<PAGE>

================================================================================
                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


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

For the quarterly period ended March 31, 2002

                                       OR

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

For the transition period from _____________ to _________________

Commission file number: 333-31282


                           O'SULLIVAN INDUSTRIES, INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                                                       <C>
                              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)
</TABLE>

                                 (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. Yes [X]   No
                                              ---      ---

         As of May 15, 2002, 100 shares of Common Stock of O'Sullivan
Industries, Inc., par value $1.00 per share, were outstanding.


================================================================================



                    The Index to Exhibits begins on page 28.

                                  Page 1 of 28

<PAGE>



                                     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)


<TABLE>
<CAPTION>
                                                                                         March 31,        June 30,
                                       Assets                                              2002             2001
                                                                                       -------------     ----------
Current assets:
<S>                                                                                   <C>              <C>
   Cash and cash equivalents                                                          $       38,476   $      7,060
   Trade receivables, net of allowance for doubtful accounts
      of $3,960 and $4,750, respectively                                                      56,304         52,570
   Inventories, net                                                                           39,687         48,538
   Prepaid expenses and other current assets                                                   2,267          8,820
                                                                                        ------------     ----------
         Total current assets                                                                136,734        116,988
Property, plant and equipment, net                                                            90,435         95,872
Other assets                                                                                  10,451         11,912
Goodwill, net of accumulated amortization                                                     38,088         38,088
Receivable from parent                                                                             -            609
                                                                                        ------------     ----------
                Total assets                                                          $      275,708   $    263,469
                                                                                        ============     ==========

                        Liabilities and Stockholder's Deficit

Current liabilities:
   Accounts payable                                                                   $       15,240   $      8,534
   Current portion of long-term debt                                                           3,987          3,696
   Accrued advertising                                                                        13,073         10,285
   Accrued liabilities                                                                        19,557         14,156
   Payable to parent                                                                          24,701              -
                                                                                        ------------     ----------
         Total current liabilities                                                            76,558         36,671
Long-term debt, less current portion                                                         214,691        222,386
Other liabilities                                                                              3,133          3,338
Deferred income taxes                                                                              -         15,624
                                                                                        ------------     ----------
                Total liabilities                                                            294,382        278,019
Commitments and contingent liabilities (Notes 2, 9 and 10)
Stockholder's deficit:
   Common stock; $1.00 par value, 100 shares authorized, issued and outstanding                    -              -
   Retained deficit                                                                         (18,040)       (14,214)
   Accumulated other comprehensive loss                                                        (634)          (336)
                                                                                        ------------     ----------
                Total stockholder's deficit                                                 (18,674)       (14,550)
                                                                                        ------------     ----------
                Total liabilities and stockholder's deficit                           $      275,708   $    263,469
                                                                                        ============     ==========
</TABLE>


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



                                       2
<PAGE>


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

<TABLE>
<CAPTION>
                                                                  Three months ended          Nine months ended
                                                                       March 31,                   March 31,
                                                                 ---------------------       --------------------
                                                                   2002          2001          2002         2001
                                                                 --------       ------       -------      -------
<S>                                                            <C>           <C>          <C>           <C>
Net sales                                                      $  105,467     $ 97,636     $ 271,974    $ 274,603
Cost of sales                                                      74,961       72,545       199,335      208,586
                                                               ----------     --------     ---------    ---------
Gross profit                                                       30,506       25,091        72,639       66,017
Operating expenses:
    Selling, marketing and administrative                          15,108       13,950        42,347       42,405
    Restructuring charge                                                -            -             -       10,506
                                                               ----------     --------     ---------    ---------
Total operating expenses                                           15,108       13,950        42,347       52,911
Operating income                                                   15,398       11,141        30,292       13,106
Other income (expense):
   Interest expense                                                (5,490)      (9,069)      (19,691)     (25,279)
   Interest income                                                    108          170           263          407
                                                               ----------     --------     ---------    ---------
Income (loss) before income tax provision                          10,016        2,242        10,864      (11,766)
    and cumulative effect of accounting change
Income tax provision (benefit)                                     14,394          891        14,690       (4,118)
                                                               ----------     --------     ---------    ---------
Income (loss) before cumulative effect of accounting               (4,378)       1,351        (3,826)      (7,648)
    change
Cumulative effect of accounting change, net of income
       tax benefit of $53                                               -            -             -          (95)
                                                               ----------     --------     ---------    ---------
Net income (loss)                                              $   (4,378)    $  1,351     $  (3,826)   $  (7,743)
                                                               ==========     ========     =========    =========

</TABLE>



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



                                       3
<PAGE>


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

<TABLE>
<CAPTION>
                                                                                           Nine months ended
                                                                                                March 31,
                                                                                        ------------------------
                                                                                           2002          2001
                                                                                        ---------      ---------
<S>                                                                                     <C>            <C>
Cash flows provided by operating activities:
     Net loss                                                                           $  (3,826)     $  (7,743)
     Adjustments to reconcile net loss to net cash provided by operating
       activities:
         Depreciation and amortization                                                     10,796         11,248
         Amortization of debt issuance costs                                                1,178          1,178
         Amortization of debt discount                                                        253            221
         Interest rate collar                                                                  99          2,034
         Bad debt expense                                                                   1,310            241
         Loss on disposal of assets                                                           422            112
             Impairment of long-lived assets to be sold                                         -          8,677
             Deferred income taxes                                                        (10,288)        (2,907)
         Accrual of special payment on options to purchase Series A
             junior preferred stock                                                           803            702
     Changes in current assets and liabilities:
         Trade receivables                                                                 (5,044)         2,043
         Inventories                                                                        8,851          9,739
         Other assets                                                                         907         (1,023)
         Accounts payable, accrued liabilities and other liabilities                       15,310         (7,005)
                                                                                        ---------      ---------
Net cash flows provided by operating activities                                            20,771         17,517
                                                                                        ---------      ---------
Cash flows used for investing activities:
     Capital expenditures                                                                  (7,007)       (14,334)
                                                                                        ---------      ---------
Cash flows provided (used) by financing activities:
     Repayment of borrowings                                                               (7,658)        (2,000)
     Advances on intercompany loans                                                        25,310            383
                                                                                        ---------      ---------
         Net cash flows used by financing activities                                       17,652         (1,617)
                                                                                        ---------      ---------
Net increase in cash and cash equivalents                                                  31,416          1,566
Cash and cash equivalents, beginning of period                                              7,060         11,867
                                                                                        ---------      ---------
Cash and cash equivalents, end of period                                                $  38,476      $  13,433
                                                                                        =========      =========
Non-cash financing activities:
     Capital expenditures included in accounts payable                                  $     299      $     415
</TABLE>



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




                                       4
<PAGE>



                  O'SULLIVAN INDUSTRIES, INC. AND SUBSIDIARIES
       (A wholly owned subsidiary of O'Sullivan Industries Holdings, Inc.)
           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S DEFICIT
                                 (in thousands)

<TABLE>
<CAPTION>
                                                        Accumulated
                                                           other            Total
                                           Retained    comprehensive    stockholder's      Comprehensive
                                           deficit         loss            deficit         Income (loss)
                                          ---------    -------------    -------------     --------------
<S>                                     <C>         <C>               <C>               <C>
Balance, June 30, 2001                    $(14,214)   $         (336)   $     (14,550)
     Net loss                               (3,826)                            (3,826)    $      (3,826)
     Other comprehensive loss                                   (298)            (298)             (298)
                                          ---------   ---------------   --------------    --------------
Balance, March 31, 2002                   $(18,040)   $         (634)   $     (18,674)    $      (4,124)
                                          =========   ===============   ==============    ==============
</TABLE>


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



                                       5
<PAGE>


                           O'SULLIVAN INDUSTRIES, INC.
       (A WHOLLY OWNED SUBSIDIARY OF O'SULLIVAN INDUSTRIES HOLDINGS, INC.)
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2002

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, 2001. The interim results
are not necessarily indicative of the results that may be expected for a full
year.

NOTE 2--RESTRUCTURING CHARGE

         In November 2000, O'Sullivan announced a business restructuring plan to
reduce production capacity and operating expenses. The plan included the January
2001 shutdown of the Cedar City, Utah production facility and reduction of the
administrative and support staff in the Lamar, Missouri headquarters. In
connection with the plan, O'Sullivan recorded a charge of $10.5 million in the
second quarter of fiscal 2001.

         O'Sullivan is actively attempting to sell the Utah land, building and
excess equipment as soon as practicable. Certain equipment has been relocated to
the Missouri and Virginia plants. Fixed assets with a net book value of $20.3
million were written down to estimated fair value, resulting in an impairment
charge of approximately $8.7 million. The impairment charge is reflected in
accumulated depreciation on the accompanying consolidated balance sheets. The
fair value is an estimate, and the impairment may be adjusted in the future.

