<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   ----------
                                    FORM 10-K

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

                     FOR FISCAL YEAR ENDED DECEMBER 31, 2001

                        COMMISSION FILE NUMBER: 333-10611

                               UNIFRAX CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


               DELAWARE                                34-1535916
    (STATE OR OTHER JURISDICTION           (I.R.S. EMPLOYER IDENTIFICATION NO.)
          OF INCORPORATION)


                    2351 WHIRLPOOL STREET, NIAGARA FALLS, NY
                                   14305-2413
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
                                   (ZIP CODE)
                    REGISTRANT'S TELEPHONE NUMBER, INCLUDING
                            AREA CODE: (716) 278-3800

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

                    SECURITIES REGISTERED PURSUANT TO SECTION
                             12(g) OF THE ACT: NONE

                    SECURITIES REGISTERED PURSUANT TO SECTION
                             12(b) OF THE ACT: NONE

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

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of the Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [ X ]

     Aggregate market value of voting and non-voting common equity held by
non-affiliates of the registrant: None

DOCUMENTS INCORPORATED BY REFERENCE: NONE.






                                                                               1
<PAGE>



                                     PART I

ITEM 1. BUSINESS

     Unifrax Corporation ("Unifrax" or "Company") manufactures heat resistant
ceramic fiber products for automotive, commercial, and industrial customers
throughout the world. Developed by the Company in 1942, ceramic fiber is a
white, glassy material belonging to a class of materials known as man-made
vitreous fibers (a class which also includes fiberglass and mineral wool).
Ceramic fiber possesses several commercially attractive performance properties
including stability at very high temperatures, extremely low heat transmission
and retention, light weight compared to other heat-resistant materials, chemical
stability and corrosion resistance. These properties make ceramic fiber a
superior insulating material in high temperature applications.

     Ceramic fiber's most common application has been to line industrial
furnaces, where high temperatures demand its heat-resistant characteristics.
Historically, the industrial furnace-related market has represented the largest
percentage of the Company's sales. Increasingly, the Company has applied its
expertise to more rapidly-growing, high value-added niche markets, including
automotive and fire protection.

     On October 4, 2000, the Company acquired the capital stock of certain
companies and certain assets of other companies that comprised the high
performance insulating ceramic fibers business (the "Ceramic Fiber Business") of
Compagnie de Saint-Gobain ("Saint-Gobain"), a societe anonyme based in Paris,
France (the "Acquisition"). The Ceramic Fiber Business was contained in legal
entities which were owned ultimately by Saint-Gobain in France, the United
Kingdom, Brazil, Germany, Australia, Venezuela, India, Belgium and Italy.

MARKETS

     Furnace-Related Markets. Ceramic fiber for furnace-related applications is
generally sold to the metal production, petrochemical, power, and ceramic and
glass industries.

     Automotive Market. Three product types account for substantially all of the
fiber consumed by the automotive industry: paper, catalytic converter gasket
material, and insulation heat shields.

     Other Markets. Ceramic fiber is being used in several newer applications in
niche markets such as fire protection, appliances, and commercial insulation. In
these industries, products are often customized to meet special customer needs.

MANUFACTURING AND OPERATIONS

     Ceramic fiber is produced by melting a combination of alumina, silica, and
other additives in either a submerged electrode furnace (SEF) or in an electric
arc furnace. The molten mixture is made into fiber either by blowing an air
stream on the molten material flowing from the furnace (blowing process) or by
directing the molten material onto a series of spinning wheels (spinning
process). The blowing and spinning processes produce fiber with different
characteristics, dimensions, and process yields.

     The Company also employs advanced manufacturing processes associated with
the "wet" manufacture of papers and felts, boards, and other products. These
processes use bulk ceramic fiber as a feedstock in combination with binders or
other liquids.

     The Company's operations in Tonawanda, New York are certified under the
International Quality Standard, ISO 9000, and the rigorous U.S. automotive
standard, QS 9000. The Company's operations in New Carlisle, Indiana and in
Amherst, New York are certified under ISO 9000.




                                                                               2
<PAGE>

     The Company's operations in Brazil are certified under ISO9001, and the
Company's operations in Australia, France, Germany, India, and the U.K. are
certified under ISO9002.

RAW MATERIALS

     Although the Company purchases some of its raw materials from sole
suppliers, substitute materials are available from other suppliers on similar
terms. Supplier changes would require some level of product and process
qualification, but there are no technical barriers identified. The exception is
vermiculite, a mineral which is an important raw material in the manufacture of
XPE(TM) which is used in automotive catalytic converter gaskets. The Company
currently purchases the majority of its requirements of vermiculite from an
overseas source and the balance from a U.S. supplier. Because vermiculite from
the overseas source has superior performance qualities, the Company believes
that over the next two to three years, both it and its competitors will continue
to rely on the overseas source.

RESEARCH AND DEVELOPMENT

     The research and development group, located at the Company's headquarters,
operates in a 9,500 square foot laboratory, including facilities for pilot plant
development and traditional research and development activities. Some limited
additional research and development expenditure is incurred in the Company's
overseas operations.

     The Company has maintained a strong financial commitment to its research
and development program. Research and development expense totaled $2,586,000,
$2,905,000 and $4,094,000, or approximately 3.0%, 2.6% and 2.6% of net sales
during the years 1999, 2000, and 2001, respectively.

COMPETITION

     The ceramic fiber industry is highly competitive, and some of the Company's
competitors are larger and have greater resources than the Company. In the
furnace-related markets, competition is based primarily on product quality,
price, and service. In the new higher growth niche markets, competition is based
primarily on product technology, technical specifications, manufacturing process
capabilities, quality assurance and price.

     The Company has significant competitors in its markets, some of which
manufacture ceramic fiber while others purchase ceramic fiber and then reprocess
it into products which compete with the Company's products. In the
furnace-related markets, the Company's competitors are the Thermal Ceramics
business unit of Morgan Crucible, the Vesuvius USA Corporation, a business unit
of Cookson Group plc., and the A.P. Green business unit of RHI AG. In the
automotive market, the Company's significant competitors include Thermal
Ceramics, Minnesota Mining & Manufacturing Company ("3M") and Lydall. Both
Lydall and 3M are reprocessors of ceramic fiber.

     The Company's significant competitors in its other markets include Lydall
and Thermal Ceramics. In some instances, ceramic fiber competes with a limited
number of non-ceramic fiber products such as hard brick refractories and mineral
wool.

CYCLICALITY AND SEASONALITY

     The Company's products are generally used in industries subject to supply
and demand cycles which reflect general economic activity. In addition, certain
markets historically have been slightly seasonal, with higher sales in the
second and fourth quarters and lower sales in the first and third quarters.





                                                                               3
<PAGE>

BACKLOG

     The Company does not consider its backlog significant because it fills most
of its orders within one month and substantially all of its orders within three
months.

PRODUCT AND HEALTH SAFETY ISSUES

     Manufacturers of man-made vitreous fibers ("MMVF") such as fiberglass,
mineral wool and ceramic fiber have investigated the potential for adverse
health effects associated with the inhalation of airborne fiber. Independent
animal studies have indicated that ceramic fiber inhaled by test animals, in
large quantities during the course of their lifetimes, can cause fibrosis, lung
cancer and mesothelioma, a malignant tumor of the lining of the lungs and chest
cavity. Company and industry-sponsored studies of workers with occupational
exposure to airborne ceramic fiber, however, to date have found no clinically
significant relationship between ceramic fiber exposure and respiratory disease
in humans.

     The Company has established organization and management systems for the
purpose of ensuring that health and safety matters are properly identified,
evaluated and addressed throughout the Company's operations. The Company
utilizes the knowledge, skills and expertise of a number of external
consultants, including an independent advisory board. Comprised of an
internationally recognized group of experts in the fields of medicine, pulmonary
science, veterinary pathology, toxicology and legislative, regulatory and legal
affairs, the Ceramic Fiber Advisory Board ("CFAB") provides advice to the
Company regarding proper handling practices for ceramic fiber and other related
product management issues.

     The Company developed and implemented a comprehensive Product Stewardship
Program ("PSP") as one of its management systems. A key element of the PSP is
research focused on identifying and evaluating the potential health effects
associated with the inhalation of respirable fibers. These studies have taken
two forms: human studies, known as epidemiological investigations, and
toxicological research, which is generally conducted with test animals. Many of
these research activities have been conducted with the participation of other
members of the ceramic fiber industry.

     The Company's PSP also includes elements designed to identify exposed
populations, monitor employee and customer exposures and pursue exposure
reductions. Initial assessments indicate that most ceramic fiber exposure is
confined to the workplace and to a limited population of about 30,000 persons.
In the United States, employee and customer exposure monitoring has been
conducted by the Company under a rigorous protocol, jointly adopted pursuant to
a voluntary consent agreement by the U.S. Environmental Protection Agency
("EPA") and the Refractory Ceramic Fiber Coalition ("RCFC"), the ceramic fiber
industry trade association. Under the terms of this agreement, industry and
customer workplace monitoring samples were taken for a period of five years
concluding in mid-1998. The EPA elected to take no immediate action.

     As part of the industry's ongoing effort to prudently manage the refractory
ceramic fiber ("RCF") exposures, on February 11, 2002 the RCFC (of which Unifrax
is a member) initiated and signed a voluntary worker protection program with the
U.S. Federal Occupational Safety and Health Administration (OSHA). This program,
entitled PSP 2002, was developed to assist those workers who use RCF containing
products with management of potential health risks associated with inhalation of
respirable fiber.

     In the absence of a specific U.S. government standard regulating ceramic
fiber exposure, several participants in the industry, including the Company,
based on prudence and not significant risk, adopted a recommended exposure
guideline ("REG") of one half fiber per cubic centimeter of air. Scientific data
available to date has been regarded as insufficient for the purpose of
determining a specific broadly-acceptable, science-based RCF exposure threshold.
Nonetheless, the industry's recommended exposure guideline provides a
quantitative





                                                                               4
<PAGE>

basis to measure progress in implementing PSP objectives to seek continuous
reduction in fiber exposure through initiatives that are technically and
economically feasible.

     Over time, health research data have been used by various organizations to
classify certain man-made fibers. For example, classification terms, such as
"possible" (International Agency for Research on Cancer, "IARC"), "probable"
(EPA and Health Canada, "HC"), "reasonably anticipated" (National Toxicology
Program, "NTP"), and "suspected" (American Conference of Governmental Industrial
Hygienists, "ACGIH") reflect the view of each organization as to the potential
carcinogenicity of ceramic fiber and/or other MMVFs. Each of these
classifications reflect concern for human health and uncertainty regarding the
potential for airborne ceramic fiber to affect occupational health adversely.
These classification determinations have not been followed by regulatory
exposure standards in the U.S.

     Some regulators in other countries have adopted a variety of regulatory
thresholds. Member States of the European Union have classified ceramic fiber as
"Category 2: Substances which should be regarded as if they are carcinogenic to
man" on the basis of animal studies, although refractory ceramic fiber exposure
has not been associated with any respiratory disease in humans. If the United
States, United Kingdom, France, Brazil or other major industrialized countries
were to adopt legislative or regulatory standards severely restricting the use
of ceramic fiber or severely limiting fiber exposure, a material adverse effect
on the Company's business could result.

ENVIRONMENTAL REGULATION

     The Company's operations and properties are subject to a wide variety of
foreign, federal, state and local laws and regulations, including those
governing the use, storage, handling, generation, treatment, emission, release,
discharge and disposal of certain materials, substances and wastes, the
remediation of contamination in the environment, and the health and safety of
employees and other persons. As such, the nature of the Company's operations
exposes it to the risk of claims with respect to environmental protection and
health and safety matters, and there can be no assurance that material costs or
liabilities will not be incurred in connection with such claims. Reference is
made to the information included in Note 13 to the consolidated financial
statements included in this Form 10-K, and to information appearing under the
headings "Health and Safety Indemnity" and "Environmental Indemnity" provided
under Item 13 of this Form 10-K, which are hereby incorporated herein by
reference.

PATENTS AND TRADEMARKS

     Although the Company obtains patent protection for certain product
innovations, the Company believes that its success depends more heavily on the
technical expertise and innovative abilities of its personnel than on its patent
protection. The Company believes its trademarks are important in order to
develop and support brand image and to differentiate itself from competitors.

EMPLOYEES

     As of December 31, 2001, the Company employed approximately 1,055
employees, of which approximately 442 are represented by ten separate unions
(called work councils outside the United States). A collective bargaining
agreement in the United States, representing 6% of the Company's employees,
expires in 2004. Outside the U.S., labor agreements are either state-mandated or
Company negotiated with various expiration dates.





                                                                               5
<PAGE>

SEGMENT AND GEOGRAPHIC INFORMATION

     Reference is made to the information contained in Note 16 to the
consolidated financial statements included under Item 8 of this Form 10-K, which
is hereby incorporated herein by reference.

ITEM 2.  PROPERTIES

The following table provides a description of the Company's principal
facilities.

<TABLE>
<CAPTION>

                                           APPROXIMATE
PLANT SITE                                 SQUARE FEET        STATUS             USE
----------                                 -----------        ------             ---
<S>                                         <C>              <C>                <C>
New Carlisle, IN                             230,000          Owned              Manufacturing
Tonawanda, NY                                186,000          Leased             Manufacturing
Amherst, NY                                   42,000          Leased             Manufacturing
Sanborn, NY                                   10,000          Leased             Manufacturing
Niagara Falls, NY                             33,000          Owned              Headquarters, research laboratory
Vinhedo, S.P., Brazil                         74,000          Owned              Manufacturing
Vinhedo, S.P., Brazil                         17,000          Leased             Warehousing
Dusseldorf, Germany                           49,000          Owned              Processing, distribution
Valencia, Venezuela                           12,000          Leased             Manufacturing
Lomas de Zamora, B.A., Argentina              11,000          Leased             Distribution
Thomastown, Australia                         75,000          Owned              Manufacturing
Lorette, France                               87,000          Owned              Manufacturing
Ambert, France                                54,000          Owned              Manufacturing
Batistaff, France                              7,500          Leased             Manufacturing
Rainford, England                            130,000          Owned              Manufacturing
Lakhtar, India                                37,000          Owned              Manufacturing

</TABLE>

ITEM 3. LEGAL PROCEEDINGS

     Reference is made to the information included in Note 13 to the
consolidated financial statements of the Company included under Item 8 in this
Form 10-K, which is hereby incorporated herein by reference.

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

     None.








                                                                               6
<PAGE>



                                     PART II

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

     There is no established public trading market for the Company's stock.

     On October 4, 2000, the Company and its subsidiaries acquired the
insulating ceramic fiber business owned by Compagnie de Saint-Gobain
("Saint-Gobain"). Under the terms of the negotiated transaction, the Company
issued $9,500,000 of subordinated notes to a wholly owned subsidiary of
Saint-Gobain, and the Company issued $20,500,000 of its Series A convertible
preferred stock to its parent holding company, Unifrax Holding Co., which then
pledged the preferred stock to Saint-Gobain as security for subordinated notes
issued by the holding company. The securities issued by the Company in the
transaction were exempt from registration under the Securities Act of 1933 by
the exemption provided by Section 4(2) of the act.

     On October 4, 2001 the Company increased its subordinated promissory note
to SEPR from $8,000,000 to $12,000,000. On the same date, the subordinated notes
issued by the Company's parent holding company, Unifrax Holding Co., to SEPR
were reduced by $4,000,000, from $20,500,000 to $16,500,000. The liquidation
preference value of the Series A convertible preferred stock issued by Unifrax
Corporation to Unifrax Holding Co. and pledged to Saint-Gobain as security for
the subordinated notes, was also reduced by $4,000,000.

     On January 20, 2001, the Company declared and paid a dividend on its
redeemable cumulative Series A preferred stock of $22.822 per share on 20,500
shares, for a total of $467,849. On December 18, 2001, the Company declared a
dividend on its redeemable cumulative Series A preferred stock of $66.572 per
share on 20,500 shares, for a total of $1,364,733. Unifrax Holding Co. then used
the proceeds of their dividend from Unifrax Corporation to pay the interest due
to SEPR on the outstanding subordinated notes.

     The Company did not pay dividends on its common stock during 2000 or 2001
and does not currently intend to pay dividends on its common stock in the
foreseeable future. Future decisions as to the payment of dividends will be at
the discretion of the Company's Board of Directors, subject to applicable law.
The Company's ability to pay dividends on its common stock is also subject to
the covenants contained in its Credit Agreement and the Indenture for the
Company's 10.5% Senior Notes. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources."

ITEM 6. SELECTED FINANCIAL DATA

     The following table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
with the Company's consolidated financial statements and related notes in Item 8
of this Form 10-K.






