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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


FORM 10-Q

X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

or

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

For the transition period from _____________ to _____________.


NOVEON, INC.
----------------------
(Exact Name of Registrant as Specified in its Charter)


Delaware File No. 333-61812 13-4143915
--------------- ------------------------ -----------------
(State of incorporation) (Commission File Number) (IRS Employer
Identification No.)

9911 Brecksville Road
Cleveland Ohio 44141
---------------------------------------
(Address of Principal Executive Offices)
(Zip Code)

(216) 447-5000
-----------------------------------------------
(Registrant's Telephone Number, Including Area Code)

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

As of November 14, 2002, there is 1 share of registrant's Common Stock
outstanding.





Noveon, Inc.

Periods of Three and Nine Months Ended September 30, 2002
and Three and Seven Months Ended September 30, 2001
and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Period of Two Months Ended February 28, 2001


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Condensed Consolidated Statement of Operations--Three months
ended September 30, 2001 and 2002...................................2

Condensed Consolidated Statement of Operations--Two months ended
February 28, 2001, seven months ended September 30, 2001, and nine
months ended September 30, 2002.....................................3

Condensed Consolidated Balance Sheet--December 31, 2001 and
September 30, 2002..................................................4

Condensed Consolidated Statement of Cash Flows--Two months ended
February 28, 2001, seven months ended September 30, 2001, and
nine months ended September 30, 2002................................5

Notes to Condensed Consolidated Financial Statements................6

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..... ...............................28

Item 3. Quantitative and Qualitative Disclosures of Market Risk.........48

Item 4. Controls and Procedures.... ....................................49


PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K................................50





Noveon, Inc.

Condensed Consolidated Statement of Operations
(dollars in millions)


THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------------------
2001 2002
-----------------------------------
(unaudited)

Sales $ 262.4 $ 273.2
Cost of sales 191.6 184.2
-----------------------------------

Gross profit 70.8 89.0
Selling and administrative expenses 46.7 51.3
Amortization expense 8.4 3.5
Consolidation costs 0.7 1.1
-----------------------------------

Operating income 15.0 33.1
Interest income (expense)--net (21.7) (18.9)
Other income (expense)--net (0.2) (0.1)
-----------------------------------
Income (loss) before income taxes (6.9) 14.1
Income tax benefit (expense) 0.9 (1.8)
-----------------------------------
Net income (loss) $ (6.0) $ 12.3
===================================


See notes to condensed consolidated financial statements.





Noveon, Inc.
and
BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Condensed Consolidated Statement of Operations
(dollars in millions)




BFGOODRICH
PERFORMANCE
MATERIALS NOVEON, INC.
---------------------------------------------------------
TWO MONTHS SEVEN MONTHS NINE MONTHS
ENDED ENDED ENDED
FEBRUARY 28, SEPTEMBER 30, SEPTEMBER 30,
2001 2001 2002
---------------------------------------------------------
(unaudited)

Sales $ 187.0 $ 629.3 $ 813.5
Cost of sales 137.3 460.0 547.5
---------------------------------------------------------

Gross profit 49.7 169.3 266.0
Selling and administrative expenses 35.2 111.4 151.7
Amortization expense 4.0 19.4 10.5
Consolidation costs - 1.4 2.9
---------------------------------------------------------

Operating income 10.5 37.1 100.9
Interest income (expense)--net 0.6 (54.6) (57.4)
Other income (expense)--net (1.5) (1.9) (0.2)
---------------------------------------------------------
Income (loss) before income taxes 9.6 (19.4) 43.3
Income tax benefit (expense) (4.0) 5.9 (6.7)
---------------------------------------------------------
Net income (loss) $ 5.6 $ (13.5) $ 36.6
=========================================================


See notes to condensed consolidated financial statements.






Noveon, Inc.

Condensed Consolidated Balance Sheet
(dollars in millions)




DECEMBER 31, 2001 SEPTEMBER 30, 2002
----------------------------------------
(unaudited)

CURRENT ASSETS
Cash and cash equivalents $ 120.0 $ 151.9
Accounts and notes receivable, less allowances for doubtful
receivables ($8.7 and $8.9 at December 31, 2001
and September 30, 2002, respectively) 133.8 153.9
Inventories 140.2 136.9
Prepaid expenses and other current assets 4.5 6.9
----------------------------------------
TOTAL CURRENT ASSETS 398.5 449.6

Property, plant and equipment--net 672.5 656.4
Goodwill--net 346.9 369.6
Identifiable intangible assets--net 192.0 183.0
Other assets 51.9 45.7
----------------------------------------
TOTAL ASSETS $ 1,661.8 $ 1,704.3
========================================

CURRENT LIABILITIES
Short-term bank debt $ 1.3 $ 0.1
Accounts payable 97.1 105.8
Accrued expenses 74.2 67.9
Income taxes payable 1.0 4.0
Current maturities of long-term debt 23.2 24.0
----------------------------------------
TOTAL CURRENT LIABILITIES 196.8 201.8

Long-term debt 876.2 863.8
Postretirement benefits other than pensions 5.3 5.7
Accrued pensions 32.8 32.4
Deferred income taxes 24.6 26.8
Accrued environmental 20.7 20.8
Other non-current liabilities 9.2 17.7

STOCKHOLDER'S EQUITY
Common stock - -
Paid in capital 527.0 527.0
Retained earnings (deficit) (20.6) 16.0
Accumulated other comprehensive loss (10.2) (7.7)
----------------------------------------
TOTAL STOCKHOLDER'S EQUITY 496.2 535.3
----------------------------------------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $ 1,661.8 $ 1,704.3
========================================


See notes to condensed consolidated financial statements.







Noveon, Inc.
and
BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Condensed Consolidated Statement of Cash Flows
(dollars in millions)




BFGOODRICH
PERFORMANCE
MATERIALS NOVEON, INC.
--------------------------------------------------
TWO MONTHS SEVEN MONTHS NINE MONTHS
ENDED ENDED ENDED
FEBRUARY 28, SEPTEMBER 30, SEPTEMBER 30,
2001 2001 2002
--------------------------------------------------
(unaudited)

OPERATING ACTIVITIES
Net income (loss) $ 5.6 $ (13.5) $ 36.6
Adjustments to reconcile net income (loss) to net
cash provided (used) by operating activities:
Depreciation and amortization 14.4 62.5 61.3
Deferred income taxes (5.2) (10.4) 2.2
Debt issuance cost amortization in interest expense - 5.2 4.2
Change in assets and liabilities, net of effects of
acquisitions and dispositions of businesses (46.4) 48.2 (7.5)
---------------------------------------------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (31.6) 92.0 96.8

INVESTING ACTIVITIES
Purchases of property, plant and equipment (7.6) (16.0) (27.7)
Payments made in connection with acquisitions, net of
cash acquired - (1,187.3) (20.6)
---------------------------------------------------
NET CASH (USED) BY INVESTING ACTIVITIES (7.6) (1,203.3) (48.3)

FINANCING ACTIVITIES
Decrease in short-term debt (3.7) (25.9) (0.4)
Payments on long-term borrowings - (5.2) (18.9)
Proceeds from issuance of long-term debt - 910.0 -
Proceeds from sale of receivables, net 0.5 - -
Debt issuance costs - (44.3) -
Equity contribution from stockholder - 355.0 -
Transfers from Parent 40.7 - -
---------------------------------------------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 37.5 1,189.6 (19.3)

Effect of exchange rate changes on cash and cash equivalents - 0.2 2.7
---------------------------------------------------
Net increase (decrease) in cash and cash equivalents (1.7) 78.5 31.9
Cash and cash equivalents at beginning of period 15.7 - 120.0
---------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 14.0 $ 78.5 $ 151.9
===================================================

Non-cash transactions
Equity contribution $ - $ 172.0 $ -
===================================================


See notes to condensed consolidated financial statements.







Noveon, Inc.
Periods of Three and Nine Months Ended September 30, 2002
and Three and Seven Months Ended September 30, 2001

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)
Period of Two Months Ended February 28, 2001

Notes to Condensed Consolidated Financial Statements (unaudited)


A. ACQUISITIONS

Noveon, Inc. (the "Company") commenced operations on March 1, 2001 through
the acquisition on February 28, 2001 of certain assets and common stock of
certain subsidiaries of the Performance Materials Segment of the BFGoodrich
Company (now known as Goodrich Corporation ("Goodrich")).

Pursuant to the Agreement for Sale and Purchase of Assets between Goodrich
and the Company (the "Agreement"), the purchase price was subject to a
post-closing working capital adjustment. On June 28, 2002, the Company
entered into an agreement with Goodrich settling the working capital
adjustment pursuant to which the Company paid Goodrich $14.5 million. The
settlement payment and the costs associated with the settlement efforts
have been reflected as an adjustment to the purchase price in the Company's
financial statements and increased the goodwill associated with the
acquisition.

The following unaudited pro forma data summarize the results of operations
for the nine months ended September 30, 2001 as if the Company had been
acquired as of the beginning of the period presented. The pro forma data
give effect to actual operating results prior to the acquisition.
Adjustments to interest expense, goodwill amortization and income taxes
related to the acquisition are reflected in the pro forma data. In
addition, the results of the textile dyes business, which were not part of
the acquisition, are excluded from the pro forma results. These pro forma
amounts (in millions) do not purport to be indicative of the results that
would have actually been attained if the acquisition had occurred as of the
beginning of the periods presented or that may be attained in the future.

Net sales $ 815.2
Operating income 45.1
Net loss (31.5)

In May 2002, the Company's Consumer Specialties segment purchased selected
assets of a Latin American personal care and pharmaceutical distributor. In
June 2002, the Company's Performance Coatings segment purchased selected
assets and technology of a coatings business. In August 2002, the Company's
Consumer Specialties segment purchased certain assets, technology and other
intellectual property relating to aroma chemicals from Firmenich S.A.





Noveon, Inc.

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)


B. BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three and nine months ended
September 30, 2002 are not necessarily indicative of the results that may
be expected for the year ending December 31, 2002.

The condensed consolidated statement of operations for the two months ended
February 28, 2001 reflects the results of the Predecessor Company prior to
the acquisition. The results for the Predecessor Company are not
necessarily comparable to those of the Company because of the exclusion of
certain businesses from the acquisition and changes in organizational
structure, recorded asset values, cost structure and capitalization of the
Company resulting from the acquisition.

Earnings per share data are not presented because the Company's common
stock is not publicly traded and the Company is a wholly owned subsidiary
of Noveon International, Inc. ("International"), previously known as Noveon
Holdings, Inc.

The balance sheet at December 31, 2001 has been derived from the audited
financial statements at that date but does not include all of the
information and footnotes required by accounting principles generally
accepted in the United States for complete financial statements.

C. NEW ACCOUNTING STANDARDS

In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 143, "Accounting
for Asset Retirement Obligations," that requires the fair value of the
liability for closure and removal costs associated with the resulting legal
obligations upon retirement or removal of any tangible long-lived assets be
recognized in the period in which it is incurred. The initial recognition
of the liability will be capitalized as part of the asset cost and
depreciated over its estimated useful life. The Company is required to
adopt this statement by January 1, 2003, the effect of which has not yet
been determined.





Noveon, Inc.

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)


C. NEW ACCOUNTING STANDARDS (CONTINUED)

In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," that supersedes SFAS No. 121,
"Accounting for the Impairment or Disposal of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of." The Statement retains the fundamental
provisions of SFAS No. 121 related to the recognition and measurement of
the impairment of long-lived assets to be "held and used," provides more
guidance on estimating cash flows when performing a recoverability test,
requires that a long-lived asset (group) to be disposed of other than by
sale (i.e., abandoned) be classified as "held and used" until it is
disposed of, and establishes more restrictive criteria to classify an asset
(group) as "held for sale." The Company adopted SFAS No. 144 effective
January 1, 2002. The effect of adoption had no impact to the Company's
consolidated financial condition or results of operations.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statement
No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical
Corrections." In most cases, SFAS No. 145 will require gains and losses on
extinguishments of debt to be classified as income or loss from continuing
operations rather than as extraordinary items as previously required under
SFAS No. 4. Extraordinary treatment will be required for certain
extinguishments as provided in APB Opinion No. 30. Upon adoption, any gain
or loss on extinguishment of debt previously classified as an extraordinary
item in prior periods presented that does not meet the criteria of Opinion
30 for such classification should be reclassified to conform with the
provisions of SFAS No. 145. SFAS No. 145 also amends SFAS No. 13 to require
certain modifications to capital leases be treated as a sale-leaseback and
modifies the accounting for sub-leases when the original lessee remains a
secondary obligor (or guarantor). The Company adopted the statement during
the second quarter of 2002, the effect of which had no impact on the
Company's consolidated financial position or results of operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 requires
recording costs associated with exit or disposal activities at their fair
values when a liability has been incurred. Under previous guidance, certain
exit costs were accrued upon management's commitment to an exit plan, which
is generally before an actual liability has been incurred. The provisions
of SFAS No. 146 are effective for exit or disposal activities that are
initiated after December 31, 2002. The Company is currently considering the
impact, if any, this statement will have on the financial statements.



