<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

                            For the fiscal year ended

                                FEBRUARY 3, 1996

                                       or

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

                          Commission file number 0-8088

                                  FURON COMPANY
             (Exact name of registrant as specified in its charter)

CALIFORNIA                                                      95-1947155
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              Identification No.)

29982 IVY GLENN DRIVE, LAGUNA NIGUEL, CA                           92677
(Address of principal executive offices)                         (Zip Code)

       Registrant's telephone number, including area code: (714) 831-5350

Securities registered pursuant to Section 12(b) of the Act on the NEW YORK STOCK
EXCHANGE:

                         COMMON STOCK, WITHOUT PAR VALUE

                          COMMON STOCK PURCHASE RIGHTS

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

         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 the 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. 
                             -----
         As of February 12, 1996, the aggregate market value of voting stock
held by non-affiliates of the registrant was approximately $171,577,000. As of
March 19, 1996, the number of outstanding shares of Common Stock of the
registrant was 8,913,802.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the registrant's definitive proxy statement for the 1996
Annual Meeting of Shareholders (to be held on June 4, 1996) have been
incorporated by reference into Part III of this report.


                                       1
<PAGE>   2


                                     PART I

ITEM 1.  BUSINESS

GENERAL

Furon(R)  designs, develops and manufactures highly engineered components made
primarily from specially formulated high performance polymer materials. Most of
Furon's products are designed and engineered to meet specific requirements of
customers in the industrial process, transportation, industrial equipment,
electronics and healthcare industries.

The Company has historically expanded its operations through the acquisition and
further development of businesses which manufacture and sell components to
original equipment manufacturers and which possess similar technologies and
serve similar markets. On February 2, 1996, the Company acquired the Fluorglas
business of AlliedSignal Inc. Fluorglas' principal product offerings are
pressure-sensitive adhesive tapes and PTFE flexible composites and fabrications,
as well as PTFE films and metal-clad PTFE/glass laminates. This acquisition,
coupled with the acquisition on January 31, 1995 of Custom Coating & Laminating
Corporation's business devoted to the manufacture and sale of release liners and
other specialty engineered products incorporating surface chemistry technology,
enabled the Company to expand and complement its CHR(R) brand of products. (See
Note 2 of the "Notes to Consolidated Financial Statements" for additional
information concerning these acquisitions.)

In addition to its acquisition activities, the Company has developed its
business through the introduction of new product lines and improvements in its
existing products and capabilities and operational methodologies. For example,
in addition to the reorganization of its operations described below, the Company
believes that its World Class Performance program continues to improve its
operations through improved product quality and performance features, improved
customer service, minimization of waste, manufacturing costs and inventories,
reduced cycle times and increased employee productivity and involvement.
Further, the Company continues to focus its technology center on the development
of proprietary polymer compounds that can be used to produce high margin,
differentiated polymer products.

During fiscal 1996, the Company sold two of its peripheral businesses. On
December 31, 1995, the Company sold its metallic gasket business based in
Houston, Texas to Garlock, Inc. and effective April 29, 1995, it sold its custom
molded rubber goods business located in Sunnyvale, California to the business'
management. For additional information concerning these divestitures, see Note 2
of the "Notes to Consolidated Financial Statements."

Furon was incorporated in California in 1957 and changed its name from "The
Fluorocarbon Company" to "Furon Company" in January 1990. Unless the context
otherwise requires, the terms "Furon" and the "Company" are used in this report
to refer to Furon Company and its subsidiaries.



-------------------------
(R)Furon and CHR are  registered trademarks of the Company.


                                       2
<PAGE>   3

OPERATIONS

Prior to fiscal 1995, the Company conducted its operations in independent
business units developed and organized around manufacturing capabilities and
products and grouped from time to time based on varying product, market or other
criteria. In fiscal 1995, the Company consolidated the diverse independent
business unit operations into one Furon operating unit that is organized around
customers in the industrial process, transportation, industrial equipment,
electronics and healthcare industries. The Company believes that its current
organizational structure enables it to better serve its customers and grow its
customer base, eliminate redundancies and other inefficiencies, and more fully
leverage its technologies and other capabilities.

MARKETS AND PRODUCTS

The Company principally serves the industrial process, transportation,
industrial equipment, electronics and healthcare industries, offering the
following FURON(R) brand products: CHR(R) and FLUORGLAS(R) pressure sensitive
tapes, and PTFE and silicone coated fabrics; CHR(R) release liners and solid and
sponge silicone rubber; DEKORON(R) control and instrumentation cable and wire,
self-regulating heating and fiber optics cable; FELSTED(R) cables, control
cables, and control systems; OMNISEAL(R) spring energized PTFE seals, lip seals,
hydraulic seals, and metallic O-rings and C-rings; RULON(R) high performance
polymer materials and molded, extruded and machined bearings and other
components made from those materials; SYNFLEX(R) hydraulic hose, specialty hose,
and tubing, couplings and accessories; UNITHERM(R) heated hose and steam traced,
preinsulated and electrical traced tubing; and FURON(R) fabricated and extruded
high performance plastic and silicone components, fluid handling products, and
custom fabricated composite, urethane and polyimide foam components.

Furon's sales are generated primarily by its own salespersons located in most
major industrial areas. The remaining sales are made by independent
manufacturers' representatives and distributors. Most of the Company's customers
are original equipment manufacturers, commercial or industrial construction
companies or firms servicing the maintenance and replacement parts market or
distributors to these markets. The Company's business is not dependent upon a
single customer, or a few customers, and no single customer accounted for more
than 5% of Furon's sales volume during any of the last three fiscal years. (For
certain financial information concerning the Company's foreign and domestic
operations and export sales, see Note 10 of the "Notes to Consolidated Financial
Statements.")




-------------------------
(R) FURON, CHR, FLUORGLAS, DEKORON, FELSTED, OMNISEAL, RULON, SYNFLEX and
UNITHERM are registered trademarks of the Company.


                                       3
<PAGE>   4


COMPETITION

The Company competes with a large number of companies, some of which have
greater financial resources, but none of which competes with the Company in more
than a limited number of products. Depending on the product, the principal
competitive factors for Furon are materials capability, engineering, design and
process technology, quality, reliability and the ability to meet delivery dates.
The Company believes that trade secrets are important to its proprietary
products. To protect its trade secrets, the Company requires all salaried
employees to enter into confidentiality agreements. While the Company holds many
patents and trademarks with varying degrees of significance to its operations,
the Company's business is not dependent upon any particular one.

BACKLOG OF ORDERS

Furon's backlog of unfilled orders at February 3, 1996 was $54,241,000 and
$50,629,000 at January 28, 1995, a 7% increase. Excluding the effect of
acquisitions and divestitures, Furon's backlog decreased 5% to 47,539,000 at
February 3, 1996.

It is estimated that substantially all of Furon's backlog of orders at February
3, 1996 will be filled during the next 12 months, except for approximately
$1,200,000 of backlog which is scheduled to be filled during the subsequent
12-month period. The lead time between receipt of orders and shipment of
products, other than products for commercial aircraft, is typically a matter of
weeks. Although many of Furon's orders contain cancellation clauses, Furon has
seldom experienced significant cancellations of orders.

RAW MATERIALS

Furon purchases its raw materials, ranging from polymer resins to component
parts, from numerous suppliers. The top resins used by the Company are PTFE and
related resins, Nylon 11 sold under the trade name Rilsan(R), and silicone
polymers. The Company purchases its requirements for PTFE and related resins and
silicone polymers from the major suppliers of those resins, while ELF Atochem is
the Company's sole source for Rilsan. Rilsan is used primarily in the production
of heavy duty air brake tubing. Alternative sources of material which can be
substituted for Rilsan are available in the event a shortage of Rilsan develops.

RESEARCH AND DEVELOPMENT

For information concerning the amounts spent by the Company during the last
three fiscal years on research and development activities, see Note 1 of the
"Notes to Consolidated Financial Statements."

EMPLOYEES

At February 3, 1996, Furon employed 2,483 persons. Furon considers its employee
relations to be good.




-------------------------
     (R)Rilsan is a registered trademark of ELF Atochem.



                                       4
<PAGE>   5


ENVIRONMENTAL MATTERS

Compliance with environmental laws and regulations designed to regulate the
discharge of materials into the environment or otherwise protect the environment
requires continuing management effort and expenditures by the Company. The
Company does not believe that the operating costs incurred in the ordinary
course of business to satisfy air and other permit requirements, properly
dispose of hazardous wastes and otherwise comply with these laws and regulations
form or will form a material component of its operating costs or have or will
have a material adverse effect on its competitive or consolidated financial
positions.

The Company or one of its subsidiaries is currently involved in environmental
remediation at six former manufacturing sites. In addition, one of the Company's
subsidiaries is involved as an EPA-named potentially responsible party or
private cost recovery/contribution action defendant in connection with
environmental remediation at the following "superfund" waste disposal sites:
Solvents Recovery Service of New England site in Southington, Connecticut;
Gallups Quarry site in Plainfield, Connecticut; and the Davis Liquid Waste and
Picillo Superfund sites in Coventry, Rhode Island.

As of February 3, 1996, the Company's reserves for environmental remediation
matters totaled approximately $1.9 million. While neither the timing nor the
amount of the ultimate costs associated with these matters can be determined
with certainty, based on investigations to determine the nature of the potential
liability at each site, the estimated amount of investigation and remedial costs
expected to be necessary to complete the remediation and other factors, the
Company presently believes that these reserves should be sufficient to cover the
Company's aggregate liability for these matters and, accordingly, does not
expect them to have a material adverse effect on its consolidated financial
position or results of operations. The actual costs to be incurred by the
Company at each site will depend on a number of factors, including one or more
of the following: the final delineation of contamination; the final
determination of the remedial action required; negotiations with governmental
agencies with respect to cleanup levels; changes in regulatory requirements;
innovations in investigatory and remedial technology; effectiveness of remedial
technologies employed; and the ultimate ability to pay of any other responsible
parties.


                                       5
<PAGE>   6

ITEM 2. PROPERTIES

Furon has organized its domestic manufacturing facilities according to the
principal process used by each facility in the production of Furon's products.
These domestic "Centers of Excellence" and the Company's European manufacturing
facilities are identified below. Furon believes that these and its other
facilities are suitable for its business and adequate for its present needs, and
that appropriate additional or substitute space is available, if needed, to
accommodate physical expansion of the business in the foreseeable future. For
further information regarding the Company's lease commitments, see Note 6 of the
"Notes to Consolidated Financial Statements."

