
      significant intercompany transactions and balances have been eliminated in
      consolidation.  Minority  interest  represents the minority  shareholders'
      proportionate  share of the equity of the Company's  Grupo Dixon,  S.A. de
      C.V.,  subsidiary.  In  1999,  the  Company  repurchased  shares  of  this
      subsidiary on the open market,  reducing the minority  interest from 20.2%
      to 3%.

      Translation  of  foreign  currencies:
      -------------------------------------

      In accordance with Financial  Accounting  Standards Board (FASB) Statement
      No.  52,  the  Company  has  determined  that  each  foreign  subsidiary's
      functional  currency is their local  currency.  All assets and liabilities
      are translated at period-end exchange rates. All revenues and expenses are
      translated  using average  exchange rates during that period.  Translation
      gains  and  losses  are  reflected  as  a  separate   component  of  other
      comprehensive  income (loss),  except for Mexico for the period January 1,
      1997  through  December  31,  1998.  As of  January  1,  1997,  Mexico was
      considered a highly  inflationary  economy for  purposes of applying  this
      statement.  Mexico  translation  gains  and  losses,  therefore,  affected
      results of  operations  through  December 31, 1998.  Gains and losses from
      foreign currency transactions are included in the Consolidated Statement

                                       25
<PAGE>

      of Operations.  Total foreign currency exchange gains (losses) included in
      operating income were  approximately  $(52,000),  $79,000 and $127,000 for
      fiscal years 2001, 2000 and 1999 respectively.

      Cash  and  cash  equivalents:
      -----------------------------

      Cash and cash equivalents  include investment  instruments with a maturity
      of three months or less at time of purchase.

      Inventories:
      ------------

      Inventories are stated at the lower of cost or market. Certain inventories
      amounting to $14,126,292  and  $13,813,000 at September 30, 2001 and 2000,
      respectively,  are  stated  on the  last-in,  first-out  (LIFO)  method of
      determining  inventory costs. Under the first-in,  first-out (FIFO) method
      of accounting,  these inventories would be $760,000 and $805,000 higher at
      September  30,  2001 and 2000,  respectively.  All other  inventories  are
      accounted for using the FIFO method.

      Inventories consist of (in thousands):
      --------------------------------------

                                              September 30,

                                             2001       2000
                                           ---------  ---------

            Raw material                    $13,328    $12,839
            Work in process                   3,572      3,656
            Finished goods                   18,683     19,721
                                           ---------  ---------

                                            $35,583    $36,216
                                           =========  =========


      Property,  plant  and  equipment:
      ---------------------------------

      Property, plant and equipment are stated at cost. Depreciation is provided
      principally on a  straight-line  basis over the estimated  useful lives of
      the  respective  assets.  The range of estimated  useful lives by class of
      property, plant and equipment are as follows:

            Buildings and improvements             10-25 years
            Machinery and equipment                 5-15 years
            Furniture and fixtures                   3-5 years

      When  assets  are sold or  retired,  their  cost and  related  accumulated
      depreciation  are removed from the accounts.  Any gain or loss is included
      in income.


      Impairment of long-lived assets:
      --------------------------------

      Long-lived  assets used in the  Company's  operations,  including  cost in
      excess of net assets of businesses  acquired,  are reviewed for impairment
      when events and  circumstances  indicate  that the  carrying  amount of an
      asset may not be recoverable. The primary indicators of recoverability are
      the associated current and forecasted  undiscounted  operating cash flows.
      Asset impairments in connection with the Company's  restructuring programs
      are  identified  and measured  using the estimated net proceeds from their
      ultimate sale or  abandonment.  (See Note 10.) The Company's  policy is to
      record an impairment  loss when it is determined  that the carrying amount
      of the asset exceeds its fair value.


                                       26
<PAGE>


      Stock-based compensation:
      -------------------------

      The Company  accounts  for  compensation  cost  related to employee  stock
      options  and other  forms of employee  stock-based  compensation  plans in
      accordance  with the  requirements  of Accounting  Principles  Board (APB)
      Opinion 25 and related interpretations.  APB 25 requires compensation cost
      for  stock-based   compensation  plans  to  be  recognized  based  on  the
      difference, if any, between the fair market value of the stock on the date
      of grant and the option exercise price.  The Company  provides  additional
      proforma disclosures as required under FASB Statement No. 123, "Accounting
      For Stock-Based Compensation".


      Income taxes:
      -------------

      The Company recognizes  deferred tax assets and liabilities for future tax
      consequences of events that have been included in the financial statements
      or tax  returns.  Under this  method,  amounts for deferred tax assets and
      liabilities are determined based on the differences  between the financial
      statement and tax bases of assets and liabilities using enacted tax rates.
      Valuation allowances are established when necessary to reduce deferred tax
      assets to the amount  expected to be  realized.  Income tax expense is the
      tax  payable  for the period and the change  during the period in deferred
      tax assets and liabilities.


      Derivative instruments and hedging activities:
      ----------------------------------------------

      The Company  adopted FASB  Statement  No.133,  "Accounting  for Derivative
      Instruments and Hedging Activities",  as amended by FASB Statement No.137,
      "Accounting for Derivative  Instruments and Hedging  Activities - Deferral
      of the  Effective  Date of FASB  Statement  No. 133", an amendment of FASB
      Statement  No.133,  and FASB  Statement  No.138  "Accounting  for  Certain
      Derivative  Instruments and Certain Hedging  Activities",  an amendment of
      Statement No. 133 (referred to hereafter as "FAS 133") on October 1, 2000.
      The Company now records the fair value of interest  rate swaps  designated
      as cash flow  hedges  in other  liabilities  with the  offset to the other
      comprehensive   income  (loss)  component  of  shareholders'   equity.  At
      adoption, the Company recorded its interest rate swap designated as a cash
      flow  hedge  with a fair  value of  $86,314  in other  liabilities.  Other
      comprehensive  loss was increased  $54,205 (net of tax benefit of $32,109)
      as a cumulative effect adjustment for this accounting  change.  During the
      year ended  September 30, 2001, the Company also  recognized an adjustment
      to  the  fair  value  of  this  cash  flow  hedge  of  $718,773  in  other
      liabilities.  Other  comprehensive loss was increased $451,388 (net of tax
      benefit of $267,385) during this period.

      The Company utilizes  interest rate swap agreements to provide an exchange
      of interest  payments  computed on notional  amounts  that will offset any
      undesirable  change in cash flows or fair value resulting from market rate
      changes on  designated  hedged bank  borrowings.  The  Company  limits the
      credit  risks  of  the  interest  rate   agreements   by  initiating   the
      transactions with  counterparties  with significant  financial  positions,
      such as major financial institutions.

      FAS 133 requires companies to recognize all of its derivative  instruments
      as either assets or  liabilities  in the balance sheet at fair value.  The
      accounting  for  changes  in the fair value  (i.e.,  gains or losses) of a
      derivative  instrument  depends  on  whether  it has been  designated  and
      qualifies as part of a hedging  relationship  and further,  on the type of
      hedging relationship. For those derivative instruments that are designated
      and qualify as hedging  instruments,  a Company must designate the hedging
      instrument,  based upon the exposure being hedged,  as either a fair value
      hedge,  cash  flow  hedge  or a hedge  of a net  investment  in a  foreign
      operation. For derivative instruments that are designated and qualify as a
      cash flow hedge (such as the Company's interest rate swap agreements), the
      effective  portion  of the gain or loss on the  derivative  instrument  is
      reported  as  a  component  of  other  comprehensive   income  (loss)  and
      reclassified into earnings in the same period or periods during which the

                                       27
<PAGE>

      hedged  transaction  affects  earnings.  The remaining gain or loss on the
      derivative  instrument in excess of the  cumulative  change in the present
      value of future cash flows of the hedged item,  if any, is  recognized  in
      current  earnings  during  the period of the  change in fair  values.  For
      derivative instruments not designated as hedging instruments,  the gain or
      loss is recognized in current  earnings during the period of the change in
      fair values.