Noveon, Inc.

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)


D. INVENTORIES

The components of inventory consist of the following:

DECEMBER 31, SEPTEMBER 30,
2001 2002
----------------------------------------
(IN MILLIONS)

Raw materials $ 30.2 $ 33.1
Work in process 2.5 3.6
Finished products 107.5 100.2
----------------------------------------
$ 140.2 $ 136.9
========================================

At December 31, 2001 and September 30, 2002, LIFO inventory approximated
replacement cost.

E. GOODWILL AND OTHER INTANGIBLE ASSETS

The FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets," in
July 2001. The Statement addresses financial accounting and reporting for
acquired goodwill and other intangible assets and supersedes Accounting
Principles Board ("APB") Opinion No. 17, "Intangible Assets." SFAS No. 142
applies to all goodwill and other intangible assets recognized in an
entity's statement of financial position at that date, regardless of when
those assets were initially recognized. Under the new rules, goodwill and
intangible assets deemed to have indefinite lives will no longer be
amortized but will be subject to annual impairment tests. Other intangible
assets will continue to be amortized over their useful lives. The Company
adopted SFAS No. 142 in the first quarter of 2002. During the second
quarter of 2002, the Company performed the first of the required impairment
tests of goodwill as of January 1, 2002 and has determined that no goodwill
impairment has occurred.



Noveon, Inc.

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)


E. GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED)

After giving effect to the elimination of goodwill amortization, as
required by the provisions of SFAS No. 142, net income (loss) for the two
months ended February 28, 2001, the three months ended September 30, 2001
and the seven months ended September 30, 2001 would have been as follows:



BFGOODRICH
PERFORMANCE
MATERIALS NOVEON, INC.
--------------------------------------------------------
TWO MONTHS THREE MONTHS SEVEN MONTHS
ENDED ENDED ENDED
FEBRUARY 28, SEPTEMBER 30, SEPTEMBER 30,
(IN MILLIONS) 2001 2001 2001
-------------------------------------------------------------------------------------------------------------

Reported net income (loss) $ 5.6 $ (6.0) $ (13.5)
Goodwill amortization 3.0 4.5 10.6
Tax effect on amortization - (0.2) (0.5)
----------------------------------------------------------
Pro forma net income (loss) $ 8.6 $ (1.7) $ (3.4)
==========================================================


The changes in the carrying amount of goodwill during the nine months ended
September 30, 2002 are as follows:

(IN MILLIONS)
------------------

Goodwill-net balance at January 1, 2002 $ 346.9
Finalization of purchase price allocation
for acquisitions in 2001 20.0
Effect of acquisitions in 2002 2.7
------------------
Goodwill-net balance at September 30, 2002 $ 369.6
==================

Intangible assets that continue to be subject to amortization are comprised
of the following at December 31, 2001:




WEIGHTED
GROSS NET AVERAGE
CARRYING ACCUMULATED CARRYING AMORTIZATION
(DOLLARS IN MILLIONS) AMOUNT AMORTIZATION AMOUNT PERIOD
------------------------------------------------------------------------------------------------------------


Technology $ 156.9 $ 8.7 $ 148.2 15.0 years
Trademarks 46.3 2.5 43.8 15.0 years
---------------------------------------------------------
Total $ 203.2 $ 11.2 $ 192.0 15.0 years
=========================================================





Noveon, Inc.

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)


E. GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED)

Intangible assets that continue to be subject to amortization are comprised
of the following at September 30, 2002:




WEIGHTED
GROSS NET AVERAGE
CARRYING ACCUMULATED CARRYING AMORTIZATION
(DOLLARS IN MILLIONS) AMOUNT AMORTIZATION AMOUNT PERIOD
------------------------------------------------------------------------------------------------------------

Technology $ 156.9 $ 16.6 $ 140.3 15.0 years
Trademarks 46.9 5.0 41.9 15.0 years
Non-compete agreements 0.8 - 0.8 4.3 years
---------------------------------------------------------
Total $ 204.6 $ 21.6 $ 183.0 15.0 years
=========================================================



Amortization expense for the intangible assets subject to amortization was
$3.5 million and $10.5 million, respectively, for the three months and nine
months ended September 30, 2002. Amortization expense for the intangible
assets subject to amortization was $1.0 million, $3.9 million and $8.8
million, respectively, for the two months ended February 28, 2001, the
three months ended September 30, 2001 and the seven months ended September
30, 2001. Amortization expense is estimated to be approximately $14.0
million annually for the next five fiscal years.

F. INCOME TAXES

The Company's operations will be included in the consolidated income tax
returns filed by International. The provision for income taxes is
calculated in accordance with SFAS No. 109, "Accounting for Income Taxes,"
which requires the recognition of deferred income taxes using the liability
method. For the seven months ended September 30, 2001, the Company recorded
a deferred tax benefit related to the losses incurred, as it anticipated
that such losses would be offset by income during the remainder of 2001.
However, subsequent to the third quarter of 2001, domestic losses continued
through the remainder of 2001. Under the provisions of SFAS No. 109, these
cumulative losses provide substantial negative evidence regarding the
realizability of deferred tax assets. As a result, a tax valuation
allowance was recorded in the fourth quarter of 2001 to offset the domestic
income tax benefits recorded in the first nine months of 2001.



Noveon, Inc.

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)


F. INCOME TAXES (CONTINUED)

During the three and nine months ended September 30, 2002, sufficient
income was generated to realize certain of the deferred tax assets. As a
result, income tax expense associated with income before income taxes for
the three and nine months ended September 30, 2002 has been significantly
offset by the reversal of certain valuation allowance amounts equal to the
reduction in cumulative domestic losses. As of September 30, 2002, the
Company still has cumulative net operating losses since its inception for
its domestic operations, and the Company intends to record tax valuation
allowances for the balance of deferred tax assets until sufficient positive
evidence (for example, cumulative positive domestic earnings and future
taxable income) exists to support the reversal of the tax valuation
allowances.

Management has determined, based on the Company's new capital structure and
lack of prior earnings history based on this new structure, that it is
uncertain that future taxable income of the Company will be sufficient
enough to recognize certain of these net deferred tax assets. As a result,
a valuation allowance of $28.0 million at September 30, 2002 has been
established. This valuation allowance relates to net domestic deferred tax
assets established in purchase accounting, acquired foreign net deferred
tax assets associated with net operating losses and credits and deferred
tax assets from domestic and foreign tax net operating losses and credits
arising subsequent to March 1, 2001. Any reversal of the valuation
allowance that was established in purchase accounting would reduce
goodwill.

In determining the adequacy of the $28.0 million valuation allowance,
management assessed the Company's profitability taking into account the
present and anticipated amounts of domestic and international earnings as
well as the anticipated taxable income as a result of the reversal of
future taxable temporary differences. Therefore, management believes that
sufficient book and taxable income will be generated to realize the benefit
of the remaining net deferred tax assets of $33.8 million.

G. SEGMENT INFORMATION

Consistent with our focus on industries and end-use applications, the
Company's operations are organized into three reportable business segments:
Consumer Specialties, Specialty Materials and Performance Coatings. In
2002, the Company changed the name of its Polymer Solutions segment to
Specialty Materials.



Noveon, Inc.

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)


G. SEGMENT INFORMATION (CONTINUED)

Segment operating income is total segment revenue reduced by operating
expenses identifiable within that business segment. Consolidation costs are
presented separately and corporate costs include general corporate
administrative expenses that are not specifically identifiable with just
one of the reportable business segments.

As a result of the Company's evaluation of SFAS No. 142, certain segment
allocations for amortization expense and intangible assets have been
reclassified between the reporting segments. The effects of this
reclassification on operating income, depreciation and amortization
expense, and total assets are reflected in the following tables summarizing
business segment information:



THREE MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
2001 % 2002 %
--------------------------------------------------------
(DOLLARS IN MILLIONS)

Sales
Consumer Specialties $ 72.9 27.8% $ 76.4 28.0%
Specialty Materials 97.1 37.0% 101.7 37.2%
Performance Coatings 92.4 35.2% 95.1 34.8%
--------------------------------------------------------
Total sales $ 262.4 100.0% $ 273.2 100.0%
========================================================

Gross profit
Consumer Specialties $ 18.2 25.0% $ 23.7 31.0%
Specialty Materials 30.5 31.4% 40.1 39.4%
Performance Coatings 22.1 23.9% 25.2 26.5%
----------------- -----------------
Total gross profit $ 70.8 27.0% $ 89.0 32.6%
================= =================
Operating income (loss)
Consumer Specialties $ 7.4 10.2% $ 13.3 17.4%
Specialty Materials 14.8 15.2% 24.6 24.2%
Performance Coatings 8.9 9.6% 13.3 14.0%
Corporate costs (15.4) (5.9)% (17.0) (6.2)%
Consolidation costs (0.7) (0.3)% (1.1) (0.4)%
----------------- -----------------
Total operating income $ 15.0 5.7% $ 33.1 12.1%
================= =================




Noveon, Inc.

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)


G. SEGMENT INFORMATION (CONTINUED)




BFGOODRICH
PERFORMANCE MATERIALS NOVEON, INC.
----------------------------------------------------------------------------------
TWO MONTHS SEVEN MONTHS NINE MONTHS
ENDED ENDED ENDED
FEBRUARY 28, SEPTEMBER 30, SEPTEMBER 30,
2001 % 2001 % 2002 %
----------------------------------------------------------------------------------
(DOLLARS IN MILLIONS)

Sales
Consumer Specialties $ 45.2 24.2% $ 172.4 27.4% $ 218.1 26.8%
Specialty Materials 73.1 39.1% 231.2 36.7% 305.6 37.6%
Performance Coatings 68.7 36.7% 225.7 35.9% 289.8 35.6%
----------------------------------------------------------------------------------
Total sales $ 187.0 100.0% $ 629.3 100.0% $ 813.5 100.0%
==================================================================================

Gross profit
Consumer Specialties $ 10.5 23.2% $ 43.5 25.2% $ 67.9 31.1%
Specialty Materials 25.6 35.0% 72.3 31.3% 116.4 38.1%
Performance Coatings 13.6 19.8% 53.5 23.7% 81.7 28.2%
---------------- ----------------- -----------------
Total gross profit $ 49.7 26.6% $ 169.3 26.9% $ 266.0 32.7%
================ ================= =================

Operating income (loss)
Consumer Specialties $ 2.1 4.6% 19.6 11.4% $ 38.0 17.4%
Specialty Materials 16.9 23.1% 35.8 15.5% 69.4 22.7%
Performance Coatings 3.2 4.7% 22.9 10.1% 46.7 16.1%
Corporate costs (11.7) (6.3)% (39.8) (6.3)% (50.3) (6.2)%
Consolidation costs - -% (1.4) (0.2)% (2.9) (0.4)%
---------------- ----------------- -----------------
Total operating income $ 10.5 5.6% $ 37.1 5.9% $ 100.9 12.4%
================ ================= =================

DECEMBER 31, SEPTEMBER 30,
2001 % 2002 %
-------------------------------------------------------
(DOLLARS IN MILLIONS)

Goodwill--net
Consumer Specialties $ 102.3 29.5% $ 111.8 30.2%
Specialty Materials 144.7 41.7% 151.4 41.0%
Performance Coatings 99.9 28.8% 106.4 28.8%
-------------------------------------------------------
Total goodwill--net $ 346.9 100.0% $ 369.6 100.0%
=======================================================

Assets
Consumer Specialties $ 516.4 31.1% $ 520.6 30.5%
Specialty Materials 657.7 39.6% 666.4 39.1%
Performance Coatings 487.7 29.3% 517.3 30.4%
-------------------------------------------------------
Total assets $1,661.8 100.0% $ 1,704.3 100.0%
=======================================================




Noveon, Inc.

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)


H. COMPREHENSIVE INCOME (LOSS)

Total comprehensive income (loss) consists of the following:




BFGOODRICH
PERFORMANCE
MATERIALS NOVEON, INC.
---------------------------------------------------------------------------------
TWO MONTHS THREE MONTHS SEVEN MONTHS THREE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED ENDED
FEBRUARY 28, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2001 2001 2001 2002 2002
---------------------------------------------------------------------------------
(IN MILLIONS)


Net income (loss) $ 5.6 $ (6.0) $ (13.5) $ 12.3 $ 36.6
Net change related to cash flow hedges - (8.6) (8.4) (5.2) (9.0)
Cumulative translation adjustment 2.6 3.5 (0.6) 1.1 11.5
---------------------------------------------------------------------------------
Total comprehensive income (loss) $ 8.2 $ (11.1) $ (22.5) $ 8.2 $ 39.1
=================================================================================


I. RESTRUCTURING AND CONSOLIDATION COSTS

To improve productivity in the electronics industry-related product lines,
during the second quarter of 2002 the Company announced the consolidation
of its static control manufacturing facilities into Malaysia and the
closing of the Twinsburg, Ohio leased facility, which occurred in the third
quarter of 2002. In conjunction with this consolidation, the Company
incurred personnel-related charges as well as closure costs related to this
leased facility. The restructuring accrual is summarized below:




BALANCE BALANCE
JANUARY 1, SEPTEMBER 30,
(IN MILLIONS) 2002 PROVISION ACTIVITY 2002
-------------------------------------------------------------------------------------------------------

Personnel-related costs $ - $ 0.1 $ (0.1) $ -
Facility closure costs - 1.1 (0.7) 0.4
-------------------------------------------------------------------------
$ - $ 1.2 $ (0.8) $ 0.4
=========================================================================




Noveon, Inc.