                                                                               7
<PAGE>



<TABLE>
<CAPTION>


                                                                                   YEAR ENDED DECEMBER 31
                                                            1997            1998           1999           2000            2001
                                                            ----            ----           ----           ----            ----
<S>                                                      <C>              <C>            <C>           <C>             <C>
STATEMENT OF INCOME DATA:
Net Sales                                                $87,111         $85,499        $85,089        $111,982       $158,439
Income before interest, income taxes and
    minority interest                                     20,039          18,338         19,101         23,082          25,511
Interest expense                                          12,537          11,988         11,335         11,692          12,626
Provision for income taxes                                 1,937           2,305          2,792          4,241          (2,264)
Minority interest                                              -               -              -             52             187
                                                          ------          ------         ------         ------         -------
Net income                                                $5,565          $4,045         $4,974         $7,097         $14,962
                                                          ======          ======         ======         ======         =======

OTHER DATA:
EBITDA (a)                                               $25,382         $23,980        $24,831        $29,913         $36,208
Depreciation and amortization                              5,323           5,649          5,420          6,725          10,724
Cash Flows From Operating Activities                      13,987           9,243         12,684         23,368          29,821
Cash Flows From Investing Activities                      (9,276)         (3,759)        (3,177)       (57,615)         (7,395)
Cash Flows From Financing Activities                      (5,250)         (5,800)        (9,550)        36,845         (21,708)

BALANCE SHEET DATA (AT PERIOD END):
Working capital                                          $12,921          $4,858         $9,447        $31,370         $17,060
Long Term Debt                                           122,500         105,950        100,900        126,023         106,095
Total assets                                              90,462          88,654         84,578        162,532         146,835
Total liabilities                                        136,641         130,778        122,009        170,701         148,123
Stockholders' Deficit                                    (48,715)        (44,810)       (40,267)       (32,888)        (21,715)

</TABLE>



(a)   "EBITDA" means earnings from operations before interest expense, taxes,
profits or losses on sales or disposals of fixed assets, depreciation, and
amortization. EBITDA is included because management believes that it is an
indicator used by investors to gauge a company's ability to service its interest
and long term debt principal obligations. EBITDA should not be considered in
isolation from, as a substitute for, or as being more meaningful than net
income, cash flows from operating, investing and financing activities or other
income or cash flow statement data prepared in accordance with generally
accepted accounting principles and should not be construed as an indication of
the Company's operating performance or as a measure of liquidity. EBITDA, as
presented herein, may be calculated differently by other companies and, as such,
EBITDA amounts presented herein may not be comparable to other similarly titled
measures of other companies.

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

FORWARD LOOKING STATEMENTS

     Statements included in this Management Discussion and Analysis of Financial
Condition and Results of Operations and elsewhere in this document that do not
relate to present or historical conditions are "forward looking statements"
within the meaning of that term in Section 27A of the Securities Act of 1933, as
amended, and of Section 21F of the Securities Exchange Act of 1934, as amended.
Forward looking statements include, without limitation, any statement that may
predict, forecast, indicate or imply future results, performance or
achievements, and may contain the words "believe," "anticipate," "expect,"
"estimate," "project," "will continue," "will result," or




                                                                               8
<PAGE>

words or phrases of similar meaning. Additional oral or written forward looking
statements may be made by the Company from time to time, and such statements may
be included in documents filed with the Securities and Exchange Commission. Such
forward looking statements involve risks and uncertainties which could cause
results or outcomes to differ materially from those expressed in such forward
looking statements. Among the important factors on which such statements are
based are assumptions concerning the continuing strength of the ceramic fiber
market on which the Company is substantially dependent, changing prices for
ceramic fiber products, acceptance of new products, the status of health and
safety issues affecting the ceramic fiber industry in general and the Company in
particular, the Company's continuing ability to operate under the restrictions
imposed by the substantial indebtedness which it is subject to, the risks
associated with international operations, foreign laws, and with transactions in
foreign currencies, risks associated with the impact of environmental
regulations on the Company's operations and property and related governmental
regulations, and the continuing availability of certain raw materials, including
vermiculite which is purchased from an overseas source.

GENERAL

     The following section should be read in conjunction with the other
information set forth in this document, including the financial statements and
the notes thereto.

RESULTS OF OPERATIONS

                                                    YEAR ENDED DECEMBER 31
                                             1999            2000          2001
                                       ----------     -----------     ---------

Net sales                                   100.0%          100.0%        100.0%
Cost of goods sold                           50.3            50.5          53.5
                                       ----------     -----------     ---------
Gross profit                                 49.7            49.5          46.5
Selling, general and administrative          27.0            28.8          30.6
                                       ----------     -----------     ---------
Operating income                             22.7%           20.7%         15.9%


YEAR ENDED DECEMBER 31, 2001 COMPARED WITH YEAR ENDED DECEMBER 31, 2000

     Net Sales increased by $46.4 million or 41.5% from $112.0 million in 2000
to $158.4 million in 2001. Sales for 2001 included the benefit of an additional
9 months of sales of the ceramic fiber business acquired by Unifrax from
Saint-Gobain in October 2000, which totaled approximately $55 million, offset by
the overall weakness in the North American market in the second half of the
year, particularly in furnace related markets, including primary metals,
petrochemical, power, glass and ceramics. Automotive catalytic converter support
systems and porosity-controlled products showed some growth.

     Gross Profit increased by $18.3 million or 32.9% from $55.4 million in 2000
to $73.7 million in 2001. Gross Profit as a percentage of net sales decreased
from 49.5% in 2000 to 46.5% in 2001. The increase in gross profit was due to
higher sales volume as a result of the acquisition from Saint-Gobain. The lower
overall gross profit percentage of net sales reflects the effect of lower gross
margins in some of the recently-acquired businesses, more severe price
competition, and the effect of lower plant utilization in North American
operations.

     Selling, general, and administrative expenses increased by $16.3 million or
50.6% from $32.2 million in 2000 to $48.5 million in 2001. SG&A expenses in 2001
included an additional 9 months of costs relating to the ceramic fiber business
acquired in October 2000, which totaled approximately $17 million, and one-time
costs associated with the consolidation of the acquired businesses.




                                                                               9
<PAGE>

     Operating income increased by $1.9 million or 8.2% from $23.2 million in
2000 to $25.1 million in 2001, as a result of the factors previously indicated.

     Other (expense) income changed by $0.8 million from an expense of $0.4
million in 2000 to an income of $0.4 million in 2001 due primarily to a gain on
the sale of a small product line during 2001, realized gains from sales of
investments, income from the redemption of senior notes, and gains on foreign
exchange in various currencies.

     Interest expense increased by $0.9 million or 8.0% from $11.7 million in
2000 to $12.6 million in 2001 due to the additional debt associated with the
acquisition of the Saint-Gobain ceramic fiber business offset by lower interest
rates on certain variable-rate borrowings. Interest expense decreased as a
percentage of net sales from 10.4% in 2000 to 8.0% in 2001.

     The provision for income taxes changed by $6.5 million from an expense of
$4.2 million in 2000 to a benefit of $2.3 million in 2001. During 2001, the
Company reversed the remaining deferred tax asset valuation allowance that was
established in connection with the Recapitalization, resulting in a one-time,
non-cash benefit of $7.3 million. Excluding this one-time, non-cash benefit, the
effective income tax rate increased from 37.2% in 2000 to 38.7% in 2001.

     Net income increased by $7.9 million or 110.8% from $7.1 million in 2000 to
$15.0 million in 2001, as a result of the factors previously indicated. Net
income as a percentage of net sales increased from 6.3% in 2000 to 9.4% in 2001.

     EBITDA increased by $6.3 million or 21.0% from $29.9 million in 2000 to
$36.2 million in 2001. The increase in EBITDA is principally attributable to the
factors affecting operating income which were discussed above. EBITDA as a
percent of net sales decreased from 26.7% in 2000 to 22.9% in 2001.

     Capital expenditures increased by $1.0 million or 15.4% from $6.1 million
in 2000 to $7.1 million in 2001.

     Working capital decreased from $31.4 million in 2000 to $17.1 million in
2001. The decrease is due primarily to lower trade receivables and inventories
and the receipt, during 2001, of the reimbursement from Saint-Gobain for certain
liabilities assumed in connection with the Acquisition, amounting to $8.3
million plus associated interest, which was primarily used to repay long term
debt.

     Cash flows from operating activities increased by $6.5 million or 27.6%
from $23.3 million in 2000 to $29.8 million in 2001, principally due to the
receipt of the reimbursement from Saint-Gobain for certain liabilities assumed
in connection with the Acquisition. Cash outflows from investing activities
decreased by $50.2 million from $57.6 million in 2000 to $7.4 million in 2001
due to the acquisition of the Saint-Gobain ceramic fiber business in October
2000 partially offset by higher capital expenditures, as discussed previously.
Cash inflows from financing activities changed by $58.5 million from an inflow
of $36.8 million in 2000 to an outflow of $21.7 million in 2001 as a consequence
of the receipt of proceeds from the issuances of long term debt, preferred stock
and revolving loans in 2000, and repayments of revolving loans and long term
borrowings in 2001.






                                                                              10
<PAGE>



YEAR ENDED DECEMBER 31, 2000 COMPARED WITH YEAR ENDED DECEMBER 31, 1999

     Net Sales increased by $26.9 million or 31.6% from $85.1 million in 1999 to
$112.0 million in 2000. Sales for the fourth quarter of 2000 included the
addition of the Saint-Gobain worldwide ceramic fiber business acquired by
Unifrax in October 2000. The overall sales increase was also the result of
higher volume in some traditional furnace-related markets including
petrochemicals, power, metals and ceramics, and in automotive catalytic
converter support systems, offset in part by lower sales in porosity-controlled
products due to changes in automotive industry airbag system designs.

     Gross Profit increased by $13.1 million or 31.0% from $42.3 million in 1999
to $55.4 million in 2000. Gross Profit as a percentage of net sales decreased
from 49.7% in 1999 to 49.5% in 2000. The increase in gross profit was due to
higher sales volume, improved plant operating efficiencies, and lower overall
production costs. The slightly lower overall gross profit percentage of net
sales reflects the effect of lower gross margins in some of the
recently-acquired businesses.

     Selling, general, and administrative expenses increased by $9.2 million or
40.0% from $23.0 million in 1999 to $32.2 million in 2000. SG&A expenses for the
fourth quarter of 2000 included the addition of the Saint-Gobain worldwide
ceramic fiber business acquired by Unifrax in October 2000. SG&A expenses were
also higher due to increased provisions for incentive compensations in 2000, and
nonrecurring reductions of liabilities associated with the product stewardship
program and retiree medical and insurance programs in 1999. Selling, general,
and administrative expenses as a percentage of net sales increased from 27.0% in
1999 to 28.8% in 2000.

     Operating income increased by $3.9 million or 20.2% from $19.3 million in
1999 to $23.2 million in 2000, as a result of the factors previously indicated.
Operating income as a percentage of net sales decreased from 22.7% in 1999 to
20.7% in 2000.

     Other expense decreased by $0.2 million or 33.3% from $0.6 million in 1999
to $0.4 million in 2000 due primarily to lower foreign exchange losses.

     Interest expense increased by $0.4 million or 3.5% from $11.3 million in
1999 to $11.7 million in 2000 due to the additional debt associated with the
acquisition of the Saint-Gobain ceramic fiber business and also due to higher
interest rates on certain variable-rate borrowings. Interest expense decreased
as a percentage of net sales from 13.3% in 1999 to 10.4% in 2000.

     Provision for income taxes increased by $1.4 million or 50.0% from $2.8
million in 1999 to $4.2 million in 2000. The effective income tax rate increased
from 36.0% in 1999 to 37.2% in 2000, primarily as a result of the effective
income tax rates of the Company's foreign subsidiaries.

     Net income increased by $2.1 million or 42.0% from $5.0 million in 1999 to
$7.1 million in 2000, as a result of the factors previously indicated. Net
income as a percentage of net sales increased from 5.8% in 1999 to 6.3% in 2000.

     EBITDA increased by $5.1 million or 20.5% from $24.8 million in 1999 to
$29.9 million in 2000. The increase in EBITDA is principally attributable to the
factors affecting operating income which were discussed above. EBITDA as a
percent of net sales decreased from 29.2% in 1999 to 26.7% in 2000.

     Capital expenditures increased by $2.9 million or 91.3% from $3.2 million
in 1999 to $6.1 million in 2000, due to higher worldwide spending on plant and
equipment. Capital expenditures in 2000 included projects to increase capacity,
to replace equipment and to reduce costs.





                                                                              11
<PAGE>

     Working capital increased from $9.4 million in 1999 to $31.4 million in
2000. The increase reflects the addition of the Saint-Gobain worldwide ceramic
fiber business acquired by Unifrax in October 2000.

     Cash flows from operating activities increased by $10.7 million or 84.3%
from $12.7 million in 1999 to $23.4 million in 2000, as a consequence of the
higher net income discussed above. Cash outflows from investing activities
increased by $54.4 million from $3.2 million in 1999 to $57.6 million in 2000
due to the acquisition of the Saint-Gobain ceramic fiber business in October
2000 and higher capital expenditures, as discussed previously. Cash inflows from
financing activities increased by $46.4 million from an outflow of $9.6 million
in 1999 for debt repayment to an inflow of $36.8 million in 2000 as a
consequence of the additional borrowings associated with the acquisition of the
Saint-Gobain ceramic fiber business discussed previously.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's Credit Agreement provides for up to $25.0 million in term
loans and $25.0 million in revolving credit facilities. The revolving credit
facilities are available for working capital and other corporate purposes. Loans
under the Credit Agreement bear interest at a rate based upon LIBOR or the
lender's base rate plus a margin as defined in the Credit Agreement. The Credit
Agreement and the Indenture for the Company's 10.5% Senior Notes contain certain
restrictive covenants including requirements that the Company meet certain
financial ratio tests and limitations on the ability of the Company to incur
additional indebtedness.

     On October 4, 2000, the Company and its subsidiaries acquired the
insulating ceramic fiber business owned by Compagnie de Saint-Gobain
("Saint-Gobain"). Under the terms of the acquisition of the Saint-Gobain Ceramic
Fiber Business (the "Acquisition"), the Company issued $9,500,000 of
subordinated notes to a wholly owned subsidiary of Saint-Gobain, and the Company
issued $20,500,000 of its Series A convertible preferred stock to its parent
holding company, Unifrax Holding Co., which then pledged the preferred stock to
Saint-Gobain as security for subordinated notes issued by the holding company.

     The Saint-Gobain notes mature June 30, 2004, are subordinate to all
currently outstanding debt, and bear interest generally at 7.0% through December
31, 2001, then 8.5% through December 31, 2002 and 10.0% thereafter. During 2001,
the Company borrowed an additional $1,500,000 under the Credit Agreement with
its banks, and repaid as required $1,500,000 of the subordinated notes to SEPR,
reducing the balance outstanding from $9,500,000 to $8,000,000. In accordance
with the terms of the subordinated promissory note, the note payable to SEPR was
increased by $4,000,000 on October 4, 2001 to $12,000,000. On the same date the
subordinated notes of $20,500,000 issued by Unifrax Holding Co. to SEPR were
reduced by $4,000,000 to $16,500,000. The liquidation preference value of the
Series A convertible preferred stock issued by Unifrax Corporation to Unifrax
Holding Co. and pledged to Saint-Gobain as security for the subordinated notes,
was also reduced by $4,000,000.

     At December 31, 2001, the Company had outstanding borrowings of $7.0
million on its term loan facilities and $2.3 million on its revolving credit
facilities.

     On January 20, 2001 the Company declared and paid a dividend on its
redeemable cumulative Series A preferred stock of $22.822 per share on 20,500
shares, for a total of $467,849. On December 18, 2001, the Company declared a
dividend on its redeemable cumulative Series A preferred stock of $66.572 per
share on 20,500 shares, for a total of $1,364,733.

     On January 22, 2002, the SEC issued a financial reporting release, FR-61,
Commission Statement about Management's Discussion and Analysis of Financial
Condition and Results of Operations, which provides specific considerations for
MD&A disclosures. FR-61 focuses on MD&A disclosure about liquidity and
off-balance sheet arrangements (including special purpose entities), trading
activities that include non-exchange traded commodity contracts accounted for at
fair value, and effects of transactions with related and certain other parties.




                                                                              12
<PAGE>

     The Credit Agreement contains various restrictive covenants which include,
but are not limited to, a minimum fixed charge coverage ratio, a maximum funded
debt to EBITDA ratio, a minimum interest coverage ratio, and restrictions on
capital expenditures, distributions, restricted investments, and additional
debt, as defined. In addition, the Indenture for the Company's 10.5% Senior
Notes contains certain restrictive covenants including requirements that the
Company meet certain financial ratio tests and limitations on the ability of the
Company to incur additional indebtedness. To the best of its knowledge and
belief, the Company has continued to be in compliance, or has obtained valid
waivers of any default, as of December 31, 2001, the latest measurement date.
The occurrence of any default of these covenants could result in acceleration of
the Company's obligations under the Credit Agreement and the Indenture for the
Company's 10.5% Senior Notes and foreclosure on the collateral securing such
obligations.

     Disclosures about contractual obligations and commercial commitments are
included in various parts of this report on Form 10-K, including Note 5 - Long
Term Debt and Seller Note, Note 6 - Fair Value of Financial Instruments and Note
12 - Lease Commitments and Rentals to the Company's consolidated financial
statements. A summary of significant contractual obligations is as follows:

                                                OPERATING
                                 DEBT             LEASE
                              MATURITIES       COMMITMENTS          TOTAL
                              ----------       -----------          -----
         2002               $        9,169    $       1,620    $       10,789
         2003                       94,032            1,415            95,447
         2004                       12,032            1,120            13,152
         2005                           31              935               966
         2006                            -              898               898
         Therafter                       -            8,406             8,406
                            --------------    -------------    --------------
                            $      115,264    $      14,394    $      129,658
                            ==============    =============    ==============


     Management believes that cash flows from operations and borrowings under
the available credit facility will be adequate to meet the Company's operating
requirements and planned capital expenditures over the next 12 months. See
"Forward Looking Statements."

     The Company has entered into a tax sharing agreement with Holding. The
results of its operations are included in the consolidated U. S. corporate
income tax return of Holding. The Company's provision for income taxes is
computed as if the Company filed its annual tax returns on a separate company
basis. The current portion of the income tax provision will be satisfied by a
payment to or from Holding.

