<PAGE>


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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

      For the year ended December 31, 1998 Commission file number: 1-13418

                         FALCON BUILDING PRODUCTS, INC.
             (Exact Name of Registrant as Specified in Its Charter)

                  Delaware                                 36-3931893
      (State or Other Jurisdiction of                  (I.R.S. Employer
       Incorporation or Organization)                 Identification No.)

                             233 SOUTH WACKER DRIVE
                             CHICAGO, ILLINOIS 60606
                     (Address of Principal Executive Office)

                                 (312) 906-9700
              (Registrant's telephone number, including area code)

        Securities registered pursuant to Section 12(b) of the Act: None

        Securities registered pursuant to Section 12(g) of the Act: None

         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 the 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 
nonaffiliates of the Registrant.

            There is currently no established public trading market
                      for the Registrant's voting stock.

         As of March 1, 1999,  Falcon Building  Products,  Inc. had the
         following  shares of its various classes of common stock
         outstanding:

                        985,438 shares of Class A Common Stock
                       6,721,536 shares of Class B Common Stock
                        838,574 shares of Class C Common Stock
                         17,000 shares of Class D Common Stock

                  Documents Incorporated herein by Reference: None

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<PAGE>



                           FALCON BUILDING PRODUCTS, INC.

                                    TABLE OF CONTENTS


PART I.                                                              PAGE

Item 1.  Business..................................................    3

Item 2.  Properties................................................    6

Item 3.  Legal Proceedings.........................................    6

Item 4.  Submission of Matters to a Vote of Security Holders.......    7

PART II.

Item 5.  Market for the Registrant's Common Stock and
           Related Stockholder Matters.............................    8

Item 6.  Selected Financial Information............................    8

Item 7.  Management's Discussion and Analysis of Financial Condition
           and Results of Operations...............................    9

Item 8.  Financial Statements and Supplementary Data...............   14

Item 9.  Changes in and Disagreements with Accountants on Accounting
           and Financial Disclosure................................   51

PART III.

Item 10. Directors and Executive Officers of the Registrant........   51

Item 11. Executive Compensation....................................   53

Item 12. Security Ownership of Certain Beneficial Owners
           and Management..........................................   57

Item 13. Certain Relationships and Related Transactions............   59

PART IV.

Item 14. Exhibits, Financial Statement Schedules and
           Reports on Form 8-K.....................................   59


                                       2


<PAGE>


                                     PART I

ITEM 1.  BUSINESS

GENERAL

         Falcon Building Products, Inc. ("Falcon" or the "Company") is a 
leading domestic manufacturer and distributor of products for the residential 
and commercial construction and home improvement markets. The Company's 
products include air distribution products including residential grilles, 
registers and diffusers; ceramic, enameled steel and acrylic plumbing 
fixtures; and air compressors, pressure washers, electric generators and 
pneumatic tools. The products that contributed more than 10% of net sales in 
1998, 1997 and 1996 were as follows: residential grilles, registers and 
diffusers as a group were 12%, 12% and 9%, respectively; ceramic china 
bathroom fixtures were 15%, 16% and 17%, respectively; air compressors were 
27%, 24% and 23%, respectively; and pressure washers were 15%, 18% and 13%, 
respectively. The Company believes that its products are well regarded as 
being innovative, of high quality and competitively priced.

          The Company was incorporated in January 1994 as part of a 
reorganization of all of the entities comprising the building products 
segment of Eagle Industries, Inc. ("Eagle"). Eagle is controlled by Equity 
Holdings Limited, an Illinois limited partnership ("EHL"). In November 1994, 
the Company completed an initial public offering of 6,000,000 shares of Class 
A Common Stock (the "Offering").

         On June 17, 1997, the Company completed a merger transaction (the 
"Merger", and together with the financings described below, the 
"Recapitalization") with FBP Acquisition Corp. ("FBP"), a newly formed 
corporation organized on behalf of INVESTCORP S.A. ("Investcorp"), certain 
affiliates of Investcorp and other international investors, whereby FBP was 
merged with and into Falcon, with Falcon as the surviving corporation. The 
Merger resulted in Investcorp, its affiliates and certain other international 
investors owning approximately 88% of the capital stock of the Company. The 
Merger was accounted for as a recapitalization and, as such, the historical 
basis of the assets and liabilities of the Company were not affected. See 
Notes 5 and 7 to the Company's Consolidated Financial Statements (the 
"Financial Statements") for further discussion of the transaction and the 
financing arrangements entered into in order to consummate the 
Recapitalization.

         Air Distribution Products - The Company is a leading supplier of air 
distribution products and is the leading manufacturer of residential and 
light commercial grilles, registers and diffusers for heating, ventilating 
and air conditioning ("HVAC") applications. These products are marketed under 
the Hart & Cooley(R), Metlvent(R), Reliable(TM), Tuttle & Bailey(R), 
Woodwinds(TM) and Valley(TM) brand names. The Company manufactures more than 
8,000 air distribution items, including metal grilles, registers and 
diffusers, flexible duct, gas vent and chimney systems, louvers, terminal 
units and electric duct heaters. Products are generally produced on a 
high-volume, low-cost basis; however, the standard product line is 
supplemented with custom-engineered products designed to meet specific size 
or performance requirements. In June 1998, the Company acquired a 
manufacturer of aluminum window wall systems used in light commercial 
applications. In January 1999, the Company acquired the assets and business 
of the Penn Ventilation Companies, Inc., a manufacturer of air moving and 
control equipment for commercial and industrial applications. See Note 18 to 
the Company's Consolidated Financial Statements for further discussion of 
this transaction.

         Air Power Products - The Company is a leading producer of consumer 
and commercial air compressors for home improvement applications. The Company 
manufactures a broad line of air compressors in the 3/4 to 10 horsepower 
range. These air compressors are electric or gasoline-driven with either 
oil-lubricated or oil-free pumps and are marketed under several brand names, 
including Air America(R), Charge Air Pro(R), Pro 4000(TM), Pro Air II(TM) and 
Steel Driver(R). The Company also manufactures air compressors under 
private-label programs, the most significant of which is the Craftsman(R) 
label for Sears Roebuck and Co. ("Sears"). In addition, the Company sells a 
variety of pneumatic tools such as paint spray guns, nailers and staplers, 
sanders and air hoses for use in home improvement applications. In 1995, 
several new product lines were introduced, including electric generators, 
pressure washers and OEM compressors. These new products, as is the case with 
compressors, are marketed primarily into retail and home center outlets. In 
January 1996, Falcon completed the acquisition of Ex-Cell Manufacturing Co., 
Inc. ("Ex-Cell"). Headquartered in Decatur, Arkansas, Ex-Cell is a leading 
manufacturer of pressure washers, marketed through the retail/home center 
distribution channel primarily under the Ex-Cell(R) brand name.


                                       3

<PAGE>


         Plumbing Fixtures - The Company is a leading domestic producer of 
high quality ceramic china bathroom fixtures, including toilets and 
lavatories. The Company also produces enameled steel bathroom tubs and sinks, 
and acrylic whirlpool tubs as well as brass and plastic trim and fittings. 
Products are largely targeted at the high volume, medium price point category 
and are primarily sold through wholesale and home center outlets to the 
residential construction and remodeling markets under the Mansfield(R) and 
Swirl-way(R) brand names. In December 1998, the Company sold an option to its 
shareholders which gives them an option to purchase its Plumbing Fixtures 
segment. See Note 14 of the Company's Consolidated Financial Statements for 
further discussion of the option.

BUILDING PRODUCTS INDUSTRY

         The building products industry depends primarily on the residential 
and commercial construction markets. The level of activity in the residential 
construction market depends on new housing starts and residential alteration 
and repair projects, which are affected to varying degrees by mortgage rates, 
inflation, unemployment, demographic trends, gross domestic product growth 
and consumer confidence. According to the U.S. Department of Commerce, 
domestic housing starts have fluctuated between 1.4 million and 1.6 million 
from 1994 to 1998. According to the U.S. Department of Commerce, residential 
alteration and repair expenditures have grown over the same period, from $115 
billion in 1994 to approximately $119 billion in 1997. The Company estimates, 
based upon management's industry experience, that the residential alteration 
and repair market accounts for approximately 55% of the Company's net sales. 
The level of activity of the commercial construction market depends largely 
on vacancy rates and general economic conditions. According to the U.S. 
Department of Commerce, commercial construction activity has risen at an 
annualized rate of approximately 6% from 1993 to 1998.

MARKETING AND DISTRIBUTION

         The Company markets and distributes its products nationwide through 
a variety of distribution channels. Based on 1998 net sales, approximately 
46% of the Company's products are distributed to wholesalers and 
manufacturers' representatives who sell to contractors serving the 
residential and commercial construction markets. Approximately 54% of the 
Company's net sales are made to mass merchandisers and retail chains, which 
sell to homeowners and contractors.

         The Company utilizes a combination of internal sales forces and 
various representatives to market and sell its products. The Company markets 
its residential and light commercial air distribution products nationwide to 
HVAC contractors through over 750 wholesale distributors. The Company 
provides sales support to these distributors through a direct field sales 
staff and a customer service group. Independent representatives are also used 
to supplement the field sales coverage. The Company markets its commercial 
and industrial air distribution products nationwide primarily to HVAC 
contractors through over 150 commercial representatives. The Company's 
commercial representative organization is supported by regional sales 
managers and a customer service group. The Company markets its ceramic china, 
acrylic whirlpool baths and enameled steel bathroom fixtures and brass 
fittings primarily through manufacturers' representatives, who sell to over 
750 wholesale distributors with more than 1,300 locations throughout the U.S. 
These distributors sell to plumbers, building contractors and remodelers. The 
Company also supplies bathroom fixture products to the retail distribution 
channel, primarily through The Home Depot. The Company markets its air power 
products primarily through consumer distribution channels which include mass 
merchants, warehouse clubs, home centers, hardware cooperatives and farm and 
fleet cooperatives. The Company services these consumer channels through a 
direct sales staff and manufacturers' representatives.

         The Company's Air Power Products and Plumbing Fixtures segments 
reported net sales to Sears that accounted for approximately 17% of the 
Company's net sales in 1998. All of the Company's segments had net sales to 
The Home Depot that accounted for approximately 11% of the Company's net 
sales in 1998.

COMPETITION

         The building products industry is highly competitive and the Company 
competes with various international, national and regional suppliers in each 
of its product areas. In Air Distribution Products, the Company competes with 
divisions of three international manufacturers as well as various other 
smaller, regional competitors. In Plumbing Fixtures, the Company competes 
with divisions of three international manufacturers as well as various other 
smaller competitors. In Air Power Products, the Company competes with three 
large manufacturers as well as various smaller competitors. Some of the 
Company's competitors are larger, have greater financial resources and are 
less leveraged than the Company. The Company believes that it competes 
successfully in its markets on the basis of quality, service and product 
differentiation.


                                       4

<PAGE>


PATENTS, TRADEMARKS AND LICENSES

         The Company has been issued several patents worldwide. The Company 
believes that its patents are important to its business operations; however, 
the Company does not believe that the expiration or loss of any of its 
patents would have a material adverse effect on the Company.

         The Company owns a number of trademarks, including Hart & Cooley(R), 
Metlvent(R), Reliable(TM), Tuttle & Bailey(R), Woodwinds(TM), Valley(TM), 
Mansfield(R), Swirl-Way(R), Air America(R), Charge Air Pro(R), Ex-Cell(R) and 
Pro Air II(TM). The Company believes that its trademarks and its licenses are 
important to its business operations, but does not believe that the 
expiration or loss of any trademark or license would have a material adverse 
effect on the Company.

RAW MATERIALS AND SUPPLIERS

         The raw materials and component parts used in the Company's 
operations include steel, aluminum, clay, electric motors, pumps and mylar. 
Most of the Company's purchases are sourced domestically and nearly all of 
the Company's purchases are readily available through multiple sources. Raw 
material costs have remained relatively stable throughout 1998.

BACKLOG

         The Company's backlog at December 31, 1998 and 1997 was $32.8 
million and $17.1 million, respectively. The increase was primarily the 
result of increased year-end orders and acquisitions. The backlog at December 
31, 1998 is expected to be shipped during the first quarter of 1999.

EMPLOYEES

         The Company employed approximately 4,900 persons as of December 31, 
1998. Approximately 2,300 hourly employees are covered by seven collective 
bargaining agreements expiring through 2003. The Company believes that its 
labor relations are satisfactory at all of its facilities.

ENVIRONMENTAL MATTERS

         The Company's operations are subject to federal, state and local 
laws and regulations governing, among other things, emissions to air, 
discharge to waters, the generation, handling, storage, transportation, 
treatment and disposal of waste and other materials and health and safety 
matters. The Company believes that its business, operations and facilities 
have been and are being operated in compliance, in all material respects, 
with applicable environmental and health and safety laws and regulations. 
However, the operation of manufacturing plants entails risks in these areas, 
and there can be no assurance that the Company will not incur material costs 
or liabilities in the future. In addition, potentially significant 
expenditures could be required in order to comply with evolving environmental 
and health and safety laws, regulations or requirements that may be adopted 
or imposed in the future.

         Capital expenditures and expenses (including ordinary course of 
business hauling and disposal expenses) in 1998 attributable to environmental 
matters were not material in relation to the Company's consolidated financial 
position or results of operations.

REGULATORY

         The Company's products are subject to extensive regulation by 
national, state, local and foreign authorities. For discussion of a current 
matter involving high temperature plastic venting systems, see Item 3, Legal 
Proceedings.


                                       5

<PAGE>


ITEM 2.  PROPERTIES

         The Company believes its manufacturing, warehouse and office facilities
are suitable, adequate and have sufficient manufacturing capacity for its
current requirements. The Company also believes that its facilities are being
utilized consistent with the Company's plans and do not have substantial excess
capacity. The Company's principal facilities consist of the following:

<TABLE>
<CAPTION>

                                                                                   APPROX. SQUARE
               LOCATION                             PRINCIPAL USE                     FOOTAGE          LEASED/OWNED
  ------------------------------------  ---------------------------------------  ------------------- ------------------
 <S>                                   <C>                                            <C>               <C>
  Air Distribution Products:
     Holland, Michigan...............   Office, Manufacturing, Warehouse               613,000           Owned
     Jackson, Tennessee..............   Manufacturing, Warehouse                       260,000           Leased(1)
     Huntsville, Alabama.............   Manufacturing                                  219,000           Owned
     Geneva, Alabama.................   Manufacturing                                  203,000           Owned
     Sanger, California..............   Manufacturing                                  127,000           Leased(2)
  Air Power Products:
     Jackson, Tennessee..............   Office, Manufacturing, Warehouse               461,000           Owned
     Decatur, Arkansas...............   Manufacturing, Warehouse                       106,000           Owned
  Plumbing Fixtures:
     Kilgore, Texas..................   Manufacturing, Warehouse                       511,000           Owned
     Perrysville, Ohio...............   Manufacturing                                  492,000           Owned
     Walnut, California..............   Manufacturing                                  414,000           Owned
     Henderson, Texas................   Manufacturing                                  125,000           Owned
     Big Prairie, Ohio...............   Manufacturing                                   60,000           Owned
-----------------------------
</TABLE>

(1)  This facility is leased pursuant to a lease that expires in February, 2002,
     with renewal options to 2005.

(2)  This facility is leased pursuant to a lease that expires in December, 2002.


ITEM 3.  LEGAL PROCEEDINGS

         The Company is involved from time to time in various legal 
proceedings and claims incident to the normal conduct of its business, 
including environmental matters. Although it is impossible to predict the 
outcome of any pending legal proceeding, the Company believes that such legal 
proceedings and claims, individually and in the aggregate, are either without 
merit, are covered by insurance or are adequately reserved for, and will not 
have a material adverse effect on its financial condition or results of 
operations.

         In addition to the matters covered by the preceding paragraph, in 
May 1994, Underwriters' Laboratories of Canada ("ULC") suspended its 
recognition of high temperature plastic venting ("HTPV") for gas appliances 
systems, including the Ultravent(R) product distributed by the Company. This 
action resulted from reports of problems with HTPV, including improper 
installation and related safety hazards, including potential for carbon 
monoxide emission. In June 1994, as a result of the ULC action, the Ontario 
Ministry of Consumer and Commercial Relations suspended sales of HTPV in the 
Province of Ontario. Other provinces of Canada have taken similar action. Gas 
appliance manufacturers in Canada and the United States no longer certify 
HTPV for use with their products. As a result, the Company discontinued sales 
of its HTPV product in 1997. Company sales of Ultravent(R) products in the 
United States and Canada in 1996 and 1997 were minimal.

         The Company is a defendant in a lawsuit in Canada that has been 
filed against 24 entities representing heating appliance manufacturers, 
plastic vent manufacturers and distributors, public utilities and listing 
agencies brought by the Ontario New Home Warranty Program, which is 
responsible for the cost of correcting appliances equipped with HTPV in new 
home construction in Ontario.

         The Company engaged in discussions with the United States Consumer 
Product Safety Commission ("CPSC") regarding the use of HTPV in the United 
States. Additionally, certain appliance manufacturers, the plastic resin 
manufacturer and the HTPV manufacturers and distributors, including Hart & 
Cooley, Inc. (the Company's Air Distribution Products segment), participated 
in a non-binding facilitative mediation process, the object of which was to 
develop and implement a voluntary HTPV corrective action program. As a result 
of the facilitative mediation process, the Company entered into a Corrective 
Action Program and Settlement Agreement in January 1998, along with 25 
appliance manufacturers, an HTPV manufacturer and a resin manufacturer to 
correct certain HTPV mid-efficiency gas fired appliances by replacing the 
venting system. The Corrective Action Program was approved by the CPSC in 
February 1998.


                                       6

<PAGE>


         In 1997, the Company recorded pretax charges of $32.8 million ($20.0 
million, net of income taxes) representing an estimate of its share of the 
cost of the Corrective Action Program in the United States, resolution of the 
Canadian litigation, various related litigation, legal fees and other related 
costs. The Company estimates that the costs associated with the Corrective 
Action Program and other related HTPV matters will be expended during the 
next two to three years. Actual amounts expended could differ depending on a 
number of factors including, but not limited to, the estimated replacement 
cost per unit as well as the number of units replaced. The Company paid $4.1 
million in 1998 related to HTPV matters.

         With respect to these matters, the Company, on September 16, 1996, 
filed an action in state court in Illinois against certain insurance 
carriers. The Company is seeking a declaratory judgment, damages for breach 
of contract and specific relief requiring the insurance carriers, pursuant to 
the terms of the Company's insurance policies, to defend and reimburse the 
Company for costs and legal expenses arising from Ultravent-related claims. 
The amount at issue cannot be determined at this time. The insurance carriers 
have denied coverage on a number of grounds and have filed motions to dismiss 
the Company's lawsuit.

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

         No matters were submitted during the fourth quarter of 1998 to a 
vote of security holders of Falcon through a solicitation of proxies or 
otherwise.

<PAGE>


                                       PART II

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

         There is currently no established public trading market for the
Company's common stock. The number of shareholders of record as of December 31,
1998 was 43. No dividends have been paid to shareholders in the last two years
and no dividends are expected to be declared in the near future. In addition,
the Company's Bank Credit Facility and Subordinated Notes contain covenants that
restrict the payment of dividends.

ITEM 6.  SELECTED FINANCIAL INFORMATION

         The selected financial information presented below has been derived 
from the Company's audited Consolidated Financial Statements for the five 
years in the period ended December 31, 1998, and should be read in 
conjunction with such financial statements and notes thereto.

<TABLE>
<CAPTION>

                                                                        YEAR ENDED DECEMBER 31,
                                                      ------------------------------------------------------------
                                                        1998         1997         1996        1995         1994
                                                      ---------    ---------    ---------    --------    ---------
                                                                            (in millions)
<S>                                                   <C>          <C>          <C>          <C>         <C>
INCOME STATEMENT DATA:
     Net sales...................................      $765.8       $686.4       $633.2       $471.3      $440.7
     Operating income (loss) (a).................        48.9        (20.9)        59.8         45.8        51.7
     Net income (loss) before extraordinary
       item .....................................         2.5        (37.4)        30.0         22.1        25.9
     Net income (loss) (b).......................         2.5        (38.9)        30.0         22.1        25.9

BALANCE SHEET DATA:
     Total assets................................      $381.4       $333.8       $261.7       $210.8      $187.5
     Long-term debt (c)..........................       440.0        428.3        109.1        110.9       103.8
     Total liabilities (c).......................       596.1        547.5        233.8        213.0       212.1
     Stockholders' equity (deficit) (d)..........      (214.7)      (213.7)        27.9         (2.2)      (24.6)
</TABLE>

___________________

   a)    Operating income for the year ended December 31, 1998 reflects pretax
         restructuring and other charges of $9.9 million. Operating loss for the
         year ended December 31, 1997 reflects pretax charges of $32.8 million
         relating to Ultravent(R), $36.3 million relating to the
         Recapitalization, and $8.0 million relating to pressure washer
         reserves.

   b)    Net loss for the year ended December 31, 1997 reflects an extraordinary
         charge of $1.5 million, net of tax, relating to the early
         extinguishment of debt associated with the Recapitalization.

   c)    As part of the Recapitalization in June 1997, the Company entered into
         a new bank credit facility and issued Senior Subordinated Notes and
         Senior Subordinated Discount Notes. Historical comparisons of long-term
         debt are not meaningful as the debt structure of the Company was
         altered in this period.

   d)    The Company's equity capital structure was altered in connection with
         the Recapitalization in June 1997. As a result, historical comparisons
         of stockholders' equity are not meaningful. The deficit in 1998 and
         1997 was primarily a consequence of the Recapitalization.


                                       8

<PAGE>


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

FORMER RELATIONSHIP WITH EAGLE

         Eagle incorporated the Company in January 1994 as part of a 
reorganization of all the entities comprising Eagle's building products 
segment. Pursuant to a corporate services agreement, Eagle provided certain 
management, financial and administrative services to the Company prior to the 
Merger. In addition, certain executive officers of the Company were also 
executive officers of Eagle and spent approximately 50% of their time on the 
business and affairs of Eagle. As a result of the Recapitalization, the 
corporate services agreement was terminated and the executive officers 
referred to above became full-time employees of the Company.