         The components of the restructuring charge and an analysis of the
amounts charged against the accrual are outlined below.

<TABLE>
<CAPTION>
                                                          Charges
                                           Charges        through       Balance,     through         Balance,
                                           Original       June 30,      June 30,      March          March 31,
     Restructuring Charges                 Accrual          2001         2001        31, 2002         2002
---------------------------------        ------------    ----------    ---------   -----------     -----------
                                                                      (in thousands)
<S>                                     <C>             <C>           <C>         <C>             <C>
Employee termination benefits(1)        $       1,302   $       915   $      387  $        387    $          -
Other Utah facility exit costs(1)                 527           282          245           245               -
                                        -------------   -----------   ----------  ------------    ------------
     Total                              $       1,829   $     1,197   $      632  $        632    $          -
                                        =============   ===========   ==========  ============    ============
</TABLE>

(1)Included in accrued liabilities in the accompanying
   consolidated balance sheets.

Accumulated depreciation was increased $8.7 million to record asset impairments.

NOTE 3--DERIVATIVE FINANCIAL INSTRUMENTS

         O'Sullivan adopted Statement of Financial Accounting Standards ("SFAS")
No. 133, Accounting for Derivative Instruments and Hedging Activities, on July
1, 2000. As required by the transition provisions of SFAS 133, O'Sullivan
recorded a net-of-tax cumulative-effect type loss of $95,000 in fiscal 2001 to
recognize the fair value of its derivatives designated as cash-flow hedging
instruments.




                                       6
<PAGE>


         As required under the 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 expires in March
2003, is based on three-month LIBOR and has a floor of 6.43% and a ceiling of
8.75%. O'Sullivan recorded additional (reduced) interest expense of $(828,000)
and $1.1 million for the quarters ended March 31, 2002 and March 31, 2001,
respectively. For the nine months ended March 31, 2002 and March 31, 2001,
O'Sullivan recognized additional interest expense associated with the interest
rate collar of $99,000 and $2.0 million, respectively. These amounts represent
the changes in fair value of the interest rate collar. To terminate this
contract at March 31, 2002 and June 30, 2001, O'Sullivan would have been
required to pay the counter-party approximately $2.2 million and $2.1 million,
respectively. Prior to March 31, 2002, these amounts have been recorded in other
liabilities in the accompanying consolidated balance sheets. Because the
interest rate collar expires in March 2003, the fair value of the interest rate
collar on March 31, 2002 has been reclassified to accrued liabilities in the
accompanying consolidated balance sheets.

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 are currently 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. Reclassifications for prior fiscal year three month and
nine month periods ending March 31, 2001 were $3.5 million and $13.6 million,
respectively.

         The Financial Accounting Standards Board ("FASB") issued SFAS 142,
Goodwill and Other Intangible Assets, on June 30, 2001. O'Sullivan adopted SFAS
142 on July 1, 2001, the beginning of its 2002 fiscal year. With the adoption of
SFAS 142, goodwill of approximately $38.1 million is no longer subject to
amortization over its estimated useful life. Rather, goodwill will be assessed
regularly for impairment by applying a fair-value-based test. SFAS 142 requires
that the initial impairment test be performed within six months of the adoption
date. O'Sullivan has completed the initial valuation of the reporting unit,
using the enterprise as the reporting unit. Because the book value of the
reporting unit is below the fair value of the reporting unit, there is no
impairment loss. O'Sullivan has discontinued amortizing approximately $1.7
million of goodwill per year. O'Sullivan recorded $417,000 of goodwill
amortization expense in the quarter ended March 31, 2001 and $1.3 million for
the nine months ended March 31, 2001. Adjusted net income (loss) for the quarter
and nine months ended March 31, 2001 and the three previous fiscal years ending
June 30 had such amortization not been recorded are shown in the following
table.


<TABLE>
<CAPTION>
                                               Three months    Nine months
                                                   ended          ended          Fiscal year ended June 30,
                                                      March 31, 2001              2001         2000       1999
                                              ------------------------------- ------------------------   --------
                                                                  (in thousands)

<S>                                              <C>           <C>             <C>         <C>         <C>
Adjusted net income (loss)                       $      1,700  $     (6,697)   $ (4,976)   $ (10,243)  $  22,272
</TABLE>

         In June 2001, the FASB issued SFAS 143, Accounting for Asset Retirement
Obligations. This pronouncement, which is effective for fiscal years beginning
after June 15, 2002, addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. O'Sullivan is currently determining what
impact, if any, this pronouncement will have on its consolidated financial
statements.




                                       7
<PAGE>


         In October 2001, the FASB 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 is currently determining
what impact, if any, this pronouncement will have on its consolidated financial
statements.

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
2002 and fiscal 2001 were approximately $3.2 million and $3.0 million,
respectively. Freight out costs in the nine months ended March 31, 2002 and
March 31, 2001 were $7.7 million and $9.3 million, respectively.

NOTE 6--INVENTORY

         Inventory, net, consists of the following:

<TABLE>
<CAPTION>
                                                                   March 31,        June 30,
                                                                     2002              2001
                                                                  ---------         --------
                                                                       (in thousands)
<S>                                                              <C>                <C>
Finished goods                                                   $   21,630         $ 35,798
Work in process                                                       5,735            4,256
Raw materials                                                        12,322            8,484
                                                                 ----------         --------
                                                                 $   39,687         $ 48,538
                                                                 ==========         ========
</TABLE>


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.



                                       8
<PAGE>


CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                Three months ended March 31, 2002
                                                                          (in thousands)
                                                 ---------------------------------------------------------------
                                                                O'Sullivan
                                                 O'Sullivan    Industries -    Consolidating
                                                 Industries      Virginia       Adjustments        Consolidated
                                                 -----------   -------------   -------------      --------------
<S>                                           <C>              <C>             <C>              <C>
   Net sales                                     $    72,266   $      33,201   $            -   $        105,467
   Cost of sales                                      50,414          24,547                -             74,961
                                                 -----------   -------------   --------------   ----------------
   Gross profit                                       21,852           8,654                -             30,506
   Operating expenses:
         Selling, marketing and
         administrative                               11,961           3,147                -             15,108
                                                 -----------   -------------   --------------   ----------------
   Operating income                                    9,891           5,507                -             15,398
   Other income (expense):
         Interest expense                             (5,357)           (133)               -             (5,490)
         Interest income                                 108               -                -                108
                                                 -----------   -------------   --------------   ----------------
   Income before income tax provision                  4,642           5,374                -             10,016
   Income tax provision                                8,311           6,083                -             14,394
                                                 -----------   -------------   --------------   ----------------
   Net loss                                      $    (3,669)  $        (709)  $            -   $         (4,378)
                                                 ===========   =============   ==============   ================
</TABLE>

<TABLE>
<CAPTION>
                                                               Three months ended March 31, 2001
                                                                         (in thousands)
                                                 ---------------------------------------------------------------
                                                                O'Sullivan
                                                 O'Sullivan    Industries -    Consolidating
                                                 Industries      Virginia       Adjustments        Consolidated
                                                 -----------   -------------   -------------      --------------
<S>                                            <C>             <C>             <C>                <C>
Net sales                                        $     68,040  $      29,596   $           -      $       97,636
Cost of sales                                          50,312         22,233               -              72,545
                                                 ------------  -------------   -------------      --------------
Gross profit                                           17,728          7,363               -              25,091
                                                 ------------  -------------   -------------      --------------
Operating expenses:
      Selling, marketing and administrative            10,634          3,316               -              13,950
                                                 ------------  -------------   -------------      --------------
Operating income                                        7,094          4,047               -              11,141
Other income (expense):
      Interest expense                                 (8,883)          (186)                             (9,069)
      Interest income                                     170              -               -                 170
                                                 ------------  -------------   -------------      --------------
Income (loss) before income tax provision              (1,619)         3,861               -               2,242
Income tax provision (benefit)                           (456)         1,347               -                 891
                                                 ------------  -------------   -------------      --------------
Net income (loss)                                $     (1,163) $       2,514   $           -      $        1,351
                                                 ============  =============   =============      ==============
</TABLE>