      The Company  has entered  into an  interest  rate swap  agreement  through
      August 2005 that effectively converts $8 million of its floating-rate debt
      to a fixed-rate basis,  thus reducing the impact of interest-rate  changes
      on future interest  expense.  The fair values of interest rate instruments
      are  estimated  by  obtaining  quotes from  brokers and are the  estimated
      amounts that the Company would receive or pay to terminate the  agreements
      at the reporting  date,  taking into account  current  interest  rates and
      other relevant factors.


      Recent accounting pronouncements:
      ---------------------------------

      In July 2001,  the FASB issued  Statement No. 141 "Business  Combinations"
      and Statement No. 142 "Goodwill and Other  Intangible  Assets".  Statement
      No. 141 requires business combinations initiated after June 30, 2001 to be
      accounted  for using the purchase  method of  accounting  and broadens the
      criteria for recording intangible assets separate from goodwill. Statement
      No. 142  requires  the use of a  nonamortization  approach  to account for
      purchased   goodwill   and   indefinite   lived   intangibles.   Under   a
      nonamortization  approach,  goodwill and indefinite lived intangibles will
      not be amortized into results of operations, but instead would be reviewed
      for impairment and written down and charged to results of operations  only
      in the  periods in which the  recorded  value of goodwill  and  indefinite
      lived intangibles is more than its fair value. The provisions of Statement
      No. 141 are effective currently.  The provisions of Statement No. 142 will
      be effective  for the Company in fiscal 2003.  Management  does not expect
      these standards, when implemented, to have a material effect on its future
      results of operations or financial position.

      In June 2001,  the FASB issued  Statement  No. 143  "Accounting  for Asset
      Retirement Obligations".  The statement addresses financial accounting and
      reporting  for  obligations  associated  with the  retirement  of tangible
      long-lived assets and the associated asset retirement costs. The statement
      is effective  for the Company in fiscal 2003.  The Company does not expect
      the  adoption  of  Statement  No.  143 to have a  material  impact  on the
      Company's future results of operations or financial position.

      In August 2001,  the FASB issued  Statement  No. 144  "Accounting  for the
      Impairment or Disposal of Long-Lived  Assets".  This statement  supersedes
      Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
      for Long-Lived Assets to be Disposed of", and the accounting and reporting
      provisions  of APB Opinion 30,  "Reporting  the  Results of  Operations  -
      Reporting  the  Effects  of  Disposal  of a  Segment  of a  Business,  and
      Extraordinary,    Unusual   and   Infrequently    Occurring   Events   and
      Transactions",  for the disposal of a segment of a business. The statement
      is effective  for the Company in fiscal 2003.  The Company does not expect
      the  adoption  of  Statement  No.  144 to have a  material  impact  on the
      Company's future results of operations or financial position.


                                       28
<PAGE>

(2)   ACCRUED LIABILITIES:
      --------------------
      The major components of accrued liabilities are as follows (in thousands):

                                              September 30,
                                              2001       2000
                                            --------  ---------

            Salaries and wages               $  968    $ 1,462
            Employee benefit plans              720        449
            Income taxes                      1,428      1,940
            Other                             6,016      6,206
                                            --------  ---------

                                             $9,132    $10,057
                                            ========  =========


(3)   NOTES PAYABLE:
      --------------

      The  Company's  Mexico  subsidiary  had  bank  lines  of  credit  totaling
      approximately  $16  million,  under which $6.3 million and $3.6 million of
      unsecured  notes  payable were  outstanding  as of September  30, 2001 and
      2000,  respectively.  The notes bear interest  (weighted  average interest
      rate of  approximately  7.1%  and  9.2% at  September  30,  2001  and 2000
      respectively)  based upon either a floating  U.S. bank rate or the rate of
      certain Mexican government securities and are renewable annually.


(4)   LONG-TERM DEBT:
      ---------------

      Long-term debt consists of the following (in thousands):

                                              September 30,
                                             2001       2000
                                           ---------  ---------

            Senior Subordinated Notes      $ 16,500   $ 16,500
            Bank notes payable               11,327     12,280
            Bank term loan                    4,625      6,125
            Building mortgage                 2,138      2,273
            Other                                27        167
                                           ---------  ---------
                                             34,617     37,345
            Less current maturities         (32,599)    (7,135)
                                           ---------  ---------

                                           $  2,018   $ 30,210
                                           =========  =========

      The  Company's  primary  financing  arrangements  are with a consortium of
      lenders,  providing a total of up to $42.5  million in  financing  through
      September 2004. The financing agreements,  as amended, include a revolving
      line of credit  facility in the amount of $35 million which bears interest
      at either the prime rate (6% at  September  30,  2001) plus 0.75%,  or the
      prevailing  LIBOR rate  (approximately  2.6% at  September  30, 2001) plus
      2.25% through  September 2004. The agreements also provide for the payment
      of various bank fees approximating $20,000 per month. Borrowings under the
      revolving credit facility are based upon eligible accounts  receivable and
      inventories  of the  Company's  U.S.  and  Canada  operations,  subject to
      reserves for  anticipated  subordinated  debt  payments and certain  other
      items,  as  defined.  The  Company  has  executed  an  interest  rate swap
      agreement  that  effectively  fixed the rate of  interest on $8 million of
      these borrowings at 8.98% through August 2005.


                                       29
<PAGE>

      The loan and security  agreements  also include a term loan in the initial
      amount of $7.5 million.  The term loan is payable in monthly  installments
      of  $125,000,  plus  interest,  through  September  2004.  The loan  bears
      interest based upon the same prevailing rate described above in connection
      with the revolving credit facility.

      These  financing  arrangements  are  collateralized  by the  tangible  and
      intangible  assets of the U.S. and Canada operations  (including  accounts
      receivable,  inventories,  property,  plant  and  equipment,  patents  and
      trademarks)   and  a  pledge  of  the  capital   stock  of  the  Company's
      subsidiaries.   The  loan  and  security  agreement  contains   provisions
      pertaining  to the  maintenance  of  certain  financial  ratios and annual
      capital  expenditure levels, as well as restrictions as to payment of cash
      dividends.  The Company was not in compliance  with certain  provisions of
      the loan and security  agreement at September  30, 2001 (see Note 15) and,
      accordingly,  has classified this debt as current  maturities of long-term
      debt in the  accompanying  balance  sheet as of that date. As of September
      30,  2001,  the Company had  approximately  $23 million of unused lines of
      credit available under the revolving credit facility.

      The Company  also has  outstanding  $16.5  million of Senior  Subordinated
      Notes  valued at their  face  amount,  due  2003.  The  subordinated  note
      agreement  provides for a total  interest  rate of 13.5% through June 2002
      and 12.25% though  maturity in 2003.  Due to the  Company's  noncompliance
      under its primary lending arrangements  discussed above, it was prohibited
      from making a scheduled  subordinated  note payment of $5.5 million due in
      September  2001  (see  Note  15).  The  note  agreement  provides  for  an
      additional interest charge of 2% on this amount until payment is made. The
      note agreement,  as amended,  contains provisions that limit dividends and
      other  payments,   and  requires  the  maintenance  of  certain  financial
      covenants  and ratios,  one of which the Company did not comply with as of
      September 30, 2001. Due to the payment  default and  noncompliance  with a
      financial  covenant,  the subordinated  notes have also been classified as
      current maturities of long-term debt in the accompanying  balance sheet as
      of September 30, 2001.

      Warrants to purchase  300,000  shares of common stock at an exercise price
      of $4.28 per share  remain  outstanding  in  connection  with the original
      subordinated note issue. The warrants expire in 2003.