INDUSTRY INFORMATION

         Demand for the Company's products depends primarily on the 
residential construction market and, to a lesser extent, on the commercial 
construction market. The level of activity in the residential construction 
market depends on new housing starts and residential alteration and repair 
projects which are affected to varying degrees by many factors not within the 
Company's control, including mortgage rates, inflation, unemployment, 
demographic trends, gross domestic product growth and consumer confidence. 
The level of activity in the commercial construction market depends largely 
on vacancy rates and general economic conditions.

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                YEAR ENDED DECEMBER 31,
                                   ----------------------------------------------------------------------------------
                                           1998                       1997                           1996
                                   ---------------------    --------------------------     --------------------------
                                                                 (DOLLARS IN MILLIONS)
<S>                                <C>             <C>          <C>            <C>          <C>             <C>
                                                    % OF                        % OF                         % OF
                                    AMOUNT          SALES        AMOUNT         SALES        AMOUNT          SALES
                                   ----------     ----------    ----------    ----------    ----------     ----------
  Net Sales:
  Air Distribution Products...       $219.4          28.7%        $191.2          27.9%       $187.0           29.6%
  Air Power Products..........        389.1          50.8          335.4          48.9         287.1           45.3
  Plumbing Fixtures...........        157.3          20.5          159.8          23.2         159.1           25.1
                                   ----------     ----------    ----------    ----------    ----------     ---------
     Total Net Sales..........       $765.8         100.0%        $686.4         100.0%       $633.2          100.0%
                                   ----------     ----------    ----------    ----------    ----------     ---------

  Profitability: (a)
  Air Distribution Products...       $ 32.9           4.3%        $ 28.8           4.2%       $ 29.6            4.7%
  Air Power Products..........         39.0           5.1           29.7           4.3          29.1            4.6
  Plumbing Fixtures...........         14.6           1.9           24.8           3.6          28.5            4.5
                                   ----------     ----------    ----------    ----------    ----------     ---------
     Segment total ...........         86.5          11.3           83.3          12.1          87.2           13.8
  Corporate...................         (5.9)         (0.8)          (5.3)         (0.8)         (5.6)          (0.9)
                                   ----------     ----------    ----------    ----------    ----------     ---------
     Total....................       $ 80.6          10.5%        $ 78.0          11.3%       $ 81.6           12.9%
                                   ----------     ----------    ----------    ----------    ----------     ---------
</TABLE>

(a)  Profitability represents income before interest expense and income taxes,
     excluding the following charges: (i) depreciation and amortization expense;
     (ii) costs associated with Ultravent(R) and the Recapitalization; (iii)
     securitization expense; and (iv) restructuring and non-cash charges.

YEAR ENDED DECEMBER 31, 1998 AS COMPARED TO YEAR ENDED DECEMBER 31, 1997

NET SALES

         Air Distribution Products net sales increased $28.2 million to 
$219.4 million, or 14.8% over 1997 results. Excluding the effect of 
acquisitions in 1998, net sales increased $22.1 million. This increase was 
primarily due to increased volume in all product categories as a result of 
increased market penetration and generally favorable market conditions, 
slightly offset by reduced pricing in flexible duct products primarily in the 
first nine months of 1998.

         Air Power Products net sales increased $53.7 million to $389.1 
million, an increase of 16.0% over 1997 results. This increase was primarily 
driven by increased volume of compressors and generators due to increased 
market penetration and high storm activity. These increases were partially 
offset by a decrease in pressure washer sales due to the loss of customers 
resulting from the Company's implementation of a "no returns policy".


                                       9

<PAGE>


         Plumbing Fixtures net sales decreased $2.5 million to $157.3 million 
or 1.6% from 1997. This decrease was primarily due to decreased volume of 
china and steel products due primarily to production inefficiencies discussed 
below.

PROFITABILITY

         Air Distribution Products profitability increased $4.1 million to 
$32.9 million in 1998 from $28.8 million in 1997. This increase was primarily 
due to increased volume and cost reduction programs, partially offset by 
reduced pricing in flexible duct products as well as increased operating and 
distribution expenses.

         Air Power Products profitability increased $9.3 million to $39.0 
million from $29.7 million in 1997. This increase was primarily due to net 
increased volume, principally in generators and compressors, as well as 
reduced direct material costs. This increase was partially offset by 
increased operating expenses primarily associated with promotional programs. 
Lower levels of returns of pressure washers that resulted from the Company's 
implementation of a "no returns" policy were partially offset by increased 
costs associated with this implementation.

         Plumbing Fixtures profitability decreased $10.2 million to $14.6 
million from $24.8 million in 1997. This decrease was primarily due to 
manufacturing inefficiencies as well as increased warranty and distribution 
expenses. The Company has instituted cost controls, revised process flows and 
instituted a capital and restructuring plan which it believes will improve 
its manufacturing process. See Note 6 to the Company's Consolidated Financial 
Statements for a further discussion of the restructuring plan.

         Corporate expense increased $0.6 million due to increased costs 
associated with the Company's organization subsequent to the Recapitalization.

         Depreciation and amortization increased from 1997 due to capital 
additions and amortization of costs associated with the Recapitalization in 
June 1997. See Note 14 to the Company's Consolidated Financial Statements for 
further discussion of the Recapitalization costs being amortized.

         Special charges in 1998 consisted of restructuring and other charges 
of $9.9 million. See Note 6 to the Company's Consolidated Financial 
Statements for further discussion of these charges.

         Net interest expense increased $15.3 million to $43.8 million. This 
increase was primarily due to the debt structure that resulted from the 
Recapitalization in June 1997. See Note 7 to the Company's Consolidated 
Financial Statements for a discussion of the Company's debt structure.

         The effective income tax rate of 50.3% for the year reflected the 
effect of state income taxes and non-deductible expenses, including goodwill 
amortization.

YEAR ENDED DECEMBER 31, 1997 AS COMPARED TO YEAR ENDED DECEMBER 31, 1996

NET SALES

         Air Distribution Products net sales increased $4.2 million to $191.2 
million, an increase of 2.2% over 1996 results. Moderate summer and winter 
temperatures reduced demand and significant price competition, primarily in 
flex duct products, limited the Company's ability to gain market share.

         Air Power Products net sales increased $48.3 million to $335.4 
million, an increase of 16.8% from the level achieved in 1996. This increase 
was primarily the result of a 48% increase in the net sales of pressure 
washers and a 14% increase in net sales of compressors. Partially offsetting 
these gains were reduced shipments of generators, as well as the elimination 
of automotive products in 1997.

         Plumbing Fixtures net sales increased $0.7 million to $159.8 million 
in 1997, from $159.1 million in 1996. This modest increase was primarily due 
to significant pressure in the wholesale channel, which was partially offset 
by increased market penetration in retail markets.


                                       10

<PAGE>


PROFITABILITY

         Air Distribution Products profitability decreased $0.8 million to 
$28.8 million in 1997, from $29.6 million in 1996. This decrease was 
primarily due to the competitive pricing on flex duct products, increased 
manufacturing costs and selling and administrative expenses, partially offset 
by positive results of cost reduction programs and increased volume in all 
product categories.

         Air Power Products profitability increased $0.6 million to $29.7 
million in 1997 from $29.1 million in 1996. The increase in sales of 
generators and pressure washers was offset by an unexpected high level of 
pressure washer product returns, as well as increased selling and 
administrative costs. The increase in net sales of pressure washers was 
accompanied by a 57% increase in the pressure washer return rate. This 
resulted in a significant increase in return costs over the 1996 period. The 
Company attributes the increase in the rate of returns to consumers' lack of 
familiarity with a relatively new and more complicated product, certain 
retailers' liberal return policies and certain purchased part quality 
problems. The Company improved its pressure washers through product design 
changes, more demanding purchase part quality assurance and improved consumer 
literature for 1998. Additionally, the Company negotiated a "no returns" 
policy for non-defective pressure washers with its major retail customers in 
1998.

         Plumbing Fixtures profitability decreased $3.7 million to $24.8 
million in 1997 from $28.5 million in 1996. This decrease was primarily due 
to manufacturing inefficiencies in certain plumbing products and reduced 
vitreous china pricing.

         Corporate expense remained constant between the 1997 and 1996 
periods.

         Depreciation and amortization expense increased from 1996 primarily 
due to capital expenditures and increased amortization of costs associated 
with the Recapitalization. See Note 14 of the Company's Consolidated 
Financial Statements for further discussion of the Recapitalization costs 
being amortized.

         Special charges in 1997 included $36.3 million of expenses 
associated with the Recapitalization and $32.8 million of expenses associated 
with Ultravent(R) (see Notes 5 and 15 to the Company's Consolidated Financial 
Statements for a complete discussion of these expenses), as well as $8.0 
million related to the establishment of reserves related primarily to 
returned pressure washer inventory. Special charges in 1996 included $1.8 
million of expenses associated with Ultravent(R).

         Net interest expense increased $17.5 million to $28.5 million. This 
increase was primarily due to the new debt structure that resulted from the 
Recapitalization in June 1997. See Note 7 to the Company's Consolidated 
Financial Statements for a discussion of the Company's debt structure.

         The effective income tax benefit rate of 24.3% for the year 
reflected the effect of state income taxes and non-deductible expenses, 
including certain expenses incurred in connection with the Recapitalization 
and goodwill amortization.

LIQUIDITY AND CAPITAL RESOURCES

         Net cash flow from operating activities amounted to $65.1 million in 
1998 compared to $10.9 million in 1997. The increase of $54.2 million was 
primarily due to a decrease in working capital through inventory reduction 
programs and an increased focus on vendor payment terms. The net residual 
interest retained by the Company in the accounts receivable sold by the 
Company increased $9.4 million from December 31, 1997 as a result of growth 
in the level of accounts receivable sold under the Accounts Receivable 
Securitization Program. This residual interest of $22.5 million at December 
31, 1998 is reflected in other current assets in the Company's financial 
statements. Net cash flow from operating activities decreased $30.2 million 
to $10.9 million in 1997 from $41.1 million in 1996. This decrease was 
primarily due to an increase in working capital requirements and the effect 
of the stand-alone securitization facility the Company entered into in April 
1996. In December 1996, the Company paid the parent of Eagle $4.6 million for 
a final tax sharing payment for tax liabilities incurred while it was 
included in its consolidated income tax returns, pursuant to a disaffiliation 
tax sharing agreement.


                                       11

<PAGE>


         The Company historically has met its working capital needs and 
capital expenditure requirements primarily through a combination of operating 
cash flow, and availability under its credit facilities and the Receivables 
Securitization Program. The Company estimates that the costs associated with 
the Corrective Action Program and other related HTPV matters will be expended 
during the next two to three years. The Company anticipates funding these 
costs, satisfying its debt service requirements, and meeting its working 
capital and capital expenditure needs through a combination of operating cash 
flow, availability under the Revolving Facility and funds available through 
the Receivables Securitization Program. At December 31, 1998, $122.5 million 
was available to borrow under the Revolving Facility.

         In December 1998, the Company sold to its stockholders, an option to 
purchase Mansfield Plumbing Products, Inc. ("Mansfield"), its Plumbing 
Fixtures segment, based on an enterprise value for such segment of $80 
million. The option exercise price is $10 million, plus the amount by which 
the indebtedness which Mansfield will incur as a result of this transaction 
(the proceeds of which would be distributed to Falcon) is less than $70 
million. The option is exercisable at any time on or prior to June 30, 1999. 
The proceeds from this transaction, if the option is ultimately exercised, 
are expected to be utilized to reduce outstanding indebtedness under the 
Company's credit facility.

CAPITAL EXPENDITURES

         Capital expenditures were $22.8 million, $19.1 million and $20.0 
million for 1998, 1997, and 1996, respectively. Capital expenditures 
attributable to environmental matters were not material in any of these 
years, nor does the Company believe that such expenditures will be material 
in 1999. The Company expects to spend approximately $30 million for capital 
expenditures in 1999.

YEAR 2000 READINESS PROGRAM

         The Year 2000 issue is the result of computer programs having been 
written using two digits, rather than four, to define the applicable year, 
resulting in an inability to distinguish between the year 1900 and the year 
2000. This may put business and governmental entities at risk for possible 
miscalculations or systems failures causing disruptions in their business 
operations. The Year 2000 issue can arise at any point in the Company's 
supply, manufacturing, processing, distribution and financial activities.

         The Company and each of its operating subsidiaries have implemented 
a Year 2000 readiness program with the objective of having all of their 
significant business systems, including those that affect facilities and 
manufacturing activities, functioning properly with respect to the Year 2000 
issues before January 1, 2000. While some of the Company's systems are Year 
2000 compliant, the Company has utilized internal personnel, contract 
programmers and vendors to identify Year 2000 noncompliance problems, modify 
code and test the modifications or, if necessary, replace non-compliant 
software and hardware. Executive management regularly monitors the status of 
the Company's Year 2000 remediation plans. The process included an assessment 
of issues and development of remediation plans, where necessary, as they 
relate to internally used software, computer hardware and use of computer 
applications in the Company's manufacturing processes and products. In 
addition, the Company is engaged in assessing the Year 2000 issue with 
significant suppliers and customers. Each segment is in a different stage of 
Year 2000 readiness.

         The assessment phase of the Year 2000 readiness program is complete 
with all operating subsidiaries having identified the business systems that 
may require remediation or replacement and established priorities for repair 
or replacement. Those systems considered most critical to operations have 
been given the highest priority.

         The second phase of the Year 2000 readiness program involves the 
actual remediation and replacement of business systems. The Company and its 
operating subsidiaries are using both internal and external resources to 
complete this process. Systems ranked highest in priority have either been 
remediated or replaced or scheduled for remediation or replacement. Systems 
earmarked for retirement and replacement without regard to the Year 2000 
issue have been evaluated for early replacement with Year 2000 compliant 
systems. The Company's objective is to complete substantially all remediation 
and replacement of internal business systems by the second quarter of 1999, 
and to complete final testing by the third quarter of 1999.

         As part of the Year 2000 readiness program, significant service 
providers, vendors, suppliers and customers that are believed to be critical 
to business operations after January 1, 2000, have been identified and steps 
have been undertaken to reasonably ascertain their stage of Year 2000 
readiness through questionnaires, interviews, on-site visits and other 
available means. These activities are intended to provide a means of managing 
risk, but cannot eliminate the potential for disruption due to third party 
failure.


                                       12

<PAGE>


         Because of the number of business systems used by the Company, in 
addition to the significant number of third parties that the Company depends 
on, the Company presently believes that it may experience some disruption in 
its business due to the Year 2000 issue. More specifically, because of the 
interdependent nature of business systems, the Company and its operating 
subsidiaries could be materially adversely affected if utilities, private 
businesses and governmental entities with which they do business or that 
provide essential services are not Year 2000 compliant.

         The possible consequences of the Company or third parties not being 
fully Year 2000 compliant by January 1, 2000 include, among other things, 
delays in the delivery of products, delays in the receipt of supplies, 
invoice and collection errors, inventory and supply obsolescence, and 
possible temporary plant closings. Consequently, the business and results of 
operations of the Company could be materially adversely affected by a 
temporary inability of the Company and its operating subsidiaries to conduct 
their businesses in the ordinary course for a period of time after January 1, 
2000. The Company does not currently have a comprehensive contingency plan 
with respect to the Year 2000 issue, but intends to establish such a plan 
during 1999 as part of its Year 2000 readiness program. Failure to meet 
critical milestones identified in the Company's plans would precipitate 
alternative actions, including an acceleration of any contingency plan.

         It is currently estimated that the aggregate cost of the Company's 
Year 2000 readiness program will be approximately $1.3 million, of which 
approximately $0.8 million has been expensed through December 31, 1998. These 
costs are being expensed as incurred and are being funded through operating 
cash flow. The costs associated with the replacement of computerized systems 
or equipment, substantially all of which would be capitalized, are not 
included in the above estimates.

SEASONALITY, WORKING CAPITAL AND CYCLICALITY

         Sales of certain products of the Company are subject to seasonal 
variation. Seasonal factors historically have not had a significant effect on 
working capital requirements, as the Company has been able to adjust its 
production to meet seasonal demands. Due to seasonal factors associated with 
the construction industry, sales of products are typically higher during the 
second and third quarters than at other times of the year. The residential 
and commercial construction markets are sensitive to cyclical changes in the 
economy.

INFLATION

         The effect of inflation on 1998, 1997 and 1996 operating results was 
not material.

FORWARD-LOOKING STATEMENTS

         When used in this discussion, the words "believes" and "expects" and 
similar expressions are intended to identify forward-looking statements. Such 
statements are subject to certain risks and uncertainties, over which the 
Company has no control, which could cause actual results to differ materially 
from those projected. Readers are cautioned not to place undue reliance on 
these forward-looking statements which speak only as of the date hereof. The 
Company undertakes no obligations to republish revised forward-looking 
statements to reflect events or circumstances after the date thereof or to 
reflect the occurrence of unanticipated events. Readers are also urged to 
carefully review and consider the various disclosures made by the Company, in 
this report, as well as the Company's periodic reports filed with the 
Securities and Exchange Commission.


                                       13

<PAGE>



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                                                                     PAGE

Reports of Independent Accountants..................................  15
Consolidated Balance Sheets.........................................  17
Consolidated Statements of Income and Comprehensive Income..........  18
Consolidated Statements of Stockholders' Equity.....................  19
Consolidated Statements of Cash Flows...............................  20
Notes to Consolidated Financial Statements..........................  21
Supplementary Financial Data (Unaudited)............................  50



                                       14
<PAGE>



                      REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors of Falcon Building Products, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related 
consolidated statements of income and comprehensive income, stockholders' 
equity and cash flows present fairly, in all material respects, the financial 
position of Falcon Building Products, Inc. and Subsidiaries (the "Company") 
at December 31, 1998 and 1997, and the results of their operations and their 
cash flows for each of the two years in the period ended December 31, 1998, 
in conformity with generally accepted accounting principles. These financial 
statements are the responsibility of the Company's management; our 
responsibility is to express an opinion on these financial statements based 
on our audits. We conducted our audits of these statements in accordance with 
generally accepted auditing standards which require that we plan and perform 
the audit to obtain reasonable assurance about whether the financial 
statements are free of material misstatement. An audit includes examining, on 
a test basis, evidence supporting the amounts and disclosures in the 
financial statements, assessing the accounting principles used and 
significant estimates made by management, and evaluating the overall 
financial statement presentation. We believe that our audits provide a 
reasonable basis for the opinion expressed above.

PRICEWATERHOUSECOOPERS LLP
March 5, 1999


                                       15

<PAGE>


                          REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors of Falcon Building Products, Inc.:

         We have audited the accompanying Consolidated Statements of Income, 
Stockholders' Equity and Cash Flows for Falcon Building Products, Inc. (a 
Delaware Corporation) and Subsidiaries as of December 31, 1996 for the year 
then ended. These financial statements are the responsibility of the 
Company's management. Our responsibility is to express an opinion on these 
financial statements based on our audit.

         We conducted our audit in accordance with generally accepted 
auditing standards. Those standards require that we plan and perform the 
audit to obtain reasonable assurance about whether the financial statements 
are free of material misstatement. An audit includes examining, on a test 
basis, evidence supporting the amounts and disclosures in the financial 
statements. 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 consolidated financial 
position of Falcon Building Products, Inc. and Subsidiaries as of December 
31, 1996, and the results of their operations and cash flows for the year 
then ended in conformity with generally accepted accounting principles.