                                       9
<PAGE>


<TABLE>
<CAPTION>
                                                                Nine months ended March 31, 2002
                                                                          (in thousands)
                                                 --------------------------------------------------------------
                                                 O'Sullivan     O'Sullivan     Consolidating      Consolidated
                                                 Industries    Industries -     Adjustments
                                                                 Virginia
                                                 -----------   -------------   -------------    ---------------
<S>                                            <C>           <C>               <C>              <C>
   Net sales                                     $   191,947   $      80,027   $          -      $     271,974
   Cost of sales                                     138,589          60,746              -            199,335
                                                 ------------  -------------   -------------    --------------
   Gross profit                                       53,358          19,281              -             72,639
                                                 ------------  -------------   -------------    --------------
   Operating expenses:
         Selling, marketing and administrative        33,980           8,367              -             42,347
                                                 ------------  -------------   -------------    --------------
   Operating income                                   19,378          10,914                            30,292
   Other income (expense):
         Interest expense                            (19,243)           (448)             -            (19,691)
         Interest income                                 263               -              -                263
                                                 ------------  -------------   -------------    --------------
   Income before income tax provision                    398          10,466              -             10,864
   Income tax provision                                6,827           7,863              -             14,690
                                                 ------------  -------------   -------------    --------------
   Net income (loss)                             $    (6,429)  $       2,603   $          -     $       (3,826)
                                                 ============  =============   =============    ===============
</TABLE>

<TABLE>
<CAPTION>
                                                                   Nine months ended March 31, 2001
                                                                             (in thousands)
                                                 --------------------------------------------------------------
                                                 O'Sullivan     O'Sullivan     Consolidating      Consolidated
                                                 Industries    Industries -     Adjustments
                                                                 Virginia
                                                 -----------   -------------   -------------    ---------------
<S>                                              <C>            <C>             <C>              <C>
Net sales                                        $   198,342   $      76,261   $          -     $       274,603
Cost of sales                                        147,560          61,026              -             208,586
Gross profit                                          50,782          15,235              -              66,017
                                                 ------------  -------------   -------------    ---------------
Operating expenses:
      Selling, marketing and administrative           33,671           8,734              -              42,405
                                                 ------------  -------------   -------------    ---------------
      Restructuring charge                            10,506               -              -              10,506
                                                 ------------  -------------   -------------    ---------------
Total operating expenses                              44,177           8,734                             52,911
                                                 ------------  -------------   -------------    ---------------
Operating income                                       6,605           6,501              -              13,106
Other income (expense):
      Interest expense                               (24,662)           (617)             -             (25,279)
      Interest income                                    407               -              -                 407
                                                 ------------  -------------   -------------    ---------------
Income (loss) before income tax provision            (17,650)          5,884              -             (11,766)
      and cumulative effect of accounting change
Income tax provision (benefit)                        (6,177)          2,059              -              (4,118)
                                                 ------------  -------------   -------------    ---------------
Income (loss) before cumulative effect of
      accounting change                              (11,473)          3,825                             (7,648)
Cumulative effect of accounting change, net of
      income tax benefit of $53                          (95)             -               -                 (95)
                                                 ------------  -------------   -------------    ---------------
Net income (loss)                                $   (11,568)  $       3,825   $          -     $        (7,743)
                                                 ============  =============   =============    ===============
</TABLE>



                                       10
<PAGE>




CONDENSED CONSOLIDATING BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                         March 31, 2002
                                                                         (in thousands)
                                                 ---------------------------------------------------------------
                                                 O'Sullivan     O'Sullivan     Consolidating      Consolidated
                                                 Industries    Industries -     Adjustments
                                                                 Virginia
                                                 -----------   -------------   -------------      --------------
<S>                                              <C>           <C>               <C>              <C>
 ASSETS:
       Current assets                            $   126,898   $       9,836   $           -      $      136,734
       Property, plant and equipment, net             56,553          33,882               -              90,435
       Other assets                                   10,342             109               -              10,451
       Investment in subsidiary                       37,739               -         (37,739)                  -
       Goodwill                                       38,088               -               -              38,088
       Receivable from parent                              -          24,395         (24,395)                  -
                                                 -----------   -------------   -------------      --------------
            Total assets                         $   269,620   $      68,222   $     (62,134)     $      275,708
                                                 ===========   =============   =============      ==============

 LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT):
       Current liabilities                       $    56,075   $      20,483   $           -      $       76,558
       Long-term debt                                204,691          10,000               -             214,691
       Payable to affiliates                          24,395               -         (24,395)                  -
       Other liabilities                               3,133               -               -               3,133
       Deferred income taxes                               -               -               -                   -
       Stockholder's equity (deficit)                (18,674)         37,739         (37,739)            (18,674)
                                                 -----------   -------------   -------------      --------------
            Total liabilities and stockholder's
                  equity (deficit)                   269,620   $      68,222   $     (62,134)     $      275,708
                                                 ===========   =============   =============      ==============
</TABLE>

<TABLE>
<CAPTION>
                                                                          June 30, 2001
                                                                         (in thousands)
                                                 ---------------------------------------------------------------
                                                 O'Sullivan     O'Sullivan     Consolidating      Consolidated
                                                 Industries    Industries -     Adjustments
                                                                 Virginia
                                                 -----------   -------------   -------------      --------------
<S>                                              <C>           <C>             <C>                <C>
ASSETS:
      Current assets                             $   102,821   $      14,167   $           -      $      116,988
      Property, plant and equipment, net              61,737          34,135               -              95,872
      Other assets                                    11,795             117               -              11,912
      Investment in subsidiary                        35,136               -         (35,136)                  -
      Goodwill                                        38,088               -               -              38,088
      Receivable from parent                             609           7,264          (7,264)                609
                                                 -----------   -------------   -------------      --------------
           Total assets                          $   250,186   $      55,683   $     (42,400)     $      263,469
                                                 ===========   =============   =============      ==============

LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT):
      Current liabilities                        $    29,118   $       7,553 $             -      $       36,671
      Long-term debt                                 212,386          10,000               -             222,386
      Payable to affiliates                            7,264               -          (7,264)                  -
      Other liabilities                                3,338               -               -               3,338
      Deferred income taxes                           12,630           2,994               -              15,624
      Stockholder's equity (deficit)                 (14,550)         35,136         (35,136)            (14,550)
                                                 -----------   -------------   -------------      --------------
           Total liabilities and stockholder's
                 equity (deficit)                $   250,186   $      55,683   $     (42,400)     $      263,469
                                                 ===========   =============   =============      ==============
</TABLE>



                                       11
<PAGE>


CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                    Nine months ended March 31, 2002
                                                                             (in thousands)
                                                      -----------------------------------------------------------
                                                      O'Sullivan     O'Sullivan    Consolidating     Consolidated
                                                      Industries     Industries     Adjustments
                                                                     - Virginia
                                                      ----------     ----------    -------------     ------------
<S>                                                     <C>           <C>            <C>               <C>
Net cash flows provided by operating activities         $ 5,398       $ 15,373       $      -          $20,771
                                                        -------       --------       --------          -------
Investing activities:
      Capital expenditures                               (3,594)        (3,413)             -           (7,007)
      Repayment of loans to affiliates                   11,960              -        (11,960)               -
                                                        -------       --------       --------          -------
           Net                                            8,366         (3,413)       (11,960)          (7,007)
                                                        -------       --------       --------          -------
Financing activities:
      Advances on intercompany loans                     25,310        (11,960)        11,960           25,310
      Repayment of borrowings                            (7,658)             -              -           (7,658)
                                                        -------       --------       --------          -------
           Net                                           17,652        (11,960)        11,960           17,652
                                                        -------       --------       --------          -------
Cash and cash equivalents:
      Net increase in cash and cash equivalents          31,416              -              -           31,416
      Cash and cash equivalents, beginning of
           period                                         7,056              4              -            7,060
                                                        -------       --------       --------          -------
      Cash and cash equivalents, end of period          $38,472       $      4       $      -          $38,476
                                                        =======       ========       ========          =======
</TABLE>


<TABLE>
<CAPTION>
                                                                    Nine months ended March 31, 2001
                                                                             (in thousands)
                                                      -----------------------------------------------------------
                                                      O'Sullivan     O'Sullivan    Consolidating     Consolidated
                                                      Industries     Industries     Adjustments
                                                                     - Virginia
                                                      ----------     ----------    -------------     ------------
<S>                                                     <C>           <C>            <C>               <C>
Net cash flows provided by operating activities         $ 6,264       $ 11,253       $      -          $ 17,517
                                                        -------       --------       --------          --------
Investing activities:
      Capital expenditures                               (6,095)        (8,239)             -           (14,334)
      Repayment of loans to affiliates                    3,014              -         (3,014)                -
                                                        -------       --------       --------          --------
           Net                                            3,081         (8,239)        (3,014)          (14,334)
                                                        -------       --------       --------          --------
Financing activities:
      Advances on intercompany loans                       383          (3,014)         3,014               383
      Repayment of borrowings                            (2,000)             -              -            (2,000)
                                                        -------       --------       --------          --------
           Net                                           (1,617)        (3,014)         3,014            (1,617)
                                                        -------       --------       --------          --------
Cash and cash equivalents:
      Net increase in cash and cash
           equivalents                                    1,566              -              -             1,566
      Cash and cash equivalents, beginning of
           period                                        11,863              4              -            11,867
                                                        -------       --------       --------          --------
      Cash and cash equivalents, end of period          $13,429       $      4       $      -          $ 13,433
                                                        =======       ========       ========          ========
</TABLE>

NOTE 8--INCOME TAXES

         O'Sullivan accounts for income taxes under SFAS No. 109, Accounting for
Income Taxes. Under the asset and liability method of SFAS 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using tax rates expected


                                       12
<PAGE>


to apply to taxable income in the years in which those temporary differences are
expected to be recovered or settled.