<TABLE>
<CAPTION>
                                              EXPIRATION OF
                                    SQUARE       MAXIMUM
         CENTERS OF EXCELLENCE      FOOTAGE     LEASE TERM
         ---------------------      -------     ----------
<S>                                  <C>      <C>
         Machining:
         Anaheim, CA                 91,000       7/31/10
         Los Alamitos, CA            74,000      12/14/03

         Molding:
         Bristol, RI                106,000       8/31/32
         Mundelein, IL               60,000       8/31/00

         Extrusion:
         Mantua, OH                 151,000       8/31/32
         Aurora, OH                 148,000       8/31/32
         Mickleton, NJ               86,000       8/31/32
         Mt. Pleasant, TX            67,000       8/31/32
         Cape Coral, FL              30,000       5/31/06

         Plastic Forming:
         Seattle, WA                116,000       1/31/97

         Coating/Films:
         New Haven, CT              110,000       8/31/32
         Hoosick Falls, NY          109,000        Owned
         Worcester, MA               76,000        Owned

         Clean Room
         Manufacturing:
         Fremont, CA                 30,000       7/01/03
</TABLE>


                                       6
<PAGE>   7


ITEM 2.  PROPERTIES (CONTINUED)

<TABLE>
<S>                                         <C>        <C>
         Assembly & Metal
         Fabrication:
         Kent, OH                           50,000      1/06/01
         Holmesville, OH                    28,000      Owned

         Compounding:
         Aurora, OH                         30,000      Owned

         Europe:
         Gembloux, Belgium                  49,000      Owned
         Kontich, Belgium                   30,000     11/30/99
</TABLE>

ITEM 3.  LEGAL PROCEEDINGS

The Company is from time to time named as a defendant in various lawsuits. The
Company vigorously defends all lawsuits brought against it, unless a reasonable
settlement appears appropriate. While the outcome of pending proceedings cannot
be predicted with certainty, the Company believes that the ultimate resolution
of the actions currently pending should not have a material adverse effect on
its consolidated financial condition.

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

There were no matters submitted to a vote of security holders during the fourth
quarter of the year ended February 3, 1996.


                                       7
<PAGE>   8


OFFICERS OF FURON

Furon's executive and other officers are as follows:

<TABLE>
<CAPTION>
Name                    Age   Position/Business Experience
----                    ---   ----------------------------
<S>                     <C>   <C>                       
EXECUTIVE OFFICERS

J. Michael Hagan        56    Chairman of the Board 

                              Mr. Hagan has been employed by the Company since
                              1967 and was promoted to Division Manager in 1969,
                              elected Vice President in 1975, and served as a
                              director and President from 1980 to June 1991 when
                              he was appointed Chairman of the Board.

Terrence A. Noonan      58    President and Director 

                              Mr. Noonan has been the President of Furon since
                              June 1991 and was elected as a director in August
                              1991. From 1989 to June 1991, he served as an
                              Executive Vice President in charge of various
                              operations. He joined Furon in 1987 as a Vice
                              President, having previously served since 1980 as
                              a Group General Manager of Eaton Corporation, a
                              diversified manufacturing company.

Monty A. Houdeshell     47    Vice President, Chief Financial Officer and 
                              Treasurer 

                              Mr. Houdeshell joined the Company in 1988 as Vice
                              President, Chief Financial Officer and Treasurer
                              and also served as Secretary from 1988 to February
                              1991. From 1985 to 1988, Mr. Houdeshell served as
                              Vice President, Chief Financial Officer and
                              Treasurer of Oak Industries, Inc., a manufacturer
                              of electronic components and controls.

OTHER OFFICERS

Koichi Hosokawa         47    Controller

                              Mr. Hosokawa joined the Company in 1988 as
                              Controller and will be leaving the Company on
                              April 30, 1996. From 1982 to 1988, Mr. Hosokawa
                              was Corporate Controller of Acme Holding, Inc., a
                              hardware manufacturing subsidiary of The Stanley
                              Works.

Donald D. Bradley       40    General Counsel and Secretary

                              Mr. Bradley joined the Company in June 1990 as
                              Senior Attorney and Assistant Secretary and was
                              named Corporate Secretary in February 1991 and
                              General Counsel in February 1992. Previously, he
                              was a Special Counsel with O'Melveny & Myers, an
                              international law firm with which he had been
                              associated since 1982.
</TABLE>

All officers of the Company are elected annually by and serve at the pleasure of
the Board of Directors. There are no family relationships among any of Furon's
officers.


                                       8
<PAGE>   9


STATEMENT REGARDING FORWARD LOOKING DISCLOSURE

Except for the historical information contained in this report, certain matters
discussed herein, including (without limitation) "Business -- Environmental
Matters" (Item 1) and "Legal Proceedings" (Item 3) in Part I and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" (Item
7) in Part II, are forward looking statements. These statements involve risks
and uncertainties, including (without limitation) the matters identified in
those sections and the following: the effect of economic and market conditions
and raw material price increases; the impact of costs, insurance recoveries and
governmental, judicial and other third party interpretations and determinations
in connection with legal and environmental proceedings; and the impact of
current or pending legislation and regulation.

                                     PART II

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

The Company's Common Stock has traded on the New York Stock Exchange ("NYSE")
under the trading symbol "FCY" since March 8, 1995. Previously, it traded on the
NASDAQ National Market System under the trading symbol "FCBN." As of March 18,
1996, the Company had approximately 1,100 holders of record of its Common Stock.
The following table sets forth for the periods indicated (i) the high and low
closing sale prices per share of the Company's Common Stock as reported by the
NYSE since March 8, 1995 and by NASDAQ prior to that date and (ii) the amount
per share of cash dividends paid by the Company with respect to its Common
Stock.

<TABLE>
<CAPTION>
                                         YEARS ENDED
            -------------------------------------------------------------------

                     FEBRUARY 3, 1996                    JANUARY 28, 1995
            ---------------------------------     -----------------------------

QUARTER       HIGH         LOW       DIVIDEND       HIGH      LOW      DIVIDEND
-------       ----         ---       --------       ----      ---      --------
<S>          <C>         <C>         <C>          <C>       <C>        <C>  
First        $22-1/2     $18-7/8      $0.06       $18-1/2   $15-1/4      $0.06
Second        23-1/4      20           0.06        18-1/2    14-1/4       0.06
Third         21          16-1/2       0.06        21        15-3/4       0.06
Fourth        20-1/2      15-1/2       0.06        23        19-1/4       0.06
</TABLE>

Future dividends will be considered by the Board of Directors taking into
account the Company's profit levels and capital requirements as well as
financial and other conditions existing at the time.

ITEM 6.  SELECTED FINANCIAL DATA

The following selected consolidated financial data for the five years in the
period ended February 3, 1996 should be read in conjunction with, and is
qualified by, the more detailed information and consolidated financial
statements included in Item 8 (Part II), "Consolidated Financial Statements and
Supplementary Data."


                                      9
<PAGE>   10

ITEM 6.  SELECTED FINANCIAL DATA (CONTINUED)

<TABLE>
<CAPTION>
                                                                         Years ended
                                         -----------------------------------------------------------------------
IN THOUSANDS, EXCEPT                      February 3,   January 28,    January 29,    January 30,    February 1,
SHARE AND PER SHARE AMOUNTS                  1996           1995          1994           1993           1992
----------------------------------------------------------------------------------------------------------------
<S>                                      <C>            <C>            <C>            <C>            <C>        
Net sales                                $   344,886    $   312,060    $   285,194    $   300,107    $   306,170
Cost of sales                                249,102        217,827        204,727        213,932        224,781
                                         -----------    -----------    -----------    -----------    -----------
Gross profit                                  95,784         94,233         80,467         86,175         81,389
Selling, general and administrative
    expenses                                  78,337         77,368         66,458         71,782         73,491
Restructuring charge                               -              -              -              -         23,650
Unusual and nonrecurring charges                   -              -              -              -          8,371
Other (income), net                           (3,866)        (3,126)        (2,296)        (2,363)        (2,104)
Interest expense                               2,899          2,394          3,337          4,243          5,824
                                         -----------    -----------    -----------    -----------    -----------
Income (loss) before income taxes             18,414         17,597         12,968         12,513        (27,843)
Provision (benefit) for income taxes           5,245          6,159          4,798          5,256         (5,501)
                                         -----------    -----------    -----------    -----------    -----------
Net income (loss)                        $    13,169    $    11,438    $     8,170    $     7,257    $   (22,342)
                                         ===========    ===========    ===========    ===========    ===========
Net income (loss) per share              $      1.46    $      1.27    $      0.92    $      0.84    $     (2.65)
                                         ===========    ===========    ===========    ===========    ===========

Weighted average number of common
    shares and equivalents outstanding     9,040,262      8,992,926      8,859,200      8,681,606      8,439,121

Cash dividends per share                 $      0.24    $      0.24    $      0.24    $      0.24    $      0.24

At year end:
      Total assets                       $   211,484    $   179,873    $   175,224    $   174,229    $   181,021
      Total long-term obligations        $    59,528    $    32,791    $    38,795    $    43,488    $    54,088
      Total stockholders' equity         $   102,882    $    91,599    $    80,815    $    75,247    $    71,017
</TABLE>


                                       10
<PAGE>   11


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

RESULTS OF OPERATIONS

The Company's fiscal year ends on the Saturday closest to January 31. The fiscal
year refers to the year in which the period ends (e.g. fiscal 1996 ended
February 3, 1996). Fiscal year 1996 consists of 53 weeks and fiscal years 1995
and 1994 consisted of 52 weeks.

Consolidated sales for fiscal year 1996 were 11% higher than in fiscal year
1995. When removing the effect of acquisitions and divestitures from fiscal 1996
and fiscal 1995, sales increased 7%. Sales to the semiconductor, truck and
general industrial markets were particularly strong. Sales to the commercial
aircraft, aerospace and healthcare markets were relatively flat. Sales to the
chemical and industrial processing markets were down substantially from last
year primarily due to the deferral of major capital expansion projects. Also
contributing with improved sales were European operations. A healthier economy
in Europe provided improved demand across all product lines, and coupled with
stronger foreign currency exchange rates resulted in increased dollar sales of
21% (8% after removing the effect of foreign currency exchange rate changes)
over last year.

In fiscal 1995, sales were 9% higher than in fiscal 1994. However, when removing
the effect of the divested businesses, sales increased 14%.

The gross profit percentage for fiscal year 1996 has declined from 30.2% to
27.8% as compared to the prior fiscal year. Excluding the impact of acquisitions
and divestitures, the gross profit percentage declined from 30.8% to 28.5%. Most
of this decrease is attributable to higher raw material costs and sales mix
compared to the prior year. Also affecting gross profit were higher costs
incurred related to the implementation of the Company's new operating structure.
The gross profit percentage increased from 28.2% in fiscal year 1994 to 30.2% in
fiscal year 1995. This improvement was primarily attributable to the Company's
focus on increasing productivity and cost reduction. When removing the effect of
divestitures, the gross profit percentage improved from 29.2% in fiscal year
1994 to 30.7% in fiscal year 1995.

Selling, general and administrative expenses as a percentage of sales were
22.7%, 24.8% and 23.3% for fiscal years 1996, 1995 and 1994, respectively. After
removing the effect of acquisitions, operating expenses as a percentage of sales
were 23.1%, 24.8% and 23.3% for fiscal years 1996, 1995 and 1994, respectively.
In terms of dollars, operating expenses increased primarily due to increased
selling expenses resulting from the Company's continued customer and market
focus. Offsetting the higher selling expenses were lower general and
administrative expenses over the prior year, mainly as a result of fewer costs
incurred related to the implementation of the Company's new operating structure.
The costs incurred in fiscal year 1995 included professional fees incurred in
connection with various consulting projects, travel, communications and
accelerated depreciation of information systems impacted by implementing the new
strategy. Research and development costs were up as the Company continues to
increase its focus on new product development.

