SECURITIES AND EXCHANGE COMMISSION
                           WASHINGTON D.C., 20549

                            --------------------

                                 FORM 10-K

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

For fiscal year ended December 31, 2000        Commission File Number 33-24317

                          JORDAN INDUSTRIES, INC.
             (Exact name of registrant as specified in charter)

                  Illinois                                  36-3598114
         (state or other jurisdiction of                 (I.R.S. Employer
         incorporation or organization)                  Identification No.)

       Arbor Lake Centre, Suite 550                             60015
         1751 Lake Cook Road                                  (Zip Code)
         Deerfield, Illinois
(Address of Principal Executive Offices)

                  Registrant's telephone number, including Area Code:
                               (847) 945-5591

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

                                                          Name of Each Exchange
              Title of Each Class                          on Which Registered
              -------------------                         ---------------------
                     None                                         N/A

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

            Indicated by checkmark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding twelve (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 ninety (90)
days.

                             Yes  X                  No ___
                                 ---

              The aggregate market value of voting stock held by
non-affiliates of the registrant is not determinable as such shares were
privately placed and there is no public market for such shares.

              The number of shares outstanding of Registrant's Common Stock
as of March 30, 2001:  98,501.0004.


<PAGE>

Item 1.  BUSINESS
         --------

Jordan Industries, Inc. ("the Company") was organized to acquire and
operate a diverse group of businesses with a corporate staff providing
strategic direction and support. The Company is currently comprised
of 25 businesses which are divided into five strategic business
units: (i) Specialty Printing and Labeling, (ii) Consumer and
Industrial Products, (iii) Jordan Specialty Plastics, (iv) Jordan Auto
Aftermarket, and (v) Motors and Gears. As of July 21, 1999, Welcome Home is
consolidated in the Company's results of operations and is included in the
Consumer and Industrial Products business unit. (See Note 3 to the
financial statements.) As a result of the transactions described in Note 4
to the financial statements, the Jordan Telecommunication Products segment
and the Capita Technologies segment have been reported as discontinued
operations for financial reporting purposes in accordance with Accounting
Principals Board ("APB") Opinion No. 30.

The Company believes that its businesses are characterized by leading
positions in niche industries, high operating margins, strong management,
minimal working capital and capital expenditure requirements and low
sensitivity to technological change and economic cycles.

The Company's business strategy is to enhance the growth and profitability
of each business unit, and to build upon the strengths of those units
through product line and other strategic acquisitions. Key elements of this
strategy have been the consolidation and reorganization of acquired
businesses, increased focus on international markets, facilities expansion
and the acquisition of complementary product lines. When, through such
activities, the Company believes that critical mass is attained in a
particular industry segment, the related companies are organized as a
discreet business unit. For example, the Company acquired Imperial in 1983
and made a series of complementary acquisitions, which resulted in the
formation of Motors and Gears, Inc., a leading domestic manufacturer of
electric motors, gears, and motion control systems.

Through the implementation of this strategy, the Company has demonstrated
significant and consistent growth in net sales. The Company generated
consolidated net sales of $807.3 million for the year ended December 31,
2000 as compared to $468.6 million for the year ended December 31, 1996,
representing a compound annual growth rate of 14.7%.

The following chart depicts the operating subsidiaries, which comprise the
Company's five strategic business units, together with the net sales for
each of the five groups for the year ended December 31, 2000.

                                    -2-

<PAGE>
                          Jordan Industries, Inc.
                      $807.3 Million of Net Sales (3)

SPECIALTY PRINTING AND LABELING              -   JII Promotions
$122.7 Million of Net Sales                  -   Pamco
                                             -   Valmark
                                             -   Seaboard

CONSUMER AND INDUSTRIAL PRODUCTS             -   Cape Craftsmen
$128.4 Million of Net Sales                  -   Welcome Home (1)
                                             -   Riverside (2)
                                             -   Cho-Pat
                                             -   Online Environs
                                             -   Internet Services of Michigan
                                             -   Flavorsource
                                             -   GramTel

JORDAN SPECIALTY PLASTICS                    -   Sate-Lite
$98.3 Million of Net Sales                   -   Beemak
                                             -   Deflecto

JORDAN AUTO AFTERMARKET                      -   Dacco
$141.2 Million of Net Sales                  -   Alma

MOTORS AND GEARS (4)                         -   Imperial
$316.7 Million of Net Sales                  -   Gear
                                             -   Merkle-Korff
                                             -   FIR
                                             -   Electrical Design & Control
                                             -   Motion Control Engineering
                                             -   Advanced D.C. Motors




---------------------------

(1)           On January 21, 1997 Welcome Home filed for Chapter 11
              bankruptcy protection. As a result of the Chapter 11 filing,
              the results of Welcome Home were not consolidated with the
              Company's results for the period between January 21, 1997 and
              July 21, 1999, the date Welcome Home emerged from bankruptcy.
              The results of Welcome Home have been consolidated with the
              Company's results from the date of its emergence, as the
              Company regained operational and financial control of Welcome
              Home. See footnote 3 to the financial statements.

     (2)      Riverside was sold on February 2, 2001.  See footnote 24 to the
              financial statements.

     (3)      The results of operations of acquired businesses have been
              included in the Company's consolidated results since the
              respective dates of acquisition. See footnote 19 to the
              financial statements.

     (4)      The Subsidiaries comprising Motors and Gears are Non-Restricted
              Subsidiaries, the common stock of which is owned by stockholders
              and affiliates of the Company and management of the respective
              companies.  In 2001 Motors and Gears, Inc. changed its name to
              Kinetek, Inc. Kinetek, Inc. is a wholly-owned subsidiary of
              Motors and Gears Holdings Inc., of which the Company's ownership
              is solely in the form of M&G Junior Preferred Stock. See note 5
              to the financial statements.

                                       -3-
<PAGE>

The Company's operations were conducted through the following business units as
of December 31, 2000:

Specialty Printing and Labeling


The Specialty Printing and Labeling Group manufactures and markets (i)
promotional and specialty advertising products for corporate buyers, (ii)
labels, tapes, and printed graphic panel overlays for electronics and other
manufacturing companies and (iii) printed folding cartons and boxes and
other shipping materials. The companies that are part of Specialty Printing
and Labeling have provided its customers with products and services for an
average of over 40 years. For the fiscal year ended December 31, 2000, the
Specialty Printing and Labeling group generated net sales of $122.7
million. Each of the Specialty Printing and Labeling subsidiaries is
discussed below:

JII Promotions. In 2001, in an effort to focus attention on its specialty
promotion strengths, Sales Promotion Associates, Inc. was renamed JII
Promotions, Inc. ("JII Promotions"). JII Promotions is a distributor of
corporate recognition, promotion and specialty advertising products and a
producer and distributor of calendars for corporate buyers and soft-cover
yearbooks for kindergarten through eighth grade.

JII Promotions' net sales for fiscal 2000 were $62.0 million. Approximately
62% of JII Promotions' 2000 net sales were derived from distributing a
broad variety of corporate recognition products, promotion and specialty
advertising products. These products include apparel, watches, crystal,
luggage, writing instruments, glassware, caps, cases, labels and other
items that are printed and identified with a particular corporate logo
and/or corporate advertising campaign. Approximately 27% of JII Promotions'
2000 net sales were derived from sales of a broad variety of calendars,
including hanging, desktop and pocket calendars that are used internally by
corporate customers and distributed by them to their clients and customers.
High-quality artistic calendars are also distributed. In addition, JII
Promotions manufactures and distributes soft-cover school yearbooks for
kindergarten through eighth grade, which accounted for approximately 11% of
2000 net sales.

JII Promotions distributes calendars that are assembled in-house as well as
by a number of outside suppliers. Facilities for in-house finishing include
a composing room, a camera room, and a calendar binding department. Print
stock, binding material, packaging and other materials are supplied by a
number of independent companies. Specialty advertising products are
purchased from more than 950 suppliers. Calendars and specialty advertising
products are sold through a 700 person sales force, most of whom are
independent contractors.

Management believes that JII Promotions has one of the largest domestic
sales forces in the industry. With this large sales force and broad range
of calendars and corporate recognition products available, management
believes that JII Promotions is a strong competitor in its market. This
market is very fragmented and most of the competition comes from
smaller-scale producers and distributors.

                                    -4-
<PAGE>


Valmark. Valmark, which was founded in 1976 and purchased by the Company in
1994, is a specialty printer and manufacturer of graphic components for the
electronics Original Equipment Manufacturer ("OEM") market. Valmark's
product line includes graphic panel overlays, membrane switch control
panels, adhesive-backed labels and electro magnetic shielding devices.
Approximately 31% of Valmark's 2000 net sales of $21.7 million were derived
from the sales of membrane switch control panels, 49% from graphic panel
overlays, 18% from labels and 2% from shielding devices.

The specialty screen print products sold in the electronics industry
continue to operate relatively free of foreign competition due to the high
level of communication and short time frame usually required to produce
orders. While the majority of Valmark's customer base of approximately
1,200 is located in the Northern California area, Valmark conducts business
nationally through its network of manufacturing sales representatives.

Valmark sells to four primary markets: personal computers; general
electronics; turn-key services; and medical instrumentation. Sales to the
hospital and telecommunication industries have experienced the most growth
over recent years due to Valmark's membrane switch control panel
capabilities.

Valmark is able to provide OEM's with a broader range of products than many
of its competitors. Valmark's markets are very competitive in terms of
price and accordingly, Valmark's advantage over its competitors is derived
from its diverse product line and excellent quality ratings.

Pamco. Pamco, which was founded in 1953 and purchased by the Company in
1994, is a manufacturer and distributor of a wide variety of printed tapes
and labels. Pamco offers a range of products from simple one and two-color
labels, such as basic bar code and address labels, to eight-color,
laminated, embossed, and hot stamped labels for products such as video
games and food packaging. All of Pamco's products are made to customer
specifications and approximately 94% of all sales were manufactured
in-house in 2000. The remaining 6% of net sales were purchased printed
products and included business cards and stationery.

Pamco's products are marketed by a team of 9 sales representatives who
procure new accounts and service existing accounts. Existing accounts are
serviced by 8 customer service representatives and 2 internal salespeople.
Pamco's customers represent several different industries with the five
largest customers accounting for approximately 19% of 2000 net sales of
$18.4 million.

Pamco competes in a highly fragmented industry. Pamco emphasizes its
impressive 24-hour turnaround and its ability to accommodate rush orders
that other printers cannot handle. Pamco's ability to deliver a quality
product with quick turn around is its key competitive advantage.

Seaboard. Seaboard, which was founded in 1954 and purchased by the Company
in 1996, is a manufacturer of printed folding cartons and boxes, insert
packaging and blister pack cards.

                                     -5-
<PAGE>

Seaboard sells directly to a broad customer base, located primarily east of
the Mississippi River, operating in a variety of industries including
hardware, personal hygiene, toys, automotive supplies, food and drugs.
Seaboard's top ten customers accounted for approximately 37% of Seaboard's
2000 net sales of $20.6 million. Seaboard has exhibited high profit margins
and has gained a reputation for exceeding industry standards primarily due
to its excellent operating capabilities. Seaboard has historically been
highly successful in buying and profitably integrating smaller
acquisitions.

Seaboard's markets are very competitive in terms of price, and accordingly,
Seaboard's advantage over its competition is derived from its high quality
products and excellent service.

Consumer and Industrial Products


Consumer and Industrial Products serves many product segments. It publishes
and markets Bibles, religious books and audio materials; manufactures and
imports gift items; manufactures orthopedic supports and pain reducing
medical devices; provides internet access to small Midwestern markets;
manufactures and develops flavors used in beverages and foods; provides
internet business development solutions and consulting services; and
provides dedicated internet connectivity, co-location, and data storage
services at regionally located Secure Network Access Centers. For the year
ended December 31, 2000, the Consumer and Industrial Products subsidiaries
generated combined net sales of $128.4 million. Each of the Consumer and
Industrial Products subsidiaries is discussed below:

Riverside. Riverside is a publisher of Bibles and a distributor of Bibles,
religious books and music recordings. Riverside was founded in 1943 and
acquired by the Company in 1988. Approximately 77% of Riverside's business
consists of products published by other companies. Riverside sells
world-wide to more than 10,000 wholesale, religious and trade book store
customers, utilizing an in-house telemarketing system, five independent
sales representative groups, printed sales media and an internet website.
In addition, Riverside sells a small percentage of its products through
direct mail and to retail customers. Riverside had 2000 net sales of $54.8
million. On February 2, 2001, Riverside was sold to a third party. See note
24 to the financial statements.

Cape Craftsmen. Founded in 1966 and purchased by the Company in 1996, Cape
Craftsmen is a manufacturer and importer of gifts, wooden furniture, framed
art and other accessories. Cape Craftsmen manufactures in North Carolina
and imports from Mexico and the Far East. Cape Craftsmen sells its products
through 3 in-house salespeople and 44 independent sales representatives.
Net sales in 2000 were $12.7 million, excluding sales to Welcome Home, a
related party, of $17.2 million. Cape Craftsmen competes in a highly
fragmented industry and has therefore found it most effective to compete on
the basis of price with most wood manufacturers and importers. Cape
Craftsmen also strives to deliver better quality and service than its
competitors.

Welcome Home.Welcome Home is a specialty retailer of gifts and decorative
home furnishings and accessories in North America. Welcome Home began
operations in the mid 1970's and was acquired by the Company in 1991. It
currently operates 124 stores located in factory outlet centers and
regional malls in 37 states. Welcome Home offers a broad product line of
1,500 to 2,500 items consisting of 12 basic groups, including decorative
home textiles, framed art, furniture, candles, lighting, fragrance,
decorative accessories, decorative garden, music, special opportunity
merchandise and seasonal products.

                                -6-
<PAGE>

Competition is highly intense among specialty retailers, traditional
department stores and mass merchant discounters in outlet malls and other
high traffic retail locations. Welcome Home competes principally on the
basis of product assortment, convenience, customer service, price and the
attractiveness of its stores. Welcome Home had net sales of $54.4 million
in the year ended December 31, 2000.

Cho-Pat. In September 1997, the Company purchased Cho-Pat, Inc., a leading
designer and manufacturer of orthopedic supports and patented preventative
and pain reducing medical devices. Cho-Pat currently produces eighteen
different products primarily for reduction of pain from injuries and the
prevention of injuries resulting from over use of the major joints.
Cho-Pat's largest selling product is the patented Cho-Pat knee strap,
designed to reduce the pain from patellar tendonitis in the knee. Cho-Pat
manufactures all of its products in-house. Cho-Pat sells its products to
professional, college and high school athletic trainers, medical product
distributors, and independent retail drug and sporting goods stores.
Cho-Pat had net sales of $1.9 million in 2000.

Online Environs. In March 2000, the Company purchased Online Environs, Inc.
Online is an international Internet business solutions developer and
consultant whose services are designed to help clients increase sales,
improve communications, and create and enhance business identities over the
Internet. Online had sales of $3.1 million from the date of acquisition
through December 31, 2000.

ISMI. Internet Services of Michigan was purchased by the Company on October
10, 2000. ISMI is an Internet service provider with approximately 9,500
customers located in Michigan. ISMI offers standard dial up resources as
well as high-speed Internet connections such as DSL, Satellite and ISDN.
ISMI also provides website development and creation services and web
hosting features. ISMI had net sales of $0.5 million from the date of
acquisition through December 31, 2000.

Flavorsource.On October 23, 2000, the Company purchased Flavorsource, Inc.
Flavorsource is a developer and compounder of flavors for use in beverages
of all kinds, including coffee, tea, juices, bar mixes, sodas, and
cordials, as well as in nutritional foods, bakery products and ice cream
and dairy products. Flavorsource had net sales of $0.7 million from the
date of acquisition through December 31, 2000.

GramTel. GramTel Communications, Inc. was started by the Company in
December 2000. GramTel is an information technology infrastructure
outsourcing company that allows its customers to transfer, protect and
store their mission critical data at regionally located Secure Network
Access Centers. GramTel had net sales of $0.3 million from the date of
formation through December 31, 2000.

                                      -7-
<PAGE>
Jordan Specialty Plastics


Jordan Specialty Plastics serves a broad range of wholesale and retail
markets within the highly-fragmented specialty plastics industry. The group
designs, manufactures and sells (1) "take-one" point of purchase brochure,
folder and application display holders, (2) modular storage systems
("Tilt-Bins"(TM)), (3) plastic injection-molded hardware and office supply
products, (4) extruded vinyl chairmats, (5) safety reflectors for bicycles
and commercial truck manufacturers and (6) colorants to the thermoplastics
industry. The companies that are part of Jordan Specialty Plastics have
provided their customers with products and services for an average of over
35 years. For the year ended December 31, 2000, the Jordan Specialty
Plastics subsidiaries generated combined net sales of $98.3 million. Each
of the Jordan Specialty Plastics subsidiaries is discussed below:

Beemak Plastics. Beemak, which was founded in 1951 and acquired by the
Company in July 1989, is an integrated manufacturer of custom
point-of-purchase displays, brochure holders and sign holders. Beemak sells
its proprietary holders and displays to approximately 5,000 customers
around the world. In addition, Beemak produces a small amount of custom
injection-molded plastic parts for customers on a contract manufacturing
basis. Beemak's net sales for 2000 were $6.8 million.

Beemak's products are both injection-molded and custom fabricated. Beemak's
molds are made by outside suppliers. The manufacturing process consists
primarily of the injection-molding of polystyrene plastic and the
fabrication of plastic sheets. Beemak also provides silk screening of
decals and logos onto the final product.

Beemak sells its products through a direct sales force, independent
representatives, an extensive on-going advertising campaign and by
reputation. Beemak sells to distributors, major companies, and competitors
which resell the product under a different name. Beemak has been successful
in providing excellent service on orders of all sizes, especially on small
orders.

The display holder industry is very fragmented, consisting of a few other
known holder and display firms and regionally-based sheet fabrication
shops. Beemak has benefited from the growth in "direct" advertising budgets
at major companies. Significant advertising dollars are spent each year on
direct-mail campaigns, point-of purchase displays and other forms of
non-media advertising.

Sate-Lite Manufacturing. Sate-Lite specializes in safety reflectors for
bicycles and commercial truck manufacturers, colorants/masterbatches for
the thermoplastics industry, and a line of retail Tilt-Bin(TM) storage
containers. Sate-Lite was founded in 1968 and acquired by the Company in
1988. Bicycle reflectors and plastic bicycle parts account for
approximately 32% of Sate-Lite's net sales in 2000. Sales of emergency
warning triangles and specialty reflectors and lenses to commercial truck
customers accounted for approximately 25% of net sales in 2000. Sales of
colorants to the thermoplastics industry accounted for approximately 32% of
net sales in 2000. Sales of storage containers accounted for approximately
5% of net sales. The remaining 6% of 2000 net sales were derived from other
miscellaneous plastic injection molded products. Sate-Lite's net sales for
2000 were $16.2 million.

Sate-Lite's bicycle and truck/auto products are sold directly to a number
of OEM's. The three largest OEM customers are Tandem (China), Grote
Industries, and Federal Mogul, which account for a total of approximately
13% of Sate-Lite's net sales in 2000. Colorants are sold primarily to
plastic processors in North America. The Tilt-Bin(TM) storage containers
are sold primarily to retail outlets used for in-store display fixtures, as
well as for home consumer use. In 2000, Sate-Lite's ten largest customers
accounted for approximately 43% of net sales.

                                    -8-
<PAGE>

Sate-Lite's bicycle products are marketed to bicycle OEM's in North America
and Asia. Sales to foreign customers are handled directly by management and
by independent trading companies on a commission basis. Sate-Lite's net
export sales accounted for approximately 25% of its total 2000 net sales.
Export sales were principally to China and Canada. The principal raw
materials used in manufacturing Sate-Lite's products are plastic resins,
metal fasteners, and color pigments. Sate-Lite purchases these materials
from several independent suppliers. In the fourth quarter of 1998,
Sate-Lite opened a wholly-owned manufacturing factory in China. Sate-Lite
sells to a variety of companies in Asia including Tandem, Giant, Southern
Cross, and other bicycle manufacturers who have recently been increasing
their sales to the North American market through mass market bicycle brands
such as Huffy, Mongoose, Pacific, and Roadmaster.

The markets for bicycle parts and thermoplastic colorants are highly
competitive. Sate-Lite competes in these markets by offering innovative
products and by relying on its established reputation for producing
high-quality plastic components and colorants. Sate-Lite's principal
competitors in the bicycle parts market consist of both foreign and
domestic manufacturers. Sate-Lite competes with regional companies in the
thermoplastic colorant markets.

Deflecto Corporation. Founded in 1960 and acquired by the Company in 1998,
Deflecto designs, manufactures and markets plastic injection-molded
products for mass merchandisers, major retailers and large wholesalers.
Deflecto sells its products in two product categories: hardware products
and office supply products. Hardware products, which comprised
approximately 57% of Deflecto's net sales in 2000, include heating and
cooling air deflectors, clothes dryer vents and ducts, kitchen vents and
ducts, sheet metal pipes and elbows, exhaust fittings, heating ventilation
and air conditioning registers and other widely recognized products. Office
supply products, many of which have patents and trademarks, represented
approximately 43% of net sales in 2000 and include such items as wall
pockets, literature displays, file and chart holders, business card
holders, chairmats and other top-branded office supply products. Deflecto's
net sales for 2000 were $75.3 million.

Deflecto manufactures approximately 80% of its products in-house, with the
remainder outsourced to other injection molders. Deflecto efficiently
manages the mix of manufactured and outsourced product due to its ability
to accurately project pricing, cost and capacity constraints. This strategy
enables Deflecto to grow without being constrained by capacity issues.

                                      -9-
<PAGE>

Deflecto sells its products through an in-house salaried sales force and
the use of independent sales representatives. Deflecto has the critical
mass to command strong positions and significant shelf space with the major
mass merchandisers and retailers. In the hardware products line, Deflecto
sells to major national retailers such as Ace Hardware, Wal-Mart, and Home
Depot, as well as to heating, ventilating and air conditioning ("HVAC") and
appliance part wholesalers. Deflecto sells its office supply products line
to major office supply retailers such as Office Depot, Office Max and
Staples, as well as to national wholesalers, such as United Wholesalers and
S.P. Richards. Deflecto has established strong relationships with its
customers and is known for delivering high quality, well packaged products
in a timely manner.

Competition in the hardware and office supplies business is increasing due
to the consolidation of companies serving the market. The increased
competition has prevented price increases and has forced manufacturers to
improve production efficiency, product quality and delivery. The Company
believes that Deflecto's mix of manufactured and outsourced product, and
its management of this process, allows it to maintain high production
efficiency, keeping costs down and product quality high.

Jordan Auto Aftermarket


Jordan Auto Aftermarket is the leading supplier of remanufactured torque
converters to the automotive aftermarket parts industry. In addition, it
produces newly manufactured torque converters, air conditioning
compressors, and clutch and disc assemblies for major automotive and
equipment OEM's. For the year ended December 31, 2000, the Jordan Auto
Aftermarket subsidiaries generated combined net sales of $141.2 million.
Each of the Jordan Auto Aftermarket subsidiaries is discussed below.

DACCO. DACCO is a producer of remanufactured torque converters, as well as
automotive transmission sub-systems and other related products used by
transmission repair shops. DACCO was founded in 1965 and acquired by the
Company in 1988.

