<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                                    FORM 10-K

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

For the fiscal year ended 12/31/98                 Commission file number 1-8591
                          --------                                        ------

                            SCOTT TECHNOLOGIES, INC.
--------------------------------------------------------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

            DELAWARE                                  52-1297376
   ------------------------------                 -------------------
  (STATE OR OTHER JURISDICTION OF                  (I.R.S. EMPLOYER
   INCORPORATION OR ORGANIZATION)                 IDENTIFICATION NO.)

5875 LANDERBROOK DRIVE, MAYFIELD HEIGHTS, OHIO                    44124
----------------------------------------------                   --------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                        (ZIP CODE)

Registrant's telephone number, including area code      (440) 446-1333
                                                         -------------

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

                     Common Stock, Par Value $.10 Per Share
--------------------------------------------------------------------------------
                                (TITLE OF CLASS)

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|

STATE THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF
THE REGISTRANT. (THE AGGREGATE MARKET VALUE SHALL BE COMPUTED BY REFERENCE TO
THE PRICE AT WHICH THE STOCK WAS SOLD, OR THE AVERAGE BID AND ASKED PRICES OF
SUCH STOCK, AS OF A SPECIFIED DATE WITHIN 60 DAYS PRIOR TO THE DATE OF FILING.)

                        At March 17, 1999 - $232,132,328
--------------------------------------------------------------------------------
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF
                COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.

                                                       Outstanding as of 3/17/99

 Common Stock, Par Value $.10 Per Share                        18,186,983
--------------------------------------------------------------------------------

DOCUMENTS INCORPORATED BY REFERENCE: LIST THE FOLLOWING DOCUMENTS IF
INCORPORATED BY REFERENCE AND THE PART OF THE FORM 10-K INTO WHICH THE DOCUMENT
IS INCORPORATED: (1) ANY ANNUAL REPORT TO SECURITY HOLDERS; (2) ANY PROXY OR
INFORMATION STATEMENT; AND (3) ANY PROSPECTUS FILED PURSUANT TO RULE 424 (b) OR
(c) UNDER THE SECURITIES ACT OF 1933. (THE LISTED DOCUMENTS SHOULD BE CLEARLY
DESCRIBED FOR IDENTIFICATION PURPOSES.)

Proxy Statement Re: Annual Stockholders' Meeting to be held in 1999 (See Part
III) Certain documents incorporated from prior filings (See Part IV)

<PAGE>

                                TABLE OF CONTENTS

PART I.........................................................................4

      Item 1.  Business........................................................4
         Customers.............................................................5
         Competition...........................................................5
         Patents and Trademarks................................................5
         Backlog of Orders.....................................................5
         Raw Materials.........................................................5
         Effect of Environmental Compliance....................................5
         Employees.............................................................6
         Research and Development..............................................6
         Distribution..........................................................6
         Interstate Electronics................................................6
         Financial Information About the Company's Business Segments...........7
         Executive Officers of the Company.....................................8

      Item 2.  Properties......................................................9
         Principal Facilities..................................................9

      Item 3.  Legal Proceedings...............................................9

      Item 4.  Submission of Matters to a Vote of Security Holders............10

PART II.......................................................................11

      Item 5.  Market for the Company's Common Stock and Related
               Stockholder Matters............................................11

      Item 6.  Summary of Selected Financial Data.............................12

      Item 7.  Management's Discussion and Analysis of Financial Condition
               and Results of Operations......................................13
         Forward-Looking Information..........................................13
         Financial Summary....................................................13
         Scott Aviation.......................................................14
         Corporate and Unallocated Costs and Expenses.........................16
         Discontinued Operations..............................................17
         Extraordinary Item...................................................17
         Financial Position and Liquidity.....................................18
         Factors Affecting the Company's Prospects............................18

      Item 8.  Financial Statements and Supplementary Data....................22
         Report of Independent Public Accountants.............................22
         Consolidated Statements of Operations ...............................23
         Consolidated Balance Sheets..........................................24
         Consolidated Statements of Stockholders' Equity and Comprehensive
         Income...............................................................26
         Consolidated Statements of Cash Flows................................27
         Notes to Consolidated Financial Statements...........................28
            (1)     Summary of Significant Accounting Policies................28
            (2)     Refinancing Costs.........................................29
            (3)     Discontinued Operations...................................30
            (4)     Income Taxes..............................................32
            (5)     Inventories...............................................34
            (6)     Receivables...............................................34


                                       2
<PAGE>

            (7)     Credit Facility...........................................34
            (8)     Long-Term Debt............................................35
            (9)     Leases....................................................36
            (10)    Contingent Liabilities....................................36
            (11)    Pension and Retirement Benefits Plans.....................36
            (12)    Capital Stock.............................................38
            (13)    Stock Options.............................................40
            (14)    Restricted Stock Purchase Plans...........................41
            (15)    Employee Stock Bonus Plan.................................41
            (16)    Extraordinary Item - Early Extinguishment of Debt.........41
            (17)    Industry Segment Data.....................................42
         QUARTERLY FINANCIAL DATA (UNAUDITED).................................43

      Item 9.       Disagreements on Accounting and Financial Disclosure......44

PART III......................................................................44

      Item 10.      Directors and Executive Officers of the Registrant........44

      Item 11.      Executive Compensation....................................44

      Item 12.      Security Ownership of Certain Beneficial Owners and
                    Management................................................44

      Item 13.      Certain Relationships and Related Transactions............44

PART IV.......................................................................45

      Item 14.      Exhibits, Financial Statement Schedules and Reports 
                    on Form 8-K...............................................45
         VALUATION AND QUALIFYING ACCOUNTS....................................51
         REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS.............................52

SIGNATURES....................................................................53

EXHIBIT INDEX.................................................................54

      SUBSIDIARIES OF THE COMPANY.............................................59

      CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS...............................60


                                       3
<PAGE>

Except as otherwise stated, the information contained in this Annual Report is
as of December 31, 1998. Information contained in this Report includes
forward-looking statements, which can be identified by the use of
forward-looking terminology such as "believes," "may," "will," "expects,"
"intends," "plans," "anticipates," "estimates" or "continues" or the negative
thereof or other variations thereon or comparable terminology, or by discussions
of strategy. The Company undertakes no obligation to revise these
forward-looking statements to reflect any future events or circumstances. The
Company's actual results, performance or achievements, could differ materially
from the results expressed in, or implied by, these forward-looking statements.
Factors that could cause or contribute to such differences are discussed under
the caption "Factors Affecting the Company's Prospects."

                                     PART I

Item 1. Business

Scott Technologies, Inc. (referred to, with its subsidiaries and divisions, and
their predecessor entities, unless the context otherwise requires, as the
"Company") is comprised of one reporting segment which operates primarily in
North America. The Company's strategy is to grow through strategic acquisitions,
systematic market expansion and continued growth through new and "next 
generation" product development. The Company's segment is described below:

      Scott Aviation is a leading manufacturer of life support respiratory
      products and consists of two principal business units: Health and Safety;
      and Aviation and Government. The two units have benefited from several
      similarities. Scott Aviation has used its broad experience and expertise
      in high pressure gas regulation and distribution developed from the two
      product lines to provide end-users with products that are reliable, light
      weight, compact in size and user-friendly. Each unit has also benefited
      from the common use of manufacturing cell and team technology. In
      addition, Scott Aviation's uniform quality assurance program has allowed
      the units to work jointly to comply with the rigorous quality requirements
      of the government, regulatory agencies and customers.

      Scott Aviation's Health and Safety unit manufactures the Scott Air-Pak* (a
      self-contained breathing apparatus), air-purifying products, gas detection
      instruments and other life support products for firefighting and personal
      protection against environmental and safety hazards. Scott Aviation's
      Aviation and Government unit manufactures protective breathing equipment,
      pilot and crew oxygen masks, and emergency oxygen for passengers and crew
      members on commercial, government and private aircraft and ships.

The Company's business is managed at the segment level. Financial, legal, real
estate and certain administrative functions are performed at the corporate
offices. The Company's real estate development activities, conducted through its
subsidiary, STI Properties, Inc., are reported as a corporate department.

During 1998, the Company announced its intent to divest its Interstate
Electronics subsidiary "IEC." For further discussion of the Company's divested
operations, see "Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations," included elsewhere herein.

* Registered or common law trademarks and service marks of Scott Technologies,
Inc. and its subsidiaries.


                                       4
<PAGE>

Customers

Aviall, Inc., which is a distributor of Scott Aviation's aviation products,
accounted for approximately 13.5%, 10.4% and 10.2% of the Company's 1998, 1997,
and 1996 net sales, respectively. The U.S. Government accounted for 7.1%, 10.0%
and 9.2% of the Company's total net sales for 1998, 1997 and 1996, respectively.
The net sales to the U.S. Government are subject to the standard government
contract clause that permits the government to terminate such contracts at its
convenience. In the event of such termination, there are provisions to enable
the Company to recover its costs plus a fee. The Company does not anticipate the
termination of any of its major government contracts. No other single customer
accounted for more than 10% of the Company's net sales.

Competition

Scott Aviation is engaged in industries characterized by substantial competition
in the form of price, service, quality, and design. The Company believes that in
the United States, Scott Aviation is among the leading manufacturers of
protective breathing and emergency oxygen equipment.

Patents and Trademarks

Scott Aviation owns and is licensed under a number of patents and trademarks
that are sufficient for its operations. Its business as a whole is not
materially dependent upon any one patent, trademark or license or
technologically related group of patents or licenses.

Backlog of Orders

As of December 31, 1998 and 1997, Scott Aviation had a backlog of orders of
$61.2 million and $54.0 million, respectively. On these dates such backlog
amounts were believed to be firm. However, realization of the backlog amounts
depends on, among other things, general economic and business conditions in 1999
that cannot be predicted. Of the backlog, $4.8 million and $3.1 million at
December 31, 1998 and 1997, respectively, are not expected to be completed
within twelve months.

Raw Materials

The Company believes that the principal raw materials and purchased component
parts for the manufacture of Scott Aviation's products are available from a
number of suppliers and are generally available in sufficient quantities to meet
its current requirements.

Effect of Environmental Compliance

At the present time, compliance with federal, state, and local provisions with
respect to environmental protection and regulation has not had, and is not
expected to have, a material impact on the Company's capital expenditures,
earnings, operations, financial position or competitive position.


                                       5
<PAGE>

Employees

As of December 31, 1998, the Company's workforce was comprised of 1,009
employees. Approximately 240 employees are covered by a collective bargaining
agreement expiring on November 12, 1999. The Company considers its overall
relations with its workforce to be satisfactory.

Research and Development

The Company's research and development activities consisted of customary product
development activities at Scott Aviation. Research and development expenditures
were $3.1 million, $3.3 million and $2.9 million for 1998, 1997 and 1996,
respectively.

Distribution

Scott Aviation's products and services are marketed and sold through Company
salesmen; independent distributors and dealers; manufacturers' agents and
directly to government agencies.

Interstate Electronics

On October 21, 1998, the Company's Board of Directors announced that it intends
to divest its Interstate Electronics subsidiary. As a result, any financial
information about the Company's business segments for the years reported reflect
IEC as a discontinued operation; however, in the consolidated statements of cash
flows, items relating to discontinued operations have not been disaggregated.


                                       6
<PAGE>

Financial Information About the Company's Business Segments

                    SCOTT TECHNOLOGIES, INC. AND SUBSIDIARIES
                       formerly Figgie International Inc.
                                 (in thousands)

                                                  Year Ended December 31,
                                                  -----------------------
Sales to Unaffiliated Customers* by Product    1998         1997         1996   
Line of Scott Aviation:                     ---------    ---------    ---------
 Health and Safety Products                 $  90,351    $  78,069    $  70,783
 Aviation and Government Products              86,757       80,189       65,901
                                            ---------    ---------    ---------
 Total Sales to Unaffiliated Customers      $ 177,108    $ 158,258    $ 136,684
                                            =========    =========    =========

Major Customer Sales*:
 Aviall, Inc.                               $  23,863    $  16,511    $  13,958
 U.S. Government                               12,654       15,885       12,591
                                            ---------    ---------    ---------
 Total Major Customer Sales                 $  36,517    $  32,396    $  26,549
                                            =========    =========    =========

Export Sales - United States to*:
 Canada                                     $   9,502    $   8,865    $   8,172
 Asia                                           7,368        3,979        3,485
 Europe                                         5,291        6,052        5,508
 Other                                          5,397        3,906        3,781
                                            ---------    ---------    ---------
 Total U.S. Export Sales                    $  27,558    $  22,802    $  20,946
                                            =========    =========    =========

Operating Income(Loss)*:
 Scott Aviation                             $  38,218    $  32,941    $  26,914
 Corporate and Unallocated Expenses            (9,889)      (9,022)     (14,019)
                                            ---------    ---------    ---------
 Total Operating Income                     $  28,329    $  23,919    $  12,895
                                            =========    =========    =========

Identifiable Assets:
 Scott Aviation                             $  58,687    $  51,067    $  48,787
 Corporate                                    158,655      219,047      164,129
 Discontinued Operations                       45,842       62,700      135,194
                                            ---------    ---------    ---------
 Total Identifiable Assets                  $ 263,184    $ 332,814    $ 348,110
                                            =========    =========    =========

Capital Expenditures:
 Scott Aviation                             $   4,788    $   3,480    $   2,202
 Corporate                                      1,152        2,227        2,183
 Discontinued Operations                        1,317        2,966        5,894
                                            ---------    ---------    ---------
 Total Capital Expenditures                 $   7,257    $   8,673    $  10,279
                                            =========    =========    =========

Depreciation and Amortization:
 Scott Aviation                             $   2,117    $   1,562    $   1,597
 Corporate                                        254          313          441
 Discontinued Operations                        2,237        4,994        5,115
                                            ---------    ---------    ---------
 Total Depreciation and Amortization        $   4,608    $   6,869    $   7,153
                                            =========    =========    =========

      *     Excludes those operating units that are discontinued operations. See
            "Item 7 - Management's Discussion and Analysis of Financial
            Condition and Results of Operations" included elsewhere herein.


                                       7
<PAGE>

Executive Officers of the Company

As of March 25, 1999, the following executive officers of the Company serve in
the positions indicated:

      ROBERT P. COLLINS, Chairman of the Company's Board of Directors since
      November 1998; Director of Scott Technologies, Inc. since December 1997;
      Chief Executive Officer, Capstone Partners, Inc., a management consulting
      firm which assists international companies design and implement strategic
      expansion programs, since 1998; President and Chief Executive Officer, GE
      Fanuc Automation North America, Inc., a manufacturer of industrial control
      systems, from 1987 to 1998; Director of Comdial Corporations, a provider
      of integrated communications solutions for small and mid-size
      organizations, since 1998; Director of CSE Systems & Engineering Ltd., an
      engineering consulting firm and installer of automation systems, since
      1999; age 60.

      GLEN W. LINDEMANN, President and Chief Executive Officer since September
      1997; President, Scott Aviation from June 1989 to September 1997; Director
      of the Company since November 1996; age 59.

      MARK A. KIRK, Senior Vice President and Chief Financial Officer since
      July, 1998; President and Chief Operating Officer (May 1997 to July 1998),
      Chief Financial Officer (February 1997 to March 1998) of HMI Industries,
      Inc., a heavy metal stamping and consumer products company; Senior Vice
      President and Chief Financial Officer from 1993 to 1997 of Anchor Glass, a
      manufacturer of glass bottles and other containers. Mr. Kirk serves as a
      Director of HMI Industries, Inc.; age 41.

      DEBRA L. KACKLEY, Vice President, General Counsel and Secretary since
      April 1998; Corporate General Attorney from December 1996 to April 1998;
      Associate Attorney, Spieth, Bell, McCurdy and Newel, L.P.A., a law firm,
      from January 1992 to November 1996; age 43.

      RICHARD DELISLE, President, Scott Aviation since September 1997; Director
      of Manufacturing, from April 1996 to September 1997; Lead Auditor, SGS
      ICS, a certification agency performing ISO CE and Automotive QS audits,
      from March 1993 to April 1996; age 58.

In September 1996, a petition was filed in the United States Bankruptcy Court in
Delaware by Anchor Glass under Chapter 11 of the Bankruptcy Code in order to
restructure the debt of the company and sell substantially all of its assets.
Mr. Kirk was an executive officer of that company at that time. The sale was
approved by the bankruptcy court in December 1996 and was consummated on
February 5, 1997. After the sale in February 1997, Mr. Kirk ceased to be
affiliated with Anchor Glass.


                                       8
<PAGE>

Item 2.  Properties

The Company's principal manufacturing plants have approximately 258,000 square
feet of floor area for manufacturing, warehousing and administrative uses.
Approximately 253,000 square feet of this area is owned and the balance is
leased. The Company believes its facilities are suitable for its purposes,
having adequate productive capacity for present and anticipated needs.

                                                   Approx.
                                                   Floor Area
      Principal Facilities                         (Sq. Feet)
      --------------------                         ----------
      Monroe, NC                                   125,000
      Lancaster, NY                                110,000
      South Haven, MI                               23,000

Item 3. Legal Proceedings

The Company has been cooperating with the U.S. Government in a civil
investigation involving possible improprieties at an Army facility where the
Company's Scott Aviation division was a supplier. The Company has furnished
documents and other requested information and denies any wrongdoing. The Company
is also involved in ordinary litigation incidental to its business and its
former businesses. Management does not believe that such litigation will have a
material adverse effect upon the Company.


