---







| | [X]   | ANNUAL REPORT PURSUANT TO SECTION 13
      OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1999                                | 
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
| |       | OR                                                                                                                                                             | 
| | [   ] | TRANSITION REPORT PURSUANT TO SECTION
      13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________. | 







| | Michigan

(State of incorporation)                                                     |  | 38-0633740

(I.R.S. Employer Identification No.) | 
| | -------------------------------------------------------------------------------------- |  | ------------------------------------------------ | 
| |                                                                                        |  |                                                  | 
| | 325 North Hanover Street

Hastings, Michigan

(Address of principal executive offices) |  | 49058

(Zip Code)                                | 







| | Title of each class           |  | Name of each exchange

on which registered | 
| | ----------------------------- |  | ------------------------------------------ | 
| | Common Stock, $2.00 par value |  | American Stock Exchange                    | 



Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

| | Yes     [X] | No     [  
] | 
| | ----------- | ------------ | 

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

Aggregate market value of voting stock of Registrant held by
  non-affiliates as of March 20, 2000 was $2,667,552.

Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of March 20, 2000:



|Common Stock - $2 par value |  | 760,766 Shares
|--------------------------- |  | --------------





| | Part III, Items 10, 11, 12 and 13 |  | Proxy Statement for Annual Meeting

to be held May 9, 2000 | 
| | --------------------------------- |  | ---------------------------------------------------------- | 



---



|Item 1. | Business.
|------- | ---------

Hastings Manufacturing Company (the "Company") is a Michigan corporation
organized in 1929 with its headquarters and U.S. manufacturing facilities
in Hastings, Michigan.

The Company is primarily a manufacturer of piston rings for automotive and light
  duty truck applications for the replacement market. In addition, some of the
  Company's piston ring products are produced for original equipment applications.
  To a lesser extent, the Company packages and sells automotive mechanics' specialty
  tools and additives for engines, transmissions and cooling systems. Prior to
  October 4, 1999, the Company directly administered and sold those additives.
  Effective that day, the Company entered into a joint venture agreement for the
  marketing of those additive products worldwide. In addition, all of the Company's
  products are currently sold in Canada where they are produced and/or packaged
  and distributed by the Company's Canadian subsidiary, Hastings, Inc., located
  in Barrie, Ontario. Effective in early 1999, that facility became responsible
  for all specialty tool packaging and distribution throughout the Canadian, U.S.
  and other foreign markets reflecting the most efficient management of that product
  offering.

The Company distributes its replacement products through numerous auto parts
  jobbers and warehouse distributors in the U.S. and Canada. These products are
  also distributed nationally and internationally through numerous large-scale
  engine rebuilders and various retailer outlets. The Company now distributes
  the majority of its export sales on a country direct basis. Prior to early 1997,
  international sales had been primarily distributed through one U.S. based customer.

Fiscal 1997 was a critical year for the Company as it returned to profitability
for the first full year period since 1994. The Company built upon that
success through the 1998 fiscal year, fueled by added sales growth and
a continued commitment to control its operating costs. The Company made
several significant operating changes in its way of conducting business
through that period. During 1997, for instance, the Company made substantial
progress in expanding its overseas distribution channels on a country direct
basis. By the close of 1997, the Company had contracted new distribution
in Australia, South Africa, the Middle East, Israel, Puerto Rico, and South
America. The maturity of several of those markets contributed to the overall
sales gain that the Company achieved in 1998. Conversely, a softening in
some of those markets in 1999 contributed to the net sales decline reported
for 1999. Indications through early 2000 are favorable that those markets
will approach their 1998 levels.

The manufacturing demands required to support the 1998 sales increase revealed
certain operating constraints within the Company's manufacturing capabilities.
As a result, the Company experienced a period of product shortages through
the latter half of 1998. In response to those pressures, the Company began
the implementation of lean manufacturing principles, including the conversion
to a cellular approach for some manufacturing processes. (Lean manufacturing
refers to a discipline of arranging the workflow in such a manner as to
minimize or eliminate any waste of materials or labor.)This conversion is expected to result in production
efficiencies through both reduced product lead times and capacity improvements.
While this conversion process will continue through mid-2000, early results
from this conversion are encouraging.

During 1999, the Company faced multiple challenges as it began the lean
manufacturing implementation. That conversion did not proceed without some
costs in time and efficiencies. Despite

---

Beginning in 1996, and carrying over to 1997, the Company made substantial
strides in its quality and business control operations. The Company's commitment
to these initiatives was rewarded with QS-9000 and ISO-9002 quality registrations
in July 1997. In February 1999, following several successful follow-up
audits, the Company was recommended for upgrade to ISO-9001, thus giving
recognition to its product design capabilities.

The market for the Company's products is highly competitive. The Company
has two principal competitors in the piston ring market. The principal
methods of competition in the industry are price, service, product performance
and product availability. The Company ranks among the three largest domestic
producers of replacement piston rings.

Among the Company's trade names used in marketing its products are "Hastings"
and "Flex-Vent," which are registered trademarks in the United States and
many foreign countries. The "Casite" trademark, used by the Company in
the past for its additives line, has been transferred to the joint venture
described above for use in its operations. The Company also holds a number
of patents and licenses. In the opinion of management, the Company's business
generally is not dependent upon patent protections.

The Company ships orders to customers within a short period, ordinarily
one week or less from the time orders are received. Accordingly, backlog
is not significant in the Company's business and the Company does not keep
separate figures of backlog. The Company's sales have limited seasonal
fluctuations.

None of the practices of the Company or the industries in which it operates
create any unusual working capital requirements that would be material
to an understanding of the Company's business taken as a whole.

The Company's sales are made to many customers and are not dependent upon
a single customer or a few customers. As stated in Note 11 to the Consolidated
Financial Statements (included in Item 8), net sales to one customer (Chrysler
Corporation), however, represented approximately $4,242,000, $3,874,000
and $3,180,000 of the Company's consolidated sales for 1999, 1998, and
1997 respectively.

Raw materials essential to the production of the Company's products are
standard items obtainable in the open market and are purchased from many
vendors. The Company maintains its own

---

Research and development are performed by the Company's engineering staff
relating to improvements in products and production as well as the design
and testing of new products. The Company's expenditures for research and
development are not material.

The Company has no material governmental contracts.

Compliance with federal, state, and local environmental laws and regulations
governing discharges into the environment is not expected to have a material
effect upon the capital expenditures, earnings, or competitive position
of the Company.

The Company and its subsidiaries have a total employment of 442 employees.
Employee relations at all of the Company's plant locations are considered
to be satisfactory.

While the Company maintains operations in Canada, there are no unusual
risks attendant to the Company's foreign operations. The Company's products
are sold worldwide. Financial information regarding the Company's geographic
sales and long-lived assets is included in Note 11 to the Consolidated
Financial Statements contained in Item 8 below.



|Item 2. | Properties.
|------- | -----------

The general offices and manufacturing and distribution plant, which produces
and distributes piston rings, are owned by the Company and are located
at 325 North Hanover Street, Hastings, Michigan. This facility consists
of approximately 260,000 square feet of production space, 154,000 square
feet of available warehouse area, and 35,000 square feet of office area.

The Company's wholly owned Canadian subsidiary, Hastings, Inc., located
in Barrie, Ontario, owns and operates manufacturing and warehouse facilities
for piston rings, additives, and mechanics' specialty tools and for the
distribution of products for other U.S. based suppliers into the Canadian
market. This facility includes approximately 65,000 square feet of production
and warehouse space and 4,000 square feet of office space.

As of year-end, production levels within the Company's Hastings, Michigan
facility were near 70% of capacity.



|Item 3. | Legal
      Proceedings.
|------- | ------------------------

As a result of the Company's amendment of its postretirement benefit plans,
  as discussed in Note 6 to the Consolidated Financial Statements (included in
  Item 8), the Company's retirees filed a class action lawsuit in the Western
  District of Michigan on January 24, 2000, under the Employee Retirement Income
  Security Act of 1974 (ERISA) and the Labor Management Relations Act of 1947
  (LMRA). The suit alleges that the Company denied retirees and their dependents
  certain health insurance benefits to which the retirees have "vested" rights
  pursuant to the terms of the Company's collective bargaining agreements (1964
  to the present). Specifically, the retiree class disputes the increase in their
  health insurance deductibles, the elimination of their prescription drug card
  and the requirement that they pay a portion of their health insurance premiums.
  The Company has denied any wrongdoing in this suit, and intends to defend it
  and any related class certification vigorously. However, because the lawsuit
  is in

---

its very early stages, the Company's ultimate chances of success
  are uncertain. If the retirees prevail, the Company anticipates that a requirement
  to provide postretirement benefits at the pre-amendment level would have a material
  adverse effect on the future financial position, results of operations and cash
  flows of the Company. The case is scheduled for trial on June 18, 2001.

In
  the normal course of business, the Company is a named party in various environmental
  matters, as well as routine litigation incidental to its business. In the opinion
  of management, disposition of these items will not have a material impact on
  the results of operations or financial condition of the Company.



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

No matter was submitted during the fourth quarter of 1999 to a vote of
the Company's shareholders through the solicitation of proxies or otherwise.





|Item 5. | Market
      for the Registrant's Common Equity and
      Related Shareholder Matters.
|------- | --------------------------------------------------------------------------------------

The Company's common stock is traded on the American Stock Exchange (ticker
  symbol HMF). On March 20, 2000, there were 760,766 outstanding shares and the
  approximate number of record shareholders was 271.

High and low sales prices and cash dividends, per quarter, are as set forth
below. All results have been adjusted to reflect the two-for-one stock
split as discussed in Note 8 to the Consolidated Financial Statements in
Item 8 below.



|               |  | 1999        |                 | 1998 |            
|-------------- |  | ----------- | --------------- | ---- | -----------
|               |  | Stock Price | Cash

Dividends |      | Stock Price
|               |  | High        | Low             | Paid |            
|First Quarter  |  | $21         | $16             | $.08 |            
|Second Quarter |  | 16-1/8      | 13              | .08  |            
|Third Quarter  |  | 13-5/8      | 11-13/16        | .08  |            
|Fourth Quarter |  | 11-7/8      | 8               | .08  |            

The Company expects to continue its policy of paying regular quarterly
dividends, although this policy is dependent upon future earnings, capital
requirements, and financial condition. In addition, cash dividends are
restricted in accordance with the Company's loan agreements as described
in Note 4 to the Consolidated Financial Statements included in Item 8 below.
Unrestricted retained earnings under the agreements amounted to $2,529,014
at December 31, 1999.

The Company made no unregistered sales of any of its securities during
1999.

---

|Item
      6. | Selected
      Financial Data.
|------------- | ------------------------------



|                               | 1999(2) |            | 1998 |   | 1997       |  | 1996(3) |            | 1995(4) |  
|------------------------------ | ------- | ---------- | ---- | - | ---------- |  | ------- | ---------- | ------- | -
|Net Sales                      | $       | 36,596,260 |      | $ | 38,752,104 |  | $       | 35,574,954 |         | $
|Net Income (Loss)              |         | 326,770    |      |   | 1,730,427  |  |         | 955,233    |         |  
|Basic and Diluted              |         |            |      |   |            |  |         |            |         |  
|Earnings (Loss) per
Share(1)   |         | .42        |      |   | 2.24       |  |         | 1.24       |         |  
|Long-Term Debt                 |         | 3,660,000  |      |   | 4,620,000  |  |         | 565,625    |         |  
|Total Assets                   |         | 35,662,817 |      |   | 36,188,500 |  |         | 33,390,331 |         |  
|Dividends per Share(1)         |         | .32        |      |   | .315       |  |         | .25        |         |  
|Average Shares Outstanding:(1) |         |            |      |   |            |  |         |            |         |  
|Basic                          |         | 775,046    |      |   | 771,496    |  |         | 768,516    |         |  
|Diluted                        |         | 775,046    |      |   | 772,694    |  |         | 768,680    |         |  



|(1) | Average shares outstanding and the related per share
	results have been adjusted to reflect the two-for-one stock split discussed
	in Note 8 to the Consolidated Financial Statements included in Item 8
	below.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                 
|(2) | Reference is made to Note 7 to the Consolidated Financial
	Statements included in Item 8 below for disclosure of an uncertainty regarding
	the outcome of a lawsuit filed on January 24, 2000.                  
|    |                                                                                                                                                                                                                 
|(3) | The 1996 data includes non-recurring restructuring and
	relocation costs totaling $819,900.                                                                                                                     
|    |                                                                                                                                                                                                                 
|(4) | The 1995 data includes the effects of the sale of filter
	operations and the subsequent realignment of the organizational structure
	to a smaller size.                                                         



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

For the year ended December 31, 1999, the Company generated net income
of $326,770 compared to net income of $1,730,427 in 1998. This decreased
profitability was the result of various factors, each of which is more
fully described below. These factors include a decrease in net sales in
1999 of 5.6%; a decrease in the gross profit margin, which was primarily
impacted by non-recurring costs associated with the conversion and start-up
of various production processes; and an increase in other expenses, which
was driven by higher interest costs associated with the 1998 restructuring
of long-term debt. These negative factors were offset slightly by a reduction
in total operating expenses, reflecting the Company's continued efforts
to control these expenses.