Approximately 70% of DACCO's products are classified as "hard" products,
which primarily consist of torque converters and hydraulic pumps that have
been rebuilt or remanufactured by DACCO. The torque converter, which
replaces the clutch in an automatic transmission, transfers power from the
engine to the drive shaft. The hydraulic pump supplies oil to all the
systems in the transmission.

Approximately 30% of DACCO's products are classified as "soft" products,
such as sealing rings, bearings, washers, filter kits and rubber
components. Soft products are purchased from a number of vendors and are
resold in a broad variety of packages, configurations and kits.

DACCO's customers are automotive transmission parts distributors and
transmission repair shops and mechanics. DACCO has 50 independent sales
representatives who accounted for approximately 51% of DACCO's net sales of
$66.4 million in 2000. These sales representatives sell nationwide to
independent warehouse distributors and transmission repair shops. DACCO
also owns and operates 39 distribution centers which sell directly to
transmission shops. DACCO's distribution centers average 5,400 square feet,
cover a 50-100 mile selling radius and sell approximately 40% hard products
and 60% soft parts. In 2000, no single customer accounted for more than 2%
of DACCO's net sales.

                                  -10-
<PAGE>

The domestic market for DACCO's hard products is fragmented and DACCO's
competitors primarily consist of a number of small regional and local
re-builders. DACCO believes that it competes strongly against these
re-builders by offering a broader product line, quality products, and lower
prices, all of which are made possible by DACCO's size and economies of
operation. However, the market for soft products is highly competitive and
several of its competitors are larger than DACCO. DACCO competes in the
soft products market on the basis of its low prices due to volume buying,
its growing distribution network and its ability to offer one-step
procurement of a broad variety of both hard and soft products.

Alma. Founded in 1944 and acquired by the Company in March 1999, Alma uses
a combination of remanufacturing and new production to produce torque
converters, air conditioning compressors, and clutch and disc assemblies
for major automotive and equipment OEM's such as Ford, Chrysler, GM, John
Deere, Caterpillar, and Case, as well as numerous other direct aftermarket
customers. Torque converters and clutch and disc assemblies are also
referred to as drive trains. Net sales were $74.8 million during the year
ended December 31, 2000.

Alma manufactures its products to customer's specifications, and its
engineering department works closely with the customer's engineers to
ensure that specifications are met. Torque converters (approximately 45% of
2000 net sales) are remanufactured and sold to major automotive OEMs such
as Ford and Chrysler, typically for warranty replacement. Alma does not
sell torque converters in the independent aftermarket, which is the primary
market for DACCO's torque converters. Air conditioning compressors
(approximately 38% of 2000 net sales) are both remanufactured and produced
new for the automotive aftermarket. Alma's compressors are sold to the
service arms of major automotive manufacturers such as Ford, Chrysler, GM,
John Deere, and Caterpillar. Alma supplies the majority of the compressors
purchased by these customers in the aftermarket. Clutch and disc assemblies
(approximately 17% of 2000 net sales) are both remanufactured and produced
new and are sold primarily to repackagers who then resell the products to
automotive parts distributors. Alma has long-term contracts with several
customers, and has developed strong relationships with all of its major
customers. Alma was selected by Ford to remanufacture, distribute, and
fully merchandise Ford's first two Ford Quality Renewal programs for torque
converters and clutch and disc assemblies. The use of Alma remanufactured
Ford Quality Renewal products in new vehicle warranty repair is indicative
of Alma's engineering, manufacturing and quality expertise. Approximately
27% of Alma's 2000 sales were to Ford and approximately 14% were to
Chrysler.

Alma's market is somewhat captive in that any supplier selling to the major
automotive and equipment OEMs must adhere to the same quality standards
with which Alma complies. Alma's primary competitors in the torque
converter market are Dynamic and Aftermarket Technologies, while Four
Seasons is the primary competitor in the air conditioning compressor
market. Alma competes based on quality, price, and customer service.

Motors and Gears


Motors and Gears is a leading domestic manufacturer of specialty purpose
electric motors, gears and motion control systems, serving a diverse
customer base. Its products are used in a broad range of applications,
including vending machines, refrigerator ice dispensers, commercial floor
care equipment, elevators, photocopy machines, and conveyor and automation
systems.

                               -11-
<PAGE>

Motors and Gears operates in the businesses of electric motors ("motors")
which includes the subsidiaries Imperial, Gear, Merkle-Korff, Fir, and
Advanced D.C. Motors; and electronic motion control systems ("controls")
which includes the subsidiaries Electrical Design & Control and Motion
Control Engineering. For the year ended December 31, 2000 Motors and Gears
generated net sales of $316.7 million.

Electric Motors. Electric motors are devices that convert electric power
into rotating mechanical energy. The amount of energy delivered is
determined by the level of input power supplied to the electric motor and
the size of the motor itself. An electric motor can be powered by
alternating current ("AC") or direct current ("DC"). AC power is generally
supplied by power companies directly to homes, offices and industrial sites
whereas DC power is supplied either through the use of batteries or by
converting AC power to DC power. Both AC motors and DC motors can be used
to power most applications; the determination is made by the consideration
of power source availability, speed variability requirements, torque
considerations, and noise constraints.

The power output of electric motors is measured in horsepower. Motors are
produced in power outputs that range from less than one horsepower up to
thousands of horsepower.

SubFractional Motors. Motors & Gears' subfractional horsepower products are
comprised of motors and gearmotors which power applications up to 30 watts
(1/25 horsepower). These small, "fist-sized" AC and DC motors are used in
light duty applications such as snack and beverage vending machines,
refrigerator ice dispensers and photocopy machines.

Fractional/Integral Motors. Motors & Gears' fractional/integral horsepower
products are comprised of AC and DC motors and gearmotors having power
ranges from 1/8 to 100 horsepower. Primary end markets for these motors
include commercial floor equipment, commercial dishwashers, commercial
sewing machines, industrial ventilation equipment, golf carts, lift trucks
and elevators.

Gears and Gearboxes. Gears and gearboxes are mechanical components used to
transmit mechanical energy from one source to another source. They are
normally used to change the speed and torque characteristics of a power
source such as an electric motor. Gears and gearboxes come in various
configurations such as helical gears, bevel gears, worm gears, planetary
gearboxes, and right-angle gearboxes. For certain applications, an electric
motor and a gearbox are combined to create a gearmotor.

Motors & Gears' precision gear and gearbox products are produced in sizes
of up to 16 inches in diameter and in various customized configurations
such as pump, bevel, worm and helical gears. Primary end markets for these
products include original equipment manufacturers ("OEM's") of motors,
commercial floor care equipment, aerospace and food processing product
equipment.

Electronic Motion Control Systems. Electronic motion control systems are
assemblies of electronic and electromechanical components that are
configured in such a manner that the systems have the capability to control
various commercial or industrial processes such as conveyor systems,
packaging systems, elevators, and automated assembly operations. The
components utilized in a motion control system are typically electric motor
drives (electronic controls that vary the speed and torque characteristics
of electric motors), programmable logic controls ("PLCs"), transformers,
capacitors, switches and software to configure and control the system. The
majority of the Company's motion control products control automated
conveyor systems used in automotive manufacturing and elevators.


                                  -12-
<PAGE>

Backlog


As of December 31, 2000 the Company had a backlog of approximately $95.6
million, compared with $90.5 million as of December 31, 1999. The backlog
in 2000 is primarily due to motor sales at Merkle-Korff. Management
believes that the backlog may not be indicative of future sales.

Seasonality


The Company's aggregate business has a certain degree of seasonality. JII
Promotions, Welcome Home's and Riverside's sales are somewhat stronger
toward year-end due to the nature of their products. Calendars at JII
Promotions have an annual cycle while Bibles and religious books at
Riverside and home furnishings and accessories at Welcome Home are popular
as holiday gifts.

Research and Development


As a general matter, the Company operates businesses that do not require
substantial capital or research and development expenditures. However,
development efforts are targeted at certain subsidiaries as market
opportunities are identified. None of these subsidiaries' development
efforts require substantial resources from the Company.

Patents, Trademarks, Copyrights and Licenses

The Company protects its confidential, proprietary information as trade
secrets. The Company's products are generally not protected by virtue of
any proprietary rights such as patents. There can be no assurance that the
steps taken by the Company to protect its proprietary rights will be
adequate to prevent misappropriation of its technology and know-how or that
the Company's competitors will not independently develop technologies that
are substantially equivalent to or superior to the Company's technology. In
addition, the laws of some foreign countries do not protect the Company's
proprietary rights to the same extent as do the laws of the United States.
In the Company's opinion, the loss of any intellectual property asset,
would not have a material adverse effect on the conduct of the Company's
business.

The Company is also subject to the risk of adverse claims and litigation
alleging infringement of proprietary rights of others. From time to time,
the Company has received notice of infringement claims from other parties.
Although the Company does not believe it infringes on the valid proprietary
rights of others, there can be no assurance against future infringement
claims by third parties with respect to the Company's current or future
products. The resolution of any such infringement claims may require the
Company to enter into license arrangements or result in protracted and
costly litigation, regardless of the merits of such claims.

Employees

As of December 31, 2000, the Company and its subsidiaries employed
approximately 6,967 people. Approximately 1,698 of these employees were
members of various labor unions. The Company believes that its
subsidiaries' relations with their respective employees are good.

Environmental Regulations

The Company is subject to numerous U.S. and foreign federal, state,
provincial and local laws and regulations relating to the storage,
handling, emissions and discharge of materials into the environment,
including the U.S. Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), the Clean Water Act, the Clean Air Act, the
Emergency Planning and Community Right-to-Know Act, and the Resource
Conservation and Recovery Act. Under CERCLA and analogous state laws, a
current or previous owner or operator of real property may be liable for
the costs of removal or remediation of hazardous or toxic substances on,
under, or in such property. Such laws frequently impose cleanup liability
regardless of whether the owner or operator knew of or was responsible for
the presence of such hazardous or toxic substances and regardless of


                                    -13-
<PAGE>


whether the release or disposal of such substances was legal at the time it
occurred. Regulations of particular significance to the Company's ongoing
operations include those pertaining to handling and disposal of solid and
hazardous waste, discharge of process wastewater and storm water and
release of hazardous chemicals. The Company believes it is in substantial
compliance with such laws and regulations.

The Company generally conducts an assessment of compliance and the
equivalent of a Phase I environmental survey on each acquisition candidate
prior to purchasing a company to assess the potential for the presence of
hazardous or toxic substances that may lead to cleanup liability with
respect to such properties. The Company does not currently anticipate any
material adverse effect on its results of operations, financial condition
or competitive position as a result of compliance with federal, state,
provincial, local or foreign environmental laws or regulations. However,
some risk of environmental liability and other costs is inherent in the
nature of the Company's business, and there can be no assurance that
material environmental costs will not arise. Moreover, it is possible that
future developments such as the obligation to investigate or cleanup
hazardous or toxic substances at the Company's property for which
indemnification is not available, could lead to material costs of
environmental compliance and cleanup by the Company.

FIR, a wholly-owned subsidiary of the Company, owns property in
Casalmaggiore, Italy that is the subject of investigation and remediation
under the review of government authorities for soils and groundwater
contaminated by historic waste handling practices. In connection with the
acquisition of FIR, the Company obtained indemnification from the former
owners for this investigation and remediation.

Alma owns two properties in Alma, MI which are contaminated by chlorinated
solvent and oil contamination. One is on the Michigan List of Sites of
Environmental Contamination and has been the subject of investigation by
the Michigan Department of Environmental Quality ("DEQ") since 1982. By
1985, the former owner had cleaned out, closed and capped the lagoons which
were the source of the contamination and in 1992, had installed a
groundwater remediation system. On January 5, 1999 the former owner
submitted to DEQ a proposed remedial action plan which recommends that the
groundwater treatment system continue to operate for up to thirty years, a
deed restriction that limits the use of the property to industrial use and
the adoption, by the City of Alma, of an ordinance which prohibits the
private use of groundwater for drinking water. DEQ has not yet approved or
denied the plan. The second property is contaminated with petroleum
constituents and chlorinated solvents. The scope and extent of the
contamination is being investigated. In connection with the acquisition of
these properties, the Company obtained indemnification and assurances from
the Seller that the Seller bore full responsibility for the completion of
the investigation and remediation of the historic contamination of the two
properties.

In October 1997, the Tennessee Department of Environmental Control ("DEC")
requested information from DACCO about a contaminated spring adjacent to
its Cookeville, Tennessee property. The spring is reportedly contaminated
with materials which DACCO does not believe would have originated at the
facility, and DACCO therefore does not believe that it caused the
contamination or that it will be responsible for the clean-up. In September
1998, the DEC informed DACCO that the spring requires further
investigation, and that DACCO's Cookeville property meets the criteria for
designation as a state Superfund cleanup site. The DEC has subsequently
agreed to examine the potential liability of other companies in the area
before pursuing DACCO for cleanup costs. While the Company does not believe
that DACCO will be liable for the cost of any further investigation or
cleanup, there can be no assurance that the DEC will not attempt to impose
such liability, or that, if the DEC is successful in doing so, that such
liability would not be material.



                                       -14-
<PAGE>

Item 2.               Properties
                      ----------

The Company leases approximately 36,800 square feet of office space for its
headquarters in Illinois. The principal properties of each subsidiary of
the Company at December 31, 2000, and the location, the primary use, the
capacity, and ownership status thereof, are set forth in the table below.

<TABLE>
<CAPTION>

                                                                       SQUARE      OWNED/
COMPANY LOCATION                     USE                                FEET       LEASE
----------------                     ---                               ------      ------
<S>                             <C>                                   <C>         <C>
Advanced DC
  Syracuse, NY                   Manufacturing/Administration          49,600        Owned
  Syracuse, NY                   Manufacturing                         45,000       Leased
  Carrollton, TX                 Manufacturing/Administration          29,000       Leased
  Dewitt, NY                     Manufacturing                         18,500       Leased
  Eternoz, France                Manufacturing/Administration          15,000       Leased
  Putzbrunn, Germany             Warehouse                              1,200       Leased

Alma
  Alma, MI                       Manufacturing                        459,000        Owned

Beemak
  Rancho Dominguez, CA           Manufacturing/Administration         104,000       Leased

Cape Craftsmen
  Elizabethtown, NC              Manufacturing/Administration          85,000       Leased
  Elizabethtown, NC              Assembly                              20,000       Leased
  Elizabethtown, NC              Assembly                              57,000       Leased
  Clarkton, NC                   Assembly                              47,000        Owned

Cho-Pat
  Hainesport, NJ                 Manufacturing/Administration           7,000       Leased

Dacco
  Cookeville, TN                 Manufacturing/Administration         355,000        Owned
  Huntland, TN                   Manufacturing                         72,000        Owned
  Rancho Cucamonga, CA           Manufacturing/Administration          42,000        Owned

Deflecto
  Indianapolis, IN               Manufacturing/Administration         182,600        Owned
  Indianapolis, IN               Assembly/Administration               47,900       Leased
  Fishers, IN                    Manufacturing                        134,400       Leased
  St. Catherines, Ont.           Manufacturing                         50,000        Owned
  St. Catherines, Ont.           Assembly                              78,000       Leased
  Midvale, OH                    Manufacturing/Administration          20,430        Owned
  Pearland, TX                   Manufacturing                         63,000       Leased
  Newport, Wales                 Manufacturing                         66,000        Owned
  Aurora, Ontario                Manufacturing/Administration          30,500       Leased

ED&C
  Troy, MI                       Manufacturing/Administration          29,000       Leased

FIR
  Casalmaggiore, Italy           Manufacturing/Administration         100,000        Owned
  Varano, Italy                  Manufacturing                         30,000        Owned
  Bedonia, Italy                 Manufacturing                          8,000       Leased
  Reggio Emilia, Italy           Manufacturing/Distribution            30,000       Leased
  Genova, Italy                  Research and Development              33,000       Leased

                                              -15-
<PAGE>
<CAPTION>

<S>                             <C>                                   <C>         <C>
Gear
  Grand Rapids, MI               Manufacturing/Administration          45,000        Owned

GramTel
  Chicago, IL                    Administration                         3,300       Leased
  South Bend, IN                 Sales                                  9,000        Owned
Imperial
  Akron, OH                      Manufacturing                         43,000        Owned
  Middleport, OH                 Manufacturing                         85,000        Owned
  Cuyahoga Falls, OH             Manufacturing                         63,000       Leased
  Alamogordo, NM                 Manufacturing                         25,800       Leased
  Oakwood Village, OH            Manufacturing/Administration          25,000       Leased

ISMI
  Howell, MI                     Administration/Sales                   3,800       Leased

Merkle-Korff
  Des Plaines, IL                Design/Administration                 38,000       Leased
  Richland Center, WI            Manufacturing                         45,000       Leased
  Darlington, WI                 Manufacturing                         68,000       Leased
  Des Plaines, IL                Manufacturing/Administration         112,000       Leased
  SLP Mexico                     Manufacturing                         46,000       Leased

Motion Control
  Rancho Cordova, CA             Manufacturing/Administration          40,000       Leased
  Rancho Cordova, CA             Administration                        45,000       Leased

Online Environs
  Cambridge, MA                  Design/Sales                           7,587       Leased
  San Francisco, CA              Design                                 1,040       Leased

Pamco
  Des Plaines, IL                Manufacturing/Administration          52,000        Owned
  King of Prussia, PA            Manufacturing/Administration          24,000       Leased

Riverside
  Iowa Falls, IA                 Distribution/Storage                 150,000        Owned

Sate-Lite
  Niles, IL                      Manufacturing/Administration         117,835       Leased
  Shunde, Guangdong              Manufacturing/Administration          57,072       Leased

Seaboard
  Fitchburg, MA                  Manufacturing/Administration         260,000        Owned
  Miami, FL                      Manufacturing                         90,000        Owned
  Brentwood, NY                  Manufacturing                         35,000       Leased

JII Promotions
  Red Oak, IA                    Manufacturing/Administration         140,000        Owned
  Coshocton, OH                  Manufacturing/Administration         218,000        Owned
  Columbus, OH                   Sales                                 11,000       Leased

Valmark
  Fremont, CA                    Manufacturing/Administration          46,700       Leased
  Fremont, CA                    Manufacturing/Administration          14,830       Leased

Welcome Home
  Wilmington, NC                 Administration                        10,000       Leased

</TABLE>


                                      -16-

<PAGE>

DACCO also owns or leases 39 distribution centers, which average 5,400
square feet in size. DACCO maintains five distribution centers in Florida,
four distribution centers in Tennessee, three distribution centers in
Illinois and Virginia, two distribution centers in each of Arizona,
Indiana, Michigan, Texas, Alabama, California, and Ohio with the remaining
distribution centers located in Pennsylvania, Minnesota, Missouri,
Nebraska, West Virginia, Oklahoma, South Carolina, Nevada, Georgia and
Kentucky.

Welcome Home leases 124 specialty retail stores in 37 states, with the
majority of store locations in outlet malls. Welcome Home maintains 17
stores in California, 9 stores in Florida, 6 stores in both Georgia and
Texas, 5 stores in both Missouri and New York, and 4 stores in each of
Illinois, Michigan, North Carolina, Ohio, Pennsylvania and Washington. The
remaining stores are located throughout the United States.

Merkle-Korff's facilities are leased from the Chairman of Merkle-Korff. The
Company believes that the terms of the lease are comparable to those which
would have been obtained by the Company had the leases been entered into
with an unaffiliated third party.

To the extent that any of the Company's existing leases expire in 2001, the
Company believes that its existing leased facilities are adequate for the
operations of the Company and its subsidiaries.

Item 3.  LEGAL PROCEEDINGS
         -----------------

The Company's subsidiaries are parties to various legal actions arising in
the normal course of their businesses. The Company believes that the
disposition of such actions individually or in the aggregate will not have
a material adverse effect on the consolidated financial position of the
Company.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         ---------------------------------------------------

         No matters were submitted to a vote of security holders during the
fiscal year ended December 31, 2000.


                                  Part II

Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
         STOCKHOLDERS MATTERS
         -------------------------------------------------

The only authorized, issued and outstanding class of capital stock of the
Company is Common Stock. There is no established public trading market for
the Company's Common Stock.

(a)     At December 31, 2000, there were 18 holders of record of the
        Company's Common Stock.


(b)     The Company has not declared any cash dividends on its Common Stock
        since the  Company's formation in May 1988.  The Indenture, dated as
        of July 25,  1997, by and between the Company and U.S. Bank Trust
        National  Association f/k/a First Bank National Association, as
        Trustee, (the "Trustee") with respect to the 10 3/8% Senior Notes and
        the Indenture dated as of April 2, 1997, by and between the Company
        and the Trustee with respect to the 11 3/4% Senior Subordinated
        Discount Debentures (collectively the "Indentures") contain
        restrictions on the Company's ability to declare or pay dividends on
        its capital stock. The Indentures each prohibit the declaration or
        payment of any dividends or the making of any distribution by the
        Company or any Restricted  Subsidiary (as defined in the Indentures)
        other than  dividends or distributions payable in stock of the Company
        or a Subsidiary and other than dividends or distributions payable to
        the Company.






                                   -17-
<PAGE>

Item 6.  SELECTED FINANCIAL DATA
         -----------------------

The following table presents selected operating, balance sheet and other
data of the continuing operations of the Company and its subsidiaries as of
and for the five years ended December 31, 2000. The financial data have
been derived from the consolidated financial statements of the Company and
its subsidiaries. As a result of the transactions described in Note 4 to
the financial statements, the Jordan Telecommunications Products segment
and the Capita Technologies segment have been reported as discontinued
operations for financial reporting purposes in accordance with Accounting
Principals Board ("APB") Opinion No. 30, and their results have been
excluded from the information shown below.

<TABLE>
<CAPTION>

                                                                  Year Ended December 31,
                                                       ------------------------------------------
                                                                 (Dollars in thousands)

                                               2000            1999          1998          1997           1996
                                               ----            ----          ----          ----           ----
<S>                                         <C>             <C>           <C>            <C>            <C>

Operating data: (1)
Net Sales.................................. $807,296         $766,655      $633,579      $450,102       $468,568
Cost of sales, excluding
 depreciation............................... 513,755          497,223       406,970       282,654        292,889
                                             -------          -------       -------       -------        -------
Gross profit, excluding
 depreciation............................... 293,541          269,432       226,609       167,448        175,679
Selling, general and
 administrative expense,
 excluding depreciation..................... 173,370          153,582       131,055       100,778        127,529
Operating income............................  51,013           69,245        57,977        39,221            407
Interest expense............................  92,009           87,058        70,184        66,947         62,576
Interest income.............................  (5,464)          (1,083)       (1,656)       (2,227)        (2,416)
Loss from continuing
 operations (2)............................. (36,046)          (5,731)      (15,081)      (10,603)       (58,797)

Balance sheet data (at end of period):
Cash and cash equivalents...................  21,713           19,973        14,967        43,512         25,787
Working capital............................. 159,299          161,570       144,474       124,941         84,208
Total assets................................ 896,701        1,159,496       955,405       849,595        642,808
Long-term debt (less
  current portion).......................... 787,694          837,712     1,054,327       915,145        683,564
Net capital deficiency (3).................. (82,010)        (238,835)     (208,144)     (175,285)      (130,281)

</TABLE>


----------------------------------------

(1)  The Company has acquired a diversified group of operating companies
     over the five year period which significantly affects the
     comparability of the information shown above.