                                       9
<PAGE>

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

A special stockholders meeting was held on December 15, 1998. Holders on the
record date for the annual meeting of 13,321,053 shares of Class A Common Stock
(1/20th of a vote per share) and 4,549,822 shares of Class B Common Stock (1
vote per share) were entitled to cast 666,053 and 3,994,423 votes, respectively.

Approval to Amend Article Fourth of the Corporation's Amended and Restated
Certificate of Incorporation (the "Charter") to Eliminate the Corporation's Dual
Class Capital Structure and to Provide for a Single, New Class of Common Stock
Designated as "Common Stock". The amendment was approved pursuant to the
following votes:

                     FOR               AGAINST         ABSTAIN
                     ---               -------         -------
         Combined    3,124,051         485,608         12,828
         Class A       433,857           2,937            820
         Class B     2,690,194         482,671         12,008
                   
Approval to Amend Article Sixth of the Charter to Eliminate the Voting
Limitations Imposed Generally Upon Any Stockholder Who Beneficially Owns More
Than 20% of the Outstanding Voting Shares of Any Class of Stock and Make Certain
Conforming Changes. The amendment was approved pursuant to the following vote:

                     FOR               AGAINST         ABSTAIN
                     ---               -------         -------
                     3,081,972         515,592         24,923

Approval to Amend Section 2 of Article 2 of the Corporation's Amended and
Restated Bylaws to Lengthen the Notice Period Before a Stockholders' Meeting for
the Nomination of Directors by Stockholders. The amendment was approved pursuant
to the following vote:

                     FOR               AGAINST         ABSTAIN
                     ---               -------         -------
                     2,704,311         915,256         20,476

Approval to Amend Article Fourth of the Charter to Eliminate Certain Unnecessary
Provisions Regarding Previously Outstanding Shares of Preference Stock and the
Terms of Convertible and Redeemable Stock. The amendment was approved pursuant
to the following vote:

                     FOR               AGAINST         ABSTAIN
                     ---               -------         -------
                     3,112,188         490,261         20,038

Approval to Amend the Scott Technologies, Inc. Key Employees' Stock Option Plan
to Increase the Number of Shares Authorized for Issuance Under the Option Plan
from 1,500,000 Shares to 3,000,000 Shares and to Revise Certain Other Provisions
of the Option Plan. The amendment was approved pursuant to the following vote:

                     FOR               AGAINST         ABSTAIN
                     ---               -------         -------
                     2,706,143         881,306         35,038


                                       10
<PAGE>

                                     PART II

Item 5. Market for the Company's Common Stock and Related Stockholder Matters

The Company's Common Stock is traded on the over-the-counter market and quoted
in the Nasdaq Stock Market. Prior to December 16, 1998 the Company's two classes
of stock were traded under the following symbols: Class A Common Stock "SCTTA"
and Class B Common Stock "SCTTB." On December 15, 1998 the stockholders of the
Company voted to collapse the dual classes of common stock into a single new
class of common stock designated as "common stock." As of December 16, 1998 the
new common stock is traded under the symbol: "SCTT."

The high and low sales prices recorded on the Nasdaq Stock Market for each
quarterly period during the years 1998 and 1997 are set forth below. The high
and low sales prices for the fourth quarter of 1998 for Class A and Class B were
through December 15, 1998. The high and low sale prices for the fourth quarter
of 1998 for the new common stock were for the period December 16, 1998 through
December 31, 1998.

<TABLE>
<CAPTION>
                                     1998                                                1997
              ------------------------------------------------     -----------------------------------------------
                                   Quarter                                              Quarter
              ------------------------------------------------     -----------------------------------------------
                 1st          2nd          3rd           4th          1st          2nd          3rd          4th
                 ---          ---          ---           ---          ---          ---          ---          ---
<S>           <C>          <C>          <C>           <C>          <C>          <C>          <C>          <C>     
Class A:
   Low        $ 11.625     $ 12.875     $  10.00      $ 10.375     $ 11.375     $ 11.625     $ 13.375     $ 12.875
   High       $  14.00     $  15.25     $15.1875      $ 15.625     $  12.75     $ 14.625     $  15.00     $  15.25

Class B:
   Low        $  10.75     $  12.00     $ 10.625      $  10.75     $  10.00     $  10.50     $ 12.625     $  11.50
   High       $ 12.625     $  15.00     $ 15.375      $ 15.375     $ 11.875     $ 13.375     $ 14.812     $  14.75

Common Stock    
   Low             N/A          N/A          N/A      $ 14.625          N/A          N/A          N/A          N/A   
   High            N/A          N/A          N/A      $ 16.625          N/A          N/A          N/A          N/A   
</TABLE>

As of March 17, 1999, there were 6,207 holders of Common Stock.

No dividends were paid in 1998 or 1997.


                                       11
<PAGE>

Item 6. Summary of Selected Financial Data

The following tables set forth selected consolidated financial data of the
Company for the five years ended December 31, 1998. This data has been derived
from the Company's audited consolidated financial statements. These tables
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated financial
statements of the Company included elsewhere herein. The report of Arthur
Andersen LLP, independent auditors, covering the Company's consolidated
financial statements for the years ended December 31, 1998, 1997 and 1996, is
also included elsewhere herein.

<TABLE>
<CAPTION>
                                                              Year Ended December 31
                                    ----------------------------------------------------------------------
                                         1998           1997           1996           1995           1994 
                                         ----           ----           ----           ----           ---- 
<S>                                 <C>            <C>            <C>           <C>            <C>        
Financial Data (in thousands)
Net Sales                           $   177,108    $   158,258    $   136,684   $   112,569    $    93,272
Income (Loss) from
     Continuing Operations before
     Extraordinary Item             $     9,494    $     5,080    $    22,902   $   (28,295)   $  (101,225)
(Loss) Income from Discontinued
   Operations, net of tax               (16,373)        (6,808)           398        12,205        (65,505)
Extraordinary Loss, net of tax           (1,689)          (778)            --            --             --
                                    -----------    -----------    -----------   -----------    -----------
Net (Loss) Income                   $    (8,568)   $    (2,506)   $    23,300   $   (16,090)   $  (166,730)
                                    ===========    ===========    ===========   ===========    ===========

Total Assets                        $   263,184    $   332,814    $   348,110   $   320,012    $   583,762
Total Debt                          $   100,031    $   159,433    $   183,541   $   192,136    $   385,530
                                                                                               
Per Share Data - Basic EPS:
Income (Loss) from
     Continuing Operations before
     Extraordinary Item             $      0.52    $      0.27    $      1.25   $     (1.57)   $     (5.71)
(Loss) Income from Discontinued
     Operations                           (0.90)         (0.37)          0.02          0.68          (3.70)
Extraordinary Loss                        (0.09)         (0.04)            --            --             --
                                    -----------    -----------    -----------   -----------    -----------
Net (Loss) Income                   $     (0.47)   $     (0.14)   $      1.27   $     (0.89)   $     (9.41)
                                    ===========    ===========    ===========   ===========    ===========

Per Share Data - Assuming
Dilution:
Income (Loss) from
     Continuing Operations before
     Extraordinary Item             $      0.52    $      0.27    $      1.22   $     (1.57)   $     (5.71)
(Loss) Income from Discontinued
     Operations                           (0.90)         (0.36)          0.02          0.68          (3.70)
Extraordinary Loss                        (0.09)         (0.04)            --            --             --
                                    -----------    -----------    -----------   -----------    -----------
Net (Loss) Income                   $     (0.47)   $     (0.13)   $      1.24   $     (0.89)   $     (9.41)
                                    ===========    ===========    ===========   ===========    ===========
Cash Dividends                               --             --             --            --             -- 
</TABLE>


                                       12
<PAGE>

Item 7. Management's Discussion and Analysis of Financial Condition and Results
        of Operations

FORWARD-LOOKING INFORMATION

Information contained in this Report includes forward-looking statements, which
can be identified by the use of forward-looking terminology such as "believes,"
"may," "will," "expects," "intends," "plans," "anticipates," "estimates" or
"continues" or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy. The Company undertakes no obligation
to revise these forward-looking statements to reflect any future events or
circumstances. The Company's actual results, performance or achievements, could
differ materially from the results expressed in, or implied by, these
forward-looking statements. Factors that could cause or contribute to such
differences are discussed under the caption "Factors Affecting the Company's
Prospects."

FINANCIAL SUMMARY

Discussion of 1998 Compared to 1997

Net sales increased 11.9% in 1998 to $177.1 million from $158.3 million in 1997,
principally due to a greater volume of sales at Scott Aviation. Gross profit
increased 10.2% in 1998 to $57.3 million from $52.0 million in 1997 as a result
of the higher sales. Operating income improved by $4.4 million to $28.3 million
as a result of the improved gross profit. Income before income taxes from
continuing operations improved by $8.2 million to $15.9 million in 1998
primarily due to the profit improvement previously mentioned combined with lower
interest expense as a result of reduced debt levels.

The loss on discontinued operations for 1998 included loss from operations 
and loss on disposal. Loss from operations represents Interstate Electronics 
subsidiary's "IEC" net operating results for 1998. Loss on disposal included 
(1) a third quarter pretax charge of $9.8 million comprised of: a $5.0 
million addition to the self-insurance accrual to reflect recent adverse 
experience, a $3.2 million charge related to underfunded foreign pension 
plans, and a $1.6 million loss provision for litigation defense costs related 
to discontinued operations; and (2) a fourth quarter pretax charge of $7.0 
million related to: a $2.5 million addition to environmental reserves, a $2.5
million addition to litigation reserves, and a $2.0 million addition to 
insurance reserves as part of the premium to purchase aggregate stop loss 
coverage.

Discussion of 1997 Compared to 1996

Net sales increased 15.8% in 1997 to $158.3 million from $136.7 million in 1996
due to a greater volume of sales at Scott Aviation. Gross profit increased 21.8%
in 1997 to $52.0 million from $42.7 million in 1996 as a result of higher sales
and improved margins at Scott Aviation. Operating income improved by $11.0
million to $23.9 million as a result of the improved gross profit and lower
corporate general and administrative expense. A decrease in refinancing costs,
lower net interest expense, and an increase in other income also contributed to
a pretax gain from continuing operations of $7.8 million compared with a loss of
$4.8 million in 1996.

In 1997, the Company also recorded a $6.8 million charge, net of tax, related to
discontinued operations and a $0.8 million charge, net of tax, related to the
early extinguishment of debt.


                                       13
<PAGE>

Segment Information

The Company currently has one operating segment, Scott Aviation. The results of
operations are as follows:

Scott Aviation

Financial Review

The annual results of operations were as follows (in thousands):

<TABLE>
<CAPTION>
                                                    98 vs 97                97 vs 96
                              1998        1997       change        1996      change 
                              ----        ----       ------        ----      ------ 
<S>                         <C>         <C>         <C>          <C>        <C>     
Net Sales                   $177,108    $158,258    $ 18,850     $136,684   $ 21,574
 Cost of Sales               119,853     106,234      13,619       93,963     12,271
                            --------    --------    --------     --------   --------
Gross Profit on Sales         57,255      52,024       5,231       42,721      9,303
 % of Sales                     32.3%       32.9%                    31.3%
Operating Expenses:
 Selling, General and
 Administrative               15,924      15,745         179       12,869      2,876
 Research and Development      3,113       3,338        (225)       2,938        400
                            --------    --------    --------     --------   --------
 Total Operating Expenses     19,037      19,083         (46)      15,807      3,276
                            --------    --------    --------     --------   --------
Operating Income            $ 38,218    $ 32,941    $  5,277     $ 26,914   $  6,027
                            --------    --------    --------     --------   --------
 % of Sales                     21.6%       20.8%                    19.7%
</TABLE>

1998 quarterly results were as follows (in thousands):

<TABLE>
<CAPTION>
                              First      Second      Third       Fourth      Twelve  
                             Quarter     Quarter     Quarter     Quarter     Months  
                            --------    --------    --------     --------   --------
<S>                         <C>         <C>         <C>         <C>         <C>     
Net Sales                   $ 46,214    $ 45,964    $ 43,197    $ 41,733    $177,108
 Cost of Sales                31,311      30,380      29,468      28,694     119,853
                            --------    --------    --------     --------   --------
Gross Profit on Sales         14,903      15,584      13,729      13,039      57,255
 % of Sales                     32.2%       33.9%       31.8%       31.2%       32.3%
Operating Expenses:
 Selling, General and
 Administrative                3,904       3,926       3,948       4,146      15,924
 Research and Development        891         793         800         629       3,113
                            --------    --------    --------     --------   --------
Total Operating Expenses       4,795       4,719       4,748       4,775      19,037
                            --------    --------    --------     --------   --------
Operating Income            $ 10,108    $ 10,865    $  8,981    $  8,264    $ 38,218
                            --------    --------    --------     --------   --------
 % of Sales                     21.9%       23.6%       20.8%       19.8%       21.6%
</TABLE>

Discussion of 1998 Compared to 1997

Net sales increased for the year due to increased shipments of oxygen products
to Aviation and Government customers of approximately 8%, and increased
shipments of Scott Air-Paks* to Health and Safety customers of approximately
18%. In 1998 and 1997, sales of $1.6 million and $9.5 million, respectively,
were represented by a multi-year contract with the U.S. Government for emergency
escape breathing devices; shipments under such contract ended in February 1998.

* Registered or common law trademarks and service marks of Scott Technologies,
Inc. and its subsidiaries.


                                       14

<PAGE>

Gross profit increased in 1998 to $57.3 million compared to last year's $52.0
million as a result of significantly increased sales. The 1998 gross margin of
32.3% represented a slight decrease when compared to the 1997 gross margin due
to competitive pricing pressures.

Selling, general and administrative expenses have increased slightly in dollar
amounts in support of increased sales, but as a percentage of net sales were
lower when compared to 1997.

Research and development expenses in 1998 were slightly lower when compared to
the prior year.

Discussion of 1997 Compared to 1996

Net sales increased for the year due to increased shipments of oxygen products
to Aviation and Government customers of approximately 22%, and increased
shipments of Scott Air-Paks to Health and Safety customers of approximately 13%.
In 1997 and 1996, sales of $9.5 million and $10.9 million, respectively, were
represented by a multi-year contract with the U.S. Government for emergency
escape breathing devices.

Gross profit and gross margin increased for the year due to significant
increased sales volume.

Selling, general and administrative expenses increased in dollar amounts in
support of increased sales, but as a percentage of net sales were only slightly
higher when compared to 1996.

Research and development expenses in 1997 were higher than in 1996 due to new
product development expenses incurred during the first half of 1997, primarily
for health and safety products.


                                       15
<PAGE>

CORPORATE AND UNALLOCATED COSTS AND EXPENSES

Financial Review

Corporate activity and unallocated costs and expenses were as follows (in
thousands):

<TABLE>
<CAPTION>
                                                    98 vs 97                97 vs 96
                              1998        1997       change      1996        change 
                              ----        ----       ------      ----        ------ 
<S>                        <C>         <C>         <C>         <C>         <C>      
Selling, General and
Administrative             $  9,889    $  9,022    $    867    $ 14,019    $ (4,997)
                           ========    ========    ========    ========    ========

Other Expenses (Income):
Refinancing Costs               652         524         128         993        (469)
Interest Expense             12,550      21,811      (9,261)     19,112       2,699
Interest Income              (3,396)     (5,214)     (1,818)     (2,079)      3,135
Other, Net                    2,602        (954)      3,556        (321)       (633)
</TABLE>

1998 quarterly results were as follows (in thousands):

<TABLE>
<CAPTION>
                               First    Second      Third      Fourth       Twelve
                             Quarter    Quarter     Quarter    Quarter      Months
                             -------    -------     -------    -------      ------
<S>                        <C>         <C>         <C>         <C>         <C>     
Selling, General and
Administrative             $  2,246    $  2,140    $  2,629    $  2,874    $  9,889

Other Expenses (Income):
Refinancing Costs               259         131         131         131         652
Interest Expense              4,216       3,085       2,594       2,655      12,550
Interest Income              (1,441)       (909)       (543)       (503)     (3,396)
Other, Net                      542         666         826         568       2,602
</TABLE>

Discussion of 1998 Compared to 1997

Selling, general and administrative expenses increased $0.9 million in 1998
compared with 1997. The increase was primarily due to a $1.1 million charge for
severance costs associated with cost reduction initiatives in the fourth quarter
of 1998.

Interest expense decreased for 1998 due to lower outstanding debt in 1998
compared with 1997 and interest expense recorded in 1997 on the discounted
present value of insurance reserves.

Interest income decreased for 1998 due primarily to the reduction in the
Company's cash position, combined with interest income recognized in 1997
connected with negotiated federal and foreign tax audits.

Discussion of 1997 Compared to 1996

Selling, general and administrative expenses decreased significantly in 1997
compared to 1996 due to the continuing benefit from prior years' corporate
cost-cutting initiatives.

Interest expense increased due to interest on the discounted self-insurance
reserves. Interest income increased due to the improvement in the Company's cash
position, interest from federal and foreign tax refunds, and interest on net
proceeds from the sale of the Snorkel division.


