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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

For the fiscal year ended June 30, 2001
                                       OR

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

For the transition period from _____________ to _________________

Commission file number: 0-28493

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

<TABLE>
<S><C>
                             Delaware                                                    43-1659062
  (State or other jurisdiction of incorporation or organization)            (I.R.S. Employer Identification No.)

                  1900 Gulf Street, Lamar, Missouri                                       64759-1899
              (Address of principal executive offices)                                    (Zip Code)
</TABLE>

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

Securities registered pursuant to Section 12(b) of the Act:

                           None

Securities registered pursuant to Section 12(g) of the Act:

Senior Preferred Stock, par value $0.01 per share

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

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

         As of September 15, 2001, 1,368,000 shares of common stock of
O'Sullivan Industries Holdings, Inc. were outstanding. The aggregate market
value of the voting stock held by non-affiliates of O'Sullivan Industries
Holdings, Inc. can not be calculated because this stock is not traded.

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                    The Index to Exhibits begins on page 58.

                                  Page 1 of 62


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                                     PART I

ITEM 1.  BUSINESS.

HISTORY AND OVERVIEW

     O'Sullivan Industries Holdings, Inc., a Delaware corporation, is a leading
designer, manufacturer and distributer of ready-to-assemble furniture in the
United States. O'Sullivan was incorporated in November 1993 and acquired
O'Sullivan Industries, Inc. in February 1994. O'Sullivan Industries Holdings,
Inc. is a holding company with no material operations. It owns all the capital
stock of O'Sullivan Industries, Inc., a Delaware Corporation. O'Sullivan
Industries, Inc. owns all of the capital stock of O'Sullivan Industries -
Virginia, Inc., a Virginia corporation. O'Sullivan Holdings is dependent on
O'Sullivan Industries, Inc., to fund the interest cost on $17.6 million of debt,
including accrued interest, and dividends on mandatorily redeemable senior
preferred stock (liquidation value plus accumulated dividends totaling $29.6
million at June 30, 2001).

         References to the words "O'Sullivan," "we," "our" and "us" refer to
O'Sullivan Industries Holdings, Inc., and its subsidiaries. References to
"O'Sullivan Holdings" refer to O'Sullivan Industries Holdings, Inc. only.
References to "O'Sullivan Industries" refer to O'Sullivan Industries, Inc. and
its subsidiaries. References to O'Sullivan Industries - Virginia refer to
O'Sullivan Industries - Virginia, Inc.

         O'Sullivan owns manufacturing, warehouse and distribution facilities in
Lamar, Missouri and South Boston, Virginia. O'Sullivan commenced operations at
the Lamar, Missouri plant in 1965, and the South Boston, Virginia facility
became operational in 1989.

         O'Sullivan engages in one industry segment: the design, manufacture and
sale of ready-to-assemble, or RTA, furniture.

BUSINESS OVERVIEW

         After two years of sales growth in excess of 10%, our net sales
declined 11.3% in fiscal 2001. Our sales declined for several reasons, including

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

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

         -    the substantial increase in energy prices in 2000 and 2001 that
              reduced consumers' income available for purchases of our products;

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

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

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

         Reacting to the lower sales levels, we closed our Cedar City, Utah
manufacturing facility in January 2001. We also reduced support staff at the
Lamar, Missouri facility. We recorded a $10.5 million pre-tax restructuring
charge to reflect the costs of these actions. We expect to save approximately
$5.0 million annually from the closing of our Cedar City, Utah facility.

         The restructuring charge, the lower sales level and the other factors
noted above resulted in a net loss before dividends and accretion on preferred
stock of $7.9 million for fiscal 2001 and reduced our earnings before interest,
taxes, depreciation and amortization to $36.8 million in fiscal 2001.



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         While we have confidence in the long-term future of the RTA furniture
industry, sales in the first quarter of fiscal 2002 are anticipated to be flat
to down slightly from sales in the first quarter of fiscal 2001, as the factors
discussed above continue to affect our sales. We cannot yet predict when our
sales will return to a pattern of sales growth.

The 1999 Recapitalization and Merger

         On November 30, 1999, O'Sullivan Holdings completed a recapitalization
and merger through which the outstanding stock of O'Sullivan Holdings was
purchased by a private equity firm, Bruckmann, Rosser, Sherrill & Co. II, LLC
("BRS"), 34 members of our management and an affiliate of a former director.
Management and the affiliate of a former director owned a total of 27.1% of the
outstanding common stock of O'Sullivan Holdings at June 30, 2001. BRS owns the
balance.

         Each share of outstanding common stock of O'Sullivan Holdings was
exchanged for $16.75 in cash and one share of senior preferred stock with an
initial liquidation value of $1.50 per share. Some of the shares of O'Sullivan
Holdings common stock, options and cash held by the management participants in
the recapitalization and merger were exchanged for 371,400 shares of common
stock, 72,748 shares of junior preferred stock and options to acquire 60,319
shares of junior preferred stock of the surviving company.

         The total amount of funds necessary to fund the recapitalization and
merger and related transactions was approximately $357.0 million. These funds
came primarily from the following sources:

         -        an equity investment by BRS of approximately $45.3 million in
                  cash in the recapitalization and merger. The cash investment
                  was used to purchase 996,000 shares of common stock and
                  442,933 shares of Series B junior preferred stock of
                  O'Sullivan Holdings;

         -        an equity investment in O'Sullivan Holdings by the management
                  participants in the recapitalization and merger in the amount
                  of approximately $13.7 million. This investment consisted of
                  the exchange by the management participants of common stock of
                  O'Sullivan Holdings with a value of $6.9 million, options to
                  acquire common stock of O'Sullivan Holdings with an intrinsic
                  value of $6.1 million and cash of $700,000 for shares of
                  common stock, shares of Series B junior preferred stock and
                  options to acquire shares of Series A junior preferred stock,
                  each of O'Sullivan Holdings;

         -        the issuance by O'Sullivan Holdings of senior preferred stock
                  with a total liquidation value of $24.6 million to the
                  existing stockholders of O'Sullivan Holdings;

         -        the issuance by O'Sullivan Holdings of a $15.0 million senior
                  note and warrants exercisable in aggregate into 6.0% of
                  O'Sullivan Holdings common stock and 6.0% of O'Sullivan
                  Holdings junior preferred stock on a fully diluted basis as of
                  the date of the issuance of the warrants;

         -        the issuance by O'Sullivan Industries of $100.0 million of
                  senior subordinated notes together with warrants issued by
                  O'Sullivan Holdings exercisable in aggregate into 6.0% of
                  O'Sullivan Holdings common stock and 6.0% of O'Sullivan
                  Holdings junior preferred stock on a fully diluted basis as of
                  the date of issuance of the warrants;

         -        borrowings by O'Sullivan Industries totaling approximately
                  $139.0 million under the senior credit facility; and

         -        $9.4 million of cash from O'Sullivan Industries.


         In addition, $10.0 million of variable rate industrial revenue bonds
remain outstanding following the recapitalization transactions.

         The recapitalization and merger was approved by the board of directors
of O'Sullivan Holdings, the board of directors of OSI Acquisition, Inc. and a
majority of the stockholders of O'Sullivan Holdings. We accounted for



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the merger under recapitalization accounting. Under this method, the historical
basis of our assets and liabilities was not affected.

RTA FURNITURE

         We are a leading designer, manufacturer and distributer of
ready-to-assemble furniture products, with over 45 years of experience. We sell
primarily to the home office and home entertainment markets. We manufacture
approximately 450 stock keeping units of ready-to-assemble furniture at retail
price points from $20 to $999. Our product offerings include ready-to-assemble
desks, computer workcenters, home entertainment centers, audio equipment racks,
pantries and microwave oven carts. We also manufacture a variety of other
ready-to-assemble furniture for home office, home entertainment, storage,
bedroom and other home uses. We design our products to provide high quality,
value and ease of assembly by the consumer using straight-forward, diagramed
instructions. For the fiscal year ended June 30, 2001, we had net sales of
$375.7 million, EBITDA of $36.8 million and a net loss before dividends and
accretion on preferred stock of $7.9 million. At June 30, 2001, our assets
totaled $263.2 million. For additional information regarding our sales,
operating profits and assets, see the financial statements included in Part II,
Item 8 of this report, "Financial Statements and Supplementary Data."

         We distribute our products primarily through office superstores,
including OfficeMax, Office Depot and Staples, discount mass merchants,
including Wal-Mart, Target and Kmart, home centers such as Lowe's, and
electronic superstores such as Best Buy and Circuit City, as well as through
other retail channels. We own two modern manufacturing facilities totaling over
1.8 million square feet located in Lamar, Missouri and South Boston, Virginia.

COMPETITIVE STRENGTHS

         We believe that we are able to compete effectively due to the following
strengths:

         Leading market share position. We believe we are the second largest
North American ready-to-assemble furniture manufacturer in terms of domestic
sales. We estimate our share of the ready-to-assemble furniture market in
calendar 2000 was approximately 16%. Many of our largest customers, including
office superstores and discount mass merchants, have substantial purchasing
requirements across the country. We are able to satisfy these requirements
because of our large manufacturing capacity and our innovative, high quality
products.

         Leader in product quality, innovation and design. We believe that we
are recognized as a leader in product quality, innovation and design in the
ready-to-assemble furniture industry. Our computer-aided design software and our
modern manufacturing processes enable us to develop more than 150 new products
per year. Consequently, about one-third of our products are new each year. Our
ability to innovate allows us to keep pace with changes in retailer and consumer
tastes and demands.

         Well-established customer relationships. We have well-established
relationships with many of the largest retailers of ready-to-assemble furniture
in the United States. These include office superstores like OfficeMax, Office
Depot and Staples. They also include national discount mass merchants, like
Wal-Mart, Target and Kmart, electronic superstores like Best Buy and Circuit
City and home centers such as Lowe's. We believe we have a long history as a
trusted vendor and have earned a reputation for product quality and innovation,
customer responsiveness and manufacturing flexibility.

         Available capacity positions us for growth. In recent years, we have
expanded our manufacturing facilities to provide capacity to meet current and
anticipated demand. Two of these expansion projects, started in early 2000 to
meet anticipated demand growth in 2001 and beyond, will be completed in calendar
2001. Thus, even with the closure of the Cedar City, Utah manufacturing
facility, we have substantial available capacity that will enable us to meet
growing demand.

         Low cost manufacturing operations. We believe that we are a low-cost
ready-to-assemble furniture producer due to our large scale, modern facilities
and efficient manufacturing processes.

         Experienced management team with significant equity ownership. Our
senior management team has extensive experience in the ready-to-assemble segment
of the furniture industry. Our ten officers have been with us


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for an average of over 17 years. In addition, we have broadened our management's
expertise by hiring executives from other leading manufacturers. Management
participants in the recapitalization invested a total of $13.7 million. This
retained equity includes an interest of approximately 27.1% in the outstanding
common stock of O'Sullivan Holdings. As a result of their substantial equity
interest, we believe the management participants in the recapitalization have a
significant incentive to continue to increase our sales and profitability.

GROWTH STRATEGY

         Sales of ready-to-assemble furniture, although expanding more rapidly
than sales of traditional case goods furniture in recent years, still represent
only about 6% of the overall domestic residential furniture market. As the
quality of ready-to-assemble furniture continues to improve, and discount mass
merchants and home centers continue to expand, we expect ready-to-assemble
furniture to gain additional market share. The key elements of our growth
strategy are as follows:

         Continue to develop a broad range of innovative, high quality products.
We are dedicated to offering a broad range of high quality products at a variety
of retail prices. We believe that by maintaining a broad product line we can
appeal to a greater number of consumers and penetrate a larger number of
distribution channels. We seek to drive demand for our products and maintain
profitability in an otherwise price-rigid environment by providing a steady
supply of high quality product introductions. In fiscal 2001, we introduced
approximately 190 new products.

         Further penetrate existing and new, growing distribution channels.
Sales to office superstores and discount mass merchants, our core distribution
channels, have grown at a compound annual growth rate of about 10% since fiscal
year 1995 to over $250 million in fiscal 2001. However, sales slumped sharply in
fiscal 2001, particularly in the office superstore channel. To increase sales to
our existing customer base, we have developed several initiatives. These
initiatives include dedicated product lines, enhanced customer service and
tailored marketing programs. We have also focused on increasing sales to other
growing distribution channels. These channels include electronic specialty
retailers and home improvement centers.

         Lower production costs. Producing ready-to-assemble furniture cost
effectively is vital to our competitive position. This belief was the premise
for capital expansions. Our capital investments have increased our total
manufacturing capacity. New equipment and employee training have also improved
our inventory management, order fulfillment rates and production efficiency.

         Remain committed to customer service. We are committed to providing
superior customer service to maintain strong relationships with our customers.
We strive to develop marketing strategies that are consistent with our
customers' needs and their position in the marketplace. The recent investments
we have made to improve our management information systems and increase our
manufacturing capacity should enable us to provide a higher level of customer
responsiveness, improve the look and quality of our products and enhance our
ability to forecast orders.

PRODUCT OVERVIEW

         We group our product offerings into three distinct categories:

  -      furniture for the home office and small office, including desks,
         computer work centers, bookcases and filing cabinets;

  -      electronics display furniture, including home entertainment centers,
         home theater systems, television and audio stands and audio and video
         storage units; and

  -      home decor furniture, including microwave oven carts, pantries, living
         room and recreation room furniture and bedroom pieces, including
         dressers, night stands and wardrobes.



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The following is a description of some of our products.

<TABLE>
<CAPTION>
                PRODUCT                              DESCRIPTION                          KEY CUSTOMERS
                -------                              -----------                          -------------
<S>                                      <C>                                   <C>
Living Dimensions...................     Contemporary small office/home        OfficeMax, Office World,
                                         office.  Upscale features include     Staples
                                         Armortop(R) laminates and
                                         Quickfit(TM) fastener system


French Gardens......................     Country French style collection       OfficeMax, Shopko, Staples, Lowe's
                                         with antique Odessa Pine finish.
                                         Both home office and entertainment
                                         products


Transitions.........................     Contemporary small office/home        Best Buy, Lowe's
                                         office and entertainment furniture
                                         collection in a medium alder finish


Diplomat............................     Modular home office/small office      Staples
                                         collection in snow maple and vivid
                                         beech finishes

Manor Hill..........................     Updated traditionally styled home     Lowe's, Meijer, Best Buy
                                         entertainment and home office
                                         furniture
</TABLE>

PRODUCT DESIGN AND DEVELOPMENT

          We believe we are an industry leader in product quality and
innovation. We are committed to the continuing development of unique furniture
that meets consumer needs. With over 50% of our sales to the home office and
small office market, we believe we are recognized as one of the industry's
premier producers of contemporary home office and small office ready-to-assemble
furniture. In the past three years, we introduced an average of over 150
products per year. In the ready-to-assemble furniture industry, a new product
can be a variation in color or styling of an existing product. By providing a
continuous supply of new product introductions, we endeavor to drive demand for
our products, which we believe will allow us to maintain our profit margins in
an otherwise price-rigid environment.

         We maintain an in-house product design staff that collaborates with our
marketing personnel and customers to develop new products based on demographic
and consumer information. The product design professionals then work with our
engineering division to produce full-scale prototypes. The engineering staff
uses computer-aided design Pro-engineering software, which provides
three-dimensional graphics capabilities. Pro-engineering software allows a
design engineer to accelerate the time-to-completion for a new product design.
This allows us to reduce the time for newly conceived products to reach the
market. We then show our prototypes to our customers to gauge interest. If
initial indications of product appeal are favorable, we usually can commence
production within twelve weeks. We spent approximately $1.0 million, $1.0
million and $766,000 on product design and development in fiscal years 2001,
2000 and 1999, respectively.


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CUSTOMERS

           Ready-to-assemble furniture is sold through a broad array of
distribution channels, including discount mass merchants, office superstores,
electronic superstores, national department stores and home centers. While the
ready-to-assemble segment historically has been dominated by discount mass
merchants like Wal-Mart, Target and Kmart, office superstores have quickly
become the second largest distribution channel.

           We have a large market share position in both of the two major
distribution channels and longstanding relationships with key customers. In
fiscal 2001, sales to OfficeMax accounted for about 19% of our gross sales,
Office Depot accounted for about 17% of our gross sales and Wal-Mart accounted
for about 11% of our gross sales. Similar to other large ready-to-assemble
furniture manufacturers, our sales are fairly concentrated.

SALES AND MARKETING

         We manage our customer relationships both through our in-house sales
force and a network of independent sales representatives. Key accounts like
OfficeMax and Office Depot are called on jointly by our sales force and
independent sales representatives. Smaller customers are serviced mainly by
independent sales representatives, whose activities are reviewed by our in-house
sales force.

         We work extensively with our customers to meet their specific
merchandising needs. Through customer presentations and other direct feedback
from the customer and consumers, we identify the consumer tastes and profiles of
a particular retailer. With this information, we make product recommendations to
our customers. We maintain a close dialogue with customers to ensure that the
design and functional requirements of our products are fulfilled.

         Our products are promoted by our customers to the public under
cooperative and other advertising agreements. Under these agreements, our
products are advertised in newspaper inserts and catalogs, among other
publications. We generally cover a portion of the customer's advertising
expenses if the customer places approved advertisements mentioning us and our
products by name. We may also provide support to some customers' advertising
programs. We generally do not advertise directly to consumers. We do, however,
advertise in trade publications to promote O'Sullivan as a producer of high
quality ready-to-assemble furniture.

         We provide extensive service support to our customers. This support
includes designing and installing in-store displays, educating retailers' sales
forces and maintaining floor displays. We have been recognized for our
commitment to our retail partners and have earned several awards in recent
years.

         We participate in the furniture markets held in High Point, North
Carolina in April and October of each year. High Point is the principal
international market in the furniture industry. It attracts buyers from the
United States and abroad. We recently signed a lease for a new, larger showroom
in High Point. We also maintain other showrooms to market our product lines. In
addition, we participate in the international furniture show in Cologne,
Germany.

         We sell our products throughout the United States and in Canada,
Mexico, the United Kingdom, Australia and other countries. Export sales were
$32.0 million, $25.0 million and $26.5 million in fiscal 2001, 2000 and 1999,
respectively. In fiscal 2001, sales increased due to marketing successes in the
United Kingdom, Australia and Canada and due to U.S. office superstore and mass
merchant sales in Mexico. In fiscal 2000 and 1999, international sales declined
largely due to the strength of the dollar against the pound and lower sales to
the Middle East.


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MANUFACTURING

         We operate two modern manufacturing facilities, in Lamar, Missouri and
South Boston, Virginia. In total, these facilities have about 1.8 million square
feet.

   -     Lamar, Missouri: Opened in 1965, this facility has about 1.15 million
         square feet. It is our larger facility and has the capability to
         produce our entire product offering. This facility also serves as our
         corporate headquarters.

   -     South Boston, Virginia: Opened in 1989, our South Boston facility has
         been expanded to approximately 675,000 square feet, including an
         expansion of about 200,000 square feet completed in 2001. The South
         Boston facility has the capability to manufacture most of our products.

RAW MATERIALS

         The materials used in our manufacturing operations include
particleboard, fiberboard, coated paper laminates, glass, furniture hardware and
packaging materials. Our largest raw material cost is particleboard. We purchase
all of our raw material needs from outside suppliers. We buy our particleboard
and fiberboard at market-based prices from several independent wood product
suppliers. We purchase other raw materials from a limited number of vendors.
These raw materials are generally available from other suppliers, although the
cost from alternate suppliers might be higher.

         As is customary in the ready-to-assemble furniture industry, we do not
maintain long-term supply contracts with our suppliers. We do, however, have
long standing relationships with all of our key suppliers and encourage supplier
partnerships. Our supplier base is sufficiently diversified so that the loss of
any one supplier in any given commodity should not have a material adverse
effect on our operations. We have never been unable to secure needed raw
materials. However, there could be adverse effects on our operations and
financial condition if we are unable to secure necessary raw materials like
particleboard and fiberboard.

         Because we purchase all of our raw materials from outside suppliers, we
are subject to fluctuations in prices of raw materials. For example, our results
of operations were significantly affected in fiscal year 2000 and in the first
half of fiscal 2001 by higher particleboard, fiberboard and cartoning costs. In
fiscal 2001, particleboard prices declined, helping our bottom line in the
latter half of the year. Future increases in the price of raw materials could
again affect our results of operations. See "Cautionary Statement Regarding
Forward Looking Information and Risk Factors" in Item 7 of Part II of this
report.

COMPETITION

         The residential furniture market is very competitive and includes a
large number of both domestic and foreign manufacturers. Our competitors include
manufacturers of both ready-to-assemble and assembled furniture. Although a
large number of companies manufacture ready-to-assemble furniture, the top five
ready-to-assemble furniture manufacturers accounted for an estimated 78% of the
domestic ready-to-assemble furniture market in 2000. Our top five competitors
are Sauder Woodworking, Inc., Bush Industries, Inc., Dorel Industries, Inc.,
Mills Pride and Creative Interiors. Some of our competitors have greater sales
volume and financial resources. RTA furniture manufacturers compete on the basis
of price, style, functionality, quality and customer support.

         Several manufacturers, including O'Sullivan, have excess manufacturing
capacity due to the current decline in sales in the RTA furniture segment. This
excess capacity could cause increased competition particularly if sales do not
return to a pattern of growth soon. This could adversely affect our margins and
results of operations.

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PATENTS AND TRADEMARKS

         We have a United States trademark registration and international
trademark registrations or applications for the use of the O'Sullivan(R) name on
furniture. We believe that the O'Sullivan name and trademark are well-recognized
and associated with high quality by both our customers and consumers and are
important to the success of our business. Our products are sold under a variety
of trademarks in addition to O'Sullivan. Some of these names are registered
trademarks. We do not believe that the other trademarks we own enjoy the same
level of recognition as the O'Sullivan trademark. We also do not believe that
the loss of the right to use any one of these other trademarks would be material
to our business.

         We hold a number of patents and licenses. We do not consider any one of
these patents and licenses to be material to our business.

SHIPPING

         We offer customers the choice of paying their own freight costs or
having us absorb freight costs. If we absorb the freight costs, our product
prices are adjusted accordingly. When we pay freight costs, we use independent
trucking companies with whom we have negotiated competitive transportation
rates.

BACKLOG

         Our business is characterized by short-term order and shipment
schedules of generally less than two weeks. Accordingly, we do not consider
backlog at any given date to be indicative of future sales.

SEASONALITY

         We generally experience a somewhat higher level of sales in the second
and third quarters of our fiscal year in anticipation of and following the
holiday selling seasons.

INSURANCE

         We maintain liability insurance at levels that we believe are adequate
for our needs. We believe these levels are comparable to the level of insurance
maintained by other companies in the furniture manufacturing business.

EMPLOYEES

         As of June 30, 2001, we had approximately 2,200 employees. About 68%
percent of these employees are located in Lamar. None of our employees are
represented by a labor union. We believe that we have good relations with our
employees.

ENVIRONMENTAL AND SAFETY REGULATIONS

         Our operations are subject to extensive federal, state and local
environmental laws, regulations and ordinances. Some of our operations require
permits. These permits are subject to revocation, modification and renewal by
governmental authorities.

         Governmental authorities have the power to enforce compliance with
their regulations. Violators may be subject to fines, injunction or both.
Compliance with these regulations has not had a significant effect on our
results of operations, capital expenditures or competitive position. In fiscal
2001, we received a Title V operating permit for our facility in Lamar,
Missouri. The permit imposes additional monitoring restrictions on our
operations, but has not required us to modify our operations. We are addressing
certain issues with the Missouri Department of Natural Resources regarding the
effectiveness of the monitoring requirements.

         Our manufacturing process creates by-products, including sawdust and
particleboard flats. At the South Boston facility, this material is given to a
recycler or disposed of in landfills. At the Lamar facility, the material has
been sent to recyclers and off-site disposal sites. In late fiscal 2001, we were
successful in increasing the percentage



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of by-products delivered to recyclers at a reduced cost to us. Our by-product
disposal costs were approximately $1.1 million for fiscal 2001, $1.9 million for
fiscal 2000 and $1.8 million for fiscal 1999.

         Our manufacturing facilities ship waste products to various disposal
sites. If our waste products include hazardous substances and are discharged
into the environment, we are potentially liable under various laws. These laws
may impose liability for releases of hazardous substances into the environment.
These laws may also provide for liability for damage to natural resources. One
example of these laws is the federal Comprehensive Environmental Response,
Compensation and Liability Act. Generally, liability under this act is joint and
several and is determined without regard to fault. In addition to the
Comprehensive Environmental Response, Compensation and Liability Act, similar
state or other laws and regulations may impose the same or even broader
liability for releases of hazardous substances.