Other income, net for fiscal year 1996 increased 23.7% over fiscal year 1995,
primarily as a result of higher licensee fees and a decrease in expenses
attributable to the elimination of income related to businesses held for sale.
This included the elimination of $180,000 of pretax loss from fiscal year 1996
and $500,000 and $363,000 of pretax profit from fiscal year 1995 and 1994,
respectively, for the previously held for sale businesses. Offsetting these
increases was lower interest income resulting from a reduction in cash balances
available for investing due to acquisition activity. In addition, included is
the net gain on divestitures of two businesses (see Note 2 of the "Notes to
Consolidated Financial Statements") offset by charges for closure and
consolidation of certain businesses, and charges to retiree medical liabilities
related to prior acquisitions. The Company substantially completed its
restructuring


                                       11
<PAGE>   12


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

RESULTS OF OPERATIONS (CONTINUED)

program without incurring certain costs that were included in the 1992 charge.
As a result, the Company reduced its restructuring accrual by $485,000.

Interest expense increased by 21% in fiscal year 1996 as compared to fiscal year
1995. Amounts owing under the Company's bank credit facility increased by
approximately $17 million over the prior year due to acquisition of the assets
of the Custom Coating and Laminating Corporation ("CC&L") and Fluorglas
businesses. Interest expense decreased 28% in fiscal year 1995 as compared to
fiscal year 1994 due to a $6 million decrease in amounts owing under the
Company's bank credit facility.

Pretax results of operations improved 5% from a profit of $17.6 million in
fiscal year 1995 to a profit of $18.4 million in fiscal year 1996. This
improvement in profitability, which was the result of higher sales volumes and
other income partially offset by higher manufacturing costs and interest
expense, was more than enough to offset increased operating expenses incurred
with implementing the new customer focused structure and strategy.

The Company's effective tax rate for the fiscal year 1996 was 28.5% as compared
to 35.0% in fiscal year 1995 and 37.0% in fiscal year 1994. The lower effective
tax rate in 1996, as compared to fiscal year 1995, resulted from the realization
of certain reserves and tax credits due to the completion of IRS audit cycles
and closure of earlier fiscal years. The lower effective tax rate in fiscal
1995, as compared to fiscal year 1994, was primarily due to a reduction of the
effect of foreign taxes as well as increased tax benefits from the Company's
export sales corporation.

LIQUIDITY AND CAPITAL RESOURCES

During fiscal year 1996, cash provided by operations increased 225% over fiscal
year 1995, to approximately $25.5 million. Included in fiscal 1996 was a use of
cash from the change in working capital of $5.1 million versus $18.3 million in
fiscal 1995. This cash flow allowed for further reductions in bank borrowings.
The most significant component is the favorable change in accounts receivable
offset by inventory which grew year over respective year, as well as accounts
payable. Heavy volume of shipments in late January and a build up of stock to
improve response time are primarily responsible. Additionally, the settlement of
Internal Revenue Service audits noted above resulted in the reduction of current
portion of income taxes payable.

At February 3, 1996 the Company's working capital was $60.7 million, an increase
of $6.0 million from the prior year. At February 3, 1996, the Company's ratio of
current assets to current liabilities was approximately 2.5:1. Capital
expenditures totaled $13.6 million and were primarily for renovating existing
facilities, leasehold improvements or replacement of existing equipment in
addition to implementation of the new operating structure referred to above.

The Company continues to believe that it generates sufficient cash flow from its
operations to finance near and long-term internal growth, capital expenditures
and the principal and interest payments on its long-term debt. The Company will
continue to evaluate its employment of capital resources including asset
management and other sources of financing.

The Company continually reviews possible acquisitions and should the Company
make a substantial acquisition, it would require utilization of the remaining
$62.0 million available at February 3, 1996 from its existing credit facility or
financing from other sources.


                                       12
<PAGE>   13

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

ENVIRONMENTAL MATTERS

Compliance with environmental laws and regulations designed to regulate the
discharge of materials into the environment or otherwise protect the environment
requires continuing management effort and expenditures by the Company. The
Company does not believe that the operating costs incurred in the ordinary
course of business to satisfy air and other permit requirements, properly
dispose of hazardous wastes and otherwise comply with these laws and regulations
form or will form a material component of its operating costs or have or will
have a material adverse effect on its competitive or consolidated financial
positions.

The Company or one of its subsidiaries is currently involved in environmental
remediation at six former manufacturing sites. In addition, one of the Company's
subsidiaries is involved as an EPA-named potentially responsible party or
private cost recovery/contribution action defendant in connection with
environmental remediation at the following "superfund" waste disposal sites:
Solvents Recovery Service of New England site in Southington, Connecticut;
Gallups Quarry site in Plainfield, Connecticut; and the Davis Liquid Waste and
Picillo Superfund sites in Coventry, Rhode Island.

As of February 3, 1996, the Company's reserves for environmental remediation
matters totaled approximately $1.9 million. While neither the timing nor the
amount of the ultimate costs associated with these matters can be determined
with certainty, based on investigations to determine the nature of the potential
liability at each site, the estimated amount of investigation and remedial costs
expected to be necessary to complete the remediation and other factors, the
Company presently believes that these reserves should be sufficient to cover the
Company's aggregate liability for these matters and, accordingly, does not
expect them to have a material adverse effect on its consolidated financial
position or results of operations. The actual costs to be incurred by the
Company at each site will depend on a number of factors, including one or more
of the following: the final delineation of contamination; the final
determination of the remedial action required; negotiations with governmental
agencies with respect to cleanup levels; changes in regulatory requirements;
innovations in investigatory and remedial technology; effectiveness of remedial
technologies employed; and the ultimate ability to pay of any other responsible
parties.


                                       13
<PAGE>   14


ITEM 8.  CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA





                         REPORT OF INDEPENDENT AUDITORS



Board of Directors and Stockholders
Furon Company

We have audited the accompanying consolidated balance sheets of Furon Company as
of February 3, 1996 and January 28, 1995, and the related consolidated
statements of income, stockholders' equity, and cash flows for each of the three
years in the period ended February 3, 1996. Our audits also included the
financial statement schedule listed in the index at Item 14(a). These financial
statements and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Furon
Company at February 3, 1996 and January 28, 1995, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended February 3, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related 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.



                                                              ERNST & YOUNG LLP

Orange County, California
March 8, 1996


                                       14
<PAGE>   15


                                  FURON COMPANY
                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                        YEARS ENDED
                                           ------------------------------------
                                           FEBRUARY 3,  JANUARY 28,  JANUARY 29,
IN THOUSANDS, EXCEPT PER SHARE AMOUNTS        1996         1995         1994
-------------------------------------------------------------------------------

<S>                                        <C>          <C>          <C>      
Net sales                                   $ 344,886    $ 312,060    $ 285,194

Cost of sales                                 249,102      217,827      204,727
                                            ---------    ---------    ---------

Gross profit                                   95,784       94,233       80,467

Selling, general and administrative
    expenses                                   78,337       77,368       66,458

Other (income), net                            (3,866)      (3,126)      (2,296)

Interest expense                                2,899        2,394        3,337
                                            ---------    ---------    ---------

Income before income taxes                     18,414       17,597       12,968

Provision for income taxes                      5,245        6,159        4,798
                                            ---------    ---------    ---------

Net income                                  $  13,169    $  11,438    $   8,170
                                            =========    =========    =========
Net income per share of
    Common Stock                            $    1.46    $    1.27    $    0.92
                                            =========    =========    =========
</TABLE>



See accompanying notes.


                                       15
<PAGE>   16


                                  FURON COMPANY
                           CONSOLIDATED BALANCE SHEETS
                                     ASSETS



<TABLE>
<CAPTION>
                                                           FEBRUARY 3,   JANUARY 28,
IN THOUSANDS                                                  1996           1995
-----------------------------------------------------------------------------------

<S>                                                         <C>          <C>      
Current assets:

    Cash and cash equivalents                               $       -    $   6,475

    Accounts receivable, less allowance for doubtful
       accounts of $1,367 in 1996 and $696 in 1995             51,681       48,955

    Inventories                                                39,827       31,197

    Deferred income taxes                                       5,178        8,215

    Prepaid expenses and other assets                           5,367        6,843
                                                            ---------    ---------
Total current assets                                          102,053      101,685

Property, plant and equipment, at cost:

    Land                                                        1,305          456

    Buildings and leasehold improvements                       18,044       13,868

    Machinery and equipment                                   128,396       99,718
                                                            ---------    ---------
                                                              147,745      114,042

    Less accumulated depreciation and amortization            (68,093)     (61,981)
                                                            ---------    ---------
Net property, plant and equipment                              79,652       52,061

Intangible assets, at cost, less accumulated amortization
    of $27,498 in 1996 and $23,739 in 1995                     23,543       17,953

Other assets                                                    6,236        8,174
                                                            ---------    ---------
                                                            $ 211,484    $ 179,873
                                                            =========    =========
</TABLE>




See accompanying notes.


                                       16
<PAGE>   17


                                  FURON COMPANY
                           CONSOLIDATED BALANCE SHEETS
                      LIABILITIES AND STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                           FEBRUARY 3,    JANUARY 28,
IN THOUSANDS, EXCEPT SHARE DATA                                1996          1995
------------------------------------------------------------------------------------
<S>                                                        <C>            <C>      
Current liabilities:                                                       
                                                                           
    Cash, less checks outstanding                           $   1,052      $       -
                                                                           
    Accounts payable                                           18,851         19,093
                                                                           
    Salaries, wages and related benefits payable               11,101         10,508
                                                                           
    Current portion of long-term debt                               -          8,000
                                                                           
    Other current liabilities                                  10,345          9,359
                                                            ---------      ---------
Total current liabilities                                      41,349         46,960
                                                                           
Long-term debt                                                 38,000         12,750
                                                                           
Other long-term liabilities                                    21,528         20,041
                                                                           
Deferred income taxes                                           7,725          8,523
                                                                           
Commitments and contingencies                                              
                                                                           
Stockholders' equity:                                                      
                                                                           
    Preferred stock without par value, 2,000,000 shares                    
       authorized, none issued or outstanding                       -              -
                                                                           
    Common stock without par value, 15,000,000 shares                      
       authorized, 8,906,905 and 8,800,164 shares issued                   
       and outstanding in 1996 and 1995, respectively          37,575         36,280
                                                                           
    Foreign currency translation adjustment                       403            419
                                                                           
    Unearned ESOP shares                                       (3,205)        (3,112)
                                                                           
    Unearned compensation                                        (556)          (885)
                                                                           
    Additional pension liability                               (1,649)          (379)
                                                                           
    Retained earnings                                          70,314         59,276
                                                            ---------      ---------
Total stockholders' equity                                    102,882         91,599
                                                            ---------      ---------
                                                            $ 211,484      $ 179,873
                                                            =========      =========
</TABLE>



See accompanying notes.