While, as discussed below, net sales, operating expenses and other expenses
were relatively comparable between fourth quarter 1999 and 1998, fourth
quarter 1999 cost of sales increased by $805,893, or 14.5%. The increase
in cost of sales was primarily due to increased workers' compensation costs
combined with an increase in cast iron costs. The cost of sales increase
is the primary cause of the fourth quarter pre-tax loss of $38,010 compared
to 1998 fourth quarter pre-tax income of $706,598, a change of $744,608.
The 1999 fourth quarter net loss was $37,010 compared to net income of
$531,598 for the comparable period in 1998.

As disclosed in Note 1 to the Consolidated Financial Statements, in October
1999 the Company formed a 50/50 joint venture company for the purpose of
expanding its additives offerings through both increased global market
penetration and an expansion of the product offerings under the "Casite"
name. The additional product offerings are expected to become available
in mid-2000. While the Company is optimistic regarding the future opportunities
relative to the expansion of the additives business, it is not expected
to have a significant impact on 2000 operations.

---

RESULTS OF OPERATIONS

NET SALES

1999 Compared to 1998

Net sales for 1999 decreased $2,155,844, or 5.6%, from $38,752,104 in 1998
to $36,596,260. The decrease in net sales primarily reflects a decline
in the Company's export volume. The export volume was negatively affected
by specific political and economic factors in the foreign countries where
the Company conducts business, combined with the effects of realigning
the distribution channel within one of the Company's major foreign markets.
The net sales decrease also reflects slight reductions in volume in the
Company's domestic aftermarket and private brand and original equipment
markets, offset by a sales increase in the Canadian aftermarket.

Net sales were relatively flat in the fourth quarter of 1999 in comparison
to the same period in 1998.

1998 Compared to 1997

Net sales for 1998 increased $3,177,150, or 8.9%, from 1997. The increase
reflected growth in the Company's domestic aftermarket, private brand and
export markets. Growth in the domestic aftermarket reflected the Company's
increased focus on that aspect of the piston ring market. Growth in the
private brand area was the result of increased volume to several major
customers. The increase in the export area reflected the success of the
on-going development of the Company's country direct export efforts.

COST OF SALES AND GROSS PROFIT

1999 Compared to 1998

Cost of sales for 1999 increased $341,351, or 1.3%, from $26,094,399 in
1998 to $26,435,750. This increase, along with the noted decrease in net
sales, resulted in a gross profit margin decrease to 27.8% in 1999 from
32.7% in 1998. The increase in cost of sales and decrease in the gross
profit margin are the result of several factors. During 1999, the Company's
cost of sales was negatively impacted by non-recurring costs associated
with the conversion and start-up of various production processes. As a
result of this conversion, productivity levels were not at their anticipated
needs. In order to cover these production deficiencies and further improve
production levels, additional labor and overhead costs were incurred throughout
1999. These additional costs were necessary in order to raise production
levels up to the point where customer order fill performance could be,
and was, improved in 1999. In addition, due to the tight labor market in
the local area, the Company experienced unplanned employee turnover in
1999, which also negatively affected the production efficiency issue. The
Company aggressively addressed these issues throughout 1999, and is now
focusing on further elevating its production capabilities as it continues
the implementation of lean manufacturing methods. Lean manufacturing refers
to a discipline of arranging the workflow in such a manner as to minimize
or eliminate any waste of materials or labor. The Company is likewise evaluating
the changes necessary to support and sustain an efficient workforce. These
issues had an effect on several of the individual production cost factors
for 1999. Material costs remained relatively unchanged from the prior year
average with increases in cast iron costs, primarily in the fourth quarter,
being offset by reductions in rolled steel costs. Labor costs increased
slightly as a result of the collective bargaining agreement, but

---

As previously noted, cost of sales for the fourth quarter of 1999 increased
by $805,893, or 14.5%, over the fourth quarter of 1998. The increase was
primarily due to an increase in workers' compensation costs combined with
an increase in cast iron costs which, by being on the LIFO method of costing
for raw materials inventory, were recognized currently in cost of sales.
In spite of the increased fourth quarter cost of sales compared to the
prior year, the gross profit margin generated in the fourth quarter (28.7%)
was higher than the margin reported through the third quarter of 1999 (27.5%),
reflecting the Company's initial success in aggressively addressing the
above noted production issues.

1998 Compared to 1997

Cost of sales for 1998 increased $1,809,202, or 7.4%, from 1997. The increase
in cost of sales reflected the corresponding increase in net sales. The
gross profit margin increased to 32.7% in 1998 from 31.7% in 1997. This
increase was primarily due to a decrease in certain raw material costs
with overhead costs increasing at a rate lower than the sales increase,
given the fixed nature of a large portion of those costs. These decreases
were partially offset by increased labor costs. Labor costs increased in
1998 as a result of the collective bargaining agreement, additional overtime
required to support increased customer demand and the Company's efforts
to significantly reduce the cycle time from customer order to product shipment.

OPERATING EXPENSES

1999 Compared to 1998

Total operating expenses for 1999 decreased $396,444, or 4.2%, from $9,341,138
in 1998 to $8,944,694. Advertising expenses decreased $49,028, or 15.1%,
from the 1998 total. This decrease reflects a reduction in advertising
support costs in 1999, combined with the inclusion, in 1998, of a biannual
customer service tips manual. Selling expenses increased $135,574, or 4.6%,
from the 1998 total. This increase reflects increases in agent-based commissions,
salesmen's travel and sales promotion costs, offset by a slight decrease
in sales support costs. General and administrative expenses decreased $482,990,
or 7.9%, from the 1998 total. This decrease is due to reductions in the
provision for doubtful accounts receivable, as discussed below, and salaried
personnel costs, offset by slight increases in various administrative support
costs. The decrease also reflects the inclusion, in 1998, of approximately
$50,000 of severance costs related to staffing reductions.

Fourth quarter 1999 operating expenses were 2.3% lower than the 1998 total
primarily due to increased 1999 agent-based commissions, sales bonuses
and workers' compensation costs, as

---

1998 Compared to 1997

Total operating expenses for 1998 increased $154,767, or 1.7%, from 1997.
Advertising expenses decreased $47,911, or 12.8%, from the 1997 total.
This decrease reflected the cost of a biannual product catalog expense
in 1997, combined with minor 1998 reductions in cooperative advertising,
printed material and various other advertising costs. These reductions
were offset slightly by an increase in advertising support staff salaries
and the inclusion of the biannual customer service tips manual in 1998.
Selling expenses decreased $179,737, or 5.8%, from the 1997 total. This
decrease was primarily due to a reduction in various sales personnel expenses,
offset slightly by a sales driven increase in agency commissions. General
and administrative expenses increased $382,415, or 6.7%, from the 1997
total. This increase was primarily due to an increase in the provision
for doubtful accounts receivable, offset by a number of insignificant account
decreases. The provision increase, which amounted to $422,500, related
primarily to two customer accounts.

OTHER EXPENSES

1999 Compared to 1998

Other expenses, net for 1999 increased $106,906 over the 1998 net total.
This increase primarily reflects the higher interest expense associated
with the restructuring of the Company's long-term debt obligations in late
August of 1998. Other expenses also reflects the 1998 interest income derived
from the funds generated by the filter operations sale held in escrow through
September 1998 and the 1999 gain on sale of obsolete plant equipment, which
is included in the other, net expense.

Other expenses, net for the fourth quarters of 1999 and 1998 were comparable.

1998 Compared to 1997

Other expenses, net for 1998 increased by $5,987 over the 1997 total. Interest
expense for 1998 was significantly impacted by the restructuring of the
Company's short- and long-term debt obligations in late August of that
year. Increased short-term borrowings through late August of 1998 reflected
the increased working capital requirements as driven by the net sales increase.
The restructuring of the short- and long-term debt resulted in increased
long-term debt obligations which resulted in increased interest expense
for the fourth quarter, and year end, of 1998. The interest income reflects
the income derived from the escrowed filter sale funds.

TAXES ON INCOME

The impact of income taxes on the reported results of the Company is detailed
in Note 9 to the Consolidated Financial Statements. The 1999, 1998 and
1997 effective tax rates of 43.3%, 37.9% and 39.4%, respectively, are higher
than the statutory federal tax rate of 34.0% due primarily to the impact
of state income taxes and certain nondeductible expenses. The 1999 effective
tax rate was also affected by the increase in the valuation allowance related
to foreign tax credits that are expected to expire unutilized in 2000.

---

As of December 31, 1999, the Company recorded net deferred income tax assets
of $6,979,345. The major components include the tax effect of net operating
loss carryforwards of $1,392,619 and net accrued retirement and postretirement
benefit obligations totaling $4,849,520. The realization of these recorded
benefits is dependent upon the generation of future taxable income.

The net operating loss carryforwards fully expire in 2010, 2011, 2012 and
2019, if not previously utilized. Management has prepared projections of
taxable income for future years indicating that the cumulative net operating
loss is expected to be fully utilized by late 2001.

The Company further expects to be able to realize the deferred tax assets
related to the retirement and postretirement benefit obligations as it
pays these benefits. Such payments will constitute an expense that is deductible
for tax reporting purposes over many future years. During each of the ten
years prior to when the recent net operating loss carryforwards arose,
the Company has been able to deduct these benefits for tax reporting purposes
and reduce its tax liability accordingly. As a result of the 1997 plan
amendment to the retiree medical plan as discussed in Note 6 to the Consolidated
Financial Statements, current tax deductible payments are expected to exceed
the annual expense recognition for financial reporting purposes, thus accelerating
the absorption of the future periods' tax benefit.

Management believes that it is more likely than not that adequate levels
of future income will be generated to absorb the net operating loss carryforwards,
the deductible amounts related to the retirement and postretirement benefit
obligations and the remaining net deductible temporary differences. In
addition, based upon projected foreign source income, management believes
that it is more likely than not that the foreign tax credits, net of the
valuation allowance at December 31, 1999, will be utilized prior to their
expiration.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary cash requirements continue to be for operating expenses
such as labor costs and raw materials, and for funding capital expenditures
and long-term debt service. Historically, the Company's primary sources
of cash have been from operations and from bank borrowings. Subsequent
to December 31, 1999, the Company entered into an agreement with its primary
lender to amend the terms of its short- and long-term debt obligations.
The amendment increases the short-term line available to the Company from
$3,000,000 to $3,500,000. The amendment also modifies the payment schedule
of the Company's long-term debt obligation, and provides the primary lender
with a security position in certain assets of the Company, as detailed
in Note 12 to the Consolidated Financial Statements. As a result of this
amendment, and based on an anticipated improvement in profitability, the
Company expects to generate sufficient future funds from operations and
bank borrowings to fund its growth and operating needs. Total short-term
lines available to the Company as of December 31, 1999 totaled $5,200,000,
of which $1,200,000 was unused. This increased to $5,700,000 and $1,700,000,
respectively, with the amended loan agreement. In an effort to minimize
its floating rate debt exposure, the Company is a party to an interest
rate swap agreement essentially fixing the interest rate on that debt within
a small range. The rate will fluctuate within 7.45% to 7.95% depending
upon certain Company performance parameters. As of December 31, 1999, the
"fixed" rate on those borrowings was 7.95%.

During 1999, the Company generated $1,112,546 of net cash from operating
activities. The realized net income and depreciation, combined with decreases
in accounts receivable, prepaid pension cost and deferred income taxes,
were partially offset by increases in inventories and decreases in accounts
payable and accruals and the postretirement benefit obligation. The decrease
in accounts receivable reflects the timing of customer sales and related
payment terms associated with those sales.

---

On February 10, 2000, the Company announced a common stock repurchase program.
  The program calls for the repurchase of up to 100,000 shares in the open market.
  The repurchased stock will be retired. On February 14, 2000, the Company repurchased
  30,000 shares. Funds for the repurchase, amounting to approximately $231,000,
  were borrowed on the Company's short-term line of credit. The Company intends
  to purchase additional shares of its stock under this program throughout 2000,
  subject to acceptable levels of cash flows and favorable market conditions.

In late August 1998, the Company entered into a $6,600,000 long-term debt
agreement with its primary lender. This new agreement allowed the Company
to take advantage of favorable interest rate conditions. Borrowings under
this new long-term debt agreement were used for several purposes including:
raising the Company's defined benefit plans to funding levels that would
alleviate the payment of the variable rate Pension Benefit Guaranty Corporation
(PBGC) premiums; consolidating the remaining long-term debt obligations;
and paying down certain short-term notes payable. As a result of this new
agreement, the Company's short-term line with its primary lender was reduced
from $5,000,000 to $3,000,000. (This amount has subsequently been raised
to $3,500,000 per the amended short- and long-term debt agreement as described
above).

During 1998, the Company used $1,192,259 of net cash for operating activities.
The realized net income, depreciation and decrease in deferred income taxes,
were offset by increases in accounts receivable, inventories, prepaid pension
cost and a decrease in the postretirement benefit obligation. The decline
in the deferred income tax asset was primarily the result of the additional
funding of the Company's defined benefit pension plans, and the partial
utilization of the net operating loss carryforwards. The increase in accounts
receivable and inventories reflect the additional working capital requirements
that were necessary to support the higher sales level. The increase in
the prepaid pension cost of $2,675,688 reflects the funding of the Company's
defined benefit plans to specified limits. As such, it did not have a direct
effect on operations during 1998. Excluding this item, net cash generated
from operating activities amounted to $1,483,429. The investing activities
for 1998 reflect the Company's commitment to enhancing its production capabilities
through the implementation of lean manufacturing principles. Investing
activities also reflect the September 1998 release of escrowed funds relating
to the 1995 sale of filter operations. These funds were subsequently used
to reduce short-term notes payable. Financing activities reflect the increased
reliance on short-term borrowings to help satisfy increased working capital
needs. Financing activities also reflect the proceeds from the new long-term
debt agreement and subsequent utilization of a portion of the proceeds
to pay down short- and long-term debt. Dividends paid increased in 1998
due to the improved operating results.

