SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-K/A-2

                 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. 0-21830

                       Johnstown America Industries, Inc.
             (Exact name of registrant as specified in its charter)

           Delaware                                       25-1672791
    (State or  other jurisdiction of      (I.R.S. Employer Identification No.)
     incorporation or organization)

                            980 North Michigan Avenue
                                   Suite 1000
                             Chicago, Illinois 60611
                    (Address of principal executive offices)

                                 (312) 280-8844
              (Registrant's telephone number, including area code)

        Securities registered pursuant to Section 12 (b) of the Act: None

          Securities registered pursuant to Section 12 (g) of the Act:

       Common Stock, $.01 par value        NASDAQ National Market System

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

                     -------

State the aggregate  market value of the voting stock held by  nonaffiliates  of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold,  or the average bid and asked  prices of such
stock,  as of a specified date within 60 days prior to the date of filing.  (See
definition of affiliate in Rule 405.)

                        $38,576,291 as of March 12, 1997.

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

        Class                               Outstanding at March 12, 1997

  Common Stock, $.01 par value                          9,755,062



Portions of the following  documents are  incorporated  by reference in Parts II
and III of this Report:  (1) Registrant's  Annual Report to Shareholders for the
fiscal  year ended  December  31,  1996 (Part II);  and (2)  Registrant's  Proxy
Statement for the Annual Meeting of Shareholders to be held on May 1, 1997 (Part
III).



<PAGE>



                                EXPLANATORY NOTE

     Pursuant  to Rule  12b-15  of the  Securities  Exchange  Act of  1934,  the
undersigned  Registrant  hereby amends Items 1, 3, 7 and 13 of its Annual Report
on Form 10-K for the year ended  December  31, 1996 by  restating  such items in
their entirety.


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                                     PART I

                                Item 1. Business

                                   The Company

     Johnstown   America   Industries,   Inc.  (the   "Company"),   through  its
subsidiaries,  designs and manufactures  railroad  freight cars,  components and
assemblies primarily for medium and heavy-duty trucks and high quality,  complex
iron castings for  transportation-related  and a variety of other markets. For a
definition  of certain  terms used in this Form 10-K,  see  "Glossary of Certain
Terms" at the end of this Item. The Company's principal business operations are:

     Railroad Freight Cars.  Johnstown America  Corporation ("JAC") is a leading
manufacturer  of  railroad  freight  cars used  principally  for  hauling  coal,
agricultural  and  mining  products,  intermodal  containers  (which are used on
trucks  and ships as well as on  freight  cars)  and  highway  trailers.  JAC is
recognized  for its expertise in the  development  and  manufacture  of aluminum
freight cars that increase load capacity and consequently  reduce carrier costs.
In addition to  manufacturing  aluminum coal cars, the Company has introduced an
aluminum covered hopper car designed for high volume grain transport. As part of
its full-service  business  strategy,  the Company through Freight Car Services,
Inc.  ("FCS") has  established a presence in the growing  market for freight car
repair and rebuilding  services and through JAIX Leasing Company ("JAIX") offers
its customers freight car leasing alternatives.

     Truck Components and Assemblies. Gunite Corporation ("Gunite") is a leading
North  American  supplier of  wheel-end  systems and  components,  such as brake
drums,  disc  wheel  hubs,  spoke  wheels  and  rotors  to  original   equipment
manufacturers  ("OEMs") in the  heavy-duty  truck  industry.  Gunite is a market
leader in the production of automatic slack adjusters  (braking devices mandated
for all new trucks  produced  with air brakes since  October 1994) and wheel-end
components for anti-lock  braking systems ("ABS"),  which have been mandated for
all new trucks  beginning in March 1997 and all new trailers  beginning in March
1998.  In addition to serving  OEMs,  Gunite has  significant  sales to the less
cyclical   aftermarket.   Bostrom  Seating,   Inc.   ("Bostrom")  is  a  leading
manufacturer  of air suspension  and static  seating  systems for the medium and
heavy-duty truck industry.  Fabco Automotive  Corporation ("Fabco") is a leading
supplier of steerable drive axles, gear boxes and related parts for heavy on/off
highway trucks and utility vehicles.

     Iron Castings.  Brillion Iron Works, Inc.  ("Brillion") operates one of the
nation's  largest and most  versatile iron foundries and is focused on providing
high  quality  complex  castings  to  customers  in a wide range of  industries,
including the truck, industrial machinery, automotive and construction equipment
markets.  A leader in  ductile  iron  technology,  Brillion  specializes  in the
production  of  lightweight,  intricate  thin  wall  castings.  In  addition  to
providing an important source of high quality castings for Gunite,  Brillion has
long-standing relationships with many of its over 225 customers. Generally, once
a foundry begins  production of a product,  it will continue to manufacture  the
item for the product's life cycle.  Brillion also  manufactures and sells a line
of farm equipment products.

Corporate History of the Company

     An investor group led by Thomas M. Begel, the Chairman, President and Chief
Executive  Officer of the Company and the former  Chairman,  President and Chief
Executive  Officer of The  Pullman  Company,  formed the  Company in 1991 as the
holding  company  for JAC to  acquire  substantially  all of the  assets  of the
freight car manufacturing business of Bethlehem Steel Corporation ("Bethlehem"),
a business started in 1901 in Johnstown,  Pennsylvania and acquired by Bethlehem
in 1923. JAC acquired the freight car  manufacturing  business from Bethlehem in
October 1991 for approximately $53.3 million.



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     In July 1993,  the  Company  completed  an initial  public  offering of its
common stock and in February 1994 the Company completed a secondary  offering of
its common stock.

     In January 1995, the Company purchased Bostrom,  a leading  manufacturer of
heavy-duty truck seating systems located in Piedmont, Alabama, for approximately
$32.4 million. Bostrom was founded in 1935 in Milwaukee, Wisconsin.

     In January 1995, the Company  through FCS acquired a freight car rebuilding
and repair facility in Danville,  Illinois for $2.5 million and through 1996 has
spent  capital of $2.6  million for  refurbishment.  FCS started  operations  in
October 1995.

     In August 1995, the Company  acquired Truck  Components,  Inc.  ("TCI"),  a
holding company for Gunite, Brillion and Fabco, for approximately $266.1 million
in cash, including the repayment of TCI's existing indebtedness.  TCI was formed
in 1987 in order to acquire Gunite and Fabco from Fruehauf Corporation now known
as K-H  Corporation  ("K-H").  In 1988,  TCI acquired  Brillion  from a group of
investors led by the Robins Group.  Gunite was founded in Rockford,  Illinois in
1854 as a custom  manufacturer of cast iron products.  Fabco was founded in 1918
in Oakland,  California  as a  manufacturer  of truck  components  and specialty
vehicles.  Brillion  was founded in 1890 as a farm  equipment  manufacturer  and
constructed its first iron foundry in 1933.

Freight Car Operations

     The  Company  is a  leading  manufacturer  of  railroad  freight  cars used
principally  for hauling  coal,  agricultural  and mining  products,  intermodal
containers  (which are used on trucks and ships as well as on freight  cars) and
highway trailers. As part of its full-service business strategy, the Company has
expanded  its  presence  in the  growing  market  for  freight  car  repair  and
rebuilding services and offers its customers freight car leasing alternatives.

     Products and Services

     The Company participates in the following freight car market segments:  new
car manufacturing;  rebuilds,  repairs and  modifications;  sales of freight car
kits and parts; and freight car leasing.

     New Car  Manufacturing.  The Company's freight car operations offer a range
of car  types in an effort to take  advantage  of  industry  trends  and  market
opportunities,  particularly in the development of aluminum freight cars used in
the  shipment  of  bulk  commodities.   The  Company's  freight  car  operations
manufacture the following types of freight cars:

     Gondolas. The BethGon Coalporter(R) is a patented twin tub car designed for
the coal and utility  industries.  The  BethGon was  designed to carry more coal
with greater  stability  and remains the dominant  type of car for hauling coal,
particularly  for  hauling  low-sulfur  coal  from the  western  United  States.
Although the BethGon is made in either  steel or aluminum,  most of the BethGons
delivered  in the last few  years  have been made of  aluminum.  In 1994,  a new
smooth-sided  Aeroflo Aluminum BethGon was introduced which offers carriers both
fuel savings and added cubic  carrying  capacity.  In 1996, a new lighter weight
BethGon was  introduced  which  weighs  approximately  3,500  pounds less than a
standard BethGon,  thereby enabling the car to carry significantly more coal per
trip.  This  new car has  been  received  by the  marketplace  with  significant
interest.

     Open Hoppers. To expand its product line to service the entire coal market,
the Company's freight car operations began  manufacturing  aluminum open hoppers
in 1994.  The Company's  freight car  operations  have the capability to produce
both aluminum and steel open hoppers and recently  developed  and  introduced an
aluminum rapid  discharge coal car (the AutoFlood  II(TM)) that provides 18 tons
more capacity per load than conventional steel automatic discharge freight cars.
The aluminum  AutoFlood II(TM) coal car, with its patented  automatic  discharge
system  providing a more  efficient  method for the rapid  discharge of coal, is
being well received in the marketplace. The Company's

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freight car operations have been  manufacturing  an increasing  quantity of open
hopper  cars and  believes  that demand for such cars will result in open hopper
cars representing a larger share of its product mix in the future.

     Covered  Hoppers.  Covered  hopper  cars  are  used to  haul  agricultural,
chemical and mineral  products.  In 1994,  the Company's  freight car operations
introduced the Grainporter  2000(TM),  the first aluminum  covered hopper car in
its size range available in high volume  production,  that is designed primarily
for high volume  transportation  of grain. The Company's freight car operations'
first commercial production of the Grainporter 2000(TM) began in 1995.

     Intermodal Cars.  Intermodal cars are primarily used for moving  intermodal
containers  and trailers.  As a result of a  substantial  build-up of intermodal
cars in the early 1990s,  the market for intermodal cars began declining in 1995
and continued to decline in 1996. As a result, there were no sales of intermodal
cars in 1996 and none are  expected  in 1997.  Moreover,  the mix of  intermodal
freight  cars  expected  to be  delivered  by the  freight  car  industry in the
foreseeable future has predominantly  shifted towards deep well car designs that
JAC  does  not  manufacture.  JAC  has  retained  the  capability,  however,  to
manufacture  articulated  intermodal  cars to meet any customer  demand that may
arise in the future.

     Specialty Cars. The Company's freight car operations manufacture other cars
for the special  needs of a particular  industry or  customer,  including a mill
gondola car, which is used to haul steel slabs,  coils or scrap,  an open hopper
or gondola wood chip car, which is used to haul wood chips, a waste hauling car,
which  is used to haul  industrial  sludge,  and an ore  car,  which  is used by
railroads to transport taconite pellets and iron ore.

     Rebuilds,  Modifications  and Repairs.  Freight cars are typically  rebuilt
once between 15 and 20 years to extend their life. To pursue what it believes to
be growing  opportunities to service the aging North American freight car fleet,
and further expand its presence in the generally  fragmented  market for freight
car rebuilding,  maintenance and repair,  FCS purchased a freight car repair and
rebuilding  facility in Danville,  Illinois in January 1995.  Operations at this
new  facility,  which is  advantageously  located in the  Midwest,  commenced in
October of 1995. FCS performs total rebuilds,  modifications and repairs of used
freight cars and manufactures certain new cars.