         We have been designated as a potentially responsible party under the
Arkansas Remedial Action Trust Fund Act for the cost of cleaning up a disposal
site in Diaz, Arkansas. We entered into a de minimis buyout agreement with some
of the other potentially responsible parties. We have contributed $2,000 to date
toward cleanup costs under this agreement. The agreement subjects potentially
responsible parties to an equitable share of any additional contributions if
cleanup costs exceed $9 million. In this event, we would be liable for our share
of the excess. Cleanup expenses have approached $9 million. The state has
approved a plan providing that groundwater at the site be monitored. No further
remediation activity is necessary unless further problems are discovered. The
monitoring activities should not require the potentially responsible parties to
make additional payments. We believe that the amounts we may be required to pay
in the future, if any, relating to this site will be immaterial.

         Our operations also are governed by laws and regulations relating to
workplace safety and worker health, principally the Occupational Safety and
Health Act and related regulations. Additionally, some of our products must
comply with the requirements and standards of the United States Consumer
Products Safety Commission. We believe that we are in substantial compliance
with all of these laws and regulations.

ITEM 2.  PROPERTIES.

         O'Sullivan owns two manufacturing, warehouse and distribution
facilities. The Lamar, Missouri facility, which also serves as O'Sullivan's
headquarters, consists of approximately 1,150,000 square feet. The South Boston,
Virginia facility has approximately 675,000 square feet. These properties are
subject to liens in favor of the holders of our senior secured credit
facility.

         We have minimal unused land at Lamar on which to build new production
or warehouse facilities. We have some excess land at South Boston which may be
used for expansion.

         We lease space for showrooms in High Point, North Carolina and in other
locations in the United States. We also lease warehouse space in Lamar and
Neosho, Missouri.

         Our Canadian operations are in a leased facility in Markham, Ontario.
O'Sullivan's United Kingdom operations are in a leased facility in Oxfordshire.

         The Cedar City, Utah manufacturing plant that we closed in January is
for sale.

         We consider our owned and leased facilities to be adequate for the
needs of O'Sullivan and believe that all of our owned and leased properties are
well maintained and in good condition.



                                       9
<PAGE>   11


ITEM 3.  LEGAL PROCEEDINGS.

         Prior to O'Sullivan Holdings' initial public offering in 1994, we were
owned by RadioShack Corporation (then named Tandy Corporation). As part of the
initial public offering, O'Sullivan Holdings entered into a tax sharing and tax
benefit reimbursement agreement with RadioShack. The structure of the public
offering increased the basis in our assets for tax purposes. This basis increase
reduces the amount of gain we recognize upon sales of our assets and increases
our annual tax deductions for depreciation and amortization. This increase in
deductions reduces the amount of income taxes that we pay. Under the tax sharing
agreement, O'Sullivan Holdings agreed to pay RadioShack nearly all of any
benefit we receive from this reduction in our taxable income. Our taxable income
is determined after taking into account all of our other deductible expenses.
The annual payment to RadioShack under the tax sharing agreement was $0 for
fiscal 2001, $4.3 million for fiscal 2000 and $9.7 million for fiscal 1999. This
agreement will remain in effect until 2033. However, under the terms of the tax
sharing agreement, in 2009 O'Sullivan Holdings and RadioShack are expected to
negotiate a final payment and termination date of the agreement.

         Since the initial public offering, in determining the benefit payment
to RadioShack under the tax sharing agreement, we have deducted our interest
expense. We are incurring significantly higher interest expense associated with
our higher debt levels in connection with the financing of the recapitalization
and merger. We believe that this increased interest expense, and certain
expenses incurred to consummate the recapitalization and merger, should be taken
into account in determining the payments O'Sullivan Holdings is required to make
to RadioShack under the tax sharing agreement. RadioShack claims we can not
deduct the additional interest and expenses in determining the tax sharing
payments. Under the tax sharing agreement, disputes between the parties must be
referred to the chief executive officers. If they are unable to resolve the
dispute, it is to be resolved by a public accounting firm or a law firm
reasonably satisfactory to RadioShack and us.

         On June 29, 1999, RadioShack filed a complaint against us in the
District Court of Texas in Tarrant County. RadioShack's complaint sought a court
order compelling us to submit to a dispute resolution process. Alternatively,
the complaint sought a declaratory judgment that after the merger we must
continue to make tax-sharing payments to RadioShack as if the merger had not
occurred. On September 9, 1999, RadioShack filed a motion for summary judgment
in its lawsuit against us. On October 8, 1999, RadioShack's motion was denied,
as was all other relief sought by RadioShack, except that O'Sullivan Holdings
was directed to commence dispute resolution procedures before an arbitrator,
according to the terms of the tax sharing agreement. Arbitrators have been
selected to hear the dispute, and discovery is being completed. The arbitration
is scheduled to be heard in October 2001.

         To support its motion for summary judgment, RadioShack referred to a
letter it received from its independent outside auditors, PricewaterhouseCoopers
LLP. PricewaterhouseCoopers audits both RadioShack's financial statements and
our financial statements. The PricewaterhouseCoopers letter advised RadioShack
on how PricewaterhouseCoopers expected the tax sharing agreement would operate,
if certain assumptions were valid. On its face, the letter made clear that it
was not expressing an "opinion" on how the actual dispute between RadioShack and
O'Sullivan Holdings would in fact be resolved, and the letter addressed
assumptions that PricewaterhouseCoopers had been given by RadioShack.

         O'Sullivan Holdings' annual report to stockholders on SEC Form 10-K for
fiscal 1999 disclosed these facts, and expressed management's view, based on an
opinion of our outside counsel, that RadioShack's position in its suit was
without merit. Because PricewaterhouseCoopers both wrote its letter to
RadioShack but did not object to the inclusion of our management's view in the
Form 10-K on the merits of RadioShack's lawsuit, the SEC Staff asked O'Sullivan
Holdings to clarify "whether PricewaterhouseCoopers has a reasonable basis to
doubt management's view that RadioShack's lawsuit has no merit." In our view,
PricewaterhouseCoopers had a reasonable basis for its acquiescence in the
footnote disclosure in the Form 10-K that RadioShack's position was without
merit. First, O'Sullivan Holdings received an opinion from our outside counsel
that supports our view that RadioShack's position in the litigation was without
merit. That opinion was made available to PricewaterhouseCoopers in connection
with its annual audit, and clearly supports the decision not to object to the
inclusion of that footnote in O'Sullivan Holdings' financial statements. Second,
PricewaterhouseCoopers also has advised O'Sullivan Holdings that its letter was
predicated on assumptions it now understands are not relevant to the merger as
structured, and therefore, PricewaterhouseCoopers has reaffirmed that its
original letter did not attempt to offer an expert opinion to RadioShack on the
merger or predict the actual outcome of the litigation between RadioShack and
us. Neither PricewaterhouseCoopers nor we believe there is any inconsistency
between PricewaterhouseCoopers' original letter


                                       10
<PAGE>   12

and its non-objection to the inclusion of that footnote disclosure in the Form
10-K. In light of PricewaterhouseCoopers' response, the PricewaterhouseCoopers
letter had no relevance to the merger. However, we have included this discussion
of the PricewaterhouseCoopers letter because the SEC requested that it be
included in the proxy statement relating to the merger.

         Finally, the Staff suggested that its concerns about this situation
could be eliminated if PricewaterhouseCoopers were to withdraw the letter to
RadioShack. But, since the letter is not an expert opinion on any pending
matter, a position PricewaterhouseCoopers has since reaffirmed to us, we do not
believe there is any reason for PricewaterhouseCoopers formally to withdraw its
letter.

         O'Sullivan Holdings believes it is now, and expects to continue to be,
in full compliance with the tax sharing agreement. We believe that RadioShack's
position is without merit and intend to defend ourselves vigorously. However, if
RadioShack's interpretation prevails over ours and our increased interest and
other merger-related expenses are not allowable in determining our payments due
to RadioShack since the merger, our payments due to RadioShack for the period
since the closing of the recapitalization and merger through June 30, 2001 would
be approximately $12.7 million more than we currently anticipate. See
"Cautionary Statement Regarding Forward Looking Statements and Risk Factors" in
Item 7 of Part II of this report.

         Other Litigation and Claims. In addition, we are a party to various
pending legal actions arising in the ordinary operation of our business. These
include product liability claims, employment disputes and general business
disputes. We believe that these actions will not have a significant negative
effect on our operating results and financial condition.

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

         No matters were submitted to a vote of security holders of O'Sullivan
during the quarter ended June 30, 2001.

                                     PART II

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

         There is no established public market for O'Sullivan Holdings' common
equity.

         As of September 15, 2001, there were approximately 92 common
stockholders of record. No dividends have been paid or declared since our
initial public offering in 1994.

         We currently intend to retain all earnings to finance the development
of our operations and to repay our indebtedness. Our credit agreements
effectively prohibit us from paying dividends on our common or preferred stock.
We do not anticipate paying cash dividends on our shares of common or preferred
stock in the near future. Our future dividend policy will be determined by our
Board of Directors on the basis of various factors, including but not limited to
our results of operations, financial condition, business opportunities and
capital requirements. The payment of dividends is subject to the requirements of
Delaware law, as well as restrictive financial covenants in our debt agreements.



                                       11
<PAGE>   13


ITEM 6.  SELECTED CONSOLIDATED HISTORICAL FINANCIAL INFORMATION.

         The selected historical consolidated results of operations and balance
sheet data for the five years ended June 30, 2001 are derived from O'Sullivan's
audited financial statements. This selected consolidated financial data should
be read in conjunction with Item 7, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and Item 8, "Consolidated
Financial Statements and Related Notes," in Part II of this report.

<TABLE>
<CAPTION>
                                                                  For the year ended June 30,
                                                -------------------------------------------------------------
                                                   2001         2000        1999         1998         1997
                                                ---------    ---------    ---------    ---------    ---------
                                                                       (in thousands)
<S>                                             <C>          <C>          <C>          <C>          <C>
Net sales                                       $ 375,670    $ 423,425    $ 379,632    $ 339,407    $ 321,490
Cost of sales                                     269,720      298,387      267,630      244,086      230,578
                                                ---------    ---------    ---------    ---------    ---------
Gross profit                                      105,950      125,038      112,002       95,321       90,912
Selling, marketing and administrative              73,541       82,364       74,962       69,212       62,137
Restructuring charge                               10,506           --           --           --           --
Merger related expenses                                --        7,792        1,143           --           --
Transaction fee to related party                       --        3,062           --           --           --
Compensation expense associated with stock
   options                                             --       10,627           --           --           --
Loss on settlement of interest rate swap               --          408           --           --           --
                                                ---------    ---------    ---------    ---------    ---------
Operating income                                   21,903       20,785       35,897       26,109       28,775
Interest expense, net                              33,967       18,595        2,844        2,468        2,327
                                                ---------    ---------    ---------    ---------    ---------
Income (loss) before income tax provision,
   extraordinary item and cumulative effect
   of accounting change                           (12,064)       2,190       33,053       23,641       26,448
Income tax provision (benefit)                     (4,221)       5,050       11,900        8,742       10,050
                                                ---------    ---------    ---------    ---------    ---------
Income (loss) before extraordinary item
   and cumulative effect of accounting change      (7,843)      (2,860)      21,153       14,899       16,398
Extraordinary loss from early extinguishment
   of debt                                             --         (305)          --           --           --
Cumulative effect of accounting change                (95)          --           --           --           --
                                                ---------    ---------    ---------    ---------    ---------
Net income (loss)                               $  (7,938)   $  (3,165)   $  21,153    $  14,899    $  16,398
                                                =========    =========    =========    =========    =========

Cash flows provided by operating activities     $  24,928    $  30,320    $  25,216    $  27,209    $  23,512
Cash flows used for investing activities          (16,811)     (17,129)     (15,554)     (28,359)     (15,825)
Cash flows used for financing activities          (12,924)      (5,064)      (7,732)      (4,015)      (1,218)

EBITDA (1)                                      $  36,848    $  36,201    $  49,859    $  37,669    $  38,735
Depreciation and amortization                      14,945       15,416       13,962       11,560        9,960
Capital expenditures                               16,811       17,129       15,554       28,359       15,825

<CAPTION>

                                                                           June 30,
                                                -------------------------------------------------------------
                                                   2001         2000          1999         1998        1997
                                                 ---------    ---------    ---------    ---------    ---------
                                                                        (in thousands)
<S>                                             <C>          <C>           <C>          <C>         <C>
Working capital                                 $  81,119    $  93,584     $  85,262    $  72,893   $  82,045
Total assets                                      263,180      296,128       266,967      250,314     232,607
Long-term debt, less current portion              236,762      247,299        22,000       30,000      30,000
Mandatorily redeemable preferred stock             15,301       12,781            --           --          --
Stockholders' equity (deficit)                    (44,695)     (33,888)      185,136      163,670     156,790
</TABLE>


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

         (1) EBITDA means earnings before interest expense and interest income,
income taxes, depreciation and amortization. EBITDA is presented here to provide
additional information about our operations. This item should be considered in
addition to, but not as a substitute for or superior to, operating income, net
income, cash flow and other measures of financial performance prepared in
accordance with generally accepted accounting principles. EBITDA may differ in
the method of calculation from similarly titled measures used by other
companies.


                                       12

<PAGE>   14




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

         The following discussion should be read in conjunction with the more
detailed information in the historical financial statements, including the
related notes thereto, appearing elsewhere in this report.

OVERVIEW.

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

         The domestic ready-to-assemble furniture market grew at a compound
annual growth rate of about 8.75% from 1992 through 1999, according to Furniture
Today. After two years of sales growth in excess of 10%, our net sales declined
11.3% in fiscal 2001. Our sales declined for several reasons:

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

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

         -     the substantial increase in energy prices in 2000 and 2001 that
               reduced consumers' income available for purchases of our
               products;

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

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

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

         The lower sales level resulted in a net loss before dividends and
accretion on preferred stock of $7.9 million for fiscal 2001 and reduced our
earnings before interest, taxes, depreciation and amortization to $36.8 million
in fiscal 2001.

         Reacting to the lower sales levels, we closed our Cedar City, Utah
manufacturing facility in January 2001. We also reduced support staff at the
Lamar, Missouri facility. We recorded a $10.5 million pre-tax restructuring
charge to reflect the costs of these actions.


         While we have confidence in the long-term future of the RTA furniture
industry, sales in the first quarter of fiscal 2002 are anticipated to be flat
to down slightly from sales in the first quarter of fiscal 2001. We cannot yet
predict when our sales will return to a pattern of sales growth.

         We purchase large quantities of raw materials including particleboard
and fiberboard. We are dependent on our outside suppliers for all of these raw
materials. Therefore, we are subject to changes in the prices charged by our
suppliers. In fiscal 2000, our operating income was reduced by price increases
of these commodities. In fiscal 2001, particleboard and fiberboard prices
declined, increasing our operating income in the latter portion of the year.

RESULTS OF OPERATIONS.

                                       13

<PAGE>   15


         The following table sets forth the approximate percentage of items
included in the Consolidated Statement of Operations relative to net sales for
the three-year period ended June 30, 2001:

<TABLE>
<CAPTION>
                                                                             YEAR ENDED JUNE 30,
                                                                         --------------------------
                                                                          2001      2000     1999
<S>                                                                      <C>       <C>       <C>
Net sales                                                                100.0%    100.0%    100.0%

Cost of sales                                                             71.8%     70.5%     70.5%
                                                                         -----     -----     -----
Gross margin                                                              28.2%     29.5%     29.5%
Selling, marketing and administrative                                     19.6%     19.5%     19.7%
Restructuring charge                                                       2.8%       -         -
Merger related expenses                                                     -        1.8%      0.3%
Transaction fee to related party                                            -        0.7%       -
Compensation expense associated with stock options                          -        2.5%       -
Loss on settlement of interest rate swap                                    -        0.1%       -
                                                                         -----     -----     -----
Operating income                                                           5.8%      4.9%      9.5%
Interest expense, net                                                      9.0%      4.4%      0.7%
                                                                         -----     -----     -----
Income (loss) before taxes, extraordinary item and cumulative effect
  of accounting change                                                    (3.2)%     0.5%      8.8%
Income tax expense (benefit)                                              (1.1)%     1.2%      3.1%
                                                                         -----     -----     -----
Income (loss) before extraordinary item and cumulative effect
  of accounting change                                                    (2.1)%    (0.7)%     5.6%
Extraordinary loss from early extinguishment of debt, net of income
  tax benefit                                                               -        0.1%       -
Cumulative effect of accounting change, net of income tax benefit          0.0%       -         -
                                                                         -----     -----     -----
Net income (loss)                                                         (2.1)%    (0.7)%     5.6%
                                                                         =====     =====     =====
Depreciation and amortization                                              4.0%      3.6%      3.7%
</TABLE>



YEAR ENDED JUNE 30, 2001 COMPARED TO THE YEAR ENDED JUNE 30, 2000.

         Net Sales. Net sales decreased by $47.8 million, or 11.3%, to $375.7
million in fiscal 2001, down from $423.4 million in fiscal 2000. The decrease in
net sales was primarily driven by a 4.9% decrease in the number of units sold
and a 6.2% decrease in the average selling price. The sales decline generally
came from the office superstore and department store/catalog showroom channels
of distribution and to a lesser extent from the mass merchant channel of
distribution. These declines were partially offset by increases in the home
improvement, electronic superstore, regional mass merchant and other channels of
distribution. Retailers reacted to the economic slowdown by increasing their
assortment of lower-priced promotional units, which was the primary reason for
the decline in the average selling price.

         The sales decline in the department store/catalog showroom channel of
distribution was primarily due to customer bankruptcies. In December 2000,
Montgomery Ward, one of our largest customers, filed for bankruptcy and was
subsequently liquidated. Gross sales to Montgomery Ward declined from
approximately 2.5% of gross sales in fiscal 2000 to approximately 1.4% of gross
sales in fiscal 2001.

         On February 22, 2000, Service Merchandise announced that as part of its
bankruptcy reorganization plan, it would no longer sell a number of product
lines, including home office and entertainment furniture. Service Merchandise,
however, does continue to sell kitchen furniture. This decision substantially
reduced our sales to Service Merchandise during fiscal 2001. Gross sales to
Service Merchandise declined from approximately 4.0% of gross sales in fiscal
2000 to approximately 0.4% of gross sales in fiscal 2001. We expect our sales to
Service Merchandise will decline further in fiscal 2002, and sales to Service
Merchandise may be further reduced, if not eliminated, thereafter.

         Sales declines in other distribution channels were generally related to
the slowdown of the economy and consumer spending in the United States, the
resulting inventory reductions in some of our retail customers' supply chains
and a decline in the average unit selling price.


                                       14
<PAGE>   16


         Gross Profit. Our gross profit for fiscal 2001 was $106.0 million, a
decrease of $19.1 million, or 15.3%, from $125.0 million in fiscal 2000. Our
gross profit margin for fiscal 2001 was 28.2%, a decrease from 29.5% in fiscal
2000. The decrease in gross profit dollars was primarily the result of lower
sales volumes and declining average unit prices. This decrease was partially
offset by lower material costs in the second half of fiscal 2001, productivity
gains in our Missouri and Virginia facilities and the closing of the less
efficient Utah facility. We expect to save approximately $5.0 million annually
from the closing of our Cedar City, Utah facility.

         In the last half of fiscal 2001 we experienced a reduction in the price
of certain raw materials due to softening market demands. However, there can be
no assurance that commodity prices will remain constant or decline further in
the future, or that we will be successful in offsetting any future potential
price increases through our value analysis program, increased productivity, the
eventual inclusion of the higher costs in our selling prices or other cost
reductions.

         Selling, Marketing and Administrative. Selling, marketing and
administrative expenses decreased to $73.5 million, or 19.6% of net sales, from
$82.4 million, or 19.5% of net sales, in fiscal 2000. The majority of the dollar
decrease in selling, marketing and administrative expenses was due to lower
promotional, freight and commission expenses associated with decreased sales
activity. We expensed $11.6 million and $17.1 million for freight out in fiscal
2001 and 2000, respectively. Employee benefit program expenses such as bonuses
and profit sharing also decreased due to lower operating income levels. We did
incur $946,000 and $498,000 of non-cash compensation expense associated with
employee stock options in fiscal 2001 and 2000, respectively.

         In August 2001, Ames Department Stores, Inc. filed for protection under
Chapter 11 of the Bankruptcy Code. As a result, we increased our allowance for
doubtful accounts by approximately $1.5 million in the fourth quarter of fiscal
2001. We are shipping to Ames while it restructures its indebtedness under
Chapter 11. Sales to Ames represented over 3% of our gross sales in fiscal 2001.

         Restructuring Charge. On November 17, 2000, we announced a
restructuring plan and recorded $10.5 million of related expense in the second
quarter of fiscal 2001. The slowdown in sales during the first half of fiscal
year 2001 caused us to reassess our business plan, specifically expenses and
available production capacity. It became evident that the sales downturn,
combined with improvements in production efficiencies and expansions in the
Missouri and Virginia plants during the past few years, provided production
capacity that exceeded near term sales requirements. Based on forecasted sales,
the Missouri and Virginia plants will provide sufficient production for the next
two and possibly three fiscal years with minimal capital expenditures for
increased capacity after on-going projects are completed. Accordingly, we closed
the Utah facility in January 2001.

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

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

         The following summarizes the fiscal 2001 restructuring charge:

<TABLE>
<CAPTION>
                                                   Restructuring    Charges
                                                       Accrual      through    Balance
                                                      12/31/00      6/30/01    6/30/01
                                                      --------      -------    -------
                                                               (in thousands)
<S>                                                 <C>            <C>         <C>
         Employee termination benefits (1)            $  1,302     $   915     $ 387
</TABLE>


                                       15

<PAGE>   17


<TABLE>
<S>                                                   <C>          <C>         <C>
         Other Utah facility exit costs (1)                527         282       245
                                                      --------     -------     -----
         TOTAL                                        $  1,829     $ 1,197     $ 632
                                                      ========     =======     =====
</TABLE>


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

         Accumulated depreciation was increased $8.7 million to record asset
impairments. We expect to pay the remainder of the restructuring accrual in the
first half of fiscal 2002.

         Costs that benefit continuing activities were excluded from the
restructuring charge and are included in cost of sales on the consolidated
statement of operations. The unusual and non-recurring portion of these costs
associated with the shutdown of the Utah facility was approximately $669,000.

         Merger Related and Other Special Charges. We expensed merger-related
costs as incurred in connection with the November 30, 1999 recapitalization and
merger. Merger related costs, consisting of investment banking, legal,
accounting, printing and other services, totaled $7.8 million in fiscal 2000.
Other merger related costs were payments for fees and expenses to BRS of which
$3.1 million was recorded as a transaction fee to a related party.

         Compensation Expense Associated with Stock Options. O'Sullivan
Industries incurred compensation expense of $10.6 million in connection with
stock options related to the November 30, 1999 recapitalization and merger. The
compensation expense relating to the options has been included as a separate
line item in the accompanying consolidated statement of operations.

         Loss on Settlement of Interest Rate Swap. On November 30, 1999,
O'Sullivan Industries terminated an interest rate swap agreement, as required by
the counter-party due to the recapitalization and merger, incurring a charge of
$408,000. The loss on the settlement of the interest rate swap has been included
as a separate line item in the accompanying consolidated statement of
operations.

         Depreciation and Amortization. Our depreciation and amortization
expense decreased $471,000 to $14.9 million in fiscal 2001 from $15.4 million in
fiscal 2000. The decrease in depreciation and amortization was due to the
closing of the Utah facility. Cash capital additions in fiscal 2001 and 2000
were $16.8 million and $17.1 million, respectively. Fiscal 2001 capital
expenditures were for a capacity and warehouse expansion program in our Virginia
facility and equipment upgrade and capacity expansion in our Missouri facility.

         Operating Income. Operating income increased $1.1 million to $21.9
million in fiscal 2001 from $20.8 million in fiscal 2000. Excluding
restructuring, merger and other related charges, operating income decreased
$10.3 million, or 24.1%, to $32.4 million in fiscal 2001 from $42.7 million in
fiscal 2000. The decrease in operating income was primarily the result of lower
sales volumes and declining average unit prices. This decrease was partially
offset by lower material costs in the second half of the year, productivity
gains in our Missouri and Virginia facilities, the closing of our less efficient
Utah facility, lower promotional, freight and commission expenses, and lower
employee benefit program expenses such as bonuses and profit sharing.

         Net Interest Expense. Net interest expense increased to $34.0 million
in fiscal 2001 from $18.6 million in fiscal 2000. Net interest expense increased
principally due to the increased indebtedness incurred in the recapitalization
and merger, the senior credit amendment fee paid in January 2001 and non-cash
charges for the interest rate collar. Other non-cash interest items affecting
both fiscal years were interest on our senior note and amortization of loan
discounts and fees. The merger related expenses and fees paid BRS have been
included as separate line items in the accompanying consolidated statement of
operations. The merger closed on November 30, 1999, so only seven months of
increased expense associated with the new debt was reflected in the fiscal 2000
results.

