---

SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549

Form 10-Q

(Mark One)|X|  QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934For
the quarterly period ended March 31, 2003

OR

|_|  TRANSITION REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934For the transition period from _____________ to _________________

Commission file number:
333-31282

OSullivan
Industries, Inc. (Exact name of registrant as specified in its charter)

|                                                               |                                     
|-------------------------------------------------------------- | ------------------------------------
|Delaware                                                       | 43-0923022                          
|(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)
|                                                               |                                     
|1900 Gulf Street, Lamar, Missouri                              | 64759-1899                          
|(Address of principal executive offices)                       | (ZIP Code)                          

(417) 682-3322
                     (Registrants telephone number, including area code)

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

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

As
of August 1, 2003, 100 shares of common stock of OSullivan Industries, Inc., par value $1.00
per share, were outstanding.

---

The
Index to Exhibits is on page 32.

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Page 1 of 34

1

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# INTRODUCTORY NOTE

In
response to a comment letter from the Securities and Exchange Commission, we, after consulting with our
independent accountants, determined to revise our method of accounting for the tax sharing agreement
between RadioShack Corporation and us.  Under the revised method of accounting, we recorded the deferred
tax asset created by the increased tax basis in our assets as a result of elections under Sections 338(g)
and 338(h)(10) of the Internal Revenue Code by RadioShack and OSullivan Industries, Inc. as of February 1994.
Simultaneously, we also recorded our total obligation to RadioShack under the tax sharing agreement.  Each of
these amounts was approximately $147.9 million as of February 1994.  These amounts were reduced as we realized
benefits from the increased deductions from our increased basis and made payments to RadioShack.  In March
2002, we placed a valuation allowance against our net deferred tax assets, debiting tax expense for the
amount of the valuation allowance.  This report reflects the revised method of accounting.  We are in the
process of amending our annual report on Form 10-K for the fiscal year ended June 30, 2002 and our quarterly
reports on Form 10-Q for the quarters ended September 30, 2002 and December 31, 2002.

# PART I

ITEM 1. FINANCIAL
STATEMENTS.

| | OSULLIVAN
INDUSTRIES, INC. AND SUBSIDIARIES (a wholly owned subsidiary of OSullivan Industries
Holdings, Inc.)UNAUDITED CONSOLIDATED
BALANCE SHEETS(in thousands, except
for share data)
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Assets                                                                                 | March 31,
2003 | June 30,
2002
|-------------------------------------------------------------------------------------- | -------------- | -------------
|
|Current assets:                                                                        |                |              
|Cash and cash equivalents                                                              |                |              
|Trade receivables, net of allowance for doubtful accounts                              |                |              
|of $4,495 and $4,101, respectively                                                     |                |              
|Inventories, net                                                                       |                |              
|Prepaid expenses and other current assets                                              |                |              
|                                                                                       |                |              
|Total current assets                                                                   |                |              
|                                                                                       |                |              
|Property, plant and equipment, net                                                     |                |              
|Other assets                                                                           |                |              
|Goodwill, net of accumulated amortization                                              |                |              
|                                                                                       |                |              
|Total assets                                                                           |                |              
|                                                                                       |                |              
|                                                                                       |                |              
|Liabilities and Stockholder's Deficit                                                  |                |              
|Current liabilities:                                                                   |                |              
|Accounts payable                                                                       |                |              
|Current portion of long-term debt                                                      |                |              
|Accrued advertising                                                                    |                |              
|Accrued liabilities                                                                    |                |              
|Payable to parent - tax sharing agreement                                              |                |              
|                                                                                       |                |              
|Total current liabilities                                                              |                |              
|                                                                                       |                |              
|Long-term debt, less current portion                                                   |                |              
|Other liabilities                                                                      |                |              
|Payable to parent - tax sharing agreement                                              |                |              
|Other payable to parent                                                                |                |              
|                                                                                       |                |              
|Total liabilities                                                                      |                |              
|                                                                                       |                |              
|Commitments and contingent liabilities (Notes 2, 8 and 9)                              |                |              
|                                                                                       |                |              
|Stockholder's deficit:                                                                 |                |              
|Common stock, $1.00 par value; 100 shares authorized, issued and           outstanding |                |              
|Retained deficit                                                                       |                |              
|Accumulated other comprehensive income (loss)                                          |                |              
|                                                                                       |                |              
|Total stockholder's deficit                                                            |                |              
|                                                                                       |                |              
|Total liabilities and stockholder's deficit                                            |                |              
|                                                                                       |                |              

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

2

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| | OSULLIVAN
INDUSTRIES, INC. AND SUBSIDIARIES (a wholly owned subsidiary of OSullivan Industries
Holdings, Inc.)UNAUDITED CONSOLIDATED
STATEMENTS OF OPERATIONS (in thousands)
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                      | Three months ended
March 31, | Nine months ended
March 31,
|------------------------------------- | ---------------------------- | ---------------------------
|
|
|Net sales                             |                              |                            
|Cost of sales                         |                              |                            
|                                      |                              |                            
|Gross profit                          |                              |                            
|                                      |                              |                            
|Operating expenses:                   |                              |                            
|Selling, marketing and administrative |                              |                            
|Restructuring charge                  |                              |                            
|                                      |                              |                            
|Total operating expenses              |                              |                            
|                                      |                              |                            
|Operating income                      |                              |                            
|                                      |                              |                            
|Other income (expense):               |                              |                            
|Interest expense                      |                              |                            
|Interest income                       |                              |                            
|                                      |                              |                            
|Income before income tax provision    |                              |                            
|Income tax provision                  |                              |                            
|                                      |                              |                            
|Net income (loss)                     |                              |                            
|                                      |                              |                            

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

3

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| | OSULLIVAN
INDUSTRIES, INC. AND SUBSIDIARIES (a wholly owned subsidiary of OSullivan Industries
Holdings, Inc.)UNAUDITED CONSOLIDATED
STATEMENTS OF CASH FLOWS  (in thousands)
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                   | Nine months ended
March 31,
|------------------------------------------------------------------ | ---------------------------
|
|
|Cash flows provided by operating activities:                       |                            
|Net income (loss)                                                  |                            
|Adjustments to reconcile net income (loss) to net cash provided by |                            
|operating activities:                                              |                            
|Depreciation and amortization                                      |                            
|Amortization of debt issuance cost                                 |                            
|Amortization of debt discount                                      |                            
|Interest rate collar                                               |                            
|Bad debt expense                                                   |                            
|Loss on disposal of assets                                         |                            
|Deferred income taxes                                              |                            
|Impairment of long-lived assets                                    |                            
|Accrual of special payment on options to purchase Series A         |                            
|junior preferred stock                                             |                            
|Changes in assets and liabilities:                                 |                            
|Trade receivables                                                  |                            
|Inventories                                                        |                            
|Other assets                                                       |                            
|Accounts payable, accrued liabilities and other liabilities        |                            
|Payable to parent - tax sharing agreement                          |                            
|                                                                   |                            
|Net cash provided by operating activities                          |                            
|                                                                   |                            
|Cash flows used for investing activities:                          |                            
|Capital expenditures                                               |                            
|                                                                   |                            
|Cash flows from financing activities:                              |                            
|Repayment of borrowings                                            |                            
|Advances on intercompany loans                                     |                            
|                                                                   |                            
|Net cash flows used by financing activities                        |                            
|                                                                   |                            
|Net increase in cash and cash equivalents                          |                            
|Cash and cash equivalents, beginning of period                     |                            
|                                                                   |                            
|Cash and cash equivalents, end of period                           |                            
|                                                                   |                            
|Non-cash investing activities:                                     |                            
|Capital expenditures included in accounts payable                  |                            

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

4

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| | OSULLIVAN
INDUSTRIES, INC. AND SUBSIDIARIES (a wholly owned subsidiary of OSullivan Industries
Holdings, Inc.)UNAUDITED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS DEFICITFor the nine months ended
March 31, 2003(in thousands)
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                           | Retained
deficit | Accumulated
other
comprehensive
income (loss) | Total
stockholder's
deficit | Comprehensive
income
|-------------------------- | ---------------- | --------------------------------------------- | --------------------------- | --------------------
|
|                           |                  |                                               |                             |                     
|Balance, June 30, 2002     |                  |                                               | $                           | (98,507             
|Net income                 |                  |                                               |                             | 8,476               
|Other comprehensive income |                  |                                               |                             |                     
|                           |                  |                                               |                             |                     
|Balance, March 31, 2003    |                  |                                               | $                           | (90,031             
|                           |                  |                                               |                             |                     

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

5

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# OSULLIVAN
INDUSTRIES, INC.(a wholly owned subsidiary
of OSullivan Industries Holdings, Inc.)NOTES TO UNAUDITED
CONSOLIDATED FINANCIAL STATEMENTS March 31, 2003

# Note 1Basis of
Presentation

The
unaudited consolidated financial statements of OSullivan Industries, Inc. and
subsidiaries (OSullivan), a wholly owned subsidiary of OSullivan
Industries Holdings, Inc. (OSullivan Holdings), included herein have
been prepared in accordance with generally accepted accounting principles for interim
financial information and with instructions to Form 10-Q and Article 10 of Regulation S-X.
Certain information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. The financial statements should be read in conjunction
with the audited financial statements and notes thereto included in OSullivans
Annual Report on Form 10-K for the fiscal year ended June 30, 2002, which is in the
process of being amended. See Note 2. The interim results are not necessarily indicative
of the results that may be expected for a full year.

# Note 2Revised
Accounting for Tax Sharing Agreement with RadioShack

OSullivan
is included in the consolidated federal income tax return filed by OSullivan
Holdings. In accordance with the intercompany tax allocation policy between
OSullivan and OSullivan Holdings, OSullivan remits to OSullivan
Holdings an amount equal to its current tax liability calculated as if OSullivan
filed a separate tax return.

In
1994, RadioShack, then Tandy Corporation, completed an initial public offering of
OSullivan Holdings. In connection with the offering, OSullivan Holdings
entered into a tax sharing and tax benefit reimbursement agreement with RadioShack.
OSullivan and RadioShack made elections under Sections 338(g) and 338(h)(10) of the
Internal Revenue Code with the effect that the tax basis of OSullivans assets
was increased to the deemed purchase price of the assets, and an equal amount of such
increase was included as taxable income in the consolidated federal tax return of
RadioShack. The result was that the tax basis of OSullivans assets exceeded
the historical book basis OSullivan used for financial reporting purposes.

The
increased tax basis of OSullivans assets results in increased tax deductions
and accordingly reduced federal and state income taxes payable by OSullivan. Under
the tax sharing agreement, OSullivan Holdings is contractually obligated to pay
RadioShack nearly all of the federal tax benefit expected to be realized with respect to
such additional basis. The payments under the agreement represent additional consideration
for the stock of OSullivan Industries, Inc. and further increase the tax basis of its assets
from the 1994 initial public offering when payments are made to RadioShack.