                                                       ARTHUR ANDERSEN LLP


Chicago, Illinois
February 5, 1997


                                       16

<PAGE>

<TABLE>
<CAPTION>


                                FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
                                          CONSOLIDATED BALANCE SHEETS
                                 (DOLLARS IN MILLIONS EXCEPT PER SHARE AMOUNTS)




                                                                                        DECEMBER 31,
                                                                                 -----------------------------
                                                                                    1998             1997
                                                                                 ------------     ------------
                                    ASSETS
<S>                                                                                <C>              <C>
Current assets:
     Cash and cash equivalents.........................................             $ 66.4           $ 29.9
     Inventories, net..................................................               78.8             79.5
     Other current assets..............................................               42.2             34.0
                                                                                 ------------     ------------
     Total current assets..............................................              187.4            143.4

Property, plant and equipment, net.....................................              109.8            101.3
Goodwill, net..........................................................               59.4             57.0
Other assets...........................................................               24.8             32.1
                                                                                 ------------     ------------
     Total assets......................................................             $381.4           $333.8
                                                                                 ------------     ------------
                                                                                 ------------     ------------

                   LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Current portion long-term debt....................................             $  2.0           $  1.5
     Accounts payable..................................................               58.0             34.0
     Accrued liabilities...............................................               57.0             43.2
                                                                                 ------------     ------------
     Total current liabilities.........................................              117.0             78.7

Senior indebtedness ...................................................              175.7            175.6
Senior subordinated notes..............................................              264.3            252.7
Accrued employee benefit obligations...................................               13.3              9.2
Other long-term liabilities............................................               25.8             31.3
                                                                                 ------------     ------------

     Total liabilities.................................................              596.1            547.5
                                                                                 ------------     ------------

Stockholders' equity (deficit):
     Class A stock, par value $.01 per share, 985,529 shares issued
         in 1998, 1,007,690 issued in 1997.............................                --               --
     Class B stock, par value $.01 per share, 6,721,536 shares issued..                0.1              0.1
     Class C stock, par value $.01 per share, 844,174 shares issued in
         1998, 844,274 shares issued in 1997...........................                --               --
     Class D stock, par value $.01 per share, 17,000 shares issued.....                --               --
     Common stock, par value $.01 per share, none issued...............                --               --
     Additional paid-in capital........................................                --               --
     Retained deficit..................................................             (209.7)          (211.8)
     Notes receivable arising from stock purchase plan.................               (1.8)            (2.0)
     Accumulated other comprehensive loss..............................               (3.3)             --
                                                                                 ------------     ------------

     Total stockholders' equity (deficit)..............................             (214.7)          (213.7)
                                                                                 ------------     ------------

     Total liabilities and stockholders' equity .......................             $381.4           $333.8
                                                                                 ------------     ------------
                                                                                 ------------     ------------

                    The accompanying notes to consolidated financial statements
                             are an integral part of these statements.
</TABLE>


<PAGE>

<TABLE>
<CAPTION>


                                       FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
                                 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
                                                          (IN MILLIONS)

                                                                                   YEAR ENDED
                                                                                  DECEMBER 31,
                                                                --------------------------------------------------
                                                                     1998              1997             1996
                                                                 --------------    -------------    --------------
<S>                                                                <C>               <C>             <C>
Net sales...................................................        $765.8            $686.4          $ 633.2
Cost of sales...............................................         640.0             576.5            513.6
                                                                 --------------    -------------    --------------
     Gross earnings.........................................         125.8             109.9            119.6

Selling, general and administrative expenses................          64.9              57.7             53.9
Securitization expense......................................           3.8               4.0              4.1
Restructuring and other charges.............................           8.2              --                --
Ultravent expenses..........................................          --                32.8              1.8
Recapitalization expenses...................................          --                36.3              --
                                                                 --------------    -------------    --------------
     Operating income (loss)................................          48.9             (20.9)            59.8

Net interest expense........................................          43.8              28.5             11.0
                                                                 --------------    -------------    --------------

Income (loss) before income taxes and extraordinary item....           5.1             (49.4)            48.8
Provision (benefit) for income taxes........................           2.6             (12.0)            18.8
                                                                 --------------    -------------    --------------
     Income (loss) before extraordinary item................           2.5             (37.4)            30.0

Extraordinary item:
     Early extinguishment of debt net of income tax
       benefit of $0.9......................................          --                (1.5)             --
                                                                 --------------    -------------    --------------
     Net income (loss)......................................       $   2.5           $ (38.9)         $  30.0
                                                                 --------------    -------------    --------------
                                                                 --------------    -------------    --------------

Other comprehensive income (loss):
     Minimum pension liability adjustment net of income tax
       expense (benefit) of ($2.3) in 1998, $0.2 in 1997
       and ($0.1) in 1996......................................       (3.3)              0.5             (0.1)
                                                                 --------------    -------------    --------------
Comprehensive income (loss)....................................    $  (0.8)          $ (38.4)         $  29.9
                                                                 --------------    -------------    --------------
                                                                 --------------    -------------    --------------


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

</TABLE>

                                       18

<PAGE>


<TABLE>
<CAPTION>

                                       FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                                          (IN MILLIONS)


                                                                                     NOTES         ACCUMULATED
                                                         ADDITIONAL    RETAINED    FROM STOCK         OTHER
                                  CLASS A    CLASS B      PAID-IN      EARNINGS     PURCHASE       COMPREHENSIVE       UNEARNED
                                   STOCK      STOCK       CAPITAL      (DEFICIT)      PLAN          INCOME(LOSS)     COMPENSATION
                                  --------   ---------   -----------   ----------  ------------    ---------------   ------------
<S>                              <C>          <C>         <C>          <C>         <C>              <C>               <C>

Balance at December 31, 1995.     $   0.1      $0.1        $  18.0      $ (17.2)    $  (2.2)         $  (0.4)          $  (0.6)
  Net income.................          --        --             --         30.0          --               --                --
  Conversion of Class B Stock
   to Class A Stock..........         0.1      (0.1)            --           --          --               --                --
  Minimum pension liability
   adjustment................          --        --             --           --          --             (0.1)               --
  Other......................          --        --             --           --          --               --               0.2
                                  --------    ---------    -----------  ----------  ------------     ---------------   ----------

Balance at December 31, 1996.         0.2        --           18.0         12.8        (2.2)            (0.5)             (0.4)
  Net loss...................          --        --             --        (38.9)         --               --                --
  Repurchase of Class A Stock        (0.2)       --          (18.0)      (320.2)         --               --               0.4
  Issuance of stock..........          --       0.1             --        134.5          --               --                --
  Minimum pension liability
   adjustment................          --        --             --           --          --              0.5
  Other......................          --        --             --           --         0.2               --                --
                                  --------    ---------    -----------  ----------  ------------     ---------------   ----------
Balance at December 31, 1997.          --       0.1             --       (211.8)       (2.0)              --                --
  Net income.................          --        --             --          2.5          --               --                --
  Repurchase of Class A Stock          --        --             --         (0.4)         --               --                --
  Minimum pension liability
   adjustment................          --        --             --           --          --             (3.3)               --
  Other......................          --        --             --           --         0.2               --                --
                                  --------    ---------    -----------  ----------  ------------     ---------------   ----------

Balance at December 31, 1998.     $  --       $   0.1       $   --      $(209.7)    $  (1.8)         $  (3.3)          $    --
                                  --------    ---------    -----------  ----------  ------------     ---------------   ----------
                                  --------    ---------    -----------  ----------  ------------     ---------------   ----------
</TABLE>


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

                                            19
<PAGE>

<TABLE>
<CAPTION>

                                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                   (IN MILLIONS)


                                                                                            YEAR ENDED
                                                                                           DECEMBER 31,
                                                                              ----------------------------------------
                                                                                 1998          1997           1996
                                                                               ----------    ----------     ----------
<S>                                                                             <C>           <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss).....................................................        $   2.5       $ (38.9)       $  30.0
   Adjustments to reconcile net income (loss) to net cash from
     operating activities:
     Depreciation........................................................           14.2          14.2           13.7
     Amortization........................................................            6.0           4.5            1.8
     Accretion of debt discount on subordinated debt.....................           11.6           5.8            --
     Deferred income tax provision (benefit).............................            5.9         (15.7)          (2.9)
     Restructuring and other charges.....................................            9.0           --             --
     Ultravent expenses..................................................           (4.1)         30.7            --
     Recapitalization expenses...........................................            --           36.3            --
     Early extinguishment of debt........................................            --            1.5            --
     Cash effects, excluding acquisitions, of changes in:
         Accounts receivable, net of residual interest...................            --            --             6.2
         Inventories.....................................................           (0.3)         (4.1)         (14.0)
         Other current assets............................................           (8.8)        (10.4)          (1.5)
         Accounts payable................................................           23.8         (16.1)          10.2
         Accrued liabilities and accrued employee benefit obligations....            5.3           3.1           (2.4)
                                                                               ----------    ----------     ----------
   Net cash from operating activities....................................           65.1          10.9           41.1
                                                                               ----------    ----------     ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of businesses................................................           (4.0)          --           (18.8)
   Capital expenditures..................................................          (22.8)        (19.1)         (20.0)
   Other.................................................................           (0.2)         (0.3)           0.2
                                                                               ----------    ----------     ----------
   Net cash used in investing activities.................................          (27.0)        (19.4)         (38.6)
                                                                               ----------    ----------     ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Proceeds from senior credit facilities................................            --          175.0            --
   Repayments of senior credit facilities................................            --         (138.8)           --
   Issuance of common stock..............................................            --          134.6            --
   Retirement of common stock............................................            --         (338.0)           --
   Payment of Recapitalization fees and expenses.........................            --          (61.8)           --
   Issuance of senior subordinated notes.................................            --          247.0            --
   Net borrowings (repayments) on debt...................................           (1.6)         16.5            0.3
                                                                               ----------    ----------     ----------
   Net cash from (used in) financing activities..........................           (1.6)         34.5            0.3
                                                                               ----------    ----------     ----------

CHANGE IN CASH AND CASH EQUIVALENTS......................................           36.5          26.0            2.8
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD...........................           29.9           3.9            1.1
                                                                               ----------    ----------     ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD.................................        $  66.4       $  29.9        $   3.9
                                                                               ----------    ----------     ----------

NET CASH PAID (RECEIVED) DURING THE PERIOD FOR:
   Interest..............................................................        $  27.4       $  20.7        $  11.0
   Income taxes to affiliate.............................................            --            --             4.6
   Income taxes to (from) third parties..................................        $  (6.6)      $   7.6        $  23.5
</TABLE>


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


                                            20
<PAGE>


                        FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                      DECEMBER 31, 1998


(1)   BASIS OF PRESENTATION

      Falcon Building Products, Inc. (the "Company") is a manufacturer
and distributor of products for the residential and commercial construction 
and home improvement markets.

      Eagle Industries, Inc. ("Eagle") incorporated the Company in January 
1994 as part of a reorganization of all of the entities comprising Eagle's 
building products segment.

      On June 17, 1997, the Company completed a merger transaction (the 
"Merger", and together with the financings described in Note 5, the 
"Recapitalization") with FBP Acquisition Corp. ("FBP"), a newly formed 
corporation organized on behalf of INVESTCORP S.A. ("Investcorp"), certain 
affiliates of Investcorp and other international investors, whereby FBP was 
merged with and into Falcon, with Falcon as the surviving corporation. The 
Merger resulted in Investcorp, its affiliates and certain other international 
investors owning approximately 88% of the capital stock of the Company. The 
Merger was accounted for as a recapitalization and, as such, the historical 
basis of the assets and liabilities of the Company were not affected.  See 
Notes 5 and 7 for further discussion of the transaction and the financing 
arrangements entered into in order to consummate the Recapitalization.

      Certain amounts in the Company's historical financial statements have 
been reclassified to be consistent with the presentation in the current 
period.

(2)   SIGNIFICANT ACCOUNTING POLICIES:

      BASIS OF CONSOLIDATION:

      The accompanying Consolidated Financial Statements include the accounts 
of the Company and its subsidiaries. All significant intercompany accounts 
and transactions have been eliminated in consolidation.

      USE OF ESTIMATES:

      These Consolidated Financial Statements have been prepared in 
accordance with generally accepted accounting principles and necessarily  
include amounts based on estimates and assumptions by management. Actual 
results could differ from those amounts.

      CASH AND CASH EQUIVALENTS:

      All highly liquid investment instruments with original maturities of 
three months or less are considered to be cash equivalents.

      INVENTORIES:

      Inventories are stated at the lower of cost or market. Cost includes 
raw materials, labor and manufacturing overhead. The last-in, first-out 
("LIFO") method of inventory valuation was used for 38.4% and 41.1% of 
inventory at December 31, 1998 and 1997, respectively. The first-in, 
first-out ("FIFO") method of inventory valuation was used for the remaining 
inventory.


                                       21
<PAGE>


                    FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                  DECEMBER 31, 1998


      NEW ACCOUNTING PRONOUNCEMENTS:

      Effective January 1, 1998, the Company adopted the provisions of 
Statement No. 132 "Employers' Disclosure about Pensions and Other
Postretirement Benefits" ("SFAS No. 132"), which revises employers' 
disclosures about pensions and other postretirement benefit plans.

      Effective January 1, 1998, the Company adopted the provisions of 
Statement No. 130 "Reporting Comprehensive Income" ("SFAS No. 130"), 
which establishes standards for reporting and display of comprehensive 
income and its components (revenues, expenses, gains and losses) in a 
full set of general-purpose financial statements.

      Effective  January 1, 1998, The Company adopted the provisions of 
Statement No. 131 ("SFAS No. 131"), "Disclosure about Segments of an 
Enterprise and Related Information."  This statement establishes standards 
for reporting information about operating segments and related disclosures 
about products and services, geographic areas and major customers.

      IMPAIRMENT OF LONG-LIVED ASSETS:

      An impairment loss is recognized in the event that facts and 
circumstances indicate that the carrying amount of an asset may not be  
recoverable and an estimate of future undiscounted cash flows is less 
than the carrying amount of the asset.

      PROPERTY, PLANT AND EQUIPMENT:

      Property, plant and equipment are stated at cost. The straight-line  
method is generally used to provide for depreciation over the estimated 
useful lives of the assets, which range from 10 to 40 years for buildings 
and 3 to 12 years for machinery and equipment.

      GOODWILL:

      Goodwill represents the purchase price associated with acquired  
businesses in excess of the fair value of the net assets acquired.  Goodwill 
is amortized on a straight-line basis, primarily over forty  years. 
Accumulated amortization was $17.7 million and $15.6 million at December 31, 
1998 and 1997, respectively. The recoverability of goodwill is reassessed 
periodically to determine if current operating income is sufficient to 
recover the current amortization. When events and circumstances indicate 
that future operating income and cash flow may be negatively affected, the 
recoverability is evaluated based upon the estimated future operating income 
and undiscounted cash flow of the related entity during the remaining period 
of goodwill amortization.

      DEFERRED FINANCING FEES:

      Deferred financing fees are amortized on a straight-line basis over the 
life of the related debt and are included in Other assets in the Company's  
Consolidated  Balance Sheets. This method of amortization approximates the 
effective yield method.


                                      22
<PAGE>


                    FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONINUED)
                                   DECEMBER 31, 1998

      REVENUE RECOGNITION:

      The Company recognizes revenues as products are shipped to customers.

      EARNINGS PER SHARE:

      As a result of the Recapitalization, the Company's stock is no 
longer traded in a public market. As such, earnings per share is no longer 
disclosed.

(3)   ACQUISITIONS

      On June 25, 1998, the Company acquired Warrior Glass & Aluminum Co., 
Inc., a manufacturer of aluminum window wall systems used in light commercial 
applications. The consideration consisted of $4.0 million in cash and a $2.7 
million four-year, non-interest bearing note. The note was recorded at a 
discounted value of $2.1 million. The acquisition was accounted for as a 
purchase and resulted in $4.2 million of goodwill that is being amortized 
over 40 years.

(4)   ACCOUNTS RECEIVABLE

      Between January 1994 and April 1996, the Company participated in 
Eagle's securitization program, selling its receivables to Eagle, which in 
turn sold certain of its receivables, including those acquired from the 
Company, to a "Master Trust". During the second quarter of 1996, Eagle 
terminated its securitization program and coordinated the termination of its 
program with the Company to allow the Company to establish its own 
securitization program.

      In April 1996, the Company entered into receivable sale agreements with 
a financial institution and its affiliates (collectively, the "Bank Group") 
whereby it sells, with limited recourse, on a continuous basis, an undivided 
interest in all of its accounts receivable for cash, while maintaining a 
residual interest in the receivables. In connection with the 
Recapitalization, the Company amended its receivables securitization program 
to increase the maximum availability from $85 million to $100 million and to 
extend its program until 2002.

      At December 31, 1998 and 1997, uncollected receivables sold under the 
agreement were $106.7 million and $88.6 million, respectively. Included in 
the Company's financial statements in other current assets is a net residual 
interest of $22.5 million and $13.1 million at December 31, 1998 and 1997, 
respectively. The expense incurred on the sale of the receivables under these 
programs was $3.8 million, $4.0 million and $4.1 million in 1998, 1997 and 
1996, respectively.

(5)   RECAPITALIZATION

      On March 20, 1997, the Company entered into an Agreement and Plan of 
Merger (the "Merger Agreement") with FBP. The Merger Agreement contemplated 
that FBP would be merged with and into Falcon and each outstanding share of 
the Company's Class A Common Stock ("Class A Stock") would be converted into 
either (i) $17.75 in cash (the "Cash Price"), or (ii) at the election of the 
holder of the Class A Stock, the right to retain one share of Class A Stock. 
On June 17, 1997, the Merger and the adoption of the Merger Agreement were 
approved by the vote of a majority of the stockholders of the Class A Stock 
and FBP was merged with and into Falcon, with Falcon continuing as the 
surviving corporation. As a result of the Merger, 19,040,585 of the then 
issued and outstanding shares of Class A Stock were converted into cash and 
1,007,690 shares were retained by existing stockholders. In addition, each 
person who, immediately prior to the consummation of the Recapitalization, 
held an option to purchase shares of the Class A Stock, received a cash 
payment equal to the product of (i) the difference between the Cash Price and 
the option exercise price multiplied by (ii) the number of options held by 
such person. Approximately $338.0 million was paid to holders of Class A 
Stock who converted their shares and approximately $5.2 million was paid to 
persons holding options to purchase shares of Class A Stock.


                                       23
<PAGE>

                         FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                       DECEMBER 31, 1998


      Pursuant to the Merger  Agreement, the certificate of incorporation 
of FBP became the  certificate of incorporation of the Company (the  
"Restated Certificate of Incorporation") upon the effective date of the 
Merger.  The Restated Certificate of Incorporation authorizes five 
classes of common stock. Each issued and outstanding share of capital  
stock of FBP was converted into a share of capital stock of Falcon  
upon the consummation of the Recapitalization.

      The Recapitalization was funded by (i) $175.0 million of borrowings 
under the Bank Credit Facility (as defined), (ii) $145.0 million from the 
offering of the Old Notes (as defined), (iii) approximately $102.0 million of 
proceeds from the offering of the Old Discount Notes (as defined) and (iv) an 
equity contribution by Investcorp, its affiliates and certain other 
international investors of approximately $134.6 million. The proceeds from 
these financings funded: the payment of approximately $338.0 million to 
holders of Class A Stock who converted their shares; the payment of 
approximately $5.2 million to option holders; the repayment of approximately 
$138.8 million of outstanding indebtedness under the then existing credit 
facility; and the payment of approximately $58.5 million of fees and expenses 
associated with the Recapitalization.

      The transaction was accounted for as a recapitalization and, as such,  
the historical basis of the Company's assets and liabilities was not 
affected.  Approximately $27.4 million of costs primarily representing 
financing fees were capitalized while approximately $36.3 million of costs 
were expensed and are reflected as a component of operating income in the 
Company's Consolidated Statements of Income. The expensed costs represent 
investment banker fees, Investcorp merger and acquisition fees, legal and 
accounting fees, transaction bonuses, payments to option holders and other 
miscellaneous costs incurred in connection with the  Recapitalization.  In 
addition, the Company recorded an extraordinary  charge of $1.5 million, net 
of a $0.9 million income tax benefit, in connection with the repayment of its 
existing credit facility.

(6)   RESTRUCTURING AND OTHER CHARGES

      In the third quarter of 1998, the Company recorded restructuring and 
other charges totaling $9.0 million, $7.9 million related to the 
reorganization of its Plumbing Fixtures business (the "Reorganization Plan") 
and a $1.1 million charge to write-down to market certain automotive product 
line fixed assets, previously utilized in Air Power Products. The 
Reorganization Plan involves: (1) the restructuring of the steel products 
enameling operations and the closure of the bath-tub pressing operations; (2) 
a reconfiguration of the Texas china plant, as new automated equipment is 
employed and new process controls are instituted; and (3) increased 
investment in manufacturing, finance, engineering and production control 
personnel. In the fourth quarter of 1998, the Company recorded restructuring 
charges of $0.9 million related to the consolidation of two Air Distribution 
Products manufacturing plants.


                                       24
<PAGE>


                       FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                   DECEMBER 31, 1998


      The following table summarizes the costs reflected in the Company's 
Consolidated Financial Statements at December 31,1998; $8.2 million is 
reflected as Restructuring and Other Charges while $1.7 million is included 
in Cost of Sales (in millions):

<TABLE>
<CAPTION>

                                                                                          RESTRUCTURING
                                                                   RESTRUCTURING             CHARGES 
                              RESTRUCTURING          OTHER           AND OTHER              INCLUDED
                                  CHARGES           CHARGES           CHARGES            IN COST OF SALES         TOTAL
                              ----------------     -----------    -----------------    --------------------    -----------
<S>                              <C>                 <C>             <C>                     <C>                <C>
Inventory......................   $  --               $ --            $  --                   $ 1.7              $  1.7
Severance......................      0.7                --              0.7                      --                 0.7
Professional fees..............      0.1                0.6             0.7                      --                 0.7
Fixed asset write-downs........      3.3                --              3.3                      --                 3.3
Workers compensation...........      2.0                --              2.0                      --                 2.0
Other..........................      0.7                0.8             1.5                      --                 1.5
                                  ---------          --------         -------                --------            -------
                                   $  6.8             $ 1.4           $ 8.2                   $ 1.7              $  9.9
                                  ---------          --------         -------                --------            -------
                                  ---------          --------         -------                --------            -------
</TABLE>

      The inventory adjustments relate primarily to a net realizable value 
adjustment to the carrying value of existing raw material and work-in-process 
inventories given the excess materials on hand as the Company exits its steel 
tub pressing operations and the new china manufacturing technologies are 
employed as well as adjustments related to the plant consolidation. The 
severance costs are for 70 employees primarily in the steel operations that 
were terminated as a result of the Reorganization Plan and employees 
associated with the Air Distribution plant consolidation. The professional 
fees represent costs incurred for projects related primarily to the Company's 
china operations and fees for positions added as a result of the 
Reorganization Plan. The fixed asset write-downs relate primarily to the 
write-off of equipment which will no longer be used as a result of the 
Reorganization Plan and plant consolidation, and a $1.1 million charge 
associated with the disposal of automotive product line assets. The workers 
compensation costs represent the increase in claim experience incurred and/or 
expected to be incurred as a result of the Reorganization Plan and plant 
consolidation. Other costs reflect relocation costs, increased employee costs 
and product costs that were incurred either prior to or as part of the 
implementation of the Reorganization Plan. Of the $9.9 million of 
Restructuring and Other charges recorded, $4.2 million are non-cash charges 
and $5.7 million are cash charges. Approximately $0.9 million of the cash 
charges have been expended through December 31, 1998. The above restructuring 
activities are anticipated to be completed within 1999.

(7)   DEBT

      As part of the Recapitalization, the Company entered into a new senior 
credit facility with a group of banks (the "Bank Credit Facility"), and 
pursuant to indentures dated June 17, 1997 (the "Indentures"), issued $145 
million of 9 1/2% Series A Senior Subordinated Notes (the "Old Notes") and 
$170 million aggregate principal amount of 10 1/2% Series A Senior 
Subordinated Discount Notes (the "Old Discount Notes", and together with the 
Old Notes, the "Old Securities"). The proceeds from the Bank Credit Facility 
and the Old Securities were used to finance the conversion to cash of the 
Class A Common Stock, to repay the then outstanding senior credit facility 
and to pay the fees and expenses associated with the Recapitalization.


