<PAGE>   1
                                  FORM 10-Q

                                UNITED STATES

                     SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, DC 20549

                QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
                     THE SECURITIES EXCHANGE ACT OF 1934

[x]  For the quarterly period ended March 29, 1997

Commission file number 1-6687
                       ------

                          JOHNSTON INDUSTRIES, INC.
           ------------------------------------------------------
           (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                Delaware                                  11-1749980        
    -------------------------------                   -------------------   
    (State or other jurisdiction of                    (I.R.S. Employer     
     incorporation or organization)                   Identification No.)   

105 Thirteenth Street, Columbus, Georgia                     31901          
(Address of principal executive offices)                  (Zip Code)        


                               (706) 641-3140
            ----------------------------------------------------
            (Registrant's telephone number, including area code)

N/A
(Former name, former address and former fiscal year if changed since last 
report.)

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

Yes  [X]   No  [ ]

The number of shares outstanding of the Registrant's Common Stock as of March
29, 1997 was 10,381,174 shares.


<PAGE>   2


                   JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES


                               INDEX TO FORM 10-Q


                         PART I - FINANCIAL INFORMATION



ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS:

              Condensed Consolidated Balance Sheets

              Condensed Consolidated Statements of Income

              Condensed Consolidated Statements of Cash Flows

              Notes to Condensed Consolidated Financial Statements

ITEM 2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
              OF OPERATIONS



                          PART II - OTHER INFORMATION



ITEM 1.  LEGAL PROCEEDINGS

ITEM 2.  EXHIBITS AND REPORTS ON FORM 8-K


SIGNATURE PAGE

INDEX TO EXHIBITS




                                      2
<PAGE>   3
                       PART I - FINANCIAL INFORMATION

ITEM 1.     CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                 JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED BALANCE SHEETS
        (IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                    MARCH 29,    DECEMBER 28,
                                                                      1997           1996
                                                                  -----------   ------------
<S>                                                               <C>           <C>
ASSETS                                                             (UNAUDITED)
CURRENT ASSETS:
   Cash and Cash Equivalents                                      $       304   $      1,720
   Accounts and Notes Receivable (Less Allowance for
      Doubtful Accounts of $1,469 and $1,379)                          43,765         37,128
   Inventories                                                         67,733         65,520
   Net Assets of Discontinued Operations                                6,244          6,011
   Income Taxes Receivable                                              5,283          5,755
   Assets held for sale                                                 2,178          2,293
   Prepaid Expenses and Other                                           2,031          2,254
                                                                  -----------   ------------
      Total Current Assets                                            127,538        120,681

Property, Plant and Equipment-Net                                     127,159        130,047

Goodwill                                                               13,958         14,046
Intangible Asset-Pension                                                2,042          2,042
Other Assets                                                            4,904          4,814
                                                                  -----------   ------------
Total Assets                                                      $   275,601   $    271,630
                                                                  ===========   ============

LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES:
   Accounts Payable                                               $    24,460   $     26,409
   Accrued Expenses                                                    14,194         12,395
   Current Maturities of Long-Term Debt                                 8,635          6,505
   Deferred Income Taxes                                                1,095            727
                                                                  -----------   ------------
      Total Current Liabilities                                        48,384         46,036

Long-Term Debt - Less Current Maturities                              144,881        143,641
Other Liabilities                                                      11,682         11,744
Deferred Income Taxes                                                  10,981         11,017

STOCKHOLDERS' EQUITY:
   Preferred Stock, Par Value .01 per Share; Authorized
      3,000,000 Shares; Issued 325,000                                      3              3
   Common Stock, Par Value $.10 per share; Authorized,
      20,000,000 Shares; Issued 12,467,691 and 12,449,391               1,246          1,246
   Additional Paid-In Capital                                          23,604         23,568
   Retained Earnings                                                   45,556         45,111
                                                                  -----------   ------------
      Total                                                            70,409         69,928
   Less Treasury Stock; 2,086,517 shares                              (10,258)       (10,258)
   Less Minimum Pension Liability Adjustment, Net of Tax Benefit         (478)          (478)
                                                                  -----------   ------------
      Total Stockholders' Equity                                       59,673         59,192
                                                                  -----------   ------------
Total Liabilities and Stockholders' Equity                        $   275,601   $    271,630
                                                                  ===========   ============
</TABLE>

See notes to Condensed Consolidated Financial Statements


                                      3
<PAGE>   4



                  JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
           CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
        (IN THOUSANDS OF DOLLARS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                        FOR THE THREE MONTHS ENDED
                                                                                        --------------------------
                                                                                           MARCH 29,   MARCH 30,
                                                                                             1997         1996
<S>                                                                                         <C>         <C>
Net Sales                                                                                   $86,778     $84,030
                                                                                            -------     -------
Costs and Expenses:
Cost of Sales, excluding Depreciation and Amortization                                       69,779      68,757
Selling, General and Administrative                                                           6,233       6,553
Depreciation and Amortization                                                                 5,340       4,612
Restructuring Charges                                                                             -       2,252
                                                                                            -------     -------
Total Costs and Expenses                                                                     81,352      82,174
                                                                                            -------     -------
Income (Loss) from Operations                                                                 5,426       1,856

Other Expenses (Income):
   Interest Expense                                                                           3,340       2,302
   Interest Income                                                                              (44)        (23)
   Other-Net                                                                                   (130)        145
                                                                                            -------     -------
      Total Other Expenses                                                                    3,166       2,424
                                                                                            -------     -------
Income (Loss) from Continuing Operations before Tax Provision,
   Minority Interest in Consolidated Subsidiary, and Extraordinary Item                       2,260        (568)