To
the extent the benefit of these basis step-up deductions caused OSullivan to have a
federal taxable loss, OSullivan Holdings was only obligated to pay RadioShack to the
extent that the benefits were used to reduce taxable income to zero. Any additional tax
deductions resulting from the step-up create a net operating loss (NOL) carryforward on
OSullivans federal income tax return. Under the terms of the tax sharing
agreement, if OSullivan utilized this NOL carryforward to generate future tax
savings, OSullivan Holdings was also obligated to remit that benefit received to
RadioShack.

Since
1994, OSullivan has treated the amount due to RadioShack as income tax expense when
such amounts become payable and to the extent that OSullivan had sufficient taxable
income. Thus, OSullivans tax expense approximated what it would have been in
the absence of the section 338(h)(10) step-up in basis and the tax sharing agreement.

Under
this accounting method, the deferred tax asset from both the step-up in basis and the future liability
to RadioShack was not recorded on OSullivans consolidated balance sheets
because OSullivan deemed the benefits to be an asset of RadioShack. When the tax benefits were received
and paid to RadioShack, OSullivan recorded the payment as tax expense since this amount would have
been paid as federal income taxes in the absence of the step-up in basis and the tax sharing agreement.

6

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In
November 1999, OSullivan Holdings completed a leveraged recapitalization transaction
which significantly increased the debt of OSullivan. As a result of the higher debt
levels, OSullivan also experienced increased interest expense, which reduced the
taxable income of OSullivan and also reduced the tax benefits used from the
deductions arising from the step-up in basis. OSullivan Holdings reduced its
payments to RadioShack accordingly. RadioShack claimed that the deductions arising from
the increased interest payments should not impact tax benefit payments due RadioShack
under the tax agreement. RadioShack pursued this matter and prevailed in an arbitration
ruling in March 2002. OSullivan Holdings reached a settlement agreement with
RadioShack in May 2002. Pursuant to the settlement agreement, OSullivan Holdings
paid RadioShack $24.6 million in May 2002 and an additional $3.1 million in June
2002. The sum of these two payments ($27.7 million) represented the amount due RadioShack
under the settlement agreement through June 30, 2002. These amounts represent the
calculation of what benefits OSullivan would have realized had it not had the
additional interest expense from the recapitalization and merger. The settlement agreement
requires calculations into the future and quarterly payments to RadioShack if
OSullivans taxable income adjusted for the additional interest expense shows
that it would have realized the benefits had it not incurred the additional interest
expense. If on this basis, OSullivan could have used the deductions from the step-up
in basis, it is required to make a payment to RadioShack even though OSullivan may
not be receiving any current tax benefit from these deductions on its federal income tax
return.

OSullivan
funded the back payment and subsequent payments from cash on hand. OSullivan expects
to fund future payments from cash on hand or borrowings under its senior credit facility.

Following
the decision in the arbitration and the settlement agreement with RadioShack,
OSullivan recorded the $24.6 million payment to RadioShack as a deferred tax asset
at March 31, 2002. OSullivan believed that this was appropriate as the payment
represented the tax benefit OSullivan could realize from future use of
net operating losses on its consolidated federal income tax return if it had sufficient
taxable income in the future. After recoring a tax provision of $3.4 million for the quarter
ended March 31, 2002 and offsetting its deferred tax liabilities of $10.2 million,
OSullivan had a net deferred tax asset of $11.0 million.

Under Statement of Financial Accounting Standards (SFAS) 109, Accounting for Income Taxes,OSullivan
must determine if it is more likely than not that its net deferred tax asset will be realized as a
reduction in tax liabilities in the future. SFAS 109 requires objective evidence to support the more
likely than not conclusion. The arbitration decision dramatically affected OSullivans
liquidity, which reduced the amounts it could invest in sales efforts or cost improvements, as most
free cash flow would now be used to pay RadioShack or repay OSullivans indebtedness. In addition,
it became evident to OSullivan by March 2002 that the prolonged economic slowdown that started prior
to September 11, 2001 was continuing. This, coupled with the adverse effect on OSullivans
liquidity of the settlement, caused OSullivan to lower its projections of future taxable income.
Accordingly, management projected OSullivans expected future taxable income utilizing
operating performance it achieved in fiscal 2002 assuming OSullivans performance would be no
better or worse over an extended period of time. Such projections indicate that OSullivan would not
have taxable income until 2009 when substantially all the tax benefit deductions had been taken. At that
point, the projections indicated that the net operating losses existing at that time would be utilized
before they expire. However, OSullivan currently has and is expected to have taxable losses for
a number of years in the future. Projections over a long time are inherently uncertain, and OSullivan
cannot provide objective evidence that its operations in 2009 and beyond will produce sufficient taxable
income. As a result, OSullivan provided a valuation allowance in its March 2002 quarter of $13.4 million
against all of its net deferred tax assets with a corresponding charge to income tax expense. Consistent
with OSullivans prior accounting, both before and after the recapitalization and merger,
OSullivan did not record any deferred tax assets related to future deductions from the step-up
in basis or any future obligations to RadioShack as they were still contingent upon its taxable income
in the future.

Similarly,
in OSullivans June, September and December 2002 financial statements,
OSullivan recorded a deferred tax asset to the extent that OSullivan could not
benefit currently from the increased deductions. OSullivan then provided a valuation
allowance against the additional deferred tax asset with a corresponding charge to income
tax expense on a quarter by quarter basis. OSullivan believed this method was in
conformity with accounting principles generally accepted in the United States and
consistent with its accounting for the tax sharing agreement since 1994.

In
the third quarter of fiscal 2003, OSullivan received a comment letter from the staff
of the Securities and Exchange Commission ("SEC") on the accounting for the tax sharing agreement. In
the course of preparing a response to the SEC staffs comment letter, OSullivan, in
consultation with its independent accountants, reassessed its accounting for the tax
sharing agreement in light of the arbitration settlement with RadioShack
and concluded that its method of accounting for the tax sharing agreement should be
changed. OSullivan determined that the deferred tax asset created by the step-up in basis and
the additional basis from the probable future payments to RadioShack should be recorded as of
February 1994.  At the same time, OSullivan recorded its obligation to RadioShack under
the tax sharing agreement.  The amounts of the deferred tax asset and the obligation to RadioShack
were each $147.9 million at February 1994.  From 1994 through December 2001, the amounts of the
deferred tax asset and the obligation to RadioShack were reduced as OSullivan realized the
benefits of the deferred tax asset and paid RadioShack amounts due under the tax sharing agreement.

7

---

At March 31, 2002, a full
valuation allowance was provided against the $95.5 million net deferred tax asset, which
consists of the $11.0 million valuation allowance originally recorded in the March 2002 quarter plus an
additional $84.5 million representing the balance of the deferred tax asset at that time.  The valuation
allowance of $95.5 million together with the $3.4 million tax provision for the quarter represent the $98.9
million recorded as tax expense in the March 2002 quarter.  OSullivan recorded the valuation allowance
because it was unable to determine, based on objective evidence, that it is more likely than not that
OSullivan would be able to utilize its net operating losses prior to their expiration. If at a
future date OSullivan determines that some or all of the deferred tax asset will
more likely than not be realized, OSullivan will reverse the appropriate portion of
the valuation allowance and credit income tax expense. The remaining maximum
obligation to RadioShack was $109.1 million at March 31, 2002. The obligation to RadioShack
was reduced by subsequent payments and was $75.2 million and $81.4 million at March 31, 2003
and June 30, 2002, respectively. OSullivan Holdings currently believes that it is probable
that payments to RadioShack will be made.

In
summary, instead of accounting for OSullivans deferred tax assets resulting
from the step-up in basis as tax expense through a valuation allowance on a quarter by
quarter basis as OSullivan makes payments to RadioShack under the tax sharing agreement,
OSullivan revised its accounting to record the aggregate deferred tax asset and the
obligation to RadioShack in February 1994.  The deferred tax asset has been reduced as OSullivan
realized the benefits from 1994 to March 2002 and was fully offset by the March 2002 valuation allowance.
Therefore, this revised method of accounting will increase OSullivans net income
(or reduce OSullivans net loss) and will increase OSullivans net income
attributable to common stockholders (or reduce the loss) by the amount we pay RadioShack
for each quarterly period after March 31, 2002
through the quarter ending March 31, 2009 or until OSullivan can determine, based on objective
evidence, that it is more likely than not that OSullivan will be able to utilize its
net operating losses prior to their expiration and reverses all or a portion of the
valuation allowance on its deferred tax assets.

The
expected timing or amounts of OSullivan Holdings payments to RadioShack are
not affected by the revised method of accounting although
the future payments to RadioShack are contingent upon OSullivans achieving
taxable income calculated on the basis stipulated in the settlement agreement.

The
effect of the adjustments for prior periods on the consolidated balance sheet and
statement of operations are as follows:

|                                          | (in thousands)
|----------------------------------------- | --------------
|
|Balance sheet:                            |               
|Payable to parent - tax sharing agreement |               
|As previously reported                    |               
|As restated                               |               
|Retained deficit                          |               
|As previously reported                    |               
|As restated                               |               
|                                          |               

|                                 | Three months
ended
March 31,
2002 | Nine months
ended
March 31,
2002
|-------------------------------- | --------------------------------- | --------------------------------
|Statement of operations:         |                                   |                                 
|Net loss as previously reported  |                                   |                                 
|Increase to income tax provision |                                   |                                 
|                                 |                                   |                                 
|Net loss as restated             |                                   |                                 

8

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# Note 3Derivative
Financial Instruments

As
required under OSullivans senior credit facility, OSullivan hedged
one-half of its term loans with an initial notional amount of $67.5 million with a
three-year, costless interest rate collar. The collar, which expired March 31, 2003, was
based on three-month LIBOR with a floor of 6.43% and a ceiling of 8.75%. OSullivan
recorded a reduction of interest expense of $783,000 and $828,000 for the quarters ended
March 31, 2003 and March 31, 2002, respectively. These amounts represent the changes in
fair value of the interest rate collar. For the nine months ended March 31, 2003 and March
31, 2002, OSullivan recognized additional (reduced) interest expense associated with
the interest rate collar of $(2.1 million) and $99,000, respectively. To terminate this
contract at June 30, 2002, OSullivan would have been required to pay the
counter-party approximately $2.1 million. The fair value of the interest rate collar
at June 30, 2002 was included in accrued liabilities in the accompanying consolidated
balance sheet.