     Car Kits and Parts.  JAC sells kits containing the parts necessary to build
(or rebuild) a particular  car to rebuilders  and others  including FCS, such as
railroads with car building but not fabrication  capability.  JAC also markets a
variety  of  fabricated  parts  to  freight  car  rebuilders  who  do  not  have
fabrication capabilities.

     Leasing.  To meet the  needs of its  customers,  the  Company  entered  the
freight car leasing business in 1994. Through JAIX Leasing, the Company provides
operating  lease  alternatives  to  customers  on new and  rebuilt  cars.  As of
December 31, 1996, the Company owned or had under  management  1,067 railcars in
its operating  lease fleet,  representing  a total  investment of  approximately
$22.6  million,  $13.6  million of which was provided  through  limited-recourse
borrowings.

     Manufacturing

     JAC's   manufacturing   operations  are  conducted  primarily  through  two
facilities  located in  Johnstown,  Pennsylvania.  JAC has reduced the number of
freight car erection lines at its  facilities  during 1996 as demand for freight
cars declined.  This has resulted in significant cost  reductions.  In addition,
JAC has  focused on making  its  manufacturing  facilities  and  processes  more
flexible while at the same time reducing  change-over  times and inventories and
improving  product  quality.  Many  of  these  improvements  were  developed  by
involving  the   participation  of  manufacturing   employees,   management  and
customers. JAC has implemented cellular manufacturing concepts,  whereby various
manufacturing  steps are  accomplished in one location  within the facility,  to
eliminate unnecessary movement of parts within the facility,  improve production
rates and reduce  inventories.  These  improvements  are intended to provide JAC
with  increased  flexibility  in  scheduling  the  production  of orders  and to
minimize down-time resulting from car type change-overs,  thereby increasing the
efficiency of its manufacturing operations.


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     FCS'  rebuilding  and repair  operations  are  conducted  at its  Danville,
Illinois facility.

     Customers

     The Company has maintained long-term relationships with major purchasers of
freight cars. Long-term customers are particularly  important in the freight car
industry  given the limited  number of buyers and sellers of freight cars.  Such
customers include railroads,  utilities,  grain shippers,  leasing companies and
major construction and industrial companies.

     The  large  average  size of  orders  often  results  in a small  number of
customers  representing a significant portion of JAC's revenues in a given year.
In 1996, the top five customers accounted for approximately 52% of the Company's
revenues from its freight car operations.


Truck Components and Assemblies Operations

Gunite

     Gunite is the leading North American supplier of wheel-end components, such
as brake  drums,  disc  wheel  hubs,  spoke  wheels  and  rotors  to OEMs in the
heavy-duty truck industry. Gunite also supplies such products to the aftermarket
as well as the medium-duty truck and trailer markets.

     OEMs have increasingly stressed product quality, engineering capability and
customer service,  as well as price, in awarding  business to suppliers.  Gunite
has distinguished  itself among wheel-end  component  manufacturers by providing
its customers with dependable  design and testing support and reliable  customer
service. Gunite works closely with its customers' product design,  marketing and
purchasing departments, including vendor quality certification personnel. Gunite
has  received  top  quality  awards from all of its major  customers.  Obtaining
quality awards is a competitive  advantage  because a manufacturer must first go
through the OEM's quality certification process before it can become a qualified
supplier.

     Markets

     The truck  components  industry in which Gunite competes is composed of two
primary markets: (i) the OEM market; and (ii) the vehicle maintenance and repair
sector, also called the replacement market or aftermarket. The OEM market served
by Gunite includes truck manufacturers such as Navistar,  Freightliner,  PACCAR,
Ford,  Volvo GM and Mack Trucks.  For the twelve months ended December 31, 1996,
approximately 66% of Gunite's total net sales were to OEMs and the remainder was
to the aftermarket.

     OEMs  use  independent  suppliers  for the  production  of most  parts  and
components.  The use of independent  suppliers,  also known as  outsourcing,  is
largely a result of the ability of independent suppliers to design, engineer and
manufacture  production parts and components at a more competitive cost than the
OEMs.  Outsourcing also enables the OEMs to be more responsive to changes in the
marketplace  and in  technology  and to  reduce  their  capital  investment.  In
general, OEMs increasingly have turned to suppliers to design products, engineer
prototypes and manufacture  parts and components for the life of their vehicles.
The OEMs also have sought to minimize the size of their  supplier  base in order
to  improve  quality,  efficiency  and their  ability to manage  their  supplier
network.   The  success  of  suppliers  in  obtaining  and  maintaining   supply
relationships  has been a  function  of four  factors:  (i)  consistent  product
quality;  (ii)  competitive  pricing;   (iii)  technical  expertise;   and  (iv)
responsiveness  to changes in the  marketplace.  The net effect of these changes
has been to increase the opportunities for, as well as the competitive pressures
faced by, independent suppliers to the OEM market.

     Sales of Gunite's  products to OEMs are  affected,  to a large  extent,  by
heavy-duty truck production volume

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which,  in turn,  is dependent  on general  economic  conditions.  Historically,
heavy-duty  truck sales have been cyclical.  In general,  Gunite's sales tend to
follow the North American Class 8 truck build.

     Gunite   seeks  to   increase   sales  to  the  OEM  market   through   the
"standardization" process. In this process, Gunite sales representatives call on
OEM purchasers and Gunite's  engineers work with OEM engineering  departments to
attempt to have Gunite products  selected for the OEMs product lines as standard
equipment.  Once a product is chosen as standard on a line of trucks,  any order
of a truck in that line will come with the  standard  part  unless  the  end-use
customer  specifies a  different  type of  product.  If a  different  product is
specified  by an  end-user,  the  end-user  is  generally  required  to  pay  an
additional  fee to the OEM.  Selection of a Gunite product as standard on a line
of trucks will generally  create a steady demand for that product.  Because such
demand is a derivative of the sales of the particular truck line, being standard
on certain lines may be more advantageous than being standard on others.  Gunite
wheel-end  components are currently standard on certain Navistar,  Freightliner,
PACCAR, Ford and Mack Truck lines.

     Aftermarket  customers include the service organizations of the OEMs, parts
manufacturers  and distributors.  Aftermarket  sales principally  consist of the
sale of brake drums. Sales of Gunite's products to the aftermarket  historically
have been less adversely  affected by general business  conditions since vehicle
owners  are more  likely  to  repair  vehicles  than  purchase  new ones  during
recessionary  periods.  Aftermarket sales, which are tied to the age of vehicles
in service and the need for  replacement  parts,  have been increasing in recent
years  due to  Gunite's  focus on the  aftermarket  and the fact  that  Gunite's
products  are offered as  standard  on more trucks than any of its  competitors'
products.  Gunite's  strategy is to  increase  sales to the  aftermarket,  where
margins are higher  when  compared to the OEM  market,  by  capitalizing  on its
reputation  as a  quality  leader in the  industry  and  continuing  to focus on
customer service.

     Products

     Gunite supplies the medium- and heavy-duty truck and trailer markets with a
full  line of  wheel-end  components.  These  products  are made by  Gunite  and
delivered to the customer either as component parts or in assemblies  which have
been pre-balanced by Gunite. Gunite products are utilized in four basic systems:
(i) Disc Wheel Hub-and-Brake Drum; (ii) Spoke  Wheel-and-Brake Drum; (iii) Spoke
Wheel-and-Brake Rotor; and (iv) Disc Wheel Hub-and-Brake Rotor. Generally, brake
drums and rotors are the braking  devices that work with the  vehicle's  braking
system to stop the  vehicle.  Wheel  hubs and spoke  wheels  are the  connecting
pieces between the brake system and the axle and upon which the rim and tire are
mounted.

     Gunite  offers a full line of brake  drums and  rotors for Class 6, 7 and 8
trucks and  trailers.  The  aftermarket  opportunities  in this product line are
substantial as all brake drums wear with use and eventually need to be replaced.
The timing of such replacement depends on the severity of service.

     Gunite  manufactures  a full line of spoke  wheels  and disc wheel hubs for
Class 6, 7 and 8 trucks and trailers.  Truck builders have recently  purchased a
greater  percentage  of disc  wheel  hubs in place of spoke  wheels due to their
perceived better performance  characteristics and ease of maintenance.  However,
spoke wheels are still popular for severe duty due to their higher strength.

     In  response  to  growing  concerns  by truck  fleet  operators  over brake
adjustment,  Gunite  introduced its initial  automatic slack adjuster product in
1984. Brake adjustment is vital to the operation of a truck for several reasons.
During  use,  the brake  shoe and drum wear  down,  causing  changes  in the gap
between the brake shoe and drum.  These  changes  lessen the  effectiveness  and
therefore  the safety of the brakes.  Gunite's  approach to  "clearance-sensing"
technology  allows its slack  adjuster to react to and adjust for  variations in
shoe-to-drum clearance automatically, as compared to manual slack adjusters. The
use of Gunite's automatic slack adjusters reduces  maintenance  costs,  improves
braking  performance and minimizes  side-to-pull  and stopping  distance.  Slack
adjusters were mandated for all new trucks in October 1994.  Gunite  believes it
is presently the second  largest  supplier of automatic  slack  adjusters to the
heavy-duty trucking industry.


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     Gunite's  product line also  includes  finely-machined  hubs and wheels for
ABS, which enhance vehicle safety and have been mandated for all new trucks with
air  brakes,  beginning  in March  1997,  and all new  trailers  with air brakes
beginning in March 1998. The  production of ABS parts  constitutes a value-added
process,  and additional  components and machining are required.  As ABS becomes
more  prevalent  in the  trucking  industry,  Gunite,  through  its  production,
engineering  and machining  capabilities,  is  positioned  to take  advantage of
increasing demand for ABS.

     In July 1994,  Gunite  introduced a new  lightweight  brake drum, a product
which Gunite did not previously produce.  This product has generated substantial
customer  interest  because its reduced weight enables carriers to increase load
capacity. Commercial production of this product began in 1996.

     Customers

     Gunite markets its wheel-end  component and assembly  products to more than
400 customers, including most of the major North American medium- and heavy-duty
truck and trailer  manufacturers,  relying on three account  managers to service
OEMs and nine regional sales managers and a nationwide  network of approximately
300 independent distributors to sell to the aftermarket.

     Gunite  has  established  close  relationships  with  many  of  its  larger
customers,  many of whom have purchased  wheel-end  systems and components  from
Gunite  for  more  than 25  years.  Gunite's  top  five  OEM  customers  in 1996
represented approximately 64% of Gunite's total net sales in 1996, with sales to
Navistar accounting for approximately 29% of Gunite's total net sales in 1996.

     Many truck manufacturers  require quality  certification of their supplies,
and Gunite  undergoes  periodic  quality surveys by all of its major  customers.
Gunite has received  numerous quality awards from its customers,  including Ford
Motor  Company's  "Q1,"   Freightliner's   "Master  of  Quality"  and  ISO  9000
equivalent,  PACCAR's  "Supplier Quality  Certification" and Volvo GM's ISO 9000
equivalent. The primary criteria on which such quality certifications and awards
are based include quality of product,  delivery performance,  inventory control,
operator  knowledge,  condition of facility,  receiving  inspection  of incoming
materials,  record  maintenance  and  retention and  equipment  gauge  controls.
Quality  certification  requirements tend to limit the number of suppliers which
can compete in the safety  intensive  product lines  manufactured  by Gunite and
benefits high-quality suppliers such as Gunite.