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)


I. RESTRUCTURING AND CONSOLIDATION COSTS (CONTINUED)

In order to increase efficiency and productivity, reduce costs and support
the Company's global growth strategy, the Company has reduced headcount at
facilities throughout its global operations, restructured its colorants
business in Cincinnati, Ohio, and discontinued its flush pigments and
colorformers product lines in June 2001. Through these restructuring
efforts, the Company will be eliminating approximately 480 positions.
Approximately 81% of the affected employees have left their positions as of
September 30, 2002. The restructuring accrual is summarized below:




BALANCE BALANCE
JANUARY 1, SEPTEMBER 30,
(IN MILLIONS) 2002 PROVISION ACTIVITY 2002
-------------------------------------------------------------------------------------------------------

Personnel-related costs $ 6.0 $ - $ (2.3) $ 3.7
Facility closure costs 0.7 - (0.2) 0.5
Relocation and restructuring
expense - 1.6 (1.6) -
-------------------------------------------------------------------------
$ 6.7 $ 1.6 $ (4.1) $ 4.2
=========================================================================

Consolidation accruals relating to pre-acquisition restructuring plans at
September 30, 2002 are summarized below:

BALANCE BALANCE
JANUARY 1, SEPTEMBER 30,
(IN MILLIONS) 2002 PROVISION ACTIVITY 2002
-------------------------------------------------------------------------------------------------------
Personnel-related costs $ 0.2 $ - $ (0.2) $ -
Relocation and restructuring
expense - 0.1 (0.1) -
-------------------------------------------------------------------------
$ 0.2 $ 0.1 $ (0.3) $ -
=========================================================================




Noveon, Inc.

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)


J. CONTINGENCIES

General--There are pending or threatened against the Company or its
subsidiaries various claims, lawsuits and administrative proceedings, all
arising from the ordinary course of business with respect to commercial,
product liability, and environmental matters, which seek remedies or
damages. The Company believes that any liability that may finally be
determined with respect to commercial and product liability claims should
not have a material adverse effect on the Company's consolidated financial
position, results of operations, or cash flows. From time to time, the
Company is also involved in legal proceedings as a plaintiff involving
contract, patent protection, environmental and other matters. Gain
contingencies, if any, are recognized when they are realized.

Environmental--The Company and its subsidiaries are generators of both
hazardous wastes and non-hazardous wastes, the treatment, storage,
transportation and disposal of which are subject to various laws and
governmental regulations. Although past operations were in substantial
compliance with the then-applicable regulations, the Company has been
designated as a potentially responsible party (PRP) by the U.S.
Environmental Protection Agency (EPA), or similar state agencies, in
connection with several sites.

The Company initiates corrective and/or preventive environmental projects
of its own to ensure safe and lawful activities at its current operations.
It also conducts a compliance and management systems audit program. The
Company believes that compliance with current laws and regulations will not
have a material adverse effect on its capital expenditures, earnings,
competitive position or cash flows.

The Company's environmental engineers and consultants review and monitor
environmental issues at past and existing operating sites, as well as
off-site disposal sites at which the Company has been identified as a PRP.
This process includes investigation and remedial selection and
implementation, as well as negotiations with other PRPs and governmental
agencies.



Noveon, Inc.

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)


J. CONTINGENCIES (CONTINUED)

At September 30, 2002, the Company had recorded total liabilities of $23.6
million to cover future environmental expenditures. Goodrich has
indemnified the Company for environmental liabilities which the Company
estimated to be $12.5 million. Accordingly, the current portion of the
environmental obligation of $2.9 million is recorded in accrued expenses
and $3.2 million is recorded in accounts receivable. Approximately $20.8
million is included in non-current liabilities and $9.3 million is included
in other non-current assets, reflecting the recovery due from Goodrich.
These amounts are recorded on an undiscounted basis.

The Company believes that its reserves are adequate based on currently
available information. Management believes that it is reasonably possible
that additional costs may be incurred beyond the amounts accrued as a
result of new information. However, the additional costs, if any, cannot be
estimated and management believes that they would not have a material
adverse effect on the Company's results of operations, financial position
or cash flows in a given period.

K. GUARANTOR AND NON-GUARANTOR SUBSIDIARY INFORMATION

The Company as presented herein represents Noveon, Inc. (or the Predecessor
Company for periods prior to March 1, 2001) exclusive of its guarantor
subsidiaries and its non-guarantor subsidiaries.

The Company's domestic subsidiaries, all of which are directly or
indirectly wholly owned, are the only guarantors of the 11% Senior
Subordinated Notes. The guarantees are full, unconditional and joint and
several. Separate financial statements of these guarantor subsidiaries are
not presented as management has determined that they would not be material
to investors.



Noveon, Inc.

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)


K. GUARANTOR AND NON-GUARANTOR SUBSIDIARY INFORMATION (CONTINUED)

The Company's foreign subsidiaries are not guarantors of the 11% Senior
Subordinated Notes. Condensed consolidating financial information for the
Company, the guarantor subsidiaries, and the non-guarantor, foreign
subsidiaries is as follows:




THREE MONTHS ENDED SEPTEMBER 30, 2002
-----------------------------------------------------------------------------------
COMBINED COMBINED
THE GUARANTOR NON-GUARANTOR
INCOME STATEMENT DATA COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
- ------------------------------------------------------------------------------------------------------------------------
(IN MILLIONS)


Sales $ 166.3 $ 45.8 $ 84.5 $ (23.4) $ 273.2
Cost of sales 104.2 38.8 64.6 (23.4) 184.2
-----------------------------------------------------------------------------------
Gross profit 62.1 7.0 19.9 - 89.0
Selling and administrative expenses 33.6 3.0 14.7 - 51.3
Amortization expense 0.1 2.1 1.3 - 3.5
Consolidation costs 1.1 - - - 1.1
-----------------------------------------------------------------------------------
Operating income 27.3 1.9 3.9 - 33.1
Interest income (expense)--net (19.1) 0.4 (0.2) - (18.9)
Other income (expense)--net (0.1) 0.1 (0.1) - (0.1)
-----------------------------------------------------------------------------------
Income before income taxes 8.1 2.4 3.6 - 14.1
Income tax expense - - (1.8) - (1.8)
-----------------------------------------------------------------------------------
Net income $ 8.1 $ 2.4 $ 1.8 $ - $ 12.3
===================================================================================

NINE MONTHS ENDED SEPTEMBER 30, 2002
-----------------------------------------------------------------------------------
COMBINED COMBINED
THE GUARANTOR NON-GUARANTOR
INCOME STATEMENT DATA COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
- ------------------------------------------------------------------------------------------------------------------------
(IN MILLIONS)

Sales $ 507.2 $ 131.9 $ 252.3 $ (77.9) $ 813.5
Cost of sales 324.6 111.9 188.9 (77.9) 547.5
-----------------------------------------------------------------------------------
Gross profit 182.6 20.0 63.4 - 266.0
Selling and administrative expenses 103.2 8.3 40.2 - 151.7
Amortization expense 0.2 6.8 3.5 - 10.5
Consolidation costs 2.8 - 0.1 - 2.9
-----------------------------------------------------------------------------------
Operating income 76.4 4.9 19.6 - 100.9
Interest income (expense)--net (57.7) 1.1 (0.8) - (57.4)
Other income (expense)--net (0.1) 0.2 (0.3) - (0.2)
-----------------------------------------------------------------------------------
Income before income taxes 18.6 6.2 18.5 - 43.3
Income tax expense (0.1) (0.1) (6.5) - (6.7)
-----------------------------------------------------------------------------------
Net income $ 18.5 $ 6.1 $ 12.0 $ - $ 36.6
===================================================================================





Noveon, Inc.

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)


K. GUARANTOR AND NON-GUARANTOR SUBSIDIARY INFORMATION (CONTINUED)




SEPTEMBER 30, 2002
-----------------------------------------------------------------------------------
COMBINED COMBINED
THE GUARANTOR NON-GUARANTOR
BALANCE SHEET DATA COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
- ------------------------------------------------------------------------------------------------------------------------
(IN MILLIONS)
CURRENT ASSETS

Cash and cash equivalents $ 95.1 $ 0.3 $ 56.5 $ - $ 151.9
Accounts and notes receivable 63.2 23.5 67.2 - 153.9
Inventories 67.1 27.5 42.3 - 136.9
Prepaid expenses and other current
assets 3.8 1.0 2.1 - 6.9
-----------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 229.2 52.3 168.1 449.6

Property, plant and equipment-net 400.6 94.6 161.2 - 656.4
Goodwill, net 252.3 - 117.3 - 369.6
Identifiable intangible assets-net 2.6 121.6 58.8 - 183.0
Intercompany receivables 341.5 4.7 13.9 (360.1) -
Investment in subsidiaries 440.3 48.9 - (489.2) -
Other assets 35.3 10.0 0.4 - 45.7
-----------------------------------------------------------------------------------
TOTAL ASSETS $ 1,701.8 $ 332.1 $ 519.7 $ (849.3) $ 1,704.3
===================================================================================
CURRENT LIABILITIES
Short-term bank debt $ - $ - $ 0.1 $ - $ 0.1
Accounts payable 62.7 7.0 36.1 - 105.8
Accrued expenses 50.0 8.4 9.5 - 67.9
Income taxes payable - - 4.0 - 4.0
Current maturities of debt 24.0 - - - 24.0
-----------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 136.7 15.4 49.7 - 201.8

Long-term debt 863.8 - - - 863.8
Postretirement benefits
other than pensions 4.4 1.3 - - 5.7
Accrued pensions 22.0 6.2 4.2 - 32.4
Deferred income taxes - - 26.8 26.8
Accrued environmental 1.3 19.5 - - 20.8
Intercompany payables 135.7 148.7 75.7 (360.1) -
Other non-current liabilities 15.7 - 2.0 - 17.7
-----------------------------------------------------------------------------------
TOTAL LIABILITIES 1,179.6 191.1 158.4 (360.1) 1,169.0

STOCKHOLDER'S EQUITY
Capital stock of subsidiaries - 136.8 352.4 (489.2) -
Paid in capital 527.0 - - - 527.0
Retained earnings (deficit) (4.8) 4.2 16.6 - 16.0
Accumulated other comprehensive
loss - - (7.7) - (7.7)
-----------------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY 522.2 141.0 361.3 (489.2) 535.3
-----------------------------------------------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 1,701.8 $ 332.1 $ 519.7 $ (849.3) $ 1,704.3
===================================================================================





Noveon, Inc.

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)


K. GUARANTOR AND NON-GUARANTOR SUBSIDIARY INFORMATION (CONTINUED)




NINE MONTHS ENDED SEPTEMBER 30, 2002
------------------------------------------------------------------------------------
COMBINED COMBINED
THE GUARANTOR NON-GUARANTOR
CASH FLOW DATA COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
- -------------------------------------------------------------------------------------------------------------------------
(IN MILLIONS)

Net cash provided by operating
activities $ 57.0 $ 4.5 $ 35.3 $ - $ 96.8
Investing activities:
Purchases of property, plant
and equipment (17.0) (4.5) (6.2) - (27.7)
Payments made in connection
with acquisitions, net of
cash acquired (20.6) - - - (20.6)
------------------------------------------------------------------------------------
Net cash (used) by investing
activities (37.6) (4.5) (6.2) (48.3)
Financing activities:
Decrease in short-term debt - - (0.4) - (0.4)
Payments on long-term borrowings (18.9) - - - (18.9)
------------------------------------------------------------------------------------
Net cash (used) by financing
activities (18.9) - (0.4) - (19.3)
Effect of exchange rate changes on
cash and cash equivalents - - 2.7 - 2.7
------------------------------------------------------------------------------------
Net increase in
cash and cash equivalents 0.5 - 31.4 - 31.9
Cash and cash equivalents
at beginning of period 94.6 0.3 25.1 - 120.0
------------------------------------------------------------------------------------
Cash and cash equivalents
at end of period $ 95.1 $ 0.3 $ 56.5 $ - $ 151.9
====================================================================================





Noveon, Inc.

