<PAGE>
 
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                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549
 
                                   FORM 10-K
 
                               ----------------
 
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
    OF 1934 (FEE REQUIRED)
 
                                      OR
 
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934 (NO FEE REQUIRED)
 
      For the fiscal year ended                Commission file number
          December 31, 1996                           0-21856
 
                               ----------------
 
                       ABT BUILDING PRODUCTS CORPORATION
            (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
        DELAWARE                                          13-3684348
(STATE OR OTHER JURISDICTION OF               (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
 
                  ONE NEENAH CENTER, NEENAH, WISCONSIN 54956
              (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
 
      Registrant's telephone number, including area code: (414) 751-8611
 
                               ----------------
 
       SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
        SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
 
                              TITLE OF EACH CLASS
                            ----------------------
                         Common Stock, $.01 par value
 
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.
 
On March 21, 1997, the aggregate market value of the voting stock held by non-
affiliates of the registrant, using the closing price of the registrant's
common stock on such date, was $226,312,440.
 
The number of outstanding shares of the registrant's common stock, $.01 par
value, was 10,526,160 as of March 21, 1997.
 
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                      DOCUMENTS INCORPORATED BY REFERENCE
 
IDENTIFICATION OF DOCUMENTS                      PART INTO WHICH INCORPORATED
---------------------------                      ----------------------------
 
Proxy Statement for Annual Meeting of            Part III--Items 11, 12 and 13
Shareholders to be held on April 30, 1997
<PAGE>
 
                       ABT BUILDING PRODUCTS CORPORATION
 
                          1996 FORM 10-K ANNUAL REPORT
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
 ITEM NO.                           DESCRIPTION                            PAGE
 --------                           -----------                            ----
 
                                     PART I
 
 <C>      <S>                                                              <C>
 Item  1. Business......................................................     1
 Item  2. Properties....................................................     8
 Item  3. Legal Proceedings.............................................     9
 Item  4. Submission of Matters to a Vote of Security Holders...........    12
 
                                    PART II
 
 Item  5. Market for Registrant's Common Equity and Related Stockholder     12
           Matters......................................................
 Item  6. Selected Financial Information and Other Data.................    13
 Item  7. Management's Discussion and Analysis of Financial Condition       14
           and Results of Operations....................................
 Item  8. Financial Statements and Supplementary Data...................    19
 Item  9. Changes in and Disagreements with Accountants on Accounting       41
           and Financial Disclosure.....................................
 
                                    PART III
 
 Item 10. Directors and Executive Officers of the Registrant............    41
 Item 11. Executive Compensation........................................    43
 Item 12. Security Ownership of Certain Beneficial Owners and               43
           Management...................................................
 Item 13. Certain Relationships and Related Transactions................    43
 
                                    PART IV
 
 Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-    45
           K............................................................
</TABLE>
 
<PAGE>
 
                                    PART I
 
ITEM 1. BUSINESS
 
GENERAL
 
  The Company is a leading manufacturer of hardboard and plastic resin
specialty building products that generally serve as substitutes for natural
wood and other materials. The Company's products are sold throughout the
United States, Canada and internationally into the repair and remodeling, new
residential construction and industrial markets. The Company services these
markets through four distribution channels: distributors, home centers,
manufactured housing builders and industrial fabricators. The Company's
products are comprised of three principal product groups: (i) exterior siding
and trimboard ("Exterior Hardboard Siding"); (ii) interior hardboard products,
including tileboard (used primarily in high-moisture areas such as kitchens
and bathrooms), prefinished paneling, door skins and hardboard substrate
("Interior Hardboard"); and (iii) plastic resin products, including decorative
prefinished mouldings, exterior vinyl siding and trim accessories, decorative
plastic shutters, vents, building product accessories and other plastic
products ("Plastics").
 
  The hardboard that is used in the Company's Exterior Hardboard Siding and
Interior Hardboard products consists of engineered wood produced from small
pulpwood, sawmill residue and wood waste. Exterior Hardboard Siding is made
from hardboard that is generally thicker and heavier than the hardboard used
in Interior Hardboard products. In the hardboard production process, the raw
material is processed into fibers and then rejoined under extreme heat and
pressure. The hardboard produced through this process is free of knots and
other imperfections of natural wood, has higher density and is less permeable
to moisture than many natural woods. In manufacturing its Exterior Hardboard
Siding and Interior Hardboard products, the Company applies various finishes
to embossed, flat and textured surfaces to produce the desired appearance.
 
  The primary materials used in the manufacture of the Company's Plastics
products are polystyrene, polyvinyl chloride ("PVC"), polypropylene and
polyethylene. Plastic mouldings and vinyl siding are produced utilizing
specialized extrusion processes in which polystyrene or PVC and other
materials are heated, drawn out and forced through various dies to produce
numerous shapes and textures. A variety of laminations and colorings are
applied to these products to achieve the desired color and type of finish. The
majority of the Company's shutters and related products are manufactured using
an injection-molding process in which the thermoplastic resins and other
materials are forced into a mold under heat and pressure to form the product.
The desired color of the product is achieved by adding colorant directly into
the resin or by subsequently painting/finishing the molded part. Products are
also produced using a thermoforming process. The Company's Plastics products
compete against similar natural wood products, but are considered to have the
advantages of uniform appearance, consistent quality, and ease of
installation.
 
  The Company believes that the principal competitive factors in the markets
for its products are quality, performance, price (particularly as compared to
natural wood and ceramic tile products), ease of installation, customer
service and marketing. These factors are especially important to home center
retailers who have become a significantly larger segment of the market and who
are in a position to promote remodeling and home improvement products.
 
  The Company's products are generally sold under the "ABTco", "ABT Canada
Limited", "Canexel" and "KenTech" trade names.
 
  The Company was formed in 1992 in order to acquire a substantial portion of
its current domestic operations from Abitibi-Price Corporation ("APC"). The
transaction was completed on October 20, 1992 (the "Acquisition"). In July
1993, the Company consummated an initial public offering of its Common Stock,
the proceeds of which were utilized to retire a significant portion of its
senior indebtedness incurred in connection with the Acquisition.
 
                                       1
<PAGE>
 
  In February 1994, the Company acquired the Canexel Division of Avenor, Inc.
("Canexel"), a manufacturer of Exterior Hardboard Siding and Interior
Hardboard products located in Nova Scotia, Canada. In April 1995, the Company
acquired substantially all of the assets of KenTech Plastics, Inc., a
manufacturer of shutters and related products based in Hopkinsville, Kentucky.
In June 1995, the Company acquired the vinyl siding operations of EMCO, Inc.
located in Acton, Ontario, Canada. In November 1995, the Board of Directors
approved plans for the construction of a facility which will manufacture a
fiber-reinforced cement plank or panel, which will have a Class 1 fire rating
and is both moisture and insect resistant. The product, initially to be used
as exterior siding, will be produced in a wide variety of simulated woodgrain
surfaces, including fir and cedar. On December 12, 1995, the Company executed
an agreement with J.M. Voith AG to provide the primary production equipment
for this facility. It is anticipated that the plant will be completed in the
second half of 1997. The estimated cost of construction is $55 million. To
date, the Company has spent $37 million on the project.
 
BUSINESS STRATEGY
 
  The Company has developed a business strategy designed to increase sales and
improve operating margins by continuously expanding its product offerings and
improving product distribution. The principal components of this strategy are
to:
 
  Capitalize on Distribution and Marketing Strength. The Company continues to
increase the volume of its products sold through home centers as well as
through international distribution channels. Domestic home center sales
increased 47% in 1996 over the prior year. Acquisitions have enabled the
Company to strengthen distribution in Canada, Europe and the Pacific Rim
nations. Sales by the Company's production facilities located outside the
United States have increased from $30 million in 1994 to $87 million in 1996.
Sales outside of North America have increased from $7.6 million in 1995 to
$20.0 million in 1996.
 
  Develop New Products. The Company has introduced several new products in the
past four years. New moulding products, such as UltraOak , Affinity and Prime
Mould, currently account for approximately 30% of total moulding sales. The
Company has also introduced an exterior hardboard trim product which has
reached 9% of total exterior hardboard sales in under two years. The Company
intends to introduce additional new products in its Interior Hardboard and
Plastics product lines. With the continued introduction of new products, the
Company expects to further increase capacity utilization at its operations,
thereby reducing average overhead cost per unit.
 
  Acquire Complementary Product Lines. The Company intends to continue to
pursue acquisitions of complementary specialty building product lines that
will enable the Company to better utilize its overall production capabilities,
extensive distribution network and management expertise. The development of
new products and acquisition of complementary product lines will allow the
Company to provide one of the most complete lines of exterior and interior
products to its customers.
 
PRODUCTS AND MARKETS
 
  Exterior Hardboard Siding. Exterior Hardboard Siding accounted for 37% of
the Company's net sales for the year ended December 31, 1996. The Company
manufactures approximately 100 different Exterior Hardboard Siding products
which fall into two broad categories, lap siding and panel siding. Lap siding
is installed with the bottom edge overlapping the top edge of adjacent
segments, while panel siding is installed flush to adjacent edges. These
products are either primed or prefinished in a wide variety of surfaces,
including stucco, fir, cedar and other simulated woodgrains.
 
  The new construction market has accounted for a significant percentage of
Exterior Hardboard Siding sales with the home improvement, repair and
remodeling market representing the balance. Exterior Hardboard Siding has less
appeal to the home improvement, repair and remodeling market where it must
compete with aluminum, vinyl and other products that can be placed on top of
existing exterior cladding and thus are easier to install.
 
                                       2
<PAGE>
 
  During the past four years, primarily in response to continued demand for
Exterior Hardboard Siding products, the Company has increased the annual
production capacity at its Roaring River Siding facility from approximately
200 million surface feet to approximately 270 million surface feet as of
December 31, 1996. The increase in capacity was attained through a combination
of improvements in the manufacturing process and a capital investment of
approximately $4.0 million during 1993 and 1994.
 
  This increased Exterior Hardboard Siding production capacity has enabled the
Company to broaden its product distribution, and the Company has arranged with
certain customers to distribute Exterior Hardboard Siding nationally. In
addition, the introduction in 1994 of the Company's trimboard products, an
alternative to solid wood trim used on the exterior of homes, is expected to
enhance the Company's long-term utilization of production capacity. The
Company's primary marketing emphasis remains on the southeastern and central
states, the regions where demand for Exterior Hardboard Siding is the highest
and where new residential construction has exceeded national averages in
recent years. The largest end users of hardboard siding are builders and
contractors. To service these markets, the Company primarily uses three
channels of distribution: (i) distributors selling to retailers and
contractors, (ii) direct sales to manufactured housing builders, and (iii)
home centers specializing in direct sales to builders and contractors. These
channels provide the Company with a broad customer base for its Exterior
Hardboard Siding products, with no single customer accounting for more than
12% of 1996 Exterior Hardboard Siding sales. Ten customers represented 59% of
the Company's 1996 Exterior Hardboard Siding sales, and the top twenty
customers represented 82% of such sales.
 
  Interior Hardboard. Sales of Interior Hardboard accounted for 29% of the
Company's net sales for the year ended December 31, 1996. The Company's
Interior Hardboard product group has three general categories, prefinished
products, door skins and industrial hardboard. Prefinished products consists
of two basic types: (i) tileboard, including both embossed and flat melamine
surfaces which substitute for ceramic tile in kitchens, bathrooms and other
high-moisture areas; and (ii) paneling, including embossed woodgrain and stone
designs, wet print designs and vinyl and paper overlays.
 
  Prefinished products are used primarily in the repair and remodeling and
home improvement markets. To a lesser extent, prefinished products are also
sold for various applications in new residential and commercial construction.
The Company believes that the main advantages of its prefinished products as
compared to ceramic tile and wallpaper are lower installed cost, superior
design capabilities and ease of application. The primary point of sale to the
end user of prefinished paneling products is the home center retailer or
retail lumber dealer. The Company distributes its prefinished products through
distributors and directly to home centers.
 
  Door skin products are manufactured from engineered hardwood fiber and are
50% denser than natural wood. The Company's product line consists of two
brands: Beauport door panels, which are embossed with the texture of oak and
prefinished in numerous natural wood colors, and Newport door panels, which
are embossed to replicate the look and design of a traditional 6-panel
colonial door. The Company sells its door panel products to interior door
manufacturers in North America and internationally.
 
  The Company's state-of-the-art printing and coating operation located in
Toledo, Ohio, is currently operating at less than full capacity. With the
continued expansion into home centers and ongoing new product development and
introduction, the Company expects to increase capacity utilization at this
facility, thereby reducing average overhead cost per unit.
 
  The Company's industrial hardboard is a high quality substrate that has a
smooth surface on both sides. The Company sells industrial hardboard in an
unfinished state to various fabricators who use hardboard for a variety of
applications, such as the production of furniture components, displays and
store fixtures. The Company also sells unfinished hardboard to other companies
who apply finishing techniques to produce interior building products similar
to those of the Company.
 
                                       3
<PAGE>
 
  No single customer accounted for more than 12% of 1996 Interior Hardboard
sales, while ten customers represented 50% of the Company's 1996 Interior
Hardboard sales and the top twenty accounts represented 63% of such sales.
 
  Plastics. Sales of Plastics products represented 34% of the Company's net
sales for the year ended December 31, 1996, of which plastic mouldings
accounted for 9%. The Company's plastic moulding products consist primarily of
prefinished polystyrene mouldings and trim which are produced in a wide
variety of profiles and lengths and are finished in a variety of colors,
woodgrain prints and paper overlays. The Company also produces a line of rigid
PVC mouldings for use with decorative plastic and designer paneling.
 
  The major market for the Company's prefinished mouldings is the home
improvement, repair and remodeling market, where mouldings are used to
complement prefinished interior panels, wallpaper and painted walls. Certain
of the Company's new plastic moulding products are designed to appeal more
directly to the new residential construction market. The Company's prefinished
mouldings and trim are designed in various patterns and finishes which match
or complement the Company's prefinished Interior Hardboard products, as well
as a wide variety of other patterns and finishes. Plastic moulding products
compete against both finished and unfinished wood mouldings, and are
considered to have the advantages of uniform appearance, consistent quality
and ease of installation. As the price of traditional pine mouldings
increases, it is anticipated that prefinished plastic mouldings will become
more attractive substitutes for such products.
 
  The Company markets its plastic moulding products through distributors for
resale to retail lumber dealers and other outlets, with the balance of sales
made directly to home centers. No single customer accounted for more than 19%
of 1996 plastic moulding sales, while ten customers represented 67% of the
Company's 1996 plastic moulding sales and the top twenty customers represented
86% of such sales.
 
  The Company's plastic mouldings production facility is currently operating
at less than full capacity. With the continued expansion into home centers and
ongoing product development, the Company expects to further increase capacity
utilization at this facility, thereby reducing average overhead cost per unit.
 
  Vinyl siding sales represented 16% of the Company's net sales for the year
ended December 31, 1996. The Company manufactures its woodgrain vinyl (PVC)
siding in four different thicknesses ranging from 37 to 44 millimeters. These
products are offered in up to 13 different colors and 9 different profiles. In
addition to vinyl siding, the Company produces a complete line of soffit,
fascia and vinyl siding accessories necessary for the installation of the
vinyl siding.
 
  Historically, the majority of vinyl siding sales were into Canadian markets
for use primarily in new residential construction. In Canada, the Company's
primary marketing emphasis will be on maintaining its market share in the new
residential construction market with opportunities to expand the use of vinyl
siding products in the home improvement, repair and remodeling market. To
service these markets, the Company primarily uses two channels of
distribution: (i) distributors selling to retailers and contractors and (ii)
home centers specializing in direct sales to builders and contractors.
 
  Vinyl siding sales into the United States are primarily for use in the home
improvement, repair and remodeling market. Because the total United States
vinyl siding market is approximately ten times larger than the Canadian
market, the Company intends to focus its marketing efforts on the United
States market. The Company intends to develop this market utilizing its
existing distribution channels which include (i) distributors selling to
retailers and contractors, (ii) home centers specializing in direct sales to
builders and contractors, and (iii) direct sales to manufactured housing
builders.
 
  No single customer accounted for more than 26% of 1996 vinyl siding sales,
while the top 10 customers represented 62% of the Company's 1996 sales and the
top 20 accounts represented 78% of such sales.
 
