##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

|       |  |                                                                                         
|------ |  | ----------------------------------------------------------------------------------------
|(XBOX) |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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|       |  | For the quarterly period ended March 31, 2002                                           

OR

|      |  |                                                                                          
|----- |  | -----------------------------------------------------------------------------------------
|(BOX) |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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|      |  | For the Transition period from ______________ to ______________                          

Commission file number 0-20328

AMTROL Inc.
(Exact Name of Registrant as Specified in its Charter)

|                                                                            |  |                                                
|--------------------------------------------------------------------------- |  | -----------------------------------------------
|Rhode Island
(State or Other Jurisdiction of
Incorporation or Organization) |  | 05-0246955
(I.R.S. Employer Identification No.)

1400 Division Road, West Warwick, RI 02893-1008
(Address of principal executive offices)

Registrants telephone number, including area code:   (401) 884-6300

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  (XBOX   No  (BOX).

Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date: $.01 Par Value: 100 shares
of Common stock as of May 14, 2002.





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TABLE OF CONTENTS



|           |                                                                                               |                                                 |  |  |  |  |  | 
|---------- | --------------------------------------------------------------------------------------------- | ----------------------------------------------- |  |  |  |  |  | 
|           |                                                                                               | Consolidated Balance Sheets                    
|           |                                                                                               | Consolidated Statements of Operations          
|           |                                                                                               | Consolidated Statements of Shareholders Equity
|           |                                                                                               | Consolidated Statements of Cash Flows          
|           | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|           | Item 3. Quantitative and Qualitative Disclosures About Market Risk                           
|PART II   
|           | Item 1. Legal Proceedings                                                                    
|           | Item 2. Changes in Securities and Use of Proceeds                                            
|           | Item 3. Defaults Upon Senior Securities                                                      
|           | Item 4. Submission of Matters to a Vote of Security Holders                                  
|           | Item 5. Other Information                                                                    
|           | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES



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##### Table of Contents



AMTROL INC. AND SUBSIDIARIES

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2002INDEX

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|------------------------------ | --------------------------------------------------------------------------------------------- | ------------------------------------------------- | -------------------------------------------------------- | -- | ---- | - | 
|                               |                                                                                               |                                                   |                                                          |    | PAGE
|                               |                                                                                               |                                                   |                                                          |    |     
|PART I   Financial Information |                                                                                               |                                                   |                                                          |   
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|                               | Item 1. Consolidated Balance Sheets -                                                         |                                                   |                                                          |    |     
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|                               |                                                                                               |                                                   | March 31, 2002 and December 31, 2001                     |    |      | 3 | 
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|                               |                                                                                               | Consolidated Statements of Operations -           |                                                          |    |      |  
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|                               |                                                                                               |                                                   | For the Quarters Ended March 31, 2002 and March 31, 2001 |    |      | 4 | 
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|                               |                                                                                               | Consolidated Statements of Shareholders Equity - |                                                          |    |      |  
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|                               |                                                                                               |                                                   | For the Quarters Ended March 31, 2002 and March 31, 2001 |    |      | 5 | 
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|                               |                                                                                               | Consolidated Statements of Cash Flows -           |                                                          |    |      |  
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|                               |                                                                                               |                                                   | For the Quarters Ended March 31, 2002 and March 31, 2001 |    |      | 6 | 
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|                               |                                                                                               | Notes to Consolidated Financial Statements        |                                                          |    | 7    |  
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|                               | Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations |                                                   |                                                          | 14 |     
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|                               | Item 3. Quantitative and Qualitative Disclosures About Market Risk                            |                                                   |                                                          | 19 |     
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|PART II   Other Information    |                                                                                               |                                                   |                                                          |   
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|                               | Item 1. Legal Proceedings                                                                     |                                                   |                                                          | 20 |     
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|                               | Item 2. Changes in Securities and Use of Proceeds                                             |                                                   |                                                          | 20 |     
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|                               | Item 3. Defaults Upon Senior Securities                                                       |                                                   |                                                          | 20 |     
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|                               | Item 4. Submission of Matters to a Vote of Security Holders                                   |                                                   |                                                          | 20 |     
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|                               | Item 5. Other Information                                                                     |                                                   |                                                          | 20 |     
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|                               | Item 6. Exhibits and Reports on Form 8-K                                                      |                                                   |                                                          | 20 |     
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|                               |                                                                                               | Signatures                                        |                                                          |    | 21   |  

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##### Table of Contents






AMTROL INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)