                                       16
<PAGE>   18


           The following table describes the components of net interest expense
for the periods indicated:

<TABLE>
<CAPTION>
                                                Twelve months ended
                                                      June 30,
                                               --------------------
                                                 2001        2000
                                               --------    --------
                                                  (in thousands)
<S>                                            <C>         <C>
Interest expense on senior credit
  facility, industrial revenue bonds
  and senior subordinated notes                $ 27,860    $ 17,146

Interest expense on O'Sullivan Holdings note      2,003       1,050

Senior credit facility amendment fee                574           -

Interest rate collar                              1,948           -

Amortization of debt discount                       472         253

Amortization of loan fees                         1,610         938

Interest income                                    (500)       (792)
                                               --------    --------
    Net interest expense                       $ 33,967    $ 18,595
                                               ========    ========
</TABLE>

         Income Tax Provision (Benefit). Income tax declined by $9.3 million to
a benefit of $4.2 million in fiscal 2001 from a tax of $5.1 million in fiscal
2000. The effective tax rate in fiscal 2001 was 35%.

         Extraordinary Item. In fiscal 2000 O'Sullivan Industries repaid private
placement notes with a principal amount of $16 million for $16.5 million. The
$476,000 repayment fee has been recognized as an extraordinary loss of $305,000,
net of related tax benefit.

         Accounting Change. O'Sullivan adopted SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities, on July 1, 2000. O'Sullivan
recorded a net-of-tax cumulative effect type adjustment of $148,000, less a tax
benefit of $53,000.

         Net Income (Loss). As a result of the preceding factors, the fiscal
2001 net loss before dividends and accretion on preferred stock increased by
$4.7 million from a net loss of $3.2 million in fiscal 2000 to a net loss of
$7.9 million in fiscal 2001.

         EBITDA. EBITDA, which we define as earnings before interest, taxes,
depreciation and amortization, increased $647,000 to $36.8 million in fiscal
2001 from $36.2 million in fiscal 2000. The decline in sales in fiscal 2001 and
the restructuring charge depressed EBITDA in fiscal 2001, partially offset by
lower material costs in the second half of the year, productivity gains in our
Missouri and Virginia facilities and the closing of our less efficient Utah
facility. Our EBITDA in fiscal 2000 was reduced by the expenses and other
charges related to the recapitalization and merger described above and by
increasing particleboard and fiberboard prices.

         EBITDA is presented to provide additional information about our
operations. This item should be considered in addition to, but not as a
substitute for or superior to, operating income, net income, operating cash flow
and other measures of financial performance prepared in accordance with
generally accepted accounting principles. EBITDA may differ in the method of
calculation from similarity titled measures used by other companies.

YEAR ENDED JUNE 30, 2000 COMPARED TO THE YEAR ENDED JUNE 30, 1999.

         Net Sales. Net sales increased by $43.8 million, or 11.5%, to $423.4
million in fiscal 2000, up from $379.6 million in fiscal 1999. The increase in
net sales was primarily driven by a 10.1% increase in the number of units sold
and, to a lesser extent, a 2.5% increase in the average selling price. Strong
sales increases to the office superstore, home improvement and electronic
specialty retailer channels accounted for the sales increase, partially offset
by a decline in sales to the department store/catalog showroom, regional mass
merchant and export channels. Consumer demand for our product was driven by the
increase of multi-computer households, the continued growth of small businesses,
especially home-based businesses, aggressive promotional efforts of certain
retailers, additional floor space allotted to our category by certain retailers
in the home improvement channel and new store openings.


                                       17
<PAGE>   19


         In March 1999, Service Merchandise Co., one of our largest customers,
filed for bankruptcy protection under Chapter 11. We continued shipping to
Service Merchandise while it operated under Chapter 11 bankruptcy protection. On
February 22, 2000, Service Merchandise announced that as part of its bankruptcy
reorganization plan, it would no longer sell a number of product lines,
including home office and entertainment furniture. Service Merchandise
continued selling kitchen furniture. This decision substantially reduced our
sales to Service Merchandise in fiscal 2000. We expect that our sales to Service
Merchandise will be further reduced, if not eliminated, in the future. Gross
sales to Service Merchandise declined from approximately 7% of our gross sales
in fiscal 1999 to approximately 4% of our gross sales in fiscal 2000.

         Sales declines in the other channels were due to the bankruptcy of
certain regional mass merchants, the discontinuance of our category or our
product line in certain department stores, and the replacement of an overseas
distributor.

         Gross Profit. Our gross profit for fiscal 2000 was $125.0 million, an
increase of $13.0 million, or 11.6%, from $112.0 million in fiscal 1999. The
gross profit margin was virtually unchanged at 29.5%. The increase in gross
profit dollars was primarily from increased sales volume, increased productivity
and our value analysis program partially offset by higher material costs. During
fiscal 1999, we incurred higher labor and overhead costs associated with the
implementation of new manufacturing equipment and related adaptation of
manufacturing processes.

         In the fourth quarter of fiscal 1999, certain key commodity suppliers
announced price increases that were followed by additional price increases
throughout fiscal 2000. We estimate that these price increases totaled
approximately $5.0 million during fiscal 2000. We were able to minimize the
effect of these increases through our value analysis program and productivity
gains in manufacturing and decreased overhead on a per unit basis due to
increased volume and capacity utilization rates.


         Selling, Marketing and Administrative Expenses. Selling, marketing and
administrative expenses increased to $82.4 million, or 19.5% of sales, from
$75.0 million, or 19.7% of sales, in fiscal 1999. The majority of the dollar
increase in selling, marketing and administrative expenses was due to higher
promotional, freight and commission expenses associated with increased sales
activity. Salaries, wages and associated taxes and benefits also increased as
additional resources were allocated to in-house training. Legal expenses
associated with the exchange offering for the senior subordinated notes,
arbitration proceedings with RadioShack and BRS management fees subsequent to
the recapitalization also contributed to the increase in selling, marketing and
administrative expenses.

         Merger Related and Other Special Charges. O'Sullivan expensed merger
related costs as incurred in connection with the November 30, 1999 merger.
Merger related costs, consisting of investment banking, legal, accounting,
printing and other services, totaled $10.9 million in fiscal 2000. Included in
these costs were payments for fees and expenses to BRS of $4.1 million, of which
$3.1 million was recorded as a transaction fee to a related party and $1.0
million was recognized as debt issuance costs. The merger related expenses and
the $3.1 million of the fee paid BRS have been included as separate line items
in the accompanying consolidated statement of operations. O'Sullivan also
incurred compensation expense in connection with stock options related to the
recapitalization and merger of $10.6 million and a charge of $408,000 for the
settlement of an interest rate swap agreement entered into in fiscal 1997. Both
the compensation expense from stock options and the loss on the settlement of
the interest rate swap have been included as separate line items in the
accompanying consolidated statement of operations. The merger related and other
special charges totaled $21.9 million in fiscal 2000.

         Depreciation and Amortization. Our depreciation and amortization
expenses increased $1.4 million to $15.4 million in fiscal 2000 from $14.0
million in fiscal 1999. The increase in depreciation and amortization expense
was due to cash capital additions of $17.1 million in fiscal 2000 and $15.6
million in fiscal 1999. The expenditures were primarily for completion of the
capacity expansion program at our Virginia plant, capacity expansion at our Utah
plant and upgrading manufacturing equipment at our Missouri plant.

         Operating Income. Operating income, including merger related expenses
and other special charges, decreased $15.1 million to $20.8 million in fiscal
2000 from $35.9 million in fiscal 1999. The decrease was due to the merger
related and other special charges which totaled $21.9 million.

         Excluding merger related and other special charges, operating income
increased $5.6 million, or 15.2%, to $42.7 million in fiscal 2000 from $37.0
million in fiscal 1999. The increase in operating income was primarily due


                                       18
<PAGE>   20


to increased sales volume and increased productivity offset by higher material
costs, higher selling, marketing and administrative costs associated with
increased sales volume and additional depreciation expense.

         Net Interest Expense. Net interest expense increased from $2.8 million
in fiscal 1999 to $18.6 million in fiscal 2000. The interest expense increased
due to the higher level of borrowings associated with the financing of the
merger. The merger closed on November 30, 1999, so only seven months of
increased expense associated with the new debt is reflected in the fiscal year
results.

         Extraordinary Item. O'Sullivan repaid private placement notes with a
principal amount of $16.0 million for $16.5 million on November 30, 1999. The
$476,000 prepayment fee has been recognized as an extraordinary loss of
$305,000, net of the related tax benefit.

         Income Tax Expense. Income tax expense decreased by $6.8 million, or
57.6%, to $5.1 million in fiscal 2000 from $11.9 million in fiscal 1999 due to
the substantial decrease in income before income taxes. The 230.7% effective tax
rate for fiscal 2000 was due to certain merger related expenses which were
treated as non-deductible differences for book income tax purposes. The
effective tax rate in fiscal 1999 was 36.0%.

         Net Income (loss). As a result of the above factors, net income
decreased by $24.3 million from net income of $21.2 million in fiscal 1999 to a
net loss of $3.2 million in fiscal 2000.

         EBITDA. EBITDA, which we define as earnings before interest income and
interest expense, income taxes, depreciation and amortization, decreased $13.7
million to $36.2 million in fiscal 2000 from $49.9 million in fiscal 1999.
EBITDA decreased primarily due to the merger related costs and other special
charges associated with the merger offset to some degree by increased earnings
due to increased sales volume and productivity. Excluding merger related and
other special charges, EBITDA would have increased $7.1 million to $58.1 million
in fiscal 2000 from $51.0 million in fiscal 1999.

         EBITDA is presented to provide additional information about our
operations. This item should be considered in addition to, but not as a
substitute for or superior to, operating income, net income, operating cash flow
and other measures of financial performance prepared in accordance with
generally accepted accounting principles. EBITDA may differ in the method of
calculation from similarity titled measures used by other companies.

LIQUIDITY AND CAPITAL RESOURCES.

         Our primary sources of liquidity are cash on hand and borrowings under
our senior secured credit facility, which is discussed below. Our liquidity
requirements will be to pay our debt, including interest expense under the
senior credit facility and the notes, payments to RadioShack and to provide for
working capital and capital expenditures.

         Working Capital. As of June 30, 2001, we had cash and cash equivalents
of $7.1 million compared to $11.9 million at June 30, 2000. Net working capital
was $81.1 million at June 30, 2001 compared to $93.6 million at June 30, 2000.
The $12.5 million decrease in net working capital resulted primarily from the
reduced investments in inventory and trade receivables partly offset by a
decrease in trade payables. Inventory investment decreased because of lower
sales volumes. The decline in trade receivables was primarily due to lower
sales.

         Operating Activities. Net cash provided by operating activities was
$24.9 million in fiscal 2001 compared to $30.3 million in fiscal 2000. Net loss
before dividends and accretion on preferred stock increased by $4.7 million to a
net loss of $7.9 million in fiscal 2001 from a net loss of $3.2 million in
fiscal 2000. The net loss was primarily due to lower sales volumes, the $10.5
million special restructuring related to the closing of our Cedar City, Utah
plant and staff reductions in Lamar, Missouri and increased net interest expense
of $34.0 million due to the debt incurred to finance the November 1999
recapitalization and merger.

         Investment in inventory decreased by $16.7 million in fiscal 2001
compared to an increase of $9.1 million in fiscal 2000. Our lower sales levels
resulted in a decrease in trade receivables of $4.7 million in fiscal 2001
compared to a decrease of $3.2 million in fiscal 2000. Accounts payable and
other accrued liabilities decreased $11.5 million this year compared to a $12.1
million increase last year primarily due to decreased sales levels.


                                       19
<PAGE>   21


         Investing Activities. We invested $16.8 million for capital
expenditures in fiscal 2001 compared to $17.1 million during the previous fiscal
year. The expenditures increased the manufacturing and warehouse capacity of our
Virginia plant and upgraded equipment and increased capacity at our Missouri
location. Our ability to make future capital expenditures is subject to certain
restrictions under our senior credit facility. Our plans are to invest about
$10.0 million for capital expenditures in fiscal 2002, about half of which will
be for the completion of the fiscal 2001 expansion projects.

         Financing Activities. On November 30, 1999 we completed our merger and
recapitalization. Our consolidated indebtedness at June 30, 2001 was $248.7
million, consisting of the following.

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

         -    $121.1 million in a senior secured credit facility consisting of a
              sixty-three month $29.1 million term loan, a seven and one-half
              year $92.0 million term loan and a $40.0 million revolving line of
              credit, currently with no borrowings. The revolving line of credit
              has a $15.0 million sub-limit for letters of credit, of which we
              are currently utilizing approximately $13.3 million.

         -    $10.0 million in variable rate industrial revenue bonds.

         -    $17.6 million, including $2.6 million of accrued interest, in a
              senior note issued with warrants to purchase 6.0% of our common
              and Series B junior preferred stock on a fully diluted basis.
              These warrants were assigned a value of $3.5 million.

         During fiscal 2001, we repaid $12.9 million of our indebtedness,
including $10.0 million of prepayments. We prepaid an additional $5.0 million of
the senior secured credit facility in August 2001. We expect to fund principal
and interest payments on our debt from cash on hand or borrowings under our
revolver.

         Our credit facility and notes are subject to certain financial and
operational covenants and other restrictions, including among others, a
requirement to maintain certain financial ratios and restrictions on our ability
to make capital expenditures, sell assets, sell securities, engage in
acquisitions and incur additional indebtedness. In addition, the agreements
effectively prohibit the payment of dividends on our stock.

         Our senior credit facility was amended as of January 30, 2001. The
primary changes to the credit facility were to the covenants for minimum
consolidated EBITDA, consolidated leverage ratios, consolidated interest
coverage ratio and the consolidated fixed charge coverage ratio. The amended
covenants are less restrictive than those in the original credit facility. The
amendment also required a $10.0 million repayment of the term loans on or before
June 30, 2001. We completed the prepayment on May 1, 2001.

         The restriction on the incurrence of additional indebtedness in the
senior credit facility limited our ability to incur additional debt to
approximately $15.4 million on June 30, 2001. In addition, we can use about $1.7
million of the line of credit for letters of credit.

         At June 30, 2001, we were in compliance with all debt covenants.

         As required under our senior credit facility, we hedged one-half of our
term loans with an initial notional amount of $67.5 million with a three-year,
costless interest rate collar. The collar, which expires in March 2003, is based
on three-month LIBOR with a floor of 6.43% and a ceiling of 8.75%. To terminate
this contract at June 30, 2001, we would have been required to pay the
counter-party approximately $2.1 million. We recorded this amount as interest
expense in our results of operations and included the resulting liability in
other liabilities.

MARKET RISK AND INFLATION.

         Our market risk is affected by changes in interest rates, foreign
currency exchange rates and certain commodity prices. Under our policies, we
may use natural hedging techniques and derivative financial instruments

                                       20

<PAGE>   22


to reduce the impact of adverse changes in market prices. We do not hold or
issue derivative instruments for trading purposes. We believe that our foreign
exchange risk is not material.

         We have market risk in interest rate exposure, primarily in the United
States. We manage interest rate exposure through our mix of fixed and floating
rate debt. As required under our credit facilities, we hedged one-half of our
term loans with a current notional amount of $65.5 million with a costless
interest rate collar. The collar is based on three-month LIBOR with a floor of
6.43% and a ceiling of 8.75%. To terminate this contract at June 30, 2001, we
would have been required to pay the counter-party approximately $2.1 million.
Interest rate swaps may be used to adjust interest rate exposures when
appropriate based on market conditions.

         Due to the nature of our product lines, we have material sensitivity to
some commodities, including particleboard, fiberboard, corrugated cardboard and
hardware. We manage commodity price exposures primarily through the duration and
terms of our vendor contracts. A 1.0% change in these commodity prices would
affect our cost of sales by approximately $1.0 million annually.

         In fiscal 2000, certain particleboard and fiberboard suppliers imposed
price increases, which increased our costs of sales in fiscal 2000 and the first
half of fiscal 2001. We were able to reduce the effect of the increases somewhat
through our value analysis program and productivity gains in manufacturing. In
the fourth quarter of fiscal 2000, certain suppliers of cartons increased their
prices to us. We were able to partially offset the effect of these price
increases through the programs mentioned above combined with increased operating
leverage from higher sales levels. We estimate that all of the price increases
increased our cost of sales by approximately $5.0 million during fiscal 2000.

         In fiscal 2001, prices for particleboard and fiberboard fell in
response to declining demand. However, these prices or others may increase in
fiscal 2002 or beyond. We believe that we can continue to partially offset the
effect of such increases through the programs mentioned above and through the
eventual inclusion of the higher costs in the selling price of our products.
However, there can be no assurance that we will be successful in offsetting
these or future potential price increases.

NEW ACCOUNTING STANDARDS.

         In April 2001, the EITF reached a consensus on EITF No. 00-25, Vendor
Income Statement Characterization of Consideration Paid to a Reseller of the
Vendor's Products. This issue addresses the income statement classification of
slotting fees, cooperative advertising arrangements and buydowns. The consensus
will require that certain customer promotional payments that are currently
classified as selling expenses be classified as a reduction of revenue. Although
the impact of EITF 00-25 on our consolidated financial statements is still being
evaluated, its adoption will result in a significant reclassification between
net sales and selling, marketing and administrative expense. EITF 00-25 will
become effective for financial periods beginning after December 15, 2001, but
its adoption by O'Sullivan will have no impact on our operating income or net
income (loss). We will adopt EITF 00-25 no later than March 31, 2002, as
required.

         The FASB issued SFAS No. 142, Goodwill and Other Intangible Assets, on
June 30, 2001. SFAS 142 is effective for fiscal years beginning after December
15, 2001, although early adoption is permitted for entities with fiscal years
beginning after March 15, 2001, provided that the first interim financial
statements have not been previously issued. We will adopt SFAS 142 on July 1,
2001, the beginning of our 2002 fiscal year. With the adoption of SFAS 142,
goodwill is no longer subject to amortization over its estimated useful life.
Rather, goodwill will be assessed regularly for impairment. We do not anticipate
recognizing any impairment of goodwill upon adoption. We will discontinue
amortizing approximately $1.7 million of goodwill per year upon adoption.

         In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. This pronouncement, which is effective for fiscal years
beginning after June 15, 2002, addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. We are currently determining what impact, if
any, this pronouncement will have on our consolidated financial statements.

SEASONALITY.

                                       21

<PAGE>   23


         Historically, we have generally experienced a somewhat higher level of
sales in the second and third quarters of our fiscal year in anticipation of and
following the holiday selling season.

INCOME TAXES.

         Prior to our initial public offering in 1994, O'Sullivan Industries was
owned by RadioShack Corporation. As part of the initial public offering,
O'Sullivan Holdings entered into a tax sharing and tax reimbursement agreement
with RadioShack. The structure of the public offering increased our basis in our
assets for tax purposes. This basis increase raises our tax deductions for
depreciation and amortization each year. This reduces the amount of income taxes
we pay to the IRS. Under the tax sharing agreement, we agreed to pay RadioShack
nearly all of any benefit we receive from the increased depreciation and
amortization which reduces our taxable income, as determined after taking into
account all of our other deductible expenses, by the increase in these
deductions. This agreement remains in effect after the merger and
recapitalization. For the years ended June 30, 2001 and 2000, O'Sullivan paid
RadioShack Corporation $0 and $4.3 million pursuant to the tax sharing
agreement.

         Since the initial public offering, in determining the benefit payment
to RadioShack under the tax sharing agreement, we have deducted our interest
expense. Our interest expense has increased significantly because of our higher
debt levels incurred to finance the merger. We believe that our increased
interest expense should be taken into account in determining the payments that
we are required to make to RadioShack.

         RadioShack filed suit in a Texas state court against us claiming that
any reduction in our tax benefit payments resulting from these expenses in
connection with the merger would violate the tax agreement. The court has
ordered the dispute to be submitted to arbitration pursuant to the tax sharing
agreement. Arbitrators have been appointed and the dispute is scheduled to be
heard in October 2001. We believe we are and expect to continue to be in full
compliance with the tax sharing agreement. We believe RadioShack's lawsuit is
without merit and intend to defend ourselves vigorously. Although we believe our
interpretation of the tax sharing agreement will ultimately prevail over
RadioShack's interpretation, we cannot assure you of this. If RadioShack's
interpretation prevails over O'Sullivan Holdings' and these expenses are not
allowable in determining our payment to RadioShack, payments to RadioShack would
be approximately $12.7 million more than we currently anticipate for the period
since the closing of the recapitalization and merger through June 30, 2001. If
necessary, we would fund the increased payment obligations from cash on hand,
borrowing under our senior credit facility or other sources of capital, if
available. Payment of this amount, however, could cause us to be in violation of
one or more of our covenants under our senior credit facility. See "Cautionary
Statement Regarding Forward Looking Information and Risk Factors" and Item 3,
"Legal Proceedings," in Part I of this report.

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION AND RISK FACTORS.

         Certain portions of this Report, and particularly the Management's
Discussion and Analysis of Financial Condition and Results of Operation and the
Notes to the Consolidated Financial Statements in Part II of this report, the
portions of Item 1 in Part I captioned "Business Overview," "Competitive
Strengths," "Growth Strategy," "Raw Materials," "Competition" and "Environmental
and Safety Regulations" and Item 3 in Part I contain forward-looking statements.
These include information relating to cost savings, benefits, revenues and
estimated sales, and earnings and expenses. These statements can be identified
by the use of future tense or dates or terms such as "believe," "would," "may,"
"expect," "anticipate" or "plan."

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

         - OUR SUBSTANTIAL LEVERAGE COULD MAKE IT MORE DIFFICULT TO PAY OUR
DEBTS, DIVERT OUR CASH ON HAND FOR DEBT PAYMENTS, LIMIT OUR ABILITY TO BORROW
FUNDS AND INCREASE OUR VULNERABILITY TO GENERAL ADVERSE ECONOMIC AND INDUSTRY
CONDITIONS. Any of these consequences of our substantial indebtedness could
prevent us from fulfilling our obligations under our indebtedness because our
ability to make required payments on our debt depends on our ability to generate
sufficient cash flow to make these payments. We have a significant amount of
indebtedness as shown in the chart below:


                                       22
<PAGE>   24

<TABLE>
<CAPTION>
                                                                                  JUNE 30, 2001
                                                                              (DOLLARS IN MILLIONS)
<S>                                                                           <C>
Total indebtedness...................................................................$ 248.7
Indebtedness senior to O'Sullivan Holdings note......................................$ 231.1
Indebtedness senior to O'Sullivan Industries senior subordinated notes...............$ 131.1
Stockholders' deficit................................................................$ (44.7)
</TABLE>

         Our substantial indebtedness could have important consequences to
holders of our debt and equity. For example, it could:

         -    make it more difficult for us to satisfy our obligations with
              respect to our debt, particularly our subordinated debt;
         -    increase our vulnerability to general adverse economic and
              industry conditions;
         -    limit our ability to fund future working capital, capital
              expenditures and other general corporate requirements;
         -    require a substantial portion of our cash on hand for debt
              payments;
         -    limit our flexibility to plan for, or react to, changes in our
              business and the industry in which we operate;
         -    place us at a competitive disadvantage compared to our competitors
              that are less leveraged;
         -    limit our ability to borrow additional funds; and
         -    expose us to fluctuations in interest rates because some of our
              new debt has a variable rate of interest.

         -    FAILURE TO COMPLY WITH ANY OF THE RESTRICTIONS CONTAINED IN THE
AGREEMENTS GOVERNING OUR INDEBTEDNESS COULD RESULT IN ACCELERATION OF OUR DEBT.
WERE THIS TO OCCUR, WE WOULD NOT HAVE SUFFICIENT CASH TO PAY OUR ACCELERATED
INDEBTEDNESS. We must maintain minimum debt service and maximum leverage ratios
under our senior credit facility. A failure to comply with the restrictions
contained in our senior credit facility could lead to an event of default, which
could result in an acceleration of that indebtedness. Were this to occur, we
would not have sufficient cash to pay our accelerated indebtedness or other
debt.

         Due to our lower sales in fiscal 2001, we negotiated amendments to the
financial covenants in our senior credit facility. Without the amendments, we
may have been in default under the facilities. If our sales continue to decline,
we may face default under the amended senior credit facility. There is no
assurance that the creditors under the facility would further amend the
covenants or, if an amendment were agreed to, what the cost would be to
O'Sullivan.

         Our senior credit facility, senior subordinated notes and the
O'Sullivan Holdings note restrict our ability, among others, to:

         -    incur additional indebtedness;
         -    pay dividends and make distributions;
         -    issue common and preferred stock of subsidiaries;
         -    make certain investments;
         -    repurchase stock;
         -    create liens;
         -    enter into transactions with affiliates;
         -    enter into sale and leaseback transactions;
         -    merge or consolidate; and
         -    transfer and sell assets other than in the ordinary course of
              business.