                                       25
<PAGE>


                   FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                  DECEMBER 31, 1998


      Although the Old Securities were sold through a confidential placement 
memorandum, in September 1997, the Company filed an exchange offer 
registration statement with respect to certain of the Old Securities (the 
"Exchange Offer"). Pursuant to the Exchange Offer, $144.0 million aggregate 
principal amount of 9 1/2% Series B Senior Subordinated Notes Due 2007 (the 
"Notes") of the Company were exchanged for a like amount of the Old Notes and 
$162.8 million aggregate principal amount at maturity of 10 1/2% Series B 
Senior Subordinated Discount Notes Due 2007 (the "Discount Notes" and 
together with the Notes, the "Securities") of the Company were exchanged for 
a like amount of the Old Discount Notes. As the terms of the Old Securities 
and the Securities are otherwise identical, for purposes of the discussions 
below, the $1.0 million of Old Notes and the $7.2 million of Old Discount 
Notes that were not exchanged are considered to be part of the Notes and 
Discount Notes, respectively. The Company did not receive any proceeds from 
the Exchange Offer.

      Certain of the Company's subsidiaries have guaranteed the Bank Credit 
Facility and the Securities, such guarantee of the Securities being 
subordinate to the guarantee of the Bank Credit Facility.  See Note 16.

      SENIOR INDEBTEDNESS:

<TABLE>
<CAPTION>

                                                      DECEMBER 31,          DECEMBER 31,
                                                          1998                  1997
                                                  -------------------    -----------------
                                                                 (IN MILLIONS)
<S>                                                   <C>                     <C>
Bank Credit Facility
   Revolver....................................       $    --                $     --
   Term........................................         173.5                   174.5
                                                   -------------          ------------
   Total.......................................         173.5                   174.5
Other  ........................................           4.2                     2.6
Less:  Current Portion.........................          (2.0)                   (1.5)
                                                   -------------          ------------
   Senior indebtedness.........................       $ 175.7                $ 175.6
                                                   -------------          ------------
                                                   -------------          ------------
</TABLE>

      The aggregate long-term debt maturities over the next five years are as 
follows: 1999 - $2.0 million; 2000 - $2.1 million; 2001 - $2.4 million; 2002 
- $10.8 million; and 2003 - $43.6 million.

      BANK CREDIT FACILITY:

      The Bank Credit Facility entered into on June 17, 1997, consists of a 
$175 million term loan facility which matures in June 2005 and a $125 million 
revolving credit facility (the "Revolver") which matures in June 2003. The 
term loan was drawn in full as part of the Recapitalization and is due in 
semi-annual installments of $0.5 million from December 1997 through June 
2002, quarterly installments of $9.5 million from December 2002 through 
September 2003, quarterly installments of $15.0 million from December 2003 
through September 2004, installments of $18.0 million in December 2004 and 
March 2005 and a final payment at maturity of $36.0 million in June 2005. No 
amounts were outstanding under the Revolver at December 31, 1998. The Bank 
Credit Facility also allows for $25.0 million to be used in the form of 
letters of credit. The use of letters of credit reduces the availability of 
funds under the Revolver. At December 31, 1998, $122.5 million was available 
to borrow under the Revolver.

      Borrowings under the Bank Credit Facility bear interest at alternative 
floating rate structures at management's option (8.2% for the term loan at 
December 31, 1998) and are secured by all the capital stock of each of the 
Company's subsidiaries and substantially all of the inventory and property, 
plant and equipment of the Company and its subsidiaries other than the 
special purpose entity established in connection with the receivables 
securitization program. The Bank Credit Facility requires an annual 
commitment fee of 0.5% on the average daily unused amount of the revolving 
portion of the Bank Credit Facility.

      The Bank Credit Facility contains various restrictive covenants 
including the maintenance of certain financial ratios, restrictions on 
additional indebtedness, mergers, asset dispositions, dividends and other 
restricted payments and prepayment and amendments of subordinated 
indebtedness. As of December 31, 1998, the Company was in compliance with all 
covenants of the Bank Credit Facility.


                                       26
<PAGE>


                 FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                DECEMBER 31, 1998


      Additional debt of the Company primarily consists of industrial revenue 
bonds, which bear interest ranging from 6.2% to 7.5%. The average monthly 
debt during 1998 was $436.6 million, an increase of $122.3 million over the 
comparable 1997 average debt. This increase is primarily due to change in the 
Company's debt structure as part of the Recapitalization.

      SENIOR SUBORDINATED NOTES:

      9 1/2% SENIOR SUBORDINATED NOTes:

      The Company's $145 million of Notes mature on June 15, 2007. Interest 
on the Notes is payable semi-annually in arrears on June 15 and December 15 
commencing on December 15, 1997. The Notes are general unsecured obligations 
of the Company ranking subordinate in right of payment to all existing and 
future senior indebtedness of the Company. The Notes rank PARI PASSU in right 
of payment with all other indebtedness of the Company that is subordinated to 
senior indebtedness of the Company.

      The Notes are not redeemable at the Company's option prior to June 15, 
2002. The Notes are redeemable at the Company's option at 104.750% during the 
12 months beginning June 15, 2002, 103.167% during the 12 months beginning 
June 15, 2003, 101.583% during the 12 months beginning June 15, 2004 and at 
100% thereafter (expressed as a percentage of principal amount). In addition, 
prior to June 15, 2000, up to 35% of the Notes may be redeemed at 109.5% of 
the principal amount out of the proceeds of certain equity offerings.

      10 1/2% SENIOR SUBORDINATED DISCOUNT NOTes:

      The $170 million aggregate principal amount of Discount Notes mature on 
June 15, 2007. The issue price of each Old Discount Note was $599.82 per 
$1,000 principal amount at maturity, which represents a yield to June 15, 
2002 of 10.5% per annum. Cash interest will not accrue on the Discount Notes 
prior to June 15, 2002. Cash interest is payable semi-annually in arrears on 
June 15 and December 15 of each year at a rate of 10.5% per annum commencing 
December 15, 2002. The Discount Notes are general unsecured obligations of 
the Company ranking subordinate in right of payment to all existing and 
future senior indebtedness of the Company. The Discount Notes rank PARI PASSU 
in right of payment with all other indebtedness of the Company that is 
subordinated to senior indebtedness of the Company. The accreted value of the 
Discount Notes was $119.3 million at December 31, 1998.

      The Discount Notes are not redeemable at the Company's option prior to 
June 15, 2002. The Discount Notes are redeemable at the Company's option at 
105.25% during the 12 months beginning June 15, 2002, 103.50% during the 12 
months beginning June 15, 2003, 101.75% during the 12 months beginning June 
15, 2004 and at 100% thereafter (expressed as a percentage of principal 
amount). In addition, prior to June 15, 2000, up to 35% of the Discount Notes 
may be redeemed out of the proceeds of certain equity offerings at 110.5% of 
the accreted value.

      Upon a Change of Control (as defined in the Indentures) the Company has 
the option prior to June 15, 2002 to redeem the Notes and/or the Discount 
Notes in whole, but not in part, at 100% of the principal amount of the Notes 
or 100% of the accreted value of the Discount Notes plus an applicable 
premium in each case, as defined in the Indentures. If the Company does not 
redeem the Securities or if the Change in Control occurs subsequent to June 
15, 2002, each holder of the Securities may require the Company to repurchase 
such holders' Securities at 101% of the aggregate principal amount of the 
Notes plus accrued interest, if any, and 101% of the accreted value of the 
Discount Notes plus accrued interest, if any.

      The Indentures contain restrictive covenants, which among other things 
limit the Company's ability to incur additional indebtedness; pay dividends 
or make other restricted payments; enter into transactions with affiliates; 
make certain asset dispositions; and merge or consolidate with or transfer 
substantially all of its assets to another person.


                                       27
<PAGE>


                   FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                    DECEMBER 31, 1998


(8)   EMPLOYEE RETIREMENT AND BENEFIT PLANS

      Substantially all hourly employees are covered by Company or union 
sponsored defined benefit plans. The Company's salaried and certain hourly 
employees participate in a pension plan which provides benefits that are 
based on the employee's years of service with the Company and the employee's 
compensation. For other employees, pension benefits are provided based on a 
stated amount for each year of service. The Company's funding policy for all 
plans is to make no less than the minimum annual contributions required by 
applicable governmental regulations.

      The Company provides post-retirement life and health-care benefits to 
certain of its employees. The Company has six plans that provide these 
benefits to employees retiring from the Company. Benefits are determined on 
varying formulas based on age at retirement and years of active service. 
Health care benefits are contributory for two of the plans; the life 
insurance plans are noncontributory. The Company has not funded any of this 
post-retirement benefits liability. Contributions to the post-retirement 
plans are made by the Company as claims are incurred.

      Following is a summary of amounts recognized in the Company's 
Consolidated Financial Statements related to these plans.

<TABLE>
<CAPTION>

                                                          PENSION BENEFITS                 OTHER BENEFITS
                                                     ----------------------------    ---------------------------
                                                        1998            1997            1998           1997
                                                     -----------     ------------    -----------    ------------
                                                                           (IN MILLIONS)
<S>                                                    <C>            <C>              <C>            <C>
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year..........       $ 30.8         $ 27.2           $ 12.2         $ 12.5
     Service cost................................          1.9            1.8              0.5            0.5
     Interest cost...............................          2.2            2.0              0.9            1.0
     Amendments..................................         --              0.5             --             --
     Actuarial loss (gain).......................          4.9            1.0              0.1           (0.9)
     Benefits paid...............................         (2.8)          (1.7)            (0.9)          (0.9)
                                                     -----------     ------------    -----------    ------------
Benefit obligation at end of year................       $ 37.0         $ 30.8           $ 12.8         $ 12.2
                                                     -----------     ------------    -----------    ------------

CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning
   of year.......................................       $ 33.9         $ 28.5          $  --          $  --
     Actual return on plan assets................          1.3            6.9             --             --
     Company contribution........................          1.2            0.2              0.8            0.9
     Plan participant contribution...............         --             --                0.1           --
     Benefits paid...............................         (2.8)          (1.7)            (0.9)          (0.9)
                                                     -----------     ------------    -----------    ------------
Fair value of plan assets at end of year.........       $ 33.6         $ 33.9          $  --          $  --
                                                     -----------     ------------    -----------    ------------

Funded status....................................       $ (3.4)        $  3.1           $(12.8)        $(12.2)
Unrecognized actuarial loss......................          6.2            0.1              2.3            2.3
Unrecognized prior service cost..................          0.5            0.4             --             --
Unrecognized net transition obligation...........          0.2            0.2             --             --
                                                     -----------     ------------    -----------    ------------
Prepaid (accrued) benefit cost...................       $  3.5         $  3.8           $(10.5)        $ (9.9)
                                                     -----------     ------------    -----------    ------------
                                                     -----------     ------------    -----------    ------------

Amounts recognized in the Consolidated Balance Sheet consist of:
     Prepaid (accrued) benefit cost..............       $  3.5         $  3.8           $(10.5)        $ (9.9)
     Accrued benefit liability...................         (6.9)          --               --             --
     Intangible asset............................          1.2           --               --             --
     Accumulated other comprehensive loss........         (3.3)          --               --             --
                                                     -----------     ------------    -----------    ------------
Net amount recognized............................       $ (5.5)        $  3.8           $(10.5)        $ (9.9)
                                                     -----------     ------------    -----------    ------------
                                                     -----------     ------------    -----------    ------------
</TABLE>

                                       28
<PAGE>

                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 DECEMBER 31, 1998

<TABLE>
<CAPTION>

                                         PENSION BENEFITS                          OTHER BENEFITS
                                       ----------------------     --------------------------------------------------
                                         1998         1997                 1998                      1997
                                       ---------    ---------     -----------------------   ------------------------
<S>                                      <C>          <C>                  <C>                      <C>
 WEIGHTED AVERAGE ASSUMPTIONS
   AS OF DECEMBER 31:
 Discount rate.....................       7.00%        7.50%                7.00%                     7.50%
 Expected return on plan assets....       9.00%        9.00%                  --                        --
 Rate of compensation increase.....       4.00%        4.00%                  --                        --
 Health care cost trend rate.......         --           --             7.00% for 1999            8.00% for 1998
                                                                     decreasing to 5.00%        decreasing to 5.50%
                                                                      for 2001 and later        for 2001 and later
</TABLE>

Net periodic benefit cost components were as follows:

<TABLE>
<CAPTION>

                                                        PENSION BENEFITS                              OTHER BENEFITS
                                             ----------------------------------------     ----------------------------------------
                                                1998           1997          1996            1998           1997          1996
                                             -----------     ----------    ----------     -----------    -----------    ----------
                                                        (IN MILLIONS)                                (IN MILLIONS)
<S>                                         <C>              <C>           <C>             <C>             <C>            <C>
Service cost.............................    $  1.9           $  1.8        $  1.8          $  0.5          $  0.5         $ 0.5
Interest cost............................       2.2              2.0           1.8             0.9             1.0           0.9
Expected return on plan assets...........      (2.7)            (2.6)         (2.4)            --              --            --
Recognized actuarial loss................       0.1               --           0.1             0.1             0.1           0.2
                                           -----------     ----------    ----------     -----------    -----------    ----------
Net periodic benefit cost................    $  1.5          $   1.2        $  1.3         $  1.5          $  1.6        $  1.6
                                           -----------     ----------    ----------     -----------    -----------    ----------
                                           -----------     ----------    ----------     -----------    -----------    ----------
</TABLE>

      The projected benefit obligation, accumulated benefit obligation and 
fair value of plan assets for the pension plan with accumulated benefit 
obligations in excess of plan assets were $37.0 million, $37.0 million, and 
$33.6 million, respectively, as of December 31, 1998.

      A one-percentage-point change in the assumed health care cost trend 
rate would have the following effects :

<TABLE>
<CAPTION>

                                                 1-PERCENTAGE-POINT          1-PERCENTAGE-POINT
                                                      INCREASE                    DECREASE
                                              --------------------------    ----------------------
                                                                   (IN MILLIONS)
<S>                                                   <C>                        <C>
        Effect on total of service and
          interest cost components.......              $   0.1                    $   (0.1)
        Effect on post-retirement
          benefit obligation.............              $   1.1                    $   (1.1)
</TABLE>

      The Company and its subsidiaries also have several defined contribution 
plans for certain employees. Employer contributions to these plans were $1.3 
million, $1.0 million and $1.4 million in 1998, 1997 and 1996, respectively. 
Contributions to this plan by the Company are determined based on a 
percentage of the contribution made by the employee.

                                       29
<PAGE>


                       FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                       DECEMBER 31, 1998

(9)   INCOME TAXES

      The Company's Consolidated Balance Sheets reflect the following 
deferred tax assets and liabilities:

<TABLE>
<CAPTION>
                                                                                DECEMBER 31,
                                                                           ------------------------
                                                                             1998          1997
                                                                           ----------    ----------
                                                                                (IN MILLIONS)
<S>                                                                         <C>           <C>
         Deferred tax assets:
              Inventory and receivable reserves......................        $   1.8       $   5.0
              Accrued employee benefit obligations...................            5.4           3.2
              Insurance reserves.....................................            4.6           5.6
              Ultravent reserves.....................................           11.1          12.8
              Other..................................................            8.7           7.7
                                                                           ----------    ----------
                                                                             $  31.6       $  34.3
                                                                           ----------    ----------
                                                                           ----------    ----------
         Deferred tax liabilities:
              Property, plant and equipment basis difference.........        $   8.7       $   8.2
                                                                           ----------    ----------
</TABLE>

      Based on management's assessment, it is more likely than not that all
the net deferred tax assets will be realized through future taxable earnings or
implementation of tax planning strategies.

      The components of the provision (benefit) for income taxes are as follows:

<TABLE>
<CAPTION>
                                                                         YEAR ENDED
                                                                        DECEMBER 31,
                                                           ----------------------------------------
                                                              1998         1997           1996
                                                           -----------  -----------    -----------
                                                                         (IN MILLIONS)
<S>                                                          <C>           <C>           <C>
         Provision (benefit) for income taxes:
            Current:
               U.S. federal..........................         $  (2.9)      $   2.7       $  18.1
               U.S. state............................            (0.4)          1.0           3.6
                                                            ----------    ----------    ----------
                 Subtotal............................            (3.3)          3.7          21.7
                                                            ----------    ----------    ----------
            Deferred:
               U.S. federal..........................             4.8         (13.3)         (2.3)
               U.S. state............................             1.1          (2.4)         (0.6)
                                                            ----------    ----------    ----------
                 Subtotal............................             5.9         (15.7)         (2.9)
                                                            ----------    ----------    ----------
                    Total............................         $   2.6       $ (12.0)      $  18.8
                                                            ----------    ----------    ----------
</TABLE>

         Reconciliation of income (loss) before income taxes computed at the
U.S. federal statutory rate to the provision (benefit) for income taxes are as
follows:

<TABLE>
<CAPTION>
                                                                                  YEAR ENDED
                                                                                 DECEMBER 31,
                                                                   ----------------------------------------
                                                                       1998           1997          1996
                                                                   --------------  ------------  ----------
                                                                              (DOLLARS IN MILLIONS)
<S>                                                                   <S>             <C>
       U.S. federal statutory rate............................          34%             35%           35%

       Income taxes at U.S. federal statutory rate............      $  1.7          $(17.3)       $ 17.1
       State income taxes, net of U.S. federal tax impact.....         0.3            (0.8)          1.9
       Amortization of intangibles............................         0.7             0.7           0.6
       Non-deductible expenses, net...........................         --              5.0            --
       Other..................................................        (0.1)            0.4          (0.8)
                                                                   ---------    ------------  ------------
          Provision (benefit) for income taxes................       $  2.6         $(12.0)       $ 18.8
                                                                   ---------    ------------  ------------
                                                                   ---------    ------------  ------------
          Effective income tax rate..........................          50.3%          24.3%         38.4%
                                                                   ---------    ------------  ------------
                                                                   ---------    ------------  ------------
</TABLE>


                                       30
<PAGE>


                   FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                        DECEMBER 31, 1998


(10)  STOCKHOLDERS' EQUITY

      CAPITAL STOCK:

      Prior to the Merger, the Company's Certificate of Incorporation 
authorized 30,000,000 shares of Class A Common Stock, $.0l par value (the 
"Class A Stock"), 14,000,000 shares of Class B Common Stock, $.0l par value 
(the "Class B Stock") and 10,000,000 shares of preferred stock.

      As discussed in Note 5, pursuant to the Merger Agreement, FBP merged 
with and into the Company and the certificate of incorporation of FBP became 
the certificate of incorporation of the Company (the "Restated Certificate of 
Incorporation").  Each issued and outstanding share of capital stock of FBP 
was converted into a share of capital stock of Falcon.

      The Company's Restated Certificate of Incorporation authorizes five 
classes of common stock. The following table summarizes the authorized shares 
of capital stock of the Company at December 31, 1998 and 1997:

<TABLE>
<CAPTION>

                          TITLE
<S>                                                               <C>
Class A Common Stock, par value $0.01 per share.......             1,034,020
Class B Common Stock, par value $0.01 per share.......             6,900,000
Class C Common Stock, par value $0.01 per share.......             2,048,980
Class D Common Stock, par value $0.01 per share.......                17,000
Common Stock, par value $0.01 per share...............            10,000,000
                                                               ----------------
    Total.............................................            20,000,000
                                                               ----------------
                                                               ----------------
</TABLE>

         Holders of the Class A Stock are entitled to one vote per share and
holders of Class D Common Stock are entitled to 446 votes for each share of such
stock held. Upon the occurrence of a sale of 100% of the outstanding equity
securities of Falcon or a public offering of any equity securities of Falcon,
each share of Class A, Class B, Class C and Class D Common Stock of the Company
will convert into one share of Common Stock of the Company. The Restated
Certificate of Incorporation no longer authorizes shares of preferred stock.

         ADDITIONAL PAID-IN CAPITAL:

         As part of the Recapitalization further discussed in Note 5, in June 
1997 the Company eliminated its Additional paid-in capital balance.


                                       31
<PAGE>


                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 DECEMBER 31, 1998


      NOTES RECEIVABLE:

      Pursuant to the Company's Senior Executive Stock Purchase Plan (the 
"Executive Stock Plan"), at the time of the Offering in 1994 certain 
executive officers of the Company purchased a total of 196,500 shares of 
Class A Stock for $0.2 million and notes of $2.2 million.  These notes bear 
interest at 7.5% per annum and are due no later than December 2001 or upon 
sale of the shares.  In January 1997, the Company repurchased 20,000 of these 
shares due to the  retirement of one of its officers and the related loan 
amount of $0.2 million was repaid.  In June 1997, as part of the Merger, 
approximately 26,200 shares were either redeemed or prorated pursuant to the 
terms of the Merger Agreement and approximately $0.4 million of the 
outstanding loans were repaid.  In February 1998, the Company repurchased 
21,818 of these shares due to the retirement of one of its officers and the 
related loan amount of $0.2 million was repaid.  In connection with the 
Recapitalization, the Executive Stock Plan was amended to permit the loans 
outstanding thereunder to remain outstanding.  Concurrently, the Company 
adopted the Falcon Building Products, Inc. 1997 Senior Executive Stock Loan 
Plan (the "1997 Loan Plan") containing loan provisions similar to the 
Executive Stock Plan.  Loans under the 1997 Loan Plan are only available to 
executives who do not have loans outstanding under the Executive Stock Plan. 
At the consummation of the Recapitalization, loans in the aggregate amount of 
$0.3 million were issued to purchase 32,140 shares of Class C Stock.  These 
notes bear interest at rates tied to interest rates paid on the Company's 
third party debt and are due no later than June 2004 or upon sale of the 
shares.

       There were $1.8 million and $2.0 million of notes outstanding under 
the Executive Stock Plan and the 1997 Loan Plan at December 31, 1998 and 
1997, respectively.  These notes have been classified as a component of 
Stockholders' equity in the Company's Consolidated Balance Sheet. All shares 
purchased pursuant to the terms of these plans have been pledged to the 
Company.

