<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, 1997    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, 1998, Falcon Building Products, Inc. had the following
     shares of its various classes of common stock outstanding:

                    985,872 shares of Class A Common Stock
                   6,721,536 shares of Class B Common Stock
                    844,174 shares of Class C Common Stock
                    17,000 shares of Class D Common Stock

              Documents Incorporated herein by Reference:  None

--------------------------------------------------------------------------------
<PAGE>

                        FALCON BUILDING PRODUCTS, INC.

                              TABLE OF CONTENTS

<TABLE>
<CAPTION>
PART I.                                                                                               PAGE
<S>                                                                                                   <C>
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 . . . . . . . . . . . . . . . . . . . . . . . .   13

Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . .   47


PART III.

Item 10.  Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . .   47

Item 11.  Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   49

Item 12.  Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . .   54

Item 13.  Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . .   56


PART IV.

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K. . . . . . . . . . . . . .   56

</TABLE>

                                       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; 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 1997, 1996 and 1995 were as follows: residential grilles, registers 
and diffusers as a group were 12%, 9% and 11%, respectively; ceramic china 
bathroom fixtures were 16%, 17% and 22%, respectively; and air compressors 
were 24%, 23% and 28%, respectively.  Pressure washers accounted for 18% and 
13% of net sales in 1997 and 1996, 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 a wholly owned 
subsidiary of Great American Management and Investment, Inc., a Delaware 
corporation ("GAMI"), which is wholly owned 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 6 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-Registered Trademark-, Metlvent-Registered 
Trademark-, Reliable-TM-, Tuttle & Bailey-Registered Trademark-, 
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.

     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 under the 
Mansfield-Registered Trademark-and Swirl-way-Registered Trademark- brand 
names.

     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-Registered Trademark-, Charge Air Pro-Registered 
Trademark-, Pro 4000-TM-, Pro Air II-TM- and Steel Driver-Registered 
Trademark-.  The Company also manufactures air compressors under 
private-label programs, the most significant of which is the 
Craftsman-Registered Trademark- 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-Registered Trademark- brand 
name.  Effective December 31, 1997, Ex-Cell was merged with and into 
DeVilbiss Air Power Company, another subsidiary of the Company.

                                       3
<PAGE>

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 1.3 million and 1.5 million 
from 1993 to 1997.  According to the U.S. Department of Commerce, residential 
alteration and repair expenditures have grown over the same period, from $108 
billion in 1993 to approximately $115 billion in 1996.  The Company 
estimates, based upon management's industry experience, that the residential 
alteration and repair market accounts for approximately 50% 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 5% from 1992 to 1996. 

MARKETING AND DISTRIBUTION

     The Company markets and distributes its products nationwide through a 
variety of distribution channels.  Based on 1997 net sales, approximately 48% 
of the Company's products are distributed to wholesalers and manufacturers' 
representatives who sell to contractors serving the residential and 
commercial construction markets.  Approximately 52% 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 wholesale 
distributors.  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.

     Sears is the Company's largest customer and in 1997 accounted for 
approximately 13% of the Company's net sales.  The Company is the primary 
supplier of air compressors to Sears.  Under its Craftsman-Registered 
Trademark-brand, Sears is the largest domestic retailer of air compressors 
for consumer use.

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 two 
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.

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. 

                                       4
<PAGE>

     The Company owns a number of trademarks, including Hart & 
Cooley-Registered Trademark-, Metlvent-Registered Trademark-, Reliable-TM-, 
Tuttle & Bailey-Registered Trademark-, Woodwinds-TM-, Valley-TM-, 
Mansfield-Registered Trademark-, Swirl-Way-Registered Trademark-, 
Kilgore-TM-, Air America-Registered Trademark-, Charge Air Pro-Registered 
Trademark-, Ex-Cell-Registered Trademark-and Pro Air II-TM-.  The Company 
also has several licenses for various trademarks, including a license to use 
the DeVilbiss trademark.  The DeVilbiss license has a ten-year term (expiring 
in April 2000) and may be renewed at the Company's option for two successive 
ten-year renewal periods.  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.  During 1995, a 
worldwide shortage of mylar occurred, restricting availability and increasing 
cost.  By the end of 1995, availability had improved.  In the last five 
years, the Company has not experienced any other shortages that materially 
affected production.  Purchases are typically made through blanket order 
releases that span a period from several months up to one year.  In 1995, 
double-digit inflation was encountered in certain of the basic raw materials 
and components used in the manufacturing process.  The total raw material 
cost inflation in 1995 added approximately $18 million to Falcon's 1995 cost 
of sales.  During 1996, raw material costs eased and have remained relatively 
stable throughout 1997.

BACKLOG

     The Company's backlog at December 31, 1997 and 1996 was $17.1 million 
and $22.0 million, respectively.  The backlog at December 31, 1997 is 
expected to be shipped during the first quarter of 1998.

EMPLOYEES

     The Company employed approximately 4,200 persons as of December 31, 
1997. Approximately 2,100 hourly employees are covered by seven collective 
bargaining agreements expiring through 2001.  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. 

     The Company is involved in environmental proceedings initiated by state 
or local governmental agencies pertaining to two of its facilities.  The 
Company is currently working with the appropriate agency on a remedial plan 
for the closure of an on-site landfill at the Company's Holland, Michigan 
facility that the Company currently estimates will cost approximately $0.4 
million.  The Company is also working with the appropriate agency on a 
remedial plan for the closure of one on-site and four off-site landfills at 
or near the Company's Perrysville, Ohio facility that the Company currently 
estimates will cost approximately $0.8 million.  The Company believes that 
its reserves are adequate and that its liabilities for these matters will not 
have a material adverse effect on the Company; however, there can be no 
assurance that the Company will not incur costs or liabilities in the future 
that will have a material adverse effect on the Company.  Capital 
expenditures and expenses (including ordinary course of business hauling and 
disposal expenses) in 1997 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, including Ultravent-Registered Trademark-, 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>
Holland, Michigan. . . . . . . . . . . .     Office, Manufacturing, Warehouse       613,000              Owned
Kilgore, Texas . . . . . . . . . . . . .     Office, Manufacturing, Warehouse       511,000              Owned
Perrysville, Ohio. . . . . . . . . . . .     Office, Manufacturing                  492,000              Owned
Walnut, California . . . . . . . . . . .     Manufacturing                          414,000              Owned
Jackson, Tennessee . . . . . . . . . . .     Office, Manufacturing, Warehouse       341,000              Owned
Huntsville, Alabama. . . . . . . . . . .     Office, Manufacturing                  219,000              Owned
Geneva, Alabama. . . . . . . . . . . . .     Office, Manufacturing                  203,000              Owned
Sanger, California . . . . . . . . . . .     Office, Manufacturing                  127,000              Leased(1)
Henderson, Texas . . . . . . . . . . . .     Office, Manufacturing                  125,000              Owned
Decatur, Arkansas. . . . . . . . . . . .     Office, Manufacturing, Warehouse       106,000              Owned
Jackson, Tennessee . . . . . . . . . . .     Manufacturing, Warehouse               103,000              Leased(2)
Memphis, Tennessee . . . . . . . . . . .     Office, Manufacturing, Warehouse        94,000              Leased(3)
Shelby, Ohio . . . . . . . . . . . . . .     Warehouse                               87,500              Leased(4)
Jackson, Tennessee . . . . . . . . . . .     Warehouse                               79,000              Leased(5)
Sparks, Nevada . . . . . . . . . . . . .     Distribution Center                     73,000              Leased(6)
Memphis, Tennessee . . . . . . . . . . .     Warehouse                               62,000              Leased(3)
Big Prairie, Ohio. . . . . . . . . . . .     Manufacturing                           60,000              Owned
</TABLE>

--------------------
(1)  This facility is leased through December 2002.
(2)  This facility is leased pursuant to a lease that expires in August 1998,
     with renewal options to 1999.
(3)  These facilities are leased pursuant to leases that expire in October 1998,
     with options to cancel after April 1998 with a 30-day advance notice
     requirement.
(4)  This facility is leased on a month-to-month basis.
(5)  This facility is leased pursuant to a lease that expires in December 1998.
(6)  This facility is leased pursuant to a lease that expires in December 2000.

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 the 
environmental matters described in Item 1 above.  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-Registered Trademark- 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 ("MCCR") suspended sales of HTPV in the 
Province of Ontario.  Other provinces of Canada have taken similar action.  
Pursuant to an MCCR 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-Registered Trademark- products in the United States and Canada in 
1995, 1996 and 1997 were minimal.

                                       6
<PAGE>

     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 is also a defendant in two cases brought by appliance 
manufacturers. In a lawsuit filed in Pennsylvania, the Company has been sued 
along with other defendants for reimbursement of costs associated with its 
corrective action program.  In the other lawsuit, the Company and two other 
defendants have been sued in Massachusetts by seven furnace manufacturers 
which are seeking damages and declaratory relief for costs expected to be 
incurred as a result of corrective action programs to be conducted in 
connection with furnace systems vented with HTPV.  The Company has filed and 
served its own legal action in Michigan against the furnace manufacturers 
that have filed suit against the Company and all other identifiable appliance 
manufacturers that certified HTPV for use with their appliance systems.  In 
that suit, the Company is seeking damages for costs it has incurred and 
declaratory relief for costs that may be incurred in the future as a result 
of the conduct of appliance manufacturers that certified their products for 
use with HTPV.  The Company has also been named in a class action lawsuit 
that has been filed in Tennessee regarding HTPV. In that case, the Company is 
a defendant along with its principal competitor in the HTPV business, a resin 
supplier and a furnace manufacturer that has been joined as a representative 
of a defendant class consisting of all appliance manufacturers.  The 
plaintiffs seek damages on behalf of all persons in the United States with 
appliance systems that are vented with HTPV.

     The Company has been 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, have participated in a non-binding facilitative mediation process, 
the object of which was to develop and implement a voluntary HTPV corrective 
action program. The CPSC agreed to delay initiating proceedings mandating a 
corrective action program while these parties were involved in the mediation 
process. 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 with 
a new venting system.  The Corrective Action Program was approved by the CPSC 
in February 1998.  The Settlement Agreement provides for the dismissal of the 
above referenced litigation in Massachusetts, Pennsylvania and Michigan.

     In 1997, the Company recorded pretax charges of $32.8 million ($20.0 
million, net) 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.

     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 1997 to a vote of 
security holders of Falcon through a solicitation of proxies or otherwise.