  Prior to 1995, the Company was a reseller of injection molded shutters
manufactured by outside sources. In April 1995, the Company purchased a
manufacturer of injection molded and thermoformed plastic shutters and
 
                                       4
<PAGE>
 
other plastic molded products. Shutter product sales represented 9% of the
Company's net sales for the year ended December 31, 1996. Shutter products are
manufactured from various thermoplastic resins, primarily utilizing an
injection molding process and to a lesser extent a thermoforming process. The
Company's product line consists of raised panel and louvered shutters, which
have a woodgrain texture and are available in a wide variety of colors and
sizes. The product line also includes gable and dryer vents, flush mounted
blocks for use with electrical outlets and lighting and other building
products. These products complement the Company's other exterior siding
product lines and are sold through the same distribution channels.
 
MANUFACTURING PROCESSES AND OPERATIONS
 
  Exterior Hardboard Siding. The Company utilizes the smooth one side ("S1S")
wet manufacturing process in the production of Exterior Hardboard Siding at
its Roaring River, North Carolina, East River, Nova Scotia, facilities. The
S1S process begins with wood waste or small logs that are converted to chips
and then reduced to wood fiber through a mechanical pulping process. After
these wood fibers are formed into mats on a continuous forming machine, the
wet fiber mats are loaded into a press and are simultaneously dried and
pressed into densified hardboard panels through a combination of high pressure
and temperatures from 400 to 415 Fahrenheit. The S1S process utilizes
embossed press plates to impart simulated woodgrains and other decorative
patterns to the panels. At the Roaring River location, the Company's unique
"Fusion Finish" process incorporates a thin paper overlay on the surface of
the fiber mats, and the pressed panels are baked in an oven to increase
strength properties and then rehumidified to a stable moisture condition. The
unfinished hardboard is cut to final dimensions for lap or panel siding
products and the surfaces are either factory primed or prefinished. After the
finishing process, the products are inspected and packaged for shipment to
customers.
 
  Interior Hardboard. The Company utilizes the smooth two sides ("S2S")
manufacturing process in the production of Interior Hardboard products at its
Alpena, Michigan facility and the S1S process to produce Interior Hardboard at
its Nova Scotia facility. The S2S process is similar to the S1S process
through the mat forming stage. While the S1S process directly links the
forming step and the pressing operation, the S2S process has an intermediate
step in which the fiber mats are dried prior to pressing. The intermediate
step is required due to the additional production complexities of
manufacturing a panel which is smooth on two sides. The pressing operations
are similar to S1S, as both processes use embossed press plates to impart
simulated woodgrains (including the traditional colonial 6-panel and flat-door
panel designs) and other decorative patterns to the hardboard panel. Finishing
the hardboard panels into decorative tileboard, woodgrain paneling and door
skin products is accomplished in a coating operation where multiple coats of
paint or decorative printing inks are applied to the panel and cured in
infrared ovens. Following the coating operation, the products are inspected
and packaged for shipment to customers.
 
  Plastics. The Company employs a specialized continuous extrusion process to
produce a substantial portion of its plastic moulding products. This process
involves the blending and melting of polystyrene resin with various other
ingredients under high temperatures. Next, a physical blowing or foaming agent
is introduced into the mixture as it is put through a tandem extruder and
drawn out and forced through various dies which produce the moulding shapes
and profiles. These profiles are then finished using a variety of woodgrain
laminates, paints or prints to achieve the desired colors and wood-like
appearance. Following the finishing operation, the products are inspected and
packaged for shipment to customers.
 
  The Company utilizes a modified extrusion process, known as co-extrusion, to
produce its vinyl siding products at its Acton, Ontario, facility. In the co-
extrusion process, two different thermoplastic resin compound formulations or
mixtures are extruded through separate extrusion machines and then joined as a
viscous melt in a co-extrusion die. The die forms the melt into a continuous
profile and is then embossed, cooled and sized using water and vacuum tools.
Further processing equipment notches, perforates and shears the finished
product. The primary ingredient used in the production of vinyl siding is
polyvinyl chloride resin or PVC. The finished products are inspected and
packaged for shipment to customers.
 
                                       5
<PAGE>
 
  The Company manufactures a majority of its shutter products using an
injection molding process at its Hopkinsville, Kentucky, facility. This
process transforms thermoplastic resin pellets (primarily polystyrene,
polypropylene or polyethylene) through the application of heat into a flowable
state. This melt is then injected under pressure into a steel mold, allowed to
cool and subsequently removed from the mold. This phase or cycle of the
process can last from a few seconds to several minutes to produce a single
part. The desired color of these products is achieved by adding a colorant
directly into the thermoplastic resin or by subsequently painting the molded
part on a state-of-the-art paintline. The finished product is inspected and
packaged for shipment to customers. The Company also manufactures high-impact
polystrene shutters and other similar products using a thermoforming process.
In this process, a thermoplastic resin sheet is subjected to heat and vacuum
pressure to draw the resin into a mold.
 
ENVIRONMENTAL REGULATION
 
  On August 30, 1995, the Company completed negotiations with Michigan
environmental authorities regarding a consent judgment providing for an odor
emissions abatement program at its Alpena, Michigan facility. The program
provides for phased installation of controls to effect a staged reduction of
the facility's emissions of odors into the air. It is estimated that capital
expenditures of approximately $6 million to $12 million will be required in
order to attain compliance with the program. (To date, the Company has
expended approximately $6 million.) It is the Company's position that costs
incurred in connection with the consent judgment will be borne in whole or in
part by Abitibi-Price Corporation ("APC"), as the prior owner of the Alpena
facility, and APC's corporate parent, Abitibi-Price, Inc. ("API").
Accordingly, on November 27, 1995, the Company and ABTco commenced an action
against APC and API in the Circuit Court for the County of Oakland, Michigan
(ABT Building Products Corporation and ABTco, Inc. v. Abitibi-Price
Corporation and Abitibi-Price, Inc., Case No. 95-508819-CK), seeking to
recover damages incurred in connection with the remediation, correction and
control of odor emissions at the Alpena facility. The complaint initially
asserted claims for breach of contract, fraudulent non-disclosure and
fraudulent misrepresentation. The Company and ABTco have determined not to
pursue the claims for fraudulent non-disclosure and fraudulent
misrepresentation, and a stipulated order to that effect was filed on May 9,
1996. The Company and ABTco are proceeding with their claims for breach of
contract. Discovery has been completed. The Company and ABTco have moved for
summary judgment on liability only; APC and API have moved for summary
judgment dismissing the claim for breach of contract. Trial is currently
scheduled for April 7, 1997.
 
  On February 9, 1996 the Company was notified by Michigan environmental
authorities that it had complied with the terms of a prior consent decree
relating to compliance with air opacity standards at its Alpena facility, and
had been granted a permit to operate the facility. Prior to February 9, 1996,
the Company had invested approximately $1.7 million (of which $650,000 was
borne by APC) to comply with the prior consent decree.
 
  The Company's operations are subject to federal and state government
regulations pertaining to air emissions, waste water discharge and solid waste
disposal. While environmental compliance costs in the future will depend on
regulatory developments that cannot be predicted, the Company believes that
compliance will be achieved with a combination of capital expenditures and
modifications to its production processes. The Company does not anticipate
that costs relating to environmental activities will have a material adverse
impact on its financial condition or results of operations.
 
  In connection with the Acquisition, APC agreed to indemnify the Company with
respect to certain pre-Acquisition environmental matters unrelated to the
matters described above, and has placed $5.3 million into escrow to fund any
required remediation of such conditions.
 
COMPETITION
 
  The building products industry is highly competitive, and the Company
competes against other manufacturers of similar wood substitute products as
well as numerous producers of natural wood, ceramic tile and other building
products. Although some of the Company's competitors are substantially larger
and have
 
                                       6
<PAGE>
 
greater resources than the Company, the Company believes that its principal
product groups have either the first or second market share position in their
respective product category.
 
  The demand for the Company's Exterior Hardboard Siding products is affected
by the level of new residential construction which is, in turn, affected by
general economic conditions. Although new construction has remained at below
mid-1980s levels, the Company has generally maintained its sales volume as a
result of the continuing reduced availability and increased costs of certain
natural wood products and levels of new construction activity in the Company's
principal geographic markets which exceeded the national average.
 
  The demand for the Company's vinyl siding products is affected primarily by
the level of the new residential construction market in Canada and the home
improvement, repair and remodeling market in the United States. The Company
believes that it has the leading market share position in Canada. Although the
Canadian new residential construction market is below historical levels, the
Company is focusing on further expansion opportunities in the United States.
 
  In the exterior siding industry, the Company competes in the new residential
construction market with manufacturers of natural wood siding and other wood
substitute siding products, such as brick, stucco, fiber cement and other non-
wood exterior products. In the home improvement, repair and remodeling market,
the principal competition for exterior siding is provided by manufacturers of
aluminum and other vinyl siding. The Company's Exterior Hardboard Siding
products are sold under warranties which are standard in the industry. Such
warranties typically provide 25 years of limited warranty against defects in
material, delamination, checking, splitting, cracking and chipping. The
Company's vinyl siding products are also sold under warranties which are
standard in the vinyl siding industry. Such warranties typically provide for
up to a lifetime warranty against defects in manufacturing, materials and
color fade. Pursuant to the Acquisition, the Company assumed responsibility
for a portion of the liability for warranty claims based on products
manufactured by APC prior to the Acquisition.
 
  The Company's principal competitors in the Interior Hardboard market include
large forest products companies and other producers or importers of plywood
and natural wood paneling as well as other manufacturers of prefinished
hardboard paneling. In the paneling market, the Company also competes against
manufacturers of ceramic tile, plastic and other products. The Company's
industrial hardboard operations are subject to competition from other domestic
S2S hardboard manufacturers as well as a large number of producers and
importers of various substitute materials.
 
  The plastic mouldings market has two principal domestic manufacturers, one
of which is the Company, and several small producers. Decorative plastic
moulding products are substitutes for and compete against a wide range of
natural wood products produced by numerous manufacturers, including
prefinished and unfinished products.
 
  The exterior residential shutter market is highly fragmented and includes
many small manufacturers.
 
RAW MATERIALS
 
  The principal raw materials used by the Company in the production of
Exterior Hardboard Siding and Interior Hardboard are small pulpwood, sawmill
by-products and other wood waste. The principal raw materials for the
Company's thermoplastic resin products are polystrene, polyvinyl chloride,
polypropylene and polyethylene. The Company also uses a wide variety of
coatings in the Interior Hardboard and thermoplastics finishing processes. All
of the raw materials required for the manufacture of the Company's specialized
building products are available from numerous sources, and the Company has not
experienced any shortages which have materially affected its operations. Each
of the Company's Exterior Hardboard Siding and Interior Hardboard substrate
manufacturing facilities is located within a 100 mile radius of its source of
wood supply. In general, the availability and cost of small pulpwood and wood
waste required for hardboard production have not been significantly affected
by the continuing shortages of natural wood building products.
 
                                       7
<PAGE>
 
EMPLOYEES
 
  As of December 31, 1996, the Company had approximately 1,809 full time
employees. The Company's hourly production employees at its Alpena; Michigan,
East River, Nova Scotia; and Acton, Ontario; plants are covered by collective
bargaining agreements with expiration dates of December 15, 2000, December 31,
1997, and October 31, 2001, respectively.
 
SEASONALITY
 
  The Company's quarterly results of operations are moderately seasonal due to
increases in construction activity that typically occur in the second and
third quarters and, to a lesser extent, the first quarter; thereby, increasing
sales and gross profits in such periods as compared to the fourth quarter.
 
INFLATION
 
  The Company does not believe that inflation had a significant impact on the
Company's results of operations for the periods presented.
 
BACKLOG
 
  In general, the Company does not produce against a backlog of firm orders.
Production is geared primarily to the level of incoming orders and to
projections of future demand. Inventories of finished goods, work-in-process
and raw materials are maintained to meet delivery requirements of customers.
 
ITEM 2. PROPERTIES
 
  The table below sets forth, as of December 31, 1996, the location, products
manufactured, facility size, estimated annual capacity and capacity
utilization of each of the Company's eight production facilities, all of which
are owned by the Company with the exception of the Independence, Iowa, plant
which is leased for a term expiring in April 1998. The Company's production
facilities are generally in good to excellent condition and are considered
adequate for their current uses. The Company's executive offices are located
in a 3,300 square foot leased office facility in Neenah, Wisconsin. The
Company's divisional offices are located in leased office space in Troy,
Michigan; Charlotte, North Carolina; and Neenah, Wisconsin.
 
<TABLE>
<CAPTION>
                                                                                                                 ESTIMATED
                                         PRODUCTS                                         ESTIMATED ANNUAL        CAPACITY
      LOCATION                         MANUFACTURED                    FACILITY SIZE          CAPACITY         UTILIZATION(1)
      --------                         ------------                   --------------- ------------------------ --------------
<S>                  <C>                                              <C>             <C>                      <C>
Roaring River, NC... Exterior Hardboard Siding; Trimboard             450,000 sq. ft. 270 million surface feet      99%
Alpena, MI.......... Substrates, Interior Hardboard                   473,000 sq. ft. 284 million surface feet      88%
Toledo, OH.......... Finished Tileboard and Paneling                  230,000 sq. ft. 350 million surface feet      53%
Middlebury, IN...... Plastic Mouldings                                233,000 sq. ft.  250 million linear feet      47%
East River, Nova
 Scotia............. Exterior Hardboard Siding and Interior Hardboard 230,000 sq. ft. 265 million surface feet      80%
Acton, Ontario...... Vinyl Siding and Trim Accessories                150,000 sq. ft.        2.0 million units      65%
Hopkinsville, KY.... Shutters and Accessories                         110,000 sq. ft.      230,000 press hours      60%
Independence, IA.... Shutters and Accessories                          30,000 sq. ft.       17,000 press hours      76%
</TABLE>
--------
(1) Full capacity utilization denotes the operation of a facility seven days
    per week, three shifts per day at budgeted product mix.
 
  The Company manufactures Exterior Hardboard Siding on two S1S production
lines at its Roaring River, North Carolina, facility, the largest single
hardboard-based siding facility in the U.S. The plant was constructed in 1970
with expansions in 1981 and 1984, and is located on 506 acres. The plant is
located near an abundant supply of wood raw materials, and process water is
drawn from the Yadkin River adjacent to the property. Steam for the
manufacturing process is provided by a 180 million BTU per hour boiler fueled
by wood waste, with two standby boilers available. Since all steam is provided
by the wood fired boiler, the facility does not depend on conventional fossil
fuels as its primary source of energy.
 
                                       8
<PAGE>
 
  The Company manufactures hardboard substrate on two S2S production lines at
its Alpena, Michigan, facility. The plant, located on 61 acres, was built in
1957 and expanded in 1970 and 1985. Hardboard substrate is finished into
tileboard and paneling at the Company's Toledo, Ohio, facility situated on 57
acres. The Toledo plant uses state-of-the-art printing capabilities to
maintain the quality of its finished products. The principal assets of the
Toledo facility include one primary coating line and one vinyl laminating
line. The primary coating line is a high quality four-stage print line with
computer-aided capability for precision printing and painting of a broad range
of panels, including embossed tileboard.
 
  The Company manufactures plastic mouldings at its Middlebury, Indiana,
facility situated on 35 acres. The facility was originally built in 1955, with
major expansions in 1978 and 1980. The extrusion operation includes eleven
polystyrene tandem extruders with a combined annual capacity of 212 million
linear feet. In addition, five extruders with an annual capacity of 38 million
linear feet are used for lower volume PVC moldings. Other equipment used to
finish the mouldings includes five woodgrain printlines, a five deck
paint/topcoat oven, two hot glue paper laminators and five packaging lines.
The plant has a modern machine tool capability for the production of its own
die requirements.
 
  The Company manufactures Exterior Hardboard Siding and industrial and
prefinished hardboard on two S1S production lines at its East River, Nova
Scotia, facility, the largest hardboard manufacturing facility in Canada. The
Canexel plant, located on 1,060 acres, was constructed in 1967 and was
expanded in 1969 to add a second S1S line. The plant is located near an
abundant supply of wood raw materials and process water is drawn from the
Little East River which is located nearby. Steam for the manufacturing process
is provided by three fire tube boilers with a total capacity of 138,000 lbs.
Other principal assets of the facility are one interior products finishing
line and one exterior siding prefinishing line.
 