     Manufacturing

     Gunite  has  a  fully  integrated  manufacturing  operation  that  combines
high-quality castings from its Rockford,  Illinois foundry and from Brillion and
machining  capabilities  at  its  Elkhart,  Indiana  facilities.   Most  of  the
components produced by Gunite are high-volume  products that are critical to the
safe  operation  of the  vehicle.  As a result,  Gunite must  combine  efficient
production with  comprehensive  product testing.  Implementation  of statistical
process controls ("SPC") insures strict control of the manufacturing process and
is important in ensuring consistent quality.

     The manufacturing  process involves melting purchased scrap iron and steel,
adding  various  alloys,  and pouring the molten  metal into molds made of sand.
After the molten metal is poured into the molds, the castings cool, solidify and
are removed.  Once the rough castings have been cleaned, they are transferred to
the Elkhart,  Indiana plant for machining  through a variety of automated  plant
techniques. Both the casting and machining operations are subject to statistical
sampling  and  charting  techniques.   Other  manufacturing   processes  include
painting, welding and assembly.

Bostrom

     Bostrom designs, manufactures and markets a full line of air suspension and
static seating systems primarily for the heavy-duty truck market.

     Markets

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     Bostrom is a leading  manufacturer  of seating  systems for the  heavy-duty
truck  industry.  Bostrom's  products are sold  primarily to the OEM  heavy-duty
truck market as well as to the  aftermarket.  Bostrom also  supplies its line of
seating systems to the medium-duty truck markets. Bostrom's seats are offered as
standard  or  as  an  option  by  all  major  North  American  heavy-duty  truck
manufacturers.

     Customers

     Bostrom's  customers  include  all of the major North  American  heavy-duty
truck  manufacturers.  Bostrom's top five customers  accounted for approximately
83% of Bostrom's 1996 net sales, with Navistar  accounting for approximately 31%
of such sales including both OEM and aftermarket sales.

     Manufacturing

     Bostrom's  manufacturing  facility is located in Piedmont,  Alabama.  For a
number of its OEM customers,  Bostrom ships its seats to a line-setting facility
which it has established near the OEM's plant to provide just-in-time  inventory
of seats to the assembly line in the order that the seats will be used.

Fabco

     Fabco designs,  manufactures and markets  steerable drive axles, gear boxes
and related  parts for the North  American  on/off-road  medium- and  heavy-duty
truck markets.

     Markets

     Fabco's  products  are  sold  primarily  to the OEM  market  for use in the
construction,  military, mining and municipal service markets. Fabco's axles and
gear boxes are offered as  standard or as an option by all major North  American
heavy-duty truck  manufacturers,  and Fabco is a leading supplier of these items
in the North American heavy-duty truck market.

     Products

     Fabco supplies a full line of steerable  drive axles for the North American
on/off-road medium- and heavy-duty truck and specialty vehicle markets.  Fabco's
drive axles are rated at  capacities  ranging  from  12,000 to 23,000  pounds to
serve  Class 6, 7 and 8  trucks.  End users of  Fabco's  axles  require  ease of
steering   and  high  speed   driving  for  on-  highway  use  while   demanding
maneuverability  and  functionality  for  off-highway  use.  Fabco's  axles  are
designed to increase  durability and maintenance  accessibility.  Fabco believes
that the ease of  operating  and  servicing  Fabco's  products  are  competitive
advantages that lead to ongoing demand for steerable drive axles.

     Fabco also  manufactures a wide range of medium- and heavy-duty gear boxes.
Gear  boxes  are  used by  vehicles  that  operate  auxiliary  equipment  in the
construction, oil and gas field services and utility industries, among others.

     Fabco also sells its products in the aftermarket.  It supplies  replacement
parts for all of its products to OEMs and, in some cases, directly to end users.
Service parts are shipped directly from Fabco's plant in Oakland,  California to
any domestic or international  location directed by the customer.  Fabco's quick
turnaround  of parts  orders  minimizes  the need for its  customers to maintain
their own parts inventory.

     Customers

     Fabco's  customers  include  most of the major North  American  on/off road
medium- and heavy-duty truck and specialty vehicle  manufacturers.  The majority
of Fabco's sales are made to OEM customers with which it enjoys

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relationships  of over 25 years.  Sales  during  1996 to  Fabco's  five  largest
customers  accounted  for  approximately  85% of Fabco's  total net sales,  with
Navistar accounting for approximately 47% of such sales.

     Manufacturing

     Fabco has gained a positive reputation for its engineering  capabilities in
designing  and  manufacturing  its  products  for the on/off  road  medium-  and
heavy-duty truck and specialty vehicle markets.  The Company believes that Fabco
is the only manufacturer which has products that are standard or available as an
option on all major OEMs Class 6, 7 and 8 all-wheel  drive truck models produced
for the commercial truck market,  and that, as a result,  Fabco's broad range of
adaptable  products are considered  the industry  standard due to the variety of
their   configurations  and  tolerances.   Fabco  believes  that  the  technical
backgrounds  of its sales and marketing  employees  contribute to the successful
marketing of Fabco's products to the heavy-duty vehicle manufacturers.

Iron Castings Operations

Brillion

     Brillion  operates one of the nation's  largest job casting iron foundries,
producing  a  wide  variety  of   high-quality,   complex   iron   castings  for
transportation-related and a wide variety of other markets. Sales to the medium-
and heavy-duty truck and trailer  industries  accounted for approximately 33% of
Brillion's  sales  (including  sales  to  Gunite)  in 1996,  while  sales to the
automotive industry accounted for approximately 11% of Brillion's sales in 1996.

     Brillion also designs,  manufactures  and markets a range of farm equipment
products for the  "behind-the-tractor"  market.  These  pulverizers,  seeders,
mulchers,  deep  tillers  and  cultivators  are  marketed  nationally  under the
Brillion trade name through a nationwide network of 1,050 farm implement dealers
and distributors.

     Markets

     Brillion  markets  its  products  on  a  job-by-job  basis  to  the  truck,
automotive and equipment  industries.  Brillion is one of the leaders in ductile
iron technology,  such as complex, thin wall and near net shape castings, in the
markets it serves.  In addition to being easily  machinable and  wear-resistant,
ductile iron has greater  strength (an important factor for customers who desire
a lighter finished  product) and elasticity than gray iron. As a result of these
superior properties,  management expects the demand for ductile iron castings to
increase.  This shift towards  ductile iron products may replace other  products
(such as  lighter-weight  aluminum  products)  that gray iron products could not
replace, and is not expected to adversely impact Brillion's business. Gray iron,
the oldest and most widely  used cast iron,  is readily  formed  into  intricate
shapes  which are  easily  machinable  and  wear-resistant.  For the year  1996,
ductile iron castings  represented  approximately  60% of  Brillion's  foundry's
total tons sold, while gray iron represented the balance.

     Products

     As illustrated in the table below,  Brillion produces a broad range of gray
and  ductile  iron  castings  used  in the  manufacture  of  components  for the
trucking,  automotive  and a variety  of light and heavy  equipment  industries.
Currently,  Brillion utilizes over 3,700 patterns to produce castings that range
in weight  from one pound to nearly  350  pounds,  with the  majority  below 100
pounds.  Castings are made to the specific  requirements  of each customer.  The
customer  consults with  Brillion to specify such  important  considerations  as
physical  properties,  surface  finish,  dimensional  accuracy  and  methods  of
inspection for each casting.



                                       10

<PAGE>



                                Foundry Products

  *  Automotive and Truck Brackets    *  Hydraulic-Valve Bodies
  *  Bearing Caps                     *  Manifolds
  *  Brake Calipers and Adapters      *  Pressure Plates
  *  Clutch Housings                  *  Small Engine Camshafts and Crankshafts
  *  Farm Machinery Castings          *  Steering Housings
  *  Flywheel Housings                *  Transmission Cases
  *  Flywheels                        *  Wheel Hubs

     Brillion markets its castings,  directly and indirectly, to OEMs in various
industrial  markets.  the table  below  provides  a list of  representative  end
products in which Brillion's castings are used.


                End Products in Which Brillion Castings Are Used

   *  Air-Cooled Engines              *  Industrial Lift Trucks
   *  Automobiles and Light Trucks    *  Lawn and Garden Equipment
   *  Construction Equipment          *  Locomotive Engines
   *  Diesel Engines                  *  Marine Engines
   *  Farm Equipment                  *  Medium- and Heavy-Duty Trucks
   *  Fluid Power Pumps and Motors    *  Oil and Gas Field Machinery and Equip.
   *  Hardware                        *  Pumps and Pumping Equipment
   *  High-speed Drives and Gears     *  Small Tools
   *  Home Shop Tools

     Customers

     Over  95% of  Brillion's  net  foundry  sales  in  1996  were  to  existing
customers, with the balance coming from new customers. Once production begins on
a product,  the same foundry  will  generally  manufacture  that product for the
product's life cycle.

     Brillion has over 225 foundry customers, a majority of which are located in
the Midwest,  East and  Southeast.  Brillion's top five  unaffiliated  customers
accounted for  approximately  20% of Brillion's  1996 total net sales.  Brillion
also serves as an important source of castings for Gunite,  with sales to Gunite
representing approximately 12.6% of Brillion's total net sales in 1996. Brillion
works closely with  customers in order to insure that castings meet all required
specifications,   including  machinability,  dimensional  accuracy  and  overall
quality.  Brillion's  engineers  work with customers from concept to market with
respect  to new  products.  Brillion's  strategy  is to focus on the  market for
higher  margin  castings,  as well as for  products  requiring  new,  innovative
castings designs.  Unlike Gunite,  Brillion's products are primarily designed by
its customers, and thus the product designs are proprietary to the customers.


                                       11

<PAGE>




     Brillion has enjoyed long-term,  stable  relationships with the majority of
its customers and is certified as a preferred supplier by most of its customers.
Brillion's quality system is certified to ISO 9000 and QS 9000 quality standards
and Brillion has  received  General  Motors'  "Targets for  Excellence  Award in
Quality,   Management  and  Technology  Disciplines,"  Caterpillar's  "Certified
Supplier  Status"  and was  approved  by Ford's  "Technical  Service  Capability
Survey." The primary  criteria on which such quality  certifications  and awards
are based include quality of product,  delivery performance,  inventory control,
operator  knowledge,  condition of facility,  receiving  inspection  of incoming
materials,  record  maintenance and retention and equipment  gauge  controls.  A
quality  certification  is required by most  sophisticated  purchasers,  thereby
enhancing  the  competitive  advantage  of  suppliers  like  Brillion  that have
achieved a quality certification.

     Manufacturing

     In general,  Brillion's customers specify the properties of their castings,
such as hardness,  strength and dimensions,  and Brillion determines how best to
meet those specifications. Brillion engineers work with its customers to develop
an efficient  manufacturing process.  Brillion constantly tests and monitors the
manufacturing  process in order to maintain the quality and  consistency  of its
castings.  The  manufacturing  process  involves  melting  iron  (which has been
internally  recycled),  steel  scrap and pig iron,  adding  various  alloys  and
pouring the molten metal into molds made primarily of sand. Most of the castings
manufactured  by Brillion  must meet  strict  dimensional  control  requirements
specified by its customers. As a result, Brillion uses SPC in every phase of the
production  process,  and all  employees are given  extensive SPC training.  The
Company  believes that Brillion has the most advanced core  capabilities  in the
industry,  allowing for efficient and  environmentally  superior core  processes
that are necessary for the production of quality,  complex thin-wall and lighter
weight products.  Production lines are designed to accommodate a wide variety of
products and volumes. In addition,  Brillion's multiple production lines provide
flexibility  to move  production  from line to line to meet customer  scheduling
changes and requirements.