                                       7
<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, 1997 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, 1997, and should be read in conjunction with such
financial statements and notes thereto.
<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                                                 ---------------------------------------------
                                                  1997      1996      1995      1994      1993
                                                 ------    ------    ------    ------    ------
                                                                  (in millions)
<S>                                             <C>       <C>       <C>       <C>       <C>
INCOME STATEMENT DATA:
  Net sales. . . . . . . . . . . . . . . . . .   $686.4    $633.2    $471.3    $440.7    $372.3
  Operating income (loss) (a). . . . . . . . .    (20.9)     59.8      45.8      51.7      45.2
  Net income (loss) before extraordinary
    item and cumulative effect of changes
    in accounting principles . . . . . . . . .    (37.4)     30.0      22.1      25.9      22.1
  Net income (loss) (b). . . . . . . . . . . .    (38.9)     30.0      22.1      25.9      18.5

BALANCE SHEET DATA:
  Total assets . . . . . . . . . . . . . . . .   $333.8    $261.7    $210.8    $187.5    $218.9
  Long-term debt (c) . . . . . . . . . . . . .    428.3     109.1     110.9     103.8       2.7
  Total liabilities (c). . . . . . . . . . . .    547.5     233.8     213.0     212.1     145.3
  Stockholders' equity (deficit) (d) . . . . .   (213.7)     27.9      (2.2)    (24.6)     73.6
</TABLE>
--------------------------------

     a)   Operating income (loss) for the year ended December 31, 1997
          reflects pretax charges of $32.8 million relating to
          Ultravent-Registered Trademark- and $36.3 million relating to the
          Recapitalization.
     
     b)   Net income (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.  Net income for the year ended December 31,
          1993 reflects a net charge of $3.6 million relating to the
          cumulative effect of changes in the method of accounting for
          income taxes and post-employment benefits.

     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. 
          The bank credit facility which was replaced had been entered
          into at the time of the Offering in November 1994. 
          Historical comparisons of long-term debt are not meaningful
          as the debt structure of the Company was altered in these
          periods.

     d)   The Company's equity capital structure was altered in connection
          with both the Recapitalization in June 1997 and the Offering in
          November 1994.  As a result, historical comparisons of
          stockholders' equity are not meaningful.  The deficit in 1997 was
          primarily a consequence of the repurchase of Class A stock,
          partially offset by the issuance of Class B stock.

                                      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.  Subsequent to 
the Merger, the Company paid Eagle $0.3 million in fees for the utilization 
of office space and administrative support. Between January 1994 and April 
1996, the Company participated in Eagle's asset securitization program.  
During the first quarter of 1996, Eagle decided to terminate its asset 
securitization program.  Eagle coordinated the termination of its program 
with the Company to allow the Company to establish its own asset 
securitization program, which began in May 1996.

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, 
                                  ---------------------------------------------------------------------
                                         1997                     1996                    1995
                                  -------------------     --------------------     --------------------
                                                         (DOLLARS IN MILLIONS)
                                  AMOUNT   % OF SALES     AMOUNT    % OF SALES     AMOUNT    % OF SALES
                                  ------   ----------     ------    ----------     ------    ----------
<S>                              <C>      <C>            <C>       <C>            <C>       <C>
Net sales. . . . . . . . . . .    $686.4     100.0%       $633.2      100.0%       $471.3       100.0%
Gross earnings . . . . . . . .     109.9      16.0         119.6       18.9          92.8        19.7
Operating income
  before Ultravent
  and Recapitalization
  expenses . . . . . . . . . .      48.2       7.0          59.8        9.4          45.8         9.7
EBITDA (a) . . . . . . . . . .      77.9      11.4          81.7       12.9          64.0        13.6
Operating income
  (loss) . . . . . . . . . . .     (20.9)     (3.0)         59.8        9.4          45.8         9.7
</TABLE>
--------------------------------

(a)  EBITDA represents income before interest expense and income taxes 
     excluding the following charges: (i) depreciation and amortization 
     expense; (ii) costs associated with Ultravent-Registered Trademark-; 
     (iii) Recapitalization expenses; (iv) securitization expense; and (v) 
     non-cash charges.  The Company has included information concerning 
     EBITDA because it is commonly used by certain investors as a measure of 
     a company's ability to service and/or incur debt.  However, EBITDA 
     should not be considered in isolation or as a substitute for other 
     consolidated income or cash flow data prepared in accordance with 
     generally accepted accounting principles or as a measure of a company's 
     profitability or liquidity.

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

     Net sales for the year ended December 31, 1997 increased $53.2 million 
to $686.4 million, an 8.4% increase from the level achieved in 1996.  
Substantially all of the revenue gains were attributable to Air Power 
Products.  The gains in Air Power Products were largely the result of a 48% 
increase in the net sales of pressure washers and a 14% increase in the net 
sales of compressors.  Net sales of Plumbing Fixtures increased very modestly 
as significant pressure in the wholesale channel was offset by increased 
market penetration in retail.  Net sales of Air Distribution Products were up 
approximately 2% over the prior year as moderate summer and winter 
temperatures reduced demand and significant price competition, primarily in 
flexible duct products, limited the Company's ability to gain market share.

                                      9
<PAGE>

     Gross earnings of $109.9 million in 1997 were $9.7 million or 8.1% lower 
than in 1996.  The increase in net sales of pressure washers was accompanied 
by a 57% increase in the pressure washer return rate.  This resulted in a 
$17.0 million increase in return costs over the 1996 period.  Included in 
these costs is an $8.0 million non-cash charge taken in the fourth quarter 
for the establishment of reserves related primarily to returned pressure 
washers in inventory.  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 has 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.

     Manufacturing inefficiencies in producing certain plumbing products also 
impacted gross earnings in 1997.  In addition, pricing for flexible duct and 
certain plumbing products remained below 1996 levels, as competitors 
maintained very aggressive pricing.  The Company has initiated cost reduction 
programs, including process control improvements, new capital expenditures to 
reduce manufacturing costs, and organizational changes to address operational 
inefficiencies as well as to increase the level of cost reductions.

     The operating loss of $20.9 million in 1997 included $36.3 million of 
expenses recorded in connection with the Recapitalization and $32.8 million 
of expenses associated with Ultravent (see Notes 5 and 14 to the Company's 
Consolidated Financial Statements for a complete discussion of these 
expenses). Excluding these expenses, operating income was $11.6 million lower 
than 1996. This decrease was primarily due to the costs associated with 
pressure washer returns and increased sales and marketing expenses.  These 
costs were partially offset by increased earnings on favorable volume in all 
businesses .

     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 6 to the Company's Consolidated 
Financial Statements for a discussion of the Company's new debt structure.  
The Company expects future interest expense to be considerably higher than it 
has been in prior years due to this new debt structure.

     The 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.

YEAR ENDED DECEMBER 31, 1996 AS COMPARED TO YEAR ENDED DECEMBER 31, 1995

     Net sales increased $161.9 million, or 34.4%, to $633.2 million in 1996 
from $471.3 million in 1995.  In January 1996, the Company acquired Ex-Cell, 
a manufacturer of pressure washers.  In addition, in May 1996, the Company 
acquired a product line of decorative metal and wooden grilles and registers. 
Excluding the impact of acquisitions, net sales increased $54.4 million.  
This increase was due to increased sales volume in all product categories 
resulting, in part, from an increase in housing starts, as well as market 
share gains.  New product sales, primarily electric generators, contributed 
$16.2 million to the increase.  Favorable pricing in Air Distribution 
Accessories was offset by strong price competition in Plumbing Fixtures.

     Gross earnings increased $26.8 million, or 28.9%, to $119.6 million in 
1996 from $92.8 million in 1995.  This increase was primarily due to 
increased volume and the impact of acquisitions.  Gross margin declined to 
18.9% in 1996 from 19.7% in 1995 due primarily to the sales contributed by 
acquired businesses that carry lower margins and increased sales of certain 
lower margin HVAC products.

     Operating income increased $14.0 million, or 30.6%, to $59.8 million in 
1996 from $45.8 million in 1995.  This increase was primarily due to 
increased sales volume and the impact of acquisitions, partially offset by an 
increase in securitization expense of $0.8 million and increased selling, 
general and administrative expenses of $10.5 million.  As a percent of sales, 
selling, general and administrative expenses declined slightly to 8.5% in 
1996 from 9.2% in 1995.

     Net interest expense increased $1.0 million to $11.0 million in 1996 
from $10.0 million 1995.  This increase was primarily due to the increased 
average monthly debt levels resulting from acquisitions.

     The income tax provision of 38.4% for the year reflected the effect of 
state income taxes and non-deductible expenses, including goodwill.

                                      10
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

     In connection with the Recapitalization, the Company entered into a new 
senior credit facility with a group of banks (the "Bank Credit Facility") and 
also issued $145 million of 9 1/2% Senior Subordinated Notes and $170 million 
aggregate principal amount of 10 1/2% Senior Subordinated Discount Notes.  The 
Bank Credit Facility provides for a $175.0 million term loan facility (the 
"Term Loan Facility"), and a $125.0 million revolving credit facility (the 
"Revolving Facility").  The Company drew all $175.0 million of the Term Loan 
Facility at the time of the Recapitalization.  The proceeds from the Bank 
Credit Facility and the subordinated notes, together with the $134.6 million 
equity contribution by Investcorp, its affiliates and certain other 
international investors, 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.  In 
connection with the Recapitalization, the Company amended its current 
receivables purchase facility to provide for a five-year receivables facility 
(the "Receivables Securitization Program") and increased its maximum amount 
from $85.0 million to $100.0 million.

     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 prior credit facility and the Receivables 
Securitization Program.  The Company expects that it will spend approximately 
$10.0 million per year in each of the next three years for costs associated 
with the Corrective Action Program and other related HTPV matters.  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, 1997, $112.5 million was available to borrow under 
the Revolving Facility.

     Net cash flow from operating activities amounted to $10.9 million in 
1997 compared to $41.1 million in 1996.  The decrease of $30.2 million was 
primarily due to an increase in working capital requirements and the effect 
of the stand-alone securitization facility the Company entered into in May 
1996.  The net residual interest retained by the Company in the receivables 
sold by the Company increased $11.2 million from December 31, 1996.  This 
residual interest of $13.1 million at December 31, 1997 is reflected in other 
current assets in the Company's financial statements.  Net cash flow from 
operating activities increased $21.7 million to $41.1 million in fiscal 1996 
from $19.4 million in fiscal 1995.  This increase was primarily due to the 
increase in net income and a decrease in working capital requirements. In 
December 1996, the Company paid GAMI $4.6 million for a final tax sharing 
payment for tax liabilities incurred while it was included in GAMI's income 
tax returns, pursuant to the GAMI-Falcon Disaffiliation Tax Sharing Agreement.

CAPITAL EXPENDITURES

     Capital expenditures were $19.1 million, $20.0 million and $16.4 million 
for 1997, 1996, and 1995, respectively.  The Company's commitments for 
capital expenditures at the end of 1997 were approximately $2.7 million.  
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 1998.