Assets

|                                        |                                                                           |                            |         |           |         |              |         |         |         | 
|--------------------------------------- | ------------------------------------------------------------------------- | -------------------------- | ------- | --------- | ------- | ------------ | ------- | ------- | ------- | 
|                                        |                                                                           |                            |         | Unaudited |         | Audited     
|                                        |                                                                           |                            |         | March 31, |         | December 31,
|                                        |                                                                           |                            |         | 2002      |         | 2001        
|                                        |                                                                           |                            |         |           |         |             
|Current Assets:                         |                                                                           |                            |         |           |         |              |         |        
|                                       
|                                       
|                                       
|                                       
|                                        | Cash and cash equivalents                                                 |                            | $       | 273       |         |              | $       | 983     |        
|                                       
|                                       
|                                       
|                                       
|                                        | Accounts receivable, less allowance for doubtful accounts                 |                            |         | 29,711    |         |              |         | 28,456  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Inventories                                                               |                            |         | 22,478    |         |              |         | 19,785  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Deferred income taxes  short-term                                        |                            |         | 1,739     |         |              |         | 1,739   |        
|                                       
|                                       
|                                       
|                                       
|                                        | Prepaid expenses and other                                                |                            |         | 2,855     |         |              |         | 2,303   |        
|                                        |                                                                           |                            |         |           |         |              |         |        
|                                        |                                                                           | Total current assets       |         |           | 57,056  |              |         |         | 53,266  | 
|                                        |                                                                           |                            |         |           |         |              |         |        
|Property, Plant and Equipment, Net      |                                                                           |                            | 39,304  |           |         |              | 41,192  |        
|                                       
|                                       
|                                       
|                                       
|Other Assets:                           |                                                                           |                            |         |           |         |              |         |        
|                                       
|                                       
|                                       
|                                       
|                                        | Goodwill                                                                  |                            |         | 157,368   |         |              |         | 157,292 |        
|                                       
|                                       
|                                       
|                                       
|                                        | Deferred financing costs                                                  |                            |         | 4,621     |         |              |         | 4,233   |        
|                                       
|                                       
|                                       
|                                       
|                                        | Deferred income taxes  long-term                                         |                            |         | 7,209     |         |              |         | 7,209   |        
|                                       
|                                       
|                                       
|                                       
|                                        | Other                                                                     |                            |         | 1,709     |         |              |         | 1,263   |        
|                                        |                                                                           |                            |         |           |         |              |         |        
|                                        |                                                                           | Total other assets         |         |           | 170,907 |              |         |         | 169,997 | 
|                                        |                                                                           |                            |         |           |         |              |         |        
|                                        |                                                                           | $                          | 267,267 |           |         | $            | 264,455 |        
|                                        |                                                                           |                            |         |           |         |              |         |        
|Liabilities and Shareholders Equity   
|                                       
|                                       
|                                       
|                                       
|Current Liabilities                     |                                                                           |                            |         |           |         |              |         |        
|                                       
|                                       
|                                       
|                                       
|                                        | Current maturities of long-term debt                                      |                            | $       | 3,054     |         |              | $       | 2,218   |        
|                                       
|                                       
|                                       
|                                       
|                                        | Notes payable to banks                                                    |                            |         | 9,068     |         |              |         | 7,930   |        
|                                       
|                                       
|                                       
|                                       
|                                        | Accounts payable                                                          |                            |         | 25,309    |         |              |         | 20,949  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Accrued expenses                                                          |                            |         | 9,221     |         |              |         | 10,856  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Accrued interest                                                          |                            |         | 3,945     |         |              |         | 752     |        
|                                       
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|                                       
|                                       
|                                        | Accrued income taxes                                                      |                            |         | 1,250     |         |              |         | 1,959   |        
|                                        |                                                                           |                            |         |           |         |              |         |        
|                                        |                                                                           | Total current liabilities  |         |           | 51,847  |              |         |         | 44,664  | 
|                                        |                                                                           |                            |         |           |         |              |         |        
|Other Noncurrent Liabilities            |                                                                           |                            | 3,670   |           |         |              | 4,061   |        
|                                       
|                                       
|                                       
|                                       
|Long Term Debt, Less Current Maturities |                                                                           |                            | 155,529 |           |         |              | 157,511 |        
|                                       
|                                       
|                                       
|                                       
|Shareholders Equity                    |                                                                           |                            |         |           |         |              |         |        
|                                       
|                                       
|                                       
|                                       
|                                        | Capital stock $.01 par value  authorized 1,000 shares,
100 shares issued |                            |         |          |         |              |         |        |        
|                                       
|                                       
|                                       
|                                       
|                                        | Additional paid-in capital                                                |                            |         | 99,273    |         |              |         | 99,273  |        
|                                       
|                                       
|                                       
|                                       
|                                        | Retained deficit                                                          |                            |         | (38,104   | )       |              |         | (36,064 | )      
|                                       
|                                       
|                                       
|                                       
|                                        | Accumulated other comprehensive loss                                      |                            |         | (4,948    | )       |              |         | (4,990  | )      
|                                        |                                                                           |                            |         |           |         |              |         |        
|                                        |                                                                           | Total shareholders equity |         |           | 56,221  |              |         |         | 58,219  | 
|                                        |                                                                           |                            |         |           |         |              |         |        
|                                        |                                                                           | $                          | 267,267 |           |         | $            | 264,455 |        
|                                        |                                                                           |                            |         |           |         |              |         |        

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

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##### Table of Contents






AMTROL INC. AND SUBSIDIARIES

Consolidated Statements of Operations
(Unaudited  in thousands)

|                                                 |  |               |         |           |  |   |         |  
|------------------------------------------------ |  | ------------- | ------- | --------- |  | - | ------- | -
|                                                 |  | Quarter Ended
|                                                 |  |              
|                                                 |  | March 31,     |         | March 31,
|                                                 |  | 2002          |         | 2001     
|                                                 |  |               |         |          
|Net sales                                        |  | $             | 42,542  |           |  | $ | 46,434  |  
|                                                
|                                                
|                                                
|                                                
|Cost of goods sold                               |  |               | 32,622  |           |  |   | 36,840  |  
|                                                 |  |               |         |           |  |   |         |  
|Gross profit                                     |  |               | 9,920   |           |  |   | 9,594   |  
|                                                
|                                                
|                                                
|                                                
|Operating
expenses:                              |  |               |         |           |  |   |         |  
|                                                
|                                                
|                                                
|                                                
|Selling, general and administrative              |  |               | 6,725   |           |  |   | 6,931   |  
|                                                
|                                                
|                                                
|                                                
|Amortization of goodwill                         |  |               |        |           |  |   | 1,113   |  
|                                                 |  |               |         |           |  |   |         |  
|Income from operations                           |  |               | 3,195   |           |  |   | 1,550   |  
|                                                
|                                                
|                                                
|                                                
|Other income (expense):                          |  |               |         |           |  |   |         |  
|                                                
|                                                
|                                                
|                                                
|Interest expense                                 |  |               | (4,808  | )         |  |   | (4,882  | )
|                                                
|                                                
|                                                
|                                                
|Interest income                                  |  |               | 21      |           |  |   | 33      |  
|                                                
|                                                
|                                                
|                                                
|License and distributorship fees                 |  |               | 25      |           |  |   | 73      |  
|                                                
|                                                
|                                                
|                                                
|Other, net                                       |  |               | (12     | )         |  |   | 314     |  
|                                                 |  |               |         |           |  |   |         |  
|Loss before provision (benefit)
for income taxes |  |               | (1,579  | )         |  |   | (2,912  | )
|                                                
|                                                
|                                                
|                                                
|Provision (benefit) for income taxes             |  |               | 461     |           |  |   | (457    | )
|                                                 |  |               |         |           |  |   |         |  
|Net loss                                         |  |               | ($2,040 | )         |  |   | ($2,455 | )
|                                                 |  |               |         |           |  |   |         |  