      In 1996, the Company entered into a mortgage agreement with respect to its
      corporate headquarters building in Heathrow, Florida. The mortgage (in the
      original  amount of $2.73  million)  is for a period of 15 years and bears
      interest at 8.1%.

      Carrying values of the Senior  Subordinated  Notes, the bank notes payable
      and term loan and the building  mortgage are reasonable  estimates of fair
      value as interest rates are based on prevailing market rates.

      Aggregate maturities of long-term debt are as follows (in thousands):


                                 2002            $32,599
                                 2003                185
                                 2004                172
                                 2005                187
                                 Thereafter        1,473
                                               ----------
                                                 $34,617
                                               ==========

      The bank notes payable and term loan under the Company's primary financing
      arrangements have a stated maturity date of September 2004; the Senior

                                       30
<PAGE>

      Subordinated  Notes  have  stated  maturities  of  $5.5  million  each  in
      September 2001, 2002 and 2003.  However,  as described  above, all of this
      long-term debt is reflected in the foregoing table as current maturities.


(5)   INCOME TAXES:
      -------------

      The  components of net deferred tax asset  recognized in the  accompanying
      consolidated balance sheet are as follows (in thousands):

                                                        2001          2000
                                                    ------------  ------------
      U.S. current deferred tax assets (included
         in other current assets)                        $  578        $  831
      Foreign current deferred tax liability
         (included in accrued liabilities)               (1,326)       (1,434)
      U.S. and foreign, noncurrent deferred tax
         asset (liability) (included in other
         assets and deferred income taxes and other)      1,559         1,486
                                                    ------------  ------------
         Net deferred tax asset                          $  811        $  883
                                                    ============  ============

      Deferred tax assets:
         Provisions for losses from discontinued
         operations                                      $  534        $   -
         Depreciation                                       192           257
         Vacation pay                                        66            75
         Accrued pension                                    622           635
         Accrued restructuring and related costs            115           558
         Accrued environmental costs                         65            49
         Installment sale and related expenses              216           702
         Other                                              478           255
         Foreign net operating loss carryforward            520           511
         Valuation allowance                               (520)         (511)
                                                    ------------  ------------
         Total deferred tax asset                         2,288         2,531
                                                    ------------  ------------
      Deferred tax liabilities:
         Inventories                                     (1,384)       (1,128)
         Property, plant and equipment                      (93)         (520)
                                                    ------------  ------------
         Total deferred tax liability                    (1,477)       (1,648)
                                                    ------------  ------------
       Net deferred tax asset                            $  811        $  883
                                                    ============  ============

      It is the  policy  of the  Company  to  accrue  deferred  income  taxes on
      temporary  differences related to the financial statement carrying amounts
      and tax bases of investments in foreign subsidiaries which are expected to
      reverse in the  foreseeable  future.  Certain  undistributed  earnings  of
      foreign  subsidiaries  that are essentially  permanent in duration and not
      expected to reverse in the foreseeable future  approximate  $26,890,000 as
      of September 30, 2001. The determination of the unrecognized  deferred tax
      liability for such temporary differences is not practicable.

      At  September  30, 2001 and 2000,  the Company  had  valuation  allowances
      against  certain  deferred  tax assets  totaling  $520,000  and  $511,000,
      respectively.   These  valuation   allowances  relate  to  tax  assets  in
      jurisdictions  where it is management's  best estimate that there is not a
      greater  than 50%  probability  that the  benefit  of the  assets  will be
      realized in the associated tax returns.


                                       31
<PAGE>

      The  provision  (benefit) for income taxes from  continuing  operations is
      comprised of the following (in thousands):

                                               2001       2000       1999
                                             --------   --------  ---------
              Current:
                 U.S. Federal                $  (352)   $  (530)  $     (9)
                 State                           (12)      (124)       (22)
                 Foreign                       1,215        845      1,527
                                             --------   --------  ---------
                                                 851        191      1,496
                                             --------   --------  ---------
              Deferred:
                 U.S. Federal                   (199)      (900)      (929)
                 State                           (71)        -        (110)
                 Foreign                         264        261        150
                                             --------   --------  ---------
                                                (534)      (639)      (889)
                                             --------   --------  ---------
                                             $   317    $  (448)  $    607
                                             ========   ========  =========


      Foreign  deferred  tax  provision is  comprised  principally  of temporary
      differences related to Mexico asset purchases. The U.S. deferred (benefit)
      in 2001, 2000 and 1999 result  primarily from expenses accrued but not yet
      deductible for taxes.

      The  differences  between the  provision  (benefit)  for income taxes from
      continuing  operations  computed at the U.S.  statutory federal income tax
      rate  and  the  provision  (benefit)  from  continuing  operations  in the
      accompanying   consolidated   financial  statements  are  as  follows  (in
      thousands):

                                               2001        2000        1999
                                             --------   ---------   ---------

              Amount computed using
               statutory rate                $  329     $  (393)    $   642

              Foreign income                    (28)       (169)        (26)

              State taxes, net of federal
               benefit                          (54)        (82)        (15)

              Permanent differences             168         254         231

              Other                             (98)        (58)       (225)
                                             --------   --------   ---------

              Provision (benefit) for
               income taxes                  $  317     $  (448)    $   607
                                             ========   =========   =========

                                       32
<PAGE>

(6)   EMPLOYEE BENEFIT PLANS:
      -----------------------

      The Company  maintains  several  defined  benefit  pension plans  covering
      substantially  all union  employees.  The  benefits  are based  upon fixed
      dollar  amounts  per years of  service.  The assets of the  various  plans
      (principally  corporate  stocks and bonds,  insurance  contracts  and cash
      equivalents)  are  managed  by  independent  trustees.  The  policy of the
      Company and its  subsidiaries is to fund the minimum annual  contributions
      required by applicable regulations.

      The  following  tables set forth the  plans'  funded  status  (accumulated
      benefits exceed assets in all plans) and other  information for the fiscal
      years ended September 30, 2001 and 2000 (in thousands):

                                                         September 30,
                                                     2001        2000
                                                  ----------  ----------
         Change in benefit obligation:

         Obligation at beginning of year          $ 3,887     $ 4,275

         Service cost                                 178         180

         Interest cost                                245         238

         Actuarial gain                                25        (495)

         Benefit payments                            (504)       (311)
                                                  ----------  ----------

         Obligation at end of year                $ 3,831     $ 3,887
                                                  ==========  ==========




         Change in market value of plan assets:

         Market value at beginning of year        $ 3,338     $ 2,906

         Actual return on plan assets                 298         219

         Employer contributions                       357         524

         Benefit payments                            (504)       (311)
                                                  ----------  ----------

         Market value at end of year              $ 3,489     $ 3,338
                                                  ==========  ==========


                                       33
<PAGE>

                                                       September 30,
                                                     2001        2000
                                                  ----------  ----------
         Prepaid pension asset:

         Projected benefit obligation             $(3,831)    $(3,887)

         Plan assets at market value                3,489       3,338
                                                  ----------  ----------

         Projected benefit obligation in excess
          of plan assets                             (342)       (549)

         Unrecognized net gain from past
           experience different from assumptions      278         334

         Unrecognized net obligation being
          recognized over periods from
          10 to 16 years                              196         631
                                                  ----------  ----------
         Prepaid pension asset                    $   132     $   415
                                                  ==========  ==========

      Net periodic pension costs include the following components (in
      thousands):

                                                        2001    2000    1999
                                                      ------- ------- -------
         Service costs - benefits earned during period $ 178   $ 180   $ 311
         Interest cost on projected benefit obligation   245     237     235
         Expected return on plan assets                 (248)   (214)   (203)
         Net amortization and deferral                    76     141     139
                                                      ------- ------- -------
         Net periodic pension cost                     $ 251   $ 344   $ 482
                                                      ======= ======= =======


      In determining  the projected  benefit  obligation,  the weighted  average
      discount  rates  utilized  were 6.4%,  6.4% and 6.7% for the periods ended
      September 30, 2001, 2000 and 1999,  respectively.  The expected  long-term
      rates of return on assets used in  determining  net periodic  pension cost
      ranged  from 7.5 % to 8.5 % in all  years  presented  above.  There are no
      assumed rates of increase in compensation expense in any year, as benefits
      are fixed and do not vary with compensation levels.