  The Company manufactures vinyl siding and trim accessories at its Acton,
Ontario, facility situated on 14 acres. The facility was originally
constructed in 1959 with major expansions completed in 1972, 1983 and 1986.
The extrusion operation includes ten co-extrusion processing lines and one
mono-extrusion line. In 1994, the Company completed the installation of a
state-of-the-art, four-story compounding tower. The computer-controlled
compounding and extrusion process allows the resin formulations to proceed
from raw material to finished goods without touching human hands until the
product is packaged.
 
  The Company manufactures injection molded shutters at its Hopkinsville,
Kentucky, facility located on 14 acres. Originally constructed in 1967, the
facility was expanded several times by previous owners. In 1994, the Company
completed the expansion of the manufacturing facility, which included the
installation of three additional presses. Molded products are manufactured on
one of twenty-seven presses, which range in size from 125 tons to 2,000 tons.
This facility has a state-of-the-art finishing line to paint shutters. The
majority of thermoformed products are manufactured at its leased facility in
Independence, Iowa.
 
ITEM 3. LEGAL PROCEEDINGS
 
  The Company and ABTco have been named as defendants in a class action and
three separate putative class actions arising from hardboard siding
manufactured, distributed, or sold by them or by APC or API:
 
  (1) Fyola et al. v. ABT Building Products Corporation et al., Docket No. 95-
12854, Court of Common Pleas of Allegheny County, Pennsylvania.
 
  On August 8, 1995, plaintiffs Glenn Fyola, Patricia Fyola, Joyce D'Antonio,
and Kenneth Hyre filed this action in the Court of Common Pleas of Allegheny
County, Pennsylvania against the Company. Plaintiffs alleged that they were
suing on behalf of themselves and a putative class composed of residential
homeowners who reside in Pennsylvania and whose homes have or had for their
exterior siding a hardboard product which was allegedly manufactured,
distributed, or sold by the Company. The original complaint alleged that the
exterior siding on plaintiffs' homes had prematurely rotted, warped, buckled,
and deteriorated. Plaintiffs asserted purported claims for breach of implied
warranty of merchantability, breach of implied warranty of fitness, breach
 
                                       9
<PAGE>
 
of express warranty, violation of the Pennsylvania Unfair Trade Practice and
Consumer Protection Law, and deceit by concealment. Plaintiffs, on behalf of
themselves and the putative class, sought compensatory and punitive damages in
unspecified amounts, including economic damages, treble damages under the
Pennsylvania Unfair Trade Practice and Consumer Protection Law, and an award
of attorneys' fees.
 
  The Company filed an "Answer and New Matter" on October 31, 1995, that
denied all material allegations of the complaint and asserted affirmative
defenses. The Company also filed a third-party complaint against additional
defendants APC and Maronda Homes, Inc. The third-party complaint asserted a
single count against APC. In that count, the Company alleged that the
hardboard siding at issue was manufactured by APC and that, as a result, APC
"may be solely liable for the causes of action pleaded by plaintiffs assuming
arguendo said causes of action have any validity." The third-party complaint
also asserted a single count against Maronda Homes, Inc. In that count, the
Company asserted that to the extent any hardboard siding involved in the case
was manufactured by ABTco (which the Company denies), and to the extent any
such siding exhibited any abnormal condition, that abnormal condition was a
direct result of improper installation of the siding by Maronda Homes, Inc.
and its failure to follow applicable building codes and application
instructions. The Company's third-party complaint asked that, should the
Company be held liable to plaintiffs or the putative class in any respect,
judgments be entered against APC and Maronda Homes, Inc., holding each of them
solely liable to plaintiffs, liable over to the Company by way of contribution
and/or indemnity, or jointly and severally liable to plaintiffs with the
Company.
 
  On February 5, 1996, plaintiffs filed an amended complaint adding ABTco and
APC as defendants. Plaintiffs allege that hardboard exterior siding on their
homes has prematurely rotted, warped, buckled, and deteriorated. Plaintiffs
and the putative class are seeking compensatory damages in unspecified
amounts, including economic damages, treble damages under the Pennsylvania
Unfair Trade Practice and Consumer Protection Law, and an award of attorneys'
fees from the Company, ABTco and APC.
 
  The action was removed to the United States District Court for the Western
District of Pennsylvania. By order dated November 25, 1996, that Court
remanded the action to the Court of Common Pleas for Allegheny County.
 
  In response to the amended complaint, defendants filed an "Answer and New
Matter" dated December 27, 1996, that denies all material allegations of the
amended complaint and asserts affirmative defenses. Plaintiffs are currently
seeking discovery from defendants. The action has not been certified as a
class action.
 
  The Company and ABTco intend to defend the action vigorously.
 
  (2) Foster et al. v. ABTco, Inc., ABT Building Products Corporation,
Abitibi-Price, Inc. and Abitibi-Price Corporation, Docket No. 96-0069-AH-M,
United States District Court for the Southern District of Alabama.
 
  On December 21, 1995, plaintiffs Thomas and Linda Foster brought this action
in the Circuit Court of Choctaw County, Alabama, on behalf of themselves and a
class generally composed of all individuals and entities (i) that own or owned
property in the United States on which hardboard siding manufactured,
distributed, or sold by the Company, ABTco, API, or APC has been installed and
(ii) that have already suffered (or will suffer within the warranty period)
alleged damage because, according to plaintiffs, such siding prematurely rots,
buckles, swells, cracks or otherwise deteriorates. Plaintiffs filed an amended
complaint on July 10, 1996. Plaintiffs and the class are seeking compensatory
damages and an award of attorneys' fees. The complaint alleges that the
"amount in controversy is in the millions of dollars classwide and is
typically several thousand dollars for each plaintiff and individual class
member."
 
  On December 22, 1995, this action was conditionally certified as a class
action by ex parte order.
 
  On January 23, 1996, defendants removed the action to the United States
District Court for the Southern District of Alabama. By order dated September
10, 1996, that court denied plaintiffs' motion to remand the action
 
                                      10
<PAGE>
 
to the Circuit Court of Choctaw County, Alabama. By order dated December 31,
1996, that court denied plaintiffs' motion for reconsideration of its order of
September 10, 1996, or in the alternative for certification of that order for
interlocutory appeal. On February 26, 1997, the United States Court of Appeals
for the Eleventh Circuit denied plaintiffs' petition for writ of mandamus,
which sought to overturn the district court's denial of plaintiffs' motion to
remand the action. To the best of our knowledge, plaintiffs have not yet filed
such a petition.
 
  The parties have agreed upon a schedule for discovery concerning issues that
are relevant to class certification. After certification-related discovery is
completed, the conditional order of certification already entered in the
action may be challenged.
 
  The Company and ABTco intend to defend the action vigorously.
 
  (3) Dunn et al. v. ABTco, Inc., ABT Building Products Corporation, Abitibi-
Price, Inc. and Abitibi-Price Corporation, Docket No. 96-CVS7690, Superior
Court of Forsyth County, North Carolina.
 
  On December 27, 1996, plaintiffs William Dunn and Paul and Teresa Sullivan
brought this action on behalf of themselves and a putative class generally
composed of all individuals and entities (i) that own or owned property in the
United States on which hardboard siding manufactured, distributed, or sold by
the Company, ABTco, API or APC has been installed and (ii) that have already
suffered (or will suffer within the warranty period) alleged damage because,
according to plaintiffs, such siding prematurely rots, buckles, swells, cracks
or otherwise deteriorates. Plaintiffs and the putative class are seeking
compensatory damages and an award of attorneys' fees. The complaint alleges
that the "aggregate amount in controversy is in the millions of dollars
classwide." This action has not been certified as a class action. On January
28, 1997, all defendants moved to abate or stay the action. That motion was
argued on February 14, 1997. By order signed on February 18, 1997, the court
denied the motion to abate but granted the motion to stay.
 
  The Company and ABTco intend to defend the action vigorously.
 
  (4) Ezzell et al. v. ABTco, Inc., ABT Building Products Corporation,
Abitibi-Price, Inc. and Abitibi-Price Corporation, No. 97-CVS-167, Superior
Court of Onslow County, North Carolina.
 
  On January 21, 1997, plaintiffs John and Rosemary Ezzell filed this action
on behalf of themselves and a putative class generally composed of all
individuals and entities (i) that own or owned property in the United States
on which hardboard siding manufactured, distributed, or sold by the Company,
ABTco, API, or APC has been installed and (ii) that have already suffered (or
will suffer within the warranty period) alleged damage because, according to
plaintiffs, such siding prematurely rots, buckles, discolors, deteriorates,
and otherwise does not perform as expressly represented or warranted, and/or
would not perform in accordance with the reasonable expectations of class
members and other consumers that such siding is durable, suitable and proper
to be used on personal residences or other properties. The complaint alleges
that "the aggregate amount in controversy is typically several thousand
dollars for each plaintiff and individual class member." The action has not
been certified as a class action.
 
  The Company and ABTco intend to defend the action vigorously.
 
  In addition, the Company is a party to various other legal proceedings
arising in the ordinary course of business, none of which, in management's
opinion, are expected to have a material adverse effect on the Company's
operating results or financial condition.
 
                                      11
<PAGE>
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
  No matters were submitted to a vote of security holders during the quarter
ended December 31, 1996.
 
                                    PART II
 
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
        MATTERS
 
  The Company's Common Stock is traded in the NASDAQ National Market under the
symbol "ABTC." The following table sets forth, for the periods indicated, the
high and low sale prices of the Common Stock as reported by NASDAQ.
 
<TABLE>
<CAPTION>
                                                         1996          1995
                                                     ------------- -------------
                                                      HIGH   LOW    HIGH   LOW
                                                     ------ ------ ------ ------
   <S>                                               <C>    <C>    <C>    <C>
   Fourth Quarter................................... 26.750 19.750 16.500 12.000
   Third Quarter.................................... 22.500 19.500 19.750 16.250
   Second Quarter................................... 23.000 18.500 18.500 15.250
   First Quarter.................................... 19.500 14.250 15.750 13.000
</TABLE>
 
  ON DECEMBER 31, 1996, THE LAST REPORTED SALE PRICE FOR THE COMPANY'S COMMON
STOCK ON THE NASDAQ NATIONAL MARKET WAS $25.00 PER SHARE. AS OF MARCH 7, 1997,
THE COMPANY HAD APPROXIMATELY 6,200 SHAREHOLDERS OF RECORD (INCLUDING
BROKERAGE FIRMS AND OTHER NOMINEES).
 
  The Company has never paid any cash dividends on its Common Stock. The
Company currently intends to retain earnings and does not anticipate paying
dividends on its Common Stock in the foreseeable future. Any future payment of
dividends on the Common Stock is within the discretion of the Board of
Directors and will depend upon various factors, including the then-current
capital requirements, operating results and financial condition of the
Company.
 
                                      12
<PAGE>
 
ITEM 6. SELECTED FINANCIAL INFORMATION AND OTHER DATA
 
  The operating data set forth below is derived from financial statements
audited by Arthur Andersen LLP, independent public accountants, and should be
read in conjunction with those financial statements and notes thereto included
elsewhere in this Form 10-K. The financial information for the year ended
December 31, 1992 represents a combination of the statements of operations for
the Company's predecessor for the period from January 1, 1992 through October
20, 1992 and for the Company for the period from October 20, 1992 through
December 31, 1992. There are material operational and accounting differences
between the Company's predecessor and the Company. Accordingly, the historical
financial data of the Company's predecessor may not be comparable in all
material respects with data of the Company and the combined statement of
operations for 1992 is not directly comparable to data for other periods. The
data set forth in the following table should be read in conjunction with, and
is qualified in its entirety by, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Company's Consolidated
Financial Statements and the Notes thereto appearing elsewhere herein.
 
<TABLE>
<CAPTION>
                          PREDECESSOR(1)   COMPANY    COMBINED                  COMPANY
                          -------------- ------------ --------  ----------------------------------------------
                            JANUARY 1     OCTOBER 20
                             THROUGH       THROUGH              YEAR ENDED DECEMBER 31,
                           OCTOBER 20,   DECEMBER 31, ---------------------------------------------------
                               1992          1992       1992      1993         1994      1995      1996
                          -------------- ------------ --------  --------     --------  --------  --------
                                           (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                       <C>            <C>          <C>       <C>          <C>       <C>       <C>      
Operating Data:
 Net sales..............     $123,843      $ 24,469   $148,312  $161,011     $203,264  $240,107  $320,402
 Cost of sales..........       96,707        20,673    117,380   106,572      139,848   176,119   227,351
                             --------      --------   --------  --------     --------  --------  --------
 Gross profit...........       27,136         3,796     30,932    54,439       63,416    63,988    93,051
 Selling, general and
  administrative
  expenses..............       17,819         4,189     22,008    21,253       25,684    30,961    48,609
                             --------      --------   --------  --------     --------  --------  --------
 Special charges........        1,320(2)        --       1,320       --           --        --        --
 Operating income
  (loss)................        7,997          (393)     7,604    33,186       37,732    33,027    44,442
 Interest expense.......           48         1,211      1,259     3,929        2,063     5,929     6,511
 Other income (expense),
  net...................           42          (189)      (147)     (201)         (80)       (4)     (269)
                             --------      --------   --------  --------     --------  --------  --------
 Income (loss) before
  income taxes and
  extraordinary item....     $  7,991        (1,793)  $  6,198    29,056       35,589    27,094    37,662
                             --------                 --------
 Provision (credit) for
  income taxes..........                       (631)              11,572       13,843    10,607    14,510
                                           --------             --------     --------  --------  --------
 Net income (loss)
  before extraordinary
  item..................                     (1,162)              17,484       21,746    16,487    23,152
 Extraordinary item (net
  of tax)...............                        --                (1,070)(3)      --        --        --
                                           --------             --------     --------  --------  --------
 Net income (loss)......                     (1,162)            $ 16,414     $ 21,746  $ 16,487  $ 23,152
                                           --------             --------     --------  --------  --------
Income (loss) per common
 share:
 Before extraordinary
  item..................                       (.11)            $   1.50     $   1.70  $   1.42  $   2.01
                                           --------             --------     --------  --------  --------
 After extraordinary
  item..................                   $   (.11)            $   1.41     $   1.70  $   1.42  $   2.01
                                           --------             --------     --------  --------  --------
 Weighted average common
  shares
  outstanding(4)........                     10,206               11,667       12,825    11,647    11,519
Balance Sheet Data:
 Working capital........     $ 17,006      $ 25,598             $ 27,363     $ 42,006  $ 55,762  $ 42,777
 Total assets...........       95,632       106,485              109,628      143,545   210,767   260,264
 Long-term debt.........          485        67,413               12,278       33,119    84,506    90,691
 Stockholders' or
  Predecessor group
  equity................       65,285        21,358               77,210       80,483    88,120   109,941
</TABLE>
--------
(1) The Company's predecessor operated as a segment of the Building Products
    Division of APC. APC did not allocate income tax or interest expense to
    the Company's predecessor. Accordingly, actual operating results for the
    Company's predecessor reflect only earnings before income taxes.
(2) Amounts represent nonrecurring charges to write down certain equipment to
    net realizable value.
(3) Represents write-off of deferred financing costs in connection with the
    repayment of long-term debt with the proceeds of the Company's initial
    public offering.
(4) Represents weighted average common shares and common share equivalents
    outstanding during the period, giving effect to the Company's stock split
    effected in June 1993 in connection with the Company's initial public
    offering.
 
