SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K/A
                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                                 ---------------

For the fiscal year ended December 31, 1996        Commission File No. 0-16452
                          -----------------                            -------

                          A. P. GREEN INDUSTRIES, INC.
                          ----------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                              43-0899374
           --------                                              ----------
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              Identification No.)

Green Boulevard, Mexico, Missouri                                   65265
---------------------------------                                   -----
(Address of principal executive offices)                          (Zip Code)

Registrant's telephone number, including area code:  (573) 473-3626

Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
                                                            $1.00 par value
                                                            Preferred Share
                                                            Purchase Rights

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 (Section 229.405 of this chapter) 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. [ ]

State the aggregate  market value of the voting stock held by  nonaffiliates  of
the  registrant:  As of  March  25,  1997,  the  market  value  of A.  P.  Green
Industries,   Inc.  Common  Stock  held  by  non-affiliates   was  approximately
$75,300,000.

Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of the latest practicable date: As of March 25, 1997,  8,024,858
shares of Common Stock, $1.00 par value were outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

     The following  documents are  incorporated  by reference into the indicated
part of this report:

Document                                                  Part of Form 10-K
--------                                                  -----------------

1996 Annual Report to Stockholders                        Parts I, II and IV
Proxy Statement for 1997 Annual Meeting of Stockholders   Part I


                                  Page 1 of 28


<PAGE>



                                     PART II


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

         The   Company   acquired   a  51%   ownership   interest   in   Lanxide
ThermoComposites,  Inc. and Subsidiary (LTI) on December 31, 1995, at which date
total stockholders'  equity of LTI was $196,078.  LTI has incurred quarterly net
losses since the acquisition. Accounting Research Bulletin No. 51, "Consolidated
Financial  Statements" (ARB 51),  requires that "...In the unusual case in which
losses  applicable to the minority  interest in a subsidiary exceed the minority
interest in the equity  capital of the  subsidiary,  such excess and any further
losses applicable to the minority interest shall be charged against the majority
interest..." The Company did not become aware of this requirement until recently
and, as such,  has been  charging  49% of all LTI losses  against  the  minority
interest.

         In order to correct  its prior  accounting  treatment,  the Company has
adjusted its consolidated statements of earnings for the year ended December 31,
1996 and the first three quarters of 1997. The impact on the year ended December
31,  1996  was  to  increase   minority   interest  in  income  of  consolidated
subsidiaries by  approximately  $674,000 through the elimination of the minority
interest in all LTI losses that were  incurred  after the  minority  interest in
such losses  exceeded the minority  interest in the equity capital of LTI, which
reduced net income by the same amount, or $.09 per share. In addition,  minority
interests was increased and retained earnings reduced by approximately  $674,000
on the adjusted consolidated  statement of financial position as of December 31,
1996.  These  adjustments are reflected in the adjusted  consolidated  financial
statements included herein under Item 8., as well as wherever these items appear
in or impact the supplementary data.

         In accordance with ARB 51, for future periods in which LTI has earnings
the  Company,  as  majority  stockholder,  will be  credited  with 100% of those
earnings until such time as total stockholders' equity of LTI is positive.























                                       -2-

<PAGE>



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
ADJUSTED CONSOLIDATED STATEMENTS OF EARNINGS
--------------------------------------------
(Dollars in thousands, except per share data)
<CAPTION>
----------------------------------------------------------------------------------------------
Years ended December 31,                                    1996           1995           1994
----------------------------------------------------------------------------------------------
<S>                                                  <C>            <C>            <C>        
Net sales                                            $   258,461    $   249,715    $   195,918
Cost of sales                                            214,353        208,309        161,420
                                                         -------        -------        -------

         Gross profit                                     44,108         41,406         34,498

Expense and other income
     Selling and administrative expense                   36,087         31,312         25,707
     Interest expense                                      3,112          3,190          1,947
     Interest income                                      (1,255)        (1,513)        (1,296)
     Minority interest in loss of
       partnership                                          (127)           (67)            --
     Other income, net                                      (542)        (1,881)        (1,155)
                                                         -------        -------        -------
      Earnings before income taxes and cumulative
        effect of an accounting change                     6,833         10,365          9,295

Income tax expense                                         2,396          2,182          2,904
Equity in net income of affiliates                          (436)          (781)          (282)
Minority interest in income of
  consolidated subsidiaries, net                             200            164             --
                                                         -------        -------        -------
      Earnings before cumulative effect of
        an accounting change                               4,673          8,800          6,673
                                                         -------        -------        -------
Cumulative effect of an accounting change -
  postemployment benefits, net of tax                         --             --           (255)
                                                         -------        -------        -------
         Net earnings                                $     4,673    $     8,800    $     6,418
==============================================================================================
Earnings per common share before cumulative effect
  of an accounting change                            $       .58    $      1.09    $       .83

Cumulative effect of an accounting change -
  postemployment benefits, net of tax                         --             --           (.03)
                                                     -----------    -----------    -----------
Net earnings per common share                        $       .58    $      1.09    $       .80

Weighted average number of common shares               8,037,710      8,060,118      8,049,624
==============================================================================================
<FN>
See accompanying notes to adjusted consolidated financial statements.
</FN>
</TABLE>

                                       -3-

<PAGE>



ADJUSTED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Dollars in thousands, except per share data)
-------------------------------------------------------------------------------
December 31                                                 1996         1995
-------------------------------------------------------------------------------
ASSETS

    Current assets
        Cash and cash equivalents                        $ 9,477     $  9,284
        Trade receivables (net of allowances -
          1996, $1,701; 1995, $1,930)                     42,084       44,183
        Reimbursement due on paid asbestos claims          3,898        3,696
        Inventories                                       53,674       55,557
        Deferred income tax asset                          3,374        4,115
        Other                                              7,030        6,411
-------------------------------------------------------------------------------
            Total current assets                         119,537      123,246

    Property, plant and equipment, net                   107,394       96,785
    Projected insurance recovery on asbestos claims      110,374      135,158
    Pension assets                                         9,044        9,071
    Intangible assets, net                                 4,132        3,941
    Other assets                                           4,648        5,367
-------------------------------------------------------------------------------
Total assets                                            $355,129     $373,568
===============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY

    Current liabilities
        Accounts payable                               $  20,408    $  18,254
        Accrued expenses
          Payrolls                                         6,267        6,281
          Taxes other than on income                       1,860        1,889
          Insurance reserves                               3,574        4,657
          Other                                            6,528        8,534
        Current maturities of long-term debt               4,168        2,705
        Income taxes                                       1,191        1,103
-------------------------------------------------------------------------------
            Total current liabilities                     43,996       43,423

    Deferred income taxes                                 10,228       12,671
    Long-term non-pension benefits                        16,583       15,597
    Long-term pensions                                    12,449       14,233
    Long-term debt                                        40,109       34,384
    Projected asbestos claims                            111,966      137,246
-------------------------------------------------------------------------------
                 Total liabilities                       235,331      257,554
-------------------------------------------------------------------------------

    Minority interests                                     2,088        2,015

    Stockholders' equity
        Preferred stock - $1 par value;
          authorized: 2,000,000 shares;
          issued and outstanding: none                        --           --
        Common stock - $1 par value;
          authorized: 10,000,000 shares;
          issued: 8,975,442 in 1996 and
          4,486,221 in 1995                                8,975        4,486
        Additional paid-in capital                        68,309       72,770
        Retained earnings                                 60,477       56,981
        Less: Deferred foreign currency translation       (2,875)      (2,931)
              Treasury stock of 953,934 shares in
                1996 and 448,962 shares in 1995,
                at cost                                   (9,498)      (9,018)
              Note receivable-ESOT                        (6,941)      (7,505)
              Minimum pension liability adjustment,
                net of tax                                  (737)        (784)
-------------------------------------------------------------------------------
                 Total stockholders' equity              117,710      113,999
-------------------------------------------------------------------------------
Total liabilities and stockholders' equity              $355,129     $373,568
===============================================================================
    See accompanying notes to adjusted consolidated financial statements.