         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.

         O'Sullivan recorded tax expense of $14.4 million for the quarter ended
March 31, 2002 that included a valuation allowance of $11.0 million. Since
O'Sullivan Holdings' initial public offering by RadioShack in 1994, the benefits
of the tax deductions under the tax sharing agreement have been accounted for as
income taxes. As those benefits reduced O'Sullivan's federal income tax
obligations, payments were made to RadioShack as opposed to the IRS. Since the
recapitalization in 1999, O'Sullivan Holdings made an $800,000 payment to
RadioShack as it had little taxable income to utilize the tax deductions. These
deductions resulted in net operating losses (NOL's) for federal tax purposes for
which O'Sullivan Holdings recorded no deferred tax assets as such deductions
were assets of RadioShack under the Agreement.

         As more fully described in Note 10--Commitments and Contingencies,
O'Sullivan Holdings can no longer consider the increased interest costs in
calculating the amounts due to RadioShack. Therefore, O'Sullivan Holdings will
have to make payments to RadioShack in advance of when all of the deductions
O'Sullivan and O'Sullivan Holdings are entitled to on their federal income tax
returns result in a reduction in federal tax payments. In effect, as a result of
the arbitration decision and settlement, O'Sullivan Holdings will contractually
prepay tax benefits to RadioShack that may be recovered from reductions to
federal income tax liabilities in the future.

         As a result of the arbitration decision and settlement, O'Sullivan
Holdings has agreed to pay $24.6 million to RadioShack as of March 31, 2002.
O'Sullivan has recorded its portion of this payment as a deferred tax asset and
accrued liability. O'Sullivan has a net deferred tax asset of approximately
$11.0 million at March 31, 2002. Under SFAS 109, O'Sullivan must determine if it
is more likely than not that the net deferred tax assets will be realized as
reductions in tax liabilities in the future. At December 31, 2001 (O'Sullivan
Holdings files federal income tax returns on a calendar year basis), O'Sullivan
Holdings had an NOL carryforward for federal income tax purposes of
approximately $58.3 million. In 2009, when substantially all the tax deductions
(which can no longer be calculated considering certain O'Sullivan interest costs
pursuant to the arbitration decision) are expected to have been taken,
O'Sullivan Holdings and RadioShack are to negotiate a settlement of the then
present value of the realizable tax benefits O'Sullivan Holdings has yet to
deduct.

         Pursuant to SFAS 109, management projected its expected future taxable
income utilizing operating performance that O'Sullivan Holdings expects to
achieve in fiscal 2002 assuming that O'Sullivan's performance would be no better
or worse over an extended period of time. Such projections indicate that
O'Sullivan Holdings will not have taxable income until 2009 when substantionally
all the tax benefit deductions have been taken. At that point, the projections
indicate that the NOL's existing at that time would be utilized before they
expire. However, O'Sullivan Holdings currently has and is expected to have
taxable losses for a number of years in the future and SFAS 109 requires
objective evidence to support the more likely than not conclusion. Projections
over a long time frame are inherently uncertain and O'Sullivan Holdings cannot
provide objective evidence that its operations in 2009 and beyond will produce
sufficient taxable income. As a result, O'Sullivan has provided a valuation
allowance on its net deferred tax assets of $11.0 million at March 31, 2002 and
will continue to provide an allowance as those net deferred tax assets grow into
the future until sufficient objective evidence exists about future results of
operations which supports the reversal of all or part of the valuation
allowance.

NOTE 9--RELATED PARTY TRANSACTIONS

         O'Sullivan entered into a management services agreement with Bruckmann,
Rosser, Sherrill & Co., Inc. for strategic and financial advisory services on
November 30, 1999. The fee for these services is the greater of (a) 1% of
O'Sullivan Industries' 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.




                                       13
<PAGE>


         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 for O'Sullivan
Industries' 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 $198,000 and $143,000
recognized in the third quarter of fiscal years 2002 and 2001, respectively, and
the fees and expenses of $418,000 and $345,000 recognized in the first nine
months of fiscal years 2002 and 2001, respectively, are included in selling,
marketing and administrative expense in the accompanying consolidated statements
of operations. Additionally, O'Sullivan paid BRS $49,000 in fiscal 2001 to
reimburse BRS for expenses. The amounts due BRS at March 31, 2002 and June 30,
2001 approximated $636,000 and $218,000, respectively. The amounts are included
in accrued liabilities on the accompanying consolidated balance sheets.

NOTE 10--COMMITMENTS AND CONTINGENCIES

RADIOSHACK LITIGATION

         On June 29, 1999, RadioShack Corporation (formerly Tandy Corporation)
filed a complaint against O'Sullivan Holdings in the District Court of Texas in
Tarrant County. The complaint related to a potential reduction in O'Sullivan
Holdings's tax sharing payments to RadioShack under a tax sharing and tax
benefit reimbursement agreement that would result from increased interest
expense after the completion of the then-proposed recapitalization and merger
that closed on November 30, 1999. RadioShack claims that this reduction would
violate the tax sharing agreement. The complaint sought a court order compelling
O'Sullivan Holdings to submit to a dispute resolution process. Alternatively,
the complaint sought a declaratory judgment that after the merger O'Sullivan
Holdings must continue to make tax sharing payments to RadioShack as if the
merger had not occurred. During the quarters and nine months ended March 31,
2002 and 2001, O'Sullivan Holdings made no payment to RadioShack pursuant to the
tax sharing agreement.

         On October 8, 1999, the District Court ordered that O'Sullivan Holdings
begin the dispute resolution process according to the terms of the tax sharing
agreement. The District Court denied all other relief sought by RadioShack.
Pursuant to the dispute resolution provisions, RadioShack and O'Sullivan
Holdings representatives discussed the issues in the dispute but did not reach a
resolution, and the parties commenced arbitration proceedings on the matter. The
hearing on the arbitration was held in October 2001, and the parties completed
post-hearing briefing in December 2001.

         In March 2002, the arbitration panel presiding over the arbitration
proceedings concerning the tax sharing agreement between RadioShack Corporation
and O'Sullivan Holdings issued its written opinion. In its opinion, the
arbitration panel ruled that the interest expense arising from the
recapitalization and merger that closed on November 30, 1999 is not deductible
in calculating the payments due from O'Sullivan Holdings to RadioShack under the
tax sharing agreement.

         Following the issuance of the opinion, O'Sullivan Holdings reached a
settlement of the dispute with RadioShack. Under the settlement, O'Sullivan
Holdings paid RadioShack $21.5 million in May 2002 to cover all amounts due
through December 31, 2001; RadioShack waived interest on the payments and its
attorneys' fees.

          O'Sullivan Holdings agreed to make future payments under the tax
sharing agreement without deducting interest on indebtedness incurred in the
recapitalization and merger. For taxes related to the quarter ended March 31,
2002, O'Sullivan Holdings paid RadioShack $3.1 million in May 2002.

         O'Sullivan Holdings funded the back payment and the payment for the
quarter ended March 31, 2002 from cash on hand. O'Sullivan Holdings expects to
fund future payments from cash on hand or borrowings under O'Sullivan's senior
credit facility. Payments under the tax sharing agreement for the second half of
fiscal 2002 and all of fiscal 2003 are expected to be about $6.2 million and
$11.0 million, respectively.

         In order to pay the amounts due under the settlement, O'Sullivan and
its senior lenders have amended the senior credit facility. The amendment
excludes from the definition of consolidated fixed charges certain amounts paid
by O'Sullivan pursuant to the tax sharing agreement through the period ended
June 30, 2002.



                                       14
<PAGE>


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

RADIOSHACK ARBITRATION

         In March 2002, the arbitration panel presiding over the arbitration
proceedings concerning the tax sharing and tax benefit reimbursement agreement
between RadioShack Corporation and O'Sullivan Holdings issued its written
opinion. In its opinion, the arbitration panel ruled that the interest expense
arising from the recapitalization and merger that closed on November 30, 1999,
is not deductible in calculating the payments due from O'Sullivan Holdings to
RadioShack under the Agreement.