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

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##### Table of Contents






AMTROL INC. AND SUBSIDIARIES

Consolidated Statements of Shareholders Equity
(Unaudited  in thousands)

|                           |                                            |   |        |   |         |   |                              |   |               |   |               |        |                   |   |        |      |   |   |        |        |  
|-------------------------- | ------------------------------------------ | - | ------ | - | ------- | - | ---------------------------- | - | ------------- | - | ------------- | ------ | ----------------- | - | ------ | ---- | - | - | ------ | ------ | -
|                           |                                            |   |        |   |         |   | Quarter Ended March 31, 2002 |   |               |   |              
|                           |                                            |   |        |   |         |   |                              |   |               |   |              
|                           |                                            |   |        |   |         |   | Additional                   |   |               |   |               |        | Accumulated Other |   |        |      |  
|                           |                                            |   | Common |   | Paid-in |   | Retained                     |   | Comprehensive |   | Comprehensive
|                           |                                            |   | Stock  |   | Capital |   | Deficit                      |   | Loss          |   | Loss         
|                           |                                            |   |        |   |         |   |                              |   |               |   |              
|Balance, December 31, 2001 |                                            | $ |       |   |         | $ | 99,273                       |   |               | $ | (36,064       | )      |                   | $ | (4,990 | )    |   | $ |       |       
|                          
|                          
|                          
|                          
|                           | Net loss                                   |   |        |  |         |   |                              |  |               |   |               | (2,040 | )                 |   |        |     |   |   |        | (2,040 | )
|                          
|                          
|                          
|                          
|                           | Derivative instrument valuation adjustment |   |        |  |         |   |                              |  |               |   |               |       |                   |   |        | 304  |   |   |        | 304    |  
|                          
|                          
|                          
|                          
|                           | Currency translation adjustment            |   |        |  |         |   |                              |  |               |   |               |       |                   |   |        | (262 | ) |   |        | (262   | )
|                           |                                            |   |        |   |         |   |                              |   |               |   |               |        |                   |   |        |      |   |   |        |       
|Balance, March 31, 2002    |                                            | $ |       |   |         | $ | 99,273                       |   |               | $ | (38,104       | )      |                   | $ | (4,948 | )    |   | $ | (1,998 | )     
|                           |                                            |   |        |   |         |   |                              |   |               |   |               |        |                   |   |        |      |   |   |        |       

|                           |                                        |   |        |   |         |   |                              |      |               |   |               |        |                   |   |        |        |   |   |        |        |  
|-------------------------- | -------------------------------------- | - | ------ | - | ------- | - | ---------------------------- | ---- | ------------- | - | ------------- | ------ | ----------------- | - | ------ | ------ | - | - | ------ | ------ | -
|                           |                                        |   |        |   |         |   | Quarter Ended March 31, 2001 |      |               |   |              
|                           |                                        |   |        |   |         |   |                              |      |               |   |              
|                           |                                        |   |        |   |         |   | Additional                   |      |               |   |               |        | Accumulated Other |   |        |        |  
|                           |                                        |   | Common |   | Paid-in |   | Retained                     |      | Comprehensive |   | Comprehensive
|                           |                                        |   | Stock  |   | Capital |   | Deficit                      |      | Loss          |   | Loss         
|                           |                                        |   |        |   |         |   |                              |      |               |   |              
|Balance, December 31, 2000 |                                        | $ |       |   |         | $ | 89,903                       |      |               | $ | (26,649       | )      |                   | $ | (3,382 | )      |   | $ |       |       
|                          
|                          
|                          
|                          
|                           | Net
loss                               |   |        |  |         |   |                              |     |               |   |               | (2,455 | )                 |   |        |       |   |   |        | (2,455 | )
|                          
|                          
|                          
|                          
|                           | Repurchase of options and common stock |   |        |  |         |   |                              | (141 | )             |   |               |       |                   |   |        |       |   |   |        |       |  
|                          
|                          
|                          
|                          
|                           | Derivative instrument valuation        |   |        |  |         |   |                              |     |               |   |               |       |                   |   |        | (372   | ) |   |        | (372   | )
|                          
|                          
|                          
|                          
|                           | Currency translation adjustment        |   |        |  |         |   |                              |     |               |   |               |       |                   |   |        | (1,194 | ) |   |        | (1,194 | )
|                           |                                        |   |        |   |         |   |                              |      |               |   |               |        |                   |   |        |        |   |   |        |       
|Balance, March 31, 2001    |                                        | $ |       |   |         | $ | 89,762                       |      |               | $ | (29,104       | )      |                   | $ | (4,948 | )      |   | $ | (4,021 | )     
|                           |                                        |   |        |   |         |   |                              |      |               |   |               |        |                   |   |        |        |   |   |        |       

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

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##### Table of Contents






AMTROL INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
(Unaudited  in thousands)

|                                                             |                                                                                            |                                             |                                           |         |               |      |           |        |        |        |  
|------------------------------------------------------------ | ------------------------------------------------------------------------------------------ | ------------------------------------------- | ----------------------------------------- | ------- | ------------- | ---- | --------- | ------ | ------ | ------ | -
|                                                             |                                                                                            |                                             |                                           |         | Quarter Ended
|                                                             |                                                                                            |                                             |                                           |         |              
|                                                             |                                                                                            |                                             |                                           |         | March 31,     |      | March 31,
|                                                             |                                                                                            |                                             |                                           |         | 2002          |      | 2001     
|                                                             |                                                                                            |                                             |                                           |         |               |      |          
|Cash Flows Provided by (Used in) Operating Activities:       |                                                                                            |                                             |                                           |         |               |      |           |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Net loss                                                                                   |                                             | $                                         | (2,040  | )             |      | $         | (2,455 | )     
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Adjustments to reconcile net loss to net cash
provided by (used in) operating activities - |                                             |                                           |         |               |      |           |        |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                            | Depreciation and amortization               |                                           |         | 2,209         |      |           |        | 3,522  |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                            | Provision for losses on accounts receivable |                                           |         | 32            |      |           |        | 38     |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             |                                                                                            | Changes in operating assets and liabilities |                                           |         | (570          | )    |           |        | (6,402 | )     
|                                                             |                                                                                            |                                             |                                           |         |               |      |           |       
|                                                             |                                                                                            |                                             | Net cash used in operating activities     |         |               | (369 | )         |        |        | (5,297 | )
|                                                             |                                                                                            |                                             |                                           |         |               |      |           |       
|Cash Flows Provided by (Used in) Investing Activities:       |                                                                                            |                                             |                                           |         |               |      |           |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Capital expenditures                                                                       |                                             |                                           | (512    | )             |      |           | (714   | )     
|                                                             |                                                                                            |                                             |                                           |         |               |      |           |       
|                                                             |                                                                                            |                                             | Net cash used in investing activities     |         |               | (512 | )         |        |        | (714   | )
|                                                             |                                                                                            |                                             |                                           |         |               |      |           |       
|Cash Flows Provided by (Used in) Financing Activities:       |                                                                                            |                                             |                                           |         |               |      |           |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Repayment of debt                                                                          |                                             |                                           | (33,085 | )             |      |           | (8,148 | )     
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Issuance of debt                                                                           |                                             |                                           | 33,264  |               |      |           | 14,897 |       
|                                                            
|                                                            
|                                                            
|                                                            
|                                                             | Repurchase of options and common stock                                                     |                                             |                                           |        |               |      |           | (141   | )     
|                                                             |                                                                                            |                                             |                                           |         |               |      |           |       
|                                                             |                                                                                            |                                             | Net cash provided by financing activities |         |               | 179  |           |        |        | 6,608  |  
|                                                             |                                                                                            |                                             |                                           |         |               |      |           |       
|Net Increase (Decrease) in Cash and Cash Equivalents         |                                                                                            |                                             | (702                                      | )       |               |      | 597       |       
|                                                            
|                                                            
|                                                            
|                                                            
|Effect of exchange rate changes on cash and cash
equivalents |                                                                                            |                                             | (8                                        | )       |               |      | (24       | )     
|                                                            
|                                                            
|                                                            
|                                                            
|Cash and cash equivalents, beginning of period               |                                                                                            |                                             | 983                                       |         |               |      | 704       |       
|                                                             |                                                                                            |                                             |                                           |         |               |      |           |       
|Cash and cash equivalents, end of period                     |                                                                                            | $                                           | 273                                       |         |               | $    | 1,277     |       
|                                                             |                                                                                            |                                             |                                           |         |               |      |           |       