      The Company also maintains two  defined-contribution  plans (401k) for all
      non-union  domestic employees and certain union employees who meet minimum
      service requirements, as well as a supplemental deferred contribution plan
      for certain executives. Company contributions under the plans consist of a
      basic amount of up to 3% of the  compensation of participants for the plan
      year,   and  for  those   participants   who  elected  to  make  voluntary
      contributions to the plan, matching  contributions up to an additional 4%,
      as specified in the plan.  Charges to  operations  for these plans for the
      years ended September 30, 2001, 2000 and 1999 were $588,000,  $610,000 and
      $871,000, respectively.


                                       34
<PAGE>

(7)   SHAREHOLDERS' EQUITY:
      ---------------------

      The Company provides an Employee Stock Purchase Plan under which shares of
      its common stock can be issued to eligible  employees.  Among the terms of
      this plan,  eligible  employees may purchase  through  payroll  deductions
      shares of the Company's  common stock up to 10 % of their  compensation at
      the  lower of 85 % of the fair  market  value of the stock on the first or
      last day of the plan year (May 1 and April 30).  On May 1, 2001,  2000 and
      1999, 9,415, 10,757 and 6,619 shares, respectively, were issued under this
      plan. At September 30, 2001,  there are 72,306 shares available for future
      purchases under the plan.

      The Company has also granted non-qualified options to key employees, under
      the 1988 Dixon  Ticonderoga  Company  Executive  Stock  Plan,  to purchase
      shares of its common stock at the market price on the date of grant. Under
      the 1988 Plan (as amended)  options  vest 25 % after one year;  25 % after
      two years; and 50 % after three years, and remain exercisable for a period
      of five years from the date of vesting.  All options  expire  three months
      after termination of employment. At September 30, 2001, there were 267,250
      options  outstanding  and no shares  available for future grants under the
      1988 Plan.

      In  addition,  the Dixon  Ticonderoga  Company 1999 Stock Option Plan (the
      "1999  Plan") was  adopted in fiscal  1999,  covering a maximum  aggregate
      300,000 shares.  Under the 1999 Plan, qualified incentive stock options or
      non-qualified  stock  options  can be granted to  employees  at the market
      price on the date of grant  and which  will vest on the same  basis as the
      1988 Plan described above.  Non-qualified  options under the 1999 Plan may
      also be issued to Company  outside  directors  at the market  price on the
      date of grant and which may vest over varying  periods.  In 2001,  159,800
      and in 2000, 10,000 options were granted to employees under the 1999 Plan.
      In addition, in 1999, 30,000 non-qualified options were granted to outside
      directors  that vest over a two-year  period.  At September 30, 2001 there
      were 189,800 options  outstanding and 110,200 shares  available for future
      grants under the 1999 Plan.  The following  table  summarizes the combined
      stock options activity for 2001, 2000 and 1999.


                                       35
<PAGE>
<TABLE>
<CAPTION>

                             2001                  2000                 1999
                      --------------------  -------------------  --------------------
                       Number    Option      Number    Option     Number    Option
                      of Shares   Price     of Shares  Price     of Shares   Price
                      --------------------  -------------------  --------------------

<S>                       <C>       <C>        <C>        <C>        <C>       <C>
   Options outstanding
    at beginning of year                                               312     $7.75
                         27,000     $8.63      41,750    $8.63      44,250      8.63
                         34,125      6.75      48,625     6.75      60,125      6.75
                         10,750      7.13      10,750     7.13      15,250      7.13
                        258,000      8.88     273,000     8.88     317,000      8.88
                                                                    10,000     14.13
                          2,500     12.88       5,500    12.88      18,500     12.88
                         10,000     11.38      10,000    11.38
                         30,000     11.00      40,000    11.00
                          7,500      4.25

   Options exercised                          (10,000)    6.75     (10,250)     6.75
                                                                    (2,000)     7.13
                                                                      (312)     7.75
                                              (11,750)    8.63      (1,750)     8.63
                                                                   (19,688)     8.88

   Options granted                                                  10,000     11.38
                                                                    40,000     11.00
                                               10,000     4.25
                         10,000      4.75
                         17,500      3.81
                        132,300      3.70

   Options expired
      or canceled        (2,500)     4.25      (2,500)    4.25
                        (27,000)     8.63      (3,000)    8.63        (750)     8.63
                        (12,875)     6.75      (4,500)    6.75      (1,250)     6.75
                        (27,000)     8.88     (15,000)    8.88     (24,312)     8.88
                         (8,250)     7.13                           (2,500)     7.13
                         (5,000)    11.00     (10,000)   11.00
                                               (3,000)   12.88     (13,000)    12.88
                                                                   (10,000)    14.13
                      ----------            ----------           ----------
                        457,050               379,875              429,625
                      ==========            ==========           ==========
</TABLE>

      The Company has adopted the  disclosure-only  provisions of FASB Statement
      No. 123 and, accordingly,  there is no compensation expense recognized for
      its stock option plans.  Pro forma net income  (loss) and earnings  (loss)
      per share would have been as follows if the fair value estimates were used
      to record compensation expense:

                                        2001           2000          1999
                                     ------------   ------------  ------------

      Pro forma net income (loss)    $ (505,281)    $(1,048,842)  $6,476,269
                                     ============   ============  ============
      Earnings (loss) per share:
          Basic                      $     (.16)    $      (.33)  $     1.89
                                     ============   ============  ============
          Diluted                    $     (.16)    $      (.33)  $     1.81
                                     ============   ============  ============


                                       36
<PAGE>

      These pro forma amounts were estimated using the  Black-Scholes  valuation
      model assuming no dividends, expected volatility of 36% in 2001 and 33% in
      prior years, an average  risk-free  interest rate of 4.7% in 2001 and 6.7%
      in prior  years  and  expected  lives of  approximately  six years for all
      grants prior to 2001 and eight years thereafter. The weighted average fair
      value  estimates of options  granted during 2001, 2000 and 1999 was $2.47,
      $2.92 and $3.67,  respectively.  The weighted average  remaining lives are
      5.5,  5.6 and 5.6  years  for  options  granted  in 2001,  2000 and  1999,
      respectively.

      In 1995,  the Company  declared a dividend  distribution  of one Preferred
      Stock  Purchase  Right on each share of Company  common stock.  Each Right
      will entitle the holder to buy  one-thousandth  of a share of a new series
      of  preferred  stock at a price of $30.00  per share.  The Rights  will be
      exercisable only if a person or group (other than the Company's  chairman,
      Gino  N.  Pala,  and  his  family  members)  acquires  20% or  more of the
      outstanding  shares of common  stock of the Company or  announces a tender
      offer following which it would hold 30% or more of such outstanding common
      stock.  The Rights entitle the holders other than the acquiring  person to
      purchase  Company  common  stock  having a market  value of two  times the
      exercise prices of the Right. If, following the acquisition by a person or
      group of 20% or more of the Company's  outstanding shares of common stock,
      the Company were acquired in a merger or other business combination,  each
      Right  would be  exercisable  for that number of the  acquiring  Company's
      shares of common  stock  having a market  value of two times the  exercise
      prices of the  Right.  The  Company  may redeem the Rights at one cent per
      Right at any time until ten days following the occurrence of an event that
      causes  the Rights to become  exercisable  for  common  stock.  The Rights
      expire ten years from the date of distribution.

