<PAGE>   1
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K

(Mark One)

/X/   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended December 31, 1996

                                       OR

/ /   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

For the transition period from ________________ to _________________
Commission File Number     0-828

                                BIRD CORPORATION
             (Exact name of registrant as specified in its charter)

         MASSACHUSETTS                                   04-3082903
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

1077 Pleasant Street, Norwood, MA                          02062
     (Address of principal executive offices)             (Zip Code)

Registrant's telephone number, including area code:  (617) 551-0656

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

<TABLE>
<CAPTION>
       Title of each class                     Name of each exchange
       -------------------                     on which registered
                                               -------------------
<S>                                            <C>
             NONE                                     NONE
</TABLE>

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

                      Common Stock, par value $1 per share
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes  X  No
                                       ---   ---

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

The aggregate market value of common stock, par value $1 per share, held by
non-affiliates as of March 3, 1997 was $16,684,000. As of March 3, 1997 there
were 4,144,800 shares of Bird Corporation common stock, par value $1 per share,
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 1997 Annual Meeting of Stockholders to
be filed with the Commission by April 30, 1997 are incorporated by reference
into Parts I and III of this report.
<PAGE>   2
                                     PART I




ITEM 1.   DESCRIPTION OF BUSINESS

Bird Corporation is engaged in the manufacture, sale and marketing of roofing
products. Products currently manufactured at Bird Corporation's roofing facility
include asphalt shingles and roll roofing for commercial and residential use.
These products are marketed through independent wholesalers, including
wholesalers whose primary customers are roofing contractors. All references
herein to the "Company" or "Bird" refer to Bird Corporation and its subsidiaries
unless otherwise indicated by the context.



SIGNIFICANT BUSINESS DEVELOPMENT


         _ On March 14, 1996, the Company signed a definitive agreement
           with CertainTeed Corporation, a subsidiary of Saint-Gobain
           Corporation, providing for CertainTeed to acquire in a merger
           transaction all of the Company's outstanding common, preferred
           and preference shares. Subsequently, on May 10, 1996, the
           Company received a notice from CertainTeed that stated that
           CertainTeed terminated the merger agreement in accordance with
           its terms and allowed the related tender offer for the
           outstanding common and preference stock of the Company to
           expire without accepting any shares.



HOUSING GROUP

Asphalt roofing products are manufactured and sold at the Company's facilities
in Norwood, Massachusetts. Asphalt shingles and roll roofing are produced by
coating a fiberglass mat with a mixture of hot asphalt and crushed rock filler
and covering the coated mat with Company-manufactured roofing granules. The
Company's facilities include a roofing manufacturing facility, a granule plant,
a quarry, an asphalt plant and a private landfill for the Company's use.

The Company's Housing Group produced vinyl siding products at its plant in
Bardstown, Kentucky prior to the sale of such facility in March 1995.
Additionally, the Company sold its interest in Kensington, its joint venture in
the replacement window fabrication business in June 1995. The Housing Group also
carried on a distribution business through wholesale building materials
distributors based in New England, New York, Kentucky, Texas, Louisiana, and
Arizona until such businesses were sold in August and November 1994.


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<PAGE>   3
Net sales of the components of the Housing Group as a percentage of consolidated
net sales of the Company were as follows: sales of asphalt roofing products,
100% in 1996, 80% in 1995 and 31% in 1994; sales of vinyl products, 20% in 1995
and 24% in 1994; and sales through building materials distribution centers
(including roofing and vinyl products manufactured by the Company), 45% in 1994.
One customer accounted for slightly more than 15% and 10% of the Company's sales
during 1996 and 1995, respectively.

The principal geographic markets for the Company's manufactured roofing
products, due to limitations imposed by freight costs, are the northeastern
United States. The building materials business is seasonal to the extent that
outside repair and remodeling and new construction decline during the winter
months. To reduce the impact of this seasonal factor, the Company generally
employs what it believes to be an industry-wide practice of "winter dating",
pursuant to which extended or discounted payment terms are offered to
credit-worthy customers who order and accept delivery of roofing products during
specified periods of time in the slow season.


RAW MATERIALS

The principal raw materials used in the manufacture of asphalt roofing products
are fiberglass mat, asphalt saturants and coatings and crushed granules. The
Company's requirements for fiberglass mat are met primarily with one vendor
under an agreement which expires December 31, 1999 with an option to extend for
an additional two years. Fiberglass mat is also generally available in adequate
quantities from a number of outside suppliers. Asphalt saturants and coatings
were, until recently, purchased from a major oil refinery. These materials are
also available from other sources at a higher delivered cost. Since completion
of construction of an asphalt plant in January 1995, the Company has been able
to process asphalt at its roofing facility, thereby reducing its costs and
decreasing the potential for temporary interruptions in its manufacturing
operations. The Company can produce all of its current granule requirements at
its granule plant.


BACKLOG

Order backlog is not a meaningful measure of the Company's building materials
business because there are fewer sales during the last quarter of the fiscal
year and the order-to-shipment cycle is relatively short. Additionally, it is
very rare, at any time, to require more than 30 days from the receipt of a
product order to delivery of the product.


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<PAGE>   4
COMPETITION

The building materials business is, to a large degree, a commodities-type
business and is highly competitive with respect to price, delivery terms and
consistent product quality. Many of the Company's competitors are larger and
financially stronger than the Company, but none is dominant in any of its
markets.

The strengths of the Company's asphalt roofing business arise, in part, from the
unique marketing programs the Company directs toward its indirect customer base,
professional roofing contractors, combined with an industry-wide reputation for
providing quality products with a high level of service. The Company's
comprehensive contractor marketing program is designed to support the position
of the Company's contractors in the industry. Such marketing programs include a
special system for in-home sales promotions. Pursuant to its exclusive
certification program, the Company also certifies contractors who have recorded
three (3) successful years in business, who provide the Company with names of
customers for quality checks, sign a letter of ethics, have a good credit
history, warrant their workmanship for two (2) years and attend annual training
meetings. Contractors must be recertified every three years. Certified
contractors are supplied with a wide array of marketing materials, including
customized sample cases, special mailers and custom job site signs.


INTELLECTUAL PROPERTY

The Company owns a number of trademarks, as well as significant technology and
know-how, which it utilizes in connection with its asphalt roofing business. The
Company believes that its trademarks are strong and well recognized in the
industry.


COMPLIANCE WITH CERTAIN ENVIRONMENTAL LAWS

The Company has expended, and expects to continue to expend, funds to comply
with federal, state and local provisions and orders which relate to the
environment. Based on the information available to the Company at this time, the
Company believes that the effect of compliance with these provisions on the
capital expenditures, earnings and competitive position of the Company is not
material. Litigation and other proceedings involving environmental matters are
described under the heading "Environmental Matters" in Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and in
Item 3, "Legal Proceedings".


FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

While the Company formerly operated in two major business segments,
its housing segment and its environmental segment, the Company no longer
operates its environmental segment. Financial information


                                       4
<PAGE>   5
about the industrial segments in which the Company operated, for the three years
ended December 31, 1996, appear in Note 12 of the Notes to Consolidated
Financial Statements which are included herein.

EMPLOYEES

At December 31, 1996, the Company employed 164 people.


ITEM 2.   PROPERTIES

The Company's executive offices are located at its plant in Norwood,
Massachusetts. The Company believes that its plant and facilities, as described
below, are suitable and adequate for its current and anticipated business.
Operating capacity can be increased by additional man hours, changing product
mix, and/or minimal capital investment should the need arise. The Company's
facilities are well maintained, in sound operating condition, and in regular
use.


ROOFING MANUFACTURING FACILITY

The Company owns its asphalt roofing manufacturing facility in Norwood,
Massachusetts. The Norwood plant includes the roofing manufacturing facility, a
granule plant and an asphalt plant. The Company's quarry is located in Wrentham,
Massachusetts, and its private landfill is located in Walpole, Massachusetts.
The Company leases an industrial laminator and certain other equipment which
were fabricated for use in its roofing plant. The laminator lease expires in
1998. The Company completed the construction of an asphalt oxidizer plant at the
Norwood premises in January 1995 to ensure a continuous supply of asphalt. The
Company also leases an asphalt storage tank and terminal facilities in
Providence, Rhode Island.


ITEM 3.   LEGAL PROCEEDINGS

The Company monitors its compliance with environmental regulations on an ongoing
basis. The Company's general counsel receives environmental site assessments
from the operating managers responsible for site environmental compliance.
Appropriate action is undertaken where needed. When environmental claims are
asserted against the Company, the claims are evaluated by the Company's general
counsel and operating management in conjunction with external legal counsel and
environmental engineers as necessary, and action is taken with respect to all
known sites, as appropriate. The Company is currently engaged in proceedings
relating to or has received notice of the following environmental matters:

On June 21, 1994, the Arizona Department of Environmental Quality ("ADEQ")
issued a notice of violation ("NV") to Southwest Roofing Supply, a previously
owned division of the Company ("Southwest"), which directed Southwest to conduct
a site investigation of property formerly leased by Southwest. The consent order
between the ADEQ and


                                       5
<PAGE>   6
the Company was issued on September 23, 1994. Pursuant to the order, the Company
agreed to submit a work plan with a view to remediating the soil and groundwater
that may have been contaminated by leaks from an underground storage tank
previously removed by the Company. On December 23, 1996, the consent order was
satisfactorily closed between the ADEQ and the Company; however, the remediation
work must still be completed. The Company's management believes that the
remediation cost to the Company will be in the range of $200,000 to $300,000. As
of December 31, 1996, the Company has provided a reserve of $300,000 for the
estimated cost of clean-up. The Company anticipates that $250,000 will be
reimbursed to the Company by the ADEQ in accordance with Arizona law and
regulation.

In 1986, the Company, along with numerous other companies, was named by the EPA
and other governmental agencies responsible for regulation of the environment as
a Potentially Responsible Person ("PRP") pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
Paragraph 9601, et seq. ("CERCLA") in connection with hazardous substances at a
site known as the Fulton Terminal Superfund site located in Fulton, Oswego
County, New York. On September 28, 1990, the Company and a number of other PRPs
reached a negotiated settlement with the EPA pursuant to which the settling PRPs
agreed to pay the costs of certain expenses in connection with the proceedings
and to pay certain other expenses, including the costs and expenses of
administering a trust fund to be established by the settling PRPs. The
settlement agreement is embodied in a consent decree lodged with the United
States District Court for the Western District of New York and fixed the
Company's proportionate share of the total expenses. The soil has been cleaned-
up and the groundwater is now being treated. The remaining cost to the Company
of the remedial work and other expenses covered by the settlement agreement is
estimated to be approximately $350,000 payable during 1997. At December 31,
1996, the Company has a reserve of $350,000 to cover the estimated cost of the
Company's remaining proportionate share (i.e., 17%) of the cost to clean-up the
groundwater. Under a cost-sharing arrangement set forth in a consent decree with
the EPA, the other PRPs have agreed to incur 83% of the aggregate cost of
remediation of this site.

The Company has been named as a PRP with respect to certain other sites which
are being investigated by federal or state agencies responsible for regulation
of the environment. As a consequence of its status as a PRP, the Company may be
jointly and severally liable for all of the potential monetary sanctions and
remediation costs applicable to each site. In assessing the potential liability
of the Company at each site, management has considered, among other things, the
aggregate potential clean-up costs of each site; the apparent involvement of the
Company at each site and its prospective share of the remediation costs
attributable thereto; the number of PRPs identified with respect to each site
and their financial ability to contribute their proportionate shares of the
remediation costs for such site; the availability of insurance coverage for the
Company's involvement at each site and the likelihood that such coverage may be
contested; and whether and to what extent potential sources of contribution from
other PRPs or indemnification by insurance companies


                                       6
<PAGE>   7
constitute reliable sources of recovery for the Company. Similar consideration
has been given in determining the exposure and potential liability of the
Company in connection with other significant legal proceedings to which the
Company is a party. On the basis of such consideration, management has
determined that such environmental matters will not have a material adverse
effect on the Company's financial position or results of operations. The Company
has provided an aggregate reserve amounting to approximately $250,000 for its
estimated share of the ultimate cost of clean-up for claims arising from other
such sites (without taking into account any potential indemnification or
recovery from third parties).

Since 1981 Bird has been named as a defendant in approximately 650 product
liability cases throughout the United States by persons claiming to have
suffered asbestos-related diseases as a result of alleged exposure to asbestos
used in products manufactured and sold by Bird. Approximately 200 of these cases
are currently pending and costs of approximately $2 million in the aggregate
have been incurred in the defense of these claims since 1981. Employers
Insurance of Wausau ("Wausau") has accepted the defense of these cases under an
agreement for sharing of the costs of defense, settlements and judgments, if
any. At December 31, 1996, the Company has recorded a reserve of $950,000 to
cover the estimated cost of these claims. In light of the nature and merits of
the claims alleged, in the opinion of management, the resolution of these
remaining claims will not have a material adverse effect on the results of
operations or financial condition of the Company.

In 1992, a subsidiary of the Company, Bird Atlantic Corporation, formerly
Atlantic Building Products Corporation ("ABPCO"), commenced an action against a
former vendor, alleging violation of an exclusive distributorship without
adequate and fair compensation to ABPCO. A jury trial was held in November 1995
in the Superior Court of Plymouth County, Massachusetts. The jury found in favor
of ABPCO and judgement was entered on January 26, 1996 in the principal amount
of approximately $1.8 million. The award, with interest accruing at 12% per
annum, is expected to be in excess of $3 million and will not be reported as
income until collected. The defendant has appealed the judgement.

On April 16, 1996, a class action suit was filed in the Superior Court of the
Commonwealth of Massachusetts against Bird Incorporated, a wholly owned
subsidiary of the Company. The complaint alleges that Bird Incorporated has
knowingly manufactured, distributed and falsely advertised defectively designed
fiber glass based roofing shingles. The complaint sets forth claims of fraud,
negligent misrepresentation, negligence and breach of express and implied
warranty. The Company is currently in the process of evaluating the complaint.
The Company has tendered the defense of the action to its insurance carriers.
Two of its insurance carriers have assumed its defense.


                                       7
<PAGE>   8
INSURANCE AND PRODUCT LIABILITY CLAIMS

On June 1, 1993, Wausau commenced action in the Superior Court for Norfolk
County, Massachusetts, against Bird seeking a declaratory judgment that certain
built-up roofing and glass shingle claims made against Bird were not covered by
liability insurance policies issued by Wausau. Bird asserts that the claims are
covered and has answered the complaint. A trial is scheduled for 1998. In the
opinion of management, the above matter will not have a material adverse effect
on the Company's financial position or results of operations.

The Company is also exposed to a number of other asserted and unasserted
potential claims encountered in the normal course of business. In the opinion of
management, the resolution of such claims will not have a material adverse
effect on the Company's financial position or results of operations.

The Company is a defendant in a number of suits alleging product defects, the
outcome of which management believes will not in the aggregate have a material
impact on the Company's financial position or results of operations.


ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the quarter
ended December 31, 1996.


EXECUTIVE OFFICERS OF THE REGISTRANT

The names and ages of the executive officers of the Company as of
March 7, 1997, the date from which they have served as officers and their
present positions with the Company are as follows:

<TABLE>

<S>                     <C>  <C>                 <C>
Richard C. Maloof        51   January 1985        President and
                                                  Chief Operating
                                                  Officer


Frank S. Anthony         50   May 1984            Vice President,
                                                  General Counsel and
                                                  Corporate Secretary
</TABLE>

Mr. Maloof joined the Company in October 1971. He has held various positions
such as Senior Roofing Engineer, Manufacturing Manager - Pacific Division, Vice
President of Manufacturing and President of the Roofing Division. Mr. Maloof
holds an engineering degree. He was elected President and COO in May 1995 and
was also elected to the Board of Directors in 1995. Mr. Anthony is an attorney
and joined the Company in 1983.

These officers are appointed annually at an organizational meeting of the Board
of Directors immediately following the annual meeting of stockholders. There are
no family relationships among any of the


                                       8
<PAGE>   9
officers of the Company nor are any of the officers related to any member of the
Board of Directors.

The Company has entered into employment agreements with its two executive
officers. Mr. Maloof's agreement provides severance benefits to him after a
change in control of the Company. Mr. Anthony's agreement provided that
severance benefits would be payable to him on March 31, 1996. The agreement
automatically converted to an oral agreement on the same terms and conditions
terminable by either party on 60 days notice. These agreements are described in
the Company's definitive proxy statement for its 1997 Annual Meeting which is to
be filed with the Commission by April 30, 1997 and is incorporated herein by
reference.


                                     PART II


ITEM 5.   MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SECURITY
          HOLDER MATTERS


COMMON STOCK INFORMATION

The Company had 2,041 common shareholders of record at December 31, 1996.

The common stock is quoted in the National Market System under the NASDAQ symbol
BIRD. The range of high and low prices for the common stock as reported by
NASDAQ for the periods indicated is set forth below.

<TABLE>
<CAPTION>
                            1996                               1995
                            ----                               ----
  QUARTER            HIGH         LOW                    HIGH         LOW
  -------            ----         ---                    ----         ---
<S>                <C>       <C>                        <C>           <C>
  FIRST             7 5/8     4 l/8                      9             7 3/4
  SECOND            7 1/2     3 1/4                      8 5/8         6 1/4
  THIRD             4 3/4     2 3/4                      8 1/2         5 7/8
  FOURTH            6         4 l/2                      6 5/8         4 1/2
</TABLE>

The Company paid no cash dividends on its common stock during 1996 or 1995.

Under the terms of the Loan Agreement between the Company and Fleet Capital, the
Company has agreed that it will refrain from paying cash dividends on its common
stock or its $1.85 cumulative preference stock, without prior approval from the
Bank.

The Company is in arrears in the payment of five dividends on its preference
stock. The Articles of Organization of the Company provide that as long as any
arrearage on the payment of dividends on the Company's 5% preferred stock
exists, no dividends may be declared or paid on any other class of stock of the
Company and further provides that in the event that full cumulative dividends on
the preference stock have not been declared and paid, the Company may not
declare or pay any dividends or make any distributions on, or purchase, redeem,


                                       9
<PAGE>   10
or otherwise acquire, its common stock until full cumulative dividends on the
preference stock have been declared and paid or set aside for payment.