                                       16
<PAGE>

DISCONTINUED OPERATIONS

On October 21, 1998, the Company's Board of Directors announced that it intends
to divest its IEC subsidiary. As a result, income from operations of
discontinued operations, net of tax, in 1998, 1997, and 1996, represents the
operating results of the Company's Taylor Environmental division from January 1,
1996 through its sale on November 25, 1996, the operating results of the
Company's Snorkel division from January 1, 1996 through its sale on November 17,
1997, and the operating results of the Company's IEC subsidiary from January 1,
1996 through December 31, 1998.

In 1998, loss on disposal included (1) a third quarter pretax charge of $9.8
million comprised of: a $5.0 million addition to the self-insurance accrual to
reflect recent adverse experience, a $3.2 million charge related to underfunded
foreign pension plans, and a $1.6 million loss provision for litigation defense
costs related to discontinued operations and (2) a fourth quarter pretax charge
of $7.0 million related to: a $2.5 million addition to environmental reserves, a
$2.5 million addition to litigation reserves, and a $2.0 million addition to
insurance reserves as part of the premium to purchase aggregate stop loss
coverage.

Loss on disposal of discontinued operations in 1997 of $7.3 million, net of tax
benefit, represents a $17.0 million provision to increase the Company's
self-insurance accrual to reflect the cost of the December 1997 settlement of a
specific personal injury lawsuit against a previously discontinued business; the
gain from the sale of the Company's Snorkel division of $23.6 million; a $9.2
million addition to the self-insurance accrual for discontinued businesses to
reflect general adverse experience on claims per a December 1997 actuarially
prepared valuation; a $6.5 million allowance against the carrying value of
deferred divestiture proceeds to reflect probable settlements of ongoing
disputes underlying prior divestitures; a $1.5 million loss provision for
litigation arising from a discontinued unit as a result of a December 1997
lawsuit; and $1.6 million of other adjustments.

Loss on disposal in 1996 represents a loss provision of $28.3 million, which is
net of a tax benefit of $15.2 million, recorded by the Company in the fourth
quarter of 1996. The provision reflects valuation adjustments to recorded assets
arising from and accruals for costs and probable losses on obligations related
to previously discontinued businesses. The loss consists of a $20.5 million
addition to the self-insurance accrual as a result of a December 1996
actuarially prepared valuation of the liabilities to negotiate the sale of a
minority position to a third party; a $14.8 million write-down of carrying value
of net assets related to discontinued operations and of deferred proceeds to
reflect fourth quarter negotiated resolutions of disputes and events that gave
rise to greater risk of realization; a $2.6 million reserve for litigation
arising from the businesses of the discontinued units; and a $5.6 million 
accrual to buy out certain employee benefit legacy obligations.

EXTRAORDINARY ITEM

In 1998, the Company paid $64.0 million to extinguish $60.6 million of its
9.875% Senior Notes due October 1, 1999. The payments included a $2.7 million
premium for the early retirement of the debt and $0.7 million of accrued
interest. Accordingly, the Company recorded an extraordinary after-tax loss of
$1.7 million on the premiums to extinguish $60.6 million of Senior Notes.

In the fourth quarter of 1997, the Company prepaid the mortgage on its former
Willoughby, Ohio headquarters facility and purchased in the open market $15.7
million of its 9.875% Senior Notes due in 1999. The premiums associated with 
these early extinguishments of debt were $1.3 million and are presented, net 
of a tax benefit of $0.5 million, as an extraordinary loss.


                                       17
<PAGE>

FINANCIAL POSITION AND LIQUIDITY

At December 31, 1998, cash and cash equivalents per the Company's consolidated
statements of cash flows totaled $39.4 million, a decrease of $64.8 million from
December 31, 1997 primarily related to the repurchase of debt.

Net cash provided by operating activities was $3.0 million reflecting a net loss
of $8.6 million, depreciation and amortization of $4.6 million and the net
change in other operating activities of $7.0 million.

Net cash provided by investing activities was $0.8 million reflecting proceeds
from the sale of property, plant and equipment of $8.0 million; capital
expenditures for continuing operations of $5.9 million for machinery, equipment,
tooling and real estate development costs; and capital expenditures for
discontinued operations of $1.3 million.

Net cash used by financing activities was $68.6 million which included $1.6
million borrowing against the Company's credit facility; $63.6 million for
principal payments on debt; $9.2 million to repurchase 684,600 shares of common
stock at market prices; and $2.6 million in proceeds from the issuing of common
stock in connection with the Company's stock option plan.

Liquidity is provided by the Company's cash and cash equivalents which totaled
$39.4 million at December 31, 1998, and by an Amended Credit Agreement entered
into by the Company on December 31, 1998, under which $32.6 million was 
available, pursuant to an agreed borrowing availability during the first 30 
day period of the Revolver in the amount of $50 million less outstanding 
letters of credit (See also Note 7 "Credit Facility" to the financial 
statements), and by the expected Earn-Out proceeds of $20-$40 million from 
the divestiture of Snorkel (See also Note 3 "Discontinued Operations" to the 
financial statements). In 1998, the Company used cash to reduce its debt by 
repurchasing $60.6 million of 9.875% Senior Notes. The repurchasing of the 
Senior Notes has resulted in lower interest expense and, to a lesser extent, 
lower interest income.

The Company expects to continue to focus on internal growth and market expansion
at Scott Aviation; investigate acquisitions; and consider alternative strategies
that may further enhance stockholder value.

The Company's cash balance at December 31, 1998 is available for general
corporate purposes. Those purposes may include investment in the current
operations of the Company, payment of liabilities associated with previously
divested businesses, use as all or a portion of the purchase price of possible
acquisitions, additional repurchases of its 9.875% Senior Notes and stock
repurchases. The Company's Board of Directors has authorized the Company to
purchase up to 3 million shares of its common stock. In 1998, the Company
repurchased 684,600 shares of common stock at market prices.

FACTORS AFFECTING THE COMPANY'S PROSPECTS

The prospects of the Company may be affected by a number of factors, including
the matters discussed below:

DEPENDENCE ON GOVERNMENT CONTRACTS - Sales to the U.S. Government represented
approximately 40% of the Company's combined total net sales of IEC and Scott
Aviation in each of the last three years. With the discontinuance of IEC, these
sales represented 7.1%, 10.0% and 9.2% of Scott Aviation's sales in 1998, 1997
and 1996, respectively. The Company expects to continue to derive a portion of
Scott Aviation's revenues from Government contracts. Consequently, fluctuations
in military spending by the U.S. Government could adversely affect the Company's
revenues and profitability. In addition, since these contracts


                                       18
<PAGE>

are the result of competitive bidding processes, there can be no assurance that
the Company will be awarded future contracts, or that once awarded, the
Government will not terminate such contracts at its convenience.

COMPETITION - Scott Aviation's Health and Safety unit manufactures the Scott
Air-Pak, air-purifying products, gas detection instruments and other life
support products for firefighting and personal protection against environmental
and safety hazards. Scott Aviation's Aviation and Government unit manufactures
protective breathing equipment, pilot and crew oxygen masks, and emergency
oxygen for passengers and crew members on commercial, government and private
aircraft and ships. Both of these manufacturing units participate in markets
which are technology based, industry regulated, and highly competitive. Failure
by Scott Aviation to develop new products and/or remain competitive with
changing industry conditions could adversely affect market share.

The GPS and Displays markets that IEC participates in are highly competitive,
subject to rapid change and significantly affected by new product introductions.
Competition may intensify, particularly as companies well established in the
defense industry increase their focus on GPS. In addition, the development and
commercialization of new types of displays or position measuring systems could
reduce the demand for IEC's products.

Certain competitors in the respective markets have significantly greater
financial, technical and marketing resources. These competitive factors could
adversely affect the Company's financial condition, cash flow, results of
operations or expected benefits from its restructuring initiatives.

LEVERAGE - Part of the Company's strategy is to grow through acquisitions. Any
such future acquisition could involve the incurrence of significant additional
debt. In addition, the Company's Board of Directors has authorized the Company
to purchase up to 3 million shares of its common stock. In 1998, 684,600 shares
were purchased. Future purchases of common stock could affect leverage. The
degree to which the Company is leveraged could: (i) impair the Company's ability
to obtain future financing for acquisitions, a refinancing, or other purposes;
(ii) make it more vulnerable than some of its competitors in a prolonged
economic downturn; and (iii) restrict its ability to exploit new business
opportunities and limit its flexibility to respond to changing business
conditions.

DISCONTINUED OPERATIONS - Since January 1, 1994, the Company has sold numerous
businesses. The contract terms included representations, warranties, and
indemnification provisions made by the Company. Remedies available for breaches
of representations and warranties range from monetary relief in specific amounts
for specific breaches to unlimited amounts.

The Company has generally retained liability for the conduct of the sold
businesses prior to the date of sale. As a result, the Company is subject to
various known and contingent liabilities, including indemnification obligations,
with respect to its discontinued operations. The Company has established
accruals and reserves for losses that may arise out of workers' compensation,
product liability and general liability claims, environmental risks, tax and
other matters. The Company believes that its accruals and reserves are
appropriate and adequate. However, as these contractual matters are subject to
significant uncertainty, no assurances can be given that the ultimate resolution
of these matters will not have a material adverse effect upon the Company's
financial position, operating results or cash flows.

Further, at December 31, 1998, the Company's balance sheet reflected $20.8
million of deferred divestiture proceeds which is net of a reserve of $12.5
million. Deferred divestiture proceeds include management's best estimates of
the amounts expected to be realized after the resolution of the underlying


                                       19
<PAGE>

matters. Additionally, at December 31, 1998, the Company's balance sheet
reflected $25.0 million of net assets of discontinued operations, which
represents the net book value of IEC. The Company expects to realize net
proceeds from the sale of IEC in excess of the carrying value. The amounts the
Company will ultimately realize from these assets may differ materially from the
amounts recorded.

STRATEGIC PLAN - The Company's strategic plan is to grow through strategic 
acquisitions, systematic market expansion and continued growth through new 
and "next generation" product development.

Part of the Company's strategy is to grow through acquisitions. There can be 
no assurance, however, that the Company will identify attractive 
acquisitions, that such acquisitions will be consummated, or that, if 
consummated, any anticipated benefits will be realized from such 
acquisitions. In addition, the availability of additional acquisition 
financing cannot be assured and, depending on the terms of such additional 
acquisitions, could be restricted by the terms of the Amended Credit 
Agreement. Moreover, the process of integrating acquired operations into the 
Company's existing operations may result in unforeseen operating difficulties 
and may require significant financial resources that would otherwise be 
available for the ongoing development or expansion of the Company's existing 
operations. Future acquisitions by the Company would likely result in 
amortization expense of goodwill, which could have a material adverse effect 
on the Company's financial condition and operating results.

Expansion into international markets will depend on numerous factors that are
beyond the Company's control, including its ability to develop or acquire
additional manufacturing and distribution capabilities outside the United
States. In addition, international expansion may increase the Company's exposure
to certain risks inherent in doing business outside the United States, such as
currency exchange rate fluctuations, compliance with foreign codes and standards
and political risks. If the Company pursues this strategy through acquisitions,
strategic alliances or joint ventures, any integration of the acquired
businesses into the Company's business would entail expense and management
attention. If the Company pursues this strategy through the establishment of new
operations, it will be subject to the difficulties inherent in starting a new
business in foreign jurisdictions. There can be no assurance that the business
and competitive environment in international markets will be as favorable to the
Company as is the U.S. market currently.

The Company expects to continue to make investments in new product development.
There can be no assurance that the Company will be able to develop and
introduce, in a timely manner, new products or enhancements to its existing
products which satisfy customer needs or achieve market acceptance. To the
extent that the Company makes substantial marketing and research and development
investments and such investments do not lead to commercially successful
products, the Company's results of operations could be adversely affected.

YEAR 2000 ISSUE - The Year 2000 Issue refers to a number of date-related
problems that may affect software applications, including codes imbedded in
chips and other hardware devices. These problems include software programs that
identify a year by its last two digits so that a year identified as "00" would
be recognized as the year "1900" rather than the year "2000."

STATE OF READINESS

The Company has completed the process of identifying and assessing the extent to
which its manufacturing equipment, business systems and products could be
affected by the Year 2000 Issue. As part of its Year 2000 Issue assessment,


                                       20
<PAGE>

the Company has taken into account whether third parties with which the Company
has material relationships, including the U.S. Government, are Year 2000
compliant. The Company's formalized plan is comprised of the following phases:
(1) development of an inventory and ranking of risks; (2) evaluation of
compliance, impact of non-compliance, and development of remediation plans; (3)
remediation of material non-compliance items; (4) testing and validation of
remediation efforts; (5) implementation of upgrades or replacement of
non-compliance items; and (6) establishment of support assistance, as required,
during the year 2000. The Company has completed the first two phases and is
currently in the process of implementing the third phase. The testing and
validation of remediation efforts is scheduled to be completed in the third
quarter and the implementation phase is scheduled to be completed by year-end
1999.

COSTS

The Company's expenses have been limited to internal costs incurred in the Year
2000 Issue assessment process. The Company does not separately track such
internal costs which are principally associated with payroll expenses, but
estimates that the Year 2000 compliance costs for 1998 were minimal. The Company
estimates that the total costs (including those costs already incurred) of the
Company's formalized plan, as described above, will be approximately $1.5
million. However, there can be no assurance that the Company will not incur any
unanticipated costs in completing its Year 2000 Compliance Project. The estimate
of $1.5 million does not include Year 2000 compliance costs related to the
Company's IEC subsidiary which it plans to sell in 1999. Such costs, estimated
at $0.9 million, will be included in the valuation of the business and be
reflected in the purchase price ultimately received for the business.

RISKS

As a result of completing the first two phases of its formalized plan, the
Company has identified, and developed remediation plans, for several significant
risks. These risks relate to vendors, suppliers, distributors, customers, and
other third parties, as well as to the Company's own internal information and
operation systems. Any failure by the Company or third parties to ensure that
its computer systems are Year 2000 compliant could have a material adverse
effect on the Company's operations, liquidity and financial position. Any
failure of the Company's products to perform could result in claims against the
Company.

CONTINGENCY PLANS

The Company will continue to develop contingency strategies, as appropriate, as
part of its Year 2000 plan. These contingency strategies may include identifying
alternate suppliers, developing procedures to override internal computer
systems, increasing inventory levels, and reallocating internal resources as
necessary.


                                       21
<PAGE>

Item 8. Financial Statements and Supplementary Data

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors
  and Stockholders
Scott Technologies, Inc.

We have audited the accompanying consolidated balance sheets of Scott
Technologies, Inc. (a Delaware corporation) and Subsidiaries as of December 31,
1998 and 1997, and the related consolidated statements of operations,
stockholders' equity and comprehensive income, and cash flows for each of the
three years in the period ended December 31, 1998. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Scott Technologies,
Inc. and Subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.


/s/

ARTHUR ANDERSEN LLP

Cleveland, Ohio,
January 22, 1999


                                       22
<PAGE>

                    SCOTT TECHNOLOGIES, INC. AND SUBSIDIARIES
                      (formerly Figgie International Inc.)
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                         FOR THE YEARS ENDED DECEMBER 31
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                                1998         1997         1996 
                                             ---------    ---------    ---------
<S>                                          <C>          <C>          <C>      
Net Sales                                    $ 177,108    $ 158,258    $ 136,684
       Cost of Sales                           119,853      106,234       93,963
                                             ---------    ---------    ---------
Gross Profit on Sales                           57,255       52,024       42,721

Operating Expenses:
       Selling, General and Administrative      25,813       24,767       26,888
       Research and Development                  3,113        3,338        2,938
                                             ---------    ---------    ---------
Total Operating Expenses                        28,926       28,105       29,826
                                             ---------    ---------    ---------

Operating Income                                28,329       23,919       12,895
                                             ---------    ---------    ---------

Other Expense (Income):
       Refinancing Costs                           652          524          993
       Interest Expense                         12,550       21,811       19,112
       Interest Income                          (3,396)      (5,214)      (2,079)
       Other, Net                                2,602         (954)        (321)
                                             ---------    ---------    ---------

Income (Loss) from Continuing Operations
       before Income (Tax) Benefit and
       Extraordinary Item                       15,921        7,752       (4,810)

Income (Tax) Benefit                            (6,427)      (2,672)      27,712
                                             ---------    ---------    ---------
Income from Continuing Operations before
       Extraordinary Item                        9,494        5,080       22,902

Discontinued Operations, net of tax:
       (Loss) Income from Operations            (6,275)         500       28,680 
       (Loss) on Disposal                      (10,098)      (7,308)     (28,282)
                                              ---------    ---------    --------- 
                                               (16,373)      (6,808)         398 

(Loss) Income before Extraordinary Item         (6,879)      (1,728)      23,300
Extraordinary Item - (Loss) on
       Extinguishment of Debt, net of tax       (1,689)        (778)          --
                                             ---------    ---------    ---------
Net (Loss) Income                            $  (8,568)   $  (2,506)   $  23,300
                                             =========    =========    =========

Weighted Average Shares - Basic                 18,321       18,411       18,371
Weighted Average Shares - Diluted               18,390       18,650       18,728

Per Share Data - Basic EPS:
Income from Continuing Operations            $    0.52    $    0.27    $    1.25
(Loss) Income from Discontinued Operations       (0.90)       (0.37)        0.02
                                             ---------    ---------    ---------
(Loss) Income before Extraordinary Item          (0.38)       (0.10)        1.27
Extraordinary (Loss)                             (0.09)       (0.04)          -- 
                                             ---------    ---------    ---------
Net (Loss) Income                            $   (0.47)   $   (0.14)   $    1.27
                                             =========    =========    =========

Per Share Data - Assuming Dilution:
Income from Continuing Operations            $    0.52    $    0.27    $    1.22
(Loss) Income from Discontinued Operations       (0.90)       (0.36)        0.02
                                             ---------    ---------    ---------
(Loss) Income before Extraordinary Item          (0.38)       (0.09)        1.24
Extraordinary (Loss)                             (0.09)       (0.04)          -- 
                                             ---------    ---------    ---------
Net (Loss) Income                            $   (0.47)   $   (0.13)   $    1.24
                                             =========    =========    =========
</TABLE>

See Notes to Consolidated Financial Statements.