---

During 1997, the Company generated net cash of $2,129,643 from operating
activities. The realized net income, depreciation and decrease in deferred
income taxes were only partially countered by increases in accounts receivable
and a reduction in the postretirement benefit obligation. The decline in
the deferred income tax asset is the result of the partial utilization
of the net operating loss carryforwards, while the postretirement benefit
factor reflects, in part, the impact from the modification of the retiree
health plan that was effective in April 1997. The majority of the Company's
1997 investing activities reflect capital equipment purchases that the
Company utilized to enhance its production capabilities. The financing
activities for 1997 reflect a modest decrease in reliance on short-term
borrowings combined with the reduction of long-term debt levels through
normally scheduled quarterly payments.

As noted throughout the above discussion, the Company is aggressively addressing
the production issues that negatively affected its earnings in 1999. As
the Company completes its move toward the adoption of a lean manufacturing
environment, it should enhance its ability to further its growth and to
generate sufficient cash flow to sustain this growth. The Company will
continue to monitor its working capital needs in order to balance its cash
and growth demands. At this time, the Company anticipates that operations
(which will be subject to minimal current cash outflows for U.S. income
taxes due to the utilization of the net operating loss carryforwards),
in combination with the balancing of available short-term lines with operations,
will generate cash flows that will be sufficient to funds its working capital,
capital outlays and dividend requirements through 2000.

LITIGATION CONTINGENCY

As disclosed in Note 7 to the Consolidated Financial Statements, on January
  24, 2000, the Company's retirees filed a class-action lawsuit against the Company
  as a result of the April 1997 amendment of the Company's postretirement benefit
  plans. The plans were amended principally to adjust the cost-sharing provisions.
  The suit alleges that the Company denied class retirees and their dependents
  certain health insurance benefits to which the retirees had a "vested" right
  pursuant to the terms of the Company's collective bargaining agreements (1964
  to the present). The Company has denied any wrongdoing in this suit, and intends
  to defend it and any related class certification vigorously. However, due to
  the fact that this lawsuit is in its early stages, the Company's ultimate success
  in prevailing against the retirees' charges is uncertain at this time. If the
  retirees' position prevails, it is anticipated that a requirement to provide
  postretirement benefits at the pre-amendment level would have a material adverse
  effect on the future financial position, results of operations and cash flows
  of the Company. The case is scheduled for trial June 18, 2001.

NEW ACCOUNTING STANDARDS

SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
  issued in June 1998, requires companies to recognize all derivative contracts
  as either assets or liabilities in the balance sheet and to measure them at
  fair value. If certain conditions are met, a derivative may be specifically
  designated as a hedge, the objective of which is to match the timing of gain
  or loss recognition on the hedging derivative with the recognition of (i) the
  changes in the fair value of the hedged asset or liability that are attributable
  to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction.
  For a derivative not designated as a hedging instrument, the gain or loss is
  recognized in income in the period of change. SFAS No. 133, as amended by SFAS
  No. 137, is effective for all fiscal quarters of fiscal years beginning after
  June 15, 2000.

---

Historically, the Company has not entered into derivatives contracts for speculative
  purposes. The Company does periodically enter into interest rate swap agreements
  to reduce the impact of changes in interest rates on its
  floating rate borrowings. However, the fair value of such derivatives are not
  significant. Accordingly, the Company does not expect adoption of the new standard
  on January 1, 2001 to materially affect its consolidated financial statements.

YEAR 2000 READINESS DISCLOSURE

The Company experienced no Y2K problems on or after January 1, 2000 and
does not anticipate any future material problems related to Y2K. Incremental
costs relating to the Company's Y2K readiness project, primarily consisting
of expenses related to use of an outside consultant, approximated $120,000
through 1998 with $10,000, $80,000 and $30,000 charged to operating expenses
as incurred in 1998, 1997 and 1996, respectively (none in 1999).

FORWARD-LOOKING STATEMENTS

With the exception of historical matters, the matters discussed in this
commentary include forward-looking statements that describe the Company's
plans, objectives, goals, expectations or projections. These forward-looking
statements are identifiable by words or phrases indicating that the Company
or management "expects," "anticipates," "projects," "plans" or "believes"
that a particular event "may occur" or "will likely occur" in the future,
or similar statements. In addition to other risks and uncertainties described
in connection with the forward-looking statements contained in this commentary,
there are many important factors that could cause actual results to be
materially different from the Company's current expectations.

Anticipated future sales are subject to competitive pressures from many
sources. As an example, future sales could be affected by consolidation
within the automotive replacement parts industry, whereby the Company could
lose sales due to a competitor purchasing all of the assets of a current
customer of the Company. Future sales could also be affected by current
and future political and economic factors in the foreign markets where
the Company conducts business.

Cost of sales and operating expenses may be adversely affected by unexpected
costs associated with various issues. For example, future cost of sales
could be affected by unexpected expenses related to the future maintenance
of a lean manufacturing environment. Future operating expenses could also
be affected, for example, by such items as unexpected large claims within
the Company's self-funded group health insurance plan, increased retiree
health insurance claim exposure as a result of an adverse court ruling
on the current retiree health issue, or bad debt expenses related to deterioration
in the credit worthiness of a customer.

The foregoing is intended to provide meaningful cautionary statements of
the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. The foregoing should not be construed as an exhaustive list
of all economic, competitive, governmental and technological factors that
could adversely affect the Company's expected consolidated financial position,
results of operations or liquidity. The Company disclaims any obligation
to update its forward-looking statements to reflect subsequent events or
circumstances.



|Item 7A. | QuantitativeandQualitativeDisclosuresAboutMarketRisk.
|-------- | -----------------------------------------------------

The Company is exposed to potential market risks on interest rates relating
  to a swap agreement transacted with its primary lender in connection with its
  long-term debt agreement. Management believes that the fluctuation in interest
  rates in the near future will not have a material impact on its consolidated
  financial statements taken as a whole. The Company does not use derivative financial
  instruments for trading purposes.



---

|Item 8. | FinancialStatementsandSupplementaryData.
|------- | ----------------------------------------



| |  | Consolidated Balance Sheets -                      |      
| |  | -------------------------------------------------- | -----
| |  | December 31, 1999 and 1998                         | 15-16
| |  |                                                    |      
| |  | Consolidated Statements of Income
-                |      
| |  | Years Ended December 31,
1999, 1998 and 1997       | 17   
| |  |                                                    |      
| |  | Consolidated Statements of Stockholders'
Equity -  |      
| |  | Years Ended December 31,
1999, 1998 and 1997       | 18-19
| |  |                                                    |      
| |  | Consolidated Statements of Cash
Flows -            |      
| |  | Years Ended December 31,
1999, 1998 and 1997       | 20-21
| |  |                                                    |      
| |  | Notes to Consolidated Financial
Statements         | 22-37
| |  |                                                    |      
| |  | Report of Independent Certified
Public Accountants | 38   



---



|                                            |                                         | December 31,                             |              
|------------------------------------------- | --------------------------------------- | ---------------------------------------- | -------------
|                                            |                                         | 1999                                     |              
|                                            |                                         |                                          |              
|Assets                                      |                                         |                                          |              
|                                            |                                         |                                          |              
|Current Assets                              |                                         |                                          |              
|                                            | Cash                                    |                                          | $   1,011,630
|                                            | Accounts receivable,
less allowance for |                                          |              
|                                            |                                         | possible losses of $230,000 and
$210,000 |              
|                                            |                                         | (Note 12)                                |              
|                                            | Refundable income
taxes                 |                                          | 30,000       
|                                            | Inventories (Notes
2 and 12):           |                                          |              
|                                            |                                         | Finished products                        |              
|                                            |                                         | Work in process                          |              
|                                            |                                         | Raw materials                            |              
|                                            | Prepaid expenses and
other assets       |                                          | 67,690       
|                                            | Future income tax
benefits (Note 9)     |                                          | 2,124,962    
|                                            |                                         |                                          |              
|Total Current Assets                        |                                         | 19,520,068                               |              
|                                            |                                         |                                          |              
|Property and Equipment                      |                                         |                                          |              
|                                            | Land and improvements                   |                                          | 654,871      
|                                            | Buildings                               |                                          | 5,369,345    
|                                            | Machinery and equipment
(Note 12)       |                                          | 20,273,718   
|                                            |                                         |                                          |              
|                                            |                                         |                                          |              
|                                            | Less accumulated depreciation           |                                          | 17,762,201   
|                                            |                                         |                                          |              
|Net Property and
Equipment                  |                                         | 8,535,733                                |              
|                                            |                                         |                                          |              
|Prepaid Pension Asset
      (Notes 4 and 5) |                                         | 2,359,980                                |              
|                                            |                                         |                                          |              
|Intangible Pension Asset
      (Note 5)     |                                         | 376,632                                  |              
|                                            |                                         |                                          |              
|Future Income Tax Benefits(Note 9)          |                                         | 4,854,383                                |              
|                                            |                                         |                                          |              
|Other Assets                                |                                         | 16,021                                   |              
|                                            |                                         |                                          |              
|                                            |                                         |                                          |              



---



|                                       | December 31,                            |                                       
|-------------------------------------- | --------------------------------------- | --------------------------------------
|                                       | 1999                                    |                                       
|                                       |                                         |                                       
|Liabilities and
Stockholders' Equity   |                                         |                                       
|                                       |                                         |                                       
|Current Liabilities                    |                                         |                                       
|                                       | Notes payable to banks
(Notes 3 and 12) | $ 4,000,000                           
|                                       | Accounts payable                        | 1,727,611                             
|                                       | Accruals:                               |                                       
|                                       |                                         | Compensation                          
|                                       |                                         | Income taxes                          
|                                       |                                         | Taxes other than income               
|                                       |                                         | Miscellaneous                         
|                                       | Current portion of
postretirement       |                                       
|                                       |                                         | benefit obligation
(Notes 6 and 7)    
|                                       | Current maturities
of long-term         |                                       
|                                       |                                         | debt (Notes 4 and
12)                 
|                                       |                                         |                                       
|Total Current Liabilities              | 8,630,822                               |                                       
|                                       |                                         |                                       
|Long-Term Debt,less current            |                                         |                                       
|                                       | maturities (Notes
4 and 12)             | 3,660,000                             
|                                       |                                         |                                       
|Pension and Deferred
Compensation      |                                         |                                       
|                                       | Obligations,
      less current portion |                                       
|                                       | (Note 5)                                | 2,394,036                             
|                                       |                                         |                                       
|Postretirement
Benefit Obligation,     |                                         |                                       
|                                       | less current portion
(Notes 6 and 7)    | 13,715,222                            
|                                       |                                         |                                       
|Total Liabilities                      | 28,400,080                              |                                       
|                                       |                                         |                                       
|Commitments and
Contingencies          |                                         |                                       
|                                       | (Notes 4, 5, 6 and
7)                   |                                       
|                                       |                                         |                                       
|Stockholders' Equity(Notes 4, 5 and 8) |                                         |                                       
|                                       | Preferred stock, $2
par value,          |                                       
|                                       |                                         | authorized and unissued
500,000 shares
|                                       | Common stock, $2 par
value, 1,750,000   |                                       
|                                       |                                         | shares authorized;
790,766 and        
|                                       |                                         | 789,526 shares issued
and             
|                                       |                                         | outstanding                           
|                                       | Additional paid-in
capital              | 313,907                               
|                                       | Retained earnings                       | 7,347,532                             
|                                       | Accumulated other
comprehensive income: |                                       
|                                       |                                         | Cumulative foreign
currency           
|                                       |                                         |                                       
|                                       |                                         | Pension liability
adjustment          
|                                       |                                         |                                       
|                                       |                                         |                                       
|                                       |                                         |                                       
|                                       |                                         |                                       
|                                       | Total accumulated
other comprehensive   |                                       
|                                       |                                         | income                                
|                                       |                                         |                                       
|Total Stockholders'
Equity             | 7,262,737                               |                                       
|                                       |                                         |                                       
|                                       |                                         |                                       