                                      13
<PAGE>
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS
 
GENERAL
 
  The following table sets forth the dollar amounts (in thousands) and
percentages of the Company's net sales attributable to each of its principal
product categories during the last three years:
 
<TABLE>
<CAPTION>
                                          1994          1995          1996
                                      ------------  ------------  -------------
<S>                                   <C>      <C>  <C>      <C>  <C>       <C>
Exterior Hardboard Siding............ $ 85,913  42% $ 91,705  38% $ 120,504  37%
Interior Hardboard...................   84,675  42    84,654  35     91,920  29
Plastics.............................   32,676  16    63,748  27    107,978  34
                                      -------- ---  -------- ---  --------- ---
Net sales............................ $203,264 100% $240,107 100% $ 320,402 100%
                                      ======== ===  ======== ===  ========= ===
</TABLE>
 
RESULTS OF OPERATIONS
 
  The following table presents, for the periods indicated, the percentage
relationship to net sales of certain items in the Company's consolidated
statements of operations:
 
STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                                      -------------------------
                                                       1994     1995     1996
                                                      -------  -------  -------
<S>                                                   <C>      <C>      <C>
Net sales............................................   100.0%   100.0%   100.0%
Cost of sales........................................    68.8     73.4     71.0
Gross profit.........................................    31.2     26.6     29.0
Selling, general and administrative expenses.........    12.6     12.8     15.2
Operating income.....................................    18.6     13.8     13.9
Net income...........................................    10.7      6.9      7.2
</TABLE>
 
BALANCE SHEET DATA
 
<TABLE>
<CAPTION>
                                                        AS OF DECEMBER 31,
                                                      -------------------------
                                                       1994     1995     1996
                                                      -------  -------  -------
<S>                                                   <C>      <C>      <C>
Working capital...................................... $42,006  $55,762  $42,777
Total assets......................................... 143,545  210,767  260,264
Long-term debt.......................................  33,119   84,506   90,691
Long-term debt to total capitalization...............      29%      49%      45%
Return on average stockholders' equity...............      28%      20%      23%
</TABLE>
 
YEARS ENDED DECEMBER 31, 1996 AND 1995
 
  Net Sales. Net sales increased $80.3 million (33.4%) from $240.1 million in
fiscal 1995 to $320.4 million in fiscal 1996. This increase reflects a $44.2
million (69.4%) increase in Plastics sales, a $28.8 million (31.4%) increase
in Exterior Hardboard Siding sales and a $7.3 million (8.6%) increase in
Interior Hardboard sales.
 
  The increase in Plastics sales of $44.2 million in fiscal 1996 was primarily
attributable to the impact of two acquisitions in 1995. KenTech Plastics, a
manufacturer of plastic shutters, exterior accessories and industrial products
was acquired in April of 1995. In June 1995, the Company acquired the Vinyl
Division of EMCO, Ltd., a manufacturer of vinyl siding and accessories. These
two acquisitions accounted for $39.5 million of the increase in net sales for
1996. Plastic mouldings sales were favorably impacted by new product
introductions and increased penetration into the mass merchandiser market, as
sales increased $4.3 million over the same period last year. Unit volume
shipments for vinyl siding, mouldings and shutters in 1996 were substantially
greater than 1995.
 
                                      14
<PAGE>
 
  The increase in Exterior Hardboard Siding sales of $28.8 million in fiscal
1996 was primarily the result of an increase in demand for the product line
(see Significant Business Trends below), continued expansion into the mass
merchandiser market and price increases implemented during the first quarter
of 1996. As a result of these factors, Exterior Hardboard Siding unit sales
volume increased 12.4% for 1996 compared to 1995 and average selling price
increased 10.5%.
 
  Sales of Interior Hardboard products increased $7.3 million in fiscal 1996.
The increase was primarily due to new product introductions and increases in
sales outside of North America. These factors resulted in a increase of unit
volume shipments of 8.7% compared to 1995.
 
  Gross Profit. Gross profit increased $29.1 million (45.4%) from $64.0
million in 1995 to $93.1 million in 1996. Exterior Hardboard Siding pricing
and volume increases as well as volume increases in the Interior Hardboard and
Plastic moulding products contributed to the increase in gross profit. In
addition, the 1995 acquisitions favorably impacted gross profit by $14.4
million. Gross profit as a percentage of net sales increased from 26.6% for
1995 to 29.0% in 1996. The increase is primarily the result of price increases
implemented during 1996 as well as volume increases in Exterior Hardboard
Siding, Interior Hardboard, Vinyl Siding and Plastic Moulding product lines.
 
  Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $17.6 million (57.0%) from $31.0 million in
1995 to $48.6 million in 1996. Selling, general and administrative expenses
increased $10.3 million as a result of the 1995 acquisitions, $1.5 million of
the increase represents legal fees incurred as a result of certain litigation
(see "Certain Litigation" below) with the balance of the increase primarily
due to increases in promotional expenses, allowances and management bonuses,
directly related to the increase in sales over 1995. As a percentage of net
sales, selling, general and administrative expenses increased from 12.8% in
1995 to 15.2% in 1996. The increase is due to higher selling, general and
administrative expenses (as a percentage of net sales for the 1995
acquisitions) as well as increases in legal fees, management bonuses and
promotional expenses related to new product introductions.
 
  Operating Income. Operating income increased $11.4 million (34.6%) from
$33.0 million in 1995 to $44.4 million in 1996. The improvement is the result
of operating income generated by the 1995 acquisitions, selling price
increases, new product introductions and volume increases in substantially all
product lines.
 
  Interest Expense. Interest expense increased $0.6 million (9.8%) from $5.9
million in 1995 to $6.5 million (net of $1.0 million of capitalized interest)
in 1996. The increase is attributable to higher outstanding indebtedness,
partially offset by a slight decline in the Company's weighted average
interest rate on outstanding borrowings during 1996 as compared to 1995.
 
YEARS ENDED DECEMBER 31, 1995 AND 1994
 
  Net Sales. Net sales increased $36.8 million (18.1%) from $203.3 million in
fiscal 1994 to $240.1 million in fiscal 1995. This increase reflects a $31.1
million (95.1%) increase in Plastics sales, a $5.8 million (6.7%) increase in
Exterior Hardboard Siding sales and a $0.1 million (0.1%) decrease in Interior
Hardboard sales.
 
  The increase in Plastics sales of $31.1 million in fiscal 1995 was primarily
attributable to the impact of the 1995 acquisitions of KenTech Plastics and
the EMCO Vinyl Division. Plastic mouldings sales were $0.4 million (1.1%) less
than 1994. Unit volume shipments for mouldings were 2.5% less than 1994;
however, average selling price was 4.2% higher. The sales of all Plastics
products were impacted by the soft economic environment during 1995,
particularly in Canada, and the general decline in mass merchant retail sales
in the United States.
 
  The increase in Exterior Hardboard Siding sales of $5.8 million in fiscal
1995 was primarily the result of new product introductions. Exterior Hardboard
Siding unit sales volume increased 3.1% for 1995 compared to 1994. The average
selling price increased 3.2% primarily due to the introduction of new higher
unit priced products, partially offset by some pricing competition in selected
United States siding markets.
 
                                      15
<PAGE>
 
  Sales of Interior Hardboard products decreased $0.1 million in fiscal 1995.
Sales were impacted during 1995 by the soft economic environment, particularly
in Canada, and the general decline in the mass merchant retail sales in the
United States. These factors resulted in a decrease of unit volume shipments
of 4.7% compared to 1994.
 
  Gross Profit. Gross profit increased $0.6 million (0.9%) from $63.4 million
in 1994 to $64.0 million in 1995. The 1995 acquisitions were the principal
contributors to the increase in gross profit. Increases in raw materials and
other costs for certain product lines have been partially offset by continuing
cost reduction programs, increased production efficiencies at certain
manufacturing facilities and selected price increases. In addition, gross
profit was negatively impacted by the soft economic environment during 1995,
particularly in Canada, and the general decline in mass merchant retail sales
in the United States. Gross profit as a percentage of net sales decreased from
31.2% for 1994 to 26.6% in 1995. The decline was primarily the result of lower
margins generated by the 1995 acquisitions and unrecovered raw material cost
increases.
 
  Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $5.3 million (20.5%) from $25.7 million for
1994 to $31.0 million in 1995. Selling, general and administrative expenses
increased $4.6 million as a result of the 1995 acquisitions. In addition, the
Company increased advertising and promotion expenditures during 1995 by $0.8
million. As a percentage of net sales, selling, general and administrative
expenses increased from 12.6% in 1994 to 12.8% in 1995.
 
  Operating Income. Operating income decreased $4.7 million (12.5%) from $37.7
million in 1994 to $33.0 million in 1995. The decrease was primarily the
result of the soft economy in Canada and the general decline in mass merchant
retail sales in the United States during 1995. In addition, unrecovered raw
material cost increases and losses generated by the 1995 acquisitions
negatively impacted operating income.
 
  Interest Expense. Interest expense increased $3.8 million (176.8%) from $2.1
million in 1994 to $5.9 million in 1995. The increase was attributable to
higher outstanding indebtedness due to the Company's stock repurchase program
($27.2 million) commenced during the third quarter of 1994 and acquisition
indebtedness ($47.1 million).
 
SIGNIFICANT BUSINESS TRENDS
 
  Management believes that the level of housing starts has a significant
influence on its ability to generate sales, particularly in relation to demand
for its siding products. The level of housing starts increased from 1.0
million in 1991 to 1.4 million in 1996. The level of housing starts in Canada
decreased from 0.156 million in 1991 to 0.125 million in 1996. Although
management is unable to predict whether this trend will continue, management
believes that the introduction of new products and expansion into
international markets will allow the Company to maintain levels of production
and sales should housing starts decline.
 
  In late 1995, two of the Company's largest exterior hardboard siding product
competitors announced the discontinuation of production of Oriented Strand
Board ("OSB") siding. (See "Certain Litigation"). The discontinuation of OSB
siding has created an increase in demand for the Company's exterior hardboard
siding products manufactured at the Roaring River, NC, facility.
 
  The cost of thermoplastic resins (polystyrene, polypropylene and polyvinyl
chloride) used in the Company's Plastics operations increased substantially
during 1995 before decreasing somewhat during the fourth quarter of 1995,
remaining at that level during 1996. Management believes that product price
increases, continuing cost reduction programs and increased production
efficiencies will counteract, to some extent, the impact of this raw material
price increase.
 
  Management also believes that continued penetration into the mass
merchandiser market (home improvement centers) will have a significant
beneficial influence on the Company's level of business activity. Sales to
these customers have increased approximately 47% over the prior year. In
addition, sales to the
 
                                      16
<PAGE>
 
Company's top three home improvement center customers increased 62% over the
past year. Management believes that this market will continue to grow in
importance to the Company.
 
LIQUIDITY AND CAPITAL RESOURCES
 
  At December 31, 1996, the Company had working capital of $42.8 million with
a current ratio of 2.0 to 1.0 as compared with working capital of $55.8
million and a current ratio of 3.4 to 1.0 at December 31, 1995. The decrease
in working capital and the change in the current ratio were primarily due to
the reclassification of $9.4 million of long term debt as a current liability
in accordance with the schedule of payments required by the term loan
facility.
 
  In July 1995, the Company and its bank group executed a Second Amended and
Restated Credit Agreement (the "Credit Agreement") which superceded all prior
credit agreements. The Credit Agreement provides a line of credit to the
Company totaling $175 million consisting of a $30 million primary revolving
credit facility, a secondary revolving credit facility of $95 million and a
term loan facility under which the Company borrowed $50 million on April 3,
1995. The Credit Agreement matures on September 30, 2002, subject to extension
for additional one year periods. As of December 31, 1996, the weighted average
interest rate on the outstanding revolving loans of $50.1 million was 6.40%.
The interest rate on the $50 million term loan was 7.99%.
 
  Debt increased from $84.6 million at December 31, 1995 to $100. 1 million
(including $9.4 million of current maturities) as of December 31, 1996. The
increase was primarily due to capital expenditures on the fiber cement
facility under construction in Roaring River, North Carolina.
 
  Capital expenditures during 1996 amounted to approximately $57.9 million and
were incurred primarily for environmental compliance projects (See
"Environmental Compliance"), improvements of the Company's manufacturing
facilities and development of new products, including $36.8 million on the
fiber cement facility.
 
  In November 1995, the Board of Directors approved plans for the construction
of a facility which will manufacture a fiber-reinforced cement plank or panel.
This product, which will have a Class 1 fire rating and will be both moisture
and insect resistant, will initially be produced as exterior siding in a wide
variety of simulated woodgrain surfaces, including fir and cedar. On December
12, 1995, the Company executed an agreement with J.M. Voith AG to provide the
primary production equipment for the facility. It is anticipated that the
plant will be completed in mid-1997. The estimated cost of construction is $55
million.
 
  Management believes that the Company's cash on hand, anticipated funds from
operations and available borrowings under the Credit Agreement will be
sufficient to cover both its short-term and long-term working capital, capital
expenditures and debt service requirements.
 
ENVIRONMENTAL COMPLIANCE
 
  The Company's operations are subject to federal and state government
regulations pertaining to air emissions, waste water discharge and solid waste
disposal. While environmental compliance costs in the future will depend on
regulatory developments that cannot be predicted, the Company believes that
compliance will be achieved with a combination of capital expenditures and
modifications to its production processes. As described above under "Item 1.
Business--Environmental Regulation," the Company has entered into a consent
decree with respect to odor emissions at its Alpena, Michigan, facility
requiring estimated expenditures of $6 million to $12 million in order to
attain compliance. (To date the Company has expended approximately $ 6
million.) The Company has instituted litigation to recover such costs from the
former owner of the facility. The Company does not anticipate that costs
relating to environmental activities will have a material adverse impact on
its financial condition or operating results.
 
                                      17
<PAGE>
 
CERTAIN LITIGATION
 
  In recent years, a number of lawsuits have been brought against
manufacturers of OSB and exterior hardboard siding products alleging various
design and production defects and breach of express or implied product
warranties. Such litigation has resulted in substantial settlements by certain
competitors of the Company. The Company has been named as a defendant in
similar litigation (see "Item 3. Legal Proceedings"). The Company believes
that its exterior hardboard siding products are free of defects and, when
properly installed and maintained, are suitable for their intended purposes
and meet all applicable quality standards. Nevertheless, no assurance can be
given that the Company will not be required to expend significant resources to
defend against claims of this nature.
 
PRIVATE SECURITIES LITIGATION REFORM ACT DISCLOSURE
 
  This report contains various forward looking statements, including
financial, operating and other projections. There are many factors that could
cause actual results to differ materially, including adoption of new
environmental laws and regulations, and changes in how they are interpreted
and enforced and general business conditions, such as the level of
competition, changes in demand for the Company's products and the strength of
the economy in general. These and other factors are discussed in this report
and other documents the Company has filed with the Securities and Exchange
Commission.
 
                                      18
<PAGE>
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
               ABT BUILDING PRODUCTS CORPORATION AND SUBSIDIARIES
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                                           PAGE
                                                                           ----
<S>                                                                        <C>
The Company and Subsidiaries:
  Report of Independent Public Accountants................................  20
  Balance Sheets as of December 31, 1995 and 1996.........................  21
  Statements of Operations for the Years Ended December 31, 1994, 1995 and
   1996...................................................................  22
  Statements of Stockholders' Equity for the Years Ended December 31,
   1994, 1995 and 1996....................................................  23
  Statements of Cash Flow for the Years Ended December 31, 1994, 1995 and
   1996...................................................................  24
  Notes to Financial Statements...........................................  25
Report of Independent Public Accountants..................................  39
Schedule II--Valuation and Qualifying Accounts............................  40
</TABLE>
 
                                       19
<PAGE>
 
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To the Stockholders and Board of Directors
of ABT Building Products Corporation:
 
  We have audited the accompanying consolidated balance sheets of ABT BUILDING
PRODUCTS CORPORATION (a Delaware corporation) AND SUBSIDIARIES (the "Company")
as of December 31, 1995 and 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
 
  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
 
  In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of ABT Building
Products Corporation and Subsidiaries as of December 31, 1995 and 1996, and
the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
 
 
                                          /s/Arthur Andersen LLP

                                          Arthur Andersen LLP
 
Chicago, Illinois,
January 20, 1997
 
                                      20
<PAGE>
 
                          CONSOLIDATED BALANCE SHEETS
                                ($ IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                             AS OF DECEMBER
                                                                   31,
                                                            ------------------
                                                              1995      1996
                                                            --------  --------
<S>                                                         <C>       <C>
                          ASSETS
CURRENT ASSETS:
  Cash..................................................... $  2,317  $     24
  Accounts receivable, less allowances of $2,452 and
   $5,030, respectively....................................   25,961    31,278
  Inventories..............................................   48,717    47,237
  Prepaid expenses.........................................    1,838     4,468
  Deferred tax assets......................................      645       765
                                                            --------  --------
    Total current assets...................................   79,478    83,772
PROPERTY, PLANT AND EQUIPMENT:
  Land.....................................................    2,960     2,968
  Buildings and improvements...............................   27,029    28,700
  Machinery and equipment..................................   95,111   108,975
  Furniture and fixtures...................................    3,808     3,947
  Construction-in-progress.................................    5,802    45,525
                                                            --------  --------
                                                             134,710   190,115
  Less--accumulated depreciation...........................  (16,156)  (25,646)
                                                            --------  --------
    Net property, plant and equipment......................  118,554   164,469
GOODWILL, Net..............................................   10,011     9,486
OTHER ASSETS, Net..........................................    2,724     2,537
                                                            --------  --------
    Total assets........................................... $210,767  $260,264
                                                            ========  ========
           LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
  Accounts payable......................................... $ 14,941  $ 15,432
  Current maturities of long-term debt.....................      123     9,380
  Accrued liabilities......................................    8,652    16,183
                                                            --------  --------
    Total current liabilities..............................   23,716    40,995
LONG-TERM DEBT.............................................   84,506    90,691
OTHER LONG-TERM LIABILITIES................................    6,189     6,957
DEFERRED INCOME TAXES......................................    8,236    11,680
STOCKHOLDERS' EQUITY:
  Common stock, $.01 par value; 40,000,000 shares
   authorized; 10,529,160 and 10,526,160 shares outstanding
   at December 31, 1995 and 1996, respectively.............      122       122
  Additional paid-in capital...............................   61,830    60,511
  Cumulative translation adjustment........................      (71)     (364)
  Retained earnings........................................   53,485    76,637
  Less: 1,682,000 and 1,685,000 common shares in treasury,
   at cost at December 31, 1995 and 1996, respectively.....  (27,246)  (26,965)
                                                            --------  --------
    Total stockholders' equity.............................   88,120   109,941
                                                            --------  --------
    Total liabilities and stockholders' equity............. $210,767  $260,264
                                                            ========  ========
</TABLE>
 
  The accompanying notes to financial statements are an integral part of these
                                balance sheets.
 