                                       10
<PAGE>   11
ITEM 6. SELECTED FINANCIAL DATA

The following tables set forth certain financial data and are qualified in their
entirety by the more detailed Consolidated Financial Statements and information
included elsewhere herein:


SELECTED CONSOLIDATED STATEMENT OF OPERATIONS DATA

<TABLE>
<CAPTION>
                                                                     YEAR ENDED DECEMBER 31,
                                                       -------------------------------------------------------------------

                                                        1996          1995           1994           1993           1992
                                                       -------       -------        -------       --------       --------
                                                                    (In thousands, except per share amounts)
<S>                                                    <C>          <C>            <C>            <C>            <C>
Net sales                                              $51,956       $54,180       $167,886       $187,745       $164,202
                                                       -------      -------        -------       --------       --------
Costs and expenses:
        Cost of sales                                   43,840        48,007        136,878        151,664        128,371
        Selling, general and
          administrative expenses                        5,764        11,817         28,786         32,716         27,811
        Other expense, net                                 667           372          4,680          5,903           (197)
        Interest expense                                   435           927          4,782          2,472          1,506
        Loss (gain) on disposal of businesses             (919)      (17,570)        (1,313)           268            178
                                                       -------       -------       --------       --------       --------

Earnings (loss) from continuing operations
     before income taxes                                 2,169        10,627         (5,927)        (5,278)         6,533
Provision (benefit) for income taxes                         0        11,424         (7,010)          (637)           869
                                                       -------       -------       --------       --------       --------

Earnings (loss) from continuing operations
     before cumulative effect of accounting change       2,169          (797)         1,083         (4,641)         5,664
                                                       -------        -------       -------        --------      --------

Discontinued operations:
     Gain (loss) from operations of discontinued
        businesses, net of taxes                             0             0          1,245        (15,414)        (2,573)
     Income (loss) on disposal of businesses,
        net of taxes                                       134       (11,252)        (6,011)       (11,000)             0
                                                       -------       -------       --------       --------       --------

Net earnings (loss) from discontinued operations           134       (11,252)        (4,766)       (26,414)        (2,573)
                                                       -------       -------       --------       --------       --------

Cumulative effect of accounting change                       0             0              0          2,733              0
                                                       -------       -------       --------       --------       --------

Net earnings (loss)                                    $ 2,303      $(12,049)      $ (3,683)      $(28,322)      $  3,091
                                                       =======       ========      ========       ========       ========


Primary earnings (loss) per common share:
     Continuing operations                             $  0.15       $ (0.57)      $  (0.11)      $  (1.51)      $   1.00
     Discontinued operations                              0.03         (2.74)         (1.20)         (6.45)         (0.62)
     Cumulative effect of accounting change               0.00          0.00           0.00           0.67           0.00
                                                       -------       -------       --------       --------       --------

Net earnings (loss) per common share                   $  0.18       $ (3.31)      $  (1.31)      $  (7.29)      $   0.38
                                                       =======       =======       ========       ========       ========

Cash dividend per common share                         $  0.00       $  0.00       $   0.00       $   0.15       $   0.20
                                                       =======       =======       ========       ========       ========

Book value per common share                            $  1.56       $  1.45       $   5.07       $   5.75       $  12.83
                                                       =======       =======       ========       ========       ========
</TABLE>



SELECTED CONSOLIDATED BALANCE SHEET DATA

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                              ---------------------------------------------------------
                                                1996        1995        1994         1993         1992
                                              -------     -------     -------     --------     --------
                                                                   (In thousands)
<S>                                           <C>         <C>         <C>         <C>          <C>
Total assets                                  $39,669     $43,703     $85,705     $123,229     $119,075
Working capital                               $ 3,375     $ 5,978     $ 5,627     $ 30,090     $ 43,782
Long-term debt, excluding current portion     $   255     $ 4,869     $12,504     $ 43,127     $ 30,374
Stockholders' equity                          $25,270     $24,416     $37,718     $ 40,561     $ 69,101
</TABLE>

                                       11
<PAGE>   12
                        BIRD CORPORATION AND SUBSIDIARIES


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


FINANCIAL CONDITION

As of December 31, 1996, the Company had cash and equivalents on hand totaling
$2,310,000 and total debt of approximately $2.4 million. The Company plans to
continue its aggressive efforts of managing working capital as a means of
generating funds. The Company's external financing needs are augmented by the
ability of its wholly owned subsidiary, Bird Incorporated, to borrow under the
three year Loan and Security Agreement (the "Loan Agreement") dated November 30,
1994 between Bird and Fleet Capital Corporation ("Fleet Capital").

At the end of the three year period, the Loan Agreement will be automatically
renewed for successive one year periods unless terminated specifically in
writing. On March 8, 1995, Fleet Capital executed the First Amendment to the
Loan Agreement amending the amount of the facility to $20 million consisting of
a $15 million revolving credit commitment and a $5 million term loan. Up to $5
million of the revolving credit facility can be used for letters of credit. At
December 31, 1996, $1,804,000 of debt was outstanding under this agreement and
letters of credit totaled $1,401,000 compared to $2,233,000 as of December 31,
1995.

Borrowings by Bird Incorporated under the Loan Agreement are guaranteed by the
Company and the Company's other subsidiaries and are secured by substantially
all of the assets of the Company and its subsidiaries. The revolving credit line
availability is determined with reference to a percentage of accounts receivable
and inventory which are pledged to the lender. During the period January 1
through April 30, the Loan Agreement provides a $2 million over advance on
accounts receivable and inventories in order to assist the Company in assuring
adequate funding of any seasonal build up of accounts receivable which may occur
under sales programs offered during the winter months. Currently, the
availability calculation does not allow borrowings to the full extent of the
revolving credit commitment, due to the seasonality of the building materials
manufacturing business. As of March 20, 1997, an aggregate of $7,654,000 was
available to Bird under the terms of the revolving credit facility under the
Loan Agreement of which $5,243,000 remains available, net of current borrowings
and letter of credit utilization.

The Loan Agreement contains financial and operating covenants which, among other
things, (i) require the Company to maintain prescribed levels of tangible net
worth, net cash flow and working capital and (ii) place limits on the Company's
capital expenditures. The Loan Agreement also contains restrictions on
indebtedness, liens, investments, distributions (including payment of common and
preference dividends), mergers, acquisitions and disposition of assets. As of
December 31, 1996, the Company was in compliance with each of the


                                       12
<PAGE>   13
prescribed financial and operating covenants as outlined in the Loan Agreement.

Interest on the revolving credit commitment under the First Amended Loan
Agreement accrues at the Fleet Capital base rate (as specified in such
Agreement) or the London Interbank Offering Rate ("LIBOR") plus 2 3/4% at the
Company's election on all borrowings plus the greater of $25,000 per annum or
1/4% on any unused portion of the commitment payable monthly in arrears. The
interest on the term loan accrues at the base rate or the LIBOR rate plus 2 3/4%
at the Company's election. The interest rate on outstanding borrowings at
December 31, 1996 was 8.125%. The repayment of the principal on the term loan is
at the rate of $71,417 per month with a final principal payment of $1,018,000
due on November 30, 1997. Proceeds in excess of $100,000 from the sale of fixed
assets may, at Fleet Capital's discretion, be applied to the outstanding
principal payments of the term loan.

Net cash and equivalents decreased during fiscal 1996 by approximately $1.4
million primarily due to repayments of debt. The Company generated cash of $4.4
million from operating activities, including $2.3 million from net earnings,
$2,8 million from depreciation and amortization, $1.3 million from decreased
prepaid expenses, primarily offset by $1.6 million in increased liabilities
unrelated to financing activities.

The Company used $1.1 million in investing activities for the period ended
December 31, 1996 as compared to $47.3 million of net cash provided from
investing activities for the same period in the prior year. The change is the
result of approximately $50.7 million of cash proceeds from the sale of assets
of the vinyl and window businesses, offset by cash used for capital expenditures
and additional investments in discontinued operations aggregating approximately
$4 million for the period ended December 31, 1995 compared to capital
expenditures of $1.1 million for the same period in 1996.

The net cash used in financing activities changed by approximately $21.1 million
from the same period in the prior year. Cash used in financing activities during
1996 was primarily due to approximately $4 million of net debt repayments as
compared to 1995 when the Company had net debt repayments of approximately $24
million.

The Company believes that cash flow generated from operations and funds
available as a result of its borrowing capacity will be adequate to meet its
working capital obligations, projected capital expenditures and other financing
needs.


ENVIRONMENTAL MATTERS


The Company monitors its compliance with environmental regulations on an ongoing
basis. The Company's general counsel receives environmental site assessments
from the operating managers responsible for site environmental compliance.
Appropriate action is undertaken where needed. When environmental claims are
asserted against the Company,


                                       13
<PAGE>   14
the claims are evaluated by the Company's general counsel and operating
management in conjunction with external legal counsel and environmental
engineers as necessary, and action is taken with respect to all known sites, as
appropriate. The Company is currently engaged in proceedings relating to or has
received notice of the following environmental matters:

On June 21, 1994, the Arizona Department of Environmental Quality ("ADEQ")
issued a notice of violation ("NV") to Southwest Roofing Supply, a previously
owned division of the Company ("Southwest"), which directed Southwest to conduct
a site investigation of property formerly leased by Southwest. The consent order
between the ADEQ and the Company was issued on September 23, 1994. Pursuant to
the order, the Company agreed to submit a work plan with a view to remediating
the soil and groundwater that may have been contaminated by leaks from an
underground storage tank previously removed by the Company. On December 23,
1996, the consent order was satisfactorily closed between the ADEQ and the
Company; however, the remediation work must still be completed. The Company's
management believes that the remediation cost to the Company will be in the
range of $200,000 to $300,000. As of December 31, 1996, the Company has a
reserve of $300,000 for the estimated cost of clean-up. The Company anticipates
that $250,000 will be reimbursed to the Company from the Arizona State Assurance
Fund administered by the ADEQ in accordance with Arizona law and regulation.

In 1986, the Company, along with numerous other companies, was named by the EPA
and other governmental agencies responsible for regulation of the environment as
a Potentially Responsible Person ("PRP") pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C.
Paragraph 9601, et seq. ("CERCLA") in connection with hazardous substances at a
site known as the Fulton Terminal Superfund site located in Fulton, Oswego
County, New York. On September 28, 1990, the Company and a number of other PRPs
reached a negotiated settlement with the EPA pursuant to which the settling PRPs
agreed to pay the costs of certain expenses in connection with the proceedings
and to pay certain other expenses, including the costs and expenses of
administering a trust fund to be established by the settling PRPs. The
settlement agreement is embodied in a consent decree lodged with the United
States District Court for the Western District of New York and fixed the
Company's proportionate share of the total expenses. The soil has been
cleaned-up and the groundwater is now being treated. The remaining cost to the
Company of the remedial work and other expenses covered by the settlement
agreement is estimated to be approximately $350,000 payable during 1997. At
December 31, 1996, the Company has provided a reserve of $350,000 to cover the
estimated cost of the Company's remaining proportionate share (i.e., 17%) of the
cost to clean-up the groundwater. Under a cost-sharing arrangement set forth in
a consent decree with the EPA, the other PRPs have agreed to incur 83% of the
aggregate cost of remediation of this site.

The Company has been named as a PRP with respect to certain other sites which
are being investigated by federal or state agencies responsible for regulation
of the environment. As a consequence of its status as a PRP, the Company may be
jointly and severally liable for all of the


                                       14
<PAGE>   15
potential monetary sanctions and remediation costs applicable to each site. In
assessing the potential liability of the Company at each site, management has
considered, among other things, the aggregate potential clean-up costs of each
site; the apparent involvement of the Company at each site and its prospective
share of the remediation costs attributable thereto; the number of PRPs
identified with respect to each site and their financial ability to contribute
their proportionate shares of the remediation costs for such site; the
availability of insurance coverage for the Company's involvement at each site
and the likelihood that such coverage may be contested; and whether and to what
extent potential sources of contribution from other PRPs or indemnification by
insurance companies constitute reliable sources of recovery for the Company.
Similar consideration has been given in determining the exposure and potential
liability of the Company in connection with other significant legal proceedings
to which the Company is a party. On the basis of such consideration, management
has determined that such environmental matters will not have a material adverse
effect on the Company's financial position or results of operations. The Company
has provided an aggregate reserve amounting to approximately $250,000 for its
estimated share of the ultimate cost of clean-up for claims arising from other
such sites (without taking into account any potential indemnification or
recovery from third parties).

Since 1981 Bird has been named as a defendant in approximately 650 product
liability cases throughout the United States by persons claiming to have
suffered asbestos-related diseases as a result of alleged exposure to asbestos
used in products manufactured and sold by Bird. Approximately 200 of these cases
are currently pending and costs of approximately $2 million in the aggregate
have been incurred in the defense of these claims since 1981. Employers
Insurance of Wausau ("Wausau") has accepted the defense of these cases under an
agreement for sharing of the costs of defense, settlements and judgments, if
any. At December 31, 1996, the Company has recorded a reserve of $950,000 to
cover the estimated cost of these claims. In light of the nature and merits of
the claims alleged, in the opinion of management, the resolution of these
remaining claims will not have a material adverse effect on the results of
operations or financial condition of the Company.

INSURANCE AND PRODUCT LIABILITY CLAIMS

On April 16, 1996, a class action suit was filed in the Superior Court of the
Commonwealth of Massachusetts against Bird Incorporated, a wholly owned
subsidiary of the Company. The complaint alleges that Bird Incorporated has
knowingly manufactured, distributed and falsely advertised defectively designed
fiber glass based roofing shingles. The complaint sets forth claims of fraud,
negligent misrepresentation, negligence and breach of express and implied
warranty. The Company is currently in the process of defending against the
complaint. The Company has tendered the defense of the action to its insurance
carriers. Several of its insurance carriers have assumed its defense. In the
opinion of management, the above matter will not have a material adverse effect
on the Company's financial position or results of operations.


                                       15
<PAGE>   16
On June 1, 1993, Wausau commenced action in the Superior Court for Norfolk
County, Massachusetts, against Bird seeking a declaratory judgment that certain
built-up roofing and glass shingle claims made against Bird were not covered by
liability insurance policies issued by Wausau. Bird asserts that the claims are
covered and has answered the complaint. A trial is scheduled for 1998. In the
opinion of management, the above matter will not have a material adverse effect
on the Company's financial position or results of operations.

The Company is also exposed to a number of other asserted and unasserted
potential claims encountered in the normal course of business. In the opinion of
management, the resolution of such claims will not have a material adverse
effect on the Company's financial position or results of operations.

The Company is a defendant in a number of suits alleging product defects, the
outcome of which management believes will not in the aggregate have a material
impact on the Company's financial position or results of operations.


LEGAL MATTERS

In 1992, a subsidiary of the company, Bird Atlantic Corporation, formerly
Atlantic Building Products Corporation ("ABPCO"), commenced an action against a
former vendor, alleging violation of an exclusive distributorship without
adequate and fair compensation to ABPCO. A jury trial was held in November 1995
in the Superior Court of Plymouth County, Massachusetts. The jury found in favor
of ABPCO and judgement was entered on January 26, 1996 in the principal amount
of approximately $1.8 million. The award, with interest accruing at 12% per
annum, is expected to be in excess of $3 million and will not be reported as
income until collected. The defendant has appealed the judgement.

In April 1996, the Company received a grand jury subpoena issued upon
application of the United States Department of Justice, Antitrust Division, for
the production of certain documents for its investigation of restraint of trade
by manufacturers in the roofing industry. In addition, an executive officer and
a senior manager of Bird received grand jury subpoenas to provide testimony
before the grand jury.

On October 9, 1996, the United States Department of Justice, Antitrust Division
advised the Company that on September 27, 1996 the Department closed its
investigation without taking any action against any companies or individuals. As
a result of complying with the subpoenas and otherwise cooperating with the
Justice Department, the Company incurred costs of approximately $300,000.


TERMINATED MERGER AGREEMENT

On March 14, 1996, the Company signed a definitive agreement with CertainTeed
Corporation ("CertainTeed"), a subsidiary of Saint-Gobain Corporation, providing
for CertainTeed to acquire in a merger


                                       16
<PAGE>   17
transaction all of the Company's outstanding common, preferred and preference
shares. Subsequently, on May 10, 1996, the Company received a notice from
CertainTeed that stated that CertainTeed terminated the

merger agreement in accordance with its terms and allowed the related tender
offer for the outstanding common and preference stock of the Company to expire
without accepting any shares. The approximate cost associated with the
termination of this merger agreement was $800,000.


RESULTS OF OPERATIONS

The Company's future prospects and sales are tied solely to one line of business
(roofing manufacturing) which is dependent upon the economy in the northeastern
United States. The Company produces all of its output at a single plant which
relies on one major supplier for glass mat, a critical raw material.
Nevertheless, the Company believes it has significant competitive advantages in
this business. These advantages stem from, and are expected to continue in light
of the Company's leading market share, its low cost production abilities
resulting from a state-of-the-art plant, its internal supply of granules from
its own quarry and granule plant and its asphalt oxidizing plant.


1996 COMPARED WITH 1995

Earnings from continuing operations before income taxes in 1996 were $2,169,000
compared to earnings of $10,627,000 in 1995. Net sales decreased 4.1% from
$54,180,000 to $51,956,000 as compared to 1995, a consequence of the sale of the
Company's window fabrication and vinyl products business units which had
aggregate sales of $10,575,000.

Cost of sales in 1996 as compared to 1995 decreased 8.7% from $48,007,000 to
$43,840,000, primarily the result of the sale of the Company's window
fabrication and vinyl products business units. Cost of sales, stated as a
percentage of net sales, was 84.4% in fiscal 1996 as compared to 88.6% in fiscal
1995. Improvements in manufacturing efficiency contributed to the percentage
decrease.

Selling, general and administrative ("SG&A") expenses for fiscal 1996 decreased
51.2% from $11,817,000 to $5,764,000. SG&A expenses, as stated as a percentage
of sales, decreased approximately 11% from year to year. The decrease was
attributable to the sale of the Company's window fabrication and vinyl products
business units, reduction in corporate staffing and operating expenses and
reduction in roofing plant expenses.

Other expenses in 1996 were primarily due to $806,000 of costs associated with
the terminated merger agreement with CertainTeed.

Interest expense in 1996 decreased approximately 53% or $492,000 as compared to
1995. The decrease reflects a reduction of debt by use of proceeds from the sale
of the Company's vinyl products and window fabrication business units.


                                       17
<PAGE>   18
1995 COMPARED WITH 1994

Earnings from continuing operations before income taxes in fiscal 1995
were $10,627,000 compared to losses of $5,927,000 in fiscal 1994. Net sales from
continuing operations decreased 67.7% from $167,886,000 to $54,180,000 as
compared to 1994, primarily due to the sale of the Company's distribution and
vinyl products business units. Sales from the roofing manufacturing business
decreased $10,857,000 or 19.9% due to price weakness and a decline in volume.
The decreased volume was attributable to a weak re-roofing market in the
northeast caused by a mild 1994/1995 winter followed by a hot, dry summer. The
Company is expanding its sales territories to include areas bordering the
northeastern United States in an effort to replace lost volume.

Cost of sales in 1995 was $48,007,000 as compared to $136,878,000 in 1994,
constituting a decrease of 64.9%. The decline was primarily a result of the sale
of the Company's distribution and vinyl products business units. Cost of sales
for the roofing business decreased 18.4% or $8,662,000 due primarily to
decreased manufacturing costs related to a decrease in sales volume. Although
the Company experienced raw material price increases in glass mat and dry felt,
the cost of asphalt, along with related freight, was reduced significantly as a
result of the newly constructed asphalt oxidizer, which produces asphalt
saturant and coatings. The oxidizer became operational in February 1995. From
November 1995 through mid-February 1996, the oxidizer was temporarily shut down
for repairs as a result of a fire in the plant.

Cost of sales, stated as a percentage of net sales, was 88.6% in fiscal 1995 as
compared to 81.5% in fiscal 1994. Roofing manufacturing cost of sales, as a
percentage of sales, increased 1.6% from 86.2% to 87.8% in 1995. Increases in
raw material costs and decreases in sales prices contributed to the percentage
increase.

Selling, general and administrative ("SG&A") expenses for fiscal 1995 decreased
59% from $28,786,000 to $11,817,000. The decrease was primarily attributable to
the sale of the Company's distribution and vinyl products business units.
However, SG&A expenses, as a percentage of sales, increased approximately 5%
from year-to-year. The increase was due primarily to amortized costs associated
with the 1994 refinancing of an earlier credit agreement, additional charges
related to environmental remediation and costs associated with closing the
Company's corporate office. The decrease in sales in the roofing business
without a corresponding decline in certain fixed costs also contributed to the
increase as a percentage of sales.