---



| |  | Year ended December 31, | 
| |  | ----------------------- | 
| |  | 1999                    | 

|                                 |                            |             |               |             |              |             |             
|-------------------------------- | -------------------------- | ----------- | ------------- | ----------- | ------------ | ----------- | ------------
|Net Sales                        |                            | $36,596,260 |               | $38,752,104 |              | $35,574,954 |             
|                                 |                            |             |               |             |              |             |             
|Cost of Sales                    |                            | 26,435,750  |               | 26,094,399  |              | 24,285,197  |             
|                                 |                            |             |               |             |              |             |             
|Gross profit                     |                            | 10,160,510  |               | 12,657,705  |              | 11,289,757  |             
|                                 |                            |             |               |             |              |             |             
|Operating Expenses               |                            |             |               |             |              |             |             
|                                 | Advertising                |             | 276,042       |             | 325,070      |             | 372,981     
|                                 | Selling                    |             | 3,076,052     |             | 2,940,478    |             | 3,120,215   
|                                 | General and administrative |             | 5,592,600     |             | 6,075,590    |             | 5,693,175   
|                                 |                            |             |               |             |              |             |             
|                                 |                            |             |               | 8,944,694   |              | 9,341,138   |             
|                                 |                            |             |               |             |              |             |             
|Operating income                 |                            | 1,215,816   |               | 3,316,567   |              | 2,103,386   |             
|                                 |                            |             |               |             |              |             |             
|Other Expenses (Income)          |                            |             |               |             |              |             |             
|Interest expense                 |                            | 671,723     |               | 571,774     |              | 510,322     |             
|Interest income                  |                            | -           |               | (35,982     | )            | (47,062     | )           
|Other, net                       |                            | (32,677     | )             | (3,652      | )            | 62,893      |             
|                                 |                            |             |               |             |              |             |             
|                                 |                            |             |               | 639,046     |              | 532,140     |             
|                                 |                            |             |               |             |              |             |             
|Income before income tax         |                            |             |               |             |              |             |             
|                                 | expense                    |             | 576,770       |             | 2,784,427    |             | 1,577,233   
|                                 |                            |             |               |             |              |             |             
|Income Tax Expense(Note
      9) |                            | 250,000     |               | 1,054,000   |              | 622,000     |             
|                                 |                            |             |               |             |              |             |             
|Net Income                       |                            | $   326,770 |               | $1,730,427  |              | $   955,233 |             
|                                 |                            |             |               |             |              |             |             
|                                 |                            |             |               |             |              |             |             
|Basic and Diluted Earnings       |                            |             |               |             |              |             |             
|                                 | Per Share of Common Stock  |             |               |             |              |             |             
|                                 | (Notes 8 and 10)           |             | $       
 .42 |             | $       2.24 |             | $       1.24



---



|                                | Common
      stock          |                   | Additional
      paid-in
      capital |         | Retained
      earnings |           | Accumulated
      other
      comprehensive
      income |   | Total      |          
|------------------------------- | --------------------------- | ----------------- | -------------------------------------- | ------- | ----------------------- | --------- | -------------------------------------------------------- | - | ---------- | ---------
|                                |                             |                   |                                        |         |                         |           |                                                          |   |            |          
|Balance,January 1,
      1997   | $ 780,276                   |                   | $140,206                               |         | $5,813,827              |           | $ (1,801,861                                             | ) | $4,932,448 |          
|Comprehensive income:           |                             |                   |                                        |         |                         |           |                                                          |   |            |          
|                                | Net income                  | -                 |                                        | -       |                         | 955,233   |                                                          | - |            | 955,233  
|                                | Other comprehensive income: |                   |                                        |         |                         |           |                                                          |   |            |          
|                                |                             | Foreign currency  |                                        |         |                         |           |                                                          |   |            |          
|                                |                             |                   | translation adjustment                 | -       |                         | -         |                                                          | - |            | (139,200 
|                                |                             | Pension liability |                                        |         |                         |           |                                                          |   |            |          
|                                |                             |                   | adjustment (($362,230),                |         |                         |           |                                                          |   |            |          
|                                |                             |                   | net of tax of ($123,158))              |         |                         |           |                                                          |   |            |          
|                                |                             |                   | (Note 5)                               | -       |                         | -         |                                                          | - |            | (239,072 
|                                |                             |                   |                                        |         |                         |           |                                                          |   |            |          
|                                |                             |                   |                                        |         |                         |           |                                                          |   |            |          
|                                |                             |                   |                                        |         |                         |           |                                                          |   |            |          
|Total comprehensive income      |                             |                   |                                        |         |                         |           |                                                          |   | 576,961    |          
|Shares issued under restricted  |                             |                   |                                        |         |                         |           |                                                          |   |            |          
|                                | stock plan, net of shares   |                   |                                        |         |                         |           |                                                          |   |            |          
|                                | forfeited                   | 350               |                                        | 5,582   |                         | -         |                                                          | - |            | 5,932    
|Cash dividends ($.25 per share) | -                           |                   | -                                      |         | (195,215                | )         | -                                                        |   | (195,215   | )        
|Two-for-one stock split         |                             |                   |                                        |         |                         |           |                                                          |   |            |          
|                                | (Note 8)                    | 780,626           |                                        | -       |                         | (780,626  | )                                                        | - |            | -        
|                                |                             |                   |                                        |         |                         |           |                                                          |   |            |          
|Balance,December 31,
      1997 | 1,561,252                   |                   | 145,788                                |         | 5,793,219               |           | (2,180,133                                               | ) | 5,320,126  |          
|Comprehensive income:           |                             |                   |                                        |         |                         |           |                                                          |   |            |          
|                                | Net income                  | -                 |                                        | -       |                         | 1,730,427 |                                                          | - |            | 1,730,427
|                                | Other comprehensive income: |                   |                                        |         |                         |           |                                                          |   |            |          
|                                |                             | Foreign currency  |                                        |         |                         |           |                                                          |   |            |          
|                                |                             |                   | translation adjustment                 | -       |                         | -         |                                                          | - |            | (230,418 
|                                |                             | Pension liability |                                        |         |                         |           |                                                          |   |            |          
|                                |                             |                   | adjustment ($359,181,                  |         |                         |           |                                                          |   |            |          
|                                |                             |                   | net of tax of $122,122)                |         |                         |           |                                                          |   |            |          
|                                |                             |                   | (Note 5)                               | -       |                         | -         |                                                          | - |            | 237,059  
|                                |                             |                   |                                        |         |                         |           |                                                          |   |            |          
|                                |                             |                   |                                        |         |                         |           |                                                          |   |            |          
|                                |                             |                   |                                        |         |                         |           |                                                          |   |            |          
|Total comprehensive income      |                             |                   |                                        |         |                         |           |                                                          |   | 1,737,068  |          
|Shares issued under restricted  |                             |                   |                                        |         |                         |           |                                                          |   |            |          
|                                | stock plan, net of shares   |                   |                                        |         |                         |           |                                                          |   |            |          
|                                | forfeited                   | 17,800            |                                        | 192,484 |                         | (3,300    | )                                                        | - |            | 206,984  
|Cash dividends ($.315 per       |                             |                   |                                        |         |                         |           |                                                          |   |            |          
|                                | share)                      | -                 |                                        | -       |                         | (246,936  | )                                                        | - |            | (246,936 





---



| | Common

stock |  | Additional

paid-in

capital |  | Retained

earnings |  | Accumulated

other

comprehensive

income |  | Total | 
| | ------------- |  | ---------------------------- |  | ------------------ |  | ----------------------------------------- |  | ----- | 

|Balance,December 31, 1998       | 1,579,052                   |                   | 338,272                 |         | 7,273,410  |         | (2,173,492  | ) | 7,017,242  |        
|------------------------------- | --------------------------- | ----------------- | ----------------------- | ------- | ---------- | ------- | ----------- | - | ---------- | -------
|Comprehensive income:           |                             |                   |                         |         |            |         |             |   |            |        
|                                | Net income                  | -                 |                         | -       |            | 326,770 |             | - |            | 326,770
|                                | Other comprehensive
income: |                   |                         |         |            |         |             |   |            |        
|                                |                             | Foreign currency  |                         |         |            |         |             |   |            |        
|                                |                             |                   | translation adjustment  | -       |            | -       |             | - |            | 200,394
|                                |                             | Pension liability |                         |         |            |         |             |   |            |        
|                                |                             |                   | adjustment (($10,812),  |         |            |         |             |   |            |        
|                                |                             |                   | net of tax of ($3,676)) |         |            |         |             |   |            |        
|                                |                             |                   | (Note 5)                | -       |            | -       |             | - |            | (7,136 
|                                |                             |                   |                         |         |            |         |             |   |            |        
|                                |                             |                   |                         |         |            |         |             |   |            |        
|                                |                             |                   |                         |         |            |         |             |   |            |        
|Total comprehensive
income      |                             |                   |                         |         |            |         |             |   | 520,028    |        
|Shares issued under
restricted  |                             |                   |                         |         |            |         |             |   |            |        
|                                | stock plan, net of
shares   |                   |                         |         |            |         |             |   |            |        
|                                | forfeited                   | 2,480             |                         | (24,365 | )          | -       |             | - |            | (21,885
|Cash dividends ($.32
per share) | -                           |                   | -                       |         | (252,648   | )       | -           |   | (252,648   | )      
|                                |                             |                   |                         |         |            |         |             |   |            |        
|Balance,December
      31, 1999 | $1,581,532                  |                   | $313,907                |         | $7,347,532 |         | $(1,980,234 | ) | $7,262,737 |        



---



|                       | Year ended December 31,        |                           
|---------------------- | ------------------------------ | --------------------------
|                       | 1999                           |                           
|                       |                                |                           
|Operating Activities   |                                |                           
|                       | Net income                     | $   326,770               
|                       | Adjustments to reconcile net   |                           
|                       | income to net cash from        |                           
|                       | (for) operating activities:    |                           
|                       | Depreciation                   | 1,464,889                 
|                       | Gain on sale of property       |                           
|                       |                                | and equipment             
|                       | Deferred income taxes          | 168,000                   
|                       | Change in postretirement       |                           
|                       |                                | benefit obligation        
|                       | Changes in operating assets    |                           
|                       |                                | and liabilities:          
|                       | Accounts receivable            | 692,292                   
|                       |                                | Refundable income taxes   
|                       |                                | Inventories               
|                       |                                | Prepaid expenses and other
|                       |                                | current assets            
|                       |                                | Prepaid pension cost      
|                       |                                | Other assets              
|                       |                                | Accounts payable and      
|                       |                                | accruals                  
|                       |                                |                           
|Net cash from (for)    |                                |                           
|                       | operating activities           | 1,112,546                 
|                       |                                |                           
|Investing Activities   |                                |                           
|                       | Capital expenditures           | (919,606                  
|                       | Release of filter sale escrow  |                           
|                       | funds                          | -                         
|                       | Proceeds from sale of property |                           
|                       | and equipment                  | 42,300                    
|                       |                                |                           
|Net cash for investing |                                |                           
|                       | activities                     | (877,306                  



---



|                                         |                                      | Year ended December 31, |             
|---------------------------------------- | ------------------------------------ | ----------------------- | ------------
|                                         |                                      | 1999                    |             
|Financing Activities                     |                                      |                         |             
|                                         | Proceeds from issuance               |                         |             
|                                         | of notes payable                     |                         |             
|                                         | to banks                             |                         | $  8,500,000
|                                         | Principal payments on                |                         |             
|                                         | notes payable
      to banks         |                         | (6,800,000  
|                                         | Proceeds from issuance               |                         |             
|                                         | of long-term
      debt              |                         |             
|                                         | to banks                             |                         | -           
|                                         | Principal payments on                |                         |             
|                                         | long-term debt                       |                         | (1,320,000  
|                                         | Dividends paid                       |                         | (252,648    
|                                         |                                      |                         |             
|Net cash from (for)                      |                                      |                         |             
|                                         | financing activities                 |                         | 127,352     
|                                         |                                      |                         |             
|Effect of Exchange
      Rate            |                                      |                         |             
|                                         | Changes on Cash                      |                         | 13,265      
|                                         |                                      |                         |             
|Net Increase (Decrease)
      in Cash    |                                      | 375,857                 |             
|                                         |                                      |                         |             
|Cash,beginning
      of year             |                                      | 635,773                 |             
|                                         |                                      |                         |             
|Cash,end
      of year                   |                                      | $  1,011,630            |             
|                                         |                                      |                         |             
|Supplemental Cash
      Flow Information |                                      |                         |             
|                                         | Cash paid during the
      year for: |                         |             
|                                         | Income taxes,
      net of           |                         |             
|                                         |                                      | refunds                 |             
|                                         | Interest                             |                         | 631,905     



---

Note 1 - Summary of Significant Accounting Policies

Nature of Operations

Hastings Manufacturing Company and subsidiaries (Company) is primarily
a manufacturer of automotive and light duty truck piston rings for the
replacement market. In addition, some of the Company's piston rings are
produced for original equipment applications. To a lesser extent, the Company
packages and sells automotive mechanics' specialty tools and additives
for engines, transmissions and cooling systems. The Company's headquarters
and primary manufacturing facilities are located in Hastings, Michigan.
All of the Company's products are also sold in Canada, where they are produced
and/or packaged and distributed by the Company's Canadian subsidiary, Hastings,
Inc., located in Barrie, Ontario.

The Company distributes its replacement products through numerous auto
parts jobbers and warehouse distributors for sale primarily in the automotive
replacement market throughout the U.S. and Canada. These products are also
distributed nationally and internationally through numerous large-scale
engine rebuilders and various retailer outlets. The Company distributes
the majority of its export sales on a country direct basis. Prior to early
1997, international sales had historically been distributed through one
U.S. customer. During 1999, Hastings, Inc. began to distribute and administer
products for other U.S. based suppliers into the Canadian market. The products
complement the current piston ring offerings as to both distribution channels
and customer base.