YEAR 2000

     In response to the Year 2000 issue, the Company initiated a project in 
early 1997 to identify, evaluate and implement changes to its existing 
computerized business systems.  The Company is addressing the issue through a 
combination of modifications to existing programs and conversions to Year 
2000 compliant software.  In addition, the Company is communicating with its 
customers, suppliers, and other service providers to determine whether they 
are actively involved in projects to ensure that their products and business 
systems will be Year 2000 compliant.  If modifications and conversions by the 
Company and those it conducts business with are not made in a timely manner, 
the Year 2000 issue may have a material adverse effect on the Company's 
business, financial condition, and results of operations.  The total cost 
associated with the required modifications is not expected to be material to 
the Company's consolidated results of operations and financial position, and 
is being expensed as incurred.

                                      11
<PAGE>

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

     Raw material cost inflation had a material impact on 1995 operating 
income. Increased raw material costs in 1995 over 1994 totaled approximately 
$18.2 million.  The effect of inflation on 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.

                                      12
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
                                                                             PAGE
<S>                                                                         <C>
Reports of Independent Accountants . . . . . . . . . . . . . . . . . . . . .  14
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . .  16
Consolidated Statements of Income. . . . . . . . . . . . . . . . . . . . . .  17
Consolidated Statements of Stockholders' Equity. . . . . . . . . . . . . . .  18
Consolidated Statements of Cash Flows. . . . . . . . . . . . . . . . . . . .  19
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . .  20
Supplementary Financial Data (Unaudited) . . . . . . . . . . . . . . . . . .  46
</TABLE>
                                      13
<PAGE>

                      REPORT OF INDEPENDENT ACCOUNTANTS
                                          
                                          
To the Board of Directors of Falcon Building Products, Inc.:

     We have audited the accompanying consolidated balance sheet of Falcon 
Building Products, Inc. and Subsidiaries as of December 31, 1997, and the 
related consolidated statements of income, stockholders' equity and cash 
flows 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 audit provides a 
reasonable basis for our opinion.

     In our opinion, the 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, 1997, and 
the results of their operations and their cash flows for the year then ended, 
in conformity with generally accepted accounting principles.

                                                  COOPERS & LYBRAND L.L.P.


Chicago, Illinois
February 25, 1998

                                      14
<PAGE>

                      REPORT OF INDEPENDENT ACCOUNTANTS
                                          
                                          
To the Board of Directors of Falcon Building Products, Inc.:

     We have audited the accompanying Consolidated Balance Sheet for Falcon 
Building Products, Inc. (a Delaware Corporation) and Subsidiaries as of 
December 31, 1996 and the related Consolidated Statements of Income, 
Stockholders' Equity and Cash Flows  for each of the two years in the period 
ended December 31, 1996. 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 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 each of the two years 
in the period ended December 31, 1996 in conformity with generally accepted 
accounting principles.

                                                  ARTHUR ANDERSEN LLP


Chicago, Illinois
February 5, 1997

                                      15

<PAGE>

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

<TABLE>
<CAPTION>
                                                                                                  DECEMBER 31,
                                                                                            --------------------
                                                                                                1997       1996
                                                                                            --------   --------
<S>                                                                                         <C>          <C>
                                           ASSETS
Current assets:
  Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ 29.9    $  3.9
  Inventories, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      79.5      76.2
  Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      34.0      15.6
                                                                                            --------   --------
  Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     143.4      95.7

Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . .     101.3      97.4
Goodwill, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      57.0      59.1
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      32.1       9.5
                                                                                            --------   --------
  Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $333.8    $261.7
                                                                                            --------   --------
                                                                                            --------   --------

                             LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Current portion long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $  1.5    $ 15.2
  Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      34.0      50.1
  Accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      43.2      30.9
                                                                                            --------   --------
  Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      78.7      96.2

Senior indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     175.6     109.1
Senior Subordinated Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     252.7        --
Accrued employee benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . .       9.2       8.7
Other long-term liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      31.3      19.8
                                                                                            --------   --------
  Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     547.5     233.8
                                                                                            --------   --------

Stockholders' equity (deficit):
  Preferred stock, par value $.01 per share, none issued . . . . . . . . . . . . . . . . .        --        --
  Class A stock, par value $.01 per share, 1,007,690 shares issued
      in 1997, 20,070,500 issued in 1996.. . . . . . . . . . . . . . . . . . . . . . . . .        --       0.2
   Class B stock, par value $.01 per share, 6,721,536 shares issued in
      1997, none issued in 1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       0.1        --
   Class C stock, par value $.01 per share,
       844,274 shares issued in 1997, none issued in 1996. . . . . . . . . . . . . . . . .        --        --
   Class D stock, par value $.01 per share, 17,000 shares issued in
      1997, none issued in 1996. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        --        --
   Common stock, par value $.01 per share, none issued in 1997, none
      issued in 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        --        --
   Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        --      18.0
   Retained earnings (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    (211.8)     12.8
   Notes receivable arising from stock purchase plan . . . . . . . . . . . . . . . . . . .      (2.0)     (2.2)
   Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        --      (0.9)
                                                                                            --------   --------
   Total stockholders' equity (deficit). . . . . . . . . . . . . . . . . . . . . . . . . .    (213.7)     27.9
                                                                                            --------   --------
   Total liabilities and stockholders' equity. . . . . . . . . . . . . . . . . . . . . . .    $333.8    $261.7
                                                                                            --------   --------
                                                                                            --------   --------
</TABLE>

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

                                             16
<PAGE>

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


<TABLE>
<CAPTION>
                                                                                 YEAR ENDED
                                                                                DECEMBER 31,
                                                                      -------------------------------
                                                                           1997     1996      1995
                                                                      ----------  --------  --------
<S>                                                                    <C>         <C>       <C>
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . .          $686.4    $633.2    $471.3
Cost of sales. . . . . . . . . . . . . . . . . . . . . . . . . .           576.5     513.6     378.5
                                                                         --------   ------    ------
   Gross earnings. . . . . . . . . . . . . . . . . . . . . . . .           109.9     119.6      92.8

Selling, general and administrative expenses . . . . . . . . . .            57.7      53.9      43.4
Securitization expense . . . . . . . . . . . . . . . . . . . . .             4.0       4.1       3.3
Ultravent expense. . . . . . . . . . . . . . . . . . . . . . . .            32.8       1.8       0.3
Recapitalization expenses. . . . . . . . . . . . . . . . . . . .            36.3        --        --
                                                                         --------   ------    ------
   Operating income (loss) . . . . . . . . . . . . . . . . . . .           (20.9)     59.8      45.8

Net interest expense . . . . . . . . . . . . . . . . . . . . . .            28.5      11.0      10.0
                                                                         --------   -------   ------

Income (loss) before income taxes and extraordinary item . . . .           (49.4)     48.8      35.8
Provision (benefit) for income taxes . . . . . . . . . . . . . .           (12.0)     18.8      13.7
                                                                         --------   -------   ------
   Income (loss) before extraordinary item . . . . . . . . . . .           (37.4)     30.0      22.1

Extraordinary item:
   Early extinguishment of debt net of income tax
      benefit of $0.9 million. . . . . . . . . . . . . . . . . .            (1.5)       --        --
                                                                         --------   -------   ------
   Net income (loss) . . . . . . . . . . . . . . . . . . . . . .         $ (38.9)   $ 30.0    $ 22.1
                                                                         --------   ------    ------
                                                                         --------   ------    ------
</TABLE>


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




                                        17
<PAGE>

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

<TABLE>
<CAPTION>
                                                                                           NOTES
                                                                 ADDITIONAL   RETAINED   FROM STOCK  
                                             CLASS A   CLASS B    PAID-IN     EARNINGS   PURCHASE    
                                              STOCK     STOCK     CAPITAL     (DEFICIT)     PLAN       OTHER
                                           ---------  ---------  ----------   ---------  ----------   -------
<S>                                         <C>        <C>        <C>         <C>         <C>          <C>
Balance at December 31, 1994 . . . . . .   $   0.1    $  0.1     $  18.0      $ (39.3)    $ (2.2)     $ (1.3)
   Net income. . . . . . . . . . . . . .        --        --          --         22.1         --          --
   Other . . . . . . . . . . . . . . . .        --        --          --           --         --         0.3
                                           ---------  ---------  ----------   ---------  ----------   -------
Balance at December 31, 1995 . . . . . .       0.1       0.1        18.0        (17.2)      (2.2)       (1.0)
   Net income. . . . . . . . . . . . . .        --        --          --         30.0         --          --
   Conversion of Class B Stock                                                                       
     to Class A Stock. . . . . . . . . .       0.1      (0.1)         --           --         --          --
   Other . . . . . . . . . . . . . . . .        --        --          --           --         --         0.1
                                           ---------  ---------  ----------   ---------  ----------   -------
Balance at December 31, 1996 . . . . . .       0.2        --        18.0         12.8       (2.2)       (0.9)
   Net loss. . . . . . . . . . . . . . .        --        --          --        (38.9)        --          --
   Repurchase of Class A Stock . . . . .      (0.2)       --       (18.0)      (320.2)        --         0.4
   Issuance of stock . . . . . . . . . .        --       0.1          --        134.5         --          --
   Other . . . . . . . . . . . . . . . .        --        --          --           --        0.2         0.5
                                           ---------  ---------  ----------   ---------  ----------   -------
Balance at December 31, 1997 . . . . . .   $    --    $  0.1     $    --      $(211.8)   $   (2.0)    $   --
                                           ---------  ---------  ----------   ---------  ----------   -------
                                           ---------  ---------  ----------   ---------  ----------   -------
</TABLE>




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


                                          18

<PAGE>

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


<TABLE>
<CAPTION>
                                                                                         YEAR ENDED
                                                                                        DECEMBER 31,
                                                                             ------------------------------
                                                                                 1997      1996      1995
                                                                             ---------  --------  ---------
<S>                                                                          <C>        <C>       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:                                                            
   Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . .    $ (38.9)  $  30.0    $  22.1
   Adjustments to reconcile net income (loss) to net cash from                                   
      operating activities:                                                                      
      Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . .       14.2      13.7       12.9
      Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . .        4.5       1.8        2.1
      Accretion of debt discount on subordinated debt. . . . . . . . . . .        5.8        --         --
      Deferred income tax provision (benefit). . . . . . . . . . . . . . .      (15.7)     (2.9)       0.2
      Ultravent expenses . . . . . . . . . . . . . . . . . . . . . . . . .       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        0.3
         Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . .       (4.1)    (14.0)     (10.2)
         Other current assets. . . . . . . . . . . . . . . . . . . . . . .      (10.4)     (1.5)       1.4
         Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . .      (16.1)     10.2      (13.0)
         Accrued liabilities and accrued employee benefit obligations. . .        3.1      (2.4)       3.6
                                                                             ---------  --------  ---------
      Net cash from operating activities:  . . . . . . . . . . . . . . . .       10.9      41.1       19.4
                                                                             ---------  --------  ---------
                                                                                                 