         An acceleration under our senior credit facility would also constitute
an event of default under the indenture relating to the O'Sullivan Industries
subordinated notes and the securities purchase agreement relating to the
O'Sullivan Holdings note.

         -    WE MAY NOT HAVE SUFFICIENT CASH FROM CASH FLOW, CASH ON HAND AND
AVAILABLE BORROWINGS UNDER OUR SENIOR BANK FACILITIES TO SERVICE OUR
INDEBTEDNESS, WHICH WILL REQUIRE A SIGNIFICANT AMOUNT OF CASH. Our business may
not generate sufficient cash flow from operations and we may not realize
operating improvements on schedule. Also, our ability to make payments on and to
refinance our indebtedness will depend on our ability to



                                       23


<PAGE>   25

generate cash in the future. This, to some extent, is subject to general
economic, financial, competitive, legislative, regulatory and other factors that
are beyond our control. Our lower sales in fiscal 2001 reduced our cash flow.

         Future borrowings may not be available to us under our senior credit
facility in an amount sufficient to enable us to service our indebtedness or to
fund our other liquidity needs. We may need to refinance all or a portion of our
indebtedness, including the O'Sullivan Industries senior credit facility, the
O'Sullivan Industries senior subordinated notes and the O'Sullivan Holdings
note, on or before maturity. We probably would not be able to refinance any of
our indebtedness on favorable terms if at all.

         - CONTINUED REDUCTIONS IN RETAIL SALES COULD REDUCE OUR SALES,
ESPECIALLY IF THE REDUCTIONS OCCUR IN THE INDUSTRIES THAT WE BELIEVE ARE
CONTRIBUTING TO THE GROWTH OF THE READY-TO-ASSEMBLE FURNITURE INDUSTRY AND COULD
REDUCE OUR ABILITY TO PAY OUR DEBTS. Most of our sales are to major retail
chains. If there is a reduction in the overall level of retail sales, our sales
could also decline and our ability to pay our debts could be reduced. We believe
that sales of ready-to-assemble furniture increased from fiscal 1995 through
fiscal 2000 in part because of an increase in sales of personal computers and
home entertainment electronic equipment. The slowdown in growth of sales of
these products hurt our sales in fiscal 2001 and could continue to lower sales
in fiscal 2002. As markets for personal computers and home entertainment
electronic equipment, and the market for our products, is now substantially
larger, it is apparent that our growth will be adversely affected by a recession
more than in previous recessions.

         - OUR PROFITS WOULD BE REDUCED IF THE PRICES OUR SUPPLIERS CHARGE US
FOR RAW MATERIALS INCREASE LEADING TO OUR BEING LESS ABLE TO SERVICE OUR DEBTS.
We are dependent on outside suppliers for all of our raw material needs and are
subject to changes in the prices charged by our suppliers. If these prices were
to increase significantly this could lead to our being unable to service our
indebtedness.

         In the past, our profits have been reduced by increases in prices of
particleboard and fiberboard. Price increases in fiscal 2000 increased our cost
of sales in fiscal 2000 and continued to reduce earnings in the first half of
fiscal 2001.

         Prices for particleboard declined in fiscal 2001, reducing our cost of
sales in the second half of the fiscal year. However, prices for particleboard
or other raw materials may increase in the future. We will try to offset any
price increases through cost savings, production efficiencies and higher prices,
but these efforts may not be successful or sufficient.

         - OUR PAYMENTS TO RADIOSHACK MAY BE SIGNIFICANTLY HIGHER THAN WE
CURRENTLY ANTICIPATE IF RADIOSHACK'S INTERPRETATION OF THE TAX SHARING AND TAX
BENEFIT REIMBURSEMENT AGREEMENT WITH RADIOSHACK IS ACCEPTED OVER OUR
INTERPRETATION OF THE AGREEMENT AND CONSEQUENTLY OUR ABILITY TO PAY OUR DEBTS
MAY BE ADVERSELY AFFECTED. If RadioShack is successful, our payments to
RadioShack may be significantly higher than currently anticipated, which would
adversely affect our ability to pay our debts.

         We are involved in an arbitration proceeding with RadioShack. The
proceeding relates to reductions in our tax benefit payments to RadioShack
resulting from our increased interest expense following completion of the
recapitalization and merger. RadioShack claims that this reduction violates the
tax sharing and tax benefit reimbursement agreement entered into at our initial
public offering in 1994. If RadioShack were to prevail, our increased interest
expense following the merger and certain expenses incurred to consummate the
merger would not be taken into account in determining our annual payments to
RadioShack. For example, based on current estimates, our payments to RadioShack
would be approximately $12.7 million more than we currently anticipate for the
period since the closing of the recapitalization and merger through June 30,
2001. The lower our earnings are, the greater the difference between the amount
we believe we will owe to RadioShack and the amount RadioShack believes we will
owe under the tax sharing agreement. If necessary, we would fund these increased
payment obligations from cash on hand, borrowing under the senior credit
facility or other sources of capital, if available. Payment of this amount,
however, could cause us to be in violation of one or more of our covenants under
our senior credit facility. See Item 3, "Legal Proceedings" in Part I of this
report.

         - BECAUSE WE SELL PRODUCTS TO A SMALL NUMBER OF CUSTOMERS, OUR SALES
WOULD BE REDUCED IF ONE OF OUR MAJOR CUSTOMERS SIGNIFICANTLY REDUCED ITS
PURCHASES OF OUR PRODUCTS OR WERE UNABLE TO FULFILL ITS FINANCIAL OBLIGATIONS TO
US. IF THIS WERE TO HAPPEN, OUR ABILITY TO PAY OUR DEBTS MAY BE SIGNIFICANTLY
AFFECTED. Our sales are concentrated among a relatively small number of
customers. Any of our major customers can stop

                                       24

<PAGE>   26

purchasing product from us or significantly reduce their purchases at any time.
Any loss or reduction may adversely affect our cash flows and our ability to pay
our debts. During fiscal year 2001, our three largest customers, OfficeMax,
Office Depot and Wal-Mart accounted for approximately 47% of our gross sales.
Reduced orders from some of our largest customers significantly reduced our
sales in fiscal 2001. Further, Montgomery Ward closed all of its stores in
fiscal 2001. We do not have long term contracts with any of our customers and
our sales depend on our continuing ability to deliver attractive products at
reasonable prices.

          At June 30, 2001, our largest five customer accounts receivable
balances comprised approximately 59% of our net trade receivables balance. The
bankruptcy of Ames in August 2001 caused us to increase our reserves for
doubtful accounts by $1.5 million in the fourth quarter of fiscal 2001.


         - WE OPERATE IN A HIGHLY COMPETITIVE MARKET WHICH MAY FORCE US TO
REDUCE MARGINS, REDUCING OUR CASH FLOWS AND OUR ABILITY TO PAY OUR DEBTS. The
industry in which we operate is highly competitive. Some of our competitors are
significantly larger and have greater financial, marketing and other resources
than we do. Because of lower sales of RTA furniture generally, a number of
manufacturers have excess capacity. The competitive nature of our industry could
lead to smaller profit margins due to competitive pricing policies or excess
capacity. If this were to occur, our cash flows and our ability to pay our debts
may be reduced. This competitive pressure could be further exacerbated if
additional excess manufacturing capacity develops in the RTA furniture industry
due to over-expansion by manufacturers, new entrants into the market, further
reduction in demand or otherwise.

         - BECAUSE THE O'SULLIVAN INDUSTRIES SENIOR SUBORDINATED NOTES, AND THE
SUBSIDIARY GUARANTEE THEREOF, AND THE O'SULLIVAN HOLDINGS NOTE RANK BEHIND OUR
SENIOR DEBT, HOLDERS OF THESE NOTES MAY RECEIVE PROPORTIONATELY LESS THAN
HOLDERS OF OUR SENIOR DEBT IN A BANKRUPTCY, LIQUIDATION, REORGANIZATION OR
SIMILAR PROCEEDING. In the event of a bankruptcy, liquidation, reorganization or
similar proceeding relating to us, holders of O'Sullivan Industries senior
subordinated notes and then the O'Sullivan Holdings note will participate with
all other holders of our subordinated indebtedness in the assets remaining after
we have paid all of the senior debt. Because our senior debt must be paid first,
holders of these notes may receive proportionately less than trade creditors in
any proceedings of this nature. In any of these cases, we may not have
sufficient funds to pay all of our creditors. Therefore, holders of our
subordinated indebtedness may receive ratably less than trade creditors.

         In addition, all payments on the subordinated debt will be blocked in
the event of a payment default on our senior debt and may be prohibited for up
to 179 days each year in the event of some non-payment defaults on senior debt.

         - DESPITE OUR CURRENT LEVELS OF DEBT, WE MAY STILL INCUR MORE DEBT AND
INCREASE THE RISKS DESCRIBED ABOVE. We may be able to incur significant
additional indebtedness in the future. If we or our subsidiaries add new debt to
our current debt levels, the related risks that we and they now face could
intensify, making it less likely that we will be able to fulfill our obligations
to holders of the O'Sullivan Industries senior subordinated notes or the
O'Sullivan Holdings senior note. None of the agreements governing our
indebtedness completely prohibits us or our subsidiaries from doing so. The
revolving credit facility of the senior credit facility permits additional
borrowings of up to $15.4 million at June 30, 2001, plus $1.7 million for
letters of credit. These additional borrowings would be senior to the O'Sullivan
Industries senior subordinated notes and the O'Sullivan Holdings note.

         - IF WE BECOME BANKRUPT, THE CLAIMS OF HOLDERS OF O'SULLIVAN INDUSTRIES
SENIOR SUBORDINATED NOTES AGAINST US MAY BE LESS THAN THE FACE VALUE OF THE
NOTES DUE TO ORIGINAL ISSUE DISCOUNT. O'Sullivan Industries senior subordinated
notes bear a discount from their stated principal amount at maturity. If a
bankruptcy case is commenced by or against O'Sullivan Industries under the U.S.
Bankruptcy Code, the claim of a holder of the notes with respect to the
principal amount thereof would likely be limited to an amount equal to the sum
of (1) the initial offering price and (2) the portion of the original issue
discount, or OID, that is not deemed to constitute "unmatured interest" for
purposes of the U.S. Bankruptcy Code. Any OID that was not accrued as of the
bankruptcy filing would constitute "unmatured interest."

         - WE ARE AT RISK THAT USERS OF OUR PRODUCTS WILL SUE US FOR PRODUCT
LIABILITY. IF WE WERE UNABLE TO DEFEND OURSELVES AGAINST SOME PRODUCT LIABILITY
LAWSUITS, OUR SUCCESS AND OUR ABILITY TO PAY OUR DEBTS MAY BE REDUCED. All of
our products are designed for use by consumers. Like other manufacturers of
similar products, we are subject to product liability claims and could be
subject to class action litigation with respect to our products.


                                       25
<PAGE>   27

If we were unable to defend ourselves against certain product liability
lawsuits, our success and ability to pay our debts may be adversely affected. We
are party to various pending product liability legal actions arising in the
ordinary operation of our business. Our liability insurance may not be adequate
for our needs, and we may not be fully insured against any particular lawsuit
which may adversely affect us.

         - WE MAY BE LIABLE FOR PENALTIES UNDER ENVIRONMENTAL LAWS, RULES AND
REGULATIONS. THIS COULD NEGATIVELY AFFECT OUR SUCCESS AND OUR ABILITY TO PAY OUR
DEBTS. Our operations are subject to many federal, state and local environmental
laws, regulations and ordinances. Some of our operations require permits, that
are subject to revocation, modification and renewal by governmental authorities.
Governmental authorities have the power to enforce compliance with their
regulations, and violators may be subject to fines, injunction or both.
Compliance with them may require substantial capital expenditures or increase
our operating expense. These costs and expenses may adversely affect our success
and ability to pay our debts.

         - THE INTERESTS OF OUR CONTROLLING STOCKHOLDERS MAY BE IN CONFLICT WITH
INTERESTS OF THE HOLDERS OF OUR INDEBTEDNESS. THIS CONFLICT COULD RESULT IN
CORPORATE DECISION MAKING THAT INVOLVES DISPROPORTIONATE RISKS TO THE HOLDERS OF
OUR INDEBTEDNESS, INCLUDING OUR ABILITY TO SERVICE OUR DEBTS OR PAY THE
PRINCIPAL AMOUNT OF INDEBTEDNESS WHEN DUE. Following the recapitalization and
merger, BRS owns securities representing approximately 72.9% of the voting power
of the outstanding common stock of O'Sullivan Holdings. By reason of their
ownership, they control our affairs and policies. There may be circumstances
where the interests of BRS and its affiliates could be in conflict with the
interests of the holders of our indebtedness. For example, BRS and its
affiliates may have an interest in pursuing transactions that, in their
judgment, could enhance their equity investment, even though these transactions
might involve risks to the holders of O'Sullivan's debt. See Item 10, "Directors
and Executive Officers of the Registrant," and Item 12, "Security Ownership of
Certain Beneficial Owners and Management," in Part III of this report.

         - IF OUR KEY PERSONNEL WERE TO LEAVE OUR SUCCESS COULD BE NEGATIVELY
AFFECTED AND OUR ABILITY TO SERVICE OUR DEBTS COULD BE ADVERSELY AFFECTED. Our
continued success is dependent, to a certain extent, upon our ability to attract
and retain qualified personnel in all areas of our business, including
management positions and key sales positions, especially those positions
servicing our major customers. If any of our key personnel were to leave, it
might adversely affect our ability to service our debt. Members of the
O'Sullivan family in particular have been instrumental in the development of our
business and the implementation of our corporate strategy. We do not have
employment agreements with any of our officers or key personnel located in the
United States and we do not carry key person life insurance on any of our
employees. We may not be able to keep existing personnel, including O'Sullivan
family members, or be able to attract qualified new personnel. Our inability to
do so could have a negative effect on us as we may be unable to efficiently and
effectively run our business without these key personnel.

         - FEDERAL AND STATE STATUTES ALLOW COURTS, UNDER SPECIFIC
CIRCUMSTANCES, TO VOID GUARANTEES, SUBORDINATE CLAIMS IN RESPECT OF OUR
INDEBTEDNESS AND REQUIRE HOLDERS OF OUR DEBT TO RETURN PAYMENTS RECEIVED FROM
GUARANTORS. Under federal bankruptcy law and comparable provisions of state
fraudulent transfer laws, courts may void guarantees or claims related to our
indebtedness, or subordinate any guarantees to all of our other debts or all
other debts of our guarantor if, among other things, at the time our guarantor
incurred the indebtedness connected with its guarantee, we or the guarantor:

         -    received less than reasonably equivalent value or fair
              consideration for the issuance of the guarantee; and
         -    we were or the guarantor was insolvent or rendered insolvent by
              the incurrence; or
         -    we were or the guarantor was engaged in a business or transaction
              for which our or the guarantor's remaining assets constituted
              unreasonably small capital; or
         -    we or the guarantor intended to incur or believed that we or it
              would incur debts beyond our or its ability to pay these debts as
              they mature.

         In addition, a court could void any payment by us or the guarantor
related to its guarantee and require that payment to be returned to us or the
guarantor, or to a fund for the benefit of our creditors or the creditors of the
guarantor.

         The measures of insolvency for purposes of these fraudulent transfer
laws will vary depending upon the law applied. Generally, a guarantor would be
considered insolvent if:


                                       26
<PAGE>   28

         -    the sum of its debts, including contingent liabilities, were
              greater than the fair saleable value of all of its assets; or
         -    the present fair saleable value of its assets were less than the
              amount that would be required to pay its probable liability on its
              existing debts, including contingent liabilities, as they became
              absolute and mature; or
         -    it could not pay its debts as they became due.

         If a court were to disagree with our conclusions as to the legality of
any subsidiary guarantees it could adversely affect the rights of holders of
O'Sullivan Industries' indebtedness.

         - WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE A
CHANGE OF CONTROL OFFER REQUIRED BY OUR DEBT AGREEMENTS. Upon certain change of
control events, we will be required to offer to repurchase all of the O'Sullivan
Industries senior subordinated notes and the O'Sullivan Holdings note. If we do
not have sufficient funds at the time of a change of control, we will not be
able to make the required repurchase of these notes. This could be because of
cash flow difficulties or because of restrictions in our senior credit facility
and any future credit agreements that will not allow these repurchases.

         In addition, some kinds of corporate events, such as a leveraged
recapitalization, would increase the level of our indebtedness but would not
necessarily constitute a "Change of Control" and would therefore not require us
to repurchase the notes.

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

         The information required by this item is incorporated herein by
reference to the section entitled "Market Risk and Inflation" in Item
7,"Management's Discussion and Analysis of Financial Condition and Results of
Operations," in Part II of this report.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         Immediately following are the report of independent accountants, the
consolidated balance sheets of O'Sullivan Industries Holdings, Inc. and
subsidiaries as of June 30, 2001 and 2000, and the related consolidated
statements of operations, cash flows and changes in stockholders' equity
(deficit) for each of the three years in the period ended June 30, 2001, and the
notes thereto.



                                       27
<PAGE>   29


                        REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
O'Sullivan Industries Holdings, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of changes in
stockholders' equity (deficit) present fairly, in all material respects, the
financial position of O'Sullivan Industries Holdings, Inc. and its subsidiaries
at June 30, 2001 and 2000, and the results of their operations and their cash
flows for each of the three years in the period ended June 30, 2001, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Kansas City, Missouri
August 28, 2001



                                       28
<PAGE>   30

              O'SULLIVAN INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                      (in thousands, except for share data)



<TABLE>
<CAPTION>
                                                                                         June 30,
                                                                                   ----------------------
                                    Assets                                            2001         2000
                                                                                   ---------    ---------
<S>                                                                                <C>          <C>
Current assets:
    Cash and cash equivalents                                                      $   7,060    $  11,867
    Trade receivables, net of allowance for doubtful accounts                         52,570       58,975
        of $4,750 and $3,095, respectively
    Inventories, net                                                                  48,538       65,256
   Prepaid expenses and other current assets                                           8,820        6,432
                                                                                   ---------    ---------
           Total current assets                                                      116,988      142,530

Property, plant and equipment, net                                                    95,872       99,548
Other assets                                                                          12,232       14,295
Goodwill, net of accumulated amortization                                             38,088       39,755
                                                                                   ---------    ---------
               Total assets                                                        $ 263,180    $ 296,128
                                                                                   =========    =========
                        Liabilities and Stockholders' Deficit

Current liabilities:
    Accounts payable                                                               $   8,534    $  15,399
    Current portion of long-term debt                                                  3,696        3,000
    Accrued liabilities                                                               23,639       30,547
                                                                                   ---------    ---------
           Total current liabilities                                                  35,869       48,946


Long-term debt, less current portion                                                 236,762      247,299
Other liabilities                                                                      5,222        3,364
Deferred income taxes                                                                 14,721       17,626
                                                                                   ---------    ---------
               Total liabilities                                                     292,574      317,235


Commitments and contingent liabilities (Notes 3, 18 and 19)

Mandatorily redeemable senior preferred stock, $0.01 par value; $29,648 and
  $26,386 liquidation value including accumulated dividends at June 30, 2001 and
  June 30, 2000, respectively, 17,000,000 shares authorized, 16,431,050 issued        15,301       12,781

Stockholders' deficit:
  Junior preferred stock, Series A, $0.01 par value; 100,000 shares                        -            -
     authorized, none issued
  Junior preferred stock, Series B, $0.01 par value; at liquidation value
    including accumulated dividends; 1,000,000 shares authorized; 529,009.33 and      65,366       55,822
    515,681.33 issued at June 30, 2001 and June 30, 2000, respectively
  Common stock, $0.01 par value; 2,000,000 shares authorized, 1,368,000
    issued                                                                                14           14
    Additional paid-in capital                                                        13,053       14,385
    Retained deficit                                                                (122,470)    (103,799)
    Accumulated other comprehensive loss                                                (336)         (14)
    Notes receivable from employees                                                     (322)        (296)
                                                                                   ---------    ---------
               Total stockholders' deficit                                           (44,695)     (33,888)
                                                                                   ---------    ---------
               Total liabilities and stockholders' deficit                         $ 263,180    $ 296,128
                                                                                   =========    =========
</TABLE>

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


                                       29
<PAGE>   31



              O'SULLIVAN INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                            For the year ended June 30,
                                                                           2001        2000         1999
                                                                        ---------    ---------    ---------
<S>                                                                     <C>          <C>          <C>
Net sales                                                               $ 375,670    $ 423,425    $ 379,632
Cost of sales                                                             269,720      298,387      267,630
                                                                        ---------    ---------    ---------
Gross profit                                                              105,950      125,038      112,002

Operating expenses:
    Selling, marketing and administrative                                  73,541       82,364       74,962
    Restructuring charge                                                   10,506            -            -
    Merger related expenses                                                     -        7,792        1,143
    Transaction fee to related party                                            -        3,062            -
    Compensation expense associated with stock options                          -       10,627            -
    Loss on settlement of interest rate swap                                    -          408            -
                                                                        ---------    ---------    ---------
Total operating expenses                                                   84,047      104,253       76,105
                                                                        ---------    ---------    ---------

Operating income                                                           21,903       20,785       35,897
Other income (expense):
    Interest expense                                                      (34,467)     (19,387)      (3,110)
    Interest income                                                           500          792          266
                                                                        ---------    ---------    ---------
Income before income tax provision, extraordinary item and
    cumulative effect of accounting change                                (12,064)       2,190       33,053
Income tax provision (benefit)                                             (4,221)       5,050       11,900
                                                                        ---------    ---------    ---------
Income (loss) before extraordinary item and cumulative effect of
    accounting change                                                      (7,843)      (2,860)      21,153
Extraordinary loss from early extinguishment of debt, net of
    income tax benefit of $171                                                  -         (305)           -
Cumulative effect of accounting change, net of income tax benefit
    of $53                                                                    (95)           -            -
                                                                        ---------    ---------    ---------
Net income (loss)                                                          (7,938)      (3,165)      21,153
Dividends and accretion on preferred stock                                (10,733)      (5,535)           -
                                                                        ---------    ---------    ---------
Net income (loss) attributable to common stockholders                   $ (18,671)   $  (8,700)   $  21,153
                                                                        =========    =========    =========
</TABLE>


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


                                       30

<PAGE>   32

              O'SULLIVAN INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)


<TABLE>
<CAPTION>
                                                                                   For the year ended June 30,
                                                                               -----------------------------------
                                                                                  2001        2000         1999
                                                                               ---------    ---------    ---------
<S>                                                                            <C>          <C>          <C>
Cash flows provided by operating activities:
    Net income (loss)                                                          $  (7,938)   $  (3,165)   $  21,153
    Adjustments to reconcile net income (loss) to net cash provided by
        operating  activities:
        Depreciation and amortization                                             14,945       15,416       13,962
        Amortization of debt issuance costs                                        1,610          938            -
        Amortization of debt discount and accrued interest on senior note          2,475        1,303            -
        Interest rate collar                                                       2,096            -            -
        Bad debt expense                                                           1,741        1,047          524
        Loss on disposal of assets                                                   230          117          223
        Impairment of long-lived assets to be sold                                 8,677            -            -
        Deferred income taxes                                                     (4,028)        (540)         481
        Employee option amortization                                                   -            -          749
        Deferred compensation                                                          -            -          160
        Accrual of special payment of options to purchase Series A junior
          preferred stock                                                            946          498
        Compensation expense associated with stock options                             -       10,627            -
    Changes in current assets and liabilities:
        Trade receivables                                                          4,664        3,246       (2,244)
        Inventories                                                               16,718       (9,122)      (9,407)
        Other assets                                                              (1,600)      (1,132)          13
        Accounts payable and accrued liabilities                                 (15,608)      11,087         (398)
                                                                               ---------    ---------    ---------
Net cash flows provided by operating activities                                   24,928       30,320       25,216
                                                                               ---------    ---------    ---------
Cash flows used for investing activities:
    Capital expenditures                                                         (16,811)     (17,129)     (15,554)
                                                                               ---------    ---------    ---------
Cash flows used by financing activities:
    Issuance of stock, net of expenses                                                 -       45,884            -
    Redemption and cancellation of stock                                               -     (269,044)           -
    Employee loans                                                                     -         (296)           -
    Proceeds from borrowings, including issuance of warrants                           -      252,018       10,000
    Repayment of borrowings                                                      (12,924)     (21,000)     (14,000)
    Net repayment of revolver                                                          -            -       (4,000)
    Debt issuance costs                                                                -      (13,021)           -
    Purchase of common stock                                                           -            -       (2,811)
    Exercise of stock options                                                          -          395          100
    Sale of common stock to employee benefit plans                                     -            -        2,979
                                                                               ---------    ---------    ---------
Net cash flows used for financing activities                                     (12,924)      (5,064)      (7,732)
                                                                               ---------    ---------    ---------
Net increase (decrease) in cash and cash equivalents                              (4,807)       8,127        1,930
Cash and cash equivalents, beginning of year                                      11,867        3,740        1,810
                                                                               ---------    ---------    ---------
Cash and cash equivalents, end of year                                         $   7,060    $  11,867    $   3,740
                                                                               =========    =========    =========
Supplemental cash flow information:
    Interest paid                                                              $  28,258    $  13,571    $   3,110
    Income taxes paid (refunded)                                               $     (17)   $   5,172    $  10,150
Non-cash financing activities:
    Loans issued to purchase company stock                                      $      -    $     285    $       -
    Dividends accrued but not paid                                             $  11,473    $   5,994    $       -
    Capital expenditures included in accounts payable                          $   1,821    $     589    $   1,159
</TABLE>