     At December 31, 2001, the Company had U.S. Federal and state net operating
loss carryforwards totaling approximately $13 million which will be available to
offset future taxable income. These net operating loss carryforwards expire in
2012 through 2022.

LEGAL PROCEEDINGS

     Reference is made to the information included in Note 13 to the
consolidated financial statements of the Company included under Item 8 in this
Form 10-K, which is hereby incorporated herein by reference.






                                                                              13
<PAGE>



DISCLOSURES ABOUT CRITICAL ACCOUNTING POLICIES

     On December 12, 2001, the SEC issued a financial reporting release, FR-60,
Cautionary Advice Regarding Disclosure About Critical Accounting Policies
("FR-60"). The SEC's Cautionary Advice alerts public companies to the need for
improved disclosures about critical accounting policies. FR-60 defines "critical
accounting policies" as those most important to the financial statement
presentation and that require the most difficult, subjective, complex judgments.
FR-60 calls for MD&A discussion of critical accounting policies, the related
judgments and uncertainties associated with the application of those accounting
policies, and the sensitivity of the amounts reported in the financial
statements to material changes were different conditions and assumptions to
apply.

     The Company's accounting policies are disclosed in Note 1 - Significant
Accounting Policies to the Company's consolidated financial statements. The more
critical of the Company's accounting policies are described below.

     Accounts Receivable - Foreign Currency: The Company generates a significant
portion of its revenues and corresponding accounts receivable from sales
denominated in currencies other than the U.S. dollar. As of December 31, 2001,
approximately $20 million of the Company's accounts receivable were denominated
in approximately 10 foreign currencies, of which $13.3 million are denominated
in Euros. Historically, the foreign currency gains and losses on these
receivables have not been significant, and the Company has determined that
foreign currency derivative products are generally not required to hedge its
exposure. If there were a significant decline in the Euro exchange rate, the
U.S. dollar equivalents the Company would receive from its customers could be
materially less than the reported amount. A decline in the exchange rate of the
Euro to the U.S. dollar of approximately 10% from the rate as of December 31,
2001 would result in an exchange loss of approximately $1.3 million.

     Ceramic Fiber Contingencies - From time to time Unifrax and other
manufacturers of ceramic fibers have been named as defendants in lawsuits
alleging death or personal injury or worker's compensation claims as a result of
exposure in the manufacture and handling of ceramic fiber and other products.
The Company believes the lawsuits brought against it have been without merit and
the litigation currently pending, or to its knowledge threatened, will not have
a material adverse effect on the financial condition or results of operations of
the Company. The Company's belief is based on the fact that, although animal
studies have indicated that ceramic fiber inhaled by test animals at elevated
doses can cause disease, there is no evidence that exposure to refractory
ceramic fiber has resulted in disease in humans. In addition, BP America and
SEPR have agreed to indemnify the Company, subject to certain limitations,
against certain losses resulting from alleged or actual exposure to ceramic
fibers. However, in the case of BP America, this indemnity is dependent upon the
Company maintaining its Product Stewardship Program consistent with the program
maintained by the Company prior to the BP Closing, as modified in a commercially
reasonable manner in accordance with changing regulatory, scientific and
technical factors. In the Company's opinion, the Product Stewardship Program has
been maintained in a manner consistent with these requirements. It is possible,
however, that future results of operations for any particular quarterly or
annual period could be materially affected should assumptions with respect to
ceramic fiber claims change.

EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS

     During 2001, the Emerging Issues Task Force ("EITF") issued guidance in the
form of discussion topic D-98, Classification and Measurement of Redeemable
Securities, which is effective for quarters ending after December 15, 2001.
Topic D-98 clarified what is contemplated by Rule 5-02.28 of Regulation S-X when
considering whether or not the decision regarding potential redemption of
redeemable securities is solely within the control of the issuer. Under the
guidance of Topic D-98, the decision regarding potential redemption of the






                                                                              14
<PAGE>

Company's redeemable preferred stock is not considered to be solely within the
control of the Company. In accordance with S-X Rule 5-02.28, companies issuing
redeemable securities for which redemption is not solely within the control of
the issuer are required to classify the liquidation preference value of such
securities outside of permanent equity. Accordingly, in the fourth quarter of
2001, the Company reclassified amounts related to its Series A and Series B
preferred stock out of permanent equity. As required by Topic D-98, this change
has been applied retroactively.

     In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets, effective for fiscal years beginning after
December 15, 2001. Under the new rules, goodwill and intangible assets deemed to
have indefinite lives will no longer be amortized but will be subject to annual
impairment tests in accordance with the Statements. Other intangible assets will
continue to be amortized over their useful lives.

     The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of the
non-amortization provisions of the statement is not expected to have any impact
on the net income of the Company.

     In August 2001, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 144, Accounting for the Impairment of
Disposal of Long-Lived Assets, effective for fiscal years beginning after
December 15, 2001. Under the new rules, the criteria for classifying an asset as
held-for-sale are significantly changed from prior treatment. Assets which are
to be disposed of are stated at the lower of their fair values or carrying
amounts and depreciation is no longer recognized.

     The Company will apply this new rule beginning in the first quarter of
2002. The Company has determined that implementation of this new rule will not
impact the financial position of the Company as of January 1, 2002.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES AND MARKET RISK

     The Company is exposed to certain market risks, principally changes in
interest rates and foreign currency exchange. Market risk is the potential loss
arising from adverse changes in market rates and prices, such as interest rates
and foreign currency exchange. The Company does not enter into derivatives or
other financial instruments for trading or speculative purposes.

     The Company has various long-term indebtedness outstanding at December 31,
2000 and 2001, and had also entered into interest rate swap agreements which
expired September 30, 2001, to effectively convert fixed-rate debt with a
notional principal amount of $25,000,000 to variable-rate debt. The interest
impact of an increase in interest rates of 100 basis points (1%) would be as
follows:






                                                                              15
<PAGE>



<TABLE>
<CAPTION>

INSTRUMENT                                     INTEREST RATE                              IMPACT ON EARNINGS
----------                                     -------------                              ------------------
                                                                                               December 31
                                                                                          2000                  2001
                                                                               -----------------     ---------------
                                                                                               (In thousands)

<S>                                        <C>                                   <C>                   <C>
Credit Agreement                            Variable, based on LIBOR              $       (294)         $        (31)
Credit Agreement                            Variable, based on CDI                          -                    (61)

Senior Notes                                Fixed                                           -                     -
Subordinated Promissory Notes               Fixed                                           -                     -

Interest Rate Swap Agreement                Variable                                      (250)                   -
                                                                                  ------------          ------------
                                                                                          (544)                  (92)

Less tax benefit                                                                           190                    32
                                                                                  ------------          ------------

Net income reduction                                                              $       (354)         $        (60)
                                                                                  ============          =============


</TABLE>

     Effective January 30, 2002, the Company entered into an interest rate swap
agreement with Bank of America N.A. which will mature November 1, 2003, to
effectively convert fixed-rate debt with a notional principal amount of
$25,000,000 to variable-rate debt. Under the terms of the agreement, Unifrax
will receive 10.50% and will pay 3 month LIBOR plus 7.30%, compounded quarterly
and paid semi-annually on the interest payment dates associated with the Senior
Notes. The initial calculated variable rate was 9.17%.

     A portion of the Company's operations consists of manufacturing and sales
activities in foreign jurisdictions. The Company manufactures its products in
the United States, the United Kingdom, France, Germany, Brazil, Venezuela,
Australia, and India using materials purchased internationally, and sells into
those and other worldwide markets. Additionally, the Company operates a branch
sales office in Argentina. The Company and its subsidiaries invoice their
products both in local and foreign currencies. As a result, the Company's
financial results could be significantly affected by factors such as changes in
foreign currency exchange rates or weak economic conditions in the foreign
markets into which the Company sells its products. For example, when the U.K.
Pound Sterling strengthens relative to the Euro, the value of sales from the
U.K. which are denominated in Euros decreases when translated back to Sterling.
When the U.S. Dollar strengthens against other currencies, the price of
competitive imports into the U.S. from those other countries often decreases. To
mitigate the short-term effect of exchange rate changes on the Company's
purchases, sales and financial results in its various locations, the Company may
from time to time hedge its exposure to certain currencies by entering into
foreign exchange contracts. During 2000 and 2001, the Company did not enter into
any foreign exchange contracts. The significant devaluation of the Argentinean
peso in January 2002 did not have a material impact on the Company's results of
operations.



                                                                              16
<PAGE>


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

<TABLE>
<CAPTION>

                                                                                PAGE IN
                                                                               FORM 10-K
                                                                               ---------
<S>                                                                                <C>
Report of Independent Auditors..............................................         18
Consolidated Balance Sheets as of December 31, 2000 and 2001................         19
Consolidated Statements of Income for the Years Ended
     December 31, 1999, 2000 and 2001.......................................         20
Consolidated Statements of Stockholders' Deficit for the Years Ended
     December 31, 1999, 2000 and 2001.......................................         21
Consolidated Statements of Cash Flows for the Years Ended
     December 31, 1999, 2000 and 2001.......................................         22
Notes to Consolidated Financial Statements .................................         23

</TABLE>








                                                                              17
<PAGE>



                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
Unifrax Corporation

We have audited the accompanying consolidated balance sheets of Unifrax
Corporation as of December 31, 2000 and 2001, and the related consolidated
statements of income, stockholders' deficit and cash flows for each of the three
years in the period ended December 31, 2001. Our audits also included the
financial statement schedule listed in the index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards 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. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Unifrax
Corporation at December 31, 2000 and 2001 and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.

                                        /s/ Ernst & Young LLP



Buffalo, New York
March  6, 2002
















                                                                              18
<PAGE>



                               UNIFRAX CORPORATION
                           CONSOLIDATED BALANCE SHEETS
               (In Thousands, except share and per share amounts)

<TABLE>
<CAPTION>

                                                                                                          DECEMBER 31
                                                                                                      2000            2001
                                                                                               ---------------------------
<S>                                                                                           <C>             <C>
ASSETS
Current assets:
   Cash                                                                                        $     2,649     $     3,219
   Marketable securities and investments                                                               200             253
   Accounts receivable, trade, less allowance of $1,977 and $2,061, respectively                    37,068          28,481
   Accounts receivable, Saint-Gobain                                                                10,091              52
   Inventories                                                                                      17,134          16,305
   Deferred income taxes                                                                             2,114           1,602
   Prepaid expenses and other current assets                                                           691           3,019
                                                                                               ---------------------------
Total current assets                                                                                69,947          52,931
Property, plant and equipment, net                                                                  71,351          69,109
Deferred income taxes                                                                               17,288          21,323
Financing costs, net of accumulated amortization of $2,358 and $3,606, respectively                  3,009           1,933
Marketable securities and investments                                                                  591           1,211
Other assets                                                                                           346             328
                                                                                               ---------------------------
                                                                                               $   162,532     $   146,835
                                                                                               ===========================

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
   Current portion of long-term debt                                                           $     8,880     $     9,169
   Accounts payable                                                                                 11,497           9,793
   Accounts payable, related parties                                                                   105           2,054
   Accrued expenses                                                                                 18,095          14,855
                                                                                               ---------------------------
Total current liabilities                                                                           38,577          35,871

Long-term debt                                                                                     126,023         106,095
Accrued postretirement benefit cost                                                                  3,491           3,578
Other long-term obligations                                                                          1,037             909
Deferred income taxes                                                                                1,573           1,670

Minority interest                                                                                      887             910

Redeemable cumulative Series A preferred stock--$0.01 par value;
   non-voting; 30,000 shares authorized; 20,500 shares issued and
   outstanding, at liquidation preference value                                                     20,846          16,381
Redeemable convertible cumulative Series B preferred stock--$0.01
   par value; voting; 10,000 shares authorized; 1,667 shares issued
   and outstanding, at liquidation preference value                                                  2,986           3,136

STOCKHOLDERS' DEFICIT
Common stock--$0.01 par value; 40,000 shares authorized;
   20,000 shares issued and outstanding                                                                  -               -
Additional paid-in capital                                                                          39,188          37,670
Accumulated deficit                                                                                (72,290)        (57,328)
Accumulated other comprehensive income (loss)                                                          214          (2,057)
                                                                                               ----------------------------
                                                                                                   (32,888)        (21,715)
                                                                                               ----------------------------
                                                                                               $   162,532     $    146,835
                                                                                               ============================

</TABLE>

See accompanying notes to consolidated financial statements.







                                                                              19
<PAGE>



                               UNIFRAX CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME
                                 (In Thousands)

<TABLE>
<CAPTION>

                                                                                            DECEMBER 31
                                                                              1999             2000              2001
                                                                       ------------------------------------------------

<S>                                                                          <C>              <C>              <C>
Net sales                                                              $      85,089    $   111, 982     $      158,439

Cost of goods sold                                                            42,765           56,530            84,765
                                                                       ------------------------------------------------
Gross profit                                                                  42,324           55,452            73,674

Selling, general and administrative expenses                                  22,972           32,240            48,548
                                                                       ------------------------------------------------
Operating income                                                              19,352           23,212            25,126

Royalty income, net of related expenses                                          350              245                 -
Other (expense) income                                                          (601)            (375)              385
                                                                       ------------------------------------------------
Income before interest, income taxes and minority interest                    19,101           23,082            25,511

Interest expense                                                             (11,335)         (11,692)          (12,626)
                                                                       -------------------------------------------------
Income before income taxes and minority interest                               7,766           11,390            12,885

Provision for income taxes                                                     2,792            4,241            (2,264)
                                                                       -------------------------------------------------
Income before minority interest                                                4,974            7,149            15,149

Minority interest                                                                  -               52               187
                                                                       ------------------------------------------------
Net income                                                             $       4,974    $       7,097     $      14,962
                                                                       ================================================

</TABLE>


See accompanying notes to consolidated financial statements.







                                                                              20
<PAGE>



                               UNIFRAX CORPORATION
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
               (In Thousands, except share and per share amounts)

<TABLE>
<CAPTION>

                                                                                          Accumulated
                                                                        Additional           Other            Total
                                              Common       Paid-In      Accumulated      Comprehensive    Stockholders'
                                               Stock       Capital        Deficit        Income (Loss)       Deficit
                                        ---------------------------------------------------------------------------------

<S>                                     <C>              <C>           <C>                <C>                <C>
 Balance at January 1, 1999               $       -        $39,834       $(84,361)          $   (283)          $(44,810)

 Net income                                       -              -          4,974                  -              4,974
 Foreign currency translation
   adjustment                                     -              -              -               (281)              (281)
                                                                                                            -----------
 Comprehensive income                                                                                             4,693
 Accumulated Series B preferred
   stock dividends ($90 per share)                -           (150)             -                  -               (150)

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

 Balance at December 31, 1999                     -         39,684        (79,387)              (564)           (40,267)

 Net income                                       -              -          7,097                  -              7,097
 Foreign currency translation
   adjustment                                     -              -              -                778                778
                                                                                                            ------------
 Comprehensive income                                                                                             7,875
 Accumulated Series A preferred
   stock dividends ($17 per share)                -           (346)             -                  -               (346)
 Accumulated Series B preferred
   stock dividends ($90 per share)                -           (150)             -                  -               (150)
                                        -------------------------------------------------------------------------------

 Balance at December 31, 2000                     -         39,188        (72,290)               214            (32,888)

 Net income                                       -              -         14,962                  -             14,962
 Foreign currency translation
   adjustment                                     -              -              -             (2,248)            (2,248)
 Minimum pension liability
   adjustment, net of taxes of $53                -              -              -                (87)               (87)
 Unrealized gain on marketable
   equity securities                              -              -              -                 64                 64
                                                                                                           ------------
 Comprehensive income                                                                                            12,691
 Accumulated Series A preferred
   stock dividends ($67 per share)                -         (1,368)             -                  -             (1,368)
 Accumulated Series B preferred
   stock dividends ($90 per share)                -           (150)             -                  -               (150)
                                        -------------------------------------------------------------------------------

 Balance at December 31, 2001             $     -          $37,670       $(57,328)          $ (2,057)          $(21,715)
                                        ===============================================================================

</TABLE>


See accompanying notes to consolidated financial statements.