Interest expense was $927,000 in 1995 as compared to $4,782,000 in 1994, an
80.6% decrease. The decrease resulted from the reduction of debt which occurred
through the use of proceeds from the sale of the vinyl products and distribution
business units.

The gain on disposal of businesses in 1995 reflects the gain of $20,579,000 on
the sale of the vinyl manufacturing business offset by the loss of $1,959,000 on
the sale of the window fabrication business and a charge of $1,500,000 for costs
associated with the Company's


                                       18
<PAGE>   19
employee benefit plans and future product liability claims, both related to
former roofing operations. The fiscal 1994 gain on disposal of businesses
reflects primarily the gain of $2,727,000 on the sale of all of the Company's
building materials distribution businesses reduced by the loss of $1,261,000 on
the sale of the Company's 40% interest in Mid-South Building Supply, Inc.

Equity losses from the Company's partnership in the Kensington window
fabrication business amounted to $372,000 for the period January 1, through
February 28, 1995 as compared to $4,680,000 for the twelve month period ended
December 31, 1994.

A provision for income taxes from continuing operations amounting to $11,424,000
was recorded in 1995 compared to a benefit of $7,010,000 in 1994. The Company's
decision to reverse $4 million of the valuation reserve in 1994 and subsequent
decision to increase the reserve to $15.1 million in 1995 is the primary reason
the effective tax rates differ from the statutory rate. At December 31, 1995 the
Company's net deferred tax asset is approximately $19.1 million less a valuation
reserve of $15.1 million. As required under FAS 109, this valuation reserve was
determined based upon the Company's review of all available evidence including
projections of future taxable income. During 1995, the Company disposed of
Bird-Kensington Holding Corporation and Bird Environmental Gulf Coast, Inc.
resulting in losses not anticipated at the end of the previous year. In
addition, the lower overall demand and price weakness in the northeast caused by
a mild 1994/1995 winter followed by a hot, dry summer negatively impacted
profits of the roofing operations.

During the second quarter of 1995, the Company's remaining investment in BEGCI
of $8.6 million was written-off to discontinued operations and a $3 million
reserve was established for additional costs associated with the closure and
disposition of the facility (see Note 9 to Consolidated Financial Statements).
In November 1995, the Company caused the sale of all the outstanding capital
stock of BEGCI to GTS Duratek, Inc. for a purchase price of $1.00. Of the $3
million reserve established in the second quarter of 1995, $2,050,000 was
utilized, while $650,000 remained at December 31, 1995 for future claims against
discontinued operations.

In connection with the Board of Director's 1994 decision to withdraw from the
"off-site" environmental business and the Company's agreement on June 18, 1994
to cause the sale of its shares in BEGCI to the minority stockholders on or
before February 28, 1995, subject to financing, the Company reclassified the
environmental business results as discontinued operations as of June 30, 1994
and adjusted the book value associated with BEGCI, resulting in an aggregate
charge for the twelve months ended December 31, 1994 of $11,586,000.

In 1993, in connection with its decision to withdraw from the "on-site"
environmental remediation business, the Company charged the results of
operations for the write-down of assets, the expected loss from operations and
general expenses related to closing of such "on-site" remediation business (see
notes to Consolidated Financial Statements). Based upon the actual outcome of
the sale of assets and results of


                                       19
<PAGE>   20
operations, excess costs of $3,861,000 charged in 1993 were reversed and
recorded as discontinued operations in the consolidated statement of operations
for the year ending December 31, 1994.


INFLATION

The Company is continually seeking ways to deal with raw material cost increases
by productivity improvements and cost reduction programs. In recent years, the
Company has not always been able to pass on increased raw material costs to
customers by increasing selling prices because of intense competitive pressures.
The Company has an ongoing program of updating productive capacity to take
advantage of improved technology, and although the cumulative impact of
inflation has resulted in higher costs for replacement of plant and equipment,
these costs have been offset, in part, by productivity savings.



ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and schedules of the Company are included
in a separate section of this report and are incorporated herein by reference.



ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
          AND FINANCIAL DISCLOSURE

                                 Not applicable.



                                    PART III



ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT



ITEM 11.  EXECUTIVE COMPENSATION



ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


                                       20
<PAGE>   21
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


The information required by Items 10, 11, 12 and 13 (except the information on
executive officers) is included in the Company's definitive proxy statement for
its 1997 Annual Meeting of Stockholders which will be filed with the Commission
by April 30, 1997 and which is incorporated herein by reference. Information on
executive officers, required by Item 10, is included in PART I of this report
under the heading "Executive Officers of the Registrant".


                                     PART IV

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

(a)      An Index of Financial Statements and Schedules is on page F1 of this
         report. The Exhibit Index is on pages 22 through 27 of this report.

(b)      Reports on Form 8-K - No reports on Form 8-K were filed during the last
         quarter of the year ended December 31, 1996.

(d)      Financial Statements of Kensington Partners are on Page F30 through F52
         of this report.


                                       21
<PAGE>   22
                            Items 14 (a) (3) and (c)
                                    Exhibits
                                Bird Corporation
                             Norwood, Massachusetts

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
                                                                                  Sequential
Exhibit No.                                                                         Page No.
-----------                                                                       ----------
<S>               <C>                                                             <C>
3(a)              Articles of Organization (Filed as Appendix B to the Company's
                  Registration Statement on Form S-4, Registration No 33-34440
                  and incorporated herein by reference.)

3(b)              By-laws of the Company as amended to date. (Filed as Exhibit
                  3(b) to the Company's report on Form 10-K for the year ended
                  December 31, 1990 and incorporated herein by reference.)

4(a)(1)           Forbearance Agreement dated as of February 14, 1994 with
                  regard to the Revolving Credit Agreement dated as of December
                  17, 1990, as amended. (Filed as Exhibit 4 (a)(3) to the
                  Company's Form 10-K for the year ended December 31, 1993 and
                  incorporated herein by reference.)

4(a)(2)           Third Amended and Restated Revolving Credit and Term Loan
                  Agreement dated as of March 4, 1994 (Filed as Exhibit 4(a)(1)
                  to the Company's Form 8-K dated March 14, 1994 and
                  incorporated herein by reference.)

4(a)(3)           Loan and Security Agreement dated as of November 30, 1994
                  (the "Loan Agreement") between Barclays Business Credit, Inc.
                  (now known as Fleet Capital Corporation) and Bird
                  Incorporated. (Filed as Exhibit 4(a)(3) to the Company's Form
                  10-K for the year ended December 31, 1994 and incorporated
                  herein by reference.)

4(a)(4)           First Amendment dated as of March 8, 1995 to the Loan
                  Agreement between Shawmut Capital Corporation (now known as
                  Fleet Capital Corporation) and Bird Incorporated. (Filed as
                  Exhibit 4(a)(4) to the Company's Form 10-K for the year ended
                  December 31, 1994 and incorporated herein by reference.)
</TABLE>


                                       22
<PAGE>   23
<TABLE>
<CAPTION>
                                                                                  Sequential
Exhibit No.                                                                         Page No.
-----------                                                                       ----------
<S>               <C>                                                             <C>
4(a)(5)           Rights Agreement dated as of November 25, 1986 between the
                  Company and the First National Bank of Boston, as Rights
                  Agent. (Filed as Exhibit 1 to Registration Statement on Form
                  8-A dated December 5, 1986 and incorporated herein by
                  reference.)

4(a)(6)           First Amendment dated May 24, 1990 to Rights Agreement dated
                  as of November 25, 1986. (Filed as Exhibit 4(b)(2) to the
                  Company's report on Form 10-K for the year ended December 31,
                  1990 and incorporated herein by reference.)

10(a)*            Plan for Assistance to Key Employees in Financing Purchases of
                  Company Stock (Filed as Exhibit 10(b) to the Company's report
                  on Form 10-K for the year ended December 31, 1980 and
                  incorporated herein by reference.)

10(b)*            Plan for Deferring Payment of Senior Officer's Compensation
                  (Adopted December 22, 1975). (Filed as Exhibit 10(c) to the
                  Company's report on Form 10-K for the year ended December 31,
                  1980 and incorporated herein by reference.)

10(c)*            1975 Plan for Deferring Payment of Director's Compensation
                  (Adopted June 23, 1975). (Filed as Exhibit 10(d) to the
                  Company's report on Form 10-K for the year ended December 31,
                  1980 and incorporated herein by reference.)

10(d)*            Settlement Agreement dated as of July 7, 1994 between Bird
                  Corporation and George J. Haufler. (Filed as Exhibit 10(d) to
                  the Company's Form 10-K for the year ended December 31, 1994
                  and incorporated herein by reference.)

10(e)*            Management Incentive Compensation Program adopted January 25,
                  1983. (Filed as Exhibit 10(m) to the Company's report on Form
                  10-K for the year ended December 31, 1982 and incorporated
                  herein by reference.)
</TABLE>


                                       23
<PAGE>   24
<TABLE>
<CAPTION>
                                                                                  Sequential
Exhibit No.                                                                         Page No.
-----------                                                                       ----------
<S>               <C>                                                             <C>
10(f)*            Bird Corporation 1982 Stock Option Plan as amended through
                  January 29, 1992. (Filed as Exhibit 10(f) to the Company's
                  report on Form 10-K for the year ended December 31, 1991 and
                  incorporated herein by reference.)

10(g)*            Bird Corporation 1992 Stock Option Plan. (Filed as Exhibit
                  10(g) to the Company's report on Form 10-K for the year ended
                  December 31, 1992 incorporated herein by reference.)

10(h)*            Bird Corporation Non-Employee Director Stock Option Plan.
                  (Filed as Exhibit 10(h) to the Company's report on Form 10-K
                  for the year ended December 31, 1992 incorporated herein by
                  reference.)

10(i)(1)*         Form of severance agreement with eight key executive employees
                  of the Company. (Filed as Exhibit 10(n) to the Company's
                  report on Form 10-K for the year ended December 31, 1984 and
                  incorporated herein by reference.)

10(i)(2)*         Form of Amendment dated May 24, 1990 to form of severance
                  agreement. (Filed as Exhibit 10(g)(2) to the Company's report
                  on Form 10-K for the year ended December 31, 1990 and
                  incorporated herein by reference.)

10(k)             Glass Mat Supply Agreement dated as of February 20, 1985
                  between the Company, The Flintkote Company and Genstar Roofing
                  Company, Inc. (Filed as Exhibit 10(s) to Amendment No. 1 to
                  the Company's report on Form 10-K for the year ended December
                  31, 1984 and incorporated herein by reference.)

10(l)             Equipment Acquisition Agreement dated May 25, 1990 between
                  BancBoston Leasing Inc. and Bird Incorporated. (Filed as
                  Exhibit 10(j) to the Company's report on Form 10-K for the
                  year ended December 31, 1990 and incorporated herein by
                  reference.)
</TABLE>


                                       24
<PAGE>   25
<TABLE>
<CAPTION>
                                                                                  Sequential
Exhibit No.                                                                         Page No.
-----------                                                                       ----------
<S>               <C>                                                             <C>
10(m)             Equipment Acquisition Agreement dated July 23, 1986 between
                  BancBoston Leasing Inc. and Bird Incorporated.  (Filed as
                  Exhibit 10(s) to the Company's report on Form 10-K for the
                  year ended December 31, 1986 and incorporated herein by
                  reference.)

10(n)(1)*         Long Term Incentive Compensation Plan dated June 28, 1988.
                  (Filed as Exhibit 10(v) to the Company's report on Form 10-Q
                  for the quarter ended September 30, 1988 and incorporated
                  herein by reference.)

10(n)(2)*         Amendment dated May 24, 1990 to Long Term Incentive
                  Compensation Plan. (Filed as Exhibit 10(o)(2) to the Company's
                  report on Form 10-K for the year ended December 31, 1990 and
                  incorporated herein by reference.)

10(o)             Amendment dated February 1, 1994 to the First Amended and
                  Restated Partnership Agreement between Bird Vinyl Products,
                  Inc. and Kensington Manufacturing Company. (Filed as Exhibit
                  10(o)(2) to the Company's report on Form 10-K for the year
                  ended December 31, 1993 and incorporated herein by reference.)

10(p)*            Employment Agreement dated as of December 1, 1993 between the
                  Company and Joseph D. Vecchiolla. (Filed as Exhibit 10(p) to
                  the Company's report on Form 10-K for the year ended December
                  31, 1993 and incorporated herein by reference.)

10(q)*            Severance Agreement dated as of December 21, 1993 between the
                  Company and Joseph D. Vecchiolla. (Filed as Exhibit 10(q) to
                  the Company's report on Form 10-K for the year ended December
                  31, 1993 and incorporated herein by reference.)

10(r)*            Settlement Agreement dated as of November 25, 1994 between
                  Bird Corporation and William A. Krivsky. (Filed as Exhibit
                  10(r) to the Company's Form 10-K for the year ended December
                  31, 1994 and incorporated herein by reference.)
</TABLE>


                                       25
<PAGE>   26
<TABLE>
<CAPTION>
                                                                                  Sequential
Exhibit No.                                                                         Page No.
-----------                                                                       ----------
<S>               <C>                                                             <C>
10(s)             Asset Purchase Agreement dated as of August 19, 1994 between
                  Bird Incorporated, Atlantic Building Products Corporation,
                  Greater Louisville Aluminum, Inc., Southwest Roofing Supply,
                  Inc., Southwest Express, Inc., New York Building Products,
                  Inc., and Wm. Cameron & Co. (Filed as Exhibit (1) to the
                  Company's Form 8-K dated August 31, 1994 and incorporated
                  herein by reference.)

10(t)             Asset Purchase Agreement dated as of September 23, 1994 among
                  Bird Corporation, Bird Incorporated, and Jannock, Inc. (as
                  amended by amendments dated as of January 27, 1995 and January
                  31, 1995). (Filed as Exhibit B to the Company's proxy
                  statement dated February 10, 1995 for the special meeting of
                  the stockholders to be held on March 7, 1995 and incorporated
                  herein by reference.)

10(u)*            Employment Agreement dated as of July 31, 1995 between the
                  Company and Frank S. Anthony. (Filed as Exhibit 10(u) to the
                  Company's Form 10-Q for the quarter ended September 30, 1995
                  and incorporated herein by reference).

10(v)*            Amended Employment Agreement dated August 21, 1995 between the
                  Company and Richard C. Maloof. (Filed as Exhibit 10(v) to the
                  Company's Form 10-Q for the quarter ended September 30, 1995
                  and incorporated herein by reference).

10(w)             Stock Purchase Agreement dated as of November 29, 1995 by and
                  among Bird Environmental Gulf Coast, Inc., Bird Environmental
                  Technologies, Inc., Bird Corporation, GTS Duratek,Inc. and
                  GTSD Sub II, Inc. (Filed as Exhibit 10(w) to the Company's
                  report on Form 10-K for the year ended December 31, 1995 and
                  incorporated herein by reference.)

10(x)             Amended Glass Mat Supply Agreement dated as of December 1,
                  1995 between the Company, Flintkote Company and Genstar
                  Roofing Company, Inc. (Filed as Exhibit 10(x) to the Company's
                  report on Form 10-K for the year ended December 31, 1995 and
                  incorporated herein by reference.)

10(y)             Agreement and Plan of Merger by and among CertainTeed
                  Corporation, BI Expansion Corporation and Bird Corporation
                  dated as of March 14, 1996. (Filed as Exhibit 10(y) to the Company's
                  report on Form 10-K for the year ended December 31, 1995 and
                  incorporated herein by reference.)

</TABLE>


                                       26
<PAGE>   27
<TABLE>
<CAPTION>
                                                                                  Sequential
Exhibit No.                                                                         Page No.
-----------                                                                       ----------
<S>               <C>                                                             <C>
11                Statement regarding computation of per share earnings(loss).

22                Significant subsidiaries.

23(a)             Consent of Price Waterhouse LLP.

23(b)             Consent of Alpern, Rosenthal and Company, independent
                  accountants for Kensington Partners.

24                Power of Attorney. (Immediately preceding the signature page
                  hereof.)

28                Annual report on Form 11-K of the Bird Employees' Savings and
                  Profit Sharing Plan for the fiscal year ended December 31,
                  1996. (To be filed by amendment.)
</TABLE>


*  Indicates management contract or compensatory plan or
   arrangement


                                       27
<PAGE>   28
                                POWER OF ATTORNEY


         We, the undersigned officers and Directors of Bird Corporation, hereby
severally constitute and appoint Richard C. Maloof and Frank S. Anthony, and
each of them severally, our true and lawful attorneys or attorney, with full
power to them and each of them to execute for us, and in our names in the
capacities indicated below, and to file with the Securities and Exchange
Commission the Annual Report on Form 10-K of Bird Corporation, for the fiscal
year ended December 31, 1996, and any and all amendments thereto.

         IN WITNESS WHEREOF, we have signed this Power of Attorney in the
capacities indicated on February 25, 1997.


Principal Executive Officer:



/s/ Richard C. Maloof               President, Director and
-----------------------------       Chief Operating Officer
Richard C. Maloof



Principal Accounting Officer:



/s/ Donald L. Sloper, Jr.           Corporate Controller
-----------------------------
Donald L. Sloper, Jr.



                                    Directors



/s/ Robert P. Bass, Jr.                              /s/ Francis J. Dunleavy
-----------------------------                        ---------------------------
Robert P. Bass, Jr.                                  Francis J. Dunleavy



/s/ Charles S. Bird, Jr.                             /s/ R. Keith Long
-----------------------------                        ---------------------------
Charles S. Bird, Jr.                                 R. Keith Long



/s/ Antonio J. Lorusso, Jr.                          /s/ Joseph D. Vecchiolla
-----------------------------                        ---------------------------
Antonio J. Lorusso, Jr.                              Joseph D. Vecchiolla



/s/ Loren R. Watts
-----------------------------
Loren R. Watts
<PAGE>   29
                                   SIGNATURES



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



                                                 BIRD CORPORATION
                                                 (Registrant)



                                                 By /s/ Richard C.Maloof
                                                   -----------------------------
                                                 Richard C. Maloof
                                                 President, COO


                                                 March 27, 1997


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
    SIGNATURE                       TITLE                          DATE
    ---------                       -----                          ----
<S>                           <C>                             <C>
/s/ Richard C. Maloof         President, Director,            March 27, 1997
--------------------------     and COO (Principal
RICHARD C. MALOOF               Executive Officer)




/s/ Donald L. Sloper, Jr.     Corporate Controller            March 27,1997
--------------------------     (Principal Accounting
DONALD L. SLOPER, JR.           Officer)




            *
--------------------------    Director                        March 27, 1997
JOSEPH D. VECCHIOLLA
</TABLE>
<PAGE>   30
                                   SIGNATURES
                                   (continued)
<TABLE>
<S>                           <C>                             <C>
            *
--------------------------    Director                        March 27, 1997
ROBERT P. BASS, JR.




            *
--------------------------    Director                        March 27, 1997
CHARLES S. BIRD, JR.




            *
--------------------------    Director                        March 27, 1997
FRANCIS J. DUNLEAVY




            *
--------------------------    Director                        March 27, 1997
ANTONIO J. LORUSSO, JR.