In October 1999, the Company entered into a joint venture agreement for
the purpose of expanding its additives offerings through both increased
global market penetration and through an expansion of the product offerings
under the "Casite" brand name. There was no activity within the joint venture
during 1999. The additional product offerings are expected to become available
in mid-2000. The 50% owned joint venture company, Casite Intraco, LLC,
which will do business as The Casite Company, was formed in late 1999.
Initial capitalization, amounting to $75,000 by each party, was in February
2000.

The Company performs ongoing credit evaluations of its customers and provides
reserves for probable credit losses.

As defined by Statement of Financial Accounting Standards (SFAS) No. 131,
Disclosures about Segments of an Enterprise and Related Information,
the Company has two operating segments, U.S. operations and Canadian operations,
based on management's geographic reporting responsibilities. As discussed
above, all of the Company's products are sold in both the U.S. and Canada.
In addition, the operating segments' production processes, types of customers,
distribution methods, regulatory environment and expected long-term financial
performance are very similar. Because management believes aggregation of
its two operating segments is consistent with the objective and basic principles
of SFAS No. 131, financial information regarding its operating segments
has been aggregated for financial reporting purposes. Additional information
required to be disclosed by SFAS No. 131 is included in Note 11.

---

Principles of Consolidation

The consolidated financial statements include the accounts of the parent
company and its subsidiaries. Upon consolidation, all significant intercompany
accounts and transactions are eliminated. The Company's investment in its
50% owned joint venture is accounted for on the equity method.

Use of Estimates in the Preparation of Financial
Statements

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

Revenue Recognition

The Company recognizes revenue when its products are shipped to its customers.
Likewise, revenues from distribution of products for unaffiliated suppliers,
which are not significant, are recognized on a commission-only basis at
the time of shipment and are included in net sales.

Fair Value of Financial Instruments

The fair value of the Company's financial instruments, comprised of cash,
short-term receivables and payables, notes payable to banks (variable interest
rate) and long-term debt (variable interest rate) approximates their carrying
values. The fair value of the Company's interest rate swap agreement, as
disclosed in Note 4, is not material.

Inventories

Inventories are stated at cost, not in excess of market. The Company uses
the last-in, first-out (LIFO) method of determining costs for U.S. raw
material inventories. Remaining inventories are valued using the first-in,
first-out (FIFO) method.

Property, Equipment and Depreciation

Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is computed primarily by the straight-line method for financial
reporting purposes, based on the estimated useful lives of the respective
assets, and accelerated methods with minimum lives for income tax purposes.

Retirement Plans

The Company sponsors noncontributory, defined benefit plans which cover
all employees of the Company who are covered by collective bargaining agreements.
The plans provide benefits based on an employee's earnings and years of
benefit service. The Company funds these plans in amounts consistent with
the funding requirements of federal laws and regulations. As discussed
in Note 4, the Company provided additional funding to the plans during
1998. The plans' assets are invested in stocks, bonds, annuities and short-term
investments.

---

The Company provides certain healthcare and life insurance benefits for
eligible retired employees. Postretirement benefits are accounted for on
the accrual basis, during the employee's years of service, based on the
expected cost of providing benefits to that employee and the employee's
beneficiaries and covered dependents.

Stock Options

The Company applies the provisions of Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees (APB 25), and related
interpretations in accounting for its stock option plan. Under APB 25,
because the exercise price of the Company's employee stock options equals
the market price of the underlying stock on the date of grant, no compensation
expense is recognized.

Advertising Costs

All advertising costs are expensed in the period in which they are incurred.

Income Taxes

The Company provides deferred income taxes based on enacted income tax
rates in effect on the dates temporary differences between the financial
reporting and tax bases of assets and liabilities reverse. The effect on
deferred tax assets and liabilities of a change in income tax rates is
recognized in income in the period that includes the enactment date. To
the extent that available evidence about the future raises doubt about
the realization of a deferred tax asset, a valuation allowance is established.

As disclosed in Note 9, the Company has recorded deferred tax assets reflecting
the benefit of net operating loss carryforwards expiring in 2010, 2011,
2012 and 2019, foreign tax credit carryforwards expiring through 2004,
accrued pension and postretirement obligations estimated to be payable
in varying amounts over the next 25 to 30 years, and other net deductible
temporary differences. Realization of the recorded income tax benefits
is dependent on generating sufficient taxable income and foreign source
income prior to expiration of the loss carryforwards and foreign tax credit
carryforwards. Although realization is not assured, management believes
it is more likely than not that all of the deferred tax assets, except
for $30,027 of foreign tax credits expiring in 2000, will be realized.
The amount of the deferred tax asset considered realizable, however, could
be reduced in the near term if estimates of future taxable income and foreign
source income during the carryforward periods are not achieved.

No provision for income taxes has been made on the accumulated undistributed
earnings of approximately $3,911,000 of the Canadian subsidiary. These
earnings are intended to be permanently reinvested in facilities and other
assets and have borne income taxes that would offset, in major part, any
tax liability resulting from their distribution.

---

Basic earnings per share (EPS) is based on the weighted average number
of shares of common stock outstanding during each period. It excludes the
dilutive effects of additional common shares that would have been outstanding
if the shares, under the Company's stock option plan, had been issued.
It also excludes the dilutive effect of contingently issuable shares, outstanding
under the Company's restricted stock plan described in Note 8, to the extent
those shares have not yet been vested. Diluted EPS includes the effects
of the Company's stock options and contingently issuable shares. Basic
and diluted EPS are retroactively adjusted for stock dividends and stock
splits.

Comprehensive Income

Total comprehensive income is reported in the consolidated statement of
stockholders' equity and includes net income, the foreign currency translation
adjustment relating to the Company's Canadian operations and the pension
liability adjustment relating to the Company's underfunded pension plan,
as disclosed in Note 5.

Interest Rate Agreements

The Company enters into interest rate swap and collar agreements to reduce
the impact of changes in interest rates on its floating rate borrowings.
Interest rate swap agreements are contracts to exchange floating rate for
fixed rate interest payments over the life of the agreements without the
exchange of the underlying notional amounts. Interest rate collar agreements
limit the Company's interest rates on floating rate borrowings to a range
within a minimum (floor) and a maximum (cap) interest rate. The notional
amounts of interest rate agreements are used to measure interest to be
paid or received and do not represent the amount of exposure to credit
loss. The differential paid or received on interest rate agreements is
recognized as an adjustment to interest expense.

The counterparty to the Company's interest rate agreements is a commercial
bank with which the Company has other financial relationships. While the
Company is exposed to credit loss in the event of nonperformance by the
counterparty, the Company does not anticipate nonperformance by the other
party, and no material loss would be expected from such non-performance.

The Company does not enter into interest rate agreements, or other derivative
financial instruments, for trading purposes.

Foreign Currency Translation

The financial statements of the Company's Canadian operations, where the
functional currency is the Canadian dollar, are translated at the exchange
rate in effect at year-end for assets and liabilities. Income and expense
items are translated at the average exchange rate for the year. Related
translation adjustments are reported as a separate component of accumulated
other comprehensive income. Gains and losses from foreign currency transactions,
which are not significant, are included in current earnings.



---

SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities,
issued in June 1998, requires companies to recognize all derivatives contracts
as either assets or liabilities in the balance sheet and to measure them
at fair value. If certain conditions are met, a derivative may be specifically
designated as a hedge, the objective of which is to match the timing of
gain or loss recognition on the hedging derivative with the recognition
of (i) the changes in the fair value of the hedged asset or liability that
are attributable to the hedged risk or (ii) the earnings effect of the
hedged forecasted transaction. For a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the period of change.
SFAS No. 133, as amended by SFAS No. 137, is effective for all fiscal quarters
of fiscal years beginning after June 15, 2000.

Historically, the Company has not entered into derivatives contracts for speculative
  purposes. The Company does periodically enter into interest rate swap agreements
  to reduce the impactof changes in interest rates on its
  floating rate borrowings. However, the fair value of such derivatives are not
  significant. Accordingly, the Company does not expect adoption of the new standard
  on January 1, 2001 to materially affect its consolidated financial statements.

Note 2 - Inventories

Inventories valued using the LIFO method were $2,604,000 and $2,654,000
at December 31, 1999 and 1998, respectively.

If the FIFO method of inventory valuation had been used by the Company,
inventories would have been $1,222,000 and $1,212,000 higher than reported
at December 31, 1999 and 1998, respectively.

Reduction of inventory quantities in 1999, 1998 and 1997 resulted in a
liquidation of LIFO inventories carried at lower costs prevailing in prior
years as compared to current years' purchases. The effect of these reductions
increased net income by $50,000, $40,000 and $35,000 ($.06, $.05 and $.05
per share, on a diluted basis, as adjusted for the stock split discussed
in Note 8) for 1999, 1998 and 1997, respectively.

Note 3 - Short-Term Borrowings

In August 1998, the Company entered into a loan agreement with its primary
lender which provides for an unsecured $6,600,000 term credit loan (see
Note 4) and an unsecured $3,000,000 credit authorization for revolving
credit loans and letters of credit. Under the agreement, the Company's
short-term line with its primary lender was reduced from $5,000,000 to
$3,000,000. It is due on demand, but no later than May 31, 2000. Interest
for both the short-term and long-term borrowings is based on three different
pricing options: a negotiated rate, a Eurodollar rate plus a factor, and
a floating rate (greater of the federal funds rate plus a factor or the
prime rate). The effective Eurodollar rate and floating rate are increased
by a margin rate, ranging from 1.50% to 2.00%, which is based upon certain
Company performance parameters. The Company maintains two additional unsecured
lines of credit with banks aggregating $2,200,000, with interest rates
based on prime. Of the $5,200,000 total short-term lines available to the
Company at December 31, 1999 and 1998, $1,200,000 and $2,900,000, respectively,
was unused.

---

Subsequent to year-end, the Company's loan agreement with its primary lender
relating to its short-term and long-term borrowings was amended. See Note
12 regarding the primary changes to the loan agreement (e.g., credit line
amount, maturity date, principal payments, restrictive financial covenants
and collateralization).

Note 4 - Long-Term Debt

As discussed in Note 3, the Company restructured its short-term and long-term
borrowing arrangements in August 1998. The entire $6,600,000 under the
term loan portion of the new loan agreement was borrowed and was used to
additionally fund the Company's defined benefit plans, to pay off the previously
outstanding long-term debt and, as discussed in Note 3, to reduce short-term
notes payable. The additional funding to the Company's defined benefit
plans resulted in the $2,359,980 and $2,675,688 prepaid pension asset in
the accompanying consolidated balance sheets at December 31, 1999 and 1998,
respectively. The term loan is payable in quarterly principal payments
of $330,000, plus interest based on the pricing options discussed in Note
3. In connection with the $6,600,000 term loan, the Company entered into
an interest rate swap agreement essentially to fix the interest rate on
these long-term borrowings at 5.95% plus the margin, discussed in Note
3, resulting in an interest rate range of 7.45% to 7.95%. At December 31,
1999, the interest rate in effect on these long-term borrowings was 7.95%
and the notional amount of the swap agreement amounted to $4,620,000. Of
the $4,620,000 outstanding long-term debt balance at December 31, 1999,
$1,320,000 is due annually for the years 2000 through 2002 with the $660,000
balance due in 2003.

The term loan agreement requires the Company to maintain certain financial
balances and ratios and limits the amount of cash dividends. Unrestricted
retained earnings under the agreement amounted to $2,529,014 at December
31, 1999. The Company has obtained a waiver from the bank for its noncompliance
with certain of these restrictions as of December 31, 1999. The bank also
agreed to modify the restriction levels as part of the impending restructuring
of the Company's current loan agreement (see Note 12).

As discussed above, subsequent to year-end, the Company's loan agreement
with its primary lender relating to its short-term and long-term borrowings
was amended (see Note 12).