                                       23
<PAGE>

                            SCOTT TECHNOLOGIES, INC.
                      (formerly FIGGIE INTERNATIONAL INC.)
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1998 AND 1997
                                 (in thousands)

ASSETS                                                    1998           1997
                                                       ---------      ---------
CURRENT ASSETS
Cash and Cash Equivalents                              $  39,344      $ 103,264
Trade Accounts Receivable, less Allowance for
  Uncollectible Accounts of $257 in 1998
  and $194 in 1997                                        13,978         12,416
Inventories                                               26,360         23,398
Prepaid Expenses                                             939            449
Recoverable Income Taxes                                     974          4,120
Current Deferred Tax Asset                                28,000          6,400
Net Assets Related to Discontinued Operations             25,039         33,376
                                                       ---------      ---------
  Total Current Assets                                   134,634        183,423
                                                       ---------      ---------

PROPERTY, PLANT AND EQUIPMENT
Land and Land Improvements                                37,395         42,758
Buildings and Leasehold Improvements                      14,696         12,942
Machinery and Equipment                                   18,682         14,445
                                                       ---------      ---------
                                                          70,773         70,145
Accumulated Depreciation                                 (17,972)       (14,758)
                                                       ---------      ---------
   Net Property, Plant and Equipment                      52,801         55,387
                                                       ---------      ---------

OTHER ASSETS
Deferred Divestiture Proceeds and Other, Net              20,803         29,324
Prepaid Pension Costs                                     15,687         12,723
Intangible Assets                                          1,866          1,953
Cash Surrender Value of Insurance Policies                 4,838          3,596
Prepaid Finance Costs                                      1,800            759
Deferred Tax Asset                                        26,936         44,060
Other                                                      3,819          1,589
                                                       ---------      ---------
   Total Other Assets                                     75,749         94,004
                                                       ---------      ---------

Total Assets                                           $ 263,184      $ 332,814
                                                       =========      =========

See Notes to Consolidated Financial Statements.


                                       24
<PAGE>

                            SCOTT TECHNOLOGIES, INC.
                      (formerly FIGGIE INTERNATIONAL INC.)
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1998 AND 1997
                                 (in thousands)

LIABILITIES                                                 1998         1997  
                                                         ---------    ---------
CURRENT LIABILITIES
Accounts Payable                                         $  15,661    $  15,614
Accrued Insurance Reserves                                  10,853       11,693
Accrued Compensation                                         3,964        4,075
Accrued Interest                                             2,435        3,827
Accrued Liabilities and Expenses                            18,135       11,362
Current Portion of Long-Term Debt                           24,481          513
                                                         ---------    ---------
   Total Current Liabilities                                75,529       47,084
                                                         ---------    ---------

Long-Term Debt                                              75,550      158,920
Non-Current Insurance Reserves                              26,172       31,410
Other Non-Current Liabilities                               30,667       23,804
                                                         ---------    ---------
   Total Liabilities                                       207,918      261,218
                                                         ---------    ---------

STOCKHOLDERS' EQUITY

Series A Junior Participating Preferred Shares,
       $1.00 Par Value; Authorized, 500 Shares;
       Issued and Outstanding, None                             --           --
Preferred Stock, $1.00 Par Value; Authorized,
       3,217 Shares; Issued and Outstanding, None               --           --
Common Stock, $0.10 Par Value; Authorized,
       36,000 Shares; Issued and Outstanding
       1998 - 18,855; 1997 - 18,436                          1,886        1,844
Capital Surplus                                            112,409      109,871
Accumulated Deficit                                        (46,575)     (38,007)
Unearned Compensation                                           --          (24)
Accumulated Other Comprehensive (Loss)                      (3,229)      (2,088)
Treasury Stock, Common Shares at Cost
       1998 - 685 shares; 1997 - 0 shares                   (9,225)          --
                                                         ---------    ---------
   Total Stockholders' Equity                               55,266       71,596
                                                         ---------    ---------

Total Liabilities and Stockholders' Equity               $ 263,184    $ 332,814
                                                         =========    =========

See Notes to Consolidated Financial Statements.


                                       25

<PAGE>

                    SCOTT TECHNOLOGIES, INC. AND SUBSIDIARIES
                      (formerly Figgie International Inc.)
    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY and COMPREHENSIVE INCOME
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                                Accumulated                         
                                                                      Retained                    Other                             
                                              Common      Capital     Earnings     Unearned   Comprehensive  Treasury  Comprehensive
                                               Stock      Surplus     (Deficit)  Compensation     (Loss)      Stock        Income   
                                               -----      -------     ---------  ------------     ------      -----        ------   
<S>                                           <C>         <C>         <C>         <C>            <C>         <C>       <C>          
BALANCE, DECEMBER 31, 1995                    $  1,837    $109,046    $(58,801)   $ (1,340)      $  (525)    $   --                
Net Income                                                              23,300                                             23,300
  Minimum Pension Liability                                                                       (1,009)                  (1,009)
  Foreign Currency Translation Adjustments                                                           291                      291
                                                                                                                         --------
Comprehensive Income                                                                                                      $22,582 
Restricted Stock Purchase Plan, net                  4         492                   1,266                               ========
                                              --------    --------    --------      --------     -------     -------
BALANCE, DECEMBER 31, 1996                       1,841     109,538     (35,501)        (74)       (1,243)         --
Net (Loss)                                                              (2,506)                                           $(2,506)
  Minimum Pension Liability                                                                          205                      205 
  Foreign Currency Translation Adjustments                                                        (1,050)                  (1,050)
                                                                                                                         --------
Comprehensive (Loss)                                                                                                     $ (3,351)
Restricted Stock Purchase Plan, net                  3         333                      50                               =========
                                              --------    --------    --------      --------     -------     -------
BALANCE, DECEMBER 31, 1997                       1,844     109,871     (38,007)        (24)       (2,088)         --              
Net (Loss)                                                              (8,568)                                          $ (8,568)
  Minimum Pension Liability                                                                       (1,136)                  (1,136)
  Foreign Currency Translation Adjustments                                                            (5)                      (5)
                                                                                                                         --------
Comprehensive (Loss)                                                                                                     $ (9,709)
Restricted Stock Purchase Plan, net                                                     24                               ========
Treasury Stock Repurchased                                                                                    (9,225)
Common Stock Issuance                               42       2,538                                                   
                                              --------    --------    --------      --------     -------     ------- 

BALANCE, DECEMBER 31, 1998                    $  1,886    $112,409    $(46,575)     $      0     $(3,229)    $(9,225)
                                              ========    ========    ========      ========     =======     =======
</TABLE>

See Notes to Consolidated Financial Statements.


                                       26

<PAGE>

                            SCOTT TECHNOLOGIES, INC.
                      (formerly FIGGIE INTERNATIONAL INC.)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
                                 (in thousands)

<TABLE>
<CAPTION>
                                                              1998        1997          1996
                                                           ---------    ---------    ---------
<S>                                                        <C>          <C>          <C>      
Operating Activities:
     Income from Continuing Operations                     $   9,494    $   5,080    $  22,902
     (Loss) Income from Discontinued Operations              (16,373)      (6,808)         398
     (Loss) from Extraordinary Item                           (1,689)        (778)          -- 
     Adjustments to Reconcile Income (Loss) to Net Cash
       Used by Operating Activities
         Depreciation and Amortization                         4,608        6,869        7,153
         Other, Net                                               24           50          973
         Gain on Sale of Snorkel                                  --      (23,600)          -- 
     Other, Net                                                1,938       (5,320)        (692)
     Changes in Operating Assets and Liabilities
         Accounts Receivable                                   2,184        3,271       (2,183)
         Inventories                                            (600)      (4,452)     (15,736)
         Prepaid Items                                        (3,125)      (1,742)      (1,138)
         Other Assets                                          3,684        3,733       11,549
         Accounts Payable                                     (1,882)       4,505       (1,799)
         Accrued Liabilities and Expenses                      3,937         (945)      (3,731)
         Accrued Income Taxes                                   (735)       3,724      (35,246)
         Other Liabilities                                     1,564        8,395       12,414
                                                           ---------    ---------    ---------
Net Cash Provided (Used) by Operating Activities               3,029       (8,018)      (5,136)
                                                           ---------    ---------    ---------

Investing Activities:
     Capital Expenditures for Continuing Operations           (5,940)      (5,707)      (4,385)
     Capital Expenditures for Discontinued Operations         (1,317)      (2,966)      (5,894)
     Proceeds from Sale of Property, Plant and Equipment       8,079        7,739       13,240
     Proceeds from Business Divestitures                          --       92,634       48,049
                                                           ---------    ---------    ---------
Net Cash Provided by Investing Activities                        822       91,700       51,010
                                                           ---------    ---------    ---------

Financing Activities:
     Proceeds from Debt                                        1,550           --          200
     Principal Payments on Debt                              (63,553)     (24,222)     (28,272)
     Proceeds from Issuing Common Stock                        2,580          721          839
     Payments to Reacquire Common Stock                       (9,225)        (385)         (50)
                                                           ---------    ---------    ---------
Net Cash (Used) by Financing Activities                      (68,648)     (23,886)     (27,283)
                                                           ---------    ---------    ---------

Net (Decrease) Increase in Cash and Cash Equivalents         (64,797)      59,796       18,591
Cash and Cash Equivalents at Beginning of Year               104,243       44,447       25,856
                                                           ---------    ---------    ---------
Cash and Cash Equivalents at End of Year                   $  39,446    $ 104,243    $  44,447
                                                           =========    =========    =========

Supplemental Disclosures:
     Cash Paid (Received) during Year for -
         Net Interest Paid                                 $  10,546    $  13,705    $  18,390
         Domestic Federal Income Taxes                     $  (1,544)   $  (1,704)   $  (3,732)
</TABLE>

Cash and Cash Equivalents Include Cash From
Discontinued Operations.

See Notes to Consolidated Financial Statements.


                                       27

<PAGE>

                    SCOTT TECHNOLOGIES, INC. AND SUBSIDIARIES
                      (formerly Figgie International Inc.)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies:

PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
accounts of Scott Technologies, Inc. (referred to, with all its consolidated
subsidiaries and divisions and their predecessor entities, unless the context
otherwise requires, as the "Company"). All intercompany account transactions
have been eliminated in consolidation.

NATURE OF OPERATIONS. The Company is a United States-based multinational
corporation operating in one segment: life support respiratory products. The two
largest customers of the Company are Aviall, Inc. and the U.S. Government.
Aviall, Inc., which is a distributor of Scott Aviation's aviation products,
accounted for approximately 13.5%, 10.4% and 10.2% of the Company's 1998, 1997,
and 1996 net sales, respectively. The U.S. Government accounted for
approximately 7.1%, 10.0% and 9.2% of the Company's total net sales for 1998,
1997 and 1996, respectively. The Company's products are marketed through most
normal channels of business, principally in North America.

USE 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
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from the estimates.

CASH AND CASH EQUIVALENTS. For purposes of the statements of cash flows, the
Company considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. Cash equivalents are stated at
cost, which approximates their fair market value. The effect of foreign currency
translation on cash held by foreign divisions is immaterial.

LONG-TERM CONTRACTS. Government sales are principally under long-term contracts
and include cost-reimbursement and fixed-price contracts. Sales under
cost-reimbursement contracts are recognized as costs are incurred and include a
proportion of the fees expected to be realized equal to the ratio of costs
incurred to date to total estimated costs. Sales under fixed price contracts are
recognized as the actual cost of work performed relates to the estimate at
completion.

Cost or performance incentives, which are incorporated in certain contracts, are
recognized when realization is assured and amounts can be reasonably estimated.
Estimated amounts for contract changes and claims are included in contract sales
only when realization is probable. Assumptions used for recording sales and
earnings are adjusted in the period of change to reflect revisions in contract
value and estimated costs. In the period in which it is determined that a loss
will be incurred on a contract, the entire amount of the estimated loss is
charged to income.

CONCENTRATION OF CREDIT RISK. The Company does not have any concentrations of
credit risk by major customer, geographic region or activity. The Company
generally does not require collateral.

INVENTORIES. Manufacturing inventories are stated at the lower of first-in-
first-out cost or market. Costs accumulated under government contracts are
stated at actual cost.


                                       28
<PAGE>

PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment are stated at cost
and depreciated over the estimated useful lives of the assets, generally using
the straight-line method. The principal rates of depreciation are: buildings, 2
1/2%; machinery and equipment, 8 1/3%; leasehold improvements, life of lease.

LAND AND LAND IMPROVEMENTS. Land and land improvements includes $37.1 million
and $42.5 million at December 31, 1998 and 1997, respectively, of developed and
developable land and improvements. The recorded amounts are net of reserves of
$6.5 million and $5.2 million at December 31, 1998 and 1997, respectively.

INTANGIBLES. Goodwill of $3.5 million at December 31, 1998 and 1997 represents
costs in excess of net assets of purchased businesses, and is generally
amortized over a 40-year period. At December 31, 1998 and 1997, accumulated
goodwill amortization was $1.8 million and $1.7 million, respectively. The
Company has evaluated the realizability of goodwill based upon expectations of
undiscounted cash flows of the related business unit and has concluded that no
impairment exists.

ENVIRONMENTAL COMPLIANCE. At the present time, compliance with federal, state,
and local provisions with respect to environmental protection and regulation has
not had a material impact on the Company's capital expenditures, earnings, or
competitive position. The Company believes compliance with respect to
environmental matters will not have a material adverse effect on the Company's
financial position, future operations or cash flow.

INCOME TAXES. Deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to be recovered or settled.

SELF-INSURANCE LIABILITIES. The Company is self-insured for certain levels of
general liability (including product liability) and workers' compensation
coverage. Effective December 31, 1998, the Company capped its exposure to
insured liabilities arising prior to December 1, 1998, with the purchase of 
an aggregate stop loss insurance policy. The aggregate stop loss insurance 
policy, which excludes coverage for mass tort injuries, provides a $20 
million layer of coverage above the Company's $40 million self-insured 
coverage. The costs and balance sheet accruals for self-insurance programs 
are based on actuarial calculations prepared by outside actuaries and the 
terms of the aggregate stop loss policy. Adjustments to recorded accruals of 
continuing operations are reflected in current operating results. Adjustments 
to recorded accruals of discontinued operations are reflected in the loss 
from discontinued operations.

EARNINGS PER SHARE. Basic earnings per common share are based upon the weighted
average number of shares outstanding during each year. Diluted earnings per
common share are based upon the basic earnings per share adjusted for any
dilutive effect from the common stock equivalents of stock options.

STOCK OPTIONS. The Company accounts for stock options under APB Opinion No. 25,
under which no compensation cost has been recognized.

(2) Refinancing Costs:

In 1998, 1997, and 1996, Refinancing Costs represent the amortization of prepaid
financing costs.


                                       29
<PAGE>

(3) Discontinued Operations:

Interstate Electronics:

On October 21, 1998, the Company's Board of Directors announced that it intends
to divest its Interstate Electronics subsidiary ("IEC"). As a result, prior
years' financial statements have been restated to reflect IEC as a discontinued
operation and is summarized as follows (in thousands):

<TABLE>
<CAPTION>
                                                 As
                                             Previously                    As
                                              Reported        IEC       Restated
                                             ---------    ---------    ---------
<S>                                          <C>          <C>          <C>      
1997:
Net Sales                                    $ 248,602    $ (90,344)   $ 158,258
                                             =========    =========    =========

(Loss) Income from Continuing Operations
  Before Extraordinary Item                     (1,382)       6,462        5,080
(Loss) from Discontinued Operations               (346)      (6,462)      (6,808)
Extraordinary Item                                (778)          --         (778)
                                             ---------    ---------    ---------

Net (Loss)                                   $  (2,506)   $      --    $  (2,506)
                                             =========    =========    =========

1996:
Net Sales                                    $ 227,221    $ (90,537)   $ 136,684
                                             =========    =========    =========

Income from Continuing Operations
 Before Extraordinary Item                      27,665       (4,763)      22,902
(Loss) Income from Discontinued Operations      (4,365)       4,763          398
Extraordinary Item                                  --           --           --
                                             ---------    ---------    ---------

Net Income                                   $  23,300    $      --    $  23,300
                                             =========    =========    =========
</TABLE>

Income (Loss) from Operations:

Income (Loss) from the operation of the discontinued operations, net of tax in
1998, 1997, and 1996, represents the operating results of the Company's Taylor
Environmental division from January 1, 1996 through its sale on November 25,
1996; the operating results of the Company's Snorkel division from January 1,
1996 through its sale on November 17, 1997; and the operating results of the
Company's IEC subsidiary from January 1, 1996 through December 31, 1998.