      In  March  1999,  the  Company   announced  a  Stock  Repurchase   Program
      authorizing  the  acquisition  of up to $3  million  in Dixon  Ticonderoga
      Company stock. Under this program,  the Company repurchased  approximately
      337,000  shares at a cost of $2.8  million  through  March 2000,  when the
      program was terminated.


(8)   SUBSIDIARY STOCK REPURCHASE:
      ----------------------------

      In fiscal 1999, the Company  purchased  5,722,760 shares (or 17.2%) of its
      subsidiary,  Grupo Dixon,  S.A. de C.V., for  approximately  $3.7 million,
      bringing  its total  ownership in its  subsidiary  to 97%. The shares were
      originally  issued in 1994, when the Company sold 16,627,760 shares of the
      subsidiary  in an  initial  public  offering  on the  Mexico  Intermediate
      Market.  The Company  applied the purchase  method of accounting to record
      these repurchases of subsidiary stock.


(9)   EARNINGS  PER  COMMON  SHARE:
      -----------------------------

      Basic  earnings  (loss) per common  share is  calculated  by dividing  net
      income  (loss) by the  weighted  average  number  of  shares  outstanding.
      Diluted  earnings  per  common  share is based upon the  weighted  average
      number of shares  outstanding,  plus the effects of  potentially  dilutive
      common shares  [consisting  of stock  options (Note 7) and stock  warrants
      (Note 4)]. For the year ended September 30, 2000,  options and warrants to
      purchase 679,875 shares of common stock were excluded from the computation
      of diluted  earnings  (loss) per share as such options and  warrants  were
      anti-dilutive.


                                       37
<PAGE>

      Weighted  average common shares used in the calculation of earnings (loss)
      per share are as follows:

              Year                 Basic      Diluted
              ----               ----------  ----------
              2001               3,171,190   3,176,609
              2000               3,202,582   3,202,582
              1999               3,420,779   3,581,062


(10)  RESTRUCTURING AND RELATED COSTS:
      --------------------------------

      In  fiscal  1999,  the  Company  provided   approximately   $1,917,000  in
      connection with Phase 1 of its Restructuring  and Cost Reduction  Program,
      which was intended to improve overall financial performance in the future.
      The program included  manufacturing  plant closure and  consolidation,  as
      well as personnel  reduction in  manufacturing,  sales and  marketing  and
      corporate  activities.  Approximately  125  employees  (principally  plant
      workers)   were   affected  by  this  phase  of  the  program.   In  1999,
      approximately  $213,000  was charged  against the  restructuring  cost and
      impairment  reserves,  as set forth below. The carrying amount of property
      and equipment  held for disposal in Phase 1  approximated  $2 million with
      the estimated fair value  principally based upon assessments of value made
      by local  realtors or  appraisals.  Management  disposed of the  remaining
      assets from Phase 1 in May 2001.

      In  fiscal  2000,   approximately   $1,910,000  was  charged  against  the
      restructuring cost and impairment reserves for finalization of the Phase 1
      program (net of $234,000 in credits  representing  higher than anticipated
      proceeds  from  the  sale  and   abandonment  of  property  and  equipment
      identified  in the Phase 1  program).  As set  forth  below,  the  Company
      incurred  approximately  $206,000 in net additional  charges,  principally
      related to  unanticipated  employee costs and other costs directly related
      to the  restructuring  program which were not eligible for  recognition in
      1999 and thus expensed as incurred in 2000.

      Also in fiscal 2000,  the Company  provided  approximately  $1,435,000  of
      impairment and  restructuring  related costs in connection with Phase 2 of
      its  Restructuring  and Cost Reduction  Program,  which  included  further
      consolidation of certain U.S. manufacturing  processes,  the consolidation
      of its Mexico  operations  into a new  facility and  additional  personnel
      reductions in manufacturing, sales, marketing and corporate activities. An
      additional 170 employees  (principally plant workers) were affected by the
      second phase of the program.  The carrying  amount of additional  property
      held for  disposal  under Phase 2 of the program was $1.1 million and this
      additional property was disposed of in 2001 for approximately that amount.


                                       38
<PAGE>

      The   restructuring   and  impairment   related   charges  and  subsequent
      utilization through fiscal 2001 are summarized below (in thousands):
<TABLE>
<CAPTION>

                                                        Losses from
                                         Employee      impairment, sale
                                        severance      and abandonment
                                        and related      of property
                                          costs         and equipment      Total
                                      --------------  -----------------  ----------
<S>                                 <C>               <C>                <C>        <C>
1999 restructuring and impairment
  related charges (Phase 1)               $ 587            $ 1,330         $ 1,917

Utilized in fiscal 1999                    (199)               (14)           (213)
                                      --------------  -----------------  ----------

Reserve balances at September 30, 1999      388              1,316           1,704

Utilized in fiscal 2000 (Phase 1)          (594)            (1,316)         (1,910)
                                      --------------  -----------------  ----------
                                           (206)               -              (206)
                                      --------------  -----------------  ----------

Additional fiscal 2000 provisions
 (Phase 1)                                  206                -               206

2000 restructuring and impairment
  related charges (Phase 2)                 834                468           1,302
                                      --------------  -----------------  ----------

Total 2000 restructuring and
  impairment related charges              1,040                468           1,508
                                      --------------  -----------------  ----------
                                            834                468           1,302

Utilized in fiscal 2000 (Phase 2)          (161)              (156)           (317)
                                      --------------  -----------------  ----------

Reserve balances at September 30,
  2000                                      673                312             985

2001 restructuring and impairment
  related charges                           -                  868             868

Utilized in fiscal 2001 (Phase 2)          (334)            (1,180)         (1,514)
                                      --------------  -----------------  ----------

                                          $ 339            $   -           $   339
                                      ==============  =================  ==========

</TABLE>


                                       39
<PAGE>

(11)  LINE OF BUSINESS REPORTING:
      ---------------------------

      Effective  with the  Company's  2001 plan to exit the  Industrial  Segment
      (Note 12), at September 30, 2001 the Company's continuing  operations only
      consist  of one  principal  business  segment - its  Consumer  Group.  The
      following information sets forth certain additional data pertaining to its
      operations as of September 30, 2001, 2000 and 1999, and for the years then
      ended (in thousands).

                                            Operating          Identifiable
                              Revenues     Profit (Loss)          Assets
                            ------------  --------------     ----------------
       2001:
          United States       $ 56,770        $ 2,076            $ 44,598
          Canada                 8,675            527               5,673
          Mexico                23,813          2,849              29,012
          United Kingdom         1,046            (26)                674
          China                    189            (70)              1,363

       2000:
          United States       $ 57,043        $  (658)           $ 45,317
          Canada                 9,515            620               6,741
          Mexico                23,943          2,664              27,910
          United Kingdom         1,124            (16)                616
          China                     66            (95)              1,153

       1999:
          United States       $ 65,222        $   145            $ 57,572
          Canada                 8,943            557               5,784
          Mexico                22,127          4,890              22,921
          United Kingdom         1,080            (13)                633


(12)  DISCONTINUED OPERATIONS:
      ------------------------

      On September 17, 2001,  the Company  formalized  its decision to offer for
      sale  its New  Castle  Refractories  division,  the last  business  of its
      Industrial  Group. The Company had disposed of its Graphite and Lubricants
      division in 1999. Accordingly, related operating results of the Industrial
      Group have been reported as  discontinued  operations in the  accompanying
      consolidated financial statements.