General

     Competition

     The Company  operates in highly  competitive  markets.  Competition  in the
freight car manufacturing  business is based on type of product,  reputation for
quality,  price,  reliability of delivery and customer service and support.  The
Company's  freight car  operation's  principal  competitors  in this segment are
Trinity Industries, Inc. ("Trinity"), Thrall Car Manufacturing Co. and Gunderson
Inc.  Although  there are  presently  seven freight car  manufacturers  in North
America,  two of the seven  manufacture  only tank cars and plastic pellet cars,
market  segments  in which the  Company  does not  currently  participate.  Only
Trinity competes in all of the Company's  freight car market segments.  Although
JAC has filed suit against Trinity for infringement of its BethGon Coalporter(R)
patent,  Trinity has competed, and JAC expects that it will continue to compete,
with JAC in the sale of coal gondolas.

     No single manufacturer  competes with respect to all products  manufactured
and sold by the  Company  in the  heavy-duty  truck  market,  and the  degree of
competition varies with different products.  In this market the Company competes
on the basis of price,  its  manufacturing  and  distribution  capabilities  and
product quality.  Gunite's primary competitors in the wheel end component market
for Class 6, 7 and 8 trucks and trailers are Dayton Walther Corporation and Webb
Wheel Products.  Bostrom's principal competitors include National Seating, Sears
Manufacturing   and  Seats,  Inc.  as  well  as  a  number  of  smaller  seating
manufacturers. Fabco's primary competitor in the steerable drive axle market for
the on/off-road  medium- and heavy-duty truck and specialty vehicles is Rockwell
Corporation.

     Brillion's major  competitors  include 10 to 12 foundries  operating in the
Midwest and Southern regions,  including Waupaca Foundry, Inc., Grede Foundries,
Inc., Western Foundry, Neenah Foundry Company, Intermet Corporation and Citation
Corporation.


                                       12

<PAGE>




     Backlog

     As of  December  31,  1996,  freight car  operations  had a backlog of firm
orders for 774 new and rebuilt  freight  cars with an  aggregate  sales price of
approximately $35 million, as compared to a backlog of firm orders for 1,204 new
and rebuilt  freight cars with an  aggregate  sales price of  approximately  $63
million as of December 31, 1995. Due to the large size of freight car orders and
variations  in the mix of freight cars,  the size of the  Company's  freight car
operation's backlog at the end of any given period may fluctuate  significantly.
The decline in backlog  reflects a decrease in industry  orders  generally and a
sharper  decrease in industry  orders for car types  produced by the freight car
operations, such as coal cars. The Company expects sales of intermodal and other
flat cars to continue to represent a relatively  small percentage of its freight
car  shipments as the  Company's  freight car  operations  continue to focus its
product  development  and  marketing  efforts on gondolas,  open hopper cars and
covered  hopper cars.  Due to short  production  turnaround  times from order to
delivery  resulting from the just-in-time  inventory systems utilized by many of
its customers,  the Company's  truck  components and castings  operations do not
normally carry a material  amount of backlog  orders.  A number of the Company's
sales  contracts  in this  segment  are made  pursuant  to  purchase  orders and
releases which are subject to change or cancellation by the customer.

     Suppliers and Raw Materials

     Between 70% and 80% of a freight car's costs relate to purchased  specialty
components  such as wheels,  axles and brakes and raw materials such as aluminum
and steel. Costs for specialty  components and raw materials generally are fixed
at the time a freight car order is accepted.

     The major raw material for the Company's foundry operations is steel scrap,
which  is  purchased  from  various  sources.   The  Company  has  no  long-term
contractual  commitments with any scrap  suppliers,  and does not anticipate any
difficulty in obtaining scrap because of the large number of potential suppliers
and its  position as a major  purchaser.  Increases  in steel  scrap  prices are
passed  through  to  customers  by means of a  fluctuating  surcharge,  which is
calculated  and  adjusted  on a monthly  or  quarterly  basis.  Other  major raw
materials,  such as silicon sand,  binders,  sand additives and coated sand, are
purchased from multiple sources.  Electricity, coke and natural gas, the primary
energy  sources for melting  operations,  are in adequate  supply and reasonably
priced.

     Labor Relations and Employees

     At December 31, 1996, the Company had  approximately  3,300  employees.  Of
these,  approximately 650 are salaried  employees and the balance are paid on an
hourly basis.  Approximately 2,260 or about 68% of all employees, are members of
unions.  The Company has collective  bargaining  agreements  with several unions
including  the United  Steelworkers  of  America,  the United  Autoworkers,  the
Brotherhood  of Teamsters,  the United  Paperworkers  International  Union,  the
Patternmakers  League of North  America  and the  International  Association  of
Machinists.  Each of the Company's unionized  facilities has a separate contract
with the union which  represents  the workers  employed at such  facility.  Such
contracts  expire at various  times over the next few years,  with JAC's current
three-year union contract scheduled to expire in October 1997. While the Company
considers its  relations  with its employees to be good at each of the Company's
subsidiaries  other than JAC and fair at JAC, there can be no assurance that the
Company  will reach new  agreements  upon  expiration  of such  union  contracts
(including the JAC union  contract  scheduled to expire in October 1997) or that
the failure to reach new agreements  will not have a material  adverse effect on
the financial condition or results of operations of the Company.

     Regulation

     The  Federal  Railroad  Administration  ("FRA")  administers  and  enforces
federal laws and  regulations  relating to railroad  safety.  These  regulations
govern equipment and safety appliance  standards for freight cars and other rail
equipment used in interstate  commerce.  The  Association of American  Railroads
("AAR") also promulgates a wide

                                       13

<PAGE>



variety of rules and  regulations  governing  safety  and  design of  equipment,
relationships  among  railroads with respect to freight cars in interchange  and
other  matters.  The AAR also  certifies  freight car  buildings  and  component
manufacturers  that provide equipment for use on railroads in the United States.
New products  generally  must undergo AAR testing and approval  processes.  As a
result of these  regulations,  the Company must maintain certain  certifications
with the AAR as a freight car  manufacturer,  and  products  sold by the Company
must meet AAR and FRA standards.

     Patents and Trademarks

     The  Company has  numerous  United  States and foreign  patents and pending
applications,  registered  trademarks and trade names.  While the existence of a
patent is prima facie  evidence of its validity,  the Company cannot assure that
any of its patents will not be challenged  nor can it predict the outcome of any
such challenge.  The Company is presently involved in litigation  concerning its
patent on the BethGon Coalporter(R). See " Legal Proceedings" in Item 3.

Environmental Matters

     Compliance Matters

     The Company's  subsidiaries  are subject to  comprehensive  and  frequently
changing federal, state and local environmental laws and regulations,  including
those governing emissions of air pollutants,  discharges of wastewater and storm
waters,  and the disposal of non-hazardous  and hazardous  waste.  Many of these
laws authorize the imposition of civil and criminal  sanctions upon corporations
that fail to comply with the statutory or regulatory requirements. In 1996, 1995
and  1994,  TCI's  capital   expenditures  for  compliance  with   environmental
requirements   were   approximately   $371,000,    $1,037,000   and   $1,428,000
respectively. These figures do not include routine operational compliance costs,
such as the costs for the disposal of hazardous and  non-hazardous  solid waste,
which were  approximately  $4.1 million,  $4.9 million and $3.1 million in 1996,
1995 and 1994,  respectively.  TCI's subsidiaries have budgeted $0.5 million for
environmentally  related capital  expenditures in 1996. The Company acquired its
Piedmont,  Alabama  and  Danville,  Illinois  facilities  in  January  1995  and
therefore did not incur capital  expenditures for compliance with  environmental
requirements and for routine operational compliance costs, such as the costs for
the disposal of hazardous  and  non-hazardous  solid waste,  prior to 1995.  The
Company's  investigation  of  the  Piedmont,  Alabama  and  Danville,   Illinois
facilities'  historic capital  expenditures and routine  operational  compliance
costs  concluded  that such  expenditures  and costs  were not  material.  JAC's
capital  expenditures  for compliance with  environmental  requirements  and for
routine  operational  compliance  costs,  such as the costs for the  disposal of
hazardous  and  non-hazardous   solid  waste,  for  the  facilities  located  in
Johnstown,  Pennsylvania  are not  material.  Other than for certain  immaterial
expenditures,  the  Company's  subsidiaries  (other than TCI) have not  budgeted
funds for capital expenditures in 1996 to comply with environmental laws.

     Pursuant to a National  Pollutant  Discharge  Elimination  System ("NPDES")
permit,  Gunite previously discharged noncontact cooling water from its Rockford
facility  to a pond (the  "Rockford  Pond"),  formerly  owned by  Gunite  and by
Gunite's prior owner,  K-H  Corporation  ("K-H"),  a subsidiary of Varity Corp.,
that is adjacent to the Gunite plant.  Gunite also  periodically had accidental,
unpermitted  discharges of process wastewater to the Rockford Pond, which Gunite
has  reported to the  Illinois  Environmental  Protection  Agency  ("IEPA").  In
addition,  Gunite had not  received  express  authorization  from the current or
immediately  preceding owner of the Rockford Pond for any of the discharges.  In
order for Gunite to eliminate all discharges,  the City of Rockford  obtained an
easement to allow Gunite to construct a conveyance  that directs  discharges  of
noncontact  cooling  water and storm water from the Gunite  facility to the Rock
River,  and the IEPA has issued a modified NPDES permit to Gunite,  substituting
the Rock  River as the  outfall  for  Gunite's  discharge.  The  conveyance  was
completed in February 1995. The modified NPDES permit contains a stringent limit
for the discharge of total residual chlorine.  Gunite estimates that the capital
cost for  installing a treatment  system  allowing its discharges to comply with
this limit could exceed $200,000,  although Gunite is exploring a less expensive
treatment system. Gunite has appealed to the Illinois Pollution Control Board to
remove or modify the chlorine  limit from the permit  (Gunite  Corp. v. Illinois
Environmental  Protection Agency, PCB 94-382, filed December 12, 1994). The cost
to  Gunite of  constructing  the  conveyance  to the river  (not  including  any
environmental

                                       14

<PAGE>



remediation   costs  that  might  be  incurred  in  connection  with  historical
discharges to the Rockford Pond) was approximately $300,000.

     The  Wisconsin  Department  of  Natural  Resources  ("WDNR")  has  notified
Brillion  that it is deemed to be in  compliance  with the  Wisconsin air toxics
program,  pending  a review  of a  compliance  plan  submitted  by  Brillion  in
September 1993, although Brillion is currently exceeding Wisconsin air emissions
limits for benzene and other air toxic compounds.  Brillion's submittal included
a plan for compliance with the emission limitations for arsenic, barium, cadmium
and formaldehyde,  and a request for a variance with respect to its emissions of
benzene.  The Company  believes  that  compliance  with  Wisconsin's  air toxics
regulations  apparently  is an  industry-wide  problem,  and WDNR is  developing
compliance  standards  for the  industry  as a whole.  Although  a recent  state
inspection   found  Brillion  to  be  in  compliance   with  all  Wisconsin  air
regulations,  it is  likely  that  as  Brillion  continues  its  review  of  its
operations,  it will find that  certain of its  emission  sources  will  require
further air pollution controls.