                                       21
<PAGE>
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31,
                                                  ----------------------------
                                                    1994      1995      1996
                                                  --------  --------  --------
<S>                                               <C>       <C>       <C>
NET SALES........................................ $203,264  $240,107  $320,402
COST OF SALES....................................  139,848   176,119   227,351
                                                  --------  --------  --------
    Gross profit.................................   63,416    63,988    93,051
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.....   25,684    30,961    48,609
                                                  --------  --------  --------
    Operating income.............................   37,732    33,027    44,442
OTHER (EXPENSE):
  Interest expense...............................   (2,063)   (5,929)   (6,511)
  Other, net.....................................      (80)       (4)     (269)
                                                  --------  --------  --------
    Total other expense..........................   (2,143)   (5,933)   (6,780)
                                                  --------  --------  --------
    Income before income taxes...................   35,589    27,094    37,662
PROVISION FOR INCOME TAXES.......................   13,843    10,607    14,510
                                                  --------  --------  --------
    Net income................................... $ 21,746  $ 16,487  $ 23,152
                                                  ========  ========  ========
INCOME PER COMMON SHARE.......................... $   1.70  $   1.42  $   2.01
                                                  --------  --------  --------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING.......   12,825    11,647    11,519
                                                  ========  ========  ========
</TABLE>
 
 
  The accompanying notes to financial statements are an integral part of these
                                  statements.
 
                                       22
<PAGE>
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                      ADDITIONAL CUMULATIVE
                               COMMON  PAID-IN   TRANSLATION RETAINED TREASURY
                               STOCK   CAPITAL   ADJUSTMENT  EARNINGS  SHARES
                               ------ ---------- ----------- -------- --------
<S>                            <C>    <C>        <C>         <C>      <C>
BALANCE, December 31, 1993....  $121   $61,837     $  --     $15,252  $    --
 Exercise of stock options....     1       559        --         --        --
 Issuance costs-secondary
  stock offering..............   --       (600)       --         --        --
 Repayment of note receivable
  from stockholder............   --        500        --         --        --
 Cumulative translation
  adjustment..................   --        --        (345)       --        --
 Purchase of treasury shares..   --        --         --         --    (18,588)
 Net income...................   --        --         --      21,746       --
                                ----   -------     ------    -------  --------
BALANCE, December 31, 1994....   122    62,296       (345)    36,998   (18,588)
 Exercise of stock options....   --       (466)       --         --        674
 Cumulative translation
  adjustment..................   --        --         274        --        --
 Purchase of treasury shares..   --        --         --         --     (9,332)
 Net income...................   --        --         --      16,487       --
BALANCE, December 31, 1995....   122    61,830        (71)    53,485   (27,246)
 Exercise of stock options....   --     (1,319)       --         --      1,983
 Cumulative translation
  adjustment..................   --        --        (293)       --        --
 Purchase of treasury shares..   --        --         --         --     (1,702)
 Net income...................   --        --         --      23,152       --
                                ----   -------     ------    -------  --------
BALANCE, December 31, 1996....  $122   $60,511     $ (364)   $76,637  $(26,965)
                                ====   =======     ======    =======  ========
</TABLE>
 
 
  The accompanying notes to financial statements are an integral part of these
                                  statements.
 
                                       23
<PAGE>
 
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31,
                                                 -----------------------------
                                                   1994      1995       1996
                                                 --------  ---------  --------
<S>                                              <C>       <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income..................................... $ 21,746  $  16,487  $ 23,152
 Adjustments to reconcile net income to net cash
  provided by
  (used in) operating activities--
  Depreciation and amortization.................    5,413      8,628    11,964
  Deferred income taxes.........................    2,499      3,017     3,324
  Cumulative translation adjustment.............     (345)       274      (293)
  Changes in certain assets and liabilities--
   Accounts receivable..........................      920      2,875    (5,317)
   Inventories..................................   (7,867)       968     1,480
   Other assets.................................     (284)       479    (1,875)
   Accounts payable and accrued liabilities.....    1,473     (8,966)    8,790
                                                 --------  ---------  --------
    Net cash provided by operating activities...   23,555     23,762    41,225
                                                 --------  ---------  --------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Acquisition of net assets......................  (15,211)   (47,083)      --
 Capital expenditures...........................  (11,382)   (16,813)  (57,922)
                                                 --------  ---------  --------
    Net cash (used in) investing activities.....  (26,593)   (63,896)  (57,922)
                                                 --------  ---------  --------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Issuance of long-term debt.....................   45,000    158,000   112,990
 Payments of long-term debt.....................  (24,160)  (106,649)  (97,548)
 Issuance of common stock.......................      560        --        --
 Note receivable from stockholder...............      500        --        --
 Issuance costs of secondary stock offering.....     (600)       --        --
 Payment for the purchase of treasury shares....  (18,588)    (9,332)   (1,702)
 Exercise of stock options......................      --         208       664
                                                 --------  ---------  --------
    Net cash provided by financing activities...    2,712     42,227    14,404
                                                 --------  ---------  --------
    Net (decrease) increase in cash.............     (326)     2,093    (2,293)
CASH, beginning of period.......................      550        224     2,317
                                                 --------  ---------  --------
CASH, end of period............................. $    224  $   2,317  $     24
                                                 ========  =========  ========
</TABLE>
 
  The accompanying notes to financial statements are an integral part of these
                                  statements.
 
                                       24
<PAGE>
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
(1) BASIS OF PRESENTATION AND NATURE OF BUSINESS
 
  The consolidated balance sheets as of December 31, 1995 and 1996, and the
consolidated statements of operations, stockholders' equity and cash flows for
the years ended December 31, 1994, 1995 and 1996 include the accounts of ABT
Building Products Corporation ("ABT") (a Delaware corporation) and its wholly-
owned subsidiaries ABTco, Inc. ("ABTco"), KenTech Plastics, Inc. ("KenTech")
and ABT Canada, Limited ("ABT Canada") (collectively referred to as the
"Company"). The Company was formed to acquire substantially all of the net
assets of the Building Products Division ("Predecessor") of Abitibi-Price
Corporation ("APC"). On October 20, 1992 ("Inception Date"), the Predecessor
was acquired by the Company (the "Acquisition") pursuant to a purchase
agreement dated September 25, 1992 (the "Purchase Agreement"), for $92
million. The Company was organized by Kohlberg & Co. and an officer of the
Company for the purpose of acquiring the Predecessor. This transaction was
accounted for using the purchase method of accounting.
 
  In February of 1994, the company acquired Canexel Hardboard, a former
division of Canadian Pacific Forest Products Limited ("CPFP") (now Avenor,
Inc.) located in Nova Scotia, Canada. The Company's 1994 results included the
results of Canexel from the date of acquisition. This transaction was
accounted for using the purchase method of accounting.
 
  In addition, during the second quarter of 1995, the Company acquired KenTech
and the Vinyl Siding Division of EMCO Limited ("Vinyl Division"). The
Company's 1995 results include the results of KenTech and the Vinyl Division
from the date of acquisition. These transactions were accounted for using the
purchase method of accounting (Note 3).
 
  The Company is a manufacturer or finisher of various building products
including exterior hardboard siding; interior hardboard, including textured
paneling, finished tileboard, hardboard substrate and door facings; and
plastics such as siding, prefinished mouldings, trim accessories and shutters.
The Company's products are sold internationally to building products
distributors, home center retailers, manufactured housing builders and
industrial fabricators. The Company's quarterly results of operations are
moderately seasonal due to increases in construction activity that typically
occur in the second and third quarters and, to a lesser extent, the first
quarter, thereby increasing sales and gross profits in such periods as
compared to the fourth quarter.
 
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Principles of Consolidation
 
  Significant transactions and balances between ABT and its subsidiaries have
been eliminated in consolidation.
 
  Cash
 
  Cash includes cash equivalents which consist of highly liquid investments
having maturities of three months or less when acquired.
 
  Inventories
 
  Inventories are stated at the lower of cost or market. Cost is determined
using the weighted average cost method. Inventory costs include material,
labor and manufacturing overhead.
 
  Inventories at December 31, 1995 and 1996 consisted of the following (in
thousands):
 
<TABLE>
<CAPTION>
                                                                 1995    1996
                                                                ------- -------
   <S>                                                          <C>     <C>
   Finished products and work-in-process....................... $31,957 $30,330
   Raw materials...............................................   9,205   8,954
   Operating parts and supplies................................   7,555   7,953
                                                                ------- -------
                                                                $48,717 $47,237
                                                                ======= =======
</TABLE>
 
 
                                      25
<PAGE>
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
  Property, Plant and Equipment
 
  Property, plant and equipment are stated at cost. Depreciation is computed
on a straight-line basis over the estimated useful lives of the assets. The
following useful lives are used for recognizing depreciation expense for
financial reporting purposes:
 
<TABLE>
   <S>                                                                <C>
   Buildings and improvements........................................ 31.5 years
   Machinery and equipment........................................... 5-16 years
   Furniture and fixtures............................................   10 years
</TABLE>
 
  Major renewals and betterments which extend the useful life of an asset are
capitalized; routine maintenance and repairs are expensed as incurred. Total
maintenance and repair expense charged to operations was approximately
$13,003,000, $14,754,000 and $17,793,000 for the years ended December 31,
1994, 1995 and 1996, respectively. Upon sale or retirement of assets, the
asset cost and related accumulated depreciation are removed from the accounts
and any related gain or loss is reflected in results of operations.
 
  Other Assets
 
  Deferred charges at December 31, 1995 and 1996 consisted of the following
(in thousands):
 
<TABLE>
<CAPTION>
                                                                1995     1996
                                                               -------  -------
   <S>                                                         <C>      <C>
   Caul plates................................................ $ 3,904  $ 4,758
     Less--accumulated amortization...........................  (2,215)  (3,093)
                                                               -------  -------
                                                               $ 1,689  $ 1,665
                                                               =======  =======
</TABLE>
 
  The Company incurred legal and other costs in connection with the issuance
of debt used to finance the Acquisition. These transaction costs are being
amortized over the term of the related outstanding debt and consisted of the
following as of December 31, 1995 and 1996 (in thousands):
 
<TABLE>
<CAPTION>
                                                                  1995    1996
                                                                 ------  ------
   <S>                                                           <C>     <C>
   Deferred financing costs..................................... $1,511  $1,511
   Less--accumulated amortization...............................   (530)   (800)
                                                                 ------  ------
                                                                 $  981  $  711
                                                                 ======  ======
</TABLE>
 
  Costs incurred for software are expensed as incurred.
 
  Goodwill
 
  Goodwill represents the excess of the purchase price over the fair value of
the net assets acquired at the acquisition date. Goodwill is being amortized
on a straight-line basis over a period of 20 years. Accumulated amortization
at December 31, 1995 and 1996 was $318,000 and $384,000, respectively. The
Company utilizes the undiscounted operating cash flow method to continuously
review the realization of goodwill associated with the acquisitions.
 
  Warranty Reserve
 
  The Company and the Predecessor warrant certain of their products against
defective workmanship for up to 20 years. The estimated cost of warranty
obligations is recognized at the time the related products are sold.
 
                                      26
<PAGE>
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Purchase Agreement required APC to retain responsibility for a portion of
this liability for products sold prior to the acquisition date as follows:
 
  1. One half of the dollar amount paid pursuant to documented claims for
     warranty service in excess of $100,000 during any calendar year, and
 
  2. All liability in excess of $2,500 with respect to each individual claim
     in excess of $5,000.
 
  For the years ended December 31, 1994, 1995 and 1996, the Company incurred
warranty expense related to its exterior hardboard siding products amounting
to $648,000, $679,000 and $705,000, respectively. Warranty expense incurred
for the remainder of the Company's product categories is immaterial.
 
  Recognition of Revenue
 
  Revenue is recorded on the date goods are shipped to the customer. Sales
returns and allowances are recorded as a charge against revenue in the period
in which the related sales are recognized.
 
  Income Taxes
 
  As of the Inception Date, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." Deferred
tax assets and liabilities are recorded for all temporary differences between
financial and tax reporting and are the result of differences in the timing of
recognition of certain income and expense items for financial and tax
reporting.
 
  Foreign Currency Transactions
 
  The Canadian dollar is considered the functional currency of ABT Canada. For
reporting purposes, assets and liabilities have been translated to U.S.
dollars at the rate in effect at the end of the year and income and expense
accounts have been translated at average rates in effect during the year.
Foreign currency transaction gains and losses are included in income in the
periods in which they occur.
 
  Research and Development
 
  Costs incurred in connection with the development of new products and
manufacturing methods are charged to operations as incurred. Such costs
amounted to $902,000, $850,000 and $1,127,000 for the years ended December 31,
1994, 1995 and 1996, respectively.
 
  Estimates and Assumptions
 
  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.
 
  New Accounting Pronouncements
 
  The Company adopted Statement of Financial Accounting Standards (SFAS) No.
121 on Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be disposed of in fiscal year 1996. The Company also adopted SFAS
123 on Accounting for Stock-Based Compensation as described more fully in Note
9 to the Consolidated Financial Statements. The adoption of SFAS No. 121 and
SFAS No. 123 did not have a material impact on the financial position or the
results of operations of the Company.
 
(3) ACQUISITIONS
 
  On April 3, 1995, the Company acquired KenTech, located in Hopkinsville,
Kentucky. The purchase price of KenTech was $14.1 million, which was funded
from drawings on the Company's revolving line of credit. The transaction was
accounted for under the purchase method of accounting, and accordingly, the
Company's
 
                                      27
<PAGE>
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
consolidated financial statements reflect the results of operations of KenTech
from the date of acquisition. The allocation of the purchase price was based
on the fair value of the net assets acquired. This allocation was as follows:
 
<TABLE>
   <S>                                                                  <C>
   Value assigned to assets and liabilities:
     Cash.............................................................. $   166
     Accounts receivable...............................................   3,616
     Inventories.......................................................   4,237
     Prepaid expenses..................................................      38
     Property, plant and equipment.....................................  10,463
     Other assets......................................................   1,412
     Accounts payable and accrued liabilities..........................  (4,040)
     Other liabilities.................................................  (1,825)
                                                                        -------
       Total purchase price............................................ $14,067
                                                                        =======
</TABLE>
 
  On May 31, 1995, the Company acquired through its wholly-owned subsidiary,
ABT Canada, the Vinyl Division of EMCO Limited, located in Acton, Ontario. The
purchase price of the Vinyl Division was $33.0 million, which was funded from
drawings on the Company's revolving line of credit. The transaction was
accounted for under the purchase method of accounting, and accordingly, the
Company's consolidated financial statements reflect the results of operations
of the Vinyl Division from the date of acquisition. The allocation of the
purchase price was based on the fair value of the net assets acquired. This
allocation was as follows:
 
<TABLE>
   <S>                                                                  <C>
   Value assigned to assets and liabilities:
     Accounts receivable............................................... $ 4,541
     Inventories.......................................................   8,057
     Prepaid expenses..................................................     276
     Property, plant and equipment.....................................  22,022
     Other assets......................................................   7,463
     Accounts payable and accrued liabilities..........................  (8,721)
     Other liabilities.................................................    (622)
                                                                        -------
       Total purchase price............................................ $33,016
                                                                        =======
</TABLE>
 
  Presented below are the unaudited summarized pro forma statements of
operations for the years ended December 31, 1994 and 1995. The statements give
effect to the purchase of KenTech and the Vinyl Division as if such
transactions had taken place on January 1, 1994 and 1995, respectively. These
results include certain adjustments, primarily for depreciation, interest and
other expenses related to the acquisitions and are not necessarily indicative
of what the results would have been had the transactions actually occurred on
such dates (in thousands, except per share data).
 