                                       40
<PAGE>

      Net revenues and income (loss) from discontinued operations are as follows
      (in thousands):

                                             2001       2000        1999
                                           ---------  ----------  ---------

      Net revenues                          $ 9,529     $11,188    $17,317
                                           =========  ==========  =========

      Income   (loss)  from   discontinued
        operations before income taxes      $   (85)    $   (88)   $10,267
      Income tax benefit (expense)               29          23     (3,987)
                                           ---------  ----------  ---------
                                                (56)        (65)     6,280
                                           ---------  ----------  ---------
      Loss on disposal of Industrial Group   (1,570)        -          -
      Income tax benefit                        526         -          -
                                           ---------  ----------  ---------
                                              1,044         -          -
                                           ---------  ----------  ---------

      Income   (loss)  from   discontinued
       operations                           $(1,100)    $   (65)    $6,280
                                           =========  ==========  =========
      Earnings (loss) per share (basic)     $ (0.35)    $ (0.02)    $ 1.83
                                           =========  ==========  =========
      Earnings (loss per share (diluted)    $ (0.35)    $ (0.02)    $ 1.76
                                           =========  ==========  =========


      Income (loss) from discontinued operations includes pre-tax gains on sales
      of  assets  of  $1,202  and  $9,636,  in  2001  and  1999,   respectively,
      attributable  to  the  sale  of  the  Company's  Graphite  and  Lubricants
      division.  In addition,  interest  expense of $427, $597 and $603 has been
      allocated to income (loss) from discontinued  operations in 2001, 2000 and
      1999, respectively, based upon the identifiable assets of such operations.
      The loss on disposal in 2001 includes the anticipated  loss on the sale of
      the New Castle Refractories  division of $468, a provision for the wind-up
      of that division's  pension plans of $432, and a provision for anticipated
      operating  losses  through the date of disposal  (expected to be by August
      2002) of $670.

      Assets and liabilities relating to discontinued operations and included in
      the   accompanying   consolidated   balance  sheets  are  as  follows  (in
      thousands):

                                                 September 30,
                                                 2001       2000
                                              ---------  ----------
      Current assets                           $ 4,619    $ 4,447
      Property, plant and equipment, net           473        534
      Current liabilities                       (1,448)      (733)
      Long-term liabilities and other, net        (743)      (495)
                                              ---------  ----------
      Net assets of discontinued operations    $ 2,901    $ 3,753
                                              =========  ==========

                                       41
<PAGE>

(13)  COMMITMENTS AND CONTINGENCIES:
      ------------------------------

      The Company has entered into  employment  agreements  with four executives
      which  provide  for the  continuation  of  salary  (currently  aggregating
      $68,700 per month) and related employee benefits for a period of 24 months
      following their termination of employment under certain changes in control
      of the Company.  In addition,  all options  held by the  executives  would
      become  immediately  exercisable  upon the date of termination  and remain
      exercisable  for 90 days  thereafter.  The Company has also  entered  into
      various  agreements  with nine  additional  employees  which  provide  for
      continuation of salaries  (averaging $8,500 each per month) for periods up
      to 24 months under certain circumstances.

      The  Company   leases  a  distribution   center  in  Macon,   Georgia  for
      approximately  $365,000  per year  and a  manufacturing  and  distribution
      facility in Mexico at an average annual rental of $1,188,000 per year. The
      Company  also leases  certain  manufacturing  equipment  under a five-year
      noncancelable  operating lease arrangement.  The rental expense under this
      lease was $372,000 in 2001.  Annual  future  minimum  rental  payments are
      approximately  $372,000 per year through 2004 and $93,000 in 2005.  Rental
      expense under a previous equipment lease was $417,000 in 1999.

      The  Company,  in the  normal  course  of  business,  is party in  certain
      litigation.  In 1996, a decision was rendered by the Superior Court of New
      Jersey in Hudson County finding the Company  responsible for $1.94 million
      in certain  environmental  clean-up  costs  relating  to a claim under New
      Jersey's  Environmental  Clean-Up  Responsibility  Act  (ECRA)  by a  1984
      purchaser of industrial property from the Company.  All subsequent appeals
      were denied and as a result of the judgment, the Company paid $3.6 million
      in 1998 to satisfy this claim in full, including all accrued interest. The
      Company continued to pursue other responsible  parties for indemnification
      and/or  contribution to the payment of this claim (including its insurance
      carriers)  and in fiscal 2000 the  Company  reached  settlements  with its
      various  insurers  for  reimbursement  of  legal  costs in the  amount  of
      $653,000   (reflected  as  a  reduction  in  selling  and   administrative
      expenses). In 2001, a pending malpractice suit was settled and the Company
      received   $575,000  (also   reflected  as  a  reduction  in  selling  and
      administrative expenses).

      The Company has  evaluated  the merits of other  litigation  and  believes
      their  outcome will not have a further  material  effect on the  Company's
      future results of operations or financial position.

      The Company  assesses  the extent of  environmental  matters on an ongoing
      basis. In the opinion of management (after taking into account accruals of
      approximately  $269,000 as of September 30, 2001), the resolution of these
      matters  will not  materially  affect  the  Company's  future  results  of
      operations or financial position.


                                       42
<PAGE>

(14)  SUMMARY OF QUARTERLY FINANCIAL INFORMATION ( UNAUDITED )
      --------------------------------------------------------
       ( In Thousands, Except Per Share Data ):
       ----------------------------------------

              2001:                 First      Second       Third       Fourth
              ----                ----------  ----------  ----------  ----------
Revenues                            $17,242     $18,727     $28,996     $25,528
Income (loss) from continuing
  operations                         (1,144)       (326)      1,514         576
Income (loss) from discontinued
  operations                           (166)        646         (98)     (1,482)
Net income (loss)                    (1,310)        320       1,416        (906)

Earnings (loss) per share: (a)
  Continuing operations:
   Basic                               (.36)       (.10)        .48         .18
   Diluted                             (.36)       (.10)        .48         .18
  Discontinued operations:
   Basic                               (.05)        .20        (.03)       (.47)
   Diluted                             (.05)        .20        (.03)       (.47)
  Net income (loss):
   Basic                               (.41)        .10         .45        (.29)
   Diluted                             (.41)        .10         .45        (.29)

              2000:                 First      Second       Third       Fourth
              ----                ----------  ----------  ----------  ----------
Revenues                            $16,351     $19,395     $30,618     $25,327
Income (loss) from continuing
  operations                         (1,309)       (221)      1,371        (574)
Income (loss) from discontinued
  operations                           (191)        (26)        145           7
Net income (loss)                    (1,500)       (247)      1,516        (567)

Earnings (loss) per share: (a)
  Continuing operations:
   Basic                               (.39)       (.07)        .44        (.18)
   Diluted                             (.39)       (.07)        .44        (.18)
  Discontinued operations:
   Basic                               (.06)       (.01)        .04         .00
   Diluted                             (.06)       (.01)        .04         .00
  Net income (loss):
   Basic                               (.45)       (.08)        .48        (.18)
   Diluted                             (.45)       (.08)        .48        (.18)

      (a) Calculated independently for each period, and consequently, the sum of
          the quarters may differ from the annual amount.


                                       43
<PAGE>

(15) LIQUIDITY, CAPITAL RESOURCES AND SUBSEQUENT EVENTS:
     ---------------------------------------------------

      On September  15, 2001, a waiver of  compliance  with one provision of the
      Company's  primary lending  agreement  expired and shortly  thereafter its
      senior lenders  prohibited the payment of $5.5 million in principal due to
      senior  subordinated  noteholders  on September 26, 2001 (see Note 4). The
      payment due date was later extended by the noteholders  until November 14,
      2001 and the  aforementioned  waiver from the Company's senior lenders was
      also extended through that date. These extensions  expired on November 15,
      2001.  The senior  lenders again  blocked any payment to the  subordinated
      noteholders  and the Company has  continued to negotiate  with its various
      lenders  since then.  As of  September  30,  2001,  the Company was not in
      compliance  with two financial  covenants under its senior debt agreements
      and one financial  covenant under its  subordinated  note  agreement.  The
      Company  has  received  an  additional  extension  and a waiver of certain
      defaults under its senior debt agreements through May 3, 2002 to allow the
      Company more time to address its debt issues to the mutual satisfaction of
      all  parties  involved.   The  Company  has  asked  both  its  senior  and
      subordinated  lenders to amend various provisions of their debt agreements
      until  at  least  October  2002 to  allow  the  Company  time to  pursue a
      longer-term solution.