                                       -4-

<PAGE>


<TABLE>
ADJUSTED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands, except per share data)
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                                                                Minimum
                                                              Deferred                          Pension      Deferred
                                        Additional            Foreign   Treasury    Note       Liability   Compensation-
                                 Common  Paid-in   Retained   Currency   Stock,   Receivable-  Adjustment,  Restricted
                                  Stock  Capital   Earnings Translation  At Cost     ESOT      Net of Tax      Stock
------------------------------------------------------------------------------------------------------------------------
<S>                              <C>     <C>        <C>        <C>      <C>        <C>            <C>          <C>  
Balance at December 31, 1993     $4,459  $72,492    $43,800    $(2,301) $(9,003)   $(8,491)       $ --         $(26)
------------------------------------------------------------------------------------------------------------------------
Net earnings                                          6,418
Dividends ($.12 per share)                             (967)
Currency translation adjustment                                   (127)
Payment on ESOT note                                                                   470
Other, net                           17      247         28                                                      22
------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994      4,476   72,739     49,279     (2,428)  (9,003)    (8,021)         --           (4)
------------------------------------------------------------------------------------------------------------------------
Net earnings                                          8,800
Dividends ($.14 per share)                           (1,128)
Currency translation adjustment                                   (503)
Payment on ESOT note                                                                   516
Minimum pension liability  
  adjustment, net of tax                                                                          (784)
Other, net                           10       31         30                 (15)                                  4
------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995      4,486   72,770     56,981     (2,931)  (9,018)    (7,505)       (784)          --
------------------------------------------------------------------------------------------------------------------------
Net earnings                                          4,673
Dividends ($.15 per share)                           (1,205)
Two-for-one stock split           4,488   (4,488)
Purchases of common stock   
   for treasury                                                            (480)
Currency translation  
  adjustment                                                        56
Payment on ESOT note                                                                   564
Other, net                            1       27         28                                         47
------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996     $8,975  $68,309    $60,477    $(2,875) $(9,498)   $(6,941)      $(737)        $ --
------------------------------------------------------------------------------------------------------------------------
<FN>
See accompanying notes to adjusted consolidated financial statements.
</FN>
</TABLE>

                                       -5-

<PAGE>


<TABLE>
ADJUSTED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<CAPTION>
-----------------------------------------------------------------------------------------------
Years ended December 31,                                       1996        1995        1994
-----------------------------------------------------------------------------------------------
Cash flows from operating activities
<S>                                                         <C>        <C>         <C>     
  Net earnings                                              $ 4,673    $  8,800    $  6,418
  Adjustments for items not requiring (providing) cash
     Cumulative effect of an accounting change-
       postemployment benefits, net of tax                       --          --         255
     Depreciation, depletion and amortization                10,582      10,174       8,725
     Deferred compensation earned                                --           4          22
     Stock compensation to directors                             28          23          28
     Provision for losses on accounts receivable                740         120         373
     Gain on sale of assets                                     (58)     (1,272)       (403)
     Equity in earnings of affiliates, net of
        dividends received                                       33        (227)       (282)
     Minority interest in earnings of
        consolidated subsidiaries and partnership, net           73          97          --
  Decrease (increase) in assets, net of effects from
    acquisitions
     Trade receivables                                        2,881       1,143      (4,924)
     Asbestos claim and fee reimbursements received          17,276      30,232      33,557
     Inventories                                              2,999      (1,758)     (4,968)
     Receivable and prepaid taxes                               315        (360)        509
     Other current assets                                    (1,053)       (712)       (995)
  Increase (decrease) in liabilities, net of effects
    from acquisitions
     Accounts payable and accrued expenses                     (958)     (9,925)       (225)
     Asbestos claims paid                                   (18,573)    (23,937)    (39,944)
     Pensions                                                (1,715)        279         206
     Income taxes                                                88        (322)        782
     Deferred income taxes                                   (1,725)     (1,185)       (575)
     Long-term non-pension benefits                             986         286         653
-----------------------------------------------------------------------------------------------
  Net cash provided by (used in) operating activities        16,592      11,460        (788)
-----------------------------------------------------------------------------------------------

Cash flows from investing activities
  Capital expenditures                                      (12,892)    (10,156)     (6,482)
  Decrease (increase) in other long-term assets                  47        (726)        355
  Increase in pension assets                                    (82)        (34)       (311)
  Proceeds from sales of assets                                 807       1,843         511
  Payment received on ESOT note                                 564         516         470
  Acquisition of businesses, net of cash acquired           (10,059)     (1,614)    (24,497)
-----------------------------------------------------------------------------------------------
  Net cash used in investing activities                     (21,615)    (10,171)    (29,954)
-----------------------------------------------------------------------------------------------
Cash flows from financing activities
  Repayments of debt                                         (2,708)       (165)       (122)
  Proceeds from borrowings                                    9,525          --      25,000
  Dividends paid                                             (1,205)     (1,128)       (967)
  Purchases of common stock for treasury                       (480)         --          --
  Capital contributions from minority partner                    --         121          --
  Exercised stock options                                        --           2         238
  Tax benefit on dividends paid to ESOT                          28          30          28
  Tax effect on restricted stock plan                            --           1          (2)
-----------------------------------------------------------------------------------------------
  Net cash provided by (used in) financing activities         5,160      (1,139)     24,175
-----------------------------------------------------------------------------------------------
Effect of exchange rate changes                                  56        (503)       (127)
-----------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents            193        (353)     (6,694)
Cash and cash equivalents at beginning of year                9,284       9,637      16,331
-----------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year                     $9,477    $  9,284    $  9,637
===============================================================================================
<FN>
See accompanying notes to adjusted consolidated financial statements.
</FN>
</TABLE>





                                       -6-

<PAGE>



NOTES TO ADJUSTED CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------------------------
December 31, 1996, 1995 and 1994

Note 1:  Nature of Operations
-----------------------------

A. P. Green Industries,  Inc. and its subsidiaries,  collectively referred to as
"A. P. Green" or "the  Company",  is a manufacturer  of refractory  products and
industrial lime products.  Refractory products,  which accounted for 85% of 1996
revenues,  are sold throughout North America and selected  international markets
to  basic  industries  such  as  metals,  glass,  ceramics,  paper  and  cement.
Industrial  lime products are sold to end-users for  applications  such as steel
and aluminum production,  pulp and paper processing, soil stabilization for road
construction,   water  and  waste  water  treatment  and  various  environmental
applications.  The industrial lime market served is generally  within a 400-mile
radius  of the  Company's  lime  plants  in New  Braunfels,  Texas,  Kimballton,
Virginia and Ripplemead, Virginia.

Note 2: Summary of Significant Accounting Policies
--------------------------------------------------

Basis of Presentation

The  Company's  consolidated  financial  statements  include  all  wholly  owned
subsidiaries and majority owned  subsidiaries.  Equity investments of 20% to 50%
are  accounted  for using the  equity  method.  All  intercompany  balances  and
transactions  have been  eliminated and there are no  significant  related party
transactions.  Certain prior year amounts have been  reclassified  to conform to
the 1996 presentation.

Cash and Cash Equivalents

A. P. Green  considers  all highly  liquid debt  instruments  purchased  with an
original maturity of three months or less to be cash  equivalents.  Due to their
short maturity,  these  instruments are carried at cost which  approximates fair
value.

Fair Value of Financial Instruments

The carrying amount of cash and cash equivalents, trade receivables and accounts
payable  approximates  fair  value  because  of  the  short  maturity  of  these
instruments. The fair value of long-term debt is discussed in Note 9. Fair value
estimates  are  made at a  specific  point in time,  based  on  relevant  market
information and information about the financial instrument.  These estimates are
subjective  in nature and  involve  uncertainties  and  matters  of  significant
judgment and, therefore, cannot be determined with precision.

Reimbursement Due on Paid Asbestos Claims

Until May 1996,  A. P. Green made  expense  and  indemnity  payments on asbestos
product claims directly to the Center for Claims Resolution on behalf of certain
insurers.  Reimbursement  due on paid asbestos claims represents the recoverable
portion  of those  payments.  Commencing  in June 1996  pursuant  to  agreements
reached with its insurance carriers, the Company no longer makes payments to the
Center  on behalf  of those  insurers.  See Note 18 for  further  discussion  of
asbestos claims and insurance recoveries.

Inventories

Predominantly all of A. P. Green's domestic  inventories are stated at the lower
of cost or  market,  with cost being  determined  using the  last-in,  first-out
(LIFO)  method.  The  remaining  inventories  are stated at the lower of cost or
market,  with cost being  determined  using the  first-in,  first-out  (FIFO) or
average  production  cost  methods.  Inventories  include  material,  labor  and
applicable factory overhead costs.


                                       -7-

<PAGE>




Property, Plant and Equipment, Net

Property, plant and equipment,  including significant renewals and improvements,
are capitalized at cost. Provisions for depreciation are determined  principally
on a  straight-line  basis over the expected  average  useful lives of composite
asset groups, which range from 3 to 50 years.  Accelerated  depreciation methods
are used for tax  purposes  when  permitted.  Depletion  is  computed on a basis
calculated  to  allocate  the  cost of  clay,  limestone  and  other  applicable
resources over the estimated quantities of recoverable material.

Intangible Assets

Intangible assets, primarily consisting of goodwill, customer lists, non-compete
agreements,  patents and trademarks, are amortized on a straight-line basis over
the period benefited,  which ranges from 2 to 12 years.  Recoverability of these
assets is considered  in  conjunction  with the ongoing  evaluation of long-term
asset  values.  Accumulated  amortization  was  approximately  $1.1  million and
$580,000 at December 31, 1996 and 1995, respectively.