                                       17
<PAGE>   18


                                  FURON COMPANY
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT SHARE AMOUNTS
------------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED FEBRUARY 3, 1996, JANUARY 28, 1995 AND JANUARY 29, 1994
                                                                                

                                                                 Foreign                                                     Total
                                            Common Stock        Currency     Unearned   Unearned    Additional               Stock-
                                        --------------------   Translation     ESOP     Compen-      Pension     Retained   holders'
                                          Shares      Amount   Adjustment     Shares     sation     Liability    Earnings    Equity
                                        --------------------------------------------------------------------------------------------
--------------------------------------
<S>                                     <C>          <C>       <C>           <C>        <C>        <C>           <C>       <C>     
BALANCE AT JANUARY 30, 1993             8,563,444    $34,628    $    511     $(3,072)   $ (644)    $     -       $43,824   $ 75,247
--------------------------------------  -------------------------------------------------------------------------------------------
Cash dividends                                  -          -           -           -         -           -        (2,068)    (2,068)
Exercise of stock options                  56,774        539           -           -         -           -             -        539
Retired shares                            (10,412)      (172)          -           -         -           -             -       (172)
Grant of restricted shares, net of                                                                              
     cancellations                         15,900        325           -           -      (325)          -             -          -
Amortization of unearned                                                                                        
     compensation                               -          -           -           -       260           -             -        260
Foreign currency translation                                                                                    
     adjustment                                 -          -      (1,545)          -         -           -             -     (1,545)
Principal payment from ESOP                     -          -           -         384         -           -             -        384
Net income                                      -          -           -           -         -           -         8,170      8,170
--------------------------------------  -------------------------------------------------------------------------------------------
BALANCE AT JANUARY 29, 1994             8,625,706     35,320      (1,034)     (2,688)     (709)          -        49,926     80,815
--------------------------------------  -------------------------------------------------------------------------------------------
Cash dividends                                  -          -           -           -         -           -        (2,088)    (2,088)
Exercise of stock options                 349,272      5,018           -           -         -           -             -      5,018
Retired shares                           (218,529)    (4,763)          -           -         -           -             -     (4,763)
Grant of restricted shares, net of                                                                              
     cancellations                         43,715        705           -           -      (705)          -             -          -
Amortization of unearned                                                                                        
     compensation                               -          -           -           -       529           -             -        529
Foreign currency translation                                                                                    
     adjustment                                 -          -       1,453           -         -           -             -      1,453
Loan to ESOP, net                               -          -           -        (424)        -           -             -       (424)
Excess of additional pension liability                                                                          
     over unrecognized net transition                                                                           
     obligation                                 -          -           -           -         -        (379)            -       (379)
Net income                                      -          -           -           -         -           -        11,438     11,438
--------------------------------------  -------------------------------------------------------------------------------------------
BALANCE AT JANUARY 28, 1995             8,800,164     36,280         419      (3,112)     (885)       (379)       59,276     91,599
--------------------------------------  -------------------------------------------------------------------------------------------
Cash dividends                                  -          -           -           -         -           -        (2,131)    (2,131)
Exercise of stock options                  90,312      1,133           -           -         -           -             -      1,133
Retired shares                            (11,852)      (251)          -           -         -           -             -       (251)
Grant of restricted shares                 10,610        215           -           -      (215)          -             -          -
Cancellations of restricted shares        (13,420)      (212)          -           -       112           -             -       (100)
Stock issued under Employee                                                                                     
     Stock Purchase Plan                   31,091        410           -           -         -           -             -        410
Amortization of unearned                                                                                        
     compensation                               -          -           -           -       432           -             -        432
Foreign currency translation                                                                                    
     adjustment                                 -          -         (16)          -         -           -             -        (16)
Loan to ESOP, net                               -          -           -         (93)        -           -             -        (93)
Excess of additional pension liability                                                                          
     over unrecognized net transition                                                                           
     obligation                                 -          -           -           -         -      (1,270)            -     (1,270)
Net income                                      -          -           -           -         -           -        13,169     13,169
--------------------------------------  -------------------------------------------------------------------------------------------
BALANCE AT FEBRUARY 3, 1996             8,906,905    $37,575    $    403     $(3,205)   $ (556)    $(1,649)      $70,314   $102,882
--------------------------------------  -------------------------------------------------------------------------------------------
</TABLE>

See accompanying notes.


                                       18
<PAGE>   19
                                  FURON COMPANY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                YEARS ENDED
                                                                               ----------------------------------------------
                                                                               FEBRUARY 3,       JANUARY 28,      JANUARY 29,
IN THOUSANDS                                                                      1996              1995              1994
-----------------------------------------------------------------------------------------------------------------------------

OPERATING ACTIVITIES
<S>                                                                              <C>              <C>              <C>     
      Net income                                                                 $ 13,169         $ 11,438         $  8,170
      Adjustments to reconcile net income to cash
           provided by operating activities:
               Depreciation                                                        11,292            9,540            8,547
               Amortization                                                         3,783            3,961            3,660
               Provision for losses on accounts receivable                            724              303              254
               Deferred income taxes                                                2,239               46               65
               (Gain) loss on sale of assets and divestitures                      (2,385)              15              390
      Working capital changes, net of acquisitions and disposals:
               Accounts receivable                                                  2,467          (11,173)          (4,525)
               Inventories                                                         (2,059)          (4,918)           1,129
               Accounts payable and accrued liabilities                            (3,663)           4,063            3,964
               Income taxes payable                                                (1,790)          (3,704)           2,913
               Other current assets and liabilities, net                              (43)          (2,561)            (653)
                                                                                 --------         --------         --------
                                                                                   (5,088)         (18,293)           2,828
      Changes in other long-term operating assets and liabilities                   1,783              842           (3,091)
                                                                                 --------         --------         --------

               Net cash provided by operating activities                           25,517            7,852           20,823

INVESTING ACTIVITIES
      Acquisition of businesses                                                   (43,497)            --               --
      Purchases of property, plant and equipment                                  (13,570)         (12,912)          (8,458)
      Proceeds from sale of divestitures                                            8,517              543            9,772
      Proceeds from sale of equipment                                                 334              185              618
      Proceeds from notes receivable                                                  844              429            2,416
      Increase in notes receivable                                                   (242)            (810)          (4,933)
                                                                                 --------         --------         --------

               Net cash used in investing activities                              (47,614)         (12,565)            (585)

FINANCING ACTIVITIES
      Proceeds from long-term debt                                                 46,756                8               27
      Principal payments on long-term debt                                        (29,506)          (6,015)          (8,471)
      Proceeds from issuance of common stock                                          782              255              367
      Principal payments received from ESOP                                           384              384              384
      Dividends paid on common stock                                               (2,131)          (2,088)          (2,068)
      Loan to ESOP                                                                   (579)            (808)            --
                                                                                 --------         --------         --------

               Net cash provided by (used in) financing activities                 15,706           (8,264)          (9,761)

EFFECT OF EXCHANGE RATE CHANGES ON CASH                                               (84)             969           (1,441)
                                                                                 --------         --------         --------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                   (6,475)         (12,008)           9,036
                                                                                 --------         --------         --------

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                      6,475           18,483            9,447
                                                                                 --------         --------         --------

CASH AND CASH EQUIVALENTS AT END OF YEAR                                         $   --           $  6,475         $ 18,483
                                                                                 ========         ========         ========
</TABLE>

See accompanying notes.


                                       19
<PAGE>   20
                                  FURON COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 3, 1996

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The consolidated financial statements include the accounts of Furon Company and
its subsidiaries, all of which are wholly owned. All significant intercompany
transactions have been eliminated. Certain reclassifications have been made to
prior year amounts in order to be consistent with the current year presentation.

Fiscal Year

The Company's fiscal year ends on the Saturday closest to January 31. The fiscal
year refers to the year in which the period ends (e.g. fiscal 1996 ended
February 3, 1996). Fiscal year 1996 consists of 53 weeks and fiscal years 1995
and 1994 consisted of 52 weeks.

Use of Estimates

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

Consolidated Statements of Cash Flows

Excess cash is invested in income-producing investments including commercial
paper, money market accounts, overnight repurchase agreements and short-term
certificates of deposit with original maturities of less than three months.
These investments are stated at cost which approximates market. Included in
other income is interest and dividend income from investments of $118,000,
$677,000, and $490,000 in fiscal 1996, 1995 and 1994, respectively.

Interest paid in fiscal 1996, 1995 and 1994 was $2,919,000, $2,451,000, and
$3,536,000, respectively.

Income taxes paid in fiscal 1996, 1995 and 1994 was $4,100,000, $8,500,000 and
$1,800,000, respectively.


                                       20
<PAGE>   21
                                  FURON COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 3, 1996

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Inventories

Inventories, stated at the lower of cost (first-in, first-out) or market, are
summarized as follows:

<TABLE>
<CAPTION>
                                                       FEBRUARY 3,      JANUARY 28,
IN THOUSANDS                                              1996             1995
--------------------------------------------------------------------------------
<S>                                                      <C>             <C>    
Raw materials and purchased parts                        $16,878         $12,482
Work-in-process                                            9,872           9,153
Finished goods                                            13,077           9,562
                                                         -------         -------
                                                         $39,827         $31,197
                                                         =======         =======
</TABLE>

Property, Plant and Equipment

Depreciation is provided on the straight-line method over the following
estimated useful lives:

Buildings                                                       25-45 years
Machinery and equipment                                          3-18 years
Leasehold improvements                Term of the lease (including options)

Concentration of Credit Risk

Concentrations of credit risk with respect to trade receivables are limited due
to the large number of customers comprising the Company's customer base, and
their dispersion across many different geographical regions. At February 3,
1996, the Company had no significant concentrations of credit risk.

Research and Development Costs

Research and development costs are expensed as incurred. Total research and
development expense, including application engineering, for fiscal 1996, 1995
and 1994 was $8,502,000, $7,125,000 and $6,103,000, respectively, and is
included in selling, general and administrative expenses in the consolidated
statements of income. Continuous research and development is necessary for the
Company to maintain its competitive position.


                                       21
<PAGE>   22
                                  FURON COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 3, 1996

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Intangible Assets

Intangible assets acquired in business combinations, net of accumulated
amortization, are summarized as follows:

<TABLE>
<CAPTION>
                                                      FEBRUARY 3,      JANUARY 28,
IN THOUSANDS                                             1996             1995
----------------------------------------------------------------------------------
<S>                                                    <C>               <C>    
Goodwill                                               $ 9,113           $   328
Other intangible assets                                 14,430            17,625
                                                       -------           -------
                                                       $23,543           $17,953
                                                       =======           =======
</TABLE>

Goodwill is amortized over 25 years. Other intangible assets are amortized over
periods ranging from 7 to 25 years.

Translation of Foreign Currencies

Foreign subsidiary financial statements are translated into U.S. dollars in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 52,
"Foreign Currency Translations." The resulting cumulative foreign currency
translation adjustment is reported separately in stockholders' equity.
Transaction gains and losses included in results of operations were not
significant in fiscal 1996, 1995 and 1994. The functional currency of the
Company's foreign operations is the respective local currency.

Net Income Per Share

Net income per share is based on the weighted average number of common shares
outstanding and common share equivalents resulting from dilutive stock options
outstanding in each of the three years in the period ended February 3, 1996. The
number of shares used in the computation was 9,040,262, 8,992,926 and 8,859,200,
respectively.

Recently Issued Accounting Standards

In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," which requires impairment losses to be recorded on long-lived
assets used in operations, when indicators of impairment are present and when
assets are expected to be disposed. The Company is required to adopt the
provisions of SFAS No. 121 for fiscal 1997 and, based on current circumstances,
does not believe the effect will be material.




                                       22
<PAGE>   23
                                  FURON COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 3, 1996

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation," was
issued. As permitted by this statement, the Company intends to continue to use
the traditional accounting for stock-based awards prescribed by APB Opinion No.
25, "Accounting for Stock Issued to Employees." Adoption of the new standard in
this form will have no impact on reported income in future years; however, pro
forma disclosures of the effect of stock-based awards on net income and earnings
per share as if SFAS No. 123 had been adopted will be required.