                                                                              21
<PAGE>



                               UNIFRAX CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In Thousands)


<TABLE>
<CAPTION>
                                                                                            DECEMBER 31
                                                                                1999            2000               2001
                                                                       ------------------------------------------------
<S>                                                                    <C>              <C>               <C>
OPERATING ACTIVITIES
Net income                                                             $       4,974    $       7,097     $       14,962
Adjustments to reconcile net income to cash
     provided by operating activities:
       Depreciation and amortization                                           5,420            6,725             10,724
       Provision for deferred income taxes                                     2,857            3,182             (5,304)
       Minority interest                                                          -                52                 23
       Other adjustments                                                          29              194                (83)
       Changes in operating assets and liabilities
          net of businesses acquired:
          Accounts receivable                                                 (1,678)            (572)            14,878
          Inventories                                                            940              700                266
          Prepaid expenses and other current assets                              (13)              38             (2,347)
          Accounts payable and accrued expenses                                  270            6,104             (3,505)
          Accrued postretirement benefit cost                                   (116)              73                 87
          Other long-term liabilities                                              1             (225)               120
                                                                       ----------------------------------------------------
Cash provided by operating activities                                         12,684           23,368             29,821

INVESTING ACTIVITIES
Payments for businesses acquired, net of cash acquired                             -          (51,383)                 -
Capital expenditures                                                          (3,211)          (6,144)            (7,092)
Proceeds from sales of marketable securities                                       -                -              1,016
Purchases of marketable securities                                                 -                -             (1,538)
Other                                                                             34              (88)               219
                                                                       ----------------------------------------------------
Cash used in investing activities                                             (3,177)         (57,615)            (7,395)

FINANCING ACTIVITIES
Dividends paid                                                                     -                -               (468)
Borrowings under revolving loans                                              42,000           39,555             19,581
Proceeds from long-term debt                                                       -           23,554                  -
Proceeds from issuance of preferred stock                                          -           20,500                  -
Repayments of revolving loan                                                 (38,800)         (38,833)           (22,856)
Repayments of long-term borrowings                                            (5,750)          (6,431)           (17,965)
Repayment of amounts due affiliates                                           (7,000)               -                  -
Deferred financing fees                                                            -           (1,500)                 -
                                                                       -------------------------------------------------
Cash provided by (used in) financing activities                               (9,550)          36,845            (21,708)
Net effect of exchange rate changes on cash                                        -               51               (148)
                                                                       --------------------------------------------------
Net increase (decrease) in cash                                                  (43)           2,649                570
Cash at beginning of year                                                         43                -              2,649
                                                                       -------------------------------------------------
Cash at end of year                                                    $           -     $      2,649     $        3,219
                                                                       =================================================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
   CASH PAID DURING THE YEAR FOR:
     Interest                                                          $       11,813    $     11,263     $       12,985
     Income taxes                                                                  80             365              3,574

</TABLE>

See accompanying notes to consolidated financial statements






                                                                              22
<PAGE>



                               UNIFRAX CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2001

1. SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BASIS OF PRESENTATION

     Prior to October 30, 1996, the date on which Unifrax Corporation ("Unifrax"
or "Company") completed a comprehensive recapitalization (the
"Recapitalization"), Unifrax and its predecessor, the North American Fibers
Division of The Carborundum Company ("Carborundum") was an indirect wholly-owned
subsidiary of The British Petroleum Company p.l.c. ("BP"). As a result of the
Recapitalization, Unifrax Holding Co. ("Holding") and BP own approximately 90%
and 10%, respectively, of the Company. Pursuant to the Recapitalization, BP
America Inc. ("BP America") a subsidiary of BP, agreed to indemnify the Company,
subject to certain limitations, against all liabilities, if any, that might
result from any claims for wrongful death or personal injury caused by exposure
to refractory ceramic fiber products manufactured by Unifrax prior to the
consummation of the Recapitalization, and against certain environmental
liabilities arising prior to consummation of the Recapitalization.

     On October 4, 2000, Unifrax Corporation and its subsidiaries acquired the
insulating ceramic fiber business owned by Compagnie de Saint-Gobain
("Saint-Gobain"), a societe anonyme based in Paris, France (the "Acquisition").
As part of the Stock and Asset Purchase Agreement and the Warranty Agreement
executed between Saint-Gobain and Unifrax Corporation, Saint-Gobain assumed
responsibility for certain pre-Closing liabilities and agreed to compensate or
indemnify Unifrax for other pre-Closing liabilities, subject to certain time
limitations and maximums.

     During 2001, the Emerging Issues Task Force ("EITF") issued guidance in the
form of discussion topic D-98, Classification and Measurement of Redeemable
Securities, which is effective for quarters ending after December 15, 2001.
Topic D-98 clarified what is contemplated by Rule 5-02.28 of Regulation S-X when
considering whether or not the decision regarding potential redemption of
redeemable securities is solely within the control of the issuer. Under the
guidance of Topic D-98, the decision regarding potential redemption of the
Company's redeemable preferred stock is not considered to be solely within the
control of the Company. In accordance with Rule 5-02.28, companies issuing
redeemable securities for which redemption is not solely within the control of
the issuer are required to classify the liquidation preference value of such
securities outside of permanent equity. Accordingly, in the fourth quarter of
2001, the Company reclassified amounts related to its Series A and Series B
preferred stock out of permanent equity. As required by Topic D-98, this change
has been applied retroactively.

CERTAIN RISKS AND UNCERTAINTIES

     The Company manufactures heat resistant ceramic fiber products for sale
generally to automotive, commercial, and industrial customers throughout the
world. The Company maintains adequate allowances for potential credit losses,
performs ongoing credit evaluations, and generally does not require collateral.

     As of December 31, 2001, the Company employed approximately 1,055
employees, of which approximately 442 are represented by ten separate unions
(called work councils outside the United States). A collective bargaining
agreement in the United States, representing 6% of the Company's employees,
expires in 2004. Outside the U.S., labor agreements are either state-mandated or
Company negotiated with various expiration dates.




                                                                              23
<PAGE>



                               UNIFRAX CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


     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 revenue, expenses, assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements. Actual results could differ from those estimates.

PRINCIPLES OF CONSOLIDATION

     The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany transactions, balances and
profits are eliminated upon consolidation.

TRANSLATION OF FOREIGN COMPANY FINANCIAL STATEMENTS

     The financial statements of the Company's foreign subsidiaries, excluding
the Company's legal branch in Argentina, are translated into U.S. dollars
assuming the functional currency of the foreign subsidiaries is the applicable
local currency. Accordingly, income and expense items are translated using
weighted average exchange rates during the period and assets and liabilities are
translated using period-end exchange rates. Equity is translated using
historical exchange rates. Gains or losses on translations are accumulated in
other comprehensive income (loss) in the stockholders' deficit section of the
balance sheet.

     The Company has determined that the Brazilian real is the functional
currency of its Argentinean branch, which is owned by the Company's Brazilian
subsidiary. A combination of current and historical rates is used to determine
foreign currency gains and losses from financial statements translation.
Translation gains and losses for the Argentinean branch are reported directly in
the consolidated statements of income.

TRANSACTIONS IN FOREIGN CURRENCIES

     Revenue and expense transactions in foreign currencies are recorded at the
local currency equivalent at the date of the transaction. Receivables, payables
and bank balances denominated in currencies other than the respective functional
currencies are translated at the closing rate and the related exchange gains and
losses are recorded in the statement of income.

REVENUE RECOGNITION

     Revenue from sales of products is recognized, net of sales discounts, when
the risk of loss has been transferred to the buyer, which is generally upon
shipment. Provisions are recorded for probable future returns and uncollectible
accounts as revenue is recognized.

SHIPPING AND HANDLING COSTS

     Freight costs incurred in connection with shipping products to customers, a
portion of which may be billed to the customers, are included in selling,
general and administrative expenses in the accompanying statements of income.
Such costs totaled $828,000, $2,387,000 and $5,002,000 for the years ended
December 31, 1999, 2000 and 2001, respectively.




                                                                              24
<PAGE>

                               UNIFRAX CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

INVENTORIES

     Inventories are valued at the lower of cost or net realizable value. The
cost of approximately 50% of inventories at December 31, 2000 and 2001,
comprising substantially all inventories in the U.S., is determined by the
last-in, first-out method (LIFO). Cost for the non-U.S. entities is principally
determined using the weighted-average method or, in some cases, the
first-in-first-out (FIFO) method.

MARKETABLE SECURITIES AND INVESTMENTS

     The Company's Indian subsidiary invests in marketable securities,
consisting principally of open-ended investment funds and unit trusts. The
Company has classified all marketable securities that do not quality as cash
equivalents as available-for-sale. Accordingly, marketable securities are
carried at market value, with unrealized gains and losses being recorded
directly to accumulated other comprehensive income (loss).

PROPERTY, PLANT AND EQUIPMENT

     Property, plant and equipment is stated at cost. Depreciation is computed
principally using the straight-line method over the estimated useful lives of
the assets which range from 3 years to 20 years for machinery and equipment, and
15 years to 45 years for land improvements and buildings. Expenditures for
renewals and improvements that extend the useful life of an asset are
capitalized. Expenditures for routine repairs and maintenance are generally
charged to operations when incurred.

FINANCING COSTS

     Financing costs are being amortized on a straight line basis over periods
ranging from 3 to 7 years.

IMPAIRMENT OF LONG LIVED ASSETS

     The Company evaluates the carrying value of long-lived assets whenever
events or circumstances indicate that such carrying value may not be
recoverable. The carrying value of a long-lived asset is considered impaired
when the anticipated undiscounted cash flow from such an asset is less than its
carrying value. In that event, a loss is recognized based on the amount by which
the carrying value exceeds the fair value of the long-lived asset. Fair value is
determined primarily using anticipated cash flows discounted at a rate
commensurate with the risk involved.

ENVIRONMENTAL LIABILITIES

     Environmental expenditures that relate to current or future revenues are
expensed or capitalized as appropriate. Expenditures that relate to an existing
condition caused by past operations and that are not allocable to current or
future earnings are expensed. Liabilities for environmental costs are recognized
when environmental assessments or clean-ups are probable and the associated
costs can be reasonably estimated.

INCOME TAXES

     The Company has entered into a tax sharing agreement with Holding. The
results of the Company's U.S. operations are currently included in the
consolidated U.S. corporate income tax return of Holding. The Company's
provision for income taxes is computed as if the Company filed its annual tax
returns on a separate company basis. The current portion of the income tax
provision is satisfied by a payment to or from Holding.




                                                                              25
<PAGE>

                               UNIFRAX CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Income taxes are accounted for under the liability method. Under this
method, deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax bases of assets and liabilities and are
measured using the enacted tax rate and laws that apply in the periods in which
the deferred tax asset or liability is expected to be realized or settled. The
Company has not recognized a deferred tax liability for the undistributed
earnings of its foreign subsidiaries, totaling approximately $4.5 million at
December 31, 2001, as the Company does not currently expect those unremitted
earnings to reverse and become taxable in the foreseeable future. A deferred tax
liability will be recognized when the Company expects that it will recover those
undistributed earnings in a taxable manner.

     A valuation allowance is recorded against deferred tax assets resulting
from net operating losses and deductible temporary differences when it is more
likely than not that the deferred tax asset will not be realized. There are no
valuation allowances recorded as of December 31, 2001.

     Investment tax credits are accounted for using the flow-through method.

ACCOUNTING FOR STOCK BASED COMPENSATION

     The Company accounts for stock options granted under its stock-based
compensation plan in accordance with the intrinsic value based method of
accounting as prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"), as allowed under
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). Accordingly, compensation cost for stock options is
measured as the excess, if any, of the fair market value of the Company's stock
at the date of grant over the amount an employee must pay to acquire the stock.

ADVERTISING COSTS

     Advertising costs, which consist principally of advertisements in trade
journals, brochures, and attendance at trade shows, are expensed as incurred.
Advertising costs totaled $771,000, $791,000 and $998,000 for the years ended
December 31, 1999, 2000 and 2001 respectively.

RESEARCH AND DEVELOPMENT COSTS

     Product research and development costs are charged to expense as incurred.
Research and development expense for the years ended December 31, 1999, 2000 and
2001 were $2,586,000, $2,905,000 and $4,094,000 respectively.

HEALTH, SAFETY AND ENVIRONMENTAL QUALITY PROGRAMS

     Costs associated with the Company's Health, Safety and Environmental
Quality ("HSEQ") programs, which include the Company's Product Stewardship
Program, the Ceramic Fibers Advisory Board, ongoing employee health studies and
workplace exposure monitoring studies, are expensed as incurred. Amounts charged
to operations during the years ended December 31, 1999, 2000 and 2001, relating
to HSEQ totaled $1,374,000, $1,307,000 and $1,643,000, respectively, and are
included in selling, general and administrative expenses in the accompanying
statements of income.




                                                                              26
<PAGE>

                               UNIFRAX CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


FINANCIAL INSTRUMENTS

     The Company periodically enters into interest rate swap agreements to
effectively convert a portion of fixed-rate debt into variable-rate debt. All
payments and receipts under the swap agreements are recorded as adjustments to
interest expense.

     The Financial Accounting Standards Board issued Statement No. 133,
Accounting for Derivative Instruments and Hedging Activities, "SFAS 133" which
is required to be adopted in years beginning after June 15, 2000. The Company
adopted the new statement effective January 1, 2001. The cumulative effect of
adopting SFAS 133 was not material. The statement requires the Company to
recognize all derivatives on the balance sheet at fair value. Derivatives that
are not qualifying hedges must be adjusted to fair value through income. If the
derivative is a qualifying hedge, depending on the nature of the hedge, changes
in the fair value of derivatives will either be offset against the change in
fair value of the hedged assets, liabilities, or firm commitments through
earnings or recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a derivative's change in fair
value will be immediately recognized in earnings.

RECLASSIFICATIONS

     Certain reclassifications of 2000 and 1999 information have been made to
conform with the 2001 presentation.

2. BUSINESS ACQUISITIONS

     On October 4, 2000, the Company acquired the capital stock of certain
companies and certain assets of other companies that comprised the high
performance insulating ceramic fibers business (the "Ceramic Fiber Business") of
Saint-Gobain.

     The Ceramic Fiber Business was managed by Societe Europeenne de Produits
Refractaires and was contained in the following legal entities which were owned
ultimately by Saint-Gobain in the percentages indicated:


<TABLE>
<CAPTION>
                                                                               PERCENTAGE             TYPE OF
                                                                                    OWNED         ACQUISITION
                                                                                    -----         -----------

<S>                                                                                 <C>                <C>
Carborundum France SA and subsidiaries (Carborundum Belgium SA-                   100.00%               Stock
  100%; Batistaff SA (France) - 99.76%)
Unifrax Limited (United Kingdom) and subsidiaries (Carborundum Italia,              99.85               Stock
Srl (Italy) - 99.85%; Orient Cerlane Limited (India) - 58.87%)
Carborundum Deutschland GmbH (Germany)                                                100               Asset
Carborundum Australia Pty. Ltd. (Australia)                                           100               Asset
Fibrasil Fibras Ceramicas Ltda. (Brazil)                                              100               Stock
CIT Carborundum de Venezuela, CA                                                    93.38               Stock


</TABLE>

     The purchase price was $58,500,000, subject to a purchase price adjustment
as defined in the stock and asset purchase agreement. The purchase price
adjustment process was completed in June 2001 with no significant change in the
original purchase price. In connection with the Acquisition, Saint-Gobain agreed
to compensate the Company for certain liabilities that the Company would be
responsible for discharging. Accordingly, in June 2001, Saint-Gobain paid the
Company $8,803,000, representing compensation for $8,309,000 of liabilities plus
interest. The Company financed the Acquisition with $28,500,000 drawn under a
new senior Credit Agreement, a subordinated note payable to Saint-Gobain for
$9,500,000 and $20,500,000 fair value of Series A Preferred Stock issued to
Holding in exchange for Holding issuing a $20,500,000 subordinated note payable
to Saint-Gobain.



                                                                              27
<PAGE>

                               UNIFRAX CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The Acquisition has been accounted for under the purchase method of
accounting, and the results of operations of the Ceramic Fiber Business have
been included in the consolidated statements of operations since the date of
acquisition. The initial purchase price has been allocated to the assets
acquired and liabilities assumed based upon their estimated fair values.

     The following unaudited pro forma information presents the results of
operations of the Company as if the Acquisition had taken place January 1, 2000.
These pro forma results of operations have been prepared for comparative
purposes only and do not purport to be indicative of the results of operations
which actually would have resulted had the Acquisition occurred on the date
indicated, or which may result in the future.


                                            DECEMBER 31
                                               2000
                                               ----
                                          (In Thousands)

Net Sales                                    $168,257
Net Income                                      7,504


     Indian law required the Company to undertake a tender offering for the
shares of Orient Cerlane Ltd ("OCL"), the Company's majority-owned Indian
subsidiary, held by the minority shareholders. In January 2001, the Company
completed its initial tender offering and acquired 83,350 shares of OCL at a
cost of approximately $404,000. In addition, in December 2001 and February 2002,
the Company acquired an additional 24,300 and 25,050 shares of OCL,
respectively, at a cost of approximately $101,000 and $100,000, respectively.
Subsequent to the tender offerings, the Company owns 65.62% of OCL.

3. INVENTORIES

Major classes of inventories are as follows:

                                                 DECEMBER 31
                                              2000             2001
                                     -------------     ------------
                                                 (In Thousands)

Raw material and supplies            $       5,662     $      6,740
In-process                                   1,187            1,604
Finished product                             9,802            7,128
                                     -------------     ------------
                                            16,651           15,472
Adjustment to LIFO cost                        483              833
                                     -------------     ------------
                                     $      17,134     $     16,305
                                     =============     ============


The cost of inventories determined on the LIFO method exceeds the current cost
of inventories principally as a result of reduced manufacturing costs.





                                                                              28
<PAGE>


                               UNIFRAX CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


4. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consists of the following:

                                                             DECEMBER 31
                                                          2000             2001
                                                 -------------    -------------
                                                           (In Thousands)

Land and land improvements                       $       3,004    $       2,884
Buildings                                               28,031           28,452
Machinery, equipment, furniture and fixtures            83,208           91,179
Construction in progress                                 2,920            1,193
                                                 -------------    -------------
                                                       117,163          123,708
Less accumulated depreciation                          (45,812)         (54,599)
                                                 --------------   -------------
                                                 $      71,351    $      69,109
                                                 ==============   =============


For the years ended December 31, 1999, 2000 and 2001, depreciation expense
amounted to $4,534,000, $5,689,000 and $9,554,000, respectively.

