United States
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K

          (Mark one) [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 1998
                                       OR
          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
            For the transition period from ____________ to __________
                         Commission file number 33-75154
                           J.B. POINDEXTER & CO., INC.
             (Exact name of registrant as specified in its charter)

                     Delaware                    76-0312814
        (State or other jurisdiction of (I.R.S. Employer Identification No.)
         incorporation or organization)

                 1100 Louisiana
                   Suite 5400
                 Houston, Texas                           77002  
       (Address of principal executive offices)         (Zip Code)


       (Registrant's telephone number, including area code) (713) 655-9800
        Securities registered pursuant to Section 12(b) of the Act: None
                  Name of each exchange where registered: None

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


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes X No Indicate by check mark if disclosure
of delinquent  filers  pursuant to Item 405 of  Regulation  S-K is not contained
herein,  and will not be contained,  to the best of registrant's  knowledge,  in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [X]

State the aggregate market value of the voting stock held by  non-affiliates  of
the registrant: $ 0 -------

The number of shares  outstanding of each of the registrants'  classes of common
stock as of March 19, 1999: 3059 

Documents Incorporated by Reference: None


<PAGE>


                  J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES


                                                             

PART I.

Item 1.  Business

     J.B.  Poindexter & Co., Inc.  ("JBPCO")  operates  primarily  manufacturing
businesses.  JBPCO's subsidiaries are Morgan Trailer Mfg Co., ("Morgan"),  Truck
Accessories Group, Inc., ("TAG"), Lowy Group, Inc. ("Lowy" or "Lowy Group"), EFP
Corporation, ("EFP") and Magnetic Instruments Corp., ("MIC Group").

       Unless the context  otherwise  requires,  the  "Company"  refers to JBPCO
together with its consolidated  subsidiaries.  The Company is controlled by John
B. Poindexter.  In May 1994, the Company completed an initial public offering of
$100.0 million,  12 1/2% Senior Notes due 2004 (sometimes  referred to herein as
the "Note Offering").  Concurrent with the Note Offering,  the Company acquired,
from John B. Poindexter and various minority interests, TAG, Lowy Group, EFP and
MIC Group. During 1998, the Company's  management made the strategic decision to
concentrate resources on the Company's manufacturing  operations.  Consequently,
the retail and wholesale distribution operations of TAG and Lowy Group are being
held  for  sale  and  have  been  treated  as  discontinued  operations  in  the
Consolidated Financial Statements of the Company. The Company manages its assets
on a decentralized  basis,  with a small  corporate  staff  providing  strategic
direction and support.

       During  1998,  the  Company  sold the  carpet  manufacturing  and  dyeing
operations  (Blue  Ridge/Courier)  of Lowy  Group.  The plan to  dispose  of the
remaining  operations of Lowy Group and the distribution  operations of TAG (TAG
Distribution)  are  anticipated to be  substantially  complete by the end of the
second  quarter  of 1999.  See Note 13 of  Notes to the  Consolidated  Financial
Statements.

     The Company  considers  each of its operating  subsidiaries  as an industry
segment. See Note 3 to the Consolidated Financial Statements of the Company.

Morgan

       Morgan is the nation's  largest  manufacturer  of  commercial  van bodies
("van bodies") for medium-duty  trucks.  Morgan  products,  which are mounted on
truck chassis  manufactured and supplied by others, are used for general freight
and deliveries, moving and storage and distribution of refrigerated consumables.
Its 119  authorized  distributors,  seven  manufacturing  plants and two service
facilities  are in  strategic  locations  to provide  nationwide  service to its
customers,  including rental companies, truck dealers and companies that operate
fleets  of  delivery  vehicles.  Formed  in 1952,  Morgan  is  headquartered  in
Morgantown, Pennsylvania, and was acquired in 1990.

       Morgan's van bodies are  manufactured  and  installed  on truck  chassis,
which are  classified  by hauling  capacity  or gross  vehicular  weight  rating
("GVWR").  There  are  eight  classes  of GVWR.  Morgan  generally  manufactures
products for Classes 3 through 7, those having a GVWR of between  10,001  pounds
(light-duty  dry  freight  vans) and  33,000  pounds  (medium-duty  trucks).  It
generally does not  manufacture  products for Classes 1 or 2 (pickup  trucks) or
Class 8. The principal products offered by Morgan are the following:

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       Dry  Freight  Bodies  (Classes  3-7).  Dry freight  bodies are  typically
fabricated with pre-painted  aluminum or fiberglass  reinforced  plywood ("FRP")
panels,  aerodynamic  front-end  treatment,  hardwood  floors and  various  door
configurations to accommodate end-user loading and unloading requirements. These
products are used for diversified dry freight  transportation and represent more
than one-half of Morgan's sales.

       Refrigerated  Van Bodies  (Classes 3-7).  Refrigerated  vans are equipped
with insulated  aluminum or FRP bodies that accommodate  controlled  temperature
and  refrigeration  needs of  end-users.  These  products are used  primarily on
trucks that transport dairy products, frozen foods and meats.

        Cutaway  Van Bodies  (Classes  3-5).  Aluminum or FRP cutaway van bodies
(which  differ  from  conventional  vans  generally  by having  different  floor
configurations and shorter lengths) are installed only on cutaway chassis, which
are  available  with or without  access to the cargo area from the cab.  Cutaway
bodies  are  used  primarily  for  local   delivery  of  parcels,   freight  and
perishables.