Income Taxes

Income taxes are accounted for using the asset and  liability  method.  Deferred
tax assets  and  liabilities  are  recognized  for the  future tax  consequences
attributable to differences  between the financial statement carrying amounts of
existing assets and liabilities  and their  respective tax basis,  net operating
loss  carryforwards  and tax  credit  carryforwards.  Deferred  tax  assets  and
liabilities  are measured  using  enacted tax rates.  The effect on deferred tax
assets  and  liabilities  of  a  change  in  tax  rates  is  recognized  in  the
consolidated  statements of earnings during the period that includes the date of
the change.

Foreign Currency Translation

The  functional   currencies  of  the  Company's  Canadian  and  United  Kingdom
subsidiaries and Colombian  affiliates are their  respective  local  currencies.
Adjustments  resulting from the currency  translation of these subsidiaries' and
affiliates'  financial  statements are reflected as a component of stockholders'
equity.

A. P. Green de Mexico and PT AP Green Indonesia  transact a significant  portion
of their  business  in U. S.  dollars  and,  as such,  use the  dollar  as their
functional  currency.   Translation   adjustments  for  these  subsidiaries  are
reflected in the statement of earnings.

Employee Stock Options

The Company has elected to follow  Accounting  Principles  Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25), and related Interpretations
in accounting for its employee stock options  rather than the  alternative  fair
value  accounting  provided  for  under  Financial  Accounting  Standards  Board
Statement No. 123,  "Accounting for Stock-Based  Compensation"  (Statement 123).
Under APB 25, because the exercise  price of the Company's  stock options equals
the market price of the underlying  stock on the date of grant,  no compensation
expense is  recognized.  Disclosures  with regard to employee stock options have
been made in accordance with the requirements of Statement 123.

Earnings Per Common Share

Earnings per common share are computed  based on the weighted  average number of
shares  of common  stock  outstanding  and have been  restated  to  reflect  the
two-for-one stock split effective September 20, 1996.


                                       -8-
<PAGE>

Use of Estimates

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.

Note 3: New Ventures and Acquisitions
-------------------------------------

Effective  December  31, 1996,  the Company  acquired  substantially  all of the
assets and assumed certain of the liabilities of the operations of Eastern Ridge
Lime, L. P. The operations include a mineral processing facility,  quarrying and
lime  manufacturing  business  in  Ripplemead,  Virginia  and a leased  terminal
facility in St.  Matthews,  South  Carolina.  In conjunction  with the Company's
adjacent  lime plant in  Kimballton,  Virginia,  the  acquisition  will  enhance
service of the growing lime market in the  Southeastern  United States and allow
improved utilization of existing management.

In addition to the  assumption  of  approximately  $300,000 of  long-term  lease
obligations, A. P. Green paid Eastern Ridge approximately $10.0 million in cash.
The acquisition was accounted for using the purchase method, which had no impact
on 1996  consolidated  operating  results  due to the  December  31  transaction
effective date.

The following unaudited proforma  information presents a summary of consolidated
results of operations of the Company and Eastern Ridge as if the acquisition had
occurred January 1, 1995:
--------------------------------------------------------------------------------
(Dollars in thousands, except per share data)               1996         1995
--------------------------------------------------------------------------------
Net sales                                               $264,782     $256,822
Net earnings                                               1,723        5,072
Net earnings per common share                                .21          .63
--------------------------------------------------------------------------------

These unaudited  proforma  results have been prepared for  comparative  purposes
only and include certain adjustments,  such as elimination of a 1995 asset write
down loss incurred by Eastern Ridge in anticipation of the acquisition,  reduced
depreciation, depletion and amortization expense as a result of lower asset book
values,  elimination of a management service fee which will not be changed by A.
P. Green and recognition of income tax benefit not previously  recognized due to
organization as a partnership.  In management's opinion, they are not indicative
of the  results  of  operations  which  actually  would  have  occurred  had the
acquisition  been effective  January 1, 1995, or of future results of operations
and synergies of the consolidated entities.

In January 1995, the Company formed  INTOGREEN Co., a joint venture  partnership
with INTOCAST AG, to sell and install cast monolithic ladle linings to the steel
industry in the United States, Canada and Mexico. INTOCAST AG, based in Germany,
is a world  leader in the  development  of cast ladle  linings,  which result in
lower  installation  costs,  reduced  disposal of used  refractory  material and
increased ladle  availability  to the steel plant.  The Company owns 51% of this
partnership  and, as such,  includes  INTOGREEN  in the  consolidated  financial
statements.

Effective  July 3, 1995,  the  Company  acquired  a 51%  ownership  interest  in
Plibrico de Mexico SA de CV, a refractory  manufacturer  located near Monterrey,
Mexico.  Plibrico de Mexico,  which has been renamed A. P. Green de Mexico SA de
CV, has one plant with annual sales of approximately $7.0 million.  The purchase
price and transaction costs totaled  approximately $2.0 million and were paid in
cash.

The acquisition was accounted for using the purchase method,  with the operating
results of A. P. Green de Mexico  included  in  consolidated  operating  results
since the date of

                                       -9-

<PAGE>

acquisition.  Goodwill of approximately $800,000, which represents the excess of
cost and liabilities assumed over the fair value of tangible assets acquired, is
being amortized on a straight-line basis over a ten-year period.

Effective  December 31, 1995, the Company  acquired a 51% ownership  interest in
Lanxide ThermoComposites, Inc. (LTI). Prior to the acquisition, LTI was a wholly
owned subsidiary of Lanxide Corporation of Newark,  Delaware, which continues to
own  a  substantial   minority  interest  in  LTI.   Immediately  prior  to  the
acquisition,  LTI acquired Chiam  Technologies,  Inc., a company  engaged in the
sourcing of refractory products from several Chinese refractory producers.

LTI is concentrating on commercializing  refractory  products for the continuous
casting segment of the steel industry  utilizing ceramic  composites  technology
licensed from Lanxide  Corporation.  The acquisition was accounted for using the
purchase method, which had no impact on 1995 consolidated  operating results due
to the December 31 transaction  effective date.  Goodwill of approximately  $1.0
million for the two companies is being amortized on a straight-line basis over a
ten-year period.

The  acquisitions  completed  during  1995 were not  material  to the  Company's
financial  condition or results of  operations,  either  individually  or in the
aggregate.  As such,  no  financial  statements  of the acquired  companies  for
periods prior to the acquisitions or pro forma financial information  reflecting
the acquisitions as of the beginning of the year have been provided.

Effective August 1, 1994, the Company acquired  substantially  all of the assets
and assumed most of the  liabilities  of the  refractory  operations  of General
Refractories Company and its affiliated companies  (collectively  referred to as
"General"). These operations include ten plants in the United States, a plant in
Smithville, Ontario, Canada and 49% equity interests in two Colombian refractory
companies. In addition to the assumption of designated liabilities,  the Company
paid at closing a cash amount of $23,450,000.  The acquisition was accounted for
using the purchase  method,  with the operating  results of General  included in
consolidated operating results from the date of acquisition.

In connection with the General acquisition,  the Company obtained Phase I and II
Environmental  Site  Assessments  (ESA)  in  order to  determine  the  potential
environmental impact of specific recognized  environmental conditions at each of
the acquired  properties and estimate the costs for remediation.  Based upon the
results  of the ESA,  the  Company  established  a $3.4  million  liability  for
remediation   costs  (in  other  accrued   expenses)  as  part  of  the  General
acquisition.  The majority of this liability  relates to leakage and spills from
underground and aboveground  storage tanks and drums,  and action is being taken
to remediate all identified conditions, which is expected to be completed within
five years. Appropriate state agencies have been notified of contamination where
required,  and there have been no  resulting  actions  taken or proposed by such
agencies against the Company.  There was no asbestos-related  liability,  either
for bodily injury or property  damage,  assumed in  connection  with the General
acquisition.

Note 4:  Reserves for Plant Closings
------------------------------------

The Company has reserves for estimated  exit costs and  termination  benefits in
connection with the shutdown of certain facilities in the U.S. and Canada. Three
of the acquired  General plants were closed during 1994, a $3.6 million  reserve
for which was established at the time of acquisition and included on the opening
balance sheet. During 1995 this reserve was increased by approximately $330,000,
primarily to revise estimates of employee  termination  benefits  resulting from
the sale of these facilities taking longer than anticipated.  A $380,000 reserve
was also established during 1995 for the closing of the Weston, Ontario plant.

Substantially  all employees at these  facilities  (approximately  210 in total)
have been terminated and approximately $3.2 million of termination  benefits and
plant closing

                                      -10-

<PAGE>



costs have been charged  against the reserves to date.  The U.S.  facilities are
held for sale at their  estimated net  realizable  value.  The income  statement
effect of  establishment of and changes to these reserves in 1995 is included in
cost of sales.