<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31,
                                                        -----------------------
                                                           1994        1995
                                                        ----------- -----------
   <S>                                                  <C>         <C>
   Net sales........................................... $   265,730 $   263,652
   Net income..........................................      19,307      15,844
   Earnings per common share...........................       $1.51       $1.36
   Average common shares outstanding...................      12,825      11,647
</TABLE>
 
                                      28
<PAGE>
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
(4) ACCRUED LIABILITIES
 
  Accrued liabilities as of December 31, 1995 and 1996 consisted of the
following (in thousands):
 
<TABLE>
<CAPTION>
                                                                  1995   1996
                                                                 ------ -------
   <S>                                                           <C>    <C>
   Accrued payroll and benefits................................. $4,616 $ 9,145
   Other........................................................  4.036   7,038
                                                                 ------ -------
                                                                 $8,652 $16,183
                                                                 ====== =======
</TABLE>
 
(5) LONG-TERM DEBT
 
  In November 1993, the Company entered into a credit facility which provided
for a line of credit to the Company totaling $75 million. On September 30,
1994, this credit facility was replaced by an amended and restated agreement
which provided a line of credit to the Company totaling $125 million. On July
13, 1995, the Company and its bank group executed a second amended and
restated credit agreement ("Credit Agreement") which replaced all prior credit
agreements. The Credit Agreement provides for a line of credit to the Company
totaling $175 million consisting of (i) a $30 million primary revolving credit
facility, (ii) a $95 million secondary revolving credit facility ("Secondary
Revolver") and (iii) a term loan facility under which the Company borrowed a
term loan in the principal amount of $50 million on April 3, 1995. Up to $20
million of the total line of credit may be used for letters of credit. The
Credit Agreement matures on September 30, 2002. However, annually, at the
request of the Company and at the discretion of the bank group, the maturity
may be extended for additional one-year periods. In addition, the Secondary
Revolver allows the Company to convert up to $95 million of outstanding
principal balance to term loans with a maturity of up to six years from
conversion. The Credit Agreement allows the Company to choose among interest
rate options, which include the agent bank's base rate of interest in effect
from time to time (prime rate) or the prevailing Eurodollar rate, each plus a
specific maximum margin. The maximum margin is based on the Company's ratio of
indebtedness as a percent of total capitalization (the "Ratio"). However, the
Credit Agreement allows the Company to bid out to the individual bank group
members each borrowing (the "Bid Rate Loans"). This has resulted in actual
margins less than the maximum margins provided for in the Credit Agreement. As
of December 31, 1995 and 1996, the interest rate on outstanding revolving
loans was 6.52% and 6.40%, respectively. The interest rate on the $50 million
term loan borrowed on April 3, 1995 was 7.99%. In addition, the Credit
Agreement requires the payment of a quarterly commitment fee, based on the
Ratio, ranging from 0.15% to 0.20% per annum of the total commitment, less the
average outstanding amounts borrowed and outstanding letters of credit.
 
  The Credit Agreement is unsecured (except for a pledge of 65% of the capital
stock of ABT Canada and a pledge of an intercompany note payable by ABT Canada
to the Company) and requires that the Company meet certain covenants which,
among other things, require the maintenance of ratios related to leverage and
net worth. In addition, the Company is permitted to effect acquisitions so
long as, on a pro-forma basis, the Company remains in compliance with the
financial covenants specified in the agreement.
 
  In addition to the Credit Agreement, in September 1995, the Company entered
into a $10 million loan agreement as permitted by the Credit Agreement (the
"Swing Line"). The Swing Line provides an administratively less complex
procedure for temporary borrowings. The terms and conditions under the Swing
Line are similar to those of the Credit Agreement. Any indebtedness incurred
under the Swing Line could be similarly incurred under the Credit Agreement.
Outstanding borrowings under this agreement have been included with Credit
Agreement debt.
 
                                      29
<PAGE>
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
<TABLE>
<CAPTION>
                                                                DECEMBER 31,
                                                               ----------------
                                                                1995     1996
                                                               -------  -------
   <S>                                                         <C>      <C>
   Revolving line of credit................................... $34,500  $50,065
   Term loans.................................................  50,000   50,000
   Capital lease obligations..................................     129        6
                                                               -------  -------
                                                                84,629  100,071
   Less-current maturities....................................    (123)  (9,380)
                                                               -------  -------
     Total long-term debt..................................... $84,506  $90,691
                                                               =======  =======
</TABLE>
 
  The Company has entered into agreements to lease certain property under
terms which qualify as capital leases. Capital leases consist primarily of
data processing equipment. As of December 31, 1995 and 1996, assets recorded
under capital leases were approximately $373,000, net of accumulated
amortization of approximately $231,000 and $306,000, respectively.
 
  Under existing agreements, maturities of long-term debt as of December 31,
1996, including capital lease obligations, are as follows (in thousands):
 
<TABLE>
     <S>                                                                <C>
     1997.............................................................. $  9,380
     1998..............................................................   12,500
     1999..............................................................   12,500
     2000..............................................................   12,500
     2001..............................................................    3,125
     Thereafter........................................................   50,066
                                                                        --------
                                                                        $100,071
                                                                        ========
</TABLE>
 
(6) INCOME TAXES
 
  The provision for income taxes in the consolidated statements of operations
for the years ended December 31, 1994, 1995 and 1996 consists of the following
(in thousands):
 
<TABLE>
<CAPTION>
                                                        1994    1995     1996
                                                       ------- -------  -------
   <S>                                                 <C>     <C>      <C>
   Current
     Federal.......................................... $ 8,338 $ 7,543  $ 9,510
     State and local..................................   1,521   1,333    2,132
     Foreign..........................................   1,491  (1,286)     215
                                                       ------- -------  -------
   Total Current......................................  11,350   7,590   11,857
                                                       ------- -------  -------
   Deferred
     Federal..........................................   1,967   1,649    2,324
     State and local..................................     526     544      426
     Foreign..........................................     --      824      (97)
                                                       ------- -------  -------
   Total Deferred.....................................   2,493   3,017    2,653
                                                       ------- -------  -------
       Total provision for income taxes............... $13,843 $10,607  $14,510
                                                       ======= =======  =======
</TABLE>
 
                                      30
<PAGE>
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
  The difference between the United States federal statutory income tax rate
and the consolidated effective income tax rate is summarized as follows (in
thousands):
 
<TABLE>
<CAPTION>
                                                      1994    1995     1996
                                                     ------- -------  -------
   <S>                                               <C>     <C>      <C>
   Income before income taxes multiplied by statu-
    tory rate....................................... $10,512 $ 9,483  $13,182
   State income tax and other.......................   1,840   1,586    1,210
   Foreign income tax (benefit).....................   1,491    (462)     118
                                                     ------- -------  -------
   Total provision for income taxes................. $13,843 $10,607  $14,510
                                                     ======= =======  =======
</TABLE>
 
  Deferred taxes are determined based on the estimated future tax effects of
temporary differences between the financial reporting and tax basis of assets
and liabilities, given the provisions of the enacted tax laws. Deferred tax
consequences of significant temporary differences existing as of December 31,
1995 and 1996 are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                             1995      1996
                                                            -------  --------
   <S>                                                      <C>      <C>
   Accrued vacation........................................ $   847  $    563
   Other accruals and reserves.............................    (371)       51
   Inventory burden........................................     169       151
                                                            -------  --------
     Net deferred tax asset................................     645       765
                                                            -------  --------
   Warranty................................................     730       (36)
   Prepaid pension expense.................................     285       469
   Depreciation............................................  (9,396)  (15,186)
   Canadian net operating loss and investment tax carryo-
    ver....................................................     287     3,170
   Deferred financing costs................................    (142)      (97)
                                                            -------  --------
     Deferred tax liability................................  (8,236)  (11,680)
                                                            -------  --------
                                                            $(7,591) $(10,915)
                                                            =======  ========
</TABLE>
 
  Tax benefits arising from the exercise of stock options in the amount of
$373,000, $176,000 and $815,000 are not reflected in the current tax
provisions for the years ended December 31, 1994, 1995 and 1996, respectively.
These amounts were credited directly to additional paid-in capital. At
December 31, 1996, the Company's Canadian operation had available tax net
operating losses and investment tax credits of $6,481,000 and $577,000,
respectively which will begin to expire in 2001 and 2004, respectively.
 
                                      31
<PAGE>
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
(7) EMPLOYEE BENEFIT PLANS
 
  The Company maintains a noncontributory, defined benefit pension plan
covering substantially all U.S. employees. Pension plan costs are funded in
compliance with the Employee Retirement Income Security Act of 1974 "ERISA"
requirements. The following table sets forth the funded status of the plan at
January 1, 1996 and 1997 (in thousands):
 
<TABLE>
<CAPTION>
                                                               1996     1997
                                                              -------  -------
   <S>                                                        <C>      <C>
   Actuarial present value of benefit obligation--
     Vested benefits......................................... $42,342  $41,318
     Nonvested benefits......................................     813      370
                                                              -------  -------
   Accumulated benefit obligation............................  43,155   41,688
   Effect of projected future compensation levels............   6,767    7,012
                                                              -------  -------
   Projected benefit obligation..............................  49,922   48,700
   Plan assets at fair value.................................  49,010   46,902
                                                              -------  -------
   Projected benefit obligation (in excess of) plan assets...    (912)  (1,798)
   Unrecognized prior service cost...........................     397      770
   Unrecognized net loss.....................................     422      955
                                                              -------  -------
   Pension (liability) recorded in balance sheets............ $   (93) $   (73)
                                                              =======  =======
</TABLE>
 
  The assumptions used to measure the projected benefit obligation and to
compute the expected long-term return on assets for the plan is as follows:
 
<TABLE>
<CAPTION>
                                                               1994  1995  1996
                                                               ----  ----  ----
   <S>                                                         <C>   <C>   <C>
   Discount rate.............................................. 9.0%  7.5%  7.5%
   Average increase in compensation levels.................... 4.5   4.5   4.5
   Expected long-term return on assets........................ 9.0   9.0   9.0
</TABLE>
 
  The plan's assets consist primarily of common stocks, bonds and cash
equivalents.
 
  Net periodic pension costs for the defined benefit pension plan for the
years ended December 31, 1994, 1995 and 1996 include the following components
(in thousands):
 
<TABLE>
<CAPTION>
                              1994    1995    1996
                             ------  ------  ------
   <S>                       <C>     <C>     <C>
   Service cost on benefits
    earned during the peri-
    od.....................  $1,089  $1,029  $1,432
   Interest cost on pro-
    jected benefit obliga-
    tion...................   3,210   3,353   3,696
   Expected return on plan
    assets.................  (3,752) (3,602) (4,361)
   Amortization cost.......    (263)    (70)     54
                             ------  ------  ------
   Net periodic pension
    cost...................  $  284  $  710  $  821
                             ======  ======  ======
</TABLE>
 
  Certain employees whose benefits under the plan have been reduced as the
result of recent formula changes or who are otherwise designated by the
Compensation Committee, may accrue additional benefits under supplemental
nonqualified plans which the Company has established. The cost of these plans
was approximately $246,000, $220,000 and $390,000 for the years ended December
31, 1994, 1995 and 1996, respectively. The accumulated benefit obligation of
these plans was $732,000 and $1,056,000 as of December 31, 1995 and 1996,
respectively. The projected benefit obligation of the plans was $998,000 and
$1,453,000 as of December 31, 1995 and 1996, respectively. The plans are not
funded, thus plan assets at December 31, 1995 and 1996 were $0. The pension
liability recorded in the consolidated balance sheets is $592,555 and $862,399
at December 31, 1995 and 1996, respectively. The actuarial assumptions used
for these plans are the same as those used to measure the defined benefit plan
funded in compliance with ERISA requirements.
 
 
                                      32
<PAGE>
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
  The Company maintains no post-retirement benefits other than pensions.
 
  The Company is in the process of finalizing the pension asset and liability
transfer with CPFP and EMCO Limited, as it relates to the acquisitions of
Canexel and the Vinyl Division (Note 3). CPFP and EMCO Limited retained the
obligation for all participants retired prior to the acquisition date. Pension
expense for the years ended December 31, 1995 and 1996 was approximately
$156,000 and $201,000.
 
(8) LEASES
 
  The Company is party to numerous leases, principally for vehicles,
administrative and sales offices and warehouses. Rent expense under operating
leases was approximately $1,693,000, $2,219,000 and $2,967,000 for the years
ended December 31, 1994, 1995 and 1996, respectively.
 
  At December 31, 1996, future minimum annual rental commitments were as
follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                       OPERATING
                                                                         LEASES
                                                                       ---------
   <S>                                                                 <C>
   1997...............................................................  $2,410
   1998...............................................................   2,150
   1999...............................................................   1,247
   2000...............................................................   1,002
   2001 and thereafter................................................     387
                                                                        ------
     Total minimum lease payments.....................................  $7,196
                                                                        ======
</TABLE>
 
(9) STOCKHOLDERS' EQUITY
 
  On February 16, 1994, the major shareholders of the Company completed a
secondary offering of 3,415,000 shares. The costs incurred were charged to
additional paid-in capital and amounted to approximately $600,000.
 
  Commencing the third quarter of 1994, the Board of Directors authorized the
repurchase of up to 2,200,000 shares of the Company's common stock in the open
market. Treasury shares repurchased amounted to 591,000 in 1995 and 115,000 in
1996. At December 31, 1996, the Company had 1,685,000 treasury shares.
Accordingly, the cost to repurchase the treasury shares has been recorded in
stockholders' equity.
 
  The Board of Directors and stockholders of the Company adopted a Stock
Option Plan pursuant to which members of management and other employees of the
Company may be granted options to purchase up to an aggregate of 3,100,000
shares of common stock. At the Inception Date, certain officers of the Company
were granted options to purchase 1,120,000 shares of common stock at an
exercise price of $2.50 per share, the fair market value as of the date of
grant. Options generally become exercisable ratably over a four-year period
and expire ten years after the date of the grant. The Company accounts for
this plan under APB Opinion No. 25, under which no compensation cost has been
recognized. Had compensation cost for these plans been determined consistent
with FASB Statement No. 123, the Company's 1995 and 1996 net income and
earnings per share would have been reduced to the following pro forma amounts:
 
<TABLE>
<CAPTION>
                                                        1995                  1996
                                                     -----------           -----------
     <S>                       <C>                   <C>                   <C>
     Net Income:               As Reported           $16,487,000           $23,152,000
                               Pro Forma              15,539,000            21,905,000
     Earnings per Share:       As Reported                 $1.42                 $2.01
                               Pro Forma                    1.33                  1.90
</TABLE>
 
 
                                      33
<PAGE>
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
  Because the Statement 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.
 
  The following table provides summary information regarding stock options
granted under the Stock Option Plan:
 
<TABLE>
<CAPTION>
                                   1994                1995                1996
                            ------------------- ------------------- -------------------
                                         1994                1995                1996
                                       WEIGHTED            WEIGHTED            WEIGHTED
                                       AVG. EX.            AVG. EX.            AVG. EX.
                             OPTIONS    PRICE    OPTIONS    PRICE    OPTIONS    PRICE
                            ---------  -------- ---------  -------- ---------  --------
   <S>                      <C>        <C>      <C>        <C>      <C>        <C>
   Outstanding at January
    1...................... 1,624,000    $  6   1,910,750    $ 9    2,376,360    $11
   Granted.................   361,750      22     529,860     19       24,400     20
   Exercised...............   (75,000)      3     (31,800)     3     (172,393)     7
   Cancelled...............       --      --      (32,450)    17      (42,710)    17
                            ---------    ----   ---------    ---    ---------    ---
   Outstanding at December
    31..................... 1,910,750       9   2,376,360     12    2,185,657     12
                            =========    ====   =========    ===    =========    ===
   Exercisable at December
    31.....................   795,000       3   1,022,960      6    1,299,532      7
                            =========    ====   =========    ===    =========    ===
</TABLE>
 
  The weighted average fair value of options granted for 1995 and 1996 was
$12.44 and $12.28, respectively. 942,000 of the 2,185,657 options outstanding
at December 31, 1996 have exercise prices of $2.50 with a weighted average
remaining contractual life of 6 years. All of these options are exercisable.
635,932 of the options outstanding have exercise prices between $13.00 and
$19.50 with a weighted average exercise price of $15.49 and a weighted average
remaining contractual life of 7 years. The remaining 607,725 options have
exercise prices between $19.75 and $29.50 with a weighted average exercise
price of $22.53 and a weighted average remaining contractual life of 8 years.
The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option pricing model with the following weighted
average assumptions used for grants in 1995 and 1996, respectively: risk-free
interest rates of 7.13% and 6.35%; expected dividend yield of 0%; expected
lives of 10 years; expected volatility of 42.00% and 38.04%.
 