Note 5 - Pension and Retirement Savings

Information regarding the Company's defined benefit plans as of and for
the years ended December 31, 1999, 1998 and 1997 is as follows:



---

|                                  |                             | Year ended December 31, |              
|--------------------------------- | --------------------------- | ----------------------- | -------------
|                                  |                             | 1999                    |              
|Change in Benefit
Obligation      |                             |                         |              
|Benefit obligation,               |                             |                         |              
|                                  | beginning of year           |                         | $  16,855,920
|Service cost                      |                             | 6,007                   |              
|Interest cost                     |                             | 1,114,262               |              
|Actuarial (gain) loss             |                             | (841,737                | )            
|Benefits paid                     |                             | (1,525,441              | )            
|Benefit obligation,               |                             |                         |              
|                                  | end of year                 |                         | 15,609,011   
|                                  |                             |                         |              
|Change in Plan
Assets             |                             |                         |              
|Fair value of plan
assets,        |                             |                         |              
|                                  | beginning of year           |                         | 16,772,221   
|Actual return on plan
assets      |                             | 521,375                 |              
|Employer contributions            |                             | -                       |              
|Benefits paid                     |                             | (1,525,441              | )            
|Fair value of plan
assets,        |                             |                         |              
|                                  | end of year                 |                         | 15,768,155   
|                                  |                             |                         |              
|Funded status                     |                             | 159,144                 |              
|Unrecognized actuarial
loss       |                             | 1,793,241               |              
|Unrecognized net transition       |                             |                         |              
|                                  | obligation                  |                         | 407,595      
|Net amount recognized
in the      |                             |                         |              
|                                  | consolidated balance sheets |                         | $  2,359,980 
|                                  |                             |                         |              
|Amounts Recognized
in the         |                             |                         |              
|                                  | Consolidated Balance Sheets |                         |              
|Prepaid pension cost              |                             | $  2,359,980            |              
|Pension obligation                |                             | (2,194,139              | )            
|Accrued pension plan
contribution |                             | -                       |              
|Intangible asset                  |                             | 376,632                 |              
|Accumulated other
comprehensive   |                             |                         |              
|                                  | income, before tax effect   |                         | 1,817,507    
|Net amount recognized
in the      |                             |                         |              
|                                  | consolidated balance sheets |                         | $  2,359,980 
|                                  |                             |                         |              
|                                  |                             |                         |              
|Weighted-Average
Assumptions      |                             |                         |              
|                                  | as of December 31           |                         |              
|Discount rate                     |                             | 7.75%                   |              
|Expected return on
plan assets    |                             | 8.00%                   |              
|Range of expected
compensation    |                             |                         |              
|                                  | increase                    |                         | 0-5.5%       

---

|Components of Net
Periodic     |                       |              |         |             |         |             |        
|------------------------------ | --------------------- | ------------ | ------- | ----------- | ------- | ----------- | -------
|                               | Benefit Cost          |              |         |             |         |             |        
|Service cost                   |                       | $      6,007 |         | $    10,403 |         | $    14,073 |        
|Interest cost                  |                       | 1,114,262    |         | 1,127,711   |         | 1,187,023   |        
|Expected return on
plan assets |                       | (1,217,559   | )       | (1,052,551  | )       | (946,392    | )      
|Amortization of unrecognized   |                       |              |         |             |         |             |        
|                               | transition obligation |              | 203,797 |             | 203,797 |             | 203,797
|Amortization of unrecognized   |                       |              |         |             |         |             |        
|                               | net loss              |              | 209,201 |             | 153,347 |             | 113,670
|                               |                       |              |         |             |         |             |        
|Net periodic benefit
cost      |                       | $   315,708  |         | $   442,707 |         | $   572,171 |        

The above represents the aggregation of amounts for the Company's two defined
benefit plans. As of December 31, 1999 and 1998, one of the plans had an
accumulated benefit obligation in excess of plan assets. For that plan,
the benefit obligation and accumulated benefit obligation, which are equal,
amounted to $13,799,506 and $14,888,810 and the fair value of plan assets
amounted to $13,443,256 and $14,659,752 as of December 31, 1999 and 1998,
respectively.

The Company's foreign subsidiary maintains a defined contribution retirement
savings plan. Due to overfunding of the plan, there were no contributions
in 1999, 1998 and 1997.

The Company has two defined contribution retirement savings plans, covering
substantially all domestic employees, which are funded solely through contributions
based on formulas as defined in the plan agreements. The assets are held
in trust for the sole benefit of the employees. Contribution expense was
$669,000, $668,000 and $569,000 for 1999, 1998 and 1997, respectively,
relating to these plans.

As part of the sale of its filter operations in 1995, the Company entered
into a deferred compensation agreement with a former officer of the Company.
The related deferred compensation expense was included as a cost of the
1995 sale. The deferred compensation benefits are to be paid over a period
of ten years, commencing in November 1995. At December 31, 1999 and 1998,
respectively, the present value of the deferred compensation liability
amounted to $232,480 and $262,566, of which $32,583 and $30,086 was due
within one year.



---

Note 6 - Postretirement Benefit Plans

Information regarding the Company's postretirement benefit plans as of
and for the years ended December 31, 1999, 1998 and 1997 is as follows:



|                                        | Year end December 31,           |            
|--------------------------------------- | ------------------------------- | -----------
|                                        | 1999                            |            
|Change in Benefit
Obligation            |                                 |            
|Benefit obligation,
beginning of year   | $   9,892,472                   |            
|Service cost                            | 32,316                          |            
|Interest cost                           | 618,182                         |            
|Amendment                               | -                               |            
|Actuarial (gain) loss                   | (856,701                        | )          
|Benefits paid                           | (1,080,887                      | )          
|Benefit obligation,
end of year         | $   8,605,382                   |            
|                                        |                                 |            
|Funded status                           | $  (8,605,382                   | )          
|Unrecognized prior
service benefit      |                                 |            
|                                        | relating to 1997 plan amendment | (5,961,451 
|Unrecognized actuarial
(gain) loss      | (194,145                        | )          
|Net amount recognized
in the            |                                 |            
|                                        | consolidated balance sheets     | (14,760,978
|Less current portion                    | (1,045,756                      | )          
|                                        |                                 |            
|Long-term portion                       | $(13,715,222                    | )          
|                                        |                                 |            
|Weighted-Average
Discount Rate          |                                 |            
|                                        | Assumption as of December 31    | 7.75%      
|                                        |                                 |            
|Components of Net
Periodic Benefit Cost |                                 |            
|Service cost                            | 32,316                          |            
|Interest cost                           | 618,182                         |            
|Amortization of unrecognized            |                                 |            
|                                        | prior service cost              | (503,563   
|                                        |                                 |            
|Net periodic benefit
cost               | $     146,935                   |            

Because the Company's contributions to the plans are fixed on a per active
and retired employee basis, assumed inflationary increases or decreases
in health care costs would have no impact on the postretirement benefit
obligation at December 31, 1999, or on the future annual aggregate service
and interest costs.

In early April 1997, the Company announced the amendment of its postretirement
benefit plans, principally to adjust the cost-sharing provisions. The amendment
resulted in a reduction of the Company's accumulated postretirement benefit
obligation by $7,346,249, creating an unrecognized prior service benefit
that is being amortized over a period of 15 years.

---

As a result of the Company's amendment of its postretirement benefit plans,
  as discussed in Note 6, the Company's retirees filed a class action lawsuit
  in the Western District of Michigan on January 24, 2000, under the Employee
  Retirement Income Security Act of 1974 (ERISA) and the Labor Management Relations
  Act of 1947 (LMRA). The suit alleges that the Company denied retirees and their
  dependents certain health insurance benefits to which the retirees have "vested"
  rights pursuant to the terms of the Company's collective bargaining agreements
  (1964 to the present). Specifically, the retiree class disputes the increase
  in their health insurance deductibles, the elimination of their prescription
  drug card and the requirement that they pay a portion of their health insurance
  premiums. The Company has denied any wrongdoing in this suit, and intends to
  defend it and any related class certification vigorously. However, because the
  lawsuit is in its very early stages, the Company's ultimate chances of success
  are uncertain. If the retirees prevail, the Company anticipates that a requirement
  to provide postretirement benefits at the pre-amendment level would have a material
  adverse effect on the future financial position, results of operations and cash
  flows of the Company. The case is scheduled for trial on June 18, 2001.

In
  the normal course of business, the Company is a named party in various environmental
  matters. In the opinion of management, disposition of these items will not have
  a material impact on the results of operations or financial condition of the
  Company.

Note 8 - Stockholders' Equity

Common Stock Repurchase Program

On February 10, 2000, the Company announced a common stock repurchase program.
The program calls for the repurchase of up to 100,000 shares in the open
market. The repurchased stock will be retired. On February 14, 2000, the
Company repurchased 30,000 shares. Funds for the repurchase, amounting
to approximately $231,000, were borrowed on the Company's short-term line
of credit discussed in Note 3.

Stockholders' Rights Plan

On February 13, 1996, the Company's Board of Directors authorized the adoption
of a Series A Preferred Stock Purchase Rights Plan (Plan). Under the Plan,
a dividend distribution of one Series A Preferred Stock Purchase Right
(Right) was made for each outstanding share of common stock, payable to
shareholders of record on March 8, 1996. The Plan is designed to protect
shareholders against unsolicited attempts to acquire control of the Company
in a manner that does not offer a fair price to all shareholders. In addition,
it is intended to help protect and preserve ownership of the Company's
principal tradenames and trademarks.

Each Right entitles shareholders to purchase one one-hundredth of a share
of preferred stock from the Company at a price of $100 per share, subject
to adjustment. The Rights will become exercisable only if a person or group
(Acquiring Person) acquires 15% or more of the Company's common stock or
announces a tender offer that would result in ownership of 30% or more
of the common stock. A person beneficially owning 15% or more of the outstanding
shares of common stock on February 13, 1996, or any affiliates or associates
thereof, do not constitute an Acquiring Person under the Plan.

The Company's Series A Preferred Stock consists of 500,000 shares authorized,
  at $2 par value, none of which are issued. Shares of preferred stock are reserved
  at a level sufficient to permit the



---

exercise in full of all the outstanding Rights. Under terms specified
  in the Plan, the Company has the right to redeem the Rights at one cent per
  Right.

Stock Option Plan

The Company's Stock Option and Restricted Stock Plan of 1997 permits the
grant of options to directors, officers and key employees to purchase shares
of common stock. A total of 38,000 shares (all share and option amounts
adjusted for the two-for-one stock split discussed below) are authorized
for grant under the plan. During 1999 and 1998, 10,200 and 12,850 options,
respectively, were granted under the plan. The options, which were immediately
vested upon grant, may be exercised for up to ten years after the date
of the grant.

A summary of activity for the plan is as follows:

| |                       | Year end December 31,
| | --------------------- | ---------------------
| |                       | 1999                 
| |                       |                      
| |                       | Shares               
| |                       |                      
| | Options outstanding,  |                      
| |                       | beginning of year    
| | Granted               | 10,200               
| | Exercised             | -                    
| | Terminated            | (1,800               
| |                       |                      
| | Options outstanding   |                      
| |                       | and exercisable,     
| |                       | end of year          
| |                       |                      
| | Options available
for |                      
| |                       | grant, end of year   

The Company has adopted the disclosure-only provisions of SFAS No. 123, Accounting
  For Stock-Based Compensation, relating to its stock option plan. Accordingly,
  no compensation cost has been recognized. Had compensation cost for the Company's
  stock options been determined based on their fair values at the grant dates
  consistent with the provisions of SFAS No. 123, the Company's net income and
  earnings per share, on a diluted basis, would have been reduced to the pro forma
  amounts indicated below:



---



| |                          |                             | Year ended December 31, |    
| | ------------------------ | --------------------------- | ----------------------- | ---
| |                          |                             | 1999                    |    
| |                          |                             |                         |    
| | Net income - as reported |                             | $  326,770              |    
| | Net income - pro forma   |                             | 296,974                 |    
| |                          |                             |                         |    
| | Earnings per share
on a  |                             |                         |    
| |                          | diluted basis - as
reported | .42                     |    
| | Earnings per share
on a  |                             |                         |    
| |                          | diluted basis - pro
forma   |                         | .38

The weighted average fair values per option at the date of grant for options
  granted under the plan during 1999 and 1998 was $3.27 and $6.17, respectively.
  The fair values of the option awards were estimated using the Black-Scholes
  option-pricing model with the following weighted-average assumptions:



| |  |  |                         | Year ended December 31, |  
| |  |  | ----------------------- | ----------------------- | -
| |  |  |                         | 1999                    |  
| |  |  |                         |                         |  
| |  |  | Dividend yield          | 2.30                    | %
| |  |  | Expected volatility     | 36.42                   | %
| |  |  | Risk-free interest rate | 6.11                    | %
| |  |  | Expected life in years  | 5.00                    |  

Restricted Stock Plan

The Company has established a restricted stock plan under which certain
officers and key employees may be awarded shares of restricted stock as
deferred compensation. Shares awarded pursuant to the plan are restricted
as to sale and transfer for periods of up to five years. The stock awards
vest 20% per year over the five-year period if predetermined corporate
performance goals are met. If goals are not met, the current year's vesting
amount is forfeited. If there is a change in control of the Company, the
shares will vest immediately. The recipient of the award has all the rights
of a shareholder, provided that all performance goals are met. During 1999,
1998 and 1997, the Company awarded 5,600, 10,600 and 5,000 shares, respectively,
of its common stock valued at $53,900, $219,700 and $68,438, respectively,
as deferred compensation, which is charged to expense based upon the vesting
schedule and upon achievement of the performance goals. Shares valued at
$72,545 (4,360 shares), $21,402 (1,700 shares) and $62,506 (4,650 shares)
were forfeited during 1999, 1998 and 1997, respectively. Share amounts
have been adjusted for the stock split discussed below.

Stock Split

On February 17, 1998, the Board of Directors authorized a two-for-one stock
split, effected in the form of a stock dividend, effective March 23, 1998,
payable to shareholders of record on March 2, 1998. On a split basis, the
Company had 780,626 shares outstanding at December 31, 1997. An amount
equal to the par value of the common shares issued was transferred from
retained earnings to common stock to effect the stock split. This transfer
has been reflected in the consolidated statements of stockholders' equity
at December 31, 1997. All references to number of common shares, except
shares authorized, and to all per share information have been adjusted
to reflect the stock split on a retroactive basis.