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)


K. GUARANTOR AND NON-GUARANTOR SUBSIDIARY INFORMATION (CONTINUED)




THREE MONTHS ENDED SEPTEMBER 30, 2001
-----------------------------------------------------------------------------------
COMBINED COMBINED
THE GUARANTOR NON-GUARANTOR
INCOME STATEMENT DATA COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
- ------------------------------------------------------------------------------------------------------------------------
(IN MILLIONS)

Sales $ 161.5 $ 45.5 $ 78.0 $ (22.6) $ 262.4
Cost of sales 114.7 41.3 58.2 (22.6) 191.6
-----------------------------------------------------------------------------------
Gross profit 46.8 4.2 19.8 - 70.8
Selling and administrative
expenses 33.1 2.4 11.2 - 46.7
Amortization expense 8.4 - - - 8.4
Consolidation costs 0.7 - - - 0.7
-----------------------------------------------------------------------------------
Operating income 4.6 1.8 8.6 - 15.0
Interest income (expense)--net (21.4) 0.5 (0.8) - (21.7)
Other income (expense)--net (0.1) 0.1 (0.2) - (0.2)
-----------------------------------------------------------------------------------
Income (loss) before income
taxes (16.9) 2.4 7.6 - (6.9)
Income tax benefit (expense) 2.4 (0.2) (1.3) - 0.9
-----------------------------------------------------------------------------------
Net income (loss) $ (14.5) $ 2.2 $ 6.3 $ - $ (6.0)
===================================================================================


TWO MONTHS ENDED FEBRUARY 28, 2001
-----------------------------------------------------------------------------------
COMBINED COMBINED
THE GUARANTOR NON-GUARANTOR
INCOME STATEMENT DATA COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
- ------------------------------------------------------------------------------------------------------------------------
(IN MILLIONS)
Sales $ 120.2 $ 26.9 $ 56.7 $ (16.8) $ 187.0
Cost of sales 85.6 26.0 42.5 (16.8) 137.3
-----------------------------------------------------------------------------------
Gross profit 34.6 0.9 14.2 - 49.7
Selling and administrative
expenses 25.0 1.7 8.5 - 35.2
Amortization expense 1.2 2.4 0.4 - 4.0
-----------------------------------------------------------------------------------
Operating income (loss) 8.4 (3.2) 5.3 - 10.5
Interest income (expense)--net 0.3 0.7 (0.4) - 0.6
Other income (expense)--net (1.0) - (0.5) - (1.5)
-----------------------------------------------------------------------------------
Income (loss) before income
taxes 7.7 (2.5) 4.4 - 9.6
Income tax benefit (expense) (3.0) 0.6 (1.6) - (4.0)
-----------------------------------------------------------------------------------
Net income (loss) $ 4.7 $ (1.9) $ 2.8 $ - $ 5.6
===================================================================================




Noveon, Inc.

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)


K. GUARANTOR AND NON-GUARANTOR SUBSIDIARY INFORMATION (CONTINUED)




SEVEN MONTHS ENDED SEPTEMBER 30, 2001
-----------------------------------------------------------------------------------
COMBINED COMBINED
THE GUARANTOR NON-GUARANTOR
INCOME STATEMENT DATA COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
- ------------------------------------------------------------------------------------------------------------------------
(IN MILLIONS)

Sales $ 387.6 $ 108.8 $ 188.1 $ (55.2) $ 629.3
Cost of sales 277.0 100.5 137.7 (55.2) 460.0
-----------------------------------------------------------------------------------
Gross profit 110.6 8.3 50.4 - 169.3
Selling and administrative
expenses 78.1 7.0 26.3 - 111.4
Amortization expense 19.4 - - - 19.4
Consolidation costs 1.4 - - - 1.4
-----------------------------------------------------------------------------------
Operating income 11.7 1.3 24.1 - 37.1
Interest income (expense)--net (53.8) 1.2 (2.0) - (54.6)
Other income (expense)--net (1.3) 0.1 (0.7) - (1.9)
-----------------------------------------------------------------------------------
Income (loss) before income
taxes (43.4) 2.6 21.4 - (19.4)
Income tax benefit (expense) 11.2 (0.3) (5.0) - 5.9
-----------------------------------------------------------------------------------
Net income (loss) $ (32.2) $ 2.3 $ 16.4 $ - $ (13.5)
===================================================================================




Noveon, Inc.

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)




K. GUARANTOR AND NON-GUARANTOR SUBSIDIARY INFORMATION (CONTINUED)

DECEMBER 31, 2001
-----------------------------------------------------------------------------
COMBINED COMBINED
THE GUARANTOR NON-GUARANTOR
BALANCE SHEET DATA COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
--------------------------------------------------------------------------------------------------------------
(IN MILLIONS)

CURRENT ASSETS
Cash and cash equivalents $ 94.6 $ 0.3 $ 25.1 $ - $ 120.0
Accounts and notes receivable 62.8 20.1 50.9 - 133.8
Inventories 74.5 30.7 35.0 - 140.2
Prepaid expenses and other
current assets 1.5 0.8 2.2 - 4.5
-----------------------------------------------------------------------------
TOTAL CURRENT ASSETS 233.4 51.9 113.2 - 398.5

Property, plant and equipment,
net 416.0 95.6 160.9 - 672.5
Goodwill--net 241.8 - 105.1 - 346.9
Identifiable intangible
assets--net 1.5 128.4 62.1 - 192.0
Intercompany receivables 443.7 - 63.5 (507.2) -
Investment in subsidiaries 252.6 328.9 - (581.5) -
Other assets 39.5 10.0 2.4 - 51.9
-----------------------------------------------------------------------------
TOTAL ASSETS $ 1,628.5 $ 614.8 $ 507.2 $(1,088.7) $ 1,661.8
=============================================================================

CURRENT LIABILITIES
Short-term bank debt $ - $ - $ 1.3 $ - $ 1.3
Accounts payable 59.3 10.4 27.4 - 97.1
Accrued expenses 60.2 7.9 6.1 - 74.2
Income taxes payable - - 1.0 - 1.0
Current maturities of debt 23.2 - - - 23.2
-----------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 142.7 18.3 35.8 - 196.8

Long-term debt 876.2 - - - 876.2
Postretirement benefits other
than pensions 4.6 0.7 - - 5.3
Accrued pensions 22.1 7.4 3.3 - 32.8
Deferred income taxes - - 24.6 - 24.6
Accrued environmental 1.3 19.4 - - 20.7
Intercompany payables 70.5 339.7 97.0 (507.2) -
Other non-current liabilities 7.4 - 1.8 - 9.2
-----------------------------------------------------------------------------
TOTAL LIABILITIES 1,124.8 385.5 162.5 (507.2) 1,165.6
STOCKHOLDER'S EQUITY
Capital stock of subsidiaries - 231.2 350.3 (581.5) -
Paid in capital 527.0 - - - 527.0
Retained earnings (deficit) (23.3) (1.9) 4.6 - (20.6)
Accumulated other comprehensive
loss - - (10.2) - (10.2)
-----------------------------------------------------------------------------
TOTAL STOCKHOLDER'S EQUITY 503.7 229.3 344.7 (581.5) 496.2
-----------------------------------------------------------------------------
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 1,628.5 $ 614.8 $ 507.2 $(1,088.7) $ 1,661.8
=============================================================================





Noveon, Inc.

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)


K. GUARANTOR AND NON-GUARANTOR SUBSIDIARY INFORMATION (CONTINUED)




TWO MONTHS ENDED FEBRUARY 28, 2001
-----------------------------------------------------------------------------------
COMBINED COMBINED
THE GUARANTOR NON-GUARANTOR
CASH FLOW DATA COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
- ------------------------------------------------------------------------------------------------------------------------
(IN MILLIONS)

Net cash (used) by operating
activities $ (10.7) $ (10.6) $ (10.3) $ - $ (31.6)
Investing activities:
Purchases of property, plant
and equipment (5.2) (0.7) (1.7) - (7.6)
-----------------------------------------------------------------------------------
Net cash (used) by investing
activities (5.2) (0.7) (1.7) - (7.6)

Financing activities:
Decrease in short-term debt - - (3.7) - (3.7)
Proceeds from sale of
receivables, net - - 0.5 - 0.5
Transfers from Goodrich 15.9 11.2 13.6 - 40.7
-----------------------------------------------------------------------------------
Net cash provided by financing
activities 15.9 11.2 10.4 - 37.5
-----------------------------------------------------------------------------------
Net decrease in cash
and cash equivalents - (0.1) (1.6) - (1.7)
Cash and cash equivalents
at beginning of period 0.1 0.2 15.4 - 15.7
-----------------------------------------------------------------------------------
Cash and cash equivalents
at end of period $ 0.1 $ 0.1 $ 13.8 $ - $ 14.0
===================================================================================





Noveon, Inc.

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)


K. GUARANTOR AND NON-GUARANTOR SUBSIDIARY INFORMATION (CONTINUED)




SEVEN MONTHS ENDED SEPTEMBER 30, 2001
------------------------------------------------------------------------------------
COMBINED COMBINED
THE GUARANTOR NON-GUARANTOR
CASH FLOW DATA COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTAL
- -------------------------------------------------------------------------------------------------------------------------
(IN MILLIONS)

Net cash provided by operating
activities $ 61.5 $ 2.4 $ 28.1 $ - $ 92.0
Investing activities:
Purchases of property, plant
and equipment (9.3) (2.3) (4.4) - (16.0)
Payments made in connection with
acquisitions, net of cash
acquired (1,187.3) - - - (1,187.3)
------------------------------------------------------------------------------------
Net cash (used) by investing
activities (1,196.6) (2.3) (4.4) - (1,203.3)
Financing activities:
Decrease in short-term debt - - (25.9) - (25.9)
Payments on long-term borrowings (5.2) - - - (5.2)
Proceeds from issuance of
long-term debt 910.0 - - - 910.0
Debt issuance costs (44.3) - - - (44.3)
Equity contribution from
stockholder 355.0 - - - 355.0
Intercompany transfers (24.8) - 24.8 - -
------------------------------------------------------------------------------------
Net cash provided (used) by
financing activities 1,190.7 - (1.1) - 1,189.6
Effect of exchange rate changes on
cash and cash equivalents - - 0.2 - 0.2
------------------------------------------------------------------------------------
Net increase in cash and
cash equivalents 55.6 0.1 22.8 - 78.5
Cash and cash equivalents
at beginning of period - - - - -
------------------------------------------------------------------------------------
Cash and cash equivalents
at end of period $ 55.6 $ 0.1 $ 22.8 $ - $ 78.5
====================================================================================





Noveon, Inc.

and

BFGoodrich Performance Materials
(The Predecessor Company and a Segment of The BFGoodrich Company)

Notes to Condensed Consolidated Financial Statements (unaudited)
(continued)


L. SUBSEQUENT EVENT

On October 31, 2002, the Company prepaid $45.0 million in principal amount
of its outstanding term loans and received consent from the senior lenders
to make a restricted payment of $45.0 million to International in the form
of a dividend for the purpose of repaying a portion of the seller note to
Goodrich.





ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Certain statements in this section and elsewhere in this report include
forward-looking statements, including those that relate to our future
plans, objectives, expectations and intentions. Statements that are
predictive in nature, that depend upon or refer to future events or
conditions or that include the words "expects," "anticipates," "intends,"
"plans," "believes," "estimates," "seeks," "thinks" and variations of these
words and similar expressions are forward-looking statements. These
statements involve known and unknown risks, uncertainties and other factors
that may cause our actual results and performance to be materially
different from any future results or performance expressed or implied by
these forward-looking statements. Although we believe that these statements
are based upon reasonable assumptions, we cannot assure you that our goals
will be achieved. These forward-looking statements are made as of the date
of these financial statements, and, except as required under the federal
securities laws and the rules and regulations of the Commission, we assume
no obligation to update or revise them or provide reasons why actual
results may differ.

Important factors that may affect our expectations, estimates or
projections include:

o the effects of the substantial debt we have incurred in
connection with our acquisition of the Performance Materials
Segment from Goodrich and our ability to refinance or repay that
debt;

o changes in customer requirements in markets or industries we
serve;

o general economic and market conditions;

o competition within our industry;

o our access to capital markets and any restrictions placed on us
by any current or future financing arrangements;

o environmental and government regulations;

o the effect of risks of investing in and conducting operations in
foreign countries, including political, social, economic,
currency and regulatory factors;

o changes in the price and supply of major raw materials; and

o the effect of fluctuations in currency exchange rates on our
international operations.





OVERVIEW

We are a leading global producer and marketer of technologically advanced
specialty materials and chemicals used in a broad range of consumer and
industrial applications. We have a number of high growth, industry-leading
franchises marketed under some of the industry's most recognized brand
names including Carbopol(R), TempRite(R), Estane(R) and Hycar(R). These
global brands are complemented by a diverse portfolio of historically
stable, cash generating businesses. We have a significant presence in many
niche product categories, where customers value our long-standing ability
to provide need-specific formulations and solutions. Our products and
services enhance the value of customers' end-products by improving
performance, providing essential product attributes, lowering cost,
simplifying processing or making them more environmentally friendly.
Through our worldwide network of 26 strategically located manufacturing
facilities, we service more than 7,000 customers operating in over 25
industries. In 2001, we derived approximately 65% of our sales from the
United States, 18% of our sales from Europe and 17% of our sales from the
rest of the world.