Note 5:  Changes in Method of Accounting
----------------------------------------

Postemployment Benefits

Effective January 1, 1994, the Company adopted Statement of Financial Accounting
Standards  No.  112,   "Employers'   Accounting  for  Postemployment   Benefits"
(Statement  112).  The standard  requires  application  of the accrual method of
accounting  to all  benefits  provided  to former or inactive  employees,  their
beneficiaries  and covered  dependents,  subsequent  to their  employment by the
Company and prior to retirement,  rather than recognizing these expenses as they
are paid. The Company  recognized the projected benefit  obligation  relating to
short-term  and  long-term  disability  benefits  as a  cumulative  effect of an
accounting change, reducing 1994 net income by $255,000, or $.03 per share.

Note 6: Inventories
-------------------

Inventory classifications as of December 31, 1996 and 1995 were as follows:
--------------------------------------------------------------------------------
(In thousands)                                               1996      1995
--------------------------------------------------------------------------------
Finished goods and work in process
         Valued at LIFO
           FIFO cost                                      $ 31,278  $ 36,429
           Less LIFO reserve                               (14,907)  (14,186)
                                                           -------   -------
              LIFO cost                                     16,371    22,243
         Valued at FIFO                                     13,225    10,404
                                                           -------   -------
                                                            29,596    32,647
                                                           -------   -------
Raw materials and supplies
         Valued at LIFO
           FIFO cost                                        17,702    18,187
           Less LIFO reserve                                (6,129)   (5,234)
                                                           -------   -------
              LIFO cost                                     11,573    12,953
         Valued at FIFO                                     12,505     9,957
                                                           -------   -------
                                                            24,078    22,910
                                                           -------   -------
                                                          $ 53,674  $ 55,557
================================================================================
For the years ended December 31, 1996, 1995 and 1994, A. P. Green experienced
liquidations of LIFO inventory quantities, none of which were significant.


                                      -11-

<PAGE>



Note 7: Property, Plant and Equipment, Net
------------------------------------------

Property,  plant and  equipment,  net, as of December  31, 1996 and 1995 were as
follows:
--------------------------------------------------------------------------------
(In thousands)                                                1996      1995
--------------------------------------------------------------------------------
Land and mineral deposits                                 $  9,926  $  8,055
Buildings and realty improvements                           47,199    46,580
Machinery and equipment                                    144,154   134,915
Construction in progress                                     9,075     5,015
                                                           -------   -------
                                                           210,354   194,565
Less accumulated depreciation and depletion                102,960    97,780
                                                           -------   -------
                                                          $107,394  $ 96,785
================================================================================
Closed production  facilities held for sale are included in other current assets
at estimated net realizable value of $2.2 million as of December 31, 1996.

Note 8: Short-Term Lines of Credit
----------------------------------

Short-term  lines of  credit  have been  established  with  banks in the  United
Kingdom for 100,000 British pounds and Canada for Cdn$250,000, each of which was
unused at December 31, 1996 and 1995.

Note 9: Long-Term Debt
----------------------

Long-term debt as of December 31, 1996 and 1995 was as follows:
--------------------------------------------------------------------------------
(In thousands)                                                1996      1995
--------------------------------------------------------------------------------
Unsecured notes payable                                    $23,048   $25,068
Industrial development revenue bonds                        11,848    11,912
U.S. line of credit                                          9,000        --
Capitalized lease obligations                                  381       109
                                                            ------    ------
                                                            44,277    37,089
Less current maturities                                      4,168     2,705
                                                            ------    ------
                                                           $40,109   $34,384
================================================================================
In 1994, the Company issued $25 million in principal  amount of unsecured  notes
to a group of institutional  lenders to finance the acquisition of General.  The
notes bear an 8.55% fixed rate of interest,  with semi-annual  interest payments
which commenced January 29, 1995. Annual principal  repayments,  which have been
and will continue to be funded out of working  capital,  commenced July 29, 1996
and will  continue  through  July 29,  2001.  A. P.  Green is subject to certain
restrictive  covenants,  including minimum levels of tangible net worth, working
capital and fixed charge  coverage,  permitted  encumbrances,  loans from and to
other  institutions  and restricted  payments.  Management does not expect these
restrictive covenants to have a material adverse effect on A. P.
Green's operations.

The capitalized  leases expire in 1997 and 1999 and carry interest rates ranging
from 6.7% to 11.1%. A significant portion of the industrial  development revenue
bonds  require  the  payment of  interest  only  until  they  mature in 1997 and
thereafter.  Interest rates range from 70% of prime to 8.6%.  Prime was 8.25% at
December 31, 1996.

In 1996,  the  Company's  U.S.  long-term  line of credit of $30.0  million  was
extended to May 2, 1998.  Restrictive covenants coincide with those reflected in
the agreement associated with the unsecured notes payable. Borrowings under this
line of credit may

                                      -12-

<PAGE>



be made for working  capital,  acquisitions and other corporate  purposes,  with
interest charged at the federal funds rate (5.38% at December 31, 1996) plus 2%.
Approximately  $2.7  million  of standby  letters of credit and $9.0  million of
borrowings were  outstanding  against the line at December 31, 1996,  leaving an
available balance of approximately $18.3 million.

Based on the borrowing  rates  currently  available to the Company for debt with
similar  terms  and  average  maturities,  the  fair  value  of  the  industrial
development   revenue  bonds  and  unsecured  notes  payable  would  not  differ
materially  from carrying  value at December 31, 1996.  Aggregate  maturities of
long-term debt are approximately $14.2 million,  $5.2 million,  $5.0 million and
$5.0  million  for  1998  through  2001,  respectively.  The net  book  value of
property,  plant and equipment pledged as security or collateral for outstanding
long-term debt was approximately $2.8 million at December 31, 1996.

Note 10: Income Taxes
---------------------

Income tax expense (benefit) attributable to earnings from continuing operations
for the years ended December 31, 1996, 1995 and 1994 consists of the following:
--------------------------------------------------------------------------------
(In thousands)                                          1996     1995     1994
--------------------------------------------------------------------------------
Current
    Federal                                          $ 3,642  $ 2,347   $2,774
    State                                                523      514      423
    Foreign                                               78      539      280
Deferred                                              (1,847)  (1,218)    (573)
                                                       -----    -----    -----
                                                     $ 2,396  $ 2,182   $2,904
================================================================================

The following  schedule  provides a  reconciliation  between expected tax at the
U.S.  statutory tax rate and the effective tax rate (total  provision for income
taxes as a percentage of earnings before income taxes). During 1995, a review of
tax years 1988 through  1993 was  completed  by the  Internal  Revenue  Service,
resulting  in less taxes than  originally  reserved.  Accordingly,  the  Company
reduced its provision for federal income taxes by approximately $1.1 million.
--------------------------------------------------------------------------------
                                                        1996     1995     1994
--------------------------------------------------------------------------------
U.S. statutory rate                                     34.0%    34.0%    34.0%
Reversal of provision for closed tax years                --     (9.7)      --
Excess tax depletion                                    (4.9)    (4.0)    (4.2)
State and local income taxes, net                        2.4      2.1      2.0
Foreign tax rate differential                             .5       .9       .3
Other, net                                              (1.1)    (3.4)    (1.8)
                                                        ----     ----     ----
     Effective tax rate                                 30.9%    19.9%    30.3%
================================================================================



                                      -13-

<PAGE>



The tax effects of temporary  differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1996 and
1995 consist of the following:
--------------------------------------------------------------------------------
(In thousands)                                                1996      1995
--------------------------------------------------------------------------------
Deferred tax assets

  Accrued liabilities, differences in
    expense recognition                                    $10,983   $11,341
  Alternative minimum tax carryforwards                         --       448
  Inventories, overhead capitalization differences             169        76
  Capital loss carryforward                                    301       395
  Net operating loss carryforwards                             855       280
                                                            ------    ------
                                                            12,308    12,540
Less valuation allowance                                        --        --
                                                            ------    ------
                                                            12,308    12,540
                                                            ------    ------
Deferred tax liabilities

  Fixed assets, principally depreciation
    method differences                                      14,679    15,897
  Prepaid pension costs                                      1,054     1,452
  State, local and other taxes                               1,069     1,194
  Inventories, differences in LIFO methods                   2,236     2,365
  Asset valuation differences                                  124       188
                                                            ------    ------
                                                            19,162    21,096
                                                            ------    ------
Net deferred tax liability                                 $ 6,854   $ 8,556
================================================================================

Management believes it is more likely than not that all deferred tax assets will
be realized  and,  accordingly,  no valuation  allowance is required.  Tax years
subject to review by the Internal  Revenue  Service are 1994, 1995 and 1996. All
remaining  alternative  minimum tax credit  carryforwards  were utilized  during
1996.