CASH FLOWS FROM INVESTING ACTIVITIES:                                                            
   Purchase of businesses. . . . . . . . . . . . . . . . . . . . . . . . .         --     (18.8)     (10.4)
   Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . . .      (19.1)    (20.0)     (16.4)
   Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (0.3)      0.2       (2.2)
                                                                             ---------  --------  ---------
   Net cash used in investing activities . . . . . . . . . . . . . . . . .      (19.4)    (38.6)     (29.0)
                                                                             ---------  --------  ---------
                                                                                                 
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 on debt. . . . . . . . . . . . . . . . . . . . . . . . .       16.5       0.3        8.5
                                                                             ---------  --------  ---------
   Net cash from financing activities. . . . . . . . . . . . . . . . . . .       34.5       0.3        8.5
                                                                             ---------  --------  ---------
                                                                                                 
CHANGE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . . . . . . . . . . .       26.0       2.8       (1.1)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . . . . . . . . . . .        3.9       1.1        2.2
                                                                             ---------  --------  ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . . . . . . . .    $  29.9   $   3.9    $   1.1
                                                                             ---------  --------  ---------
                                                                             ---------  --------  ---------
NET CASH PAID DURING THE PERIOD FOR:                                                             
   Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    $  20.7   $  11.0    $  10.3
   Income taxes to affiliate . . . . . . . . . . . . . . . . . . . . . . .         --       4.6         --
   Income taxes to third parties . . . . . . . . . . . . . . . . . . . . .        7.6      23.5       14.2
</TABLE>


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


                                            19

<PAGE>

                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 DECEMBER 31, 1997
                                          
                                       
(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.  Eagle is a wholly owned subsidiary of Great American
Management and Investment, Inc., a Delaware corporation ("GAMI") that is wholly
owned 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").  In May 1996, Eagle distributed
its ownership of the Company's Class B common stock (14,000,000 shares) to EHL. 
Pursuant to provisions in the Company's charter, the transfer of the Class B
common stock resulted in its conversion to Class A common stock.

     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 6 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 41.1% of inventory at December 31,
1997 and 1996.  The first-in, first-out ("FIFO") method of inventory valuation
was used for the remaining inventory.


                                      20

<PAGE>


                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 DECEMBER 31, 1997


     NEW ACCOUNTING PRONOUNCEMENTS:

     In February 1998 the Financial Accounting Standards Board (the "FASB")
issued 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.  The Company intends to
make appropriate disclosures upon adoption of SFAS No. 132, which is effective
for years beginning after December 15, 1997.

     In June 1997, the FASB issued 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.  SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997.  The Company does
not believe that the adoption of SFAS No. 130 will have a material effect on the
Company's financial statements.

     IMPAIRMENT OF LONG-LIVED ASSETS:

     Effective January 1, 1996, the Company adopted the provisions of 
Statement of Financial Accounting Standards No. 121, "Accounting for the 
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" 
("SFAS No. 121"). SFAS No. 121 prescribes that 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.  There 
was no material effect on the financial statements from the adoption of SFAS 
No. 121 as the Company's prior impairment recognition practice was consistent 
with the major provisions of the statement.

     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 $15.6 million and $13.6 million at December 31, 
1997 and 1996, 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.

                                  21

<PAGE>

                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 DECEMBER 31, 1997

     ENVIRONMENTAL REMEDIATION:

     In 1997, the Company adopted Statement of Position ("SOP") 96-1, 
"Environmental Remediation Liabilities."  SOP 96-1 provides additional 
guidance for recognizing, measuring and disclosing environmental remediation 
liabilities. The effect of initially applying the provisions of SOP 96-1 was 
not material to the Consolidated Financial Statements.  The Company accrues 
for such losses when they are probable and reasonably estimable.  Costs of 
future expenditures do not reflect any claims for recoveries and are not 
discounted to their present value. The accruals for environmental liabilities 
are reflected in the Consolidated Balance Sheets primarily in Other long-term 
liabilities.

     REVENUE RECOGNITION:

     The Company recognizes revenues as products are shipped to customers.

     INCOME TAXES:

     The Company was included in GAMI's consolidated U.S. federal income tax
return until the consummation of the Offering in November 1994.  In addition,
the Company filed certain combined state tax returns with GAMI until the
distribution to EHL in 1996.  Under the terms of the GAMI-Falcon Disaffiliation
Tax Sharing Agreement (the "Tax Sharing Agreement"), the Company computed and
paid to GAMI its liability for U.S. federal income taxes as if the Company filed
a separate U.S. federal income tax return.  Since the Offering, the Company has
filed a separate U.S. federal income tax return.  The Company files separate
U.S. state income tax returns.

     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 January 2, 1996, the Company acquired the stock of Ex-Cell Manufacturing
Company, Inc. ("Ex-Cell"), a manufacturer of cold-water pressure washers.  The
Company paid a total of $20.2 million in cash for the stock of Ex-Cell.  The
acquisition was accounted for as a purchase and resulted in $19.5 million of
goodwill.  As of December 31, 1997, Ex-Cell was merged with and into DeVilbiss
Air Power Company, another subsidiary of the Company.

(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 first quarter of 1996, Eagle decided to terminate
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.  To establish this stand-alone securitization program in 1996, the
Company:  (1) acquired a special purpose company from Eagle to facilitate the
establishment of the Falcon securitization program; (2) acquired from the Master
Trust the receivables it had previously sold to Eagle; and (3) immediately sold
these re-acquired receivables through the special purpose company to the Bank
Group.

                                     22
<PAGE>

                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 DECEMBER 31, 1997

     At December 31, 1997 and 1996, uncollected receivables sold under the
agreement were $88.6 million and $75.2 million, respectively.  Included in the
Company's financial statements in other current assets is a net residual
interest of $13.1 million and $1.9 million at December 31, 1997 and 1996,
respectively.  The expense incurred on the sale of the receivables under these
programs was $4.0 million, $4.1 million and $3.3 million in years ended December
31, 1997, 1996 and 1995, 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.

     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)  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.

                                   23
<PAGE>

                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 DECEMBER 31, 1997

     Although the Old Securities were sold through a confidential placement
memorandum, in September 1997, the Company filed an exchange offer registration
statement with the Securities and Exchange Commission with respect to certain of
the Old Securities (the "Exchange Offer"). Pursuant to the Exchange Offer,
$144.0 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.  The Exchange Offer was made pursuant to
the terms of a Registration Rights Agreement dated June 17, 1997, by and among
the Company, the Guarantors (as defined in the Agreement), and the initial
purchasers of the Old Securities.  The Exchange Offer was designed to provide
the holders of the Securities an opportunity to acquire securities that, unlike
the Old Securities, are freely transferable subject to certain restrictions.  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 15.

     SENIOR INDEBTEDNESS :

<TABLE>
<CAPTION>
                                     DECEMBER 31,    DECEMBER 31,
                                         1997           1996
                                    -------------   -------------
                                          (IN MILLIONS)
     <S>                            <C>             <C>
     Bank Credit Facility
          Revolver . . . . . . . .     $ --           $ 39.0
          Term . . . . . . . . . .      174.5           82.5
                                      -------       --------
          Total. . . . . . . . . .      174.5          121.5
     Other . . . . . . . . . . . .        2.6            2.8
     Less:  Current Portion. . . .       (1.5)         (15.2)
                                      -------       --------
          Senior indebtedness. . .    $ 175.6        $ 109.1
                                      -------       --------
                                      -------       --------
</TABLE>

     The aggregate long-term debt maturities over the next five years are as
follows:  1998 - $1.5 million; 1999 -$1.5 million; 2000 - $1.5 million; 2001 -
$1.5 million; and 2002 - $10.4 million.

     BANK CREDIT FACILITY:

     In 1995 the Company amended and restated its then existing senior credit
facility, increasing it to a $250 million credit facility (the "Facility").  The
Facility consisted of a six year $100.0 million term loan, maturing in June
2001, due in quarterly installments, and a $150.0 million revolving credit
facility that was set to expire in 2001.  Borrowings under the Facility bore
interest, at management's option, at rates equal to London Interbank Offered
Rates ("LIBOR") plus a margin, or at the prime rate plus a margin.  The Facility
was secured by substantially all of the inventory, intangibles, property, plant,
equipment and capital stock of the Company's subsidiaries.

     On June 17, 1997, using a portion of the proceeds from the
Recapitalization, the Company repaid and terminated the Facility.  An
extraordinary charge of $1.5 million, net of an income tax benefit of $0.9
million was recorded in connection with this repayment, primarily representing
the write-off of associated deferred financing fees.

                                       24
<PAGE>

                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 DECEMBER 31, 1997

     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, 1997.  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, 1997, $112.5 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 (8.9% for the term loan at
December 31, 1997) 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, 1997, the Company was in compliance with all covenants of the Bank
Credit Facility.

     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 1997 was $314.3 million, an increase of $173.1 million over the
comparable 1996 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 $107.7 million at December 31, 1997.

                                   25
<PAGE>

                FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                               DECEMBER 31, 1997

     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.

(7)  EMPLOYEE RETIREMENT AND BENEFIT PLANS

     PENSION:

     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 following table sets forth the funded status for all defined benefit 
pension plans and related amounts recognized in the Company's Consolidated 
Financial Statements (in millions):

<TABLE>
<CAPTION>

                                                     DECEMBER 31, 1997          DECEMBER 31, 1996
                                                     -----------------  -------------------------------
                                                        PLANS WHOSE       PLANS WHOSE       PLANS WHOSE
                                                       ASSETS EXCEED     ASSETS EXCEED      ACCUMULATED
                                                        ACCUMULATED       ACCUMULATED        BENEFITS
                                                          BENEFITS         BENEFITS        EXCEED ASSETS
                                                     -----------------    ------------     -------------
<S>                                                 <C>                  <C>              <C>
 Actuarial present value of:
      Accumulated benefit obligation . . . . . .           $ 30.7           $ 21.1           $  6.2
                                                     -----------------    ------------     -------------
                                                     -----------------    ------------     -------------
      Vested benefits  . . . . . . . . . . . . .           $ 26.5           $ 17.7           $  6.0
                                                     -----------------    ------------     -------------
                                                     -----------------    ------------     -------------
 Projected benefit obligation  . . . . . . . . .           $ 30.7           $ 21.1           $  6.2
 Plan assets at fair value . . . . . . . . . . .             33.9             22.8              5.8
                                                     -----------------    ------------     -------------
 Plan assets in excess of (less than)
      projected benefit obligation . . . . . . .              3.2              1.7             (0.4)
 Net unrecognized loss . . . . . . . . . . . . .               --              2.7              0.7
 Net unrecognized prior service costs 
      (benefits) . . . . . . . . . . . . . . . .              0.4             (0.3)             0.3
 Unrecognized liability at August 1, 1987  . . .              0.2               --              0.2
 Additional minimum liability  . . . . . . . . .               --               --             (1.2)
                                                     -----------------    ------------     -------------
 Pension asset (liability) recognized
      in Consolidated Financial Statements . . .           $  3.8           $  4.1           $ (0.4)
                                                     -----------------    ------------     -------------
                                                     -----------------    ------------     -------------
</TABLE>

 Plan assets generally consist of common stocks, fixed income instruments and 
certain purchased annuities.