Loss on Disposal of Discontinued Operations:

In 1998, loss on disposal included (1) a third quarter pretax charge of $9.8
million comprised of: a $5.0 million addition to the self-insurance accrual to
reflect recent adverse experience, a $3.2 million charge related to underfunded
foreign pension plans, and a $1.6 million loss provision for litigation defense
costs related to discontinued operations; and (2) a fourth quarter pretax charge
of $7.0 million related to a $2.5 million addition to environmental reserves, a
$2.5 million addition to litigation reserves, and a $2.0 million addition to
insurance reserves as part of the premium to purchase aggregate stop loss
coverage.

Loss on disposal of discontinued operations in 1997 of $7.3 million, net of tax
benefit, represents a $17.0 million provision to increase the Company's
self-insurance accrual to reflect the cost of the December 1997 settlement of a
specific personal injury lawsuit against a previously discontinued business; the
gain from the sale of the Company's Snorkel division of $23.6 million; a $9.2
million addition to the self-insurance accrual for discontinued businesses to
reflect general adverse experience on claims per a December 1997 actuarially
prepared valuation; a $6.5 million allowance against the carrying value of
deferred divestiture proceeds to reflect probable settlements of ongoing
disputes underlying prior divestitures; a $1.5 million loss provision for
litigation arising from a discontinued unit as a result of a December 1997
lawsuit; and $1.6 million of other adjustments.


                                       30
<PAGE>

Loss on disposal of discontinued operations in 1996 represents a loss provision
of $28.3 million, which is net of a tax benefit of $15.2 million, recorded by
the Company in the fourth quarter of 1996. The provision reflects valuation
adjustments to recorded assets arising from and accruals for costs and probable
losses on obligations related to previously discontinued businesses. The loss
consists of a $20.5 million addition to the self-insurance accrual as a result
of a December 1996 actuarially prepared valuation of the liabilities to
negotiate the sale of a minority position to a third party; a $14.8 million
write-down of carrying value of net assets related to discontinued operations
and of deferred proceeds to reflect negotiated resolutions of disputes and
events that gave rise to greater risk of realization; a $2.6 million reserve for
litigation arising from the businesses of the discontinued units; and a $5.6
million accrual to buy out certain employee benefit legacy obligations.

Sale of Snorkel:

On November 17, 1997, the Company sold its Snorkel division. The agreement, as
amended, provides for $100 million paid to the Company at closing plus a
contingent additional amount. The contingent amount will be the amount of sales
of the Snorkel business for the twelve-month period commencing on April 1, 1998
and ending on March 31, 1999 (the "Earn-Out Period") in excess of $140 million,
such additional payment not to exceed $20 million, plus 70% of the amount of
sales of the Snorkel business during the Earn-Out Period in excess of $160
million, such additional amount not to exceed $30 million. In the first half of
1999, the Company expects to recognize $20-$40 million of income as a result of
the Earn-Out. The agreement further provides for the assumption by the purchaser
of certain liabilities and operating lease commitments of the Snorkel business.
The sale generated a $23.6 million gain, which was recognized in the Company's
financial statements. The financial statements do not reflect the contingent
additional amount as an asset or as income.

Prior Divestitures:

Prior to 1998, the Company divested a number of its businesses. The contract
terms under which businesses were divested include representations and
warranties, covenants and indemnification provisions made (a) by the Company to
purchasers of the businesses and (b) by purchasers of businesses to the Company.
Each transaction has contract terms specific to that transaction. The extent of
representations and warranties made range from those qualified by time,
knowledge, and dollar materiality to those representations and warranties which
are unqualified. Covenants require the Company to act, or prevent the Company
from acting, in a variety of ways, such as not competing with the purchasers of
a business. Covenants also require the purchasers to act, or prevent them from
acting, in a variety of ways. The duration of covenants ranges from those
effective for a specified period of time to those which are indefinite.

Remedies available for breaches of representations and warranties and covenants
range from monetary relief in specific amounts for specific breaches or
violations to unlimited amounts.

Under the contracts, the Company has generally retained liability for events
that occurred prior to sale. The Company believes that it has established
appropriate accruals for losses that may arise, such as workers' compensation,
product liability, general liability, environmental risks and federal and state
tax matters.

The Company has indemnified purchasers and has received indemnifications from
purchasers for a variety of items. In some transactions, a portion of the
purchase price was held back or escrowed at banks to support indemnification
provisions. Such amounts are reflected as the assets of the Company within
deferred divestiture proceeds.

Proceeds and other consideration from divestitures which will be paid to the
Company upon fulfillment of contractual provisions, the passage of time, or the
occurrence of future events have been recorded as deferred divestiture proceeds
classified as non-current assets. At December 31, 1998, deferred divestiture
proceeds consisted of cash held in bank escrow accounts from the sale of the
Company's Hartman Electrical and Safway Steel Products operations, cash held
back


                                       31
<PAGE>

by purchasers from the sale of the Company's Figgie Financial Services
operations, a note receivable from the purchaser of the Taylor Instruments
business, a partnership interest in the entity that acquired Interstate
Engineering (a vacuum cleaner manufacturer), cash due to the Company from future
tax benefits under a tax sharing agreement with an unaffiliated public company,
Rawlings Sporting Goods Company, Inc., the net assets of Willoughby Assurance,
Ltd., a dormant reinsurance subsidiary of the Company, installation contracts in
process of completion from the "Automatic" Sprinkler business, former facilities
of discontinued business units and other items. Deferred divestiture proceeds do
not include any contingent additional amount associated with the Snorkel sale.

Deferred divestiture proceeds include management's best estimates of the amounts
expected to be realized on the collection of deferred proceeds and sale of
residual assets related to discontinued operations. The amounts the Company will
ultimately realize could differ materially from the amounts recorded. The
Company has a reserve of $12.5 million at December 31, 1998 and $28.0 million at
December 31, 1997 against these assets, which is presented as a deduction from
deferred divestiture proceeds.

(4) Income Taxes:

Income tax provision (benefit) consists of the following components (in
thousands):

<TABLE>
<CAPTION>
                                                 1998        1997         1996
                                               --------    --------    --------
<S>                                            <C>         <C>         <C>      
Continuing Operations:
  Currently Payable:
     Federal                                   $  5,572    $  2,713    $ (1,684)
     State                                          770          --          -- 
     Effect of Net Operating Loss and
       Valuation Allowance                           --          --       1,684
                                               --------    --------    --------
                                                  6,342       2,713          -- 
  Deferred and other:
     Federal                                        221     (13,976)     (2,701)
     Effect of Net Operating Loss and
       Valuation Allowance                         (136)     13,935     (25,011)
                                               --------    --------    --------
     Total from Continuing Operations             6,427       2,672     (27,712)

Discontinued Operations:
     Operations                                  (4,183)      2,185         690
     Disposal                                    (6,732)     (4,873)    (15,228)
                                               --------    --------    --------
     Total from Discontinued Operations         (10,915)     (2,688)    (14,538)

Extraordinary Item                               (1,126)       (519)         -- 
                                               --------    --------    --------

Total Tax(Benefit)                             $ (5,614)   $   (535)   $(42,250)
                                               ========    ========    ========
</TABLE>

A reconciliation of the actual tax provision (benefit) to the U.S. federal
income tax rates effective for each year for continuing operations is as
follows:

                                                  1998       1997        1996
                                                 -----      -----      -------
Statutory Federal Tax Rates                       35.0%      35.0%      (35.0%)

 Other, net                                        2.3       (2.3)        4.8
 State Income Taxes                                3.1        1.8        (7.7)
 Recognition of Deferred Tax Asset                  --         --      (538.2)
                                                 -----      -----      -------

Effective Tax Rate (Benefit)                      40.4%      34.5%     (576.1%)
                                                 =====      =====      =======


                                       32

<PAGE>

The components of the net deferred tax asset as of December 31, 1998 and 1997
are as follows (in thousands):

                                                         1998            1997
                                                       --------        --------
Deferred Tax Assets:
    Deferred Compensation Plans                        $  6,851        $  2,441
    Insurance and Other Reserves                         14,681          15,399
    Contingency Reserves                                  5,430           3,436
    Inventory Reserves                                      157             532
    Operating & Capital Losses and Tax
      Credit Carryforwards                               66,888          66,069
    Discontinued Operations and Other                     2,612           2,443
    Valuation Allowance                                 (16,712)        (16,029)
                                                       --------        --------
Total Deferred Tax Assets                              $ 79,907        $ 74,291
                                                       --------        --------

Deferred Tax Liabilities:
    Property, Plant and Equipment                      $(16,484)       $(14,871)
    Benefit Plans                                        (5,352)         (4,590)
    Discontinued Operations and Other                    (3,135)         (4,370)
                                                       --------        --------
Total Deferred Tax Liabilities                         $(24,971)       $(23,831)
                                                       --------        --------

Net Deferred Tax Assets                                $ 54,936        $ 50,460
                                                       ========        ========

As of December 31, 1998, for tax reporting purposes, the Company has tax credit
carryforwards of $18.5 million, and operating loss and charitable contribution
deduction carryforwards of $98.9 million ($34.6 million tax) that will begin to
expire in 2005 through 2008, respectively. The Company recorded these assets in
1996 based on the profitability of the continuing divisions. Management has
determined that income will more likely than not be sufficient to recognize
fully all deferred tax assets.

In addition, the Company has capital loss carryforwards of $39.5 million ($13.8
million tax) which were incurred in 1996. At the present time, the Company has
reserved the future tax benefit of these loss carryforwards until a time when it
believes they can be realized.

Realization of tax carryforwards is dependent on future taxable income and
amounts realized are subject to tax regulations which include limitations by
year and type of tax attribute being carried forward. The Company has similar
carryforward attributes for federal alternative minimum tax purposes and for
state income tax purposes.

Accumulated unremitted foreign earnings are not material and any liability
related to the remittance of foreign earnings would not be material to the
financial statements.

The remaining receivable balance at December 31, 1997 of $1.4 million, which
resulted from the Company's 1991-1993 tax audit, was received in March 1998.


                                       33
<PAGE>

(5) Inventories:

Inventories are summarized as follows (in thousands):

                                           1998          1997  
                                        --------      --------
                                           
           Raw materials                 $ 7,323      $  6,182
           Work in process                 3,526         3,146
           Finished goods                 15,944        14,594
           Inventory reserves               (433)         (524)
                                        --------      --------
           Total Inventories            $ 26,360      $ 23,398 
                                        ========      ========

(6) Receivables:

Receivables consist of the following components (in thousands):

                                                         1998        1997  
                                                       --------    --------
       U.S. Government                                                     
           Billed                                      $    398    $  1,193
           Unbilled                                           -           -
                                                       --------    --------
                                                            398       1,193
       Commercial                                                          
           Billed                                        13,837      11,417
           Allowance for Uncollectible Accounts            (257)       (194)
                                                       --------    --------
                                                       $ 13,978    $ 12,416 
                                                       ========    ========

U.S. Government receivables include amounts derived from contracts on which the
Company performs on a prime contractor or subcontractor basis. Unbilled
receivables represent the difference between revenue recognized on a percentage
of completion basis for financial accounting and reporting purposes and amounts
permitted to be billed to customers under contract terms. These amounts will be
billed in subsequent periods based on provisions of the agreements.

Costs charged by the Company to the U.S. Government in the performance of U.S.
Government contracts are subject to audit. During 1998 and 1997, the U.S.
Government concluded its audit with respect to 1991, 1992 and 1993 costs. The
year 1994 is currently under audit.

(7) Credit Facility:

On December 31, 1998, the Company refinanced through General Electric Capital
Corporation ("GECC") its $75 million, revolving credit loan and letter of credit
sub-facility, which matured on January 1, 1999. The new loan facilities
("Amended Credit Agreement") include a 72-month, $75 million revolving line of
credit ("Revolver") as well as a 69-month, $20 million, delayed draw, term loan
facility ("Term Loan"). In March 1999, the Company successfully completed
syndication of an additional $55 million to increase the Term Loan to $75
million.

Within the Revolver is a $30 million letter of credit sub-facility. Borrowings
under the Revolver are available up to the lesser of: (1) $75 million, less
outstanding letters of credit, or (2) four times the Company's trailing 12 month
EBITDA, less: (a) outstanding indebtedness and a 50% letter of credit reserve;
plus (b) cash and cash equivalents. At the Company's option, borrowings under
the Revolver bear interest at alternate base rates based on (1) the higher of
(a) U.S. prime rate, or (b) the Federal Funds rate plus 50 basis points, plus
100 basis points; or (2) LIBOR plus 250 basis points.


                                       34
<PAGE>

The Term Loan is available to pay the Company's 9.875% Senior Notes due on
October 1, 1999. The Company can draw amounts under the Term Loan from time to
time to pay for the purchase of Senior Notes in the open market. At the
Company's option, borrowings under the Term Loan bear interest at alternative
base rates based on (1) the higher of (a) the U.S. prime rate, or (b) the
Federal Funds rate plus 50 basis points, plus 100 basis points; or (2) LIBOR
plus 250 basis points. The Company is also permitted to arrange for financial
hedges to swap a variable interest rate on the Term Loan for a fixed interest
rate.

The Amended Credit Agreement is secured by a majority of the Company's non-real
estate assets, including certain accounts receivable, inventory, machinery and
equipment, and intangibles. The facility contains various affirmative and
negative covenants, including restrictions on dividends and financial covenants
(maximum leverage ratio, minimum fixed charge coverage ratio and limitations on
capital expenditures).

As of December 31, 1998, $15.8 million of letters of credit and $1.6 million of
borrowings were outstanding under the Revolver ($32.6 million was available
pursuant to an agreed borrowing availability during the first 30-day period of
the Revolver in the amount of $50 million less outstanding letters of credit),
no borrowings were outstanding under the Term Loan and all financial covenants
have been satisfied.

(8) Long-Term Debt:

Long-term debt at December 31, 1998 and 1997 consisted of the following (in
thousands):

<TABLE>
<CAPTION>
                                            1998                    1997
                                  ----------------------   ----------------------
                                   Carrying       Fair      Carrying        Fair  
                                     Value       Value       Value         Value 
                                  ---------    ---------   ---------    ---------
<S>                               <C>          <C>         <C>          <C>      
9.875% Senior Notes               $  97,647    $  99,600   $ 158,270    $ 164,600
Credit Facility                       1,550        1,550          --           --
Mortgage Notes                          834          834         979          979
Obligations under Capital Lease          --           --         184          184
                                  ---------    ---------   ---------    ---------
Total                               100,031    $ 101,984     159,433    $ 165,763
                                               =========                =========

Less - Current Maturities           (24,481)                    (513)            
                                  ---------                ---------

Long-Term Debt                    $  75,550                $ 158,920             
                                  =========                =========
</TABLE>

The Company intends to extinguish its 9.875% Senior Notes, due October 1, 1999,
by using cash and the $75 million Term Loan available under the Company's
Amended Credit Agreement. As a result, $75 million of Senior Notes have been
classified as long-term debt with the balance classified as current maturities.
Interest on the Senior Notes is payable semi-annually on April 1 and October 1.
During 1998, the Company purchased in the market $60.6 million of Senior Notes
at market prices. These Senior Notes have been returned to the Indenture Trustee
for retirement.

Mortgage notes are secured by real property, are due at various dates through
2004 and bear interest at rates ranging from 7.5% to 8.5%.

The fair value estimates were made as follows: the Senior Notes were based on
the market price at which the debt traded near year-end; and the mortgages were
based on carrying value given their collateralized nature.

The scheduled principal payments for long-term debt are as follows: 1999 - $97.9
million; 2000 - $0.1 million; 2001 - $0.1 million; 2002 - $0.2 million; 2003 and
after - $1.7 million.


                                       35
<PAGE>

(9) Leases:

The Company leases manufacturing equipment under operating leases. Operating
lease expense for continuing operations was approximately $3.4 million, $4.3
million, and $3.3 million in 1998, 1997, and 1996, respectively. Rental
commitments under non-cancelable operating leases as of December 31, 1998 were
as follows (in thousands):

                                        Discontinued   Continuing
                                         Operations     Operations         Total
                                         ----------     ----------         -----
Year Ending December 31,
     1999                                  $1,464         $1,958          $3,422
     2000                                     358            389             747
     2001                                     223            118             341
     2002                                      --            118             118
     2003 & Beyond                             --            180             180
                                           ------         ------          ------
Total minimum payments required            $2,045         $2,763          $4,808
                                           ======         ======          ======
                                                                  
At the termination of two equipment leases in June 1999, the Company is
effectively required to purchase the equipment for a fixed price of
approximately 35% of the original lease value. As a result of these provisions
and the anticipated need for continued use of the equipment in the Company's
operations, the Company currently expects to purchase this equipment. The
purchase price would be approximately $4.6 million.

(10) Contingent Liabilities:

The Company and its subsidiaries are defendants in various lawsuits arising in
the ordinary course of business. In the opinion of management, any liability
with respect to these matters will not have a material adverse effect on the
Company's financial condition, cash flow or results of operations.