Provision (Benefit) for Income Taxes                                                            900        (647)
Minority Interest in Loss of Consolidated Subsidiary                                              -       1,200
                                                                                            -------     -------
Income (Loss) from Continuing Operations                                                      1,360       1,279

DISCONTINUED OPERATIONS:
Income from Discontinued Operations of Jupiter National (less
   applicable income tax of $83 and $4,268, respectively)
   net of minority interest in income of $0 and $1,083, respectively                            164       2,448
Loss on Disposal of Jupiter National,
   (less applicable income tax benefit of $2,801)                                                 -      (1,479)
                                                                                            -------     -------
Income from Discontinued Operations                                                             164         969
Extraordinary Item, (less applicable income taxes of $323), - Loss
   on Early Extinguishment of Debt                                                                -         527
                                                                                            -------     -------
Net Income                                                                                    1,524       1,721

Dividends on Preferred Stock                                                                     41           2
                                                                                            -------     -------

Net Income Available to Common Stockholders                                                 $ 1,483     $ 1,719
                                                                                            =======     =======
Earnings (Loss) Per Common Share:
   Income from Continuing Operations                                                        $  0.12     $  0.12
   Discontinued Operations                                                                     0.02        0.09
   Extraordinary Loss                                                                             -       (0.05)
                                                                                            -------     -------
      Net Earnings Per Common share                                                         $  0.14     $  0.16
                                                                                            =======     =======
Dividends Per Share                                                                         $  0.10     $  0.10
                                                                                            =======     =======
Weighted Average Number of Common and
   Common Equivalent Shares Outstanding                                                      10,710      10,642
                                                                                            =======     =======
</TABLE>

See notes to Condensed Consolidated Financial Statements


                                      4
<PAGE>   5


                  JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                          (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                                                                      FOR THE THREE MONTHS ENDED
                                                                                      --------------------------
                                                                                         MARCH 29,   MARCH 30,
                                                                                            1997        1996
                                                                                      -----------    -----------
<S>                                                                                       <C>        <C>
OPERATING ACTIVITIES:
CONTINUING OPERATIONS:
   Net Income from Continuing Operations                                                  $ 1,360    $  1,279
   Adjustments to Reconcile Net Income from Continuing Operations
      to Net Cash Provided by (Used in) Operating Activities:
      Depreciation and Amortization                                                         5,340       4,612
      Provision for Bad Debts                                                                 104         (99)
      Loss on Disposal of Fixed Assets                                                                     69
      Minority Interest in (Loss) on Consolidated Subsidiary                                           (1,200)
      Changes in Assets and Liabilities, Net of Effect of Acquisition
         Accounts and Notes Receivables                                                    (6,741)     (5,276)
         Inventories                                                                       (2,213)       (911)
         Deferred Income Taxes                                                                332        (629)
         Prepaid Expenses and Other Assets                                                    154        (804)
         Accounts Payable                                                                    (742)      3,816
         Accrued Expenses                                                                     761       2,672
         Income Taxes Receivable                                                              472       2,172
         Other Liabilities                                                                    (62)        107
                                                                                          -------    --------
         Total Adjustments                                                                 (2,595)      4,529
                                                                                          -------    --------
         Net Cash Provided by Continuing Operations                                        (1,235)      5,808

DISCONTINUED OPERATIONS:
   Income from Discontinued Operations                                                        164       2,448
   Loss on Disposal of Discontinued Operations                                                         (1,479)

   Cash Provided by (Used in) Discontinued Operations                                         (69)        975
   Items not Affecting Cash                                                                  (164)    (12,092)
                                                                                          -------    --------
         Net Cash Used in Discontinued Operation                                              (69)    (10,148)
                                                                                          -------    --------
         Net Cash Used in Operating Activities                                             (1,304)     (4,340)

INVESTING ACTIVITIES:
CONTINUING OPERATIONS:
   Additions to Property, Plant and Equipment                                              (2,270)     (5,669)
   Decrease in Non-Operating Accounts Payable                                              (1,207)     (1,198)
   Purchase of Minority Interest in Jupiter                                                           (37,693)
   Purchase of T.J. Beall, Net of Cash Acquired                                                           296
                                                                                          -------    --------
      Net Cash Used in Continuing Operations                                               (3,477)    (44,264)

DISCONTINUED OPERATIONS:
   Additions to Property, Plant, and Equipment                                                           (78)
   Proceeds from Sale of Investment                                                                    20,457
                                                                                          -------    --------
      Net Cash Provided by Discontinued Operations                                              -      20,379
                                                                                          -------    --------
      Net Cash Used in Investing Activities                                                (3,477)    (23,885)

</TABLE>
                                                                       Continued


                                      5
<PAGE>   6


                  JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES
         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                          (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                                                                               FOR THE THREE MONTHS ENDED
                                                                                               --------------------------
                                                                                                 MARCH 29,     MARCH 30,
                                                                                                   1997          1996
                                                                                               ----------    ------------
<S>                                                                                               <C>        <C>
FINANCING ACTIVITIES:
CONTINUING OPERATIONS:
   Principal Payments of Debt                                                                        (130)    (94,116)
   Proceeds from Issuance of Long-Term Debt                                                         3,500     142,236
   Borrowings under Line-of-Credit Agreements                                                                   4,750
   Repayments under Line-of-Credit Agreements                                                                 (18,000)
   Purchase of Treasury Stock                                                                                  (2,150)
   Proceeds from Issuance of Common Stock                                                              36          73
   Dividends Paid                                                                                     (41)
   Extraordinary Item, Loss on Early Extinguishment of Debt                                                      (850)
                                                                                                  -------    --------
      Net Cash Provided by Continuing Operations                                                    3,365      31,943