(2)  Loss from continuing operations in 1996 includes compensation expense
     related to compensation agreements of $3,876, the loss on the purchase
     of an affiliate, $4,488, restructuring charges related to Welcome
     Home, $8,106, and other non-recurring charges, $4,136. Loss from
     continuing operations in 1997 includes a gain on the sale of a
     subsidiary of $17,081, and the recording of equity in the loss of an
     investee of $3,386. Loss from continuing operations in 1999 includes a
     gain of the sale of Parsons of $10,037. Loss from continuing
     operations in 2000 includes a $14,636 write-down of goodwill related
     to a subsidiary of Motors and Gears (see footnote 22 to the financial
     statements) and a loss on the sale of a subsidiary of $2,798 (see
     footnote 24 to the financial statements).

(3)  No cash dividends on the Company's Common Stock have been declared or paid.


                                 -18-
<PAGE>

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

Historical Results of Operations


         Summarized below are the historical net sales, operating income and
operating margin (as defined below) for each of the Company's business
groups for the fiscal years ended December 31, 2000, 1999, and 1998. This
discussion should be read in conjunction with the historical consolidated
financial statements and the related notes thereto contained elsewhere in
this Annual Report.

         In 1998 Sate-Lite and Beemak were reclassified from the Consumer and
Industrial Products segment to the Jordan Specialty Plastics segment. In
1999, DACCO was reclassified from the Consumer and Industrial Products
segment to the Jordan Auto Aftermarket segment. Also in 1999, Welcome Home
was reconsolidated into the Consumer and Industrial Products segment.
Welcome Home's results are included from the time of its emergence from
bankruptcy on July 21, 1999. Prior period results were also realigned into
these new groups in order to provide accurate comparisons between periods.

                                                   Year ended December 31,
                                                   -----------------------
                                              2000         1999           1998
                                              ----         ----           ----
                                                    (dollars in thousands)

    Net Sales:
    Specialty Printing & Labeling           $122,691      $117,678    $120,160
    Jordan Specialty Plastics                 98,353        86,284      65,387
    Jordan Auto Aftermarket                  141,213       131,935      71,568
    Motors and Gears                         316,666       307,877     275,833
    Consumer and Industrial Products         128,373       122,881     100,631
                                            --------      --------    --------
       Total                                $807,296      $766,655    $633,579
                                            ========      ========    ========

    Operating Income (1):
    Specialty Printing & Labeling             $7,210        $7,638      $8,259
    Jordan Specialty Plastics                  1,928         4,319       4,654
    Jordan Auto Aftermarket                   20,449        16,675      10,531
    Motors and Gears                          36,497        50,597      42,324
    Consumer and Industrial Products           3,071         7,867       6,574
                                             -------       -------     -------
       Total                                 $69,155       $87,096     $72,342
                                             =======       =======     =======

    Operating Margin (2):
    Specialty Printing & Labeling               5.9%          6.5%        6.9%
    Jordan Specialty Plastics                   2.0%          5.0%        7.1%
    Jordan Auto Aftermarket                    14.5%         12.6%       14.7%
    Motors and Gears                           11.5%         16.4%       15.3%
    Consumer and Industrial Products            2.4%          6.4%        6.5%
    Combined                                    8.6%         11.4%       11.4%


(1)      Before corporate overhead of $18,142, $17,851 and $14,365 for the
         years ended December 31, 2000, 1999, and 1998, respectively.

(2)      Operating margin is operating income divided by net sales.


                                       -19-
<PAGE>

Specialty Printing & Labeling. As of December 31, 2000, the Specialty
Printing & Labeling group consisted of JII Promotions, Valmark, Pamco, and
Seaboard.

2000 Compared to 1999. Net sales increased $5.0 million or 4.3% for the
year ended December 31, 2000. Net sales increased primarily due to
increased sales of outside specialties at JII Promotions, $1.2 million,
screen printing and membrane switches at Valmark, $1.6 million and $0.9
million, respectively, labels at Pamco, $1.2 million and packaging at
Seaboard, $0.4 million. Partially offsetting these increases was the
decrease in calendar sales at JII Promotions of $0.3 million. The decrease
in sales of calendars at JII Promotions is due to consolidation in the
banking and insurance industries. The increase in sales at Valmark is
primarily the result of Valmark's successful initiative to provide Apple
Computer with the product identification labels for its new computer
products.

Operating income decreased $0.4 million or 5.6% for the year ended December
31, 2000. The majority of the decrease was due to lower operating income at
Pamco, $0.8 million and Seaboard, $0.3 million, partially offset by
increases in operating income at JII Promotions, $0.1 million and Valmark,
$0.6 million. The increase in operating income at Valmark is due primarily
to the increase in sales to Apple as mentioned above. The decrease in
operating income at Pamco was due to it's new facility in Pennsylvania.

1999 Compared to 1998. Net sales decreased $2.5 million, or 2.1% and
operating income decreased $0.6 million, or 7.5% when comparing the year
ended December 31, 1999 with the year ended December 31, 1998. Sales
decreased primarily due to lower sales of calendars at JII Promotions, $1.8
million, decreased sales of roll stock at Valmark, $0.1 million, and lower
sales of folding boxes at Seaboard, $4.2 million. Partially offsetting
these decreases were increased sales of ad specialty products and school
annuals at JII Promotions, $0.3 million and $0.1 million, respectively,
higher sales of screen printed products and membrane switches at Valmark,
$2.2 million and $0.2 million, respectively, and increased sales of labels
at Pamco, $0.8 million. Sales of calendars decreased at JII Promotions due
to consolidation in the banking and insurance industries, which are a large
part of JII Promotions' customer base, and sales declined at Seaboard due
to a general slowdown in the corrugated folding box industry. The increase
in sales of screen printed products at Valmark is due to Valmark's
implementation of a stock inventory program that allows Valmark to more
efficiently accommodate its larger customers.

Operating income decreased due to lower operating income at JII Promotions
and Seaboard $0.7 million and $1.4 million, respectively. Partially
offsetting these decreases was increased operating income at Valmark and
Pamco, $0.8 million and $0.7 million, respectively. Operating income
declined at JII Promotions due to lower sales and the increased focus on
and investments in the corporate programs division and operating income
decreased at Seaboard due to lower absorption of fixed overhead because of
a lower sales level. Operating income increased at Valmark and Pamco due to
those businesses more efficiently monitoring production, inventory levels,
and operating expenses.

                                          -20-
<PAGE>

Jordan Specialty Plastics. As of December 31, 2000 the Jordan Specialty
Plastics group consisted of Sate-Lite, Beemak, and Deflecto.

2000 Compared to 1999. Net sales increased $12.1 million or 14.0% for the
year ended December 31, 2000. The increase in net sales was primarily due
to increases in sales at Deflecto and Sate-Lite, $12.0 million and $1.5
million, respectively, partially offset by decreased sales at Beemak, $1.4
million. The increase in sales at Deflecto is due to the acquisitions of
Yearntree and IDL on December 20, 1999 and June 2, 2000, respectively,
which added $5.1 million and $4.6 million to 2000 sales, in addition to
increased sales of hardware products of $7.1 million. These increases were
partially offset by decreased sales in Deflecto's office product line of
$4.8 million. Sate-Lite's increase in sales resulted from the addition of
the Tilt-Bin(TM) product line which was transitioned from Beemak to
Sate-Lite in August 2000, $0.8 million, and increased sales at Midwest
Color of $0.7 million. Beemak's sales decreased due to the transfer of the
Tilt-Bin(TM) product line to Sate-Lite. Beemak's sales from the
Tilt-Bin(TM) product line for the period from January to July 2000 amounted
to $1.3 million as compared to $2.7 million for the full year of 1999.

Operating income decreased $2.4 million or 55.4% for the year ended
December 31, 2000. Lower operating income was due to decreases at Beemak
and Deflecto, $0.9 million and $1.6 million, respectively, partially offset
by increases at Sate-Lite of $0.1 million. Decreased operating income at
Beemak is attributable to the Tilt-Bin(TM) transfer to Sate-Lite and a
shift of product mix to more fabricated product which is a lower margin
product. Deflecto's decrease in operating income was due to a $1.5 million
management severance accrual in December. Increased operating income at
Sate-Lite was due to greater operating efficiencies and the increased sales
resulting from the Tilt-Bin(TM) addition to their product line.

1999 Compared to 1998. Net sales increased $14.7 million or 20.6% for the
year ended December 31, 1999. This increase was partially due to the
acquisition by Deflecto of Teleflow in July 1999. Teleflow contributed net
sales of $3.5 million since the date of acquisition. In addition, sales of
thermo-plastic colorants and truck reflector products increased at
Sate-Lite, $1.2 million and $0.4 million, respectively, and sales of
hardware and office products increased at Deflecto, $7.0 million and $4.0
million, respectively. Partially offsetting these increases were lower
sales of plastic injection molded and fabricated products at Beemak, $0.9
million and $0.1 million, respectively, and decreased sales of bicycle
reflectors at Sate-Lite, $0.4 million. In addition to the increase in net
sales resulting from the Teleflow acquisition, sales at Deflecto also
increased due to the benefit of a full year of sales in 1999 versus ten
months of sales in 1998 as well as Deflecto's success at integrating
Rolite's operations and selling Rolite chairmat products through Deflecto
sales channels. Beemak sales declined due to heavy competition in the
Tilt-bin(TM) product line.

Operating income decreased $0.3 million or 7.2% for the year ended December
31, 1999. Operating income increased at Beemak and Sate-Lite, $0.2 million
and $0.5 million, but decreased at Deflecto, $1.0 million. Operating income
increased at Beemak and Sate-Lite due to gross margin increases and better
overhead control. Operating income at Deflecto decreased due to lower gross
profit resulting from an unfavorable product mix shift from office products
sales to hardware sales.

                                        -21-
<PAGE>

Jordan Auto Aftermarket.  As of December 31, 2000, the Jordan Auto Aftermarket
group consisted of DACCO and Alma.

2000 Compared to 1999. Net sales increased $9.3 million or 7.0% for the
year ended December 31, 2000. The increase was due to increased sales at
Alma of $11.9 million, including increased sales of drive trains and air
compressors of $7.4 million and $4.5 million, respectively, offset by a
decrease in sales at DAACO of $2.6 million. The primary reason for the
increase at Alma was due to a full year's results being included in 2000 as
compared with approximately nine months results included in 1999. The
decrease in DACCO's sales resulted from lower sales of converters, $3.1
million, other hard parts, $0.5 million and scrap sales, $0.2 million,
partially offset by increased sales of soft parts of $1.2 million.

Operating income increased $3.8 million or 22.6% for the year ended
December 31, 2000. Increases at Alma and DACCO were $2.6 million and $1.8
million, respectively, partially offset by increased corporate expenses of
$0.6 million. The major reason for the increase in operating income at Alma
is due to the increase in 2000 sales, as mentioned above. DACCO's operating
income increased as a result of focused cost cutting efforts aimed at
achieving production efficiencies and a price increase instituted in
October 2000.

1999 Compared to 1998. Net sales increased $66.5 million or 101.8% for the
year ended December 31, 1999. The increase is primarily due to the
acquisition of Alma in March 1999 which contributed net sales of $63.0
million since the date of acquisition. In addition, sales of rebuilt torque
converters increased at DACCO, $3.5 million.

Operating income increased $6.1 million or 58.3% for the year ended
December 31, 1999. This increase is also primarily due to the acquisition
of Alma, as discussed above. Alma contributed operating income of $8.1
million in the last nine months of 1999. Partially offsetting this increase
was lower operating income at DACCO, $1.2 million, and increased corporate
expenses, $0.8 million. The decrease in operating income at DACCO was due
to expenses incurred related to the UAW negotiations at DACCO's Cookeville,
TN plant. DACCO did not experience any loss of production or sales due to
its ability to hire replacement workers, and an agreement was reached on
February 1, 2000.

Motors and Gears. As of December 31, 2000, the Motors and Gears group
consisted of Imperial, Gear, Merkle-Korff, FIR, ED&C, Motion Control, and
Advanced DC.

2000 Compared to 1999. Net sales increased $8.8 million or 2.9% for the
year ended December 31, 2000. The increase in net sales was primarily due
to increased sales of fractional/integral products, 3.4%. This growth is
the result of strong performance in the material handling, utility vehicle
and European markets (net of unfavorable Euro exchange rates). Sales of
electronic motion control systems increased by 15.2% as a result of
continued strength in the elevator modernization market. The increase in
sales was partially offset by decreases in subfractional motor sales, 6.4%,
due to weakness in the bottle and can vending market.

                                  -22-
<PAGE>

Operating income decreased $14.1 million or 27.9% for the year ended
December 31, 2000. The decrease was primarily the result of the $14.6
million goodwill impairment charge at ED&C (see note 24 to the financial
statements). Excluding the impact of the goodwill impairment, operating
income would have increased 1.1%, primarily as a result in the increased
sales and gross margin. The improvement to gross margin was driven by the
company's continued product design changes, manufacturing process
improvements, and outsourcing and insourcing of component purchases.
Offsets to the gross margin improvement include increased selling, general
and administrative expenses.

1999 Compared to 1998. Net sales increased $32.0 million or 11.6% for the
year ended December 31, 1999. The increase in net sales was primarily
driven by the 1998 acquisition of Advanced DC and Euclid (a wholly-owned
subsidiary of Imperial) which accounted for $21.8 million of the increase.
Subfractional motor sales decreased 4.1% in 1999 as compared to 1998
largely due to weakness in the vending markets. Significant difficulties in
international markets of a major beverage company are the primary reason
for this decline. In 1999, sales of fractional/integral motor products
increased 22.8% including the effects of the 1998 acquisitions, and 3.2%
excluding the effects of the 1998 acquisitions. The growth in
fractional/integral products is a result of strong performance in the
material handling, elevator and floor care markets partially offset by a
weak European market and an unfavorable Euro exchange rate. Sales of
electronic motion control systems increased by 17.7% mainly attributed to
continued strength in the elevator modernization market.

Operating income increased $8.3 million or 19.5% for the year ended
December 31, 1999. The primary increase in operating income was a result of
the increase in sales discussed above coupled with an improvement in gross
margin from 34.6% in 1998 to 36.1% in 1999. The improvement in gross margin
is a result of product design changes, manufacturing process improvements
and material cast savings experienced throughout Motors and Gears due to
efforts put forth by Motors and Gears' sourcing council. Improvements in
gross margin were partially offset by increases in selling, general and
administrative expenses primarily as a result of the 1998 acquisitions,
increases in depreciation due to the 1998 acquisitions and due to a new
systems implementation at one of the Motor and Gears subsidiaries.

Consumer and Industrial Products. As of December 31, 2000, the Consumer and
Industrial Products group consisted of Riverside, Cape, Welcome Home,
Cho-Pat, Online Environs, Flavorsource, ISMI and GramTel. Riverside was
sold on February 2, 2001. See footnote 25 to the financial statements.

2000 Compared to 1999. Net sales increased $5.5 million or 4.5% for the
year ended December 31, 2000. Net sales increased primarily due to higher
sales at Welcome Home, $19.1 million, sales to third parties at Cape of
$1.9 million, and sales of knee straps and related products at Cho-Pat,
$0.2 million. In addition, ISMI, Online Environs, GramTel and Flavorsource
were added to the group in 2000, increasing net sales by $0.5 million, $3.1
million, $0.3 million and $0.7 million, respectively. The increase in sales
was offset by decreases in Riverside sales of $2.0 million, and the sale of
Parsons and Pex, which had 1999 net sales of $10.8 million and $1.2 million
respectively. Total consolidated sales at Cape decreased $6.3 million due
to a twelve month elimination of Cape's intercompany sales to Welcome Home
in the current year versus six months in 1999 due to Welcome Home's
reconsolidation in mid 1999. Welcome Home's sales increase was the result
of being consolidated for a full year in 2000 versus six months in 1999.

Operating income decreased $4.8 million or 61.0% for the year ended
December 31, 2000. The decrease in operating income is primarily the result
of lower operating income at Welcome Home, $5.5 million, resulting from
their reconsolidation. Due to the seasonality of Welcome Home's business,
the majority of its operating income is recorded in the fourth quarter,
therefore, because of the timing of Welcome Home's reconsolidation, its
typical slow season was not included in the 1999 consolidated results. Also
contributing to the decrease in operating income were the dispositions of
Parsons and Pex, which contributed operating income in 1999 of $2.3 million
and $0.4 million respectively. Offsetting the decrease in operating income
were increases at Cape, $1.1 million and Riverside, $2.2 million. In
addition, Cho-Pat recorded increased operating income of $0.1 million.

                                          -23-
<PAGE>


1999 Compared to 1998. Net sales increased $22.3 million or 22.1% for the
year ended December 31, 1999. The increase was primarily due to the
reconsolidation of Welcome Home in July 1999. Welcome Home contributed net
sales of $35.3 million during the period from July 21, 1999 to December 31,
1999. In addition, net sales increased due to increased contract
distribution sales at Riverside, $0.5 million, and higher sales of
orthopedic supports and other pain reducing devices at Cho-Pat, $0.2
million. Partially offsetting these increases were lower sales at Parsons
and Dura Line Retube ("Pex"), $2.2 million and $3.7 million, respectively,
due to the divestitures of those businesses during 1999. In addition, sales
decreased due to lower sales of Bibles and Bible accessories, and books at
Riverside, $1.8 million and $0.8 million, respectively. This is due to a
strong economy and low unemployment. Although sales at Cape decreased by
$5.2 million, the decrease is due to the reconsolidation of Welcome Home
and the resulting elimination of sales from Cape to Welcome Home. Sales
from Cape to third parties increased $2.7 million, due to improved products
and additional customers.

Operating income increased $1.3 million or 19.7% for the year ended
December 31, 1999. The primary reason for the increase was due to the
reconsolidation of Welcome Home, as discussed above. Welcome Home
contributed operating income of $4.0 million since the date of its
emergence from bankruptcy. In addition, operating income was positively
effected by $0.3 million as a result of the disposition of Pex in March
1999. Pex had negative operating income historically. Partially offsetting
this increase was decreased operating income at Parsons, $1.4 million, due
to the divestiture of the business in November 1999. In addition, operating
income declined at Riverside, $1.6 million, due to lower sales mentioned
above.

Consolidated Operating Results.  (See Consolidated Statements of Operations).
-------------------------------

2000 Compared to 1999. Net sales increased $40.6 million or 5.3% for the
year ended December 31, 2000 as compared to 1999. The increase in sales
partially resulted from Welcome Home's inclusion in the consolidated
financial statements for the full year due to its reconsolidation in mid
1999, $19.1 million, and the Company's acquisitions of Yearntree and
Rolite, $5.1 million and $4.6 million, respectively. In addition, increased
sales of outside specialties at JII Promotions, greater sales of membrane
switches and screen printing at Valmark, increased sales of drive trains
and air compressors at Alma, higher sales of fractional/integral products
and electronic motion control systems in the Motors and Gears group and an
increase of sales to third parties at Cape also contributed to higher 2000
sales. Sales also increased due to the acquisitions of ISMI, GramTel,
Online Environs and Flavorsource in the Consumer and Industrial Products
group. Offsetting these increases were lower calendar sales at JII
Promotions, decreased sales in Deflecto's office products division, lower
converter sales at DACCO, a decrease in sub fractional motor sales in the
Motors and Gears group, and the sale of Parsons and Pex in 1999.

Operating income decreased $18.2 million or 26.3% for the year ended
December 31, 2000. The decrease in operating income was due to a $14.6
million goodwill impairment charge in the Motors and Gears group relating
to ED&C. SPL had lower operating income due to Pamco's new operations in
Pennsylvania. In addition, the sales of Parsons and Pex contributed to the
decrease. Partially offsetting these decreases was increased operating
income in the Auto Aftermarket group for both DACCO and Alma due to DACCO's
price increase and cost cutting efforts and Alma's increase in sales as
mentioned above. Operating income for SPL increased slightly due to
Valmark's increased sales to Apple.


                                  -24-
<PAGE>


1999 Compared to 1998. Net sales increased $133.1 million or 21.0% for the
year ended December 31, 1999. The increase in sales was partially due to
the 1999 acquisitions of Teleflow in the Jordan Specialty Plastics group
($3.5 million) and Alma in the Jordan Auto Aftermarket group ($63.0
million). Sales also increased due to a full year of sales from the
following companies which were acquired in 1998: Deflecto and Rolite in the
Jordan Specialty Plastics group and Advanced DC in the Motors and Gears
group. In addition, increased sales were due to higher sales of screen
printed products at Valmark, increased sales of labels at Pamco, higher
sales of thermo-plastic colorants and truck reflector products at
Sate-Lite, increased sales of hardware and office products at Deflecto,
higher sales of rebuilt converters at DACCO, and increased sales of
fractional/integral motors and motion control systems in the Motors and
Gears group. Sales also increased by $35.3 million due to the
reconsolidation of Welcome Home, resulting from that company's emergence
from bankruptcy in July 1999. Partially offsetting these increases were
lower sales of calendars at SPAI, decreased sales of folding boxes at
Seaboard, decreased sales of plastic-injection molded products at Beemak,
lower sales of subfractional motors in the Motors and Gears group, and
lower sales of Bibles and Bible accessories at Riverside. In addition, net
sales decreased due to the divestitures of Parsons and Dura Line Retube in
November and March 1999, respectively.

Operating income increased $11.3 million or 19.4% for the year ended
December 31, 1999. Operating income increased due to the 1999 acquisitions,
a full year of operations at the businesses acquired in 1998, more
efficient monitoring of production and operating expenses at Valmark and
Pamco, increased gross margins at Sate-Lite and Beemak, manufacturing
process improvement in the Motors and Gears group, and the reconsolidation
of Welcome Home in the Consumer and Industrial Products group. Partially
offsetting these increases was lower operating income due to decreased
absorption of fixed overhead resulting from lower sales at Seaboard, an
unfavorable product mix at Deflecto, startup expenses incurred to establish
the Jordan Auto Aftermarket segment, legal and security expenses incurred
during DACCO's negotiations with the UAW, and increased depreciation and
amortization related to the 1999 and 1998 acquisitions. In addition,
operating income decreased due to the divestitures of Parsons and Dura Line
Retube.

Interest expense increased $16.9 million or 24.0% due to the Company's
Senior Notes offering in March 1999 in addition to higher outstanding
revolver balances used to finance acquisitions and seasonal working capital
requirements.

Income taxes - See note 13 of Notes to Consolidated Financial Statements.

Liquidity and Capital Resources


The Company had approximately $159.3 million of working capital from
continuing operations at the end of 2000 compared to approximately $161.6
million at the end of 1999. The decrease in working capital from 1999 to
2000 was primarily due to a higher current portion of long-term debt,
accounts payable, and accrued expenses of $24.7 million, $8.5 million, and
$2.5 million, respectively. These increases were partially offset by higher
inventory and prepaids and other current assets of $8.3 million and $14.0
million, respectively.

The Company has acquired businesses through leveraged buyouts, and as a
result has significant debt in relation to total capitalization. See
"Business". Most of this acquisition debt was initially financed through
the issuance of bonds which were subsequently refinanced in 1997. See Note
12 to the Consolidated Financial Statements.