(11)  STOCK OPTION PLAN

1997  STOCK INCENTIVE PLAN:

      In June 1997, the Company adopted the Senior Management Stock Incentive 
Plan (the "1997 Plan"). Pursuant to the 1997 Plan certain directors, 
employees and officers of the Company are given an opportunity to acquire 
shares of Class C Common Stock (the "Class C Stock") through the grant of 
non-qualified stock options, incentive stock options, stock appreciation 
rights and restricted stock.  The options granted pursuant to the 1997 Plan 
are exercisable at no less than the fair market value of the Class C Stock at 
the time of grant and vest immediately upon the seventh anniversary of the 
grant with the possibility for accelerated vesting based, in part on the 
achievement of an annual EBITDA amount, and in part on the achievement of 
certain investment targets as defined in the plan.  The plan also provides 
for vesting of certain percentages of the options in the event of an Initial 
Public Offering or an Authorized Sale as defined in the 1997 Plan.  Options 
issued pursuant to the 1997 Plan expire upon the 30th day following the tenth 
anniversary of the grant date. A total of 947,851 shares of Class C Stock are 
reserved for issuance under the 1997 Plan.  The 1997 Plan is administered by 
the Board of Directors.

      Non-Qualified stock option activity is shown below:
<TABLE>
<CAPTION>
                                                 OPTIONS OUTSTANDING                      EXERCISABLE OPTIONS
                                         -------------------------------------     -----------------------------------
                                           NUMBER OF          WEIGHTED AVG.         NUMBER OF         WEIGHTED AVG.
                                             SHARES           EXERCISE PRICE          SHARES         EXERCISE PRICE
                                         ---------------     -----------------     -------------    ------------------
<S>                                         <C>                  <C>                   <C>              <C> 
Balance at December 31, 1996..........         --                $  --                  --              $  --
     Granted..........................        926,140               17.75               --                 --
     Exercised........................         --                   --                  --                 --
     Canceled.........................         --                   --                  --                 --
                                         ---------------     -----------------     -------------    ------------------
Balance at December 31, 1997..........        926,140               17.75               --                 --
     Granted..........................         40,100               17.75               --                 --
     Exercised........................         --                   --                  --                 --
     Canceled.........................       (51,701)               17.75               --                 --
                                                                                   -------------    ------------------
                                         ---------------     -----------------
Balance at December 31, 1998..........        914,539             $ 17.75               --              $  --
                                         ---------------     -----------------     -------------    ------------------
                                         ---------------     -----------------     -------------    ------------------
</TABLE>

                                      32
<PAGE>


                FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                               DECEMBER 31, 1998


      At December 31, 1998, the options outstanding had an exercise price of 
$17.75. The weighted average remaining contractual life of the options 
outstanding was 8 1/2 years.

      The Company measures compensation cost using the intrinsic value-based 
method of accounting pursuant to the provisions of APB Opinion No. 25.  Had 
compensation cost been determined on the fair market value-based accounting 
method prescribed by Statement of Financial Accounting  Standards No. 123 
"Accounting for Stock Based Compensation" ("SFAS No. 123") for options 
granted in 1998 and 1997, pro forma net income (loss) would have been $2.0 
million and $(39.2) million, respectively.

      For purposes of fair market value disclosures, the fair market value of 
an option grant is estimated using the Black-Scholes option pricing model 
with the following assumptions:

<TABLE>
<CAPTION>
                                                        1998        1997
                                                     ----------  ----------
<S>                                                     <C>         <C>
         Risk-Free Interest Rate..................      5.2%        6.4%
         Average Life of Options (years)..........        7           7
         Volatility...............................       0%          0%
         Dividend Yield...........................       0%          0%
</TABLE>

         1994 STOCK OPTION PLAN:

         In June 1997, as part of the Merger, the Company paid $5.2 million to
holders of options which were granted under the 1994 Stock Option and Restricted
Stock Plan (the "1994 Plan"). Pursuant to the provisions of the 1994 Plan, the
options became immediately exercisable upon a change in control. The 1994 Plan
was terminated subsequent to the Merger. SFAS 123 disclosure of 1996 information
has been omitted as this information is not meaningful.

         As part of the Offering in 1994, the Company awarded 70,500 restricted
shares of Class A Stock to certain officers. The market value of the shares
awarded was $0.8 million. This amount was recorded as unearned compensation and
is shown as a separate component of Stockholders' equity at December 31, 1997.
Unearned compensation was amortized to expense over a four-year vesting period.
This expense amounted to $0.1 million in 1997 and $0.2 million in 1996. As a
result of the Recapitalization, these shares became immediately vested. Included
in the Recapitalization expenses is $0.3 million related to the accelerated
vesting of these shares.

                                      33
<PAGE>


                FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                DECEMBER 31, 1998


(12)  BALANCE SHEET DETAIL

<TABLE>
<CAPTION>
                                                                       DECEMBER 31,
                                                                ----------------------------
                                                                    1998            1997
                                                                 -----------     -----------
                                                                       (IN MILLIONS)
<S>                                                                <C>             <C>
Inventories:
   Raw materials and supplies...............................       $  28.7         $  27.8
   Work in process..........................................          12.0            12.0
   Finished goods...........................................          38.1            39.7
                                                                 -----------     -----------
     Total..................................................       $  78.8         $  79.5
                                                                 -----------     -----------
                                                                 -----------     -----------
   Excess of replacement cost over LIFO inventory cost......       $   3.8         $   3.2
                                                                 -----------     -----------
                                                                 -----------     -----------

Other current assets:
   Deferred tax assets......................................       $  15.2         $  18.2
   Residual interest in sold accounts receivable............          22.5            13.1
   Other ...................................................           4.5             2.7
                                                                 -----------     -----------
     Total..................................................       $  42.2         $  34.0
                                                                 -----------     -----------
                                                                 -----------     -----------

Property, plant and equipment:
   Land                                                            $   9.2         $   8.8
   Buildings................................................          51.8            51.2
   Machinery and equipment..................................         150.4           130.2
   Construction in progress.................................          11.4            13.4
   Less accumulated depreciation............................        (113.0)         (102.3)
                                                                 -----------     -----------
     Total..................................................       $ 109.8         $ 101.3
                                                                 -----------     -----------
                                                                 -----------     -----------

Other assets:
   Deferred financing fees..................................       $  18.2         $  21.0
   Other ...................................................           6.6            11.1
                                                                 -----------     -----------
     Total..................................................       $  24.8         $  32.1
                                                                 -----------     -----------
                                                                 -----------     -----------

Other accrued expenses:
   Accrued warranty.........................................       $  10.1         $   5.7
   Accrued wages and benefits...............................           9.0             6.8
   Accrued rebates..........................................           8.5             6.9
   Ultravent reserve........................................          10.0            10.2
   Other ...................................................          19.4            13.6
                                                                 -----------     -----------
     Total..................................................       $  57.0         $  43.2
                                                                 -----------     -----------
                                                                 -----------     -----------
</TABLE>
                                      34
<PAGE>


                FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                               DECEMBER 31, 1998


(13)  FAIR VALUE OF FINANCIAL INSTRUMENTS

      The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value:

      CASH AND CASH EQUIVALENTS
      The carrying amount of cash and cash equivalents approximates fair
value because of the short maturity of those instruments.

      SENIOR SUBORDINATED NOTES
      The fair value of the Company's  Subordinated  Notes is based on quoted 
market prices at December 31, 1998 and 1997.

      CREDIT FACILITIES
      The carrying amount approximates fair value as the rates are tied to
the prime rate and LIBOR, which fluctuate based on current market conditions.

      OTHER DEBT
      The carrying amount approximates fair value as rates approximate
borrowing rates currently available to the Company for similar loans.

      The estimated fair values of the Company's financial instruments are as
follows:

<TABLE>
<CAPTION>
                                            DECEMBER 31, 1998           DECEMBER 31, 1997
                                         ------------------------    -------------------------
                                          CARRYING       FAIR         CARRYING        FAIR
                                           AMOUNT        VALUE         AMOUNT         VALUE
                                         ----------    ----------    -----------    ----------
                                                            (IN MILLIONS)
<S>                                       <C>           <C>            <C>            <C>
Cash and cash equivalents..........       $ 66.4        $ 66.4         $ 29.9         $ 29.9
Senior Subordinated Notes..........        264.3         232.5          252.7          257.6
Credit Facilities..................        173.5         173.5          174.5          174.5
Other Debt.........................          4.2           4.2            2.6            2.6

</TABLE>

(14)  RELATED PARTY TRANSACTIONS

      On December 30, 1998, the Company entered into an option agreement (the
"Agreement") for the benefit of the Company's stockholders of record on the date
of the Agreement (the "Holders") whereby the Company sold to the Holders, for
the aggregate purchase price of $1.0 million, an option (the "Option") to
purchase all of the issued and outstanding capital stock of Mansfield Plumbing
Products, Inc. ("Mansfield"), its Plumbing Fixtures segment, based upon an
enterprise value for such segment of $80 million. The option exercise price is
$10 million, plus the amount by which the indebtedness which Mansfield will
incur as a result of this transaction (the proceeds of which would be
distributed to Falcon) is less than $70 million.. This Option is exercisable by
the Holders at any time on or prior to June 30, 1999. The value of the option
and the purchase price were determined through an independent valuation. The
Option has been included in Other long-term liabilities in the Company's
Consolidated Balance Sheet.

      Financing for the Recapitalization was provided in part by
approximately $134.6 million of capital provided by Investcorp, its affiliates
and other international investors organized by Investcorp. An affiliate of
Investcorp was paid a fee of $5.0 million in 1997 for services rendered outside
of the United States in connection with the raising of the equity capital from
the international investors.

      In connection with the Recapitalization, the Company paid Investcorp
International, Inc. ("III"), an affiliate of Investcorp, advisory fees
aggregating $4.2 million, and Invifin S.A., an affiliate of Investcorp, received
fees aggregating $5.8 million for providing a standby commitment to fund the
amount of the senior subordinated indebtedness and the Credit Facility. The
Company also entered into an agreement for management advisory and consulting
services for a five-year term with III, pursuant to which the Company prepaid
III $5.0 million upon the consummation of the Recapitalization. This amount is
being amortized to expense over the five-year period.


                                      35
<PAGE>


                 FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                DECEMBER 31, 1998


      The Company shared management, administrative and other services with 
Eagle pursuant to a Corporate Services Agreement that renewed annually.  The 
fee under this agreement was intended to cover Eagle's expected costs in 
providing these services to the Company.  Total fees paid under this 
agreement were $1.4 million in 1997 and $2.6 million in 1996. As a result of 
the Recapitalization, the Corporate Services Agreement was terminated. 
Subsequent to the Merger, the Company paid Eagle $0.3 million in fees for 
utilization of office space and administrative support.

      Prior to the Offering, the Company was included in its parent's 
consolidated federal income tax returns.  In addition, the Company filed 
certain combined state tax returns until the distribution to EHL in 1996.  
Pursuant to the Tax Sharing Agreement, the Company paid $4.6 million in 1996 
for tax liabilities it incurred during the periods it was included in 
consolidated federal and certain combined state tax returns.

      The law firm of Rosenberg & Liebentritt, P.C., of which a former 
Director is a member, rendered legal services to the Company.  The Company 
paid this law firm $0.4 million in 1997.

      Also see Notes 1 and 5 for other information regarding related party 
transactions.

(15)  COMMITMENTS AND CONTINGENCIES

      The Company conducts manufacturing operations at various leased 
facilities and also leases warehouses, manufacturing equipment, office space, 
computers and office equipment.  Most of the realty leases contain renewal 
options and escalation clauses.  Total rent expense, including related real 
estate taxes, amounted to $5.5 million, $4.9 million and $4.7 million for the 
years ended December 31, 1998, 1997, and 1996, respectively.

      Future minimum lease payments required as of December 31, 1998 (in
millions):

<TABLE>
<CAPTION>
                  <S>                                 <C>
                  1999.........................       $  2.3
                  2000........................           2.1
                  2001........................           1.9
                  2002........................           1.4
                  2003 and thereafter.........           1.2
                                                     ---------
                                                      $  8.9
                                                     ---------
                                                     ---------
</TABLE>

      The Company and certain of its subsidiaries are involved in several 
lawsuits and environmental matters arising in the ordinary course of 
business. However, it is the opinion of the Company's management, based upon 
the advice of legal counsel, that these lawsuits are either without merit, 
are covered by insurance or are adequately reserved for in the Consolidated 
Balance Sheets, and the ultimate disposition of pending litigation will not 
be material in relation to the Company's consolidated financial position or 
results of operations.

      In addition to the matters covered by the preceding paragraph, in May
1994, Underwriters' Laboratories of Canada ("ULC") suspended its recognition of
high temperature plastic venting ("HTPV") for gas appliances systems, including
the Ultravent(R) product distributed by the Company. This action resulted from
reports of problems with high temperature plastic venting, including improper
installation, cracking, inadequate joint adhesion, and related safety hazards,
including potential for carbon monoxide emission. In June 1994, as a result of
the ULC action, the Ontario Ministry of Consumer and Commercial Relations
suspended sales of HTPV in the Province of Ontario. Other provinces of Canada
have taken similar action. Pursuant to an order, appliance systems in Ontario
with HTPV have been corrected. Gas appliance manufacturers in Canada and the
United States no longer certify HTPV for use with their products. As a result,
the Company discontinued sales of its HTPV product in 1997. Company sales of
Ultravent(R) products in the United States and Canada in 1996 and 1997 were
minimal.


                                      36
<PAGE>


                FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                               DECEMBER 31, 1998


      The Company is a defendant in a suit in Canada that has been filed 
against 24 entities representing heating appliance manufacturers, plastic 
vent manufacturers and distributors, public utilities and listing agencies 
brought by the Ontario New Home Warranty Program, which is responsible for 
the cost of correcting appliances equipped with HTPV in new home construction 
in Ontario.

      The Company engaged in discussions with the United States Consumer 
Product Safety Commission ("CPSC") regarding the use of HTPV in the United 
States. Additionally, certain appliance manufacturers, the plastic resin 
manufacturer and the HTPV manufacturer and distributor, including Hart & 
Cooley, participated in a non-binding facilitative mediation process, the 
object of which was to develop and implement a voluntary HTPV corrective 
action program. As a result of the facilitative mediation process, the 
Company entered into a Corrective Action Program and Settlement Agreement in 
January 1998, along with 25 appliance manufacturers, an HTPV manufacturer and 
a resin manufacturer to correct certain HTPV mid-efficiency gas fired 
appliances by replacing the venting system. The Corrective Action Program was 
approved by the CPSC in February 1998.

      In 1997, the Company recorded pretax charges of $32.8 million ($20.0 
million, net of income tax) representing an estimate of its share of the cost 
of the Corrective Action Program in the United States, resolution of the 
Canadian litigation, the class action litigation, legal fees and other 
related costs. The Company estimates that the costs associated with the 
Corrective Action Program and other related HTPV matters will be expended 
during the next three years. Actual amounts expended could differ depending 
on a number of factors including, but not limited to, the estimated 
replacement cost per unit as well as the number of units replaced. The 
Company paid $4.1 million in 1998 related to this matter.

      With respect to these matters, the Company, on September 16, 1996, 
filed an action in state court in Illinois against certain insurance 
carriers.  The Company is seeking a declaratory judgment, damages for breach 
of contract and specific relief requiring the insurance carriers, pursuant to 
the terms of the Company's insurance policies, to defend and reimburse the 
Company for costs and legal expenses arising from Ultravent-related claims.  
The amount at issue cannot be determined at this time.  The insurance 
carriers have denied coverage on a number of grounds and have filed motions 
to dismiss the Company's lawsuit.



                                      37
<PAGE>


                FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                              DECEMBER 31, 1998


(16)  GUARANTOR SUBSIDIARIES

      The Company's payment obligations under the Notes and the Discount 
Notes are fully and unconditionally guaranteed on a joint and several basis  
(collectively, the "Guarantees") by DeVilbiss Air Power Company, Hart & 
Cooley, Inc., Warrior Glass and Aluminum, Inc., Mansfield Plumbing Products, 
Inc., SWC Industries, Inc. and Falcon Manufacturing, Inc. (collectively, the 
"Guarantor Subsidiaries").  Each of the Guarantor Subsidiaries is a direct or 
indirect wholly-owned subsidiary of the Company.  The Company's only other 
subsidiary, Falcon Receivable Program, Inc., is a special purpose corporation 
formed for the Company's accounts receivable securitization program.  The 
obligations of each Guarantor Subsidiary under its Guarantee are subordinated 
to such subsidiary's obligations under its guarantee of the Bank Credit 
Facility.

      Presented below is condensed consolidating financial information for 
Falcon Building Products, Inc. ("Parent Company"), the Guarantor Subsidiaries 
and Falcon Receivable Program, Inc. (the "Non-Guarantor Subsidiary").  In the 
Company's opinion, separate financial statements and other disclosures 
concerning each of the Guarantor Subsidiaries would not provide additional 
information that is material to investors.  Therefore, the Guarantor 
Subsidiaries are combined in the presentation below.

      Investments in subsidiaries are accounted for by the Parent Company on 
the equity method of accounting. Earnings of subsidiaries are, therefore, 
reflected in the Parent Company's investments in and advances to/from 
subsidiaries account and earnings. The elimination entries eliminate 
investments in subsidiaries and intercompany balances and transactions.






                                     38
<PAGE>


                FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                               DECEMBER 31, 1998


(16)  GUARANTOR SUBSIDIARIES (CONTINUED)

<TABLE>
<CAPTION>
                                SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
                                                 December 31, 1998
                                                   (in millions)

                                                                                    NON-
                                                   PARENT        GUARANTOR        GUARANTOR
                                                   COMPANY      SUBSIDIARIES     SUBSIDIARY      ELIMINATIONS     CONSOLIDATED
                                                   -------      ------------     -----------     ------------     ------------

                                     ASSETS
<S>                                                <C>            <C>              <C>            <C>               <C>
Current assets:
     Cash and cash equivalents.............        $ 62.7         $  0.9           $  2.8         $  --             $ 66.4
     Inventories, net......................          --             78.8             --              --               78.8
     Other current assets..................           0.5           19.2             22.5            --               42.2
                                                   -------      ------------     -----------     ------------     ------------
     Total current assets..................          63.2           98.9             25.3            --              187.4

Property, plant and equipment, net.........           0.5          109.3             --              --              109.8
Goodwill...................................           --            59.4             --              --               59.4
Investment in and advances 
     to/from subsidiaries..................         163.2         (109.6)           (18.9)          (34.7)            --
Other long-term assets.....................          21.8            3.0             --              --               24.8
                                                   -------      ------------     -----------     ------------     ------------
     Total assets..........................        $248.7         $161.0           $  6.4          $(34.7)          $381.4
                                                   -------      ------------     -----------     ------------     ------------
                                                   -------      ------------     -----------     ------------     ------------

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Current portion long-term debt........        $   1.0          $  1.0          $  --           $  --             $  2.0
     Accounts payable......................            0.1            57.9             --              --               58.0
     Accrued liabilities...................           18.4            38.3              0.3            --               57.0
                                                   -------      ------------     -----------     ------------     ------------
     Total current liabilities.............           19.5            97.2              0.3            --              117.0

Long term debt.............................          436.8             3.2             --              --              440.0
Other long-term liabilities................            6.3            32.8             --              --               39.1
                                                   -------      ------------     -----------     ------------     ------------
     Total liabilities.....................          462.6           133.2              0.3            --              596.1
                                                   -------      ------------     -----------     ------------     ------------

Stockholders' equity (deficit):
     Common stock..........................            0.1            --               --              --                0.1
     Additional paid-in capital............           --              42.9              6.5           (49.4)            --
     Retained earnings (deficit)...........         (209.7)          (14.3)            (0.4)           14.7           (209.7)
     Accumulated other comprehensive
        income.............................           (2.5)           (0.8)            --              --               (3.3)
     Other.................................           (1.8)           --               --              --               (1.8)
                                                   -------      ------------     -----------     ------------     ------------
     Total stockholders' equity (deficit)..         (213.9)           27.8              6.1           (34.7)          (214.7)
                                                   -------      ------------     -----------     ------------     ------------
Total liabilities and stockholders' equity.         $248.7          $161.0           $  6.4          $(34.7)          $381.4
                                                   -------      ------------     -----------     ------------     ------------
                                                   -------      ------------     -----------     ------------     ------------
</TABLE>

                                      39
<PAGE>


                FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                              DECEMBER 31, 1998


(16)  GUARANTOR SUBSIDIARIES (CONTINUED)

<TABLE>
<CAPTION>
                                SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
                                                 December 31, 1997
                                                   (in millions)

                                                                                    NON-
                                                   PARENT        GUARANTOR        GUARANTOR
                                                   COMPANY      SUBSIDIARIES     SUBSIDIARY      ELIMINATIONS     CONSOLIDATED
                                                   -------      ------------     -----------     ------------     ------------

                                     ASSETS
<S>                                                <C>            <C>              <C>            <C>               <C>
Current assets:
     Cash and cash equivalents.............        $  29.1        $   0.7          $   0.1         $  --            $  29.9
     Inventories, net......................           --             79.5             --              --               79.5
     Other current assets..................            1.1           19.8             13.1            --               34.0
                                                   -------      ------------     -----------     ------------     ------------
     Total current assets..................           30.2          100.0             13.2            --              143.4

Property, plant and equipment, net.........            0.2          101.1             --              --              101.3
Goodwill...................................           --             57.0             --              --               57.0
Investment in and advances
     to/from subsidiaries..................          174.4         (135.5)            (7.6)          (31.3)            --
Other long-term assets.....................           27.4            4.7             --              --               32.1
                                                   -------      ------------     -----------     ------------     ------------
     Total assets..........................        $ 232.2        $ 127.3          $   5.6         $ (31.3)         $ 333.8
                                                   -------      ------------     -----------     ------------     ------------
                                                   -------      ------------     -----------     ------------     ------------

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Current portion long-term debt........        $   1.0        $   0.5          $  --           $  --            $   1.5
     Accounts payable......................            0.3           33.7             --              --               34.0
     Accrued liabilities...................           14.2           29.0             --              --               43.2
                                                   -------      ------------     -----------     ------------     ------------
     Total current liabilities.............           15.5           63.2             --              --               78.7

Long term debt.............................          426.2            2.1             --              --              428.3
Other long-term liabilities................            4.2           36.3             --              --               40.5
                                                   -------      ------------     -----------     ------------     ------------
     Total liabilities.....................          445.9          101.6             --              --              547.5
                                                   -------      ------------     -----------     ------------     ------------