DISCONTINUED OPERATIONS:
   Principal Payments of Debt                                                                                  (1,605)
   Proceeds from Issuance of Long-Term Debt                                                                       138
                                                                                                  -------    --------
      Net Cash Used in Discontinued Operations                                                          -      (1,467)
                                                                                                  -------    --------
      Net Cash Provided by Financing Activities                                                     3,365      30,476
                                                                                                  -------    --------
NET INCREASE (DECREASE) IN CASH AND CASH
   EQUIVALENTS                                                                                     (1,416)      2,251

CASH AND CASH EQUIVALENTS
   Beginning of Period                                                                              1,720       1,471
                                                                                                  -------    --------
   End of Period                                                                                  $   304       3,722
                                                                                                  =======    ========   
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
   Cash paid during the year for:
      Interest                                                                                    $ 3,287       3,538
                                                                                                  =======    ========
      Income Taxes                                                                                $    94         638
                                                                                                  =======    ========


SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING INFORMATION
The Company acquired T.J. Beall Company in an exchange for preferred stock in 1996.

</TABLE>
See notes to Condensed Consolidated Financial Statements.

                                                                      Concluded





                                      6
<PAGE>   7

                 JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES

      NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



1.    BASIS OF PRESENTATION

      The accompanying condensed consolidated financial statements for the
      three months ended March 29, 1997 and March 30, 1996 are unaudited. The
      March 30, 1996 statements included the accounts of Johnston Industries,
      Inc. ("Johnston"), its direct wholly owned subsidiaries, Southern Phenix
      Textiles, Inc. ("Southern Phenix"), Opp and Micolas Mills, Inc. ("Opp and
      Micolas"), Jupiter National, Inc. ("Jupiter") and Johnston Industries
      Composite Reinforcements, Inc. ("JICR" formerly Tech Tech Textiles, USA)
      and its indirect wholly owned subsidiaries Wellington Sears Company
      ("Wellington") and Greater Washington Investments, Inc. ("GWI").

      On April 3, 1996, after the acquisition by Johnston of the minority
      interest in Jupiter (see note 2), Jupiter was merged into Opp and
      Micolas.  At the close of business on June 29, 1996, the name of Opp and
      Micolas was changed to Johnston Industries Alabama, Inc. ("JI Alabama").
      Southern Phenix and Wellington were merged into JI Alabama and JICR, T.
      J. Beall Company ("TJB") and GWI became subsidiaries of JI Alabama.

      The March 29, 1997 statements include the accounts of Johnston, its
      direct wholly owned subsidiary, JI Alabama and its indirect wholly owned
      subsidiaries, JICR, TJB, and GWI (collectively, the "Company").

      In the opinion of management, the unaudited condensed consolidated
      financial statements reflect all adjustments, consisting only of normal
      recurring accruals, necessary for a fair presentation of the results for
      the periods presented.  Operating results for the three months ended
      March 29. 1997 are not necessarily indicative of the results that may be
      expected for the entire year.  The condensed consolidated financial
      statements included herein should be read in conjunction with the
      financial statements and notes thereto included in the Company's Annual
      Report on Form 10-K for the year ended December 28, 1996.  Reference is
      made to the accounting policies of the Company described in the notes to
      consolidated financial statements included in the Company's Annual Report
      on Form 10-K for year ended December 28, 1996.

2.    JUPITER NATIONAL

      Acquisition of Minority Interest

      On March 28, 1996, the Company consummated the acquisition of the
      remaining outstanding shares of Jupiter (the "Jupiter Acquisition") at a
      purchase price of $33.97 per share.  Total purchase consideration was
      approximately $45,950,000 which included payments of $39,000,000 to
      stockholders, and certain holders of options to purchase common stock and
      the assumption of certain Jupiter options by Johnston.  Other acquisition
      costs included approximately $5,488,000 of merger related expenses paid
      by Jupiter less a reduction for Johnston equity-related deferred taxes of
      $1,432,000.  The acquisition was accounted for under the purchase method
      of accounting as a "step acquisition" resulting in a partial step-up in
      Jupiter's tangible assets.  At March 27, 1997 the Company had recorded
      goodwill of $12,290,000 which will be amortized over 20 years.



                                      7


<PAGE>   8


      The following represents the results of operations on a pro forma basis
      assuming Johnston had owned 100% of Jupiter as of January 1, 1996.  This
      pro forma information is provided for information purposes only.  Such
      pro forma information is based on historical information and is not
      necessarily indicative of the actual results that would have been
      achieved had Johnston purchased the additional shares of Jupiter on
      January 1, 1996, nor is it indicative of future results of operations:


<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED
                                                      MARCH 30, 1996
                                                      --------------
  <S>                                                  <C>
  Net Sales                                            $84,030,000

  Loss from Continuing Operations                         (965,000)
  Earnings from Discontinued Operations                  2,206,000   
  Loss from Extraordinary Item                            (527,000)
                                                       -----------
  Earnings Applicable to Common Stock                  $   712,000
                                                       ===========

  Earnings (Loss) Per Share                                   
      Continuing Operations                            $      (.09)
      Discontinued Operations                                  .21 
      Extraordinary Item                                      (.05)
                                                        -----------
          Total                                        $       .07
                                                        ===========
</TABLE>


      Discontinuance of the Venture Capital Segment

      Concurrent with the Jupiter Acquisition, the Company's management made
      the decision to discontinue the venture capital investment segment of
      Jupiter's operation.  The segment has been accounted for as discontinued
      operations, and in accordance with Generally Accepted Accounting
      Principles, the net assets of the discontinued segment are recorded as an
      asset on the consolidated balance sheet and are expected to be disposed
      of by June 1997.  The results of operations for Jupiter's venture capital
      investment activities have been recorded as discontinued operations for
      1996 and subsequent periods.