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



                                       31
<PAGE>   33
              O'SULLIVAN INDUSTRIES HOLDINGS, INC. AND SUBSIDIARIES
      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                                 (in thousands)

<TABLE>
<CAPTION>

                                                      Series B junior
                                                      preferred stock        Common stock       Additional     Retained
                                                     -----------------     ----------------       paid-in      earnings
                                                     Shares    Dollars     Shares   Dollars       capital      (deficit)
                                                     ------    -------     ------   -------     ----------     ---------
<S>                                                <C>       <C>         <C>      <C>          <C>           <C>
Balance, June 30, 1998                                    -   $      -     16,820  $ 16,820     $   87,809     $  68,317
    Net income                                                                                                    21,153
    Other comprehensive loss
    Purchase of common stock
    Exercise of stock options, net of tax
        benefit                                                                                        (53)
    Sale of common stock                                                                              (207)
                                                     ------   --------     ------  --------     ----------     ---------
Balance, June 30, 1999                                    -   $      -     16,820  $ 16,820     $   87,549     $  89,470

    Net loss                                                                                                      (3,165)
    Other comprehensive income
    Exercise of stock options, net of tax
        benefit                                                                                       (138)
    Compensation expense associated with
        stock options                                                                               12,982
    Redemption and cancellation of
        common stock                                                      (16,820)  (16,820)       (93,008)     (184,569)
    Issue of warrants                                                                                7,000
    Loans to employees                                    3        285         12         -
    Issuance of preferred stock                         513     51,283
    Issuance of common stock                                                1,356        14
    Dividends and accretion on senior
        preferred stock                                                                                           (1,281)
    Dividends and accretion on junior
        preferred stock                                          4,254                                            (4,254)
                                                     ------   --------     ------  --------     ----------     ---------
Balance, June 30, 2000                                  516   $ 55,822      1,368  $     14     $   14,385     $(103,799)

    Net loss                                                                                                      (7,938)
    Other comprehensive loss
    Loans to employees-interest income
    Issuance of preferred stock upon
        exercise of warrants                             13      1,332                              (1,332)
    Dividends and accretion on senior
        preferred stock                                                                                           (2,521)
    Dividends and accretion on junior
        preferred stock                                          8,212                                            (8,212)
                                                     ------   --------     ------  --------     ----------     ---------
Balance, June 30, 2001                                  529   $ 65,366      1,368  $     14     $   13,053     $(122,470)
                                                     ======   ========     ======  ========     ==========     =========
</TABLE>

<TABLE>
<CAPTION>


                                                      Notes                          Accumulated      Total
                                                    receivable    Treasury stock        other      stockholders'  Comprehensive
                                                      from       ----------------   comprehensive    equity          income
                                                    employees    Shares   Dollars   income (loss)   (deficit)        (loss)
                                                    ----------   ------   -------   -------------  ------------   -------------
<S>                                               <C>           <C>      <C>       <C>            <C>              <C>
Balance, June 30, 1998                              $        -     (798)  $(9,240)  $         (36) $    163,670
    Net income                                                                                           21,153     $21,153
    Other comprehensive loss                                                                   (7)           (7)         (7)
    Purchase of common stock                                       (258)   (2,811)                       (2,811)
    Exercise of stock options, net of tax
        benefit                                                      14       205                           152
    Sale of common stock                                            271     3,186                         2,979
                                                    ----------   ------   -------   -------------  ------------     -------
Balance, June 30, 1999                              $        -     (771)  $(8,660)  $         (43) $    185,136     $21,146
                                                                                                                    =======
    Net loss                                                                                             (3,165)    $(3,165)
    Other comprehensive income                                                                 29            29          29
    Exercise of stock options, net of tax
        benefit                                                      42       533                           395
    Compensation expense associated with
        stock options                                                                                    12,982
    Redemption and cancellation of
        common stock                                                729     8,127                      (286,270)
    Issue of warrants                                                                                     7,000
    Loans to employees                                    (296)                                             (11)
    Issuance of preferred stock                                                                          51,283
    Issuance of common stock                                                                                 14
    Dividends and accretion on senior
        preferred stock                                                                                  (1,281)
    Dividends and accretion on junior
        preferred stock                                                                                       -
                                                    ----------   ------   -------   -------------  ------------     -------
Balance, June 30, 2000                              $     (296)       -   $     -   $         (14) $    (33,888)    $(3,136)
                                                                                                                    =======
    Net loss                                                                                             (7,938)    $(7,938)
    Other comprehensive loss                                                                 (322)         (322)       (322)
    Loans to employees-interest income                     (26)                                             (26)
    Issuance of preferred stock upon
        exercise of warrants                                                                                  -
    Dividends and accretion on senior
        preferred stock                                                                                  (2,521)
    Dividends and accretion on junior
        preferred stock                                                                                       -
                                                    ----------   ------   -------   -------------  ------------     -------
Balance, June 30, 2001                              $     (322)       -   $     -   $        (336) $    (44,695)    $(8,260)
                                                    ==========   ======   =======   =============  ============     =======
</TABLE>


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


                                       32
<PAGE>   34
                      O'SULLIVAN INDUSTRIES HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - GENERAL INFORMATION.

         O'Sullivan Industries Holdings, Inc. ("O'Sullivan"), a Delaware
corporation, is a domestic producer of ready-to-assemble ("RTA") furniture.
O'Sullivan's RTA furniture includes desks, computer tables, cabinets, home
entertainment centers, audio equipment racks, microwave oven carts and a wide
variety of other RTA furniture for use in the home, office and home office. The
products are distributed primarily through office superstores, discount mass
merchants, mass merchants, home centers, electronics retailers, furniture stores
and internationally. O'Sullivan Holdings' is the sole owner of O'Sullivan
Industries - Virginia, Inc. ("O'Sullivan Industries - Virginia").

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

         Basis of Presentation: The consolidated financial statements include
the accounts of O'Sullivan and its wholly owned subsidiaries. All significant
intercompany transactions, balances and profits have been eliminated.

         Pervasiveness of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, and related revenues and expenses, and disclosure of gain and loss
contingencies at the date of the financial statements. Actual results could
differ from those estimates.

         Cash and Cash Equivalents: Cash and cash equivalents include cash on
hand and all highly liquid investments with original maturities of three months
or less.

         Business and Credit Risk Concentrations: The largest five customer
accounts receivable balances accounted for approximately 59% and 68% of the
trade receivable balance at June 30, 2001 and 2000, respectively. Credit is
extended to customers based on evaluation of the customer's financial condition,
generally without requiring collateral. Exposure to losses on receivables is
dependent on each customer's financial condition. Therefore, O'Sullivan would be
exposed to a large loss if one of its major customers were not able to fulfill
its financial obligations. From time to time, O'Sullivan maintains certain
limited credit insurance which may help reduce, but not eliminate, exposure to
potential credit losses. In addition, O'Sullivan monitors its exposure for
credit losses and maintains allowances for anticipated losses.

         Revenues: Revenue is recognized at the date title to product passes to
customers. Provisions for discounts, rebates to customers, returns and other
adjustments are provided for in the same period the related sales are recorded.

         Shipping and Handling: O'Sullivan reports amounts billed to customers
as revenue, the cost of warehousing operations in cost of sales and freight out
costs as part of selling, marketing and administrative expenses. Freight out
costs included in selling, marketing and administrative expenses in fiscal 2001,
2000 and 1999 were approximately $11.6 million, $17.1 million and $16.4 million,
respectively.

         Inventories: Inventories are stated at the lower of cost, determined on
a first-in, first-out (FIFO) basis, or market. Provision for potentially
obsolete or slow-moving inventory is made based on management's evaluation of
inventory levels and future sales forecasts.

         Property, Plant and Equipment: Depreciation and amortization of
property, plant and equipment is calculated using the straight-line method,
which amortizes the cost of the assets over their estimated useful lives. The
ranges of estimated useful lives are: buildings--30 to 40 years; machinery and
equipment--3 to 10 years; leasehold improvements--the lesser of the life of the
lease or asset. Maintenance and repairs are charged to expense as incurred.
Renewals and betterments which materially prolong the useful lives of the assets
are capitalized. The cost and related accumulated depreciation of assets retired
or sold are removed from the accounts, and gains or losses on disposal are
recognized in the statement of operations.

         Amortization of Excess Purchase Price Over Net Tangible Assets of
Businesses Acquired: Cost in excess of net assets acquired is amortized over a
40-year period using the straight-line method. Accumulated amortization at June
30, 2001 and 2000 approximated $29,753,000 and $28,086,000, respectively.


                                       33
<PAGE>   35

         Impairment of Long-Lived Assets: Long-lived assets (i.e., property,
plant and equipment and goodwill) held and used are reviewed for possible
impairment whenever events or changes in circumstances indicate that the net
book value of the asset may not be recoverable. O'Sullivan recognizes an
impairment loss if the sum of the expected future cash flows (undiscounted and
before interest) from the use of the asset is less than the net book value of
the asset. The amount of the impairment loss is measured as the difference
between the net book value of the assets and the estimated fair value of the
related assets.

         Fair Value of Financial Instruments: The fair value of financial
instruments is determined by reference to various market data and other
valuation techniques, as appropriate. Unless otherwise disclosed, the fair value
of financial instruments approximates their recorded values due primarily to the
short-term nature of their maturities.

         Advertising Costs: Advertising costs are expensed the first time the
advertising takes place. Cooperative advertising costs are accrued and expensed
when the related revenues are recognized. Advertising expense for fiscal 2001,
2000 and 1999 was $25,384,000, $25,032,000 and $21,147,000, respectively.

         Income Taxes: Deferred taxes are provided on the liability method
whereby deferred tax assets are recognized for deductible temporary differences
and operating loss carryforwards and deferred tax liabilities for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws
and rates on the date of enactment.

         Environmental Remediation and Compliance: Environmental remediation and
compliance expenditures that relate to current operations are expensed or
capitalized, as appropriate. Expenditures that relate to an existing condition
caused by past operations and that do not contribute to current or future
revenue generation are expensed. Liabilities are recognized when environmental
assessments and/or remedial efforts are probable and the costs can be reasonably
estimated. Generally, the timing of these accruals coincides with completion of
a feasibility study or O'Sullivan's commitment to a formal plan of action. To
date, environmental expenditures have not been material, and management is not
aware of any material environmental related contingencies.

         Significant Fourth Quarter Adjustments: During the fourth quarter of
fiscal 1999, O'Sullivan recorded merger related expenses of approximately $1.1
million incurred for legal, accounting, printing and investment banking fees.

         During the fourth quarter of fiscal 2001, O'Sullivan recorded bad debt
expense of $1.5 million associated with the August 20, 2001 bankruptcy filing of
Ames Department Stores, Inc.

         Accounting for Stock-Based Compensation: O'Sullivan accounts for stock
based compensation pursuant to the intrinsic value based method of accounting as
prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees. O'Sullivan has made pro forma disclosures of net income as
if the fair value based method of accounting defined in Statement of Financial
Accounting Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation,
had been applied.

         Comprehensive Income: Other comprehensive income consists of foreign
currency translation adjustments. The tax benefit (expense) related to other
comprehensive income (loss) approximated $113,000, $(10,000) and $4,000 for the
years ended June 30, 2001, 2000 and 1999 respectively.

         Reclassifications: Certain items in the prior years' financial
statements have been reclassified to conform with the current year's
presentation.



                                       34
<PAGE>   36

NOTE 3 - RESTRUCTURING CHARGE

         On November 17, 2000, O'Sullivan announced a restructuring plan and
recorded $10.5 million of related expense in the second quarter of fiscal 2001.
The slowdown in sales during the first half of fiscal year 2001 caused
O'Sullivan to reassess its business plan, specifically expenses and available
production capacity. Accordingly, the Utah facility was closed in January 2001.

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

         O'Sullivan also recognized a $495,000 expense for separation of
approximately 325 management and non-management employees at the Utah facility
as well as exit costs of approximately $527,000 for increased workers'
compensation claims, real and personal property taxes and security expenses
applicable to the Utah closure.

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

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

<TABLE>
<CAPTION>


                                         Restructuring     Charges
                                            Accrual        through      Balance
                                           12/31/00        6/30/01      6/30/01
                                         -------------     -------      -------
                                                        (in thousands)
<S>                                     <C>             <C>          <C>
Employee termination benefits (1)         $    1,302      $     915    $    387

Other Utah facility exit costs (1)               527            282         245
                                          ----------      ---------    --------
Total                                     $    1,829      $   1,197    $    632
                                          ==========      =========    ========
</TABLE>

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

         Accumulated depreciation was increased $8.7 million to record asset
impairments. The remainder of the restructuring charge is expected to be paid in
the first half of fiscal 2002.

NOTE 4 - LEVERAGED RECAPITALIZATION.

         On November 30, 1999, O'Sullivan completed a recapitalization and
merger through which the outstanding stock of O'Sullivan was purchased by an
investment firm, Bruckmann, Rosser, Sherrill & Co. II, LLC ("BRS"), certain
directors and members of O'Sullivan's senior management. The leveraged
recapitalization required approximately $357 million to complete the merger and
pay related fees and expenses. Approximately $264 million was funded with debt
proceeds.

         In fiscal 2000, O'Sullivan recognized $10.9 million of merger related
expenses for investment banking, legal, accounting, printing and other services.
These costs included a payment to BRS of $3.1 million. The merger related
expenses and the fee paid BRS have been included as separate line items in the
accompanying consolidated statement of operations.

         O'Sullivan also incurred approximately $10.6 million in compensation
expense associated with stock options as part of the merger. Of this amount,
$6.0 million was exchanged for options to purchase shares of Series A junior
preferred stock, $5.9 million in cash was paid and $1.1 million in liquidation
value of senior preferred


                                       35
<PAGE>   37

stock was distributed to the option holders. O'Sullivan had previously incurred
approximately $2.3 million in compensation expense for the options prior to the
merger. The compensation expense relating to the options has been included as a
separate line item in the accompanying consolidated statement of operations.

         At the time of the merger, O'Sullivan repaid private placement notes
held with a principal amount of $16.0 million for $16.5 million. The $476,000
prepayment fee has been recognized as a $305,000 extraordinary loss, net of
related tax benefit.

NOTE 5 - DERIVATIVE FINANCIAL INSTRUMENTS.

         Effective October 1, 1998, O'Sullivan had a forward starting interest
rate swap agreement with a notional principal amount of $10.0 million, which was
to terminate on October 1, 2008. Pursuant to the agreement, O'Sullivan paid a
fixed rate of 7.13% and received a floating interest rate during the duration of
the swap agreement. On November 30, 1999, O'Sullivan terminated the swap as
required by the counter-party due to the merger and recapitalization, incurring
a loss of $408,000. The loss on the settlement of the interest rate swap has
been included as a separate line item in the accompanying consolidated statement
of operations.

         As required under the new senior credit facility, O'Sullivan hedged
one-half of its term loans with an initial notational amount of $67.5 million
with a three-year, costless interest rate collar. The collar, which expires in
March 2003, is based on three-month LIBOR and has a floor of 6.43% and a ceiling
of 8.75%. To terminate this contract at June 30, 2001, O'Sullivan would have
been required to pay the counter-party approximately $2.1 million. This amount
has been recorded as interest expense in results of operations and in other
liabilities in the accompanying consolidated balance sheet.

NOTE 6 - NEW ACCOUNTING STANDARDS.

         In May 2000, the Emerging Issues Task Force ("EITF"), a subcommittee of
the Financial Accounting Standards Board ("FASB"), issued EITF No. 00-10,
Accounting for Shipping and Handling Fees and Costs. EITF 00-10 requires that
amounts billed to customers related to shipping and handling costs be classified
as revenue. Historically, O'Sullivan has reported amounts billed to customers as
revenue, has included the cost of warehousing operations in cost of sales and
freight out costs as part of selling, marketing and administrative expenses.
O'Sullivan will continue this practice and disclose freight out costs in the
notes to the financial statements, as permitted by EITF 00-10.

         In April 2001, the EITF reached a consensus on EITF No. 00-25, Vendor
Income Statement Characterization of Consideration Paid to a Reseller of the
Vendor's Products. This issue addresses the income statement classification of
slotting fees, cooperative advertising arrangement and buydowns. The consensus
will require that certain customer promotional payments that are currently
classified as selling expenses be classified as a reduction of revenue. Although
the impact of EITF 00-25 on the consolidated financial statements is still being
evaluated, its adoption will result in a significant reclassification between
net sales and selling, marketing and administrative expense. EITF 00-25 will
become effective for financial periods beginning after December 15, 2001, but
its adoption by O'Sullivan will have no impact on operating income or net income
(loss). O'Sullivan will adopt EITF 00-25 no later than March 31, 2002, as
required.

         The FASB issued SFAS No. 142, Goodwill and Other Intangible Assets, on
June 30, 2001. SFAS 142 is generally effective for fiscal years beginning after
December 15, 2001, although early adoption is permitted for entities with fiscal
years beginning after March 15, 2001, provided that the first interim financial
statements have not been previously issued. O'Sullivan will adopt SFAS 142 on
July 1, 2001, the beginning of its 2002 fiscal year. With the adoption of SFAS
142, goodwill is no longer subject to amortization over its estimated useful
life. Rather, goodwill will be assessed regularly for impairment by applying a
fair-value-based test. O'Sullivan does not anticipate recognizing any impairment
of goodwill upon adoption. O'Sullivan will discontinue amortizing approximately
$1.7 million of goodwill per year upon adoption.

         In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. This pronouncement, which is effective for fiscal years
beginning after June 15, 2002, addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. O'Sullivan is currently determining what
impact, if any, this pronouncement will have on its consolidated financial
statements.


                                       36
<PAGE>   38

NOTE 7 - INVENTORY.

Inventory consists of the following:

<TABLE>
<CAPTION>

                                                                                              June 30,
                                                                                      -----------------------
                                                                                        2001           2000
                                                                                      ---------     ---------
                                                                                          (in thousands)
<S>                                                                                 <C>           <C>
Finished goods                                                                        $  35,798     $  47,350
Work in process                                                                           4,256         6,258
Raw materials                                                                             8,484        11,648
                                                                                      ---------     ---------
                                                                                      $  48,538     $  65,256
                                                                                      =========     =========
</TABLE>

NOTE 8 - PROPERTY, PLANT AND EQUIPMENT.

Property, plant, and equipment consist of the following:

<TABLE>
<CAPTION>

                                                                                             June 30,
                                                                                    -------------------------
                                                                                       2001           2000
                                                                                    ----------     ----------
                                                                                          (in thousands)
<S>                                                                               <C>            <C>
Land                                                                                $    1,034     $    1,034
Buildings and improvements                                                              49,557         43,219
Machinery and equipment                                                                129,125        118,778
Construction in progress                                                                 5,596          9,395
                                                                                    ----------     ----------
                                                                                       185,312        172,426
Less: accumulated depreciation                                                         (89,440)       (72,878)
                                                                                    ----------     ----------
                                                                                    $   95,872     $   99,548
                                                                                    ==========     ==========
</TABLE>

         Depreciation expense was $12,814,000, $13,578,000 and $12,295,000 for
fiscal 2001, 2000 and 1999, respectively, of which $10,563,000, $11,098,000 and
$9,912,000 respectively, was included in cost of sales.

NOTE 9 - ACCRUED LIABILITIES.

Accrued liabilities consist of the following:

<TABLE>
<CAPTION>

                                                                                           June 30,
                                                                                   ------------------------
                                                                                      2001           2000
                                                                                   ---------      ---------
                                                                                        (in thousands)
<S>                                                                              <C>            <C>
Accrued employee compensation                                                      $   6,871      $  11,997
Accrued advertising                                                                   10,285         12,462
Accrued interest                                                                       3,677          3,719
Other current liabilities                                                              2,806          2,369
                                                                                   ---------      ---------
                                                                                   $  23,639      $  30,547
                                                                                   =========      =========
</TABLE>



                                       37
<PAGE>   39
NOTE 10 - LONG-TERM DEBT AND OTHER BORROWING ARRANGEMENTS.

         Long-term debt consisted of the following:

<TABLE>

                                                                                             June 30,
                                                                                   ----------------------------
                                                                                      2001              2000
                                                                                   ----------        ----------
                                                                                           (in thousands)
<S>                                                                              <C>               <C>
Senior term notes, tranche A                                                       $   29,107        $   34,000
Senior term notes, tranche B                                                           91,969           100,000
Industrial revenue bonds                                                               10,000            10,000
Senior subordinated notes                                                              95,007            94,708
Senior note                                                                            14,375            11,591
                                                                                   ----------        ----------
Total debt                                                                            240,458           250,299
Less current portion of senior term notes                                              (3,696)           (3,000)
                                                                                   ----------        ----------
Total long-term debt                                                               $  236,762        $  247,299
                                                                                   ==========        ==========
</TABLE>

         Total debt, including the discount of $5.0 million on the senior
subordinated notes and $3.2 million on the senior note, matures as follows (in
thousands):

<TABLE>

<S>                                         <C>
                          2002               $   3,700
                          2003                   5,500
                          2004                  10,200
                          2005                  12,000
                          2006                  32,400
                          Thereafter           184,888
                                             ---------
                                             $ 248,688
                                             =========

</TABLE>

         SENIOR SECURED CREDIT FACILITY. O'Sullivan Industries is the obligor
under a senior secured credit facility totaling $175.0 million. O'Sullivan
Industries entered into an agreement for the senior secured credit facility on
November 30, 1999. The senior secured credit facility consisted of the
following:

         - Senior term note, tranche A - $35.0 million term loan facility
           payable in 23 quarterly installments beginning March 31, 2000. The
           outstanding balance has been reduced to $26.3 million.

         - Senior term note, tranche B - $100.0 million term loan facility
           payable in 26 quarterly installments beginning March 31, 2001. The
           balance of these loans has been reduced to $91.0 million.

         - Revolving credit facility - $40.0 million revolving credit facility
           due November 30, 2005, which includes a $15.0 million letter of
           credit subfacility and a $5.0 million swing line subfacility. At June
           30, 2001, O'Sullivan had no borrowings outstanding on the credit
           facility and approximately $13.3 million of letters of credit
           outstanding.

         O'Sullivan Industries' obligations under the senior secured facility
are secured by first priority liens and security interests in the stock of
O'Sullivan Industries and O'Sullivan Industries - Virginia and substantially all
of the assets of O'Sullivan Industries and O'Sullivan Industries - Virginia.

         At O'Sullivan Industries' option, borrowings under the senior secured
credit facility accrue interest at the varying rates based on (a) a Eurodollar
rate plus an applicable margin or (b) an applicable margin plus the highest of a
bank's prime rate, the federal funds effective rate plus 0.5% or three-month
certificates of deposit secondary market rates as adjusted for statutory
reserves plus 1.0%. The applicable margins vary based upon O'Sullivan
Industries' leverage ratio. The applicable margins for the $100.0 million term
loan are 4.0% for Eurodollar loans and 3.0%, for base rate loans, which may be
reduced by 25 basis points if O'Sullivan Industries reduces its consolidated
leverage ratio to 4.5:1 or below. O'Sullivan Industries also pays a quarterly
fee equal to 0.5% per annum of the unused commitment under the senior secured
credit facility. On June 30, 2001, the interest rate for Tranche A notes was
7.6%. The interest rate for Tranche B notes was 8.1%. See also Note 5.

         The senior credit facility and notes are subject to certain financial
and operational covenants and other restrictions, including among others, a
requirement to maintain certain financial ratios and restrictions on O'Sullivan
Industries' ability to make capital expenditures, sell assets, sell securities,
engage in acquisitions and incur


                                       38
<PAGE>   40

additional indebtedness. In addition, the agreements effectively prohibit the
payment of dividends on O'Sullivan stock.

         The senior credit facility was amended as of January 30, 2001. The
primary changes to the credit facility were to the covenants for minimum
consolidated EBITDA, consolidated leverage ratios, consolidated interest
coverage ratio and the consolidated fixed charge coverage ratio. The amended
covenants are less restrictive than those in the original credit facility. The
amendment also required a $10.0 million repayment of the term loans on or before
June 30, 2001. The prepayment was completed on May 1, 2001.