A. P. Green has not  recognized a deferred tax liability  for the  undistributed
earnings of its wholly owned foreign  subsidiaries  that arose in 1996 and prior
years since the Company  plans to continue  to finance  foreign  operations  and
expansion through  reinvestment of those undistributed  earnings. A deferred tax
liability will be  recognized,  if necessary,  when the Company  expects that it
will recover those  undistributed  earnings in a taxable manner, such as through
receipt of  dividends  or sale of the  investments.  The  remittance  of foreign
earnings  subjected to tax at a rate greater than the U.S. rate may create a tax
asset for the Company to the extent foreign tax credits may be generated and are
able to be utilized.  As of December 31, 1996, 1995 and 1994, the  undistributed
earnings of these subsidiaries were approximately $4.9 million, $4.4 million and
$3.3 million, respectively.

Note 11: Incentive Plans
------------------------

A. P. Green maintains the 1987 Long-Term  Performance  Plan (the 1987 Plan), the
1989 Long-Term  Performance Plan (the 1989 Plan), the 1993 Performance Plan (the
1993 Plan) and the 1996 Long-Term  Performance Plan (the 1996 Plan).  Under each
of the  plans,  common  stock  has been  reserved  for  issuance  in the form of
incentive  stock  options,  nonqualified  stock  options,  restricted  stock and
performance shares.  Under the 1987 plan, shares are also available for issuance
in the form of stock appreciation rights.

The Company's  stock option activity for the years ended December 31, 1996, 1995
and 1994 is summarized as follows:

                                      -14-

<PAGE>

--------------------------------------------------------------------------------
                                 1996              1995              1994
--------------------------------------------------------------------------------
                                    Weighted          Weighted          Weighted
                                     Average           Average           Average
                                    Exercise          Exercise          Exercise
                            Options   Price   Options   Price   Options   Price
--------------------------------------------------------------------------------
1987, 1989 and 1996 Plans
Outstanding - January 1     373,500   $7.90   394,500   $7.86   424,500   $7.86
Granted                      30,000    9.32        --                --
Exercised                        --           (18,000)   6.67   (30,000)   7.92
Expired/Lapsed                   --            (3,000)   9.17        --
                            -------           -------           -------
Outstanding - December 31   403,500   $8.01   373,500   $7.90   394,500   $7.86
                            =======           =======           =======
Exercisable at December 31  403,500   $8.01   373,500   $7.90   394,500   $7.86
                            =======           =======           =======
1993 Plan
Outstanding - January 1     382,500   $6.17   412,500   $6.17   412,500   $6.17
Granted                          --                --                --
Exercised                        --           (18,000)   6.17        --
Expired/Lapsed                   --           (12,000)   6.17        --
                            -------           -------           -------
Outstanding - December 31   382,500   $6.17   382,500   $6.17   412,500   $6.17
                            =======           =======           =======
Exercisable at December 31  300,000   $6.17   300,000   $6.17   330,000   $6.17
                            =======           =======           =======

Exercise  prices and weighted  average  remaining  contractual  lives of options
outstanding at December 31, 1996 are summarized as follows:
--------------------------------------------------------------------------------
                                      Exercise           Remaining
                       Options          Price               Life
--------------------------------------------------------------------------------
                       382,500          $6.17              6 years
                       189,000           6.67              4 years
                       184,500           9.17              3 years
                        30,000           9.32              9 years

Stock options granted under the 1987, 1989 and 1996 plans expire ten years after
grant  date.  Of the options  outstanding  at December  31,  1996,  82,500 at an
exercise price of $6.17 are not yet exercisable. Under the terms of the February
1993 grant, these options will become exercisable if, prior to February 18, 1998
and for a period of 30 consecutive  trading days, the last transaction  price of
the common stock equals or exceeds  $11.00.  To the extent these options  become
exercisable, they will remain exercisable until February 18, 2003 along with the
300,000  options  already  exercisable  under the 1993 Plan. To the extent these
options do not become exercisable due to failure to reach the $11.00 stock price
level,  such options will become  exercisable  for one day on February 19, 1998.
There were a total of 496,758  remaining  shares  available  for grant under all
plans as of December 31, 1996.

The Company has  determined  that the effect of applying the  Statement 123 fair
value  method to options  granted  during 1996 would  result in net earnings and
earnings per share which are not materially different from reported amounts.

Note 12: Pension Plans
----------------------

A. P. Green has various pension plans covering substantially all employees. Plan
benefits are  generally  based on years of service and  compensation  during the
last years of  employment.  A. P. Green's  contributions  are made in accordance
with independent  actuarial  reports to meet minimum funding  requirements.  The
Company contributed $3.7

                                      -15-

<PAGE>



million and $2.1 million to these plans during 1996 and 1995, respectively.  The
plans' assets consist primarily of listed common stocks and debt securities.

Net  pension  expense  for the years  ended  December  31,  1996,  1995 and 1994
included the following components:
--------------------------------------------------------------------------------
(In thousands)                                          1996     1995     1994
--------------------------------------------------------------------------------
Service cost of benefits earned during period       $  1,885 $  1,676  $ 1,793
Interest cost on projected benefit obligations         9,077    8,703    6,751
Actual (gain) loss on assets                         (11,712) (20,964)   1,055
Net amortization and deferral                          2,603   12,454   (8,892)
                                                      ------   ------   ------
  Net pension expense                                  1,853    1,869      707
Multiemployer pension expense                            183      170      181
                                                      ------   ------   ------
  Total pension expense                             $  2,036 $  2,039  $   888
================================================================================

The  majority  of the  Company's  pension  plans have plan  assets  that  exceed
accumulated  benefit  obligations.  The following table sets forth the actuarial
present value of benefit  obligations and funded status for all of the Company's
pension  plans at  December  31,  1996 and 1995.  Plan asset  values and benefit
obligations are measured as of September 30, 1996 and 1995:
--------------------------------------------------------------------------------
(In thousands)                             1996                    1995
                                    Assets      Accum.     Assets      Accum.
                                    Exceed     Benefits    Exceed     Benefits
                                    Accum.      Exceed     Accum.      Exceed
                                   Benefits     Assets    Benefits     Assets
--------------------------------------------------------------------------------
Accumulated benefit obligations,
   substantially all of which
   are vested                     $(90,474)   $(27,414)   $(90,318)   $(27,585)
Effect of projected future
   compensation levels              (6,027)        (55)     (7,442)        (24)
                                   -------     -------     -------     -------
  Projected benefit obligations    (96,501)    (27,469)    (97,760)    (27,609)
Plans' assets at fair value        104,405      17,218      99,899      15,597
                                   -------     -------     -------     -------
  Excess (deficiency)                7,904     (10,251)      2,139     (12,012)
Unrecognized net asset at
  transition                        (3,031)        (21)     (3,576)        (24)
Unrecognized net (gain) loss        (1,889)        630       4,794         827
Unrecognized prior service cost      4,307         945       4,036         582
Minimum pension liability
  adjustment                           --       (1,639)         --      (1,598)
                                   -------     -------     -------     -------
  Prepaid (accrued) pension cost  $  7,291    $(10,336)    $ 7,393    $(12,225)
================================================================================

In  accordance  with  Statement  of  Financial   Accounting  Standards  No.  87,
"Employers' Accounting for Pensions," the Company recorded an additional minimum
pension  liability of  approximately  $1.6 million at both December 31, 1996 and
1995.  This minimum  liability  represented  the excess of unfunded  accumulated
benefit  obligations  over  recorded  pension  liabilities,   determined  on  an
individual  plan basis.  A  corresponding  amount was recorded as an  intangible
asset except to the extent the minimum  liability for a particular plan exceeded
the  related  unrecognized  prior  service  cost,  in which  case the excess was
recorded as a reduction of  stockholders'  equity.  As of December 31, 1996,  an
intangible asset of approximately $454,000 was recorded,  along with a reduction
in stockholders'  equity of $737,000,  net of related tax benefits.  At December
31, 1995, an intangible asset of approximately $345,000 was recorded, along with
a reduction of stockholders' equity of $784,000, net of related tax benefits.


                                      -16-

<PAGE>




U.S. Pensions

The expected long-term rate of return on plan assets was 8.75% for 1996 and 1995
and 8.5% for 1994. A weighted average discount rate of 7.75%, 7.5% and 8.25% was
used for  1996,  1995 and  1994,  respectively.  A rate of  increase  in  future
compensation  levels of 5.0% for 1996, 1995 and 1994 was used in determining the
actuarial present value of projected  benefit  obligations on all except hourly,
collectively bargained plans.

Canadian Pensions

The expected long-term rate of return on plan assets was 8.5% for 1996, 1995 and
1994. A weighted average discount rate of 8.0% was used for all three years, and
a 5.0% rate of  increase  in future  compensation  levels  was used for 1996 and
1995, 6.5% for 1994.