      Income before taxes from discontinued operations includes net realized
      and unrealized gains from investments of approximately $146,000 and
      $10,218,000 less interest expense and operating expenses for the three
      months ended March 29, 1997 and March 30, 1996 respectively. The gains
      from investments are mainly due to gains realized on the sale of the
      Company's investment in EMC Corporation and Viasoft during the three
      months ended March 30, 1996.

      For the three months ended March 30, 1996, the loss after income taxes
      for the disposal of the discontinued operations included a $4,380,000
      write down for the carrying value after considering liquidation plans on
      disposal of the remaining portfolio investments and related debt as well
      as a $300,000 provision for future operating costs.

3.    RESTRUCTURING CHARGES

      In connection with the Jupiter Acquisition, the Company decided to close
      the manufacturing facility in Tarboro, North Carolina, which had been
      operated by Jupiter's Wellington subsidiary (the "Tarboro Facility") in
      an effort to realign and consolidate certain operations, concentrate
      capital resources on more profitable operations and better position
      itself to achieve its strategic corporate objectives.  All activities
      related to the closing of the Tarboro Facility were substantially
      completed in January 1997.  The Tarboro Facility, which is currently
      vacant, is held for sale and is recorded at its estimated net realizable
      value. During the first quarter of 1996, the Company recorded 
      restructuring charges totaling $4,118,000 to cover anticipated losses
      including $1,619,000 related to write-downs of accounts receivable and
      inventory, $834,000 for severance costs and $1,665,000 for other costs
      related to  the operation.  Of these costs, $1,866,000, representing the
      minority interest (the portion of Wellington not owned by Johnston), has
      been recorded in



                                      8

<PAGE>   9


      the purchase accounting for the Jupiter Acquisition with the remaining
      $2,252,000 recorded as an expense on the consolidated statement of
      income.

      The plan for the closing of the Tarboro Facility called for termination
      of 168 employees with various job descriptions at the facility.  As of
      March 29, 1997, 167 employees had been terminated.  Through March 29,
      1997, approximately $3,984,000 has been charged to the reserves
      established for the closing.  These costs included $479,000 related to
      severance costs.

4.    INVENTORIES

      Inventories consisted of the following at March 29, 1997 and December 28,
      1996:


<TABLE>
<CAPTION>
                                     MARCH 29, 1997  DECEMBER 28, 1996
                                     --------------  -----------------

      <S>                               <C>                <C>
      Finished Goods                    $31,251,000        $30,051,000
      Work-In Process                     8,998,000          9,012,000
      Raw Materials and Supplies         27,484,000         26,457,000
                                        -----------        -----------
      Total                             $67,733,000        $65,520,000
                                        ===========        ===========
</TABLE>


5.    LONG-TERM FINANCING AND SHORT-TERM BORROWINGS

      Long-term debt and short-term borrowings consisted of the following at
      March 29, 1997 and December 28, 1996:


<TABLE>
<CAPTION>
                                         MARCH 29, 1997  DECEMBER 28, 1996
                                         --------------  -----------------
      <S>                                   <C>               <C>
      Johnston Industries, Inc.
        Term Loans                         $ 74,500,000       $ 74,500,000
        Lines of Credit Borrowings                    0                  0
        Revolving Credit Loans               77,399,000         73,899,000
        Purchase Money Mortgage Debt          1,065,000       $  1,108,000
                                           ------------       ------------
                                            152,964,000        149,507,000


      Wellington Sears Company
      Industrial Development Note
          (net of unamortized discount)         552,000            639,000

                                           ------------       ------------
        Total                               153,516,000        150,146,000
      Less Current Maturities                (8,635,000)        (6,505,000)
                                           ------------       ------------
                                           $144,881,000       $143,641,000
                                           ============       ============
</TABLE>





      Johnston Industries, Inc.
      Bank Credit Agreement

      On March 28, 1996, the Company signed a new credit agreement with a
      syndicate of banks (the "Bank Credit Agreement") to provide aggregate
      loans of up to $160,000,000 to repay existing indebtedness, to provide
      funds used to acquire the remaining outstanding shares of the common
      stock of Jupiter and to finance working capital needs.  The Bank Credit
      Agreement provides for revolving credit loans (the "Revolver") of up to
      $80,000,000, a term loan for $40,000,000 ("Term Loan A") and a term loan
      for an additional $40,000,000 ("Term Loan B").  Borrowings under the
      Revolver and the Term Loan A mature on 


      
                                      9

<PAGE>   10
      March 28, 2001, and Term Loan B matures on March 28, 2003.  The term
      loans are repayable in quarterly installments starting in 1997.

      As of March 29 1997, the Company had outstanding borrowings under the
      Bank Credit Agreement of $151,899,000 and availability under the Revolver
      of $2,476,000.

      Covenants and Restrictions

      Under the terms of the Bank Credit Agreement, substantially all assets
      are pledged as collateral for the borrowings under the Bank Credit
      Agreement. The Bank Credit Agreement requires the Company to maintain
      certain financial ratios and specified levels of tangible net worth.  The
      Bank Credit Agreement places a limit on the Company's level of capital
      expenditures and its ability to effect certain type of mergers or
      acquisitions.  The Bank Credit Agreement permits the Company to pay
      dividends on its Common Stock provided it is in compliance with various
      covenants and provisions contained therein, which among other things
      limit dividends and restrict investments to the lesser of (x) 20% of
      total assets of the Company, on a fully consolidated basis, as of the
      date of determination thereof, or (y) $5,000,000 for the period
      commencing on January 1, 1996 and ending on December 31, 1996 or (z)
      $5,000,000 plus 50% of cumulative consolidated net income for the period
      commencing January 1, 1997, minus 100% of cumulative consolidated net
      loss for the consolidated entities for such period, as calculated on a
      cumulative basis as of the end of each fiscal quarter of the consolidated
      entities with reference to the financial statements for such quarter.