Management expects continued growth in net sales and operating income in
2001. Capital spending levels in 2001 are anticipated to be below 2000
levels and, along with working capital requirements, will be financed
internally from operating cash flow. Operating margins and operating cash
flow are expected to be favorably impacted by ongoing cost reduction
programs, improved efficiencies and sales growth. Management believes that
the Company's cash on hand and anticipated funds from operations will be
sufficient to cover its working capital, capital expenditures, debt service
requirements and other fixed charge obligations for at least the next 12
months.


                                    -25-
<PAGE>


The Company is, and expects to continue to be, in compliance with the
provisions of its Indentures.

None of the subsidiaries require significant amounts of capital spending to
sustain their current operations or to achieve projected growth.

Net cash provided by operating activities for the year ended December 31,
2000 was $1.0 million, compared to $22.0 million provided by operating
activities during the same period in 1999. The decrease is primarily
attributed to increased prepaids and other current assets and inventory
balances and decreased operating liabilities.

Net cash provided by investing activities for year ended December 31, 2000
was $64.8 million, compared to $159.4 million used in investing activities
during the same period in 1999. The increase is due primarily to decreased
spending on acquisitions and the proceeds from the sale of discontinued
operations in the current year.

Net cash used in financing activities for the year ended December 31, 2000
was $59.6 million, compared to $140.2 million provided by financing
activities during the same period in 1999. The decrease is primarily due to
the net proceeds of $149.8 million from the Company's senior debt issuance
in the prior year. In addition, the Company had net revolver repayments of
$53.6 million in the current year as compared to net revolver borrowings of
$22.1 million in the prior year.

The Company is party to various credit agreements under which the Company
is able to borrow up to $160 million to fund acquisitions, provide working
capital and for other general corporate purposes. The credit agreements
mature at various dates through 2002. The agreements are secured by a first
priority security interest in substantially all of the Company's assets. As
of March 30, 2001, the Company had approximately $133.0 million of
available funds under these arrangements.

The Company may, from time to time, use cash, including cash generated from
borrowings under its credit agreements, to purchase either its 11 3/4%
Senior Subordinated Discount Debentures due 2009 or its 10 3/8% Senior
Notes due 2007, or any combination thereof, through open market purchases,
privately negotiated purchases or exchanges, tender offers, redemptions or
otherwise, and may, from time to time, pursue various refinancing or
financial restructurings, including pursuant to current solicitations and
waivers involving those securities, in each case, without public
announcement or prior notice to the holders thereof, and if initiated or
commenced, such purchases or offers to purchase may be discontinued at any
time.

Foreign Currency Impact

The Company's exposure to fluctuations in foreign currency exchange rates
is protected by its investment in manufacturing facilities overseas whose
costs, including labor and raw materials, are also denominated in local
currency. Decreases in the value of foreign currencies relative to the U.S.
dollar have not resulted in significant losses from foreign currency
translation. However, there can be no assurance that foreign currency
fluctuations in the future would not have an adverse effect on the
Company's business, financial condition and results of operations.

Impact of Inflation

General inflation has had only a minor effect on the operations of the
Company and its internal and external sources for liquidity and working
capital, as the Company has been able to increase prices to reflect cost
increases, and expects to be able to do so in the future.

                                    -26-
<PAGE>

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
         -----------------------------------------------------------

The Company's debt obligations are primarily fixed-rate in nature and, as
such, are not sensitive to changes in interest rates. At December 31, 2000,
the Company had $31.7 million of variable rate debt outstanding. A one
percentage point increase in interest rates would increase the annual
amount of interest paid by approximately $0.3 million. The Company does not
believe that its market risk financial instruments on December 31, 2000
would have a material effect on future operations or cash flows.

The Company is exposed to market risk from changes in foreign currency
exchange rates, including fluctuations in the functional currency of
foreign operations. The functional currency of operations outside the
United States is the respective local currency. Foreign currency
translation effects are included in accumulated other comprehensive income
in shareholder's equity.


Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
         -------------------------------------------

                                                                       Page No.
Reports of Independent Auditors......................................     31

Consolidated Balance Sheets as of December 31, 2000 and
1999..................................................................    35

Consolidated Statements of Operations for the years ended December
31, 2000, 1999, 1998...................................................   36

Consolidated Statements of Changes in Shareholder's Equity (Net
Capital Deficiency) for the years ended December 31, 2000, 1999 and
1998...................................................................   37

Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999, and 1998......................................   38

Notes to Consolidated Financial Statements.............................   40






                                   -27-
<PAGE>

                       REPORT OF INDEPENDENT AUDITORS

     The Board of Directors and Shareholders
     Jordan Industries, Inc.

     We have audited the accompanying consolidated balance sheets of Jordan
     Industries, Inc. as of December 31, 2000 and 1999 and the related
     consolidated statements of operations, shareholder's equity (net
     capital deficiency), and cash flows for each of the three years in the
     period ended December 31, 2000. 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 did not
     audit the financial statements of certain subsidiaries whose
     statements reflect total assets constituting 26% as of December 31,
     1999, and net sales constituting 21% and 8% for the years ended
     December 31, 1999 and 1998, respectively, of the related consolidated
     totals. Those statements were audited by other auditors whose reports
     have been furnished to us, and our opinion, insofar as it relates to
     data included for these subsidiaries, is based solely on the reports
     of the other auditors.

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

     In our opinion, based on our audits and the reports of other auditors,
     the financial statements referred to above present fairly, in all
     material respects, the consolidated financial position of Jordan
     Industries, Inc. at December 31, 2000 and 1999, and the consolidated
     results of its operations and its cash flows for each of the three
     years in the period ended December 31, 2000, in conformity with
     accounting principles generally accepted in the United States. 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.


                                                  /s/ ERNST & YOUNG LLP

     Chicago, Illinois
     March 23, 2001


                                           -28-

<PAGE>

                  REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

     To the Shareholder of Alma Products I, Inc.:

     We have audited the balance sheet of ALMA PRODUCTS I, INC. (a Michigan
     corporation) as of December 31, 1999, and the related statements of
     operations, shareholder's equity and cash flows for the period from
     March 22, 1999 to December 31, 1999. These financial statements are
     the responsibility of the Company's management. Our responsibility is
     to express an opinion on these financial statements based on our
     audit.

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

     In our opinion, the financial statements referred to above present
     fairly, in all material respects, the financial position of Alma
     Products I, Inc. as of December 31, 1999, and the results of its
     operations and its cash flows for the period from March 22, 1999 to
     December 31, 1999 in conformity with accounting principles generally
     accepted in the United States.

                                                /s/ ARTHUR ANDERSEN LLP

     Detroit, Michigan
     February 18, 2000






                                        -29-
<PAGE>

                  REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

     To the Board of Directors of
     Motion Control Engineering, Inc.:

     We have audited the balance sheets of MOTION CONTROL ENGINEERING, INC.
     (a California  corporation and a wholly-owned subsidiary of Kinetek, Inc.
     formerly Motors and Gears,  Inc.) as of December 31, 1999, and the related
     statements of income,  shareholder's  equity and cash flows for the two
     years then ended. These financial statements are the responsibility of the
     Company's management.  Our responsibility is to express an opinion on
     these financial statements based on our audits.

     We 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 financial statements referred to above present
     fairly, in all material respects, the financial position of Motion
     Control Engineering, Inc. as of December 31, 1999 and the results of
     its operations and its cash flows for the two years then ended in
     conformity with generally accepted accounting principles.

                                                 /s/ ARTHUR ANDERSEN LLP

     Sacramento, California
     January 21, 2000






                                       -30-
<PAGE>

                       INDEPENDENT AUDITOR'S REPORT

     To the Board of Directors
     FIR Group Holding Italia S.p.A.

         We have audited the consolidated balance sheets of FIR Group
     Holding Italia S.p.A. (a wholly-owned subsidiary of Kinetek, Inc.,
     formerly Motors and Gears, Inc.) as of October 31, 1999, and the
     related consolidated statements of income for the two years ended
     October 31, 1998 and 1999, and the related consolidated statements of
     retained earnings and cash flow for the year ended October 31, 1999.
     These financial statements are the responsibility of the Company's
     management. Our responsibility is to express an opinion on these
     financial statements based on our audits.

         We 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 misstatements. An audit includes
     examining, on a test basis, evidence supporting the amounts and
     disclosures in the financial statements. An audit also includes
     assessing the accounting principles used and significant estimates
     made by management, as well as evaluating the overall financial
     statement presentation. We believe that our audits provide a
     reasonable basis for our opinion.

         In our opinion, the consolidated financial statements referred to
     above present fairly, in all material respects, the financial position
     of the Company as of October 31, 1999, and the results of its
     operations for the two years ended October 31, 1998 and 1999 and its
     cash flow for the year ended October 31, 1999, in conformity with
     generally accepted accounting principles.

                                       /s/ PRICEWATERHOUSECOOPERS S.p.A.

     Bologna, 26 January 2000






                                   -31-

<PAGE>

                          JORDAN INDUSTRIES, INC.
                        CONSOLIDATED BALANCE SHEETS
                           (dollars in thousands)

                                                               December 31,
                                                          --------------------
                                                           2000          1999
                                                           ----          ----

Current assets:
  Cash and cash equivalents                               $21,713      $19,973
  Accounts receivable, net of allowance of
  $4,384 and $2,809 in 2000 and 1999, respectively        128,265      127,537
  Inventories                                             139,046      130,747
  Net assets of discontinued operations held for
    sale                                                        -      297,297
  Deferred income taxes                                     9,001        9,681
  Prepaid expenses and other current assets                32,155       18,135
                                                          -------      -------
     Total current assets                                 330,180      603,370

Property, plant and equipment, net                        107,526      107,483
Investments in and advances to affiliates                  42,902       18,052
Goodwill, net                                             371,487      373,041
Deferred income taxes                                       2,851        6,170
Other assets                                               41,755       51,380
                                                         --------   ----------
  Total Assets                                           $896,701   $1,159,496
                                                         ========   ==========

LIABILITIES AND SHAREHOLDER'S EQUITY (NET CAPITAL DEFICIENCY)
-------------------------------------------------------------

Current liabilities:
  Accounts payable                                        $68,236      $59,722
  Accrued liabilities                                      65,108       62,578
  Advance deposits                                          1,937        1,651
  Current portion of long-term debt                        35,600      424,520
                                                         --------      -------
      Total current liabilities                           170,881      548,471

Long-term debt                                            787,694      837,712
Other non-current liabilities                              17,728        9,896
Minority interest                                             410          406
Preferred stock                                             1,998        1,846

Shareholder's equity (net capital deficiency):
Common stock $.01 par value: authorized - 100,000
  shares; issued and outstanding - 98,501 shares                1            1
Additional paid-in capital                                  2,116        2,116
Accumulated other comprehensive loss                      (16,641)      (5,740)
Accumulated deficit                                       (67,486)    (235,212)
                                                          --------    ---------
Total shareholder's equity (net capital deficiency)       (82,010)    (238,835)
                                                          --------    ---------
Total Liabilities and Shareholder's Equity (Net
  Capital Deficiency)                                    $896,701    $1,159,496
                                                         =========   ==========

                      See accompanying notes.


                                     -32-


<PAGE>
<TABLE>
<CAPTION>

                                      JORDAN INDUSTRIES, INC.
                                CONSOLIDATED STATEMENTS OF OPERATIONS
                                      (dollars in thousands)

                                                                    Year ended December 31,
                                                                    -----------------------
                                                         2000              1999             1998
                                                         ----              ----             ----

<S>                                                  <C>               <C>               <C>
    Net Sales                                          $807,296          $766,655         $633,579
    Cost of sales, excluding depreciation               513,755           497,223          406,970
    Selling, general, and administrative
     expense, excluding depreciation                    173,370           153,582          131,055
    Depreciation                                         24,070            20,647           16,409
    Amortization of goodwill and other
     Intangibles                                         31,108            15,504           13,753
    Management fees and other                            13,980            10,454            7,415
                                                        -------            ------         --------
       Operating income                                  51,013            69,245           57,977
    Other income and expenses:
      Interest expense                                   92,009            87,058           70,184
      Interest income                                    (5,464)           (1,083)          (1,656)
      Loss (gain) on sale of subsidiaries                 2,798           (10,037)               -
      Other                                                 554               (90)             361
                                                        -------           -------         --------
          Total other expenses                           89,897            75,848           68,889
                                                        -------           -------         --------
    Loss from continuing operations before
     income taxes and minority interest                 (38,884)           (6,603)         (10,912)
    (Benefit) provision for income taxes                 (3,191)             (952)           3,875
                                                        -------           -------         --------
    Loss from continuing operations before
     minority interest                                  (35,693)           (5,651)         (14,787)
    Minority interest                                       353                80              294
                                                        -------          --------         --------
    Loss from continuing operations                     (36,046)           (5,731)         (15,081)
    Discontinued operations, net of taxes
     (Note 4)                                           203,924           (12,848)         (16,326)
                                                        -------          --------         --------
    Income (loss) before extraordinary
     Items                                              167,878           (18,579)         (31,407)
    Extraordinary loss                                        -                 -              179
                                                       ---------         ---------        --------
        Net income (loss)                              $167,878          $(18,579)        $(31,586)
                                                       =========         =========        =========

                          See accompanying notes.


                                       -33-

<PAGE>

<CAPTION>


                                   JORDAN INDUSTRIES, INC.
                  CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDER'S EQUITY
                                   (NET CAPITAL DEFICIENCY)
                                    (dollars in thousands)

                                  Common Stock
                                  ------------                           Accumulated
                             Number                    Additional           Other
                               of                       Paid-in         Comprehensive    Accumulated
                             Shares        Amount       Capital             Loss           Deficit          Total
                             ------        ------       -------             ----           -------          -----

<S>                          <C>           <C>         <C>              <C>             <C>             <C>
Balance at
January 1, 1998               98,501         $1         $2,116              $(504)       $(176,898)      $(175,285)
Non-cash dividends to
third parties                      -          -              -                  -           (3,815)         (3,815)
Cumulative
translation adjustment             -          -              -              2,542                -           2,542
Net loss                           -          -              -                  -          (31,586)        (31,586)
                                                                                                         ----------
Comprehensive
income                             -          -              -                  -                -         (29,044)
                              ------         --         ------            --------        ---------      ----------
Balance at
December 31, 1998             98,501          1          2,116              2,038         (212,299)       (208,144)
Non-cash dividends to
third parties                      -          -              -                  -           (4,334)         (4,334)
Cumulative
translation adjustment             -          -              -             (7,778)               -          (7,778)
Net loss                           -          -              -                  -          (18,579)        (18,579)
                                                                                                         ----------
Comprehensive
income                             -          -              -                  -                -         (26,357)
                              ------         --         ------            --------       ----------      ----------
Balance at
December 31, 1999             98,501          1          2,116             (5,740)        (235,212)       (238,835)
Non-cash dividends to
third parties                      -          -              -                  -             (152)           (152)
Cumulative
translation adjustment             -          -              -            (10,901)               -         (10,901)
Net income                         -          -              -                  -          167,878         167,878
                                                                                                           -------
Comprehensive
income                             -          -              -                  -                -         156,977
                              ------         --         ------           ---------        ---------        -------
Balance at
December 31, 2000             98,501         $1         $2,116           $(16,641)        $(67,486)       $(82,010)
                              ======         ==         ======           =========        =========       =========



                                                See accompanying notes.


                                                      -34-

<PAGE>
<CAPTION>


                                      JORDAN INDUSTRIES, INC.
                              CONSOLIDATED STATEMENTS OF CASH FLOWS
                                      (dollars in thousands)

                                                                 Year ended December 31,
                                                                 -----------------------
                                                       2000               1999              1998
                                                       ----               ----              ----

<S>                                              <C>                 <C>                <C>
Cash flows from operating activities:
  Net income (loss)                                  $167,878          $(18,579)          $(31,586)
Adjustments to reconcile net income
 (loss) to net cash provided by
 operating activities:
  Amortization of deferred financing
   costs                                                5,067             4,679              4,451
  Depreciation and amortization                        55,178            36,151             45,047
  Deferred taxes                                        3,999           (12,542)               205
  Loss(gain) on sale of
    subsidiaries                                        2,798           (10,037)             6,299
  Gain on sale of discontinued
   operations, net of tax                            (213,520)                -                  -
  Minority interest                                         4                80                696
  Extraordinary loss                                        -                 -                179
  Non-cash interest                                    20,160            30,085             26,303
Changes in operating assets and liabilities
 (net of acquisitions):
  Accounts receivable                                   1,384              (457)           (17,597)
  Inventories                                          (6,454)           (5,517)            (3,947)
  Prepaid expenses and other current
   assets                                             (13,729)            3,640             (3,998)
  Non-current assets                                   (5,008)           (1,702)            (4,024)
  Accounts payable and accrued
   liabilities                                        (24,716)            7,798              5,370
  Advance deposits                                        286              (190)               156
  Non-current liabilities                               7,830            (4,954)               378
  Other                                                  (169)              806               (540)
  Net current assets of discontinued
   operations                                               -            (7,277)             1,991
                                                    ----------        ----------          ---------
Net cash provided by operating
 activities                                               988            21,984             29,383

Cash flows from investing activities:
Proceeds from sale of discontinued
 operations                                           149,285                 -                  -
Capital expenditures, net of
 dispositions                                         (16,608)          (23,318)           (21,477)
Acquisitions of subsidiaries                          (48,154)         (133,233)          (118,416)
Additional purchase price payments
 and SAR payments                                      (3,093)           (9,359)           (10,649)
Net cash acquired in purchase of
 subsidiaries                                           1,196             2,534              2,292
Net proceeds from sale of subsidiary                        -            17,965             15,000
Investment in affiliates                              (17,842)          (13,942)            (7,285)
                                                   -----------        ----------         ----------
Net cash provided by (used in)                        $64,784         $(159,353)         $(140,535)
 investing activities

                                      (Continued on following page.)
                                         See accompanying notes.


                                                -35-

<PAGE>
<CAPTION>

                          JORDAN INDUSTRIES, INC.

                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (dollars in thousands)
                                (continued)


                                                               Year ended December 31,
                                                               -----------------------
                                                 2000               1999              1998
                                                 ----               ----              ----

<S>                                         <C>                <C>                 <C>
Cash flows from financing activities:
Proceeds of debt issuance-JII, Inc.                  -             149,761                -
Proceeds (repayments) on revolving
 credit facilities, net                        (53,614)             22,100           96,000
Payment of financing costs                           -             (12,930)               -
Repayment of long-term debt                     (8,420)            (18,851)          (19,192)
Other borrowing                                  2,449                 135             2,310
                                              ---------           ---------        ----------
Net cash (used in) provided by
 financing activities                          (59,585)            140,215            79,118
Foreign currency translation                    (4,447)             (5,881)            2,542
                                              ---------           ---------        ----------
Net increase (decrease) in cash and
 cash equivalents                                1,740              (3,035)          (29,492)
Cash and cash equivalents at beginning
 of year                                        19,973              23,008            52,500
                                              ---------           ---------        ----------
Cash and cash equivalents at end of
 Year                                          $21,713             $19,973           $23,008
                                              =========           =========        ==========

Supplemental disclosures of cash flow

 Information:
   Cash paid during the year for:
        Interest                               $66,370             $59,281           $48,250
        Income taxes, net                      $31,958              $9,595            $3,714
   Non-cash investing activities:
        Capital leases                          $6,648              $5,008           $13,019




                                       See accompanying notes.


                                               -36-

</TABLE>













<PAGE>


                          JORDAN INDUSTRIES, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                          (dollars in thousands)

Note 1 - Organization
---------------------

Jordan Industries, Inc. ("the Company"), an Illinois corporation, was
formed by Chicago Group Holdings, Inc. on May 26, 1988 for the purpose of
combining into one corporation certain companies in which partners and
affiliates of the Jordan Company (the Jordan Group) acquired ownership
interests through leveraged buy-outs. Chicago Group Holdings, Inc. was
formed on February 8, 1988 and had no operations. The Company was merged
with Chicago Group Holdings, Inc. on May 31, 1988 with the Company being
the surviving company.

The Company's continuing business is divided into five groups. The
Specialty Printing and Labeling group consists of JII Promotions, Inc.
("JII Promotions"), Valmark Industries, Inc. ("Valmark"), Pamco Printed
Tape and Label Co., Inc. ("Pamco") and Seaboard Folding Box, Inc.
("Seaboard"). The Jordan Specialty Plastics group consists of Beemak
Plastics, Inc. ("Beemak"), Sate-Lite Manufacturing Company ("Sate-Lite"),
and Deflecto Corporation ("Deflecto"). The Jordan Auto Aftermarket group
consists of Dacco Incorporated ("Dacco") and Alma Products Company
("Alma"). The Motors and Gears group consists of The Imperial Electric
Company ("Imperial") and its subsidiaries, Gear Research, Inc. ("Gear") and
Euclid Universal Corporation ("Euclid"), Merkle-Korff Industries, Inc.
("Merkle-Korff"), FIR Group Companies ("FIR"), Electrical Design & Control
("ED&C"), Motion Control Engineering ("Motion Control") and Advanced D.C.
Motors ("Advanced DC"). The remaining businesses comprise the Company's
Consumer and Industrial Products group. This group consists of Riverside
Book and Bible House, Inc. ("Riverside"), Cape Craftsmen, Inc. ("Cape"),
Welcome Home, Inc. ("Welcome Home"), Cho-Pat, Inc. ("Cho-Pat"), Online
Environs, Inc. ("Online Environs"), Flavorsource, Inc. ("Flavorsource"),
Internet Services of Michigan ("ISMI") and GramTel Communications, Inc.
("GramTel"). All of the foregoing corporations are collectively referred to
herein as the "Subsidiaries", and individually as a "Subsidiary."

As a result of the transactions described in Note 4 to the financial
statements, the Jordan Telecommunication Products segment and the Capita
Technologies segment have been reported as discontinued operations for
financial reporting purposes in accordance with Accounting Principals Board
("APB") Opinion No. 30.

All of the Subsidiaries, exclusive of the Motors and Gears subsidiaries,
are classified as Restricted Subsidiaries ("Restricted Subsidiaries") for
purposes of certain of the Company's debt instruments.

Note 2 - Significant accounting policies
----------------------------------------

                Principles of consolidation
                ---------------------------

The consolidated financial statements include the accounts of the Company
and subsidiaries. All significant inter-company balances and transactions
have been eliminated. Operations of FIR are included for the period ended
two months prior to the Company's year-end and interim periods to ensure
timely preparation of the consolidated financial statements.



                                  -37-

<PAGE>

                Cash and cash equivalents
                -------------------------

The Company considers all highly liquid investments purchased with an
initial maturity of three months or less to be cash equivalents.

                Inventories
                -----------

Inventories are stated at lower of cost or market. Inventories are
primarily valued at either average or first-in, first-out (FIFO) cost.

                Depreciation and amortization
                -----------------------------

Property, plant and equipment- Depreciation and amortization of property,
plant and equipment is calculated using estimated useful lives, or over the
lives of the underlying leases, if less, using the straight-line method.
Amortization of leasehold improvements and assets under capital leases is
included in depreciation expense.