Consistent with our focus on industries and end-use applications, we have
organized our business into three segments: Consumer Specialties, Specialty
Materials and Performance Coatings.

RESTRUCTURING MATTERS

To improve the productivity of our electronics industry-related product
lines, during the second quarter of 2002 we announced the consolidation of
our static control manufacturing facilities into Malaysia and the closing
of the Twinsburg, Ohio leased facility, which occurred in the third quarter
of 2002. In conjunction with this consolidation, we incurred
personnel-related charges as well as closure costs related to this leased
facility, totaling $1.2 million, in the second quarter of 2002. As of
September 30, 2002, approximately $0.4 million remains accrued for
restructuring costs.

In 2001, we implemented a plan to restructure and streamline our operations
to increase efficiency and productivity, reduce costs and support our
global growth strategy. As part of this plan, we reduced headcount
throughout our global operations, restructured our colorants business in
Cincinnati, Ohio and discontinued our flush pigments and colorformers
product lines. Through these restructuring efforts, we will be eliminating
approximately 480 positions. Approximately 81% of the affected employees
have left their positions as of September 30, 2002. As of September 30,
2002, approximately $4.2 million remains accrued for restructuring costs
with substantially all of the remaining costs anticipated to be paid in
2002 and 2003. As a result of these restructuring efforts, we estimate
annualized savings of approximately $17.0 million attributable to reduced
employee expenses. These savings were partially recognized beginning in the
third quarter of 2001.





RESULTS OF OPERATIONS ON A PRO FORMA BASIS

The following table presents major components of the historical and pro
forma statements of operations. The major components of the pro forma
consolidated statements of operations reflect the effect of the acquisition
of the Performance Materials Segment of Goodrich on February 28, 2001 as if
the acquisition occurred on January 1, 2001.

The components of the pro forma consolidated statements of operations for
the nine months ended September 30, 2001 are derived from the audited
consolidated financial statements of the Performance Materials Segment of
Goodrich for the two months ended February 28, 2001 and the unaudited
consolidated financial statements of Noveon, Inc. for the seven months
ended September 30, 2001.




THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------- -----------------------------------------
PRO
ACTUAL ACTUAL FORMA ACTUAL
INCOME STATEMENT 2001 % 2002 % 2001 % 2002 %
--------------------- ------------------- -------------------- --------------------

Sales $ 262.4 100.0% $ 273.2 100.0% $ 815.2 100.0% $ 813.5 100.0%
Cost of sales 191.6 73.0% 184.2 67.4% 597.4 73.3% 547.5 67.3%
-------------------- ------------------- -------------------- --------------------
Gross profit 70.8 27.0% 89.0 32.6% 217.8 26.7% 266.0 32.7%
Selling and
administrative
expenses 46.7 17.8% 51.3 18.8% 146.6 18.0% 151.7 18.6%
Amortization expense 8.4 3.2% 3.5 1.3% 24.7 3.0% 10.5 1.3%
Consolidation costs 0.7 0.3% 1.1 0.4% 1.4 0.2% 2.9 0.4%
-------------------- ------------------- -------------------- --------------------
Operating income 15.0 5.7% 33.1 12.1% 45.1 5.5% 100.9 12.4%
Interest income
(expense)--net (21.7) (8.2)% (18.9) (6.9)% (69.9) (8.6)% (57.4) (7.1)%
Other income
(expense)--net (0.2) (0.1)% (0.1) - % (3.4) (0.4)% (0.2) - %
-------------------- ------------------- -------------------- --------------------
Income (loss) before
income taxes (6.9) (2.6)% 14.1 5.2% (28.2) (3.5)% 43.3 5.3%
Income tax benefit
(expense) 0.9 0.3% (1.8) (0.7)% (3.8) (0.5)% (6.7) (0.8)%
-------------------- ------------------- -------------------- --------------------
Net income (loss) $ (6.0) (2.3)% $ 12.3 4.5% $ (32.0) (4.0)% $ 36.6 4.5%
==================== =================== ==================== ====================

THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------- ------------------------------------------
PRO
ACTUAL ACTUAL FORMA ACTUAL
2001 % 2002 % 2001 % 2002 %
-------------------- ------------------- -------------------- ---------------------
SALES
Consumer Specialties $ 72.9 27.8% $ 76.4 28.0% $ 217.5 26.7% $ 218.1 26.8%
Specialty Materials 97.1 37.0% 101.7 37.2% 304.3 37.3% 305.6 37.6%
Performance Coatings 92.4 35.2% 95.1 34.8% 293.4 36.0% 289.8 35.6%
-------------------- ------------------- -------------------- ---------------------
Total Sales $262.4 100.0% $ 273.2 100.0% $ 815.2 100.0% $ 813.5 100.0%
==================== =================== ==================== =====================

GROSS PROFIT
Consumer Specialties $ 18.2 25.0% $ 23.7 31.0% $ 53.9 24.8% $ 67.9 31.1%
Specialty Materials 30.5 31.4% 40.1 39.4% 97.2 31.9% 116.4 38.1%
Performance Coatings 22.1 23.9% 25.2 26.5% 66.7 22.7% 81.7 28.2%
----------- ---------- ----------- -----------
Total Gross Profit $ 70.8 27.0% $ 89.0 32.6% $ 217.8 26.7% $ 266.0 32.7%
=========== ========== =========== ===========

OPERATING INCOME
Consumer Specialties $ 7.4 10.2% $ 13.3 17.4% $ 21.8 10.0% $ 38.0 17.4%
Specialty Materials 14.8 15.2% 24.6 24.2% 50.4 16.6% 69.4 22.7%
Performance Coatings 8.9 9.6% 13.3 14.0% 26.1 8.9% 46.7 16.1%
Corporate Costs (15.4) (5.9)% (17.0) (6.2)% (51.8) (6.4)% (50.3) (6.2)%
----------- ---------- ----------- -----------
15.7 6.0% 34.2 12.5% 46.5 5.7% 103.8 12.8%
Consolidation Costs (0.7) (0.3)% (1.1) (0.4)% (1.4) (0.2)% (2.9) (0.4)%
----------- ---------- ----------- -----------
Total Operating Income $ 15.0 5.7% $ 33.1 12.1% $ 45.1 5.5% $ 100.9 12.4%
=========== ========== =========== ===========






THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 2001

TOTAL COMPANY ANALYSIS

Sales--Sales increased $10.8 million, or 4.1%, from $262.4 million for the
three months ended September 30, 2001 to $273.2 million for the three
months ended September 30, 2002. The increase was primarily the result of
higher sales of $3.7 million in our personal care product lines,
principally due to an improved sales mix shift and the impact of higher
volume; higher sales of $2.7 million within the Performance Coatings
product lines and $2.7 million within the Estane(R) thermoplastic
polyurethane ("TPU") product lines, principally related to higher volumes;
and to a stronger Euro. The increase was offset primarily by lower sales
within our food colorants business of $2.1 million, principally the result
of the product lines discontinued in 2001.

Cost of Sales--Cost of sales as a percentage of sales decreased from 73.0%
for the three months ended September 30, 2001 to 67.4% for the three months
ended September 30, 2002. The decrease in cost of sales as a percentage of
sales was primarily attributable to a net decrease in raw material and
utility costs across all segments and, to a lesser extent, lower
manufacturing spending.

Gross Profit--Gross profit increased $18.2 million, or 25.7%, from $70.8
million for the three months ended September 30, 2001 to $89.0 million for
the three months ended September 30, 2002. As a percentage of sales, gross
profit increased from 27.0% for the three months ended September 30, 2001
to 32.6% for the three months ended September 30, 2002. The increase in
gross profit was primarily associated with decreases in raw material and
utility costs, volume increases and lower manufacturing spending.

Selling and Administrative Expenses--Selling and administrative expenses
increased $4.6 million, or 9.9%, from $46.7 million for the three months
ended September 30, 2001 to $51.3 million for the three months ended
September 30, 2002. The increase in selling and administrative expenses was
primarily related to the addition of sales and marketing resources and the
additional costs associated with our variable incentive plans, driven by
improved financial performance during 2002 and expansion of the variable
incentive plans to include substantially all employees beginning in 2002.
Selling and administrative expenses as a percentage of sales were 17.8% for
the three months ended September 30, 2001 and 18.8% for the three months
ended September 30, 2002.

Amortization Expense--Amortization expense decreased $4.9 million, or
58.3%, from $8.4 million for the three months ended September 30, 2001 to
$3.5 million for the three months ended September 30, 2002. The decrease
was primarily due to the elimination of $4.5 million of goodwill
amortization, as required by the provisions of Statement of Financial
Accounting Standards, or SFAS, No. 142 beginning in 2002.

Consolidation Costs--Consolidation costs increased $0.4 million from $0.7
million for the three months ended September 30, 2001 to $1.1 million for
the three months ended September 30, 2002.





Operating Income--Operating income increased by $18.1 million, or 120.7%,
from $15.0 million for the three months ended September 30, 2001 to $33.1
million for the three months ended September 30, 2002. The increase in
operating income was primarily attributable to decreases in raw material
and utility costs, higher volumes, lower manufacturing spending, and
reduced amortization expense for goodwill. The increase was partially
offset by an increase in selling and administrative expenses.

Interest (Expense)-Net--Interest expense was $21.7 million for the three
months ended September 30, 2001 and $18.9 million for the three months
ended September 30, 2002. The decrease in interest expense was attributable
to lower interest rates in 2002, debt repayment and interest income from
our cash balances.

Other Income (Expense)-Net--Other expense was $0.2 million for the three
months ended September 30, 2001 and was $0.1 million for the three months
ended September 30, 2002.

Income Tax Benefit (Expense)--Income tax benefit was $0.9 million for the
three months ended September 30, 2001 compared to income tax expense of
$1.8 million for the three months ended September 30, 2002. The income tax
benefit for the three months ended September 30, 2001 was a result of
income tax benefit associated with our domestic operations offset by income
tax expense associated with our international operations. The income tax
expense for the three months ended September 30, 2002 was associated with
our international operations. The effective tax rate for the three months
ended September 30, 2001 and 2002 was 13.0% and 12.8%, respectively.

During the third quarter of 2001, we believed a valuation allowance against
the deferred tax assets relating to domestic losses incurred was not
necessary, as we anticipated such losses would be offset by income during
the remainder of 2001. Accordingly, an income tax benefit associated with
our domestic net operating losses was realized. However, domestic losses
continued through the remainder of 2001. These cumulative losses and a lack
of prior earnings history in our new capital structure provided substantial
evidence regarding our inability to realize certain deferred tax assets. As
a result, under the provisions of SFAS No. 109, "Accounting for Income
Taxes," a tax valuation allowance was recorded in the fourth quarter of
2001 to offset the domestic income tax benefits recorded during the seven
months ended September 30, 2001.

During the third quarter of 2002, sufficient income was generated to
realize certain of the deferred tax assets associated with domestic net
operating losses. Therefore, under the provisions of SFAS No. 109, domestic
income tax expense for the three months ended September 30, 2002 has been
offset by the reversal of a portion of the related valuation allowance
amounts.

As of September 30, 2002, we still have cumulative losses for our domestic
operations and we therefore intend to record valuation allowances for the
balance of deferred tax assets until sufficient positive evidence (for
example, cumulative positive domestic earnings and taxable income) exists
to support the reversal of the tax valuation allowances.




Net Income (Loss)--As a result of the factors discussed above, net income
increased by $18.3 million from a net loss of $6.0 million for the three
months ended September 30, 2001 to net income of $12.3 million for the
three months ended September 30, 2002.

Adjusted EBITDA is an important performance measure used by us and our
stakeholders. Adjusted EBITDA is defined as income from continuing
operations before interest, taxes, depreciation and amortization, non-cash
cost of sales impact of inventory write-up from purchase accounting, other
income and expense, management fees and consolidation costs. We believe
that adjusted EBITDA provides additional information for determining our
ability to meet future obligations and debt service requirements. However,
adjusted EBITDA is not indicative of operating income or cash flow from
operations as determined under generally accepted accounting principles.
Adjusted EBITDA for the three months ended September 30, 2001 and 2002 is
calculated as follows (dollars in millions):

2001 2002
-----------------------------

Operating income $ 15.0 $ 33.1
Depreciation and amortization 26.9 21.3
Investor management fees 1.0 0.7
Consolidation costs 0.7 1.1
Non-cash cost of sales impact of inventory
write-up from purchase accounting 0.7 -
-----------------------------
Adjusted EBITDA $ 44.3 $ 56.2
=============================

SEGMENT ANALYSIS

Consumer Specialties--Sales increased $3.5 million, or 4.8%, from $72.9
million for the three months ended September 30, 2001 to $76.4 million for
the three months ended September 30, 2002. The increase is primarily
attributable to the impact of higher sales of $3.7 million in our personal
care product lines, principally due to higher Carbopol(R) acrylic thickener
sales, and higher sales of $1.0 million within our pharmaceutical product
lines due primarily to an improved sales mix shift and a stronger Euro. The
increase was partially offset by lower sales in our food colorants business
of $2.1 million, resulting from discontinued product lines.