      The initial Bank Credit Agreement was amended on June 28, 1996 and
      February 28, 1997 to modify certain covenants.  Prior to the execution of
      these amendments, the Company was in technical noncompliance with certain
      of the financial covenants contained therein.  At March 29, 1997, the
      Company was in compliance with its covenants under the Bank Credit
      Agreement.

6.    FINANCIAL INSTRUMENTS

      Interest Rate Swaps

      In order to minimize the Company's exposure to the uncertainty of
      floating interest rates, the Bank Credit Agreement requires the Company
      to maintain interest rate protection agreements covering a minimum of 50%
      of the principal amount outstanding under the term loans, as long as
      these loans exceed an aggregate of $40 million.  Under the Credit
      Agreement, the Company may elect to pay interest based on either the
      prime rate plus various margins or the LIBOR rate plus various margins.
      Effective June 7, 1996, the Company entered into interest rate swap
      agreements with several lenders whereby it exchanged its floating rate
      obligations under the Bank Credit Agreement on $38 million notional
      principal amount for a fixed rate payment obligation of 6.705% for a term
      of three years, with an option to renew for an additional two years.
      Prior to the interest rate swap agreements, the Company was paying
      interest based on a floating rate of 5.535%, based on a three month LIBOR
      rate.

7.    EARNINGS PER SHARE

      Earnings per share for the three months ended March 29, 1997 and March
      30, 1996 were calculated based on the weighted average number of shares
      of common and common equivalent shares outstanding during the periods.
      Preferred dividends were deducted from net income to compute earnings
      applicable to common stock.  Additionally, earnings (loss) per share were
      computed for continuing operations, discontinued operations, and
      extraordinary item.

      New Accounting Pronouncement

      In February 1997, the Financial Accounting Standards Board issued
      Statement of Financial Accounting Standards No. 128, "Earnings per Share"
      ("SFAS No. 128").  This Statement establishes new standards for 

      

                                     10


<PAGE>   11


      computing and presenting earnings per share ("EPS") information.
      SFAS No. 128 simplifies the computation of earnings per share currently
      required by APB Opinion No. 15 and its related interpretations.  The new
      statement replaces the presentation of "primary" (and when required
      "fully diluted") earnings per share with "basic" and "diluted" earnings
      per share.  This new statement is effective for financial statements
      issued for periods ending after December 15, 1997 including interim
      periods; earlier application is not permitted.  The Company's computation
      of basic and diluted EPS under SFAS No. 128 for the three months ended
      March 29, 1997 and March 30, 1996 will not be materially different than
      EPS previously reported.

8.    INCOME TAXES

      The provision for income taxes from continuing operations as computed
      under Financial Accounting Standards Board Standard No. 109, "Accounting
      for Income Taxes", is comprised of the following for the three months
      ended March 29, 1997 and March 30, 1996:


<TABLE>
<CAPTION>
                                                              1997       1996
                                                            --------   ---------
      <S>                                                   <C>        <C>

      Federal:
        Current                                             $174,000   $ 163,000
      Deferred                                               617,000    (830,000)
                                                            --------   ---------
                                                             791,000    (667,000)
 
      State:
        Current                                               35,000     126,000
      Deferred                                                74,000    (106,000)
                                                            --------   ---------
                                                             109,000      20,000

      Provision (benefit) for income taxes                  $900,000   $(647,000)
                                                            ========   =========
</TABLE>


      The reconciliation of the Company's effective income tax rate to the
      Federal statutory rate from continuing operations of 34% for the three
      months ended March 29, 1997 and March 30, 1996 follows:


<TABLE>
<CAPTION>
                                                        1997       1996
                                                      --------  ----------
      <S>                                             <C>       <C>

      Federal income taxes at statutory rate          $768,000   $(193,000)

      State income taxes, net of Federal tax benefit    72,000      27,000
      Equity in Income of Majority-Owned Subsidiary          -    (508,000)
      Amortization of Goodwill                          62,000
      Other - Net                                       (2,000)  $  27,000
                                                      --------   ---------
                                                      $900,000   $(647,000)
                                                      --------   ---------
      Effective rate                                      39.8%      113.9%
                                                      ========   =========
</TABLE>


      The significant equity loss from continuing operations has distorted the
      1996 effective rate which is usually comparable with the effective rate
      for the same period of the prior year.




                                      11
<PAGE>   12


9.    COMMITMENTS AND CONTINGENCIES

      Former Steel Fabrication Operations

      In 1981, a subsidiary of the Company closed a steel fabricating facility
      in Pennsylvania which it had operated before its closing.  In February
      1994, the current operators of the facility filed a complaint against
      previous owners and operators of the facility, including the Company,
      claiming contamination by a former Johnston subsidiary which had operated
      at the facility before its close in 1981.  Based upon the discovery that
      certain co-defendants had no assets or had been through bankruptcy
      proceedings, the Company's management accrued $2,000,000 in the six
      months ended December 30, 1995.  In addition, the Company
      established a reserve in the amount of $200,000 as an estimate of
      potential additional legal costs and other costs to be incurred in
      connection with the defense of this matter.