The Company has been cooperating with the U.S. Government in a civil
investigation involving possible improprieties at an Army facility where the
Company's Scott Aviation division was a supplier. The Company has furnished
documents and other requested information and denies any wrongdoing.

See also Note (3) with reference to discontinued businesses.

(11) Pension and Retirement Benefits Plans:

The Company has pension plans covering the majority of its employees. The plan
benefits for salaried employees are based on employees' earnings during their
years of participation in the plan. Hourly employees' plan benefits are based on
various dollar units multiplied by the number of years of eligible service as
defined in each plan. The Company's policy has been to fund amounts as necessary
on an actuarial basis to comply with the Employee Retirement Income Security Act
of 1974. In addition, the Company has a nonqualified supplemental retirement
plan covering certain officers and senior executives.

The following table provides a reconciliation of the changes in the plans'
benefit obligations and fair value of assets over the two-year period ending on
December 31, 1998, and a statement of the funded status as of December 31, 1998
and 1997. In 1998, the two foreign pension plans not previously consolidated
were added to the table. The benefit obligation and assets of these plans are
reflected on the foreign plans line of the following table. The net benefit
obligation of these plans at January 1, 1998 was $1.9 million.


                                       36
<PAGE>

                                                            1998          1997
                                                            ----          ----
Change in Benefit Obligation (in thousands):
Benefit Obligation at Beginning of Year                 $  84,767     $  75,494
Service Cost                                                1,963         1,774
Interest Cost                                               6,781         5,827
Plan Participants' Contributions                              472           556
Amendments                                                    435           465
Actuarial Loss                                              6,009         5,311
Disbursements                                              (6,291)       (4,523)
Foreign Currency Exchange Rate                                 78            --
Foreign Plans                                              14,127            --
Curtailments                                                 (531)         (137)
                                                        ---------     ---------
Benefit Obligation at End of Year                       $ 107,810     $  84,767
                                                        =========     =========

Change in Plan Assets (in thousands):
Fair Value of Plan Assets at Beginning of Year          $  78,035     $  66,209
Asset Gain at Beginning of Year                               908            --
Actual Return on Plan Assets                                8,695        13,173
Employer Contribution                                       3,123         2,620
Plan Participants' Contributions                              472           556
Disbursements                                              (6,291)       (4,523)
Foreign Currency Exchange Rate                                 66            --
Foreign Plans                                              12,239            --
                                                        ---------     ---------
Fair Value of Plan Assets at End of Year                $  97,247     $  78,035
                                                        =========     =========

Funded Status                                           $ (10,564)    $  (6,732)
Unrecognized Net Actuarial Loss                            13,219         9,981
Unrecognized Prior Service Cost                               983           673
Unrecognized Initial Net (Asset)                           (2,621)       (3,191)
                                                        ---------     ---------
Net Amount Recognized                                   $   1,017     $     731
                                                        =========     =========

The following table provides the amounts recognized in the statement of
financial position as of December 31, of both years.

                                                           1998          1997
                                                           ----          ----
Amounts Recognized in the Statement of
 Financial Position Consist of (in thousands):
Prepaid Benefit Cost                                    $  15,688     $  12,723
Accrued Benefit Liability                                 (19,290)      (15,085)
Intangible Asset                                              412            --
Accumulated Other Comprehensive Income                      4,207         3,093
                                                         --------      --------
Net Amount Recognized                                    $  1,017      $    731
                                                         ========      ========

The assumptions used in measuring the Company's benefit obligation are as
follows:

                                                          1998             1997
                                                          ----             ----
Weighted-Average Assumptions as of December 31                       
Discount Rate                                             6.75%            7.00%
Expected Return on Plan Assets                           10.00%           10.00%
Rate of Compensation Increase                                        
- SEBP                                                    6.00%            6.00%
- All Other Plans                                         5.00%            5.00%


                                       37
<PAGE>

The following table provides the components of net periodic benefit cost for the
plan fiscal years 1998 and 1997.

                                                             1998         1997
                                                             ----         ----
Components of Net Periodic Benefit
 Cost (in thousands):
Service Cost                                               $ 1,963      $ 1,774
Interest Cost                                                6,781        5,826
Expected Return on Plan Assets                              (8,925)      (6,641)
Amortization of Prior Service Cost                              89          109
Amortization of Initial Net Obligation (Asset)               1,329         (570)
Recognized Net Actuarial Loss                                1,563          374
Curtailment Loss                                                37          127
                                                           -------      -------
Net Periodic Benefit Cost                                  $ 2,837      $   999
                                                           =======      =======

The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for the pension plans with accumulated benefit obligations in
excess of plan assets were $34.0 million, $33.5 million, and $14.2 million,
respectively, as of December 31, 1998, and $15.3 million, $15.1 million, and
$0.0 million, respectively, as of December 31, 1997.

(12) Capital Stock:

On December 15, 1998, the stockholders of the Company voted to collapse the dual
class of common stock into a single new class of common stock designated as
"common stock." As of December 16, 1998 the new common stock is traded under the
symbol: "SCTT." Each share of Common Stock is entitled to one vote per share.

On December 15, 1998, the Company established a series of Preference Stock,
Series A Junior Participating Preferred Shares (the "Preferred Shares"),
consisting of 500,000 shares. The Preferred Shares may be issued to holders of
Common Stock upon the exercise of purchase rights that, on December 15, 1998,
were declared as a dividend to holders of Common Stock as of December 28, 1998
upon the Board's adoption of a Stockholder Rights Plan. The Preferred Shares
will be senior to the Common Stock with respect to payment of dividends and the
distribution of assets, but will rank junior to any other series of Preference
Stock unless the terms of such other series of Preference Stock provides
otherwise.

The Company's Board of Directors has authorized the Company to purchase up to 3
million shares of its common stock. In 1998, the Company repurchased 684,600
shares of common stock at a cost of $9.2 million on the open market. The total
cost of purchasing the shares is reflected as treasury stock on the Company's
balance sheet.

Earnings per share ("EPS") were calculated using the following share data. The
following reconciles the numerators and denominators of the basic and diluted
EPS calculations (in thousands, except per share data):

                                           Income        Shares       Per Share 
For the Year Ended December 31, 1998      Numerator    Denominator     Amount   
------------------------------------      ---------    -----------     ------   
                                              
    Basic EPS                          
        (Loss) Available to Common
        Stockholders                       $(8,568)       18,321      $(0.47)
    Effect of Dilutive Securities
       Stock Options                                          69
    Diluted EPS
        (Loss) Available to Common
        Stockholders                       $(8,568)       18,390      $(0.47)


                                       38
<PAGE>

Options to purchase shares of common stock that were outstanding as of December
31, 1998 but were not included in the computation of diluted EPS because the
options' exercise price was greater than the average market price of the common
shares are as follows:

   Grant Date        #of Shares          Option Price       Expiration Date  
   ----------        ----------          ------------       ---------------  
                                                                               
September 22, 1997       200             $13.75             September 22, 2004 
April 20, 1998             7             $14.75             April 20, 2005     
May 20, 1998               4             $14.75             May 20, 2005       
July 1, 1998              15             $14.6875           July 1, 2005       
July 7, 1998              70             $15.00             July 7, 2005       
July 22, 1998             55             $14.875            July 22, 2005      
November 5, 1998         186             $14.4375           November 5, 2005   
December 15, 1998        150             $14.9375           December 15, 2005  

                                              Income       Shares     Per Share
For the Year Ended December 31,1997          Numerator   Denominator    Amount  
-----------------------------------          ---------   -----------    ------  

    Basic EPS                                
        (Loss) Available to Common          
        Stockholders                         $(2,506)      18,411      $( 0.14)
    Effect of Dilutive Securities                                              
        Stock Options                                         239              
    Diluted EPS                                                                
        (Loss) Available to Common           
        Stockholders                         $(2,506)      18,650      $( 0.13)

Options to purchase shares of common stock that were outstanding as of December
31, 1997 but were not included in the computation of diluted EPS because the
options' exercise price was greater than the average market price of the common
shares are as follows:

Grant Date             #of Shares        Option Price        Expiration Date   
----------             ----------        ------------        ---------------   
                                                                               
April 16, 1996              1            $13.1875            April 16, 2003    
August 27, 1996             9            $13.50              August 27, 2003   
September 22, 1997        200            $13.75              September 22, 2004

                                         Income         Shares       Per Share
For the Year Ended December 31,1996     Numerator     Denominator     Amount  
-----------------------------------     ---------     -----------     ------  
                                                                              
     Basic EPS                                                                
         Income Available to Common      
         Stockholders                    $23,300        18,371        $ 1.27  
     Effect of Dilutive Securities                                            
         Stock Options                                     357                
     Diluted EPS                                                              
         Income Available to Common      
         Stockholders                    $23,300        18,728        $ 1.24  

Options to purchase shares of common stock that were outstanding as of December
31, 1996 but were not included in the computation of diluted EPS because the
options' exercise price was greater than the average market price of the common
shares are as follows:

Grant Date            #of Shares       Option Price          Expiration Date
----------            ----------       ------------          ---------------
August 27, 1996           9            $13.50                August 27, 2003


                                       39
<PAGE>

(13) Stock Options:

The Scott Technologies, Inc. Key Employees' Stock Option Plan ("The Stock Option
Plan") was amended by stockholders on December 15, 1998. The Company accounts
for this plan under APB Opinion No. 25, under which no compensation cost has
been recognized. Had compensation cost for stock options been determined
consistent with FASB Statement No. 123, the Company's operating results would
have been calculated as follows (in thousands, except per share data):

                                          1998            1997           1996
                                          ----            ----           ----

Net (Loss) Income:
     As Reported                      $   (8,568)     $   (2,506)     $   23,300
     Pro Forma                        $   (9,985)     $   (3,322)     $   22,600
Primary EPS:
     As Reported                      $    (0.47)     $    (0.14)     $     1.27
     Pro Forma                        $    (0.55)     $    (0.18)     $     1.23
Fully Diluted EPS:
     As Reported                      $    (0.47)     $    (0.13)     $     1.24
     Pro Forma                        $    (0.54)     $    (0.18)     $     1.21

The Company may grant options for up to 3 million shares. The stock option plan
allows for grants below the stock's market price; however, option exercise
prices typically equal the stock's market price on the date of grant. Options
generally vest between three and five years and expire between seven and ten
years.

A summary of the status of the Stock Option Plan at December 31, 1998, 1997 and
1996 and changes during the years then ended is presented in the table and
narrative below:

<TABLE>
<CAPTION>
                                     1998                    1997                  1996
                                     ----                    ----                  ----
                              Shares     Wtd. Avg.     Shares    Wtd. Avg.    Shares   Wtd. Avg.
                              (000)      Ex. Price     (000)     Ex. Price     (000)   Ex. Price
                              -----      ---------     -----     ---------     -----   ---------
<S>                          <C>         <C>           <C>       <C>          <C>      <C>    
Outstanding, Beg of Year     1,001.3      $ 10.12      889.4      $  7.92      769.5    $  7.12
Granted                        594.0        14.44      523.0        12.07      237.5      11.26
Exercised                     (404.9)        7.19      (81.2)        5.45      (23.8)      7.63
Forfeited                      (28.9)       12.45     (237.4)        8.86      (93.8)      9.86
Cancelled                         --           --      (92.5)        7.38         --         --
Expired                        (15.3)       12.18         --           --         --         --
                             -------                 -------                  ------   
Outstanding, End of Year     1,146.2      $ 13.31    1,001.3      $ 10.12      889.4    $  7.92

Exercisable at end of          320.4      $ 11.39      482.6      $  7.65      292.6    $  7.06
year                     

Weighted average fair                     $  7.21                 $  7.19               $  5.77
value of options granted 
</TABLE>

Of the 1,146,234 options outstanding at December 31, 1998, 356,734 have exercise
prices between $7.625 and $12.75, with a weighted average exercise price of
$11.15 and a weighted average remaining contractual life of 4.5 years. 247,444
of these options are exercisable. The remaining 789,500 options have exercise
prices between $13.00 and $15.00, with a weighted average price of $14.28 and a
weighted average remaining contractual life of 6.4 years. 73,001 of these
options are exercisable.

The fair value of each stock option grant is estimated on the date of grant
using the Black-Scholes option pricing model. The following weighted average
assumptions were used for the stock option grants in 1998: risk-free interest
rate of 5.1%, no expected dividend yield, expected life of 7.0 years, and 
expected volatility of 38.44%.


                                       40
<PAGE>

(14) Restricted Stock Purchase Plans:

Under the 1993 Restricted Stock Purchase Plan for Employees ("Employee Plan"),
up to 800,000 shares of Common Stock were authorized for issuance. On December
4, 1996, the Board decided to terminate the Employee Plan, effective January 2,
1997, and all restrictions on outstanding shares lapsed. Accordingly, the
Company wrote off in 1996 all unearned compensation with respect to this plan.

Under the 1993 Restricted Stock Purchase Plan for Directors ("Director Plan"),
up to 75,000 shares of Common Stock were authorized for possible issuance and
certain directors of the Company were granted the right to purchase shares of
Common Stock at prices substantially below market value. The Director Plan was
terminated on July 1, 1998, and all restrictions on outstanding shares lapsed.

The original excess of the market price over the purchase price at the date of
grant under the Director Plan, $0.6 million, was deferred as Unearned
Compensation and was amortized as compensation expense over the restricted
period.

Unamortized amounts (unearned compensation) are shown as a reduction of
stockholders' equity. The following amounts were amortized to expense (in
thousands):

                                            1998            1997            1996
                                            ----            ----            ----
Employee Plan                               $ --            $ --            $904
Director Plan                                 24              50              69
                                            ----            ----            ----
     Total                                  $ 24            $ 50            $973
                                            ====            ====            ====

(15) Employee Stock Bonus Plan:

Under the Stock Bonus Trust and Plan, shares of the Company's Common Stock were
allocated to eligible employee accounts each December 31 based on salary. The
Company did not make contributions to this plan in 1998, 1997, or 1996. In
February 1998, the plan assets were merged into the Company's 401(k) savings
plan for salaried employees. The Stock Plan held 631,577 shares of the Company's
Common Stock as of December 31, 1997.

(16) Extraordinary Item - Early Extinguishment of Debt:

In 1998, the Company paid $64.0 million to extinguish $60.6 million of its
9.875% Senior Notes due October 1, 1999. The payments included a $2.7 million
premium for the early retirement of the debt and $0.7 million of accrued
interest. Accordingly, the Company recorded an extraordinary after-tax loss of
$1.7 million on the premiums to extinguish $60.6 million of Senior Notes.

On October 9, 1997, the Company prepaid the mortgage on its Willoughby, Ohio,
headquarters. The cash payment of $7.2 million included a $0.6 million yield
maintenance premium to retire the debt before its maturity date of February 1,
2005. Also, in December 1997, the Company paid $16.4 million to extinguish $15.7
million of its Senior Notes due October 1, 1999. The payment included a $0.7
million premium for the early retirement of the debt. Accordingly, the Company
recorded an extraordinary after-tax loss of $0.8 million on the premiums to
pay-off the mortgage on the Company's headquarters and the extinguishment of
$15.7 million of senior notes.


                                       41
<PAGE>

(17) Industry Segment Data:

The Company's operations are conducted through one business segment, described
in Part I, Item 1 on page 4 of this Form 10-K.

Page 7 contains a summary of certain financial data for the business segment for
1998, 1997 and 1996. Information concerning the content of this financial data
is as follows: Intersegment and foreign sales are immaterial. Operating income
is total revenue less operating expenses (cost of sales, SG&A expense and R&D
expense). Operating income does not include refinancing costs, interest expense,
interest income, or federal and state income taxes. Identifiable assets are
those assets used in the Company's operation for the segment. Corporate assets
are principally cash and cash equivalents, property and other assets.


                                       42
<PAGE>

                      QUARTERLY FINANCIAL DATA (UNAUDITED)

This information is required by the Securities and Exchange Commission and is
unaudited.