     The  Company's  subsidiaries'  manufacturing  plants are large and  complex
facilities.  The environmental regulations to which these facilities are subject
are numerous,  complicated,  often  ambiguous  and  constantly  changing.  It is
possible,  therefore,  that  in  addition  to  the  instances  of  noncompliance
discussed above, there are other areas in which the facilities are not currently
in compliance  with  environmental  laws and  regulations.  The Company does not
currently  believe  that any such  noncompliance  is likely  to have a  material
adverse effect on the Company's  business or financial results.  However,  there
can be no guarantee  that the Company  will not be required to make  substantial
additional expenditures to remain in or achieve compliance in the future.

     Remediation Matters

     In addition to environmental laws that regulate the Company's subsidiaries'
ongoing   operations,   the  subsidiaries  also  are  subject  to  environmental
remediation   liability.   Under  the  Comprehensive   Environmental   Response,
Compensation  and Liability Act  ("CERCLA")  and analogous  state laws,  certain
persons  may be liable as a result  of the  release  or  threatened  release  of
hazardous  substances  into the  environment.  Such persons  include the current
owner or operator of property  where such release or  threatened  releases  have
occurred,  any  persons  who owned or  operated  such  property  during the time
hazardous substances were disposed of at such property, and persons who arranged
for the disposal of  hazardous  substances  at such  property.  Liability  under
CERCLA  is strict  and,  in most  cases,  joint and  several,  meaning  that any
responsible  party could be held  liable for all of the costs  incurred or to be
incurred in  investigating  and  remediating a release or threatened  release of
hazardous  substances,  although liability at most CERCLA (and similar) sites is
shared among all of the solvent potentially  responsible  parties ("PRPs").  The
liability of PRPs is typically  determined by the cost of the  investigation and
remediation, the amount and toxicity of hazardous substances contributed by each
PRP and the number of solvent PRPs.

     Under CERCLA,  sites may be listed for priority  cleanup by being placed on
the National  Priorities List ("NPL").  NPL sites are sites at which the federal
government may spend monies from the "Superfund"  for long-term  remediation and
then seek reimbursement from liable parties. A much more extensive list compiled
pursuant  to  CERCLA,  known  as  the  Comprehensive   Environmental   Response,
Compensation,  and Liability Act Information System ("CERCLIS"),  includes sites
that have been,  or are to be,  evaluated  and  "scored" by the EPA for possible
future inclusion on the NPL.

     Gunite.  Gunite  is a PRP at three  NPL  sites,  the  Interstate  Pollution
Control  ("IPC")  site (which is adjacent to Gunite's  Rockford  facility),  the
M.I.G./Dewane  Landfill  located in Boone  County,  Illinois,  and the Southeast
Rockford Groundwater site located in Rockford,  Illinois. Gunite's connection to
the  IPC,  M.I.G./Dewane  and  Southeast  Rockford  sites  stem  primarily  from
activities that took place during the period that Gunite was a division of K-H.

     As to the IPC  site,  K-H,  on  behalf of  Gunite,  entered  into a partial
consent decree with the IEPA in 1991 (State of Illinois v. Interstate  Pollution
Control,  Inc.,  et al.,  Northern  District of  Illinois,  filed in 1991).  K-H
entered  into  this  partial  consent  decree  pursuant  to  an  indemnification
agreement contained in the purchase and sale agreement between

                                       15

<PAGE>



K-H and TCI, dated September 4, 1987 (the "K-H Sale"). The consent decree covers
an ongoing remedial  investigation/feasibility  study ("RI/FS") for the site. In
connection with the consent decree and an emergency removal order, K-H agreed to
pay  approximately  14% of such RI/FS and  removal  costs,  which is expected to
total  approximately  $1.0 million.  K-H has not agreed to indemnify  Gunite for
remediation  costs  to be  incurred  at  this  site  and,  as  discussed  below,
remediation costs that would be payable by K-H or Gunite with respect to the IPC
site have not yet been determined.

     The RI/FS for the IPC site includes the Rockford Pond, which is adjacent to
the Gunite Property, was transferred to K-H at the time of the K-H Sale, and was
used by Gunite  both  before and after the K-H Sale for the  disposal of foundry
process  wastewater  and  possibly  other  wastes;  a  landfill  (the  "Rockford
Landfill")  transferred to K-H at the time of the K-H Sale,  which was used as a
landfill  by K-H prior to the K-H  Sale,  and  certain  portions  of the  Gunite
property  itself.  The results of the RI/FS may lead to the inclusion of some or
all  of  these  areas  within  the  IPC  site  boundaries  for  the  purpose  of
remediation.  Any such  redefinition  of the  boundaries  of the IPC site  could
result in a  reallocation  of  responsibility  for  remediation  costs among the
entities that are PRP's with respect to the larger site and could also result in
an increase in K-H's and/or Gunite's share of any such costs. Although it is not
possible to predict the exact timing or amount of the expenditures  that will be
made in future years to remediate  the IPC site, it is possible that Gunite will
be required to contribute substantial funds to remediate the IPC site.

     As to the  M.I.G./Dewane  Landfill  site,  Gunite  was  added  in 1994 as a
third-party  defendant in a private cost recovery  action filed by the companies
comprising the MIG/Dewane  Landfill Task Force,  the steering  committee of PRPs
for this site (Browning-Ferris  Industries of Illinois,  Inc., et al. v. Richard
Ter Maat, et al,  Northern  District of Illinois).  The plaintiffs  have alleged
that the Gunite  division of K-H arranged for the disposal of waste at this site
from approximately 1972 to 1987.  Approximately $10 million has been expended to
conduct an RI/FS at this site. A remedy has not yet been  proposed for the site.
Gunite filed a motion to dismiss this matter, which was granted, in part, by the
district  court;  the remainder of the action is still pending  against  Gunite,
however.  Although it is not  possible to predict the exact  timing or amount of
expenditures  that will be made in future years to remediate  the  M.I.G./Dewane
Landfill  site,  it is possible  that  Gunite  will be  required  to  contribute
substantial  funds towards the  investigation  and  remediation  of this site if
Gunite is judged to have  disposed of materials  at this site.  K-H has denied a
claim for indemnification with respect to this site.

     The Southeast  Rockford  Groundwater  NPL Site is reportedly  down gradient
from the IPC site.  The EPA and the City of Rockford  have  reportedly  incurred
approximately  $11 million in  response  costs to date in  connection  with this
site.  In 1996,  the City of  Rockford  demanded  that  Gunite pay $1 million in
response  costs  which  the City  allegedly  has  incurred  at the site  area 7,
commonly known as the Ekberg Park area within the Southeast Rockford Groundwater
NPL site.  Gunite has denied that it is liable to the City for these costs of $1
million.  K-H has also denied a claim for  indemnification  with respect to this
site.  Gunite believes that the EPA will also seek to recover some or all of its
costs at the site from Gunite, although Gunite has not to date received a formal
request for reimbursement from the EPA for this matter.

     Gunite  also may be  subject  to  liabilities  at other  NPL sites or other
locations as a result of its past disposal of hazardous substances.

     As a result of historical operations at the Gunite plant in Rockford, there
are areas  on-site  that have been  affected by the  disposal or spillage or raw
materials  or wastes.  Gunite does not know at this time  whether any cleanup or
remediation  of such  areas  will be  required  by any  state,  local or federal
agency,  although  it is  possible  that such areas may be  included  in the IPC
remediation.

     The  Company   believes  that  Gunite  has  valid  claims  for  contractual
indemnification against K-H with respect to most of the matters described above,
subject to an aggregate  deductible  for certain  matters  which,  under various
theories,  could range from $300,000 to $1.8 million, and other limitations.  As
of  October  28,  1993,  however,   K-H  has  formally  denied  all  claims  for
indemnification for environmental  matters on, appurtenant to, or emanating from
the

                                       16

<PAGE>



Gunite  foundry plant site in Rockford,  Illinois.  The specific  scope of K-H's
denial is  ambiguous,  but it might be  interpreted  to include  all pending and
future  claims  from  Gunite for  indemnity.  In 1994,  K-H filed a  declaratory
judgment action against TCI and Gunite for certain  specific matters in dispute,
including any costs related to the  construction of the conveyance  structure to
the Rock River, reducing particulate emissions from the cupola charge doors, and
remediating  conditions  related to  certain  underground  storage  tanks on the
Gunite property (K-H Corp. v. Truck  Components,  Inc., et al. Circuit Court for
the  County of Wayne,  Michigan).  K-H's  complaint  also  included  a claim for
trespass (for unspecified  damages) related to Gunite's  post-December  31, 1990
discharges to the Rockford  Pond.  On August 5, 1994,  TCI and Gunite filed suit
against  K-H and  certain of its  affiliates  for the  recovery of costs and for
declaratory and injunctive relief with respect to various  environmental matters
pursuant to the  indemnification  provisions of the K-H Sale purchase  agreement
and other causes of action, including CERCLA (Truck Components,  Inc., et al. v.
K-H Corp., et al., Northern District of Illinois).  No trial dates have been set
in either of the actions.  There can be no assurance  concerning the amounts, if
any, that Gunite will be able to recover on its indemnity claims against K-H nor
any assurance as to the timing of any such recoveries.  It is also probable that
Gunite has incurred  some  liability for  activities  following the K-H Sale for
which it would not be covered by the K-H indemnity.

     Brillion.  Brillion  is likely to incur  investigation  and/or  remediation
costs in  connection  with two  landfills  that it used to  dispose  of  foundry
wastes. These landfills are the Brillion Iron Works Landfill, where Brillion was
the  operator  and sole  generator  of waste  from 1980  through  1989,  and the
adjacent  City  of  Brillion  Landfill,  where  Brillion  may  be a  significant
generator of waste.  Brillion  disposed of plant trash at the City landfill from
1970 to 1975 and also  disposed of foundry  wastes in this landfill from 1976 to
1980.  Both of these  landfills  are on the CERCLIS and the  Wisconsin  Remedial
Response  Site  list,  and both have been  scored by the WDNR and both have been
listed on the  State's  Hazard  Ranking  List as being above the  threshold  for
potential  State  remedial  action.  Although it is not  possible to predict the
exact timing or amount of the expenditures  that will be made in future years to
remediate these sites, TCI expects that investigation and/or remediation will be
required and that such expenditures could be substantial.

     Brillion  has also  disposed  of foundry  wastes at many other sites in the
Brillion  area,  a few of which are on the  CERCLIS and the  Wisconsin  Remedial
Response Site list. It is possible  that Brillion will incur  remedial  response
costs at some or all of these  sites,  although  at this date,  Brillion  is not
aware of any  action by  federal  or state  regulators  or  private  parties  to
investigate or remediate any of these other sites.

     In 1992, Brillion excavated two underground diesel fuel storage tanks which
were discovered to have leaked diesel fuel into  surrounding soil as a result of
a 1978 spill. Brillion has removed approximately 300 cubic yards of contaminated
fill in connection  with this incident.  Although the WDNR  initially  indicated
that a deed  restriction  would be sufficient for managing this issue,  Brillion
has not at this  date  been able to reach a  satisfactory  arrangement  with the
owners of the  Brillion  property.  Accordingly,  Brillion  expects to undertake
additional soil and groundwater analysis in connection with this matter.

     As the  Brillion  facility  has been in  operation  for many  years,  it is
possible  that  there are areas at this  facility,  other  than the  underground
storage  tanks,  that have been  adversely  affected by the  handling of foundry
process  materials  and wastes.  Brillion does not know at this time whether any
remediation  of any such areas will be required  by any state,  local or federal
agency.