Note 13: Long-Term Non-Pension Benefits
---------------------------------------

The Company  sponsors two defined benefit  postretirement  plans that cover both
salaried and  nonsalaried  employees.  One plan provides health care benefits to
employees  hired prior to January 1, 1991 and the other  provides life insurance
benefits.  The health care plan is  contributory,  with  retiree  contributions,
deductibles and benefit levels adjusted periodically; the life insurance plan is
noncontributory.  Under the terms of its health care plan,  based on anticipated
increases in future health care costs,  the retirees'  share of total costs will
be  adjusted  so that the  Company's  share will not  increase  more than 7% per
annum.  The  Company  maintains  the  right  to  adjust  benefits,  deductibles,
contributions or the Company's share of increases,  at its sole  discretion,  at
future dates.

The following table sets forth the actuarial present value of the plans' benefit
obligations  at  December  31,  1996 and 1995.  The  accumulated  postretirement
benefit obligation was measured as of September 30, 1996 and 1995.
--------------------------------------------------------------------------------
(In thousands)                                                1996      1995
--------------------------------------------------------------------------------
Accumulated postretirement benefit obligation
     Retirees, dependents and beneficiaries                $11,405   $12,198
     Fully eligible active plan participants                 2,669     2,588
     Other active plan participants                          3,486     3,353
                                                            ------    ------
Accumulated postretirement benefit obligation               17,560    18,139
Unrecognized prior service cost                               (202)     (231)
Unrecognized net loss from past experience
  different from that assumed                               (1,343)   (2,844)
                                                            ------    ------
Accrued postretirement benefits other than pensions        $16,015   $15,064
================================================================================

The  Company's  postretirement  health  care  plan and life  insurance  plan are
unfunded; the accumulated postretirement benefit obligation at December 31, 1996
and 1995 is $16.5 million and $17.0 million,  respectively,  for the health care
plan and $1.1 million in both years for the life insurance plan.



                                      -17-

<PAGE>



Net  postretirement  benefits  cost  other  than  pensions  for the years  ended
December 31, 1996, 1995 and 1994 included the following components:
--------------------------------------------------------------------------------
(In thousands)                                          1996     1995     1994
--------------------------------------------------------------------------------
Service cost of benefits earned during the period    $   617   $  344   $  355
Interest cost on accumulated
  postretirement benefit obligation                    1,313    1,106    1,044
Net amortization                                         108       --       --
                                                       -----    -----    -----
  Net postretirement benefits cost
    other than pensions                               $2,038   $1,450   $1,399
================================================================================

For measurement  purposes,  a 10% annual rate of increase in the per capita cost
of covered  health care  benefits was assumed for 1996;  the rate was assumed to
decrease gradually to 5% by 2001 and remain at that level thereafter. Increasing
the assumed  health care cost trend rates by one  percentage  point in each year
would increase the accumulated  postretirement benefit obligation for the health
care plan as of December 31, 1996 by 3.0%, or $502,000,  and would  increase the
service and interest  costs of net  postretirement  health care benefits for the
year then ended by 3.9%, or $75,000.

The discount rate used in determining  the  accumulated  postretirement  benefit
obligation  was  7.75%,  7.5% and 8.25% at  December  31,  1996,  1995 and 1994,
respectively.

As discussed in Note 5, the Company adopted  Statement 112 effective  January 1,
1994.  This  standard  requires  use of the  accrual  method of  accounting  for
benefits  provided to former or inactive  employees after  employment but before
retirement,  rather  than  recognizing  these  expenses  as they are  paid.  The
projected  benefit  obligation  relates to short-term  and long-term  disability
benefits provided by the Company to salaried  employees.  The annual incremental
expense  for 1996,  1995 and 1994 was not  material  and the  projected  benefit
obligation  was  $568,000  and  $533,000  as of  December  31,  1996  and  1995,
respectively.

Note 14: Employee Savings Plans
-------------------------------

The Company  sponsors three defined  contribution  employee  savings plans under
Section  401(k) of the Internal  Revenue Code. In one plan,  all U.S.  full-time
salaried  employees and the hourly  employees of certain  plants are eligible to
participate.  Participants  are  entitled  to  contribute  between 2% and 15% of
compensation.  The Company  makes  contributions  to the employee  savings plans
through the Employee Stock Ownership Trust.

The second plan,  instituted in 1991,  covers employees at certain locations who
have negotiated  participation through collective  bargaining.  Participants are
eligible  to  contribute  between 2% and 15% of  compensation.  For all of these
locations,  the  Company  matches  25%  of  the  first  6%  of  a  participant's
contribution.  Amounts  charged  against  income  were  approximately  $204,000,
$214,000 and $151,000 in 1996, 1995 and 1994, respectively.

Effective  January 1, 1996, all employees at LTI were eligible to participate in
a defined  contribution plan.  Participants can contribute between 1% and 15% of
compensation.  The  Company  matches  50% of  the  first  4% of a  participant's
contribution.  During 1996 $12,000 was charged against income.

Note 15: Employee Stock Ownership Trust
---------------------------------------

The  Company  sponsors  an  Employee  Stock  Ownership  Trust  (ESOT).  All U.S.
full-time  salaried  employees  and the hourly  employees of certain  plants are
eligible  to  participate.  The ESOT  purchased  a total of  895,520  previously
unissued shares of A. P. Green common stock.  The shares were issued to the ESOT
in accordance with the Stock Purchase  Agreement  between LaSalle National Bank,
as Trustee,  and A. P. Green. The aggregate  purchase price of $10.0 million was
financed entirely by A. P. Green. To

                                      -18-

<PAGE>



secure the  financing,  the ESOT has pledged  the shares to A. P.  Green.  A. P.
Green makes the necessary contributions to the ESOT.
--------------------------------------------------------------------------------
(In thousands)                                          1996     1995     1994
--------------------------------------------------------------------------------
Interest payments on ESOT debt                        $  713   $  762   $  806
Principal payments                                       564      515      471
Less
   Dividends on ESOT shares used for debt service       (120)    (114)    (104)
   Forfeitures                                           (21)    (104)     (58)
   Interest income                                        (1)      (3)      --
                                                       -----    -----    -----
Contributions to ESOT                                  1,135    1,056    1,115
Administrative expenses                                  109      147      159
                                                       -----    -----    -----
Employee savings plan cost                            $1,244   $1,203   $1,274
================================================================================

The loan to the ESOT is  repayable  in  annual  installments  extending  through
September 30, 2004. Interest is payable semiannually at 9.5% per annum. The note
receivable from the ESOT is reflected as a reduction of stockholders'  equity in
the  accompanying  consolidated  financial  statements.  The Company  recognized
interest  income on the ESOT note of  $700,000,  $750,000  and $795,000 in 1996,
1995 and 1994, respectively.

Note 16: Preferred and Common Stock
-----------------------------------

The  Company's  preferred  stock  can be issued  in one or more  series  without
stockholder  approval.  A Preferred  Share Purchase Right (Right) is attached to
each outstanding  share of common stock.  The Rights become  exercisable 10 days
following a public announcement that a party acquired,  or obtained the right to
acquire, beneficial ownership of 20% or more of A. P. Green's outstanding common
shares,  or 10 days following  commencement or announcement of a tender offer or
exchange offer for 30% or more of A. P. Green's  outstanding common shares. When
exercisable,  each Right entitles the  registered  holder to purchase from A. P.
Green 1/10 of a share of a junior  participating  preferred stock,  Series A, $1
par value per share,  which is  substantially  similar to one common share, at a
price of $45 per 1/10 of a  preferred  share,  subject to  adjustment.  If A. P.
Green is involved in a merger or business combination or if the acquiring entity
engages in "self dealing transactions" after the Rights become exercisable,  the
Rights will  entitle the holder to buy a number of shares of common stock of the
acquiring  company or of A. P. Green,  as the case may be,  having a fair market
value at that time of twice the exercise price of the Right.

Note 17: Supplemental Financial Information
-------------------------------------------

Cash payments and selected  non-cash  investing and financing  activities during
1996, 1995 and 1994 were as follows:
--------------------------------------------------------------------------------
(In thousands)                                          1996     1995     1994
--------------------------------------------------------------------------------
Income taxes paid                                     $3,763   $4,093   $2,125
Interest paid                                          3,206    3,191    1,039
================================================================================

Rental payments were approximately $1.0 million in each of the last three years.
Minimum future payments under non-cancellable operating leases are approximately
$1.0 million in 1997 and decline  progressively to $0 after 2001. In most cases,
management expects expiring leases will be replaced by similar leases. The lease
obligations relate primarily to office and warehouse space.

Research  and  development  costs are  expensed  as  incurred  and  amounted  to
approximately $3.9 million,  $2.9 million and $2.5 million during 1996, 1995 and
1994, respectively.