<TABLE>
<CAPTION>
                                            First         Second           Third          Fourth
                                           Quarter        Quarter         Quarter         Quarter
                                                  (in thousands, except for per share data)
--------------------------------------------------------------------------------------------------
<S>                                     <C>             <C>             <C>             <C>       
1998:
     Net Sales                          $   46,214      $   45,964      $   43,197      $   41,733
     Gross Profit                           14,903          15,584          13,729          13,039
     Net Income (Loss):
       Continuing Operations                 2,574           3,439           1,983           1,498
       Discontinued Operations              (1,875)            443         (11,420)         (3,521)
       Extraordinary Loss                      (80)         (1,565)            (44)             --
                                        ----------      ----------      ----------      ----------
       Net Income (Loss)                $      619      $    2,317      $   (9,481)     $   (2,023)
                                        ==========      ==========      ==========      ==========

Per Share Data - Basic EPS:
       Continuing Operations            $     0.13      $     0.19      $     0.11      $     0.08
       Discontinued Operations               (0.10)           0.02           (0.63)          (0.19)
       Extraordinary Loss                       --           (0.08)             --              --
                                        ----------      ----------      ----------      ----------
       Net Income (Loss)                $     0.03      $     0.13      $    (0.52)     $    (0.11)
                                        ==========      ==========      ==========      ==========

Per Share Data - Assuming Dilution:
       Continuing Operations            $     0.13      $     0.18      $     0.11      $     0.08
       Discontinued Operations               (0.10)           0.02           (0.62)          (0.19)
       Extraordinary Loss                       --           (0.08)             --              --
                                        ----------      ----------      ----------      ----------
       Net Income (Loss)                $     0.03      $     0.12      $    (0.51)     $    (0.11)
                                        ==========      ==========      ==========      ==========

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

1997:
     Net Sales                          $   39,958      $   40,709      $   38,084      $   39,507
     Gross Profit                           12,785          13,478          12,033          13,728
     Net Income (Loss):
       Continuing Operations                    60           1,336             968           2,716
       Discontinued Operations               4,457          (2,741)          1,256          (9,780)
       Extraordinary Loss                       --              --              --            (778)
                                        ----------      ----------      ----------      ----------
       Net Income (Loss)                $    4,517      $   (1,405)     $    2,224      $   (7,842)
                                        ==========      ==========      ==========      ==========

Per Share Data - Basic EPS:
       Continuing Operations            $       --      $     0.08      $     0.05      $     0.15
       Discontinued Operations                0.25           (0.15)           0.07           (0.53)
       Extraordinary Loss                       --              --              --           (0.04)
                                        ----------      ----------      ----------      ----------
       Net Income (Loss)                $     0.25      $    (0.07)     $     0.12      $    (0.42)
                                        ==========      ==========      ==========      ==========

Per Share Data - Assuming Dilution:
       Continuing Operations            $       --      $     0.08      $     0.05      $     0.14
       Discontinued Operations                0.24           (0.15)           0.07           (0.52)
       Extraordinary Loss                       --              --              --           (0.04)
                                        ----------      ----------      ----------      ----------
       Net Income (Loss)                $     0.24      $    (0.07)     $     0.12      $    (0.42)
                                        ==========      ==========      ==========      ==========

--------------------------------------------------------------------------------------------------
</TABLE>


                                       43
<PAGE>

Item 9. Disagreements on Accounting and Financial Disclosure

      None

                                    PART III

Item 10. Directors and Executive Officers of the Registrant

      (a) Identification of Directors

      Information with respect to the members of the Board of Directors of the
      Company is set forth under the captions "Nominees for Election as
      Directors for a Term of Three Years" and "Directors Continuing in Office"
      in the Company's definitive proxy statement to be filed pursuant to
      Regulation 14A, which information is incorporated herein by reference.

      (b) Identification of Executive Officers

      Information with respect to the executive officers of the Company is set
      forth under the caption "Executive Officers of the Company" contained in
      Part I, Item 1 of this report, which information is incorporated herein by
      reference.

Item 11. Executive Compensation

      Information required by this Item is set forth under the captions
      "Executive and Director Compensation" in the Company's definitive proxy
      statement to be filed pursuant to Regulation 14A, which information is
      incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

      Information required by this Item is set forth under the captions
      "Principal Stockholders" and "Stock Ownership of Directors, Nominees for
      Directors, Executive Officers and One Former Executive Officer" in the
      Company's definitive proxy statement to be filed pursuant to Regulation
      14A, which information is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions

      Information required by this Item is set forth under the caption
      "Executive and Director Compensation " in the Company's definitive proxy
      statement to be filed pursuant to Regulation 14A, which information is
      incorporated herein by reference.


                                       44
<PAGE>

                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

                                                                            Page
                                                                             No.
                                                                             ---

(a) Financial Statements, Schedules and Exhibits:

      1.   Financial Statements 

           Included in Part II of this report:

           Report of Independent Public Accountants                           22

           Consolidated Statements of Operations for the
           Years Ended December 31, 1998, 1997, and 1996                      23

           Consolidated Balance Sheets at December 31, 1998 and 1997       24-25

           Consolidated Statements of Stockholders' Equity and Comprehensive
           Income for the Years Ended December 31, 1998, 1997, and 1996       26

           Consolidated Statements of Cash Flows for the
           Years Ended December 31, 1998, 1997, and 1996                      27

           Notes to Consolidated Financial Statements                      28-42

           Quarterly Financial Data (Unaudited)                               43

      2.   Schedules
           Included in Part IV of this report:

           Schedule II -  Valuation and Qualifying Accounts for
           the Years Ended December 31, 1998, 1997 and 1996                   51

           Report of Independent Public Accountants                           52

      3.   Exhibits:

            (3)   Articles of incorporation and by-laws:

                  (i)   The Restated Certificate of Incorporation of the
                        Company, as amended, included as Exhibit 3.1 to the
                        Company's Current Report on Form 8-K dated December 15,
                        1998, File No. 1-8591, is hereby incorporated herein by
                        reference.

                  (ii)  The Bylaws of the Company, as amended and restated
                        effective December 15, 1998, included as Exhibit 3.2 to
                        the Company's Current Report on Form 8-K dated December
                        15, 1998, File No 1-8591, is hereby incorporated herein
                        by reference.

                  (iii) The Certificate of Designations, Preferences, Related
                        Rights, Qualifications, Limitations and Restrictions of
                        Series A Junior Participating Preferred Shares of the
                        Company, included as Exhibit 3.1.1 to the Company's
                        Current Report on Form 8-K dated December 15, 1998, File
                        No 1-8591, is hereby incorporated herein by reference.


                                       45
<PAGE>

            (4)   Instruments defining rights of security holders, including
                  indentures, for the following classes of securities:

                  (i)   Common Stock, par value $.10 per share, are contained in
                        the Restated Certificate of Incorporation, as amended,
                        incorporated by reference in Exhibit (3)(i) above and
                        are incorporated herein by reference.

                  (ii)  Indenture, dated as of October 1, 1989, between Figgie
                        International Inc. and Continental Bank, National
                        Association, as Trustee, with respect to the 9.875%
                        Senior Notes due October 1, 1999, included as Exhibit
                        (4) (c) to the Company's Annual Report on Form 10-K for
                        the year ended December 31, 1989, is hereby incorporated
                        herein by reference. State Street Trust succeeded
                        Continental Bank as Trustee pursuant to an agreement
                        dated as of February 7, 1994, which was included as
                        Exhibit (4)(c) to the Company's Annual Report on Form
                        10-K for the year ended December 31, 1993, and is hereby
                        incorporated herein by reference.

                  (iii) Rights Agreement, dated as of December 15, 1998, between
                        Scott Technologies, Inc. and National City Bank, as
                        Rights Agent, included as exhibit 4 to the Company's
                        Current Report on Form 8-K dated December 15, 1998, File
                        No 1-8591, is hereby incorporated herein by reference.

            (10)  Material contracts:

                  (i)*  The Company's Compensation Plan for Executives, included
                        as Exhibit (3)(10)(b) to the Company's Form 8-B filed
                        October 19, 1983 with the Commission, is hereby
                        incorporated herein by reference.

                  (ii)* The Company's Senior Executive Benefits Program, as
                        amended, included as Exhibit (19) to the Company's
                        Quarterly Report on Form 10-Q for the quarter ended
                        September 30, 1988, is hereby incorporated herein by
                        reference.

                 (iii)* The Company's 1983 Deferred Compensation Agreement,
                        included as Exhibit (3)(10)(f) to the Company's Form 8-B
                        filed on October 19, 1983 with the Commission, is hereby
                        incorporated herein by reference.

                  (iv)* The Company's 1982 Deferred Compensation Agreement,
                        included as Exhibit 10(g) to the Company's Annual Report
                        on Form 10-K for the year ended December 31, 1984, File
                        No. 1-8591, is hereby incorporated herein by reference.

                  (v)*  The Company's Split Dollar Life Insurance Plan, included
                        as Exhibit 10(h) to the Company's Annual Report on Form
                        10-K for the year ended December 31, 1985, File No.
                        1-8591, is hereby incorporated herein by reference.

                  (vi)* The Company's 1993 Restricted Stock Purchase Plan for
                        Employees, included as Exhibit A to the Company's
                        definitive Proxy Statement dated May 25, 1993, is hereby
                        incorporated herein by reference.


                                       46
<PAGE>

                 (vii)* The Company's 1993 Restricted Stock Purchase Plan for
                        Directors, included as Exhibit B to the Company's
                        definitive Proxy Statement dated May 25, 1993, is hereby
                        incorporated herein by reference.

                (viii)* The Company's Key Employees' Stock Option Plan,
                        included as Exhibit A to the Company's definitive Proxy
                        Statement dated September 22, 1994, is hereby
                        incorporated herein by reference.

                  (ix)* Employment agreement dated July 1, 1994, by and between
                        the Company and Steven L. Siemborski, included as
                        Exhibit 10(b) to the Company's Quarterly Report on Form
                        10-Q for the quarter ended September 30, 1994, is hereby
                        incorporated herein by reference.

                  (x)*  Employment Agreement, dated as of January 1, 1995, by
                        and between John P. Reilly and the Company, included as
                        Exhibit 10(p) to the Company's Annual Report on Form
                        10-K for the year ended December 31, 1994, is hereby
                        incorporated herein by reference.

                  (xi)  Credit Agreement between the Company and General
                        Electric Capital Corporation, dated as of December 19,
                        1995; Waiver and Amendment No. 1 dated as of January 30,
                        1996; Amendment No. 2 dated as of February 19, 1996,
                        included as Exhibit 10(xiv) on Form 10-K for the year
                        ended December 31, 1995, is hereby incorporated herein
                        by reference.

                 (xii)* Management Agreement, dated February 1, 1996, by and
                        between Robert D. Vilsack and the Company, included as
                        Exhibit 10(xii) to the Company's Annual Report on Form
                        10-K for the year ended December 31, 1996, is hereby
                        incorporated by reference.

                (xiii)* Retention Agreement, dated March 20, 1996, by and
                        between Robert D. Vilsack and the Company, included as
                        Exhibit 10 (xiii) to the Company's Annual Report on Form
                        10-K for the year ended December 31, 1996, is hereby
                        incorporated by reference.

                 (xiv)* Management Agreement, dated December 9, 1994, by and
                        between Glen W. Lindemann and the Company, included as
                        Exhibit 10 (xv) to the Company's Annual Report on Form
                        10-K for the year ended December 31, 1996, is hereby
                        incorporated by reference.

                  (xv)* Retention Agreement, dated July 17, 1996, by and between
                        Glen W. Lindemann and the Company, included as Exhibit
                        10 (xvi) to the Company's Annual Report on Form 10-K for
                        the year ended December 31, 1996, is hereby incorporated
                        by reference.

                  (xvi) Amendment No. 3, dated June 6, 1996, to the Credit
                        Agreement between the Company and General Electric
                        Capital Corporation, included as Exhibit 10 (xvii) to
                        the Company's Annual Report on Form 10-K for the year
                        ended December 31, 1996, is hereby incorporated by
                        reference.


                                       47
<PAGE>

                (xvii)* Executive Arrangement, approved by the Management
                        Development, Compensation and Nominating Committee of
                        the Board of Directors on February 18, 1997, included as
                        Exhibit 10 (a) to the Company's Quarterly Report on Form
                        10-Q for the quarter ended September 30, 1997, is hereby
                        incorporated by reference.

               (xviii)* Amended and Restated Management Agreement, dated June
                        9, 1997, by and between Glen W. Lindemann and the
                        Company, included as Exhibit 10 (b) to the Company's
                        Quarterly Report on Form 10-Q for the quarter ended
                        September 30, 1997, is hereby incorporated by reference.

                 (xix)* Amended and Restated Management Agreement, Dated June
                        11, 1997, by and between William J. Sickman and the
                        Company, included as Exhibit 10 (c) to the Company's
                        Quarterly Report on Form 10-Q for the quarter ended
                        September 30, 1997, is hereby incorporated by reference.

                  (xx)* Amended and Restated Management Agreement, dated June
                        11, 1997, by and between Robert D. Vilsack and the
                        Company, included as Exhibit 10 (d) to the Company's
                        Quarterly Report on Form 10-Q for the quarter ended
                        September 30, 1997, is hereby incorporated by reference.

                 (xxi)* Letter Agreement, dated October 15, 1997, by and
                        between Glen W. Lindemann and the Company, included as
                        Exhibit 10 (e) to the Company's Quarterly Report on Form
                        10-Q for the quarter ended September 30, 1997, is hereby
                        incorporated by reference.

                 (xxii) Amendment No. 4, dated February 9, 1998 and effective
                        December 31, 1997, to the Credit Agreement between the
                        Company and General Electric Capital Corporation,
                        included as Exhibit 10 (xxii) to the Company's Annual
                        Report on Form 10-K for the year ended December 31,
                        1998, is hereby incorporated by reference.

               (xxiii)* Arrangement dated March 31, 1998, by and between
                        Steven L. Siemborski and the Company, included as
                        Exhibit 10 (a) to the Company's Quarterly Report on Form
                        10-Q for the quarter ended March 31, 1998, is hereby
                        incorporated herein by reference.

                (xxiv)* The Company's Directors' Stock Option Plan, included
                        as Exhibit B to the Company's definitive Proxy Statement
                        dated April 17, 1998, is hereby incorporated herein by
                        reference.

                 (xxv)* Management agreement, addendum to June 11, 1997
                        management agreement, dated as of August 13, 1998, by
                        and between William J. Sickman and the Company, included
                        as Exhibit 10 (i) to the Company's Quarterly Report on
                        Form 10-Q for the quarter ended September 30, 1998, is
                        hereby incorporated herein by reference.

                (xxvi)* Management agreement, amended and restated management
                        agreement, dated as of August 13, 1998, by and between
                        William J. Sickman and the Company, included as Exhibit
                        10 (ii) to the Company's Quarterly Report on Form 10-Q
                        for the quarter ended September 30, 1998, is hereby
                        incorporated herein by reference.


                                       48
<PAGE>

               (xxvii)* Management agreement, second addendum to June 11,
                        1997 management agreement and first addendum to August
                        13, 1998 management agreement and amendment to
                        non-qualified stock option agreement dated August 13,
                        1998, dated as of October 30, 1998, by and between
                        William J. Sickman and the Company, included as Exhibit
                        10 (iii) to the Company's Quarterly Report on Form 10-Q
                        for the quarter ended September 30, 1998, is hereby
                        incorporated herein by reference.

              (xxviii)* Management agreement, dated as of September 10,
                        1998, by and between Debra L. Kackley and the Company,
                        included as Exhibit 10 (iv) to the Company's Quarterly
                        Report on Form 10-Q for the quarter ended September 30,
                        1998, is hereby incorporated herein by reference.

                 (xxix)* Management agreement, amended and restated management
                        agreement, dated as of August 17, 1998, by and between
                        Glen W. Lindemann and the Company, included as Exhibit
                        10 (v) to the Company's Quarterly Report on Form 10-Q
                        for the quarter ended September 30, 1998, is hereby
                        incorporated herein by reference.

                 (xxx)* Management agreement, dated as of August 25, 1998, by
                        and between Mark A. Kirk and the Company, included as
                        Exhibit 10 (vi) to the Company's Quarterly Report on
                        Form 10-Q for the quarter ended September 30, 1998, is
                        hereby incorporated herein by reference.

                 (xxxi) Amendment No. 5, dated October 8, 1998 and effective
                        August 14, 1998, to the Credit Agreement between the
                        Company and General Electric Capital Corporation,
                        included as Exhibit 10 (vii) to the Company's Quarterly
                        Report on Form 10-Q for the quarter ended September 30,
                        1998, is hereby incorporated herein by reference.

                (xxxii) Amendment No. 6 and Exhibit A, dated October 21, 1998
                        and effective September 30, 1998, to the Credit
                        Agreement between the Company and General Electric
                        Capital Corporation, included as Exhibit 10 (vii) to the
                        Company's Quarterly Report on Form 10-Q for the quarter
                        ended September 30, 1998, is hereby incorporated herein
                        by reference.

              (xxxiii)* The Company's Key Employees' Stock Option Plan,
                        amended as of December 15, 1998, included as Exhibit 10
                        to the Company's Current Report on Form 8-K dated
                        December 15, 1998, is hereby incorporated herein by
                        reference.

               (xxxiv)* Management agreement, dated as of December 18, 1998,
                        by and between the Company and Robert P. Collins,
                        effective November 3, 1998.

                 (xxxv) Amendment and Restated Credit Agreement, dated as of
                        December 31, 1998, Amendment No. 1, dated as of February
                        26, 1999, Amendment No. 2, dated as of March 1, 1999,
                        and Amendment No. 3, dated as of March 2, 1999, by and
                        between the Company and the Lenders Party hereto and
                        General Electric Capital Corporation, as agent.


                                       49
<PAGE>

                (xxxvi) Aggregate Stop Loss Insurance Policy, dated December
                        31, 1998, by and between the Company and Princeton Eagle
                        West Insurance Company Limited.

               (xxxvii) Stockholders Agreement, dated as of December 15,
                        1998, by and between the Company and RCBA Strategic
                        Partners, L.P.

              (xxxviii) The Registration Rights Agreement, dated December
                        16, 1998, by and between the Company and Richard C. Blum
                        & Associates, L.P.

                (xxxix) Agreement, dated November 16, 1998 among the Company
                        and Richard C. Blum & Associates, L.P., Richard C. Blum
                        & Associates, Inc., and Richard C. Blum.

                  (xl)  Agreement, dated November 23, 1998 among the Company and
                        Reich and Tang Asset Management, L.P.