Stockholders' equity:
     Common stock..........................            0.1           --               --              --                0.1
     Additional paid-in capital............           --             42.9              6.5           (49.4)            --
     Retained earnings (deficit)...........         (211.8)         (17.2)            (0.9)           18.1           (211.8)
     Other.................................           (2.0)          --               --              --               (2.0)
                                                   -------      ------------     -----------     ------------     ------------
     Total stockholders' equity (deficit)..         (213.7)          25.7              5.6           (31.3)          (213.7)
                                                   -------      ------------     -----------     ------------     ------------
Total liabilities and stockholders' equity.        $ 232.2        $ 127.3          $   5.6         $ (31.3)         $ 333.8
                                                   -------      ------------     -----------     ------------     ------------
                                                   -------      ------------     -----------     ------------     ------------
</TABLE>

                                      40
<PAGE>

                 FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                              DECEMBER 31, 1998

(16)  GUARANTOR SUBSIDIARIES (CONTINUED)

<TABLE>
<CAPTION>
                             SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME
                                             AND COMPREHENSIVE INCOME
                                           YEAR ENDED DECEMBER 31, 1998
                                                   (in millions)
                                                                                    NON-
                                                   PARENT        GUARANTOR        GUARANTOR
                                                   COMPANY      SUBSIDIARIES     SUBSIDIARY      ELIMINATIONS     CONSOLIDATED
                                                   -------      ------------     -----------     ------------     ------------
<S>                                                <C>            <C>              <C>            <C>               <C>
Net sales........................................  $  --           $765.8          $  --            $  --            $765.8
Cost of sales....................................     --            640.0             --               --             640.0
                                                   -------      ------------     -----------     ------------     ------------
     Gross earnings..............................     --            125.8             --               --             125.8
Selling and administrative expenses..............      7.1           57.8             --               --              64.9
Securitization expense...........................      6.3           --               (2.5)            --               3.8
Restructuring and other charges..................     --              8.2             --               --               8.2
Ultravent expense................................     --             --               --               --              --
Recapitalization expense.........................     --             --               --               --              --
                                                   -------      ------------     -----------     ------------     ------------
     Operating income (loss).....................    (13.4)          59.8              2.5             --              48.9
Corporate allocation.............................    (54.0)          54.0             --               --              --
Net interest expense.............................     41.8            0.2              1.8             --              43.8
                                                   -------      ------------     -----------     ------------     ------------
Income (loss) before income taxes................     (1.2)           5.6              0.7             --               5.1
Provision (benefit) for income taxes.............     (0.3)           2.6              0.3             --               2.6
                                                   -------      ------------     -----------     ------------     ------------
Income (loss) before equity in income (loss) of
     consolidated subsidiaries...................     (0.9)           3.0              0.4             --               2.5
Equity in income of consolidated subsidiaries....      3.4           --               --               (3.4)           --
                                                   -------      ------------     -----------     ------------     ------------
Net income (loss)................................   $  2.5         $  3.0           $  0.4           $ (3.4)         $  2.5
                                                   -------      ------------     -----------     ------------     ------------
                                                   -------      ------------     -----------     ------------     ------------
Other comprehensive loss:
     Minimum pension liability adjustment net
       of income tax benefit of $2.3.............     (2.5)          (0.8)            --               --              (3.3)
                                                   -------      ------------     -----------     ------------     ------------
Comprehensive income (loss)......................  $  --           $  2.2           $  0.4           $ (3.4)         $ (0.8)
                                                   -------      ------------     -----------     ------------     ------------
                                                   -------      ------------     -----------     ------------     ------------
</TABLE>

                                      41
<PAGE>

                FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                              DECEMBER 31, 1998


(16)  GUARANTOR SUBSIDIARIES (CONTINUED)

<TABLE>
<CAPTION>
                             SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME
                                             AND COMPREHENSIVE INCOME
                                           YEAR ENDED DECEMBER 31, 1997
                                                   (in millions)

                                                                                    NON-
                                                   PARENT        GUARANTOR        GUARANTOR
                                                   COMPANY      SUBSIDIARIES     SUBSIDIARY      ELIMINATIONS     CONSOLIDATED
                                                   -------      ------------     -----------     ------------     ------------
<S>                                                <C>            <C>              <C>            <C>               <C>
Net sales........................................  $  --          $686.4           $  --            $  --            $686.4
Cost of sales....................................     --           576.5              --               --             576.5
                                                   -------      ------------     -----------     ------------     ------------
     Gross earnings..............................     --           109.9              --               --             109.9
Selling and administrative expenses..............      5.9          51.8              --               --              57.7
Securitization expense...........................      5.8          --                (1.8)            --               4.0
Ultravent expense................................     --            32.8              --               --              32.8
Recapitalization expense.........................     36.3          --                --               --              36.3
                                                   -------      ------------     -----------     ------------     ------------
     Operating income (loss).....................    (48.0)         25.3               1.8             --             (20.9)
Corporate allocation.............................    (60.0)         60.0              --               --              --
Net interest expense.............................     26.7           0.2               1.6             --              28.5
                                                   -------      ------------     -----------     ------------     ------------
Income (loss) before income taxes................    (14.7)        (34.9)              0.2             --             (49.4)
Provision (benefit) for income taxes.............      0.9         (12.9)             --               --             (12.0)
                                                   -------      ------------     -----------     ------------     ------------
Income (loss) before equity in income (loss) of
     consolidated subsidiaries and extraordinary
       item......................................    (15.6)        (22.0)              0.2             --             (37.4)
Equity in income of consolidated subsidiaries....    (21.8)         --                --               21.8            --
                                                   -------      ------------     -----------     ------------     ------------
Income (loss) before extraordinary item..........    (37.4)        (22.0)              0.2             21.8           (37.4)
Extraordinary item:
     Early extinguishment of debt net of income
       tax benefit of $0.9 million...............     (1.5)         --                --               --              (1.5)
                                                   -------      ------------     -----------     ------------     ------------
Net income (loss)................................   $(38.9)       $(22.0)           $  0.2           $ 21.8          $(38.9)
                                                   -------      ------------     -----------     ------------     ------------
                                                   -------      ------------     -----------     ------------     ------------
Other comprehensive income:
     Minimum pension liability adjustment net
       of income tax expense of $0.2.............     --             0.5              --               --               0.5
                                                   -------      ------------     -----------     ------------     ------------
Comprehensive income (loss)......................   $(38.9)       $(21.5)           $  0.2           $ 21.8          $(38.4)
                                                   -------      ------------     -----------     ------------     ------------
                                                   -------      ------------     -----------     ------------     ------------
</TABLE>

                                      42
<PAGE>

                FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                               DECEMBER 31, 1998


(16)  GUARANTOR SUBSIDIARIES (CONTINUED)

<TABLE>
<CAPTION>
                             SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME
                                             AND COMPREHENSIVE INCOME
                                           YEAR ENDED DECEMBER 31, 1996
                                                   (in millions)

                                                                                    NON-
                                                   PARENT        GUARANTOR        GUARANTOR
                                                   COMPANY      SUBSIDIARIES     SUBSIDIARY      ELIMINATIONS     CONSOLIDATED
                                                   -------      ------------     -----------     ------------     ------------
<S>                                                <C>            <C>              <C>            <C>               <C>
Net sales........................................  $  --          $ 633.2          $  --            $  --           $ 633.2
Cost of sales....................................     --            513.6             --               --             513.6
                                                   -------      ------------     -----------     ------------     ------------
     Gross earnings..............................     --            119.6             --               --             119.6
Selling and administrative expenses..............      5.6           48.3             --               --              53.9
Securitization expense...........................      4.3          --                 (0.2)           --               4.1
Ultravent expenses...............................     --              1.8              --              --               1.8
                                                   -------      ------------     -----------     ------------     ------------
     Operating income (loss).....................     (9.9)          69.5               0.2            --              59.8
Corporate allocation.............................    (20.4)          20.4             --               --            --
Net interest expense.............................      9.5            0.3               1.2            --              11.0
                                                   -------      ------------     -----------     ------------     ------------
Income (loss) before income taxes................      1.0           48.8              (1.0)           --              48.8
Provision (benefit) for income taxes.............     (0.9)          19.7             --               --              18.8
                                                   -------      ------------     -----------     ------------     ------------
Income (loss) before equity in income of
     consolidated subsidiaries...................      1.9           29.1              (1.0)           --              30.0
Equity in income of consolidated subsidiaries....     28.1          --                --               (28.1)        --
                                                   -------      ------------     -----------     ------------     ------------
Net income (loss)................................  $  30.0        $  29.1           $  (1.0)         $ (28.1)       $  30.0
                                                   -------      ------------     -----------     ------------     ------------
                                                   -------      ------------     -----------     ------------     ------------
Other comprehensive loss:
     Minimum pension liability adjustment net
       of income tax benefit of $0.1.............     --             (0.1)             --               --             (0.1)
                                                   -------      ------------     -----------     ------------     ------------
Comprehensive income (loss)......................  $  30.0        $  29.0           $  (1.0)         $ (28.1)       $  29.9
                                                   -------      ------------     -----------     ------------     ------------
                                                   -------      ------------     -----------     ------------     ------------
</TABLE>

                                     43
<PAGE>

                FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                               DECEMBER 31, 1998


(16)  GUARANTOR SUBSIDIARIES (CONTINUED)

<TABLE>
<CAPTION>
                           SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                                           Year Ended December 31, 1998
                                                   (in millions)

                                                                                    NON-
                                                   PARENT        GUARANTOR        GUARANTOR
                                                   COMPANY      SUBSIDIARIES     SUBSIDIARY      ELIMINATIONS     CONSOLIDATED
                                                   -------      ------------     -----------     ------------     ------------
<S>                                                <C>            <C>              <C>            <C>               <C>
Cash flows from operating activities.........      $ 20.2         $ 53.6            $ (8.7)         $  --           $ 65.1
                                                   -------      ------------     -----------     ------------     ------------
Cash flows from investing activities:
     Purchase of business....................        --             (4.0)             --               --             (4.0)
     Capital expenditures....................        (0.4)         (22.4)             --               --            (22.8)
     Other...................................         0.4           (0.6)             --               --             (0.2)
                                                   -------      ------------     -----------     ------------     ------------
     Net cash used in investing activities...        --            (27.0)             --               --            (27.0)
                                                   -------      ------------     -----------     ------------     ------------
Cash flows from financing activities:
     Advances (to) from affiliate............        14.6          (25.9)             11.3             --             --
     Net borrowings on debt..................        (1.0)          (0.6)             --               --             (1.6)
                                                   -------      ------------     -----------     ------------     ------------
     Net cash from financing activities......        13.6          (26.5)             11.3             --             (1.6)
                                                   -------      ------------     -----------     ------------     ------------
Change in cash and cash equivalents..........        33.8            0.1               2.6             --             36.5
Cash and cash equivalents, beginning
     of period...............................        29.0            0.7               0.2             --             29.9
                                                   -------      ------------     -----------     ------------     ------------
Cash and cash equivalents, end of period.....      $ 62.8         $  0.8            $  2.8           $ --           $ 66.4
                                                   -------      ------------     -----------     ------------     ------------
                                                   -------      ------------     -----------     ------------     ------------
</TABLE>


                                     44
<PAGE>

                FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                               DECEMBER 31, 1998


(16)  GUARANTOR SUBSIDIARIES (CONTINUED)

<TABLE>
<CAPTION>
                           SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                                           Year Ended December 31, 1997
                                                   (in millions)

                                                                                    NON-
                                                   PARENT        GUARANTOR        GUARANTOR
                                                   COMPANY      SUBSIDIARIES     SUBSIDIARY      ELIMINATIONS     CONSOLIDATED
                                                   -------      ------------     -----------     ------------     ------------
<S>                                                <C>            <C>              <C>            <C>               <C>
Cash flows from operating activities.........      $  41.5        $ (19.5)          $ (11.1)        $  --           $   10.9
                                                   -------      ------------     -----------     ------------     ------------
Cash flows from investing activities:
     Capital expenditures....................         (0.2)         (18.9)             --              --              (19.1)
     Other...................................         (0.6)           0.1               0.2            --               (0.3)
                                                   -------      ------------     -----------     ------------     ------------
     Net cash used in investing activities...         (0.8)         (18.8)              0.2            --              (19.4)
                                                   -------      ------------     -----------     ------------     ------------
Cash flows from financing activities:
     Advances (to) from affiliate............        (49.1)          38.0              11.1            --               --
     Proceeds from senior credit facilities..        175.0           --                --              --              175.0
     Repayment of senior credit facilities...       (138.8)          --                --              --             (138.8)
     Issuance of senior subordinated debt....        247.0           --                --              --              247.0
     Issuance of common stock................        134.6           --                --              --              134.6
     Retirement of common stock..............       (338.0)          --                --              --             (338.0)
     Payment of Recapitalization fees and
        expenses.............................        (61.8)          --                --              --              (61.8)
     Net borrowings on debt..................         16.8           (0.3)             --              --               16.5
                                                   -------      ------------     -----------     ------------     ------------
     Net cash from financing activities......        (14.3)          37.7              11.1            --               34.5
                                                   -------      ------------     -----------     ------------     ------------
Change in cash and cash equivalents..........         26.4           (0.6)              0.2            --               26.0
Cash and cash equivalents, beginning
     of period...............................          2.6            1.3              --              --                3.9
                                                   -------      ------------     -----------     ------------     ------------
Cash and cash equivalents, end of period.....      $  29.0        $   0.7           $   0.2         $  --            $  29.9
                                                   -------      ------------     -----------     ------------     ------------
                                                   -------      ------------     -----------     ------------     ------------
</TABLE>

                                     45
<PAGE>

                FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                              DECEMBER 31, 1998


(16)  GUARANTOR SUBSIDIARIES (CONTINUED)

<TABLE>
<CAPTION>
                           SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                                           Year Ended December 31, 1996
                                                   (in millions)

                                                                                    NON-
                                                   PARENT        GUARANTOR        GUARANTOR
                                                   COMPANY      SUBSIDIARIES     SUBSIDIARY      ELIMINATIONS     CONSOLIDATED
                                                   -------      ------------     -----------     ------------     ------------
<S>                                                <C>            <C>              <C>            <C>               <C>
Cash flows from operating activities.........      $  11.5        $   6.6          $  23.0          $  --           $  41.1
                                                   -------      ------------     -----------     ------------     ------------
Cash flows from investing activities:
     Purchase of businesses..................           --          (18.8)            --               --             (18.8)
     Capital expenditures....................           --          (20.0)            --               --             (20.0)
     Other...................................          0.5           (0.1)            (0.2)            --               0.2
                                                   -------      ------------     -----------     ------------     ------------
     Net cash used in investing activities...          0.5          (38.9)            (0.2)            --             (38.6)
                                                   -------      ------------     -----------     ------------     ------------
Cash flows from financing activities:
     Advances (to) from affiliate............         (9.6)          32.4            (22.8)            --              --
     Net borrowings on debt..................          0.5           (0.2)            --               --               0.3
                                                   -------      ------------     -----------     ------------     ------------
     Net cash from financing activities......         (9.1)          32.2            (22.8)            --               0.3
                                                   -------      ------------     -----------     ------------     ------------
Change in cash and cash equivalents..........          2.9           (0.1)            --               --               2.8
Cash and cash equivalents, beginning
     of period...............................         (0.3)           1.4             --               --               1.1
                                                   -------      ------------     -----------     ------------     ------------
Cash and cash equivalents, end of period.....      $   2.6        $   1.3          $  --            $  --           $   3.9
                                                   -------      ------------     -----------     ------------     ------------
                                                   -------      ------------     -----------     ------------     ------------
</TABLE>

                                      46
<PAGE>

                FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                              DECEMBER 31, 1998


(17)  BUSINESS SEGMENT INFORMATION

      Effective January 1, 1998, the Company adopted the provisions of 
Statement No. 131, "Disclosure about Segments of an Enterprise and Related 
Information," which establishes standards for reporting information about 
operating segments and related disclosures about products and services, 
geographic areas and major customers. Prior year amounts have been restated 
to conform to the current year's presentation.

      The Company has three operating segments under this Statement: Air 
Distribution Products, Air Power Products and Plumbing Fixtures.

      Air Distribution Products: The Company is a leading supplier of air 
distribution products and is the leading manufacturer of residential and 
light commercial grilles, registers and diffusers for heating, ventilating 
and air conditioning applications.  Air Power Products: The Company is the 
leading producer of consumer and commercial air compressors for home 
improvement applications.  The Company also produces generators and pressure 
washers marketed primarily into retail and home center outlets.  In addition, 
the Company sells a variety of pneumatic tools for use in home improvement 
applications.  Plumbing Fixtures: The Company is a leading domestic producer 
of ceramic china bathroom fixtures, including toilets and lavatories.  The 
Company also produces enameled steel bathroom tubs and sinks, and acrylic 
whirlpool tubs as well as brass and plastic trim and fittings.  These 
products are primarily sold to the residential construction market.

      The accounting policies of the segments are the same as those disclosed 
in the "Summary of Significant Accounting Policies."  The Company evaluates 
the performance of its segments based on their Profitability which is defined 
as earnings before interest expense and income taxes, excluding the following 
charges: (i) depreciation and amortization expense; (ii) costs associated 
with Ultravent(R) and the Recapitalization; (iii) securitization expense; and 
(iv) restructuring and non-cash charges.




                                     47
<PAGE>

                FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                              DECEMBER 31, 1998

<TABLE>
<CAPTION>
                                                                                   YEAR ENDED
                                                                                  DECEMBER 31,
                                                                    ------------------------------------------
                                                                       1998          1997            1996
                                                                    ------------  -----------    -------------
                                                                                  (IN MILLIONS)
<S>                                                                    <C>            <C>            <C>
NET SALES:
   Air Distribution Products.................................          $219.4         $191.2         $187.0
   Air Power Products........................................           389.1          335.4          287.1
   Plumbing Fixtures.........................................           157.3          159.8          159.1
                                                                    -----------    -----------    -----------
      Total..................................................          $765.8         $686.4         $633.2
                                                                    -----------    -----------    -----------
                                                                    -----------    -----------    -----------

SEGMENT PROFITABILITY:
   Air Distribution Products.................................          $ 32.9         $ 28.8         $ 29.6
   Air Power Products........................................            39.0           29.7           29.1
   Plumbing Fixtures.........................................            14.6           24.8           28.5
                                                                    -----------    -----------    -----------
      Total..................................................          $ 86.5         $ 83.3         $ 87.2
                                                                    -----------    -----------    -----------
                                                                    -----------    -----------    -----------

RECONCILIATION OF SEGMENT PROFITABILITY TO INCOME (LOSS) BEFORE INCOME TAXES AND
   EXTRAORDINARY ITEM:
Total segment profitability..................................          $ 86.5         $ 83.3         $ 87.2
Corporate....................................................            (5.9)          (5.3)          (5.6)
Non-cash retiree medical.....................................            (0.6)          (0.9)          (0.4)
Depreciation and amortization................................           (17.4)         (16.9)         (15.5)
Restructuring and other charges..............................            (9.9)          (8.0)          --
Ultravent expense............................................            --            (32.8)          (1.8)
Recapitalization expense.....................................            --            (36.3)          --
Net interest expense.........................................           (43.8)         (28.5)         (11.0)
Securitization expense.......................................            (3.8)          (4.0)          (4.1)
                                                                    -----------    -----------    -----------
   Income (loss) before incomes taxes and extraordinary item.          $  5.1         $(49.4)        $ 48.8
                                                                    -----------    -----------    -----------
                                                                    -----------    -----------    -----------

SEGMENT ASSETS(A):
   Air Distribution Products.................................          $110.3         $101.7         $100.7
   Air Power Products........................................           166.7          150.4          127.6
   Plumbing Fixtures.........................................           100.0           99.3           97.5
                                                                    -----------    -----------    -----------
      Total Segment Assets...................................          $377.0         $351.4         $325.8
                                                                    -----------    -----------    -----------
                                                                    -----------    -----------    -----------

RECONCILIATION OF SEGMENT ASSETS TO TOTAL ASSETS:
     Total Segment Assets....................................          $377.0        $351.4         $325.8
     Securitized Receivables.................................          (106.7)        (88.6)         (75.2)
     Corporate and other(b)..................................           111.1          71.0           11.1
                                                                    ----------    -----------    ------------
           Total Assets......................................          $381.4        $333.8         $261.7
                                                                    ----------    -----------    ------------
                                                                    ----------    -----------    ------------
</TABLE>

(a) Segment assets include accounts receivable sold under the securitization
    program.
(b) Corporate and other represents corporate assets, primarily consisting of
    cash, deferred financing fees and residual interest in accounts receivable
    sold under the securitization program.

      The Company's export sales are less than 10% of total revenues. The 
Company reported revenues from two individual customers that represented 
sales of more than 10% of the Company's consolidated net sales. The Company's 
Air Power Products and Plumbing Fixtures segments reported net sales to Sears 
of $129.6 million, $90.5 million and $84.0 million for 1998, 1997 and 1996, 
respectively. All of the Company's segments had net sales to The Home Depot 
totaling $83.2 million for 1998. The Company's revenues and identifiable 
assets are predominantly related to its U.S. operations and no one other 
geographic area accounts for more than 10% of total revenue or 10% of total 
assets.

                                      48
<PAGE>


                FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                              DECEMBER 31, 1998


(18)  SUBSEQUENT EVENT

      On January 22, 1999, the Company acquired the assets and business of 
the Penn Ventilation Companies, Inc. ("Penn Ventilation") a manufacturer of 
air moving and control equipment for commercial and industrial applications. 
The consideration for Penn Ventilation consisted of $26.0 million in cash, a 
$3.0 million three-year interest bearing note and non-compete agreement 
payments totaling $3.0 million payable over three years. The acquisition will 
be accounted for as a purchase. Penn Ventilation reported approximately $80.0 
million of net sales in 1998. Penn Ventilation will be part of the Company's 
Air Distribution Products segment.