                                      -19-

<PAGE>



Research and development expenditures in 1996 included costs associated with LTI
product development.

Note 18: Litigation
-------------------

Asbestos-Related Claims - Personal Injury
-----------------------------------------

A. P. Green is among numerous  defendants in lawsuits pending as of December 31,
1996 that seek to recover compensatory and, in many cases,  punitive damages for
personal  injury  allegedly  resulting  from  exposure  to   asbestos-containing
products.

A. P. Green is a member of the Center for Claims  Resolution  (the  Center),  an
organization  of twenty  companies  (Members) who were formerly  distributors or
manufacturers  of   asbestos-containing   products.   The  Center   administers,
evaluates, settles, pays and defends all of the asbestos-related personal injury
lawsuits  involving its Members.  Under the terms of the Center Agreement,  each
Member's  portion of the  liability  payments and defense  costs are based upon,
among other things, the numbers and types of claims brought against it.

Claims  activity for the Company for each of the years ended  December 31, 1996,
1995 and 1994, based upon information provided by the Center, was as follows:

--------------------------------------------------------------------------------
                                                       1996     1995     1994
--------------------------------------------------------------------------------
Claims pending at January 1                          48,367   50,920   52,122
  Claims filed                                       29,702   12,560   14,836
 Cases settled, dismissed or
   otherwise resolved                               (19,184) (15,113) (16,038)
                                                     ------   ------   ------
    Claims pending at December 31                    58,885   48,367   50,920
                                                     ======   ======   ======
Average settlement amount per claim(1)              $ 1,582  $ 1,778  $ 1,816
================================================================================
(1)Substantially all settlements are covered by the Company's insurance program.

On January 15,  1993,  the Members  were named as  defendants  in a class action
lawsuit brought on behalf of all persons who have been occupationally exposed to
asbestos-containing  products of the Members and who had not yet asserted claims
for such  exposure  (the  Class)  pursuant  to Federal  Rule of Civil  Procedure
23(b)(3) in the Federal District Court for the Eastern District of Pennsylvania.
At the same time,  a  settlement  (the  Settlement)  between the Members and the
Class was filed with the court.  Under the terms of the Settlement,  the Members
have agreed to pay compensation to any member of the Class who has, according to
objective  medical criteria,  physical  impairment as a result of such exposure.
Different  levels of compensation  will be paid depending on the type and degree
of  physical  impairment.  No  punitive  damages  will be paid.  The  Settlement
provides,  among other things, for a cap on the number of claims to be processed
each  year  through  2004  and a range of  settlement  values  for each  disease
category.  Settlement  values are based on  historical  average  payments by the
Center for similar  cases.  Each Member will be  responsible  for its percentage
share of each claim payment (no joint and several liability), such shares having
been  previously  established.  A five week  hearing was held to  determine  the
fairness of the Settlement.  At the end of the hearing, the court ruled that the
Settlement was fair and enjoined Class members from filing  lawsuits in the tort
system against the Members.  The Center has been  processing and settling claims
filed by Class members  pursuant to the Settlement since 1994. The ruling by the
Eastern  District Court of Pennsylvania was appealed by certain  objectors.  The
Third Circuit Court of Appeals  reversed the lower court,  ruling that the Class
should be decertified.  The Class members and settling  plaintiffs applied for a
writ of certiorari to the U. S. Supreme Court which was granted.  Oral arguments
were heard in February 1997.


                                      -20-

<PAGE>



In a  third-party  action  filed  simultaneously  with the class  action (and in
parallel Alternate Dispute Resolution proceedings), the Members have asked for a
declaratory judgment against their respective insurers that such insurers cannot
use the  Settlement as a defense to their payment under  applicable  policies of
insurance.  The Settlement is expressly contingent upon such declaratory relief.
In addition,  some Members,  including A. P. Green, have asked for a declaratory
judgment  against  their  insurers  with  whom they  have not  reached  coverage
resolutions.  No decision  has been  rendered at this date with respect to these
issues.  However,  in December 1996 A. P. Green and the E. J.  Bartells  Company
(Bartells), a former subsidiary, reached a comprehensive settlement with all but
one of their insurance carriers.  Under the terms of that settlement  agreement,
the carriers have agreed to pay (subject to applicable policy limits), on behalf
of the  insureds,  their  liabilities  arising out of asbestos  personal  injury
claims.  A.  P.  Green  will  maintain  its  coverage   litigation  against  the
non-settling carrier in the event that agreement cannot be reached with it.

Under the  assumption  that it  receives  the  necessary  court  approvals,  the
Settlement  has provided the Company with a basis for  estimating  its potential
liability and related  insurance  recovery  associated with asbestos cases.  The
Company has reviewed its insurance policies,  historical settlement amounts, the
number of pending cases and the projected  number of claims to be filed pursuant
to the Settlement and the Company's share of amounts to be paid thereunder.  The
Company  has  also  reviewed  its  contractual  liability  for  the  payment  of
deductibles   under  certain   insurance   policies  insuring  Bartells  against
asbestos-related  personal injury claims,  such policies having been issued when
Bartells  was owned by A. P. Green.  The Company has also  reviewed the terms of
the settlement  agreement with its insurance carriers.  Based upon such reviews,
the Company has projected  its liability for such cases and claims  through 2004
to be  approximately  $112.0 million and $137.2 million at December 31, 1996 and
1995, respectively, with partially offsetting projected insurance reimbursements
of approximately $110.4 million and $135.2 million, respectively.

While management understands the inherent uncertainty in litigation of this type
and the  possibility  that past  costs may not be  indicative  of future  costs,
management does not believe that these claims and cases will have any additional
material  adverse  effect on the  Company's  financial  position  or  results of
operations.  Management anticipates the Company's payments for these claims will
occur  over at least  seven  years and can be made from  normal  operating  cash
sources.

In addition to  asbestos-related  personal injury claims asserted  against A. P.
Green,  a number of similar  claims have been  asserted  against  Bigelow-Liptak
Corporation  (now known as A. P. Green  Services,  Inc.),  a  subsidiary  of the
Company.  These  claims  have  been  and are  currently  being  handled  by such
subsidiary's  insurance  carriers.  Except for deductible  amounts or retentions
provided under  insurance  policies,  no claim for  reimbursement  of defense or
indemnity  payments has been made against the Company or such  subsidiary by any
such carriers.

Asbestos-Related Claims-Property Damage
---------------------------------------

A. P. Green is among numerous  defendants in a property damage class action suit
pending in South  Carolina.  A. P. Green  previously  has been  dismissed from a
number of property  damage cases and believes  that it should be dismissed  from
the South  Carolina case based on the end uses of its  products.  A similar suit
pending in the State of Oregon involves a former wholly owned  subsidiary of the
Company and is being defended by the Company's insurance carrier. Based upon the
Company's history in these asbestos-related  property damage claims,  management
does not believe  that the  ultimate  resolution  of these  matters  will have a
material  adverse  effect on the  Company's  financial  position  or  results of
operations.

There was no assumption  by the Company of  asbestos-related  liability,  either
personal injury or property  damage,  in connection with the August 1994 General
acquisition.



                                      -21-

<PAGE>



Environmental
-------------

The EPA or private parties have named the Company or one of its  subsidiaries as
a potentially  responsible  party in connection  with two superfund sites in the
United  States.  The  Company is a de minimis  party with  respect to one of the
sites and expects to arrive at a settlement  agreement  and consent  decree with
respect  to it for an amount  of not more  than  $10,000.  With  respect  to the
second,  involving a wholly  owned  subsidiary  of the  Company,  there does not
appear to be any evidence of delivery to the site of  hazardous  material by the
subsidiary.  An  estimate  has been  made of the costs to be  incurred  in these
matters and the Company has recorded a reserve respecting those costs.

Other
-----

From time to time,  A. P. Green is subject  to claims  and other  lawsuits  that
arise in the  ordinary  course of  business,  some of which may seek  damages in
substantial amounts,  including punitive or extraordinary damages.  Reserves for
these  claims and  lawsuits  are  recorded  to the extent that losses are deemed
probable and are estimable. In the opinion of management, the disposition of all
current  claims  and  lawsuits  will not have a material  adverse  effect on the
consolidated financial position or results of operations of A. P. Green.

Note 19: Industry and Geographic Segments
-----------------------------------------

A. P. Green operates  principally in two industry segments:  Industrial Lime and
Refractory  Products and Services.  Segment net sales include  products sold and
services rendered to unaffiliated  customers.  Interindustry  segment sales were
immaterial for the periods presented. No single customer accounted for more than
10% of  consolidated  annual  net sales in any such  period.  Segment  operating
profit includes all costs and expenses  directly related to the segment involved
and a reasonable  allocation  of general  costs and expenses  which benefit more
than one  segment.  General  corporate  expenses,  interest  income and interest
expense  are shown as  separate  line  items in order to arrive at  consolidated
earnings  before income taxes and  cumulative  effect of an  accounting  change.
Corporate identifiable assets include cash and cash equivalents and those assets
maintained  for  corporate  purposes  which  are  not  directly  related  to the
operations of either industry segment.