2.       ACQUISITIONS AND DISPOSITIONS

Acquisitions

On January 31, 1995 the Company acquired certain assets of Custom Coating &
Laminating Corporation ("CC&L"). The cash purchase price was $24.0 million, of
which $18.0 million was borrowed under the Company's unsecured revolving credit
facility. In addition, the Company assumed certain liabilities approximating
$2.4 million, and may pay up to an additional $4.0 million based upon future
product sales over the next three fiscal years. The business manufactures
release liners and other specialty engineered products incorporating surface
chemistry technology. Its manufacturing facilities are located in Worcester,
Massachusetts.

On February 2, 1996, the Company acquired certain assets and assumed certain
liabilities of the Fluorglas business ("Fluorglas") from AlliedSignal Inc., for
$19.0 million in cash. The purchase price was paid from borrowings under the
Company's unsecured revolving facility. Fluorglas manufactures a broad line of
pressure sensitive adhesive tapes and PTFE flexible composites and fabrications
in facilities located in Hoosick Falls, New York.

These acquisitions have been recorded using the purchase method of accounting,
and their results of operations have been included in the consolidated financial
statements since the respective dates of acquisition. The excess purchase price
over the estimated fair value of net assets acquired for CC&L of approximately
$9.3 million is being amortized using the straight-line method over 25 years.
The purchase price for Fluorglas has been preliminarily allocated to the net
assets acquired based on their estimated fair values with no goodwill being
recorded. Management believes that any resulting adjustments will not have a
material effect on the results of operations.




                                       23
<PAGE>   24
                                  FURON COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 3, 1996

2.       ACQUISITIONS AND DISPOSITIONS (CONTINUED)

Summarized below are the unaudited consolidated results of operations of the
Company, including the CC&L and Fluorglas businesses on a pro forma basis, as
though both acquisitions had occurred at the beginning of each respective fiscal
year. The pro forma financial information is presented for informational
purposes only and may not be indicative of the results of operations had the
transactions been effected, nor is it necessarily indicative of the results of
operations which may occur in the future.

<TABLE>
<CAPTION>
                                                          YEARS ENDED
IN THOUSANDS, EXCEPT PER SHARE DATA         FEBRUARY 3, 1996        JANUARY 28, 1995
------------------------------------------------------------------------------------
<S>                                              <C>                    <C>     
Net sales                                        $377,501               $365,954
Net income                                         14,594                 13,257
Net income per share of Common Stock                 1.48                   1.45
</TABLE>                                                     


Dispositions

During the fiscal year ended February 3, 1996 the Company sold two businesses
for a net pre-tax gain of $2.7 million and accrued approximately $665,000 for
insurance reserves relative to one of the businesses. These amounts are included
in Other income, net in the accompanying statement of income.

In conjunction with the acquisitions and divestitures made during fiscal year
ended February 3, 1996, the Company has developed plans to close and 
consolidate certain businesses. Accordingly, a pre-tax charge of $1.3 million 
for closing duplicate facilities and severance costs is included in Other 
income, net. In fiscal year ended February 3, 1996, retiree medical liabilities 
related to prior acquisitions increased by $865,000.

3.    RESTRUCTURING CHARGE

During fiscal 1992, the Company implemented a comprehensive restructuring
program designed to improve profitability and improve the Company's focus on its
primary objectives and strengths. Accordingly, a pretax charge of $23.7 million,
primarily related to the estimated loss on the disposal of the Company's
businesses which did not meet its long-term strategy was taken. The change in
the reserve during fiscal 1996 was primarily attributable to payments on
consulting and non-compete agreements and abandoned leases related to divested
businesses. As of February 3, 1996, the company substantially completed its
restructuring program without incurring certain costs that had been included in
1992 charge. As a result, the Company reduced its restructuring accrual by
$485,000.


                                       24
<PAGE>   25
                                  FURON COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 3, 1996

4.       INCOME TAXES

The provision (benefit) for income taxes for the three years ended February 3,
1996, consists of the following:

<TABLE>
<CAPTION>
IN THOUSANDS                             CURRENT         DEFERRED        TOTAL
--------------------------------------------------------------------------------
<S>                                       <C>            <C>              <C>   
1996:

         Federal                          $  954         $ 2,300          $3,254
         Foreign                           1,197            --             1,197
         State                               855             (61)            794
                                          ------         -------          ------

                                          $3,006         $ 2,239          $5,245
                                          ======         =======          ======
1995:

         Federal                          $4,714         $   (79)         $4,635
         Foreign                             848            --               848
         State                               551             125             676
                                          ------         -------          ------

                                          $6,113         $    46          $6,159
                                          ======         =======          ======
1994:

         Federal                          $3,810         $  (368)         $3,442
         Foreign                             472            --               472
         State                               451             433             884
                                          ------         -------          ------

                                          $4,733         $    65          $4,798
                                          ======         =======          ======
</TABLE>



                                       25
<PAGE>   26
                                  FURON COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 3, 1996

4.       INCOME TAXES (CONTINUED)

The provision (benefit) for income taxes differs from the amount computed by
applying the statutory income tax rate for the following reasons:

<TABLE>
<CAPTION>
                           FEBRUARY 3, 1996      JANUARY 28, 1995     JANUARY 27, 1994
                           -----------------     ----------------     ----------------
DOLLARS IN THOUSANDS       AMOUNT        %       AMOUNT        %      AMOUNT        %
--------------------------------------------------------------------------------------
<S>                        <C>          <C>     <C>          <C>     <C>          <C> 
Statutory federal
     provision             $ 6,445      35.0    $ 6,159      35.0    $ 4,539      35.0
                                                                    
Realization of reserves                                             
     due to completed                                               
     audit cycles and                                               
     closure of earlier                                             
     fiscal years           (1,200)     (6.5)      --         --        --         --
                                                                    
State and local taxes,                                              
     net of federal tax                                             
     benefit                   801       4.4      1,076       6.1        832       6.4
                                                                    
                                                                    
Effect of foreign taxes       (164)     (0.9)      (145)     (0.8)       104       0.8
                                                                    
Research and                                                        
     experimental credit      (195)     (1.1)      (424)     (2.4)      (303)     (2.3)
                                                                    
Export sales corporation                                            
     benefit                  (376)     (2.0)      (393)     (2.2)      (243)     (1.9)
                                                                    
Other                          (66)     (0.4)      (114)     (0.7)      (131)     (1.0)
                           -------      ----    -------      ----    -------      ----
                                                                    
                           $ 5,245      28.5    $ 6,159      35.0    $ 4,798      37.0
                           =======      ====    =======      ====    =======      ====
</TABLE>
                                                                  

                                       26
<PAGE>   27
                                  FURON COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 3, 1996

4.       INCOME TAXES (CONTINUED)

Significant components of the Company's deferred tax liabilities and assets are
as follows:

<TABLE>
<CAPTION>
                                                         FEBRUARY 3,  JANUARY 28,
IN THOUSANDS                                                1996         1995
--------------------------------------------------------------------------------
<S>                                                        <C>          <C>     
Deferred tax liabilities:

              Tax over book depreciation                   $(5,844)     $(4,923)
                                                           -------      -------

Deferred tax assets:

              Inventories                                      923        1,007

              Accruals recognized in
                   different periods for tax
                   than financial reporting                  4,113        6,830
                                                           -------      -------


              Total assets                                   5,036        7,837

Valuation allowance for realization
      of and payment for reserves
      and depreciable assets                                (1,739)      (3,222)
                                                           -------      -------


Net deferred assets                                          3,297        4,615
                                                           -------      -------

Total deferred taxes                                       $(2,547)     $  (308)
                                                           =======      =======
</TABLE>


Applicable U.S. income and foreign withholding taxes have not been provided on
undistributed earnings of certain foreign subsidiaries and affiliates
aggregating $6,500,000 at February 3, 1996. Management's intention is to
reinvest such undistributed earnings outside the United States for an indefinite
period except for distributions upon which incremental U.S. income taxes would
not be material. Any withholding taxes ultimately paid, which could approximate
$325,000, may be recoverable as foreign tax credits in the United States.


                                       27
<PAGE>   28
                                  FURON COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 3, 1996

4.       INCOME TAXES (CONTINUED)

During the fourth quarter of fiscal 1995 the Company resolved the Internal
Revenue Service audit for fiscal years 1988 and 1989 relating to the purchase
price allocation of an acquisition made in fiscal 1988. This resolution
resulted in realization of reserves due to completed audit cycles and
closure of earlier fiscal years.

During the fourth quarter of fiscal 1994 the Company resolved the Internal
Revenue Service audit for fiscal years 1990 and 1991. It was determined that the
Company had provided sufficient income tax expense for the resolution of the
1990 and 1991 audits as of fiscal 1993, and beginning with fourth quarter fiscal
1994, the Company has decreased the taxes provided for the issues resolved in
this audit.

5.       LONG-TERM DEBT

On October 30, 1995, the Company entered into a credit agreement with a
syndicate of banks. The agreement provides the Company with a five year,
unsecured, revolving credit facility in the amount of $100,000,000. Beginning
October 30, 1998 availability under the facility will be reduced by $6,250,000
on a semi-annual basis. All advances outstanding under the credit facility are
due on October 30, 2000. Under terms of the agreement, the Company may borrow at
the prevailing prime rate or at a rate based upon LIBOR. Borrowings based upon
the LIBOR rate are subject to performance grid pricing. In addition, the Company
pays a commitment fee on the unused portion of the revolving facility. The
commitment fee is subject to performance grid pricing.

At February 3, 1996, the unused portion of the credit facility was $62,000,000.
Borrowing rates during the year ranged from 5.8% to 7.0% (5.9% at February 3,
1996).

In order to reduce the impact of changes in interest rates on its variable rate
borrowings, the Company entered into an 8-year Interest Rate Swap agreement with
a commercial bank in August 1988. The notional amount of the swap, which
decreases $2,000,000 each quarter, totaled $6,000,000 at February 3, 1996. The
swap agreement effectively changes the Company's interest rate on $6,000,000 of
its variable borrowings to a fixed interest rate of 9.938%.

Due to the fact that the swap agreement increases the effective rate of the
Company's borrowings, the Company is not exposed to credit risk in the event of
nonperformance by the other parties to the interest rate swap agreement. The
fair market value of this off balance sheet instrument as determined by an
independent third party at February 3, 1996 is $128,000.


                                       28
<PAGE>   29
                                  FURON COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 3, 1996

5.       LONG-TERM DEBT (CONTINUED)

Long-term debt is summarized as follows:

<TABLE>
<CAPTION>
                                                      FEBRUARY 3,     JANUARY 28,
IN THOUSANDS                                             1996            1995
-------------------------------------------------------------------------------
<S>                                                     <C>            <C>     
Loans under bank credit agreements                      $38,000        $ 20,750
Less current portion                                       --            (8,000)
                                                        -------        --------

Due after one year                                      $38,000        $ 12,750
                                                        =======        ========
</TABLE>

6.       COMMITMENTS AND CONTINGENCIES

At February 3, 1996, the Company is obligated under non-cancelable leases of
real property and equipment used in its operations for minimum annual rentals
plus insurance and taxes. Amounts payable under these obligations are as
follows:

<TABLE>
<CAPTION>
            FISCAL YEARS
                ENDED                                       IN THOUSANDS
            ------------                                    ------------              
<S>                                                          <C>
                 1997                                         $  7,925
                 1998                                            6,926
                 1999                                            5,904
                 2000                                            4,574
                 2001                                            4,004
             2002 to 2006                                       15,288
             2007 to 2011                                        3,778
</TABLE>
                                                           

                                       29
<PAGE>   30
6.       COMMITMENTS AND CONTINGENCIES (CONTINUED)

Certain leases contain escalation provisions for periodic adjustments based on
certain indices. Rental expense for operating leases for the three years in the
period ended February 3, 1996 was $8,646,000, $7,956,000 and $7,952,000,
respectively.