     Brillion was the Robins Group  (consisting of the Robins Family Trust, Karl
F. Gabler and First City Securities) entity that acquired a Beatrice  subsidiary
(also named  Brillion)  from Beatrice in 1984.  That purchase and sale agreement
obligates  Beatrice to indemnify  Brillion for any and all claims,  liabilities,
losses and  expenses  resulting  from loss of life,  bodily  injury or  property
damage which arise out of accidents or injury causing incidents  occurring prior
to December 31, 1984, for which  Brillion may be liable,  regardless of when the
claims alleging such liability may be filed, but excluding  obligations  arising
from the design, formulation, manufacture or sale of a product prior to December
31, 1984.  TCI believes  that it has valid  claims for  indemnification  against
Beatrice  with  respect  to  most  of its  disposal  sites  to the  extent  that
liabilities arise from incidents  occurring prior to December 31, 1984. Beatrice
has disputed this  interpretation  and notified  Brillion that it will not honor
any claims for indemnification (apart from one claim for breach of

                                       17

<PAGE>



representation  made  within two years after the sale).  Brillion  has also been
notified by the Robins Group (which sold Brillion to TCI) that it will not honor
any claims for  indemnification.  On May 25, 1994,  TCI and Brillion  filed suit
against  Beatrice and the Robins  Group for  recovery of costs  expended and for
declaratory and injunctive relief with respect to various  environmental matters
pursuant to the  indemnification  provisions of the  respective  stock  purchase
agreements and other causes of action, including CERCLA (Truck Components, Inc.,
et al. v. Beatrice Company et al., Northern  District of Illinois).  On June 10,
1994,  TCI and Brillion  filed a first amended  complaint in this lawsuit to add
Hunt-Wesson,  Inc., a corporate successor of Beatrice that may be a successor to
Beatrice's  liabilities  in these  matters.  In 1996, the district court entered
judgment  against  Brillion,  holding that Beatrice and the Robins Group did not
owe any indemnity for Brillion's  expenses at the sites,  and that Brillion owed
Karl F. Gabler $0.2 million pursuant to a 1987 indemnity contract.  Brillion has
appealed  this  adverse  judgment;  the  appellate  court is expected to rule on
Brillion's  appeal in late 1997.  Given the  adverse  judgment  and the  pending
appeal therefrom, there can be no assurance concerning the amounts, if any, that
Brillion  will be able to  recover  on its  indemnity  or other  claims  against
Beatrice or the Robins  Group,  nor any  assurances as to the timing of any such
recoveries.

     JAC.  Pursuant to an  indemnification  agreement between JAC and Bethlehem,
Bethlehem  conducted  investigations  and remediations at several areas of JAC's
plants in Johnstown,  Pennsylvania.  In addition,  under the purchase  agreement
with Bethlehem,  Bethlehem has  indemnified  JAC against  certain  environmental
liabilities relating to periods prior to the acquisition in October 1991.

     Bostrom.  Subsurface investigations at Bostrom's Piedmont, Alabama facility
detected low  concentrations  of certain  contaminants  in the soil in a limited
area around a formerly used waste water  underground  storage tank.  The Alabama
Department of Environmental Management ("ADEM") requested that Bostrom install a
monitoring well to obtain  monitoring  results on a semi-annual  basis for a two
year  period.  Bostrom  installed  the  well  in  March  1995  and  will  submit
semi-annual  monitoring  results to ADEM until March 1997.  It is not known what
remediation, if any, ADEM will require after March 1997. In addition, Bostrom is
a PRP at the  Muskego  Landfill  site in  Wisconsin  and the PRPs have signed an
allocation  agreement  pursuant to which Bostrom's  allocated share of the costs
are not material.

     Freight Car  Services.  FCS has reached an agreement in principle  with its
adjacent  property  owner for each party to share in the costs of  completing an
investigation and implementing a corrective action plan to remediate diesel fuel
contamination  detected in the soil and  groundwater on the affected  properties
located in Danville, Illinois. The investigation and corrective action plan were
implemented on a voluntary basis and not pursuant to any regulatory requirement,
and FCS' share of the costs was not material.

     Potential  Costs.  As of December  31, 1996,  based on all the  information
currently  available,  the Company  maintained its environmental  reserve in the
amount  of $26.4  million  for  estimated  future  costs  related  to  potential
environmental  investigation and remediation liabilities with respect to certain
currently known matters. Management of the Company established the environmental
reserve in connection  with the August 1995  acquisition of TCI in  consultation
with the Company's  outside  environmental  consultants and legal and accounting
advisors.  In assessing and  ultimately  approving the  acquisition  of TCI, the
Company's Board of Directors paid particular attention to environmental matters,
including  the  potential  environmental  reserve.  The Audit  Committee  of the
Company's Board regularly meets with the Company's principal accounting officers
and its outside auditors to discuss significant  accounting policies and issues,
including  the  adequacy of the  environmental  reserve.  The Audit  Committee's
findings are, in turn, reported to the entire Board.

     The environmental  reserve is principally related to potential  remediation
liability at various  off-site  locations and, to a lesser degree,  to potential
remediation liability at Gunite's, Rockford, Illinois, and Brillion's, Brillion,
Wisconsin  manufacturing  facilities.  This  reserve  is based on  current  cost
estimates  and does not reduce  estimated  expenditures  to net  present  value.
Further, the estimated reserve takes into consideration the number of other PRPs
at each site,  the  alleged  volume of waste  contributed  by other PRPs at each
site,  and the identity and  financial  position of such parties in light of the
joint and several  nature of the  liability,  but it does not take into  account
possible insurance  coverage or other similar  indemnification or reimbursement.
Based upon all currently available information, no reserve has been

                                       18

<PAGE>



established  with  respect  to  potential  environmental  obligations  of JAC or
Bostrom and an immaterial  reserve has been  established at FCS. Because many of
the  matters  described  above,  however,  are  at the  early  stages  in  their
respective investigations, there can be no assurance that the amounts ultimately
expended to address  all of these  matters or to address  other  matters not yet
known  to be  in  existence  will  not  exceed  the  amounts  allocated  in  the
environmental reserve.  Accordingly, it may be necessary to establish additional
reserves for environmental liabilities in the future.

     Any cash  expenditures  required by the  Company to comply with  applicable
environmental laws and/or to pay for any remediation efforts will not be reduced
or otherwise affected by the existence of the environmental reserve.  Management
believes,  based on its  evaluation  of the  various  matters  described  above,
including its  experience  with such matters to date, the time period over which
it believes costs for such matters are likely to be incurred by the Company, and
the existence of the various  indemnifications  described above,  that any costs
the Company  ultimately will incur for such matters are not reasonably likely to
have a material adverse effect on the Company's  business or financial  results.
However, given the early stage of many of the matters, there can be no assurance
that  one or  more of  these  matters  (or  matters  which  have  not  yet  been
identified)  will  not have  such an  effect.  See  Note 11 to the  Consolidated
Financial Statements of the Company. The Company currently  anticipates spending
approximately $500,000 per year for the next three years and $1 million per year
in years 2000 and 2001 for monitoring the various environmental sites associated
with the  environmental  reserve,  including  attorney and consultant  costs for
strategic  planning and negotiations with regulators and other PRPs, and payment
of remedial  investigation  costs. The Company expects to fund such expenditures
with the cash flow generated from its operations and amounts available under its
revolving credit facility.  These sites are generally in the early investigatory
stages of the remediation  process and thus it is anticipated  that  significant
cash payments for  remediation  will not be incurred for at least several years.
After the evaluation and investigation period, the investigation and remediation
costs will  likely  increase  because  the  actual  remediation  of the  various
environmental  sites  associated with the  environmental  reserve will likely be
under  way.  In  addition,  it is  possible  that the  timing  of any  necessary
expenditures could be accelerated.

Executive Officers of the Registrant

     Set forth below is certain information concerning the executive officers of
the Company:

        Name                 Age                 Position
   Thomas M. Begel           54    Chairman of the Board, President and
                                   Chief Executive Officer of  the Company

   Andrew M.  Weller         50    Executive Vice President and Chief 
                                   Financial Officer and Director of the Company

   David W. Riesmeyer        39    Vice President and Treasurer of the Company

   Kenneth M. Tallering      35    Vice President, General Counsel and Secretary
                                   of  the Company

   Timothy A. Masek          31    Vice President - Corporate Development of the
                                   Company and President of Bostrom Seating,Inc.

   Edward J. Whalen          48    Vice President of the Company and President
                                   of Freight Car Services, Inc. and 
                                   JAIX Leasing Company

   James D. Cirar            50    President and Chief Executive Officer of 
                                   Johnstown America Corporation

   Thomas W. Cook            59    President and Chief Executive Officer of 
                                   Truck Components, Inc. and President - 
                                   Gunite Corporation

   John D. McClain           52    President - Brillion Iron Works, Inc.

   Mark A. Niemela           61    President - Fabco Automotive Corporation


                                       19

<PAGE>




     Thomas M.  Begel,  Chairman  of the Board,  President  and Chief  Executive
Officer  of the  Company,  has served as  President  since  October  1991 and as
Chairman of the Board and Chief  Executive  Officer  since May 1993.  He is also
President of, and a partner in, TMB Industries ("TMB"), an investment firm which
is a  partnership  between  himself and Mr.  Weller.  Mr.  Begel has served as a
director of Silgan Holdings Inc., a packaging company,  since March 1997 and was
a director of Uniroyal Chemical Corporation from 1990 to 1996.

     Andrew M. Weller,  has served as Executive Vice President,  Chief Financial
Officer and a Director of the Company since September 1994 and as Secretary from
March 1995 to November  1995.  From April 1988 to  September  1994,  he was Vice
President and Treasurer of Bethlehem  Steel  Corporation  and prior thereto held
various  other  positions  with  Bethlehem.  He has  also  been  Executive  Vice
President of, and a partner in TMB since September 1994.

     David W.  Riesmeyer,  has  served as Vice  President  and  Treasurer  since
September  1995 and  previously as Treasurer and Controller of the Company since
March 1995. Mr. Riesmeyer served as Director of Financial Reporting and Planning
from January 1994 through March 1995. From 1991 to 1993, Mr.  Riesmeyer was Vice
President of Corporate Development at the Park Corporation, a private label food
manufacturer,  and from 1988 to August 1992, he was Vice President of Finance of
the Park Corporation.

     Kenneth M.  Tallering,  has served as Vice  President,  General Counsel and
Secretary of the Company since  November  1995.  From  September 1987 to October
1995, Mr. Tallering was an attorney with the law firm of Skadden,  Arps,  Slate,
Meagher & Flom.

     Timothy A. Masek,  has served as Vice President - Corporate  Development of
the Company since  December 1995 and President of Bostrom  Seating,  Inc.  since
June 1996. From September 1992 to December 1995, Mr. Masek  performed  marketing
and corporate  development  functions for the Company.  Prior to September 1992,
Mr.  Masek  was a  Market  Analyst  for the  Transportation  Equipment  Group of
Bombardier Corporation, a railcar and aviation manufacturer.

     Edward J. Whalen, has served as Vice President of the Company since January
1997.  He has also served as President of JAIX  Leasing  since its  inception in
December 1994 and as President of Freight Car Services,  Inc.  since March 1995.
Mr.  Whalen  served as  Secretary  of the Company  from October 1991 until March
1995,  as  Treasurer  of the Company  from May 1993 until March 1995 and as Vice
President  of the Company from October  1991 until  October  1995.  From 1989 to
1991, he was a financial and rail car industry consultant.