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

6



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AMTROL INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.   Basis of Presentation

In the opinion of management, the accompanying
unaudited condensed consolidated financial
statements contain all adjustments necessary to present fairly, in accordance
with generally accepted accounting principles, the Companys financial
position, results of operations and cash flows of AMTROL Inc. and it
subsidiaries (the Company) for the interim periods presented. Such
adjustments consisted of only normal recurring items. The results of
operations for the interim periods shown in this report are not necessarily
indicative of results for any future interim period or for the entire year.
These condensed consolidated financial statements do not include all disclosures
associated with annual consolidated financial statements and accordingly should
be read in conjunction with the consolidated financial statements and notes
thereto included in the Companys Annual Report on Form 10-K.

2.   Use of Estimates

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

3.   Significant Accounting Policies

Long-Lived Assets

In July 2001, the FASB released SFAS No. 141, Business Combinationsand SFAS
No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations initiated
after June 30, 2001. SFAS No. 142 changes the accounting for goodwill from an
amortization method to an impairment-only approach. As a result of SFAS No.
142, amortization of goodwill to earnings has ceased in 2002 and instead, the
carrying value of goodwill will be evaluated for impairment on at least an
annual basis. The Company has until June 30, 2002 to evaluate the impact of
adoption of SFAS No. 142 and has not yet determined whether any impairment loss
will be required to be recorded in its consolidated financial statements.
Impairment charges, if any, associated with the initial adoption will be
retroactively recorded as a cumulative effect of a change in accounting
principle. Amortization of goodwill for the period ended March 31, 2001 was
$1.1 million.

7



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Revenue Recognition

The Company adopted Staff Accounting Bulletin (SAB) No. 101, Revenue
Recognition in Financial Statements,as of January 1, 2001. In accordance with
SAB No. 101, the Company recognizes revenue only when there is a valid contract
or purchase order, which includes a fixed price; the goods have been delivered
in accordance with the shipping terms; and there is an expectation that the
collection of the revenue is reasonably assured. The cumulative effect of this
adoption had no net effect on the accompanying consolidated statements of
operations.

The Company generally recognizes revenue upon shipment of its products to
customers. The Company classifies shipping/handling fees and costs to revenue
consistent with the presentation required by Emerging Issues Task Force
(EITF) 00-10.

Deferred Financing Costs

Deferred financing costs are stated at cost as a component of other assets and
amortized over the life of the related debt using the effective interest
method. Amortization of deferred financing costs is included in interest
expense.

Foreign Currency Translation

Assets and liabilities of non-U.S. operations have been translated into United
States dollars using the quarter-end rate of exchange. Shareholders equity
has been converted using historical rates while revenues and expenses have
been converted at the average exchange rates prevailing during the quarter.
The cumulative effect of the resulting translation was reflected as a separate
component of shareholders equity.

Reclassifications

Certain amounts in prior periods have been reclassified to permit comparison to
the current year presentation.

Recent Accounting Pronouncements

In July 2001, the FASB issued SFAS No. 143, Accounting for Asset Retirement
Obligations. SFAS No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated retirement costs. SFAS No. 143 requires that the fair value of
a liability for an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made. The
associated asset retirement costs are capitalized as part of the carrying
amount of the long-lived asset. SFAS No. 143 is effective for financial
statements issued for fiscal years beginning after June 15, 2002 with early
adoption permitted. The Company is currently assessing the impact, if any, of
adopting SFAS No. 143 on its consolidated financial statements.

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4.   Long-Term Debt

Revolving Credit and Term Loans  New Financing

The Company, on December 26, 2001 completed a refinancing of its senior secured
credit facility. In its place, the Company entered into two new credit
facilities: a $42.5 million senior first-priority secured credit facility
arranged by Foothill Capital Corporation (the Foothill Facility) and a $25.0
million senior second-priority secured credit facility with affiliates of The
Cypress Group L.L.C. (the Cypress Facility). Proceeds from the refinancing
were used to repay in full the Companys existing credit facility and to pay fees
and expenses related to the refinancing.

The Foothill Facility consists of senior term loans (the Term Loans) and a
revolving credit facility (the Revolving Credit Facility). A portion ($10.2
million) of the Term Loans (the Term Loan A) is the lower of (a) $10.5
million and (b) the sum of (i) 80% of the net liquidation percentage of
eligible equipment located in North America and (ii) 60% of the fair market
value of real property located in North America. The remaining portion of the
Term Loans (the Term Loan B) is $7.5 million. The Revolving Credit Facility
is secured by North American accounts receivable and inventories. Aggregate
borrowings under the Revolving Credit Facility are limited to the lesser of (a)
$35.0 million less the aggregate outstanding principal amount of the Term Loan
A less letter of credit usage, and (b) the borrowing base less letter of credit
usage. At March 31, 2002, total availability and aggregate borrowings under
the Revolving Credit Facility were $11.7 million and $4.0 million,
respectively.