            *
--------------------------    Director                        March 27, 1997
R. KEITH LONG





            *
--------------------------    Director                        March 27, 1997
LOREN R. WATTS
</TABLE>




                               *  By /s/ Frank S. Anthony
                                     -----------------------------------
                                         Frank S. Anthony as
                                         Attorney-in-fact
<PAGE>   31
                           ANNUAL REPORT ON FORM 10-K



                             ITEM 14 (a) (1) AND (2)


         LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES



                          YEAR ENDED DECEMBER 31, 1996



                                BIRD CORPORATION
                             NORWOOD, MASSACHUSETTS
<PAGE>   32
                        Bird Corporation and Subsidiaries
                                    Form 10-K
                             Items 14(a)(1) and (2)


                   INDEX OF FINANCIAL STATEMENTS AND SCHEDULES




The following consolidated financial statements of the registrant and its
subsidiaries required to be included in Item 8 are listed below.


Consolidated Financial Statements:                                   Page

<TABLE>
<S>                                                                   <C>
         Reports of independent accountants........................    F2

         Balance sheets at December 31, 1996 and 1995..............    F4

         Statements of operations for each of the three years in
          the period ended December 31, 1996.......................    F6

         Statements of stockholders' equity for each of the three
          years in the period ended December 31, 1996..............    F7

         Statements of cash flows for each of the
          three years in the period ended December 31, 1996........    F8

         Notes to consolidated financial statements................    F9
</TABLE>


The following consolidated financial statement schedules of Bird Corporation and
its subsidiaries are included in Item 14(a)(2) and should be read in conjunction
with the financial statements included herein:


         Schedule II  - Valuation and qualifying accounts..........    F29


All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted because
they are not applicable or the required information is shown in the financial
statements or the notes thereto.


                                       F1
<PAGE>   33
                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Board of Directors and Stockholders
of Bird Corporation

         We have audited the consolidated balance sheets of Bird Corporation and
its subsidiaries as of December 31, 1996 and 1995, and the related consolidated
statements of operations, of stockholders' equity and of cash flows for each of
the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of Kensington Partners,
which statements reflect total net sales of $24.2 million and net losses of $5.3
million for the year ended December 31, 1994. Those statements were audited by
other auditors whose report has been furnished to us, and our opinion, insofar
as it relates to the amounts included for Kensington Partners, is based solely
on the report of the other auditors.

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

         In our opinion, based on our audits and the report of the other
auditors, the consolidated financial statements listed in the index appearing
under Item 14(a) and (2) on Page F-1 present fairly, in all material respects,
the financial position of Bird Corporation and its subsidiaries as of December
31, 1996 and 1995, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.




/s/Price Waterhouse LLP
Boston, Massachusetts

February 20, 1997


                                       F2
<PAGE>   34
                          INDEPENDENT AUDITORS' REPORT



To the Partners
Kensington Partners and Affiliate
Leechburg, Pennsylvania

         We have audited the combined balance sheet (presented elsewhere
herein) of Kensington Partners and Affiliate (Joint Venture Partnerships) as of
December 31, 1994 and the related combined statements of operations and
partners' deficit, and cash flows for the year then ended. These financial
statements are the responsibility of the Partnerships' management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

         In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of Kensington
Partners and Affiliate as of December 31, 1994, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.

         The accompanying financial statements have been prepared assuming the
Kensington partners and Affiliate will continue as going concerns. As discussed
in Note 2 to the financial statements, the Companies have incurred significant
operating losses and current liabilities exceed current assets. Those
conditions, among others, raise substantial doubt about the Companies' ability
to continue as going concerns. Management's plans regarding those matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.



/s/ Alpern, Rosenthal & Company
Pittsburgh, Pennsylvania


February 10, 1995


                                       F3
<PAGE>   35
                        BIRD CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
       (IN THOUSANDS, EXCEPT SHARE, PAR VALUE, AND LIQUIDATION VALUE DATA)

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              1996             1995
                                                             -------          -------
<S>                                                          <C>              <C>
ASSETS

Current Assets:
   Cash and equivalents                                      $ 2,310          $ 3,679
   Accounts and notes receivable, less
     allowances - $150 in 1996
     and $153 in 1995                                          5,191            5,461
   Inventories                                                 5,273            4,701
   Refundable income taxes                                         0            1,021
   Prepaid expenses and other assets                             784            1,157
   Deferred income taxes                                         435              435
                                                             -------          -------
                               Total current assets           13,993           16,454
                                                             -------          -------
Property, Plant and Equipment:
   Land and land improvements                                  3,099            2,810
   Buildings                                                   6,936            7,184
   Machinery and equipment                                    30,455           28,980
   Construction in progress                                      255              672
                                                             -------          -------
                                                              40,745           39,646

   Less - Depreciation and amortization                       18,805           16,127
                                                             -------          -------
                                                              21,940           23,519
                                                             -------          -------

Deferred income taxes                                          3,631            3,631
Other assets                                                     105               99
                                                             -------          -------
                                                             $39,669          $43,703
                                                             =======          =======
</TABLE>


See accompanying notes to consolidated financial statements.


                                       F4
<PAGE>   36
                        BIRD CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
       (IN THOUSANDS, EXCEPT SHARE, PAR VALUE, AND LIQUIDATION VALUE DATA)

<TABLE>
<CAPTION>
                                                                        DECEMBER 31,
                                                                    1996               1995
                                                                  --------           --------
<S>                                                               <C>                <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Accounts payable                                               $  2,144           $  3,394
   Accrued expenses                                                  6,214              5,881
   Long-term debt, portion due within one year                       2,177              1,113
   Retirement plan contributions payable                                83                 88
                                                                  --------           --------
                               Total current liabilities            10,618             10,476

Long-term debt, portion due after one year                             255              4,869
Other liabilities                                                    3,526              3,942

                                                                  --------           --------
   Total liabilities                                                14,399             19,287
                                                                  --------           --------

STOCKHOLDERS' EQUITY
   5% cumulative preferred stock, par
     value $100. Authorized 15,000 shares;
     issued 5,820 shares in 1996 and 1995
     (liquidating preference $110 per share,
     aggregating $640,000)                                             582                582

   Preference stock, par value $1. Authorized
     1,500,000 shares; issued 814,300 shares
     of $1.85 cumulative convertible preference
     stock in 1996 and 1995(liquidating value $20
     per share, aggregating $16,286,000)                               814                814

   Common stock, par value $1. Authorized
     15,000,000 shares; 4,414,991 shares issued
     in 1996 and 4,395,162 shares issued in 1995                     4,415              4,395
   Other capital                                                    27,436             27,362
   Retained earnings (deficit)                                      (4,986)            (5,746)
                                                                  --------           --------
                                                                    28,261             27,407

   Less -
     Treasury stock, at cost, Common stock:
       275,102 shares in 1996 and 275,100
       shares in 1995                                               (2,991)            (2,991)

                                                                  --------           --------
                                                                    25,270             24,416
                                                                  --------           --------
   COMMITMENTS AND CONTINGENCIES (NOTE 11)

                                                                  $ 39,669           $ 43,703
                                                                  ========           ========
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F5
<PAGE>   37
                        BIRD CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                       Year Ended December 31,
                                                               1996             1995             1994
                                                           -----------      -----------      -----------
<S>                                                        <C>              <C>              <C>
Net sales                                                  $    51,956      $    54,180      $   167,886
                                                           -----------      -----------      -----------

Costs and expenses:
  Cost of sales                                                 43,840           48,007          136,878
  Selling, general and administrative expense                    5,764           11,817           28,786
  Equity losses from partnership                                     0              372            4,680
  Other expense, net                                               667                0                0
  Interest expense                                                 435              927            4,782
  Gain on disposal of businesses                                  (919)         (17,570)          (1,313)
                                                           -----------      -----------      -----------
    Total costs and expenses                                    49,787           43,553          173,813
                                                           -----------      -----------      -----------

Earnings (loss) from continuing
  operations before income taxes                                 2,169           10,627           (5,927)

Provision (benefit) for income taxes                                 0           11,424           (7,010)
                                                           -----------      -----------      -----------

Earnings (loss) from continuing operations                       2,169             (797)           1,083
                                                           -----------      -----------      -----------

Discontinued operations (Note 9):
  Income from operations of discontinued
   businesses, net of taxes                                          0                0            1,245
  Income (loss) on disposal of environmental business,
   net of taxes                                                    134          (11,252)          (6,011)
                                                           -----------      -----------      -----------
  Net income (loss) from discontinued operations                   134          (11,252)          (4,766)
                                                           -----------      -----------      -----------

Net earnings (loss) before dividends                             2,303          (12,049)          (3,683)
Preferred and preference stock
  cumulative dividends                                           1,536            1,536            1,536
Net earnings (loss) applicable to common
                                                           ===========      ===========      ===========
  stockholders                                             $       767       $  (13,585)      $   (5,219)
                                                           ===========      ===========      ===========

Primary earnings (loss) per common share:
  Continuing operations                                    $      0.15       $    (0.57)      $    (0.11)
  Discontinued operations                                         0.03            (2.74)           (1.20)
                                                           ===========      ===========      ===========
Net earnings (loss) after dividends                        $      0.18       $    (3.31)      $    (1.31)
                                                           ===========      ===========      ===========

Fully diluted earnings (loss) per common share:
  Continuing operations                                    $      0.15       $    (0.57)      $    (0.11)
  Discontinued operations                                         0.03            (2.74)           (1.20)
                                                           ===========      ===========      ===========
Net earnings (loss) after dividends                        $      0.18       $    (3.31)      $    (1.31)
                                                           ===========      ===========      ===========

Average number of shares used in earnings
  per share computations                                     4,146,888        4,104,965        3,992,251
                                                           ===========      ===========      ===========
</TABLE>


See accompanying notes to consolidated financial statements.


                                       F6
<PAGE>   38
                        BIRD CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
               (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                       $1.85
                                                       5%            CUMULATIVE
                                                   CUMULATIVE        CONVERTIBLE
                                                    PREFERRED        PREFERENCE          COMMON             OTHER
                                                      STOCK             STOCK             STOCK             CAPITAL
                                                      -----             -----             ------            --------
<S>                                                   <C>               <C>               <C>               <C>
Balance December 31, 1993                             $ 582             $ 814             $4,291            $ 26,456

Net loss
Cash dividends declared:
 5% cumulative preferred
  stock - $1.25 per share
Common stock issued as
  compensation - 1,426 shares                                                                  1                  14
Common stock issued for contributions to
 employees' saving plan - 12,439 shares                                                       13                 110
Common stock issued upon exercise
 of stock options - 69,750 shares common
 and 15,000 shares treasury                                                                   70                 609
Purchase of 248 shares of common stock
L.T.Incentive forfeitures - 125,145 shares
Common stock from distribution
 business - 916 shares                                                                                            (6)
Amortization of unearned compensation
Cumulative foreign currency translation                                                                           52
                                                      -----             -----             ------            --------
Balance December 31, 1994                               582               814              4,375              27,235

Net loss
Cash dividends declared:
 5% cumulative preferred
  stock - $1.25 per share
 $1.85 cumulative
  convertible preference stock -
  $1.85 per share
Common stock issued as
  compensation - 200 shares                                                                                        1
Common stock issued for contributions to
 employees' saving plan - 17,783 shares                                                       18                 112
Common stock issued upon exercise
 of stock options - 2,000 shares common                                                        2                  14
Amortization of unearned compensation
                                                      -----             -----             ------            --------
Balance December 31, 1995                               582               814              4,395              27,362

Net earnings
Cash dividends declared:
 5% cumulative preferred
  stock - $1.25 per share
 $1.85 cumulative
  convertible preference stock -
  $1.85 per share
Common stock issued for contributions to
 employees' saving plan - 19,829 shares                                                       20                  74
                                                      -----             -----             ------            --------
Balance December 31, 1996                             $ 582             $ 814             $4,415            $ 27,436
                                                      =====             =====             ======            ========
</TABLE>

<TABLE>
<CAPTION>
                                                      RETAINED             COMMON                                 TOTAL
                                                      EARNINGS            STOCK IN           UNEARNED          STOCKHOLDERS'
                                                      (DEFICIT)           TREASURY         COMPENSATION           EQUITY
                                                      ---------           --------         ------------           ------
<S>                                                   <C>                  <C>                 <C>               <C>
Balance December 31, 1993                             $ 11,551             ($2,179)            ($954)            $ 40,561

Net loss                                                (3,683)                                                    (3,683)
Cash dividends declared:
 5% cumulative preferred
  stock - $1.25 per share                                   (8)                                                        (8)
Common stock issued as
  compensation - 1,426 shares                                                                                          15
Common stock issued for contributions to
 employees' saving plan - 12,439 shares                                                                               123
Common stock issued upon exercise
 of stock options - 69,750 shares common
 and 15,000 shares treasury                                                    109                                    788
Purchase of 248 shares of common stock                                          (3)                                    (3)
L.T.Incentive forfeitures - 125,145 shares                                    (910)              910                    0
Common stock from distribution
 business - 916 shares                                                          (8)                                   (14)
Amortization of unearned compensation                                                           (113)                (113)
Cumulative foreign currency translation                                                                                52
                                                      --------             -------             -----             --------
Balance December 31, 1994                                7,860              (2,991)             (157)              37,718

Net loss                                               (12,049)                                                   (12,049)
Cash dividends declared:
 5% cumulative preferred
  stock - $1.25 per share                                  (51)                                                       (51)
 $1.85 cumulative
  convertible preference stock -
  $1.85 per share                                       (1,506)                                                    (1,506)
Common stock issued as
  compensation - 200 shares                                                                                             1
Common stock issued for contributions to
 employees' saving plan - 17,783 shares                                                                               130
Common stock issued upon exercise
 of stock options - 2,000 shares common                                                                                16
Amortization of unearned compensation                                                            157                  157
                                                      --------             -------             -----             --------
Balance December 31, 1995                               (5,746)             (2,991)                0               24,416

Net earnings                                             2,303                                                      2,303
Cash dividends declared:
 5% cumulative preferred
  stock - $1.25 per share                                  (37)                                                       (37)
 $1.85 cumulative
  convertible preference stock -
  $1.85 per share                                       (1,506)                                                    (1,506)
Common stock issued for contributions to
 employees' saving plan - 19,829 shares                                                                                94

                                                      --------             -------             -----             --------
Balance December 31, 1996                             ($ 4,986)            ($2,991)            $   0             $ 25,270
                                                      ========             =======             =====             ========
</TABLE>


See accompanying notes to consolidated financial statements.


                                       F7
<PAGE>   39
                        BIRD CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                Year Ended December 31,
(Brackets denote cash outflows)                            1996          1995           1994
                                                         --------      --------      ---------
<S>                                                      <C>           <C>           <C>
Cash flow provided (used) by operations:
Net earnings (loss)                                      $  2,303      ($12,049)     ($  3,683)
Adjustments to reconcile to net
 cash provided by operations:
   Depreciation and amortization                            2,817         2,861          4,317
   Provision for losses on accounts receivable                  0            26            905
   Deferred income taxes                                        0        11,304        (10,172)
   Gain on sale of vinyl business                               0       (20,579)             0
   Loss on sale of window business                              0         1,959              0
   Gain on sale of distribution business                        0             0         (1,466)
   Loss (gain) on disposal of environmental business         (134)       11,252          9,747
Changes in balance sheet items:
   Accounts receivable                                        270         3,120         (2,841)
   Inventories                                               (572)       (2,664)         1,423
   Prepaid expenses                                         1,286           712            203
   Liabilities not related to financing activities         (1,587)      (14,325)        (6,867)
   Liquidation reserve                                          0             0         (5,398)
   Other assets                                                (6)          128          2,230
                                                         --------      --------      ---------
Cash flow provided (used) by operations:                    4,377       (18,255)       (11,602)
                                                         --------      --------      ---------

Cash flows from investing activities:
   Acquisition of property, plant and equipment            (1,130)       (1,590)       (10,614)
   Proceeds from disposal of assets                             0        50,680         31,296
   Additional investments in discontinued operations            0        (2,402)             0
   Other investments                                            0           651         (1,277)
                                                         --------      --------      ---------

Net cash provided (used) in investing activities           (1,130)       47,339         19,405
                                                         --------      --------      ---------

Cash flows from financing activities:
   Debt proceeds                                            9,445        16,627        159,139
   Debt repayments                                        (12,996)      (40,942)      (175,091)
   Dividends paid                                          (1,159)       (1,558)            (8)
   Other equity changes                                        94           147            960
                                                         --------      --------      ---------

Net cash used by financing activities                      (4,616)      (25,726)       (15,000)
                                                         --------      --------      ---------

Net increase (decrease) in cash and equivalents            (1,369)        3,358         (7,197)
Cash and equivalents at beginning of year                   3,679           321          7,518
                                                         --------      --------      ---------

Cash and equivalents at end of year                      $  2,310      $  3,679      $     321
                                                         ========      ========      =========

Supplemental Disclosures:
Cash paid during the year for:
   Interest                                              $    498      $  1,501      $   4,811
   Income taxes                                          $      0      $  1,170      $     363
</TABLE>

See accompanying notes to consolidated financial statements.


                                       F8
<PAGE>   40
                        BIRD CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.   ACCOUNTING POLICIES

NATURE OF OPERATIONS

Bird Corporation is a manufacturer of asphalt roofing products. Currently,
asphalt shingles and roll roofing are produced at the Company's plant in
Norwood, Massachusetts for commercial and residential use. These products are
marketed in the northeastern United States through independent wholesalers and
building material retailers whose primary customers are roofing contractors.


BASIS OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of Bird
Corporation and its majority-owned subsidiaries (the "Company"). All material
intercompany activity has been eliminated from the financial statements.
Investments in less than majority-owned companies are accounted for by the
equity method. Certain prior year amounts have been reclassified to conform with
the 1996 presentation.


PERVASIVENESS OF ESTIMATES

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


CONCENTRATION OF RISK AND MAJOR CUSTOMERS

The Company is dependent upon the economy in the northeastern United States and
sells its products primarily to independent wholesalers and building material
retailers for resale primarily to roofing contractors. One customer accounted
for slightly more than 15% and 10% of the Company's gross sales during 1996 and
1995, respectively.

The principal raw materials used in the manufacture of asphalt roofing products
are fiberglass mat, asphalt saturants and coatings and crushed granules. The
Company's requirements for fiberglass mat are met primarily with one vendor
under an agreement which expires December 31, 1999 with an option to extend for
an additional two years. Fiberglass mat is also generally available in adequate
quantities from a number of outside suppliers. The Company has a raw material
processing agreement with a company whose President is also a


                                       F9
<PAGE>   41
Director of Bird Corporation. The Company's purchases from this related party
amounted to $1,817,000 in 1996, $1,619,000 in 1995, and $2,191,000 in 1994.
Management believes that amounts paid were equivalent to those that would be
paid under an arm's length transaction. At December 31, 1996 and 1995 amounts
due to this Company totaled $268,000 and $194,000, respectively.


REVENUE RECOGNITION

The Company recognizes revenue when products are shipped or services are
performed.


CASH AND EQUIVALENTS

The Company considers all highly liquid instruments purchased with a maturity of
three months or less to be cash equivalents. The Company invests its excess cash
in a money market account that is subject to minimal credit and market risk. At
December 31, 1996, cash and equivalents include $2,004,000 in a money market
investment recorded at cost which approximates fair market value.


INVENTORIES

Inventories are valued at the lower of cost or market. Cost is determined for a
large portion of the inventories by the last-in, first-out (LIFO) method
computed using the dollar value method for natural business unit pools. The cost
of the remaining inventories is determined on a first-in, first-out (FIFO)
basis.


PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment is stated at cost. Depreciation has been provided
in the financial statements primarily on the straight-line method at rates,
based on reasonable estimates of useful lives, which fall within the following
ranges for major asset classifications:

<TABLE>
--------------------------------------------------------------------------------
<S>                                                       <C>
Land improvements                                         10 to 20 years
Buildings                                                 20 to 25 years
Machinery and equipment                                    5 to 13 years
--------------------------------------------------------------------------------
</TABLE>

Deprecation expense for continuing operations for 1996, 1995 and 1994 amounted
to $2,709,000, $2,831,000 and $3,644,000, respectively. Maintenance, repairs and
minor renewals are charged to earnings in the year in which the expense is
incurred. Additions, improvements and major renewals are capitalized. The cost
of assets retired or sold, together with the related accumulated depreciation,
are removed from the accounts, and any gain or loss on disposition is credited
or charged to earnings.


                                      F10
<PAGE>   42
RETIREMENT PLANS

The Company has a defined contribution plan covering substantially all
eligible non-union salaried and non-union hourly employees. Annual contributions
are made to the plan based on rates identified in the plan agreement.


ADVERTISING

Advertising costs are charged to operations when incurred. The Company did not
incur any costs associated with direct response advertising in 1996, 1995 and
1994, and there were no capitalized advertising costs at December 31, 1996 and
1995. Advertising expense for 1996, 1995 and 1994 was $485,000, $503,000 and
$1,023,000, respectively.


EARNINGS(LOSS) PER COMMON SHARE

Primary earnings(loss) per common share is determined after deducting the
dividend requirements of the preferred and preference shares and is based on the
weighted average number of common shares outstanding during each period
increased by the effect of dilutive stock options. Fully diluted earnings(loss)
per common share also give effect to the reduction in earnings per share, if
any, which would result from the conversion of the $1.85 cumulative convertible
preference stock at the beginning of each period if the effect is dilutive.


ENVIRONMENTAL MATTERS

The Company records a liability for environmental matters when it is probable
that a liability has been incurred and the amount of the liability can be
reasonably estimated based on the available evidence and site assessments. If an
amount is likely to fall within a range and no single amount within that range
can be determined to be a better estimate, the minimum amount of the range is
recorded. If there are other participants and the liability is joint and
several, the financial stability of the other participants is considered in
determining the Company's accrual. Costs of future expenditures for
environmental remediation obligations are not discounted to their present value.
In addition, the liability excludes claims for recoveries from insurance
companies and other third parties until such claims for recoveries are probable
of realization at which point they would be classified separately as a
receivable.


WARRANTY COSTS

The Company warrants under certain circumstances that its building material
products meet certain manufacturing and material specifications. The warranty
policy is unique to each product, ranges from twenty to forty years, is
generally for the material cost and requires the owner to meet specific criteria
such as proof of purchase. The Company offers the original manufacturer's
warranty only as part of the original sale and at no additional cost to the


                                      F11
<PAGE>   43
customer. In addition, for marketing considerations, the Company makes elective
settlements in response to customer complaints. The Company records the
liability for warranty claims and elective customer settlements when it
determines that a specific liability exists or a payment will be made.


STOCK COMPENSATION

The Company's employee stock option plans are accounted for in accordance with
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees". In 1996, the Company adopted the disclosure requirements of
Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation".


2.   INVENTORIES

The percentages of inventories valued on the LIFO method was 98% at December 31,
1996 and 1995. It is not practical to separate LIFO inventories by raw materials
and finished goods components; however, the following table (in thousands)
presents these components on a current cost basis with the LIFO reserve shown as
a reduction.

<TABLE>
<CAPTION>
                                                           December 31,
                                                     1996                 1995
                                                    ------                ------
<S>                                                 <C>                   <C>
Current Costs:
 Raw materials                                      $1,378                $1,202
 Finished goods                                      4,093                 4,217
                                                    ------                ------
                                                     5,471                 5,419
 Less LIFO reserve                                     198                   718
                                                    ------                ------
                                                    $5,273                $4,701
                                                    ======                ======
</TABLE>


3.   DEBT

At December 31, the Company's borrowings and debt obligations are summarized as
follows (in thousands):

<TABLE>
<CAPTION>
                                                        1996               1995
                                                       ------             ------
<S>                                                    <C>                <C>
Long Term Debt:
 Term Loan                                             $1,804             $5,000
 Obligations under capital leases                         628                982
                                                       ------             ------
                                                        2,432              5,982
 Less - portion due within                              2,177              1,113
                                                       ------             ------
        one year                                       $  255             $4,869
                                                       ======             ======
</TABLE>


The Company's external financing needs are augmented by its ability to borrow
under the three year Loan and Security Agreement (the "Loan Agreement") dated
November 30, 1994 with Fleet Capital Corporation ("Fleet Capital"). At the end
of the three year period, the Loan Agreement will be automatically renewed for
successive one year periods unless terminated specifically in writing. On March
8, 1995, Fleet Capital executed the First Amendment to the Loan Agreement
amending the amount of the facility to $20 million consisting of a $15


                                      F12
<PAGE>   44
million revolving credit commitment and a $5 million term loan. Up to $5 million
of the revolving credit facility can be used for letters of credit. At December
31, 1996, letters of credit totaled $1,401,000 compared to $2,233,000 as of
December 31, 1995.

Borrowings by Bird Incorporated under the Loan Agreement are guaranteed by the
Company and the Company's other subsidiaries and are secured by substantially
all of the assets of the Company and its subsidiaries. The revolving credit line
availability is determined with reference to a percentage of accounts receivable
and inventory which are pledged to the lender. During the period January 1
through April 30, the Loan Agreement provides a $2 million over advance on
accounts receivable and inventories in order to assist the Company in assuring
adequate funding of any seasonal build up of accounts receivable which may occur
under sales programs offered during the winter months. Currently, the
availability calculation does not allow borrowings to the full extent of the
revolving credit commitment, due to the seasonality of the building materials
manufacturing business. As of March 20, 1997, an aggregate of $7,654,000 was
available to Bird under the terms of the revolving credit facility under the
Loan Agreement of which $5,243,000 remains available, net of current borrowings
and letter of credit utilization.

The Loan Agreement contains financial and operating covenants which, among other
things, (i) require the Company to maintain prescribed levels of tangible net
worth, net cash flow and working capital and (ii) place limits on the Company's
capital expenditures. The Loan Agreement also contains restrictions on
indebtedness, liens, investments, distributions (including payment of common and
preference dividends), mergers, acquisitions and disposition of assets. As of
December 31, 1996, the Company was in compliance with each of the prescribed
financial and operating covenants as outlined in the Loan Agreement.

Interest on the revolving credit commitment under the First Amended Loan
Agreement accrues at the Fleet Capital base rate (as specified in such
Agreement) or the London Interbank Offering Rate ("LIBOR") plus 2 3/4% at the
Company's election on all borrowings plus the greater of $25,000 per annum or
1/4% on any unused portion of the commitment payable monthly in arrears. The
interest on the term loan accrues at the base rate or the LIBOR rate plus 2 3/4%
at the Company's election. The interest rate on outstanding borrowings at
December 31, 1996 was 8.125%. The repayment of the principal on the term loan is
at the rate of $71,417 per month with a final principal payment of $1,018,000
due on November 30, 1997. Proceeds in excess of $100,000 from the sale of fixed
assets may, at Fleet Capital's discretion, be applied to the outstanding
principal payments of the term loan.

The weighted average interest rates on short term borrowings at December 31,
1996 and December 31, 1995 were 8.25% and 9.74%, respectively. The fair value of
the Company's total debt approximated the carrying value at December 31, 1996
and 1995, respectively. The fair value is based on management's estimate of
current rates available to the Company for similar debt with the same remaining
maturity.


                                      F13
<PAGE>   45
Maturities of long-term debt for each of the five years subsequent to December
31, 1996 are as follows:

1997 - $2,177,000; 1998 - $255,000; Thereafter - None. The Company incurred net
interest expense of $435,000 in 1996, $927,000 in 1995 and $4,782,000 in 1994
(net of $257,000 capitalized interest).



4.       INCOME TAXES

Earnings (loss) from continuing operations before income taxes and the
provision(benefit) for income taxes are shown below (in thousands):


<TABLE>
<CAPTION>
                                               Year Ended December 31,
                                               -----------------------
                                      1996              1995              1994
                                    -------          --------           -------
<S>                                 <C>              <C>                <C>
Earnings (loss) from
 continuing operations
 before income taxes:               $ 2,169          $ 10,627           $(5,927)
                                    =======          ========           =======


Provision (benefit) for
 continuing operations:
  Currently payable                 $     0          $    120           $   200
  Deferred                                0            11,304            (7,210)
                                    -------          --------           -------
                                    $     0          $ 11,424           $(7,010)
                                    =======          ========           =======
</TABLE>


The provision (benefit) for income taxes on continuing operations varied from
the U.S. federal statutory rate for the following reasons:

<TABLE>
<CAPTION>
                                        1996             1995             1994
                                       ------           ------           ------
<S>                                    <C>              <C>              <C>
Continuing operations:
U.S. federal statutory rate              34.0%            34.0%           (34.0%)
State income taxes, net                   0.0              7.3             (6.5)
Corporate owned life insurance           (7.0)             2.5             (9.9)
Effect of valuation allowance           (28.4)            63.7            (67.5)
Other                                     1.4              0.0             (0.4)
                                       ------           ------           ------
                                          0.0%           107.5%          (118.3%)
                                       ======           ======           ------
</TABLE>


The net benefit for income taxes related to discontinued operations amounted to
$2,962,000 for 1994.


                                      F14
<PAGE>   46
The deferred income tax asset recorded in the consolidated balance sheet results
from differences between financial statement and tax reporting of income and
deductions. A summary of the composition of the deferred income tax asset at
December 31, 1996 and 1995 is as follows (in thousands):

<TABLE>
<CAPTION>
                                                       1996              1995
                                                     --------          --------
<S>                                                  <C>               <C>
Deferred tax assets:
         Compensation/pension accruals               $    641          $    648
         Net operating loss carryover                  17,716            14,810
         Investment tax credit carryover                1,136             1,233
         Minimum tax credit carryover                   1,091             1,091
         Other reserves & accruals                      1,789             2,506
         Other                                          1,053               782
                                                     --------          --------
                  Total deferred tax assets            23,426            21,070


Deferred tax liabilities:
         Depreciation                                  (2,141)           (1,942)
                                                     --------          --------

Net deferred tax asset before
  valuation reserve                                    21,285            19,128

Less:  Valuation reserve                              (17,219)          (15,062)
                                                     --------          --------
Net deferred tax asset                               $  4,066          $  4,066
                                                     ========          ========
</TABLE>


The Company has available for federal income tax purposes unused net operating
loss and investment tax credit carryforwards, which may provide future tax
benefits, expiring as follows (in thousands):

<TABLE>
<CAPTION>
           Year of                       Net                   Investment
         Expiration                 Operating Loss             Tax Credit
         ----------                 --------------             ----------
<S>      <C>                        <C>                        <C>
            1997                            0                      317
            1998                            0                      135
            1999                            0                      212
            2000                            0                      297
            2001                            0                      175
            2002                          138                        0
            2008                        9,898                        0
            2009                       16,122                        0
            2010                       15,735                        0
            2011                          416                        0
                                      -------                   ------
                                      $42,309                   $1,136
                                      =======                   ======
</TABLE>

Additionally, for federal income tax purposes, at December 31, 1996 the Company
had available for carryforward minimum tax credits with no expiration
aggregating $1,091,000. If certain substantial changes in the Company's
ownership should occur, there would be an annual limitation on the amount of the
carryforwards, including certain unrealized built-in losses, which can be
utilized for regular and alternative minimum tax purposes.

                                       F15
<PAGE>   47
At December 31, 1996 the Company's net deferred tax asset is approximately $21.3
million less a valuation reserve of $17.2 million which was determined based
upon the Company's review of all available evidence including projections of
future taxable income. The Company expects to be profitable and with other tax
planning strategies expects to generate future taxable income. Realization of
the $4,066,000 net deferred tax asset is dependent on generating sufficient
taxable income prior to expiration of the loss carryforwards. Although
realization is not assured, management believes that it is more likely than not
that the net deferred tax asset will be realized. The amount of the net deferred
tax asset considered realizable, however, could be reduced in the near term if
estimates of future taxable income during the carryforward period are reduced.


5.       STOCKHOLDERS' EQUITY

The $1.85 cumulative convertible preference stock is redeemable, in whole or in
part, at the option of the Company, at a redemption price of $20.00 per share.
The convertible preference stock has a liquidation value of $20.00 per share and
is convertible at the option of the holder into common stock of the Company at a
conversation price of $22.25 per share, subject to adjustment in certain events.
Dividends are cumulative from the date of issue and are payable quarterly. There
are five preference dividends in arrears. The Company has the option to redeem
the convertible preference stock. The Company's 5% cumulative preferred stock
ranks senior to the convertible preference stock as to dividends and upon
liquidation.

On June 18, 1992, the Company announced that its Board of Directors authorized
it to buy back, on the open market or in privately negotiated transactions, up
to 400,000 of its outstanding shares of common stock at prices available from
time to time that the Company deems attractive. Since this announcement, the
Company has repurchased 97,619 shares.

The Company is prohibited from purchasing its common stock as long as dividends
on the convertible preference stock are in arrears. Under the 1992 Stock Option
Plan described in Note 6, 931,325 shares of common stock are reserved for
issuance upon exercise of options and stock appreciation rights at December 31,
1996.

Restrictions on the payment of dividends on common and preference stock are
imposed by the terms of the Loan Agreement dated November 30, 1994. Payment of
dividends on the preferred stock are permitted under the Loan Agreement. As of
December 31, 1996, all dividends on the preferred stock have been declared and
paid in full. Dividends are in arrears on the preference stock in the aggregate
amount of $1,506,000 for the four quarterly periods ended February 15, 1995 and
$377,000 for the quarterly period ended May 15, 1996. Dividends on the
preference stock must be paid in full before any dividends could be declared and
paid on the common stock. The quarterly dividends on the preference stock due
February 15, August 15, and November 15, 1996 in the aggregate amount of
$1,130,000 have, with the consent of Fleet Capital, been declared and paid in
full. The quarterly dividend on the preference stock due February 15, 1997 has
been declared and will be paid when due.

                                      F16
<PAGE>   48
6.       EMPLOYEE BENEFIT PLANS

RETIREMENT PLANS

The Company's "Bird Employees' Savings and Profit Sharing Plan" provides for a
defined base contribution and profit sharing and savings contributions.

DEFINED BASE CONTRIBUTION

The Company contributes annually 2% of plan participants' basic compensation.
Vesting accrues at 20% per year of service. Contributions for continuing
operations for the years ended December 31, 1996, 1995, and 1994 amounted to
$64,000, $72,000, and $203,000, respectively.

PROFIT SHARING CONTRIBUTION

Profit sharing contributions are made annually, if earned, based upon certain
defined levels of return on equity by the Company and its business units. The
distribution of the contribution to the plan's participants is based upon annual
basic compensation. No profit sharing contributions were earned for 1996, 1995
or 1994.

SAVINGS CONTRIBUTION

The Company's savings plan provides that eligible employees may contribute to
the plan any whole percentage of their basic compensation varying from 2 to 15%.
The Company may make discretionary matching contributions not exceeding 6% of
the participant's basic compensation during the plan year. Such matching Company
contributions are invested in shares of the Company's common stock. The
Company's contributions for continuing operations for the years ended December
31, 1996, 1995, and 1994 amounted to $91,000, $124,000, and $142,000,
respectively.

POST RETIREMENT BENEFITS

Certain health care and life insurance benefits are provided for substantially
all of the Company's retired employees, except those covered under union plans.
Benefits are provided by the payment of premiums for life insurance benefits and
the reimbursement for eligible employees of a portion of their health care
premiums. The Company's cost for the years 1996, 1995, and 1994 amounted to
$71,000, $66,000, and $79,000, respectively.

EMPLOYEE INCENTIVE PLANS

Under the 1982 Stock Option Plan, as amended, options to purchase up to 900,000
shares of the Company's common stock may be granted to officers, directors and
key employees upon terms and conditions determined by a committee of the Board
of Directors which administers the plan. In 1993, the Company adopted a new
stock option plan which allows the issuance of up to 450,000 stock options in
addition to the unissued shares approved for issuance under the 1982 plan. The
new plan will expire in 2002 and no further options will be granted under


                                      F17
<PAGE>   49
the former plan. A Non-Employee Directors' Stock Option Plan was also adopted in
1993 which will automatically provide grants of options to each non-employee
director serving on the Board of Directors at the time of such grant. Each
annual grant will cover 2,500 shares of common stock and any recipient may not
receive option grants exceeding a total of 30,000 shares. An aggregate of
100,000 shares of common stock are available for grants under the Non-Employee
Directors' Stock Option Plan.

Options granted by the committee may be designated as either incentive stock
options, as defined under the current tax laws, or non-qualified options. The
committee may also grant stock appreciation rights, either singly or in tandem
with stock options. A right entitles the holder to benefit from market
appreciation in the Company's common stock subject to the right between the date
of the grant and the date of exercise without any payment on the part of the
holder. Upon exercise of a right, the holder surrenders the option and receives
an amount of common stock (or, at the election of the committee, cash) equal in
value to the amount of such appreciation.

The exercise price of options specified by the committee must be at least 100%
of the fair market value of the Company's common stock as of the date of grant.
All options and rights granted become exercisable at the rate of 20 to 25% per
year, on a cumulative basis, beginning with the first anniversary of the date of
grant for options granted under the Stock Option Plan and in full one year after
grant for option granted under the Non-Employee Directors' Stock Option Plan. In
case of termination of employment, options and grants vested, but not yet
exercised, are subject to forfeiture under the Stock Option Plan and are
exercisable up to 90 days after termination for the Non-Employee Directors'
Stock Option Plan.

In tandem with the stock options there are 8,000 stock appreciation rights at
December 31, 1996.