         Following the issuance of the opinion, O'Sullivan Holdings reached a
settlement of the dispute with RadioShack. Under the settlement, O'Sullivan
Holdings paid RadioShack $21.5 million in May 2002 to cover all amounts due
through December 31, 2001; RadioShack waived interest on the payments and its
attorneys' fees.

         O'Sullivan Holdings agreed to make future payments under the tax
sharing agreement without deducting interest on indebtedness incurred in the
recapitalization and merger. For the quarter ended March 31, 2002, O'Sullivan
Holdings paid RadioShack $3.1 million in May 2002.

         O'Sullivan Holdings funded the back payment and the payment for the
quarter ended March 31, 2002 from cash on hand. O'Sullivan Holdings expects to
fund future payments from cash on hand or borrowings under our senior credit
facility. Payments under the tax sharing agreement for the fourth quarter of
fiscal 2002 and all of fiscal 2003 are expected to be about $6.2 million and
$11.0 million, respectively. See Note 8 to our unaudited consolidated financial
statements for additional information on the accounting for the settlement of
the tax sharing agreement arbitration.

         O'Sullivan and its senior lenders have amended our senior credit
facility. The amendment excludes from the definition of consolidated fixed
charges certain amounts paid by O'Sullivan pursuant to the tax sharing agreement
through the period ended June 30, 2002.

OVERVIEW

         We are a leading ready-to-assemble furniture manufacturer in the United
States with over 45 years of experience. We design, manufacture and distribute a
broad range of RTA furniture products--bookcases, cabinets, computer
workcenters, desks, entertainment centers and stereo racks with retail prices
ranging from $20 to $999. In recent years, we have committed substantial
resources to the development and implementation of a diversified sales,
marketing and product strategy in order to capitalize on growth opportunities
presented by emerging 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 increasingly popular retail
distribution channels, including office superstores, discount mass merchants,
electronic superstores, department stores, 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 sustain our future growth.

         The domestic ready-to-assemble furniture market grew at a compound
annual growth rate of about 8.75% from 1997 through 2000, according to Homeworld
Business. Sales for the RTA furniture market, however, declined about 11% in
calendar 2001; our sales for calendar 2001 were down around 9%. Our net sales
grew in excess of 10% in each of fiscal years 1999 and 2000 and declined 11.3%
in fiscal 2001 and 6.9% in the first half of fiscal 2002. Our sales declined for
several reasons:

         o        the stalling of growth in sales of personal computers, which
                  reduced the need for computer desks and workstations;

         o        the slowdown of economic growth and consumer spending in the
                  United States, particularly in the office superstore channel;




                                       15
<PAGE>


         o        store closings by a number of customers, including OfficeMax,
                  Office Depot, Montgomery Ward and ShopKo;

         o        the bankruptcy of Ames and Service Merchandise;

         o        the liquidation of Montgomery Ward;

         o        inventory reductions by our customers, particularly in the
                  office superstore channel; and

         o        the decline in price of the average unit sold, reflecting a
                  trend toward more promotional merchandise.

         These factors, along with the economic repercussions from the September
11, 2001 terrorist attacks, continue to affect our business in fiscal 2002.
Recent improvements in the economy, coupled with new product introductions and
inventory replenishments by our customers, helped our net sales increase by 8.0%
in the quarter ended March 31, 2002. Our current estimate is that sales for the
fourth quarter of fiscal 2002 will increase about 5% to 10% over the fourth
quarter of fiscal 2001 due in part to new product introductions.

         Raw Material Prices. We purchase large quantities of raw materials,
including particleboard and fiberboard. We are dependent on our outside
suppliers for all of these. Therefore, we are subject to changes in the prices
charged by our suppliers. In fiscal 2000, our operating income was reduced by
price increases of 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 the first nine months of fiscal 2002. Prices for fiberboard, however,
have begun to increase in the fourth quarter of fiscal 2002. We cannot assure
you that raw material prices will not increase in the future.

RESULTS OF OPERATIONS

         Net Sales. Net sales for the quarter ended March 31, 2002 increased by
$7.8 million, or 8.0%, to $105.5 million from $97.6 million for the quarter
ended March 31, 2001. For the nine-month period ended March 31, 2002, net sales
decreased $2.6 million, or 1.0%, to $272.0 million from $274.6 million. During
the quarter, sales decreases in the regional mass merchant and consumer
electronics channels were offset by strong increases in the mass merchant, home
center and office superstore channels. For the nine months, sales decreases in
the office superstore and regional mass merchant channels were partially offset
by increases in home center and mass merchant channels.

         On January 22, 2002, Kmart Corporation, which accounted for around 8%
of our gross sales in the first six months of fiscal 2002, filed for Chapter 11
bankruptcy court protection. As part of its reorganization, Kmart announced it
is closing 283 stores. Kmart said it has secured financing of $2 billion to help
the company's cash flow while it restructures and hopes to emerge from Chapter
11 in 2003. We increased our allowance for doubtful accounts by $700,000 during
the quarter ended December 31, 2001 because of the Kmart bankruptcy. We resumed
shipments to the company on a post-petition basis 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.

         Gross Profit. Gross profit increased to $30.5 million, or 28.9% of
sales, for the three month period ended March 31, 2002, from $25.1 million, or
25.7% of sales, for the comparable prior year quarter. For the nine months ended
March 31, 2002, gross profit increased to $72.6 million, or 26.7% of sales, from
$66.0 million, or 24.0% of sales for the first nine months of fiscal 2001.
Fiscal 2002 third quarter gross profit dollars increased primarily because of
increased sales volume, lower material costs, primarily for particleboard, and
greater overhead absorption. For the nine months ended March 31, 2002, favorable
material pricing enhanced gross margin. The cost savings from the January 2001
closure of our less efficient Cedar City, Utah manufacturing plant also helped
to improve our gross profit in the first nine months of fiscal 2002.


         Selling, Marketing and Administrative Expenses. Selling, marketing and
administrative expenses increased to $15.1 million, or 14.3% of sales, for the
three month period ended March 31, 2002, from


                                       16
<PAGE>

$14.0 million, or 14.3% of sales, for the quarter ended March 31, 2001. For the
nine months ended March 31, 2002, selling, marketing and administrative expenses
were virtually unchanged compared to the prior year at approximately $42.4
million. In fiscal 2002, costs for incentive and profit sharing programs
increased with our improved financial results, and legal fees increased due to
the RadioShack arbitration. We also increased our bad debt expense this year
because of the Kmart bankruptcy filing. Offsetting these increases were tighter
cost controls in several areas and the discontinuation of goodwill amortization
on July 1, 2001.

         Restructuring Charge. In November 2000, we announced a strategic
restructuring plan intended to ensure long-term stability and prosperity. The
slowdown in sales during the first half of fiscal 2001 caused us to reassess our
business plan, specifically expenses and available production capacity. The
sales downturn, combined with improvements in production efficiencies and
expansions at the Missouri and Virginia plants during the past few years,
provided production capacity that exceeded our near term sales requirements.
Based on forecasted sales, the Missouri and Virginia plants would provide
sufficient production for the next two and possibly three fiscal years with
minimal capital expenditures for increased capacity after ongoing projects were
completed. Accordingly, we closed the Utah facility on January 19, 2001.

         We are actively attempting to sell the Utah land, building and excess
equipment as soon as practicable. We have relocated certain equipment to the
Missouri and Virginia plants. Fixed assets with a net book value of $20.3
million were written down to estimated fair value, resulting in an impairment
charge of approximately $8.7 million. The impairment charge is reflected in
accumulated depreciation on the accompanying consolidated balance sheet. The
fair value is an estimate, and the impairment may be adjusted in the future. We
also recognized a $495,000 cash expense for the involuntary termination of 325
management and non-management employees at the Utah facility as well as exit
costs of approximately $527,000 for increased workers' compensation claims, real
and personal property taxes and security expenses applicable to the Utah
facility closure.

         We reduced the administrative and support staff in the Lamar, Missouri
headquarters through voluntary and involuntary terminations. About 40 employees
received termination packages totaling approximately $807,000. The total
restructuring charge of $10.5 million is included as a separate line item on the
accompanying consolidated statement of operations.

         The following summarizes the restructuring charge:

<TABLE>
<CAPTION>
                                                          Charges
                                            Charges       through       Balance,     through         Balance,
                                            Original      June 30,      June 30,      March          March 31,
     Restructuring Charges                  Accrual         2001         2001        31, 2002          2002
---------------------------------         -----------   -----------    ---------   -----------     -----------
                                                                     (in thousands)
<S>                                       <C>            <C>           <C>         <C>             <C>
Employee termination benefits(1)          $     1,302    $      915    $     387   $       387      $        -
Other Utah facility exit costs(1)                 527           282          245           245               -
                                          -----------    ----------    ---------   -----------      ----------
     Total                                $     1,829    $    1,197    $     632   $       632      $        -
                                          ===========    ===========   =========   ===========      ==========
</TABLE>


        (1)Included in accrued liabilities in the accompanying consolidated
           balance sheets.