         The restriction on the incurrence of additional indebtedness in the
senior credit facility limited O'Sullivan Industries' ability to incur
additional debt to approximately $15.4 million on June 30, 2001. In addition,
about $1.7 million of the line of credit can be used for letters of credit.

         At June 30, 2001, O'Sullivan was in compliance with all debt covenants.

         INDUSTRIAL REVENUE BONDS. O'Sullivan Industries - Virginia was obligor
on $10.0 million of 8.25% industrial revenue bonds ("IRB's") that were to mature
on October 1, 2008. On October 1, 1998, O'Sullivan Industries - Virginia
refinanced these bonds with new, ten year variable rate IRB's. The $300,000
premium on the early retirement of the bonds was recognized as a loss in the
second quarter of 1999 and is included in interest expense in the accompanying
consolidated statement of operations. Interest on the IRB's is paid monthly. The
loan is secured by a $10.2 million standby letter of credit under the senior
credit facility.

         Effective October 1, 1998, O'Sullivan Industries entered into a forward
starting interest rate swap agreement with a notional principal amount of $10.0
million that was to terminate October 1, 2008. O'Sullivan Industries contracted
to pay a fixed rate of 7.13% and receive a floating interest rate during the
duration of the swap agreement. On November 30, 1999, as part of the merger and
recapitalization, O'Sullivan Industries terminated this swap incurring a loss of
$408,000. The loss has been included as a separate line item in the accompanying
consolidated statement of operations.

         SENIOR SUBORDINATED NOTES. The senior subordinated notes issued by
O'Sullivan Industries totaling $100.0 million bear interest at the rate of
13.375% per annum and are due in 2009. The notes were sold at 98.046% of their
face value. Interest is payable semiannually on April 15 and October 15. The
senior subordinated notes contain various covenants including restrictions on
additional indebtedness based on EBITDA coverage. In connection with these
notes, O'Sullivan issued warrants to purchase 93,273 shares of O'Sullivan common
stock at an exercise price of $0.01 per share and 39,273 shares of O'Sullivan
Series B junior preferred stock at an exercise price of $0.01 per share. The
warrants were immediately exercisable and were recorded at their fair value of
$3.5 million. The notes were recorded net of discount, which consists of $2.0
million of original issue discount and $3.5 million of the original proceeds
allocated to the estimated fair value of the warrants and which have been
classified as paid-in capital in the accompanying consolidated balance sheet.

         SENIOR NOTE. The $17.6 million senior note, including accrued interest,
issued by O'Sullivan bears interest at the rate of 12.0% per annum, compounding
semiannually, and principal and interest are due in 2009. In connection with
this note, O'Sullivan issued warrants to purchase 93,273 shares of O'Sullivan's
common stock at an exercise price of $0.01 per share and 39,273 shares of
O'Sullivan's Series B junior preferred stock at an exercise price of $0.01 per
share. The note was recorded net of discount of $3.5 million, which represents
the estimated fair value of the warrants. Accordingly, this amount has been
recognized as additional paid-in capital in the accompanying consolidated
balance sheet.

         The original issue discount and the warrants are amortized over the
life of the notes using the effective interest rate method. Expenses related to
the issuance of the debt financing were approximately $13.0 million and have
been capitalized and recorded as other assets. Of this amount, $1.0 million was
paid to BRS.

         REPAYMENT OF PRIVATE PLACEMENT NOTES. O'Sullivan repaid private
placement notes held with a principal amount of $16.0 million for $16.5 million
on November 30, 1999. The $476,000 prepayment fee has been recognized as a
$305,000 extraordinary loss, net of the related tax benefit.

NOTE 11 - MANDATORILY REDEEMABLE PREFERRED STOCK.


                                       39
<PAGE>   41

         As part of the recapitalization and merger, O'Sullivan issued shares of
senior preferred stock, par value $0.01 per share, to the stockholders of
O'Sullivan as partial consideration for their shares of common stock. The senior
preferred stock has a liquidation preference of $1.50 per share. Dividends
accrue at a rate of 12% per annum, compounding semiannually if unpaid. The
liquidation value plus accumulated dividends on June 30, 2001 was $29.6 million.
The senior preferred stock may be redeemed by O'Sullivan at any time and must be
redeemed on November 30, 2011, or earlier in the event of a change in control of
O'Sullivan.

         The carrying amount of the senior preferred stock is based upon the
fair market value of the senior preferred stock on November 30, 1999 plus
accretion to June 30, 2001.

NOTE 12 - JUNIOR PREFERRED STOCK.

         As part of the recapitalization and merger, O'Sullivan issued
515,681.33 shares of Series B junior preferred stock, par value $0.01 per share,
to BRS and the management participants in the recapitalization and merger.
Consideration paid for these consisted of cash and shares of O'Sullivan common
stock. Dividends accrue at a rate of 14% per annum, compounding semiannually if
unpaid. The liquidation value plus accumulated dividends on June 30, 2001 was
$65.4 million, which is the carrying amount for the stock on the accompanying
balance sheet. The junior preferred stock may be redeemed by O'Sullivan at any
time, but there is no mandatory redemption date for the Series B junior
preferred stock.

NOTE 13 - INCOME TAXES.

The income tax provision consists of the following:

<TABLE>
<CAPTION>

                                                     For the year ended June 30,
                                            -------------------------------------------
                                               2001             2000            1999
                                            ----------      -----------     -----------
                                                           (in thousands)
<S>                                       <C>             <C>             <C>
Current:
    Federal                                 $     (210)     $     5,511     $    10,890
    State                                           17               79             529
                                            ----------      -----------     -----------
                                                  (193)           5,590          11,419
Deferred                                        (4,028)            (540)            481
                                            ----------      -----------     -----------
                                            $   (4,221)     $     5,050     $    11,900
                                            ==========      ===========     ===========
</TABLE>

The following table reconciles O'Sullivan's federal corporate statutory rate and
its effective income tax rate:

<TABLE>
<CAPTION>

                                                     For the year ended June 30,
                                            -------------------------------------------
                                               2001             2000            1999
                                            ----------      -----------     -----------
<S>                                       <C>              <C>             <C>
Statutory rate                                    35.0%            35.0%           35.0%
State income taxes, net of federal benefit        (1.6)             1.6             1.6
Goodwill amortization                              2.5             14.2             1.1
Merger related expenses                              -            173.5               -
Other, net                                        (0.9)             6.4            (1.7)
                                            ----------      -----------     -----------
Effective tax rate                                35.0%           230.0%           36.0%
                                            ==========      ===========     ===========
</TABLE>


                                       40
<PAGE>   42

Deferred tax assets and liabilities consist of the following:

<TABLE>
<CAPTION>

                                                                                             June 30,
                                                                                    -----------------------------
                                                                                      2001               2000
                                                                                    ---------        ------------
                                                                                         (in thousands)
<S>                                                                               <C>              <C>
Deferred tax assets:

Allowance for doubtful accounts                                                     $   1,757        $      1,145
Insurance liabilities                                                                     564                 613
Accrued compensation                                                                    3,149               2,827
Inventories                                                                               286                   -
Other                                                                                     240                 297
                                                                                    ---------        ------------
   Total deferred tax assets                                                            5,996               4,882
                                                                                    ---------        ------------
Deferred tax liabilities:
Depreciation and amortization                                                         (14,808)            (17,721)
Other                                                                                    (573)               (584)
                                                                                    ---------        ------------
   Total deferred tax liabilities                                                     (15,381)            (18,305)
                                                                                    ---------        ------------
      Net deferred tax liability                                                    $  (9,385)       $    (13,423)
                                                                                    =========        ============

Reported as:
Current assets (included in prepaid expenses and other current assets)              $   5,336        $      4,203
Noncurrent liabilities-deferred income taxes                                          (14,721)            (17,626)
                                                                                    ---------        ------------
      Net deferred tax liability                                                    $  (9,385)       $    (13,423)
                                                                                    =========        ============

</TABLE>

         In connection with the 1994 initial public offering of O'Sullivan's
common stock, RadioShack Corporation, TE Electronics Inc. and O'Sullivan entered
into a Tax Sharing and Tax Benefit Reimbursement Agreement. Pursuant to the tax
agreement, RadioShack is primarily responsible for all U.S. federal income
taxes, state income taxes and foreign income taxes with respect to O'Sullivan
for all periods ending on or prior to the date of consummation of the offering
and for audit adjustments to such federal income and foreign income taxes.
O'Sullivan is responsible for all other taxes owing with respect to O'Sullivan,
including audit adjustments to state and local income and for franchise taxes.

         O'Sullivan and RadioShack made an election under Sections 338(g) and
338(h)(10) of the Internal Revenue Code with the effect that the tax basis of
O'Sullivan's assets was increased to the deemed purchase price of the assets. An
amount equal to such increase was included in income in the consolidated federal
income tax return filed by RadioShack. This additional tax basis results in
increased income tax deductions and, accordingly, reduced income taxes payable
by O'Sullivan. Pursuant to the tax agreement, O'Sullivan pays RadioShack nearly
all of the federal tax benefit expected to be realized with respect to such
additional basis. Amounts payable to RadioShack pursuant to the tax agreement
are recorded as current federal income tax expense in the accompanying
consolidated statements of operations. Income tax expense thus approximates the
amount which would be recognized by O'Sullivan in the absence of the tax
agreement. Although the amount of the payment required to be made in a
particular year under the tax agreement may differ somewhat from the difference
in that tax year between O'Sullivan's actual taxes and the taxes that O'Sullivan
would have owed had the increase in basis not occurred, the aggregate amount of
payments required to be made by O'Sullivan to RadioShack over the life of the
tax agreement will not differ materially from the difference over the life of
the tax agreement between O'Sullivan's actual taxes and the amount of taxes that
O'Sullivan would have owed had the increase in basis not occurred. Consequently,
such payments should have no effect on O'Sullivan's earnings and should not have
a material effect on its cash flow. The tax agreement provides for adjustments
to the amount of tax benefit payable in the event of certain material
transactions, such as a business combination or significant disposition of
assets. During fiscal 2001, 2000 and 1999, $ 0, $4.3 million and $9.7 million,
respectively, were paid to RadioShack pursuant to this agreement. See note 19.



                                       41
<PAGE>   43
NOTE 14 - STOCK OPTIONS.

         In connection with the recapitalization and merger of O'Sullivan, all
outstanding options issued by O'Sullivan were either converted into options to
purchase shares of O'Sullivan Series A junior preferred stock or exchanged for
shares of O'Sullivan's senior preferred stock and a cash payment equal to the
difference between $16.75 and the exercise price of the option times the number
of option shares. As a result, all of the outstanding options under O'Sullivan's
Amended and Restated 1994 Incentive Stock Plan were converted or exchanged. In
fiscal 2000, O'Sullivan recognized compensation expense of $10.6 million in
connection with the conversion and exchange of the stock options, which has been
shown as a separate line item on the accompanying consolidated statement of
operations.

         In January 2000, O'Sullivan adopted its 2000 Common Stock Option Plan.
Pursuant to this plan, O'Sullivan may issue up to 81,818 shares of O'Sullivan
common stock to employees of O'Sullivan. The exercise price for shares issued
under the plan is equal to the fair market value on the date of grant. Options
issued pursuant to the plan will vest in five annual installments if certain
performance targets are met; otherwise, the options will vest in seven years
from their date of grant or one day prior to their expiration. On June 19, 2000,
the compensation committee granted options to purchase 75,800 shares of common
stock at an exercise price of $1.90 per share, which was the estimated fair
value of the underlying common stock at the date of grant. The expiration date
of these options is November 30, 2009. Twenty percent of these options were
exercisable at June 30, 2001.

                   Summary of Common Stock Option Transactions
                          (share amounts in thousands)

<TABLE>
<CAPTION>

                                           June 30, 2001         June 30, 2000            June 30, 1999
                                       --------------------   -------------------     --------------------
                                                   Weighted              Weighted                 Weighted
                                                    Average               Average                  Average
                                                   Exercise              Exercise                 Exercise
                                       Shares        Price    Shares       Price      Shares        Price
                                       ------      --------   ------     --------     ------      --------
<S>                                  <C>          <C>       <C>         <C>         <C>         <C>
Outstanding at beginning of year           76        $1.90     1,593       $9.84       1,544       $ 9.77
Grants                                      1         1.90        86        3.50          91        10.60
Exercised                                   -                    (42)       8.68         (14)        7.23
Converted into Series A junior
  preferred stock options                   -                   (828)      10.97           -            -
Extinguished and exchanged for
  senior preferred stock and cash           -                   (725)       8.66           -
Canceled                                   (1)        1.90        (8)      12.94         (28)       10.00
                                       ------                 ------                  ------
Outstanding at end of year                 76         1.90        76        1.90       1,593         9.84
                                       ======                 ======                  ======
Exercisable at end of year                 15         1.90         -                     928         8.82
                                       ======                 ======                  ======
Weighted average fair value of
  options granted during the year                    $0.43                 $0.53                   $ 5.38
                                                     =====                 =====                   ======
</TABLE>

         In the merger, O'Sullivan issued options to purchase 60,318.67 shares
of its Series A junior preferred stock, par value $0.01 per share, in exchange
for certain options held by management participants in the buyout. All of these
options are currently vested and exercisable and expire on December 31, 2025.
The agreements for the options to purchase O'Sullivan's Series A junior
preferred stock provide for a special accrual at the rate of 14% per annum on
the difference between the liquidation value of the stock ($150.00 per share)
and the exercise price of the option ($50.00 per share). The special accrual
accrues at the same time and in the same manner as would dividends on issued and
outstanding shares of O'Sullivan's Series A junior preferred stock. No amount is
payable until the exercise of the option, and payment is further subject to the
terms of any debt agreement of O'Sullivan. When made, payment of the special
accrual may be made in cash or by a reduction in the exercise price for the
option. The special accrual approximated $946,000 and $498,000 for fiscal 2001
and fiscal 2000, respectively, and is included in selling, marketing and
administrative expense in the accompanying consolidated statement of operations.

         O'Sullivan has adopted the disclosure-only provisions of SFAS 123.
Accordingly, no compensation cost has been recognized for options granted except
as mentioned above. Had compensation cost for O'Sullivan's stock option plans
been determined based on the fair value at the grant date for awards in fiscal
2001, 2000 and 1999 in


                                       42
<PAGE>   44

accordance with the provisions of SFAS 123, O'Sullivan's net income (loss) would
have been adjusted to the pro forma amounts indicated below (in thousands):

<TABLE>
<CAPTION>

                                                                 Year Ended June 30,
                                                      ----------------------------------------
                                                          2001         2000           1999
                                                      -----------     --------      ----------
<S>                                                 <C>             <C>           <C>
                                 Net income (loss)
                                 As reported          $    (7,938)    $ (3,165)     $   21,153
                                 Pro forma                 (7,942)       2,356          19,765
</TABLE>

         The fair value of each option on the date of grant is estimated using
the Black-Scholes option-pricing model based upon the following weighted average
assumptions:

<TABLE>
<CAPTION>

                                                              2001          2000         1999
                                                            --------     --------      --------
<S>                                                       <C>          <C>           <C>
              Risk-free interest rate                         5.09%        6.24%         5.10%
              Dividend yield                                  None         None          None
              Volatility factor                                0.1%         5.5%        42.57%
              Weighted average expected life (years)           5.0          3.6           6.0
</TABLE>

         For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period.

NOTE 15 - EMPLOYEE BENEFIT PLANS.

         O'Sullivan maintains a stock purchase program that is available to most
employees. The stock purchase program (the "SPP"), as amended, allows a maximum
employee contribution of 5%, while O'Sullivan's matching contribution is 25%,
40% or 50% of the employee's contribution, depending on the length of the
employee's participation in the program. Effective with the closing of the
recapitalization and merger the program was amended to invest contributions in a
broad-based mutual fund. The matching contributions to the stock purchase
program were $673,000, $685,000 and $700,000 in fiscal years 2001, 2000 and
1999, respectively.

         O'Sullivan also has a Savings and Profit Sharing Plan in which most
employees are eligible to participate. Under the savings or ss. 401(k) portion
of the plan, employees may contribute from 1% to 15% of their compensation
(subject to certain limitations imposed by the Internal Revenue Code), and
O'Sullivan makes matching contributions equal to 50% of the first 5% of eligible
employee contributions. Under the profit sharing portion of the plan, O'Sullivan
may contribute annually an amount determined by the Board of Directors. Employer
matching contributions vest immediately, while profit sharing contributions vest
100% when the employee has five years of service with O'Sullivan. For fiscal
2001, 2000 and 1999, O'Sullivan accrued approximately $0, $2.5 million and $2.5
million, respectively, for the profit sharing portion of the plan. The matching
contributions to the savings portion of the plan were $600,000, $750,000 and
$800,000 in fiscal year 2001, 2000 and 1999, respectively.

         Effective July 1, 1997, O'Sullivan implemented its Deferred
Compensation Plan. This plan is available to employees of O'Sullivan deemed to
be "highly compensated employees" pursuant to the Internal Revenue Code.
O'Sullivan makes certain matching and profit sharing accruals to the accounts of
participants. All amounts deferred or accrued under the terms of the plan
represent unsecured obligations of O'Sullivan to the participants. Matching and
profit sharing accruals under this plan were not material in fiscal 2001, 2000
or 1999.

NOTE 16 - TERMINATION PROTECTION AGREEMENTS.

         O'Sullivan has entered into Termination Protection Agreements with its
officers. These Termination Protection Agreements, all of which are
substantially similar, have initial terms of two years which automatically
extend to successive one-year periods unless terminated by either party. If the
employment of any of these officers is terminated, with certain exceptions,
within 24 months following a change in control, the officers are entitled to
receive certain cash payments, as well as the continuation of fringe benefits
for a period of up to twelve months. Additionally, all benefits under the
Savings and Profit Sharing Plan and the Deferred Compensation Plan vest, all
restrictions on any outstanding incentive awards or shares of restricted common
stock will lapse and such awards or shares will become fully vested, all
outstanding stock options will become fully vested and immediately exercisable,
and O'Sullivan will be required to purchase for cash, on demand made within 60
days following a change in control,


                                       43
<PAGE>   45

any shares of unrestricted common stock and options for shares at the then
current per-share fair market value. The agreements also provide one year of
outplacement services for the officer and that, if the officer moves more than
20 miles from his primary residence in order to accept permanent employment
within 36 months after leaving O'Sullivan, O'Sullivan will, upon request,
repurchase the officer's primary residence at a price determined in accordance
with the agreement.

         Under the Termination Protection Agreements, a "Change in Control" will
be deemed to have occurred if either (i) any person or group acquires beneficial
ownership of 15% of the voting securities of O'Sullivan; (ii) there is a change
in the composition of a majority of the board of directors within any two-year
period which is not approved by certain of the directors who were directors at
the beginning of the two-year period; (iii) the stockholders of O'Sullivan
approve a merger, consolidation or reorganization involving O'Sullivan; (iv)
there is a complete liquidation or reorganization involving O'Sullivan; or (v)
O'Sullivan enters into an agreement for the sale or other disposition of all or
substantially all of the assets of O'Sullivan.

NOTE 17 - STOCKHOLDER RIGHTS PLAN.

         O'Sullivan has adopted a Stockholder Rights Plan under which one right
(a "Right") was issued with respect to each share of common stock. Each Right
entitles the holder to purchase from O'Sullivan a unit consisting of one
one-thousandth of a share of Series A junior participating preferred stock at a
purchase price of $110 per Right, subject to adjustment in certain events.

         The Rights are currently attached to all certificates representing
outstanding shares of common stock, and separate certificates for the Rights
will be distributed only upon the occurrence of certain specified events. The
Rights will separate from the common stock and a "Distribution Date" will occur
upon the earlier of (i) ten days following a public announcement that a person
or group of affiliated or associated persons (an "Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership of 15% or more
of the outstanding shares of common stock, or (ii) ten business days (or such
later date as may be determined by O'Sullivan's Board of Directors before the
Distribution Date occurs) following the commencement of a tender offer or
exchange offer that would result in a person becoming an Acquiring Person.

         The Rights Plan was amended in March 1999 to change the Rights Agent
and to conform the plan to recent Delaware court decisions. The Rights are not
exercisable until the Distribution Date and will expire at the close of business
on February 1, 2004, unless earlier redeemed or exchanged by O'Sullivan. In the
merger agreement discussed in note 4 above, O'Sullivan amended the stockholder
rights plan so that OSI Acquisition, Inc. was not an Acquiring Person.

NOTE 18 - RELATED PARTY TRANSACTIONS.

         BRS provided various advisory services to O'Sullivan related to the
merger. These services included arranging and negotiating the financing of the
merger, arranging and structuring the transaction, planning O'Sullivan's capital
structure and related services. BRS received a transaction fee of $4.0 million
from O'Sullivan and expenses of $62,000 for these services. Of the $4.0 million
transaction fee, $3.0 million was recognized as a merger related expense by
O'Sullivan and $1.0 million was capitalized into loan fees at O'Sullivan
Industries.

         BRS also provided $15.0 million in financing pursuant to a securities
purchase agreement with O'Sullivan. BRS received a transaction fee of $300,000
in connection with this financing, which was capitalized into loan fees at
O'Sullivan. BRS later sold this note and the related warrants to an unrelated
third party which received the $300,000 transaction fee from BRS.

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

         The senior credit facility and the management services agreement both
contain certain restrictions on the payment of the management fee. The
management services agreement provides that no cash payment for the management
fee can be made unless the fixed charge coverage ratio for O'Sullivan's most
recently ended four full


                                       44
<PAGE>   46

fiscal quarters would have been at least 2.0 to 1.0. All fees and expenses under
the management services agreement are subordinated to the senior subordinated
notes.

         In September 2000, O'Sullivan paid BRS $682,000 under the management
services agreement, of which $266,000 was a prepayment of a portion of the
fiscal 2001 management fees. The management fee and other reimbursable costs of
$536,000 and $364,000 recognized during fiscal years 2001 and 2000,
respectively, are included in selling, marketing and administrative expense in
the accompanying consolidated statement of operations. The amounts due BRS at
June 30, 2001 and June 30, 2000 approximated $218,000 and $364,000,
respectively, are included in accrued liabilities on the accompanying
consolidated balance sheets.

         At June 30, 2001, O'Sullivan held two notes receivable with a balance
of approximately $322,000 from employees of O'Sullivan. O'Sullivan loaned the
employees money to purchase common stock and Series B junior preferred stock of
O'Sullivan in the recapitalization and merger. The notes bear interest at the
rate of 9% per annum and mature on November 30, 2009, or earlier if there is a
change of control and is with full recourse to the employees. The receivables
are recorded on the O'Sullivan balance sheet as a reduction in stockholders'
equity.

NOTE 19 - COMMITMENTS AND CONTINGENCIES.

         Leases. O'Sullivan leases warehouse space, computers and certain other
equipment under operating leases. As of June 30, 2001, minimum future lease
payments for all noncancellable lease agreements were as follows (in thousands):

<TABLE>
<S>                                                       <C>
                                           2002             $     1,381
                                           2003                   1,098
                                           2004                     804
                                           2005                     510
                                           2006                     316
                                           Thereafter                 0
                                                            -----------
                                           Total            $     4,109
                                                            ===========
</TABLE>

         Amounts incurred by O'Sullivan under operating leases (including
renewable monthly leases) were $1,868,000, $1,945,000 and $1,679,000 in fiscal
2001, 2000 and 1999, respectively.

         RadioShack Arbitration. On June 29, 1999, RadioShack Corporation
(formerly Tandy Corporation) filed a complaint against O'Sullivan in the
District Court of Texas in Tarrant County. The complaint relates to a potential
reduction in O'Sullivan's tax benefit payments to RadioShack that would result
from increased interest expense after the completion of the merger. RadioShack
claims that this reduction would violate the tax sharing and tax reimbursement
agreement. The complaint sought a court order compelling O'Sullivan to submit to
a dispute resolution process. Alternatively, the complaint sought a declaratory
judgment that after the merger O'Sullivan must continue to make tax-sharing
payments to RadioShack as if the merger had not occurred.

         On September 9, 1999, RadioShack filed a motion for summary judgment in
its lawsuit against O'Sullivan. On October 8, 1999, RadioShack's motion was
denied, as was all other relief sought by RadioShack, except that O'Sullivan
Holdings was directed to commence dispute resolution procedures before an
arbitrator, according to the terms of the tax sharing agreement. To support its
motion for summary judgment, RadioShack referred to a letter it received from
its independent outside auditors, PricewaterhouseCoopers LLP
("PricewaterhouseCoopers"). PricewaterhouseCoopers audits both RadioShack's
financial statements and O'Sullivan's financial statements. The
PricewaterhouseCoopers letter advised RadioShack on how PricewaterhouseCoopers
expected the tax sharing agreement would operate, if certain assumptions were
valid. On its face, the letter made clear that it was not expressing an
"opinion" on how the actual dispute between RadioShack and O'Sullivan would in
fact be resolved, and the letter addressed assumptions that
PricewaterhouseCoopers had been given by RadioShack.