Gross profit increased $5.5 million, or 30.2%, from $18.2 million for the
three months ended September 30, 2001 to $23.7 million for the three months
ended September 30, 2002. As a percentage of sales, gross profit increased
from 25.0% for the three months ended September 30, 2001 to 31.0% for the
three months ended September 30, 2002. The increase in gross profit was
primarily associated with decreases in raw material and utility costs, an
improved sales mix shift, higher personal care volumes and lower
manufacturing costs.

Operating income increased $5.9 million, or 79.7%, from $7.4 million for
the three months ended September 30, 2001 to $13.3 million for the three
months ended September 30, 2002. The increase was primarily associated with
decreases in raw material and utility costs, an improved sales mix shift,
higher personal care volumes, lower manufacturing costs and $1.3 million in
reduced amortization expense for goodwill.




Specialty Materials--Sales increased by $4.6 million, or 4.7%, from $97.1
million for the three months ended September 30, 2001 to $101.7 million for
the three months ended September 30, 2002. The increase was primarily
attributable to $2.7 million in higher sales within our Estane(R) TPU
product lines, principally related to higher volumes and to a stronger
Euro, partially offset by competitive pricing pressure, and $1.1 million of
higher sales within our TempRite(R) chlorinated polyvinyl chloride ("CPVC")
product lines, principally due to increased volumes in products used in
fire sprinkler and flexible piping applications.

Gross profit increased $9.6 million, or 31.5%, from $30.5 million for the
three months ended September 30, 2001 to $40.1 million for the three months
ended September 30, 2002. As a percentage of sales, gross profit increased
from 31.4% for the three months ended September 30, 2001 to 39.4% for the
three months ended September 30, 2002. The increase in gross profit was
primarily attributable to decreases in raw material and utility costs and
higher volume. The increase was partially offset by a shift in sales mix to
lower priced products along with competitive pricing pressure.

Operating income for the segment increased $9.8 million, or 66.2%, from
$14.8 million for the three months ended September 30, 2001 to $24.6
million for the three months ended September 30, 2002. The increase was
primarily attributable to decreases in raw material and utility costs,
higher volume, and $1.9 million in reduced amortization expense for
goodwill. The increase was partially offset by a change in sales mix to
lower priced products along with competitive pricing pressure and increases
in selling and administrative expenses, primarily related to the addition
of sales and marketing resources and the additional costs associated with
our variable incentive plans, driven by improved financial performance
during 2002 and expansion of the variable incentive plans to include
substantially all employees beginning in 2002.

Performance Coatings--Sales increased $2.7 million, or 2.9%, from $92.4
million for the three months ended September 30, 2001 to $95.1 million for
the three months ended September 30, 2002. The increase was primarily
attributable to higher volumes in specialty coatings and graphic arts
applications.

Gross profit increased $3.1 million, or 14.0%, from $22.1 million for the
three months ended September 30, 2001 to $25.2 million for the three months
ended September 30, 2002. As a percentage of sales, gross profit increased
from 23.9% for the three months ended September 30, 2001 to 26.5% for the
three months ended September 30, 2002. The increase was primarily
associated with decreases in raw material and utility costs and higher
sales volume.

Operating income for the segment increased $4.4 million, or 49.4%, from
$8.9 million for the three months ended September 30, 2001 to $13.3 million
for the three months ended September 30, 2002. The increase was primarily
associated with the decrease in raw material and utility costs and $1.3
million in reduced amortization expense for goodwill.

Corporate--Corporate costs increased $1.6 million, or 10.4%, from $15.4
million for the three months ended September 30, 2001 to $17.0 million for
the three months ended September 30, 2002. This increase was primarily the
result of the additional costs associated with our variable incentive
plans, driven by improved financial performance during 2002 and expansion
of the variable incentive plans to include substantially all employees
beginning in 2002.





NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED WITH PRO FORMA NINE MONTHS
ENDED SEPTEMBER 30, 2001

The comparison of the nine months ended September 30, 2002 to the pro forma
nine months ended September 30, 2001 has been completed by using unaudited
pro forma consolidated financial information. This unaudited pro forma
consolidated financial information is provided for informational purposes
only and does not purport to be indicative of the results which would have
actually been obtained had the acquisition of the Performance Materials
Segment of Goodrich occurred on January 1, 2001.

TOTAL COMPANY ANALYSIS

Sales--Sales decreased $1.7 million, or 0.2%, from $815.2 million for the
pro forma nine months ended September 30, 2001 to $813.5 million for the
nine months ended September 30, 2002. The decrease was primarily the result
of lower sales of $10.8 million in Specialty Materials, excluding
TempRite(R) CPVC, due primarily to lower industrial and European demand and
competitive price pressure, and $3.6 million in Performance Coatings,
primarily due to lower textile application volume. The decline in sales
resulted from an unfavorable sales mix shift and competitive pricing
pressure. Furthermore, sales decreased in our food colorants business by
$5.2 million, principally due to discontinued product lines in 2001. The
decrease was partially offset by higher sales within our TempRite(R) CPVC,
product lines of $12.2 million and personal care product lines of $6.4
million, principally related to increased volume.

Cost of Sales--Cost of sales as a percentage of sales decreased from 73.3%
for the pro forma nine months ended September 30, 2001 to 67.3% for the
nine months ended September 30, 2002. The decrease in cost of sales as a
percentage of sales was primarily attributable to a decrease in raw
material and utility costs across all segments and, to a lesser extent,
lower manufacturing spending.

Gross Profit--Gross profit increased $48.2 million, or 22.1%, from $217.8
million for the pro forma nine months ended September 30, 2001 to $266.0
million for the nine months ended September 30, 2002. As a percentage of
sales, gross profit increased from 26.7% for the pro forma nine months
ended September 30, 2001 to 32.7% for the nine months ended September 30,
2002. The increase in gross profit was primarily associated with decreases
in raw material and utility costs and lower manufacturing spending. The
increase was partially offset by competitive pricing pressure and an
unfavorable sales mix shift.

Selling and Administrative Expenses--Selling and administrative expenses
increased $5.1 million, or 3.5%, from $146.6 million for the pro forma nine
months ended September 30, 2001 to $151.7 million for the nine months ended
September 30, 2002. The increase in selling and administrative expenses is
primarily attributable to the addition of sales and marketing resources and
the additional costs associated with our variable incentive plans, driven
by improved financial performance during 2002 and expansion of the variable
incentive plans to include substantially all employees beginning in 2002.
The increase was partially offset by cost reductions attributable to our
restructuring efforts. Selling and administrative expenses as a percentage
of sales increased from 18.0% for the pro forma nine months ended September
30, 2001 to 18.6% for the nine months ended September 30, 2002.




Amortization Expense--Amortization expense decreased $14.2 million, or
57.5%, from $24.7 million for the pro forma nine months ended September 30,
2001 to $10.5 million for the nine months ended September 30, 2002. The
decrease was primarily due to the elimination of $13.5 million of goodwill
amortization, as required by the provisions of SFAS No. 142 beginning in
2002.

Consolidation Costs--Consolidation costs increased $1.5 million from $1.4
million for the pro forma nine months ended September 30, 2001 to $2.9
million for the nine months ended September 30, 2002. This increase was
primarily related to the consolidation of the static control manufacturing
facilities into Malaysia and the closing of the Twinsburg, Ohio leased
facility, which occurred in the third quarter of 2002.

Operating Income--Operating income increased by $55.8 million, or 123.7%,
from $45.1 million for the pro forma nine months ended September 30, 2001
to $100.9 million for the nine months ended September 30, 2002. The
increase in operating income was primarily attributable to decreases in raw
material and utility costs, lower manufacturing spending, increased volumes
within our TempRite(R) CPVC and personal care product lines and reduced
amortization expense for goodwill. The increase was partially offset by an
unfavorable sales mix shift and competitive pricing pressure and an
increase in selling and administrative expenses.

Interest Income (Expense)-Net--Interest expense was $69.9 million for the
pro forma nine months ended September 30, 2001 and $57.4 million for the
nine months ended September 30, 2002. The decrease in expense was
attributable to lower interest rates in 2002, debt repayment and interest
income from our cash balances.

Other Income (Expense)-Net--Other expense was $3.4 million for the pro
forma nine months ended September 30, 2001 and $0.2 million for the nine
months ended September 30, 2002. The expense for the pro forma nine months
ended September 30, 2001 was primarily due to the unfavorable operating
performance of our investments accounted for under the equity method.

Income Tax Expense--Income tax expense was $3.8 million for the pro forma
nine months ended September 30, 2001 compared to income tax expense of $6.7
million for the nine months ended September 30, 2002. The income tax
expense for the pro forma nine months ended September 30, 2001 and the nine
months ended September 30, 2002 was primarily associated with our
international operations. The effective tax rate for the pro forma nine
months ended September 30, 2001 and the nine months ended September 30,
2002 was 13.5% and 15.5%, respectively.

For the pro forma nine months ended September 30, 2001, we estimated that
we would continue to incur pro forma domestic losses for 2001. These pro
forma cumulative losses and a lack of prior earnings history in our new
capital structure provided substantial evidence regarding our inability to
realize certain deferred tax assets. As a result, under the provisions of
SFAS No. 109, we established a tax valuation allowance to offset domestic
income tax benefits associated with domestic losses for the nine months
ended September 30, 2001.





For the nine months ended September 30, 2002, sufficient income was
generated to realize certain of the deferred tax assets associated with
domestic net operating losses. Therefore, under the provisions of SFAS No.
109, domestic income tax expense for the nine months ended September 30,
2002 has been significantly offset by the reversal of a portion of the
related valuation allowance.

As of September 30, 2002, we still have cumulative losses for our domestic
operations and we therefore intend to record valuation allowances for the
balance of deferred tax assets until sufficient positive evidence (for
example, cumulative positive domestic earnings and taxable income) exists
to support the reversal of a portion of the tax valuation allowances.

Net Income (Loss)--As a result of the factors discussed above, net income
increased by $68.6 million from a net loss of $32.0 million for the pro
forma nine months ended September 30, 2001 to net income of $36.6 million
for the nine months ended September 30, 2002.

Adjusted EBITDA for the pro forma nine months ended September 30, 2001 and
the nine months ended September 30, 2002 is calculated as follows (dollars
in millions):

2001 2002
-----------------------------

Operating income $ 45.1 $ 100.9
Depreciation and amortization 78.8 61.3
Investor management fees 2.9 2.7
Consolidation costs 1.4 2.9
Non-cash cost of sales impact of inventory
write-up from purchase accounting 2.5 -
-----------------------------
Adjusted EBITDA $ 130.7 $ 167.8
=============================

SEGMENT ANALYSIS

Consumer Specialties--Sales increased $0.6 million, or 0.3%, from $217.5
million for the pro forma nine months ended September 30, 2001 to $218.1
million for the nine months ended September 30, 2002. The increase is
primarily attributable to the impact of higher sales of $6.4 million in our
personal care product lines, principally due to higher Carbopol(R) acrylic
thickener sales volumes and the impact of new product introductions. The
increase was partially offset by lower sales in our food colorants business
of $5.2 million, principally the result of discontinued product lines.

Gross profit increased $14.0 million, or 26.0%, from $53.9 million for the
pro forma nine months ended September 30, 2001 to $67.9 million for the
nine months ended September 30, 2002. As a percentage of sales, gross
profit increased from 24.8% for the pro forma nine months ended September
30, 2001 to 31.1% for the nine months ended September 30, 2002. The
increase in gross profit was primarily associated with decreases in raw
material and utility costs, lower manufacturing spending and higher
personal care volumes.





Operating income increased $16.2 million, or 74.3%, from $21.8 million for
the pro forma nine months ended September 30, 2001 to $38.0 million for the
nine months ended September 30, 2002. The increase was primarily associated
with decreases in raw material and utility costs, lower manufacturing
spending, higher personal care volumes, and $3.9 million in reduced
amortization expense for goodwill.

Specialty Materials--Sales increased by $1.3 million, or 0.4%, from $304.3
million for the pro forma nine months ended September 30, 2001 to $305.6
million for the nine months ended September 30, 2002. The increase was
primarily attributable to higher sales of $12.2 million in TempRite(R)
CPVC, primarily related to volume increases, partially offset by lower
sales of $9.6 million in Estane(R) TPU and polymer additives product lines,
principally resulting from competitive pricing pressure and soft industrial
and European demand.

Gross profit increased $19.2 million, or 19.8%, from $97.2 million for the
pro forma nine months ended September 30, 2001 to $116.4 million for the
nine months ended September 30, 2002. As a percentage of sales, gross
profit increased from 31.9% for the pro forma nine months ended September
30, 2001 to 38.1% for the nine months ended September 30, 2002. The
increase in gross profit was primarily attributable to decreases in raw
material and utility costs, higher TempRite(R) CPVC volume and lower
manufacturing spending.