# Note 4New
Accounting Standards

In
April 2001, the Emerging Issues Task Force (EITF) reached a consensus on
EITF No. 00-25, Vendor Income Statement Characterization of Consideration
Paid to a Reseller of the Vendors Products. This issue addresses the income
statement classification of slotting fees, cooperative advertising arrangements and
buydowns. The consensus requires that certain customer promotional payments that
OSullivan previously classified as selling expenses be classified as a reduction of
revenue. OSullivan adopted EITF 00-25 effective January 1, 2002 and reclassified
certain selling, marketing and administrative expenses as a reduction of net sales. Its
adoption by OSullivan had no impact on operating income (loss) or net income (loss).
As a result of the adoption of EITF 00-25, for the six months ended December 31,
2001, $7.7 million was reclassified as a reduction in revenue rather than as selling,
marketing and administrative expense.

In
August 2001, the Financial Accounting Standards Board issued SFAS 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. This pronouncement, which is effective for fiscal
years beginning after December 15, 2001, addresses financial accounting and reporting for
the impairment of long-lived assets and for long-lived assets to be disposed of.
OSullivan adopted this pronouncement effective July 1, 2002. The adoption of SFAS
144 had no effect on OSullivans results of operations but did impact its
balance sheet presentation as described below.

In
January 2001, OSullivan closed its Cedar City, Utah production facility.  (See Note 10.)
Certain equipment has been relocated to the Missouri and
Virginia plants. Fixed assets with a net book value of $20.3 million were valued at the
lower of their carrying amount or fair value less cost to sell, resulting in an impairment
charge of approximately $8.7 million in the second quarter of fiscal 2001. An
additional impairment charge of $540,000 was recognized in the quarter ended March 31,
2003. The additional impairment charge resulted from subsequent changes in the carrying
amounts of the assets due to unfavorable market conditions. The costs of the long-lived
assets held for sale and the associated accumulated depreciation have been reclassified
from property, plant and equipment to other assets on the accompanying consolidated
balance sheets. There are no other significant assets or liabilities relating to the
discontinued Utah operation.

# Note 5Shipping and
Handling Costs

OSullivan
reports amounts billed to customers as revenue, the cost for warehousing operations in
cost of sales and freight out costs as part of selling, marketing and administrative
expenses. Freight out costs included in selling, marketing and administrative expenses in
the third quarters of fiscal 2003 and fiscal 2002 were approximately $1.3 million and $3.2
million, respectively. Freight out costs for the nine months ended March 31, 2003 and
2002 were $4.9 million and $7.7 million, respectively.

9

---

# Note 6Inventory

Inventory,
net, consists of the following:

| | March 31,
2003  | June 30,
2002
| | --------------- | -------------
|
| | Finished goods  |              
| | Work in process |              
| | Raw materials   |              
| |                 |              
| |                 |              
| |                 |              

# Note 7Condensed
Consolidating Financial Information

In
November 1999 OSullivan issued $100 million of 13.375% Senior Subordinated Notes due
2009. These notes were unsecured obligations of OSullivan; however, they were
guaranteed on an unsecured basis by its subsidiary OSullivan Industries 
Virginia, Inc. (OSullivan Industries  Virginia). In fiscal 2000,
OSullivan exchanged the notes issued in November 1999 for notes with substantially
identical terms and associated guarantees. The exchange notes have been registered under
the Securities Act of 1933, as amended.

OSullivan
also is the obligor under a senior secured credit facility totaling $175 million. This
facility is secured by substantially all the assets of OSullivan and its guarantor
subsidiary OSullivan Industries  Virginia. The credit facility is also
guaranteed by OSullivan Holdings, OSullivans parent. Security for the
credit facility includes first priority liens and security interests in the stock of
OSullivan and OSullivan Industries  Virginia.

The
accompanying condensed consolidating financial information has been prepared and presented
pursuant to SEC rules and regulations. This information is not intended to present the
financial position, results of operations and cash flows of the individual companies in
accordance with generally accepted accounting principles.

The
financial information for OSullivan Furniture Factory Outlet, Inc. is included in
the consolidated results of OSullivan Industries. OSullivan Furniture Factory
Outlet, Inc. commenced operations in April 2002. Net sales and net income for the three
months ended March 31, 2003 were $482,000 and $60,000, respectively. Net sales and net
income for the nine months ended March 31, 2003 were $953,000 and $92,000, respectively.
At March 31, 2003 and June 30, 2002, total assets were $307,000 and $191,000,
respectively. Total liabilities, excluding payables to affiliates, at March 31, 2003 and
June 30, 2002 were $17,000 and $20,000, respectively.

10

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# Condensed Consolidating
Statements of Income

|                                      | Three months ended March 31, 2003
(in thousands)
|------------------------------------- | ------------------------------------------------
|
|Net sales                             |                                                 
|Cost of sales                         |                                                 
|                                      |                                                 
|Gross profit                          |                                                 
|Operating expenses:                   |                                                 
|Selling, marketing and administrative |                                                 
|Restructuring charge                  |                                                 
|                                      |                                                 
|                                      |                                                 
|                                      |                                                 
|Operating income                      |                                                 
|Other income (expense):               |                                                 
|Interest expense                      |                                                 
|Interest income                       |                                                 
|                                      |                                                 
|Income before income tax provision    |                                                 
|Income tax provision                  |                                                 
|                                      |                                                 
|Net income                            |                                                 
|                                      |                                                 
|                                      |                                                 

|                                      | Three months ended March 31, 2002
(in thousands)
|------------------------------------- | ------------------------------------------------
|
|Net sales                             |                                                 
|Cost of sales                         |                                                 
|                                      |                                                 
|Gross profit                          |                                                 
|Operating expenses:                   |                                                 
|Selling, marketing and administrative |                                                 
|                                      |                                                 
|                                      |                                                 
|Operating income                      |                                                 
|Other income (expense):               |                                                 
|Interest expense                      |                                                 
|Interest income                       |                                                 
|                                      |                                                 
|Income before income tax provision    |                                                 
|Income tax provision                  |                                                 
|                                      |                                                 
|Net loss                              |                                                 
|                                      |                                                 

11

---

|                                      | Nine months ended March 31, 2003
(in thousands)
|------------------------------------- | -----------------------------------------------
|
|Net sales                             |                                                
|Cost of sales                         |                                                
|                                      |                                                
|Gross profit                          |                                                
|Operating expenses:                   |                                                
|Selling, marketing and administrative |                                                
|Restructuring charge                  |                                                
|                                      |                                                
|                                      |                                                
|                                      |                                                
|Operating income                      |                                                
|Other income (expense):               |                                                
|Interest expense                      |                                                
|Interest income                       |                                                
|                                      |                                                
|Income before income tax provision    |                                                
|Income tax provision                  |                                                
|                                      |                                                
|Net income                            |                                                
|                                      |                                                
|                                      |                                                

|                                      | Nine months ended March 31, 2002
(in thousands)
|------------------------------------- | -----------------------------------------------
|
|Net sales                             |                                                
|Cost of sales                         |                                                
|                                      |                                                
|Gross profit                          |                                                
|Operating expenses:                   |                                                
|Selling, marketing and administrative |                                                
|                                      |                                                
|                                      |                                                
|Operating income                      |                                                
|Other income (expense):               |                                                
|Interest expense                      |                                                
|Interest income                       |                                                
|                                      |                                                
|Income before income tax provision    |                                                
|Income tax provision                  |                                                
|                                      |                                                
|Net loss                              |                                                
|                                      |                                                

12

---

# Condensed Consolidating Balance
Sheets

|                                                | March 31, 2003
(in thousands)
|----------------------------------------------- | -----------------------------
|
|ASSETS:                                         |                              
|Current assets                                  |                              
|Property, plant and equipment, net              |                              
|Other assets                                    |                              
|Investment in subsidiary                        |                              
|Goodwill                                        |                              
|Receivable from parent                          |                              
|                                                |                              
|Total assets                                    |                              
|                                                |                              
|                                                |                              
|LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT): |                              
|Current liabilities                             |                              
|Long-term debt                                  |                              
|Other liabilities                               |                              
|Payable to parent - tax sharing agreement       |                              
|Other payable to parent                         |                              
|Stockholder's equity (deficit)                  |                              
|                                                |                              
|Total liabilities and stockholder's             |                              
|equity (deficit)                                |                              
|                                                |                              
|                                                |                              

|                                                | June 30, 2002
(in thousands)
|----------------------------------------------- | ----------------------------
|
|ASSETS:                                         |                             
|Current assets                                  |                             
|Property, plant and equipment, net              |                             
|Other assets                                    |                             
|Investment in subsidiary                        |                             
|Goodwill                                        |                             
|Receivable from parent                          |                             
|                                                |                             
|Total assets                                    |                             
|                                                |                             
|                                                |                             
|LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT): |                             
|Current liabilities                             |                             
|Long-term debt                                  |                             
|Other liabilities                               |                             
|Payable to parent - tax sharing agreement       |                             
|Other payable to parent                         |                             
|Stockholder's equity (deficit)                  |                             
|                                                |                             
|Total liabilities and stockholder's            
|equity (deficit)                                |                             
|                                                |                             

13

---

# Condensed Consolidating
Statements of Cash Flows

|                                          | Nine months ended March 31, 2003
(in thousands)
|----------------------------------------- | -----------------------------------------------
|
|Net cash flows provided by operating      |                                                
|activities                                |                                                
|                                          |                                                
|Investing activities:                     |                                                
|Capital expenditures                      |                                                
|Repayment of loans to affiliates          |                                                
|                                          |                                                
|Net                                       |                                                
|                                          |                                                
|Financing activities:                     |                                                
|Advances (repayment) of loans from        |                                                
|affiliates                                |                                                
|Repayment of borrowings                   |                                                
|                                          |                                                
|Net                                       |                                                
|                                          |                                                
|                                          |                                                
|Cash and cash equivalents:                |                                                
|Net increase in cash and cash equivalents |                                                
|Cash and cash equivalents, beginning      |                                                
|of period                                 |                                                
|                                          |                                                
|Cash and cash equivalents, end of period  |                                                
|                                          |                                                
|                                          |                                                

|                                                | Nine months ended March 31, 2002
(in thousands)
|----------------------------------------------- | -----------------------------------------------
|
|Net cash flows provided by operating activities |                                                
|                                                |                                                
|Investing activities:                           |                                                
|Capital expenditures                            |                                                
|Repayment of loans to affiliates                |                                                
|                                                |                                                
|Net                                             |                                                
|                                                |                                                
|                                                |                                                
|Financing activities:                           |                                                
|Advances (repayment) of loans from              |                                                
|affiliates                                      |                                                
|Repayment of borrowings                         |                                                
|                                                |                                                
|Net                                             |                                                
|                                                |                                                
|                                                |                                                
|Cash and cash equivalents:                      |                                                
|Net increase in cash and cash equivalents       |                                                
|Cash and cash equivalents, beginning            |                                                
|of period                                       |                                                
|                                                |                                                
|Cash and cash equivalents, end of period        |                                                
|                                                |                                                

14

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# Note 8Related
Party Transactions

OSullivan
entered into a management services agreement with Bruckmann, Rosser, Sherrill & Co.,
Inc. (BRS) for strategic and financial advisory services on November 30, 1999.
The fee for these services is the greater of (a) 1% of OSullivans consolidated
cash flow (as defined in the indenture related to the OSullivan senior subordinated
notes) or (b) $300,000 per year. Under the management services agreement, BRS can also
receive reimbursement for expenses which are limited to $50,000 a year by the senior
credit facility.