     James D. Cirar,  has served as  President  and Chief  Executive  Officer of
Johnstown America Corporation since September 1995. Prior to September 1995, Mr.
Cirar was the Plant  Manager  of the Truck  and Bus  Assembly  Group of  General
Motors Corporation in Flint, Michigan.

     Thomas W. Cook, has been the President and Chief  Executive  Officer of TCI
since May 1994 and President of Gunite Corporation since 1991. Mr. Cook has been
Senior Vice President of the Company since July 1997. He was President and Chief
Executive Officer of Redlaw  Industries,  Inc., a holding company with interests
in foundries,  stamping plants and textile  industries,  from 1986 to 1991. From
1967 to 1986, Mr. Cook was with ITT Grinnell  Corporation,  a  manufacturer  and
distributor of values and related piping products,  where he became President in
1983.

     John D. McClain,  joined Brillion as Manager of  Manufacturing  in 1988 and
was appointed Vice President of  Manufacturing in 1989. Mr. McClain was promoted
to his present  position of President in 1994.  Prior to joining  Brillion,  Mr.
McClain held  metallurgical and foundry manager positions at  Owens-Illinois,  a
manufacturer of glass containers and television picture tubes, Emerson Electric,
a diverse  manufacturing company producing power transmission and electric motor
components,  pumps, valves and handtools, and Clow Valve Company, a manufacturer
of waste and water  system  valves,  fire  hydrants and fire  protection  system
valves.

     Mark A. Niemela,  joined Fabco Automotive Corporation in 1966 as Production
Control  Manager.  He held the  positions of Material  Manager and Plant Manager
before  his  appointment  to the  position  of  General  Manger  in 1975 and was
appointed President in 1986.


                                       20

<PAGE>



                            GLOSSARY OF CERTAIN TERMS

     The following industry terms have the meanings set forth below for purposes
of the Form 10-K


ABS:                        Anti-lock brake system.

Auto-Flood(TM):             The  Company's  product name for an aluminum,  rapid
                            discharge  open hopper car that offers more capacity
                            than conventional steel automatic discharge cars.

Automatic Slack  Adjuster:  A  mechanism  that  reacts to, and
                            adjusts  for,  variations  in  brake  shoe-to-drum
                            clearance,  maintains  the  proper  amount  of space
                            between the shoe and drum and thereby eliminates the
                            need for manual adjustment.

Brake Drum:                 A metal  cylinder to which pressure is applied
                            by a braking  mechanism in order to arrest  rotation
                            of the wheel to which the cylinder is attached.

Brake Rotor:                Device which works with a vehicle's  braking
                            system to stop the vehicle.

Covered Hopper Car:         A totally  contained freight car used to
                            haul agricultural, chemical and mineral products.

Gondola Car:                Open-top  freight car principally used
                            for hauling coal which discharges  through a
                            rotary  dump  mechanism.  Gondolas  are also
                            used to  haul  products  such as ore,  scrap
                            metal and other items.

Intermodal Car:             Freight   car  used   primarily   for  moving
                            containers and trailers that can be placed on trucks
                            and ships as well as freight cars.

OEM:                        Original equipment manufacturer.

Open Hopper Car:            Freight car which  discharges  its load
                            from the bottom of the car.

Quad Hopper Car:            A  type  of  open  hopper  car  which
                            discharges  through  four doors on the bottom of the
                            freight car.

Spoke Wheels:               Along  with  the  wheel  hub,  it  is  the
                            connecting  piece  between the brake  system and the
                            axle upon which the rim and tire are mounted.

Wheel Hubs:                 Along  with  the  spoke  wheel,  it  is  the
                            connecting  piece  between the brake  system and the
                            axle upon which the rim and tire are mounted.


                                       21

<PAGE>



Item 3. Legal Proceedings

     The Company is involved in certain threatened and pending legal proceedings
including  worker's  compensation  claims  arising  out  of the  conduct  of its
businesses.  In the opinion of  management,  the ultimate  outcome of such legal
proceedings will not have a material adverse effect on the financial position or
results of operations of the Company.

     In December  1992,  JAC  commenced a patent  infringement  lawsuit  against
Trinity Industries, Inc. ("Trinity") in the United States District Court for the
Western District of Pennsylvania, alleging infringements of JAC's patent for its
BethGon Coalporter(R) freight car. The suit involved Trinity's manufacture, sale
and offering for sale of its Aluminator II coal freight car in competition  with
JAC's BethGon  Coalporter(R) freight car, the tubs of which are covered by JAC's
patent.  In such suit,  JAC seeks  monetary  damages and an  injunction  against
Trinity to prohibit Trinity from making, using, selling or offering for sale the
Aluminator  II. The lawsuit  was tried in 1996 with the trial court  entering an
order upholding a jury verdict that the patent,  though valid, was not infringed
by Trinity's  Aluminator  II freight  car. In  addition,  JAC was not held to be
liable for any of the  counterclaims  alleged by Trinity.  JAC  thereafter  made
motions to the trial court to set aside the verdict as not being consistent with
the facts or the law and enter judgement in favor of JAC or,  alternatively,  to
order a new trial,  which motions were denied.  JAC has appealed the case to the
United States Court of Appeals for the Federal  Circuit.  JAC expects the appeal
to be decided in mid to late 1997.  Although  neither  the outcome of the action
nor the effect of such outcome can be predicted with  certainty,  in the opinion
of management of the Company, the outcome of the action will not have a material
adverse  effect on the  financial  condition  or  results of  operations  of the
Company.

     The  Company  may be subject to  liability  as a result of the  disposal of
hazardous  substances  on and  off  the  properties  owned  or  operated  by its
subsidiaries,  including Brillion, Gunite and Fabco. See "Business-Environmental
Matters." TCI and Brillion  filed suit on May 25, 1994 against  Beatrice and the
Robins  Group for  certain  causes of action,  including  indemnification  under
purchase   agreements.   See   "Business-Environmental   Matters."   TCI   added
Hunt-Wesson,  Inc., a corporate successor to Beatrice that may be a successor to
Beatrice's liability in theses matters, as a defendant on June 10, 1994. TCI and
Gunite  filed suit on August 5, 1994  against K-H and certain of its  affiliates
for certain causes of action,  including  claims related to the  indemnification
provisions of the K-H sale stock purchase agreement. See "Business-Environmental
Matters."  K-H filed a separate  declaratory  judgement  action  against TCI and
Gunite asserting that it had no indemnification  obligation for certain disputed
environmental matters. See "Business-Environmental Matters" in Item 1.


                                       22

<PAGE>

Item 7.  Management's Discussion and Analysis of
         Financial condition and Results of Operations

GENERAL
The Company completed the acquisition of Truck Components Inc. ("TCI") on August
23,  1995 and Bostrom  Seating,  Inc.  ("Bostrom")  on January  13,  1995.  Both
acquisitions  were  accounted for under the purchase  method of accounting  and,
accordingly,  their  operating  results were included in the Company's  reported
results from their respective acquisition dates. Such results have a significant
impact on the comparative discussions below.  Additionally,  the Company through
it's wholly owned subsidiary  Freight Car Services,  Inc. ("FCS")  completed the
purchase of the  Danville,  Illinois  facility and began  operations  in October
1995.

The Company's sales are affected to a significant  degree by the freight car and
Class 8 truck  markets.  Both the freight car and the Class 8 truck  markets are
subject to significant  fluctuations due to economic conditions,  changes in the
alternative  methods  of  transportation  and  other  factors.  There  can be no
assurance  that  fluctuations  in such markets will not have a material  adverse
effect on the results of operations or financial condition of the Company.

RESULTS OF OPERATIONS 
Years Ended December 31, 1996 and 1995 
Total  Revenue  Total  revenue in 1996  decreased  16.2% to $560.0  million from
$668.6  million  in 1995.  The total  revenue  decrease  of $108.6  million  was
primarily due to the decrease in freight car sales of $294.7  million (3,470 new
and  rebuilt  cars in 1996 vs 9,157  new and  rebuilt  cars in 1995)  and a $9.6
million  decrease in truck related sales volume at Bostrom.  The decreases  were
offset in part by the inclusion of TCI for all of 1996 versus  inclusion for the
partial year of 1995,  an increase of $195.7  million.  As of December 31, 1996,
the Company's  backlog of new and rebuilt freight cars was 774 compared to 1,204
new and rebuilt freight cars at December 31, 1995.

COST OF SALES-MANUFACTURING AND GROSS PROFIT
Cost of  sales-manufacturing  for 1996 as a percent of  manufacturing  sales was
85.0%,  compared to 91.3% in 1995.  Related  gross  profits were 15.0% and 8.7%,
respectively.  The  improvement  in gross  profit  resulted  primarily  from the
acquisition of TCI in August 1995. TCI has  historically  generated higher gross
profits than the freight car business.  Partially  mitigating  this increase was
the decrease of gross profit at JAC. JAC's gross profit  percentage for 1996 was
down from the prior year  approximately  1 percentage  point,  and the aggregate
dollar  gross  profit was down due to the  significant  decrease  in freight car
revenues mentioned above.

SELLING, GENERAL,  ADMINISTRATIVE AND
AMORTIZATION EXPENSES 
Selling, general and administrative expense as a percentage of total revenue was
8.3% and 4.2% in 1996 and 1995,  respectively.  The increase in selling, general
and administrative expense as a percent of revenues is principally  attributable
to  spreading  such  expenses  over a  significantly  lower  sales  base  at the
Company's  freight car business and is also related to the  acquisition  and the
integration  of TCI  which,  at 8% of its  sales in 1996,  has  higher  selling,
general  and  administrative  levels as a percent  of  revenue  compared  to the
historical levels of the Company's  freight car business,  and to a $2.0 million
increased  MIS and product  development  cost at the  freight  car  operations.
Amortization  expense as a percentage of total revenue was 1.8% and 1.0% for the
years ended 1996 and 1995, respectively. The increase in amortization expense as
a percentage of total revenue is related to certain intangible assets of TCI and
the excess cost over net assets acquired in the acquisition.

OPERATING INCOME
Operating  income was $30.4 million in 1996,  compared to $25.0 million in 1995.
The increase was primarily due to including the operating  income of TCI for all
of 1996 versus  inclusion for the partial year of 1995 more than  offsetting the
drop in operating income at JAC.

At December  31, 1996 the  Company had 1,067  freight  cars on lease and leasing
business  generated $4.5 million in revenue and $2.4 million in operating income
before a $1.4 million gain on the sale of leased freight cars for the year ended
1996 as compared to $2.6 million  revenue and $1.9 million  operating  income in
the prior year.

INTEREST EXPENSE
Interest  expense,  net was $35.8  million in 1996  compared to $14.7 million in
1995.  Higher interest expense in 1996 resulted from borrowings under the Senior
Bank  Facilities  and the issuance of Notes to finance the  acquisition  of TCI,
1995.  In  addition,  JAIX  Leasing  had  increased  debt  levels to finance the
additional freight cars for the lease fleet.

                                        23
<PAGE>




Net loss and loss per share for 1996 were $5.4  million and $.55,  respectively,
compared  to net  income  and  earnings  per  share of $5.6  million  and  $.57,
respectively, for 1995.