                                      26

<PAGE>

                FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                               DECEMBER 31, 1997
                                          
                                          
     In accordance with Statement of Financial Accounting Standards No. 87, 
"Employers' Accounting for Pensions," ("SFAS No. 87") the Company recorded an 
additional minimum pension liability for underfunded plans at December 31, 
1996, representing the excess of unfunded accumulated benefit obligations 
over previously recorded pension cost.  A corresponding amount was recognized 
as an intangible asset except to the extent that these additional liabilities 
exceeded related unrecognized prior service costs and net transition 
obligations, in which case the increase in liabilities was charged directly 
to stockholders' equity.  At December 31, 1996, the excess minimum pension 
liability resulted in a net reduction of equity of $0.5 million.  There was 
no additional minimum liability component at December 31, 1997.

     Net periodic pension cost for defined benefit pension plans reporting 
under the provisions of SFAS No. 87 was:

<TABLE>
<CAPTION>

                                                          YEAR ENDED
                                                         DECEMBER 31,
                                                --------------------------------
                                                 1997         1996         1995
                                                -------     --------     -------
                                                         (IN MILLIONS) 
     <S>                                       <C>        <C>          <C>
     Service cost  . . . . . . . . . . .        $   1.8    $   1.8      $   1.1 
     Interest cost . . . . . . . . . . .            2.0        1.8          1.3 
     Actual return on assets . . . . . .           (6.3)      (2.9)        (2.3)
     Net amortization and deferral . . .            3.7        0.6          0.6 
                                                -------     --------     -------
          Net periodic pension cost  . .        $   1.2    $   1.3      $   0.7 
                                                -------     --------     -------
                                                -------     --------     -------
</TABLE>

     The following assumptions were used in determining the actuarial present
value of the projected benefit obligation for the Company's defined benefit
plans for all periods presented: weighted-average discount rate of 7.5%; rate of
increase in future compensation levels of 4.0%; and expected long-term rate of
return on assets of 9.0%.
     
     The Company and its subsidiaries also have several defined contribution
plans for certain employees.  Employer contributions to these plans were $1.0
million, $1.4 million and $1.0 million in 1997, 1996 and 1995, respectively. 
Contributions to this plan by the Company are determined based on a percentage
of the contribution made by the employee.

     OTHER POSTRETIREMENT BENEFITS:

     The Company provides post-retirement life and health-care benefits to
certain of its employees.  The Company has four 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.  Two of
the plans are non-contributory.  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.

     The following table sets forth post-retirement benefit obligations
recognized in the Company's Consolidated Financial Statements :

<TABLE>
<CAPTION>

                                                                               DECEMBER 31,
                                                                         ----------------------
                                                                            1997          1996
                                                                         ---------     --------
                                                                              (IN MILLIONS)
       <S>                                                                <C>          <C>
       Accumulated post-retirement benefit obligation:
            Retirees . . . . . . . . . . . . . . . . . . . . . .          $  6.5        $  6.4
            Other fully eligible participants  . . . . . . . . .             1.8           2.1 
            Other active participants  . . . . . . . . . . . . .             3.9           4.0
                                                                         ---------     --------
                 Subtotal  . . . . . . . . . . . . . . . . . . .            12.2          12.5
            Unrecognized actuarial loss  . . . . . . . . . . . .            (2.3)         (3.4)
                                                                         ---------     --------
       Post-retirement benefit liability recognized in
            Consolidated Financial Statements  . . . . . . . . .          $  9.9        $  9.1
                                                                         ---------     --------
                                                                         ---------     --------
</TABLE>

                                      27

<PAGE>

                FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                               DECEMBER 31, 1997
                                          
                                          
     Net post-retirement benefit cost included the following components:

<TABLE>
<CAPTION>

                                                               YEAR ENDED
                                                               DECEMBER 31,
                                                      ---------------------------
                                                        1997      1996      1995
                                                      -------   -------   -------
                                                             (IN MILLIONS)
     <S>                                             <C>       <C>        <C>
     Service cost. . . . . . . . . . . . . . . . .    $  0.5    $  0.5     $ 0.4
     Interest cost . . . . . . . . . . . . . . . .       1.0       0.9       0.7
     Net amortization and deferral . . . . . . . .       0.1       0.2       0.1
                                                      ------    ------     -----
             Net post-retirement benefit cost. . .    $  1.6    $  1.6     $ 1.2
                                                      ------    ------     -----
                                                      ------    ------     -----
</TABLE>

     The accumulated post-retirement benefit obligation was determined using 
an assumed discount rate of 7.5% and 8.0% for the years ended December 31, 
1997 and 1996, respectively, and health care cost trend rates of 9.0% in 1997 
and 10.5% in 1996, decreasing ratably to 6.0% by the year 1999.  The effect 
of a one percent increase in the health care cost trend rate assumption would 
increase the accumulated post-retirement benefit obligation, resulting in an 
increase to the aggregate annual service cost and interest expense components 
by approximately $1.2 million and $0.2 million, respectively.

(8)  INCOME TAXES

     The Company's Consolidated Financial Statements reflect the following
deferred tax assets and liabilities:

<TABLE>
<CAPTION>

                                                                   DECEMBER 31,
                                                                   ------------
                                                                    1997   1996
                                                                   ------ ------ 
                                                                   (IN MILLIONS)
     <S>                                                          <C>    <C>
     Deferred tax assets:
          Inventory and receivable reserves. . . . . . . . . . . . $ 5.0  $ 4.5
          Accrued employee benefit obligations . . . . . . . . . .   3.2    2.8
          Insurance reserves . . . . . . . . . . . . . . . . . . .   5.6    5.5
          Ultravent reserves . . . . . . . . . . . . . . . . . . .  12.8    0.4
          Other. . . . . . . . . . . . . . . . . . . . . . . . . .   7.7    5.4
                                                                   ------ ------ 
                                                                   $34.3  $18.6
                                                                   ------ ------ 
     Deferred tax liabilities:
          Property, plant and equipment basis difference . . . . . $ 8.2  $ 8.1
                                                                   ------ ------ 
                                                                   ------ ------ 
</TABLE>

          The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>

                                                                YEAR ENDED
                                                               DECEMBER 31,
                                                  -------------------------------------
                                                    1997           1996          1995
                                                  --------        -------       -------
                                                               (IN MILLIONS)
     <S>                                         <C>            <C>           <C>
     Provision (benefit) for income taxes:
      Current:
            U.S. federal . . . . . . . . .        $   2.7        $ 18.1        $ 11.8 
            U.S. state . . . . . . . . . .            1.0           3.6           1.7 
                                                  --------       --------      -------
                 Subtotal. . . . . . . . .            3.7          21.7          13.5 
                                                  --------       --------      -------
      
      Deferred:
            U.S. federal . . . . . . . . .          (13.3)         (2.3)          0.4 
            U.S. state . . . . . . . . . .           (2.4)         (0.6)         (0.2)
                                                  --------       --------      --------
                 Subtotal. . . . . . . . .          (15.7)         (2.9)          0.2 
                                                  --------       --------      --------
                 Total . . . . . . . . . .        $ (12.0)       $ 18.8        $ 13.7
                                                  --------       --------      --------
                                                  --------       --------      --------
</TABLE>

                                      28

<PAGE>

                 FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                               DECEMBER 31, 1997


   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,
                                                                         ---------------------------
                                                                          1997       1996      1995
                                                                         ------     ------    ------
                                                                            (DOLLARS IN MILLIONS)
    <S>                                                                 <C>        <C>       <C>
     U.S. federal statutory rate . . . . . . . . . . . . . . . . . . .      35%        35%       35%
     Income taxes at U.S. federal statutory rate . . . . . . . . . . .   $(17.3)    $ 17.1    $ 12.5
     U.S. state income taxes, net of U.S. federal tax impact . . . . .     (0.8)       1.9       1.0
     Amortization of intangibles . . . . . . . . . . . . . . . . . . .      0.7        0.6       0.5
     Non-deductible expenses, net. . . . . . . . . . . . . . . . . . .      5.0         --        --
     Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      0.4       (0.8)     (0.3)
                                                                         -------    -------   -------
          Provision (benefit) for income taxes . . . . . . . . . . . .   $(12.0)    $ 18.8    $ 13.7
                                                                         -------    -------   -------
                                                                         -------    -------   -------
          Effective income tax rate. . . . . . . . . . . . . . . . . .     24.3%      38.4%     38.4%
                                                                         -------    -------   -------
                                                                         -------    -------   -------
</TABLE>

(9)  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.  Upon 
completion of the Offering in 1994, the Company had 6,070,500 shares of Class 
A Stock outstanding, including: (i) 196,500 shares sold to the Company's 
management in the public offering; (ii) 70,500 restricted shares granted to 
management pursuant to the Company's 1994 Stock Option and Restricted Share 
Plan; and (iii) 14,000,000 shares of Class B Stock outstanding, which were 
beneficially owned by Eagle.  In May 1996, Eagle transferred its ownership of 
the Company's Class B Stock to EHL.  Pursuant to provisions in the Company's 
charter, the transfer of the Class B Stock to EHL resulted in its conversion 
to Class A 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, 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>
                                      29
<PAGE>

                FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                               DECEMBER 31, 1997
                                          

     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.

     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 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.

     At December 31,1997, $2.0 million of notes were outstanding under the 
Executive Stock Plan and the 1997 Loan Plan.  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.

(10) 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.

     Options for 870,556 shares of Class C Stock have been granted under the 
1997 Plan.  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.

                                      30
<PAGE>

                FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                               DECEMBER 31, 1997


     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. . . . . . . . . . . . . . . .   870,556        17.75
  Exercised. . . . . . . . . . . . . . .      --           --  
  Canceled . . . . . . . . . . . . . . .      --           --  
                                          ---------   --------------
  Balance at December 31, 1997 . . . . .   870,556       $17.75           --           $--      
                                          ---------   --------------   ---------  --------------
                                          ---------   --------------   ---------  --------------
</TABLE>

     At December 31, 1997, the options outstanding had an exercise price of 
$17.75.  The weighted average remaining contractual life of the options 
outstanding was 9 1/2 years.  The weighted average fair value of options 
granted in 1997 was $17.75.

     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 1997, pro forma net loss would have been $39.2 million.