The
senior credit facility and the management services agreement both contain certain
restrictions on the payment of the management fee. The management services agreement
provides that no cash payment for the management fee can be made unless the fixed charge
coverage ratio (as defined in the indenture relating to the OSullivan senior
subordinated notes) for OSullivans most recently ended four full fiscal
quarters would have been at least 2.0 to 1.0. All fees and expenses under the management
services agreement are subordinated to the senior subordinated notes.

The
management fees and reimbursable expenses of $132,000 and $198,000 recognized in the third
quarter of fiscal years 2003 and 2002, respectively, are included in selling, marketing
and administrative expense in the accompanying consolidated statements of operations.
Management fees and expenses for the nine months ending March 31, 2003 and 2002 were
$365,000 and $418,000, respectively. OSullivan paid BRS $713,000 in the first
quarter of fiscal 2003 for the balance owed through June 30, 2002 and an additional
$305,000 as a prepayment of the fiscal 2003 management fee. In January 2003,
OSullivan paid BRS $285,000 for incurred reimbursable expenses and expected
management fees for the remainder of the fiscal year. The prepaid balance at March 31,
2003 was $219,000 and is included in prepaid expenses and other current assets on the
consolidated balance sheet. The amount due BRS at June 30, 2002 approximated $719,000 and
is included in accrued liabilities on the consolidated balance sheet.

# Note 9Commitments
and Contingencies

Tax
Sharing Agreement with RadioShack.Future tax sharing agreement payments are
contingent on taxable income. (See Note 2.) The maximum payments are as follows: fiscal
2003, including $6.2 million paid through March 31, 2003  $11.0 million; fiscal 2004
 $9.9 million; fiscal 2005  $10.5 million; fiscal 2006  $11.3
million; and thereafter  $38.6 million.

At
March 31, 2003, OSullivan was in compliance with all applicable debt covenants.

# Note 10Subsequent Events

In June 2003, OSullivan sold the land and building it owned in Cedar City, Utah.  The net proceeds from
the sale of $6.8 million were used to reduce indebtedness under the senior credit facility.  The sale did not
require a further significant adjustment from March 2003 to the carrying value of the land and building.
No significant excess assets remain from the closing of the facility.

As of June 30, 2003, OSullivan Industries executed a fourth amendment to its senior credit facility.
The facility amends certain financial covenants for quarters ending June 30, 2003 through June 30, 2004.  The
amendment made several other changes to the senior credit agreement, including reducing the revolving credit
commitment from $40 million to $30 million and increasing the excess cash flow prepayment percentage from 75% to
100%.  The interest rate on loans under the senior credit facility was increased to LIBOR plus 4.75% or prime
plus 3.75% for revolving credit and tranche A loans and LIBOR plus 5.25% or prime plus 4.25% for tranche B
loans.  In addition, OSullivan will pay additional interest of 2.0% on the outstanding balance of tranche B
loans on July 2, 2004.

With the execution of the fourth amendment, OSullivan expects that it will be in compliance with its
covenants under the senior credit facility at June 30, 2003.

In June 2003, OSullivan completed a reduction in force of approximately 50 corporate employees.  The
estimated cash termination benefits associated with the reduction is approximately $1.5 million.
OSullivan accrued this cost in the fourth quarter of fiscal 2003.

15

---

# ITEM 2.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.

# Overview

We
are a leading ready-to-assemble furniture manufacturer in North America with over 45 years
of experience. We design, manufacture and distribute a broad range of RTA furniture
productscomputer workcenters, desks, entertainment centers, audio stands, bookcases
and cabinetswith retail prices ranging from $20 to $999. We have committed
substantial resources to the development and implementation of a diversified sales,
marketing and product strategy in order to capitalize on opportunities presented by large
retail channels of distribution and changes in consumer demographics and preferences. We
have structured our business to offer a wide variety of RTA furniture products through
popular retail distribution channels, including office superstores, discount mass
merchants, electronic superstores, home improvement centers and home furnishings
retailers. We continue to strive towards building long-term relationships with quality
retailers in existing and emerging high growth distribution channels to develop and grow
our business.

Our
net sales declined 17.6% in the third quarter of fiscal 2003 and 12.7% for the first nine
months of fiscal 2003. This decline continued the sales decreases experienced by us in
fiscal 2001 and 2002. Our sales declined for several reasons:

|   |                                                                                                                                     
|-- | ------------------------------------------------------------------------------------------------------------------------------------
|-> | the lack of growth in sales of personal computers, which reduced the need for computer desks and
workcenters;                       
|   |                                                                                                                                     
|-> | increasing competition from imported furniture, particularly from China;                                                            
|   |                                                                                                                                     
|-> | the slowdown of economic growth and consumer spending in the United States;                                                         
|   |                                                                                                                                     
|-> | liquidations and bankruptcies by a number of customers, including Montgomery Ward, Ames and
Kmart;                                  
|   |                                                                                                                                     
|-> | inventory reductions by our customers;                                                                                              
|   |                                                                                                                                     
|-> | the decline in price of the average unit sold, reflecting a trend toward more promotional
merchandise and increased competition; and
|   |                                                                                                                                     
|-> | the retrenchment in business capital outlays, which reduced purchases of office furniture.                                          

These factors will continue to affect
our business throughout the remainder of fiscal 2003 and into fiscal 2004.

Even
with the lower sales levels, we produced net income of $3.5 million for the third quarter
of fiscal 2003. For the first nine months of fiscal 2003, our net income was $8.5 million.
Operating income declined to $8.8 million in the third quarter of fiscal 2003 from
$15.4 million in fiscal 2002. For the first nine months of fiscal 2003, our operating
income was $24.9 million, compared with $30.3 million in the first nine months of fiscal
2002.

We
purchase large quantities of raw materials, including particleboard and fiberboard. We are
dependent on our outside suppliers for all of our raw materials. Therefore, we are subject
to changes in the prices charged by our suppliers. In fiscal 2000, our operating income
was reduced by price increases for these commodities. In fiscal 2001, particleboard and
fiberboard prices declined, increasing our operating income in the latter portion of the
year. Industry pricing for particleboard was flat to slightly lower in fiscal 2002, and
prices declined in the first half of fiscal 2003 from the fourth quarter of fiscal 2002.
We saw small increases in particleboard pricing in the third quarter of fiscal 2003.
Prices for fiberboard increased in the fourth quarter of fiscal 2002, but remained
essentially flat for the first nine months of fiscal 2003. We did experience a price
increase from several suppliers of another commodity in the second quarter of fiscal 2003.
We cannot assure you that raw material prices will not increase further in the future.
If the demand for particleboard increases or the supply declines further, prices may also
increase.

16

---

Several
manufacturers, including OSullivan, have excess manufacturing capacity due to the
current decline in sales in the RTA furniture segment and increasing imports. This excess
capacity is causing increased competition that is expected to continue, and perhaps to
intensify, through the remainder of fiscal 2003 and into fiscal 2004. This reduced our margins and results of
operations in fiscal 2002, and is continuing to reduce sales, margins and results of
operations in fiscal 2003. We have been taking, and will continue to take, steps to reduce
costs as the lower sales levels affect our operations.

While
we have confidence in the long-term future of the RTA furniture industry, given our
current sales trends in this economic environment, gross sales in the fourth
quarter of fiscal 2003 will be about one-third lower than sales in the fourth quarter of fiscal
2002. We anticipate our fiscal 2003 fourth quarter operating income will decline
about 55% to 60% from the fiscal 2002 fourth quarter. We cannot yet predict when our
sales will return to a pattern of sales growth.

RadioShack Arbitration
and Revised Accounting for Tax Sharing Agreement with RadioShack.

In
1994, RadioShack, then Tandy Corporation, completed an initial public offering of
OSullivan Holdings. In connection with the offering, OSullivan Holdings
entered into a tax sharing and tax benefit reimbursement agreement with RadioShack.
RadioShack and OSullivan made elections under Sections 338(g) and 338(h)(10) of the
Internal Revenue Code with the effect that the tax basis of our assets was increased to
the deemed purchase price of the assets, and an equal amount of such increase was included
as taxable income in the consolidated federal tax return of RadioShack. The result was
that the tax basis of our assets exceeded the historical book basis we used for financial
reporting purposes.

The
increased tax basis of our assets results in increased tax deductions and reduced federal and
state income taxes payable by us. Under the tax sharing agreement,
OSullivan Holdings is contractually obligated to pay RadioShack nearly all of the
federal tax benefit expected to be realized with respect to such additional basis. The payments under
the agreement represent additional consideration for the stock of OSullivan Industries, Inc. and
further increase the tax basis of our assets from the 1994 initial public offering when payments
are made to RadioShack.

To
the extent the benefit of these basis step-up deductions caused us to have a federal
taxable loss, OSullivan Holdings was only obligated to pay RadioShack to the extent
that the benefits were used to reduce taxable income to zero. Any additional tax
deductions resulting from the step-up create a net operating loss (NOL) carryforward on
our federal income tax return. Under the terms of the tax sharing agreement, if we
utilized this NOL carryforward to generate future tax savings, OSullivan Holdings
was also obligated to remit that benefit received to RadioShack.

Since
1994, we have treated the amount due to RadioShack as income tax expense when such amounts
become payable and to the extent that we had sufficient taxable income. Thus, our tax
expense approximated what it would have been in the absence of the Section 338(h)(10)
step-up in basis and the tax sharing agreement.

Under
this accounting method, the deferred tax asset from both the step-up in basis and the future liability
to RadioShack was not recorded on our consolidated balance sheets because we
deemed the benefits to be an asset of RadioShack. When the tax benefits were received and paid by
OSullivan Holdings to RadioShack, we funded the payment and recorded it as tax expense
since this amount would have been paid by us as federal income taxes in the absence of the
step-up in basis and the tax sharing agreement.

In
November 1999, OSullivan Holdings completed a leveraged recapitalization transaction
which significantly increased our debt. As a result of the higher debt levels, we also
experienced increased interest expense, which reduced our taxable income and also reduced
the tax benefits used from the deductions arising from the step-up in basis.
OSullivan Holdings reduced its payments to RadioShack accordingly. RadioShack
claimed that the deductions arising from the increased interest payments should not impact
tax benefit payments due RadioShack under the tax agreement. RadioShack pursued this
matter and prevailed in an arbitration ruling in March 2002.