                                      49
<PAGE>


               FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
                       SUPPLEMENTARY FINANCIAL DATA
                               (UNAUDITED)


QUARTERLY FINANCIAL DATA

      The following is a summary of the unaudited interim results of 
operations for the years ended December 31, 1998 and 1997 (in millions).

<TABLE>
<CAPTION>
                                 QUARTER ENDED            QUARTER ENDED           QUARTER ENDED           QUARTER ENDED
                                   MARCH 31,                JUNE 30,              SEPTEMBER 30,            DECEMBER 31,
                              ---------------------    --------------------    --------------------    ---------------------
                                1998        1997         1998        1997        1998        1997        1998         1997
                              --------    ---------    --------    --------    --------    --------    --------     --------
<S>                            <C>         <C>          <C>         <C>         <C>         <C>         <C>          <C>
Net sales..............        $171.4      $160.2       $190.9      $195.7      $197.5      $172.7      $206.0       $157.8
Gross earnings(1)......          25.1        28.2         34.8        36.8        31.0        29.1        34.9         15.8
Income (loss)
   before extra-
   ordinary item.......          (0.7)        6.1          3.8       (18.4)       (2.7)        0.8         2.1        (25.9)
Net income (loss)(2)             (0.7)        6.1          3.8       (19.9)       (2.7)        0.8         2.1        (25.9)

</TABLE>
--------------------
(1)  Gross earnings for the quarter ended September 30, 1998 reflects $1.7
     million of costs associated with the Reorganization Plan. Gross earnings
     for the quarter ended December 31, 1997 reflects $12.4 million of costs
     associated with pressure washer returns including an $8.0 million non-cash
     charge.

(2)  Net loss for the quarter ended September 30, 1998 reflects $9.0 million of
     pretax costs associated with the Reorganization Plan, and write down of
     automotive assets. Net income for the quarter ended December 31, 1998
     reflects $0.9 million of pretax costs associated with the consolidation of
     manufacturing plants. Net loss for the quarter ended June 30, 1997 reflects
     after tax charges of $28.4 million relating to the Recapitalization and an
     extraordinary charge of $1.5 million related to the early extinguishment of
     debt associated with the Recapitalization. Net loss for the quarter ended
     December 31, 1997 reflects after tax charges of $19.0 million related to
     Ultravent(R).




                                     50
<PAGE>


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

         None

                                                     PART III

ITEM 10.  DIRECTORS & EXECUTIVE OFFICERS OF THE REGISTRANT

         The following table lists the name, age as of March 1, 1999, position,
offices and certain information with respect to the executive officers and
Directors of the Company. The term of office of each executive will expire upon
the appointment of his successor by the Board of Directors.

<TABLE>
<CAPTION>
<S>                                          <C>
William K. Hall, 55.....................     President,  Chief  Executive  Officer and Director of Falcon since 1994;
                                             Chairman of the Board of Directors of Falcon since June 1997;  President
                                             from 1988 and Chief  Executive  Officer and  Director  from 1990 to June
                                             1997 of Eagle; Director of GenCorp and A.M. Castle.

William E. Allen, 54....................     President of DeVilbiss Air Power Company, a subsidiary of Falcon,  since
                                             1989.

Gus J. Athas, 62........................     Executive  Vice  President -  Administration  of Falcon since June 1997;
                                             Senior Vice  President,  General  Counsel and  Secretary of Falcon since
                                             1994;   Senior  Vice   President  of  Great   American   Management  and
                                             Investment,  Inc.  ("GAMI")  from 1995 to June  1997;  Served in various
                                             capacities  at  Eagle  from  1987 to June  1997  including  Senior  Vice
                                             President  (and prior  thereto Vice  President),  General  Counsel,  and
                                             Secretary  (and prior  thereto  Assistant  Secretary)  from 1995 to June
                                             1997.

Sam A. Cottone, 58......................     Executive Vice  President and Director of Falcon since June 1997;  Chief
                                             Financial  Officer of Falcon since 1994; Senior Vice President - Finance
                                             and  Treasurer of Falcon from 1994 to June 1997;  Senior Vice  President
                                             of GAMI from 1995 to June 1997;  Senior  Vice  President-Finance,  Chief
                                             Financial Officer and Director of Eagle from 1993 to 1995.

Edward G. Finnegan, Jr., 37.............     Vice  President-Operations  and  Corporate  Development  of Falcon since
                                             January  1996;  Served in  various  non-executive  capacities  at Eagle,
                                             Equity Group  Investments,  Inc.,  and EGI Corporate  Investments,  Inc.
                                             from 1988 to 1996.

Joseph W. Harbrecht, 54.................     President of Mansfield Plumbing Products,  Inc., a subsidiary of Falcon,
                                             since December 1997.  President,  Amana Home  Appliances of the Raytheon
                                             Appliance  Company from 1996 to 1997;  Served in various  capacities  at
                                             the  Kohler  Company  from  1981 to  1996  including  President,  Kohler
                                             Plumbing North America from 1993 to 1996.

Lawrence B. Lee, 56.....................     President of Hart & Cooley, Inc., a subsidiary of Falcon, since 1985.

Anthony J. Navitsky, 42.................     Vice  President-Finance  & Treasurer of Falcon since March 1997.  Served
                                             as Vice President and Treasurer of Eagle from 1990 to 1997.

Christopher J. O'Brien, 40..............     Director of Falcon since June 1997;  Executive of  Investcorp  or one or
                                             more of its wholly owned  subsidiaries  since  December  1993;  Managing
                                             Director  of  Mancuso &  Company  from  1989 to 1993;  Director  of Star
                                             Markets  Holdings,  Inc., CSK Auto  Corporation,  and The William Carter
                                             Company.
</TABLE>


                                      51
<PAGE>

<TABLE>
<CAPTION>
<S>                                          <C>
Charles J. Philippin, 48................     Director of Falcon since June 1997;  Executive of  Investcorp  or one or
                                             more of its wholly  owned  subsidiaries  since July 1994;  partner  with
                                             Coopers & Lybrand L.L.P.  from 1982 to 1994;  Director of Saks Holdings,
                                             Inc.,  CSK Auto  Corporation,  The William  Carter  Company,  Harborside
                                             Healthcare and Stratus Computer, Inc.

Christopher J. Stadler, 34..............     Director of Falcon since June 1997;  Executive of  Investcorp  or one or
                                             more of its wholly  owned  subsidiaries  since  April 1, 1996.  Prior to
                                             joining  Investcorp,  Mr.  Stadler was a director  with CS First  Boston
                                             Corporation.  Director of CSK Auto  Corporation,  and The William Carter
                                             Company.
</TABLE>










                                      52
<PAGE>


ITEM 11.   EXECUTIVE COMPENSATION

           The following tables set forth information about the compensation of
the chief executive officer and the four other most highly compensated executive
officers of the Company (the "Named Executive Officers"):

<TABLE>
<CAPTION>
                                               SUMMARY COMPENSATION TABLE

                                                                                                   LONG TERM
                                                                                              COMPENSATION AWARDS
                                                                                      ----------------------------------
                                                                                           SECURITIES        ALL OTHER
                                                     ANNUAL COMPENSATION                   UNDERLYING         COMPEN-
                                            --------------------------------------          OPTIONS           SATION
NAME AND PRINCIPAL POSITIONS                 YEAR      SALARY($)      BONUS($)(2)             (#)             ($) (3)
-----------------------------               -------    ----------     ------------        --------------    ------------
<S>                                          <C>        <C>           <C>                   <C>              <C>
William K. Hall (1).......................   1998       598,900       366,012                  --             13,600
   President and Chief Executive Officer     1997       425,000        83,333               241,271          706,415
                                             1996       250,000       271,200                43,300            6,410

Sam A. Cottone (1)(5).....................   1998       405,585       167,552                  --             13,600
   Executive Vice President-Finance,         1997       275,000        37,500               120,636          306,415
   Treasurer and Chief Financial Officer     1996       144,731       122,040                32,200            6,410


Gus J. Athas (1)(5).......................   1998       347,731       138,271                  --             13,600
   Executive Vice President, General         1997       252,692        37,500                86,168          306,415
   Counsel and Secretary                     1996       144,731       122,040                32,200            6,410


Joseph W. Harbrecht.......................   1998       275,000           --                   --             13,600
   President, Mansfield Plumbing             1997        19,920           --                 51,000             --
   Products, Inc.                            1996          --             --                   --               --

William E. Allen (4)......................   1998       250,020       222,100                  --             12,000
   President, DeVilbiss Air Power Co.        1997       226,768        63,804                51,706          817,830
                                             1996       186,162       208,157                19,500           11,402


Lawrence B. Lee...........................   1998       225,000       152,645                  --             10,400
   President, Hart & Cooley, Inc.            1997       210,603        52,818                51,701          411,830
                                             1996       194,750        73,148                18,450            8,960
</TABLE>
---------------------
(1)  For periods prior to the Recapitalization, the annual compensation and all
     other compensation (except for the transaction incentive bonus discussed in
     Note 3 below) shown for Messrs. Hall, Athas and Cottone represents 50% of
     such compensation paid to them by a subsidiary of Eagle and reimbursed by
     the Company.

(2)  Partial year bonuses were paid in June 1997 based on Company performance
     through the date of the Recapitalization. No bonuses were earned or paid
     for the remainder of 1997.

(3)  All other compensation in 1997 includes transaction incentive bonuses of
     $700,000, $500,000, $300,000, $300,000 and $399,000 paid to the above named
     officers (excluding Mr. Harbrecht), respectively, upon consummation of the
     Recapitalization. The remaining amounts include amounts contributed to an
     employee savings plan and accrued under an unfunded supplemental plan.

(4)  In addition to the compensation discussed in footnote (3) above, All Other
     Compensation in 1997 for Mr. Allen includes a $275,000 payment for a
     three-year non-competition agreement.

(5)  In connection with the Recapitalization in 1997, Messrs. Athas and Cottone
     were named Executive Vice Presidents. Prior to such time, Messrs. Athas and
     Cottone were Senior Vice Presidents of the Company.

                                      53
<PAGE>

                       OPTION GRANTS IN LAST FISCAL YEAR

                                    NONE


<TABLE>
<CAPTION>

                AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR,
                         AND FISCAL YEAR OPTION VALUE

                                                                                    NUMBER OF
                                                                                    SECURITIES                VALUE OF
                                                                                    UNDERLYING              UNEXERCISED
                                                                                   UNEXERCISED              IN-THE-MONEY
                                                                                    OPTIONS AT               OPTIONS AT
                                                                                    FY-END (#)               FY-END ($)
                                     SHARES ACQUIRED ON          VALUE             EXERCISABLE/             EXERCISABLE/
                                        EXERCISE (#)          REALIZED ($)        UNEXERCISABLE           UNEXERCISABLE(1)
                                     -------------------     ---------------    -------------------       -----------------
<S>                                         <C>                    <C>             <C>                        <C>
William K. Hall................              --                    --               0/241,271                 0 / N/A
William E. Allen...............              --                    --                0/51,706                 0 / N/A
Gus J. Athas...................              --                    --                0/86,168                 0 / N/A
Sam A. Cottone.................              --                    --               0/120,636                 0 / N/A
Joseph W. Harbrecht............              --                    --                0/51,000                 0 / N/A
Lawrence B. Lee................              --                    --                0/51,701                 0 / N/A
</TABLE>
---------------------
(1) As there is no public trading market for the Company's common stock, the
    value of In-The-Money Options is not determinable.

                               PENSION PLAN TABLE

         The Falcon Cash Balance Pension Plan is a qualified "cash balance"
defined benefit plan that covers eligible salaried and hourly employees of
Falcon and its subsidiaries that adopt the plan. Prior to the Recapitalization,
certain officers of the Company participated in an Eagle sponsored Cash Balance
Plan which mirrored the Falcon Cash Balance Plan (collectively the "Pension
Plans"). The normal form of retirement benefit under the Pension Plans is an
annuity payable at age 65 (the normal retirement age), although, in lieu of an
annuity, a participant may elect to receive a lump sum payment at retirement or
other termination of service. A participant's benefit is based on an account
balance, which is the sum of 5% of the participant's compensation for each of
the first 15 years of service and 6.5% of compensation for each year of service
thereafter. The account balances are further credited with interest. The
interest credit is based on the One Year Treasury Constant Maturities as
published in the Federal Reserve Statistical Release over the one month period
ending on the November 30 immediately preceding the applicable plan year. The
interest rate for the plan year ending December 31, 1998 was 5.7%. Covered
compensation includes salary, annual bonus, 401(k) deferrals and overtime, but
excludes long-term incentive compensation.

         The estimated annual annuity benefits payable under the Pension Plans
at normal retirement are $17,471, $48,025, $4,848, $10,498, $16,229 and $41,774
for Messrs. Hall, Allen, Athas, Cottone, Harbrecht, and Lee, respectively at
December 31, 1998. Prior to the Recapitalization, the Company bore 50% of the
current costs of these benefits for Messrs. Hall, Cottone and Athas pursuant to
the Corporate Services Agreement described below. The Corporate Services
Agreement was terminated in connection with the Recapitalization and the Company
now bears all of the costs associated with these benefits.

                            COMPENSATION OF DIRECTORS

         The Company does not pay any additional remuneration to its employees
or to executives of Investcorp for serving as directors.


                                      54
<PAGE>


                       EMPLOYMENT CONTRACTS AND TERMINATION OF
                   EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS

         Messrs. Hall, Cottone and Athas have entered into employment agreements
with the Company, effective as of the consummation of the Recapitalization
(collectively, the "Employment Agreements"). Under the terms of the Employment
Agreements, Mr. Hall serves as Chairman, President and Chief Executive Officer,
Mr. Cottone serves as Executive Vice President and Chief Financial Officer, and
Mr. Athas serves as Executive Vice President Administration, General Counsel and
Secretary. These Employment Agreements stipulated base salary amounts that are
subject to adjustment.

         The Employment Agreements also provide (i) for an annual bonus to be
paid to the officers in accordance with goals to be mutually agreed upon by the
Company and such officers, (ii) that the Company will establish a supplemental
executive retirement plan for Messrs. Cottone and Athas, (iii) the receipt of
10-year stock options, (iv) that such officers have certain rights to "put" to
the Company and the Company has certain rights to "call" from such officers
unrestricted share of Falcon capital stock owned by such officers and certain
vested stock options held by such officers, and (v) that such officers are each
required to own a specific percentage of shares of Falcon capital stock .

         Each Employment Agreement is subject to a fixed term, unless earlier
terminated by the Company or an officer. If an Employment Agreement is
terminated by the Company, the termination is not effective until the later of
June 17, 2000 or two years after the notice of termination, unless the
termination is for "Good Cause". If an Employment Agreement is terminated by an
officer, the termination is not effective until 60 days after the notice of
termination. Under the Employment Agreements if the Company terminates the
employment of an officer without Good Cause or the officer terminates his
employment for "Good Reason", the officer is entitled to receive severance
benefits which include (i) the ability to exercise vested and outstanding stock
options for the period ending on the earlier of the date that is 18 months from
the date his employment is terminated or the specific expiration date stated in
the options and (ii) for the period ending on the later of June 17, 2000 or two
years after notice of such termination, payment of the officer's base
compensation at the rate most recently determined and an annual bonus in an
amount equal to the bonus that would be paid if then targeted goals were
achieved; the continuation of health, life and disability benefits; the
provision of office space and secretarial services; the reimbursement for
outplacement services; and the full vesting in all retirement and savings plans.
If the officer dies while he is receiving severance benefits, such benefits will
continue to be paid to his spouse, and if such spouse subsequently dies, to the
officer's estate.

         "Good Cause" is defined as (i) the officer's conviction of any
embezzlement or any felony involving fraud or breach of trust relating to the
performance of the officer's duties, (ii) the officer's willful engagement in
gross misconduct in the performance of his duties, (iii) the officer's death, or
(iv) permanent disability which materially impairs the officer's performance of
his duties.

         "Good Reason" exists if (i) the Company continues a reduction in
compensation or expenditures for benefit plans, relocates outside the Chicago
area or commits another material breach of the Employment Agreement for more
than 30 days after being notified by the officer of such breach provided the
officer has given notice to the Company within 30 days of first becoming aware
of the facts constituting such breach, (ii) the Company gives the officer a
notice of termination without Good Cause provided the officer terminates the
Employment Agreement within 30 days of receiving such notice, (iii) a "change in
control" occurs and the officer's employment is terminated by either party for
any reason other than Good Cause, or (iv) the officer retires from the Company
on a date that is mutually agreed upon by the Company and the officer.

         The Company has entered into agreements with each of Messrs. Allen, Lee
and Harbrecht, that provide benefits in the event that the executives'
employment is terminated, other than by reason of death, disability, Voluntary
Termination or Termination with Cause (as defined in the agreements) within two
years following a change in control of ownership of the subsidiary employer or
the Company that occurs prior to September 30, 1997 for Messrs. Allen and Lee
and December 10, 1999 for Mr. Harbrecht. Upon a covered termination, the
executive will be entitled to receive a payment equal to two times the sum of
base salary and bonus in effect at the time of termination. In addition, the
Company will provide up to one year of outplacement assistance and will pay the
executive's cost of continuing certain health care benefits for up to two years.
Similar agreements have been entered into with twenty-two other employees of the
Company's subsidiaries which provide for a lump sum payment from six to 18
months of the employee's base salary plus bonus at the time of such employee's
termination and the Company's payment of the costs for continuation of certain
benefits for a specified period of time after such employee's termination.

                                     55
<PAGE>

                            COMPENSATION COMMITTEE
                     INTERLOCKS AND INSIDER PARTICIPATION


         The Company does not have a compensation committee. Mr. Hall makes
recommendations to the Board of Directors regarding executive officer
compensation. The Board of Directors makes decisions regarding compensation with
Messrs. Hall and Cottone abstaining from voting regarding such matters.

         Prior to the consummation of the Recapitalization, the Company shared
management, administrative and other services with Eagle pursuant to a Corporate
Services Agreement that renewed annually. The fee under this agreement was
intended to cover Eagle's expected costs in providing these services to the
Company and was reviewed by the Audit Committee of the Board of Directors of the
Company. The fee paid for 1997 was $1.4 million.

         The law firm of Rosenberg & Liebentritt, P.C., of which Sheli Z.
Rosenberg (a former director) is a partner, provided legal service to the
Company and was paid $0.4 million and $0.1 million in 1997 and 1996,
respectively, for these services.

         The Company, until the Offering in November 1994, was included in the
consolidated federal income tax returns of GAMI. In addition, the Company filed
certain combined state tax returns with GAMI until the distribution to EHL in
1996. The Company has agreed to pay to GAMI amounts equal to the amounts the
Company would have paid had it filed its own income tax returns for these
periods. In December 1996, the Company paid GAMI $4.6 million pursuant to this
agreement.

         In connection with the 1994 public offering of its Common Stock, the
Company has agreed with the Pension Benefit Guaranty Corporation that through
November 1999 it will remain jointly and severally liable for certain pension
liabilities of GAMI, Eagle and their subsidiaries without regard to whether or
not the sale of the Common Stock to the public was sufficient to remove the
Company from the group having joint and several liability for these pension plan
liabilities. GAMI and Eagle have agreed to hold the Company harmless from any
pension plan liabilities not attributable to the Company's pension plans and the
Company has agreed to hold GAMI and Eagle harmless from any liabilities
attributable to such plans. The Company and Eagle have agreed to hold each other
harmless from certain liabilities unrelated to the others' business.

         In 1994, the Company loaned $0.9 million to Mr. Hall; $0.2 million to
Mr. Cottone; $0.2 million to Mr. Athas; $0.3 million to Mr. Allen; and $0.1
million to Mr. Lee. In addition, a total of $0.5 million was loaned to two
officers of the Company who are not Named Executive Officers. These loans were
to enable these officers to purchase Common Stock in the public offering at $12
per share. The loans mature in seven years or earlier in certain circumstances
and bear interest at the rate of 7.5% per year, compounded semi-annually payable
upon maturity of the loans. At December 31, 1998, the balances of these loans
including accrued interest to the Named Executive Officers were $1.0 million,
$0.2 million, $0.2 million, $0.3 million, and $0.2 million, respectively. In
connection with the Recapitalization, the Stock Purchase Plan was amended to
permit the loans outstanding thereunder to remain outstanding. Concurrently, the
Company adopted the Falcon Building Products, Inc. 1997 Senior Executive Stock
Loan Plan (the "1997 Loan Plan") containing loan provisions similar to the Stock
Purchase Plan. Loans under the 1997 Loan Plan are only available to executives
who do not have loans outstanding under the Stock Purchase Plan. At the
consummation of the Recapitalization, loans in aggregate amount of approximately
$0.3 million to purchase shares of Class C Stock were made under the 1997 Loan
Plan to three employees of the Company who are not Named Executive Officers.


                                      56
<PAGE>


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth, as of December 31, 1998, certain
information with respect to the beneficial ownership of the voting stock of the
Company by (i) each stockholder who is known by the Company to beneficially own
more than 5% of the Common Stock, (ii) each director of the Company who could be
deemed to be the beneficial owner of shares of voting stock, (iii) each Named
Executive Officer and (iv) all directors and executive officers of the Company
as a group. Unless otherwise indicated, each beneficial owner has sole
investment power and sole voting power with respect to the securities
beneficially owned.

         Holders of the Class A Stock are entitled to one vote per share and in
the aggregate represent approximately 12% of the voting stock of Falcon. The
holders of Class D Common Stock, $0.01 par value per share (the "Class D
Stock"), are entitled to 446 votes per share and have approximately 88% of the
voting power of Falcon.