5. LONG TERM DEBT AND SELLER NOTE

Long term debt consists of the following:


<TABLE>
<CAPTION>
                                           WEIGHTED AVERAGE
                                             INTEREST RATE                      BALANCE OUTSTANDING
                                              DECEMBER 31                            DECEMBER 31
                                              2000         2001                  2000             2001
                                     --------------------------         ------------------------------
                                                                                   (In Thousands)
<S>                                         <C>         <C>            <C>              <C>
Credit Agreement:
     Term loans
         United Kingdom                     8.51%           n/a         $       3,531    $           -
         France                             7.54           5.90%               10,540              780
         Brazil                            15.72          20.35                 9,502            6,082
         India                              -                 -                   157              127
                                                                        -------------    -------------
              Total                                                            23,730            6,989

     Revolving loans
         United States                      9.36           4.75                 3,342               32
         United Kingdom                     8.60           6.64                 2,331            2,243
                                                                        -------------    -------------
              Total                                                             5,673            2,275

10 1/2% Senior Notes due 2003              10.50          10.50                96,000           94,000

Subordinated promissory notes               7.56           7.00                 9,500           12,000
                                                                        -------------    -------------

Total debt                                                                    134,903          115,264
Less current portion                                                            8,880            9,169
                                                                        -------------    -------------
Long term debt                                                          $     126,023     $    106,095
                                                                        =============    =============


</TABLE>



                                                                              29

<PAGE>

                               UNIFRAX CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


     The Company's Credit Agreement dated as of October 5, 2000, as amended,
provides a total Credit Facility consisting of (a) a U.S. Revolving Loan not to
exceed $19,000,000; (b) a U.K. Revolving Loan not to exceed GBP 4,123,711
(approximately $6,000,000); (c) a Term Loan (U.K.) in the amount of GBP
4,123,711 (approximately $6,000,000); (d) a Term Loan (France) in the amount of
EUR 11,454,754 (approximately $10,100,000); and (e) a Brazilian Letter of Credit
in the amount of $12,500,000, $9,000,000 of which is part of the term loan
facility and the balance of which is charged as a reserve against the U.S.
Borrowing Base. The revolving loan commitments expire August 1, 2003. Interest
rates on the revolving loans and term loans in the U.S. and Europe are based on
LIBOR or a bank base rate plus a margin of 2.25% or 2.50% as defined. Interest
on the term loan in Brazil is based on a market rate index. Term loan amounts
under the Credit Agreement mature August 1, 2003.

     A fee of 0.375% is charged on the amount by which the U.S. or U.K. maximum
revolving loan amount exceeds the average actual daily outstanding amount of
U.S. and U.K. revolving loans and letter of credit obligations including the
Brazilian letter of credit reserve. The Brazilian letter of credit and other
letters of credit are subject to fees of 2.88% and 2.38%, respectively, as
defined. As of December 31, 2001, the Company also has outstanding an Indian
letter of credit of $600,000 (necessary to support a tender offer), and a
$624,000 letter of credit required by the State of New York for Worker's
Compensation. The Brazilian letter of credit expires October 1, 2002.

     Interest rates and fees under the Credit Agreement will be adjusted upward
or downward quarterly beginning January 2002 based on the previous 12 months'
actual fixed charge coverage ratio. Based on the fixed charge coverage ratio for
the 12 months ended December 31, 2001, the Company expects the letter of credit
fees and the applicable margins on the revolving loans and term loans in the
U.S. and Europe to decrease by 0.25%. In addition, the Company expects the fee
charged on the unused revolving loans in the U.S. and Europe to decrease to
0.25% from the current 0.375%.

     The Credit Agreement contains various restrictive covenants which include,
but are not limited to, a minimum fixed charge coverage ratio, a maximum funded
debt to EBITDA ratio, a minimum interest coverage ratio, and restrictions on
capital expenditures, distributions, restricted investments, and additional
debt, as defined. Borrowings under the Credit Agreement are secured by assets of
the Company in the U.S. and the U.K. including, but not limited to, accounts
receivable, inventory, plant and equipment. All borrowings under the Credit
Agreement are guaranteed by the U.S. parent.

     At December 31, 2001, Unifrax also had outstanding subordinated promissory
notes to SEPR, for $12,000,000 ($9,500,000 at December 31, 2000). The notes
require annual interest payments at agreed upon rates. The notes mature on June
30, 2004. The notes permit interest payments to be added to principal in the
event payment of the interest would violate provisions of the Company's senior
indebtedness. During 2001, the Company repaid, as required, $1,500,000 of the
subordinated notes to SEPR.

     In addition, Holding, which owns approximately 90% of Unifrax had
outstanding to SEPR at December 31, 2001, subordinated promissory notes totaling
$16,500,000. The subordinated note between Unifrax and SEPR can be increased
under certain conditions with a corresponding decrease in the subordinated notes
between Holding and SEPR. On October 4, 2001, the subordinated note between
Unifrax and SEPR was increased by $4,000,000 and the subordinated notes between
Holding and SEPR were decreased $4,000,000. Unifrax accounted for the additional
notes assumed from Holding as a reduction in the liquidation preference value of
the Series A preferred stock issued to Holding.



                                                                              30
<PAGE>


                               UNIFRAX CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Maturities of debt are as follows (in thousands):

                             2002              $   9,169
                             2003                 94,032
                             2004                 12,032
                             2005                     31

6. FAIR VALUE OF FINANCIAL INSTRUMENTS

     At December 31, 2000 and 2001, the carrying amount and fair value of the
Company's financial instruments were as follows. Bracketed amounts in the
carrying amount column represent liabilities for potential cash outflows.
Bracketed amounts in the fair value column represent estimated cash outflows
required to currently settle the financial instrument at current market rates.

<TABLE>
<CAPTION>

                                            DECEMBER 31, 2000                      DECEMBER 31, 2001
                                            -----------------                      -----------------
                                      CARRYING               FAIR             CARRYING              FAIR
                                       AMOUNT                VALUE             AMOUNT               VALUE
                                       ------------------------------------------------------------------
                                                                (In Thousands)

<S>                                   <C>               <C>                   <C>              <C>
Assets:
     Cash and cash equivalents        $    2,649        $    2,649            $    3,219       $    3,219
     Marketable securities                   791               791                 1,464            1,464
Liabilities:
     Long-term debt (including
         current maturities)            (134,903)         (125,303)             (115,264)        (115,264)
Interest rate swap agreement                  --               130                   --                --

</TABLE>


     The following methods and assumptions were used by the Company in
estimating the fair values of financial instruments. The carrying amount
reported in the balance sheet for cash and cash equivalents approximates fair
value. The fair value of the Company's marketable securities is based upon
current market quotes. The fair value of the Company's senior notes was
estimated using quoted prices. The fair value of variable rate loans approximate
carrying amounts. The fair value of interest rate swap agreements was determined
using discounted cash flows and currently anticipated yields through maturity.

     Effective October 1, 1999, the Company entered into two-year interest rate
swap agreements to effectively convert fixed-rate debt with a notional principal
amount of $25,000,000 to variable-rate debt. Under the agreements, the Company
received from the banks an amount for interest based upon a fixed rate of 6.2%
per annum, and paid the banks an amount for interest based upon the established
LIBOR rate. All payments and receipts under the swap agreements were recorded as
adjustments to interest expense. The agreement expired on September 30, 2001.

     Effective January 30, 2002, the Company entered into an interest rate swap
agreement with Bank of America N.A. which will mature November 1, 2003, to
effectively convert fixed-rate debt with a notional principal amount of
$25,000,000 to variable-rate debt. Under the terms of the agreement, Unifrax
will receive 10.50% and will pay 3 month LIBOR plus 7.30%, compounded quarterly
and paid semi-annually on the interest payment dates associated with the Senior
Notes. The initial calculated variable rate was 9.17%.





                                                                              31
<PAGE>

                               UNIFRAX CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. RELATED PARTY TRANSACTIONS

     An affiliate of Kirtland Capital Partners II L.P. ("Kirtland"), the
principal shareholder of Holding, and the Company have entered into an Advisory
Services Agreement pursuant to which Kirtland provides management consulting and
financial advisory services to the Company for a stipulated fee. The Company was
charged $300,000 in 1999 and $500,000 in 2000 and 2001 by Kirtland in connection
with the Advisory Services Agreement. In addition, if the Company completes an
acquisition, Kirtland is entitled to receive a fee of approximately 1% of the
purchase price, including assumed debt. In connection with the Acquisition, the
Company paid Kirtland a fee of $585,000 in 2000.

8. ACCRUED EXPENSES

Accrued expenses consist of the following:

                                                            DECEMBER 31
                                                          2000             2001
                                                 -------------    -------------
                                                            (In Thousands)

Accrued compensation and employee benefits       $       9,986    $       4,979
Interest                                                 2,396            3,842
Other                                                    5,713            6,034
                                                 -------------    -------------
                                                 $      18,095    $      14,855
                                                 =============    =============




                                                                              32
<PAGE>

                               UNIFRAX CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


9. PENSION AND OTHER RETIREMENT BENEFITS

     The Company sponsors qualified defined benefit pension plans (the "Plans")
covering its U.S. hourly union employees, its U.K. employees, and certain other
foreign employees. Benefits under the Plans are generally based on length of
service. The following tables summarize certain information with respect to the
Plans:


<TABLE>
<CAPTION>
                                                                                 DECEMBER 31
                                                                               2000             2001
                                                                        -----------      -----------
                                                                                 (In Thousands)

<S>                                                                     <C>              <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year                                 $       962      $     1,947
Service cost                                                                     34               37
Interest cost                                                                    73              181
Benefits paid                                                                   (44)            (166)
Actuarial gain                                                                   34               51
Benefit obligations transferred from predecessor plan                             -           14,119
Benefit obligations of businesses acquired                                      888                -
Foreign currency translation impact                                               -               60
                                                                        -----------      -----------
Benefit obligation at end of year                                             1,947           16,229
                                                                        -----------      -----------

CHANGE IN PLAN ASSETS

Fair value of plan assets at beginning of year                                  926              870
Actual return on plan assets                                                    (53)             (64)
Employer contribution                                                            41              156
Benefits paid                                                                   (44)            (166)
Plan asset transferred from predecessor plan                                      -           14,304
Foreign currency translation impact                                               -               99
                                                                        -----------      -----------
Fair value of plan assets at end of year                                        870           15,199
                                                                        -----------      -----------

Funded status                                                                (1,077)          (1,030)
Unrecognized prior service cost                                                  93               86
Unrecognized actuarial (gains) losses                                           (46)             140
Additional minimum liability                                                    (48)            (226)
                                                                        -----------      -----------
Accrued pension obligation                                              $    (1,078)     $    (1,030)
                                                                        ===========      ===========

WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31
Discount rate                                                                  7.5%      6.0% - 7.0%
Expected return on plan assets                                                 8.0%      6.0% - 8.0%
Rate of compensation increase                                                   n/a             3.5%


</TABLE>

<TABLE>
<CAPTION>
                                                                         YEAR ENDED DECEMBER 31
                                                                    1999              2000           2001
                                                           -------------      ------------     ----------
                                                                             (In Thousands)
<S>                                                        <C>               <C>              <C>
COMPONENTS OF NET PERIODIC PENSION COST
Service cost                                               $          40     $          62    $          37
Interest cost                                                         66                93              181
Expected return on plan assets                                       (66)              (74)            (70)
Amortization of unrecognized prior service cost
     and actuarial gains and losses                                    7                 2                7
                                                           --------------    -------------    -------------
Net periodic pension cost                                  $          47     $          83    $         155
                                                           ==============    =============    =============

</TABLE>





                                                                              33
<PAGE>


                               UNIFRAX CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                                                              DECEMBER 31
                                                          2000             2001
                                                   -----------      -----------
                                                            (In Thousands)

AMOUNTS RECOGNIZED IN THE BALANCE SHEET
Prepaid (accrued) benefit asset (liability):
     Other assets                                  $         -      $       114
     Accrued liabilities                                  (190)            (384)
     Other long-term liabilities                          (888)            (760)
                                                   -----------      -----------
                                                        (1,078)          (1,030)
Intangible asset                                            48               86
Accumulated other comprehensive loss                       (48)             (86)
                                                   -----------      -----------
                                                   $    (1,078)     $    (1,030)
                                                   ===========      ===========

     Unrecognized gains and losses and prior service cost are amortized on a
straight-line basis over a period approximating the average remaining service
period for active participants.

     The aggregate accumulated benefit obligation and aggregate fair value of
plan assets for pension plans with accumulated benefit obligations in excess of
plan assets were $1,940,000 and $796,000, respectively, as of December 31, 2001,
and $1,947,000 and $926,000, respectively, at December 31, 2000.

     Prior to the Acquisition, the Company's employees in the U.K. participated
in a defined benefit pension plan sponsored by affiliates of Saint-Gobain. In
connection with the Acquisition, Saint-Gobain retained pension liabilities
associated with all retirees and agreed to transfer assets equal to the
projected benefit obligations of all active employees transferred with the U.K.
Ceramic Fiber Business to a similar defined benefit pension plan to be
established and sponsored by the Company's U.K. subsidiary. Effective November
2001, the Company created a defined benefit pension plan in the United Kingdom.
In January 2002, Saint-Gobain transferred approximately GBP 9.7 million to
Barclay's Global Investors (BGI), the UK plan's fund manager, who then promptly
invested the transferred amount, largely in equity mutual funds. The funds
transferred represented the U.K. actuary's estimate of the pension rights and
entitlements, under the Trust Deed and Rules, of the members who transferred
from the Saint-Gobain defined benefit pension plan to the new Unifrax defined
benefit pension plan.

     From the Acquisition date through the effective date of the U.K. pension
plan, the Company continued to make contributions to the predecessor
Saint-Gobain plan. Contributions for 2001 totaled GBP 329,000 (approximately
$470,000).

     In France, Germany and Italy, the Company's employees participate in a
national retirement plan which may require annual contributions by the employer
and the employee. In some instances the Company may provide a limited lump sum
supplement to the employee at the retirement date.

     The Company also sponsors a qualified defined contribution, money-purchase
pension plan for its U.S. salaried employees. Under the money-purchase plan, the
Company contributes an amount equal to 2.5% of an employee's applicable annual
compensation to investment accounts as directed by the employee. The annual
expense for the money purchase plan was $435,000, $458,000 and $467,000 for the
years ended December 31, 1999, 2000 and 2001, respectively.

     The Company also sponsors a defined contribution 401(k) plan which is
available to substantially all U.S., non-union employees of the Company. Company
contributions, representing a 50% matching of employee contributions up to a
maximum of 6% of the employee's base pay, amounted to $480,000, $488,000 and
$546,000 during the years ended December 31, 1999, 2000 and 2001, respectively.




                                                                              34
<PAGE>


                               UNIFRAX CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     During 2000, Unifrax began a non-qualified defined contribution retirement
plan covering the officers of the Company. The provisions of the Plan provide
Company contributions in an amount equal to 2.5% of compensation in excess of
applicable Internal Revenue Service limits, as well as Company contributions
representing a 50% matching of officer contributions in excess of Internal
Revenue Service limits, up to a maximum of 6% of the officer's base pay.

     In Australia, certain of the Company's current and former employees
participate in a defined contribution (superannuation) pension plan administered
by a trustee. Total assets in the plan at December 31, 2001 were approximately
A$2.5 million (approximately $1.3 million). The annual expense for the
Australian plan is approximately A$98,000 (approximately $50,000).

     In addition to pension benefits, the Company also provides certain health
care benefits to retired U.S. employees who meet eligibility requirements. The
Company's policy is to fund other postretirement benefits as insurance premiums
or claims become due.

     The following table summarizes certain information with respect to the
Company's other postretirement benefits.

<TABLE>
<CAPTION>

                                                                                          YEAR ENDED DECEMBER 31
                                                                                   1999              2000            2001
                                                                           ------------      ------------     -----------
                                                                                            (In Thousands)
<S>                                                                        <C>               <C>              <C>
COMPONENTS OF NET PERIODIC POSTRETIREMENT BENEFIT COST
Service cost--benefits earned                                              $          95     $          95    $        69
Interest costs                                                                       110               139            116
Amortization of unrecognized net gain                                                (90)              (97)          (92)
Amortization of unrecognized prior service cost                                       24                40             40
Curtailment gain                                                                    (265)               -               -
                                                                           --------------    ------------     -----------
Net periodic postretirement benefit expense (income)                       $        (126)    $         177    $       133
                                                                           ==============    =============    ===========
</TABLE>


<TABLE>
<CAPTION>
                                                                                  DECEMBER 31
                                                                                 2000           2001
                                                                        -------------    -----------
                                                                                (In Thousands)

<S>                                                                     <C>              <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year                                 $       1,644    $     2,069
Service cost                                                                       95             69
Interest cost                                                                     139            116
Curtailment                                                                       169              -
Actuarial loss (gain)                                                              64           (418)
Benefits paid                                                                     (42)           (44)
                                                                        -------------    -----------
Benefit obligation at end of year                                               2,069          1,792
Unrecognized prior service cost                                                  (406)          (367)
Unrecognized actuarial gains                                                    1,828          2,153
                                                                        -------------    -----------
Accrued postretirement benefit cost                                     $       3,491    $     3,578
                                                                        =============    ===========

WEIGHTED AVERAGE ASSUMPTIONS AS OF DECEMBER 31
Discount rate                                                                    7.5%           7.0%

</TABLE>




                                                                              35
<PAGE>


                               UNIFRAX CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


     The assumed annual rate of future increase in the per capita cost of health
care benefits (health care cost trend rate) for 2001 and beyond is 6% for all
beneficiaries. Assumed health care cost trend rates have a significant effect on
the amounts reported for the health care plans. A one percentage point change in
assumed health care cost trend rates would have the following effect:


<TABLE>
<CAPTION>
                                                                    ONE PERCENTAGE           ONE PERCENTAGE
                                                                    POINT INCREASE           POINT DECREASE
                                                                    --------------          ----------------
                                                                                (In Thousands)
<S>                                                                            <C>                     <C>
Effect on total of service and interest cost components              $         1               $       (1)
Effect on postretirement benefit obligation                                    7                       (9)

</TABLE>

Unrecognized gains and losses and prior service cost are amortized on a
straight-line basis over a period approximating the average remaining service
period for active participants.