17

---

OSullivan Holdings
reached a settlement agreement with RadioShack in May 2002. Pursuant to the settlement
agreement, OSullivan Holdings paid RadioShack $24.6 million in May 2002 and an
additional $3.1 million in June 2002. The sum of these two payments ($27.7 million)
represented the amount due RadioShack under the settlement agreement through June 30,
2002. These amounts represent the calculation of what benefits we would have realized had
we not had the additional interest expense from the recapitalization and merger. The
settlement agreement requires calculations into the future and quarterly payments to
RadioShack if our taxable income adjusted for the additional interest expense shows that
we would have realized the benefits had we not incurred the additional interest expense.
If on this basis, we could have used the deductions from the step-up in basis,
OSullivan Holdings is required to make a payment to RadioShack even though we may
not be receiving any current tax benefit from these deductions on our federal income tax
return.

Following
the decision in the arbitration and the settlement agreement with RadioShack, we recorded
the $24.6 million payment to RadioShack as a deferred tax asset at March 31, 2002. We
believed that this was appropriate as the payment represented the tax benefit we could realize
from future use of net operating losses on our federal income tax returns if we had sufficient
taxable income in the future. After offsetting our deferred tax liabilities of $10.2 million,
we had a net deferred tax asset of $11.0 million.

Under SFAS 109, we must determine if it is more likely than not that we will realize the net deferred
tax assets as reductions in our tax liabilities in the future.  SFAS 109 requires objective evidence
to support the more likely than not conclusion.  The arbitration decision dramatically affected our
liquidity, which reduced the amounts we could invest in sales efforts or cost improvements, as most
free cash flow would now be used to pay RadioShack or repay our indebtedness.  In addition, it became
evident to us by March 2002 that the prolonged economic slowdown that started prior to September 11, 2001
was continuing.  This, coupled with the adverse effect on our liquidity of the settlement, caused us to
lower our projections of future taxable income.  Accordingly, we projected our expected future taxable
income utilizing operating performance we achieved in fiscal 2002 assuming our performance would be no
better or worse over an extended period of time.  Such projections indicate that we would not have taxable
income until 2009 when substantially all the tax benefit deductions had been taken.  At that point, the
projections indicated that our net operating losses existing at that time would be utilized before they
expire.  However, we currently have and expect to have taxable losses for a number of years in the future.
Projections over a long time are inherently uncertain, and we cannot provide objective evidence that our
operations in 2009 and beyond will produce sufficient taxable income.  As a result, we provided a valuation
allowance in our March 2002 quarter of $13.4 million against all of our net deferred tax assets with a
corresponding charge to income tax expense. Consistent with our prior accounting, both before and after the
recapitalization and merger, we did not record any deferred tax assets related to future deductions from
the step-up in basis or any future obligations to RadioShack as they were still contingent upon our taxable
income in the future.

Similarly,
in our June, September and December 2002 financial statements, we recorded a deferred tax
asset to the extent that we could not benefit currently from the increased deductions. We
then provided a valuation allowance against the additional deferred tax asset with a
corresponding charge to income tax expense on a quarter by quarter basis. We believed this
method was in conformity with accounting principles generally accepted in the United
States and consistent with our accounting for the tax sharing agreement since 1994.

In
the third quarter of fiscal 2003, OSullivan received a comment letter from the staff
of the SEC on the accounting for
the tax sharing agreement between RadioShack Corporation and us. In the course of
preparing our response to the SEC staffs comment letter, we, in consultation with our
independent accountants, reassessed our accounting for the tax sharing agreement with
RadioShack in light of the arbitration settlement with RadioShack and concluded that our
method of accounting for the tax sharing agreement should be changed. OSullivan determined
that the deferred tax asset created by the step-up in basis,
and the additional basis from the probable future payments to RadioShack should be recorded
as of February 1994.  At the same time, we recorded our obligation to RadioShack.  The amounts
of the deferred tax asset and obligation to RadioShack were each $147.9 million at February 1994.
From 1994 through 2001, we reduced the amount of the deferred tax asset and the obligation to RadioShack
as we realized the benefits of the deferred tax asset and paid RadioShack amounts due under
the tax sharing agreement.

At March 31, 2002, a full valuation allowance was provided against the $95.5 million net deferred tax
asset, which consists of the $11.0 million valuation allowance originally recorded in the March 2002 quarter
plus an additional $84.5 million representing the balance of the deferred tax asset at that time.  The
valuation allowance of $95.5 million together with the $3.4 million tax provision for the quarter
represent the $98.9 million recorded as tax expense in the March 2002 quarter. We recorded the valuation
allowance because we were unable to determine, based on objective evidence, that it was more likely than
not we would be able to utilize our net operating losses prior to their expiration.   If at a future date
we determine that some or all of the deferred tax asset will more likely than not be realized, we will reverse the appropriate portion of the valuation allowance and credit income tax
expense. The remaining maximum obligation to RadioShack was $109.1 million at March 31, 2002.  The obligation
to RadioShack was reduced by subsequent payments and was $75.2 million and $81.4 million at March 31, 2003
and June 30, 2002, respectively.  We currently believe that it is probable that future payments to
RadioShack will be made.

In summary, instead of accounting for our deferred tax assets resulting from the step-up in basis as tax expense
through a valuation allowance on a quarter by quarter basis as we make payments to RadioShack under the tax
sharing agreement, we revised our accounting to record the aggregate deferred tax asset and the obligation to
RadioShack in February 1994.  Our deferred tax asset has been reduced as we realized the benefits from 1994
to March 2002 and was fully offset by the March 2002 valuation allowance.  Therefore, this revised method of accounting
will increase our net income (or reduce our loss) and will increase our net income attributable to common stockholders
(or reduce the loss) by the amount we pay RadioShack for each quarterly
period after March 31, 2002 through the quarter ending March 31,
2009 or until we can determine, based on objective evidence, that it is more likely than not that we will be able
to utilize our net operating losses prior to their expiration and reverse all or a portion of the valuation
allowance on our deferred tax assets.

18

---

The
expected timing or amounts of our payments to RadioShack will not be affected by the
revised method of accounting, although the future payments to RadioShack are contingent upon our achieving
taxable income calculated on the basis stipulated in the settlement agreement. For the three months and
nine months ended March 31, 2003, we paid RadioShack $0 and $6.2 million, respectively, as the payment
for the March quarter was not due until April 15, 2003.

We
funded the back payment and subsequent payments from cash on hand.  We expect to fund future payments
from cash on hand or borrowings under our senior credit facility.

We
amended our senior credit facility in March 2002 as a result of the arbitration settlement. The
amendment excludes from the definition of consolidated fixed charges $27.0 million of the
total paid by us pursuant to the tax sharing agreement through the period ended
June 30, 2002.

# Recent Events

In June 2003, we sold the land and building we owned in Cedar City, Utah.  We used the net proceeds from the
sale to reduce indebtedness under our senior credit facility. The sale did not not require a further
significant adjustment from March 2003 to the carrying value of the land and building. No significant
assets remain from the closing of the facility.

As of June 30, 2003, we executed a fourth amendment to our senior credit facility.  The facility amends
certain financial covenants for quarters ending June 30, 2003 through June 30, 2004.  The amendment made several
other changes to the senior credit agreement, including reducing the revolving credit commitment from $40 million
to $30 million and increasing the excess cash flow prepayment percentage from 75% to 100%.  The interest rate on
loans under the senior credit facility was increased to LIBOR plus 4.75% or prime plus 3.75% for revolving credit
and tranche A loans and LIBOR plus 5.25% or prime plus 4.25% for tranche B loans.  In addition, we will pay an
additional interest of 2.0% on the outstanding balance of tranche B loans on July 2, 2004.

With the execution of the fourth amendment, we expect that it will be in compliance with its covenants
under the senior credit facility at June 30, 2003.

In June 2003, we completed a reduction in force of approximately 50 corporate employees.  The estimated
cash termination benefits associated with the reduction is $1.5 million. We accrued this cost in the fourth
quarter of fiscal 2003.

See
Cautionary Statement Regarding Forward Looking Information.

# Results of Operations

Net
Sales.Net sales for the quarter ended March 31, 2003 decreased by $18.6 million, or
17.6%, to $86.9 million from $105.5 million for the quarter ended March 31, 2002. Net
sales for the nine months ended March 31, 2003 decreased by $34.4 million, or 12.7%,
to $237.5 million from $272.0 million for the nine months ended March 31, 2002. Our
sales declined in nearly every major channel due to the economic uncertainties in the
United States and the other reasons cited above. The sales decline for the quarter and
year to date was attributable to lower unit sales.

In
January 2002, Kmart Corporation, which accounted for around 9% of our gross sales in
fiscal 2002, filed for Chapter 11 bankruptcy court protection. As part of its
reorganization, Kmart has closed or is closing a total of about 600 stores. The bankruptcy
court has approved Kmarts plan of reorganization, and Kmart emerged from Chapter 11
in May 2003. We resumed shipments to Kmart on a post-petition basis after the filing and
anticipate significant sales to Kmart in the future. However, there can be no assurance
that we will ship as much to Kmart as we did in prior periods or that Kmart will be
successful in its restructuring efforts.

In
August 2002, Ames Department Stores, Inc. decided to close all of its stores and
liquidate. We had anticipated sales to Ames would be less than 2% of our gross sales in
fiscal 2003.

Gross
Profit.Gross profit decreased to $21.2 million, or 24.5% of sales, for the three
month period ended March 31, 2003, from $30.5 million, or 28.9% of sales, for the
comparable prior year quarter. The gross margin percentage for the third quarter of fiscal
2003 declined primarily because of lower sales and operating levels, partially offset by
lower material costs, particularly for particleboard. For the nine months ended
March 31, 2003, gross profit declined to $60.9 million, or 25.7% of sales, from $72.6
million, or 26.7% of sales.

Selling,
Marketing and Administrative Expenses.Selling, marketing and administrative expenses
decreased to $11.9 million, or 13.7% of sales, for the three month period ended March 31,
2003, from $15.1 million, or 14.3% of sales, for the quarter ended March 31, 2002.
Freight out expense declined because of lower sales and a change in a major
customers program. Profit sharing and incentive compensation expenses declined in
the third quarter of fiscal 2003 because of lower sales and profits compared to the third
quarter of fiscal 2002.

19

---

For
the nine months ended March 31, 2003, selling, marketing and administrative expenses
decreased $6.9 million from $42.3 million in fiscal 2002 to $35.5 million in fiscal
2003. The major factors were a decrease in freight out expense due to the reasons stated
above and lower incentive compensation and profit sharing expenses because of our lower
sales and financial performance. Commission expenses declined because of lower sales
levels. Legal fees and bad debt expense were higher in fiscal 2002 because of the
RadioShack arbitration and Kmart bankruptcy, respectively.