<TABLE>
<CAPTION>
                                                                                SHARES BENEFICIALLY OWNED
                                                                                ---------------------------
                                                                                 NUMBER OF         % OF
                                                                                 SHARES (1)        CLASS
                                                                                -------------    ----------
<S>                                                                               <C>              <C>
CLASS A VOTING STOCK
EHL (2)..................................................................          783,354          77.7%
William E. Allen (3).....................................................           21,818           2.2
Gus J. Athas (3).........................................................           13,636           1.4
Sam A Cottone (3)........................................................           13,488           1.3
William K. Hall (3)......................................................           68,182           6.8
Lawrence B. Lee (3)......................................................           11,364           1.1
All directors and executive officers as a group, including the above
   named persons (8 persons).............................................          134,852          13.7

CLASS D VOTING STOCK
INVESTCORP S.A. (4)(5)...................................................           17,000         100.0%
SIPCO Limited (6)........................................................           17,000         100.0
CIP Limited (7)(8).......................................................           15,640          92.0
Ballet Limited (7)(8)....................................................            1,564           9.2
Denary Limited (7)(8)....................................................            1,564           9.2
Gleam Limited (7)(8).....................................................            1,564           9.2
Highlands Limited (7)(8).................................................            1,564           9.2
Nobel Limited (7)(8).....................................................            1,564           9.2
Outrigger Limited (7)(8).................................................            1,564           9.2
Quill Limited (7)(8).....................................................            1,564           9.2
Radial Limited (7)(8)....................................................            1,564           9.2
Shoreline Limited (7)(8).................................................            1,564           9.2
Zinnia Limited (7)(8)....................................................            1,564           9.2
INVESTCORP Investment Equity Limited (5).................................            1,360           8.0
</TABLE>
---------------------
(1)  As used in the table above, a beneficial owner of a security includes any
     person who, directly or indirectly, through contract, arrangement,
     understanding, relationship, or otherwise has or shares (i) the power to
     vote, or direct the voting, of such security or (ii) investment power which
     includes the power to dispose, or to direct the disposition of, such
     security. In addition, a person is deemed to be the beneficial owner of a
     security if that person has the right to acquire beneficial ownership of
     such security within 60 days.

(2)  EHL's general partners are the Samuel Zell Revocable Trust and the 
     Robert H. and Ann Lurie Trust.  Samuel Zell is the trustee of the Zell 
     Trust.  Mark Slezak and Ms. Lurie are co-trustees of the Robert H. and
     Ann Lurie Trust.  Messrs. Zell and Slezak and Ms. Lurie disclaim beneficial
     ownership of the shares of Class A Stock beneficially owned by EHL.  The
     address of EHL, Messrs.  Zell and Slezak and Ms. Lurie is Two North 
     Riverside Plaza, Chicago, Illinois 60606.

(3)  The address of Messrs. Allen, Athas, Cottone, Hall and Lee is 
     c/o Falcon Building Products, Inc., 233 South Wacker Drive, Suite 3500,
     Chicago, Illinois 60606.


                                      57
<PAGE>


(4)  Investcorp does not directly own any stock in Falcon. The number of shares
     shown as owned by Investcorp includes all of the shares owned by INVESTCORP
     Investment Equity Limited (see (5) below). Investcorp owns no stock in
     Ballet Limited, Denary Limited, Gleam Limited, Highlands Limited, Noble
     Limited, Outrigger Limited, Quill Limited, Radial Limited, Shoreline
     Limited, Zinnia Limited, or in the beneficial owners of these entities (see
     (7) below). Investcorp may be deemed to share beneficial ownership of the
     shares of voting stock held by these entities because the entities have
     entered into revocable management services or similar agreements with an
     affiliate of Investcorp, pursuant to which each such entity has granted
     such affiliate the authority to direct the voting and disposition of the
     Falcon voting stock owned by such entity for so long as such agreement is
     in effect. Investcorp is a Luxembourg corporation with its address at 37
     rue Notre-Dame, Luxembourg.

(5)  INVESTCORP Investment Equity Limited is a Cayman Islands corporation, and a
     wholly-owned subsidiary of Investcorp, with its address at P.O. Box 1111,
     West Wind Building, George Town, Grand Cayman, Cayman Islands.

(6)  SIPCO Limited may be deemed to control Investcorp through its control of a
     company that indirectly is the beneficial owner of 100% of Investcorp's
     shares. SIPCO Limited's address is P.O. Box 1111, West Wind Building,
     George Town, Grand Cayman, Cayman Islands.

(7)  CIP Limited ("CIP") owns no stock in Falcon. CIP indirectly owns less than
     0.1% of the stock in each of Ballet Limited, Denary Limited, Gleam Limited,
     Highlands Limited, Noble Limited, Outrigger Limited, Quill Limited, Radial
     Limited, Shoreline Limited and Zinnia Limited (see (8) below). CIP may be
     deemed to share beneficial ownership of the shares of voting stock of
     Falcon held by such entities because CIP acts as a director of such
     entities, and the ultimate beneficial shareholders of each of those
     entities have granted to CIP revocable proxies in companies that own those
     entities' stock. None of the ultimate beneficial owners of such entities
     beneficially owns individually more than 5% of Falcon's voting stock.

(8)  Each of CIP Limited, Ballet Limited, Denary Limited, Gleam Limited,
     Highlands Limited, Noble Limited, Outrigger Limited, Quill Limited, Radial
     Limited, Shoreline Limited and Zinnia Limited is a Cayman Islands
     corporation with its address at P.O. Box 2197, West Wind Building, George
     Town, Grand Cayman, Cayman Islands.



                                      58
<PAGE>


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         For a description of transactions and relationships between the Company
and its directors, executive officers and more than 5% stockholders, see
"Compensation Committee Interlocks and Insider Participation" and Note 14 of the
Notes to the Company's Consolidated Financial Statements.

                                   PART IV

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

         (a) Financial Statements
<TABLE>
<CAPTION>
             <S>                                                             <C>
             Reports of Independent Accountants..........................    15
             Consolidated Balance Sheets.................................    17
             Consolidated Statements of Income and Comprehensive Income..    18
             Consolidated Statements of Stockholders' Equity.............    19
             Consolidated Statements of Cash Flows.......................    20
             Notes to Consolidated Financial Statements..................    21
</TABLE>

             All schedules for which provision is made in the applicable 
accounting regulations of the Securities and Exchange Commission are not 
required under the related instructions, or are inapplicable, or the 
information called for therein is included elsewhere in the financial 
statements or the notes thereto. Accordingly, such schedules have been 
omitted.

         (b) Reports on Form 8-K

             Current Report on Form 8-K dated December 30, 1998, relative to
the issuance of the Option to purchase Mansfield Plumbing Products, Inc.

             Current Report on Form 8-K dated January 22, 1999, regarding the
acquisition of the assets and business of the Penn Ventilation Companies, Inc.

         (c) Exhibits

             Exhibits required by Item 601 of Regulation S-K are listed in the
Index to Exhibits, which is incorporated herein by reference.


                                      59
<PAGE>


                                   SIGNATURES


         PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.


                         FALCON BUILDING PRODUCTS, INC.


                         By:  /S/  WILLIAM K. HALL 
                             ---------------------------------------
                                    William K. Hall
                             PRESIDENT AND CHIEF EXECUTIVE OFFICER

                         Date:  March 26, 1999
                              --------------------------------------

         PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED.

<TABLE>
<CAPTION>

       SIGNATURE                           TITLE                                   DATE
<S>                                <C>                                         <C>

/S/     WILLIAM K. HALL            Director and Chairman of the                March 26, 1999
------------------------------     Board of Directors, President and
        (William K. Hall)          Chief Executive Officer (Principal
                                   Executive Officer)


/S/     SAM A. COTTONE             Executive Vice President-Finance,           March 26, 1999
------------------------------     and Chief Financial Officer
        (Sam A. Cottone)           (Principal Financial Officer)


/S/     ANTHONY J. NAVITSKY        Vice President - Finance and Treasurer      March 26, 1999
------------------------------     (Principal Accounting Officer)
        (Anthony J. Navitsky)


* /S/  CHRISTOPHER J. O'BRIEN      Director                                    March 26, 1999
  ----------------------------
       (Christopher J. O'Brien)


* /S/  CHARLES J. PHILIPPIN        Director                                    March 26, 1999
  ----------------------------
       (Charles J. Philippin)


* /S/  CHRISTOPHER J. STADLER      Director                                    March 26, 1999
  ----------------------------
       (Christopher J. Stadler)
</TABLE>

* by /s/ Sam A. Cottone as attorney in fact for each person indicated.
     ------------------
     (Sam A. Cottone)

                                      60
<PAGE>

<TABLE>
<CAPTION>
                               INDEX TO EXHIBITS

EXHIBIT
NUMBER                       DESCRIPTION OF EXHIBIT
<S>        <C>
   2.1     Agreement and Plan of Merger, dated as of March 20, 1997, between
           Falcon Building Products, Inc. (the "Company") and FBP Acquisition
           Corporation, Inc. ("FBP"), including exhibits thereto (incorporated
           by reference to Annex I to the Proxy Statement/Prospectus contained
           in the Company's Registration Statement on Form S-4, File No.
           333-24625, filed April 4, 1997, as amended).
   2.2     Stockholder Voting Agreement, dated as of March 20, 1997, among the
           Company, FBP and Equity Holdings Limited ("EHL") (incorporated by
           referenced to Annex II-A to the Proxy Statement/Prospectus
           contained in the Company's Registration Statement on Form S-4, File
           No. 333-24625, filed April 4, 1997, as amended).
   2.3     Form of Stockholder Voting Agreements, dated as of March 20, 1997,
           among the Company, FBP and certain management stockholders
           (incorporated by reference to Annex II-B to the Proxy
           Statement/Prospectus contained in the Company's Registration
           Statement on Form S-4, File No. 333-24525, filed April 4, 1997, as
           amended).
   3.1     Restated Certificate of Incorporation of the Company as filed with
           the Delaware Secretary of State on June 17, 1997. (Incorporated by
           reference to Exhibit 3.01 of the Company's Quarterly Report on Form
           10-Q, dated June 30, 1997.)
   3.2     Bylaws of the Company.  (Incorporated  by reference to Exhibit 3.02
           of the Company's Quarterly Report on Form 10-Q, dated June 30, 1997.)
   4.1     Indenture between the Company, its subsidiaries DeVilbiss Air Power
           Company, Ex-Cell Manufacturing Company, Inc., Hart & Cooley,
           Inc., Mansfield Plumbing Products, Inc. and SWC Industries, Inc.
           (collectively, the "Guarantors"), and Harris Trust and Savings
           Bank, as Trustee, dated as of June 17, 1997, relating to the
           Company's 9 1/2% Senior Subordinated Notes due 2007 (the "Notes"),
           including form of Note (incorporated by reference to Exhibit 4.1 of
           the Company's Current Report on Form 8-K dated June 17, 1997).
   4.2     Supplemental Indenture between Falcon Manufacturing, Inc. and 
           Harris Trust and Savings Bank, as Trustee, dated as of June 17, 1997
           relating to the Company's Notes (Incorporated by reference to
           Exhibit 4.2 of the Company's Annual Report on Form 10-K for the
           year ended December 31, 1997).
   4.3     Indenture between the Company, the Guarantors and Harris Trust and
           Savings Bank, as Trustee, dated as of June 17, 1997, relating to
           the Company's 10 1/2% Senior Subordinated Discount Notes due 2007
           (the "Discount Notes"), including form of Discount Note
           (incorporated by reference to Exhibit 4.2 of the Company's Current
           Report on Form 8-K dated June 17, 1997).
   4.4     Supplemental Indenture between Falcon Manufacturing, Inc. and Harris
           Trust and Savings Bank, as Trustee, dated as of June 17, 1997 
           relating to the Company's Discount Notes (Incorporated by reference
           to Exhibit 4.4 of the Company's Annual Report on Form 10-K for the
           year ended December 31, 1997).
   4.5     Form of Note. (Incorporated by reference to Exhibit 4.03 of the 
           Company's Registration Statement on Form S-4, filed August 28, 1997.)
   4.6     Registration Rights Agreement, dated June 17, 1997, between the
           Company, the Guarantors and Smith Barney, Inc., BT Securities
           Corporation, Chase Securities Inc. and Merrill Lynch, Pierce,
           Fenner & Smith Incorporated. (Incorporated by reference to Exhibit
           4.03 of the Company's Quarterly Report on Form 10-Q, dated June 30,
           1997.)
   4.7     Credit Agreement, dated as of June 17, 1997, among the Company, the
           several Lenders from time to time parties thereto, and The Chase
           Manhattan Bank, as administrative agent for the Lenders
           (incorporated by reference to Exhibit 10.1 of the Company's Current
           Report on Form 8-K dated June 17, 1997).
   4.8     Form of Discount Note.  (Incorporated by reference to Exhibit 4.04
           of the Company's Registration Statement on Form S-4, filed 
           August 28, 1997.)
   4.9     Form of Note Guarantee.  (Incorporated by reference to Exhibit 4.05
           of the Company's Registration Statement on Form S-4, filed 
           August 28, 1997.)
   4.10    Form of Discount Note Guarantee.  (Incorporated by reference to 
           Exhibit 4.06 of the Company's Registration Statement on Form S-4,
           filed August 28, 1997.)
   4.11    Form of Certificate for Class A Stock (Incorporated by reference to
           Exhibit 4.1 of Falcon Building Products, Inc. Registration
           Statement of Form S-1. Registration Number 33-79006, filed May 17,
           1994, as amended.)
  10.1     Financing Advisory Agreement, dated March 20, 1997, between FBP and
           Investcorp International, Inc. (Incorporated by reference to
           Exhibit 10.01 of the Company's Quarterly Report on Form 10-Q, dated
           June 30, 1997.)
  10.2     Standby Loan Commitment Letter Agreement, dated as of March 20,
           1997, between FBP and Invifin S.A. (incorporated by reference to
           Annex I to the Proxy Statement/Prospectus contained in the
           Company's Registration Statement on Form S-4, File No. 333-24625,
           filed April 4, 1997, as amended).
</TABLE>
                                     61
<PAGE>

<TABLE>
<CAPTION>

EXHIBIT
NUMBER                       DESCRIPTION OF EXHIBIT
<S>        <C>
  10.3     Agreement for Management Advisory, Strategic Planning and
           Consulting Services, between FBP and Investcorp International,
           Inc., dated as of June 17, 1997. (Incorporated by reference to
           Exhibit 10.03 of the Company's Quarterly Report on Form 10-Q, dated
           June 30, 1997.)
  10.4     Employment Agreement, dated May 22, 1997, between the Company and
           Gus J. Athas. (Incorporated by reference to Exhibit 10.04.1 of the
           Company's Quarterly Report on Form 10-Q, dated June 30, 1997.)
  10.5     First Amendment to the Employment Agreement between the Company and
           Gus J. Athas. (Incorporated by reference to Exhibit 10.04.2 of the
           Company's Quarterly Report on Form 10-Q, dated June 30, 1997.)
  10.6     Employment Agreement, dated May 22, 1997, between the Company and
           Sam A. Cottone. (Incorporated by reference to Exhibit 10.05.1 of
           the Company's Quarterly Report on Form 10-Q, dated June 30, 1997.)
  10.7     First Amendment to the Employment Agreement between the Company and
           Sam A. Cottone. (Incorporated by reference to Exhibit 10.05.2 of
           the Company's Quarterly Report on Form 10-Q, dated June 30, 1997.)
  10.8     Employment Agreement, dated May 22, 1997, between the Company and
           William K. Hall. (Incorporated by reference to Exhibit 10.06.1 of
           the Company's Quarterly Report on Form 10-Q, dated June 30, 1997.)
  10.9     First Amendment to the Employment Agreement between the Company and
           William K. Hall. (Incorporated by reference to Exhibit 10.06.2 of
           the Company's Quarterly Report on Form 10-Q, dated June 30, 1997.)
  10.10    Employment Agreement, dated May 22, 1997, between the Company and
           Anthony J. Navitsky. (Incorporated by reference to Exhibit 10.07.1
           of the Company's Quarterly Report on Form 10-Q, dated June 30,
           1997.)
  10.11    First Amendment to the Employment Agreement between the Company and
           Anthony J. Navitsky. (Incorporated by reference to Exhibit 10.07.2
           of the Company's Quarterly Report on Form 10-Q, dated June 30,
           1997.)
  10.12    Employment Agreement, dated May 22, 1997, between the Company and
           Edward G. Finnegan, Jr. (Incorporated by reference to Exhibit
           10.08.1 of the Company's Quarterly Report on Form 10-Q, dated June
           30, 1997.)
  10.13    First Amendment to the Employment Agreement between the Company and
           Edward G. Finnegan, Jr. (Incorporated by reference to Exhibit
           10.08.2 of the Company's Quarterly Report on Form 10-Q, dated June
           30, 1997.)
  10.14    Non-Competition Agreement, dated as of March 31, 1997 between the
           Company and William E. Allen. (Incorporated by reference to Exhibit
           10.09 of the Company's Quarterly Report on Form 10-Q, dated June
           30, 1997.)
  10.15    Amended and Restated Receivables Purchase Agreement, dated as of
           June 17, 1997 among Falcon Receivable Program, Inc., the Company,
           Market Street Funding Corporation and PNC Bank, National
           Association. (Incorporated by reference to Exhibit 10.10 of the
           Company's Quarterly Report on Form 10-Q, dated June 30, 1997.)
  10.16    Form of Director Indemnity Agreements, dated as of June 17, 1997,
           between the Company and its Directors. (Incorporated by reference
           to Exhibit 10.12 of the Company's Quarterly Report on Form 10-Q,
           dated June 30, 1997.)
  10.17    1997 Senior Executive Stock Loan Plan.  (Incorporated  by reference
           to Exhibit 10.13 of the Company's Quarterly Report on Form 10-Q,
           dated June 30, 1997.)
  10.18    Form of Stock Pledge Agreement between the Company and certain
           management stockholders (schedule attached). (Incorporated by
           reference to Exhibit 10.14 of the Company's Quarterly Report on
           Form 10-Q, dated June 30, 1997.)
  10.19    Form of Common Stock Option Settlement Agreement, between the
           Company and certain employees (schedule attached). (Incorporated by
           reference to Exhibit 10.15 of the Company's Quarterly Report on
           Form 10-Q, dated June 30, 1997.)
  10.20    Form of Restricted Settlement Agreements between the Company and
           certain employees. (Incorporated by reference to Exhibit 10.16 of
           the Company's Quarterly Report on Form 10-Q, dated June 30, 1997.)
  10.21    Falcon Building Products, Inc. Employee Savings Plan as adopted
           January 1, 1995. (Incorporated by reference to Exhibit 10.17 of the
           Company's Annual Report on Form 10-K for the year ended December
           31, 1996.)
  10.22    Management Stock Incentive Plan.  (Incorporated  by reference to
           Exhibit 10.17 of the Company's Quarterly Report on Form 10-Q, 
           dated June 30, 1997.)
  10.23    Falcon Building Products, Inc. Cash Balance Pension Plan as adopted
           January 1, 1996. (Incorporated by reference to Exhibit 10.18 of the
           Company's Annual Report on Form 10-K for the year ended December
           31, 1996.)
  10.24    Form of Stock Option Agreement pursuant to the Company's Management
           Stock Incentive Plan between the Company and certain employees
           (schedule attached). (Incorporated by reference to Exhibit 10.18 of
           the Company's Quarterly Report on Form 10-Q, dated June 30, 1997.)
  10.25    Termination Benefits Agreement dated December 13, 1996 between Hart
           & Cooley, Inc. and Lawrence B. Lee. (Incorporated by reference to
           Exhibit 10.19 of the Company's Annual Report on Form 10-K for the
           year ended December 31, 1996.)
</TABLE>
                                      62
<PAGE>

<TABLE>
<CAPTION>

EXHIBIT
NUMBER                       DESCRIPTION OF EXHIBIT
<S>        <C>
  10.26    Form of Stockholder Agreement, dated June 17, 1997, by and among
           Falcon, FBP and certain management stockholders (schedule
           attached). (Incorporated by reference to Exhibit 10.19 of the
           Company's Quarterly Report on Form 10-Q, dated June 30, 1997.)
  10.27    Stockholder Rights Agreement, dated June 17, 1997, by and among the
           Company, FBP and EHL. (Incorporated by reference to Exhibit 10.20
           of the Company's Quarterly Report on Form 10-Q, dated June 30,
           1997.)
  10.28    Termination Benefits Agreement dated December 31, 1996 between
           DeVilbiss Air Power Company and William E. Allen. (Incorporated by
           reference to Exhibit 10.21 of the Company's Annual Report on Form
           10-K for the year ended December 31, 1996.)
  10.29    Amendment to the Company's Senior Executive Stock Purchase Plan,
           dated as of June 17, 1997, among the Company and certain employees.
           (Incorporated by reference to Exhibit 10.21 of the Company's
           Quarterly Report on Form 10-Q, dated June 30, 1997.)
  10.30    Casualty Insurance Indemnity Agreement, dated as of March 20, 1997,
           by and among the Company, DeVilbiss Air Power Company, Eagle
           Industries, Inc., Great American Management and Investment, Inc.,
           Hart & Cooley, Inc. and Mansfield Plumbing Products, Inc..
           (Incorporated by reference to Exhibit 10.22 of the Company's
           Quarterly Report on Form 10-Q, dated June 30, 1997.)
  10.31    Tax Indemnity Agreement, dated as of March 20, 1997, by and among
           the Company, DeVilbiss Air Power Company, Eagle Industries, Inc.,
           Great American Management and Investment, Inc., Hart & Cooley, Inc.
           and Mansfield Plumbing Products, Inc. (Incorporated by reference to
           Exhibit 10.23 of the Company's Quarterly Report on Form 10-Q, dated
           June 30, 1997.)
  10.32    Pension Benefits Indemnity Agreement, dated as of March 20, 1997,
           by and among the Company, DeVilbiss Air Power Company, Eagle
           Industries, Inc., Great American Management and Investment, Inc.,
           Hart & Cooley, Inc. and Mansfield Plumbing Products, Inc.
           (Incorporated by reference to Exhibit 10.24 of the Company's
           Quarterly Report on Form 10-Q, dated June 30, 1997.)
  10.33    Termination Benefits Agreement dated December 20, 1997 between
           Mansfield Plumbing Products, Inc. and Joseph W. Harbrecht.
           (Incorporated by reference to Exhibit 10.35 of the Company's Annual
           Report on Form 10-K for the year ended December 31, 1997.)
  10.34    Option Agreement dated December 30, 1998 between the Company and 
           its shareholders.
  21.1     Subsidiaries of the Company.
  24.1     Power of Attorney of Directors.
</TABLE>
                                      63