(10) COMMITMENTS AND CONTINGENCIES
 
  Under the terms of the asset purchase agreements between the Company and
APC, CPFP and EMCO Limited, such entities agreed to indemnify the Company for
certain liabilities or obligations of the Predecessor, Canexel and the Vinyl
Division respectively, arising on or prior to the change in ownership
including liabilities related to environmental, product liability and
litigation matters. In connection with such transactions, as well as the
acquisition of KenTech, the Company assumed various liabilities and
obligations under product warranties with respect to products manufactured
prior to the change in ownership.
 
  Litigation
 
  On August 30, 1995, the Company completed negotiations with Michigan
environmental authorities regarding a consent judgment providing for an odor
emissions abatement program at its Alpena, Michigan, facility. The program
provides for phased installation of controls to effect a staged reduction of
the facility's emissions of odors into the air. It is estimated that capital
expenditures of approximately $6 million to $12 million will be required in
order to attain compliance with the program. (To date the Company has expended
approximately $6 million.) It is the Company's position that costs incurred in
complying with the consent judgment will be borne in whole or in part by
Abitibi-Price Corporation ("APC"), as the prior owner of the Alpena facility,
and APC's corporate parent Abitibi-Price, Inc. ("API"). Accordingly, on
November 27, 1995, the Company and ABTco commenced an action against APC and
API in the Circuit Court for the County of Oakland, Michigan, (ABT Building
Products Corporation and ABTco, Inc. v. Abitibi-Price Corporation and
 
                                      34
<PAGE>
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Abitibi-Price, Inc., Case No. 95-508819-CK), seeking to recover damages
incurred in connection with the remediation, correction and control of odor
emissions at the Alpena facility. The complaint initially asserted claims for
breach of contract, fraudulent non-disclosure and fraudulent
misrepresentation. The Company and ABTco have determined not to pursue the
claims for fraudulent non-disclosure and fraudulent misrepresentation, and a
stipulated order to that effect was filed on May 9, 1996. The Company and
ABTco are proceeding with their claims for breach of contract. Discovery has
been completed. The Company and ABTco have moved for summary judgment on
liability only; APC and API have moved for summary judgment dismissing the
remaining claims in the complaint. Trial is currently scheduled for April 7,
1997.
 
  The Company and ABTco have been named as defendants in a class action and
three separate putative class actions arising from hardboard siding
manufactured, distributed, or sold by them or by APC or API:
 
    (1) Fyola et al. v. ABT Building Products Corporation et al., Docket No. 
95-12854, Court of Common Pleas of Allegheny County, Pennsylvania.
 
    On August 8, 1995, plaintiffs Glenn Fyola, Patricia Fyola, Joyce
  D'Antonio, and Kenneth Hyre filed this action in the Court of Common Pleas
  of Allegheny County, Pennsylvania against the Company. Plaintiffs alleged
  that they were suing on behalf of themselves and a putative class composed
  of residential homeowners who reside in Pennsylvania and whose homes have
  or had for their exterior siding a hardboard product which was allegedly
  manufactured, distributed, or sold by the Company. The original complaint
  alleged that the exterior siding on plaintiffs' homes had prematurely
  rotted, warped, buckled, and deteriorated. Plaintiffs asserted purported
  claims for breach of implied warranty of merchantability, breach of implied
  warranty of fitness, breach of express warranty, violation of the
  Pennsylvania Unfair Trade Practice and Consumer Protection Law, and deceit
  by concealment. Plaintiffs, on behalf of themselves and the putative class,
  sought compensatory and punitive damages in unspecified amounts, including
  economic damages, treble damages under the Pennsylvania Unfair Trade
  Practice and Consumer Protection Law, and an award of attorneys' fees.
 
    The Company filed an "Answer and New Matter" on October 31, 1995, that
  denied all material allegations of the complaint and asserted affirmative
  defenses. The Company also filed a third-party complaint against additional
  defendants APC and Maronda Homes, Inc. The third-party complaint asserted a
  single count against APC. In that count, the Company alleged that the
  hardboard siding at issue was manufactured by APC and that, as a result,
  APC "may be solely liable for the causes of action pleaded by plaintiffs
  assuming arguendo said causes of action have any validity." The third-party
  complaint also asserted a single count against Maronda Homes, Inc. In that
  count, the Company asserted that to the extent any hardboard siding
  involved in the case was manufactured by ABTco (which the Company denies),
  and to the extent any such siding exhibited any abnormal condition, that
  abnormal condition was a direct result of improper installation of the
  siding by Maronda Homes, Inc. and its failure to follow applicable building
  codes and application instructions. The Company's third-party complaint
  asked that, should the Company be held liable to plaintiffs or the putative
  class in any respect, judgments be entered against APC and Maronda Homes,
  Inc., holding each of them solely liable to plaintiffs, liable over to the
  Company by way of contribution and/or indemnity, or jointly and severally
  liable to plaintiffs with the Company.
 
    On February 5, 1996, plaintiffs filed an amended complaint adding ABTco
  and APC as defendants. Plaintiffs allege that hardboard exterior siding on
  their homes has prematurely rotted, warped, buckled, and deteriorated.
  Plaintiffs and the putative class are seeking compensatory damages in
  unspecified amounts, including economic damages, treble damages under the
  Pennsylvania Unfair Trade Practice and Consumer Protection Law, and an
  award of attorneys' fees from the Company, ABTco and APC.
 
    The action was removed to the United States District Court for the
  Western District of Pennsylvania. By order dated November 25, 1996, that
  Court remanded the action to the Court of Common Pleas for Allegheny
  County.
 
                                      35
<PAGE>
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
    In response to the amended complaint, defendants filed an "Answer and New
  Matter" dated December 27, 1996, that denies all material allegations of
  the amended complaint and asserts affirmative defenses. Plaintiffs are
  currently seeking discovery from defendants. The action has not been
  certified as a class action.
 
    The Company and ABTco intend to defend the action vigorously.
 
    (2) Foster et al. v. ABTco, Inc., ABT Building Products Corporation,
  Abitibi-Price, Inc. and Abitibi-Price Corporation, Docket No. 96-0069-AH-M,
  United States District Court for the Southern District of Alabama.
 
    On December 21, 1995, plaintiffs Thomas and Linda Foster brought this
  action in the Circuit Court of Choctaw County, Alabama, on behalf of
  themselves and a class generally composed of all individuals and entities
  (i) that own or owned property in the United States on which hardboard
  siding manufactured, distributed, or sold by the Company, ABTco, API, or
  APC has been installed and (ii) that have already suffered (or will suffer
  within the warranty period) alleged damage because, according to
  plaintiffs, such siding prematurely rots, buckles, swells, cracks or
  otherwise deteriorates. Plaintiffs filed an amended complaint on July 10,
  1996. Plaintiffs and the putative class are seeking compensatory damages
  and an award of attorneys' fees. The complaint alleges that the "amount in
  controversy is in the millions of dollars classwide and is typically
  several thousand dollars for each plaintiff and individual class member."
 
    On December 22, 1995, this action was conditionally certified as a class
  action by ex parte order.
 
    On January 23, 1996, defendants removed the action to the United States
  District Court for the Southern District of Alabama. By order dated
  September 10, 1996, that court denied plaintiffs' motion to remand the
  action to the Circuit Court of Choctaw County, Alabama. By order dated
  December 31, 1996, that court denied plaintiffs' motion for reconsideration
  of its order of September 10, 1996, or in the alternative for certification
  of that order for interlocutory appeal. Counsel for plaintiffs have stated
  that plaintiffs may file a petition for writ of mandamus with the United
  States Court of Appeals for the Eleventh Circuit seeking to overturn the
  district court's denial of plaintiffs' motion to remand the action. To the
  best of our knowledge, plaintiffs have not yet filed such a petition.
 
    The parties are currently discussing a schedule for discovery concerning
  issues that are relevant to class certification. After certification-
  related discovery is completed, the conditional order of certification
  already entered in the action may be challenged.
 
    The Company and ABTco intend to defend the action vigorously.
 
    (3) Dunn et al. v. ABTco, Inc., ABT Building Products Corporation,
  Abitibi-Price, Inc. and Abitibi-Price Corporation, Docket No. 96-CVS7690,
  Superior Court of Forsyth County, North Carolina.
 
    On December 27, 1996, plaintiffs William Dunn and Paul and Teresa
  Sullivan brought this action on behalf of themselves and a putative class
  generally composed of all individuals and entities (i) that own or owned
  property in the United States on which hardboard siding manufactured,
  distributed, or sold by the Company, ABTco, API or APC has been installed
  and (ii) that have already suffered (or will suffer within the warranty
  period) alleged damage because, according to plaintiffs, such siding
  prematurely rots, buckles, swells, cracks or otherwise deteriorates.
  Plaintiffs and the putative class are seeking compensatory damages and an
  award of attorneys' fees. The complaint alleges that the "aggregate amount
  in controversy is in the millions of dollars classwide." This action has
  not been certified as a class action. On January 28, 1997, all defendants
  moved to abate or stay the action. That motion was argued on February 14,
  1997. At the conclusion of the argument, the court denied the motion to
  abate but granted the motion to stay. The parties are currently
  deliberating over the form of the order, inter alia, specifying the
  duration of the stay.
 
    The Company and ABTco intend to defend the action vigorously.
 
    (4) Ezzell et al. v. ABTco, Inc., ABT Building Products Corporation,
  Abitibi-Price, Inc. and Abitibi-Price Corporation, No. 97-CVS-167, Superior
  Court of Onslow County, North Carolina.
 
                                      36
<PAGE>
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
    On January 21, 1997, plaintiffs John and Rosemary Ezzell filed this
  action on behalf of themselves and a putative class generally composed of
  all individuals and entities (i) that own or owned property in the United
  States on which hardboard siding manufactured, distributed, or sold by the
  Company, ABTco, API, or APC has been installed and (ii) that have already
  suffered (or will suffer within the warranty period) alleged damage
  because, according to plaintiffs, such siding prematurely rots, buckles,
  discolors, deteriorates, and otherwise does not perform as expressly
  represented or warranted, and/or would not perform in accordance with the
  reasonable expectations of class members and other consumers that such
  siding is durable, suitable and proper to be used on personal residences or
  other properties. The complaint alleges that "the aggregate amount in
  controversy is typically several thousand dollars for each plaintiff and
  individual class member." The action has not been certified as a class
  action.
 
    The Company is considering filing a motion to stay further proceedings in
  this action that would be similar to the motion filed in Dunn v. ABTco,
  Inc. et al., as discussed above.
 
    The Company and ABTco intend to defend the action vigorously.
 
    In addition, the Company is a party to various other legal proceedings
  arising in the ordinary course of business, none of which, in management's
  opinion, is expected to have a material adverse effect on the Company's
  operating results or financial condition.
 
  Commitments
 
    In November 1995, the Board of Directors approved plans for the
  construction of a facility which will manufacture a fiber-reinforced cement
  plank or panel, which will have a Class 1 fire rating and is both moisture
  and insect resistant. The product, initially for use as exterior siding,
  will be produced in a variety of simulated woodgrain surfaces, including
  fir and cedar. On December 12, 1995, the Company executed an agreement with
  J.M. Voith AG to provide the primary production equipment for this
  facility. It is anticipated that the plant will be completed in mid-1997.
  The estimated cost of construction is $55 million.
 
(11) RELATED-PARTY TRANSACTIONS
 
  The Company entered into an agreement with Kohlberg & Co. to provide
management services for an annual fee of $95,000, plus out-of-pocket expenses.
Payments under this agreement for the years ended December 31, 1994, 1995 and
1996 were approximately $124,000, $114,000 and $103,000, respectively.
 
  At December 31, 1993, the Company had a $500,000 loan outstanding to an
officer of the Company. For financial reporting purposes, the transaction is
reflected as an offset to stockholders' equity. This loan was repaid during
1994.
 
(12) SUPPLEMENTAL CASH FLOW DISCLOSURE
 
  In addition to the information provided in the Statements of Cash Flows, the
following is a supplemental disclosure of cash flow information for the years
ended December 31, 1994, 1995 and 1996 (in thousands):
 
<TABLE>
<CAPTION>
                                                            1994   1995   1996
                                                           ------ ------ ------
   <S>                                                     <C>    <C>    <C>
   Cash paid during period for--
     Interest............................................. $1,315 $4,834 $8,017
     Income taxes......................................... 11,059 10,833  7,124
</TABLE>
 
                                      37
<PAGE>
 
                  NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
 
(13) QUARTERLY FINANCIAL DATA (UNAUDITED)
 
  Dollar amounts are in thousands, except per share data.
 
<TABLE>
<CAPTION>
                          FIRST QUARTER  SECOND QUARTER   THIRD QUARTER  FOURTH QUARTER
                         --------------- --------------- --------------- ---------------
                          1995    1996    1995    1996    1995    1996    1995    1996
                         ------- ------- ------- ------- ------- ------- ------- -------
<S>                      <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>
Net sales............... $53,712 $74,362 $62,892 $82,549 $66,694 $88,435 $56,809 $75,056
Gross profit............  16,136  21,062  17,235  24,469  17,545  26,456  12,982  21,064
Operating income........   9,626  10,880   9,777  12,577   8,582  13,209   5,042   7,776
Net income..............   5,409   5,481   5,033   6,552   4,074   6,894   1,971   4,225
Net income per common
 share..................     .46     .48     .43     .57     .35     .60     .17     .36
</TABLE>
 
(14) CONCENTRATION OF BUSINESS/GEOGRAPHIC INFORMATION
 
  The Company's operations involve a single industry segment; the design,
manufacture, sale and support of building products. No single customer
accounts for more than 10% of net sales.
 
  Prior to 1994, revenues and operating income were generated by U.S.
operations. Subsequent to the acquisition of Canexel in 1994 and the Vinyl
Division in 1995, revenues and operating income are derived from U.S. and
Canadian operations. The following table provides summary information for the
years ended December 31, 1994, 1995 and 1996 (in millions):
 
<TABLE>
<CAPTION>
                                                             1994   1995   1996
                                                            ------ ------ ------
<S>                                                         <C>    <C>    <C>
Revenues
  U.S. Operations.......................................... $173.4 $192.6 $233.6
  Canadian Operations......................................   29.9   47.5   86.8
                                                            ------ ------ ------
    Total Revenues.........................................  203.3  240.1  320.4
                                                            ====== ====== ======
Operating Income
  U.S. Operations..........................................   33.3   31.6   38.1
  Canadian Operations......................................    4.4    1.4    6.3
                                                            ------ ------ ------
    Total Operating Income.................................   37.7   33.0   44.4
                                                            ====== ====== ======
Assets
  U.S. Operations..........................................  123.2  156.5  193.4
  Canadian Operations......................................   20.3   54.3   66.9
                                                            ------ ------ ------
    Total Assets........................................... $143.5 $210.8 $260.3
                                                            ====== ====== ======
</TABLE>
 
                                      38
<PAGE>
 
                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To ABT Building Products Corporation:
 
  We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of ABT Building Products Corporation and
Subsidiaries (the "Company") included in this Form 10-K and have issued our
report thereon dated January 20, 1997. Our audit was made for the purpose of
forming an opinion on the basic financial statements taken as a whole. The
schedule listed on the index on page 19 is the responsibility of the Company's
management and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic consolidated
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic consolidated financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic consolidated
financial statements taken as a whole.
 