YEARS ENDED DECEMBER 31, 1995 AND 1994 
TOTAL REVENUE  
Total revenue in 1995  increased  42.7% to $668.6 million from $468.5 million in
1994. The total revenue increase of $200.1 million was primarily  related to the
acquisition of TCI in August 1995 (58% of the increase),  and the acquisition of
Bostrom in January 1995 (30% of the  increase),  while  revenue from JAC and FCS
account for 12% of the increase,  collectively.  This increase resulted from the
start-up  of  operations  of FCS and a change in product mix at JAC to cars with
higher  selling  values,  offsetting  lower  production  (9,157 new and  rebuilt
freight cars in 1995 versus 10,707 new freight cars in 1994). As of December 31,
1995, the Company's backlog of new freight cars was 1,204 as compared with 7,180
on December 31, 1994.

At December 31, 1995 the Company had 600 freight cars on lease,  and the leasing
business  generated $2.6 million in revenue and $1.9 million in operating income
for the year ended 1995  compared  with $.5  million  revenue and $.3 million in
operating income in the prior year.

COST OF SALES-MANUFACTURING AND GROSS PROFT
Cost of  sales-manufacturing  for 1995 as a percent of  manufacturing  sales was
91.3%,  compared to 94.4% in 1994.  Related  gross  profits  were 8.7% and 5.6%,
respectively.  The  improvement  in gross  profit  resulted  primarily  from the
acquisitions  of  Bostrom  in  January  1995  and  TCI  in  August  1995,  which
historically  have generated higher gross profits than the freight car business.
Gross profits percentages were slightly lower at JAC in 1995 compared to 1994.

SELLING, GENERAL, ADMINISTRATIVE AND
AMORTIZATION EXPENSES
Selling,  general and  administrative  expense as a percentage  of total revenue
were 4.2% and 2.8% in 1995 and 1994,  respectively.  The  increase  in  selling,
general  and  administrative  expenses  is  related to the  acquisition  and the
integration  of  Bostrom  and  TCI,  which  have  higher  selling,  general  and
administrative  levels as a percent of revenue  compared to JAC. The increase in
amortization  expense  as a  percentage  of total  revenue is related to certain
intangible assets of TCI and Bostrom and excess cost over net assets acquired in
those acquisitions.

OPERATING INCOME
Operating income was $25.0 million in 1995,  compared with $9.7 million in 1994.
The increase was primarily due to the  acquisition of TCI in August 1995,  while
operating income at JAC in 1995 remained approximately the same as in 1994.

INTEREST EXPENSE
Interest  expense,  net was $14.7  million in 1995  compared with $.3 million in
1994. Interest expense in 1995 resulted from increased borrowings to finance the
acquisition  of Bostrom in January 1995,  from  increased  borrowings  under the
Senior Bank  Facilities and the issuance of Notes to finance the  acquisition of
TCI and the refinancing of its debt in August 1995, as well as from JAIX Leasing
debt which was used to finance the addition of freight cars for the lease fleet.

Net  income  and  earnings  per  share  for 1995  were  $5.6  million  and $.57,
respectively,  compared  with net income and  earnings per share of $5.7 million
and $.58, respectively for 1994.

LIQUIDITY AND CAPITAL RESOURCES
For the year ended December 31, 1996, the Company  provided cash from operations
of $36.4 million  compared with $52.1  million for 1995.  The Company  generated
$3.5 million of net cash from investing  activities  during 1996;  $18.1 million
from the sale of leased  freight  cars offset by $9.9  million  used for capital
expenditures and other, $5.4 million used for leased asset additions.  Cash used
for  financing  activities  was $27.0  million  for 1996  primarily  related  to
payments on term debt of $16.8  million and net decreases on in the JAIX Leasing
debt of $8.8 million.

The Company's freight car sales are characterized by large order sizes, specific
customer delivery schedules,  and related vendor receipts and payment schedules,
all of which can combine to create  significant  fluctuations in

                                       24
<PAGE>



working  capital   accounts  when  comparing  end  of  period   balances.   Such
fluctuations tend to be of short duration,  and the Company considers this to be
a normal part of its  operating  cycle which does not  significantly  impact its
financial flexibility and liquidity.

On  August  23,  1995,  in  conjunction  with  the  acquisition  of TCI  and the
refinancing  of the existing debt of the Company,  the Company and the Guarantor
Subsidiaries  entered into the $300 million  Senior Bank  Facilities  and issued
$100  million  of  Notes.  See  Notes  6 and  7 of  the  Consolidated  Financial
Statements for a description of the Senior Bank Facilities and the Notes.

As of December  31,  1996,  there was $183.3  million of term loans  outstanding
under the Senior  Bank  Facilities,  $100  million of Notes  outstanding  and no
borrowings  under the $100 million  revolving  credit line under the Senior Bank
Facilities.  Availability  under  the  Revolving  Loan  after  consideration  of
outstanding  letters of credit of $17.6  million was $44.9  million after giving
effect to the applicable borrowing base.

Interest  payments on the Notes and interest and  principal  payments  under the
Senior Bank Facilities represent  significant cash requirements for the Company.
The Notes will require semiannual interest payments of approximately $6 million.
Borrowings  under the Senior Bank Facilities bear interest at floating rates and
require  interest  payments on varying  dates  depending  upon the interest rate
option  selected by the Company.  The $183.3 million of  outstanding  term loans
will require periodic principal payments through their maturities. See Note 6 of
the Consolidated Financial Statements.

On December 31, 1995 and December 31, 1996, the Company  amended the total debt
ratio,  interest  coverage  ratio and net worth  financial  covenants  under the
Senior Bank  Facilities  to avoid  anticipated  future  defaults  and to address
changes in the  Company's  business,  particularly  the effect on the  Company's
financial  position  and  results  of  operation  of losses at its  freight  car
subsidiary, JAC. The Company is currently in compliance with all covenants under
the Senior Bank Facilities.

The  Company  formed a leasing  business  in 1994 to lease  freight  cars.  This
leasing  division  was formed into a wholly  owned  subsidiary  JAIX  Leasing in
January 1995 and currently owns and has under  management 1,067 freight cars. In
May 1995,  JAIX Leasing  entered into a loan facility to finance its freight car
leasing activities.  In June 1996, this debt was refinanced with a $27.7 million
ten-year term loan. See Note 6 of the  Consolidated  Financial  Statements for a
description of this facility.  As of December 31, 1996,  there was $13.6 million
outstanding  under this facility.  In January 1997, JAIX Leasing sold 85 freight
cars generating  $4.5 million in cash and further  reducing JAIX Leasing debt by
$3.6 million.

The Company believes that the cash flow generated from its operations,  together
with amounts  available under the Revolving Loans,  should be sufficient to fund
its debt  service  requirements,  working  capital  needs,  anticipated  capital
expenditures and other operating expenses  (including  expenditures  required by
applicable  environmental  laws and  regulations  over the next 18 months).  The
Company's future operating performance and, therefore,  its long-term ability to
service  or  refinance  the Notes and to extend or  refinance  the  Senior  Bank
Facilities  will be  subject to future  economic  conditions  and to  financial,
business and other factors, many of which are beyond the Company's control.

As of December 31, 1996,  the  Company's  balance  sheet  included cash of $24.5
million.

ENVIRONMENTAL AND LEGAL MATTERS
The Company is subject to comprehensive and frequently  changing federal,  state
and local environmental laws and regulations,  and will incur additional capital
and  operating  costs in the future to comply with  currently  existing laws and
regulations,  new regulatory requirements arising from recently enacted statutes
and possible new statutory  enactments.  In addition to environmental  laws that
regulate the Company's  subsidiaries' ongoing operations,  the subsidiaries also
are  subject  to  environmental   remediation   liability.   Under  the  federal
Comprehensive  Environmental  Response,  Compensation and Liability Act (CERCLA)
and analogous state laws, the Company's  subsidiaries  may be liable as a result
of  the  release  or  threatened  release  of  hazardous   substances  into  the
environment.  The  Company's  subsidiaries  are  currently  involved  in several
matters relating to the investigation  and/or remediation of locations where the
subsidiaries have arranged for the disposal of foundry and other wastes.

Such matters  include  five  situations  in which the  Company,  through its TCI
subsidiaries  and their  predecessors,  have been  named or are  believed  to be
potentially  responsible  parties  (PRPs)  in the  contamination  of the  sites.
Additionally,  environmental  remediation  may be  required  at  two of the  TCI
facilities at which soil and ground water contamination has been identified. The
Company  believes  that it has  valid  claims  for  contractual  indemnification
against prior owners for certain of the investigatory and remedial costs at each
of the above mentioned sites.

                                       25
<PAGE>



The Company has been notified, however, by all contractual indemnitors that they
will not honor future claims for  indemnification.  Accordingly,  the Company is
litigating  indemnification  claims  and  there  is no  assurance  that  even if
successful  in any such  claims,  any  judgments  against the  indemnitors  will
ultimately be recoverable.  In addition,  the Company believes it is likely that
it has incurred  some  liability at various  sites for  activities  and disposal
following acquisition which would not in any event be covered by indemnification
by prior owners.

As of December 31, 1996, the Company has a $26.4 million environmental  reserve.
This reserve is based on current cost  estimates  and does not reduce  estimated
expenditures to net present value. The Company  currently  anticipates  spending
approximately  $500,000 per year for the next three years and  approximately  $1
million per year in years 2000 and 2001 for monitoring the various environmental
sites  associated  with  the  environmental  reserve,   including  attorney  and
consultant  costs for strategic  planning and  negotiations  with regulators and
other PRPs, and payment of remedial  investigation costs. The Company expects to
fund such  expenditures  with the cash flow  generated  from its  operations and
amounts  available under its Revolving  Loans.  These sites are generally in the
early investigatory stages of the remediation process and thus it is anticipated
that significant cash payments for remediation will not be incurred for at least
several years. After the evaluation and investigation  period, the investigation
and remediation costs will likely increase because the actual remediation of the
various  environmental  sites  associated  with the  environmental  reserve will
likely be under  way.  Any cash  expenditures  required  by the  Company  or its
subsidiaries to comply with applicable  environmental laws and/or to pay for any
remediation  efforts will not be reduced or otherwise  affected by the existence
of the environmental reserve. Due to the early stage of investigation of many of
the sites and potential  remediations  referred to above,  there are significant
uncertainties  as to waste  quantities  involved,  the  extent and timing of the
remediation which will be required, the range of acceptable solutions,  costs of
remediation and the number of PRPs  contributing to such costs.  Based on all of
the  information  presently  available  to it,  the  Company  believes  that the
environmental  reserve will be adequate to cover its future costs related to the
sites associated with the environmental  reserve,  and that any additional costs
will not have a material adverse effect on the financial condition or results of
operations  of the Company.  However,  the discovery of  additional  sites,  the
modification  of  existing  laws or  regulations,  the  imposition  of joint and
several  liability  under  CERCLA or the  uncertainties  referred to above could
result in such a material adverse effect.

FORWARD-LOOKING STATEMENTS
The foregoing  outlook  contains  forward-looking  statements  that are based on
current  expectations  and are  subject to a number of risks and  uncertainties.
Actual results could differ materially from current expectations due to a number
of factors,  including  general  economic  conditions;  competitive  factors and
pricing  pressures;  shifts  in  market  demand,  the  performance  and needs of
industries served by the Company's businesses; and the risks described from time
to time in the Company's Securities & Exchange Commission reports.

EFFECTS OF INFLATION
General price inflation has not had a material  impact on the Company's  results
of operations.

Item 13.  Certain Transactions and Related Transactions

     None



                                       26

<PAGE>


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


JOHNSTOWN AMERICA INDUSTRIES, INC.


/s/ Andrew M. Weller
----------------------------------------------
ANDREW M. WELLER
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)

Dated: November 4, 1997
                                       27