Operating income for the segment increased $19.0 million, or 37.7%, from
$50.4 million for the pro forma nine months ended September 30, 2001 to
$69.4 million for the nine months ended September 30, 2002. The increase
was primarily attributable to decreases in raw material and utility costs,
higher TempRite(R) CPVC volume, lower manufacturing spending and $5.7
million in reduced amortization expense for goodwill. The increase was
partially offset by lower sales in Estane(R) TPU and polymer additives as
mentioned above and increases in selling and administrative expenses,
primarily related to the addition of sales and marketing resources and the
additional costs associated with our variable incentive plans, driven by
improved financial performance during 2002 and expansion of the variable
incentive plans to include substantially all employees beginning in 2002.

Performance Coatings--Sales decreased $3.6 million, or 1.2%, from $293.4
million for the pro forma nine months ended September 30, 2001 to $289.8
million for the nine months ended September 30, 2002. The decrease was
primarily attributable to a decline in demand in textile applications,
partially offset by volume improvements in specialty coatings.

Gross profit increased $15.0 million, or 22.5%, from $66.7 million for the
pro forma nine months ended September 30, 2001 to $81.7 million for the
nine months ended September 30, 2002. As a percentage of sales, gross
profit increased from 22.7% for the pro forma nine months ended September
30, 2001 to 28.2% for the nine months ended September 30, 2002. The
increase in gross profit was primarily associated with decreases in raw
material and utility costs. The increase was partially offset by a decline
in demand in textile applications.





Operating income for the segment increased $20.6 million, or 78.9%, from
$26.1 million for the pro forma nine months ended September 30, 2001 to
$46.7 million for the nine months ended September 30, 2002. The increase
was primarily associated with the decrease in raw material and utility
costs, and $3.9 million in reduced amortization expense for goodwill. The
increase was partially offset by a decline in demand in textile
applications.

Corporate--Corporate costs decreased $1.5 million, or 2.9% from $51.8
million for the pro forma nine months ended September 30, 2001 to $50.3
million for the nine months ended September 30, 2002. This decrease was
primarily the result of our restructuring efforts, partially offset by
additional costs associated with our variable incentive plans, driven by
improved financial performance during 2002 and expansion of the variable
incentive plans to include substantially all employees beginning in 2002.

SHORT PERIOD DISCUSSIONS

Since Noveon, Inc. acquired the Performance Materials Segment of Goodrich
on February 28, 2001, the Performance Materials Segment of Goodrich and
Noveon, Inc. are reported under different bases. Accordingly, there are
short reporting periods that are not comparable to other periods.
Discussions follow for the short periods, including the two months ended
February 28, 2001 for the Performance Materials Segment of Goodrich and the
seven months ended September 30, 2001 for Noveon, Inc.

TWO MONTHS ENDED FEBRUARY 28, 2001

TOTAL COMPANY ANALYSIS

For the two months ended February 28, 2001, the Performance Materials
Segment of Goodrich generated sales of $187.0 million, with cost of sales
of $137.3 million, resulting in a gross profit of $49.7 million and a gross
profit margin of 26.6%. Selling and administrative expenses were $35.2
million, or 18.8% of sales. Amortization expense was $4.0 million and
operating income was $10.5 million, or 5.6% of sales. Interest income was
$0.6 million, other expense was $1.5 million, income tax expense was $4.0
million and net income was $5.6 million. Net income was 3.0% of sales.

SEGMENT ANALYSIS

Consumer Specialties--For the two months ended February 28, 2001, the
Consumer Specialties segment of the Performance Materials Segment of
Goodrich generated sales of $45.2 million, with a gross profit of $10.5
million and a gross profit margin of 23.2%. Operating income was $2.1
million, or 4.6% of sales.

Specialty Materials--For the two months ended February 28, 2001, the
Specialty Materials segment of the Performance Materials Segment of
Goodrich generated sales of $73.1 million, with a gross profit of $25.6
million and a gross profit margin of 35.0%. Operating income was $16.9
million, or 23.1% of sales.




Performance Materials--For the two months ended February 28, 2001, the
Performance Coatings segment of the Performance Materials Segment of
Goodrich generated sales of $68.7 million, with a gross profit of $13.6
million and a gross profit margin of 19.8%. Operating income was $3.2
million, or 4.7% of sales.

Corporate--For the two months ended February 28, 2001, the corporate
expense of the Performance Materials Segment of Goodrich was $11.7 million.

SEVEN MONTHS ENDED SEPTEMBER 30, 2001

TOTAL COMPANY ANALYSIS

For the seven months ended September 30, 2001, we generated sales of $629.3
million, with cost of sales of $460.0 million resulting in a gross profit
of $169.3 million and a gross profit margin of 26.9%. Selling and
administrative expenses were $111.4 million. Selling and administrative
expense as a percentage of sales was 17.7%. Amortization expense was $19.4
million, consolidation costs were $1.4 million and operating income was
$37.1 million. Operating income as a percentage of sales was 5.9%. Interest
expense was $54.6 million, other expense was $1.9 million, income tax
benefit was $5.9 million and net loss was $13.5 million. The net loss as a
percentage of sales was 2.1%

SEGMENT ANALYSIS

Consumer Specialties--For the seven months ended September 30, 2001, the
Consumer Specialties segment generated sales of $172.4 million, with a
gross profit of $43.5 million and a gross profit margin of 25.2%. Operating
income was $19.6 million, or 11.4% of sales.

Specialty Materials--For the seven months ended September 30, 2001, the
Specialty Materials segment generated sales of $231.2 million, with a gross
profit of $72.3 million and a gross profit margin of 31.3%. Operating
income was $35.8 million, or 15.5% of sales.

Performance Coatings--For the seven months ended September 30, 2001, the
Performance Coatings segment generated sales of $225.7 million, with a
gross profit of $53.5 million and a gross profit margin of 23.7%. Operating
income was $22.9 million, or 10.1% of sales.

Corporate--For the seven months ended September 30, 2001, corporate costs
were $39.8 million.

Consolidation Costs--For the seven months ended September 30, 2001,
consolidation costs were $1.4 million.

RAW MATERIAL COST TRENDS

We have benefited from reduced costs for raw materials for the nine months
ended September 30, 2002 compared to the comparable period in 2001. Raw
material prices have begun to increase and some forecasts anticipate that
these costs will continue to increase in the fourth




quarter of 2002. Raw material cost increases could have an unfavorable
impact on our financial results.

LIQUIDITY AND CAPITAL RESOURCES

DEBT AND COMMITMENTS

Our credit facilities include (1) a Term Loan A facility in the original
amount of $125.0 million that matures in 2007, (2) a Term Loan B facility
in the original amount of $510.0 million that matures in 2008 and (3) a
revolving credit facility in the amount of $125.0 million that matures in
2007. A portion of the revolving credit is available in various foreign
currencies. A portion of Term Loan A and Term Loan B are denominated in
Euros. The domestic revolving credit facility provides for a letter of
credit subfacility, usage under which will reduce the amount available
under the domestic revolving credit facility. Borrowings under the
revolving credit facility may be used for working capital and for general
corporate purposes. Our direct and indirect material domestic subsidiaries
guarantee our obligations under the credit facilities.

As of September 30, 2002, we had a cash balance of $151.9 million. In
addition, we had $120.1 million available under the revolving credit
facility of $125.0 million, net of $4.9 million of outstanding letters of
credit. As of September 30, 2002, the balance of Term Loan A was $108.8
million, and the balance of Term Loan B was $504.0 million.

On October 31, 2002, the Company prepaid $45.0 million in principal amount
of its outstanding term loans and received consent from the senior lenders
to make a restricted payment of $45.0 million to International in the form
of a dividend for the purpose of repaying a portion of the seller note to
Goodrich.

Our $275.0 million senior subordinated notes mature on February 28, 2011
and interest accrues at 11% per year. Interest payments on the notes occur
on March 15 and September 15 of each year.

Principal and interest payments under the credit facilities and the senior
subordinated notes represent significant liquidity requirements for us.
Borrowings under the credit facilities bear interest at floating rates and
require periodic interest payments. Interest on the senior subordinated
notes is payable semi-annually and interest and principal on the credit
facilities is payable periodically but not less frequently than
semi-annually. The credit facilities will be repaid in periodic
installments until the maturity of each of the term loans. The credit
facilities contain customary representations, covenants related to net
worth requirements, capital expenditures, interest coverage, leverage and
EBITDA levels and events of default. As of September 30, 2002, we were in
compliance with all of the covenants of our credit facilities.

We believe that our cash on hand, anticipated funds from operations, and
the amounts available to us under our revolving credit facilities will be
sufficient to cover our working capital needs, capital expenditures, debt
service requirements and tax obligations for the foreseeable future.
However, our ability to fund working capital, capital expenditures, debt
service requirements and tax obligations will be dependent upon our future
financial performance and our ability to repay




or refinance our debt obligations which in turn will be subject to
economic, financial, business and other factors, many of which are beyond
our control.

In conjunction with the acquisition, Noveon International, Inc.
("International") made an equity contribution of $527.0 million to us
comprised of $355.0 million in cash and $172.0 million from the seller note
that International issued to a subsidiary of Goodrich in connection with
the acquisition. The seller note bears interest at an initial rate of 13%
payable semi-annually in cash or additional notes at the option of
International and increases to a rate of 15% after 5 years. If the interest
is paid in cash, the interest rate remains at 13%. International may be
dependent on our cash flows to repay the seller note upon maturity in 2011.

CASH FLOWS

Cash flows provided by operating activities increased $36.4 million from
$60.4 million provided by operating activities in the nine months ended
September 30, 2001 to $96.8 million provided by operating activities in the
nine months ended September 30, 2002. The increase was primarily related to
improved operating results.

Investing activities included the working capital settlement with Goodrich,
totaling $14.5 million and reflected as an adjustment to purchase price
under the purchase agreement, payments made in connection with acquisitions
and $27.7 million of purchases of property in the nine months ended
September 30, 2002. Investing activities included the acquisition of the
Performance Materials Segment of Goodrich for $1,187.3 million and
purchases of property for $23.6 million in the nine months ended September
30, 2001.

Financing activities used $19.3 million for the nine months ended September
30, 2002, primarily related to the principal payments on our Term Loans.
Financing activities provided $1,227.1 million of cash in the nine months
ended September 30, 2001, primarily related to the funding of our
acquisition.

CAPITAL EXPENDITURES

We believe that our manufacturing facilities are generally in good
condition and we do not anticipate that major capital expenditures will be
needed to replace existing facilities in the near future. Our capital
expenditures for the nine months ended September 30, 2002 were $27.7
million. These expenditures were used to maintain our production sites,
implement our business strategy regarding operations and health and safety
and for strategic capacity expansion in our key product lines. These
capital expenditures were paid for through internally generated cash flow.
We expect capital expenditures for the years 2002 and 2003 to be between
$45.0 million and $60.0 million annually.

WORKING CAPITAL ADJUSTMENT

Pursuant to the Agreement between us and Goodrich, the purchase price was
subject to a post-closing working capital adjustment. On June 28, 2002, we
entered into an agreement with Goodrich settling the working capital
adjustment and in which we agreed to pay Goodrich $14.5 million. We paid
that amount to Goodrich on June 28, 2002 using cash on hand. The




settlement payment and the costs associated with the settlement efforts
have been reflected as an adjustment to the purchase price in our financial
statements and increased the goodwill associated with the acquisition.

CONTINGENCIES

We have numerous purchase commitments for materials, supplies and energy
incident to the ordinary course of business.

GENERAL

There are pending or threatened against us or our subsidiaries various
claims, lawsuits and administrative proceedings, all arising from the
ordinary course of business with respect to commercial, product liability,
and environmental matters, which seek remedies or damages. We believe that
any liability that may finally be determined with respect to commercial and
product liability claims should not have a material adverse effect on our
consolidated financial position, results of operations or cash flows. From
time to time, we are also involved in legal proceedings as a plaintiff
involving contract, patent protection, environmental and other matters.
Gain contingencies, if any, are recognized when they are realized.

ENVIRONMENTAL

We are generators of both hazardous and non-hazardous wastes, the
treatment, storage, transportation and disposal of which are regulated by
various laws and governmental regulations. Although we believe past
operations were in substantial compliance with the then-applicable
regulations, either we or the Performance Materials Segment of Goodrich
have been designated as potentially responsible parties by the U.S.
Environmental Protection Agency, or similar state agencies, in connection
with several disposal sites. These laws and regulations, including the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 and similar state laws, generally impose liability for costs to
investigate and remediate contamination without regard to fault and under
certain circumstances liability may be joint and several resulting in one
responsible party being held responsible for the entire obligation.
Liability may also include damages to natural resources.

We initiate corrective and/or preventive environmental projects to ensure
environmental compliance and safe and lawful activities at our current
operations. We also conduct a compliance and management systems audit
program. We believe that compliance with current laws and regulations will
not have a material adverse effect on our capital expenditures, results of
operations or competitive position.

Our environmental engineers and consultants review and monitor
environmental issues at our existing operating sites. This process includes
investigation and remedial selection and implementation, as well as
negotiations with other potentially responsible parties and governmental
agencies.