---

The components of income (loss) before income taxes are as follows:



| |          |  | Year ended December 31, | 
| | -------- |  | ----------------------- | 
| |          |  | 1999                    | 
| |          |  |                         | 
| | Domestic |  | $357,739                | 
| | Foreign  |  | 219,031                 | 
| |          |  |                         | 
| |          |  | $576,770                | 

Income tax expense (benefit) is made up of the following components:



| | Year ended December 31, 1999 | Current   |   | Deferred  |   | Deferred

Valuation

Allowance

Change |  | Total       |  
| | ---------------------------- | --------- | - | --------- | - | -------------------------------------- |  | ----------- | -
| |                              |           |   |           |   |                                        |  |             |  
| | Domestic                     | $ (21,000 | ) | $ 137,000 |   | $  30,000                              |  | $  146,000  |  
| | Foreign                      | 103,000   |   | 1,000     |   | -                                      |  | 104,000     |  
| |                              |           |   |           |   |                                        |  |             |  
| |                              | $  82,000 |   | $ 138,000 |   | $  30,000                              |  | $  250,000  |  
| |                              |           |   |           |   |                                        |  |             |  
| | Year ended December 31, 1998 |           |   |           |   |                                        |  |             |  
| |                              |           |   |           |   |                                        |  |             |  
| |                              |           |   |           |   |                                        |  |             |  
| | Domestic                     | $  68,000 |   | $ 958,000 |   | $          
-                          |  | $1,026,000  |  
| | Foreign                      | 31,000    |   | (3,000    | ) | -                                      |  | 28,000      |  
| |                              |           |   |           |   |                                        |  |             |  
| |                              | $  99,000 |   | $ 955,000 |   | $          
-                          |  | $1,054,000  |  
| |                              |           |   |           |   |                                        |  |             |  
| | Year ended December 31, 1997 |           |   |           |   |                                        |  |             |  
| |                              |           |   |           |   |                                        |  |             |  
| | Domestic                     | $  39,000 |   | $ 602,000 |   | $          
-                          |  | $   641,000 |  
| | Foreign                      | (8,000    | ) | (11,000   | ) | -                                      |  | (19,000     | )
| |                              |           |   |           |   |                                        |  |             |  
| |                              | $  31,000 |   | $ 591,000 |   | $          
-                          |  | $   622,000 |  



---



| |                                       | December 31,                     |             
| | ------------------------------------- | -------------------------------- | ------------
| |                                       | 1999                             |             
| |                                       |                                  |             
| | Deferred income tax
assets:           |                                  |             
| |                                       | Postretirement benefit           |             
| |                                       | obligation                       | $  5,018,732
| |                                       | Current asset valuation          |             
| |                                       | allowances                       | 640,214     
| |                                       | Net operating loss carryforwards | 1,392,619   
| |                                       | Foreign tax credit carryforwards | 329,520     
| |                                       | Deferred compensation            | 79,043      
| |                                       | Other                            | 360,113     
| |                                       |                                  |             
| | Gross deferred income
tax assets      | 7,820,241                        |             
| | Valuation allowance
- foreign tax     |                                  |             
| |                                       | credits (current)                | (30,027     
| |                                       |                                  |             
| | Total deferred income
tax assets      | 7,790,214                        |             
| |                                       |                                  |             
| | Deferred income tax
liabilities:      |                                  |             
| |                                       | Accumulated depreciation         | (469,224    
| |                                       | Prepaid pension costs            | (169,212    
| |                                       | Other                            | (172,433    
| |                                       |                                  |             
| | Total deferred income
tax liabilities | (810,869                         | )           
| |                                       |                                  |             
| | Net deferred income
tax assets        | 6,979,345                        |             
| | Less current portion                  | 2,124,962                        |             
| |                                       |                                  |             
| | Noncurrent portion                    | $ 4,854,383                      |             

The Company's net operating loss carryforwards for federal income tax purposes
amounted to $4,095,937 at December 31, 1999, of which $686,098 expires
in 2010, $100,185 in 2011, $2,761,711 expires in 2012 and $547,943 in 2019,
if not previously utilized. Foreign tax credits, amounting to $299,493
at December 31, 1999, net of valuation allowance, expire through 2004,
if not previously utilized.





---



| |                            | Year ended December 31, |  
| | -------------------------- | ----------------------- | -
| |                            | 1999                    |  
| |                            |                         |  
| | Computed "expected" tax    | $ 196,000               |  
| | Increase (decrease) in     |                         |  
| | tax resulting from:        |                         |  
| | Valuation allowance change |                         |  
| | due to foreign
tax credits | 30,000                  |  
| | State income taxes, net
of |                         |  
| | federal income
tax         |                         |  
| | benefit                    | (15,000                 | )
| | Other                      | 39,000                  |  
| |                            |                         |  
| |                            | $ 250,000               |  

Note 10 - Earnings Per Share

A reconciliation of the numerators and denominators in the basic and diluted
EPS calculations follows:



|             | Year ended December 31,  |                          
|------------ | ------------------------ | -------------------------
|             | 1999                     |                          
|             |                          |                          
|Numerator:   |                          |                          
|             | Net income used for      |                          
|             |                          | both basic and diluted   
|             |                          | EPS calculation          
|Denominator: |                          |                          
|             | Weighted average shares  |                          
|             |                          | outstanding for the      
|             |                          | period - used for basic  
|             |                          | EPS calculation          
|             | Dilutive effect of
stock |                          
|             |                          | options and contingently 
|             |                          | issuable shares          
|             | Weighted average shares  |                          
|             |                          | outstanding for the      
|             |                          | period - used for diluted
|             |                          | EPS calculation          

All outstanding shares have been adjusted for the two-for-one stock split
discussed in Note 8.



---

The Company's net sales were made to customers in the following countries:



| |                         | Year ended December 31, | 
| | ----------------------- | ----------------------- | 
| |                         | 1999                    | 
| |                         |                         | 
| | United States           | $28,588,594             | 
| | Canada                  | 4,348,971               | 
| | Other foreign countries | 3,658,695               | 
| |                         |                         | 
| | Consolidated total      | $36,596,260             | 

The location of the Company's long-lived assets is as follows:



| |                    | December 31, | 
| | ------------------ | ------------ | 
| |                    | 1999         | 
| |                    |              | 
| | United States      | $ 7,277,400  | 
| | Canada             | 1,258,333    | 
| |                    |              | 
| | Consolidated total | $ 8,535,733  | 

Net sales to one customer represented approximately $4,242,000, $3,874,000
and $3,180,000 of the Company's consolidated sales for 1999, 1998 and 1997,
respectively.

Note 12 - Subsequent Event

Effective March 30, 2000, the Company's loan agreement with its primary lender
  relating to its short-term and long-term borrowings was amended. The primary
  changes to the loan agreement include (1) an increase in the short-term line
  from $3,000,000 to $3,500,000, (2) an extension of the maturity date on the
  short-term line from May 31, 2000 to September 30, 2002, (3) a reduction in
  the quarterly principal payments on the long-term portion of the loan agreement,
  as detailed below, with a corresponding extended final maturity date from June
  30, 2003 to December 31, 2003, and (4) an adjustment of certain restrictive
  covenants. In addition, borrowings under the amended loan agreement are secured
  by all accounts receivable, inventory, furniture and equipment, machinery and
  equipment and all other personal property of the Company, and are guaranteed
  by all subsidiaries of the Company. Of the $4,620,000 outstanding long-term
  debt balance at December 31, 1999, principal payments under the amended agreement
  are due as follows: $960,000 in 2000, $1,100,000 in 2001 and $1,280,000 in 2002
  and 2003. The revised maturity schedule has been reflected in the current and
  non-current classifications of long-term debt in the accompanying consolidated
  balance sheet at December 31, 1999.



---

Hastings Manufacturing Company

Hastings, Michigan

We have audited the accompanying consolidated balance
sheets of Hastings Manufacturing Company and subsidiaries as of December
31, 1999 and 1998, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the three years in the period ended December
31, 1999. These consolidated financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.

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

As described in Note 7, on January 24, 2000, a class action
lawsuit was filed against the Company by its retirees with respect to the
early 1997 amendment of the Company's postretirement benefit plans. The
outcome of the lawsuit is uncertain at this time.

In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Hastings Manufacturing Company and subsidiaries at December
31, 1999 and 1998, and the results of their operations and their cash flows
for each of the three years in the period ended December 31, 1999, in conformity
with generally accepted accounting principles.

/s/BDO Seidman, LLP
BDO Seidman, LLP
Grand Rapids, Michigan
February 29, 2000, except Note 12,
which is dated March
  30, 2000



---

|Item
      9. | Changes
      in and Disagreements With Accountants
      on Accounting and Financial Disclosure
|------------- | ------------------------------------------------------------------------------------------------
|              |                                                                                                 
|              | Not applicable.                                                                                 





|Item
      10. | Directors
      and Executive Officers of the Registrant.
|-------------- | ---------------------------------------------------------

The information required by this item is incorporated herein by reference
from the sections entitled "Directors and Executive Officers" and "Section
16(a) Beneficial Ownership Reporting Compliance" in the Company's definitive
proxy statement relating to its Annual Meeting of Shareholders to be held
May 9, 2000.



|Item
      11. | Executive
      Compensation.
|-------------- | -----------------------------

The information required by this item is incorporated herein by reference
from the sections entitled "Compensation of Directors," "Executive Compensation,"
and "Deferred Compensation" in the Company's definitive proxy statement
relating to its Annual Meeting of Shareholders to be held May 9, 2000.



|Item
      12. | Security
      Ownership of Certain Beneficial Owners
      and Management.
|-------------- | ---------------------------------------------------------------------------

The information required by this item is incorporated herein by reference
from the section entitled "Voting Securities" in the Company's definitive
proxy statement relating to its Annual Meeting of Shareholders to be held
May 9, 2000.



|Item 13. | Certain
      Relationships and Related Transactions.
|-------- | -----------------------------------------------------

The information required by this item, if any, is incorporated herein by
reference from the sections entitled "Directors and Executive Officers"
and "Compensation Committee Interlocks and Insider Participation" in the
Company's definitive proxy statement relating to its Annual Meeting of
Shareholders to be held May 9, 2000.



---



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

Item 14(a)1.       
Financial Statements.

(A)        
The following financial statements are filed as part of this document in
Item 8, "Financial Statements and Supplementary Data."



| |                                                               |                              | Page 
| | ------------------------------------------------------------- | ---------------------------- | -----
| | Consolidated Balance
Sheets as of December 31, 1999 and 1999  |                              | 15-16
| | Consolidated Statements
of Income for the years ended         |                              |      
| | December
31, 1999, 1998 and 1997                              |                              | 17   
| | Consolidated Statements
of Stockholders' Equity for the years |                              |      
| | ended
December 31, 1999, 1998 and 1997                        |                              | 18-19
| | Consolidated Statements
of Cash Flows for the years ended     |                              |      
| | December
31, 1999, 1998 and 1997                              |                              | 20-21
| | Notes to Consolidated
Financial Statements                    |                              | 22-37
| | Report of Independent
Certified Public Accountants            |                              | 38   
| |                                                               |                              |      
| | (B)                                                           | Financial Statement Schedule |      
| |                                                               |                              |      
| | Report of Independent
Certified Public Accountants            |                              | 47   
| | Schedule II - Valuation
and Qualifying Accounts               |                              | 48   

Item 14(a)2.        
Financial Statement Schedules.

The Financial Statement Schedule set forth in the Index to Financial Statement
Schedules hereto is filed as a part of this Form 10-K Report.

Item 14(a)3.        
Exhibits.

Number



|3(a) | Amended Articles of Incorporation
      of Hastings Manufacturing Company, filed as an exhibit to the Form 10-Q
      Quarterly Report for the period ended June 30, 1998, are here incorporated
      by reference.                                                                                                           
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                
|3(b) | Bylaws of Hastings Manufacturing
Company, filed as an exhibit to the Form 10-Q Quarterly Report for the
period ended March 31, 1999, are here incorporated by reference.                                                                                                                                                       
|     |                                                                                                                                                                                                                                                                                                                                
|4(a) | NBD Bank Amended and Restated
Letter Agreement for $6,600,000 Term Loan and $3,000,000 Credit Authorization
to Make Revolving Credit Loans and Issue Letters of Credit dated August
28, 1998, filed as an exhibit to the Form 10-Q Quarterly Report for the
period ended September 30, 1998, is here incorporated by reference.
|     |                                                                                                                                                                                                                                                                                                                                