Restructuring
Charge. In January 2001, OSullivan closed its Cedar City, Utah production
facility. Fixed assets with a net book value of $20.3 million were valued at the lower
of their carrying amount or fair value less cost to sell,
resulting in an impairment charge of approximately $8.7 million in the second quarter of
fiscal 2001. An additional impairment charge of $540,000 was recognized in the quarter
ended March 31, 2003. The additional charge resulted from subsequent changes in the
carrying amount of the assets held for sale due to unfavorable market conditions.

Depreciation
and Amortization.Depreciation and amortization expenses decreased to $3.7 million for
the third quarter of fiscal 2003 compared to $3.8 million for the third quarter of fiscal
2002. For the nine month periods ended March 31, 2003 and 2002, depreciation and
amortization expenses were $10.3 million and $10.8 million, respectively.
Depreciation and amortization declined because equipment placed into service during the
twelve months ended March 31, 2003 was less than the amount of equipment that became fully
depreciated during the same time period.

Operating
Income.Operating income decreased $6.6 million to $8.8 million for the quarter ended
March 31, 2003 from $15.4 million in the quarter ended March 31, 2002. Lower sales
and operating levels, as well as the restructuring charge, were partially offset by lower
material costs and lower selling, marketing and administrative expenses for the three
months ended March 31, 2003. For the nine months ended March 31, 2003, operating income
decreased $5.4 million from the nine months ended March 31, 2002. Decreased
income caused by lower sales and operating levels and the restructuring charge were
partially offset by reduced raw material prices, incentive compensation and profit sharing
expense and lower freight out expense, commission costs, legal fees and bad debt expense.

Net
Interest Expense.Net interest expense was $5.3 million in the third quarter of fiscal
2003, about the same as in the third quarter of fiscal 2002. Net interest expense declined
$3.0 million from $19.4 million for the first nine months of fiscal 2002 to $16.5 million
for the first nine months of fiscal 2003. Interest expense decreased due to the change in
fair value of our interest rate collar as well as our repayment of debt and lower variable
interest rates on a portion of our debt. The following table describes the components of
net interest expense.

|                                   | Three months ended
March 31, | Nine months ended
March 31,
|---------------------------------- | ---------------------------- | ---------------------------
|
|
|Interest expense on senior credit  |                              |                            
|facility, industrial revenue bonds |                              |                            
|and senior subordinated notes      |                              |                            
|Interest income                    |                              |                            
|Non-cash items:                    |                              |                            
|Interest rate collar               |                              |                            
|Amortization of debt discount      |                              |                            
|Amortization of loan fees          |                              |                            
|                                   |                              |                            
|Net interest expense               |                              |                            
|                                   |                              |                            

Income
Tax Provision. As a result of the RadioShack tax sharing agreement arbitration
decision in March 2002 and subsequent settlement in May 2002 (see Note 2 to the financial
statements), we recorded a tax provision for the third quarter of fiscal 2002
of $98.9 million.

20

---

We recorded no tax provisions for the three and nine
months ended March 31, 2003 as we have provided a valuation allowance on our net deferred tax assets.

Net
Income (Loss).Our net income increased from a fiscal 2002 third quarter loss of $88.8
million to a net profit of $3.5 million in fiscal 2003. Net income increased from a loss
of $88.3 million in the first nine months of fiscal 2002 to a net profit of $8.5 million
in the first nine months of fiscal 2003. The increase in net income was due primarily to
the fiscal 2002 income tax provision associated with the RadioShack tax sharing agreement
arbitration settlement. For comparison, our pre-tax income for the quarter and nine months
ended March 31, 2002 was $10.0 million and $10.9 million, respectively.

EBITDA.EBITDA, or earnings before interest, income taxes, depreciation and amortization,
          decreased by $6.7 million
          to $12.5 million for the quarter ended March 31, 2003 from $19.2 million
          for the prior year quarter. EBITDA for the fiscal 2003 third quarter decreased
          primarily due to lower sales and operating levels and the restructuring charge,
          partially offset by lower material costs and selling and administrative
          expenses. For the nine months ended March 31, 2003, EBITDA was $35.2 million,
          down $5.9 million from the nine months ended March 31, 2002. The decrease was
          due primarily to lower sales and operating levels and the restructuring charge,
          partially offset by lower material costs and lower selling and administrative
          expenses.

EBITDA
is presented to provide additional information about our operations. This item should be
considered in addition to, but not as a substitute for or superior to, operating income,
net income, operating cash flow and other measures of financial performance prepared in
accordance with generally accepted accounting principles. EBITDA may differ in the method
of calculation from similarly titled measures used by other companies. EBITDA provides
another measure of the operations of our business prior to the impact of
interest, taxes and depreciation and of our liquidity. Further, EBITDA is a common method of valuing highly
leveraged companies such as OSullivan, and EBITDA, with adjustments, is a component of each of the
financial covenants in our senior credit facility.

The
following table reconciles net income (loss) to EBITDA for the three months and nine
months ended March 31, 2003 and 2002.

|                              | Three months ended
March 31, | Nine months ended
March 31,
|----------------------------- | ---------------------------- | ---------------------------
|
|
|Net income (loss)             |                              |                            
|Income tax provision          |                              |                            
|Interest expense, net         |                              |                            
|                              |                              |                            
|Operating income              |                              |                            
|Depreciation and amortization |                              |                            
|                              |                              |                            
|EBITDA                        |                              |                            
|                              |                              |                            

# Liquidity and Capital
Resources

We are highly leveraged and have a stockholders deficit of $89.9 million at March 31, 2003.
Our liquidity requirements will be to pay our debt, including interest expense under the senior
credit facility and notes, to pay RadioShack amounts due under the tax sharing agreement and to
provide for working capital and capital expenditures. Our primary sources of liquidity are cash flows from
operations and borrowings under our senior secured credit facility, which is discussed below.
Decreased demand for our products could decrease our cash flow from operations and the availability
of borrowings under our credit facility.

Working
Capital.As of March 31, 2003, cash and cash equivalents totaled $17.6 million. Net
working capital was $47.3 million at March 31, 2003 compared to $51.6 million at June 30,
2002.

Operating
Activities.Net cash provided by operating activities for the nine months ended March
31, 2003 was $22.6 million compared to net cash provided of $45.4 million for the nine
months ended March 31, 2002. Cash flow from operations decreased year-over-year for
the following reasons.

21

---

| | -> | Reduced net sales and lower levels of operating profits reduced cash provided by operating
activities in fiscal 2003.
| | -- | ---------------------------------------------------------------------------------------------------------------------

| | -> | In fiscal 2003, we paid RadioShack $6.2 million under the tax sharing agreement.
| | -- | --------------------------------------------------------------------------------

| | -> | Accounts payable increased $6.7 million during the first nine months of fiscal 2002 but
only $594,000 during the first nine months of fiscal 2003. The change was due to
differences in the timing of plant shutdowns in the two years and to lower operating
levels in fiscal 2003.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | -> | Profit sharing and incentive compensation payments during the first half of fiscal 2003
were approximately $3.0 million higher than in the first half of fiscal 2002 because of
the respective prior year financial results.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | -> | Trade receivables were virtually unchanged in fiscal 2003, reducing cash by $23,000
compared with an increase of $5.0 million that decreased cash in fiscal 2002. The fiscal
2002 receivables increase was due to higher sales levels in the March 2002 quarter
compared to the June 2001 quarter.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | -> | Increases in accrued advertising provided net cash of $670,000 in fiscal 2003 compared to
$2.8 million during fiscal 2002. The decrease this year was due to lower sales and
associated decreases in vendor incentive programs. In addition, a particular customer
changed its pattern of claiming certain incentives, lowering accrued advertising.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | -> | In fiscal 2003, decreases in inventories provided $10.4 million of cash, compared with
$8.9 million in fiscal 2002.
| | -- | -------------------------------------------------------------------------------------------------------------------

Investing Activities.We invested $4.8 million for capital expenditures for the nine months
ended March 31, 2003 compared to $7.0 million for the prior year nine month period.
We currently estimate that the total capital expenditure requirements for the remainder of
the fiscal year will be approximately $250,000, which we expect to fund from cash flow
from operations or cash on hand. Our ability to make future capital expenditures is
subject to certain restrictions under our senior credit facility.

Financing Activities.  On November 30, 1999 we completed our recapitalization and merger.  Our
consolidated indebtedness at March 31, 2003 was $205.8 million consisting of:

| | · | $95.8 million in a senior secured credit facility consisting of a five year $14.7 million
term loan A, a seven and one-half year $81.1 million term loan B and a $40.0 million
revolving line of credit, with no borrowings at March 31, 2003. The current portion of
these term loans was approximately $4.4 million at March 31, 2003. The revolving line
of credit has a $15.0 million sub-limit for letters of credit, of which we are currently
utilizing approximately $13.8 million.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | $100.0 million in 13-3/8% senior subordinated notes due 2009 issued with warrants to
purchase 6.0% of our common and Series B junior preferred stock on a fully diluted basis.
These warrants were assigned a value of $3.5 million. These notes were issued at a price
of 98.046% providing $98.0 million in cash proceeds before expenses related to the
issuance.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | $10.0 million in variable rate industrial revenue bonds.
| | - | --------------------------------------------------------

22

---

The reconciliation of consolidated
indebtedness to recorded book value at March 31, 2003 is as follows:

|                         | Consolidated
Indebtedness | Current
Portion | Original
Issue
Discount
Net of
Accretion | Warrants
Net of
Accretion | Recorded
Book Value
|------------------------ | ------------------------- | --------------- | ---------------------------------------- | ------------------------- | -------------------
|
|Term loan A              |                           |                 | $                                        | 14,677                    |                    
|Term loan B              |                           |                 |                                          | 81,116                    |                    
|                         |                           |                 |                                          |                           |                    
|Senior secured credit    |                           |                 |                                          | 95,793                    |                    
|Senior subordinated note |                           |                 |                                          | 100,000                   |                    
|Industrial revenue bonds |                           |                 |                                          | 10,000                    |                    
|                         |                           |                 |                                          |                           |                    
|Total                    |                           |                 | $                                        | 205,793                   |                    
|                         |                           |                 |                                          |                           |                    

During
the nine months ended March 31, 2003, we repaid $16.7 million of our indebtedness,
including $14.1 million of prepayments. We expect to fund principal and interest payments
on our debt from cash flow from operations, cash on hand or borrowings under our revolver.
Our borrowing availability under our credit facility was approximately $8.8 million at
March 31, 2003. Decreased demand for our products could decrease our cash flow from
operations and the availability of borrowings under our credit facility.