Transactions involving the Stock Option Plan are summarized as follows for the
years ended December 31, 1996 and 1995:

<TABLE>
<CAPTION>
                                                                                1996                                  1995
                                                                           Weighted Average                     Weighted Average
                                                           Shares           Exercise Price       Shares          Exercise Price
                                                           ------           --------------       ------          --------------
<S>                                                        <C>                 <C>               <C>                  <C>
     Outstanding beginning of year                         438,100             $10.40             500,650             $10.91
     Granted                                               171,500             $ 4.35              65,000             $ 7.78
     Exercised                                                   0                 --              (2,000)            $ 5.00
     Forfeited                                             (51,500)            $10.58            (125,550)            $11.15
     Expired                                               (11,800)            $ 8.75                   0                 --
     Outstanding end of year                               546,300             $ 8.52             438,100             $10.40
     Options exercisable at end of year                    168,100             $10.00             186,300             $10.70

     Weighted average fair value of options
       granted during the year (exercise price
       equals market price)                                                    $ 2.67                                 $ 4.52
</TABLE>


                                      F18
<PAGE>   50
The following table summarizes information about stock options outstanding at
December 31, 1996:

<TABLE>
<CAPTION>
                                                                      Range of Exercise Prices
                                                                      ------------------------
<S>                                                           <C>               <C>              <C>
                                                              $4.13 - $6.13     $8.13 - $10.75   $11.00 - $17.50
                                                              -------------     --------------   ---------------

Number outstanding at 12/31/96                                   192,200            209,100         145,000
Weighted Average Remaining Contractual Life                      6.6 years          4.8 years       3.0 years
Weighted Average Exercise Price                                  $4.52              $9.31           $12.73
Number Exercisable at 12/31/96                                   20,700             102,100         45,300
Weighted Average Exercise Price                                  $5.86              $9.33           $13.38
</TABLE>



Had the Company elected to recognize compensation cost based on the fair value
of options granted in years beginning after December 31, 1994, at grant date as
prescribed by Statement of Financial Accounting Standard No. 123 "Accounting for
Stock-Based Compensation," issued in October 1995, net income and earning per
share would have been reduced to the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                   (In thousands, except per share amounts)
                                                   ----------------------------------------
                                                           1996                1995
                                                           ----                ----
<S>                                                     <C>                 <C>
     Net income (loss) - as reported                    $      767          $  (13,585)
     Net income (loss) - pro forma                      $      600          $  (13,650)

     Earnings (loss) per share - as reported            $     0.18          $    (3.31)
     Earnings (loss) per share - pro forma              $     0.14          $    (3.33)
</TABLE>



The assumptions and methods used in estimating the fair value at the grant date
of options granted are listed below:

<TABLE>
<CAPTION>
                                                          Grant Year
                                                          ----------
                                                    1996              1995
                                                    ----              ----
<S>                                                 <C>                <C>
Expected Volatility of Share Price                  46%                43%
Dividend Yield                                      --                 --
Interest Rate                                       6.8%               7.0%
Expected Life                                       7.7 years          7.3 years
Valuation Methodology                               Black-Scholes Option Pricing Model
</TABLE>


Because the determination of the fair value of all options granted includes
vesting periods over several years and additional option grants are expected to
be made each year, the above pro forma disclosures are not representative of pro
forma effects of reported net income for future periods.


                                      F19
<PAGE>   51
LONG TERM INCENTIVE COMPENSATION

Under the terms of a Long Term Incentive Compensation Plan, certain officers and
key management employees received common stock of the Company on a restricted
time lapse grant basis. These shares were to be released from escrow and
delivered to the plan's participants when the market price of the Company's
common stock achieved certain designated levels between $12 and $24 per share
for 30 consecutive days prior to June 28, 1994 or in any event if the
participant has remained in the continuous employ of the Company through June
2003. Certain market prices were achieved and maintained for the required 30-day
period during 1994; therefore, 40,670 shares of the Company's common stock were
released in June of 1994 to the plan's participants. Additionally, 30,000 shares
were released to the former Chief Executive Officer in 1994 as part of his
Termination Agreement. As a result of his termination and the termination of
certain other officer and key management personnel during 1994, 125,145 shares
of restricted stock valued at $910,000 were forfeited and returned to treasury
stock. Upon consummation of the sale of the vinyl business in 1995, all
restrictions on the remaining 23,560 shares of common stock held under the plan
automatically lapsed and such shares were distributed to the intended
recipients.

Amortization of unearned compensation under this agreement for 1995 amounted to
$157,000. In 1994, amortization was reduced by $113,000 associated with the
forfeiture of shares.


7.       SALE OF BUSINESSES

The Company records income and expenses associated with former business
activities on the Consolidated Statement of Operations under the caption "Gain
on Disposal of Businesses".

In April 1996, the Company favorably settled a legal dispute related to the
cancellation of a Supply and Sales Representative Agreement with a former
business partner. The settlement agreement calls for Bird to receive total
payments of $410,000 over a period of two years, for cancellation of the Sale
Representative and Supply Agreements, and termination of the partnership. In
July 1996, the Company received an aggregate of $535,000 in cash for the
settlement of three legal disputes relating to insurance coverage. These legal
disputes related to the Company's former vinyl and roofing businesses.

In December 1996, the Company was reimbursed $123,000 for costs associated with
the remediation of an underground storage tank system at its former distribution
center located in Arizona.

On March 8, 1995, the Company sold substantially all of the assets of its vinyl
business to Jannock, Inc. for $47.5 million in cash subject to certain downward
adjustments which totaled $4,962,000. Net of adjustments, the gain on the sale
of the vinyl business totaled $20,579,000. Sales of $6,365,000 were recorded for
the vinyl business in 1995 through the date of the sale.


                                      F20
<PAGE>   52
On June 2, 1995 the Company sold all of the outstanding capital stock of
Bird-Kensington Holding Corp., which owned the Company's interest in Kensington
Partners, to Jannock, Inc. The purchase price consisted of cash in the gross
amount of $2,780,000 and the assumption of certain liabilities related to the
Kensington window business. The sale resulted in a loss of $1,959,000. Sales of
$4,265,000 were recorded for this business for the period March 1, 1995 through
June 2, 1995.

On June 10, 1994, the Company's 40% interest in Mid-South Building Supply, Inc.
was redeemed for $1 million in cash resulting in a loss of $1,261,000.

On August 22, 1994, the Company sold the assets of substantially all of its
distribution businesses to Wm. Cameron & Co. for a purchase price consisting of
cash in the amount of $26,142,000, including $1 million held in escrow which was
released in full to the Company in November 1995. The sale resulted in a gain of
$2,677,000. Sales of $67,089,000 were recorded for these businesses for the
period ending August, 22, 1994.

On November 28, 1994, the Company sold its last remaining building materials
distribution business, Southland Building Products, Inc., to Ashley Aluminum,
Inc. for a purchase price of $2,134,000. The sale resulted in a modest gain.
Sales of $9,092,000 were recorded for this business for the period ending
November 27, 1994.

The Company recorded other expenses related to former business activities of
$149,000, $1,050,000, and $153,000 for the years 1996, 1995, and 1994,
respectively. These charges against earnings include warranty claims and other
costs directly related to former business activities. Expenses incurred in 1995
also included $1.5 million in provisions relating to employee benefit plans and
product liability claims associated with former roofing operations which were
offset by a $602,000 crude oil refund from the Department of Energy.

8.       OTHER EXPENSE, NET

Other expenses in 1996 were primarily due to the $806,000 of costs associated
with the terminated merger agreement with CertainTeed.

9.       DISCONTINUED OPERATIONS

ENVIRONMENTAL BUSINESSES

On June 18, 1994, the Company agreed to cause the sale of its 80% interest in
its "off-site" environmental business, Bird Environmental Gulf Coast,Inc.
("BEGCI") to the minority shareholders thereof, subject to financing, resulting
in the complete withdrawal from the environmental business. Accordingly, the
Company, as of June 30, 1994, recorded the operating results of BEGCI as a
discontinued operation for all years presented. In conjunction with this
decision, the Company recorded an aggregate charge of approximately $9 million,
to adjust its book value to approximate the net realizable value of $7.5 million
at June 30, 1994. In June 1994, the Company estimated that the results of
operations from the "off-site" environmental business would be breakeven through
the disposal date and,


                                      F21
<PAGE>   53
accordingly, no liability for anticipated losses from the measurement date to
the disposal date was recorded. However, at December 31, 1994, the Company had
invested an additional $1,270,000 in BEGCI which, based on the Company's
assessment, would not be recoverable and was accordingly written-off, thus
maintaining the Company's investment at $7.5 million.

During 1995, the minority partner became unable to finance the purchase of the
facility and efforts to attract another purchaser were unsuccessful. In July
1995, the Company's Board of Directors suspended further funding of the
facility. As a result of this action, during the second quarter of 1995, the
Company's remaining investment of $8.6 million was written off and a $3 million
reserve was established for additional expenses associated with the closure of
the facility. On November 29, 1995, the Company caused the sale of all of the
outstanding capital stock of BEGCI to GTS Duratek, Inc. for a purchase price of
$1.00.

In 1993, the Company decided to close its "on-site" environmental remediation
business. This business involved environmental remediation projects such as the
processing of oily waste sites at a refinery, operations and management of waste
processing sites and the removal and remediation of sludge. In connection with
its decision to withdraw from this business, the Company charged the results of
operations for the write-down of assets, the expected loss from operations and
general expenses related to closing of such "on-site" remediation business.
Based upon the actual results of the environmental "on-site" remediation
operations and the sale of its assets, excess costs of $3,861,000 charged in
1993 were reversed and recorded as discontinued operations in the consolidated
statement of operations for the twelve months ended December 31, 1994.

Net sales relating to these environmental businesses amounted to $2,848,000 and
$3,715,000 for 1995 and 1994, respectively.

10.      ACQUISITIONS

On July 1, 1992 the Company entered into a 50% joint venture with Kensington
Manufacturing Company to manufacture vinyl replacement windows through
Kensington Partners ("Kensington"). On February 28, 1995, the Company's
ownership in the joint venture was permanently fixed at 90%, resulting in a
change in financial reporting from the equity method to consolidation beginning
March 1, 1995 through June 2, 1995 when the operation was sold (see Note 7).

The following table represents summarized financial information for Kensington
Partners for the year ended December 31, 1994 (in thousands):

<TABLE>
<S>                                                                 <C>
     Current Assets                                                 $ 5,040
     Property and Equipment                                           3,137
     Other Assets                                                       677
                                                                    -------
              Total Assets                                          $ 8,854
                                                                    =======

     Current Liabilities                                            $ 9,722
     Other Liabilities                                                1,288
                                                                    -------
              Total Liabilities                                     $11,010
                                                                    =======
</TABLE>


                                      F22
<PAGE>   54
The following table represents summarized financial information for the years
ended December 31, 1994 and and the two month period ended February 28, 1995 (in
thousands):

<TABLE>
<CAPTION>
                                                        1995            1994
                                                        ----            ----
<S>                                                  <C>               <C>
         Net Sales                                   $  1,774          $ 24,180
         Gross Profit (Loss)                         $    (18)         $  1,317
         Net Loss                                    $   (413)         $ (5,310)
</TABLE>



11.  COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS

The Company leases certain manufacturing, administrative, warehousing,
transportation equipment and other facilities. The leases generally provide that
the Company pay the taxes, insurance and maintenance expenses related to the
leased assets.

At December 31, 1996 minimum lease commitments under noncancelable operating
leases are as follows (in thousands):

<TABLE>
<CAPTION>
                   Year
                   ----
<S>                <C>                              <C>
                   1997                             $  1,003
                   1998                                1,003
                   1999                                1,003
                   2000                                  885
                   2001                                  777
                   Later years                         9,614
                                                    --------
                                                    $ 14,285
                                                    ========
</TABLE>

Total rental expense for continuing operations, exclusive of taxes, insurance
and other expenses paid by the lessee related to all operating leases (including
those with terms of less than one year) was as follows (in thousands):

<TABLE>
<CAPTION>
                   Year                                      Amount
                   ----                                      ------
<S>                <C>                                       <C>
                   1996                                      $ 1,043
                   1995                                      $ 1,059
                   1994                                      $ 2,883
</TABLE>


The following represents property under capital leases (in thousands):

<TABLE>
<CAPTION>
                                                          December 31,
                                                          ------------
                                                    1996                  1995
                                                    ----                  ----
<S>                                               <C>                   <C>
Machinery and equipment                           $ 2,248               $ 2,456
Less, accumulated depreciation                        903                   903
                                                   ------                ------
                                                  $ 1,345               $ 1,553
                                                  =======               =======
</TABLE>


                                      F23
<PAGE>   55
At December 31, 1996 minimum lease commitments under capital leases are as
follows (in thousands):

<TABLE>
<CAPTION>
         Year                                                        Amount
         ----                                                        ------
<S>      <C>                                                        <C>
         1997                                                       $    406
         1998                                                            262
         Thereafter                                                        0
                                                                    --------
         Total minimum lease payments                                    668
         Imputed interest (@ rates ranging from
           3.4% to 7.2%)                                                 (40)
                                                                    --------
         Total future principal payments
          of lease obligations                                      $    628
                                                                    ========
</TABLE>


LITIGATION

Since 1981, the Company has been named as a defendant in approximately 650
product liability cases throughout the United States by persons claiming to have
suffered asbestos-related diseases as a result of alleged exposure to asbestos
in products manufactured and sold by the Company. Approximately 200 of these
cases are currently pending and costs of approximately $2 million in the
aggregate have been incurred in the defense of these claims since 1981. The
Company's insurance provider has accepted the defense of these cases under an
agreement for sharing of the costs of defense, settlements and judgements, if
any. The Company has a reserve of $950,000 at December 31, 1996 for its
estimated share of losses related to these claims. In light of the nature and
merits of the claims alleged, in the opinion of management, the resolution of
these remaining claims will not have a material adverse effect on the results of
operations or financial condition of the Company.


In 1986, the Company, along with numerous other companies, was named by the
United States Environmental Protection Agency ("EPA") as a Potentially
Responsible Party ("PRP") under the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, 42 U.S.C. Paragraph 9601, et seq.
("CERCLA"), in connection with the existence of hazardous substances at a site
known as the Fulton Terminal Superfund site located in Fulton, Oswego County,
New York. On September 28, 1990 the Company and a number of other PRPs reached a
negotiated settlement with the EPA pursuant to which the settling PRPs agreed to
pay the costs of certain expenses in connection with the proceedings, and to pay
certain other expenses including the costs and expenses of administering a trust
fund to be established by the settling PRPs. The settlement agreement is
embodied in a consent decree lodged with the United States District Court for
the Western District of New York and fixed the Company's proportionate share of
the total expenses. The soil has been cleaned-up and the ground water is now
being treated. The remaining cost to the Company of the remedial work and other
expenses covered by the settlement agreement is estimated to be approximately
$350,000. This is based, in part, on an allocation of certain sites' costs
which, due to the joint and several nature of the liability, could increase if
the other PRP's are unable to bear their allocated share. The Company has
a reserve of $350,000 at December 31, 1996 to cover the remaining proportionate
share of the estimated cost to clean-up the ground water, most of which will be
paid in 1997. Based on information


                                      F24
<PAGE>   56
currently available to the Company, management believes that it is probable that
the major responsible parties will fully pay the cost apportioned to them.
Management believes that, based on its financial position and the estimated
accrual recorded, its remediation expense with respect to this site is not
likely to have a material adverse effect on its consolidated financial position
or results of operations of the Company.

The Company has been named as a PRP with respect to certain other sites which
are being investigated by federal or state agencies responsible for regulation
of the environment. Status as a PRP means that the Company may be jointly and
severally liable for all of the potential monetary sanctions and remediation
costs applicable to each site. In assessing the potential liability of the
Company at each site, management has considered, among other things, the
aggregate potential cleanup costs of each site; the apparent involvement of the
Company at each site and its prospective share of the remediation costs
attributable thereto; the number of the PRPs identified with respect to each
site and their financial ability to contribute their proportionate shares of the
remediation costs for such site; the availability of insurance coverage for the
Company's involvement at each site and the likelihood that such coverage may be
contested; and whether and to what extent potential sources of contribution from
other PRPs or indemnification by insurance companies constitute reliable sources
of recovery for the Company. On the basis of such consideration, management has
determined that such environmental matters will not have a material affect on
the Company's financial position or results of operations. The Company has
provided an aggregate reserve amounting to approximately $250,000 at December
31, 1996 for its estimated share of the ultimate cost of cleanup for such claims
excluding any potential sources of indemnification or recovery from third
parties.

In 1992, a subsidiary of the Company, Bird Atlantic Corporation, formerly
Atlantic Building Products Corporation ("ABPCO"), commenced an action against a
former vendor, alleging violation of an exclusive distributorship without
adequate and fair compensation to ABPCO. A jury trial was held in November 1995
in the Superior Court of Plymouth County, Massachusetts. The jury found in favor
of ABPCO and judgement was entered on January 26, 1996 in the principal amount
of approximately $1.8 million. The award, with interest accruing at 12% per
annum, is expected to be in excess of $3 million and will not be reported as
income until collected. The defendant has appealed the judgement.

The Company is also exposed to a number of other asserted and unasserted
potential claims encountered in the normal course of business and unrelated to
environmental matters. In the opinion of management, the resolution of such
claims will not have a material adverse effect on the Company's financial
position or results of operations.


WARRANTY OBLIGATIONS

The Company warrants under certain circumstances that its Housing Group's
products meet certain manufacturing and material


                                      F25
<PAGE>   57
specifications. In addition, for marketing considerations, the Company makes
elective settlements in response to customer complaints. The Company records the
liability for warranty claims and elective customer settlements when it
determines that a specific liability exists or a payment will be made. During
1996, 1995 and 1994, the Company recorded (exclusive of those claims related to
former roofing operations) approximately $2,155,000, $2,262,000, and $2,687,000,
respectively, in warranty expenses and elective customer settlements. The
warranty expense related to former roofing operations for 1996, 1995 and 1994
amounted to approximately $85,000, $94,000 and $100,000, respectively. Based
upon analyses performed by the Company's management, a reasonably possible range
of potential liability from unasserted warranty obligations for all products
sold prior to December 31, 1996 is estimated to be between $3.5 million and
$17.5 million. However, the Company has not recorded any liability for these
future unasserted claims or complaints because management has concluded, based
on such analyses, that no particular estimate within this range is probable.


12.  OPERATIONS IN DIFFERENT INDUSTRIES

The Company has had two business segments which it defined as the Housing Group
and the Environmental Group.

The Housing Group manufactures and markets residential and commercial roofing
products in the northeastern United States, including a full line of fiberglass
based asphalt shingles and roll roofing. Until early to mid 1995, the Group also
manufactured vinyl siding, window profiles, trim and accessories which were
distributed nationwide. In prior years, the Group operated distribution centers
primarily in the southeastern and southwestern markets for vinyl siding and in
the Arizona and northeastern markets for roofing and other building materials
products.

The Company's Environmental Group provided recycling, remediation, and
beneficial re-use services for applications as diverse as food processing waste
streams, oily waste recovery and the treatment of municipal wastes. Generally,
these on-site services recovered valuable constituents, removed wastes and
reduced the volume of materials which must be disposed of by other means. In
December 1993, the Company decided to close this portion of the environmental
segment and dedicate this group to operating BEGCI, the fixed site facility in
Texas. As discussed in Note 9, the Company sold its interest in BEGCI in
November 1995 to GTS Duratek, Inc.

Net sales represent sales to unaffiliated customers. Since the dispositon of the
environmental group, which was recorded as a discontinued operation as discussed
in Note 9, the Company has operated exclusively in the housing group. As such,
net sales and earnings (loss) from continuing operations recorded on the
consolidated statement of operations are attributable to the housing group.