     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>
                                                                 1997
                                                                 ----
         <S>                                                    <C>
          Risk-Free Interest Rate. . . . . . . . . . . . .       6.4%
          Average Life of Options (years). . . . . . . . .         7
          Volatility . . . . . . . . . . . . . . . . . . .         0%
          Dividend Yield . . . . . . . . . . . . . . . . .         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, 
1996. 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.

                                      31

<PAGE>

                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 DECEMBER 31, 1997


(11) BALANCE SHEET DETAIL

<TABLE>
<CAPTION>

                                                                             DECEMBER 31, 
                                                                           ----------------
                                                                            1997      1996
                                                                           ------    ------
          <S>                                                              <C>       <C>
                                                                             (in millions)
          Inventories:
            Raw materials and supplies . . . . . . . . . . . . . . . .     $27.8     $30.9
            Work in process. . . . . . . . . . . . . . . . . . . . . .      12.0      12.7
            Finished goods . . . . . . . . . . . . . . . . . . . . . .      39.7      32.6
                                                                          -------   -------
               Total . . . . . . . . . . . . . . . . . . . . . . . . .     $79.5     $76.2
                                                                          -------   -------
                                                                          -------   -------

            Excess of replacement cost over LIFO inventory cost. . . .      $3.2      $3.0
                                                                          -------   -------
                                                                          -------   -------

          Other current assets:
            Deferred tax assets. . . . . . . . . . . . . . . . . . . .     $18.2     $11.4
            Residual interest in sold accounts receivable. . . . . . .      13.1       1.9
            Other. . . . . . . . . . . . . . . . . . . . . . . . . . .       2.7       2.3
                                                                          -------   -------
               Total . . . . . . . . . . . . . . . . . . . . . . . . .     $34.0     $15.6
                                                                          -------   -------
                                                                          -------   -------

          Property, plant and equipment:
            Land . . . . . . . . . . . . . . . . . . . . . . . . . . .      $8.8      $8.8
            Buildings. . . . . . . . . . . . . . . . . . . . . . . . .      51.2      48.0
            Machinery and equipment. . . . . . . . . . . . . . . . . .     130.2     117.0
            Construction in progress . . . . . . . . . . . . . . . . .      13.4      13.2
            Less accumulated depreciation. . . . . . . . . . . . . . .    (102.3)    (89.6)
                                                                          -------   -------
               Total . . . . . . . . . . . . . . . . . . . . . . . . .    $101.3     $97.4
                                                                          -------   -------
                                                                          -------   -------

          Other assets:
            Deferred financing fees. . . . . . . . . . . . . . . . . .     $21.0      $2.5
            Other. . . . . . . . . . . . . . . . . . . . . . . . . . .      11.1       7.0
                                                                          -------   -------
               Total . . . . . . . . . . . . . . . . . . . . . . . . .     $32.1      $9.5
                                                                          -------   -------
                                                                          -------   -------
</TABLE>

                                             32

<PAGE>


                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 DECEMBER 31, 1997
                                          
                                          
(12)  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, 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, 1997   DECEMBER 31, 1996
                                         ------------------- --------------------
                                          CARRYING    FAIR    CARRYING      FAIR
                                           AMOUNT     VALUE    AMOUNT      VALUE
                                         ---------  -------- ----------  --------
                                                        (in millions)       
    <S>                                   <C>         <C>     <C>         <C>
    Cash and cash equivalents. . . . .      $29.9     $29.9      $3.9      $3.9
    Senior Subordinated Notes. . . . .      252.7     257.6        --        --
    Credit Facilities. . . . . . . . .      174.5     174.5     121.5     121.5
    Other Debt . . . . . . . . . . . .        2.6       2.6       2.8       2.8

</TABLE>


(13) RELATED PARTY TRANSACTIONS

     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 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.

     The Company has in the past entered into agreements or arrangements with 
affiliates relating to legal services, acquisition services, financing 
services and consulting arrangements that are described below.  The Company 
believes that the terms and resulting costs of all related party transactions 
and agreements were no less favorable than those that could have been 
obtained from non-affiliated parties.

                                    33

<PAGE>

                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 DECEMBER 31, 1997


     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, $2.6 million in 1996 and $2.3 million in 
1995.  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 1996, the Company participated in an Eagle sponsored self-insurance 
program that included coverage for medical, workers' compensation, product 
liability and general liability insurance.  The Company reimbursed Eagle for 
amounts paid on behalf of the Company.  Payments made either to Eagle or 
directly to the third party administrator for Falcon's participation in these 
shared coverages totaled $17.0 million in the year ended December 31, 1995.

     Prior to the Offering, the Company was included in GAMI's consolidated 
federal income tax returns.  In addition, the Company filed certain combined 
state tax returns with GAMI until the distribution to EHL in 1996. Pursuant 
to the Tax Sharing Agreement, the Company paid GAMI $4.6 million in 1996 for 
tax liabilities it incurred during the periods it was included in GAMI's 
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 and $0.1 million in 1996.

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

(14) 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 $4.9 million, $4.7 million and $3.9 million for the 
years ended December 31, 1997, 1996, and 1995, respectively.

     Future minimum lease payments required as of December 31, 1997 (in
millions):

                    1998 . . . . . . . . . . . . .    $  1.4
                    1999 . . . . . . . . . . . . .       1.0
                    2000 . . . . . . . . . . . . .       1.0
                    2001 . . . . . . . . . . . . .       0.8
                    2002 and thereafter. . . . . .       1.4
                                                     ---------
                                                      $  5.6
                                                     ---------
                                                     ---------

     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-Registered Trademark- 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 ("MCCR") suspended sales of HTPV in the 
Province of Ontario.  Other provinces of Canada have taken similar action.  
Pursuant to an MCCR 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-Registered Trademark- products in the United States and Canada in 
1995, 1996 and 1997 were minimal.

                                    34

<PAGE>


                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 DECEMBER 31, 1997


     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 is also a defendant in two cases brought by appliance 
manufacturers. In a lawsuit filed in Pennsylvania, the Company has been sued 
along with other defendants for reimbursement of costs associated with its 
corrective action program.  In the other lawsuit, the Company and two other 
defendants have been sued in Massachusetts by seven furnace manufacturers 
which are seeking damages and declaratory relief for costs expected to be 
incurred as a result of corrective action programs to be conducted in 
connection with furnace systems vented with HTPV.  The Company has filed and 
served its own legal action in Michigan against the furnace manufacturers 
that have filed suit against the Company , and all other identifiable 
appliance manufacturers that certified HTPV for use with their appliance 
systems.  In that suit, the Company is seeking damages for costs it has 
incurred and declaratory relief for costs that may be incurred in the future 
as a result of the conduct of appliance manufacturers that certified their 
products for use with HTPV.  The Company has also been named in a class 
action lawsuit that has been filed in Tennessee regarding HTPV. In that case, 
the Company is a defendant along with its principal competitor in the HTPV 
business, a resin supplier and a furnace manufacturer that has been joined as 
a representative of a defendant class consisting of all appliance 
manufacturers.  The plaintiffs seek damages on behalf of all persons in the 
United States with appliance systems that are vented with HTPV.

     The Company has been 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, have participated in a non-binding facilitative mediation process, 
the object of which was to develop and implement a voluntary HTPV corrective 
action program. The CPSC agreed to delay initiating proceedings mandating a 
corrective action program while these parties were involved in the mediation 
process. 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 with 
a new venting system.  The Corrective Action Program was approved by the CPSC 
in February 1998.  The Settlement Agreement provides for the dismissal of the 
above referenced litigation in Massachusetts, Pennsylvania and Michigan.

     In 1997, the Company recorded pretax charges of $32.8 million ($20.0 
million, net) 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.

     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.

                                      35

<PAGE>

                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 DECEMBER 31, 1997
                                          
(15) 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., 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.

                                   36

<PAGE>

                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 DECEMBER 31, 1997


(15) GUARANTOR SUBSIDIARIES (CONTINUED)

                 SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
                                 December 31, 1997
                               (dollars in millions)
<TABLE>
<CAPTION>
                                                                                         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 (deficit):
     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>
                                      37
<PAGE>

                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 DECEMBER 31, 1997

(15) GUARANTOR SUBSIDIARIES (CONTINUED)

                 SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
                                 December 31, 1996
                               (dollars in millions)
<TABLE>
<CAPTION>
                                                                                       NON-
                                                     PARENT        GUARANTOR        GUARANTOR
                                                     COMPANY      SUBSIDIARIES      SUBSIDIARY       ELIMINATIONS      CONSOLIDATED
                                                     -------      ------------     ------------      ------------      ------------
                                                                     ASSETS
<S>                                                  <C>           <C>              <C>               <C>                <C>
Current assets:
     Cash and cash equivalents . . . . . . . . . .      $2.6            $1.3             $--               $ --           $  3.9
     Inventories, net. . . . . . . . . . . . . . .      --              76.2              --                 --             76.2
     Other current assets. . . . . . . . . . . . .       0.6            13.1              1.9                --             15.6
                                                      ------          ------             ----              ------         ------
     Total current assets. . . . . . . . . . . . .       3.2            90.6              1.9                --             95.7

Property, plant and equipment, net . . . . . . . .      --              97.4              --                 --             97.4
Goodwill . . . . . . . . . . . . . . . . . . . . .      --              59.1              --                 --             59.1
Investment in and advances
     to/from subsidiaries. . . . . . . . . . . . .     147.1           (97.5)             2.0               (51.6)          --  
Other long-term assets . . . . . . . . . . . . . .       5.5             3.8              0.2                --              9.5
                                                      ------          ------             ----              -------        ------
     Total assets. . . . . . . . . . . . . . . . .    $155.8          $153.4             $4.1              $(51.6)        $261.7
                                                      ------          ------             ----              -------        ------
                                                      ------          ------             ----              -------        ------

                                                    LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Current portion long-term debt. . . . . . . .     $15.0            $0.2            $--                 $--            $15.2
     Accounts payable. . . . . . . . . . . . . . .       4.8            45.2              0.1                --             50.1
     Accrued liabilities . . . . . . . . . . . . .      (1.9)           32.8             --                  --             30.9
                                                      ------          ------            -----              ------         ------
     Total current liabilities . . . . . . . . . .      17.9            78.2              0.1                --             96.2

Long term debt . . . . . . . . . . . . . . . . . .     106.5             2.6             --                  --            109.1
Other long-term liabilities. . . . . . . . . . . .       3.0            25.5             --                  --             28.5
                                                      ------          ------            -----              ------         ------
     Total liabilities . . . . . . . . . . . . . .     127.4           106.3              0.1                --            233.8
                                                      ------          ------            -----              ------         ------