         O'Sullivan's annual report to stockholders on SEC Form 10-K for the
year ended June 30, 1999 disclosed these facts, and expressed management's view,
based on an opinion of outside counsel, that RadioShack's position in its suit
was without merit. Because PricewaterhouseCoopers both wrote its letter to
RadioShack but did not object to the inclusion of management's view in the Form
10-K on the merits of RadioShack's lawsuit, the SEC Staff asked O'Sullivan to
clarify "whether PricewaterhouseCoopers has a reasonable basis to doubt
management's view that RadioShack's lawsuit has no merit." In management's view,
PricewaterhouseCoopers had a reasonable basis for its


                                       45
<PAGE>   47

acquiescence in the footnote disclosure in the Form 10-K that RadioShack's
position was without merit. First, O'Sullivan received an opinion from its
outside counsel that supports management's view that RadioShack's position in
the litigation was without merit. That opinion was made available to
PricewaterhouseCoopers in connection with its annual audit, and clearly supports
the decision not to object to the inclusion of that footnote in O'Sullivan's
financial statements. Second, PricewaterhouseCoopers also has advised O'Sullivan
that its letter was predicated on assumptions it now understands are not
relevant to the merger as actually structured, and therefore,
PricewaterhouseCoopers has reaffirmed that its original letter did not attempt
to offer an expert opinion to RadioShack on the merger or predict the actual
outcome of the litigation between RadioShack and O'Sullivan. Neither
PricewaterhouseCoopers nor O'Sullivan believe there is any inconsistency between
PricewaterhouseCoopers' original letter, and its non-objection to the inclusion
of that footnote disclosure in the Form 10-K. In light of
PricewaterhouseCoopers' response, the PricewaterhouseCoopers letter has no
relevance to the merger. At the SEC Staff's request, however, the discussion of
PricewaterhouseCoopers' letter is included in this note. Finally, the Staff
suggests that its concerns about this situation could be eliminated if
PricewaterhouseCoopers were to withdraw the letter to RadioShack. But, since the
letter is not an expert opinion on any pending matter, a position
PricewaterhouseCoopers has since reaffirmed to us, management does not believe
there is any reason for PricewaterhouseCoopers formally to withdraw its letter.

         O'Sullivan believes it is now, and expects to continue to be, in full
compliance with the tax sharing agreement. O'Sullivan believes that RadioShack's
position is without merit and intends to defend itself vigorously. If RadioShack
were to prevail, O'Sullivan's payments to RadioShack would be approximately
$12.7 million more than O'Sullivan currently anticipates for the period since
the closing of the recapitalization and merger through June 30, 2001. If
necessary, the increased payment obligation would be funded from cash on hand,
borrowing under the senior credit facility or other sources of capital, if
available. Payment of this amount, however, could cause O'Sullivan to be in
violation of one or more of the covenants under the senior credit facility. The
arbitration is scheduled to be heard in October 2001.

         Other Litigation. In addition, O'Sullivan Industries is a party to
various legal actions arising in the ordinary course of its business. O'Sullivan
does not believe that any such pending actions will have a material adverse
effect on its results of operations or financial position. O'Sullivan maintains
liability insurance at levels which it believes are adequate for its needs.

         Regulatory Matters. O'Sullivan's operations are subject to extensive
federal, state and local laws, regulations and ordinances relating to the
generation, storage, handling, emission, transportation and discharge of certain
materials, substances and waste into the environment. Permits are required for
certain of O'Sullivan's operations and are subject to revocation, modification
and renewal by governmental authorities. In general, compliance with air
emission regulations is not expected to have a material adverse effect on
O'Sullivan's business, results of operations or financial condition.

         O'Sullivan's manufacturing facilities ship waste product to various
disposal sites. O'Sullivan Industries has been designated as a potentially
responsible party under the Arkansas Remedial Action Trust Fund Act in
connection with the cost of cleaning up one site in Diaz, Arkansas and has
entered into a de minimis buyout agreement with certain other potentially
responsible parties, pursuant to which it has contributed $2,000 to date toward
cleanup costs. O'Sullivan believes that amounts it may be required to pay in the
future, if any, will be immaterial.

         Retirement Agreement. In October 1998, Mr. Daniel F. O'Sullivan,
Chairman of the Board of Directors and Chief Executive Officer, completed
negotiations of a retirement and consulting agreement with O'Sullivan contingent
upon the hiring of his successor. In May 1999, the original retirement agreement
was amended, removing the contingency relating to the hiring of his successor.
The retirement agreement contains noncompetition provisions. O'Sullivan agreed
to pay Mr. O'Sullivan $42,160 per month for 36 months after his retirement and
then to pay him $11,458 per month until he reaches age 65. Payments under Mr.
O'Sullivan's retirement and consulting agreement amount to an aggregate of $2.2
million. The initial value of the noncompetition asset which represents the
present value of the future payments to be paid pursuant to the agreement, and
the corresponding liability were $1.9 million. During this period, Mr.
O'Sullivan is required to provide consulting, marketing and promotional services
with respect to O'Sullivan's manufacturing activities and relations with major
customers, if requested by O'Sullivan from time to time. O'Sullivan will also
provide Mr. O'Sullivan with health insurance during the term of the agreement
and thereafter until he becomes eligible for Medicare and life insurance during
the term of the agreement.


                                       46
<PAGE>   48

         The present value of all future payments to Mr. O'Sullivan under this
agreement have been capitalized and recorded as an intangible asset associated
with the noncompetition provisions. The noncompetition asset is being amortized
on a straight line basis over the term of the agreement with Mr. O'Sullivan
commencing on March 31, 2000. The amortization period will be approximately 6.3
years.

         During fiscal 1999, O'Sullivan also recorded compensation expense equal
to the intrinsic value of Mr. O'Sullivan's outstanding options in conjunction
with the acceleration of the vesting of Mr. O'Sullivan's unvested options and
the extension of the exercise period for all of Mr. O'Sullivan's options. The
compensatory charge related to the options, combined with the associated legal
and other costs, approximated $235,000.

NOTE 20 - MAJOR CUSTOMERS.

         Sales to three customers exceeded 10% of gross sales. Sales to such
customers as a percentage of gross sales were:

<TABLE>
<CAPTION>

                                                          Year ended June 30,
                                                      ---------------------------
                                                       2001      2000       1999
                                                      ------    ------     ------
<S>                                                  <C>       <C>        <C>
                        Customer A                     18.8%     22.0%      21.4%
                        Customer B                     16.8%     18.2%      13.1%
                        Customer C                     10.7%     10.5%       9.1%
</TABLE>

NOTE 21 - QUARTERLY OPERATING RESULTS - UNAUDITED.

<TABLE>
<CAPTION>

                                                    (in thousands)
                               -----------------------------------------------------
                                               Fiscal 2001 (By Quarter)
                               -----------------------------------------------------
                                      1              2             3           4
                               ------------- -------------- ------------ -----------
<S>                            <C>               <C>         <C>           <C>
Net sales                        $ 90,519        $96,579      $101,145      87,427
Gross profit                       24,344         26,713        28,600      26,293
Net income (loss)                  (2,388)        (7,486)          979         957
</TABLE>

<TABLE>
<CAPTION>

                                                Fiscal 2000 (By Quarter)
                               -----------------------------------------------------
                                    1              2             3           4
                               ------------- -------------- ------------ -----------
<S>                           <C>            <C>            <C>         <C>
Net sales                        $101,992       $111,023       $116,686    $93,724
Gross profit                       29,761         33,806         33,954     27,517
Net income (loss)                   5,228        (12,103)         2,935        775
</TABLE>

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

        None

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The following sets forth certain information with respect to the
business experience of each Director of O'Sullivan during the past five years
and certain other directorships held by Director. References to service with
O'Sullivan in this section include service with O'Sullivan Industries.

CLASS I DIRECTORS--TERM EXPIRING 2003.

Chuck Carroll 52, became President and Chief Executive Officer of Goodman Global
Holdings, Inc., a manufacturer of air conditioning and heating equipment, in
September 2001 after serving for two years as President and Chief Executive
Officer of Goodman Global's Amana Appliances Division until its sale by Goodman
Global to Maytag. From 1993 to 1999, Mr. Carroll was President and Chief
Operating Officer and a director of Rubbermaid,


                                       47
<PAGE>   49

Inc. Mr. Carroll was appointed a Director of O'Sullivan Holdings, O'Sullivan
Industries and O'Sullivan - Virginia in July 2001.

Richard D. Davidson, 53, was promoted to President and Chief Executive Officer
of O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan Industries -
Virginia in January 2000. He was named President and Chief Operating Officer of
O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan Industries -Virginia
in July 1996. He was named a Director of O'Sullivan Industries and O'Sullivan
Industries - Virginia in July 1996 and of O'Sullivan Holdings in August 1996.

CLASS II DIRECTORS--TERM EXPIRING 2001.

Stephen F. Edwards, 38, was appointed a director of O'Sullivan Holdings,
O'Sullivan Industries and O'Sullivan Industries - Virginia in connection with
the merger. Mr. Edwards has been a principal of BRS since August 1995. Mr.
Edwards was an officer of Citicorp Venture Capital from 1993 through July 1995.
Mr. Edwards is a director of Town Sports International, Inc., Anvil Knitwear,
Inc., Unwired Pty. Ltd. and Champs Entertainment, Inc.

Harold O. Rosser, 52, was appointed a director of O'Sullivan Holdings,
O'Sullivan Industries and O'Sullivan Industries - Virginia in connection with
the merger. Mr. Rosser has been a principal of BRS since August 1995. Mr. Rosser
was an officer of Citicorp Venture Capital from 1987 through July 1995. He is a
director of California Pizza Kitchen, Inc., American Paper Group, Inc., Acapulco
Restaurants, Inc., Penhall International, Inc., ICM Equipment Company and Head &
Enquist. Mr. Rosser is also Chairman of the Board of Trustees of Hope Church in
Wilton, Connecticut.

CLASS III DIRECTORS--TERM EXPIRING 2002.

Daniel F. O'Sullivan, 60, was named President, Chief Executive Officer and a
Director of O'Sullivan Holdings in November 1993 and became Chairman of the
Board in December 1993. He relinquished the position of President of O'Sullivan
Holdings in July 1996 and resigned as Chief Executive Officer in October 1998.
He served as President of O'Sullivan Industries from 1986 until July 1996, and
was appointed Chairman of the Board and Chief Executive Officer in 1994. He also
served as Chairman of the Board and Chief Executive Officer of O'Sullivan
Industries - Virginia. Mr. O'Sullivan was employed by O'Sullivan from 1962 until
his retirement. Under the terms of his retirement and consulting agreement with
O'Sullivan Holdings, Mr. O'Sullivan retired as an executive of O'Sullivan
Holdings, O'Sullivan Industries and O'Sullivan Industries - Virginia effective
March 31, 2000. He remains as non-executive Chairman of the Board for each
company.

EXECUTIVE OFFICERS.

         O'Sullivan's executive officers, and their ages and positions with
O'Sullivan as of September 1, 2001, are as follows:

<TABLE>
<CAPTION>

NAME                                AGE    OFFICER    POSITION(S)
                                           SINCE(1)

<S>                                <C>     <C>       <C>
Richard D. Davidson                  53      1996     President and Chief Executive Officer and Director
Tyrone E. Riegel                     58      1969     Executive Vice President
Phillip J. Pacey                     36      1999     Senior Vice President and Chief Financial Officer
Thomas M. O'Sullivan, Jr.            46      1993     Senior Vice President-Sales
Michael P. O'Sullivan                42      1995     Senior Vice President-Marketing
Rowland H. Geddie, III               47      1993     Vice President, General Counsel and Secretary
E. Thomas Riegel                     57      1993     Vice President-Strategic Operations
James C. Hillman                     56      1973     Vice President-Human Resources
Tommy W. Thieman                     50      1999     Vice President-Manufacturing-Lamar
Stuart D. Schotte                    39      1999     Vice President-Supply Chain Management
</TABLE>

-------------
         (1) Includes officer positions held with O'Sullivan Industries

         Tyrone E. Riegel, has been Executive Vice President of O'Sullivan
Industries since July 1986 and served as a Director from March 1994 through
November 1999. He was appointed as Executive Vice President and a Director of
O'Sullivan Holdings in November 1993. His service as a director of O'Sullivan
Holdings ended


                                       48
<PAGE>   50

November 1999. Mr. Riegel also serves as Executive Vice President of O'Sullivan
Industries - Virginia. Mr. Riegel has been employed by O'Sullivan since January
1964.

         Phillip J. Pacey was promoted to Senior Vice President and Chief
Financial Officer of O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan
Industries - Virginia in January 2000. He was appointed Vice President-Finance
and Treasurer of O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan
Industries -Virginia in July 1999. From November 1995 until July 1999, he served
as Treasurer of O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan
Industries - Virginia.

         Thomas M. O'Sullivan, Jr. was promoted to Senior Vice President-Sales
of O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan Industries -
Virginia in January 2000. He had been Vice President-Sales of O'Sullivan
Holdings, O'Sullivan Industries and O'Sullivan Industries - Virginia, Inc. since
1993. Mr. O'Sullivan has been employed by O'Sullivan since June 1979.

         Rowland H. Geddie, III has been Vice President, General Counsel and
Secretary of O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan
Industries - Virginia since December 1993. He served as a Director of O'Sullivan
Industries and O'Sullivan Industries - Virginia from March 1994 through November
1999.

         E. Thomas Riegel has been Vice President-Strategic Operations of
O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan Industries - Virginia
since November 1995. From June 1993 until November 1995, he was Vice
President-Marketing of O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan
Industries - Virginia. Mr. Riegel has been employed by O'Sullivan since May
1971.

         James C. Hillman has been Vice President-Human Resources of O'Sullivan
Holdings since November 1993 and of O'Sullivan Industries since 1980. He also
serves as Vice President-Human Resources of O'Sullivan Industries - Virginia.
Mr. Hillman has been employed by O'Sullivan since May 1971.

         Michael P. O'Sullivan was named Senior Vice President-Marketing of
O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan Industries - Virginia
in January 2000. He had been Vice President-Marketing of O'Sullivan Holdings,
O'Sullivan Industries and O'Sullivan Industries - Virginia since November 1995.
He served as National Sales Manager of O'Sullivan Industries and O'Sullivan
Industries - Virginia from July 1993 until November 1995. Mr. O'Sullivan has
been employed by O'Sullivan since 1984.

         Tommy W. Thieman was appointed Vice President-Manufacturing-Lamar in
July 1999 for O'Sullivan Holdings and O'Sullivan Industries. Since 1987, he has
served as the Plant Manager in Lamar for O'Sullivan Industries. Mr. Thieman has
been employed by O'Sullivan since 1972.

         Stuart D. Schotte was appointed Vice President-Supply Chain Management
in July 1999 for O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan
Industries - Virginia. From February 1998 to July 1999, Mr. Schotte served as
Controller for O'Sullivan Holdings, O'Sullivan Industries and O'Sullivan
Industries - Virginia. From July 1996 until February 1998, Mr. Schotte served as
Director of Financial Analysis and Planning for Fast Food Merchandisers, Inc.

         CERTAIN RELATIONSHIPS. Daniel F. O'Sullivan, Thomas M. O'Sullivan, Jr.
and Michael P. O'Sullivan are brothers. Tommy W. Thieman is the brother-in-law
of Daniel F. O'Sullivan, Thomas M. O'Sullivan, Jr. and Michael P. O'Sullivan.
Tyrone E. Riegel and James C. Hillman were, prior to the deaths of their
respective spouses, brothers-in-law of Daniel F. O'Sullivan, Thomas M.
O'Sullivan, Jr. and Michael P. O'Sullivan. Tyrone E. Riegel and E. Thomas Riegel
are brothers.

ITEM 11.  EXECUTIVE COMPENSATION.

                           SUMMARY COMPENSATION TABLE

         The following table reflects the cash and non-cash compensation for the
chief executive officer of O'Sullivan, the four next most highly compensated
executive officers at June 30, 2001. Footnotes appear on the next page.


                                       49
<PAGE>   51
<TABLE>
<CAPTION>

                                                                                 LONG-TERM
                                               ANNUAL COMPENSATION(1)           COMPENSATION
                                            ----------------------------      ----------------
                                                                                 SECURITIES           ALL OTHER
                                 FISCAL          SALARY        BONUS          UNDERLYING STOCK       COMPENSATION
NAME AND PRINCIPAL POSITION       YEAR             ($)          ($)             OPTIONS (#)(2)          ($)(3)
<S>                             <C>            <C>          <C>              <C>                   <C>
Richard D. Davidson               2001           297,885      105,000                        -          49,896
President and                     2000           244,231      176,623                    8,500          45,984
Chief Executive Officer           1999           225,000      174,263                        -          37,104

Tyrone E. Riegel                  2001           212,885       53,300                        -          39,603
Executive Vice President          2000           204,616      109,586                    4,000          39,860
                                  1999           195,000      116,276                        -          35,009

Thomas M. O'Sullivan, Jr.         2001           159,423       40,000                        -          28,067
Senior Vice President-Sales       2000           144,423       66,005                    4,000          26,181
                                  1999           130,000       54,422                        -          24,222

Phillip J. Pacey                  2001           149,615       37,500                        -          24,970
Senior Vice President and         2000           123,808       59,074                    4,000          20,284
Chief Financial Officer           1999            93,808       28,253                    3,000           8,782

Michael P. O'Sullivan             2001           140,192       35,100                        -          25,876
Senior Vice President-Marketing   2000           134,423       61,473                    4,000          24,807
                                  1999           120,000       50,259                        -          20,627
</TABLE>

-------------
         (1) For the years shown, the named officers did not receive any annual
compensation not properly categorized as salary or bonus, except for certain
perquisites and other personal benefits. The amounts for perquisites and other
personal benefits for the named officers are not shown because the aggregate
amount of such compensation, if any, for each of the named officers during the
fiscal year shown does not exceed the lesser of $50,000 or 10% of total salary
and bonus reported for such officer.

         (2) Includes all options granted to the named officers during fiscal
years shown under O'Sullivan's 2000 Common Stock Option Plan and its Amended and
Restated 1994 Common Stock Option Plan. No stock appreciation rights were
granted with any options.

         (3) In fiscal 2001, other compensation for the named officers consisted
of the following:

<TABLE>
<CAPTION>

                                                                                                          DEFERRED
                                                                                     STOCK PURCHASE     COMPENSATION
                                                                       SPSP             PROGRAM         PLAN MATCHING
                                        GROUP LIFE                 MATCHING AND         ("SPP")              AND
                                         INSURANCE       AUTO      PROFIT SHARING      MATCHING         PROFIT SHARING
                     NAME                PREMIUMS     ALLOWANCE    CONTRIBUTIONS     CONTRIBUTIONS       CONTRIBUTIONS
<S>                                      <C>         <C>          <C>              <C>                <C>
        Richard D. Davidson               $ 2,016     $  9,000       $  10,003         $  11,863          $  16,588
        Tyrone E. Riegel                  $ 3,150     $  8,500       $  10,003         $   8,062          $  10,648
        Thomas M. O'Sullivan, Jr.         $   835     $  8,500       $  10,003         $   5,636          $   2,893
        Phillip J. Pacey                  $   330     $  8,500       $  10,003         $   5,217          $   1,217
        Michael P. O'Sullivan             $   363     $  8,500       $   9,965         $   5,042          $   2,007
</TABLE>

         The table does not include amounts payable in the event of a Change in
Control. See "Change in Control Protections".


                         OPTION GRANTS IN THE LAST YEAR

         During the fiscal year ended June 30, 2001, no options were granted to
the named officers.

                        OPTION EXERCISES IN THE LAST YEAR
                           AND YEAR-END OPTION VALUES


                                       50
<PAGE>   52

         No options were exercised by the named officers in fiscal 2001. The
following table summarizes information regarding outstanding options to purchase
stock held by the named officers as of June 30, 2001. All options to purchase
Series A junior preferred stock are vested.

<TABLE>
<CAPTION>

                                                                                          SERIES A JUNIOR PREFERRED
                                                  COMMON STOCK                                      STOCK
                              ------------------------------------------------------   --------------------------------
                                 OPTION       OPTION          VALUE OF       VALUE OF         OPTION         VALUE OF
                                 SHARES       SHARES        EXERCISABLE   UNEXERCISABLE       SHARES        EXERCISABLE
                              EXERCISABLE  UNEXERCISABLE     OPTIONS AT     OPTIONS AT      EXERCISABLE      OPTIONS AT
            NAME               AT 6/30/01    AT 6/30/01         6/30/01       6/30/01        AT 6/30/01        6/30/01
<S>                         <C>            <C>              <C>           <C>            <C>             <C>
Richard D. Davidson               1,700         6,800           $   -         $   -            10,929       $ 1,354,504
Tyrone E. Riegel                    800         3,200           $   -         $   -             3,378       $   418,605
Thomas M. O'Sullivan, Jr.           800         3,200           $   -         $   -             5,996       $   743,145
Phillip J. Pacey                    800         3,200           $   -         $   -             1,411       $   174,922
Michael P. O'Sullivan               800         3,200           $   -         $   -             6,176       $   765,406
</TABLE>

                          CHANGE IN CONTROL PROTECTIONS

         O'Sullivan has termination agreements with its executive officers. If
the employment of a protected employee is terminated by us within a period of up
to 24 months after a change in control, the employee will be entitled to receive
various benefits. The completion of the merger is a change of control for
purposes of these agreements. These benefits include:

    1.     a cash payment equal to the current base salary and highest bonus
           received in the previous three years;

    2.     a cash payment equal to the bonus earned by the employee in the year
           of termination, calculated on a pro rated basis on the date of
           termination;

    3.     a cash payment equal to accrued and unpaid vacation pay;

    4.     a cash payment for an automobile allowance of 12 months;

    5.     continued life and health insurance coverage for up to 12 months;

    6.     a lump sum payment, adjusted for taxes, to the employee in an amount
           equal to the protected employee's unvested profit sharing account in
           the Savings and Profit Sharing Plan;

    7.     a cash payment based on the amount that the protected employee would
           have received under our Deferred Compensation Plan had he continued
           to work for O'Sullivan until he attained the age of 65;

    8.     all outstanding stock options vest and become immediately
           exercisable;

    9.     O'Sullivan will be required to purchase for cash any shares of
           unrestricted common stock and options for shares at the fair market
           value;

    10.    one year of outplacement services;

    11.    for certain executive officers, if the protected employee moves more
           than 20 miles from his primary residence in order to accept permanent
           employment within 36 months after leaving O'Sullivan, we will
           repurchase employee's primary residence; and

    12.    if the executive officer is required to pay an excise tax under
           Section 4999 of the Internal Revenue code of 1986, we will pay the
           employee an additional amount to offset the effect of the tax.

         The agreements for certain executive officers also provide for cash
payments in lieu of matching payments under the Stock Purchase Program and the
Savings and Profit Sharing Plan. The agreements for certain executive officers
also provide that, in some circumstances, they may voluntarily leave our
employment after a change in control and receive the benefits under the
protection agreements. These circumstances include:


                                       51
<PAGE>   53

    -      an adverse change in the executive's status, title or duties;

    -      a reduction in the executive's salary or bonus;

    -      relocation of the executive's office to a site which is more than 20
           miles from its present location;

    -      a reduction in the executive's benefit levels;

    -      the insolvency or bankruptcy of O'Sullivan; or

    -      the executive leaves the employment of O'Sullivan for any reason
           during the 60-day period beginning on the first anniversary of the
           change in control

         However, for purposes of the recapitalization and merger, each of the
executive officers waived his right to receive benefits under the protection
agreements in these circumstances, other than a reduction in his salary or
bonus.

         The table below sets forth the total payments that may be received by
each of the named officers if these persons are terminated during fiscal 2002,
assuming the provisions of his Termination Protection Agreement were applicable.
The values of non-cash benefits have been included on the basis of their
estimated fair value. These amounts do not include any payments to be received
for shares of O'Sullivan stock or options to acquire O'Sullivan stock. These
amounts also do not include payments which we would make to offset the effect of
excise taxes or to purchase any officer's home. We have assumed for this purpose
that the named officers are terminated on September 30, 2001.