Goodrich provided us with an indemnity for various environmental
liabilities. We estimate Goodrich's share of such currently identified
liabilities under the indemnity to be approximately $12.5 million. In
addition to Goodrich's indemnity, several other indemnities from third
parties such as past owners relate to specific environmental liabilities.
Goodrich and other third party indemnitors are currently indemnifying us
for several environmental remediation projects. Goodrich's share of all
these liabilities may increase to the extent such third parties fail to
honor their indemnity obligations through 2011. Our September 30, 2002
balance sheet includes liabilities of $23.6 million to cover future
environmental expenditures either payable by us or indemnifiable by
Goodrich. Accordingly, the current portion of the environmental obligation
of $2.9 million is recorded in accrued expenses and $3.2 million is
recorded in accounts receivable. Approximately $20.8 million is included in
non-current liabilities and $9.3 million is included in other non-current
assets, reflecting the recovery due from Goodrich.

We believe that our reserves are adequate based on currently available
information. We believe that it is reasonably possible that additional
costs may be incurred beyond the amounts accrued as a result of new
information, newly discovered conditions, or a change in the law. However,
the additional costs, if any, cannot be currently estimated.

NEW ACCOUNTING STANDARDS

The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other
Intangible Assets," in July 2001. The Statement addresses financial
accounting and reporting for acquired goodwill and other intangible assets
and supersedes Accounting Principles Board ("APB") Opinion No. 17,
"Intangible Assets." SFAS No. 142 applies to all goodwill and other
intangible assets recognized in an entity's statement of financial position
at that date, regardless of when those assets were initially recognized.
Under the new rules, goodwill and intangible assets deemed to have
indefinite lives will no longer be amortized but will be subject to annual
impairment tests. Other intangible assets will continue to be amortized
over their useful lives. We adopted SFAS No. 142 in our first quarter of
2002 reporting. After giving effect to the elimination of goodwill
amortization as required by the provisions of SFAS No. 142, net income
(loss) for the two months ended February 28, 2001, the three months ended
September 30, 2001 and the seven months ended September 30, 2001 would have
been $8.6 million, $(1.7) million and $(3.4) million, respectively. During
the second quarter of 2002, we performed the first of the required
impairment tests of goodwill as of January 1, 2002. We have determined that
no goodwill impairment has occurred.

In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations," that requires the fair value of the liability for
closure and removal costs associated with the resulting legal obligations
upon retirement or removal of any tangible long-lived assets be recognized
in the period in which it is incurred. The initial recognition of the
liability will be capitalized as part of the asset cost and depreciated
over its estimated useful life. We are required to adopt this statement on
January 1, 2003, the effect of which has not yet been determined.





In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," that supersedes SFAS No. 121,
"Accounting for the Impairment or Disposal of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of." The Statement retains the fundamental
provisions of SFAS No. 121 related to the recognition and measurement of
the impairment of long-lived assets to be "held and used," provides more
guidance on estimating cash flows when performing a recoverability test,
requires that a long-lived asset (group) to be disposed of other than by
sales (i.e. abandoned) be classified as "held and used" until it is
disposed of, and establishes more restrictive criteria to classify an asset
(group) as "held for sale." We adopted SFAS No. 144 effective January 1,
2002. The effect of adoption had no impact to our consolidated financial
condition or results of operations.

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statement
No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical
Corrections." For most companies, SFAS No. 145 will require gains and
losses on extinguishments of debt to be classified as income or loss from
continuing operations rather than as extraordinary items as previously
required under SFAS No. 4. Extraordinary treatment will be required for
certain extinguishments as provided in APB Opinion No. 30. SFAS No. 145
also amends SFAS No. 13 to require certain modifications to capital leases
be treated as a sale-leaseback and modifies the accounting for sub-leases
when the original lessee remains a secondary obligor (or guarantor). Upon
adoption, any gain or loss on extinguishment of debt previously classified
as an extraordinary item in prior periods presented that does not meet the
criteria of Opinion 30 for such classification should be reclassified to
conform with the provisions of SFAS No. 145. We adopted the statement
during the second quarter of 2002, the effect of which had no impact to the
Company's consolidated financial position or results of operations.

In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 requires
recording costs associated with exit or disposal activities at their fair
values when a liability has been incurred. Under previous guidance, certain
exit costs were accrued upon management's commitment to an exit plan, which
is generally before an actual liability has been incurred. The provisions
of SFAS No. 146 are effective for exit or disposal activities that are
initiated after December 31, 2002. The Company is currently considering the
impact, if any, this statement will have on the financial statements.





CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements that have
been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an on-going basis, we
evaluate our estimates, including those related to product returns, bad
debts, inventories, investments, intangible assets, income taxes,
restructuring, pensions and other postretirement benefits, and
contingencies and litigation. We base our estimates on historical
experience and on various other assumptions that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our
significant judgments and estimates used in the preparation of our
consolidated financial statements.

REVENUE AND INCOME RECOGNITION

Revenue from the sale of products is recognized at the point of passage of
title, which is at the time of shipment or consumption by the customer for
inventory on consignment. Rebates, customer claims, allowances, returns and
discounts are reflected as reductions from gross sales in determining net
sales. In 2001, the total of rebates, customer claims, returns and
allowances and discounts amounted to 4.1% of gross sales. Rebates to
customers are accrued based on contractual relationships with customers as
shipments are made to customers. Customer claims, returns and allowances
and discounts are accrued based on our history of claims and sales returns
and allowances.

INVENTORIES

Inventories are stated at the lower of cost or market. The elements of
inventory cost include raw materials and labor and manufacturing overhead
costs attributed to the production process. Most domestic inventories are
valued by the last-in, first-out, or LIFO, cost method. Inventories not
valued by the LIFO method are valued principally by the average cost
method. We provide for allowances for excess and obsolete inventory based
on the age and quality of our products.

DERIVATIVE AND HEDGING ACTIVITIES

As required by our credit agreement, we have entered into interest rate
swap agreements to limit our exposure to interest rate fluctuations on
$180.0 million of the outstanding principal of our Term Loans through 2005.
These agreements require us to pay a fixed rate of interest while receiving
a variable rate. At September 30, 2002, the fair value of these swap
arrangements included in other non-current liabilities totaled
approximately $14.6 million. The offsetting impact of this hedge
transaction is included in accumulated other comprehensive loss.




We enter into currency forward exchange contracts, totaling $15.0 million
at September 30, 2002, to hedge certain firm commitments denominated in
foreign currencies. The purpose of our foreign currency hedging activities
is to protect us from risk that the eventual dollar cash flows from the
sale of products to international customers will be adversely affected by
changes in the exchange rates. The fair value of these contracts was a
current liability of $0.1 million at September 30, 2002. The offsetting
impact of this hedge transaction is included in accumulated other
comprehensive loss.

We have foreign denominated floating rate debt to protect the value of our
investments in our foreign subsidiaries in Europe. Realized and unrealized
gains and losses from these hedges are not included in the income
statement, but are shown in the cumulative translation adjustment account
included in other comprehensive loss. During the three months and nine
months ended September 30, 2002, we recognized $0.8 million and $7.3
million, respectively, of net losses included in the cumulative translation
adjustment, related to the foreign denominated floating rate debt.

DEFERRED INCOME TAXES

The provision for income taxes is calculated in accordance with SFAS No.
109, "Accounting for Income Taxes," which requires the recognition of
deferred income taxes using the liability method. Deferred income taxes
reflect the net tax effect of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Management provides valuation
allowances against the deferred tax assets if, based on available evidence,
it is more likely than not than some portion or all of the deferred tax
assets will not be realized.

In determining the adequacy of the valuation allowance, which totaled $28.0
million as of September 30, 2002, management assesses our profitability by
taking into account the present and anticipated amounts of domestic and
international earnings, as well as the anticipated taxable income as a
result of the reversal of future taxable temporary differences. Therefore,
management believes that sufficient book and taxable income will be
generated to realize the benefit of the remaining net deferred tax assets
as of September 30, 2002.

Although we generated domestic taxable income through September 30, 2002,
we still have cumulative losses from our domestic operations and a lack of
prior earnings history in our new capital structure. Because of these
factors, we intend to maintain the recorded valuation allowances until
sufficient positive evidence (for example, cumulative positive domestic
earnings and future taxable income) exists to support a reversal of the tax
valuation allowances.





ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES OF MARKET RISK

MARKET RISK

We are exposed to various market risk factors such as fluctuating interest
rates and changes in foreign currency rates. These risk factors can impact
results of operations, cash flows and financial position. We manage these
risks through regular operating and financing activities and periodically
use derivative financial instruments such as foreign exchange forward
contracts. These derivative instruments are placed with major financial
institutions and are not for speculative or trading purposes.

FOREIGN CURRENCY RISK

We limit our foreign currency risk by operational means, mostly by locating
our manufacturing operations in those locations where we have significant
exposures to major currencies. We have entered into forward contracts to
partially offset the risk of foreign currency fluctuations. The value of
these contracts at September 30, 2002 was a current liability of $0.1
million.

We sell to customers in foreign markets through foreign operations and
through export sales from plants in the U.S. These transactions are often
denominated in currencies other than the U.S. dollar. The primary currency
exposure is the Euro.

We have foreign denominated floating rate debt to protect the value of our
investments in our foreign subsidiaries in Europe. Realized and unrealized
gains and losses from these hedges are not included in the income
statement, but are shown in the cumulative translation adjustment account
included in other comprehensive loss.

INTEREST RATE RISK

As required by our credit agreement, we are a party to interest rate swap
agreements with notional amounts of $180.0 million and for which we pay a
fixed rate of interest and receive a LIBOR-based floating rate. Our
interest rate swap agreements as of September 30, 2002 did qualify for
hedge accounting under SFAS No. 133 and, as such, the changes in the fair
value of the interest rate swap agreements are recognized as a component of
equity. The decrease in the fair value of the interest rate swap agreements
was $5.8 million and $8.8 million, respectively, for the three months and
nine months ended September 30, 2002.

As of September 30, 2002, we carried $887.9 million of outstanding debt on
our balance sheet, with $432.9 million of that total held at variable
interest rates. Holding all other variables constant, if interest rates
hypothetically increased or decreased by 10%, for the nine months ended
September 30, 2002, interest expense would increase or decrease by $1.8
million. In addition, if interest rates hypothetically increased or
decreased by 10% on September 30, 2002, with all other variables held
constant, the fair market value of our $275.0 million, 11% senior
subordinated notes would decrease or increase by approximately $16.5
million.





ITEM 4. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

An evaluation was performed under the supervision and with the
participation of our management, including the Chief Executive Officer
(CEO) and Chief Financial Officer (CFO), of the effectiveness of the design
and operation of our disclosure controls and procedures within 90 days
before the filing date of this quarterly report. Based on that evaluation,
our management, including the CEO and CFO, concluded that the Company's
disclosure controls and procedures were effective. We have established a
formal Disclosure Committee comprised of members of operational and
functional management. The Disclosure Committee reports directly to the CEO
and CFO regarding the committee's formal evaluation of disclosure controls
and procedures.

CHANGES IN INTERNAL CONTROLS

There have been no significant changes in our internal controls or in other
factors that could significantly affect internal controls subsequent to the
date of their evaluation, nor were there any significant deficiencies or
material weaknesses in our internal controls. Accordingly, no corrective
actions were required or undertaken.





PART II: OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

None



(b) Reports on Form 8-K

On July 8, 2002, Noveon, Inc. announced the settlement of the
working capital adjustment with Goodrich (Item 5).

On July 25, 2002, Noveon, Inc. issued a press release relating to
its financial results for the second quarter of 2002 (Item 5).








SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

NOVEON, INC.


Dated: November 14, 2002 By: /s/ Christopher R. Clegg
----------------- ------------------------
Christopher R. Clegg
Senior Vice President, General
Counsel and Secretary



By: /s/ Michael D. Friday
---------------------
Michael D. Friday
Senior Vice President and Chief
Financial Officer





Form 10-Q Certifications



I, Steven J. Demetriou, the Chief Executive Officer of Noveon, Inc.,
certify that:

1. I have reviewed this quarterly report on Form 10-Q of Noveon,
Inc.;

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and have:

a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing of this quarterly report (the "Evaluation Date");
and

c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):

a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and




b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated
in this quarterly report whether there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.



Date: November 14, 2002 /s/ Steven J. Demetriou
----------------- -----------------------
Steven J. Demetriou
President and Chief
Executive Officer






I, Michael D. Friday, the Chief Financial Officer of Noveon, Inc., certify
that:


1. I have reviewed this quarterly report on Form 10-Q of Noveon,
Inc.;

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;

3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;

4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
for the registrant and have:

a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing of this quarterly report (the "Evaluation Date");
and

c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors
and the audit committee of registrant's board of directors (or
persons performing the equivalent functions):

a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and

b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and


6. The registrant's other certifying officers and I have indicated
in this quarterly report whether there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.



Date: November 14, 2002 /s/ Michael D. Friday
----------------- ---------------------
Michael D. Friday
Senior Vice President
and Chief Financial Officer