At February 3, 1996, the Company is obligated under irrevocable letters of
credit totaling $2,145,000.

At February 3, 1996, the Company had approximately $2,300,000 of foreign
currency hedge contracts outstanding consisting of over-the-counter forward
contracts. The contracts reflect the selective hedging of the Belgium Franc with
varying maturities up to six months. Net unrealized gains/losses from hedging
activities were not material as of February 3, 1996.

The Company is currently involved in various litigation. Management of the
Company is of the opinion that the ultimate resolution of such litigation should
not have a material effect on the Company's consolidated financial position or
results of operations.

Compliance with environmental laws and regulations designed to regulate the
discharge of materials into the environment or otherwise protect the environment
requires continuing management effort and expenditures by the Company. The
Company does not believe that the operating costs incurred in the ordinary
course of business to satisfy air and other permit requirements, properly
dispose of hazardous wastes and otherwise comply with these laws and regulations
form or will form a material component of its operating costs or have or will
have a material adverse effect on its competitive or consolidated financial
positions.

The Company or one of its subsidiaries is currently involved in environmental
remediation at six former manufacturing sites. In addition, one of the Company's
subsidiaries is involved as an EPA-named potentially responsible party or
private cost recovery/contribution action defendant in connection with
environmental remediation at the following "superfund" waste disposal sites:
Solvents Recovery Service of New England site in Southington, Connecticut;
Gallups Quarry site in Plainfield, Connecticut; and the Davis Liquid Waste and
Picillo Superfund sites in Coventry, Rhode Island.

As of February 3, 1996, the Company's reserves for environmental remediation
matters totaled approximately $1.9 million. While neither the timing nor the
amount of the ultimate costs associated with these matters can be determined
with certainty, based on investigations to determine the nature of the potential
liability at each site, the estimated amount of investigation and remedial costs
expected to be necessary to complete the remediation and other factors, the
Company presently believes that these reserves should be sufficient to cover the
Company's aggregate liability for these matters and, accordingly, does not
expect them to have a material adverse effect on its consolidated financial
position or results of operations. The actual costs to be incurred by the
Company at each site will depend on a number of factors, including one or more
of the following: the final delineation of contamination; the final
determination of the remedial action required; negotiations with governmental
agencies with respect to cleanup levels; changes in regulatory requirements;
innovations in investigatory and remedial technology; effectiveness of remedial
technologies employed; and the ultimate ability to pay of any other responsible
parties.


                                       30
<PAGE>   31
                                  FURON COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 3, 1996

7.       STOCKHOLDERS' EQUITY

Stock Incentive Plan

The Company has a 1995 Stock Incentive Plan (approved by the Board of Directors
in April 1995) and a 1982 Stock Incentive Plan. Under both plans, the
Compensation Committee, appointed by the Board of Directors, is authorized to
grant awards to any officer or key employee of the Company. Awards granted can
take the form of non-qualified stock options, stock appreciation rights,
restricted stock awards (RSAs), and performance share awards. The 1995 Stock
Incentive Plan does not provide for depreciation rights and tax-offset bonuses
which are components of the 1982 Stock Incentive Plan. The 1995 Stock Incentive
Plan provides for the annual grant of awards in a maximum number of shares of
common stock of 1.8% of the Company's issued and outstanding shares as of the
last day of the preceding fiscal year, commencing with the fiscal year beginning
February 4, 1996. Accordingly no awards have been issued under this plan. Shares
of common stock authorized under the 1982 Stock Incentive Plan have been nearly
exhausted as approximately 49,969 shares are available for grant at February 3,
1996. Options are granted at a price equal to 100% of the fair market value at
the date of grant and become exercisable not earlier than six months after the
award date and vest at a rate of 25% per year. The options shall remain
exercisable until the expiration date but not later than ten years after the
award date.

At February 3, 1996, 153,775 RSAs have been granted (of which 28,320 have been
canceled) under the 1982 Stock Incentive Plan. The issuance of these RSAs
resulted in $1,907,000 (net of cancellations) of unearned compensation which is
being amortized over the five year period in which the awards vest.

The following summarizes stock option transactions under the 1982 Stock
Incentive Plan for the year ended February 3, 1996:

<TABLE>
<CAPTION>
                                                   NUMBER        PER SHARE
                                                 OF SHARES      OPTION PRICE
                                                 ---------      -------------
<S>                                               <C>           <C>          
Options outstanding at January 28, 1995           729,328       $8.17 - 18.00
                                                              
                Granted                           118,000               19.38
                Exercised                         (90,312)       8.17 - 13.31
                Canceled                           (6,500)              19.38
                                                  -------       -------------
                                                              
Options outstanding at February 3, 1996           750,516       $9.75 - 19.38
                                                  =======       =============
                                                              
Exercisable at February 3, 1996                   531,516       $9.75 - 18.00
                                                  =======       =============
</TABLE>
                                                        

                                       31
<PAGE>   32
                                  FURON COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 3, 1996

7.       STOCKHOLDERS' EQUITY (CONTINUED)

Shareholders' Rights Plan

On March 21, 1989, the Board of Directors authorized the distribution of one
right for each outstanding share of common stock under the Shareholders' Rights
Plan. The rights which were distributed on May 23, 1989, become exercisable ten
business days after (i) a person has acquired or obtained the right to acquire
20% or more of the Company's general voting power without approval by the Board
of Directors, or (ii) a tender or exchange offer which would make a person the
beneficial owner of 30% or more of the Company's general voting power, whichever
is earlier. When exercisable, each right entitles the shareholder to purchase
one-fourth of a share of common stock at a price of $13.75, subject to
adjustment. In the event the Company engages in certain business combinations or
a 20% shareholder engages in certain transactions with the Company, each holder
of a right (other than those of the acquiring person) shall have the right to
receive, upon the exercise thereof and payment of four times the then current
exercise price, that number of shares of Common Stock of the surviving Company's
common stock which at the time of such transaction would have a market value of
two times such price paid.

8.       EMPLOYEE BENEFIT PLANS

The Company and its subsidiaries sponsor various qualified plans which cover
substantially all of its domestic employees including a
profit-sharing/retirement plan, an employee stock ownership plan, and an
employee stock purchase plan. The Company also sponsors a nonqualified defined
benefit plan covering certain employees.

Profit-Sharing/Retirement Plan

The trusteed profit-sharing/retirement plan provides for an employee salary
deferral contribution, a company matching contribution and a company primary
contribution. Under the deferral provisions (401K), eligible employees are
permitted to contribute up to 10% of gross compensation to the
profit-sharing/retirement plan. For amounts up to 8% of the employee's gross
compensation the Company will match the employee's contribution at a rate
determined by the Board of Directors. Under the company primary contribution
provision, each eligible employee will receive a contribution to the
profit-sharing/retirement plan based on a percentage of qualified wages as
determined based on the Company's performance. Total Company contributions for
the years ended February 3, 1996, January 28, 1995 and January 29, 1994 were
$1,917,000, $1,528,000 and $1,336,000, respectively.


                                       32
<PAGE>   33
                                  FURON COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 3, 1996

8.       EMPLOYEE BENEFIT PLANS (CONTINUED)

Employee Stock Ownership Plan

The Company sponsors an Employee Stock Ownership Plan (ESOP) covering
substantially all of its employees (subject to certain limitations). The Company
annually contributes amounts sufficient to cover principal and interest on loans
made to the ESOP as determined by the Board of Directors.

Prior to December 31, 1992, the Company loaned the ESOP $3,666,000 ($1,957,000
outstanding at February 3, 1996) to purchase 311,000 shares of stock, at
interest rates ranging from 7.83% to 9.12%. The loans are payable in ten annual
installments of principal and interest. In fiscal 1996, the Company loaned the
ESOP $579,063 to purchase 27,500 shares of stock from a director of the Company,
at interest rates ranging from 6.36% to 7.31%. In fiscal 1995, the Company
loaned the ESOP $808,125 to purchase 45,000 shares of stock from a director of
the Company, at interest rates ranging from 7.45% to 7.67%. These loans are
payable in ten annual installments of principal and interest, beginning in
fiscal 1996. Shares are released and allocated to participant accounts annually
as loan repayments are made.

In fiscal 1995, the Company adopted the provisions of AICPA Statement of
Position No. 93-6 (the SOP) which requires that compensation expense be measured
based on the fair value of the shares over the period the shares are earned. In
addition, the SOP requires that dividends paid on unallocated shares held by the
ESOP are reported as a reduction of accrued interest or as compensation expense
rather than a charge to retained earnings, and shares not yet committed to be
released are not considered outstanding in the calculation of earnings per
share. As allowed by the SOP, the Company has elected not to apply the SOP's
provisions to shares acquired prior to fiscal 1994. As such, compensation
expense related to such shares is measured based on the historical cost of the
shares, dividends have been deducted as a charge to retained earnings and the
unallocated shares are considered outstanding in the calculation of earnings per
share. The adoption of the SOP did not have a material impact on the
consolidated financial statements.

Of the leveraged shares acquired prior to fiscal 1994, 117,367 and 165,731 are
allocated and unallocated, respectively, at February 3, 1996. Of the leveraged
shares acquired in fiscal 1996 and 1995, there were 2,021 allocated shares,
5,615 committed-to-be-released shares and 64,864 unallocated shares at February
3, 1996. The fair value of unallocated shares acquired in fiscal 1996 was
$1,232,000 at February 3, 1996. Total compensation cost recognized by the
Company during fiscal 1996, 1995 and 1994, which consists of the annual
contribution and plan administrative costs, net of dividend income on
unallocated and forfeited shares, totaled $699,000, $528,000 and $339,000,
respectively.


                                       33
<PAGE>   34
                                  FURON COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 3, 1996

8.       EMPLOYEE BENEFIT PLANS (CONTINUED)

Employee Stock Purchase Plan

Effective November 1, 1994 the Company adopted an Employee Stock Purchase Plan
to provide substantially all employees who have completed one year of service an
opportunity to purchase shares of its common stock through payroll deductions,
up to 10% of eligible compensation. Annually, on October 31, participant account
balances are used to purchase shares of stock at the lesser of 85 percent of the
fair market value of shares on November 1 (grant date) or October 31 (exercise
date). The aggregate number of shares purchased by an employee may not exceed
5,000 shares annually (subject to limitations imposed by the Internal Revenue
Code). The stock purchase plan expires on October 31, 2004. A total of 200,000
shares are available for purchase under the plan. There were 31,091 shares
issued under the plan during fiscal 1996.

Supplemental Executive Retirement Plan

In fiscal 1987, the Company adopted an unfunded executive defined benefit
retirement plan for certain key officers of the Company, which provides for
benefits which supplement those provided by the Company's other retirement
plans. Benefits payable under the plan are based upon compensation levels and
length of service of the participants.

In accordance with SFAS No. 87, "Employers' Accounting for Pensions," the
Company has recorded an additional liability of $2,342,000 and $1,156,000 in
fiscal 1996 and 1995, respectively, which represents the excess of the
accumulated benefit obligation over previously recognized accrued pension costs.
In 1996 and 1995, the excess of additional pension liability over the
unrecognized net transition obligation has been recorded as a component of
stockholders' equity.