                                      F26
<PAGE>   58
Identifiable assets are those that are used in the Company's operations in each
industry segment. Corporate assets are principally cash and equivalents and
property maintained for general corporate purposes. Summarized identifiable
assets and capital expenditures by business segment for 1996, 1995 and 1994 are
as follows (in thousands):

<TABLE>
<CAPTION>
                                                   Year Ended December 31,
                                         1996               1995               1994
                                         ----               ----               ----
<S>                                   <C>                <C>                <C>
     Identifiable assets:
       Housing group                  $30,910            $34,111            $57,282
       Environmental group                  0                 75              7,874
       Corporate                        8,759              9,517             20,549
                                      -------            -------            -------
                                      $39,669            $43,703            $85,705
                                      =======            =======            =======

     Capital expenditures:
       Housing group                  $ 1,130            $ 1,924            $ 9,446
       Environmental group                  0                  0              1,283
       Corporate                            0                  0                 37
                                      -------            -------            -------
                                      $ 1,130            $ 1,924            $10,766
                                      =======            =======            =======
</TABLE>


                                      F27
<PAGE>   59
13.   QUARTERLY  FINANCIAL  DATA  (UNAUDITED)


Summarized quarterly financial data for 1996 and 1995 is shown below:

<TABLE>
<CAPTION>
THREE  MONTHS  ENDED                 MARCH 31          JUNE 30          SEPT. 30        DEC. 31
                                     --------          -------          --------        -------
                                           (thousands of dollars, except per share amounts)
<S>                                 <C>                <C>             <C>             <C>
1996
Net sales                           $  6,446(1)        $ 14,960(2)     $ 17,084(2)     $ 13,466(2)
Gross profit                        ($   111)(1)       $  2,942        $  3,539        $  1,746
Earnings(loss):
   Continuing operations            ($ 1,560)          $  1,140        $  2,112        $    477
   Discontinued operations                 0                 60              81              (7)
                                    --------           --------        --------        --------
Net earnings  (loss)                ($ 1,560)          $  1,200        $  2,193        $    470
                                    ========           ========        ========        ========

Earnings per share data:
Primary earnings  (loss) per
   common share:
      Continuing operations         ($  0.47)          $   0.19        $   0.42        $   0.02
      Discontinued operations           0.00               0.01            0.02            0.00
                                    --------           --------        --------        --------
      Net earnings  (loss)          ($  0.47)          $   0.20        $   0.44        $   0.02
                                    ========           ========        ========        ========



1995
Net sales                           $ 16,623           $ 15,138        $ 12,170        $ 10,249
Gross profit                        $  1,532           $  2,621        $  1,817        $    203(3)
Earnings(loss):
   Continuing operations            $  9,036           ($ 4,066)       ($   596)       ($ 5,171)
   Discontinued operations              (236)           (11,368)              0             352
                                    --------           --------        --------        --------
Net earnings  (loss)                $  8,800           ($15,434)       ($   596)       ($ 4,819)
                                    ========           ========        ========        ========

Earnings per share data:
Primary earnings  (loss) per
   common share:
      Continuing operations         $   2.11           ($  1.08)       ($  0.24)       ($  1.35)
      Discontinued operations          (0.06)             (2.77)           0.00            0.09
                                    --------           --------        --------        --------
      Net earnings  (loss)          $   2.05           ($  3.85)       ($  0.24)       ($  1.26)
                                    ========           ========        ========        ========
</TABLE>

(1)   Decrease in gross profit and the decline in sales is attributable to
      unfavorable weather conditions in the northeast during the first quarter.

(2)   Increase in sales during the last three quarters of 1996 is due in part to
      the release of pent-up demand caused by the severe weather conditions
      during the first quarter.

(3)   Decrease in gross profit in the fourth quarter compared to the previous
      quarter is due to sales price weakness and the decline in sales volume
      attributable to a weak re-roofing market caused by a dry, hot summer.


                                      F28
<PAGE>   60
                        BIRD CORPORATION AND SUBSIDIARIES


                                   SCHEDULE II


                        VALUATION AND QUALIFYING ACCOUNTS


                  Years Ended December 31, 1996, 1995 and 1994
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                   Additions
                                                                   ---------
                                           Balance        Charged to     Charged to                            Balance
                                          beginning        cost and         other           Deduc-              at end
                                           of year         expenses       accounts(a)        tions              of year
                                           -------         --------       -----------        -----              -------
<S>                                        <C>              <C>           <C>              <C>                  <C>
Year Ended December 31, 1996:

  Allowance for doubtful accounts          $   153          $     0          $  0          $    (3)(b)          $   150

  Valuation allowance for
    deferred tax assets                    $15,062          $ 2,157          $  0          $     0              $17,219


Year Ended December 31, 1995:

  Allowance for doubtful accounts          $ 3,137          $    26          $ 56          $(3,066)(c)          $   153

  Valuation allowance for
    deferred tax assets                    $ 5,000          $10,789          $  0          $  (727)             $15,062



Year Ended December 31, 1994:

  Allowance for doubtful accounts          $ 4,273          $   905          $100          $(2,141)(b)          $ 3,137

  Valuation allowance for
    deferred tax assets                    $ 9,000          $     0          $  0          $(4,000)             $ 5,000
</TABLE>



(a)      Represents recovery of balances previously written off.

(b)      Uncollectable accounts written off by a charge to reserve.

(c)      Represents the allowance for doubtful accounts of vinyl business sold
         of $517 and the uncollectable accounts written off by a charge to
         reserve of $2,549.


                                      F29
<PAGE>   61
                        KENSINGTON PARTNERS AND AFFILIATE
                          (JOINT VENTURE PARTNERSHIPS)

                          COMBINED FINANCIAL STATEMENTS
                          AND SUPPLEMENTAL INFORMATION
                                   ITEM 14 (d)

                                DECEMBER 31, 1994



                                       F30
<PAGE>   62
                        KENSINGTON PARTNERS AND AFFILIATE
                          (JOINT VENTURE PARTNERSHIPS)

                          COMBINED FINANCIAL STATEMENTS


--------------------------------------------------------------------------------
                                DECEMBER 31, 1994
--------------------------------------------------------------------------------

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                           PAGE
<S>                                                                        <C>
FINANCIAL STATEMENTS

    Independent Auditors' Report                                            F32

    Combined Balance Sheet                                                  F33

    Combined Statement of Operations and Partners' Deficit                  F35

    Combined Statement of Cash Flows                                        F36

    Notes to the Combined Financial Statements                              F38


SUPPLEMENTAL INFORMATION

    Independent Auditors' Report on Financial Statement Schedule            F51

    Financial Statement Schedule II                                         F52
</TABLE>


                                       F31
<PAGE>   63
                          INDEPENDENT AUDITORS' REPORT


TO THE PARTNERS
KENSINGTON PARTNERS AND AFFILIATE
Leechburg, Pennsylvania

         We have audited the accompanying combined balance sheet of Kensington
Partners and Affiliate (Joint Venture Partnerships) as of December 31, 1994 and
the related combined statements of operations and partners' deficit, and cash
flows for the year then ended. These financial statements are the responsibility
of the Partnerships' management. Our responsibility is to express an opinion on
these financial statements based on our audit.

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

         In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the financial position of Kensington
Partners and Affiliate as of December 31, 1994, and the results of their
operations and their cash flows for the year then ended, in conformity with
generally accepted accounting principles.

         The accompanying financial statements have been prepared assuming that
Kensington Partners and Affiliate will continue as going concerns. As discussed
in Note 2 to the financial statements, the Companies have incurred significant
operating losses and current liabilities exceed current assets. Those
conditions, among others, raise substantial doubt about the Companies' ability
to continue as going concerns. Management's plans regarding those matters are
also described in Note 2. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.


/s/ Alpern, Rosenthal & Company

Pittsburgh, Pennsylvania
February 10, 1995



                                       F32
<PAGE>   64
                        KENSINGTON PARTNERS AND AFFILIATE
                          (JOINT VENTURE PARTNERSHIPS)

                             COMBINED BALANCE SHEET

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
DECEMBER 31                                                              1994
--------------------------------------------------------------------------------
<S>                                                                   <C>
ASSETS

CURRENT ASSETS
    Cash                                                              $   55,655
    Accounts receivable
        Trade - net of allowance for doubtful
          accounts of $323,000 - Note 3                                1,742,715
        Related parties - Note 13B                                     1,286,189
    Inventories - Note 4                                               1,875,584
    Prepaid expenses                                                      79,862
                                                                      ----------


              TOTAL CURRENT ASSETS                                     5,040,005
                                                                      ----------

PROPERTY AND EQUIPMENT - At cost - net of
  accumulated depreciation of $1,139,398 - Note 5                      3,136,639
                                                                      ----------


OTHER ASSETS
    Other receivables - related party - net of
      allowance - Note 13D                                               306,386
    Other assets - Note 6                                                371,249
                                                                      ----------

                                                                         677,635
                                                                      ----------
              TOTAL ASSETS                                            $8,854,279
                                                                      ==========
</TABLE>



The accompanying notes are an integral part of these combined financial
statements.


                                       F33
<PAGE>   65
                       KENSINGTON PARTNERS AND AFFILIATES
                          (JOINT VENTURE PARTNERSHIPS)
                             Combined Balance Sheet


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
DECEMBER 31                                                            1994
--------------------------------------------------------------------------------
<S>                                                                <C>
LIABILITIES AND PARTNERS' DEFICIT

CURRENT LIABILITIES
    Demand notes payable - Note 7                                  $  1,628,302
    Current maturities of capital lease
      obligations and long-term debt -  Note 8                          312,023
    Accounts payable
        Trade                                                         2,485,977
        Related parties - Note 13A                                    3,654,990
    Accrued expenses - Note 9                                         1,640,238
                                                                    -----------
              TOTAL CURRENT LIABILITIES                               9,721,530
                                                                    -----------

LONG-TERM LIABILITIES
    Capital lease obligations and long-term debt -
      net of current maturities - Note 8                                807,012
    Accounts payable - trade - long-term                                354,636
    Other long-term liabilities - related parties -
      Notes 13D                                                         126,314
                                                                    -----------

              TOTAL LONG-TERM LIABILITIES                             1,287,962
                                                                    -----------

              TOTAL LIABILITIES                                      11,009,492
                                                                    -----------
PARTNERS' DEFICIT                                                    (2,155,213)


COMMITMENTS AND CONTINGENCIES - Note 12                                      --
                                                                   ------------

              TOTAL LIABILITIES AND PARTNERS' DEFICIT              $  8,854,279
                                                                   ============
</TABLE>

The accompanying notes are an integral part of these combined financial
statements.
                                       F34
<PAGE>   66
                        KENSINGTON PARTNERS AND AFFILIATE
                          (JOINT VENTURE PARTNERSHIPS)

             COMBINED STATEMENT OF OPERATIONS AND PARTNERS' DEFICIT

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                      FOR THE YEAR ENDED DECEMBER 31, 1994
--------------------------------------------------------------------------------
<S>                                                                <C>
NET SALES (related parties - 26%)                                  $ 24,180,093

COST OF GOODS SOLD (purchased
  from related parties - 28%)                                        22,863,159
                                                                   ------------

              GROSS PROFIT                                            1,316,934

OPERATING EXPENSES (related parties - 11%)                            5,346,966
                                                                   ------------

              LOSS FROM OPERATIONS                                   (4,030,032)
                                                                   ------------

OTHER INCOME (EXPENSE)
    Interest expense                                                   (289,638)
    Income from equity investment                                         3,468
    Provision for doubtful accounts                                    (595,417)
    Tax penalties                                                      (199,872)
    Other expense - net                                                (198,186)
                                                                   ------------

              TOTAL OTHER EXPENSE                                    (1,279,645)
                                                                   ------------

              NET LOSS                                               (5,309,677)

PARTNERS' DEFICIT - Beginning of year                                  (195,526)

    Capital Contributions                                             3,349,990
                                                                   ------------
PARTNERS' DEFICIT - End of year                                    $ (2,155,213)
                                                                   ============
</TABLE>



The accompanying notes are an integral part of these combined financial
statements.


                                       F35
<PAGE>   67
                        KENSINGTON PARTNERS AND AFFILIATE
                          (JOINT VENTURE PARTNERSHIPS)

                        COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                      FOR THE YEAR ENDED DECEMBER 31, 1994
--------------------------------------------------------------------------------
<S>                                                                 <C>
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES
    Net loss                                                        ($5,309,677)
    Adjustments for noncash items
      included in net loss
        Depreciation and amortization                                   763,183
        Loss from equity investment                                      (3,468)
        Working capital changes (below)                               2,818,892
                                                                    -----------

              NET CASH USED FOR OPERATING ACTIVITIES                 (1,731,070)
                                                                    -----------

CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES
    Purchase of property and equipment                                  (38,222)
    Proceeds from sale of equipment                                      81,430
    Other assets                                                        (98,273)
    Other receivables - related parties                                  18,723
                                                                    -----------

              NET CASH USED FOR INVESTING ACTIVITIES                    (36,342)
                                                                    -----------

CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES
    Cash contributed by the partners - Note 10                        2,825,000
    Demand notes payable                                               (617,278)
    Proceeds from long-term debt                                        169,706
    Payments on long-term debt                                         (631,082)
    Other long-term liabilities - related parties                        61,203
                                                                    -----------

              NET CASH PROVIDED BY FINANCING ACTIVITIES               1,807,549
                                                                    -----------

INCREASE IN CASH                                                         40,137

CASH - Beginning of year                                                 15,518
                                                                    -----------

CASH - End of year                                                  $    55,655
                                                                    ===========
</TABLE>



The accompanying notes are an integral part of these combined financial
statements.


                                       F36
<PAGE>   68
                       KENSINGTON PARTNERS AND AFFILIATE
                          (JOINT VENTURE PARTNERSHIPS)

                  COMBINED STATEMENT OF CASH FLOWS (CONTINUED)


<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                      FOR THE YEAR ENDED DECEMBER 31, 1994
--------------------------------------------------------------------------------
                SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<S>                                                                 <C>
Cash paid during the year for interest                              $   255,304
                                                                    ===========

                   NONCASH INVESTING AND FINANCING ACTIVITIES

Capital lease and debt obligations
  incurred for acquisition of equipment                             $    68,431
                                                                    ===========

Partners' capital contribution of inventory                         $   399,990
                                                                    ===========

Liability to related party
  contributed to capital                                            $   125,000
                                                                    ===========

                      WORKING CAPITAL (INCREASES) DECREASES

Accounts receivable
    Trade                                                           $ 1,020,492
    Related parties                                                    (280,204)
Inventories                                                           1,480,803
Other current assets and
  liabilities                                                           940,601
Accounts payable
    Trade                                                            (1,087,268)
    Related parties                                                     744,468
                                                                    -----------

        INCREASE IN WORKING CAPITAL                                 $ 2,818,892
                                                                    ===========
</TABLE>




The accompanying notes are an integral part of these combined financial
statements.


                                       F37
<PAGE>   69
                        KENSINGTON PARTNERS AND AFFILIATE
                          (JOINT VENTURE PARTNERSHIPS)

                   NOTES TO THE COMBINED FINANCIAL STATEMENTS


NOTE 1  -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       A.    PRINCIPLES OF COMBINATION
             The accompanying combined financial statements include the accounts
       of Kensington Partners (KP), combined with the accounts of North American
       Installations Company (NAICO). NAICO is owned 100% by common owners of
       KP. All significant intercompany balances and transactions have been
       eliminated in the preparation of the combined financial statements. The
       combined group is herein referred to as "the Companies".

             KP is a joint venture partnership formed by ZES, Inc. (formerly
       Kensington Manufacturing Company) (ZES) and Bird-Kensington Holding
       Corp., an indirect subsidiary of Bird Corporation (Bird). NAICO was
       formed in May 1993, as a joint venture partnership, and ceased operations
       in 1994.

       B.    NATURE OF BUSINESS
             Kensington Partners operates in one principal industry segment: the
       manufacture of vinyl replacement windows for wholesalers and home
       remodelers. The Partnership grants credit to its customers, substantially
       all of which are retail and wholesale resellers of windows located in the
       eastern half of the United States.

             NAICO was an exclusive installer of KP windows for a significant
       customer of KP, a retail seller of windows to end users, which has sales
       throughout the United States. The installation of the windows has been
       transferred to the customer that purchases the windows.

       C.    CASH AND CASH EQUIVALENTS
             Interest-bearing deposits and other investments with original
       maturities of three months or less are considered cash equivalents.

       D.    ACCOUNTS RECEIVABLE
             The Companies provide for estimated losses on uncollectable
       accounts receivable based on historical data and management's evaluation
       of individual accounts receivable balances at the end of the year.

       E.    INVENTORIES
             The Companies value all of its inventories at the lower of cost or
       market. Raw materials are determined on the last-in, first-out (LIFO)
       method. Work-in-process and finished goods inventories are determined on
       a first-in, first-out (FIFO) method.


                                       F38
<PAGE>   70
                        KENSINGTON PARTNERS AND AFFILIATE

                          (JOINT VENTURE PARTNERSHIPS)

             NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)



NOTE 1  -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

       F.    DEPRECIATION
             Depreciation is computed by the straight-line method at rates
       intended to distribute the cost of the assets over their estimated useful
       lives. Property under capital lease is being amortized over the life of
       the lease in accordance with generally accepted accounting principles.
       Rates used by principal classifications are as follows:

<TABLE>
<CAPTION>
                                                                     Rate
                                                                    (Years)
                                                                    -------
<S>                                                                 <C>
             Warehouse and manufacturing equipment                  3  -  10
             Furniture and fixtures                                 5  -  10
             Leasehold improvements                                 3  -  15
             Transportation equipment                               3  -   6
</TABLE>

             Maintenance and repairs which are not considered to extend the
       useful lives of assets are charged to operations as incurred. Upon sale
       or retirement, the cost of assets and related allowances are removed from
       the accounts and any resulting gains or losses are included in other
       income (expense) for the year.

       G.    INVESTMENT IN AFFILIATED COMPANY
             The Companies' investment in a joint venture partnership is carried
       on the equity basis, which approximates the Companies' equity in the
       underlying net book value.

       H.    PRODUCT WARRANTIES
             The Companies provide an accrual for future warranty costs based
       upon actual claims experience. The warranties are limited and provide for
       parts and/or labor based upon the type of window sold.

       I.    INCOME TAXES
             The Companies are being treated as partnerships for Federal and
       state income tax purposes. Under the Internal Revenue Code provisions for
       partnerships, the partners reflect their proportionate share of the
       Companies' taxable income or loss on their respective income tax returns,
       and the Companies are not liable for income taxes.


                                       F39
<PAGE>   71
                        KENSINGTON PARTNERS AND AFFILIATE

                          (JOINT VENTURE PARTNERSHIPS)

             NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)


NOTE 2  -  OPERATIONS AND LIQUIDITY

       The Companies' combined financial statements have been presented on the
basis that they are going concerns, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. The
Companies incurred net losses of approximately $5,310,000 and negative cash
flows from operations of $1,731,000 for 1994. At December 31, 1994, the balance
sheet reflects an excess of current liabilities over current assets of
$4,682,000, and a net capital deficiency of $2,155,000.

       In addition, a lease agreement (Note 12A) is in default as a result of
late payments being made and certain payroll and sales taxes are delinquent.
(Note 9)

       Management believes the above mentioned losses and the associated balance
sheet deficiencies are a result of adding new products in 1993 which required
different manufacturing processes and a significant increase in orders, which
put strain on the existing systems. The combination of the above resulted in
manufacturing inefficiencies, low asset performance, excessive delivery costs
and inadequate management information.

       During 1993, the Companies embarked on a program to correct the problems
associated with operations. Management believes that the major components of the
plan have been achieved in 1994 and that the effect of addressing and correcting
these problems during 1994 will have a positive impact on 1995 operating
results.

       During the first quarter of 1995, KP has secured price increases from a
majority of its customers and negotiated a price reduction from a major vendor.
In addition, KP continues on a program to increase productivity, which includes:
simplifying product lines, improving plant layout, management training and
investing in labor saving equipment. KP has also begun a sales program to
broaden its customer base.

       The outcome of the uncertainties discussed above cannot be predicted at
this time. The financial statements do not include any adjustments relating to
the recoverability and classification of recorded asset amounts and
classification of liabilities that might be necessary should the Companies be
unable to continue in existence.