                  *     Management contracts or compensatory plans filed
                        pursuant to Item 14(c) of the Form 10-K.

                  (21)  Subsidiaries of the Company

                  (23)  Consents of Independent Public Accountants

                  (27)  Financial Data Schedule

(b)   Reports on Form 8-K:

                        Form 8-K dated December 31, 1997 and filed on January 6,
                        1998.

                        Form 8-K dated May 22, 1998 and filed on May 29, 1998.

                        Form 8-K dated December 15, 1998, filed on December 22,
                        1998.

(c)   See Exhibits to this report.


                                       50
<PAGE>

(d)                                                                  SCHEDULE II

                   SCOTT TECHNOLOGIES, INC. AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
                                 (in thousands)

<TABLE>
<CAPTION>
                                          Balance,     Charged      Amounts      Balance,
                                         Beginning     to Costs     Charged       End of
             Description                  of Year     & Expenses      Off          Year
-----------------------------------------------------------------------------------------
<S>                                      <C>          <C>          <C>           <C>     
ALLOWANCE FOR UNCOLLECTIBLE
TRADE ACCOUNTS RECEIVABLES

 Year ended December 31, 1998            $    194     $     60     $      3      $    257
                                         ========     ========     ========      ========

 Year ended December 31, 1997            $    151     $     60     $    (17)     $    194
                                         ========     ========     ========      ========

 Year ended December 31, 1996            $    104     $     74     $    (27)     $    151
                                         ========     ========     ========      ========

ALLOWANCE FOR PROPERTIES
HELD FOR SALE

 Land and Land Improvements              $  5,177     $  3,047     $ (1,738)     $  6,486
 Building and Leasehold Improvements           --           --           --            --
                                         --------     --------     --------      --------
 Year ended December 31, 1998            $  5,177     $  3,047     $ (1,738)     $  6,486
                                         ========     ========     ========      ========

 Land and Land Improvements              $  5,344     $     --     $   (167)     $  5,177
 Building and Leasehold Improvements           --           --           --            --
                                         --------     --------     --------      --------
 Year ended December 31, 1997            $  5,344     $      0     $   (167)     $  5,177
                                         ========     ========     ========      ========

 Land and Land Improvements              $  7,694     $     --     $ (2,350)     $  5,344
 Building and Leasehold Improvements        3,490           --       (3,490)           --
                                         --------     --------     --------      --------
 Year ended December 31, 1996            $ 11,184     $      0     $ (5,840)     $  5,344
                                         ========     ========     ========      ========

ALLOWANCE FOR DEFERRED
DIVESTITURE PROCEEDS

 Year ended December 31, 1998            $ 27,962     $     --     $(15,428)     $ 12,534
                                         ========     ========     ========      ========

 Year ended December 31, 1997            $ 21,743     $  6,479     $   (260)     $ 27,962
                                         ========     ========     ========      ========

 Year ended December 31, 1996            $ 20,825     $  8,519     $ (7,601)     $ 21,743
                                         ========     ========     ========      ========
</TABLE>


                                       51
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors
and Stockholders,
Scott Technologies, Inc.

We have audited in accordance with generally accepted auditing standards, the
financial statements of Scott Technologies, Inc. and Subsidiaries included in
this Form 10K, and have issued our report thereon dated January 22, 1999. Our
audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The financial statement schedule is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.

ARTHUR ANDERSEN LLP

      /s/

Cleveland, Ohio,
January 22, 1999


                                       52
<PAGE>

                                   SIGNATURES

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

                                               Scott Technologies, Inc.
                                               (Company)


                                               By        /s/
                                                  ------------------------------
Date: March 25, 1999                              Mark A. Kirk
                                                  Senior Vice President and
                                                  Chief Financial Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed as of March 25, 1999 by the following persons on
behalf of the Company and in the capacities indicated.

By          /s/                                By          /s/
   -------------------------------                ------------------------------
   G. W. Lindemann, Principal                     H. Nesbit, II, Director
   Executive Officer & Director

By           /s/                               By          /s/
   -------------------------------                ------------------------------
   F. N. Linsalata, Director                      R.P. Collins, Director

By           /s/                               By          /s/
   -------------------------------                ------------------------------
   J.P. Reilly, Director                          N. C. Lind, Director

By           /s/
   -------------------------------
   F. R. McKnight, Director


                                       53
<PAGE>

                                  EXHIBIT INDEX

      (3)   Articles of incorporation and by-laws:

            (i)   The Restated Certificate of Incorporation of the Company, as
                  amended, included as Exhibit 3.1 to the Company's Current
                  Report on Form 8-K dated December 15, 1998, File No. 1-8591,
                  is hereby incorporated herein by reference.

            (ii)  The Bylaws of the Company, as amended and restated effective
                  December 15, 1998, included as Exhibit 3.2 to the Company's
                  Current Report on Form 8-K dated December 15, 1998, File No
                  1-8591, is hereby incorporated herein by reference.

            (iii) The Certificate of Designations, Preferences, Related Rights,
                  Qualifications, Limitations and Restrictions of Series A
                  Junior Participating Preferred Shares of the Company, included
                  as Exhibit 3.1.1 to the Company's Current Report on Form 8-K
                  dated December 15, 1998, File No 1-8591, is hereby
                  incorporated herein by reference.

      (4)   Instruments defining rights of security holders, including
            indentures, for the following classes of securities:

            (i)   Common Stock, par value $.10 per share, are contained in the
                  Restated Certificate of Incorporation, as amended,
                  incorporated by reference in Exhibit (3)(i) above and are
                  incorporated herein by reference.

            (ii)  Indenture, dated as of October 1, 1989, between Figgie
                  International Inc. and Continental Bank, National Association,
                  as Trustee, with respect to the 9.875% Senior Notes due
                  October 1, 1999, included as Exhibit (4) (c) to the Company's
                  Annual Report on Form 10-K for the year ended December 31,
                  1989, is hereby incorporated herein by reference. State Street
                  Trust succeeded Continental Bank as Trustee pursuant to an
                  agreement dated as of February 7, 1994, which was included as
                  Exhibit (4)(c) to the Company's Annual Report on Form 10-K for
                  the year ended December 31, 1993, and is hereby incorporated
                  herein by reference.

            (iii) Rights Agreement, dated as of December 15, 1998, between Scott
                  Technologies, Inc. and National City Bank, as Rights Agent,
                  included as exhibit 4 to the Company's Current Report on Form
                  8-K dated December 15, 1998, File No 1-8591, is hereby
                  incorporated herein by reference.

      (10)  Material contracts:

            (i)*  The Company's Compensation Plan for Executives, included as
                  Exhibit (3)(10)(b) to the Company's Form 8-B filed October 19,
                  1983 with the Commission, is hereby incorporated herein by
                  reference.

            (ii)* The Company's Senior Executive Benefits Program, as amended,
                  included as Exhibit (19) to the Company's Quarterly Report on
                  Form 10-Q for the quarter ended September 30, 1988, is hereby
                  incorporated herein by reference.

           (iii)* The Company's 1983 Deferred Compensation Agreement, included
                  as Exhibit (3)(10)(f) to the Company's Form 8-B filed on
                  October 19, 1983 with the Commission, is hereby incorporated
                  herein by reference.


                                       54
<PAGE>

            (iv)* The Company's 1982 Deferred Compensation Agreement, included
                  as Exhibit 10(g) to the Company's Annual Report on Form 10-K
                  for the year ended December 31, 1984, File No. 1- 8591, is
                  hereby incorporated herein by reference.

            (v)*  The Company's Split Dollar Life Insurance Plan, included as
                  Exhibit 10(h) to the Company's Annual Report on Form 10-K for
                  the year ended December 31, 1985, File No. 1-8591, is hereby
                  incorporated herein by reference.

            (vi)* The Company's 1993 Restricted Stock Purchase Plan for
                  Employees, included as Exhibit A to the Company's definitive
                  Proxy Statement dated May 25, 1993, is hereby incorporated
                  herein by reference.

          (vii)*  The Company's 1993 Restricted Stock Purchase Plan for
                  Directors, included as Exhibit B to the Company's definitive
                  Proxy Statement dated May 25, 1993, is hereby incorporated
                  herein by reference.

          (viii)* The Company's Key Employees' Stock Option Plan, included as
                  Exhibit A to the Company's definitive Proxy Statement dated
                  September 22, 1994, is hereby incorporated herein by
                  reference.

          (ix)*   Employment agreement dated July 1, 1994, by and between the
                  Company and Steven L. Siemborski, included as Exhibit 10(b) to
                  the Company's Quarterly Report on Form 10-Q for the quarter
                  ended September 30, 1994, is hereby incorporated herein by
                  reference.

            (x)*  Employment Agreement, dated as of January 1, 1995, by and
                  between John P. Reilly and the Company, included as Exhibit
                  10(p) to the Company's Annual Report on Form 10-K for the year
                  ended December 31, 1994, is hereby incorporated herein by
                  reference.

            (xi)  Credit Agreement between the Company and General Electric
                  Capital Corporation, dated as of December 19, 1995; Waiver and
                  Amendment No. 1 dated as of January 30, 1996; Amendment No. 2
                  dated as of February 19, 1996, included as Exhibit 10(xiv) on
                  Form 10-K for the year ended December 31, 1995, is hereby
                  incorporated herein by reference.

           (xii)* Management Agreement, dated February 1, 1996, by and between
                  Robert D. Vilsack and the Company, included as Exhibit 10(xii)
                  to the Company's Annual Report on Form 10-K for the year ended
                  December 31, 1996, is hereby incorporated by reference.

          (xiii)* Retention Agreement, dated March 20, 1996, by and between
                  Robert D. Vilsack and the Company, included as Exhibit 10
                  (xiii) to the Company's Annual Report on Form 10-K for the
                  year ended December 31, 1996, is hereby incorporated by
                  reference.

           (xiv)* Management Agreement, dated December 9, 1994, by and between
                  Glen W. Lindemann and the Company, included as Exhibit 10 (xv)
                  to the Company's Annual Report on Form 10-K for the year ended
                  December 31, 1996, is hereby incorporated by reference.

            (xv)* Retention Agreement, dated July 17, 1996, by and between Glen
                  W. Lindemann and the Company, included as Exhibit 10 (xvi) to
                  the Company's Annual Report on Form 10-K for the year ended
                  December 31, 1996, is hereby incorporated by reference.


                                       55
<PAGE>

            (xvi) Amendment No. 3, dated June 6, 1996, to the Credit Agreement
                  between the Company and General Electric Capital Corporation,
                  included as Exhibit 10 (xvii) to the Company's Annual Report
                  on Form 10-K for the year ended December 31, 1996, is hereby
                  incorporated by reference.

          (xvii)* Executive Arrangement, approved by the Management
                  Development, Compensation and Nominating Committee of the
                  Board of Directors on February 18, 1997, included as Exhibit
                  10 (a) to the Company's Quarterly Report on Form 10-Q for the
                  quarter ended September 30, 1997, is hereby incorporated by
                  reference.

         (xviii)* Amended and Restated Management Agreement, dated June 9,
                  1997, by and between Glen W. Lindemann and the Company,
                  included as Exhibit 10 (b) to the Company's Quarterly Report
                  on Form 10-Q for the quarter ended September 30, 1997, is
                  hereby incorporated by reference.

           (xix)* Amended and Restated Management Agreement, Dated June 11,
                  1997, by and between William J. Sickman and the Company,
                  included as Exhibit 10 (c) to the Company's Quarterly Report
                  on Form 10-Q for the quarter ended September 30, 1997, is
                  hereby incorporated by reference.

            (xx)* Amended and Restated Management Agreement, dated June 11,
                  1997, by and between Robert D. Vilsack and the Company,
                  included as Exhibit 10 (d) to the Company's Quarterly Report
                  on Form 10-Q for the quarter ended September 30, 1997, is
                  hereby incorporated by reference.

           (xxi)* Letter Agreement, dated October 15, 1997, by and between Glen
                  W. Lindemann and the Company, included as Exhibit 10 (e) to
                  the Company's Quarterly Report on Form 10-Q for the quarter
                  ended September 30, 1997, is hereby incorporated by reference.

           (xxii) Amendment No. 4, dated February 9, 1998 and effective
                  December 31, 1997, to the Credit Agreement between the Company
                  and General Electric Capital Corporation, included as Exhibit
                  10 (xxii) to the Company's Annual Report on Form 10-K for the
                  year ended December 31, 1998, is hereby incorporated by
                  reference.

         (xxiii)* Arrangement dated March 31, 1998, by and between Steven L.
                  Siemborski and the Company, included as Exhibit 10 (a) to the
                  Company's Quarterly Report on Form 10-Q for the quarter ended
                  March 31, 1998, is hereby incorporated herein by reference.

          (xxiv)* The Company's Directors' Stock Option Plan, included as
                  Exhibit B to the Company's definitive Proxy Statement dated
                  April 17, 1998, is hereby incorporated herein by reference.

           (xxv)* Management agreement, addendum to June 11, 1997 management
                  agreement, dated as of August 13, 1998, by and between William
                  J. Sickman and the Company, included as Exhibit 10 (i) to the
                  Company's Quarterly Report on Form 10-Q for the quarter ended
                  September 30, 1998, is hereby incorporated herein by
                  reference.

          (xxvi)* Management agreement, amended and restated management
                  agreement, dated as of August 13, 1998, by and between William
                  J. Sickman and the Company, included as Exhibit 10 (ii) to the
                  Company's Quarterly Report on Form 10-Q for the quarter ended
                  September 30, 1998, is hereby incorporated herein by
                  reference.


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<PAGE>

         (xxvii)* Management agreement, second addendum to June 11, 1997
                  management agreement and first addendum to August 13, 1998
                  management agreement and amendment to non-qualified stock
                  option agreement dated August 13, 1998, dated as of October
                  30, 1998, by and between William J. Sickman and the Company,
                  included as Exhibit 10 (iii) to the Company's Quarterly Report
                  on Form 10-Q for the quarter ended September 30, 1998, is
                  hereby incorporated herein by reference.

        (xxviii)* Management agreement, dated as of September 10, 1998, by
                  and between Debra L. Kackley and the Company, included as
                  Exhibit 10 (iv) to the Company's Quarterly Report on Form 10-Q
                  for the quarter ended September 30, 1998, is hereby
                  incorporated herein by reference.

          (xxix)* Management agreement, amended and restated management
                  agreement, dated as of August 17, 1998, by and between Glen W.
                  Lindemann and the Company, included as Exhibit 10 (v) to the
                  Company's Quarterly Report on Form 10-Q for the quarter ended
                  September 30, 1998, is hereby incorporated herein by
                  reference.

           (xxx)* Management agreement, dated as of August 25, 1998, by and
                  between Mark A. Kirk and the Company, included as Exhibit 10
                  (vi) to the Company's Quarterly Report on Form 10-Q for the
                  quarter ended September 30, 1998, is hereby incorporated
                  herein by reference.

           (xxxi) Amendment No. 5, dated October 8, 1998 and effective August
                  14, 1998, to the Credit Agreement between the Company and
                  General Electric Capital Corporation, included as Exhibit 10
                  (vii) to the Company's Quarterly Report on Form 10-Q for the
                  quarter ended September 30, 1998, is hereby incorporated
                  herein by reference.

          (xxxii) Amendment No. 6 and Exhibit A, dated October 21, 1998 and
                  effective September 30, 1998, to the Credit Agreement between
                  the Company and General Electric Capital Corporation, included
                  as Exhibit 10 (vii) to the Company's Quarterly Report on Form
                  10-Q for the quarter ended September 30, 1998, is hereby
                  incorporated herein by reference.

        (xxxiii)* The Company's Key Employees' Stock Option Plan, amended as
                  of December 15, 1998, included as Exhibit 10 to the Company's
                  Current Report on Form 8-K dated December 15, 1998, is hereby
                  incorporated herein by reference.

         (xxxiv)* Management agreement, dated as of December 18, 1998, by and
                  between the Company and Robert P. Collins, effective November
                  3, 1998.

           (xxxv) Amendment and Restated Credit Agreement, dated as of December
                  31, 1998, Amendment No. 1, dated as of February 26, 1999,
                  Amendment No. 2, dated as of March 1, 1999, and Amendment No.
                  3, dated as of March 2, 1999, by and between the Company and
                  the Lenders Party hereto and General Electric Capital
                  Corporation, as agent.

          (xxxvi) Aggregate Stop Loss Insurance Policy, dated December 31,
                  1998, by and between the Company and Princeton Eagle West
                  Insurance Company Limited.

         (xxxvii) Stockholders Agreement, dated as of December 15, 1998, by
                  and between the Company and RCBA Strategic Partners, L.P.


                                       57
<PAGE>

        (xxxviii) The Registration Rights Agreement, dated December 16,
                  1998, by and between the Company and Richard C. Blum &
                  Associates, L.P.

          (xxxix) Agreement, dated November 16, 1998 among the Company and
                  Richard C. Blum & Associates, L.P., Richard C. Blum &
                  Associates, Inc., and Richard C. Blum.

            (xl)  Agreement, dated November 23, 1998 among the Company and Reich
                  and Tang Asset Management, L.P.

            *     Management contracts or compensatory plans filed pursuant to
                  Item 14(c) of the Form 10-K.

            (21)  Subsidiaries of the Company

            (23)  Consents of Independent Public Accountants

            (27)  Financial Data Schedule


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