The
credit facility and notes are subject to certain financial and operational covenants and
other restrictions, including among others, requirements to maintain certain financial
ratios and restrictions on our ability to incur additional indebtedness. The financial
covenants contained in the credit facility, as amended effective June 30, are as follows:

| | -> | Our consolidated leverage ratio must be less than 4.25. The ratio at March 31, 2003 was
4.08. At June 30, 2003, our consolidated leverage ratio must be less than 5.00.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | -> | Our consolidated interest coverage ratio must be greater than 2.00. The ratio at March 31,
2003 was 2.03. At June 30, 2003, our consolidated interest coverage ratio must be greater
than 1.75.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | -> | Our consolidated fixed charge coverage ratio must be greater than 1.10. The ratio at March
31, 2003 was 1.25. At June 30, 2003, our consolidated fixed charge coverage ratio must be
greater than 1.00.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | -> | Our senior debt coverage ratio must be less than 2.50. The ratio at March 31, 2003 was
2.09. At June 30, 2003, our senior debt coverage ratio must be less than 2.50.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | -> | Our consolidated EBITDA as defined in the credit facility must be at least $42 million for the fiscal year ending June 30,
2003.
| | -- | --------------------------------------------------------------------------------------------------------------------------------

EBITDA and consolidated interest
expense as defined in the senior credit facility for the twelve and nine month periods
ended March 31, 2003 were $50.5 million and $36.7 million, respectively.
OSullivan Industries is the borrower under the senior credit facility, so the
covenants do not include the $21.0 million senior note of OSullivan Industries
Holdings, Inc. or interest on the note. Pursuant to an amendment to our senior credit
facility, $27.0 million of our payments to RadioShack under the tax sharing agreement
through the period ending June 30, 2002 are excluded from the definition of consolidated
fixed charges and thus from calculations of the consolidated fixed charge coverage ratio.

In
addition, the agreements effectively prohibit the payment of dividends on our stock.

At March
31, 2003, we were in compliance with all applicable debt covenants. We expect to be in
compliance with the amended covenants at June 30, 2003.

23

---

See
the overview section of this Managements Discussion and Analysis of Financial
Condition and Results of Operations for a discussion of the impact of the Settlement
Agreement with RadioShack on our liquidity and financial condition.

The
following table illustrates our contractual obligations due in the future:

|                                   | Payments Due by Period
|---------------------------------- | ----------------------
|
|
|Long-term debt                     |                       
|Tax benefit payments to            |                       
|RadioShack(1)                      |                       
|Capital lease obligations          |                       
|Operating leases--unconditional    |                       
|Other long-term obligations        |                       
|                                   |                       
|Total contractual cash obligations |                       
|                                   |                       

(1)    
          Timing and amount of payments to RadioShack are contingent on actual taxable income
          adjusted to exclude the increased interest expense arising from the recapitalization
          and merger.  The amounts in the table above represent the maximum amounts payable to RadioShack.

# Critical Accounting
Policies and Estimates

Our
discussion and analysis of our financial condition and results of operations are based
upon our consolidated financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States. The preparation of these
financial statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities.

On
an on-going basis, we evaluate our estimates, including those related to customer
programs and incentives, bad debts, inventories, intangible assets, income taxes,
restructuring, asset impairments, contingencies and litigation. We base our estimates on
historical experience and on various other assumptions that we believe are reasonable
under the circumstances. The results of these estimates form the basis for making
judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates under
different assumptions or conditions.

We
believe the following critical accounting policies affect our more significant judgments
and estimates used in the preparation of our consolidated financial statements.

| | -> | We derive our revenue from product sales. We recognize revenue from the sale of products
when persuasive evidence of an arrangement exists, the product has been delivered, the
price is fixed and determinable and collection of the resulting receivable is reasonably
assured. For all sales, we use purchase orders from the customer, whether oral, written or
electronically transmitted, as evidence that a sales arrangement exists. Generally,
delivery occurs when product is delivered to a common carrier or private carrier, with
standard terms being FOB shipping point. We assess whether the price is fixed and
determinable based upon the payment terms associated with the transaction. We assess
collection based on a number of factors, including past transaction history with the
customer and the creditworthiness of the customer. Collateral is not requested from
customers.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | -> | We record estimated reductions to revenue for customer programs and incentive offerings including
special pricing agreements, price protection, promotions and other volume-based incentives.  Market
conditions could require us to take actions to increase customer incentive offerings. These offerings
could result in our estimates being too small and reduce our revenues when the incentive
is offered.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

24

---

| | -> | We maintain allowances for doubtful accounts for estimated losses resulting from the
inability of our customers to make required payments. If the financial condition of our
customers were to deteriorate, resulting in an impairment of their ability to make
payments, additional allowances may be required.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | -> | We write down our inventory for estimated obsolescence or unmarketable inventory equal to
the difference between the cost of inventory and its estimated market value based upon
assumptions about future demand and market conditions. If actual market conditions are
less favorable than those projected by us, additional inventory write-downs may be
required. Obsolete and slow-moving inventory reserves were approximately $4.3 million and
$5.7 million at March 31, 2003 and 2002, respectively.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | -> | We record our deferred tax assets at the amount that the asset is more likely than not to
be realized. While we have considered future taxable income and ongoing prudent and
feasible tax planning strategies in assessing the need for a valuation allowance, our
determinations can change. If we objectively determine it was more likely than not we
would be able to realize our deferred tax assets in the future in excess of our recorded
amount, we would reduce our valuation allowance, increasing income in the period such
determination was made. Likewise, should we determine that we would not be able to realize
all or part of our recorded gross deferred tax assets in the future, we would increase our
valuation allowance, decreasing income in the period such determination was made.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | -> | We periodically review our long-lived assets, including property and equipment, for
impairment and determine whether an event or change in facts and circumstances indicates
their carrying amount may not be recoverable. We determine recoverability of the assets by
comparing the carrying amount of the assets to the net future undiscounted cash flows
expected to be generated by those assets. If the sum of the undiscounted cash flows is
less than the carrying value of the assets, an impairment charge is recognized. Adverse
economic conditions could cause us to record impairment charges in the future.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | -> | We assess goodwill regularly for impairment by applying a fair-value-based test, using the
enterprise as the reporting unit. If the book value of the reporting unit is below the
fair value of the reporting unit, there is no impairment loss. Adverse economic conditions
could cause us to record impairment charges in the future.
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Cautionary Statement
Regarding Forward Looking Information.

Certain
portions of this Report, and particularly the Notes to the Consolidated Financial
Statements and the Managements Discussion and Analysis of Financial Condition and
Results of Operations, contain forward-looking statements. These statements can be
identified by the use of future tense or dates or terms such as believe,
would, expect, anticipate or plan. These
forward-looking statements involve risks and uncertainties.

25

---

Actual results may differ materially from
those predicted by the forward-looking statements. Factors and possible events which could
cause results to differ include:

|· | loss of liquidity due to the arbitration panel's opinion in RadioShack Corporation v. O'Sullivan
Industries Holdings, Inc.;
|- | ---------------------------------------------------------------------------------------------------------------------------

|· | significant indebtedness that may limit our financial and operational flexibility;
|- | ----------------------------------------------------------------------------------

|· | changes from anticipated levels of sales, whether due to future national or
regional economic and competitive
conditions, including new domestic or foreign entrants into the industry, customer
acceptance of existing and new products, terrorist attacks or otherwise, as we are
experiencing now;
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|· | pricing pressures due to excess capacity in the ready-to-assemble furniture industry, as
occurred in 1995 and is occurring again now, or customer demand in excess of our ability
to supply product;
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|· | raw material cost increases, particularly in particleboard and fiberboard, as occurred in
1994 and 1995 and to a lesser extent in fiscal 2000;
|- | ----------------------------------------------------------------------------------------------------------------------------------------------

|· | transportation cost increases, due to higher fuel costs or otherwise;
|- | ---------------------------------------------------------------------

|· | loss of or reduced sales to significant customers as a result of bankruptcy, liquidation, merger,
              acquisition or any other reason, as occurred with the liquidation of Montgomery Ward in fiscal 2001,
              the liquidation of Ames in 2002 and with the reorganization of Service Merchandise Co., Inc. in 2000;
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|· | actions of current or new competitors, foreign or domestic, that increase competition with our products
              or prices;
|- | --------------------------------------------------------------------------------------------------------------------------------

|· | the consolidation of manufacturers in the ready-to-assemble furniture industry;
|- | -------------------------------------------------------------------------------

|· | increased advertising costs associated with promotional efforts;
|- | ----------------------------------------------------------------

|· | increased
interest rates;
|- | -------------------------

|· | pending or new litigation or governmental regulations such as the
recently settled arbitration involving RadioShack;
|- | --------------------------------------------------------------------------------------------------------------------

|· | other uncertainties which are difficult to predict or beyond our control; and
|- | -----------------------------------------------------------------------------

|· | the risk that we incorrectly analyze these risks and forces, or that the strategies we
develop to address them could be unsuccessful.
|- | -------------------------------------------------------------------------------------------------------------------------------------

See also the Risk Factors section in
our annual report on Form 10-K for the year ended June 30, 2002.

Because
these forward-looking statements involve risks and uncertainties, actual results may
differ significantly from those predicted in these forward-looking statements. You should
not place a lot of weight on these statements. These statements speak only as of the date
of this document or, in the case of any document incorporated by reference, the date of
that document.

All
subsequent written and oral forward-looking statements attributable to OSullivan or
any person acting on our behalf are qualified by the cautionary statements in this
section. We will have no obligation to revise these forward-looking statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Our
market risk is impacted by changes in interest rates, foreign currency exchange rates and
certain commodity prices. Pursuant to our policies, we may use natural hedging techniques
and derivative financial instruments to reduce the impact of adverse changes in market
prices. We do not hold or issue derivative instruments for trading purposes. A change in
interest rates of one percentage point would affect our cash interest expense by about
$1.1 million per year.

We
have market risk in interest rate exposure, primarily in the United States. We manage
interest rate exposure through our mix of fixed and floating rate debt. Interest rate
swaps or collars may be used to adjust interest rate exposures when appropriate based on
market conditions. For qualifying hedges, the interest differential of swaps is included
in interest expense. Our interest rate collar expired on March 31, 2003. Approximately
$105.8 million of our debt at March 31, 2003 is subject to variable interest rates. We
believe that our foreign exchange risk is not material.

26

---

Due
to the nature of our product lines, we have material sensitivity to some commodities,
including particleboard, fiberboard, corrugated cardboard and hardware. We manage
commodity price exposures primarily through the duration and terms of our vendor
contracts. A one percent change in our raw material prices would affect our cost of sales
by approximately $1.5 million annually.

As
noted above, in fiscal 2000 we encountered price increases in certain commodities, which
reduced our gross margin. During fiscal 2001, prices for these products declined, which
helped gross margins. We saw small increases in particleboard pricing in the third quarter
of fiscal 2003. Prices for these and other commodities will continue to fluctuate.