      The Company believes it has sufficient lines of credit available under its
      senior debt and other  agreements  to fulfill all current and  anticipated
      operating requirements of its business.  Moreover, the senior lenders have
      consistently  supported  the Company by  continuing  normal  funding under
      their agreements throughout the ongoing negotiations. However, the Company
      does not  believe it will have  excess cash flow to retire the total $16.5
      million in  subordinated  notes by their due date in 2003. The Company has
      asked the  subordinated  noteholders and they have expressed a willingness
      to consider  restructuring their scheduled principal payments to allow the
      Company  sufficient  time to retire the notes through the infusion of some
      form of new equity  capital,  new secondary  financing  and/or the sale of
      assets.  However,  the Company  cannot  assure  that its  efforts  will be
      successful,  that the subordinated  noteholders will amend their scheduled
      payments  and/or  that it will  maintain  and/or  secure  new  sources  of
      capital.  Moreover,  in light of the current  circumstances  regarding the
      Company's  various  debt   arrangements,   the  report  of  the  Company's
      independent   accountants   includes  an   explanatory   paragraph  as  to
      substantial  doubt  about the  Company's  ability to  continue  as a going
      concern.

      The Company's Mexico  subsidiary  presently has  approximately $13 million
      lines of credit  ($6  million  unused)  expiring  at  various  dates.  The
      Company's  subsidiary  cannot  assure  that  these  lines of  credit  will
      continue to be available after their respective  expiration dates, or that
      replacement lines of credit will be secured.

      The  Company  has  retained  Wachovia  Securities  (formerly  First  Union
      Securities) and certain other outside  consultants to advise and assist it
      in  evaluating   certain   strategic   alternatives,   including   capital
      restructuring, mergers and acquisitions, and/or other measures designed to
      resolve the Company's issues with its lenders while maximizing shareholder
      value.


                                       44
<PAGE>

                         DIXON TICONDEROGA COMPANY AND SUBSIDIARIES
                      SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
                FOR THE THREE YEARS ENDED SEPTEMBER 30, 2001, 2000 and 1999

                      Balance at    Additions    Additions to         Balance
                      Beginning      Charged      (Deductions         at Close
   Description        Of Period     to Income    From) Reserves      of Period
-------------------  ------------  ----------   ---------------    -------------

Allowance for Doubtful Accounts:
--------------------------------

Year Ended
 September 30, 2001  $ 1,418,908   $ 151,263    $  (87,647) (1)    $ 1,482,524
                     ============  ==========   ===============    =============

Year Ended
 September 30, 2000  $ 1,428,541   $ 218,795    $ (228,428) (1)    $ 1,418,908
                     ============  ==========   ===============    =============

Year Ended
 September 30, 1999  $ 1,369,815   $ 191,356    $ (132,630) (1)    $ 1,428,541
                     ============  ==========   ===============    =============

(1) Write-off of accounts considered to be uncollectible (net of recoveries).




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

        None.


                                       45
<PAGE>

                                          PART III
                                          --------


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
--------------------------------------------------------

      Certain information required under this Item with respect to Directors and
      Executive   Officers  will  be  contained  in  the  Company's  2001  Proxy
      Statement,  pursuant to Regulation  14A, which is  incorporated  herein by
      reference.

      The  following  table  sets  forth  the  names  and ages of the  Company's
      Executive Officers,  together with all positions and offices held with the
      Company by such Executive Officers.  All Executive Officers are subject to
      re-election  or  re-appointment  by the  Board of  Directors  at the first
      Directors' Meeting succeeding the next Annual Meeting of shareholders.

             Name                  Age                     Title

Gino N. Pala                        73  Chairman  of the  Board  since  February
(Father-in-law of Richard F. Joyce)     1989;   President  and  Chief  Executive
                                        Officer or Co-Chief Executive Officer
                                        since 1978.

Richard F. Joyce                    46  Vice   Chairman   of  the  Board   since
(Son-in-law of Gino N. Pala)            January  1990;  President  and  Co-Chief
                                        Executive  Officer  since  March   1999;
                                        prior   thereto   President  and   Chief
                                        Operating Officer, Consumer Group, since
                                        March,1996; Executive Vice President and
                                        Chief Legal   Executive  since  February
                                        1991; Corporate Counsel since July 1990.

Richard A. Asta                     45  Executive  Vice President of Finance and
                                        Chief  Financial  Officer since February
                                        1991;    prior   thereto   Senior   Vice
                                        President - Finance and Chief  Financial
                                        Officer  since March 1990;  and Director
                                        since May 1999.

Leonard D. Dahlberg, Jr.            50  Executive  Vice  President of Operations
                                        since   August  2000;   Executive   Vice
                                        President  of  Procurement  since  April
                                        1999;   prior  thereto   Executive  Vice
                                        President,   Industrial   Group,   since
                                        March 1996;  Executive Vice President of
                                        Manufacturing/Consumer          Products
                                        division since August 1995;  Senior Vice
                                        President   of    Manufacturing    since
                                        February   1993;   Vice   President   of
                                        Manufacturing since March 1990.

John Adornetto                      60  Vice President and Corporate  Controller
                                        since   January   1991;   prior  thereto
                                        Corporate   Controller  since  September
                                        1978.

Diego Cespedes Creixell             43  President,  Grupo  Dixon  S.A.  de C.V.,
                                        since  August  1996 and  Director  since
                                        May 2000.


                                       46
<PAGE>

ITEM 11. EXECUTIVE COMPENSATION
-------------------------------

     Information  required  under this Item will be contained  in the  Company's
2001 Proxy Statement which is incorporated herein by reference.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
-----------------------------------------------------------------------

     Information  required  under this Item will be contained  in the  Company's
2001 Proxy Statement which is incorporated herein by reference.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------

     Information  required  under this Item will be contained  in the  Company's
2001 Proxy Statement which is incorporated herein by reference.


                                       47
<PAGE>

                                     PART IV
                                     -------

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

(a)   Documents filed as part of this report:
      --------------------------------------

        1.  Financial statements
            --------------------
            See index under Item 8. Financial Statements and Supplementary Data.

        2.  Exhibits
            --------
               The following exhibits are required to be filed as part of this
            Annual Report on Form 10-K:

            (2)  a.  Share Purchase  Agreement by and among Dixon Ticonderoga
                     de Mexico,  S.A. de C.V., and by Grupo Ifam,  S.A. de C.V.,
                     and  Guillermo  Almazan  Cueto with  respect to the capital
                     stock  of  Vinci  de  Mexico,   S.A.   de  C.V.,   (English
                     translation). 4

            (2)  b.  Asset Purchase  Agreement dated February 9, 1999, by and
                     between  Dixon  Ticonderoga  Company,  as Seller and Asbury
                     Carbons, Inc., as Buyer. 6

            (3)  (i) Restated Certificate of Incorporation. 2

            (3) (ii) Amended and Restated Bylaws. 1

            (4)  a.  Specimen Certificate of Company Common Stock. 2

            (4)  b.  Amended and Restated Stock Option Plan. 3

            (10) a.  First  Modification  of Amended and  Restated  Revolving
                     Credit  Loan and  Security  Agreement  by and  among  Dixon
                     Ticonderoga Company,  Dixon Ticonderoga,  Inc., First Union
                     Commercial  Corporation,  First National Bank of Boston and
                     National Bank of Canada. 1