Stockholders' equity:
     Common stock. . . . . . . . . . . . . . . . .       0.2            --               --                  --              0.2
     Additional paid-in capital. . . . . . . . . .      18.0            42.9              5.0               (47.9)          18.0
     Retained earnings (deficit) . . . . . . . . .      12.8             4.7             (1.0)               (3.7)          12.8
     Other . . . . . . . . . . . . . . . . . . . .      (2.6)           (0.5)            --                  --             (3.1)
                                                      -------         -------           ------             -------        -------
     Total stockholders' equity (deficit). . . . .      28.4            47.1              4.0               (51.6)          27.9
                                                      -------         -------           ------             -------        -------
Total liabilities and stockholders' equity . . . .    $155.8          $153.4             $4.1              $(51.6)        $261.7
                                                      -------         -------           ------             -------        -------
                                                      -------         -------           ------             -------        -------
</TABLE>
                                      38
<PAGE>
FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
DECEMBER 31, 1997

(15) GUARANTOR SUBSIDIARIES (CONTINUED)

             SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME 
                            YEAR ENDED DECEMBER 31, 1997
                                (dollars in millions)
                                          
<TABLE>
<CAPTION>
                                                                                      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)
                                                     --------     -----------      ------------      ------------      -----------
                                                     --------     -----------      ------------      ------------      -----------
</TABLE>
                                      39


<PAGE>

                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 DECEMBER 31, 1997
                                          
(15) GUARANTOR SUBSIDIARIES (CONTINUED)

             SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME 
                            YEAR ENDED DECEMBER 31, 1996
                                (dollars in millions)

<TABLE>
<CAPTION>
                                                                                   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
                                                    --------- --------------  ------------- ---------------   ---------------
                                                    --------- --------------  ------------- ---------------   ---------------

</TABLE>

                                                          40

<PAGE>

                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 DECEMBER 31, 1997
                                          
(15) GUARANTOR SUBSIDIARIES (CONTINUED)

             SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF INCOME 
                            YEAR ENDED DECEMBER 31, 1995
                                (dollars in millions)

<TABLE>
<CAPTION>

                                                                                  NON-
                                                     PARENT      GUARANTOR     GUARANTOR
                                                     COMPANY   SUBSIDIARIES    SUBSIDIARY    ELIMINATIONS      CONSOLIDATED
                                                    --------- --------------  ------------- ---------------   ---------------
<S>                                                  <C>       <C>            <C>           <C>                <C>
Net sales. . . . . . . . . . . . . . . . . . . . .     $--         $471.3          $--            $--             $471.3
Cost of sales. . . . . . . . . . . . . . . . . . .      --          378.5           --             --              378.5
                                                    --------- --------------  ------------- ---------------   ---------------
     Gross earnings. . . . . . . . . . . . . . . .      --           92.8           --             --               92.8
Selling and administrative expenses. . . . . . . .       4.5         38.9           --             --               43.4
Securitization expense . . . . . . . . . . . . . .       3.3         --             --             --                3.3
Ultravent expense. . . . . . . . . . . . . . . . .      --            0.3           --             --                0.3
                                                    --------- --------------  ------------- ---------------   ---------------
     Operating income (loss) . . . . . . . . . . .      (7.8)        53.6           --             --               45.8
Corporate allocation . . . . . . . . . . . . . . .     (16.8)        16.8           --             --               --  
Net interest expense . . . . . . . . . . . . . . .      10.7         (0.7)          --             --               10.0
                                                    --------- --------------  ------------- ---------------   ---------------
Income (loss) before income taxes. . . . . . . . .      (1.7)        37.5           --             --               35.8
Provision (benefit) for income taxes . . . . . . .      (0.9)        14.6           --             --               13.7
                                                    --------- --------------  ------------- ---------------   ---------------
Income (loss) before equity in income of
     consolidated subsidiaries . . . . . . . . . .      (0.8)        22.9           --             --               22.1
Equity in income of consolidated subsidiaries. . .      22.9         --             --           (22.9)             --  
                                                    --------- --------------  ------------- ---------------   ---------------
Net income . . . . . . . . . . . . . . . . . . . .     $22.1        $22.9          $--          $(22.9)            $22.1
                                                    --------- --------------  ------------- ---------------   ---------------
                                                    --------- --------------  ------------- ---------------   ---------------

</TABLE>

                                                            41

<PAGE>


                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 DECEMBER 31, 1997
                                          

(15) GUARANTOR SUBSIDIARIES (CONTINUED)
                                          
            SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                            Year Ended December 31, 1997
                               (dollars in millions)


<TABLE>
<CAPTION>
                                                                                   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>


                                      42

<PAGE>

                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 DECEMBER 31, 1997
                                          

(15) GUARANTOR SUBSIDIARIES (CONTINUED)
                                          
            SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                            Year Ended December 31, 1996
                               (dollars in millions)

<TABLE>
<CAPTION>
                                                                                     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>

                                      43

<PAGE>


                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 DECEMBER 31, 1997
                                          

(15) GUARANTOR SUBSIDIARIES (CONTINUED)
                                          
            SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
                            Year Ended December 31, 1995
                               (dollars in millions)

<TABLE>
<CAPTION>
                                                                                   NON-
                                                     PARENT       GUARANTOR      GUARANTOR
                                                     COMPANY     SUBSIDIARIES    SUBSIDIARY   ELIMINATIONS   CONSOLIDATED
                                                   ------------  -------------  ------------  -------------  -------------
<S>                                                <C>           <C>            <C>           <C>            <C>
Cash flows from operating activities . . . . . . .     $4.6          $14.8          $--            $--           $19.4
                                                   ------------  -------------  ------------  -------------  -------------
Cash flows from investing activities:
     Purchase of businesses. . . . . . . . . . . .     --            (10.4)          --             --           (10.4)
     Capital expenditures. . . . . . . . . . . . .     --            (16.4)          --             --           (16.4)
     Other . . . . . . . . . . . . . . . . . . . .     (0.9)          (1.3)          --             --            (2.2)
                                                   ------------  -------------  ------------  -------------  -------------
     Net cash used in investing activities . . . .     (0.9)         (28.1)          --             --           (29.0)
                                                   ------------  -------------  ------------  -------------  -------------
Cash flows from financing activities:
     Advances (to) from affiliate. . . . . . . . .    (14.1)          14.1           --             --            --  
     Net borrowings on debt. . . . . . . . . . . .      8.5           --             --             --             8.5
                                                   ------------  -------------  ------------  -------------  -------------
     Net cash from financing activities. . . . . .     (5.6)          14.1           --             --             8.5
                                                   ------------  -------------  ------------  -------------  -------------
Change in cash and cash equivalents. . . . . . . .     (1.9)           0.8           --             --            (1.1)
Cash and cash equivalents, beginning
     of period . . . . . . . . . . . . . . . . . .      1.6            0.6           --             --             2.2
                                                   ------------  -------------  ------------  -------------  -------------
Cash and cash equivalents, end of period . . . . .    $(0.3)          $1.4          $--            $--            $1.1
                                                   ------------  -------------  ------------  -------------  -------------
                                                   ------------  -------------  ------------  -------------  -------------
</TABLE>

                                      44

<PAGE>

                  FALCON BUILDING PRODUCTS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
                                 DECEMBER 31, 1997



(16) BUSINESS SEGMENT INFORMATION

     The Company's current operations are in one industry segment, building and
construction related products, serving the residential and commercial
construction and home improvement markets.  These businesses are influenced
primarily by housing starts, construction and remodeling activity and consumer
spending.

     The Company's export sales are less than 10% of total revenues.  Sales to
Sears, Roebuck and Co. accounted for 13.2%, 13.3% and 17.7% of total net sales
for the years ended December 31, 1997, 1996 and 1995, respectively.  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.

     In June 1997, the Financial Accounting Standards Board issued Statement No.
131 ("SFAS 131"), "Disclosure about Segments of an Enterprise and Related
Information", which requires the reporting of selected segment information and
entity-wide disclosures about products and services, major customers, and the
countries in which the entity holds assets and reports revenues.  The Company is
evaluating the effect of adoption of SFAS 131, which is effective for financial
statement periods beginning after December 15, 1997.

                                      45
<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 December 31, 1997 and 1996 (in millions).

<TABLE>
<CAPTION>
                                    QUARTER ENDED       QUARTER ENDED       QUARTER ENDED       QUARTER ENDED
                                      MARCH 31,           JUNE 30,          SEPTEMBER 30,       DECEMBER 31,
                                 ------------------  ------------------  ------------------  ------------------
                                   1997      1996      1997      1996      1997      1996      1997      1996
                                 --------  --------  --------  --------  --------  --------  --------  --------
<S>                              <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Net sales. . . . . . . . . . .    $160.2    $144.4    $195.7    $168.4    $172.7    $162.7    $157.8    $157.7
Gross earnings(1). . . . . . .      28.2      26.8      36.8      32.2      29.1      30.6      15.8      30.0
Income (loss)
  before extra-  
  ordinary item. . . . . . . .       6.1       5.4     (18.4)      8.1       0.8       8.0     (25.9)      8.5
Net income (loss)(2)(3). . . .       6.1       5.4     (19.9)      8.1       0.8       8.0     (25.9)      8.5
</TABLE>

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

(1)  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 income (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.

(3)  Net income (loss) for the quarter ended December 31, 1997 reflects after
     tax charges of $19.0 million related to Ultravent-Registered Trademark-.

                                      46
<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, 1998, 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>
<S>                               <C>
William K. Hall, 54 . . . . . .   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, 53 . . . . . .   President of DeVilbiss Air Power Company, a
                                  subsidiary of Falcon, since 1989.

Gus J. Athas, 61  . . . . . . .   Executive Vice President - Administration of
                                  Falcon since June 1997; Senior Vice President,
                                  General Counsel and Secretary of Falcon since
                                  1994; Senior Vice President of 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, 57  . . . . . .   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;
                                  Partner with Arthur Andersen LLP from 1973 to
                                  1993.

Edward G. Finnegan, Jr., 36 . .   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, 53 . . . .   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, 55 . . . . . .   President of Hart & Cooley, Inc., a subsidiary
                                  of Falcon, since 1985.

Anthony J. Navitsky, 41 . . . .   Vice President-Finance & Treasurer of Falcon
                                  since March 1997. Served as Vice President and
                                  Treasurer of Eagle from 1990 to 1997 and as
                                  Vice President and Controller of GAMI from
                                  1983 to 1990.

Christopher J. O'Brien, 39. . .   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 Simmons Holdings,
                                  Inc., Star Markets Holdings, Inc., CSK Auto
                                  Corporation, and the William Carter Company.

                                      47
<PAGE>

Charles J. Philippin, 47. . . .   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, and the William Carter
                                  Company.