                                       34
<PAGE>   35
                                  FURON COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 3, 1996

8.       EMPLOYEE BENEFIT PLANS (CONTINUED)

Actuarial present value of benefit obligations:

<TABLE>
<CAPTION>
                                                     FEBRUARY 3,     JANUARY 28,
IN THOUSANDS                                            1996             1995
--------------------------------------------------------------------------------
<S>                                                    <C>             <C>    
Vested benefit obligation                              $ 8,200         $ 6,574
                                                       =======         =======

Accumulated benefit obligation                         $ 8,345         $ 6,662
                                                       =======         =======

Unfunded projected benefit obligation                  $ 8,652         $ 7,419
Unrecognized net loss                                   (1,956)         (1,136)
Unrecognized net transition obligation                    (693)           (777)
                                                       -------         -------
                                                         6,003           5,506
Additional minimum liability                             2,342           1,156
                                                       -------         -------
Accrued pension cost                                   $ 8,345         $ 6,662
                                                       =======         =======

Assumptions:
             Discount rate                                 7.5%            8.5%
             Salary increase rate                          5.0%            5.0%
</TABLE>
   
Net periodic pension costs for fiscal 1996, 1995 and 1994 were as follows:
   
<TABLE>
<CAPTION>
                                                             YEARS ENDED
                                             --------------------------------------------
                                             FEBRUARY 3,     JANUARY 28,      JANUARY 29,
IN THOUSANDS                                   1996             1995             1994
-----------------------------------------------------------------------------------------
<S>                                            <C>              <C>              <C> 
Service cost                                   $ 37             $ 44             $ 41
Interest cost                                   618              609              605
Net amortization and deferral                   211              212              184
                                               ----             ----             ----
                                               $866             $865             $830
                                               ====             ====             ====
</TABLE>
                                                                      
   


                                      35
<PAGE>   36
                                  FURON COMPANY
   
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 3, 1996


9.       QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT                                             INCOME                      NET INCOME
PER SHARE DATA                      NET SALES  GROSS PROFIT   BEFORE TAXES    NET INCOME     PER SHARE
-------------------------------------------------------------------------------------------------------
<C>                                  <C>         <C>             <C>            <C>           <C>   

YEAR ENDED FEBRUARY 3, 1996

1st Quarter                          $88,453     $25,560         $5,162         $3,355        $ 0.37
2nd Quarter                           82,300      22,343          4,169          2,710          0.30
3rd Quarter                           85,401      23,065          4,457          3,797          0.42
4th Quarter                           88,732      24,816          4,626(a)       3,307          0.37
                                                                                            
YEAR ENDED JANUARY 28, 1995                                                                 
                                                                                            
1st Quarter                          $74,960     $21,960         $3,832         $2,414        $ 0.27
2nd Quarter                           75,127      22,580          4,234          2,667          0.30
3rd Quarter                           81,071      25,092          5,119          3,357          0.37
4th Quarter                           80,902      24,601          4,412          3,000          0.33
</TABLE>                                                  

(a)  The fourth quarter of fiscal year ended February 3, 1996 includes a gain on
     sale of businesses of approximately $2.7 million, a charge of approximately
     $1.4 million relative to various compensation plans and a charge of
     approximately $1.3 million in connection with the closing of certain
     facilities as described in Note 2.



                                       36
<PAGE>   37
                                  FURON COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                FEBRUARY 3, 1996

10.      SEGMENT INFORMATION

The Company designs, develops and manufactures highly engineered components made
primarily from specially formulated high performance polymer materials, a single
business segment. Most of Furon's products are designed and engineered to meet
specific requirements of customers in the industrial process, transportation,
industrial equipment, electronics and healthcare industries.

The following table provides information as to the significant geographic areas
in which the Company has operations.

<TABLE>
<CAPTION>
                                                                YEARS ENDED
                                              ------------------------------------------

                                              FEBRUARY 3,     JANUARY 28,    JANUARY 29,
IN THOUSANDS                                      1996           1995           1994
----------------------------------------------------------------------------------------
<S>                                             <C>            <C>            <C>     
Net sales to outside customers:

                        United States           $309,683       $283,006       $261,424
                        Europe                    35,203         29,054         23,770
                                                --------       --------       --------
                                                $344,886       $312,060       $285,194
                                                ========       ========       ========
                                                                             
Income before income taxes:                                                  
                                                                             
                        United States           $ 15,333       $ 15,096       $ 11,407
                        Europe                     3,081          2,501          1,561
                                                --------       --------       --------
                                                $ 18,414       $ 17,597       $ 12,968
                                                ========       ========       ========
                                                                             
Identifiable assets:                                                         
                                                                             
                        United States           $190,463       $160,848       $160,905
                        Europe                    21,021         19,025         14,319
                                                --------       --------       --------
                                                $211,484       $179,873       $175,224
                                                ========       ========       ========
                                                                             
Export sales                                    $ 35,967       $ 38,145       $ 27,536
                                                ========       ========       ========
</TABLE>
                                                                          

                                       37
<PAGE>   38
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information in response to this Item is incorporated herein by reference from
the Company's definitive Proxy Statement for the Annual Meeting of Shareholders
to be held on June 4, 1996. Information concerning the Company's executive
officers is included in Part I.

ITEM 11. EXECUTIVE COMPENSATION

Information in response to this Item is incorporated herein by reference from
the Company's definitive Proxy Statement for the Annual Meeting of Shareholders
to be held on June 4, 1996.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information in response to this Item is incorporated herein by reference from
the Company's definitive Proxy Statement for the Annual Meeting of Shareholders
to be held on June 4, 1996.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information in response to this Item is incorporated herein by reference from
the Company's definitive Proxy Statement for the Annual Meeting of Shareholders
to be held on June 4, 1996.

                                     PART IV

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

         (a)  1.   Index to Financial Statements                     Page
                                                                     ----
                   Report of Independent Auditors                     14

                   Consolidated Statements of Income                  15
                       Years ended February 3, 1996,
                       January 28, 1995 and January 29, 1994


                                       38
<PAGE>   39
                               PART IV (CONTINUED)

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

                                                                            Page
                                                                            ----
                  Consolidated Balance Sheets
                      February 3, 1996 and January 28, 1995                  16

                  Consolidated Statements of Stockholders' Equity
                      Years ended February 3, 1996, January 28, 1995
                      and January 29, 1994                                   18

                  Consolidated Statements of Cash Flows
                      Years ended February 3, 1996, January 28, 1995
                      and January 29, 1994                                   19

                  Notes to Consolidated Financial Statements
                      February 3, 1996                                       20

         2.       Index to Financial Statement Schedules

                  Schedule II - Valuation and Qualifying Accounts            *40

                  All other schedules have been omitted since the
                  required information is not present or not present in
                  amounts sufficient to require the submission of the
                  schedules, or because the information required is
                  included in the consolidated financial statements or
                  the notes thereto.

         3.       Exhibits:

                  The exhibits listed in the accompanying Index to Exhibits are
                  filed as part of this annual report.

         (b)      Reports on Form 8-K:

                  No reports on Form 8-K were filed during the last quarter of
                  the period covered by this report.



                  * Schedule not included in this document.


                                       39
<PAGE>   40
                                  FURON COMPANY
                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
       YEARS ENDED FEBRUARY 3, 1996, JANUARY 28, 1995 AND JANUARY 29, 1994

<TABLE>
<CAPTION>
                                                                DEDUCTIONS/
                          BALANCE AT        ADDITIONS        ACCOUNTS WRITTEN
                           BEGINNING    CHARGED TO COSTS        OFF NET OF                          BALANCE AT
                            OF YEAR       AND EXPENSES          RECOVERIES          OTHER           END OF YEAR
                          ----------    ----------------     ----------------     ----------        -----------
<S>                        <C>              <C>                 <C>               <C>               <C>       
ALLOWANCE FOR DOUBTFUL
     RECEIVABLES:

        1996               $695,750         $724,147            $(256,851)        $  203,889 (a)    $1,336,935
                           ========         ========            =========         ==========        ==========
                                                                                                 
        1995               $631,540         $302,954            $(238,744)            --            $  695,750
                           ========         ========            =========         ==========        ==========
                                                                                                 
        1994               $740,700         $253,770            $(362,930)            --            $  631,540
                           ========         ========            =========         ==========        ==========
</TABLE>

(a) Relates to opening balances of acquisitions.


                                       40
<PAGE>   41
                                  FURON COMPANY

                                INDEX TO EXHIBITS

REGULATION S-K                                                      SEQUENTIAL
ITEM NUMBER                                                         PAGE NUMBER
--------------                                                      -----------
   3                Restated Articles of Incorporation
                    (Incorporated by reference to Exhibit 3 to
                    the Registrant's Annual Report on Form 10-K
                    filed on April 7, 1994, Commission File No.
                    0-8088)

 3.1                Amended and Restated Bylaws (Incorporated by
                    reference to Exhibit 3.1 to the Registrant's
                    Annual Report on Form 10-K filed on April 7,
                    1994 and Exhibit 3.2 to the Registrant's
                    Quarterly Report on Form 10-Q filed on
                    September 13, 1994, Commission File 0-8088)

  4                 Rights Agreement as amended (Incorporated by
                    reference to Exhibit 2.1 to the Registrant's
                    Registration Statement on Form 8-A filed
                    March 22, 1989, and Exhibit 4.1 to the
                    Registrant's Annual Report on Form 10-K filed
                    on April 28, 1992, Commission File No.
                    0-8088)

10.1*               1982 Stock Incentive Plan (as Amended and
                    Restated as of March 22, 1994) (Incorporated
                    by reference to Exhibit 10.1 to the
                    Registrant's Quarterly Report on Form 10-Q
                    filed on September 13, 1994, Commission File
                    No. 0-8088)

10.2*               Employee Relocation Assistance Plan as
                    amended (Incorporated by reference to Exhibit
                    10.2 to the Registrant's Annual Report on
                    Form 10-K filed on March 21, 1990, Commission
                    File No. 0-8088)

10.3*               Supplemental Executive Retirement Plan as
                    presently in effect (Incorporated by
                    reference to Exhibit 10.5 to the Registrant's
                    Annual Report on Form 10-K filed on March 28,
                    1991, Exhibit 10.4 to the Registrant's Annual
                    Report on Form 10-K filed on March 29, 1993,
                    and Exhibit 10.4A to the Registrant's
                    Quarterly Report on Form 10-Q filed on
                    September 13, 1994, Commission File No.
                    0-8088)

10.4                Asset Purchase Agreement, dated as of January
                    31, 1995, by and between the Registrant and
                    Custom Coating & Laminating Corporation
                    (Incorporated by reference to Exhibit 2 to
                    the Registrant's Current Report on Form 8-K/A
                    filed on February 17, 1995, Commission File
                    No. 0-8088)


                     * A management contract or compensatory plan
                       or arrangement.