10. INCOME TAXES

     The components of income (loss) before income taxes are as follows:

<TABLE>
<CAPTION>
                                                                        YEAR ENDED DECEMBER 31
                                                                  1999               2000            2001
                                                               -------          ---------      ----------
                                                                             (In Thousands)
<S>                                                            <C>              <C>            <C>
         Domestic                                              $  8,137         $   10,576     $    6,237
         Foreign                                                   (371)               814          6,648
                                                               ---------        ----------     ----------
                                                               $  7,766         $   11,390     $   12,885
                                                               ========         ==========     ==========

</TABLE>

The provision for income taxes consists of the following:

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31
                                                        1999             2000              2001
                                                 -----------      -----------       -----------
                                                                   (In Thousands)
<S>                                              <C>              <C>               <C>
Current:
         Federal                                 $        53      $       376       $       640
         State                                            38              149               146
         Foreign                                           -              534             2,254
                                                 -----------      -----------       -----------
                                                          91            1,059             3,040
Deferred:                                              2,701            3,182            (5,304)
                                                 -----------      -----------       -----------
                                                 $     2,792      $     4,241       $    (2,264)
                                                 ===========      ===========       ===========

</TABLE>

The provision for income taxes differs from the amount computed by applying the
statutory income tax rate as follows:

<TABLE>
<CAPTION>

                                                                                      YEAR ENDED DECEMBER 31
                                                                              1999             2000             2001
                                                                       -----------      -----------       ----------
                                                                                          (In Thousands)
<S>                                                                   <C>              <C>                 <C>
Income before income taxes at 34%                                      $     2,641      $     3,872       $    4,381
Impact of foreign taxes                                                          -              226               36
Permanent income tax disallowances                                              63              177               13
State taxes, net of federal benefit                                             24               98               96
Impact of income tax rate changes on deferred income taxes                   2,054                -                -
Reduction of valuation allowance                                            (2,078)            (483)          (7,250)
Other                                                                           88              351              460
                                                                       -----------      -----------       ----------
                                                                       $     2,792      $     4,241       $   (2,264)
                                                                       ===========      ===========       ==========

</TABLE>




                                                                              36
<PAGE>


                               UNIFRAX CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


     Deferred income taxes reflect the net effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. At December 31, 2000 and
2001, the major components of deferred tax assets and liabilities were as
follows:

<TABLE>
<CAPTION>

                                                                          DECEMBER 31
                                                                      2000           2001
                                                              -------------    -----------
                                                                        (In Thousands)

<S>                                                           <C>              <C>
Deferred tax liabilities:
     Property, plant and equipment                            $      (2,144)   $   (4,458)
     Other                                                                -          (176)
                                                              -------------    -----------
Gross deferred tax liabilities                                       (2,144)       (4,634)

Deferred tax assets:
     Tax goodwill and other intangible assets                        18,344         16,650
     AMT credit carry forward                                           380            492
     Net operating loss carryforward                                  4,324          4,996
     Accrued liabilities                                              1,882          1,361
     Accrued postretirement benefit cost                              1,315          1,360
     Inventory                                                          775            699
     Other                                                              203            331
                                                              -------------    -----------
Gross deferred tax assets                                            27,223         25,889
Valuation allowance                                                  (7,250)             -
                                                              -------------    -----------
Deferred tax assets, net of valuation allowance                      19,973         25,889
                                                              -------------    -----------
Net deferred tax asset                                        $      17,829    $    21,255
                                                              =============    ===========

</TABLE>

     During 2001, the Company reversed the remaining valuation allowance on
deferred tax assets, all of which related to the Company's U.S. operations.
Management has determined that based upon the Company's continued and the
expected future profitability of the Company's U.S. operations, the recent
utilization of net operating loss carryforwards for Federal income tax purposes
and the expectation that the remaining net operating loss carryforwards for
Federal income tax purposes will be fully utilized within the subsequent four
year period, it is more likely than not that the deferred tax assets will be
realized and, accordingly, a valuation allowance is no longer necessary.

     The Recapitalization agreement provided for an election to have the
Recapitalization (see Note 1) treated as an asset purchase for income tax
purposes, with a resulting increase in the tax basis of assets. The historical
cost basis of assets and liabilities was retained for financial reporting
purposes.

     At December 31, 2001, the Company has Federal and state net operating loss
carryforwards totaling approximately $13 million which will be available to
offset future taxable income. These net operating loss carryforwards expire in
2012 through 2022.

11. STOCK OPTIONS

     Effective October 30, 1996 the Company established the Unifrax Corporation
1996 Stock Option Plan to make awards of stock options to officers and key
employees for up to 1,505 shares of common stock. During 2000, the Stock Option
Plan was amended to provide for a total of up to 2,407 shares of common stock.
The options are granted at the approximate fair value of the underlying shares
at the date of grant and generally vest in equal amounts over a four year period
from the grant date. The options expire ten years after grant. A summary of
stock option activity and exercise prices is as follows:




                                                                              37
<PAGE>


                               UNIFRAX CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>

                                                  1999                           2000                         2001
                                      ----------------------------     -----------------------      -----------------------
                                                        WEIGHTED                    WEIGHTED                     WEIGHTED
                                                         AVERAGE                     AVERAGE                      AVERAGE
                                                        EXERCISE                    EXERCISE                     EXERCISE
                                          OPTIONS         PRICE        OPTIONS        PRICE         OPTIONS        PRICE
                                      ----------------------------     -----------------------      -----------------------

<S>                                    <C>          <C>               <C>        <C>               <C>        <C>
Outstanding, January 1                      1,236    $     1,500        1,236     $     1,500         1,531   $     2,047

Granted                                         -             -           295           4,337           841         4,337
Forfeited                                       -             -             -               -          (25)         4,337
                                      --------------------------      -----------------------     -----------------------

Outstanding, December 31                    1,236    $     1,500        1,531     $     2,047         2,347   $     2,843
                                      ==========================      =======================     =======================

Exercisable, end of year                      886    $     1,500        1,196     $     1,500         1,279   $     1,594
                                      ==========================      =======================     =======================

Weighted average fair value of
     options granted during the year                                                $     786                        $641
                                                                                    =========                        ====

</TABLE>

The following table summarizes information for stock options outstanding and
exercisable at December 31, 2001:


                                                                    WEIGHTED-
                                                                     AVERAGE
                            OPTIONS             OPTIONS             REMAINING
                          OUTSTANDING         EXERCISABLE             LIFE
                          -----------         -----------           ---------
Exercise price:
     $1,500                   1,236               1,236             5.04 years
     $4,337                   1,111                  43             8.97 years


     The Company has elected to account for its employee stock options in
accordance with APB 25 and related interpretations, as permitted by SFAS 123. As
a result, no compensation expense for employee stock options has been recognized
in the financial statements. Companies electing to account for employee stock
options in accordance with APB 25 must make pro forma disclosures of net income
as if the fair value based method of accounting in SFAS 123 had been applied.
The fair value of each option on the date of grant was estimated at the date of
grant using the minimum value method and the following weighted-average
assumptions:

<TABLE>
<CAPTION>

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

<S>                                                             <C>              <C>
Risk free interest rate                                          5%               4%
Dividend yield                                                   0%               0%
Weighted-average expected life of the option (in years)          4                4

</TABLE>


     If the fair value based method accounting provision of SFAS 123 had been
adopted, net income would have been $4,888,000, $7,015,000 and $14,838,000 for
the years ended December 31, 1999, 2000, and 2001, respectively. The effects of
applying SFAS 123 for providing pro forma disclosures are not likely to be
representative of the effects on reported net income for future years.





                                                                              38
<PAGE>

                               UNIFRAX CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


12. LEASE COMMITMENTS AND RENTALS

     The Company rents three manufacturing facilities in the United States and
certain equipment under various operating leases. The lease agreement for one of
the facilities expires 2014 and contains options which allow the Company to
extend the lease term for up to two additional five year periods. The lease
agreement for a second facility expires 2004 and contains options which allow
the Company to extend the lease term for up to two additional five year periods,
or to purchase the facility for a purchase price equal to fair value. Total
rental expense was $1,717,000, $2,181,000 and $3,500,000 for the years ended
December 31, 1999, 2000 and 2001, respectively.

     Future minimum lease payments under all non-cancelable operating leases
having a remaining term in excess of one year as of December 31, 2001 are as
follows (in thousands):

                        2002                      $     1,620
                        2003                            1,415
                        2004                            1,120
                        2005                              935
                        2006                              898
                        Thereafter                      8,406

13. CONTINGENCIES

CERAMIC FIBERS

     Regulatory agencies and others, including the Company, are currently
conducting scientific research and employee monitoring to determine the
potential health impact resulting from the inhalation of airborne ceramic
fibers. To date, studies of workers with occupational exposure to airborne
ceramic fiber have found no clinically significant relationship between prior or
current exposure to ceramic fiber and disease in humans; however, independent
animal studies have indicated that ceramic fiber inhaled by test animals at
elevated doses can produce respiratory disease, including cancer. The results of
this research have been inconclusive as to whether or not ceramic fiber exposure
presents an unreasonable risk to humans.

     From time to time Unifrax and other manufacturers of ceramic fibers have
been named as defendants in lawsuits alleging death or personal injury or
worker's compensation claims as a result of exposure in the manufacture and
handling of ceramic fiber and other products. The amount of any liability that
might ultimately exist with respect to these claims or any other unasserted
claims is presently not determinable. The Company believes the lawsuits brought
against it have been without merit and the litigation currently pending, or to
its knowledge threatened, will not have a material adverse effect on the
financial condition or results of operations of the Company. The Company's
belief is based on the fact that, although animal studies have indicated that
ceramic fiber inhaled by test animals at elevated doses can cause disease, there
is no evidence that exposure to refractory ceramic fiber has resulted in disease
in humans.

     Consistent with customary practice among manufacturers of ceramic fiber
products, the Company has entered into agreements with distributors of its
product in the United States whereby it agreed to indemnify the U.S.
distributors against losses resulting from ceramic fiber claims and the costs to
defend against such claims. To the best of the Company's knowledge, there have
been no historical, nor are there any current, ceramic fiber exposure claims
made against these indemnification agreements. Consequently, the amount of any
liability that might ultimately exist with respect to these indemnities is
presently not determinable.





                                                                              39
<PAGE>

                               UNIFRAX CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Pursuant to the Recapitalization Agreement, BP America Inc. and certain of
its affiliates (collectively "BP America"), have agreed to indemnify the Company
against liabilities for personal injury and wrongful death attributable to
exposure which occurred prior to October 30, 1996 (the "BP Closing") to
refractory ceramic fibers manufactured by the Company. BP America has agreed to
indemnify the Company against all liabilities arising from exposure claims
pending at the time of the BP Closing. For all other claims arising from alleged
exposure occurring solely prior to the BP Closing, BP America has agreed to
indemnify the Company against 80% of all losses, until the total loss which the
Company incurs reaches $3.0 million, after which time BP America has agreed to
indemnify the Company against 100% of such losses. BP America has agreed to
indemnify the Company against all punitive damages attributable to the conduct
of the Company prior to the BP Closing. Where losses arise from alleged exposure
both before and after the BP closing, the losses will be allocated between BP
America and the Company, pro rata, based on the length of exposure or pursuant
to arbitration if initiated by the Company. To date the Company has incurred no
claims losses applicable to the $3.0 million total mentioned above.

     The Company cannot avail itself of this indemnity for losses attributable
to the Company's failure to maintain a Product Stewardship Program consistent
with the program maintained by the Company prior to the BP Closing, as modified
in a commercially reasonable manner in accordance with changing regulatory,
scientific and technical factors. BP shall not indemnify the Company with
respect to any liabilities for wrongful death or personal injury to the extent
caused by the failure of the Company to maintain a Product Stewardship Program
consistent with that maintained by the Company prior to the BP Closing. In the
Company's opinion, the Product Stewardship Program has been maintained in a
manner consistent with these requirements. Unifrax intends to defend ceramic
fiber claims vigorously.

     Pursuant to a Warranty Agreement executed in conjunction with the
Acquisition, SEPR agreed to indemnify the Company, subject to certain maximums
as established in the Warranty Agreement, against losses resulting from alleged
or actual exposure to ceramic fibers which occurred prior to October 4, 2000
(the "SEPR Closing"). Where losses arise from alleged exposure both before and
after the SEPR Closing, the losses will be determined pro rata, temporis.

ENVIRONMENTAL MATTERS

     The Company is subject to loss contingencies pursuant to various federal,
state and local environmental laws and regulations and is currently involved in
several actions regarding the clean-up of disposal sites alleged to contain
hazardous and/or toxic wastes generated over a number of years. These include
possible obligations to remove or mitigate the effects on the environment of the
placement, storage, disposal or release of certain chemical or petroleum
substances by the Company or by other parties. In addition, The Carborundum
Company has entered into a Consent Decree with the New York State Department of
Environmental Conservation to remediate contamination at the facility located in
Sanborn, New York. While the Company's ultimate clean-up liability at the
various sites is not presently determinable, the Company does not expect to
incur any material liability with respect to any of these sites, individually or
in the aggregate, as a result of its activities at these sites. Furthermore, BP
America has agreed to indemnify the Company for certain environmental
liabilities, which might ultimately exist, under the Recapitalization Agreement.
In addition, BP America has assumed liability for other potential off-site
clean-up obligations associated with Carborundum. The locations at which the
Company has maintained potential off-site liability in the U.S. and the
Carborundum Sanborn, New York facility are described below.

     Kline Trail Site. In 1984, the Company voluntarily advised the State of
Indiana of potential unauthorized disposal of waste at an Indiana site by a
transporter. No response from the state has been received, and no further
information about the potential for remediation costs at the site has been
received by the Company. It is expected that little or no liability will be
associated with this site.





                                                                              40
<PAGE>

                               UNIFRAX CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     PCB Inc., Site. The New Carlisle, Indiana, facility received a request for
information from the EPA in 1994 concerning potential responsibility for cleanup
of the PCB Treatment site located in Kansas City, Kansas and Kansas City,
Missouri. Records indicate that a number of capacitors from the New Carlisle
facility of the Company were sent to the PCB Treatment site. A response
documenting the timely destruction of those materials was submitted to the EPA.
In September 1997 the EPA contacted BP America via letter to verify that a total
of 10,900 pounds of capacitors and transformers had been sent to the site by BP
America/Carborundum. BP America made a payment of $68,000 during 2001 which
substantially settled its environmental obligation for this site. Consequently,
the liability, if any, ultimately attributable to BP America or the Company is
not expected to have a material adverse effect on the Company's financial
position.

     Shulman Site. The Company has potential liability with respect to the
Shulman site in St. Joseph County, Indiana. The site is a landfill which the
Company believes to have been contaminated by chemicals migrating from an
adjacent facility. Plant trash from the New Carlisle facility was hauled to the
site. An agreement has been reached pursuant to which the Company, as part of a
response group, agreed to assume approximately 5% of certain response costs,
which to date includes $1.7 million for installation of a water line. The
Company's share of that cost is less than $100,000. The owner of the adjacent
facility has assumed the bulk of site remediation costs to date. It is
anticipated that site remediation will ultimately involve installing a clay cap
over the site, the cost of which is not yet known.

     Sanborn Site. Under the terms of an agreement with BP America, Unifrax
leases a portion of the present manufacturing facilities on this site. The
Carborundum Company's Sanborn, New York site was used by a number of former
Carborundum operations. Testing in the area has found that contamination by
volatile organic compounds is present in the soil and groundwater. Neither past
nor current operations of Unifrax are believed to have contributed to, or to be
contributing to, the existence of this contamination. While The Carborundum
Company entered into a Consent Decree with the State of New York under which it
was to conduct remedial activities at the site, BP America has taken title to
and assumed liability for the remediation of this property as of October 30,
1996. Efforts to remediate the site, chiefly by means of soil vapor extraction,
are expected to continue for some time.

     Under the terms of the Recapitalization Agreement, BP America assumed
liability, and the rights to recovery from third parties, for environmental
remediation and other similar required actions with respect to certain
environmental obligations of Unifrax including the above, which existed as of
the BP Closing.

     Pursuant to the Warranty Agreement executed in conjunction with the sale of
its ceramic fiber business to Unifrax, SEPR also agreed to indemnify the Company
against certain environmental liabilities related to activities conducted at the
various acquired sites prior to the SEPR Closing, subject to certain maximums as
established in the Warranty Agreement.

     The Company may, in the future, be involved in further environmental
assessments or clean-ups. While the ultimate requirement for any such
remediation, and its cost, is presently not known, and while the amount of any
future costs could be material to the results of operations in the period in
which they are recognized, the Company does not expect these costs, based upon
currently known information and existing requirements, will have a material
adverse effect on its financial position.



                                                                              41
<PAGE>

                               UNIFRAX CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


LEGAL PROCEEDINGS

     In addition to the ceramic fiber and environmental matters discussed above,
BP/Carborundum and Unifrax are involved in litigation relating to various claims
arising out of their operations in the normal course of business, including
product liability claims. While the outcomes of this litigation could be
material to the results of operations in the period recognized, based on the
current claims asserted the management of the Company believes that the ultimate
liability, if any, resulting from such matters will not have a material adverse
effect on the Company's financial position.