---

|4(b)   | First Amendment to Amended and Restated
      Letter Agreement, dated November 11, 1999 between Hastings Manufacturing
      Company and Bank One, Michigan (formerly NBD Bank), filed as an exhibit
      to the Form 10-Q Quarterly Report for the period ended September 30, 1999,
      is here incorporated by reference.
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                               
|4(c)   | Restated Master Agreement
      dated August 10, 1998, regarding an interest rate swap transaction between
      Hastings Manufacturing Company and NBD Bank, filed as an exhibit to the
      Form 10-Q Quarterly Report for the period ended September 30, 1998, is here
      incorporated by reference.                   
|       |                                                                                                                                                                                                                                                                                                                               
|4(d)   | Commercial Line of Credit
      Agreement and Note, dated as of January 23, 1998, between Hastings Manufacturing
      Company and Hastings City Bank, filed as an exhibit to the Form 10-Q Quarterly
      Report for the period ended June 30, 1998, is here incorporated by reference.                                     
|       |                                                                                                                                                                                                                                                                                                                               
|4(e)   | Preferred Stock Purchase
      Rights Plan, filed as an exhibit to Form 8-K filed with the Securities and
      Exchange Commission on February 15, 1996, is here incorporated by reference.                                                                                                                                  
|       |                                                                                                                                                                                                                                                                                                                               
|10(a)  | List of Recipients of
      Indemnity Agreement and Form of Indemnity Agreement, filed as an exhibit
      to the Form 10-K Annual Report for the year ended December 31, 1998, is
      here incorporated by reference.                                                                                                      
|       |                                                                                                                                                                                                                                                                                                                               
|10(b)* | 1990 Restricted Stock
      Plan, filed as an exhibit to the Form 10-K Annual Report for the year ended
      December 31, 1998, is here incorporated by reference.                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                               
|10(c)  | Asset Purchase Agreement
      between Hastings Manufacturing Company and CLARCOR Inc. dated as of September
      3, 1995, filed as an exhibit to the Form 8-K filed with the Securities and
      Exchange Commission on September 20, 1995, is incorporated herein by reference.                                           
|       |                                                                                                                                                                                                                                                                                                                               
|10(d)  | Transition Agreement,
      dated September 3, 1995, among Hastings Filters, Inc., Hastings Manufacturing
      Company and Hastings, Inc. and joined in by CLARCOR Inc., filed as an exhibit
      to the Form 10-Q Quarterly Report for the period ended September 30, 1997,
      is incorporated herein by reference.     
|       |                                                                                                                                                                                                                                                                                                                               
|10(e)* | Stock Option and Restricted
      Stock Plan of 1997, as amended.                                                                                                                                                                                                                                                             
|       |                                                                                                                                                                                                                                                                                                                               
|10(f)* | Form of Incentive Stock
      Option Agreement for use under the Stock Option and Restricted Plan of 1997,
      filed as an exhibit to the Form 10-K Annual Report for the year ended December
      31, 1998, is here incorporated by reference.                                                                            
|       |                                                                                                                                                                                                                                                                                                                               
|10(g)* | Form of Nonqualified
      Stock Option Agreement for use under the Stock Option and Restricted Stock
      Plan of 1997, filed as an exhibit to the Form 10-K Annual Report for the
      year ended December 31, 1998, is here incorporated by reference.                                                                   
|       |                                                                                                                                                                                                                                                                                                                               
|10(h)  | Joint Venture Agreement
      dated October 4, 1999, between Hastings Manufacturing Company and Intraco
      Corporation, filed as an exhibit to the Form 8-K Current Report dated October
      7, 1999, is here incorporated by reference.                                                                                 
|       |                                                                                                                                                                                                                                                                                                                               
|21     | Subsidiaries of Hastings
      Manufacturing Company                                                                                                                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                               
|23     | Consent of BDO Seidman,
LLP                                                                                                                                                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                               

---

|24 | Powers of Attorney                                                               
|-- | ---------------------------------------------------------------------------------
|   |                                                                                  
|27 | Financial Data Schedule as
      of December 31, 1999 and for the year then ended

*Management contract or compensatory plan or arrangement.

Item 14(b).        
Reports on Form 8-K.

On October 7, 1999, the Company filed a Current Report on
  Form 8-K to report that the Company had entered into a Joint Venture Agreement
  with Intraco Corporation. No financial statements were included with this Form
  8-K.

---

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report on Form 10-K to
be signed below on its behalf by the undersigned, thereunto duly authorized.



|Dated: March 30, 2000 | HASTINGS MANUFACTURING COMPANY
(registrant)

By /s/ Thomas J. Bellgraph
Thomas J. Bellgraph
Its Vice President, Finance
(Principal Financial and
Accounting Officer)
|--------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



---



|Signature                    |  | Title                                  | Date           | 
|---------------------------- |  | -------------------------------------- | -------------- | 
|                             |  |                                        |                | 
|                             |  |                                        |                | 
|/s/ Andrew F. Johnson        |  | Co-Chief Executive
Officer, President/ | March 30, 2000 | 
|Andrew F. Johnson            |  | Operations and                         |                | 
|                             |  | Director                               |                | 
|                             |  |                                        |                | 
|                             |  |                                        |                | 
|/s/ Mark R. S. Johnson       |  | Co-Chief Executive
Officer, President/ | March 30, 2000 | 
|Mark R. S. Johnson           |  | Marketing and                          |                | 
|                             |  | Director                               |                | 
|                             |  |                                        |                | 
|                             |  |                                        |                | 
|*/s/ Dale W. Koop            |  | Director                               | March 30, 2000 | 
|Dale W. Koop                 |  |                                        |                | 
|                             |  |                                        |                | 
|                             |  |                                        |                | 
|*/s/ Monty C. Bennett        |  | Director                               | March 30, 2000 | 
|Monty C. Bennett             |  |                                        |                | 
|                             |  |                                        |                | 
|                             |  |                                        |                | 
|*/s/ Douglas A. DeCamp       |  | Director                               | March 30, 2000 | 
|Douglas A. DeCamp            |  |                                        |                | 
|                             |  |                                        |                | 
|                             |  |                                        |                | 
|*/s/William R. Cook          |  | Director                               | March 30, 2000 | 
|William R. Cook              |  |                                        |                | 
|                             |  |                                        |                | 
|                             |  |                                        |                | 
|*/s/ Neil A. Gardner         |  | Director                               | March 30, 2000 | 
|Neil A. Gardner              |  |                                        |                | 
|                             |  |                                        |                | 
|                             |  |                                        |                | 
|*/s/ Richard L. Foster       |  | Director                               | March 30, 2000 | 
|Richard L. Foster            |  |                                        |                | 
|                             |  |                                        |                | 
|                             |  |                                        |                | 
|*By  /s/ Thomas J. Bellgraph |  |                                        |                | 
|Thomas J. Bellgraph          |  |                                        |                | 
|Attorney In Fact             |  |                                        |                | 

---





---





|                                                   | Page                                  
|-------------------------------------------------- | --------------------------------------
|                                                   |                                       
|                                                   |                                       
|Report of Independent
Certified Public Accountants |                                       
|on Financial Statement
Schedule                    | 47                                    
|                                                   |                                       
|                                                   |                                       
|Schedule:                                          |                                       
|                                                   |                                       
|                                                   | II - Valuation and Qualifying
Accounts

Other schedules have been omitted because they were inapplicable or otherwise
not required.

---

In our opinion, such financial statement schedule presents
fairly, in all material respects, the information set forth therein.

/s/ BDO Seidman, LLP
BDO Seidman, LLP
Grand Rapids, Michigan
February 29, 2000

---

|Column A    | Column B                                   |  | Column C                                  |  | Column D                              |  | Column E                    
|----------- | ------------------------------------------ |  | ----------------------------------------- |  | ------------------------------------- |  | ----------------------------
|            |                                            |  |                                           |  |                                       |  |                             
|            |                                            |  | Additions                                 |  |                                       |  |                             
|Description | Balance at
      beginning
      of period |  | Charged to
      costs and
      expenses |  | Charged to
      other
      accounts |  | Deductions/
      write-offs
|            | $                                          |  | $                                         |  | $                                     |  | $                           

|Year Ended December
31, 1999: |                        |         |  |         |  |    |  |         |  |        
|----------------------------- | ---------------------- | ------- |  | ------- |  | -- |  | ------- |  | -------
|                              |                        |         |  |         |  |    |  |         |  |        
|                              | Allowance for possible |         |  |         |  |    |  |         |  |        
|                              | losses on receivables  | 210,000 |  | 157,500 |  | -- |  | 137,500 |  | 230,000
|                              |                        |         |  |         |  |    |  |         |  |        
|Year Ended December
31, 1998: |                        |         |  |         |  |    |  |         |  |        
|                              |                        |         |  |         |  |    |  |         |  |        
|                              | Allowance for possible |         |  |         |  |    |  |         |  |        
|                              | losses on receivables  | 215,000 |  | 458,500 |  | -- |  | 463,500 |  | 210,000
|                              |                        |         |  |         |  |    |  |         |  |        
|Year Ended December
31, 1997: |                        |         |  |         |  |    |  |         |  |        
|                              |                        |         |  |         |  |    |  |         |  |        
|                              | Allowance for possible |         |  |         |  |    |  |         |  |        
|                              | losses on receivables  | 215,000 |  | 36,000  |  | -- |  | 36,000  |  | 215,000

---

|3(a)   | Amended Articles of Incorporation
      of Hastings Manufacturing Company, filed as an exhibit to the Form 10-Q
      Quarterly Report for the period ended June 30, 1998, are here incorporated
      by reference.                                                                                                                                   
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                        
|3(b)   | Bylaws of Hastings Manufacturing
      Company, filed as an exhibit to the Form 10-Q Quarterly Report for the period
      ended March 31, 1999, are here incorporated by reference.                                                                                                                                                                   
|       |                                                                                                                                                                                                                                                                                                                                                        
|4(a)   | NBD Bank Amended and Restated Letter
      Agreement for $6,600,000 Term Loan and $3,000,000 Credit Authorization to
      Make Revolving Credit Loans and Issue Letters of Credit dated August 28,
      1998, filed as an exhibit to the Form 10-Q Quarterly Report for the period
      ended September 30, 1998, is here incorporated by reference.
|       |                                                                                                                                                                                                                                                                                                                                                        
|4(b)   | First Amendment to Amended and Restated
      Letter Agreement, dated November 11, 1999 between Hastings Manufacturing
      Company and Bank One, Michigan (formerly NBD Bank), filed as an exhibit
      to the Form 10-Q Quarterly Report for the period ended September 30, 1999,
      is here incorporated by reference.                         
|       |                                                                                                                                                                                                                                                                                                                                                        
|4(c)   | Restated Master Agreement
      dated August 10, 1998, regarding an interest rate swap transaction between
      Hastings Manufacturing Company and NBD Bank, filed as an exhibit to the
      Form 10-Q Quarterly Report for the period ended September 30, 1998, is here
      incorporated by reference.                                            
|       |                                                                                                                                                                                                                                                                                                                                                        
|4(d)   | Commercial Line of Credit
      Agreement and Note, dated as of January 23, 1998, between Hastings Manufacturing
      Company and Hastings City Bank, filed as an exhibit to the Form 10-Q Quarterly
      Report for the period ended June 30, 1998, is here incorporated by reference.                                                              
|       |                                                                                                                                                                                                                                                                                                                                                        
|4(e)   | Preferred Stock Purchase
      Rights Plan, filed as an exhibit to Form 8-K filed with the Securities and
      Exchange Commission on February 15, 1996, is here incorporated by reference.                                                                                                                                                           
|       |                                                                                                                                                                                                                                                                                                                                                        
|10(a)  | List of Recipients of
      Indemnity Agreement and Form of Indemnity Agreement, filed as an exhibit
      to the Form 10-K Annual Report for the year ended December 31, 1998, is
      here incorporated by reference.                                                                                                                               
|       |                                                                                                                                                                                                                                                                                                                                                        
|10(b)* | 1990 Restricted Stock
      Plan, filed as an exhibit to the Form 10-K Annual Report for the year ended
      December 31, 1998, is here incorporated by reference.                                                                                                                                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                        
|10(c)  | Asset Purchase Agreement
      between Hastings Manufacturing Company and CLARCOR Inc. dated as of September
      3, 1995, filed as an exhibit to the Form 8-K filed with the Securities and
      Exchange Commission on September 20, 1995, is incorporated herein by reference.                                                                    
|       |                                                                                                                                                                                                                                                                                                                                                        
|10(d)  | Transition Agreement,
      dated September 3, 1995, among Hastings Filters, Inc., Hastings Manufacturing
      Company and Hastings, Inc. and joined in by CLARCOR Inc., filed as an exhibit
      to the Form 10-Q Quarterly Report for the period ended September 30, 1997,
      is incorporated herein by reference.                              
|       |                                                                                                                                                                                                                                                                                                                                                        

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|10(e)* | Stock Option and Restricted
      Stock Plan of 1997, as amended.                                                                                                                                                                                          
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                            
|10(f)* | Form of Incentive Stock
      Option Agreement for use under the Stock Option and Restricted Plan of 1997,
      filed as an exhibit to the Form 10-K Annual Report for the year ended December
      31, 1998, is here incorporated by reference.         
|       |                                                                                                                                                                                                                                                            
|10(g)* | Form of Nonqualified
      Stock Option Agreement for use under the Stock Option and Restricted Stock
      Plan of 1997, filed as an exhibit to the Form 10-K Annual Report for the
      year ended December 31, 1998, is here incorporated by reference.
|       |                                                                                                                                                                                                                                                            
|10(h)  | Joint Venture Agreement
      dated October 4, 1999, between Hastings Manufacturing Company and Intraco
      Corporation, filed as an exhibit to the Form 8-K Current Report dated October
      7, 1999, is here incorporated by reference.              
|       |                                                                                                                                                                                                                                                            
|21     | Subsidiaries of Hastings
      Manufacturing Company                                                                                                                                                                                                       
|       |                                                                                                                                                                                                                                                            
|23     | Consent of BDO Seidman,
      LLP                                                                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                            
|24     | Powers of Attorney                                                                                                                                                                                                                                         
|       |                                                                                                                                                                                                                                                            
|27     | Financial Data Schedule
      as of December 31, 1999 and for the year then ended                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                            
|       | *Management contract
      or compensatory plan or arrangement.                                                                                                                                                                                            

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