                                      -22-

<PAGE>



Industry Segments
--------------------------------------------------------------------------------
(In thousands)                                    1996        1995        1994
--------------------------------------------------------------------------------
Net Sales
--------------------------------------------------------------------------------
Refractory products and services              $218,400    $212,203    $160,933
Industrial lime                                 40,168      37,727      35,144
Intersegment eliminations                         (107)       (215)       (159)
                                               -------     -------     -------
                                              $258,461    $249,715    $195,918
================================================================================
Operating Profit
--------------------------------------------------------------------------------
Refractory products and services              $  7,972    $ 12,565    $ 11,463
Industrial lime                                  8,287       6,911       5,429
                                                ------      ------      ------
                                                16,259      19,476      16,892
                                                ------      ------      ------
Other charges to income
  General corporate
    expenses, net                                7,570       7,434       6,946
  Interest expense                               3,112       3,190       1,947
  Interest income                               (1,256)     (1,513)     (1,296)
                                                ------      ------      ------
                                                 9,426       9,111       7,597
                                                ------      ------      ------
Earnings before income taxes
  and cumulative effect of an
  accounting change                           $  6,833    $ 10,365    $  9,295
================================================================================
Identifiable Assets
--------------------------------------------------------------------------------
Refractory products and services              $284,180    $313,165    $311,514
Industrial lime                                 58,514      47,698      47,995
Corporate                                       12,435      12,705      13,613
                                               -------     -------     -------
                                              $355,129    $373,568    $373,122
================================================================================
Depreciation, Depletion and Amortization
--------------------------------------------------------------------------------
Refractory products and services              $  6,811    $  6,375    $  4,967
Industrial lime                                  2,813       2,751       2,653
Corporate                                          958       1,048       1,105
                                                ------      ------       -----
                                              $ 10,582    $ 10,174    $  8,725
================================================================================
Capital Expenditures
--------------------------------------------------------------------------------
Refractory products and services              $  9,675    $  7,597    $  2,154
Industrial lime                                  2,470       2,137       3,482
Corporate                                          747         422         846
                                                ------      ------       -----
                                              $ 12,892    $ 10,156    $  6,482
================================================================================


                                      -23-

<PAGE>



A. P. Green's principal  operations are located in the United States, the United
Kingdom,  Canada, Mexico and the Far East. Transactions between geographic areas
are  accounted  for  on  an  "arm's-length"  basis.  Export  sales  to  foreign,
unaffiliated customers represent less than 10% of consolidated annual net sales.

--------------------------------------------------------------------------------
Geographic Segments
--------------------------------------------------------------------------------
(In thousands)                                    1996        1995        1994
--------------------------------------------------------------------------------
Net Sales
--------------------------------------------------------------------------------
United States                                 $226,290    $219,571    $176,869
Canada                                          23,759      24,045      17,876
United Kingdom                                   9,978       9,745       7,336
Mexico                                           8,123       3,242          --
Intersegment transfers                          (9,689)     (6,888)     (6,163)
                                               -------     -------     -------
                                              $258,461    $249,715    $195,918
================================================================================
Earnings (Loss) Before Income Taxes and Cumulative Effect
  of an Accounting Change
--------------------------------------------------------------------------------
United States                                 $  5,883    $  8,352    $  8,389
Canada                                            (324)        999         570
United Kingdom                                     607         673         336
Mexico                                             992         341          --
Far East                                          (325)         --          --
                                                 -----      ------       -----
                                              $  6,833    $ 10,365    $  9,295
================================================================================
Identifiable Assets
--------------------------------------------------------------------------------
United States                                 $306,945    $330,285    $339,380
Canada                                          17,143      18,000      15,887
United Kingdom                                   5,234       5,020       4,242
Mexico                                           6,447       5,451          --
Far East                                         6,925       2,107          --
Corporate                                       12,435      12,705      13,613
                                               -------     -------     -------
                                              $355,129    $373,568    $373,122
================================================================================

                                      -24-

<PAGE>



Note 20: Quarterly Financial Highlights (Unaudited)
---------------------------------------------------

--------------------------------------------------------------------------------
                                                First   Second    Third   Fourth
(Dollars in thousands, except per share data) Quarter  Quarter  Quarter  Quarter
--------------------------------------------------------------------------------
1996 (adjusted)
Net sales                                     $64,234  $69,538  $61,948  $62,741
Gross profit                                   11,355   13,496    8,942   10,315
Net earnings                                    1,604    2,571      162      336
Net earnings per common share                     .20      .32      .02      .04
--------------------------------------------------------------------------------
1995
Net sales                                     $61,889  $64,315  $62,652  $60,859
Gross profit                                   10,438    9,959   11,188    9,821
Net earnings                                    1,688    2,506    2,265    2,341
Net earnings per common share                     .21      .31      .28      .29
================================================================================

Lower sales and a planned  reduction  of  refractory  finished  goods  inventory
during the third and fourth  quarters  of 1996  resulted  in reduced  production
efficiencies and declines in gross profit and net earnings. Also contributing to
the  decline  were  inventory-related  adjustments  resulting  from  changes  in
inventory levels.

Note 21: Subsequent Event
-------------------------

The Company acquired a 51% ownership interest in Lanxide ThermoComposites,  Inc.
and  Subsidiary  (LTI) on December 31, 1995,  at which date total  stockholders'
equity of LTI was  $196,078.  LTI has  incurred  quarterly  net losses since the
acquisition.  ARB 51  requires  that  "...In the  unusual  case in which  losses
applicable to the minority interest in a subsidiary exceed the minority interest
in the equity  capital of the  subsidiary,  such excess and any  further  losses
applicable  to the  minority  interest  shall be charged  against  the  majority
interest..." The Company did not become aware of this requirement until recently
and, as such,  has been  charging  49% of all LTI losses  against  the  minority
interest.

In order to correct its prior accounting treatment, the Company has adjusted its
consolidated statements of earnings for the year ended December 31, 1996 and the
first three quarters of 1997.

The impact, by quarter, on the year ended December 31, 1996 was as follows:

--------------------------------------------------------------------------------
                                                First   Second    Third   Fourth
(Dollars in thousands, except per share data) Quarter  Quarter  Quarter  Quarter
--------------------------------------------------------------------------------
Minority interest in income of consolidated
  subsidiaries, net (as reported)              $ (140)  $ (186)   $(112)   $(36)
Minority interest in income of consolidated
  subsidiaries, net (as adjusted)                 (13)      80       70      63

Net earnings (as reported)                      1,731    2,837      344     435
Net earnings (as adjusted)                      1,604    2,571      162     336

Net earnings per common share (as reported)       .22      .36      .04     .05
Net earnings per common share (as adjusted)       .20      .32      .02     .04

In  accordance  with ARB 51, for future  periods in which LTI has  earnings  the
Company, as majority  stockholder,  will be credited with 100% of those earnings
until such time as total stockholders' equity of LTI is positive.






                                      -25-

<PAGE>



                          INDEPENDENT AUDITORS' REPORT


THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
A. P. GREEN INDUSTRIES, INC.:

We have audited the accompanying  consolidated  statements of financial position
of A. P. Green  Industries,  Inc. and  subsidiaries  as of December 31, 1996 and
1995, and the related consolidated statements of earnings, stockholders' equity,
and cash flows for each of the years in the three-year period ended December 31,
1996 (all as restated, see note 21). These consolidated financial statements are
the responsibility of A. P. Green's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position  of A.  P.  Green
Industries,  Inc. and  subsidiaries  as of December  31, 1996 and 1995,  and the
results  of their  operations  and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles.

As  discussed  in note 5 of  notes to  consolidated  financial  statements,  the
Company changed its method of accounting for postemployment benefits in 1994.


/s/ KPMG Peat Marwick LLP


St. Louis, Missouri
February 10, 1997, except for
   note 21, as to which the date is
   January 13, 1998





                                      -26-

<PAGE>





                                     PART IV

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

(a)      3.     Exhibits
                --------

         Exhibit No.
         -----------

         23      Consent of KPMG Peat Marwick LLP

         27      Financial Data Schedule as of December 31, 1996 (as adjusted).

                                      -27-

<PAGE>


                                   SIGNATURES

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

                                     A. P. GREEN INDUSTRIES, INC.
                                     ----------------------------
                                             Registrant


Dated: February 2, 1998              By:  /s/   Gary L. Roberts
       ----------------                  ---------------------------
                                          Gary. L. Roberts, Vice President,
                                          Chief Financial Officer and Treasurer
















































                                      -28-


<PAGE>