<TABLE>
<CAPTION>

         OFFICER                                                            AMOUNT
         -------                                                            ------
<S>                                                                      <C>
Richard D. Davidson....................................................... $659,704
      President and Chief Executive Officer
Tyrone E. Riegel.......................................................... $470,166
      Executive Vice President
Thomas M. O'Sullivan, Jr.................................................. $317,931
      Senior Vice President-Sales
Phillip J. Pacey Jr....................................................... $293,109
      Senior Vice President and Chief Financial Officer
Michael P. O'Sullivan..................................................... $287,345
      Senior Vice President-Marketing
</TABLE>

                        COMPENSATION COMMITTEE INTERLOCKS
                            AND INSIDER PARTICIPATION

      The members of the Compensation Committee are Stephen F. Edwards and
Harold O. Rosser. No member of the Compensation Committee was an officer or
employee of O'Sullivan or its subsidiaries during the fiscal year ended June 30,
2001. Neither was formerly an officer of O'Sullivan or any of its subsidiaries.
In addition, no executive officer of O'Sullivan serves on the board of directors
or the compensation committee of another entity where a committee member is
employed.

                             DIRECTORS' COMPENSATION

      Directors of O'Sullivan who are not employees of O'Sullivan or its
subsidiaries or of BRS are paid $2,500 per meeting (with all meetings that occur
on the same day being considered as one meeting). The chairmen of the
compensation committee and the audit committee each receive an additional $1,000
per year if not employed by BRS. Expenses of attendance at meetings are paid by
O'Sullivan. Directors who are not employees of O'Sullivan or BRS will also
receive an option to purchase shares of common stock of O'Sullivan. Employees of
O'Sullivan do not receive additional compensation for their service as a
director other than payment of expenses, if any, to attend a meeting.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

      Under the securities laws of the United States, O'Sullivan Holdings'
directors, executives and any persons holding 10% or more of Common Stock are
required to report their ownership of O'Sullivan Holdings' securities and any
change in that ownership to the Securities and Exchange Commission. Specific due
dates for these reports have been established and we are required to report in
this report any failure to file by these dates during the fiscal


                                       52
<PAGE>   54
year ended June 30, 2001. All of these filing requirements were satisfied by our
directors and executives during fiscal 2001.

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

      The following table sets forth, as of September 15, 2001, certain
information with respect to the beneficial ownership of the securities of
O'Sullivan Holdings by (i) each of our directors, (ii) each of the named
executives, (iii) our executives and directors as a group and (iv) the only
other owner of five percent of any class of O'Sullivan Holdings' equity
securities known to us.

<TABLE>
<CAPTION>

                                                                                         OPTIONS TO
                                                                                          PURCHASE
                                                                                          SHARES OF       SHARES OF
                                                           PERCENTAGE      SHARES OF       SERIES A        SERIES B
                                        SHARES OF             OF            SENIOR          JUNIOR          JUNIOR
                                         COMMON             COMMON         PREFERRED       PREFERRED       PREFERRED
       NAME OF BENEFICIAL OWNER          STOCK               STOCK          STOCK           STOCK           STOCK
                                        ---------          ----------      ---------     -----------      ----------
<S>                                  <C>                 <C>            <C>              <C>            <C>
BRS(1)                                  995,002(2)           72.33%                -               -         442,233

Daniel F. O'Sullivan                      9,972               0.73%          197,681           4,432               -

Richard D. Davidson                      83,249(3)            6.08%           14,819          10,929          20,839

Tyrone E. Riegel                         22,065(4)            1.61%          101,939           3,378           3,644

Thomas M. O'Sullivan, Jr.                34,951(4)            2.55%           17,864           5,996           6,561

Phillip J. Pacey                         12,549(4)            0.92%           29,676           1,411           1,722

Michael P. O'Sullivan                    32,105(4)            2.35%           32,380           6,176           5,117

Directors and executive officers
as a group (14 persons)               1,288,177(5)           94.10%          419,343          52,138         496,462

BancBoston Investments, Inc.             93,273(6)            6.38%                -               -          39,273(6)
</TABLE>

-----------

         (1) The principals of BRS's general partner are Bruce C. Bruckmann,
Harold O. Rosser, Stephen C. Sherrill, Stephen F. Edwards, Thomas J. Baldwin and
Paul D. Kaminsky, each of whom could be deemed to beneficially own the shares of
O'Sullivan Holdings held by BRS.

         (2) Consists of 989,617 shares held by BRS and 5,385 shares held by
BRS's general partner, all of which may be deemed to be beneficially owned by
Stephen F. Edwards and Harold O. Rosser, Directors of O'Sullivan.

         (3) Includes 1,700 shares purchasable upon the exercise of options.

         (4) Includes 600 shares purchasable upon the exercise of options.

         (5) Includes 995,002 shares held by BRS and its general partner and
7,900 shares purchasable upon the exercise of options.

         (6) Banc Boston Investments, Inc. holds warrants to purchase these
shares.


                                       53
<PAGE>   55

        Each management participant has a business address at 1900 Gulf Street,
Lamar, Missouri 64759-1899. BRS' address is 126 East 56th Street, 29th Floor,
New York, New York 10022. BancBoston Investments, Inc.'s address is 175 Federal
Street, 10th Floor, Boston, Massachusetts 02110. BancBoston Investments, Inc. is
a subsidiary of Fleet Boston Financial Corporation, a publicly held corporation.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         During fiscal 2001, Casey O'Sullivan, a son of Daniel F. O'Sullivan,
worked as a salesman for Bennett Packaging, which provides O'Sullivan corrugated
boxes for its products. Bennett Packaging has long been one of O'Sullivan's
suppliers; O'Sullivan paid Bennett $4.5 million during fiscal 2001. O'Sullivan
has followed the practice of awarding purchase orders for cartons for a model to
the lowest bidder for the carton.

BRS TRANSACTION FEES

         BRS provided various advisory services to us related to the
recapitalization and merger. These services included arranging and negotiating
the financing of the recapitalization and merger, arranging and structuring the
transaction, including forming OSI, planning its capital structure, planning our
capital structure and related services. For these services, BRS received a
transaction fee of $4.0 million plus $62,000 in expenses upon completion of the
recapitalization and merger.

         BRS also provided $15.0 million of financing pursuant to a securities
purchase agreement with O'Sullivan Holdings. BRS received a transaction fee of
$300,000 in connection with its provision of this financing. BRS subsequently
sold the securities it acquired under this agreement to BancBoston Investments,
Inc.

BRS MANAGEMENT SERVICES AGREEMENT

         In connection with the merger, O'Sullivan Industries entered into a
management services agreement with BRS. Under the terms of this agreement, BRS
provides:

         -   general management services;
         -   assistance with the negotiation and analysis of financial
             alternatives; and
         -   other services agreed upon by BRS.

In exchange for these services, BRS will earn an annual fee equal to the greater
of:

         -   1.0% of O'Sullivan Industries' annual consolidated cash flow (as
             defined in the indenture related to the O'Sullivan Industries
             senior subordinated notes); or
         -   $300,000.

         In addition to certain restrictions on the payment of the management
fee contained in the senior credit facility, the management services agreement
contains certain restrictions on the payment of that fee. The management
services agreement, among other things, provides that no cash payment of the
management fee will be made unless the Fixed Charge Coverage Ratio for our most
recently ended four full fiscal quarters for which internal financial statements
are available to management immediately preceding the date when the management
fee is to be paid is at least 2.0 to 1. The management services agreement also
provides that the payment of all fees and other obligations under the management
services agreement will be subordinated to the prior payment in full in cash of
all interest, principal and other obligations on O'Sullivan Industries' senior
subordinated notes in the event of a bankruptcy, liquidation or winding-up of
O'Sullivan Industries.

         Pursuant to the management services agreement, O'Sullivan paid BRS
$682,000 in September 2000 for all of the fiscal 2000 fees and expenses and a
portion of the fiscal 2001 fee.

SEVERANCE AGREEMENTS

         In October 1998, O'Sullivan Holdings entered into a Retirement and
Consulting Agreement, Release and Waiver of Claims with Daniel F. O'Sullivan.
Under the retirement agreement, as amended in May 1999, Mr. O'Sullivan resigned
as Chief Executive Officer in October 1998 and retired as an executive on March
31, 2000. O'Sullivan Holdings agreed to pay Mr. O'Sullivan $42,160 per month for
36 months after his retirement and then to



                                       54
<PAGE>   56

pay him $11,458 per month until he reaches age 65. Payments under Mr.
O'Sullivan's retirement and consulting agreement amount to an aggregate of $2.2
million and a present value of approximately $1.9 million. During this period,
Mr. O'Sullivan is required to provide consulting, marketing and promotional
services with respect to our manufacturing activities and relations with major
customers, if requested by us, from time to time. Mr. O'Sullivan has agreed not
to compete with us during the period he is a consultant. O'Sullivan Holdings
will also provide Mr. O'Sullivan with health insurance during the term of the
agreement and thereafter until he becomes eligible for Medicare and life
insurance during the term of the agreement.

                                     PART IV

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

(a)(1)   Financial Statements

         The following consolidated statements of O'Sullivan Industries
Holdings, Inc. and subsidiaries are filed as part of this report:

<TABLE>

<S>                                                                                                                <C>
         Report of Independent Accountants........................................................................    29
         Consolidated Balance Sheets as of June 30, 2001 and 2000.................................................    30
         Consolidated Statements of Operations for each of the three years in the period ended June 30, 2001......    31
         Consolidated Statements of Cash Flows for each of the three years in the period ended June 30, 2001......    32
         Consolidated  Statements of Changes in Stockholders' Equity (Deficit) for each of the three years in the
         period ended June 30, 2001...............................................................................    33
         Notes to Consolidated Financial Statements...............................................................    34
</TABLE>

(a)(2)   Financial Statements Schedules

         Schedules have been omitted because they are not required or are not
applicable or the information required to be set forth therein either is not
material or is included in the financial statements or notes thereto.

(a)(3)   Exhibits:

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

(b)      Reports on Form 8-K

         None


                                       55
<PAGE>   57
                                   SIGNATURES

         Pursuant to the requirements of Sections 13 and 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 28th day of
September, 2001.

                                         O'SULLIVAN  INDUSTRIES  HOLDINGS, INC.

                                         By       /s/ Richard D. Davidson
                                           -------------------------------------
                                                      Richard D. Davidson
                                           President and Chief Executive Officer

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

<TABLE>

<S>                                 <C>                                         <C>
   /s/ Daniel F. O'Sullivan                  Chairman of the Board                 September 28, 2001
----------------------------------
       Daniel F. O'Sullivan

   /s/ Richard D. Davidson            President and Chief Executive Officer
----------------------------------                   and Director                  September 28, 2001
       Richard D. Davidson                 (Principal Executive Officer)


   /s/ Phillip J. Pacey                        Senior Vice President and
----------------------------------              Chief Financial Officer            September 28, 2001
       Phillip J. Pacey             (Principal Financial and Accounting Officer)

   /s/ Charles Carroll                                 Director                    September 28, 2001
----------------------------------
       Charles Carroll

   /s/ Stephen F. Edwards                              Director                    September 28, 2001
----------------------------------
       Stephen F. Edwards

   /s/ Harold O. Rosser                                Director                    September 28, 2001
----------------------------------
       Harold O. Rosser
</TABLE>


                                       56
<PAGE>   58

                                INDEX TO EXHIBITS


EXHIBIT                                                                   PAGE
  NO.                        DESCRIPTION                                   NO.

  2.1      Amended and Restated Agreement of Merger dated as of
           October 18, 1999 by and among OSI Acquisition, Inc. and
           O'Sullivan Holdings (incorporated by reference to Appendix
           A to Proxy Statement /Prospectus included in Registration
           Statement on Form S-4 (File No. 333-81631))

  3.1 &    Amended and Restated Certificate of Incorporation of
  4.1      O'Sullivan Holdings (incorporated by reference to Exhibit
           2.4(a) to Appendix A to Proxy Statement /Prospectus
           included in Registration Statement on Form S-4 (File No.
           333-81631))

  3.2 &    By-laws of O'Sullivan Holdings (incorporated by reference
  4.2      to Exhibit 3.2 to Registration Statement on Form S-1 (File
           No. 33-72120))

  4.3      Indenture dated as of November 30, 1999 by and among
           O'Sullivan Industries, O'Sullivan Industries - Virginia as
           Guarantor and the Norwest Bank of Minnesota, National
           Association, as Trustee (incorporated by reference to
           Exhibit 4.4 to Quarterly Report on Form 10-Q of O'Sullivan
           Holdings for the quarter ended December 31, 1999 (File No.
           0-28493))

  4.4      Warrant Agreement dated as of November 30, 1999 between
           O'Sullivan Holdings and Norwest Bank Minnesota, National
           Association, as Warrant Agent, relating to warrants to
           purchase 39,273 shares of O'Sullivan Holdings Series B
           junior preferred stock, including form of warrant
           certificate (incorporated by reference to Exhibit 4.5 to
           Quarterly Report Form 10-Q of O'Sullivan Holdings for the
           quarter ended December 31, 1999 (File No. 0-28493))

  4.5      Warrant Agreement dated as of November 30, 1999 between
           O'Sullivan Holdings and Norwest Bank Minnesota, National
           Association, as Warrant Agent, relating to warrants to
           purchase 93,273 shares of O'Sullivan Holdings common stock,
           including form of warrant certificate (incorporated by
           reference to Exhibit 4.6 to Quarterly Report Form 10-Q of
           O'Sullivan Holdings for the quarter ended December 31, 1999
           (File No. 0-28493))

  4.6      Amended and Restated Warrant Agreement dated as of January
           31, 2000 between O'Sullivan Holdings and the holder thereof
           relating to warrants to purchase 39,273 shares of
           O'Sullivan Holdings Series B junior preferred stock,
           including form of warrant certificate (incorporated by
           reference to Exhibit 4.7 to Quarterly Report Form 10-Q of
           O'Sullivan Holdings for the quarter ended December 31, 1999
           (File No. 0-28493))

  4.7      Amended and Restated Warrant Agreement dated as of January
           31, 2000 between O'Sullivan Industries Holdings, Inc. and
           the holder thereof relating to warrants to purchase 93,273
           shares of O'Sullivan Industries Holdings, Inc. common
           stock, including form of warrant certificate (incorporated
           by reference to Exhibit 4.8 to Quarterly Report Form 10-Q
           of O'Sullivan Industries Holdings, Inc. for the quarter
           ended December 31, 1999 (File No. 0-28493))

  9        Stockholders Agreement dated November 30, 1999 by and among
           O'Sullivan Holdings, Bruckmann, Rosser, Sherrill & Co. II
           L.P., each of the persons executing and investor or
           executive signature page thereto and each of the warrant
           holders executing a warrant holder signature page attached
           thereto and such other persons acquiring a warrant after
           the date thereof (incorporated by reference to Exhibit 10.5
           to Quarterly Report Form 10-Q of O'Sullivan Holdings for
           the quarter ended December 31, 1999 (File No. 0-28493))


                                  57
<PAGE>   59
EXHIBIT                                                                   PAGE
  NO.                        DESCRIPTION                                   NO.

 10.1      Debt Registration Rights Agreement dated as of November 30,
           1999 by and among O'Sullivan Industries, Lehman Brothers
           and O'Sullivan Industries - Virginia as guarantor
           (incorporated by reference to Exhibit 10.1 to Registration
           Statement on Form S-4 (File No. 333-31282))

*10.2      Stock Purchase Agreement dated as of November 30, 1999 by
           and among Bruckmann, Rosser, Sherrill & Co. II, L.P. and
           the individuals whose names appear on the signature pages
           attached thereto (incorporated by reference to Exhibit 10.2
           to Registration Statement on Form S-4 (File No. 333-31282))

 10.3      Unit Agreement dated as of November 30, 1999 by and among
           O'Sullivan Industries, O'Sullivan Holdings, O'Sullivan
           Industries - Virginia and Norwest Bank of Minnesota,
           National Association (incorporated by reference to Exhibit
           10.3 to Registration Statement on Form S-4 (File No.
           333-31282))

 10.4      Credit Agreement dated as of November 30, 1999 by and among
           O'Sullivan Industries, O'Sullivan Holdings, Lehman Brothers
           Inc. and Lehman Commercial Paper, Inc. (incorporated by
           reference to Exhibit 10.1 to Quarterly Report on Form 10-Q
           of O'Sullivan Holdings for the quarter ended December 31,
           1999 (File No. 0-02843))

 10.4a     First Amendment to Credit Agreement, effective as of
           November 30, 1999 (incorporated by reference to Exhibit
           10.4a to Amendment No. 2 to Registration Statement on Form
           S-4 (File No. 333-31282))

 10.4b     Second Amendment to Credit Agreement dated as of January
           25, 2001 (incorporated by reference to Exhibit 10.1 to
           Quarterly Report on Form 10-Q for the quarter ended
           December 31, 2000 (File No. 0-28493))

 10.5      Deed of Trust, Assignment of Leases and Rents, Security
           Agreement and Fixture Filing dated as of November 30, 1999
           from O'Sullivan Industries to the trustee named therein for
           the benefit of Lehman Brothers Inc., Lehman Commercial
           Paper, Inc. and the several lenders and financial
           institutions which become parties thereto from time to time
           (incorporated by reference to Exhibit 10.5 to Registration
           Statement on Form S-4 (File No. 333-31282))

 10.6      Guarantee and Collateral Agreement dated as of November 30,
           1999 by and among O'Sullivan Industries, O'Sullivan
           Holdings, O'Sullivan Industries - Virginia, and Lehman
           Commercial Paper, Inc. (incorporated by reference to
           Exhibit 10.6 to Registration Statement on Form S-4 (File
           No. 333-31282))

 10.7      Intellectual Property Security Agreement dated as of
           November 30, 1999 by and among O'Sullivan Industries and
           Lehman Commercial Paper, Inc. (incorporated by reference to
           Exhibit 10.7 to Registration Statement on Form S-4 (File
           No. 333-31282))

 10.8      Intercompany Subordinated Demand Promissory Note dated as
           of November 30, 1999 by and among O'Sullivan Industries and
           O'Sullivan Industries - Virginia (incorporated by reference
           to Exhibit 10.8 to Registration Statement on Form S-4 (File
           No. 333-31282))

*10.9      Management Stock Agreement dated November 30, 1999 by and
           among O'Sullivan Holdings, Bruckmann, Rosser, Sherrill &
           Co. II, L.P., and the individuals whose signatures appear
           on the signature pages thereto (incorporated by reference
           to Exhibit 10.7 to Quarterly Report on Form 10-Q of
           O'Sullivan Holdings for the quarter ended December 31, 1999
           (File No. 0-28493))


                                  58
<PAGE>   60

EXHIBIT                                                                   PAGE
  NO.                        DESCRIPTION                                   NO.

*10.10     Subscription Agreement dated November 30, 1999 by and among
           OSI Acquisition, Inc., Bruckmann, Rosser, Sherrill & Co.
           II, L.P. and the individuals whose signatures appear on the
           signature pages thereto (incorporated by reference to
           Exhibit 10.10 to Registration Statement on Form S-4 (File
           No. 333-31282))

*10.11     O'Sullivan Holdings Common Stock Option Plan (incorporated
           by reference to Exhibit 10.11 to Registration Statement on
           Form S-4 (File No. 333-31282))

 10.11a    First Amendment to Common Stock Option Plan (incorporated
           by reference to Exhibit 10.2 to Quarterly Report on Form
           10-Q for the quarter ended March 31, 2001 (File No.
           0-28493))

*10.12     Form of Common Stock Option Agreement (incorporated by
           reference to Exhibit 10.12 to Annual Report on Form 10-K
           for the year ended June 30, 2000 (File No. 0-28493))

*10.13     O'Sullivan Holdings Preferred Stock Option Plan
           (incorporated by reference to Exhibit 10.3 to Quarterly
           Report on Form 10-Q of O'Sullivan Holdings for the quarter
           ended December 31, 1999 (File No. 0-28493))

*10.14     Form of Preferred Stock Option Agreement dated November 30,
           1999 (incorporated by reference to Exhibit 10.4 to
           Quarterly Report on Form 10-Q of O'Sullivan Holdings for
           the quarter ended December 31, 1999 (File No. 0-28493))

*10.15     Registration Rights Agreement dated November 30, 1999 by
           and among O'Sullivan Holdings, Bruckmann, Rosser, Sherrill
           & Co. II, L.P. and the individuals who executed executive
           signature pages or warrant holder signature pages or
           acquired warrants after execution of the signature pages
           attached thereto (incorporated by reference to Exhibit 10.6
           to Quarterly Report on Form 10-Q of O'Sullivan Holdings for
           the quarter ended December 31, 1999 (File No. 0-28493))

*10.16     Agreement and Acknowledgment of Optionee dated November 30,
           1999 by and among O'Sullivan Holdings and each of the
           individuals who executed an individual signature page
           thereto (incorporated by reference to Exhibit 10.15 to
           Registration Statement on Form S-4 (File No. 333-31282))

*10.17     Form of Election to Roll Shares dated November 30, 1999 by
           and among O'Sullivan Holdings and each of the individuals
           who executed an individual signature page thereto
           (incorporated by reference to Exhibit 10.1 to Registration
           Statement on Form S-4 (File No. 333-31282))

*10.18     Management Services Agreement dated November 30, 1999 by
           and among O'Sullivan Holdings and Bruckmann, Rosser,
           Sherrill & Co. II, L.P. (incorporated by reference to
           Exhibit 10.2 to Quarterly Report on Form 10-Q of O'Sullivan
           Holdings for the quarter ended December 31, 1999 (File No.
           0-28493))

*10.19     Form of Amended and Restated Termination Protection
           Agreement between O'Sullivan Holdings and certain members
           of management (incorporated by reference to Exhibit 10.2 to
           Quarterly Report on Form 10-Q of O'Sullivan Holdings for
           the quarter ended March 31, 1996 (File No. 1-12754))

*10.20     Form of Termination Protection Agreement between O'Sullivan
           Holdings and certain members of management (incorporated by
           reference to Exhibit 10.3 to Annual Report on Form 10-K of
           O'Sullivan Holdings for the year ended June 30, 1999 (File
           No. 1-12754))

*10.21     O'Sullivan Holdings Deferred Compensation Plan (the "DCP")
           (incorporated by reference to Exhibit 10.2 to Quarterly
           Report on Form 10-Q of O'Sullivan Holdings for the quarter
           ended March 31, 1997 (File No. 1-12754))


                                  59
<PAGE>   61

EXHIBIT                                                                   PAGE
  NO.                        DESCRIPTION                                   NO.

*10.21a    First Amendment to the DCP (incorporated by reference to
           Exhibit 10.4a to Annual Report on Form of O'Sullivan
           Holdings 10-K for the year ended June 30, 1997 (File No.
           1-12754))

*10.21b    Second Amendment to the DCP (incorporated by reference to
           Exhibit 10.20b to Registration Statement on Form S-4 (File
           No. 333-31282))

*10.21c    Third Amendment to the DCP (incorporated by reference to
           Exhibit 10.21c to Annual Report on Form 10-K for the year
           ended June 30, 2000 (File No. 0-28493))

 10.22     Amended and Restated Tax Sharing and Tax Reimbursement
           Agreement dated as of June 19, 1997 between O'Sullivan
           Holdings and RadioShack Corporation and TE Electronics Inc.
           (incorporated by reference to Exhibit 10.5 to Annual Report
           on Form 10-K of O'Sullivan Holdings for the year ended June
           30, 1997 (File No. 1-12754))

*10.23     Form of Indemnity Agreement between O'Sullivan Holdings and
           certain directors and officers (incorporated by reference
           to Exhibit 10.7 to Amendment No. 1 to Registration
           Statement on Form S-1 (File No. 33-72120))

*10.24     Retirement and Consulting Agreement, Release and Waiver of
           Claims between O'Sullivan Holdings and Daniel F. O'Sullivan
           dated October 16, 1998 (incorporated by reference to
           Exhibit 10 to Quarterly Report on Form 10-Q of O'Sullivan
           Holdings for the quarter ended September 30, 1998 (File No.
           1-12754))

*10.24a    Amendment to Retirement Agreement dated as of May 16, 1999
           between O'Sullivan Holdings and Daniel F. O'Sullivan
           (incorporated by reference to Exhibit 10.9a to Annual
           Report on Form 10-K of O'Sullivan Holdings for the year
           ended June 30, 1999 (File No. 1-12754))

*10.25     Description of O'Sullivan Holding's annual incentive
           compensation plan (incorporated by reference to Exhibit
           10.13 to Annual Report on Form 10-K of O'Sullivan Holdings
           for the year ended June 30, 1999 (File No. 1-12754))

 21        Subsidiaries of the Registrant (incorporated by reference
           to Exhibit 21 to Annual Report on Form 10-K of O'Sullivan
           Holdings for the year ended June 30, 1995 (File No.
           1-12754))

 23        Consent of PricewaterhouseCoopers LLP                            62

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

         * Each of these exhibits is a "management contract or compensatory plan
or arrangement."

         Pursuant to item 601 (b) (4) (iii) of Regulation S-K, O'Sullivan has
not filed agreements relating to certain long-term debt of O'Sullivan
aggregating $10 million. O'Sullivan agrees to furnish the Securities and
Exchange Commission a copy of such agreements upon request.


                                  60