The useful lives of plant and equipment for the purpose of computing book
depreciation are as follows:

                Machinery and equipment              3-10 years
                Buildings and improvements           5-35 years
                Furniture and fixtures               3-10 years

Goodwill - Goodwill is being amortized on the straight-line basis over
periods ranging from 3 to 40 years. Goodwill at December 31, 2000 and 1999
is net of accumulated amortization of $78,011 and $50,002, respectively.
The Company evaluates the recoverability of long-lived assets by measuring
the carrying amounts of the assets against the estimated undiscounted
future cash flows associated with them. At the time such evaluations
indicate that the future undiscounted cash flows of certain long-lived
assets are not sufficient to recover the carrying value of such assets, the
assets are adjusted to their fair values. Based on these evaluations, the
Company recorded a non-cash impairment charge in the third quarter of 2000
of $14,636 associated with one of Motors and Gears businesses, ED&C. (See
note 22.) There were no material adjustments to the carrying value of
long-lived assets in 1999 or 1998.

                Other assets
                ------------

Patents are amortized over the remainder of their legal lives, which
approximate their useful lives, on the straight-line basis. Deferred
financing costs amounting to $28,709 and $33,720, net of accumulated
amortization of $22,830 and $17,763 at December 31, 2000 and 1999,
respectively, are amortized over the terms of the loans or, if shorter, the
period such loans are expected to be outstanding. Non-compete covenants and
customer lists amounting to $755 and $1,783, net of accumulated
amortization of $25,562 and $24,534 at December 31, 2000 and 1999,
respectively, are amortized on the straight-line basis over their estimated
useful lives, ranging from three to ten years.


                                     -38-

<PAGE>


                Income taxes
                ------------

Deferred tax assets and liabilities are determined based on differences
between the financial reporting and tax basis of assets and liabilities and
are measured using the enacted tax rates and laws that are expected to be
in effect when the differences reverse. The Company has not provided for
U.S. Federal and State Income Taxes on undistributed earnings of foreign
subsidiaries to the extent the undistributed earnings are considered to be
permanently reinvested.


                Revenue recognition
                -------------------

Revenues are recognized when products are shipped and title passes to
customers.

                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 amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.

                Reclassification
                ----------------

Certain amounts in prior years financial statements have been reclassified
to conform with the presentation in 2000.

                Realignment of segment reporting
                --------------------------------

In 1998 Sate-Lite and Beemak were reclassified from the Consumer and
Industrial Products segment to the Jordan Specialty Plastics segment. In
1999, Dacco was moved from the Consumer and Industrial Products segment to
the Jordan Auto Aftermarket Products segment. Also in 1999, Welcome Home
was reconsolidated into the Consumer and Industrial Products segment as a
result of its emergence from bankruptcy on July 21, 1999. Prior period
results were realigned into these new groups in order to provide accurate
comparisons between periods.

                New pronouncements
                ------------------

In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities ("Statement 133"), which is required to
be adopted effective January 1, 2001. Statement 133 requires all
derivatives to be recognized in the balance sheet as either assets or
liabilities at fair value. Derivatives that are not hedges must be adjusted
to fair value through income. In addition, all hedging relationships must
be designated, reassessed and documented pursuant to the provisions of
Statement 133. The adoption of this Statement did not have a material
effect on the Company.



                                   -39-

<PAGE>

                Concentration of credit risk
                ----------------------------

Financial instruments which potentially subject the Company to a
concentration of credit risk consist principally of cash and cash
equivalents and accounts receivable. The Company deposits cash and cash
equivalents with high quality financial institutions, and is restricted by
its revolving credit facilities as to its investment instruments.
Concentration of credit risk relating to accounts receivable is limited due
to the large number of customers from many different industries and
locations. The Company believes that its allowance for doubtful accounts is
adequate to cover potential credit risk.


At December 31, 2000 and 1999 the Company has approximately $14,446 and
$8,950, respectively, of investments in Russia related to advances made to
two affiliates (see note 8). The Company will continue to monitor the
underlying economics of doing business in this region, but currently
believes that such amounts are fully recoverable.

                Foreign currency translation
                ----------------------------

In accordance with SFAS No. 52, Foreign Currency Translation, assets and
liabilities of the Company's foreign operations are translated from foreign
currencies into U.S. dollars at year-end rates while income and expenses
are translated at the weighted average exchange rates for the year. The
Company is exposed to market risk from changes in foreign currency exchange
rates, including fluctuations in the functional currency of foreign
operations. Gains or losses resulting from the translations of foreign
currency financial statements are deferred and classified as a separate
component of shareholder's equity.

Note 3 - Welcome Home Chapter 11 Filing
---------------------------------------

On January 21, 1997, Welcome Home filed a voluntary petition for relief
under Chapter 11 ("Chapter 11") of title 11 of the United States code in
the United States Bankruptcy Court for the Southern District of New York
("Bankruptcy Court"). In Chapter 11, Welcome Home continued to manage its
affairs and operate its business as a debtor-in-possession. The results of
Welcome Home were not consolidated with the Company's results for the
period between January 21, 1997 and July 21, 1999 as the Company no longer
had the ability to control the operations and financial affairs of Welcome
Home. On July 21, 1999, Welcome Home emerged from bankruptcy, whereupon the
Company now effectively owns 100% of the outstanding common stock of
Welcome Home, for consideration paid to creditors of approximately $2,274.
The results of Welcome Home are consolidated with the Company's results
from the day of the emergence, as the Company has regained operational and
financial control of Welcome Home.

The operating results of Welcome Home included in the consolidated results
of the Company over the last three years are as follows:

                                              Year ended December 31,
                                              -----------------------
                                           2000         1999        1998
                                           ----         ----        ----

Net Sales                                $54,373      $35,272          -
Operating income (loss)                   (1,085)       4,006          -
Income (loss) before income taxes        $(2,031)      $3,465          -



                                 -40-

<PAGE>


Note 4 - Discontinued Operations
--------------------------------

On July 25, 1997, the Company recapitalized its investment in Jordan
Telecommunication Products, Inc. ("JTP") and JTP acquired the Company's
telecommunications and data communications products business from the
Company for total consideration of approximately $294,027, consisting of
$264,027 in cash, $10,000 of assumed indebtedness and preferred stock, and
the issuance to the Company of $20,000 aggregate liquidation preference of
JTP Junior Preferred Stock. The Company's stockholders and affiliates and
JTP management invested in and acquired the JTP common stock. As a result
of the recapitalization, certain of the Company's affiliates and JTP
management owned substantially all of the JTP common stock. The Company's
investment in JTP was represented solely by the JTP Junior Preferred Stock.
The JTP Preferred Stock controlled over 80% of JTP's stockholder voting
rights and accreted 95% of JTP's net income or loss. The Company had
obtained an independent opinion as to the fairness, from a financial point
of view, of the recapitalization to the Company and its public bondholders.

On January 18, 2000, the Company's affiliates sold the common stock of JTP
to an unaffiliated third party and the Company sold its interest in the JTP
Junior Preferred Stock for $54,100. The Company also received $6,535 for
reimbursement of expenses, $12,000 for the buyout of the management
services agreements, and $3,900 for an advisory and indemnity fee. The
Company recognized a gain on the sale of its interests in JTP of $200,078
in 2000, net of taxes of approximately $28,000.

For the period from January 1, 2000 to January 18, 2000 and the years ended
December 31, 1999 and 1998, JTP's net sales were $20,724, $431,310, and
$310,028, respectively. The losses from discontinued operations related to
JTP in the Company's Statements of Operations for the period from January
1, 2000 to January 18, 2000 and the years ended December 31, 1999 and 1998,
included income tax expense of $406, $3,270, and $4,287, respectively.

On June 22, 2000, the shareholders of Capita Technologies, Inc. ("Capita")
(including the Company) exchanged their stock in Capita, which included its
subsidiaries Protech, Aurora, Garg, and Raba, for shares in The Interpublic
Group of Companies, Inc. ("IPG") in a reorganization of Capita. In the
reorganization, the Company received registered common shares in IPG having
a value of $10,000 in exchange for its Capita stock.  The Company also
received registered common shares in IPG having a value of $60,750 for its
intercompany notes and $2,000 in cash for the buyout of its management
services agreements. The Company's common shares in IPG were sold for cash
of $70,750 in August 2000. In 2000, the Company recognized a gain, for
financial reporting purposes, on the sale of its stock in IPG of $13,442,
net of taxes of $7,000.

For the period from January 1, 2000 to June 22, 2000 and the year ended
December 31, 1999, Capita's net sales were $17,225 and $10,207,
respectively. The losses from discontinued operations related to Capita in
the Company's Statements of Operations for the period from January 1, 2000
to June 22, 2000 and the year ended December 31, 1999, included tax
expenses of $0 and $(80), respectively.

For financial reporting purposes, the assets and liabilities of JTP and
Capita have been classified in the December 31, 1999 Consolidated Balance
Sheet as Net assets of discontinued operations, as follows:


                                    -41-

<PAGE>


                                                          December 31,
Assets:                                                       1999
-------                                                       ----

Cash                                                         $7,307
Accounts receivable, net                                     80,290
Inventories, net                                             54,370
Other current assets                                          5,181
Property, plant, and equipment, net                          53,855
Goodwill                                                    194,671
Other assets                                                 29,525
                                                            -------
  Total Assets                                              425,199

Liabilities:
------------
Accounts payable                                             39,619
Accrued expenses                                             40,492
Advanced deposits                                             3,267
Other non-current liabilities                                16,440
Preferred Stock                                              28,084
                                                            -------
  Total Liabilities                                         127,902
                                                            -------
Net assets of discontinued operations held
 for sale                                                  $297,297
                                                           ========


The following table summarizes the Company's discontinued operations:

<TABLE>
<CAPTION>
                                                      Year ended December 31,
                                                      -----------------------
                                                  2000            1999         1998
                                                  ----            ----         ----

<S>                                          <C>             <C>            <C>
Loss from discontinued operations
 before income taxes                            $(9,190)       $(9,658)      $(12,039)
Provision for income taxes                         (406)        (3,190)        (4,287)
                                               ---------       --------       --------
Net loss from discontinued
 operations                                      (9,596)       (12,848)       (16,326)
Gain on sale of discontinued
 operations                                     248,520              -              -
Provision for income taxes                      (35,000)             -              -
                                               ---------      ---------      ---------
Gain on sale, net of taxes                      213,520              -              -
                                               ---------      ---------      ---------
Discontinued operations, net of taxes          $203,924       $(12,848)      $(16,326)
                                               =========      =========      =========
</TABLE>




                                           -42-

<PAGE>

Note 5-Investments in JAAI, JSP, and M&G Holdings
-------------------------------------------------
JAAI
----
During 1999, the Company completed the recapitalization of Jordan Auto
Aftermarket, Inc. ("JAAI"). As a result of the recapitalization, certain of
the Company's affiliates and JAAI management own substantially all of the
JAAI common stock and the Company's investment in JAAI is represented
solely by the Cumulative Preferred Stock of JAAI. The JAAI Cumulative
Preferred Stock controls over 80% of the combined voting power of JAAI
capital stock outstanding and accretes at plus or minus 97.5% of the
cumulative JAAI net income or net loss, as the case may be, through the
earlier of an Early Redemption Event (as defined) or the fifth anniversary
of issuance (unless redemption is prohibited by a JAAI or Company debt
covenant).

The Company recapitalized JAAI in order to establish JAAI as a more
independent, stand-alone, industry-focused company. The Company continues
to consolidate JAAI and its subsidiaries, for financial reporting purposes,
as subsidiaries of the Company. The Company's consolidation of the results
of JAAI will be discontinued upon redemption of the JAAI Cumulative
Preferred Stock, or at such time as the JAAI Cumulative Preferred Stock
ceases to represent at least a majority of the voting power and a majority
share in the earnings of JAAI and its subsidiaries. The JAAI Cumulative
Preferred Stock is mandatorily redeemable upon certain events and is
redeemable at the option of JAAI, in whole or in part, at any time.

JSP
---

During 1998, the Company recapitalized Jordan Specialty Plastics, Inc.
("JSP"). As a result of the recapitalization, certain of the Company's
affiliates and JSP management own substantially all of the JSP common stock
and the Company's investment in JSP is represented solely by the Cumulative
Preferred Stock of JSP. The JSP Cumulative Preferred Stock controls over
80% of the combined voting power of JSP capital stock outstanding and
accretes at plus or minus 95% of the cumulative JSP net income or net loss,
as the case may be, through the earlier of an Early Redemption Event (as
defined) or the fifth anniversary of issuance (unless redemption is
prohibited by a JSP or Company debt covenant).

The Company continues to consolidate JSP and its subsidiaries, for financial
reporting purposes, as subsidiaries of the Company.  The Company's
consolidation of the results of JSP will be discontinued upon redemption
of the JSP Cumulative Preferred Stock, or at such time as the JSP
Cumulative Preferred Stock ceases to represent at least a majority
of the voting power and a majority share in the earnings of JSP and
its subsidiaries. The JSP Cumulative Preferred Stock is mandatorily
redeemable upon certain events and is redeemable at the option of JSP,
in whole or in part, at any time.

M&G Holdings
------------

Motors and Gears Holdings, Inc., ("M&G Holdings" or "M&G") along with its
wholly-owned subsidiary, Kinetek, Inc. ("Kinetek") (formerly Motors and
Gears, Inc.), was formed to combine a group of companies engaged in the
manufacturing and sale of fractional and sub-fractional motors and gear
motors primarily to customers located throughout the United States and
Europe.



                                      -43-

<PAGE>


At the end of 1996, M&G was comprised of Merkle-Korff and its wholly-owned
subsidiary, Barber-Colman, and Imperial and its wholly-owned subsidiaries,
Scott and Gear. All of the outstanding shares of Merkle-Korff were
purchased by M&G in September 1995 and the net assets of Barber-Colman were
purchased by Merkle-Korff in March 1996. Barber-Colman was legally merged
into Merkle-Korff as of January 1, 1997 and now operates as a division of
Merkle-Korff. The net assets of Imperial, Scott, and Gear were purchased by
M&G, from the Company, at an arms length basis on November 7, 1996, with
the proceeds from a debt offering. The purchase price was $75,656, which
included the repayment of $6,008 in Imperial liabilities owed to the
Company, and a contingent payment payable pursuant to a contingent earnout
agreement. Under the terms of the contingent earnout agreement, 50% of
Imperial, Scott, and Gear's cumulative earnings before interest, taxes,
depreciation and amortization, as defined, exceeding $50,000 during the
five fiscal years ended December 31, 1996, through December 31, 2000, will
be paid to the Company. At December 31, 2000 the value of the earn out
agreement was determined to be $174.

As a result of this sale to M&G, the Company recognized approximately
$62,700 of deferred gain at the time of sale for U.S. Federal income tax
purposes. A portion of this deferred gain is recognized as M&G reports
depreciation and amortization over approximately 15 years on the step-up in
basis of those purchased assets. As long as M&G remains in the Company's
affiliated group, the gain recognized and the depreciation on the step-up
in basis should exactly offset each other. Upon any future de-consolidation
of M&G from the Company's affiliated group for U.S. Federal income tax
purposes, any unreported gain would be fully reported and subject to tax.

On May 16, 1997, the Company participated in a recapitalization of M&G
Holdings. In connection with the recapitalization, M&G Holdings issued
16,250 shares of M&G Holdings common stock (representing approximately
82.5% of the outstanding shares of M&G Holdings common stock) to certain
stockholders and affiliates of the Company and M&G Holdings management for
total consideration of $2,200 (of which $1,110 was paid in cash and $1,090
was paid through delivery of 8.0% zero coupon notes due 2007). As a result
of the recapitalization, certain of the Company's affiliates and M&G
Holdings management own substantially all of the M&G Holdings common stock
and the Company's investment in M&G Holdings is represented solely by the
Cumulative Preferred Stock of M&G Holdings (the "M&G Holdings Junior
Preferred Stock"). The M&G Holdings Junior Preferred Stock represents 82.5%
of M&G Holdings' stockholder voting rights and 80% of M&G Holdings' net
income or loss is accretable to the M&G Holdings Junior Preferred Stock.
The Company has obtained an independent opinion as to the fairness, from a
financial point of view, of the recapitalization to the Company and its
public bondholders. The Company continues to consolidate M&G Holdings and
its subsidiaries, for financial reporting purposes, as subsidiaries of the
Company. The M&G Holdings Junior Preferred Stock discontinues its
participation in M&G Holdings' earnings on the fifth anniversary of
issuance. The Company's consolidation of the results of M&G Holdings will
be discontinued upon redemption of the M&G Holdings Junior Preferred Stock,
or at such time as the M&G Holdings Junior Preferred Stock ceases to
represent at least a majority of the voting power and a majority share in
the earnings of M&G Holdings and its subsidiaries. As long as the M&G
Holdings Junior Preferred Stock is outstanding, the Company expects the
vote test to be satisfied. The M&G Holdings Junior Preferred Stock is
mandatorily redeemable upon certain events and is redeemable at the option
of M&G Holdings, in whole or in part, at any time.



                                  -44-

<PAGE>


The Company expects to continue to include M&G Holdings and its
subsidiaries in its consolidated group for U.S. Federal income tax
purposes. This consolidation would be discontinued, however, upon the
redemption of the M&G Holdings Junior Preferred Stock, which could result
in recognition by the Company of substantial income tax liabilities arising
out of the recapitalization. If such deconsolidation had occurred at
December 31, 2000, the Company believes that the amount of taxable income
to the Company attributable to M&G Holdings would have been approximately
$57,300 (or approximately $22,920 of tax liabilities, assuming a 40.0%
combined Federal, state, and local tax rate). The Company currently expects
to offset these tax liabilities arising from deconsolidation with
redemption proceeds from the M&G Holdings Junior Preferred Stock.
Deconsolidation would also occur with respect to M&G Holdings if the M&G
Holdings Junior Preferred Stock ceased to represent at least 80.0% of the
voting power and 80.0% of the combined stock value of the outstanding M&G
Holdings Junior Preferred Stock and common stock of M&G Holdings. As long
as the M&G Holdings Junior Preferred Stock is outstanding, the Company
expects the vote test to be satisfied. The value test depends on the
relative values of the M&G Holdings Junior Preferred Stock and common stock
of M&G Holdings. The Company believes the value test is satisfied at
December 31, 2000. It is possible that on or before the fifth anniversary
of its issuance, the M&G Holdings Junior Preferred Stock would cease to
represent 80.0% of the relevant total combined stock value. In the event
that deconsolidation for U.S. Federal income tax purposes occurs without
redemption of the M&G Holdings Junior Preferred Stock, the tax liabilities
discussed above would be incurred without the Company receiving the
proceeds of the redemption.

Note 6 - Inventories
--------------------
Inventories consist of:

                                      Dec. 31, 2000          Dec. 31, 1999
                                      -------------          -------------

Raw Materials                              $51,814                $50,484
Work-in-process                             16,760                 16,335
Finished goods                              70,472                 63,928
                                          --------               --------
                                          $139,046               $130,747
                                          ========               ========

Note 7 - Property, plant and equipment
--------------------------------------

Property, plant and equipment, at cost, consists of:

                                             Dec. 31, 2000      Dec. 31, 1999
                                             -------------      -------------

Land                                           $8,014               $7,997
Machinery and equipment                       136,323              125,981
Buildings and improvements                     35,067               31,931
Furniture and fixtures                         59,271               56,252
                                              --------             -------
                                              238,675              222,161

Accumulated depreciation and amortization    (131,149)            (114,678)
                                             ---------            ---------

                                             $107,526             $107,483
                                             =========            =========




                                        -45-

<PAGE>

Note 8 - Investments in and advances to affiliates
--------------------------------------------------

The Company holds 75.6133 shares of Class A PIK Preferred Stock and 151.28
shares of common stock of Fannie May Holdings, Inc. ("Fannie May"),
representing a total investment of $1,721 and approximately 15.1% of the
outstanding common stock of Fannie May on a fully diluted basis. The
Company is accounting for this investment under the cost method. Fannie
May's Chief Executive Officer is Mr. Quinn, and its stockholders include
Mr. Jordan, Mr. Quinn, Mr. Zalaznick, and Mr. Boucher, who are directors
and stockholders of the Company, as well as other partners, principals, and
associates of the Jordan Company, who are also stockholders of the Company.
Fannie May, which is also known as "Fannie May Candies", is a manufacturer
and marketer of kitchen-fresh, high-end boxed chocolates and other
confectionary items, through its company-owned retail stores and through
specialty sales channels. Its products are marketed under the "Fannie May
Candy", "Fanny Farmer Candy", "Sweet Factory", and "Laura Secord" brand
names.

In 2000 and 1999, the Company made approximately $5,496 and $7,989,
respectively, of unsecured advances to JIR Broadcast, Inc. and JIR Paging,
Inc. Each of these companies' Chief Executive Officer is Mr. Quinn and its
stockholders include Messrs. Jordan, Quinn, Zalaznick, and Boucher, who are
the Company's directors and stockholders, as well as other partners,
principals and associates of The Jordan Company who are also the Company's
stockholders. These companies are engaged in the development of businesses
in Russia, including the broadcast and paging sectors. The Company receives
notes in exchange for these advances, which bear interest at 12.0%. During
2000, the Company accrued interest on these notes of approximately $2,963.
At December 31, 2000 and 1999 the total amounts due from these Russian
businesses excluding accrued interest was $14,446 and $8,950.

In November 1998, the Company, through Motors and Gears, invested $5,585 in
Class A Preferred Stock and $1,700 in Class B Preferred Stock of JZ
International, Ltd. In April 2000, the Company, through Motors and Gears,
invested an additional $5,059 in Class A Preferred Stock of JZ
International, Ltd. This increases the Company's investment in JZ
International to $12,344 at December 31, 2000. JZ International's Chief
Executive Officer is David W. Zalaznick, and its stockholders include
Messrs. Jordan, Quinn, Zalaznick and Boucher, who are the Company's
directors and stockholders, as well as other partners, principals and
associates. JZ International is a merchant bank located in London, England
that is focused on making European and other international investments. The
Company is accounting for this investment under the cost method. At
December 31, 2000, the cost of the investment approximates market value.

Internet Services Management Group ("ISMG") is an Internet service provider
with over 110,000 customers. ISMG's stockholders include Mr. Jordan, Mr.
Quinn, Mr. Zalaznick, and Mr. Boucher, who are directors and stockholders
of the Company, as well as other partners, principals, and associates of
the Jordan Company, who are also stockholders of the Company. The Company
has a 5% ownership interest in ISMG's common stock and $1,000 of ISMG's 5%
mandatorily redeemable cumulative preferred stock. The Company is
accounting for these investments under the cost method. The Company has
also made unsecured advances to ISMG totaling $10,701 and $6,381 as of
December 31, 2000 and 1999, respectively, for the purpose of funding ISMG
acquisitions and its working capital needs.

The Company made aggregate investments of $1,550 in the capital stock of
three different businesses in technology-related industries. The Company's
ownership in these businesses ranges from 1-15% on a fully diluted basis.
The Company is accounting for these investments under the cost method.




                                 -46-


<PAGE>

The Company has a 20% limited partnership interest in a partnership that
was formed during 2000 for the purpose of making equity investments
primarily in datacom/telecom infrastructure and software, e-commerce
products and services, and other Internet-related companies. The Company
has a $10,000 capital commitment, of which $1,390 was contributed during
2000. The Company is accounting for this investment using the equity method
of accounting. Certain stockholders of the Company are also stockholders in
the general partner of the partnership. The Company has an agreement with
the partnership's general partner to provide management services to the
partnership for annual fees of $1,250.