Term Loan A has a five-year maturity with quarterly principal payments of
$426,757 commencing April 1, 2002. The outstanding unpaid principal shall be
due and payable on the date of termination of the Foothill Facility, whether by its
terms, by prepayment, or by acceleration and bears interest at LIBOR plus 3.5%.
Term Loan B has a three-year maturity with quarterly principal payments of
$312,500 commencing April 1, 2002. The outstanding unpaid principal shall be
due and payable on the date of termination of the Foothill Facility, whether by its
terms, by prepayment, or by acceleration and bears interest at the greater of
the Wells Fargo Reference Rate (approximates the prime rate) plus 3.5% and
9.25%. The Revolving Credit Facility has a five-year maturity. Amounts
borrowed under the Revolving Credit Facility may be repaid and reborrowed at
any time during the term of the Foothill Facility and bear interest at LIBOR
plus 2.5% for LIBOR based borrowings and the Wells Fargo Reference Rate plus
0.5% for non-LIBOR based borrowings. The Foothill Facility contains certain
affirmative and negative covenants and restrictions. As of March 31, 2002, the
Company was in compliance with the various covenants of the Foothill Facility.

The Cypress Facility consists of a single $25.0 million term loan (the Term
Loan C). Term Loan C has a five-year maturity and bears Pay-In-Kind (PIK)
interest fixed at 12% per annum paid quarterly, which at the lenders option can
be paid in common stock of the Company. In connection with the Cypress
Facility, Amtrol Holdings, Inc., which wholly owns the Company, has issued the
lenders under the Cypress Facility 60,000 warrants to purchase approximately
5.2% of its common stock on a fully diluted basis. The 60,000 warrants, which
have an exercise price of

9



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##### Table of Contents



$.01, were valued at $3.4 million using the Black-Scholes model. This amount
was recorded as an offset to the Term Loan C debt and included in the Companys
equity section. This discount is being accreted to the face value of the
Term Loan C over the life of the Cypress Facility. The Company expects that the
effective interest rate associated with the Term Loan C will be greater than
12% given the additional compensation associated with the issuance of the
warrants. The Cypress Facility contains certain affirmative and negative
covenants and restrictions. As of March 31, 2002, the Company was in
compliance with the various covenants of the Cypress Facility.

Senior Subordinated Notes

The Company issued $115.0 million of Senior Subordinated Notes due 2006 (the
Notes). The Notes are unsecured obligations of the Company. The Notes bear
interest at a rate of 10.625% per annum that is payable semi-annually on each
June 30 and December 31.

The Notes are redeemable at the option of the Company on or after December 31,
2001. The Notes will be subject to redemption, in whole or in part, at various
redemption prices, declining from 105.313% of the principal amount to par on
and after December 31, 2003. Upon a Change of Control (as defined in the
Indenture), each Note holder has the right to require the Company to repurchase
such holders Notes at a purchase price of 101% of the principal amount plus
accrued interest.

The Notes Indenture contains certain affirmative and negative covenants and
restrictions. As of March 31, 2002, the Company was in compliance with the
various covenants.

The Company and/or affiliates of the Company, including entities related to
Cypress may, from time to time, purchase the Notes previously issued by the
Company in the open market or by other means.

5.   Inventories

Inventories are stated at the lower of cost or market and were as follows (in
thousands):

|                                  |  |           |        |              |  |   |        | 
|--------------------------------- |  | --------- | ------ | ------------ |  | - | ------ | 
|                                  |  | March 31, |        | December 31,
|                                  |  | 2002      |        | 2001        
|                                  |  |           |        |             
|Raw materials and work in process |  | $         | 12,341 |              |  | $ | 11,120 | 
|                                 
|                                 
|                                 
|                                 
|Finished goods                    |  |           | 10,137 |              |  |   | 8,665  | 
|                                  |  |           |        |              |  |   |        | 
|                                  |  | $         | 22,478 |              |  | $ | 19,785 | 
|                                  |  |           |        |              |  |   |        | 

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6.   Accounting for Derivative Instruments and Hedging Activities

Effective January 1, 2001, the Company adopted SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities,SFAS No. 137, Accounting for
Derivative Instruments and Hedging Activities  Deferral of the Effective Date
of FASB Statement No. 133  an Amendment of FASB Statement No. 133and SFAS No.
138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities  an Amendment of FASB Statement No. 133(collectively SFAS No. 133
as amended). SFAS No. 133 as amended is required to be adopted no later than
the beginning of the first fiscal year beginning on or after June 15, 2000.
These standards were adopted as a change in accounting principle and do not
apply retroactively to financial statements of prior periods.

The Company has one derivative contract consisting of an interest rate swap
contract and an interest rate cap (the Contract) outstanding as of March 31,
2002, with an initial notional amount of $15 million. Under this arrangement,
which will mature on June 30, 2004, the Company receives the 90-day LIBOR rate
and pays a fixed rate of 4.60% for the period from March 31, 2002 through
maturity, unless LIBOR increases to 7.1%. If LIBOR increases to 7.1%, then the
Company continues to receive the 90-day LIBOR rate but now pays the 90-day
LIBOR rate for all subsequent periods capped at a maximum of 7.1%. The LIBOR
rate has not exceeded 7.1% since inception of the Contract and it was treated,
prior to adoption of SFAS No. 133, as a hedge agreement and accounted for as
such. As a result of the refinancing of its senior debt with the Foothill
Facility, the Contract was redesignated as a cash flow hedge of variable future
cash flows associated with the Foothill Facility Term Loan A and Term Loan B
Debt.

As of March 31, 2002, the fair value of the instrument ($0.2 million) was
recorded in other noncurrent liabilities with a corresponding entry to accumulated
other comprehensive loss. Subsequent changes in the fair value of the swap
will be recorded through accumulated other comprehensive loss (except for
changes related to ineffectiveness, which will be recorded through net income).
The Company did not realize any material ineffectiveness during the current
quarter and does not anticipate any material ineffectiveness under the hedge
for the remainder of 2002.

7.   Provision for Income Taxes

The effective income tax rates used in the interim financial statements are
estimates of the full years rates. Net deferred tax assets recognized on the
Companys balance sheet continue to require managements evaluation as to their
realization. Although realization is not assured, management believes it is
more likely than not that the net deferred tax assets will be realized. The
amount realized is based upon estimates derived from tax planning strategies
which the Company believes is currently prudent and feasible. Additions to the
valuation allowance may be required in the event that estimates are changed.

8.   Business Segment Information

The Company adopted SFAS No. 131, Disclosure about Segments of an Enterprise
and Related Information,in 1998. The Companys reportable segments are delineated
geographically. In addition to the geographic delineation, the segments are
managed separately because of their different product offerings, markets served
and cost structures.

11



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The Companys North American segment operates manufacturing facilities in Rhode
Island, Kentucky, Maryland and Ohio, and operates a distribution facility in
Ontario, Canada. This segment manufactures and markets products used
principally in flow control, storage, heating and other treatment of fluids in
the water system and HVAC markets. These products are marketed
throughout the world but primarily in North America, Western Europe, Asia and
Mexico.