            (10) b.  12.00% Senior  Subordinated  Notes,  Due 2003,  Note and
                     Warrant Purchase Agreement. 1

            (10) c.  12.00% Senior Subordinated Notes, Due 2003, Common Stock
                     Purchase Warrant Agreement. 1

            (10) d.  License and Technological  Agreement between Carborundum
                     Corporation and New Castle Refractories Company, a division
                     of Dixon Ticonderoga Company. 1

            (10) e.  Equipment   Option  and  Purchase   Agreement   between
                     Carborundum   Corporation   and  New  Castle   Refractories
                     Company, a division of Dixon Ticonderoga Company. 1

            (10) f.  Product   Purchase   Agreement   between   Carborundum
                     Corporation and New Castle Refractories Company, a division
                     of Dixon Ticonderoga Company. 1


                                       48
<PAGE>

            (10) g.  Second  Modification  of Amended and Restated  Revolving
                     Credit  Loan and  Security  Agreement  by and  among  Dixon
                     Ticonderoga Company,  Dixon Ticonderoga,  Inc., First Union
                     Commercial  Corporation,  First National Bank of Boston and
                     National Bank of Canada. 5

            (10) h.  Third  Modification  of Amended and  Restated  Revolving
                     Credit  Loan  and  Security  Agreement,  Amendment  to Loan
                     Documents  and  Assignment  by and among Dixon  Ticonderoga
                     Company,  Dixon  Ticonderoga,  Inc., First Union Commercial
                     Corporation,  BankBoston, N.A., National Bank of Canada and
                     LaSalle Bank. 7

            (10) i.  First  Modification  of Amended and  Restated  Term Loan
                     Agreement  and  Assignment  by and among Dixon  Ticonderoga
                     Company,  Dixon  Ticonderoga,  Inc., First Union Commercial
                     Corporation,  BankBoston, N.A., National Bank of Canada and
                     LaSalle Bank. 7

            (10) j.  Amendment No. 1 to 12.00% Senior Subordinated Notes, Due
                     2003, Note and Warrant Purchase Agreement.7

            (10) k.  Fourth  Modification  of Amended and Restated  Revolving
                     Credit Loan and Security Agreement.

            (10) l.  Second  Modification  of Amended and Restated  Term Loan
                     Agreement.

            (10) m.  Amendment No. 2 to Note and Warrant Purchase Agreement.

            (21)     Subsidiaries of the Company

            (23)     Consent of Independent Certified Public Accountants.

1 Incorporated by reference to the Company's  Annual Report on Form 10-K for the
year ended September 30, 1996, file number 0-2655, filed in Washington, D.C.

2 Incorporated by reference to the Company's  quarterly  report on Form 10-Q for
the period ended March 31, 1997, file number 0-2655, filed in Washington, D.C.

3 Incorporated by reference to Appendix 3 to the Company's Proxy Statement dated
January 27, 1997, filed in Washington, D.C.

4  Incorporated  by reference to the Company's  current report on Form 8-K dated
December 12, 1997, filed in Washington D.C.

5 Incorporated by reference to the Company's  Annual Report on Form 10-K for the
year ended September 30, 1998, file number 0-2615, filed in Washington, D.C.

6  Incorporated  by reference to the Company's  current report on Form 8-K dated
March 2, 1999, filed in Washington D.C.

7 Incorporated by reference to the Company's  Annual Report on Form 10-K for the
year ended September 30, 1999, file number 0-2615 filed in Washington, D.C.

8 Incorporated by reference to the Company's  Annual Report on Form 10-K for the
year ended September 30, 2000, file number 0-2655 filed in Washington, D.C.

(b)     Reports on Form 8-K:
        None.


                                       49
<PAGE>

                                   SIGNATURES
                                   ----------

     Pursuant to the  requirements  of Section 15(d) of the Securities  Exchange
Act of 1934,  the Company has duly caused this Annual  Report on Form 10-K to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                      DIXON TICONDEROGA COMPANY


                                      /s/ Gino N. Pala
                                      ----------------------
                                      Gino N. Pala, Chairman of Board and
                                      Co-Chief Executive Officer

     Pursuant to the Securities Exchange Act of 1934, this Annual Report on Form
10-K has been signed below by the following  persons on behalf of the Company in
the capacities indicated.





        /s/  Gino N. Pala
        ----------------------------
        Gino N. Pala                Chairman of Board, Co-Chief
                                    Executive Officer and Director
                                    Date:  January 15, 2002
        /s/  Richard F. Joyce
        ----------------------------
        Richard F. Joyce            Vice Chairman of Board,
                                    Co-Chief Executive Officer,
                                    President and Director
                                    Date: January 15, 2002
        /s/  Richard A. Asta
        ----------------------------
        Richard A. Asta             Executive Vice President of
                                    Finance, Chief Financial
                                    Officer and Director
                                    Date:  January 15, 2002
        /s/  Diego Cespedes Creixell
        ----------------------------
        Diego Cespedes Creixell     President, Grupo Dixon S.A. de
                                    C.V., and Director
                                    Date: January 15, 2002
        /s/  Harvey L. Massey
        ----------------------------
        Harvey L. Massey            Director
                                    Date: January 15, 2002
        /s/  Philip M. Shasteen
        ----------------------------
        Philip M. Shasteen          Director
                                    Date: January 15, 2002
        /s/  Ben Berzin, Jr.
        ----------------------------
        Ben Berzin, Jr.             Director
                                    Date: January 15, 2002
        /s/  Kent Kramer
        ----------------------------
        Kent Kramer                 Director
                                    Date: January 15, 2002
        /s/  John Ritenour
        ----------------------------
        John Ritenour               Director
                                    Date: January 15, 2002


                                       50
<PAGE>

                                                                    Exhibit (21)
                                                                    ------------


                         2001 ANNUAL REPORT ON FORM 10-K
                         -------------------------------

                           SUBSIDIARIES OF THE COMPANY
                           ---------------------------

All of the Registrant's subsidiaries as of September 30, 2001, are listed below.
Subsidiaries of a subsidiary are indented.  All subsidiaries are included in the
consolidated financial statements of the Registrant.


                                                                   Percentage of
                                                   State Or           Voting
                                               Jurisdiction of      Securities
                                                Organization          Owned
                                              -----------------  ---------------

Dixon Ticonderoga, Inc.                              Canada            100%

  Grupo Dixon, S.A. de C.V. (Subsidiary of
   Dixon Ticonderoga, Inc.)                          Mexico             97%

    Dixon Ticonderoga de Mexico, S.A. de C.V.
     (Subsidiary of Grupo Dixon, S.A. de C.V.)       Mexico            100%

    Dixon Comercializadora Dixon, S.A. de  C.V.
     (Subsidiary of Grupo Dixon, S.A. de C.V.)       Mexico            100%

    Servidix, S.A. de C.V.  (Subsidiary of
     Grupo Dixon, S.A. de C.V.)                      Mexico            100%

Dixon Industrial Mexico, S.A. de C.V. (a)            Mexico            100%

Beijing Dixon Ticonderoga Stationery Company, Ltd.   China             100%

Ticonderoga Graphite, Inc. (a)                     New York            100%

Dixon Europe, Limited                           United Kingdom         100%

(a)  Inactive


                                       51
<PAGE>

                                                                    Exhibit (23)
                                                                    ------------
               CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
               ---------------------------------------------------



     We hereby  consent to the  incorporation  by reference in the  Registration
Statements  on Form S-8 (File Nos.  33-20054,  33-23380 and  333-22205) of Dixon
Ticonderoga Company of our report dated December 6, 2001, except as to the first
paragraph  of Note 15 for which the date is January  10,  2002,  relating to the
financial  statements and financial  statement  schedule,  which appears in this
Form 10-K.





PricewaterhouseCoopers LLP
Tampa, Florida
January 10, 2002



                                       52