See Note 15 for additional discussion of related party transactions.

Note 9 - Accrued liabilities
----------------------------

Accrued liabilities consist of:

                                            Dec. 31, 2000         Dec. 31, 1999
                                            -------------         -------------

Accrued vacation                                 $2,635              $2,962
Accrued income taxes                                823               3,115
Accrued other taxes                               1,394               1,738
Accrued commissions                               1,974               1,802
Accrued interest payable                         18,205              18,122
Accrued payroll and payroll taxes                 4,777               4,418
Accrued rebates                                   3,637               2,153
Insurance reserve                                 5,353               3,904
Accrued management fees                           7,425               7,179
Accrued other expenses                           18,885              17,185
                                                 ------              ------
                                                $65,108             $62,578
                                                =======             =======

Note 10 - Operating leases
--------------------------

Certain Subsidiaries lease land, buildings, and equipment under
non-cancelable operating leases.

Total minimum rental commitments under non-cancelable operating leases at
December 31, 2000 are:

           2001                               $12,131
           2002                                10,226
           2003                                 8,111
           2004                                 6,423
           2005                                 4,281
        Thereafter                              3,070
                                              -------
                                              $44,242

Rental expense amounted to $16,285, $13,302, and $8,339 for 2000, 1999, and
1998, respectively. Rental expense increased in 1999 due to the
acquisitions in 1998 and 1997.

Note 11 - Benefit plans and pension plans
-----------------------------------------

Certain of the Company's subsidiaries participate in the JII 401(k) Savings
Plan (the "Plan"), a defined-contribution plan for salaried and hourly
employees. In order to participate in the Plan, employees must be at least
21 years old and have worked at least 1,000 hours during the first 12
months of employment. Each eligible employee may contribute from 1% to 15%
of their before-tax wages into the Plan. In addition to the JII 401(k)
Plan, certain subsidiaries have additional defined contribution plans in
which employees may participate. The Company made contributions to these
plans totaling approximately $2,345, $1,698 and $1,457 for the years ended
December 31, 2000, 1999 and 1998, respectively.


                                         -47-

<PAGE>

FIR, a Motors & Gears subsidiary, provides for a severance liability for
all employees at 7.4% of each respective employee's annual salary. In
addition, the amount accrued is adjusted each year according to an official
index (equivalent to 0.75% of the retail price index). This obligation is
payable to employees when they leave the employ of FIR and approximated
$2,277 and $2,900 at December 31, 2000 and 1999, respectively.
The Company has two defined benefit pension plans, both at Alma, which was
acquired in March 1999, that cover substantially all of the employees of
that subsidiary. In accordance with Statement of Financial Standards No.
132, the following table sets forth the change in benefit obligations,
change in plan assets and net amount recognized as of December 31, 2000 and
1999.

                                                        2000            1999
                                                        ----            ----
Change in Benefit Obligation:

Benefit obligation at beginning of period             $10,688          $11,231

  Service cost                                            519              352
  Interest cost                                           832              533
  Plan amendments                                         464                -
  Actuarial gain                                         (253)          (1,145)
  Benefits paid                                          (465)            (283)
                                                       -------         --------

Benefit obligations at end of period                  $11,785          $10,688
                                                      --------         --------

Change in Plan Assets:

Fair value of plan assets at beginning of period      $11,205          $10,616

  Actual return on assets                                 311              872
  Contributions received                                  621                -
  Benefits paid                                          (465)            (283)
                                                     ---------         --------

Fair value of plan assets at end of period           $ 11,672          $11,205
                                                     ---------         --------

  Funded status                                          (113)             516
  Unrecognized net gain                                  (997)          (1,416)
  Unrecognized prior service cost                         431                -
  Employer contribution                                    49                -
                                                     ---------         --------

  Accrued benefit cost                                  $(630)           $(900)
                                                     =========         ========

Net periodic pension expense included the following components:

                                                        Year ended December 31,
                                                        -----------------------
                                                          2000            1999
                                                          ----            ----

  Service cost                                           $519          $   352
  Interest cost                                           832              533
  Expected return on plan assets                         (952)            (601)
  Amortization of unrecognized prior service cost          33                -
  Amortization of unrecognized net gain                   (31)               -
                                                       -------         --------

  Net periodic pension expense                          $ 401          $   284
                                                       =======         ========


                                       -48-

<PAGE>

The following  assumptions were used in determining the actuarial  present
value of the projected  benefit obligations:

                                                       Year ended December 31,
                                                       2000              1999
                                                       ----              ----

Discount rate                                          7.75%            7.75%
Average annual salary increase                         4.50%            4.50%
Expected long term rate of return on plan assets       8.50%            8.00%


Note 12 - Debt
--------------

Long-term debt consists of:

                                        December 31,         December 31,
                                            2000                 1999
                                        -----------          -----------
Revolving Credit Facilities (A)           $31,673              $190,387
Notes payable (B)                             670                     -
Subordinated promissory notes (C)          30,912                32,442
Capital lease obligations (D)              23,884                24,401
Bank Term Loans (E)                         5,868                 4,606
Senior Notes (F)                          544,643               732,483
Senior Subordinated Discount
  Debentures (F)                          185,644               277,913
                                        ----------            ----------

                                          823,294             1,262,232
Less current portion                      (35,600)             (424,520)
                                        ----------            ----------
                                         $787,694              $837,712
                                        ==========            ==========

As a result of the transactions described in note 4, $413,649 of JTP debt
that was repaid on January 18, 2000 has been classified as current at
December 31, 1999.

Aggregate maturities of long-term debt at December 31, 2000 are as follows:

                           2001                    $35,600
                           2002                     15,399
                           2003                     20,219
                           2004                      5,818
                           2005                      5,993
                           Thereafter              740,265
                                                   -------
                                                  $823,294
                                                  ========


A.              At December 31, 2000, the Company had borrowings outstanding
                on lines of credit totaling $31,673.

                On July 14, 1999, the Company amended and restated its
                revolving credit facility with FleetBoston N.A. ("Fleet")
                increasing the facility from $75,000 to $85,000. Interest
                on borrowings is at Fleet's base rate plus an applicable
                margin or, at the Company's option, the rate at which
                Fleet's Eurodollar lending office is offered dollar
                deposits (Eurodollar Rate) plus an applicable margin (10.0%
                and 8.75%, respectively, at December 31, 2000. The
                facility, which matures on June 29, 2002, is used for
                working capital and acquisitions. At December 31, 2000, the
                Company had no outstanding borrowings on its revolving
                credit facility ($53,000 of borrowings at December 31,
                1999). The facility is secured by substantially all of the
                assets of the Restricted Subsidiaries. The Company must


                                     -49-

<PAGE>

                comply with certain financial convenants as specified in
                the revolver agreement, and at December 31, 2000, the
                Company is in compliance with such covenants.
                Motors and Gears, Inc. has available a long-term line of
                credit from Bankers Trust Company in the amount of $75,000.
                Outstanding borrowings carry a floating rate of LIBOR plus
                2.25% (8.625% at December 31, 2000) or base rate plus 1.25%
                (9.50% at December 31, 2000). M&G had $26,000 of
                outstanding borrowings under this credit agreement at
                December 31, 2000 ($28,000 at December 31, 1999). The
                Motors & Gears credit agreement expires November 7, 2001.

                Welcome Home is obligated under an Amended and Restated
                Loan and Security Agreement with Fleet which provides for
                maximum borrowings of $15,000. Initial interest rates are
                Eurodollar rate plus 3.25% or Fleet's Base Rate plus 1.25%.
                These rates decrease upon Welcome Home meeting certain
                operating performance benchmarks. The agreement is secured
                by substantially all the assets of Welcome Home, includes
                covenants standard for this type of financing, and expires
                October 29, 2003. At December 31, 2000, borrowings
                outstanding under the Amended and Restated Loan and
                Security Agreement were $5,673.

B.              Notes payable are due in monthly or annual installments and
                bear interest at rates ranging from 6.0% to 8.0%.

C.              Subordinated promissory notes payable are due to minority
                interest shareholders and former shareholders of certain
                Subsidiaries in annual installments through 2004, and bear
                interest ranging from 8% to 9%. The loans are unsecured.

D.              Interest rates on capital leases range from 3% to 9.5% and
                mature in installments through 2008.

                The future minimum lease payments as of December 31, 2000
                under capital leases consist of the following:


                2001                                       $5,129
                2002                                        4,697
                2003                                        8,802
                2004                                        2,535
                2005                                        1,469
                Thereafter                                  5,326
                                                           --------
                  Total                                     27,958
                Less amount representing interest           (4,074)
                                                           -------
                Present value of future minimum
                 lease payments                            $23,884
                                                           =======

                The present value of the future minimum lease payments
                approximates the book value of property, plant and
                equipment under capital leases at December 31, 2000.

E.              Bank term loans consist of a mortgage on the Pamco
                facility, which bears interest at 8.1% and is due in
                monthly installments through 2003. The mortgage is secured
                by the Pamco facility. There is also a mortgage on the
                Deflecto facility which bears interest at .25% below the
                prime rate and is due in 2028.


                                     -50-

<PAGE>

F.              In April of 1997, the Company issued $214,036 aggregate
                principal amount of 11 3/4% Senior Subordinated Discount
                Debentures due 2009 ("2009 Debentures"). The 2009 Debentures
                were issued at a substantial discount from the principal
                amount. Interest on the 2009 Debentures is payable in cash
                semi-annually on April 1 and October 1 of each year beginning
                October 1, 2002. The 2009 Debentures are redeemable for
                105.875% of the accreted value from April 1, 2002 to March 31,
                2003, 102.937% from April 1, 2003 to March 31, 2004 and
                100% from April 1, 2004 and thereafter plus any accrued
                and unpaid interest from April 1, 2002 to the redemption
                date if such redemption occurs after April 1, 2002.  The
                fair value of the 2009 Debentures was $132,000 at December 31,
                2000. The fair value was calculated using the 2009 Debentures'
                December 31, 2000 market price multiplied by the face amount.
                The 2009 Debentures are not secured by the assets of the
                Company.

                In July 1997, the Company issued $120,000 of 10 3/8% Senior
                Notes due 2007 ("2007 Seniors"). These notes bear interest
                at a rate of 10 3/8% per annum, payable semi-annually in
                cash on February 1 and August 1 of each year. The 2007
                Seniors are redeemable for 105.188% of the principal amount
                from August 1, 2002 to July 31, 2003, 102.594% from August
                1, 2003 to July 31, 2004 and 100% from August 1, 2004 and
                thereafter plus any accrued and unpaid interest to the date
                of redemption. The fair value of the 2007 Seniors was
                $108,000 at December 31, 2000. The fair value was
                calculated using the 2007 Seniors' December 31, 2000 market
                price multiplied by the face amount. The 2007 Seniors are
                not secured by the assets of the Company.

                In March 1999, the Company issued $155,000 of 10 3/8%
                Series C Senior Notes due 2007 ("New 2007 Seniors"). These
                notes have the identical interest and redemption terms as
                the 2007 Seniors. The notes were issued at a discount of
                96.62% of face value including accrued interest, resulting
                in net cash to the Company of $149,761. The fair value of
                the New 2007 Seniors was $139,500 at December 31, 2000. The
                fair value was calculated using the Notes' December 31,
                2000 market price multiplied by the face amount. The New
                2007 Seniors are not secured by the assets of the Company.

                On February 23, 1998, Motors and Gears completed an
                exchange offer under which $270,000 of 10 3/4% Series D
                Senior Notes ("Motors and Gears Notes") were exchanged for
                $170,000 of Senior Notes and $100,000 of Senior Notes. The
                terms of the new Motors and Gears Notes are substantially
                identical to the terms of the old Motors and Gears Notes.
                Interest on the Motors and Gears Notes is payable in
                arrears on May 15 and November 15. The notes are redeemable
                at the option of the Company, in whole or in part, at
                anytime on or after November 15, 2001. The fair value of
                the Motors and Gears Notes at December 31, 2000 was
                $251,000. The fair value was calculated using the Motors
                and Gears Notes' December 31, 2000 market price multiplied
                by the face amount. The Motors and Gears Senior Notes are
                not secured by the assets of Kinetek, Inc., Motors and
                Gears Holdings, Inc., or the Company and mature on November
                15, 2006.


                                         -51-

<PAGE>

                JTP had outstanding borrowings of $105,100 under a
                revolving credit agreement, $301,049 of public bonds, and
                $7,500 of subordinated seller notes outstanding at December
                31, 1999. All of these outstanding borrowings were repaid
                in connection with the sale of JTP on January 18, 2000.

                Capita had $5,500 of subordinated seller notes outstanding
                at December 31, 1999. These notes were assumed by the
                acquirer in connection with the reorganization of Capita on
                June 22, 2000.

The Indentures relating to the 2009 Debentures, the 2007 Seniors, and the
New 2007 Seniors (collectively the "JII Notes") restrict the ability of the
Company to incur additional indebtedness at its Restricted Subsidiaries.
The Indentures also restrict: the payment of dividends, the repurchase of
stock and the making of certain other restricted payments; certain dividend
payments to the Company by its subsidiaries; significant acquisitions; and
certain mergers or consolidations. The Indentures also require the Company
to redeem the JII Notes upon a change of control and to offer to purchase a
specified percentage of the JII Notes if the Company fails to maintain a
minimum level of capital funds (as defined).

The Indenture governing the Motors and Gears Notes contains certain
convenants which, among other things, restricts the ability of Motors and
Gears to incur additional indebtedness, to pay dividends or make other
restricted payments, engage in transactions with affiliates, to complete
certain mergers or consolidations, or to enter into certain guarantees of
indebtedness.

The Company is, and expects to continue to be, in compliance with the
provisions of these Indentures.

Included in interest expense is $5,067, $4,679 and $3,595 of amortization
of debt issuance costs for the years ended December 31, 2000, 1999, and
1998, respectively.


Note 13 - Income taxes
----------------------

Income (loss) from continuing operations before income taxes and minority
interest is as follows:

                                       Year ended December 31,
                                       -----------------------
                               2000              1999           1998
                               ----              ----           ----
Domestic                    $(45,200)         $(10,140)       $(17,128)
Foreign                        6,136             3,537           6,216
                            ---------          --------       ---------
 Total                      $(38,884)          $(6,603)       $(10,912)
                            =========          ========       =========

The provision (benefit) for income taxes from continuing operations
consists of the following:

                                            Year ended December 31,
                                            -----------------------
                                   2000                1999             1998
                                   ----                ----             ----

Current:
Federal                         $(9,601)             $3,191            $1,049
Foreign                           3,664               4,793               612
State and Local                  (1,253)              3,606             2,009
                                --------            --------           -------
                                 (7,190)             11,590             3,670
Deferred                          3,999             (12,542)              205
                                --------            --------           -------
   Total                        $(3,191)              $(952)           $3,875
                                ========            ========           =======


                                              -52-

<PAGE>


                                           December 31,        December 31,
                                              2000                 1999

Deferred income taxes consist of:
Deferred tax liabilities:
Intangibles                                  $11,918              $9,510
Tax over book depreciation                    10,494              11,356
Inter company tax gains                        5,869               6,331
Acquisition related liabilities                3,046               3,046
Other                                          1,718               1,421
                                             --------            -------
   Total deferred tax liabilities            $33,045             $31,664
                                             ========            =======
Deferred tax assets:
NOL carryforward                             $13,605             $18,325
Accrued interest on discount
 debentures                                   15,553              15,553
Pension obligation                               796                 954
Vacation accrual                               1,216                 922
Uniform capitalization of
 inventory                                     2,751               2,374
Allowance for doubtful accounts                1,754               1,130
Deferred financing fees                          623                 686
Intangibles                                    5,913               7,253
Book over tax depreciation                     3,542               3,312
Medical claims reserve                           873               1,067
Accrued commissions and bonuses                  281                 664
Warranty accrual                                 135                 289
Inventory reserves                             1,867               1,367
Restructuring reserve                            595                 712
Loss on sale of subsidiary                     1,107                   -
Deferred income                                  592                 989
Interest income                                  309                   -
Other                                          6,990               5,028
                                             --------            -------
   Total deferred tax assets                 $58,502             $60,625
                                             ========            =======
Valuation allowance for deferred
 tax assets                                 $(13,605)          $ (13,110)
                                            ---------          ----------
   Total deferred tax assets                $ 44,897             $47,515
                                            ---------          ----------
   Net deferred tax assets                  $ 11,852             $15,851
                                            =========          ==========

The increase in the valuation allowance during 2000 and 1999 was $495 and
$636, respectively.

The continuing operations provision (benefit) for income taxes differs from
the amount of income tax benefit computed by applying the United States
federal income tax rate to loss before income taxes.



                                      -53-

<PAGE>

A reconciliation of the differences from continuing operations is as
follows:

                                               Year ended December 31,
                                               -----------------------
                                           2000            1999           1998
                                           ----            ----           ----

Computed statutory tax benefit          $(13,609)        $(2,311)      $(3,819)
Increase (decrease) resulting from:
  Foreign subsidiary losses                    -               -           612
  Amortization of goodwill                 6,836           1,280         1,873
  Meals and entertainment                    285             273           265
  State and local tax                     (1,953)           (164)        3,397
  Increase in valuation allowance            495             636           564
  Foreign tax rate differential            1,879           1,427             -
  Foreign tax holidays                      (313)              -             -
  Other items, net                         3,189          (2,093)          983
                                         --------         -------      --------
Provision (benefit) for income
 taxes                                   $(3,191)          $(952)       $3,875
                                         ========         ========     ========

As of December 31, 2000, the consolidated loss carryforwards are
approximately $34,400 for regular tax purposes, and expire in various years
through 2012. These loss carryforwards, attributable to Welcome Home, are
subject to separate return limitation year rules. A full valuation
allowance has been provided against these loss carryforwards.

Note 14 - Sale of Subsidiaries
------------------------------

On March 19, 1999, the Company sold its assets in the Consolidated Plumbing
Industries ("CPI" or "Retube") division of Dura-Line for $3,389. There was
no gain or loss associated with the sale. CPI's product is used to replace
copper water pipe in homes.

On November 9, 1999, the Company sold the net assets of Parsons Precision
Products ("Parsons") for $22,000. Parsons is a manufacturer of titanium
hot-formed products for the aerospace industry. The Company recorded a gain
of $10,037 associated with the sale.

Note 15 - Related party transactions
------------------------------------

An individual who is shareholder, Director, General Counsel, and Secretary
for the Company is also a partner in a law firm used by the Company. The
firm was paid $1,451, $2,700, and $1,078 in fees and expenses in 2000,
1999, and 1998, respectively. The rates charged to the Company were at
arms-length.

Certain shareholders of TJC Management Corporation ("TJC") are also
shareholders of the Company. On July 25, 1997, a previous agreement with
TJC was amended and restated. This agreement was amended again in December
1999. Effective January 1, 2000, the Company pays TJC a $250 quarterly fee
for management services. The Company accrued fees to TJC of $1,000, $3,000,
and $3,000 in 2000, 1999, and 1998, respectively, related to this
agreement. These expenses are classified in "management fees and other" in
the Company's statements of operations.


                                      -54-

<PAGE>

On July 25, 1997, a previous agreement with TJC was amended and restated.
Under the new agreement, the Company pays TJC an investment banking fee of
up to 1%, based on the aggregate consideration paid, for its assistance in
acquisitions undertaken by the Company or its subsidiaries, and a financial
consulting fee not to exceed 0.5% of the aggregate debt and equity
financing that is arranged by the Jordan Company, plus the reimbursement of
out-of-pocket and other expenses. The Company paid $0, $1,176 and $3,000 in
2000, 1999, and 1998, respectively, to TJC for their assistance in relation
to acquisition and refinancing activities. These expenses are classified in
"management fees and other" in the Company's statements of operations.

The Company has agreements to provide management and consulting services to
various entities whose shareholders are also shareholders of the Company.
The Company also has agreements to provide investment banking and financial
consulting services to these entities. Fees for management and consulting
services are typically a percentage of the entity's net sales or earnings
before interest, taxes, depreciation and amortization. Fees for investment
banking and financial consulting services are based on the aggregate
consideration paid for acquisitions or the aggregate debt and equity
financing that is arranged by the Company, plus the reimbursement of out-of
pocket and other expenses. Amounts due from affiliated entities as a result
of providing the services described above were $2,469 and $937 as of
December 31, 2000 and 1999, respectively, and are classified in "prepaid
expenses and other current assets" in the Company's balance sheets. The
Company also made unsecured advances to these entities for the purpose of
funding operating expenses and working capital needs. These advances
totaled $9,081 and $6,385 as of December 31, 2000 and 1999, respectively,
and are classified in "prepaid expenses and other current assets" in the
Company's balance sheets.

Note 16 - Capital stock
-----------------------

Under the terms of a restricted common stock agreement with certain
shareholders and members of management, the Company has the right, under
certain circumstances, for a specified period of time to reacquire shares
from certain shareholders and management at their original cost. Starting
in 1993 or within 60 days of termination, the Company's right to repurchase
may be nullified if $1,800, in the aggregate, is paid to the Company by
management.

Note 17 - Preferred Stock
-------------------------

In May 1997, M&G Holdings issued $1,500 of senior, non-voting 8.0%
cumulative preferred stock to its minority shareholders.

Note 18 - Business segment information
--------------------------------------

The Company's business operations are classified into five business
segments: Specialty Printing and Labeling, Jordan Specialty Plastics,
Jordan Auto Aftermarket, Motors and Gears, and Consumer and Industrial
Products. As of July 21, 1999, Welcome Home is consolidated in the
Company's results of operations and is included in the Consumer and
Industrial Products segment (see note 3).

Specialty Printing and Labeling includes distribution of corporate
recognition, promotion, and specialty advertising products and the
production and distribution of calendars by JII Promotions; manufacture of
pressure sensitive label products for the electronics OEM market by
Valmark; manufacture of a wide variety of printed tape and labels by Pamco;
and manufacture of printed folding cartons and boxes, insert packaging and
blister pack cards at Seaboard.



                                     -55-

<PAGE>

Jordan Specialty Plastics includes the manufacturing of point-of-purchase
advertising displays by Beemak; manufacture and marketing of safety
reflectors, lamp components, bicycle reflector kits, modular storage units,
colorants and emergency warning triangles by Sate-Lite; design,
manufacture, and marketing of plastic injection-molded products for mass
merchandisers, major retailers, and large wholesalers and manufacture of
extruded vinyl chairmats for the office products industry by Deflecto.

Jordan Auto Aftermarket includes the remanufacturing of transmission
sub-systems for the U.S. automotive aftermarket by Dacco and the
remanufacturing and manufacturing of transmission sub-systems and the
manufacturing of clutch and discs and air conditioning compressors for the
U.S. automotive aftermarket at Alma.

Motors and Gears includes the manufacture of specialty purpose electric
motors for both industrial and commercial use by Imperial; precision gears
and gearboxes by Gear; AC and DC gears and gear motors and sub-fractional
AC and DC motors and gear motors for both industrial and commercial use by
Merkle Korff and FIR; and electronic motion control systems for use in
industrial and commercial processes such as conveyor systems, packaging
systems, elevators and automated assembly operations by ED&C and Motion
Control.