The Companys European segment includes its facilities in Guimaraes, Portugal,
Donaueschingen, Germany and Swarzedz, Poland. The Guimaraes facility
manufactures returnable and non-returnable steel gas cylinders for storing
cooking, heating and refrigerant gases which are marketed worldwide. The
Donaueschingen facility manufactures residential and commercial water heaters
marketed primarily in Switzerland, Austria and Germany. The Swarzedz facility
refurbishes gas cylinders.

The primary criteria by which financial performance is evaluated and resources
are allocated include revenues and EBITDA. The following is a summary of key
financial data by segment:

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##### Table of Contents



|                                |               |          |   |           |        |           |   |        |        | 
|------------------------------- | ------------- | -------- | - | --------- | ------ | --------- | - | ------ | ------ | 
|                                |               |          |   | March 31, |        | March 31,
|                                |               |          |   | 2002      |        | 2001     
|                                |               |          |   |           |        |          
|Net Sales to external customers |               |          |   |           |        |           |   |       
|                               
|                               
|                               
|                               
|                                | North America |          |   |           |        |           |   |        |       
|                               
|                               
|                               
|                               
|                                |               | US       |   | $         | 28,210 |           |   | $      | 29,271 | 
|                               
|                               
|                               
|                               
|                                |               | Other    |   |           | 1,235  |           |   |        | 1,210  | 
|                               
|                               
|                               
|                               
|                                | Europe        |          |   |           |        |           |   |        |       
|                               
|                               
|                               
|                               
|                                |               | Portugal |   |           | 11,031 |           |   |        | 13,135 | 
|                               
|                               
|                               
|                               
|                                |               | Other    |   |           | 2,066  |           |   |        | 2,818  | 
|                                |               |          |   |           |        |           |   |       
|                                | Consolidated  |          | $ | 42,542    |        |           | $ | 46,434 |       
|                                |               |          |   |           |        |           |   |       
|Income from operations          |               |          |   |           |        |           |   |       
|                               
|                               
|                               
|                               
|                                | North America |          | $ | 2,335     |        |           | $ | 552    |       
|                               
|                               
|                               
|                               
|                                | Europe        |          |   | 860       |        |           |   | 998    |       
|                                |               |          |   |           |        |           |   |       
|                                | Consolidated  |          | $ | 3,195     |        |           | $ | 1,550  |       
|                                |               |          |   |           |        |           |   |       
|EBITDA                          |               |          |   |           |        |           |   |       
|                               
|                               
|                               
|                               
|                                | North America |          | $ | 3,604     |        |           | $ | 3,076  |       
|                               
|                               
|                               
|                               
|                                | Europe        |          |   | 1,620     |        |           |   | 2,125  |       
|                                |               |          |   |           |        |           |   |       
|                                | Consolidated  |          | $ | 5,224     |        |           | $ | 5,201  |       
|                                |               |          |   |           |        |           |   |       

|                  |               |          |   |         |         |  |   |              |         | 
|----------------- | ------------- | -------- | - | ------- | ------- |  | - | ------------ | ------- | 
|                  |               |          |   |         |         |  |   | December 31,
|                  |               |          |   |         |         |  |   | 2001        
|                  |               |          |   |         |         |  |   |             
|Long-Lived assets |               |          |   |         |         |  |   |             
|                 
|                 
|                 
|                 
|                  | North America |          |   |         |         |  |   |              |        
|                 
|                 
|                 
|                 
|                  |               | US       |   | $       | 156,124 |  |   | $            | 156,998 | 
|                 
|                 
|                 
|                 
|                  |               | Other    |   |         | 8       |  |   |              | 9       | 
|                 
|                 
|                 
|                 
|                  | Europe        |          |   |         |         |  |   |              |        
|                 
|                 
|                 
|                 
|                  |               | Portugal |   |         | 31,562  |  |   |              | 32,304  | 
|                 
|                 
|                 
|                 
|                  |               | Other    |   |         | 8,978   |  |   |              | 9,173   | 
|                  |               |          |   |         |         |  |   |             
|                  | Consolidated  |          | $ | 196,672 |         |  | $ | 198,484      |        
|                  |               |          |   |         |         |  |   |             

Income from operations for the North America business segment above is reduced
by goodwill amortization for 2001. EBITDA is earnings (net income/loss) before
interest, taxes, depreciation and amortization. The method of calculating
EBITDA is consistent with the definition contained in the Foothill Facility and
the Notes. Readers of financial statements frequently consider EBITDA a
useful tool in evaluating a companys performance. Therefore, the Company
believes that inclusion of EBITDA is useful supplemental information. However,
EBITDA is not a measure of true cash flow since it does not incorporate changes
of other assets or liabilities that may generate or require cash. EBITDA is
not a generally accepted accounting measure. Long-Lived assets include
property, plant and equipment and goodwill.

13



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##### Table of Contents



9.   Commitments and Contingencies

At March 31, 2002, the Foothill Facility contained a sublimit to support the
issuance of letters of credit in the amount of $3.0 million. At March 31,
2002, letters of credit outstanding amounted to $0.7 million.

The Company is involved in various legal proceedings which, in the opinion of
management, will not result in a material adverse effect on its financial
condition or results of operations.




Item 2.   Managements Discussion and Analysis of Financial Condition and Results of Operations

Overview

This section should be read in conjunction with the condensed Consolidated
Financial Statements of the Company included elsewhere herein and the Companys
Form 10-K for 2001.

The Company and its subsidiaries and their representatives may from time to
time make written or oral statements, including statements contained in
the Companys filings with the Securities and Exchange Commission (SEC) and in its
reporting to customers, which constitute or contain forward-looking
statements as that term is defined in the Private Securities Litigation Reform
Act of 1995 or the SEC in its rules, regulations and releases.

All statements other than statements of historical fact included in this Form
10-Q and elsewhere relating to the Companys financial position, strategic
initiatives and statements addressing industry developments are forward-looking
statements. When incorporated in this discussion, the words expect(s),
feel(s), believe(s), anticipate(s) and similar expressions are intended
to identify some of these forward-looking statements. Forward looking
statements include those containing these phrases but also any other statements
that are not references to historical fact. Although the Company believes that
the expectations reflected in such forward-looking statements are expressed in
good faith and are believed to have a reasonable basis, there can be no
assurance that such expectations or beliefs will result or be achieved or
accomplished. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The
following are some of the important factors that can vary or change or involve
substantial risk and cause actual results to differ materially from such
expectations: the Companys ability to successfully implement its business
strategy; the availability and cost of raw materials; changes in domestic or
foreign government regulation or enforcement policies, particularly related to
refrigerant gases or cylinders and building and energy efficiency requirements
or restrictions or limitations or general reduction in the use of
domestic wells; significant weather conditions adverse to the Companys
business; development of competing technologies; acceptance of the Companys
existing and planned new products in international markets; competition in the
Companys markets, particularly price
competition; the rate of growth of developing economies and demand for the
Companys products; the ultimate cost of future warranty and other claims
relating to the Companys

14



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##### Table of Contents



products and business; whether the Company succeeds
in acquiring new businesses; availability of capital; foreign exchange rates;
increases in interest rates; the business abilities and judgment of personnel;
and general economic, financial and business conditions, both domestically and
internationally.