NOTE 3  -  ACCOUNTS RECEIVABLE

       At December 31, 1994, accounts receivable - trade from three customers
were approximately 67% of trade receivables. Sales to these unrelated customers
comprised 67% of total sales for the year ended December 31, 1994.


                                       F40
<PAGE>   72
                        KENSINGTON PARTNERS AND AFFILIATE

                          (JOINT VENTURE PARTNERSHIPS)

             NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
NOTE 4  -  INVENTORIES
<S>                                                                  <C>
       Inventories at December 31, 1994 are as follows:
             Raw materials                                           $   950,893
             Allowance to state raw materials at LIFO cost               (39,005)
                                                                     -----------

             Raw materials at LIFO cost                                  911,888
             Work-in-process                                             648,987
             Finished goods                                              314,709
                                                                     -----------

                       Total Inventories                             $ 1,875,584
                                                                     ===========

NOTE 5  -  PROPERTY AND EQUIPMENT

       Property and equipment at December 31, 1994 is as follows:

             Equipment under capital leases - Note 8                 $ 1,785,817
             Warehouse and manufacturing equipment                     1,715,676
             Furniture and fixtures                                      290,258
             Leasehold improvements                                      419,791
             Transportation equipment                                     64,495
                                                                     -----------

                                                                       4,276,037
             Less: Accumulated depreciation                            1,139,398
                                                                     -----------

                       Total Property and Equipment                  $ 3,136,639
                                                                     ===========

NOTE 6  -  OTHER ASSETS
       Other assets at December 31, 1994 are as follows:

             Deposits                                                $   199,838
             Sample windows                                               89,965
             Other assets                                                 81,446
                                                                     -----------
                                                                     $   371,249
                                                                     ===========
</TABLE>


                                       F41
<PAGE>   73
                        KENSINGTON PARTNERS AND AFFILIATE

                          (JOINT VENTURE PARTNERSHIPS)

             NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)


NOTE 7  -  DEMAND NOTES

       On June 15, 1994, KP entered into a financing/factoring agreement with a
lending institution to sell, on an ongoing basis, up to 80% or $2,500,000,
whichever is less, of acceptable trade accounts receivable. All accounts
receivable that remain unpaid after 90 days of the purchase by the lender are
subject to recourse at the lender's discretion. KP may, at any time, repurchase
the accounts receivable sold. The agreement, which expires on June 15, 1995, is
subject to automatic renewal for a six month period, unless notice of nonrenewal
is given by either party. The loan was funded with $1,000,000, at which time the
Companies' line of credit was paid in full (see below).

       Under the terms of this agreement, fees ranging from 1% to 3-1/2% are
based on the number of days to collect the trade receivable, with a guaranteed
minimum monthly fee of $5,000. In addition, interest is charged on any amounts
advanced under the agreement, at the rate of prime (8-1/2% at December 31, 1994)
plus 1-1/2%. Under the terms of this agreement, Bird has guaranteed $1,250,000
of this debt.

       The amount outstanding under this agreement, included in the accompanying
balance sheet at December 31, 1994, is net of a $150,000 cash reserve held by
the lending institution.

       Prior to June 15, 1994, the Companies had a line-of-credit, with maximum
borrowings of $2,500,000. Interest was payable monthly at the bank's basic rate
plus 1% (see below). The borrowings on the line were collateralized by
substantially all the assets of the Companies. The line was guaranteed by the
partners of the Companies.

       In early 1994, the bank cited defaults under the line of credit agreement
and made demand for payment. Based on agreements between the Companies and the
bank in February and April, 1994, the bank agreed to forebear collection and set
a final due date of August 31, 1994. In addition, the interest rate was changed
to the bank's basic rate plus 3%. Bird was required to put up $750,000 as
additional collateral, which was later applied to the line. Bird was also
required to make additional payments totaling $1,200,000. The payments by Bird
were recorded as capital contributions to the partnership.


                                       F42
<PAGE>   74
                        KENSINGTON PARTNERS AND AFFILIATE

                          (JOINT VENTURE PARTNERSHIPS)

             NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)


NOTE 8  -  CAPITAL LEASE OBLIGATIONS AND LONG-TERM DEBT

       The following is a schedule by years of future minimum lease payments
under capital leases and installment notes together with the present value of
the net minimum lease payments and note payments as of December 31, 1994:

<TABLE>
             <S>                                                             <C>
             1995                                                             $332,000
             1996                                                              287,000
             1997                                                              278,000
             1998                                                              334,000
                                                                              --------
</TABLE>

<TABLE>
<S>                                                                          <C>
                 Net minimum lease payments                                  1,231,000

          Less: Amount representing interest                                   158,000
                                                                            ----------
                 Present value of net minimum lease payments                 1,073,000
          Long-term debt principal payments - all due
            within one year                                                     46,000
                                                                            ----------
                 Net obligations under capital leases and notes payable      1,119,000

          Less: Current portion                                                312,000
                                                                            ----------
          Long-term obligations under capital leases and notes payable      $  807,000
                                                                            ==========
</TABLE>

       The partners have guaranteed substantially all of the above lease
obligations.

       Assets under capital lease are capitalized using interest rates
appropriate at the inception of each lease. The following is an analysis of the
Companies' assets under capital lease obligations, included in property and
equipment (Note 5), at December 31, 1994:

<TABLE>

<S>                                                         <C>
          Warehouse and manufacturing equipment             $1,624,677
          Transportation equipment                             161,140
                                                            ----------
                                                             1,785,817
          Less:  Accumulated amortization                      290,729
                                                            ----------
                 Total                                      $1,495,088
                                                            ==========
</TABLE>


                                       F43
<PAGE>   75
                        KENSINGTON PARTNERS AND AFFILIATE

                          (JOINT VENTURE PARTNERSHIPS)

             NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)


NOTE 9  -  ACCRUED EXPENSES

<TABLE>
<S>                                                                       <C>
          Accrued expenses at December 31, 1994 are as follows:
              Accrued and withheld payroll and payroll taxes (Note 2)     $  575,500
              Accrued and collected sales taxes (Note 2)                     502,415
              Accrued tax penalties and interest                             239,219
              Accrued vacation                                               155,510
              Accrued real estate taxes                                      105,932
              Other accrued expenses                                          61,662
                                                                          ----------
                  Total Accrued Expenses                                  $1,640,238
                                                                          ==========
</TABLE>

NOTE 10  -  PARTNERS' CAPITAL

       Effective July 1, 1992, ZES entered into an agreement with Bird through
one of Bird's indirect subsidiaries to form a joint venture partnership,
Kensington Partners (KP), for the purpose of manufacturing and selling custom
windows, a business previously conducted by ZES. ZES' capital contribution to KP
consisted of all of its assets subject to certain of its liabilities, including
$2,800,000 owed to Jones and Brown, Inc. (J&B), a related party. Bird's capital
contribution consisted of $2,800,000, in cash, which was used to pay off the
amount owed by KP to J&B, subsequent to the inception of the Partnership. The
net assets contributed by ZES were $1,689,000.

       During 1994, the partners entered into an agreement to restructure the
partnership agreement of KP and to make capital contributions. Each partner's
ownership percentage is to be adjusted plus or minus 2% for each $50,000 of
capital contributed or collateral provided on the bank loan, but in no event
should a partner be diluted below 10%. A diluted partner is entitled to cure any
shortfall between its capital account and the other partner's capital account by
contributing the capital necessary to equalize each partner's capital account by
the later of December 31, 1994 or six months from the date of the last capital
contribution (August 1994) made on or before December 31, 1994.

       Pursuant to the agreement, Bird contributed $2,700,000 in cash, including
payments on debt (Note 7), and $150,000 of inventory. ZES has contributed
$250,000 in cash and $250,000 of inventory. Accordingly, the ownership
percentages for Bird and ZES at December 31, 1994 are 90% and 10%, respectively.

       In addition to the capital contributed, the partners have advanced
various amounts of working capital during 1994 (Note 13).


                                       F44
<PAGE>   76
                        KENSINGTON PARTNERS AND AFFILIATE
                          (JOINT VENTURE PARTNERSHIPS)

             NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)


NOTE 10  -  PARTNERS' CAPITAL (CONTINUED)

       In September 1994, Bird entered into a sales agreement with Jannock, Inc.
to sell all of the assets of a wholly owned subsidiary, Bird Incorporated. The
sales agreement contains an option for Jannock to purchase Bird's interest in
Kensington Partners for $2,780,000. In addition to the purchase price, Jannock
would assume all of Bird's obligations under various security agreements. The
option, which expires on April 7, 1995, is subject to Bird fulfilling its
obligations under the partnership agreement.

       Subsequent to December 31, 1994, Bird advanced KP approximately $524,000.

NOTE 11  -  RETIREMENT PLANS

       KP participates in a multi-employer defined benefit pension plan for the
electrician's union employees. Plan contributions are determined by the union
labor agreement. Management has not expressed any intent to terminate its
participation in this plan. KP contributed approximately $191,000 to this plan
during the year ended December 31, 1994.

       The Companies also sponsor an executive retirement plan. Under the
provisions of the plan certain key employees may elect, at their discretion, to
contribute to the plan. The Companies provide a matching contribution of one
half of all employee contributions up to a maximum of 3% of gross compensation.
Contributions are used to purchase variable rate annuities.

       Additional benefits under this plan include proceeds from life insurance
policies owned by KP or the cash value upon termination of employment. The
Companies' contributions to this plan were not material for the year ended
December 31, 1994.

NOTE 12  -  COMMITMENTS AND CONTINGENCIES

       A.    OPERATING LEASES

             The Companies lease various operating facilities from related and
       unrelated parties and transportation equipment from unrelated parties
       under various operating leases. Rent expense for the year ended December
       31, 1994 is as follows:

<TABLE>
<S>                                              <C>
          Facilities leases - primarily
            related party                        $285,000
          Transportation equipment                133,000
                                                 --------
                                                 $418,000
                                                 ========
</TABLE>


                                       F45
<PAGE>   77
                        KENSINGTON PARTNERS AND AFFILIATE
                          (JOINT VENTURE PARTNERSHIPS)

             NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)


NOTE 12  -  COMMITMENTS AND CONTINGENCIES (CONTINUED)

       A.    OPERATING LEASES (CONTINUED)

             The following are the approximate future minimum operating lease
       payments at December 31, 1994, substantially all of which are due to a
       related party:

<TABLE>
<CAPTION>
               Year Ending
               December 31                                            Amount
               -----------                                            ------
             <S>                                                  <C>
                   1995                                           $  239,000
                   1996                                              227,000
                   1997                                              215,000
                   1998                                              215,000
                   1999                                              215,000
               Thereafter                                          1,280,000
                                                                  ----------
             Total minimum lease payments                         $2,391,000
                                                                  ==========
</TABLE>

             KP is currently in default on its lease for its primary operating
       facility as a result of not making the required rent payments as they
       became due. Rent of approximately $237,000, due a related party, has been
       accrued in the accompanying balance sheets at December 31, 1994. Based
       upon the current payment plan, approximately $61,000 of the accrued rent
       at December 31, 1994 is included in other long-term liabilities - related
       parties.

       B.    PURCHASE COMMITMENTS

             KP and Bird have entered into a supply agreement which requires KP
       to purchase specified quantities of raw materials from Bird beginning in
       1993 and ending in the year 2002. Minimum purchases for the next five
       years are 1995, $900,000; 1996, $1,100,000; 1997, $1,300,000; and 1998
       and 1999, the greater of $1,300,000 or actual amounts purchased in 1997.
       The agreement includes penalties for shortfalls in purchases on a per
       year basis. Shortfalls can be offset with credits from years when excess
       volume is purchased.

             KP and Domken Plastics (Note 13A) have entered into a supply
       agreement which requires KP to purchase $2,500,000 of raw materials,
       annually, through 1999. The agreement includes penalties for shortfalls
       in total purchases over the term of the agreement.

       C.    SUPPLY AGREEMENTS

             KP has entered into a supply agreement with a customer that
       primarily purchases through Quantum II Partners (Notes 12D and 13D). The
       agreement requires KP to provide not less than 90% of the customer's
       total requirement of Quantum II vinyl replacement windows (Note 12D).


                                       F46
<PAGE>   78
                        KENSINGTON PARTNERS AND AFFILIATE
                          (JOINT VENTURE PARTNERSHIPS)

             NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)


NOTE 12  -  COMMITMENTS AND CONTINGENCIES (CONTINUED)

       D.    LITIGATION

             On September 13, 1994, a complaint was filed in Middlesex Superior
       Court by the other 50% owner of Quantum II Partners (Note 13D) and
       others, including Quantum II Partners (collectively, the plaintiffs),
       against Kensington Partners and Quantum II Partners (collectively, the
       defendants). The plaintiffs allege various breaches of contract on the
       part of the defendants including breach of a partnership agreement, a
       supply agreement (Note 12C) and an employment agreement along with other
       complaints under the Massachusetts Unfair Trade Practices Act. The
       plaintiffs are seeking relief of actual damages in an unspecified amount
       and a doubling or trebling of such damages as provided in the Unfair
       Trade Practices Act. KP believes that the claims filed by the plaintiffs
       have no merit and denies any liability.

             On October 4, 1994, the defendants filed a complaint in Federal
       Court alleging various breaches of contract by the plaintiffs and seeking
       collection of outstanding balances due to the Company from the plaintiffs
       of approximately $560,000, included in accounts receivable - trade.

             No answers have been filed in these actions because the parties are
       involved in settlement negotiations. With respect to the litigation filed
       by KP for the collection of the 1994 balances receivable, management
       estimates that some loss may occur and has recorded its estimate of
       possible loss as an allowance for doubtful accounts.

             The Company anticipates that a settlement agreement will be
       achieved, as currently contemplated. If the matter is not settled, and
       goes to trial, management believes that the ultimate loss, if any, will
       not exceed the amounts recorded.

NOTE 13  -  RELATED PARTY TRANSACTIONS

       The Companies have entered into various transactions with related parties
during the year ended December 31, 1994. The transactions are as follows:

       A.    PURCHASES AND PAYABLES

             The Companies have purchases for raw materials, advertising
       services, and commissions from the following related parties as of and
       for the year ended December 31, 1994:

<TABLE>
<S>                                                              <C>
                 Vinyl Division of Bird, Inc.                    $2,862,000
                 Domken Plastics Limited (DPL)                   $3,616,000
                 Quantum II Partners (see below)                 $  200,000
</TABLE>


                                       F47
<PAGE>   79
                        KENSINGTON PARTNERS AND AFFILIATE
                          (JOINT VENTURE PARTNERSHIPS)

             NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)


NOTE 13  -  RELATED PARTY TRANSACTIONS (CONTINUED)

       A.    PURCHASES AND PAYABLES (CONTINUED)

             Accounts payable to related parties at December 31,1994 is as
       follows:

<TABLE>

<S>                                                             <C>
                 Bird, Inc.                                     $1,947,000
                 Domken Plastics Limited (DPL)                   1,436,000
                 Quantum II (Notes 12D and 13D)                     16,000
                 Other related parties                             256,000
                                                                ----------
                                                                $3,655,000
                                                                ==========
</TABLE>


             DMI and DPL are related through common ownership with ZES.

             Fees from J&B for computer software support of approximately
       $144,000 were charged to operations for the year ended December 31, 1994.

       B.    SALES AND RECEIVABLES

             The Companies had sales to Jones & Brown, Inc. (J&B), a related
       party through common ownership with ZES, of approximately $5,890,000 for
       1994. In addition, the Companies had sales to other related parties of
       approximately $471,000 for 1994. Accounts receivable from related parties
       are as follows as of December 31, 1994:

<TABLE>
<S>                                                               <C>
                 J&B                                              $1,174,000
                 Other                                               112,000
                                                                  ----------
                     Total                                        $1,286,000
                                                                  ==========
</TABLE>

       C.    RENTS

             KP rents facilities from related parties (Note 12).

       D.    OTHER

             Kensington Partners owns a 50% equity investment in Quantum II
       Partners (Note 12D). Quantum II was formed during 1993 to be the
       exclusive marketing representative to sell Quantum II replacement windows
       manufactured by KP. Quantum II Partners reported a net partnership
       deficit of approximately $130,000 for 1994. KP has reflected its share of
       Quantum's excess of liabilities over assets in other long-term
       liabilities.


                                       F48
<PAGE>   80
                        KENSINGTON PARTNERS AND AFFILIATE
                          (JOINT VENTURE PARTNERSHIPS)

             NOTES TO THE COMBINED FINANCIAL STATEMENTS (CONTINUED)


NOTE 13  -  RELATED PARTY TRANSACTIONS (CONTINUED)

       D.    OTHER (CONTINUED)

             At December 31, 1994, approximately $306,000 due from Quantum II is
       included in other receivables - related parties. This amount is net of an
       allowance for doubtful accounts of $65,000.

            EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT
            AUDITORS' REPORT

       In 1995, Jannock, Inc. exercised its option to purchase Bird's interest,
owned by its wholly-owned subsidiary Bird-Kensington Holding Corporation, in
KP. Immediately preceding the sale, Bird purchased ZES' interest in KP for
$1,000,000. In addition, Bird invested in KP $4,090,000 prior to the sale to
fulfill provisions in the asset purchase agreement.

       On June 2, 1995, the stock of Bird-Kensington Holding Corporation, which
owned the assets and liabilities of KP, was sold by Bird to Jannock, Inc. in
exchange for cash of $2,780,000 and assumption of certain liabilities.

       In April 1996, the litigation (Note 12D) between the other 50% owner of
Quantum II Partners (Note 13D) and Bird, as successor in interest to certain of
Kensington Partners' rights and obligations under the Quantum II Partnership,
Supply and Sales Representative Agreements, was concluded as a result of the
parties entering into a settlement agreement. The agreement calls for Bird to
receive total payments of $410,000, and for cancellation of the Sales
Representative and Supply Agreements, and termination of the partnership.


                                       F49
<PAGE>   81
                            SUPPLEMENTAL INFORMATION



                                       F50
<PAGE>   82
          INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE





TO THE PARTNERS
KENSINGTON PARTNERS AND AFFILIATE
Leechburg, Pennsylvania



       We have audited the combined financial statements of Kensington Partners
and Affiliate as of December 31, 1994 and for the year then ended, and have
issued our report thereon dated February 10, 1995. In connection with our audit
of these financial statements, we audited financial statement schedule II. In
our opinion, such a financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly in all material
respects, the information set forth therein.



/s/Alpern, Rosenthal & Company
Pittsburgh, Pennsylvania


February 10, 1995


                                       F51
<PAGE>   83
                        KENSINGTON PARTNERS AND AFFILIATE

                                   SCHEDULE II

                        VALUATION AND QUALIFYING ACCOUNTS

                          YEAR ENDED DECEMBER 31, 1994

<TABLE>
<CAPTION>
                                                                     Additions
                                                             -------------------------
                                              Balance        Charged to      Charged to                     Balance
                                             beginning       costs and       other           Deduc-         at end
                                              of year        expenses        accounts        tions(1)       of year
                                              -------        --------        --------        --------       -------

YEAR ENDED DECEMBER 31, 1994:
<S>                                          <C>             <C>             <C>             <C>            <C>
   Allowance for doubtful accounts           $195,000        $595,000        $      -        $402,000       $388,000
                                              =======         =======        ========        ========       ========
</TABLE>


(1)   Uncollectible accounts written off.


                                       F52