                                      41
<PAGE>   42
                                  FURON COMPANY
                                INDEX TO EXHIBITS
                                   (CONTINUED)

<TABLE>
<CAPTION>
 REGULATION S-K                                                                            SEQUENTIAL
  ITEM NUMBER                                                                              PAGE NUMBER
  -----------                                                                              -----------
 <S>                                                                                          <C>               
      10.5*          Form of Indemnity Agreement with each of the directors and
                     officers of the Registrant (Incorporated by reference to
                     Exhibit C to the Registrant's definitive Proxy Statement
                     filed May 2, 1988, Commission File No. 0-8088)

      10.6*          Form of Change-in-Control Agreement between the Registrant
                     and each of its executive officers (Incorporated by
                     reference to Exhibit 10.7 to the Registrant's Annual Report
                     on Form 10-K filed on March 28, 1991, Commission File No.
                     0-8088)

      10.7*          Deferred Compensation Plan (Incorporated by reference to
                     Exhibit 10.7 to the Registrant's Annual Report on Form 10-K
                     filed on March 29, 1993, Commission File No. 0-8088)

      10.8*          Economic Value Added (EVA) Incentive Compensation Plan, as
                     Amended and Restated (Incorporated by reference to Exhibit
                     10.8 to the Registrant's Annual Report on Form 10-K filed
                     on April 7, 1994, Commission File No. 0-8088)

      10.9*          Consulting  agreement  with Peter Churm for fiscal                       48
                     year 1997                                                               

      10.9A*         Consulting agreement with Peter Churm for fiscal year 1996
                     (Incorporated by reference to Exhibit 10.9 to the
                     Registrant's Annual Report on Form 10-K filed on March 22,
                     1995, Commission File No. 0-8088)

      10.10*         Promissory note and subordination agreement for Terrence A.
                     Noonan relocation (Incorporated by reference to Exhibit
                     10.10 to the Registrant's Annual Report on Form 10-K filed
                     on April 7, 1994, Commission File No. 0-8088)
</TABLE>

                      * A management contract or compensatory plan or
                        arrangement.


                                       42
<PAGE>   43
                                  FURON COMPANY
                                INDEX TO EXHIBITS
                                   (CONTINUED)

<TABLE>
<CAPTION>
 REGULATION S-K                                                                            SEQUENTIAL
  ITEM NUMBER                                                                              PAGE NUMBER
  -----------                                                                              -----------
 <S>                                                                                       <C>                               
      10.11          1993 Non-Employee Directors' Stock Compensation Plan, as
                     amended (Incorporated by reference to Exhibit 10.12 to the
                     Registrant's Quarterly Report on Form 10-Q filed on June 2,
                     1994 and Exhibit 10.12A to the Registrant's Quarterly
                     Report on Form 10-Q filed on August 24, 1995, Commission
                     File No. 0-8088).

      10.12*         1995 Stock Incentive Plan (Incorporated by reference to
                     Exhibit A to the Registrant's definitive Proxy Statement
                     filed May 1, 1995, Commission File No. 0-8088)

      10.13          Credit Agreement, dated as of October 30, 1995, between the
                     Registrant, as Borrower, Bank of America National Trust and
                     Savings Association, as the Agent, and the Banks named
                     therein.                                                                 

      10.14          Asset Purchase Agreement, dated November 9, 1995, by and
                     among the Registrant, as Purchaser, AlliedSignal Laminate
                     Systems, Inc., as Seller, and AlliedSignal Inc., as Parent.

       11            Statement re Computation of Net Income Per Share                         

       21            Subsidiaries of the Registrant                                           

       23            Consent of Independent Auditors                                          

       27            Financial Data Schedule                                                  
</TABLE>

                    * A management contract or compensatory plan 
                      or arrangement.


                                       43
<PAGE>   44
                        SIGNATURES AND POWER OF ATTORNEY

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 on March 19, 1996 by the undersigned, thereunto duly authorized.

FURON COMPANY

By:       /S/ MONTY A. HOUDESHELL                     /S/ KOICHI HOSOKAWA
          -------------------------------             --------------------------
          Monty A. Houdeshell                         Koichi Hosokawa
          Vice President, Chief Financial             Controller
          Officer and Treasurer

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. Each person whose signature
appears below hereby authorizes and appoints J. Michael Hagan, Terrence A.
Noonan, and Monty A. Houdeshell as attorneys-in-fact and agents, each acting
alone, to execute and file with the applicable regulatory authorities any
amendment to this report on his behalf individually and in each capacity stated
below.

/S/ J. MICHAEL HAGAN                                 /S/ COCHRANE CHASE
--------------------------------------               ---------------------------
J. Michael Hagan                                     Cochrane Chase
Chairman of the Board                                Director, March 19, 1996
(Principal Executive Officer),
March 19, 1996


/S/ TERRENCE A. NOONAN                               /S/ H. DAVID BRIGHT
--------------------------------------               ---------------------------
Terrence A. Noonan                                   H. David Bright
President and Director, March 19, 1996               Director, March 19, 1996


/S/ PETER CHURM                                      /S/ WILLIAM D. CVENGROS
--------------------------------------               ---------------------------
Peter Churm                                          William D. Cvengros
Chairman Emeritus, March 19, 1996                    Director, March 19, 1996


/S/ MONTY A. HOUDESHELL                              /S/ R. DAVID THRESHIE
--------------------------------------               ---------------------------
Monty A. Houdeshell                                  R. David Threshie
Vice President, Chief Financial                      Director, March 19, 1996
Officer and Treasurer, March 19, 1996


/S/ KOICHI HOSOKAWA                                  /S/ BRUCE E. RANCK
--------------------------------------               ---------------------------
Koichi Hosokawa                                      Bruce E. Ranck
Controller, March 19, 1996                           Director, March 19, 1996


                                                     /S/ WILLIAM C. SHEPHERD
                                                     ---------------------------
                                                     William C. Shepherd
                                                     Director, March 19, 1996

                                       44
<PAGE>   45
                                  FURON COMPANY
                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
 REGULATION S-K                                                                            SEQUENTIAL
  ITEM NUMBER                                                                              PAGE NUMBER
  -----------                                                                              -----------
 <S>                                                                                       <C>                                
      3              Restated Articles of Incorporation (Incorporated by
                     reference to Exhibit 3 to the Registrant's Annual Report on
                     Form 10-K filed on April 7, 1994, Commission File No.
                     0-8088)

      3.1            Amended and Restated Bylaws (Incorporated by reference to
                     Exhibit 3.1 to the Registrant's Annual Report on Form 10-K
                     filed on April 7, 1994 and Exhibit 3.2 to the Registrant's
                     Quarterly Report on Form 10-Q filed on September 13, 1994,
                     Commission File 0-8088)

      4              Rights Agreement as amended (Incorporated by reference to
                     Exhibit 2.1 to the Registrant's Registration Statement on
                     Form 8-A filed March 22, 1989, and Exhibit 4.1 to the
                     Registrant's Annual Report on Form 10-K filed on April 28,
                     1992, Commission File No. 0-8088)

      10.1*          1982 Stock Incentive Plan (as Amended and Restated as of
                     March 22, 1994) (Incorporated by reference to Exhibit 10.1
                     to the Registrant's Quarterly Report on Form 10-Q filed on
                     September 13, 1994, Commission File No. 0-8088)

      10.2*          Employee Relocation Assistance Plan as amended
                     (Incorporated by reference to Exhibit 10.2 to the
                     Registrant's Annual Report on Form 10-K filed on March 21,
                     1990, Commission File No. 0-8088)

      10.3*          Supplemental Executive Retirement Plan as presently in
                     effect (Incorporated by reference to Exhibit 10.5 to the
                     Registrant's Annual Report on Form 10-K filed on March 28,
                     1991, Exhibit 10.4 to the Registrant's Annual Report on
                     Form 10-K filed on March 29, 1993, and Exhibit 10.4A to the
                     Registrant's Quarterly Report on Form 10-Q filed on
                     September 13, 1994, Commission File No. 0-8088)

      10.4           Asset Purchase Agreement, dated as of January 31, 1995, by
                     and between the Registrant and Custom Coating & Laminating
                     Corporation (Incorporated by reference to Exhibit 2 to the
                     Registrant's Current Report on Form 8-K/A filed on February
                     17, 1995, Commission File No. 0-8088)
</TABLE>

                     * A management contract or compensatory plan or
                       arrangement.
                     


                                       45
<PAGE>   46
                                  FURON COMPANY
                                INDEX TO EXHIBITS
                                   (CONTINUED)

<TABLE>
<CAPTION>
 REGULATION S-K                                                                            SEQUENTIAL
  ITEM NUMBER                                                                              PAGE NUMBER
  -----------                                                                              -----------
 <S>                                                                                       <C>         
      10.5*          Form of Indemnity Agreement with each of the directors and
                     officers of the Registrant (Incorporated by reference to
                     Exhibit C to the Registrant's definitive Proxy Statement
                     filed May 2, 1988, Commission File No. 0-8088)

      10.6*          Form of Change-in-Control Agreement between the Registrant
                     and each of its executive officers (Incorporated by
                     reference to Exhibit 10.7 to the Registrant's Annual Report
                     on Form 10-K filed on March 28, 1991, Commission File No.
                     0-8088)

      10.7*          Deferred Compensation Plan (Incorporated by reference to
                     Exhibit 10.7 to the Registrant's Annual Report on Form 10-K
                     filed on March 29, 1993, Commission File No. 0-8088)

      10.8*          Economic Value Added (EVA) Incentive Compensation Plan, as
                     Amended and Restated (Incorporated by reference to Exhibit
                     10.8 to the Registrant's Annual Report on Form 10-K filed
                     on April 7, 1994, Commission File No. 0-8088)

      10.9*          Consulting agreement with Peter Churm for fiscal year 1997                48

      10.9A*         Consulting agreement with Peter Churm for fiscal year 1996
                     (Incorporated by reference to Exhibit 10.9 to the
                     Registrant's Annual Report on Form 10-K filed on March 22,
                     1995, Commission File No. 0-8088)

      10.10*         Promissory note and subordination agreement for Terrence A.
                     Noonan relocation (Incorporated by reference to Exhibit
                     10.10 to the Registrant's Annual Report on Form 10-K filed
                     on April 7, 1994, Commission File No. 0-8088)
</TABLE>

                     * A management contract or compensatory plan or
                       arrangement.
                     


                                       46
<PAGE>   47
                                  FURON COMPANY
                                INDEX TO EXHIBITS
                                   (CONTINUED)

<TABLE>
<CAPTION>
 REGULATION S-K                                                                            SEQUENTIAL
  ITEM NUMBER                                                                              PAGE NUMBER
  -----------                                                                              -----------
 <S>                                                                                       <C>                     

      10.11          1993 Non-Employee Directors' Stock Compensation Plan, as
                     amended (Incorporated by reference to Exhibit 10.12 to the
                     Registrant's Quarterly Report on Form 10-Q filed on June 2,
                     1994, and Exhibit 10.12A to the Registrant's Quarterly
                     Report on Form 10-Q filed on August 24, 1995, Commission
                     File No. 0-8088).

      10.12*         1995 Stock Incentive Plan (Incorporated by reference to
                     Exhibit A to the Registrant's definitive Proxy Statement
                     filed May 1, 1995, Commission File No. 0-8088)

      10.13          Credit Agreement, dated as of October 30, 1995, between the
                     Registrant, as Borrower, Bank of America National Trust and
                     Savings Association, as the Agent, and the Banks named
                     therein.                                                                 

      10.14          Asset Purchase Agreement, dated November 9, 1995, by and
                     among the Registrant, as Purchaser, AlliedSignal Laminate
                     Systems, Inc., as Seller, and AlliedSignal Inc., as Parent.

       11            Statement re Computation of Net Income Per Share                         

       21            Subsidiaries of the Registrant                                           

       23            Consent of Independent Auditors                                          

       27            Financial Data Schedule                                                  
</TABLE>

                    * A management contract or compensatory plan 
                      or arrangement.


                                       47