Results of Operations

The following table sets forth, for the periods indicated, the percentages of
the Companys net sales represented by certain income and expense items in the
Companys Consolidated Statements of Operations.

|                                             |  |                       |       |           |  |  |       |   
|-------------------------------------------- |  | --------------------- | ----- | --------- |  |  | ----- | --
|                                             |  | For the Quarter Ended
|                                             |  |                      
|                                             |  | March 31,             |       | March 31,
|                                             |  | 2002                  |       | 2001     
|                                             |  |                       |       |          
|Net sales                                    |  |                       | 100.0 | %         |  |  | 100.0 | % 
|                                            
|                                            
|                                            
|                                            
|Cost of goods sold                           |  |                       | 76.7  |           |  |  | 79.3  |   
|                                             |  |                       |       |           |  |  |       |   
|Gross profit                                 |  |                       | 23.3  |           |  |  | 20.7  |   
|                                            
|                                            
|                                            
|                                            
|Selling, general and administrative expenses |  |                       | 15.8  |           |  |  | 14.9  |   
|                                            
|                                            
|                                            
|                                            
|Amortization of goodwill                     |  |                       |      |           |  |  | 2.5   |   
|                                             |  |                       |       |           |  |  |       |   
|Income from operations                       |  |                       | 7.5   |           |  |  | 3.3   |   
|                                            
|                                            
|                                            
|                                            
|Interest expense                             |  |                       | (11.3 | )         |  |  | (10.5 | ) 
|                                            
|                                            
|                                            
|                                            
|Interest income                              |  |                       |      |           |  |  | 0.1   |   
|                                            
|                                            
|                                            
|                                            
|Other income, net                            |  |                       | 0.1   |           |  |  | 0.8   |   
|                                             |  |                       |       |           |  |  |       |   
|Loss before provision for income taxes       |  |                       | (3.7  | )         |  |  | (6.3  | ) 
|                                            
|                                            
|                                            
|                                            
|Provision (benefit) for income taxes         |  |                       | 1.1   |           |  |  | (1.0  | ) 
|                                             |  |                       |       |           |  |  |       |   
|Net loss                                     |  |                       | (4.8  | )%        |  |  | (5.3  | )%
|                                             |  |                       |       |           |  |  |       |   

Net sales for the first quarter of 2002 decreased $3.9 million or 8.4% compared
to the same period in 2001. In North America, net sales declined approximately
$1.0 million or 3.4% due principally to a decline in volume attributable to a
continuing weakness in the North American economy, pricing pressures and shifts
in product mix. Net sales in Europe decreased $2.9 million or 17.9% as a
result of a sluggish European economy. In addition, the average Euro rate
against the U.S. dollar in 2002 weakened as compared to the average Euro rate
in 2001, thereby reducing net sales $0.6 million.

Gross profit for the first quarter of 2002 increased $0.3 million or 3.4% from
the first quarter of 2001. As a percentage of net sales, the gross
profit
percentage increased to 23.3% in 2002 from 20.7% in 2001. Manufacturing
efficiency improvements, lower energy costs and lower commodity costs
contributed to the margin improvement.

15



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##### Table of Contents



Selling, general and administrative expenses for the first quarter of 2002
decreased by $0.2 million or 3.0% compared to 2001. The decrease was
principally due to marketing investments made in the first quarter of 2001 that
were not repeated in the first quarter of 2002.

Other income, net decreased $0.3 million when compared to 2001. The decrease
was principally due to currency exchange gains recorded by the Companys
European operations in 2001.

Income taxes during the first quarter of 2002
increased $0.9 million as compared to 2001. The increase was the
result of the Company discontinuing its recognition of a tax benefit
within its North American operations.

The net loss for the first quarter of 2002 of $2.0 million compares to a net
loss in the first quarter of 2001 of $2.5 million, an absolute
change of $0.5
million.

Earnings before interest expense, taxes,
depreciation and amortization (EBITDA) for 2002 was substantially unchanged compared to 2001. As a percentage of net sales,
EBITDA increased from 11.2 % in 2001 to 12.3 % in 2002.

Liquidity and Capital Resources

The Companys operating capital (defined as accounts receivable and inventory,
less accounts payable) decreased $0.4 million from $27.3 million at December
31, 2001 to $26.9 million at March 31, 2002. Accounts
receivable and inventories increased $1.3 million and $2.7 million,
respectively while accounts payable increased $4.4 million consistent with seasonal operating
levels principally in the Companys water systems and cylinder businesses.

For the current three-month period, the Company
used $4.9 million less in cash
from operating activities when compared to 2001. The decrease in cash used was
due to the Companys improved working capital position versus last year.

Cash provided by financing activities during the quarter ended March 2002
decreased approximately $6.4 million reflecting less borrowings because of the
additional cash generated from operating activities.

The Company, on December 26, 2001 completed a refinancing of its senior secured
credit facility. In its place, the Company entered into two new credit
facilities: a $42.5 million senior first-priority secured credit facility
arranged by Foothill Capital Corporation (the Foothill Facility) and a $25.0
million senior second-priority secured credit facility with affiliates of The
Cypress Group L.L.C. (the Cypress Facility). Proceeds from the refinancing
were used to repay in full the Companys existing credit facility and to pay fees
and expenses related to the refinancing.

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The Foothill Facility consists of senior term loans (the Term Loans) and a
revolving credit facility (the Revolving Credit Facility). A portion ($10.2
million) of the Term Loans (the Term Loan A) is the lower of (a) $10.5
million and (b) the sum of (i) 80% of the net liquidation percentage of
eligible equipment located in North America and (ii) 60% of the fair market
value of real property located in North America. The remaining portion of the
Term Loans (the Term Loan B) is $7.5 million. The Revolving Credit Facility
is secured by North American accounts receivable and inventories. Aggregate
borrowings under the Revolving Credit Facility are limited to the lesser of (a)
$35.0 million less the aggregate outstanding principal amount of the Term Loan
A less letter of credit usage, and (b) the borrowing base less letter of
credit usage. At March 31, 2002, total availability and aggregate borrowings
under the Revolving Credit Facility were $11.7 million and $4.0 million,
respectively.