      This case was settled in December 1996.  The total judgment against the
      Company was $904,000, including prejudgment interest.  There is an
      associated unasserted claim for additional, as yet unspecified, damages.  
      At December 28, 1996, the reserve balance for response costs and
      associated legal fees was approximately $800,000, net of amounts due
      under the settlement.  In consideration of the total judgement, which was
      paid in January 1997, and the range of estimated potential liability for
      response costs pursuant to the unasserted claim, the Company's management
      reduced its reserve for such liability and associated legal fees to
      approximately $500,000.  Although management believes, based upon the
      currently available facts, that the reserve established for this matter
      is reasonable, the Company's future potential liability for response
      costs pursuant to the unasserted claim cannot presently be determined.

      General

      The Company is periodically involved in legal proceedings arising out of
      the ordinary conduct of its business.  Management does not expect that
      any of these legal proceedings or the legal proceedings discussed above,
      will have a material adverse effect on the Company's consolidated
      financial statements or consolidated results of operations.

10.   RELATED PARTY TRANSACTIONS

      Redlaw Industries, Inc. ("Redlaw"), a stockholder, is the commissioned
      sales agent for the Company for sales of the Company's products into
      Canada under the terms of a non-exclusive sales agency agreement.  For
      the three months ended March 29, 1997, there were no sales to Redlaw.  As
      of March 29, 1997 accounts receivable from Redlaw was $187,953 and
      commissions payable to Redlaw were $165,367.  Johnston also maintains
      inventory at a public warehouse in Ontario, Canada which is supervised by
      Redlaw.  At March 29, 1997, there was approximately $474,000 of inventory
      located at the warehouse in Canada.




                                      12

<PAGE>   13


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


GENERAL

The operations of Johnston Industries, Inc. ("Johnston") include its direct
wholly owned operating subsidiary, Johnston Industries Alabama, Inc., and its
indirect wholly owned subsidiaries, Johnston Industries Composite
Reinforcements, Inc. ("JICR") (formerly Tech Textiles, USA), T.J. Beall Company
("TJB"), and Greater Washington Investments, Inc. ("GWI") (collectively, the
"Company").

The March 30, 1996 condensed consolidated financial statements included the
accounts of Johnston, its wholly owned subsidiaries, Southern Phenix Textiles,
Inc. ("Southern Phenix"), Opp and Micolas Mills, Inc. ("Opp and Micolas"), and
Jupiter National, Inc. ("Jupiter") and Jupiter's wholly-owned subsidiaries,
Wellington Sears Company ("Wellington") and Greater Washington Investments,
Inc. ("GWI"), (collectively, the "Company").

On March 28, 1996, the Company acquired the outstanding minority interest in
Jupiter (the "Jupiter Acquisition") for a total purchase consideration of
$45,950,000 which included payments of $39,000,000 to security holders.
Thereafter, on April 3, 1996, Jupiter was merged into Opp and Micolas.  At the
close of business on June 29, 1996, the name of Opp and Micolas was changed to
Johnston Industries Alabama, Inc. ("JI Alabama"), Southern Phenix and
Wellington were merged into JI Alabama, and JICR, TJB and GWI became
subsidiaries of JI Alabama.

Concurrent with the Jupiter Acquisition, the Company's management made the
decision to discontinue the venture capital investment segment of Jupiter's
operation.  The segment has been accounted for as discontinued operations in
accordance with APB 30.  Accordingly, the net assets of the discontinued
segment are recorded as a current asset on the consolidated balance sheet and
are expected to be disposed of by June 30, 1997.

RESULTS OF OPERATIONS        

Results for the quarter ended March 29, 1997 reflected a slight increase in net
sales while income from operations showed significant improvement over the
first quarter of 1996.  While the first quarter of 1996 included $2,252,000 in
restructuring charges related to the Company's decision to close the
manufacturing facility in Tarboro, North Carolina which had been operated by
Wellington (the "Tarboro Facility"), improvements in income from operations
described above also reflects substantial decline in the price of raw material
as costs for both cotton and synthetics were at extremely high levels during
the first quarter of 1996.  Increased interest costs associated with higher
average borrowings plus a swing in provision for income taxes (discussed below)
are reflected in income from continuing operations.  As the Company's former
investment portfolio segment has been largely divested since the Jupiter
Acquisition, income from discontinued operations for the quarter ended March
29, 1997 was significantly reduced.

Net sales for the first quarter of 1997 were $86,778,000 compared to $84,030,000
the first quarter of 1996 reflecting a 3.3% increase of $2,748,000. Sales of
automotive fabrics, which accounted for 3% of the Company's sales in 1996,
declined in the first quarter of 1997 by approximately $436,000 (15.3%) and
sales of industrial fabrics declined only slightly by approximately $827,000
(3.7%) compared to the prior period.  Sales of home furnishing fabrics grew by
approximately $2.3 million (4.8%) from the first quarter of 1996 resulting from
slightly improved demand for these fabrics.  Sales to specialty markets grew by
approximately $2.1 million compared to the first quarter in 1996.  Sales to such
specialty markets are largely comprised of the Company's Fiber Products Division
(fiber and fabric waste reclamation) including TJB which was acquired at the end
of the first quarter of 1996.  The Company's composite reinforcement business,
which is included in sales to specialty markets, declined by $419,000 (18%) from
the first quarter of 1996, reflecting some weakness in demand for composite
reinforcement fabrics.  Sales of apparel fabrics declined by $258,000 from the
first quarter of 1996 reflecting the Company's decision to de-emphasize sales of
these low margin products.




                                      13
<PAGE>   14


At March 29, 1997, the sales backlog of the Company was approximately
$92,636,000 compared to sales backlog of approximately $88,581,000 at December
28, 1996 and $68,734,000 at March 30, 1996.  The backlog at March 29, 1997
includes approximately $17,671,000 for TJB which would not be reflected in the
March 1996 amounts since backorder amounts were not available at the time the
acquisition of TJB was completed.  Management is cautiously optimistic that the
comparable increase in sales backlog (after excluding the TJB backlog) is
representative of strengthened demand in certain markets in which the Company
sells its products.