Consumer and Industrial Products includes the publishing of Bibles and
distribution of Bible, religious books, and recorded music by Riverside;
the manufacturing and importing of decorative home furnishing accessories
by Cape; the specialty retailing of gifts and decorative home accessories
by Welcome Home; and manufacture of orthopedic supports and pain reducing
medical devices at Cho-Pat, the manufacturing and development of flavors
used in beverages and foods at Flavorsource, the development of Internet
business solutions by Online Environs, the providing of Internet access to
Midwestern markets by ISMI, and the storage of data and access to dedicated
Internet connectivity at GramTel.

Measurement of Segment Operating Income and Segment Assets

The Company evaluates performance and allocates resources based on
operating income. The accounting policies of the reportable segments are
the same as those described in Note 2 - Significant Accounting Policies.

Inter-segment sales exist between Cape and Welcome Home. These sales were
eliminated in consolidation and are not presented in segment disclosures.
No single customer accounts for 10% or more of segment or consolidated net
sales.

Operating income by business segment is defined as net sales less operating
costs and expenses, excluding interest and corporate expenses.

Identifiable assets are those used by each segment in its operations.
Corporate assets consist primarily of cash and cash equivalents, equipment,
notes receivable from affiliates and deferred debt issuance costs.


                                 -56-

<PAGE>

The operating results and assets of entities acquired during the three year
period are included in the segment information since their respective dates
of acquisition. The operating results of JTP and Capita have not been
included in the segment information below, as these businesses have been
classified as discontinued operations in accordance with APB 30.

Factors Used to Identify the Enterprise's Reportable Segments

The Company's reportable segments are business units that offer different
products. The reportable segments are each managed separately because they
manufacture and distribute distinct products with different production
processes.

Summary financial information by business segment is as follows:

                                                  Year ended December 31,
                                                  -----------------------
                                              2000         1999          1998
                                              ----         ----          ----
Net Sales:
  Specialty Printing and Labeling           $122,691     $117,678     $120,160
  Jordan Specialty Plastics                   98,353       86,284       71,568
  Jordan Auto Aftermarket                    141,213      131,935       65,387
  Motors and Gears                           316,666      307,877      275,833
  Consumer and Industrial Products           128,373      122,881      100,631
                                             -------    ---------      --------
    Total                                   $807,296     $766,655     $633,579
                                            ========     =========     ========

Operating income (loss):
  Specialty Printing and Labeling             $7,210       $7,638       $8,259
  Jordan Specialty Plastics                    1,928        4,319        4,654
  Jordan Auto Aftermarket                     20,449       16,675       10,531
  Motors and Gears                            36,497       50,597       42,324
  Consumer and Industrial Products             3,071        7,867        6,574
                                               -----       ------       ------
    Total business segment operating
     income                                   69,155       87,096       72,342

  Corporate expense                           (18,142)    (17,851)     (14,365)
                                              --------    --------     --------
    Total consolidated operating
     Income                                  $51,013      $69,245      $57,977
                                             =======      ========     =======

Depreciation and Amortization:
  Specialty Printing and Labeling             $4,786       $4,563       $4,949
  Jordan Specialty Plastics                    6,312        5,174        4,693
  Jordan Auto Aftermarket                      4,234        3,100        1,129
  Motors and Gears                            29,964       14,594       12,727
  Consumer and Industrial Products             4,134        3,228        2,421
                                               -----       ------        -----
    Total business segment
     amortization and depreciation            49,430       30,659       25,919
  Corporate                                    5,748        5,492        4,243
                                               -----       ------        -----
    Total consolidated depreciation
     and amortization                        $55,178      $36,151      $30,162
                                             =======      =======      =======

Capital expenditures, net:
  Specialty Printing and Labeling             $3,071       $1,587       $1,867
  Jordan Specialty Plastics                    5,277        2,742        3,533
  Jordan Auto Aftermarket                      1,539        1,196          665
  Motors and Gears                             5,105        4,234        5,190
  Consumer and Industrial Products             3,930        1,136          967
  Corporate                                   (2,314)       1,002          847
                                              -------     -------        ------
    Total capital expenditures               $16,608      $11,897      $13,069
                                             =======      =======      =======


                                        -57-

<PAGE>

                                                    Year ended December 31,
                                                       2000          1999
                                                       ----          ----
Identifiable assets:
  Specialty Printing and Labeling                     $103,895     $102,061
  Jordan Specialty Plastics                            119,749      104,086
  Jordan Auto Aftermarket                              152,618      146,835
  Motors and Gears                                     359,197      383,790
  Consumer and Industrial Products                      82,887       59,624
                                                       -------      -------
   Total consolidated business segment
    assets of continuing operations                    818,346      796,396
  Corporate assets                                      78,355       65,803
  Assets of discontinued operations                          -      297,297
                                                       -------      -------
   Total consolidated identifiable
     assets                                           $896,701   $1,159,496
                                                      ========   ==========

-------------------------------------------------------------------------------

Summary financial information by
 geographic area is as follows:                     Year ended December 31,
                                                    -----------------------
Net sales to unaffiliated customers:              2000        1999       1998
                                                  ----        ----       ----

United States                                   $728,714     $709,986  $589,921
Foreign                                           78,582       66,669    43,658
                                                  ------     --------    ------
  Total                                         $807,296     $776,655  $633,579
                                                ========    =========  ========
Identifiable assets:
United States                                   $881,419   $1,147,528
Foreign                                           15,282       11,968
                                                  ------       ------
  Total                                         $896,701   $1,159,496
                                                ========   ==========

Note 19 - Acquisition and formation of subsidiaries
---------------------------------------------------

In December 2000, the Company formed GramTel Communications, Inc.
("GramTel"). GramTel is an information technology infrastructure
outsourcing company that allows its customers to transfer, protect and
store their mission critical data at regionally located Secure Network
Access Centers. The Company has invested $2,280 in GramTel through December
31, 2000 for property, equipment and other start-up related expenses.

On October 23, 2000, the Company purchased the stock of Flavorsource, Inc.
("Flavorsource") for $9,728 including costs directly related to the
transaction. Flavorsource is a developer and compounder of flavors for use
in beverages of all kinds, including coffee, tea, juices, bar mixes, sodas,
and cordials, as well as in nutritional foods, bakery products and ice
cream and dairy products. The acquisition was financed with $8,478 in cash
and a $1,250 subordinated seller note. The purchase price has been
allocated to working capital of $270 and property, plant and equipment of
$66, and resulted in an excess purchase price over net identifiable assets
of $9,392.

On October 10, 2000, the Company purchased the assets of Internet Services
of Michigan, Inc. ("ISMI") for $1,181. ISMI is an Internet service provider
with approximately 9,500 customers located in Michigan. ISMI offers
standard dial up resources as well as high-speed Internet connections such
as DSL, Satellite and ISDN. ISMI also provides website development and
creation services and web hosting features. The acquisition was financed
with cash and the purchase price has been allocated to net operating
liabilities of $(659), and property, plant and equipment of $350, and
resulted in an excess purchase price over net identifiable assets of
$1,490.


                                      -58-

<PAGE>

On June 2, 2000, the Company purchased Instachange Displays Limited and
Pique Display Systems, Inc. (collectively "IDL") for approximately $12,805
including costs directly related to the transaction. IDL is Canada's
leading manufacturer and distributor of point-of-purchase display and
retail merchandising products. The acquisition was financed with $10,316 of
cash and a $2,489 subordinated seller note. The purchase price has been
allocated to working capital of $1,629, and property, plant and equipment
of $1,389, and resulted in an excess purchase price over net identifiable
assets of $9,787. IDL is a division of Deflecto.

On March 14, 2000, the Company purchased Online Environs, Inc. ("Online
Environs"), an international Internet business solutions developer and
consultant, for $5,093 including costs directly associated with the
transaction. The acquisition was financed with $3,593 in cash and a $1,500
subordinated seller note. Online Environs' digital communications solutions
are designed to help clients increase sales, improve communications, and
create and enhance business identities over the Internet, commonly known as
eBusiness. The purchase price has been preliminarily allocated to working
capital of $258, property, plant and equipment of $194, non current assets
of $2, and long-term liabilities of $(43) and resulted in an excess
purchase price over net identifiable assets of $4,682.

On December 20, 1999, the Company purchased the stock of Yearntree, Ltd.
("Yearntree") for $3,603. Yearntree is a manufacturer of injection molded
office products in the United Kingdom. The purchase was financed with cash
of $2,946 and assumed debt of $657. The purchase price has been allocated
to working capital of $1,117 and property, plant and equipment of $1,845,
and resulted in an excess purchase price over net identifiable assets of
$641. Yearntree is a subsidiary of Deflecto.

In December 1999, Motors and Gears, through its wholly owned subsidiary
FIR, acquired certain net assets of the L'Europea Electric Hoist division
("L'Europea") from Pramac Industriale for approximately $5,200. L'Europea
hoists are electric pulleys and elevators used for lifting applications
mainly found at construction sites. As FIR's operations are included for
periods ending two months prior to the Company's year-end and interim
periods, the effects of this transaction were not included in the Company's
results until 2000. The purchase price has been preliminarily allocated to
working capital of approximately $1,200 and resulted in an excess purchase
price over net identifiable assets of $4,000.

On July 30, 1999, the Company purchased Tele-Flow, Inc. ("Tele-Flow") for
$3,400. Tele-Flow is a manufacturer of polystyrene plastic injection molded
heating, ventilation and air conditioning ("HVAC") registers, air diffusers
and flexible air ducts. The purchase price was allocated to working capital
of $232, property, plant, and equipment of $1,811 and non-current
liabilities of ($185), resulting in an excess purchase price over
identifiable assets of $1,542.

On July 1, 1999, the Company acquired Supreme Die Cutting, Inc.
("Supreme"). Supreme is a manufacturer of folding cartons and specialty
paperboard products. The purchase price of $514 including costs directly
related to the transaction, was allocated to inventory of $50 and property,
plant and equipment of $450, and resulted in an excess purchase price over
identifiable assets of $14.



                                    -59-

<PAGE>

On March 22, 1999, the Company purchased Alma Products, Inc. ("Alma") for
$86,166 including costs directly related to the transaction. Alma is
comprised of three primary product lines: (i) high quality remanufactured
torque converters used to supply warranty replacements for auto
transmissions originally sold to Ford, Chrysler, John Deere and
Caterpillar, (ii) new and remanufactured air conditioning compressors for
original equipment manufacturers including Ford, Chrysler and General
Motors, and (iii) new and remanufactured clutch and disc assemblies used in
standard transmissions sold primarily to Ford. The purchase price of
$88,084 is made up of cash of $85,995 and the assumption of a $2,089
long-term liability for retiree healthcare benefits. The purchase price was
allocated to working capital of $18,722, property, plant and equipment of
$9,455, retiree healthcare benefit obligations of ($2,089), and resulted in
an excess purchase price over net identifiable assets of $59,907. The
acquisition was financed using a portion of the proceeds from the issuance
of the New 2007 Seniors (see note 12).

On February 11, 1998, JSP purchased all of the common stock of Deflecto
Corporation ("Deflecto"). Deflecto designs, manufactures and markets
plastic injection molded products such as office supplies and hardware
products. The purchase price of $43,000, including costs directly related
to the transaction, was allocated to working capital of $8,598, property,
plant and equipment of $6,346, other long-term assets and liabilities of
$(1,942), and resulted in an excess purchase price over net identifiable
assets of $29,998. The acquisition was financed with cash from the
Company's credit line and a $5,000 subordinated seller note.

On February 26, 1998, JSP purchased all of the net assets of Rolite
Plastics, Inc. Rolite is a manufacturer of extruded vinyl chairmats for the
office products industry. The purchase price of $6,000 including costs
directly related to the transaction, was allocated to working capital of
$483, property, plant and equipment of $754, and resulted in an excess
purchase price over net identifiable assets of $4,763. The acquisition was
financed with cash and a $900 subordinated seller note. Rolite operates as
a division of Deflecto.

On May 15, 1998, Motors and Gears Industries, Inc. ("Motors and Gears")
acquired all of the outstanding stock of Advanced D.C. Motors, Inc. and its
affiliated corporations (collectively "ADC") for $59,157. The purchase
price, including costs incurred directly related to the transaction, was
allocated to working capital of $9,345; property, plant and equipment of
$4,088; covenants not to compete of $662; other long-term assets and
liabilities of $(51); and resulted in an excess purchase price over net
identifiable assets of $45,113. ADC designs and manufactures special
purpose, custom designed motors for use in electric lift trucks, power
sweepers, electric utility vehicles, golf carts, electric boats, and other
niche products. ADC also designs and manufactures its own production
equipment as well as electric motor components know as commutators.

On December 31, 1998, Motors and Gears, through its wholly-owned subsidiary
Imperial, acquired all of the outstanding stock of Euclid Universal
Corporation ("Euclid") for $2,039. The purchase price, including costs
incurred directly related to the transaction, was allocated to working
capital of $772, property, plant and equipment of $953, and other
non-current assets and liabilities of $(498), resulting an excess purchase
price over net identifiable assets of $812. Euclid designs and manufactures
speed reducers, custom gearing, right angle gearboxes and transaxles for
use in a wide array of industries including material handling, healthcare
and floor care. Euclid has strong technical expertise in the areas of worm,
spur and helical gearing.



                                     -60-

<PAGE>

The above acquisitions have been accounted for as purchases and their
operating results have been consolidated with the Company's results since
the respective dates of acquisition. Unaudited pro forma information with
respect to the Company as if the 2000 acquisitions and divestitures had
occurred on January 1, 2000 and 1999 and as if the 1999 acquisitions and
divestitures had occurred on January 1, 1999, is as follows:

                                                             Year ended
                                                             December 31,
                                                         2000           1999
                                                         ----           ----
Net Sales                                              $815,828       $817,994
Net (loss) income before extraordinary items            (43,450)        (9,194)
Net (loss) income                                       (41,521)        (8,891)

Note 20 - Additional Purchase Price Agreements
----------------------------------------------

The Company has a contingent purchase price agreement relating to its
acquisition of Deflecto in 1998. The plan is based on Deflecto achieving
certain earnings before interest and taxes and is payable on April 30,
2008. If Deflecto is sold prior to April 30, 2008, the plan is payable 120
days after the transaction.

The Company has a deferred purchase price agreement relating to its
acquisition of Yearntree in December 1999. The agreement is based on
Yearntree achieving certain agreed upon cumulative net income before
interest and taxes for the 24 months beginning January 1, 2000 and ending
December 31, 2001. The agreement is payable 30 days after the receipt of
the December 31, 2001 audited financial statements.

The Company also has a deferred purchase price agreement relating to its
acquisition of Teleflow in July 1999. This agreement is based upon Teleflow
achieving certain agreed upon earnings before interest, taxes,
depreciation, and amortization for each year through the year ended
December 31, 2002. At December 31, 2000, $500 has been accrued related to
this agreement.

Motors and Gears has an additional purchase price agreement relating to its
acquisition of Advanced DC in May 1998. The terms of this agreement provide
for additional consideration to be paid if the acquired entity's results of
operations exceed certain targeted levels. Targeted levels are set
substantially above the historical experience of the acquired entity at the
time of acquisition. Subject to the terms and conditions of the agreement,
the Company made payments to the sellers on or before April 1st immediately
following the respective fiscal year during which each such contingent
payment was earned. The contingent payments apply to operations of fiscal
years 1998 and 1999. Motors and Gears made a payment related to this
agreement of $3,093 to the sellers of Advanced DC in March 2000 and an
additional payment of $3,200 in March 1999. These contingent payments are
recorded as an addition to goodwill.

Motors and Gears also has a contingent purchase price agreement relating to
its acquisition of Motion Control on December 18, 1997. The terms of the
Motion Control acquisition agreement provides for additional consideration
to be paid if the acquired entity's results of operations exceed certain
targeted levels. Targeted levels are set substantially above the historical
experience of the acquired entity at the time of acquisition. The agreement
becomes exercisable in 2003 and payments, if any, under the contingent
agreement will be placed in a trust and paid out in cash in equal annual
installments over a four year period.




                                      -61-

<PAGE>

Note 21 - Contingencies
-----------------------

The Company is subject to legal proceedings and claims which arise in the
ordinary course of its business. The Company believes that the final
disposition of such matters will not have a material adverse effect on the
financial position or results of operations of the Company.

Note 22 - Goodwill Impairment
-----------------------------

During the third quarter of 2000, the Company recorded a non-cash
impairment loss of $14,636 associated with the write-down of goodwill
relating to one of the Motors and Gears businesses, ED&C. This write-down
of goodwill is not deductible for income tax purposes. Significant adverse
changes in ED&C's business environment as well as historical, current and
projected cash flow losses led management to evaluate the operations of
ED&C. As a result of this evaluation, management concluded that ED&C's
goodwill was impaired, and accordingly, it has been written down to zero,
the Company's best estimate of its fair value as determined using expected
future cash flows. Considerable management judgment is necessary to
determine fair value. Accordingly, actual results could vary significantly
from these estimates.

Note 23 - Quarterly Financial Information (Unaudited)
-----------------------------------------------------
                                                   Three Months Ended
                              December 31  September 30    June 30     March 31
                              -----------  ------------    --------    --------
2000:
Net sales                     $205,297       $203,798      $207,083   $191,118
Cost of sales,
 excluding depreciation        130,963        130,604       128,809    122,379
Loss from continuing
 operations                    (14,354)       (18,967)          552     (3,277)
Net income (loss)               (9,120)       (19,098)        9,350    186,746

1999:
Net sales                     $217,265       $192,605      $193,175   $163,610
Cost of sales,
 excluding depreciation        141,159        125,815       124,806    105,443
Loss from continuing
 operations                      3,021         (2,837)       (2,577)    (3,338)
Net income (loss)              (15,200)        (2,355)        7,843     (8,867)



Note 24 - Subsequent Events
---------------------------

On February 2, 2001, the Company sold the assets of Riverside to a
third-party for cash proceeds of $16,663. Riverside is a publisher of
Bibles and a distributor of Bibles, religious books and music recordings.
The cash proceeds were used to pay down the Company's Revolving Credit
Facility. The Company recognized a loss of $2,798, which is recorded in the
2000 financial statements.

On March 7, 2001, the Company purchased the assets of J.A. Larson Company
("JA Larson"). JA Larson is a flexographic printer of pressure sensitive
labels, tags and seals, which are manufactured in a wide variety of shapes
and sizes. JA Larson will be fully integrated into Pamco by March 31, 2001.
The Company paid $375 in cash for the assets. The purchase price has not
been allocated at this time.



                                     -62-

<PAGE>


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

         None.

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
         -----------------------------------------------

The following sets fourth the names and ages of each of the Company's
directors and executive officers and the positions they hold at the
Company:

Name                     Age  Position with the Company
----                     ---  -------------------------

  John W. Jordan II      53   Chairman of the Board of Directors and Chief
                              Executive Officer.
  Thomas H. Quinn        53   Director, President and Chief Operating Officer.
  Joseph S. Steinberg    57   Director.
  David W. Zalaznick     46   Director.
  Jonathan F. Boucher    44   Director, Vice President and Assistant Secretary.
  G. Robert Fisher       61   Director, General Counsel and Secretary.

Each of the directors and executive officers of the Company will serve
until the next annual meeting of the stockholders or until their death,
resignation or removal, whichever is earlier. Directors are elected
annually and executive officers for such terms as may be determined by the
Company's board of directors (the "Board of Directors").

Set fourth below is a brief description of the business experience of each
director and executive officer of the Company.

Mr.Jordan has served as Chairman of the Board of Directors and Chief
Executive Officer of the Company since 1988. Mr. Jordan is a managing
partner of The Jordan Company, a private merchant banking firm which he
founded in 1982. Mr. Jordan is also a director of Ameriking, Inc., Carmike
Cinemas, Inc., Archibald Candy Corporation, GFSI Inc., GFSI Holdings, Inc.,
Kinetek, Inc., Rockshox, Inc., Welcome Home and Apparel Ventures, Inc., as
well as other privately held companies.

Mr. Quinn has served as a director, President and Chief Operating Officer
of the Company since 1988. From November 1985 to December 1987, Mr. Quinn
was Group Vice President and a corporate officer of Baxter International
("Baxter"). From September 1970 to November 1985, Mr. Quinn was employed by
American Hospital Supply Corporation ("American Hospital"), where he was a
Group Vice President and corporate officer when American Hospital was
acquired by Baxter. Mr. Quinn is also the Chairman of the Board and Chief
Executive Officer of Archibald Candy Corporation, Chairman of the Board of
Kinetek, Inc. as well as a director of Welcome Home, Ameriking, Inc. and
other privately held companies.

Mr. Steinberg has served as a director of the Company since 1988. Since
1979, Mr. Steinberg has been the President and a director of Leucadia
National Corporation, a holding company. He is also a Trustee of New York
University.

Mr. Zalaznick has served as a director of the Company since June 1997.
Since 1982, Mr. Zalaznick has been a managing partner of The Jordan
Company. Mr. Zalaznick is also a director of Carmike Cinemas, Inc.,
Ameriking, Inc., Marisa Christina, Inc., Kinetek, Inc., GFSI Inc., GFSI
Holdings Inc. and Apparel Ventures, Inc., as well as other privately held
companies. Mr. Boucher has served as a Vice President, Assistant Secretary
and a director of the Company since 1988. Since 1983, Mr. Boucher has been
a partner of The Jordan Company. Mr. Boucher is also a director of Kinetek,
Inc., as well as several other privately held companies.


                                  -63-


<PAGE>


Mr. Fisher has served as a director, General Counsel and Secretary since
1988. Since February 1999, Mr. Fisher has been a member of the law firm of
Sonnenschein, Nath & Rosenthal, a firm that represents the Company in
various legal matters. From June 1995 until February 1999, Mr. Fisher was a
member of the law firm of Bryan Cave LLP. For the prior 27 years, Mr.
Fisher was a member of the law firm of Smith, Gill, Fisher & Butts, P.C.,
which combined with Bryan Cave LLP in June 1995.


Item 11. EXECUTIVE COMPENSATION
         ----------------------

The following table shows the cash compensation paid by the Company, for
the three years ended December 31, 2000, for services in all capacities to
the President and Chief Operating Officer of the Company.

                                         Summary Compensation Table(1)

                                              Annual Compensation
                                 ----------------------------------------------
                                                                       Other
Name and Principal Position      Year     Salary        Bonus      Compensation
---------------------------      ----     ------        -----      ------------
John W. Jordan II, Chief
Executive Officer(2)
                                 2000            -              -          -
                                 1999            -              -          -
                                 1998            -              -          -
Thomas H. Quinn, President
and Chief Operating Officer      2000      750,000      1,250,000
                                 1999      700,000      1,906,150          -
                                 1998      600,000      1,402,950     36,865


------------------------------------
(1)    The aggregate number of shares of restricted Common Stock held by
       the Company's executive officers and directors at December 31, 2000
       was 5,000 shares, consisting of 4,000 shares held by Mr. Quinn and
       1,000 shares held by Mr. Boucher. The value of the restricted shares
       is not able to be calculated because there is no market price for
       shares of the Company's unrestricted Common Stock. Dividends will be
       paid on the restricted shares to the same extent paid on
       unrestricted shares. See "Management-Restricted Stock Agreements".

(2)    Mr. Jordan derived his compensation from The Jordan Company and JZCC
       for his services to the Company and its subsidiaries. He received no
       compensation from the Company or its subsidiaries for his services
       as Chief Executive Officer.