Christopher J. Stadler, 33. . .   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>
                                      48
<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"):


                          SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                                                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) . . . . . . . . . . . . . . .    1997     425,000       83,333        241,271     706,415
    President and Chief Executive Officer             1996     250,000      271,200         43,300       6,410
                                                      1995     241,551           --         53,300       6,200

 William E. Allen (4)  . . . . . . . . . . . . . .    1997     226,768       63,804         51,706     817,830
    President, DeVilbiss Air Power Co.                1996     186,162      208,157         19,500      11,402
                                                      1995     171,102       50,117         22,100      12,399

 Gus J. Athas (1)(5) . . . . . . . . . . . . . . .    1997     252,692       37,500         86,168     306,415
    Executive Vice President, General Counsel         1996     144,731      122,040         32,200       6,410
     and Secretary                                    1995     126,174           --         40,000       6,200

 Sam A. Cottone (1)(5) . . . . . . . . . . . . . .    1997     275,000       37,500        120,636     306,415
    Executive Vice President-Finance, Treasurer       1996     144,731      122,040         32,200       6,410
     and Chief Financial Officer                      1995     136,048           --         40,000       6,200

 Lawrence B. Lee . . . . . . . . . . . . . . . . .    1997     210,603       52,818         51,701     411,830
    President, Hart & Cooley, Inc.                    1996     194,750       73,148         18,450       8,960
                                                      1995     185,562           --         22,100      12,399
</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 includes transaction incentive bonuses of $700,000,
     $500,000, $300,000, $300,000 and $399,000 paid to the above named officers,
     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 for Mr. Allen includes a $275,000 payment for a three-year
     non-competition agreement.

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

                                      49
<PAGE>

                           OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
                                                                                                 POTENTIAL REALIZABLE VALUE
                                                                                                     AT ASSUMED ANNUAL RATES
                                                                                                  OF STOCK PRICE APPRECIATION
                                   INDIVIDUAL GRANTS                                                    FOR OPTION TERM
                         -----------------------------------                                 -----------------------------------
                             NUMBER OF          % OF TOTAL                                          5% ($)            10% ($)
                             SECURITIES           OPTIONS                                          (ASSUMES          (ASSUMES
                             UNDERLYING         GRANTED TO      EXERCISE OR                      $28.91 PRICE      $46.04 PRICE
                              OPTIONS          EMPLOYEES IN     BASE PRICE        DATE OF         AT END OF          AT END OF
                          GRANTED (#) (1)       FISCAL YEAR      ($/SHARE)       EXPIRATION     10 YEARS) (2)      10 YEARS) (2)
                         ----------------     -------------    ------------    ------------   ---------------    -----------------
<S>                        <C>                   <C>              <C>             <C>            <C>              <C>
William K. Hall. . . . .    241,271               27.7%            17.75          7/17/07         2,721,309         6,912,656
William E. Allen . . . .     51,706                5.9%            17.75          7/17/07           583,195         1,481,429
Gus J. Athas . . . . . .     86,168                9.9%            17.75          7/17/07           971,894         2,469,799
Sam A. Cottone . . . . .    120,636               13.9%            17.75          7/17/07         1,360,660         3,456,342
Lawrence B. Lee. . . . .     51,701                5.9%            17.75          7/17/07           583,139         1,481,285
</TABLE>

--------------------
(1)  Options are for Class C Stock and vest immediately upon the seventh
     anniversary of the grant with the possibility of 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.

(2)  These numbers are for presentation purposes only and are not predictions of
     future stock prices.


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


<TABLE>
<CAPTION>

                                                                            NUMBER OF 
                                                                            SECURITIES              VALUE OF
                                                                            UNDERLYING            UNEXERCISED
                                                                            UNEXERCISED           IN-THE-MONEY
                                                                            OPTIONS AT             OPTIONS AT
                                                                             FY-END (#)             FY-END ($)
                            SHARES ACQUIRED ON           VALUE             EXERCISABLE/           EXERCISABLE/
                              EXERCISE (#)(1)      REALIZED ($)(1)        UNEXERCISABLE        UNEXERCISABLE(2)
                          ---------------------   ----------------       ---------------      ------------------
 <S>                          <C>                   <C>                     <C>                    <C>
 William K. Hall . . .           136,600              902,447               0/241,271              0 / N/A
 William E. Allen  . .            56,600              373,095               0/51,706               0 / N/A
 Gus J. Athas  . . . .           102,200              675,618               0/86,168               0 / N/A
 Sam A. Cottone  . . .           102,200              675,618               0/120,636              0 / N/A
 Lawrence B. Lee . . .            56,850              378,566               0/51,701               0 / N/A
</TABLE>

------------------------
(1)  Upon consummation of the Merger, all options outstanding became immediately
     exercisable and were redeemed at the difference between $17.75 and the
     exercise price of the option.

(2)  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, 1997 was 5.5%.  Covered
compensation includes salary, annual bonus, 401(k) deferrals and overtime, but
excludes long-term incentive compensation.

                                  50

<PAGE>

     The estimated annual annuity benefits payable under the Pension Plans at 
normal retirement are $17,432 , $47,884 , $4,828, $9,269  and $41,643 for 
Messrs. Hall, Allen, Athas, Cottone, and Lee, respectively at December 31, 
1997. 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, although such directors are
reimbursed for expenses incurred in attending board meetings.

                      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
and receives a minimum base salary payable at an annual rate of $600,000,
subject to adjustment.  Mr. Cottone serves as Executive Vice President and Chief
Financial Officer and receives a minimum base salary payable at an annual rate
of $400,000, subject to adjustment, and Mr. Athas serves as Executive Vice
President - Administration, General Counsel and Secretary and receives a minimum
base salary payable at an annual rate of $330,000, 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 funded
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.

                                 51

<PAGE>

     "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 and Lee
and Joseph W. Harbrecht, President of Mansfield Plumbing Products, Inc., a
subsidiary of the Company, 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-three other
employees of the Company's subsidiaries which provide for a lump sum payment
equal to 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.

                               COMPENSATION COMMITTEE
                        INTERLOCKS AND INSIDER PARTICIPATION

     Prior to the consummation of the Recapitalization, the Board of Directors
of Falcon consisted of Mr. Hall, Rod F. Dammeyer, Bradbury Dyer, III, Philip C.
Kantz, Sheli Z. Rosenberg, Richard G. Sim, Robert L. Smialek and B. Joseph
White.  Of this group, only Mr. Hall currently serves as a director of the
Company.

     Prior to the consummation of the Recapitalization, the Compensation
Committee of the Board of Directors determined the Company's policy with respect
to the nature and amount of all compensation of the Company's executive
officers.   Prior to the consummation of the Recapitalization, the Compensation
Committee was comprised of Messrs. Dammeyer, Kantz and White.

     Prior to the consummation of the Recapitalization,  the following
relationships existed:  Mr. Hall, President and Chief Executive Officer of
Falcon was a member of the Board of Directors of GAMI and the Chief Executive
Officer and a director of its subsidiary, Eagle; Mr. Dammeyer was the Chief
Executive Officer and a director of GAMI and Chairman of the Board of Directors
of Eagle.  EHL owned 100% of the outstanding common stock of GAMI.   GAMI owned
100% of the outstanding common stock of Eagle.  EHL's sole general partners were
the Samuel Zell Revocable Trust and the Robert H. and Ann Lurie Trust; Mr. Zell
was the trustee of the Zell Trust; Ms. Rosenberg and Ms. Lurie were co-trustees
of the Robert H. and Ann Lurie Trust; Messrs. Athas and Cottone  were executive
officers and directors of the Company and were executive officers of GAMI and
Eagle and in the case of Mr. Cottone, a director of Eagle.  Mr. Dyer was a
director of GAMI. 

     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 Ms. Rosenberg 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.

                                  52

<PAGE>

     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, 1997, the 
balances of these loans to the Named Executive Officers were $0.8 million, 
$0.2 million, $0.2 million, $0.1 million, and $0.1 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 four employees of the Company who are not Named 
Executive Officers.  

                                  53

<PAGE>

ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth, as of December 31, 1997, 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)  . . . . . . . . . . . . . . . . . . . . . . . .           156,670       15.5

      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.

                                    54

<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.


                                     55

<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 13 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. . . . . . . . . . . . .    14
               Consolidated Balance Sheets . . . . . . . . . . . . . . . .    16
               Consolidated Statements of Income . . . . . . . . . . . . .    17
               Consolidated Statements of Stockholders' Equity . . . . . .    18
               Consolidated Statements of Cash Flows . . . . . . . . . . .    19
               Notes to Consolidated Financial Statements. . . . . . . . .    20
</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 February 24, 1998, relative to
the Corrective Action Program that was approved by the Consumer Products Safety
Commission regarding high temperature plastic venting systems.

          (c) Exhibits

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

                                        56

<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 27, 1998
                                   -------------------------------


     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 27, 1998
---------------------------------  Board of Directors, President and
     (William K. Hall)             Chief Executive Officer (Principal
                                   Executive Officer)


/s/  SAM A. COTTONE                Executive Vice President-Finance,            March 27, 1998
---------------------------------  and Chief Financial Officer
     (Sam A. Cottone)              (Principal Financial Officer)


/s/  ANTHONY J. NAVITSKY           Vice President--Finance and Treasurer        March 27, 1998
---------------------------------  (Principal Accounting Officer)
     (Anthony J. Navitsky)        


*  /s/  CHRISTOPHER J. O'BRIEN     Director                                     March 27, 1998
---------------------------------
     (Christopher J. O'Brien)


*  /s/  CHARLES J. PHILIPIN        Director                                     March 27, 1998
---------------------------------
     (Charles J. Philipin)


*  /s/  CHRISTOPHER J. STADLER     Director                                     March 27, 1998
---------------------------------
     (Christopher J. Stadler)

</TABLE>



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




                                            57

<PAGE>

                                 INDEX TO EXHIBITS

EXHIBIT
NUMBER                          DESCRIPTION OF EXHIBIT
------                          ----------------------

 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.
 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.
 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).

                                          58
<PAGE>

EXHIBIT
NUMBER                          DESCRIPTION OF EXHIBIT
------                          ----------------------

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.)

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<PAGE>

EXHIBIT
NUMBER                          DESCRIPTION OF EXHIBIT
------                          ----------------------

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     Termination Benefits Agreement dated December 18, 1996 between
          Mansfield Plumbing Products, Inc. and Paul Fischer. (Incorporated by
          reference to Exhibit 10.20 of the Company's Annual Report on Form 10-
          K for the year ended December 31, 1996.)
10.28     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.)
10.29     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.)
10.30     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.)
10.31     Termination Benefits Agreement dated December 19, 1996 between
          Falcon Building Products, Inc. and Daniel G. Ellis.  (Incorporated by
          reference to Exhibit 10.22 of the Company's Annual Report on Form 10-
          K for the year ended December 31, 1996.)
10.32     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.)
10.33     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.)
10.34     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.)
10.35     Termination Benefits Agreement dated December 20, 1997 between
          Mansfield Plumbing Products, Inc. and Joseph W. Harbrecht.
21.1      Subsidiaries of the Company.
24.1      Power of Attorney of Directors

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