         Depreciation and Amortization. Depreciation and amortization expenses
increased to $3.8 million for the third quarter of fiscal 2002 compared to $3.4
million for the third quarter of fiscal 2001. For the nine months ended March
31, 2002, depreciation and amortization expenses declined $452,000 to $10.8
million from $11.2 million for the nine months ended March 31, 2001. The
year-to-date decline was due to the discontinuance of goodwill amortization upon
the adoption of FAS 142 partially offset by capital additions.

         Operating Income. Operating income increased $4.3 million to $15.4
million for the quarter ended March 31, 2002 from $11.1 million in the quarter
ended March 31, 2001. Operating income increased $17.2 million from $13.1
million in the nine months ended March 31, 2001 to $30.3 million in the nine
months ended March 31, 2002. The restructuring charge in fiscal 2001 reduced
operating income by $10.5 million. Profits from increased sales, lower material
prices and increased overhead absorption were partially offset by increased
selling, marketing and administrative expenses in the three months ended March
31, 2002.



                                       17
<PAGE>


         Net Interest Expense. Net interest expense decreased from $8.9 million
in the third quarter of fiscal 2001 to $5.4 million in the third quarter of
fiscal 2002. For the nine months ended March 31, 2002, net interest expense
decreased $5.4 million to $19.4 million from $24.9 million in the nine months
ended March 31, 2001. 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.

<TABLE>
<CAPTION>
                                                                    Three months ended            Nine months ended
                                                                         March 31,                     March 31,
                                                                    ------------------            ------------------
                                                                     2002        2001               2002      2001
                                                                    ------      ------            -------    -------
                                                                                     (in thousands)
<S>                                                                 <C>         <C>               <C>        <C>
Interest expense on senior credit facility, industrial
   revenue bonds and senior subordinated notes                      $5,835      $6,954            $18,161    $21,272
Senior credit facility amendment fee                                    --         574                 --        574
Interest rate collar                                                  (828)      1,074                 99      2,034
Amortization of debt discount                                           90          80                253        221
Amortization of loan fees                                              393         387              1,178      1,178
Interest income                                                       (108)       (170)              (263)      (407)
                                                                    ------      ------            -------    -------
Net interest expense                                                $5,382      $8,899            $19,428    $24,872
                                                                    ======      ======            =======    =======
</TABLE>

    Income Tax Provision (Benefit). We recorded tax expense of $14.4 million for
the quarter ended March 31, 2002 that included a valuation allowance of $11.0
million. Since O'Sullivan Holdings' initial public offering by RadioShack in
1994, the benefits of the tax deductions under the tax sharing agreement have
been accounted for as income taxes. As those benefits reduced O'Sullivan
Holdings and our federal income tax obligations, payments were made to
RadioShack as opposed to the IRS. Since the recapitalization in 1999, O'Sullivan
Holdings made an $800,000 payment to RadioShack as we had little taxable income
to utilize the deductions. These deductions resulted in net operating losses
(NOL's) for federal tax purposes for which we recorded no deferred tax assets as
such deductions were assets of RadioShack under the Agreement.

         As more fully described above, we can no longer consider the increased
interest costs in calculating the amounts due to RadioShack. Therefore,
O'Sullivan Holdings will have to make payments to RadioShack in advance of when
all of the deductions we are entitled to on our federal income tax return result
in a reduction in federal tax payments. In effect, as a result of the
arbitration decision and settlement, O'Sullivan Holdings will contractually
prepay tax benefits to RadioShack that may be recovered from reduced federal
income tax liabilities in the future.

         As a result of the arbitration decision and settlement, O'Sullivan
Holdings has agreed to pay $24.6 million to RadioShack as of March 31, 2002. We
recorded this payment as a deferred tax asset and accrued liability. We have a
net deferred tax asset of approximately $11.0 million at March 31, 2002. Under
SFAS No.109, Accounting for Income Taxes, we must determine if it is more likely
than not that the net deferred tax assets will be realized as reductions in tax
liabilities in the future. At December 31, 2001 (we file federal income tax
returns on a calendar year basis), O'Sullivan Holdings had an NOL carryforward
for federal income tax purposes of approximately $58.3 million. In 2009, when
substantially all of the tax deductions (which can no longer be calculated
considering certain interest costs pursuant to the arbitration decision) are
expected to have been taken, O'Sullivan Holdings and RadioShack are to negotiate
a settlement of the then present value of the realizable tax benefit O'Sullivan
has yet to deduct.

     Pursuant to SFAS 109, we projected our expected future taxable income
utilizing operating performance O'Sullivan Holdings expects to achieve in fiscal
2002 assuming that our performance would be no better or worse over an extended
period of time. Such projections indicate that we will not have taxable income
until 2009 when substantially all the RadioShack tax benefit deductions have
been taken. At that point, the projections indicate that the NOL's existing at
that time would be utilized before they expire. However, we currently have and
are expected to have taxable losses for a number of years in the future and SFAS
109 requires objective evidence to support the more likely than not conclusion.
Projections over a long time frame are inherently uncertain and we cannot
provide objective evidence that its operations in 2009 and beyond will produce
sufficient taxable income.


                                       18
<PAGE>

As a result, we have provided a valuation allowance on our net deferred tax
assets of $11.0 million at March 31, 2002 and will continue to provide an
allowance as those net deferred tax assets grow into the future until sufficient
objective evidence exists about future results of operations which supports the
reversal of all or part of the valuation allowance.

         Cumulative Effect of Accounting Change. Upon the adoption of SFAS 133
in July 2000, we recognized a liability of $386,000 based upon the fair value of
a costless interest rate collar initiated on February 28, 2000. That portion of
the liability incurred prior to fiscal 2001, $148,000, is included, net of
income tax benefit of $53,000, as cumulative effect of accounting change on the
accompanying consolidated statement of operations.

         Net Income (Loss). Net loss increased $5.7 million from income of $1.4
million in the third quarter of fiscal 2001 to a loss of $4.4 million in the
third quarter of fiscal 2002 due to the increased tax expense, partially offset
by increased operating income. For the nine month period ended March 31, 2002,
the net loss declined $3.9 million to $3.8 million from a net loss of $7.7
million in fiscal 2001.

         EBITDA. EBITDA, which we define as earnings before interest income and
interest expense, income taxes, depreciation and amortization, increased by $4.6
million to $19.2 million for the quarter ended March 31, 2002 from $14.5 million
for the prior year quarter. For the nine months ended March 31, 2002, EBITDA
increased $16.7 million to $41.1 million from $24.4 million for the comparable
period a year ago. EBITDA for the fiscal 2002 third quarter increased primarily
due to increased sales, lower material costs, better overhead absorption and
cost savings associated with the January, 2001 closure of the Cedar City, Utah
manufacturing facility. EBITDA for the nine months ended March 31, 2001 was
adversely affected by the $10.5 million restructuring charge. EBITDA for the
nine months ended March 31, 2002 increased compared to the prior year period
because of lower material prices and the improved fiscal 2002 third quarter
financial results.

         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.

The following table reconciles net income (loss) to EBITDA for the three and
nine months ended March 31, 2002 and March 31, 2001.

<TABLE>
<CAPTION>
                                                      Three months ended                 Nine months ended
                                                          March 31,                           March 31,
                                                    ----------------------              --------------------
                                                      2002          2001                  2002         2001
                                                    -------       --------              -------      -------
                                                                          (in thousands)
<S>                                                 <C>            <C>                  <C>          <C>
Net income (loss)                                   $ (4,378)      $ 1,351              $(3,826)     $(7,743)
Cumulative effect of accounting change,
    net of income tax benefit of $53                      --            --                   --           95
Income tax provision (benefit)                        14,394           891               14,690       (4,118)
Interest expense, net                                  5,382         8,899               19,428       24,872
                                                     -------       -------              -------      -------
Operating income                                     $15,398       $11,141              $30,292      $13,106
Depreciation and amortization                          3,767         3,397               10,796       11,248
                                                     -------       -------              -------      -------
EBITDA                                               $19,165       $14,538              $41,088      $24,354
                                                     =======       =======              =======      =======
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

         Our primary sources of liquidity are cash flows from operations and
borrowings under our senior secured credit facility, which is discussed below.
Our liquidity requirements will be to pay our debt, including interest expense
under the senior credit facility and notes, payments to RadioShack and to
provide for working capital and capital expenditures. Decreased demand for our
products could decrease our cash flow from operations and the availability of
borrowings under our credit facility.