                                      /s/Arthur Andersen LLP

                                       Arthur Andersen LLP
 
Chicago, Illinois, January 20, 1997
 
 
                                      39
<PAGE>
 
               ABT BUILDING PRODUCTS CORPORATION AND SUBSIDIARIES
 
                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
                         ACCOUNTS RECEIVABLE ALLOWANCES
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                             FOR THE YEAR ENDED DECEMBER 31,
                                            ----------------------------------
                                               1994        1995        1996
                                            ----------  ----------  ----------
<S>                                         <C>         <C>         <C>
Balance, beginning of period............... $    1,330  $    1,433  $    2,452
Provision for discounts and allowances.....      7,256       7,948      12,014
Discounts and allowances taken.............     (7,153)     (6,929)     (9,436)
                                            ----------  ----------  ----------
Balance, end of period..................... $    1,433  $    2,452  $    5,030
                                            ==========  ==========  ==========
</TABLE>
 
                                       40
<PAGE>
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE
 
  None.
 
                                   PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
  The directors and executive officers of the Company, and their ages as of
February 28, 1997, are as follows:
 
<TABLE>
<CAPTION>
        NAME                          AGE                  POSITION
        ----                          ---                  --------
<S>                                   <C> <C>
George T. Brophy(1)..................  62 Chairman, President and Chief Executive
                                           Officer
William J. Adams.....................  55 Executive Vice President--Exterior Products
                                           Group
J. Phillipe Latreille................  58 Executive Vice President--International and
                                           Corporate Marketing
Michael A. Lupo......................  64 Executive Vice President, Chief Financial
                                           Officer and Secretary
Richard E. Parker....................  55 Executive Vice President--Interior Products
                                           Group
Warner C. Frazier(2).................  64 Director
Samuel P. Frieder(1)(2)(3)...........  32 Director
James A. Kohlberg(1).................  39 Director
Jerome Kohlberg Jr...................  71 Director
George W. Peck IV(3).................  65 Director
Nelson J. Rohrbach(2)(3).............  56 Director
W. Dexter Paine, III.................  36 Director
</TABLE>
--------
(1) Member of the Executive Committee
(2) Member of the Audit Committee
(3) Member of the Compensation Committee
 
  Jerome Kohlberg Jr. is the father of James A. Kohlberg; there are no other
family relationships among any of the directors or executive officers of the
Company. All of the current directors became directors of the Company in
October 1992 at the time of the Acquisition, except Mr. Frieder (appointed a
director in April 1993), Messrs. Frazier and Rohrbach (appointed in October
1993) and Mr. Paine (appointed in February 1996).
 
  The Board of Directors has established an Executive Committee, an Audit
Committee and a Compensation Committee. The Executive Committee generally
exercises the powers of the Board of Directors when the board is not in
session, subject to the limitations of Delaware Law, and has the ability to
approve expenditures of up to $1.0 million. The Audit Committee oversees
actions taken by the Company's independent auditors and recommends the
engagement of auditors. The Compensation Committee approves the compensation
of executives of the Company, makes recommendations to the Board of Directors
with respect to standards for setting compensation levels and administers the
Company's incentive plans.
 
  Directors do not currently receive compensation from the Company for their
services as directors, except that Messrs. Frazier and Rohrbach receive a
retainer of $12,000 per annum plus $1,000 for each day on which a board and/or
committee meeting is attended. All directors are reimbursed for expenses
incurred in connection with attendance at meetings.
 
  The following is a background description of the executive officers and
directors of the Company:
 
  George T. Brophy has been Chairman, President and Chief Executive Officer of
the Company since October 1992. From 1983 to 1988, Mr. Brophy was President,
Chief Executive Officer and a director of Morgan Products
 
                                      41
<PAGE>
 
Ltd., a building products company ("Morgan"), and was a private business
consultant from 1988 to 1992. From 1966 to 1980, Mr. Brophy served in various
positions at Masonite Corporation ("Masonite"), including Executive Vice
President, Chief Operating Officer and director. Mr. Brophy is also a director
of Banta Corporation, a printing company, and Simplicity Manufacturing, Inc.,
a manufacturer of outdoor power equipment ("Simplicity").
 
  William J. Adams has been Executive Vice President of the Exterior Products
Group since December 1995. From September 1994 to December 1995, Mr. Adams was
the Executive Vice President of the Siding Division. Mr. Adams was the
Hardboard/Plastics Division's Vice President of Marketing and Sales since
October of 1992. From 1990 to 1992, Mr. Adams was President and Chief
Executive Officer of Vanderpool Electric Company. From 1987 to 1990, Mr. Adams
was President and Chief Executive Officer of Harris-Tarkett, Inc., a
manufacturer of hardwood flooring.
 
  J. Phillipe Latreille has been Executive Vice President of the Company since
November 1993. From 1983 to 1992, Mr. Latreille was Vice President of
Corporate Marketing with Morgan. Earlier in his career Mr. Latreille held
various management positions at Masonite for a period of 20 years. Mr.
Latreille is also a director of Associated Bank, N.A., a commercial bank.
 
  Michael A. Lupo has been Executive Vice President and Chief Financial
Officer of the Company since June 1993. From June 1991 to June 1993, Mr. Lupo
was Chairman and a director of BackStage Music Network, Inc., a corporation
engaged in the provision of music instructional services. From 1983 to 1991,
Mr. Lupo was Executive Vice President, Chief Financial Officer and a director
of Morgan. Prior to that time, Mr. Lupo held various financial and management
positions in other industries.
 
  Richard E. Parker has been the Company's Executive Vice President of the
Interior Products Group since December 1995. From October 1992 through Decmber
1995 Mr. Parker was the Executive Vice President of the Hardboard/Plastics
Division. From 1990 to October 1992, Mr. Parker served as Vice President and
General Manager of the Bend Door & Millwork Company. From 1986 to 1990, Mr.
Parker was Executive Vice President of the Manufacturing Division of Morgan.
Earlier in his career, Mr. Parker held sales, distribution, marketing and
general management positions at Masonite for a period of 13 years.
 
  Warner C. Frazier has been Chairman and Chief Executive Officer of
Simplicity since March 1988. He is also a director of Northwestern Steel and
Wire Company, a manufacturer of steel and wire ("Northwestern"), and Rexworks,
Inc., a manufacturer of landfill compactors.
 
  Samuel P. Frieder joined Kohlberg & Co. in 1989 and was named a principal in
1995.
 
  James A. Kohlberg has been a principal of Kohlberg & Co. since 1987. Mr.
Kohlberg is also a director of Northwestern.
 
  Jerome Kohlberg Jr. has been a principal of Kohlberg & Co. since 1987. Mr.
Kohlberg is also a director of Fred Meyer, Inc., a retailer.
 
  George W. Peck IV has been a principal of Kohlberg & Co. since 1987. Mr.
Peck is also a director of ABC Rail Products Corporation, a manufacturer of
specialty trackwork and other rail products; The Lion Brewery, Inc., a
producer and bottler of brewed beverages, including specialty beers and
specialty soft drinks; and Northwestern.
 
  Nelson J. Rohrbach has been a consultant since January 1996. From March 1994
to December 1995, Mr. Rohrbach was President and Chief Executive Officer of
Cleo Inc., a manufacturer of gift wrap and accessories. From February 1989 to
March 1994, Mr. Rohrbach was President and Chief Executive Officer of The
Paper Factory of Wisconsin, Inc., a chain of retail party stores.
 
 
                                      42
<PAGE>
 
  W. Dexter Paine, III has been a principal of Kohlberg & Co. since March 1994.
From 1987 to 1994, he was managing director of Robertson Stephens & Company, an
investment banking firm.
 
ITEM 11. EXECUTIVE COMPENSATION
 
  The information required by this item is incorporated by reference to the
Company's definitive Proxy Statement prepared with respect to the Annual
Meeting of Shareholders to be held April 30, 1997.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
  The information required by this item is incorporated by reference to the
Company's definitive Proxy Statement prepared with respect to the Annual
Meeting of Shareholders to be held April 30, 1997.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
  The information required by this item is incorporated by reference to the
Company's definitive Proxy Statement prepared with respect to the Annual
Meeting of Shareholders to be held April 30, 1997.
 
                                       43
<PAGE>
 
                                  SIGNATURES
 
  PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
 
             SIGNATURES                        TITLE                 DATE
 
    /s/ George T. Brophy               Chairman of the          March 22, 1997
-------------------------------------   Board, Chief
          GEORGE T. BROPHY              Executive Officer
                                        (Principal
                                        Executive Officer)
 
    /s/ Michael A. Lupo                Executive Vice           March 22, 1997
-------------------------------------   President, Chief
           MICHAEL A. LUPO              Financial Officer,
                                        Secretary
                                        (Principal
                                        Financial Officer)
 
    /s/ Joseph P. O'Neill              Controller (Chief        March 22, 1997
-------------------------------------   Accounting Officer)
          JOSEPH P. O'NEILL
 
    /s/ Samuel P. Frieder              Director                 March 22, 1997
-------------------------------------
          SAMUEL P. FRIEDER
 
    /s/ James A. Kohlberg              Director                 March 22, 1997
-------------------------------------
          JAMES A. KOHLBERG
 
    /s/ Jerome Kohlberg Jr.            Director                 March 22, 1997
-------------------------------------
         JEROME KOHLBERG JR.
 
    /s/ George W. Peck IV              Director                 March 22, 1997
-------------------------------------
          GEORGE W. PECK IV
 
    /s/ Warner C. Frazier              Director                 March 22, 1997
-------------------------------------
          WARNER C. FRAZIER
 
    /s/ Nelson J. Rohrbach             Director                 March 22, 1997
-------------------------------------
         NELSON J. ROHRBACH
 
    /s/ W. Dexter Paine, III.          Director                 March 22, 1997
-------------------------------------
        W. DEXTER PAINE, III.
 
                                      44
<PAGE>
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
(a)1.Financial Statements
 
    2.Exhibits
 
     Reference is made to the Index to Exhibits beginning on this page.
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
 EXHIBIT DESCRIPTION
 ------- -----------
 <C>     <S>
  3.1    Amended and Restated Certificate of Incorporation of ABT Building
         Products Corporation, as amended to date (incorporated by reference to
         Exhibit 3.1 to the Company's Registration Statement on Form S-1 (File
         No. 33-61676)).
  3.2    Amended and Restated By-Laws of ABT Building Products Corporation
         (incorporated by reference to Exhibit 3.2 to the Company's
         Registration Statement on Form S-1 (File No. 33-61676)).
  4.1    Form of certificate representing shares of the Common Stock of the
         Company (incorporated by reference to Exhibit 4.1 to the Company's
         Registration Statement on Form S-1 (File No. 33-61676)).
 10.1    Asset Purchase Agreement, dated September 25, 1992, by and between
         Abitibi-Price Corporation ("APC") and the Company (incorporated by
         reference to Exhibit 10.1 to the Company's Registration Statement on
         Form S-1 (File No. 33-61676)).
 10.2    First Amendment to Asset Purchase Agreement, dated as of October 16,
         1992, by and between APC and the Company (incorporated by reference to
         Exhibit 10.2 to the Company's Registration Statement on Form S-1 (File
         No. 33-61676)).
 10.3    Amended and Restated Escrow Agreement, dated December 15, 1993, among
         APC, the Company and NBD Bank, N.A. (incorporated by reference to
         Exhibit 10.3 to the Company's Registration Statement on FormS-1 (File
         No. 33-73732)).
 10.4    IWA Labor Contract Assumption Agreement, dated as of October 20, 1992,
         by and between Local III-260, International Woodworkers of America,
         AFL-CIO-CLC and ABT (incorporated by reference to Exhibit 10.4 to the
         Company's Registration Statement on Form S-1
         (File No. 33-61676)).
 10.5    USW Labor Contract Assumption Agreement, dated as of October 20, 1992,
         by and between Local 7923 of the United Steelworkers of America, AFL-
         CIO and ABT (incorporated by reference to Exhibit 10.5 to the
         Company's Registration Statement on Form S-1 (File No. 33-61676)).
 10.6    Trademark License Agreement, dated as of October 20, 1992, by and
         between APC and ABT (incorporated by reference to Exhibit 10.6 to the
         Company's Registration Statement on Form S-1 (File No. 33-61676)).
 10.7    Stockholders Agreement, among the Company, KABT Acquisition Company,
         L.P. and KABT II Acquisition Company, L.P., George T. Brophy, Richard
         E. Parker, William J. Adams, and others dated as of October 20, 1992
         (incorporated by reference to Exhibit 10.7 to the Company's
         Registration Statement on Form S-1 (File No. 33-61676)).
 10.8    ABT Building Products Corporation--Amended and Restated Stock Option
         Plan (adopted April 22, 1993 (incorporated by reference to Exhibit
         10.8 to the Company's Registration Statement on Form S-1 (File No. 33-
         61676)).
 10.9    ABT Building Products Corporation--1994 Director Stock Option Plan
         (incorporated by reference to Exhibit 4(c) to the Company's
         Registration Statement on Form S-8 (File No. 33-82606)).
 10.10   Employment Agreement between the Company and George T. Brophy, dated
         as of October 20, 1992 (incorporated by reference to Exhibit 10.9 to
         the Company's Registration Statement on Form S-1 (File No. 33-61676)).
</TABLE>
 
                                       45
<PAGE>
 
                            EXHIBIT INDEX--CONTINUED
 
<TABLE>
<CAPTION>
 EXHIBIT DESCRIPTION
 ------- -----------
 <C>     <S>
 10.11   ABT Building Products Corporation--1994 Employee Stock Option Plan
         (incorporated by reference to Exhibit 4(c) to the Company's
         Registration Statement on Form S-8 (File No. 33-82606)).
 10.13   Amended and Restated Revolving and Term Credit Agreement, dated as of
         July 13, 1995, between the Company and Comerica Bank, as agent
         (incorporated by reference to Exhibit 10.13 to the Company's Annual
         Report Form 10-K for the year ended December 31, 1995 (File No. 0-
         21856)).
 10.14   Summary of ABT Building Products Corporation Bonus Plan (adopted April
         22, 1993) (incorporated by reference to Exhibit 10.14 to the Company's
         Registration Statement on Form S-1
         (File No. 33-61676)).
 10.15   Labor Agreement between ABTco Inc., Alpena Plant and Local III-
         26010.15 International Woodworkers of America AFL-CIO-CLC, 1992-1996
         Contract (incorporated by reference to Exhibit 10.15 to the Company's
         Registration Statement on Form S-1 (File No. 33-61676)).
 10.16   Labor Agreement between Abitibi-Price Corporation Building Products
         Group, Alpena Plant and United Steelworkers of America Local 7923 AFL-
         CIO, 1992-1996 Contract (incorporated by reference to Exhibit to the
         Company's Registration Statement on Form S-1 (File No. 33-61676)).
 10.17   Settlement Agreement between ABT Building Products Corporation and APC
         (incorporated by reference to Exhibit 10.17 to the Company's
         Registration Statement on Form S-1(File No. 33-61676)).
 10.18   Asset Purchase Agreement, dated as of January 26, 1994, between
         Canadian Pacific Forest Products Limited and ABT Building Products
         Canada, Limited (incorporated by reference to Exhibit 10.18 to the
         Company's Registration Statement on Form S-1 (File No. 33-73732)).
 10.19   Asset Purchase Agreement, dated as of May 5, 1995, between EMCO
         Limited and ABT Building Products Canada, Limited (incorporated by
         reference to Exhibit 1 to the Company's Current Report on Form 8-K
         dated June 14, 1995 (File No. 0-21856)).
 10.20   Consent Judgement between the Company and the Michigan Department of
         Natural Resources (incorporated by reference to Exhibit 10.1 to the
         Company's Quarterly Report for the Quarter Ended September 30, 1995
         (File No. 0-21856)).
 10.21   Equipment Purchase Contract between the Company and J.M. Voith
         Aktiengesselschaft. (incorporated by reference to Exhibit 10.21 to the
         Company's Annual Report Form 10-K for the year ended December 31, 1995
         (File No. 0-21856)).
 10.22   Form of Indemnification Agreement Between the Company and its
         Directors and Officers. (incorporated by reference to Exhibit 10.22 to
         the Company's Annual Report Form 10-K for the year ended December 31,
         1995 (File No. 0-21856)).
 10.23   ABT Building Products Corporation Executive Severance Policy
         (incorporated by reference to Exhibit 10.23 to the Company's Annual
         Report Form 10-K for the year ended December 31, 1995 (File No. 0-
         21856)).
 11.1    Computation of Earnings per Share.
 21.1    List of Subsidiaries of the Company.
 27      Financial Data Schedule.
</TABLE>
 
                                       46