                                   -64-

<PAGE>

         Employment Agreement. Mr. Quinn has entered into an employment
agreement with the Company which provides for his employment as President
and Chief Operating Officer of the Company. The employment agreement can be
terminated at any time by the Company. His base salary is $750,000 per
year, and he is provided with a guaranteed bonus of $100,000 per year,
which amounts are inclusive of any compensation, fees, salary, bonuses or
other payments to Mr. Quinn by any of the subsidiaries or affiliates of The
Jordan Company. Under the employment agreement, if Mr. Quinn's employment
is terminated for reasons other than voluntary termination, cause,
disability or death, he will be paid a severance equal to the greater of
$350,000 or the sum of his most recent base annual salary plus $100,000. If
employment is terminated for reasons of cause or voluntary termination, no
severance payment is made.

         Restricted Stock Agreements. The Company is a party to restricted
stock agreements, dated as of February 25, 1988, with each Messrs. Quinn
and Boucher, pursuant to which they were issued shares of Common Stock
which, for purposes of such restricted stock agreements, were classified as
"Group 1 Shares" or "Group 2 Shares". Messrs. Quinn and Boucher were issued
3,500 and 1,870.7676 Group 1 Shares, respectively, and 4,000 and 1,000
Group 2 Shares, respectively, at $4.00 per share. The Group 1 Shares are
not subject to repurchase or contractual restrictions on transfer pursuant
to the Restricted Stock Agreements. The Group 2 Shares are subject to
repurchase at cost, in the event that Messrs. Quinn or Boucher ceases to be
employed (as a partner, officer, or employee) by the Company, The Jordan
Company, Jordan/Zalaznick Capital Company ("JZCC"), or any reconstitution
thereof conducting similar business activities in which they are a partner,
officer or employee. If such person ceases to be so employed prior to
January 1, 2003, the Group 2 Shares can also be repurchased at cost, unless
such person releases and terminates such repurchase option by making a
payment of $300.00 per share to the Company. Certain adjustments to the
foregoing occur in the event of the death or disability of any of the
partners of The Jordan Company or JZCC, the death or disability of such
person, or the sale of the Company. On January 1, 1992, the Company issued
Messrs. Quinn and Boucher 600 and 533.8386 shares, respectively, at $107.00
per share pursuant to similar Restricted Stock Agreements, under which such
shares were effectively treated as "Group 1 Shares". On December 31, 1992
the Company issued an additional 400 shares to Mr. Quinn for $107.00 per
share pursuant to similar Restricted Stock Agreements, under which such
shares were effectively treated as "Group 1 Shares". The purchase price per
share was based upon an independent appraiser's valuation of the shares of
Common Stock at the time of their issuance. These shares were issued by the
Company to provide a long-term incentive to the recipients to advance the
Company's business and financial interest.

         Directors Compensation. The Company compensates its directors
quarterly at $20,000 per year for each director. The Indenture permits
directors fees of up to $250,000 per year in the aggregate. In addition,
the Company reimburses directors for their travel and other expenses
incurred in connection with attending Board meetings (and committees
thereof) and otherwise performing their duties as directors of the Company.



                                   -65-


<PAGE>

Item 12. PRINCIPAL STOCKHOLDERS

The following table furnishes information, as of March 30, 2001, as to the
beneficial ownership of the Company's Common Stock by (i) each person known
by the Company to beneficially own more than 5% of the outstanding shares
of Common Stock (ii) each director and executive officer of the Company,
and (iii) all officers and directors of the Company as a group.

                                              Amount of Beneficial Ownership
                                             ----------------------------------
                                              Number of            Percentage
                                               Shares                Owned(1)
                                                ------               --------
Executive Officers and Directors
John W. Jordan, II (2) (3) (4)                  41,820.9087           42.5%
David W. Zalaznick (3) (5) (6)                  19,965.0000           20.3%
Thomas H. Quinn (7)                             10,000.0000           10.2%
Leucadia Investors, Inc. (3)                     9,969.9999           10.1%
Jonathan F. Boucher (8)                          5,533.8386            5.6%
G. Robert Fisher (4) (9)                           624.3496            0.6%
Joseph S. Steinberg (10)                             0.0000            0.0%
All directors and officers as a group
(5 persons) (3)                                 87,914.0968           89.3%


------------------------------------

(1)    Calculated pursuant to Rule 13d-3 (d) under the Exchange Act. Under
       Rule 13d-3 (d), shares not outstanding which are subject to options,
       warrants, rights of conversion privileges exercisable within 60 days
       are deemed outstanding for the purpose of calculating the number and
       percentage owned by such person, but not deemed outstanding for the
       purpose of calculating the percentages owned by each other person
       listed. As of December 31, 2000, there were 98,501.0004 shares of
       Common Stock issued and outstanding.

(2)    Includes 1 share held personally and 41,819.9087 shares held by
       the John W. Jordan II Revocable Trust. Does not include 309.2933
       shares held by Daly Jordan O'Brien, the sister of Mr. Jordan, 309.2933
       shares held by Elizabeth O'Brien Jordan, the mother of Mr. Jordan, or
       309.2933 shares held by George Cook Jordan, Jr., the brother of
       Mr. Jordan.

(3)    Does not include 100 shares held by The Jordan/Zalaznick Capital
       Company ("JZCC") or 3,500 shares held by Mezzanine Capital & Income
       Trust 2001 PLC ("MCIT"), a publicly traded U.K. investment trust advised
       by an Affiliate of The Jordan Company (controlled by Messrs. Jordan and
       Zalaznick). Mr. Jordan, Mr. Zalaznick and Leucadia, Inc. are the sole
       partners of JZCC. Mr. Jordan and Mr. Zalaznick own and manage the
       advisor to MCIT.

(4)    Does not include 3,248.3332 shares held by the Jordan Family Trust, of
       which John W. Jordan II, George Cook Jordan, Jr., and G. Robert Fisher
       are the trustees.

(5)    Does not include 82.1697 shares held by Bruce Zalaznick, the brother of
       Mr. Zalaznick.

(6)    Excludes 2,541.4237 shares that are held by John W. Jordan II
       Revocable Trust, but which may be purchased by Mr. Zalaznick, and must
       be purchased by Mr. Zalaznick, under certain circumstances, pursuant
       to an agreement, dated as of October 27, 1988, between Mr. Jordan and
       Mr. Zalaznick.

(7)    Includes 4,000 shares which are treated as "Group 2 Shares" pursuant
       to the terms of a Restricted Stock Agreement between Mr. Quinn and the
       Company. See "Management-Restricted Stock Agreements".

(8)    Includes 1,000 shares which are treated as "Group 2 Shares" pursuant
       to the terms of a Restricted Stock Agreement between Mr. Boucher and
       the Company. See "Management-Restricted Stock Agreements".

(9)    Includes 624.3496 shares held by G. Robert Fisher, as trustee of the
       G. Robert Fisher Irrevocable Gift Trust, U.T.I., dated December 26,
       1990.


                                    -66-

<PAGE>


(10)   Excludes 9,969.9999 shares held by Leucadia Investors, Inc., of
       which Joseph S. Steinberg is President and a director.

         Stockholder Agreement. Each holder of outstanding shares of Common
Stock of the Company is a party to a Stockholder Agreement, dated as of
June 1, 1998 (the "Stockholder Agreement"), by and among the Company and
such stockholders. The Stockholder Agreement subjects the transfer of
shares of Common Stock by such stockholders to a right of first refusal in
favor of the Company and "co-sale" rights in favor of the other
stockholders, subject to certain restrictions. Under certain circumstances,
stockholders holding 60% or more of the outstanding shares of Common Stock,
on a fully diluted basis, have certain rights to require the other
stockholders to sell their shares of Common Stock.

Item 13. CERTAIN TRANSACTIONS
-----------------------------

Employment Agreements; Stock Transactions. On February 25, 1988, the
Company entered into an employment agreement with Thomas H. Quinn, pursuant
to which Mr. Quinn became the President and Chief Operating Officer of the
Company, effective January 1, 1988. See "Management-Employment Agreement".

Fannie May. In 1995, the Company acquired 151.28 shares of common stock of
Fannie May (representing 15.1% of the outstanding common stock of Fannie
May on a fully-diluted basis) for $0.2 million. These shares of common
stock were purchased from the John W. Jordan II Revocable Trust, which
purchased the in July 1995 for $0.2 million. Fannie May's Chief Executive
Officer is Mr. Quinn, and its stockholders include Messrs. Jordan, Quinn,
Zalaznick, and Boucher, who are directors and stockholders of the Company,
as well as other partners, principals, and associates of The Jordan Company
who are also stockholders of the Company. Fannie May, which is also known
as "Fannie May Candies" is a manufacturer and marketer of kitchen-fresh,
high-end boxed chocolates and other confectionary items through its
company-owned retail stores and third-party retail outlets. Fannie May also
sells through quantity order, mail order, and fund raising programs in the
United States and Canada. Its products are marketed under the "Fannie May",
and "Fanny Farmer", "Sweet Factory" and "Laura Secord" brand names.

JIR. In 2000, the Company made approximately $5.5 million of unsecured
advances to JIR Broadcast, Inc. and JIR Paging, Inc. Each of these
company's Chief Executive Officer is Mr. Quinn and its stockholders include
Messrs. Jordan, Quinn, Zalaznick and Boucher, who are the Company's
directors and stockholders, as well as other, partners, principals and
associates of The Jordan Company who are also the Company's stockholders.
These companies are engaged in the development of businesses in Russia,
including the broadcast and paging sectors.

JZ International, Ltd. In November 1998, the Company, through Motors and
Gears, invested $5.6 million in Class A Preferred Stock and $1.7 million in
Class B Preferred Stock of JZ International, Ltd. In April 2000, the
Company, through Motors and Gears, invested an additional $5.0 million in
Class A Preferred Stock of JZ International, Ltd. This increases the
Company's investment in JZ International to $12.3 million at December 31,
2000. JZ International's Chief Executive Officer is David W. Zalaznick, and
its stockholders include Messrs. Jordan, Quinn, Zalaznick and Boucher, who
are the Company's directors and stockholders, as well as other partners,
principals and associates of The Jordan Company who are also the Company's
stockholders. JZ International is a merchant bank located in London,
England that is focused on making European and other international
investments.

ISMG. As of December 31, 2000, the Company has made unsecured advances of
approximately $10.7 million to Internet Services Management Group ("ISMG").
ISMG is an Internet services provider ("ISP") for more than 111,000
customers. The Company owns 5% of the common stock of ISMG, with the
remainder owned by the Company's stockholders and management of ISMG.


                               -67-

<PAGE>


Legal Counsel. Mr. G. Robert Fisher, a director of, and the general counsel
and secretary to, the Company, is also a partner of Sonnenschein, Nath &
Rosenthal. Mr. Fisher and his law firm have represented the Company and The
Jordan Company in the past, and expect to continue representing them in the
future. In 2000, Sonnenschein, Nath & Rosenthal were paid approximately
$1.5 million in fees and expenses by the Company.

Directors and Officers Indemnification. The Company has entered into
indemnification agreements with each member of the Board of Directors
whereby the Company has agreed, subject to certain exceptions, to indemnify
and hold harmless each director from liabilities incurred as a result of
such persons status as a director of the Company. See "Management-Directors
and Executive Officers of the Company".

Future Arrangements. The Company has adopted a policy that future
transactions between the Company and its officers, directors and other
affiliates (including the Motors and Gears Subsidiaries) must (i) be
approved by a majority of the members of the Board of Directors and by a
majority of the disinterested members of the Board of Directors and (ii) be
on terms no less favorable to the Company than could be obtained from
unaffiliated third-parties.


                                  Part IV

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

(a)      Documents filed as part of this report:

(1)      Financial Statements

         Reference is made to the Index to Consolidated Financial
         Statements appearing at Item 8, which is incorporated herein by
         reference.

(2)      Financial Statement Schedule

         The following financial statement schedule for the years ended
         December 31, 2000, 1999, and 1998 is submitted herewith:

         Item                                                    Page Number
         ----                                                    -----------
         Schedule II - Valuation and qualifying accounts              76

         All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions, are not applicable and therefore
have been omitted, or the information has been included in the consolidated
financial statements.

(3)      Exhibits
         --------

         An index to the exhibits required to be listed under this Item
         14(a) (3) follows the "Signatures" section hereof and is
         incorporated herein by reference.

(a)      Reports on Form 8-K

         None.

                                      -68-

<PAGE>

                                 SIGNATURES

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



                                                    JORDAN INDUSTRIES, INC.


                                                By   /s/ John W. Jordan II
                                                   ----------------------------
                                                    John W. Jordan II
Dated:            March 30, 2001                    Chief Executive Officer

                  Pursuant to the requirements of the Securities and
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.


                                                By   /s/ John W. Jordan II
                                                   ----------------------------
                                                    John W. Jordan, II
Dated:            March 30, 2001                    Chairman of the Board of
                                                    Directors and Chief
                                                    Executive Officer



                                                By   /s/ Thomas H. Quinn
                                                   ----------------------------
                                                    Thomas H. Quinn
Dated:            March 30, 2001                    Director, President and
                                                    Chief Operating Officer



                                                By   /s/ Jonathan F. Boucher
                                                   ----------------------------
                                                    Jonathan F. Boucher
Dated:            March 30, 2001                    Director, Vice President,
                                                    and Assistant Secretary



                                                By   /s/ G. Robert Fisher
                                                   ----------------------------
                                                    G. Robert Fisher
Dated:            March 30, 2001                    Director, General Counsel
                                                    and Secretary



                                                By   /s/ David W. Zalaznick
                                                   ----------------------------
                                                    David W. Zalaznick
Dated:            March 30, 2001                    Director



                                                By   /s/ Joseph S. Steinberg
                                                   ----------------------------
                                                    Joseph S. Steinberg
Dated:            March 30, 2001                    Director



                                                By   /s/ Thomas C. Spielberger
                                                   ----------------------------
                                                  Thomas C. Spielberger
Dated:            March 30, 2001                  Sr. Vice President,
                                                  Finance and Accounting
                                                  (Principal Financial Officer)


                                   -69-

<PAGE>

                                                                   Schedule II

                          JORDAN INDUSTRIES, INC.
                     VALUATION AND QUALIFYING ACCOUNTS
                           (dollars in thousands)




                                         Additions  Uncollectible      Balance
                                         charged      balances            at
                             Balance at    to        written off         end
                             beginning   cost and      net of             of
                             of period   expenses    recoveries  Other   period
December 31, 1998:          ----------   ---------  ------------ ----- --------

Allowance for
 doubtful accounts            $2,777        2,382     (1,927)     24     $3,256

Valuation allowance
 for deferred
 tax assets                   11,910          564          -       -     12,474

December 31, 1999:

Allowance for
 doubtful accounts             3,256        1,923     (2,043)     (327)   2,809

Valuation allowance
 for deferred
 tax assets                   12,474          636           -        -   13,110

December 31, 2000:

Allowance for
 doubtful accounts             2,809        2,849     (1,178)     (96)    4,384

Valuation allowance
 for deferred
 tax assets                   13,110          495           -        -   13,605





                                      -71-

<PAGE>
                               EXHIBIT INDEX
                               -------------

1(a)13       -- Purchase Agreement, dated March 22, 1999, by and among Jordan
                Industries,  Inc., Donaldson,  Lufkin & Jenrette Securities
                Corporation, Jeffries & Company, Inc. and BancBoston Robertson
                Stephens Inc.*
1(b)12       -- Purchase Agreement, dated July 21, 1997, by and among Jordan
                Industries,  Inc., Jeffries & Company, Inc. and Donaldson,
                Lufkin & Jenrette Securities Corporation.
1(c)12       -- Purchase and Sale Agreement, dated as of April 2, 1997, by
                and between Jordan Industries,  Inc. and the holders of
                11 3/4% Senior Subordinated Discount Debentures due 2005
                parties thereto.
1(d)12       -- Purchase and Sale Agreement, dated as of April 2, 1997, by
                and between Jordan Industries,  Inc. and the holders of
                11 3/4% Senior Subordinated Discount Debentures due 2005
                parties thereto.
1(e)12       -- Exchange  Agreement,  dated as of April 2, 1997,  by and
                between  Jordan  Industries,  Inc. and the holders of 11 3/4%
                Senior Subordinated Discount Debentures due 2005 parties
                thereto.
2(a)4        -- Agreement and Plan of Merger between Thos. D. Murphy Company
                and Shaw-Barton, Inc.
2(b)6        -- Asset Purchase Agreement between Alma Piston Company and Alma
                Products  Holdings,  Inc. dated as of February 26, 1999.
3(a)1        -- Articles of Incorporation of the Registrant.
3(b)1        -- By-Laws of the Registrant.
4(a)13       -- Series C and  Series D 10 3/8%  Senior  Notes  Indenture,
                dated  March 22,  1999,  between  Jordan Industries, Inc.
                and U.S. Bank Trust National Association.
4(b)12       -- Series A and  Series  B 10 3/8%  Senior  Notes  Indenture,
                dated  July 25,  1997,  between  Jordan Industries, Inc. and
                First Trust National Association, as Trustee.
4(c)13       -- First Supplemental Indenture, dated March 9, 1999, between
                Jordan Industries,  Inc. and U.S. Bank & Trust  Company f/k/a
                First Trust  National Association, as Trustee, to the 10 3/8%
                Senior Notes Indenture, dated July 25, 1997.
4(d)12       -- Series A and Series B 11 3/4% Senior  Subordinated  Discount
                Debentures  Indenture,  dated April 2, 1997, between Jordan
                Industries, Inc. and First Trust National Association, as
                Trustee.
4(e)12       -- First Supplemental Indenture, dated as of July 25,
                1997, between Jordan Industries, Inc. and First Trust
                National Association, as Trustee, to the 11 3/4% Senior
                Subordinated Discount Debentures Indenture, dated as of
                April 2, 1997.
4(f)13       -- Second Supplemental Indenture, dated as of March 9,
                1999, between Jordan Industries, Inc. and First Trust
                National Association, as Trustee, to the 11 3/4% Senior
                Subordinated Discount Debentures Indenture, dated as of
                April 2, 1997.
4(g)13       -- Global Series D Senior Note.
4(h)12       -- Global Series B Senior Note.
4(i)12       -- Global Series B Senior Subordinated Discount Debenture.
10(a)1,2     -- Inter-company Notes, dated June 1, 1988, by and among the
                Registrant and the Subsidiaries.
10(b)1,2     -- Inter-company  Management  Agreement, dated June 1, 1988,
                by and among the  Registrant  and the Subsidiaries.
10(c)1,2     -- Inter-company Tax Sharing  Agreement,  dated June 1, 1988,
                by and among the Registrant and the Subsidiaries.
10(d)1       -- Management Consulting Agreement, dated as of June 1, 1988,
                between the Registrant and The Jordan Company.
10(e)3       -- First Amendment to Management Consulting Agreement,
                dated as of January 3, 1989, between the Registrant and
                The Jordan Company.
10(f)7       -- Amended and Restated Management Consulting Agreement, dated
                September  30,  1990,  between the Company and The Jordan
                Company.
10(g)1       -- Stockholders  Agreement, dated as of June 1, 1988, by and
                among the Registrant's holders of Common Stock.
10(h)1       -- Employment Agreement, dated as of February 25, 1988, between
                the Registrant and Thomas H. Quinn.


                                    -72-
<PAGE>


10(i)1       -- Restricted  Stock  Agreement, dated February 25, 1988, between
                the Registrant and Jonathan F. Boucher.
10(j)1       -- Restricted Stock Agreement, dated February 25, 1988, between
                the Registrant and Jack R. Lowden.
10(k)1       -- Restricted Stock Agreement, dated February 25, 1988, between
                the Registrant and Thomas H. Quinn.
10(l)1       -- Stock Purchase Agreement, dated June 1, 1988, between Leucadia
                Investors, Inc. and John W. Jordan, II.
10(m)1       -- Zero Coupon Note, dated June 1, 1988, issued by John W.
                Jordan, II to Leucadia Investors, Inc.
10(n)1       -- Pledge, Security and Assignment Agreement, dated June 1, 1988
                by John W. Jordan, II.
10(o)5       -- Revolving Credit and Term Loan Agreement, dated August 18,
                1989, between the Company and The First National Bank of
                Boston.
10(p)7       -- Second Amendment to Revolving Credit  Agreement, dated
                September 1, 1990,  between the Company and The First National
                Bank of Boston.
10(q)5       -- Guaranty, dated as of August 18, 1989, from DACCO,
                Incorporated in favor of First Bank National Association,
                as Trustee. The Company has also entered into similar
                guarantees with other Restricted subsidiaries and will
                furnish the above guarantees upon request.
10(r)8       -- Amended and Restated  Revolving Credit  Agreement,  dated
                December 10, 1991 between the Company and The First National
                Bank of Boston.
10(s)10      -- Revolving Credit  Agreement, dated as of June 29, 1994 among
                JII, Inc., a wholly-owned  subsidiary of the Company and the
                First National Bank of Boston and certain other Banks.
10(t)12      -- Amended and Restated  Revolving  Credit  Agreement, dated as
                of July 25,  1997,  by and among JII, Inc., the lenders
                listed thereto and BankBoston, N.A., as agent.
10(u)12      -- Security  Agreement,  dated as of July 25, 1997, between JII,
                Inc. and BankBoston,  N.A., as agent (Incorporated by
                reference to the Form S-4).
10(v)12      -- Revolving Credit Agreement, between Specialty Printing and
                Labeling and The First National Bank of Boston (Incorporated
                by reference to the Form S-4).
10(w)12      -- Amended and Restated Revolving Credit Agreement,
                between Specialty Printing and Labeling and The First
                National Bank of Boston (Incorporated by reference to the
                Form S-4).
10(x)12      -- Revolving Credit Agreement, between Motors & Gears, Inc. and
                Bankers Trust Company.
10(y)        -- Third  Amendment  to  Revolving  Credit Agreement, dated as of
                August 24,  1999,  between  Jordan Industries, Inc. and
                BankBoston, N.A.
10(z)        -- Fourth Amendment to Revolving Credit Agreement, dated as of
                October 15,  1999,  between  Jordan Industries, Inc. and
                BankBoston, N.A.
10(aa)12     -- Properties Services Agreement, dated as of July 25, 1997,
                between Jordan Industries,  Inc. and its subsidiaries.
10(bb)12     -- Transition Agreements, each dated as of July 25, 1997,
                between Jordan Industries,  Inc. and Jordan Telecommunication
                Products, Inc. and Motors & Gears, Inc., respectively.
10(cc)12     -- New Subsidiary  Advisory  Agreements, each dated as of
                July 25, 1997,  between Jordan  Industries, Inc. and its
                subsidiaries.
10(dd)12     -- New Subsidiary Consulting Agreements, each dated as of
                July 25, 1997, between Jordan Industries, Inc. and its
                subsidiaries (Incorporated by reference to the Form S-4).
10(ee)12     -- New TJC Management  Consulting  Agreement,  dated as of
                July 25, 1997, between TJC Management Corp. and Jordan
                Industries, Inc.
10(ff)12     -- Termination  Agreement, dated as of July 25, 1997, between
                Jordan Industries, Inc. and its subsidiaries.
10(gg)12     -- Form of Indemnification Agreement between Jordan Industries,
                Inc. and its subsidiaries and their directors.
12           -- Statements re. Computation of Ratios.
21           -- Subsidiaries of the Registrant.


                                        -73-