                                       19
<PAGE>


         Working Capital. As of March 31, 2002, cash and cash equivalents
totaled $38.5 million. Net working capital was $60.3 million at March 31, 2002
compared to $80.3 million at June 30, 2001. Working capital decreased primarily
due to the increase in income taxes payable related to the RadioShack
arbitration.

         Operating Activities. Net cash provided by operating activities for the
nine months ended March 31, 2002 was $45.4 million compared to net cash provided
of $17.5 million for the nine months ended March 31, 2001. Cash flow from
operations increased year-over-year for the following reasons.

    o     Net loss of $3.8 million for the first nine months of fiscal 2002
          improved slightly from the $7.7 million loss for the same period of
          fiscal 2001. We also improved our operating efficiency in fiscal 2002.
          However, the current year loss included a $11.0 million valuation
          allowance for deferred income taxes. The largest portion of the
          improvement was due to the December 2000 restructuring charge of $10.5
          million. Of this charge, $8.7 million was non-cash, partially offset
          by the $3.5 million increase in deferred income taxes associated with
          the charge.

    o     Cash was provided by increases in accounts payable and accrued
          advertising of $16.2 million in the nine months ended March 31, 2002,
          while cash totaling $9.2 million was used to fund decreases in
          accounts payable and accrued advertising in the prior year period. The
          increases in fiscal 2002 were due to increased sales levels in the
          third quarter.

    o     In the nine months ended March 31, 2001, accrued liabilities declined
          $2.4 million principally due to reduced profit sharing and incentive
          compensation. In the nine month period ended March 31, 2002, accrued
          liabilities increased $7.4 million for the reclassification of the
          interest rate collar liability to current liability, increased profit
          sharing and incentive compensation and increased accrued interest.

         Three items partially offset the increase in cash flow provided by
operating activities for the period ended March 31, 2002:

    o     Accounts receivable increased $3.7 million in the period ended March
          31, 2002, and decreased $2.3 million in the comparable fiscal 2001
          period, providing more cash in fiscal 2001 than in the same period of
          fiscal 2002.

    o     Decreases in accrued restructuring charges used $600,000 of cash inp
          the nine months ended March 31, 2002, while accrued restructuring
          charges increased by $900,000 in the same period of fiscal 2001.

    o     The change in value of our interest rate collar resulted in a $99,000
          increase in the accrual in the first nine months of fiscal 2002,
          compared with $2.0 million in the same period of fiscal 2001.
          Declining interest rates in fiscal 2001 caused us to increase interest
          expense in fiscal 2001.

         Investing Activities. We invested $7.0 million for capital expenditures
for the nine months ended March 31, 2002 compared to $14.3 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 $3.0
million, which we expect to fund from cash flow operations or cash on hand. Our
ability to make future capital expenditures is subject to certain restrictions
under our senior credit facility.

         Financing Activities. We recorded a payable to O'Sullivan Holdings of
$25.3 million for the nine months ended March 31, 2002. Of this amount, $24.6
million was for the intercompany tax allocation related to the settlement with
RadioShack and was paid in May 2002. On November 30, 1999 we completed our
merger and recapitalization. Our consolidated indebtedness at March 31, 2002 was
$223.4 million consisting of:


     o    $113.4 million in a senior secured credit facility consisting of a
          five year $25.9 million term loan A, a seven and one-half year $87.5
          million term loan B and a $40.0 million revolving line of credit,
          currently with no borrowings. The current portion of these term loans
          is approximately $4.0 million.


                                       20
<PAGE>

          The revolving line of credit has a $15.0 million sub-limit for letters
          of credit, of which we are currently utilizing approximately $13.3
          million.

     o    $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.

     o    $10.0 million in variable rate industrial revenue bonds.

The reconciliation of consolidated indebtedness to recorded book value is as
follows:

<TABLE>
<CAPTION>
                                                                     Original         Warrants
                                   Consolidated      Current       Issue Discount       Net of        Recorded
                                   Indebtedness      Portion      Net of Accretion    Accretion       Book Value
                                   ------------     ---------     ----------------    ----------      ----------
                                                                   (in thousands)
<S>                                <C>              <C>            <C>                 <C>            <C>
Term loan A                        $     25,912     $  (3,101)     $             -     $       -      $   22,811
Term loan B                              87,506          (886)                   -             -          86,620
                                   ------------     ---------      ---------------     ---------      ----------
Senior secured credit                   113,418        (3,987)                   -             -         109,431
Senior subordinated note                100,000             -      $        (1,698)    $  (3,042)         95,260
Industrial revenue bonds                 10,000             -                    -             -          10,000
                                   ------------     ---------      ---------------     ---------      ----------
Total                              $    223,418     $  (3,987)     $        (1,698)    $  (3,042)     $  214,691
                                   ============     =========      ===============     =========      ==========
</TABLE>

         During the nine months ended March 31, 2002, we made regularly
scheduled principal payments of $2.7 million against the term loans included in
our senior secured credit facility and a $5.0 million prepayment. 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 $23.4 million at March 31, 2002. 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, are as follows:

     o    Our consolidated leverage ratio must be less than 4.50. The ratio at
          March 31, 2002 was 4.07.

     o    Our consolidated interest coverage ratio must be greater than 1.90.
          The ratio at March 31, 2002 was 2.08.

     o    Our consolidated fixed charge coverage ratio must be greater than
          1.10. The ratio at March 31, 2002 was 1.52.

     o    Our senior debt coverage ratio must be less than 2.75. The ratio at
          March 31, 2002 was 2.25.

     o    Our consolidated EBITDA must be at least $52 million for the fiscal
          year ending June 30, 2002.

EBITDA and consolidated interest expense as defined in the credit facility for
the twelve months ended March 31, 2002 were $54.9 million and $26.3 million,
respectively. Pursuant to an amendment to our senior credit facility, certain
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.


                                       21
<PAGE>


         In addition, the agreements effectively prohibit the payment of
dividends on our stock. At March 31, 2002, we were in compliance with all
applicable debt covenants.

         As required under the senior credit facility, we hedged one-half of our
term loans with an initial notional amount of $67.5 million with a costless
interest rate collar. The collar is based on three-month LIBOR with a floor of
6.43% and a ceiling of 8.75%. To terminate this contract at March 31, 2002, we
would have been required to pay the counter-party approximately $2.2 million.
The counter-party to our interest rate collar provides us with the payment
amount that would be required to terminate the collar as of the end of each
quarter. We recorded the change in fair value of the collar as increased or
decreased interest expense in the consolidated statements of operations and
included the resulting liability in accrued liabilities on the consolidated
balance sheets.

         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 adverse arbitration panel opinion on our liquidity and financial
condition.

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


<TABLE>
<CAPTION>
                                                                      Payments Due by Period
                                                    -----------------------------------------------------------
                                                                          (in thousands)

                                                        Less                                          After
Contractual Obligations                 Total        than 1 year      1-3 years      4-5 years       5 years
                                      ---------      -----------      ---------     ----------      ---------
<S>                                   <C>            <C>              <C>           <C>             <C>
Long-term debt                        $ 223,418      $    3,987       $  17,496     $   65,351      $ 136,584
Tax Benefit payments to
RadioShack(1)                            24,597          24,597               -              -              -
Capital lease obligations                     -               -               -              -              -
Operating leases unconditional            4,158           1,417           2,425            316              -
Other long-term obligations                 907             114             639            154              -
                                      ---------      ----------       ---------     ----------      ---------
Total contractual cash obligations    $ 253,080      $   30,115       $  20,560     $   65,821      $ 136,584
                                      =========      ==========       =========     ==========      =========
(1) Payments to RadioShack are
contingent on taxable income.  The
maximum payments are:                 $  87,269      $    9,289       $  19,860     $   22,567      $  35,553
                                      =========      ==========       =========     ==========      =========
</TABLE>

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, 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.



                                       22
<PAGE>


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

     o    We recognize revenue and profit when title passes.

     o    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 reduce our revenues or
          increase our expenses when the incentive is offered.

     o    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.

     o    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.

     o    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 the valuation allowance, our
          determinations can change. If we determine that we would be able to
          realize our deferred tax assets in the future in excess of our net
          recorded amount, we would adjust the deferred tax asset, 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 net
          deferred tax asset in the future, we would charge to income an
          adjustment to the deferred tax asset in the period such determination
          was made. See "Valuation Allowance" above.

     o    Payments made to RadioShack under the Tax Sharing Agreement are
          treated as tax expense to the extent the tax benefits are used. To the
          extent such benefits are not used, the payments are treated as
          deferred tax costs, which are then subjected to the analysis described
          in the preceding bullet point.

     o    We recorded asset impairment charges, employee termination benefits
          and other exit costs related to a business restructuring plan to
          reduce production capacity and operating expenses. If market
          conditions deteriorate further, additional write-downs on the building
          and equipment may be necessary.