Term Loan A has a five-year maturity with quarterly principal payments of
$426,757 commencing April 1, 2002. The outstanding unpaid principal shall be
due and payable on the date of termination of the Foothill Facility, whether by its
terms, by prepayment, or by acceleration and bears interest at LIBOR plus 3.5%.
Term Loan B has a three-year maturity with quarterly principal payments of
$312,500 commencing April 1, 2002. The outstanding unpaid principal shall be
due and payable on the date of termination of the Foothill Facility, whether by its
terms, by prepayment, or by acceleration and bears interest at the greater of
the Wells Fargo Reference Rate (approximates the prime rate) plus 3.5% and
9.25%. The Revolving Credit Facility has a five-year maturity. Amounts
borrowed under the Revolving Credit Facility may be repaid and reborrowed at
any time during the term of the Foothill Facility and bear interest at LIBOR plus 2.5%
for LIBOR based borrowings and the Wells Fargo Reference Rate plus 0.5% for
non-LIBOR based borrowings. The Foothill Facility contains certain affirmative and
negative covenants and restrictions. As of March 31, 2002, the Company was in
compliance with the various covenants of the Foothill Facility.

The Cypress Facility consists of a single $25.0 million term loan (the Term
Loan C). Term Loan C has a five-year maturity and bears Pay-In-Kind (PIK)
interest fixed at 12% per annum paid quarterly, which at the lenders option can
be paid in common stock of the Company. In connection with the Cypress
Facility, Amtrol Holdings, Inc., which wholly owns the Company, has issued
the lenders under the Cypress Facility 60,000 warrants to purchase
approximately 5.2% of its common stock on a fully diluted basis. The 60,000
warrants, which have an exercise price of $.01, were valued at $3.4 million
using the Black-Scholes model. This amount was recorded as an offset to the
Term Loan C debt and included in the Companys equity section.
This discount is being accreted to the face value of the Term Loan C
over the life of the Cypress Facility. The Company
expects that the effective interest rate associated with the Term Loan C will
be greater than 12% given the additional compensation associated with
the issuance of the warrants. The Cypress Facility contains certain affirmative and negative
covenants and restrictions. As of March 31, 2002, the Company was in
compliance with the various covenants of the Cypress Facility.

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In November 1996, the Company issued, under an Indenture, $115.0 million of
Senior Subordinated Notes due 2006 (the Notes). The Notes are unsecured
obligations of the Company. The Notes bear interest at the rate of 10.625% per
annum payable semi-annually on each June 30 and December 31 commencing on June
30, 1997. The Notes are redeemable at the option of the Company on or after
December 31, 2001. From and after December 31, 2001, the Notes will be subject
to redemption at the option of the Company, in whole or in part, at various
redemption prices, declining from 105.313% of the principal amount to par on
and after December 31, 2003. Upon a Change of Control (as defined in the
Indenture), each Note holder has the right to require the Company to repurchase
such holders Notes at a purchase price of 101% of the principal amount plus
accrued interest. The Indenture contains certain affirmative and negative
covenants and restrictions. As of March 31, 2002, the Company is in compliance
with the various covenants.

The Company intends to fund its future working capital, capital expenditures
and debt service requirements through cash flows generated from operations and
borrowings under the Revolving Credit Facility. Management believes that cash
generated from operations, together with borrowings available under the
Revolving Credit Facility, will be sufficient to meet the Companys working
capital and capital expenditure needs in the foreseeable future. The Company
may consider other options available to it in connection with funding future
working capital and capital expenditure needs, including the issuance of
additional debt and equity securities.

The Company and/or affiliates of the Company, including entities related to
Cypress may, from time to time, depending on market conditions, purchase the
Senior Subordinated Notes previously issued by the Company in the open market
or by other means.

The Company will continue to selectively pursue strategic acquisitions, such as
the acquisitions of AMTROL ALFA and AMTROL NOVA. The Company believes that
strategic acquisitions, both domestic and international, provide an effective
means of increasing or establishing a market presence in targeted markets and a
means of identifying and introducing new products and technologies in markets
where it already has a strong presence. The Company also believes that
establishing local manufacturing and distribution facilities in international
markets significantly enhances its ability to build strong customer
relationships, understand local product preferences and be price competitive.

Inflation

The Company believes that anticipated inflation rates will not have a
materially adverse effect on its results of operating or its financial
condition in 2002, except for domestic steel purchases. The Company, based
upon discussions with domestic steel vendors, expects steel prices to increase
beginning in the second quarter of 2002. The Company, to the extent possible,
will attempt to mitigate the anticipated price increases by securing lower
priced steel wherever possible. However, there can be no assurance that sharply
increasing raw material or fuel costs will not adversely affect the Companys
financial condition or results of operations.

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Item 3.   Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in information relating to market risk
since the Companys disclosure included in Item 7A of Form 10-K as filed with
the Securities and Exchange Commission on March 29, 2002.

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AMTROL INC. AND SUBSIDIARIES




PART II




Item 1.   Legal Proceedings

No material legal proceedings were terminated or filed against the Company during the
period covered by this report.




Item 2.   Changes in Securities and Use of Proceeds

None.




Item 3.   Defaults Upon Senior Securities

None.




Item 4.   Submission of Matters to a Vote of Security Holders

None.




Item 5.   Other Information

None.




Item 6.   Exhibits and Reports on Form 8-K

No exhibits or reports on Form 8-K were filed during the period covered by this
report.

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AMTROL INC. AND SUBSIDIARIES




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.

|      |  |              |  |             |  |                                                                                            
|----- |  | ------------ |  | ----------- |  | -------------------------------------------------------------------------------------------
|      |  |              |  | AMTROL INC.
|     
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|      |  |              |  |             |  |                                                                                            
|     
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|Date: |  | May 14, 2002 |  | By:         |  | /s/ ALBERT D. INDELICATO                                                                   
|      |  |              |  |             |  |                                                                                            
|      |  |              |  |             |  | Albert D. Indelicato
President, Chairman of the Board,
Chief Executive Officer and
Director
|     
|     
|     
|     
|      |  |              |  |             |  |                                                                                            
|     
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|Date: |  | May 14, 2002 |  | By:         |  | /s/ LARRY T. GUILLEMETTE                                                                   
|      |  |              |  |             |  |                                                                                            
|      |  |              |  |             |  | Larry T. Guillemette,
Executive Vice President,
Chief Financial Officer and
Treasurer      

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