Cost of sales increased by slightly over $1 million to $69,779,000 in the three
months ended March 29, 1997  compared to $68,757,000 for the comparable 1996
period.  Cost of sales as a percentage of sales decreased in the first quarter
of 1997 when compared to the prior period.  Gross margin improved from 18.2%
for the first quarter of 1996 to 19.6% for the first quarter of 1997.  This
increase resulted largely from improvement in the price of raw materials which
began to decline mid-year in 1996.  Such improvement began to be fully realized
in the first quarter of 1997 when the Company's inventories purchased earlier
at higher prices had cleared the manufacturing cycle at the end of 1996.

Selling, general, and administrative expenses of $6,233,000 for the first
quarter of 1997 declined by $320,000 from $6,553,000.  This improvement is a
result of certain costs which have been eliminated in conjunction with
realignment of selling, general and administrative functions following the
Jupiter Acquisition.

In connection with the Jupiter Acquisition, the Company decided to close the
Tarboro Facility in an effort to realign and consolidate certain operations,
concentrate capital resources on more profitable operations and better position
itself to achieve its strategic corporate objectives.  All activities related
to the closing of the Tarboro Facility were substantially completed in January
1997.  The Tarboro Facility, which is currently vacant, is held for sale and is
recorded at its estimated net realizable value.  During the first quarter of
1996, the Company recorded restructuring charges totaling $4,118,000 to cover
anticipated losses including $1,619,000 related to write-downs of accounts
receivable and inventory, $834,000 for severance costs and $1,665,000 for other
costs related to the operation.  Of these costs, $1,866,000, representing the
minority interest (the portion of Wellington not previously owned by Johnston),
has been recorded in the purchase accounting for the Jupiter Acquisition with
the remaining $2,252,000 recorded as an expense on the consolidated statement
of income.

Depreciation and amortization expense for the three months ended March 29, 1997
increased $728,000 to $5,340,000 compared to $4,612,000 for the three months
ended March 30, 1996.  This increase resulted from additional depreciation
based on the Company's capital investment to upgrade machinery and equipment to
state-of-the-art levels and also included additional depreciation related to
the Company's step-up in basis of property, plant, and equipment in connection
with the Jupiter acquisition.  Such capital investment is an ongoing process
necessary to maintain the Company's production capabilities and competitive
position within the textile industry.

Interest expense for the three months ended March 29, 1997 was $3,340,000
reflecting an increase of $1,038,000 compared to the three months ended March
30, 1996.  Such increases were reflective of higher average borrowings through
the Company's credit facilities during the three months ended March 29, 1997.
The majority of the increased borrowings were deployed to complete the Jupiter
Acquisition.

There was a provision for income taxes of $900,000 for the three months ended
March 28, 1997.  The benefit for income taxes of $647,000 for the three months
ended March 30, 1996 largely reflects a tax benefit related to Wellington,
which was recorded during the first quarter of 1996 in conjunction with the
Jupiter Acquisition.

The minority interest in loss of consolidated subsidiary reflects the minority
shareholders' proportionate share in the losses of Wellington through March 28,
1996, the date the Jupiter Acquisition was completed.

Concurrent with the Jupiter Acquisition, the Company's management made the
decision to discontinue the venture capital investment segment of Jupiter's
operation.  The segment has been accounted for as discontinued operations in
accordance with Generally Accepted Accounting Principles.  Accordingly, the net
assets of the discontinued segment are recorded as an asset on the consolidated
balance sheet and are expected to be disposed of by June 1997.  The results of
operations for Jupiter's venture capital investment activities were recorded as
discontinued operations for 1996.  For the three months ended March 29, 1997,
income from the discontinued operations was $164,000 net of applicable taxes 



                                      14
<PAGE>   15

of $83,000 and for the three months ended March 30, 1996, income from the
discontinued operations was $2,448,000 net of applicable taxes of $4,268,000 and
minority interest in income of $1,083,000.  Income during the first quarter of
1996 from discontinued operations was mainly reflective of gains on the sale of
the Company's investment in EMC Corporation and Viasoft.  In connection with the
classification of the venture capital investment portfolio business as
discontinued operations, for the three months ended March 30, 1996, the Company
recorded a loss on disposal of Jupiter of $1,479,000 net of the applicable
income tax benefit of $2,801,000.  This loss is mainly reflective of the
write-down of the remaining portfolio of venture capital investments from the
values previously established by Jupiter's Board of Directors.  Such write-down
was recorded to reduce the investments to their estimated fair value which was
expected to be realized upon the sale of such investments within one year versus
the value of these investments held on a long-term basis.

MATERIAL CHANGES IN FINANCIAL CONDITION

As a result of the Jupiter Acquisition, the Company has revalued certain
Jupiter assets, mainly inventories and property, plant, and equipment.   Due to
Johnston's previous partial ownership interest in Jupiter, the acquisition of
the remaining outstanding interest is accounted for as a "step acquisition"
resulting in a partial step-up in Jupiter assets.  The Company recorded such
partial step-up in basis on such assets and has recorded goodwill of
$12,196,000 which is to be amortized over 20 years.

LIQUIDITY AND CAPITAL RESOURCES

Working capital at March 29, 1997 was $79,154,000 representing a ratio of
current assets to current liabilities of 2.64 to 1.