FORWARD LOOKING STATEMENTS.

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

      o  loss of liquidity due to the arbitration panel's opinion in RadioShack
         Corporation v.O'Sullivan Industries Holdings, Inc.;
      o  significant indebtedness that may limit our financial and operational
         flexibility;
      o  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
         experienced in fiscal 2001 and the first half of fiscal 2002;
      o  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;



                                       23
<PAGE>


      o  raw material cost increases, particularly in particleboard and
         fiberboard, as occurred in 1994 and 1995 and to a lesser extent in
         fiscal year 2000;
      o  transportation cost increases, due to higher fuel costs or otherwise;
      o  loss of or reduced sales to significant customers as a result of a
         merger, acquisition, bankruptcy, liquidation or any other reason, as
         occurred with the liquidation of Montgomery Ward in fiscal 2001, the
         bankruptcy filing of Ames in August 2001 and with the reorganization of
         Service Merchandise Co., Inc. in 2000;
      o  actions of current or new competitors, foreign or domestic, that
         increase competition with our products or prices;
      o  the consolidation of manufacturers in the ready-to-assemble furniture
         industry;
      o  increased advertising costs associated with promotional efforts;
      o  increased interest rates;
      o  pending or new litigation or governmental regulations such as the
         recently settled arbitration involving RadioShack;
      o  other uncertainties which are difficult to predict or beyond our
         control; and
      o  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, 2001.

         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 $600,000 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. We believe
that our foreign exchange risk is not material.

         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 these commodity prices,
assuming none of the increase could be passed on to customers, would affect our
cost of sales by approximately $1.2 million annually.

         As noted above, in fiscal 2000 we encountered price increases in
certain commodities, which reduced our gross margin in the first quarter of
fiscal 2001. During fiscal 2001, prices for these products declined, which
helped gross margins in the second half of fiscal 2001 and the first nine months
of fiscal 2002. Prices for these and other commodities will continue to
fluctuate.




                                       24
<PAGE>


                          PART II -- OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         In March 2002, the arbitration panel presiding over the arbitration
proceedings concerning the tax sharing and tax benefit reimbursement agreement
between RadioShack Corporation and O'Sullivan Industries Holdings, Inc.
("O'Sullivan Holdings") issued its written opinion. In its opinion, the
arbitration panel ruled that the interest expense arising from the
recapitalization and merger that closed on November 30, 1999, is not deductible
in calculating the payments due from O'Sullivan Holdings to RadioShack under the
tax sharing agreement.

         Prior to the initial public offering of O'Sullivan Holdings in 1994, we
were owned by RadioShack Corporation (then named Tandy Corporation). As part of
the initial public offering, O'Sullivan Holdings entered into the tax sharing
agreement with RadioShack. The structure of the public offering increased the
basis in our assets for tax purposes. This basis increase reduces the amount of
gain we recognize upon sales of our assets and increases our annual tax
deductions for depreciation and amortization. This increase in deductions
reduces the amount of income taxes that we pay. Under the tax sharing agreement,
O'Sullivan Holdings agreed to pay RadioShack nearly all of any benefit we
receive from this reduction in our taxable income. Our taxable income is
determined after taking into account all of our other deductible expenses. Since
the initial public offering, we have deducted our interest expense in
determining the benefit payment to RadioShack under the tax sharing agreement.
We are incurring significantly higher interest expense associated with our
higher debt levels in connection with the financing of the recapitalization and
merger. During the nine months ended March 31, 2002 and 2001, we made no payment
to RadioShack pursuant to the tax sharing agreement.

         On June 29, 1999, RadioShack filed a complaint against us in the
District Court of Texas in Tarrant County. The complaint related to the
potential reduction in O'Sullivan Holdings' tax sharing payments to RadioShack
under the tax sharing agreement from our increased interest expense after the
completion of the then-proposed recapitalization and merger. RadioShack claimed
that this reduction would violate the tax sharing agreement. The complaint
sought a court order compelling O'Sullivan Holdings to submit to a dispute
resolution process. Alternatively, the complaint sought a declaratory judgment
that after the merger O'Sullivan Holdings must continue to make tax sharing
payments to RadioShack as if the merger had not occurred. On October 8, 1999,
the District Court ordered that O'Sullivan Holdings begin the dispute resolution
process according to the terms of the tax sharing agreement. The District Court
denied all other relief sought by RadioShack. Pursuant to the dispute resolution
provisions, RadioShack and O'Sullivan Holdings representatives discussed the
issues in the dispute but did not reach a resolution, and the parties commenced
arbitration proceedings on the matter. The hearing on the arbitration was held
in October 2001.

         In the arbitration proceedings, O'Sullivan Holdings took the position
that this increased interest expense should be taken into account in determining
the payments O'Sullivan Holdings is required to make to RadioShack under the tax
sharing agreement. RadioShack, by contrast, claimed that O'Sullivan Holdings
cannot deduct the additional interest in determining the tax sharing payments.

         In March 2002, the arbitration panel ruled in favor of RadioShack on
this issue, concluding that the interest expense arising from the
recapitalization and merger is not deductible in calculating the payments due
from us to RadioShack under the tax sharing agreement.

         Following the issuance of the opinion, O'Sullivan Holdings reached a
settlement of the dispute with RadioShack. Under the settlement, O'Sullivan
Holdings paid RadioShack $21.5 million to cover all amounts due through December
31, 2001; RadioShack waived interest on the payments and its attorneys' fees.
O'Sullivan Holdings agreed to make future payments under the tax sharing
agreement without deducting interest on indebtedness incurred in the
recapitalization and merger. For the quarter ended March 31, 2002, O'Sullivan
Holdings paid RadioShack $3.1 million.

         O'Sullivan Holdings funded the back payment and the payment for the
quarter ended March 31, 2002 from cash on hand. O'Sullivan Holdings expects to
fund future payments from cash on hand or borrowings under



                                       25
<PAGE>

the senior credit facility. Payments under the tax sharing agreement for the
fourth quarter of fiscal 2002 and all of fiscal 2003 are expected to be about
$6.2 million and $11.0 million, respectively.

         O'Sullivan and its senior lenders have amended the senior credit
facility. The amendment excludes from the definition of consolidated fixed
charges certain amounts paid by O'Sullivan pursuant to the tax sharing agreement
through the period ended June 30, 2002.


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



                                       26
<PAGE>


                                   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:   May 15, 2002            By:     /s/ Richard D. Davidson
                                     --------------------------------------
                                          Richard D. Davidson
                                            President and
                                       Chief Executive Officer



Date:   May 15, 2002            By:       /s/ Phillip J. Pacey
                                     --------------------------------------
                                            Phillip J. Pacey
                                        Senior Vice President and
                                         Chief Financial Officer
                                (Principal Financial and Accounting Officer)



                                       27
<PAGE>




                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
 Exhibit No.                                               Description
<S>           <C>
     2.1       Amended and Restated Agreement and Plan of Merger, dated as of October 18, 1999, between O'Sullivan
               Industries Holdings, Inc. and OSI Acquisition, Inc. (incorporated by reference from Appendix A to
               Proxy Statement/Prospectus included in Amendment No. 5 to Registration Statement on Form S-4 (File
               No. 333-81631))

  3.1 & 4.1    Amended and Restated Certificate of Incorporation of O'Sullivan (incorporated by reference from
               Exhibit 3.1 to Registration Statement on Form S-4 (File No. 333-81631))

  3.2 & 4.2    Bylaws of O'Sullivan (incorporated by reference from Exhibit 3.3 to Registration Statement on
               Form S-4 (File No. 333-81631))

     4.3       Indenture dated as of November 30, 1999, by O'Sullivan, as Issuer, O'Sullivan - Virginia, as
               Guarantor, and Norwest Bank Minnesota, National Association, as Trustee, relating to O'Sullivan'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 December 31, 1999 (File No. 0-28493))

     4.4       Warrant Agreement dated as of November 30, 1999 between O'Sullivan Holdings and Norwest Bank
               Minnesota, National Association, as Warrant Agent, relating to warrants to purchase 39,273 shares
               of O'Sullivan Holdings 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 December 31, 1999
               (File No. 0-28493))

     4.5       Warrant Agreement dated as of November 30, 1999 between O'Sullivan Holdings and Norwest Bank
               Minnesota, National Association, as Warrant Agent, relating to warrants to purchase 93,273 shares
               of O'Sullivan Holdings 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))
</TABLE>

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