     The Carborundum Company has been named in numerous legal claims alleging
pre-BP Closing asbestos exposure. None of the current or past Unifrax-related
products are asbestos-containing materials, as defined by OSHA
(29CFR1900.1001(b)). For these claims related to pre-BP Closing Carborundum
Company matters, BP America has responsibility under the Recapitalization
Agreement and is managing the claims directly.

     Also, SEPR has indemnified Unifrax for any future asbestos claims which may
arise related to alleged pre-SEPR Closing asbestos exposures associated with
products or sites sold by SEPR to Unifrax.

14. PREFERRED STOCK

SERIES A PREFERRED STOCK

     In conjunction with the Acquisition, Unifrax amended its Certificate of
Incorporation authorizing the issuance of up to 30,000 shares of cumulative,
nonvoting, non-convertible Series A preferred stock, with a par value of $0.01
per share. The Company issued 20,500 shares of Series A preferred stock to
Holding, and Holding pledged those shares as security for its $20,500,000
subordinated note payable to SEPR. Dividends are payable quarterly on March 31,
June 30, September 30 and December 31 of each year at an annual rate of 7% from
the date of issuance through December 31, 2001, 8.5% from January 1, 2002
through December 31, 2002, and 10% thereafter.

     In the event that on January 20th of any year the dividends owed by the
Company to the holders of the Series A preferred stock are in arrears, then
until the dividends in arrears have been paid, the holders of a majority of the
shares of the Series A preferred stock are entitled as a class to elect one
Director of the Company, and the Board of Directors of the Company shall be
expanded by one director during such period. On January 31, 2001, the Company
paid dividends on the Series A preferred stock of $467,849. On December 18, 2001
the Company declared dividends on the Series A preferred stock of $1,364,733,
which were paid on January 31, 2002. Declared but unpaid dividends at December
31, 2001, were included in accounts payable, related parties, in the
accompanying balance sheets.

     The Company may redeem the outstanding shares of Series A preferred stock
at any time at a price per share equal to the liquidation preference amount plus
accrued but unpaid dividends. The amount of the liquidation preference may be
reduced if the Company were to issue certain guarantees associated with the
$20,500,000 of subordinated promissory notes issued by Holding to SEPR, or if
the Company were to increase the $8,000,000 subordinated promissory note issued
by Unifrax to SEPR. On October 4, 2001, the Company increased its subordinated
promissory note to SEPR from $8,000,000 to $12,000,000, as required by the note.
On the same date, the subordinated notes issued by Unifrax Holding Co. to SEPR
were reduced by $4,000,000, from $20,500,000 to $16,500,000. The liquidation
preference value of the Series A convertible preferred stock issued by Unifrax
Corporation to Unifrax Holding Co. and pledged to Saint-Gobain as security for
the subordinated notes, was also reduced by $4,000,000, from $1,000 per share to
$805 per share.




                                                                              42
<PAGE>


                               UNIFRAX CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


SERIES B PREFERRED STOCK

     The Series B preferred stock has a par value of $0.01 per share and is
redeemable, in full, at the option of the Company, at $1,500 per share, plus
accrued but unpaid dividends, which equals the stated value of the preferred
stock. The preferred Series B stock accrues cumulative dividends at the rate of
6% per annum, payable annually, and is convertible, at the option of the
stockholder, into an equal number of shares of common stock. The number of
shares into which the Series B preferred stock is convertible is subject to
adjustment for subsequent stock dividends payable on the common stock, stock
splits or reverse stock splits, and other modifications to the common stock.

     Dividends in arrears totaled $636,250 at December 31, 2001 or $382 per
share ($486,250 or $292 per share at December 31, 2000).

15. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

     The components of accumulated other comprehensive income (loss), net of
related tax, are as follows:

<TABLE>
<CAPTION>

                                                                       DECEMBER 31
                                                                       2000              2001
                                                                -----------       -----------
                                                                        (In Thousands)

<S>                                                               <C>               <C>
         Currency translation adjustment                          $     214         $  (2,034)
         Minimum pension liability adjustment                             -               (87)
         Unrealized gain on marketable equity securities                  -                64
                                                                -----------       -----------
                                                                  $     214         $  (2,057)
                                                                ===========       ===========

</TABLE>


16. SEGMENT AND GEOGRAPHIC INFORMATION

     The Company regards its principal business as being in a single operating
segment, ceramic fibers.

     Selected information related to Unifrax Corporation's operations by
geographical area is as follows:


                                             United
                                             States              Other
                                       -------------------------------

     December 31, 2001:
          Net sales                        $ 70,863           $ 87,576
          Long-lived assets                  35,778             33,331

     December 31, 2000:
          Net sales                        $ 78,345           $ 33,637
          Long-lived assets                  37,600             33,751







                                                                              43
<PAGE>


                               UNIFRAX CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


17. EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS

     In June 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, Business Combinations, and No. 142,
Goodwill and Other Intangible Assets, effective for fiscal years beginning after
December 15, 2001. Under the new rules, goodwill and intangible assets deemed to
have indefinite lives will no longer be amortized but will be subject to annual
impairment tests in accordance with the Statements. Other intangible assets will
continue to be amortized over their useful lives.

     The Company will apply the new rules on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of the
non-amortization provisions of the statement is not expected to have any impact
on the net income of the Company.

     In August 2001, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 144, Accounting for the Impairment of
Disposal of Long-Lived Assets, effective for fiscal years beginning after
December 15, 2001. Under the new rules, the criteria for classifying an asset as
held-for-sale are significantly changed from prior treatment. Assets which are
to be disposed of are stated at the lower of their fair values or carrying
amounts and depreciation is no longer recognized.

     The Company will apply this new rule beginning in the first quarter of
2002. The Company has determined that implementation of this new rule will not
impact the financial position of the Company as of January 1, 2002.





                                                                              44
<PAGE>



                                   SCHEDULE II

                        VALUATION AND QUALIFYING ACCOUNTS

                               UNIFRAX CORPORATION
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>

                                                      BALANCE
                                                         AT                         CHARGED TO                  BALANCE AT
                                                      BEGINNING     CHARGED TO         OTHER                      END OF
                                                      OF PERIOD       EXPENSE        ACCOUNTS    DEDUCTIONS       PERIOD
                                                      ----------------------------------------------------------------------
<S>                                                    <C>            <C>           <C>           <C>               <C>
YEAR ENDED DECEMBER 31, 2001
Deducted from asset accounts:
     Allowance for doubtful accounts                   $  1,062       $    441      $      -      $   267 (a)       $  1,236
     Allowance for return                                   915          4,455             -        4,544 (b)            826
     Allowance for obsolescence and shrinkage             1,355            451             -          891                915
                                                       --------        -------       -------      -------           --------

                                                       $  3,332       $  5,347      $      -      $ 5,702           $  2,977
                                                       ========        =======       =======      =======           ========

YEAR ENDED DECEMBER 31, 2000
Deducted from asset accounts:
     Allowance for doubtful accounts                   $    380       $   134       $    561 (c)  $    13 (a)       $  1,062
     Allowance for return                                   441         1,916            266 (c)    1,708 (b)            915
     Allowance for obsolescence and shrinkage                -            234          1,299 (c)      178              1,355
                                                       --------        -------       -------      -------           --------

                                                       $    821       $ 2,284       $  2,126      $ 1,899           $  3,332
                                                       ========        =======       =======      =======           ========

YEAR ENDED DECEMBER 31, 1999
Deducted from asset accounts:
     Allowance for doubtful accounts                   $    382       $    (1)      $      -      $     1 (a)       $    380
     Allowance for return                                   326           938              -          823 (b)            441
                                                       --------        -------       -------      -------           --------

TOTAL                                                  $    708       $   937       $      -      $   824           $    821
                                                       ========        =======       =======      =======           ========
</TABLE>


(a)  Uncollectible accounts written off, net of recoveries.

(b)  Returns from customers during the year.

(c)  Valuation allowances of businesses acquired.



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

     The directors and executive officers of the Company are as follows:

<TABLE>
<CAPTION>

NAME                       AGE     POSITION
----                       ---     --------

<S>                       <C>      <C>
William P. Kelly           52       Director, President and Chief Executive Officer
Mark D. Roos               46       Senior Vice President and Chief Financial Officer
David E. Brooks            52       Senior Vice President, Americas
Kevin J. O'Gorman          51       Senior Vice President, Europe, Africa and India
Paul J. Viola              46       Vice President, Acquisitions and Strategic Development
Paul M. Boymel             49       Worldwide Vice President, Technology
Joseph J. Kuchera          44       Vice President, Human Resources
John E. Pilecki            49       Vice President, Engineering and Purchasing
Thomas N. Littman          38       Director
William D. Manning, Jr.    67       Director
John G. Nestor             57       Chairman of the Board
John F. Turben             66       Director
Edmund S. Wright           59       Director

</TABLE>

     Mr. Kelly has been President and Chief Executive Officer of the Company
since February 1996. He joined Carborundum in 1972 as an engineer, and served in
several positions, including Vice President of Carborundum's worldwide ceramic
fiber business from 1993 to 1996, Vice President of Carborundum's domestic
ceramic fiber business from 1989 to 1993, and Vice President of Carborundum's
European operations from 1986-1989.

     Mr. Roos has been Senior Vice President since May 2001 and Vice President
and Chief Financial Officer of the Company since February 1996, and has been
Chief Financial Officer of the Company since 1995. He joined Carborundum in 1985
and served in several financial planning, control and business strategy
positions until he left in 1991 to become Vice President, Finance and
Administration, of The Airolite Company, a metal products manufacturer. He
rejoined Carborundum in 1993 as Director of Finance, Planning and Control.

     Mr. Brooks has been Senior Vice President, Americas for the Company since
May 2001 and Vice President, Americas since October 2000. Previously he was Vice
President of Sales and Marketing since May 1998. Before joining Unifrax, he was
President of Monofrax, Inc., a unit of Cookson Group/Vesuvius Refractories,
since January 1997. Mr. Brooks originally joined Carborundum in 1980 and served
in several positions, including Marketing Manager of Carborundum's domestic
ceramic fiber business from 1988 to 1993 and General Manager of the Monofrax
Refractories Division from 1993 to 1996.

     Mr. O'Gorman has been Senior Vice President, Europe, Africa and India since
May 2001 and Vice President, Europe, Africa and India since October 2000.
Previously he was Vice President of Operations since February 1996. He joined
Carborundum in 1990 and served as General Manager, Manufacturing and Engineering
of its worldwide ceramic fiber business from 1993 to 1995 and Manager,
Manufacturing for its domestic ceramic fiber business from 1990 to 1993.





                                                                              46
<PAGE>

     Mr. Viola has been Vice President, Acquisitions and Strategic Development
of the Company since May 1998. Previously he had been Vice President, Sales and
Marketing of the Company since February 1996. Mr. Viola joined Carborundum in
1978 and served in several positions, including General Manager, Sales and
Marketing for Carborundum's worldwide ceramic fiber business from 1993 to 1995
and Manager of the Automotive Products Group of Carborundum's Structural
Ceramics Division from 1991 to 1993.

     Dr. Boymel has been Worldwide Vice President, Research and Development of
the Company since May 2001 and Vice President, Research and Development since
February 1996 and Manager of Technology since 1989. He joined Carborundum in
1981.

     Mr. Kuchera has been Vice President, Human Resources of the Company since
February 1996 and was Manager of Human Resources for Carborundum's domestic
ceramic fiber business from 1988 to 1996. He joined Carborundum in 1981 and
served in several human resource positions in connection with a number of
different Carborundum business units.

     Mr. Pilecki has been Vice President, Engineering and Purchasing of the
Company since February 1996. He joined Carborundum's ceramic fiber business in
1976 and has served in various engineering and manufacturing positions,
including domestic engineering manager since 1990 and worldwide engineering and
purchasing manager since 1993.

     Mr. Littman has been a Partner with Kirtland since 1995. He is a director
of R Tape Corporation, Stonebridge Industries, Inc. and Instron Corporation.

     Mr. Manning has been self-employed as a management consultant for more than
5 years. From 1987 to 1994, he was Senior Vice President of The Lubrizol
Corporation and President of Lubrizol Petroleum Chemicals Co. Mr. Manning is a
Director of Robbins and Myers, Inc.

     Mr. Nestor has been with Kirtland since 1986 and has been a Managing
Partner since 1995. He serves as Chairman of TruSeal Technologies, Inc., Profile
Metal Forming, Inc. and Essex Crane Rental Corp. and is a director of Kirtland
Capital Partners, Fairmount Minerals Ltd., R Tape Corporation and PVC Container
Corporation.

     Mr. Turben founded Chagrin Valley Company, the predecessor to Kirtland
Capital Partners in 1977. During the 1960s and 70s, he served as Chairman of the
Executive Committee and Vice Chairman of the Board of Prescott, Ball & Turben,
an investment banking firm headquartered in Cleveland, and was Chairman of the
Executive Committee and Director of the Geneve Corp. He is Chairman of PVC
Container Corp., Instron Corporation, Fairport Asset Management LLC and is
Chairman of the Executive Committee of Fairmount Minerals Ltd. He is a member of
Kirtland Capital Partners' Advisory Board, and a Director of Stonebridge
Industries, Inc., Gries Financial LLC, Profile Metal Forming, Inc., PDM Bridge
LLC and NACCO Industries, Inc.

     Mr. Wright has been affiliated with Kirtland since 1985. He is past
Chairman of Dakota Catalyst Products Inc. and from 1981 to 1994 was President
and Chief Executive Officer of North American Refractories Company. Mr. Wright
is a director of Fairmount Minerals Ltd., Glasstech, Inc., STAM, Inc.,
Stonebridge Industries, Inc. and Essex Crane Rental Corporation.




                                                                              47
<PAGE>




ITEM 11. EXECUTIVE COMPENSATION

     COMPENSATION OF DIRECTORS

     All non-Executive Directors receive an annual retainer of $10,000 which is
paid in approximately quarterly installments.

     The following table sets forth the respective amounts of compensation of
the Chief Executive Officer and the next four highest-paid executive officers of
the Company (the "named executive officers") for 1999, 2000 and 2001.

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>

                                                                                      LONG-TERM                  ALL OTHER
                                                   ANNUAL COMPENSATION              COMPENSATION               COMPENSATION*
                                                   -------------------          ---------------------       -------------------
                                                                                       AWARDS
                                                                                ---------------------
NAME AND                                                                        SECURITIES UNDERLYING
PRINCIPAL POSITION                                  SALARY      BONUS                  OPTIONS
------------------                                  ------      -----           ---------------------

<S>                               <C>              <C>           <C>                      <C>                      <C>
W. Kelly                          2001             268,986       98,449                   296                      20,209
President and                     2000             259,159      335,800                   N/A                      29,203
Chief Executive Officer           1999             247,913      165,000                   N/A                      22,519

K. O'Gorman                       2001             205,169       23,800                   135                      12,592
Senior Vice President,            2000             161,696      166,597                   N/A                      18,983
Europe, Africa, India             1999             149,864       61,733                   N/A                      12,171

D. Brooks                         2001             178,043       20,447                   135                      10,917
Senior Vice President,            2000             171,308      178,292                   N/A                      19,022
Americas                          1999             165,240       68,067                   N/A                      12,832

M. Roos                           2001             138,750       15,934                   100                       8,508
Senior Vice President,            2000             132,459      137,166                   N/A                      14,869
Chief Financial Officer           1999             127,748       52,094                   N/A                      10,358

P. Viola                          2001             137,690       15,813                    25                       8,443
Vice President,                   2000             133,107      137,837                   N/A                      14,898
Acquisitions &                    1999             128,486       51,597                   N/A                      10,409
Strategic Development

</TABLE>



*    All Other Compensation includes Company match on 401k savings plan and
     Company contribution to defined contribution pension plan.





                                                                              48
<PAGE>



STOCK OPTION GRANTS, EXERCISES AND YEAR-END VALUES

     The following tables set forth information regarding grants of Unifrax
Corporation stock options to the named executive officers. The stock options
were granted in 1996, 1998 and 2001, and relate to shares of common stock of
Unifrax Corporation. No options have been exercised to date.

                               OPTION GRANTS 2001
<TABLE>
<CAPTION>

                                                                                                                 POTENTIAL
                                                                                                             REALIZABLE VALUE
                                                                                                                AT ASSUMED
                                                                                                               ANNUAL RATES
                                                                                                              OF STOCK PRICE
                                                                                                             APPRECIATION FOR
                                               INDIVIDUAL GRANTS                                              OPTION TERM (c)
------------------------------------------------------------------------------------------------------------------------------
                                               % OF TOTAL
                  NUMBER OF SECURITIES       OPTIONS GRANTED
                   UNDERLYING OPTIONS        TO EMPLOYEES IN       EXERCISE OR         EXPIRATION
NAME                 GRANTED (a) (d)           FISCAL YEAR       BASE PRICE (b)           DATE             5%              10%
------------------------------------------------------------------------------------------------------------------------------

<S>                      <C>                     <C>                <C>           <C>                  <C>           <C>
W. Kelly                 296.00                  35.2%              $4,337.00     January 15, 2011     $807,345      $2,045,970

K. O'Gorman              135.00                  16.1%               4,337.00     January 15, 2011      368,215         933,128

D. Brooks                135.00                  16.1%               4,337.00     January 15, 2011      368,215         933,128

P. Viola                  25.00                   3.0%               4,337.00     January 15, 2011       68,188         172,802

M. Roos                  100.00                  11.9%               4,337.00     January 15, 2011      272,752         691,206

</TABLE>

a)   Options vest in annual 25% increments on January 15, 2002; January 15,
     2003; January 15, 2004; and January 15, 2005.

b)   Exercise price based on estimated fair market value at date of grant. The
     stock of Unifrax Corporation is not traded in the public markets.

c)   The assumed rates of appreciation are not intended to represent either past
     or future appreciation rates with respect to the common stock of Unifrax
     Corporation. The rates are prescribed in the applicable Securities and
     Exchange Commission rules for use by all companies for the purpose of this
     table.

d)   None of the options at December 31, 2001 were considered in-the-money.