The Company's primary needs for capital resources have been funded by
borrowings under its bank credit agreement, which was entered into on March 28,
1996 and thereafter amended on June 28, 1996 and February 28, 1997 (the "Bank
Credit Agreement").  Borrowings under the Bank Credit Agreement have been used
to finance the purchase of the Jupiter Acquisition (as discussed above), to
refinance certain indebtedness, and to pay related fees and expenses related to
the forgoing, and available borrowings will be used, as needed, to finance
working capital and capital expenditure.  The Bank Credit Agreement provides
for revolving credit loans (the "Revolver") of up to $80,000,000, a term loan
for $40,000,000 ("Term Loan A") and a term loan for an additional $40,000,000
("Term Loan B").  Borrowings under the Revolver and the Term Loan A mature on
March 28, 2001 and Term Loan B matures on March 28, 2003.  The term loans are
repayable in quarterly installments starting in 1997.

As of March 27, 1997, the Company had outstanding borrowings under the Bank
Credit Agreement of $153,516,000 and availability under the revolver of
$2,476,000.

Under the terms of the Bank Credit Agreement, substantially all assets are
pledged as collateral for the borrowings under the Bank Credit Agreement. The
Bank Credit Agreement requires the Company to maintain certain financial ratios
and specified levels of tangible net worth.  The Bank Credit Agreement places a
limit on the Company's level of capital expenditures and its ability to effect
certain type of mergers or acquisitions.  The Bank Credit Agreement permits the
Company to pay dividends on its Common Stock provided it is in compliance with
various covenants and provisions contained therein, which among other things
limit dividends and restrict investments to the lesser of (x) 20% of total
assets of the Company, on a fully consolidated basis, as of the date of
determination thereof, or (y) $5,000,000 for the period commencing on January 1,
1996 and ending on December 31, 1996 or (z) $5,000,000 plus 50% of cumulative
consolidated net income for the period commencing January 1, 1997, minus 100% of
cumulative consolidated net loss for the consolidated entities for such period,
as calculated on a cumulative basis as of the end of each fiscal quarter of the
consolidated entities with reference to the financial statements for such
quarter.

The initial Bank Credit Agreement was amended on June 28, 1996 and February
28, 1997 to modify certain covenants.  Prior to the execution of these
amendments, the Company was in technical noncompliance with certain of the
financial covenants contained therein.  At March 29, 1997, the Company was in
compliance with its covenants under the Bank Credit Agreement.




                                      15
<PAGE>   16


Soft markets for the Company's products resulted in a reduction in cash
provided from operations during 1996.  Although available cash has been
adequate to sustain the Company's operations and pay required dividends on its
preferred stock as well as dividends on its Common Stock, cash used to complete
the Jupiter Acquisition, cash used for debt service and debt reduction under
the Bank Credit Agreement and cash used in the Company's capital expenditure
plan have strained the Company's available liquid assets.  Management expects
improvements in cash generation from improved operating results, strict cost
containment, reduction in inventories, judicious review of its short term
capital expenditure plans plus liquidation of the remaining net assets of the
discontinued Jupiter operations and sale of the remaining Tarboro Facility
assets.  While discretionary cash expenditures will require constraint and
careful planning, management believes that funds generated from operations and
funds available under the Bank Credit Agreement will be sufficient to satisfy
the Company's liquidity requirements for at least the next year.

OTHER MATTERS

The Company is periodically involved in legal proceedings arising out of the
ordinary conduct of business.  Management does not expect that such proceedings
will have a material adverse effect on the Company's consolidated financial
position or results of operations.

RISKS AND UNCERTAINTIES

Except for historical information contained herein, the matters set forth in
this report are forward looking statements which are subject to certain risks
and uncertainties that could cause actual results to differ materially from
those in, or which could be expected based on, such forward looking statements.
The Company's expectations regarding future sales and profits assume, among
other things, reasonable continued growth in the general economy which affects
demand for the Company's products, and reasonable stability in raw materials
pricing, changes in which affect customer purchasing decisions as well as the
Company's prices and margins.  The costs and benefits of the Company's
discontinuance of Jupiter venture capital investments and the disposition of
the Tarboro Facility may vary from the Company's expectations due to various
factors such as:  higher or lower than anticipated proceeds from the sale of
assets; the extent of management's ability to control duplication of costs,
inefficiencies and overhead during the period of phasing out operations; and
the difficulties inherent in forecasting the operating results of an operating
mode different from that which exists at the time the forecast is made.  For a
further discussion of risks and uncertainties associated with the Company's
business, readers are referred to the cautionary statement set forth in Item 1
of the Company's annual report on Form 10-K for the transition period ended
December 30, 1995, which cautionary statement is incorporated by reference
herein.



                                      16

<PAGE>   17


                  JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES

                         PART II.   OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS

No reportable legal proceedings arose in the quarter ended March 29, 1997.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K


(a)     Exhibits

        11   Statements of Computation of Per Share Earnings
        27   Financial Data Schedule (Filed Electronically)


(b)     Reports on Form 8-K

        (i) No reports on Form 8-K were filed during the quarter ended
            March 29, 1997.




                                      17
<PAGE>   18


JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES

                                  SIGNATURES



     Pursuant to the requirements of the Securities and Exchange Act of 1934,
the undersigned has duly caused this report to be filed on its behalf by the
undersigned hereto duly authorized.





                                         JOHNSTON INDUSTRIES, INC.
                                         
Dated:  May 13, 1997                      By: /s/ John W. Johnson
                                             -----------------------------------
                                             John W. Johnson
                                             Vice President
                                             Chief Financial Officer
                                         
                                         
                                         
                                         
                                         By: /s/ John W. Johnson
                                             -----------------------------------
                                                 John W. Johnson
                                                 (Principal Accounting Officer)




                                       18