# ITEM 4. CONTROLS AND
PROCEDURES.

OSullivan
maintains disclosure controls and procedures (as defined in Rule 13a-14(c) of the
Securities Exchange Act of 1934) that are designed to ensure that information required to
be disclosed in OSullivans Exchange Act reports is recorded, processed,
summarized and reported accurately within the time periods specified in the SECs
rules and forms, and that such information is accumulated and communicated to
OSullivans Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow timely decisions regarding required disclosures. In designing and
evaluating the disclosure controls and procedures, management recognized that any controls
and procedures, no matter how well designed and operated, can provide only reasonable
assurance of achieving the desired control objectives, and management was necessarily
required to apply its judgment in evaluating the cost-benefit relationship of possible
controls and procedures.

Within
90 days prior to the date of this report, OSullivan carried out an evaluation, under
the supervision and with the participation of OSullivans management, including
OSullivans Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of OSullivans disclosure controls
and procedures. Based on the foregoing, OSullivans Chief Executive Officer and
Chief Financial Officer concluded that OSullivans disclosure controls and
procedures were effective.

There
have been no significant changes in OSullivans internal controls or in other
factors that could significantly affect the internal controls subsequent to the date
OSullivan completed its evaluation. Therefore, no corrective actions were taken.

27

---

# PART II  OTHER
INFORMATION

# ITEM 6. EXHIBITS AND
REPORTS ON FORM 8-K.

(a)    Exhibits:

A
list of exhibits required to be filed as part of this Report is set forth in the Index to
Exhibits, which immediately precedes such exhibits, and is incorporated herein by
reference.

(b)    Reports on Form
8-K:

none

28

---

# SIGNATURES

Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.

| |  |                            
| |  | ---------------------------
| |  | O'SULLIVAN INDUSTRIES, INC.
| |  |                            

|Date: | August 4, 2003 | By: | /s/ Richard D. Davidson
|----- | -------------- | --- | -----------------------
|      |                |     |                        
|      |                |     | Richard D. Davidson    
|      |                |     | President and          
|      |                |     | Chief Executive Officer



|Date: | August 4, 2003 | By: | /s/ Phillip J. Pacey                        
|----- | -------------- | --- | --------------------------------------------
|      |                |     |                                             
|      |                |     | Phillip J. Pacey                            
|      |                |     | Senior Vice President and                   
|      |                |     | Chief Financial Officer                     
|      |                |     | (Principal Financial and Accounting Officer)

29

---

# CERTIFICATION

I,
Richard D. Davidson, certify that:

1.    
          I have reviewed this quarterly report on Form 10-Q of OSullivan
          Industries, Inc.;

2.    
          Based on my knowledge, this quarterly report does not contain any untrue
          statement of a material fact or omit to state a material fact necessary to make
          the statements made, in light of the circumstances under which such statements
          were made, not misleading with respect to the period covered by this quarterly
          report;

3.    
          Based on my knowledge, the financial statements, and other financial information
          included in this quarterly report, fairly present in all material respects the
          financial condition, results of operations and cash flows of the registrant as
          of, and for, the periods presented in this quarterly report;

4.    
          The registrants other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

|a) | designed such disclosure controls and procedures to ensure that material
          information relating to the registrant, including its consolidated subsidiaries,
          is made known to us by others within those entities, particularly during the
          period in which this quarterly report is being prepared;
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) | evaluated the effectiveness of the registrants disclosure controls and
          procedures as of a date within 90 days prior to the filing date of this
          quarterly report (the Evaluation Date); and
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|c) | presented in this quarterly report our conclusions about the effectiveness of
          the disclosure controls and procedures based on our evaluation as of the
          Evaluation Date;
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5.    
          The registrants other certifying officers and I have disclosed, based on
          our most recent evaluation, to the registrants auditors and the audit
          committee of registrants board of directors (or persons performing the
          equivalent function):

|a) | all significant deficiencies in the design or operation of internal controls
          which could adversely affect the registrants ability to record, process,
          summarize and report financial data and have identified for the
          registrants auditors any material weaknesses in internal controls; and
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) | any fraud, whether or not material, that involves management or other employees
          who have a significant role in the registrants internal controls; and
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

6.    
          The registrants other certifying officers and I have indicated in this
          quarterly report whether or not there were significant changes in internal
          controls or in other factors that could significantly affect internal controls
          subsequent to the date of our most recent evaluation, including any corrective
          actions with regard to significant deficiencies and material weaknesses.

|Date: | August 4, 2003 |  | /s/ Richard D. Davidson
|----- | -------------- |  | -----------------------
|      |                |  |                        
|      |                |  | Richard D. Davidson    
|      |                |  | President and          
|      |                |  | Chief Executive Officer

30

---

# CERTIFICATION

I,
Phillip J. Pacey, certify that:

1.    
          I have reviewed this quarterly report on Form 10-Q of OSullivan
          Industries, Inc.;

2.    
          Based on my knowledge, this quarterly report does not contain any untrue
          statement of a material fact or omit to state a material fact necessary to make
          the statements made, in light of the circumstances under which such statements
          were made, not misleading with respect to the period covered by this quarterly
          report;

3.    
          Based on my knowledge, the financial statements, and other financial information
          included in this quarterly report, fairly present in all material respects the
          financial condition, results of operations and cash flows of the registrant as
          of, and for, the periods presented in this quarterly report;

4.    
          The registrants other certifying officers and I are responsible for
          establishing and maintaining disclosure controls and procedures (as defined in
          Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

|a) | designed such disclosure controls and procedures to ensure that material
          information relating to the registrant, including its consolidated subsidiaries,
          is made known to us by others within those entities, particularly during the
          period in which this quarterly report is being prepared;
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) | evaluated the effectiveness of the registrants disclosure controls and
          procedures as of a date within 90 days prior to the filing date of this
          quarterly report (the Evaluation Date); and
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|c) | presented in this quarterly report our conclusions about the effectiveness of
          the disclosure controls and procedures based on our evaluation as of the
          Evaluation Date;
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5.    
          The registrants other certifying officers and I have disclosed, based on
          our most recent evaluation, to the registrants auditors and the audit
          committee of registrants board of directors (or persons performing the
          equivalent function):

|a) | all significant deficiencies in the design or operation of internal controls
          which could adversely affect the registrants ability to record, process,
          summarize and report financial data and have identified for the
          registrants auditors any material weaknesses in internal controls; and
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b) | any fraud, whether or not material, that involves management or other employees
          who have a significant role in the registrants internal controls; and
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

6.    
          The registrants other certifying officers and I have indicated in this
          quarterly report whether or not there were significant changes in internal
          controls or in other factors that could significantly affect internal controls
          subsequent to the date of our most recent evaluation, including any corrective
          actions with regard to significant deficiencies and material weaknesses.

|Date: | August 4, 2003 |  | /s/ Phillip J. Pacey     
|----- | -------------- |  | -------------------------
|      |                |  |                          
|      |                |  | Phillip J. Pacey         
|      |                |  | Senior Vice President and
|      |                |  | Chief Financial Officer  

31

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# INDEX TO EXHIBITS

|Exhibit No. | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                        | Page
 No.
|----------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |          
|3.1 & 4.1   | Certificate of Incorporation of O'Sullivan, as amended (incorporated by reference from
Exhibit 3.1(a) to Registration Statement on Form S-4 (File No. 333-31282))                                                                                                                                                                                                                                                                                                  |          
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |          
|3.2 & 4.2   | Bylaws of O'Sullivan (incorporated by reference from Exhibit 3.3 to Registration
Statement on Form S-4 (File No. 333-31282))                                                                                                                                                                                                                                                                                                                                       |          
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |          
|4.3         | Indenture dated as of November 30, 1999, by O'Sullivan Industries, Inc., as Issuer,
O'Sullivan Industries - Virginia, Inc., as Guarantor, and Norwest Bank Minnesota,
National Association, as Trustee, relating to O'Sullivan Industries, Inc.'s $100,000,000
principal amount of 13.375% senior subordinated notes (incorporated by reference to
Exhibit 4.4 to Quarterly Report on Form 10-Q for the quarter ended March 31, 1999
(File No. 0-28493))           |          
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |          
|4.4         | Warrant Agreement dated as of November 30, 1999 between O'Sullivan Industries
Holdings, Inc. and Norwest Bank Minnesota, National Association, as Warrant Agent,
relating to warrants to purchase 39,273 shares of O'Sullivan Industries Holdings, Inc.
Series B junior preferred stock, including form of warrant certificate (incorporated by
reference to Exhibit 4.5 to Quarterly Report on Form 10-Q for the quarter ended March 31,
1999 (File No. 0-28493)) |          
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |          
|4.5         | Warrant Agreement dated as of November 30, 1999 between O'Sullivan Industries
Holdings, Inc. and Norwest Bank Minnesota, National Association, as Warrant Agent,
relating to warrants to purchase 93,273 shares of O'Sullivan Industries Holdings, Inc.
common stock, including form of warrant certificate (incorporated by reference to
Exhibit 4.6 to Quarterly Report on Form 10-Q for the quarter ended December 31, 1999
(File No. 0-28493))                 |          
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |          
|99.1        | Certificate of chief executive officer under Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                         | 33       
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |          
|99.2        | Certificate of chief financial officer under Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                         | 34       

32

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Exhibit 99.1

Certification
of Chief Executive Officer underSection 906 of the Sarbanes-Oxley Act of 2002

I
hereby certify that the Quarterly Report on Form 10-Q of OSullivan Industries, Inc.
for the quarter ended March 31, 2003 fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934, and that the
information contained in such quarterly report fairly presents, in all material respects,
the financial condition and results of operations of OSullivan Industries, Inc.

|Date: | August 4, 2003 |  | /s/ Richard D. Davidson
|----- | -------------- |  | -----------------------
|      |                |  |                        
|      |                |  | Richard D. Davidson    
|      |                |  | President and          
|      |                |  | Chief Executive Officer

A signed original of this written
statement required by Section 906 has been provided to OSullivan Industries, Inc.
and will be retained by OSullivan Industries, Inc. and furnished to the Securities
and Exchange Commission or its staff upon request

---

Exhibit 99.2

Certification
of Chief Financial Officer underSection 906 of the Sarbanes-Oxley Act of 2002

I
hereby certify that the Quarterly Report on Form 10-Q of OSullivan Industries, Inc.
for the quarter ended March 31, 2003 fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934, and that the
information contained in such quarterly report fairly presents, in all material respects,
the financial condition and results of operations of OSullivan Industries, Inc.

|Date: | August 4, 2003 |  | /s/ Phillip J. Pacey     
|----- | -------------- |  | -------------------------
|      |                |  |                          
|      |                |  | Phillip J. Pacey         
|      |                |  | Senior Vice President and
|      |                |  | Chief Financial Officer  

A signed original of this written
statement required by Section 906 has been provided to OSullivan Industries, Inc.
and will be retained by OSullivan Industries, Inc. and furnished to the Securities
and Exchange Commission or its staff upon request