                                                                              49
<PAGE>

                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                            AND FY-END OPTION VALUES

<TABLE>
<CAPTION>

                                    NUMBER OF SECURITIES UNDERLYING         VALUE OF UNEXERCISED IN-THE-
                                     UNEXERCISED OPTIONS AT FY-END            MONEY OPTIONS AT FY-END
NAME                                   EXERCISABLE/UNEXERCISABLE              EXERCISABLE/UNEXERCISABLE
---------------------------------------------------------------------------------------------------------

<S>                                   <C>                  <C>                <C>                <C>
W. Kelly                              376.25     /         296.00             $ 1,067,422      / $ -0-

K. O'Gorman                           161.25     /         135.00                 457,466      /   -0-

D. Brooks                             161.25     /         135.00                 457,466      /   -0-

P. Viola                              161.25     /          25.00                 457,466      /   -0-

M. Roos                               107.50     /         100.00                 304,978      /   -0-

</TABLE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     Of the 20,000 shares of common stock of Unifrax Corporation outstanding as
of March 20, 2002, Unifrax Holding Co. owns 18,000 shares or 90% and BP
Exploration (Alaska) Inc., a subsidiary of BP, owns 2,000 shares or 10%. Unifrax
Holding Co. owns 100% of the 20,500 shares of the Series A preferred stock
outstanding. Of the 1666.67 shares of Series B cumulative preferred stock
outstanding, Unifrax Holding Co. owns 1500 shares or 90% and BP Exploration
(Alaska) Inc., owns 166.67 shares or 10% as of March 20, 2002. The following own
shares of Unifrax Holding Co. and, consequently, have a beneficial interest in
Unifrax Corporation.

<TABLE>
<CAPTION>

                                                 NUMBER OF
                                                 SHARES OF                                    BENEFICIAL
                                             UNIFRAX HOLDING CO.         PERCENT OF          OWNERSHIP OF
BENEFICIAL OWNER                               COMMON STOCK          UNIFRAX HOLDING CO.     UNIFRAX CORP.
----------------                               ------------          -------------------     -------------

<S>                                             <C>                         <C>                 <C>
Kirtland
     2550 SOM Center Road
     Suite 105
     Willoughby Hills, Ohio 44094(a)             246,344                     90.2%                81.2%
William P. Kelly                                   5,000                      1.8%                 1.6%
David E. Brooks                                    3,700                      1.4%                 1.2%
Kevin J. O'Gorman                                  1,500                        *                    *
Paul J. Viola                                      1,350                        *                    *
Mark D. Roos                                       1,000                        *                    *
All directors and executive officers
     of Unifrax Corporation as a group(b)         17,050                      6.2%                 5.6%

</TABLE>

*    Less than 1.0%






                                                                              50
<PAGE>



(a)  "Kirtland" includes Kirtland Capital Partners II L.P. and its affiliates.
     Kirtland Capital Corporation is the general partner of Kirtland and
     exercises voting control and investment discretion with respect to
     Kirtland's investment in Unifrax. John F. Turben and John G. Nestor are
     advisory board members of Kirtland Capital Corporation.

(b)  Excludes shares held by Kirtland of which Messrs. Turben and Nestor may be
     deemed to be beneficial owners as a result of their control of Kirtland.
     Messrs. Turben and Nestor disclaim any such beneficial ownership.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Reference is made to the information included in Notes 1 and 13 of the
financial statements contained in Item 8, which is hereby incorporated herein by
reference.

RELATIONSHIP WITH BP AND ITS SUBSIDIARIES

     Stockholders Agreement. On October 30, 1996, Unifrax Holding Co.
("Holding") and BP Exploration (Alaska), Inc. ("BPX") entered into an agreement
relating to their respective ownership of stock of the Company (the
"Stockholders Agreement"). This agreement (i) in certain circumstances grants
BPX preemptive rights and rights of first refusal with respect to issuances and
sales, respectively, of stock of the Company; (ii) grants BP piggyback
registration rights with respect to equity securities of the Company; (iii)
restricts in certain circumstances the ability of the Company to enter into
certain dilutive or non-arm's length transactions; and (iv) grants BP the right
to participate in certain circumstances in sales by Unifrax Holding of Holding's
common stock of the Company.

     Recapitalization Agreement. Pursuant to the Unifrax Corporation
Recapitalization Agreement ("Recapitalization Agreement"), BP America, Inc. ("BP
America") has agreed to indemnify the Company as set forth below.

     General Indemnity. The Recapitalization Agreement provides that, subject to
certain limitations, BP America and certain of its affiliates shall jointly and
severally indemnify the Company and Holding against, among other things, any and
all claims, damages, losses, expenses, costs, penalties, liens, fines,
assessments, obligations or liabilities of any kind, arising from all the
discontinued operations of the Company or its subsidiaries. The discontinued
operations include but are not limited to certain previously divested
businesses, any other former Carborundum business not part of the Company or its
foreign subsidiaries, and the Sanborn, New York, real estate transferred from
the Company to a BP subsidiary prior to Closing. BP America also has agreed to
indemnify the Company and Holding for any breach of a representation or warranty
set forth in the Recapitalization Agreement.

     Health and Safety Indemnity. Pursuant to the Recapitalization Agreement, BP
America has agreed to indemnify the Company and Holding against liabilities for
personal injury and wrongful death attributable to exposure prior to the Closing
to refractory ceramic fibers manufactured by the Company. BP America has agreed
to indemnify the Company and Holding against all liabilities arising from
exposure claims pending at the time of the Closing. For all other claims arising
from alleged exposure occurring solely prior to Closing, BP America has agreed
to indemnify the Company and Holding against 80% of all losses, until the total
loss which the Company incurs reaches $3.0 million, after which time BP America
has agreed to indemnify the Company and Holding against 100% of such losses. BP
America has agreed to indemnify the Company and Holding against all punitive
damages attributable to the conduct of the Company prior to Closing. Where
losses arise from alleged exposure both before and after Closing, the losses
will be allocated between BP America and the Company, pro rata, based on the
length of exposure or pursuant to arbitration if initiated by the Company.



                                                                              51
<PAGE>

     The Company cannot avail itself of this indemnity for losses attributable
to the Company's failure to maintain a Product Stewardship Program consistent
with the program maintained by the Company prior to Closing, as modified in a
commercially reasonable manner in accordance with changing regulatory,
scientific and technical factors. BP America shall not indemnify the Company
with respect to any liabilities for wrongful death or personal injury to the
extent caused by the failure of the Company to maintain a Product Stewardship
Program consistent with that maintained by the Company prior to October 30,
1996.

     Environmental Indemnity. Pursuant to the Recapitalization Agreement, and
subject to certain limitations, BP America has agreed to indemnify the Company
and Holding against environmental liabilities arising from pre-closing
conditions. The Recapitalization Agreement also provides that BP America shall
indemnify the Company and Holding against off-site liabilities caused by the
transport, storage or disposal of hazardous substances as well as for the
remedial obligations at the Sanborn, New York site.

     Non-compete Agreement. At the Closing, BP entered into the Non-compete
Agreement with Holding providing that for a period of five years from the
Closing, BP and its affiliates will not, anywhere in the world, own, advise,
consult, manage, operate, join, control, be associated with or participate in
the ownership, management, operation or control of any business that competes
with the Company or its subsidiaries. Holding paid BP $10 million for the
Non-compete Agreement, which expired October 4, 2001.

     Sanborn Lease. Prior to the Closing, the Company transferred the real
property located in Sanborn, New York (the "Sanborn Property") to a subsidiary
of BP America. BP America leased the real property comprising the Sanborn
Property currently used by the Company in its operations to the Company in
accordance with the terms and conditions of a 20 year lease (the "Lease"). The
Lease provides that the Company will be responsible for taxes, utilities and
insurance. The Company has an option to purchase the property for $1.00 at any
time during the 20-year lease term. The Company will utilize this facility
pursuant to a lease, rather than fee ownership, in order to preserve maximum
flexibility for possible consolidation of operations in the future.

RELATIONSHIP WITH KIRTLAND AND UNIFRAX HOLDING CO.

     Kirtland Advisory Services Agreement. Kirtland and the Company have entered
into an Advisory Services Agreement pursuant to which Kirtland will provide
management consulting and financial advisory services to the Company for an
annual fee initially in the amount of $300,000, which amount was increased in
2000 to $500,000 with the approval of the members of the Board of Directors of
the Company who do not have a direct financial interest in any person receiving
payments under the Advisory Services Agreement. In addition, if the Company
completes an acquisition, Kirtland will be entitled to receive a fee in an
amount which will approximate 1% of the gross purchase price of the acquisition
(including assumed debt). In connection with the Acquisition, the company paid
Kirkland a fee of $585,000 in 2000. The Advisory Services Agreement included
customary indemnification provisions in favor of Kirtland.

     Tax Sharing Agreement. Holding will file a consolidated federal income tax
return, under which the federal income tax liability of Holding and its
subsidiaries will be determined on a consolidated basis. Holding has entered
into a tax sharing agreement with the Company (the "Tax Sharing Agreement"). The
Tax Sharing Agreement provides that in any year in which the Company is included
in any consolidated tax return of Holding and has taxable income, the Company
will pay to Holding (except with respect to tax benefits resulting from the
Non-compete Agreement between BP and Holding) the amount of the tax liability
that the Company would have had on such date if it had been filing a separate
return. Conversely, if the Company generates losses or credits which actually
reduce the consolidated tax liability of Holding and its other subsidiaries, if
any, Holding will credit to the Company the amount of such reduction in the
consolidated tax liability. In the event any state and local income taxes are
determinable on a combined or consolidated basis, the Tax Sharing Agreement
provides for a similar allocation between Holding and the Company of such state
and local taxes.


                                                                              52
<PAGE>


                                     PART IV

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

(a) The following documents are filed as part of this report:


<TABLE>
<CAPTION>
                                                                                       Page in
                                                                                      FORM 10-K
                                                                                      ---------
<S>   <C>                                                                              <C>
(1)  FINANCIAL STATEMENTS

       Audited consolidated financial statements of the Company                          17
       as of December 31, 2000 and 2001, and for the three years
       in the period ended December 31, 2001.

(2)  FINANCIAL STATEMENT SCHEDULE

       II - Valuation and Qualifying Accounts                                            45

       All other schedules have been omitted as the required
       information is not applicable or the information is
       presented in the financial statements or the notes thereto.

(3)    EXHIBITS

       2.1(i)      Unifrax Corporation Recapitalization Agreement

       2.2(vii)    Stock and Asset Purchase Agreement, dated as of July 27, 2000, by and among the Company,
                   SEPR and certain other parties

       2.3(vii)    Amendment to the Stock and Asset Purchase Agreement, dated as of October 4, 2000

       3.1(i)      Certificate of Incorporation of the Registrant

       3.2(iii)    Consent of Stockholders for Amendment of Certificate of Incorporation

       3.3(iii)    Certificate of Amendment to Certificate of Incorporation

       3.4(vii)    Certificate of Amendment No. 2 to Certificate of Incorporation

       3.5(i)      By-laws of the Registrant

       4.1(i)      Form of Indenture (including form of Note)

       4.2(i)      Form of Stockholders Agreement among the Company, BPX and Holding

       4.3(iii)    Amendment to Stockholders Agreement dated September 30, 1997, among the Company,
                   BP Exploration (Alaska), Inc. and Holding

</TABLE>


                                                                              53
<PAGE>

<TABLE>
<CAPTION>

<S>               <C>
       4.4(iii)    Stock Purchase Agreement dated September 30, 1997, between the Company and Holding

       4.5(iii)    Stock Purchase Agreement dated September 30, 1997, between the Company and
                   BP Exploration (Alaska), Inc.

       4.6(vii)    Amendment to Stockholders Agreement dated October 4, 2000, between the Company,
                   BP Exploration (Alaska), Inc. and Holding

       10.1(vii)   Credit Agreement dated October 5, 2000 among Bank of America, N.A., National
                   City Bank, Multi Banco, S.A., Unifrax Corporation, NAF Brazil Ltda. and others

       10.2(i)*    1996 Stock Option Plan

       10.3(ii)    Unifrax Corporation Noncompetition Agreement

       10.4(i)     Lease relating to Tonawanda plant

       10.5(vi)    Amendment to lease relating to Tonawanda plant

       10.6(i)     Lease relating to Amherst plant

       10.7(i)     Sanborn Lease

       10.8(i)     Covenant Not to Compete between The British Petroleum Company p.l.c., its
                   affiliates, and theUnifrax Corporation and Societe Europeenne de Produits
                   Refractaires, and its affiliates (portions of this Exhibit have been omitted
                   and were filed separately with the Commission pursuant to a request for confidential treatment)

       10.9(i)     Form of Covenant Not to Compete between Holding and BP

       10.10(i)    Tax Sharing Agreement between the Company and Holding

       10.11(i)    Advisory Services Agreement between the Company and Kirtland Capital Corporation

       10.12(vi)*  Retirement Select Basic Plan document and Trust Agreement

       10.13(vii)  Subordinated Promissory Note, dated as of October 4, 2000, issued by the Company
                   in favor of SEPR in the original principal amount of $8,000,000

       10.14(vii)  Subordinated Promissory Note, dated as of October 4, 2000, issued in favor of SEPR
                   in the original principal amount of $1,500,000

       10.15(vii)  Limited Recourse Promissory Note, dated as of October 4, 2000, issued in favor
                   of SEPR in the original principal amount of $20,200,000

       10.16(vii)  Limited Recourse Promissory Note, dated as of October 4, 2000, issued in favor
                   of Carborundum do Brasil in the original principal amount of $300,000

       10.17(vii)  Pledge Agreement, dated of as October 4, 2000, by Holding in favor of SEPR


</TABLE>




                                                                              54
<PAGE>

<TABLE>
<CAPTION>


<S>               <C>
       10.18(vii)  Subordination Agreement, dated as of October 5, 2000, by and among SEPR, the Company,
                   Bank of America, N.A. and the lenders named therein

       10.19(vii)  Subordination Agreement (Real Estate), dated as of October 5, 2000, by and among SEPR,
                   the Company, Bank of America, N.A. and the lenders named therein

       10.20(vii)  Subordination Agreement, dated as of October 5, 2000, by and among SEPR, the Company,
                   Chase Manhattan Trust Company, National Association and the noteholders named therein.

       12.1        Computation of Ratio of Earnings to Fixed Charges

       21.1        Subsidiaries of the Registrant

        (i)        Incorporated by reference to the exhibits filed with the Registration Statement
                   on Form S-1 of Unifrax Investment Corp (Registration No. 333-10611).

       (ii)        Incorporated by reference to the exhibits filed with Form 10-K for the fiscal year
                   ended December 31, 1996 for Unifrax Corporation.

       (iii)       Incorporated by reference to the exhibits filed with Form 10-K for the fiscal year
                   ended December 31, 1997 for Unifrax Corporation.

       (iv)        Incorporated by reference to the exhibits filed with Form 10-Q for the fiscal quarter
                   ended June 30, 1998 for Unifrax Corporation.

       (v)         Incorporated  by reference to the  exhibits  filed with Form 10-K for the fiscal year ended
                   December 31, 1998 for Unifrax Corporation.

       (vi)        Incorporated by reference to the exhibits filed with Form 10-K for the fiscal year ended
                   December 31, 1999 for Unifrax Corporation.

       (vii)       Incorporated by reference to the exhibits filed with Form 8-K in connection with the
                   SEPR Ceramic Fiber Business acquisition filed October 19, 2000.

       *           Indicates a management contract or compensatory plan or arrangement.

</TABLE>

(b)    Reports on Form 8-K.
       None







                                                                              55
<PAGE>




                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 28th, 2002.

                                       UNIFRAX CORPORATION.

                                       By: /s/William P. Kelly
                                           -------------------
                                       William P. Kelly, President and
                                       Chief Executive Officer

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

<TABLE>
<CAPTION>

     SIGNATURE                              TITLE                                                DATE
     ---------                              -----                                                ----
<S>                                       <C>                                                   <C>
     /s/William P. Kelly                                                                         March 28, 2002
     -------------------
     William P. Kelly                       Director, President and Chief
                                            Executive Officer (Principle
                                            Executive Officer)

     /s/Mark D. Roos                                                                             March 26, 2002
     ---------------
     Mark D. Roos                           Senior Vice President & Chief
                                            Financial Officer (Principal
                                            Financial Officer and Principal
                                            Accounting Officer)
     /s/John G. Nestor                                                                           March 26, 2002
     -----------------
     John G. Nestor                         Chairman of the Board

     /s/Thomas N. Littman                                                                        March 26, 2002
     --------------------
     Thomas N. Littman                      Director

                                                                                                 March   , 2002
     --------------------------
     William D. Manning, Jr.                Director

     /s/John F. Turben                                                                           March 26, 2002
     -----------------
     John F. Turben                         Director

     /s/Edmund S. Wright                                                                         March 27, 2002
     -------------------
     Edmund S. Wright                       Director

</TABLE>


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