        Stake Bodies and Flatbeds.  Morgan also manufactures stake bodies, which
are flatbeds with various  configurations  of removable sides.  Stake bodies are
used for the  movement  of a  variety  of  materials  for the  agricultural  and
construction industries, among others.

        Gem Top Pickup Truck Caps.  Pickup truck caps are fabricated  enclosures
that fit over the beds of pickup trucks,  converting the beds into  weatherproof
storage areas.  Effective June 30, 1997,  Morgan  acquired the operations of Gem
Top from  TAG.  Gem Top  services  primarily  commercial  customers.  For a more
detailed discussion of the truck accessories business see TAG below.

        Some of the components of Morgan's  products,  such as certain  patented
methods for making curtained doors for vehicle bodies,  are proprietary.  Morgan
also offers certain products manufactured by others, including those distributed
by Morgan's  Advanced  Handling Systems Division that facilitate the loading and
unloading of cargo.  Morgan  distributes  spare parts through and offers limited
service  programs at some of its own  facilities  and through its 119 authorized
distributors.

        Customers and Sales.  The van body industry has two major  categories of
customers:  (1)  customers  operating  their own fleets of vehicles or who lease
their vehicles to third parties (collectively,  "fleet/leasing customers");  and
(2) truck dealers and  distributors  who sell vehicles to others  (collectively,
"dealer/distributor customers"). Morgan's net sales constituted 55%, 54% and 49%
of the Company's total net sales in 1998, 1997 and 1996, respectively.

        Morgan's  revenue is generated by five sources:  (1) sales to commercial
divisions  of leasing  companies,  companies  with fleets of delivery  vehicles,
truck  dealers  and  distributors  ("Commercial  Sales");  (2) sales to consumer
rental companies  ("Consumer Rental Sales");  (3) parts; (4) service and (5) the
Advanced Handling Systems Division.

        Consumer  Rental Sales are composed of sales to companies  that maintain
large  fleets of one-way and local  moving  vehicles  available  for rent to the
general public.  Procurement  contracts for Consumer Rental Sales are negotiated
annually,  usually in late summer to early fall and tend to be the most volatile
and price sensitive aspect of Morgan's business.

                                       3
<PAGE>


        Morgan's  two largest  customers,  Ryder Truck  Rental,  Inc. and Penske
Truck Leasing  L.P.,  have,  together,  historically  represented  approximately
40-50% of  Morgan's  total net  sales.  Each has been a  customer  of Morgan for
approximately 20 years and management  considers relations with each to be good.
Sales  to  these  customers  represented  26%,  24%  and  21% of  the  Company's
consolidated net sales during the years 1998, 1997, and 1996, respectively.

        Morgan  sells   products   through  its  own  sales  force  and  through
independent distributors.  Most of the distributors sell a wide variety of truck
related equipment to truck dealers and end-users.

        Manufacturing and Supplies. Morgan operates manufacturing, body mounting
and service facilities in Pennsylvania,  Wisconsin,  Georgia, Texas and Arizona.
It also  has  sales,  service  and  body  mounting  facilities  in  Florida  and
California. Its Gem Top division is located in Oregon.

        Generally,  all van bodies manufactured by Morgan are produced to order.
The shipment of a unit is dependent upon receipt of the chassis  supplied by the
customer  and the  customer's  arrangements  for  delivery of  completed  units.
Revenue is  recognized  and the customer is billed upon final body  assembly and
quality inspection. Because contracts for Consumer Rental Sales are entered into
in the summer or fall but production does not begin until the following January,
Morgan  generally has a significant  backlog of Consumer  Rental Sales orders at
the end of each year that is processed  through May of the  following  year.  In
addition,  Morgan typically maintains a significant backlog of Commercial Sales.
At December 31, 1998 and 1997,  Morgan's  total  backlog was  approximately  $73
million and $55  million,  respectively.  All of the  products  under the orders
outstanding at December 31, 1998 are expected to be shipped during 1999.

        Morgan  maintains an inventory of raw  materials  necessary to build van
bodies according to customers' orders. Raw materials are acquired from a variety
of sources and Morgan has not experienced  significant shortages of materials in
recent  years.   Fiberglass  reinforced  plywood  panels,  which  are  important
components of Morgan's  products,  are acquired  principally from two suppliers.
The loss of either of those suppliers could disrupt Morgan's  operations until a
replacement  source could be located.  Morgan's  customers  purchase their truck
chassis from major truck manufacturing  companies.  The delivery of a chassis to
Morgan is dependent upon truck manufacturers'  production  schedules,  which are
beyond  Morgan's  control.  Delays in chassis  deliveries  can disrupt  Morgan's
operations and can increase its working capital requirements.

        Industry.  Industry  revenue and growth are  dependent  primarily on the
demand for delivery vehicles in the general freight,  moving and storage, parcel
delivery and food  distribution  industries.  Replacement  of older  vehicles in
fleets represents an important revenue source,  with replacement  cycles varying
from  approximately  four to six  years,  depending  on  vehicle  types.  During
economic  downturns,  replacement  orders are often  deferred or, in some cases,
older vehicles are retired without replacement.

        Competition.  The van body manufacturing industry is highly competitive.
Morgan competes with a limited number of large  manufacturers and a large number
of smaller  manufacturers.  Some of Morgan's  competitors operate from more than
one location.  Certain  competitors are publicly owned with substantial  capital
resources. Competitive factors in the industry include product quality, delivery


                                       4
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time,  geographic proximity of manufacturing  facilities to customers,  warranty
terms, service and price.

TAG

         TAG historically has had two operating  divisions:  TAG  Manufacturing,
which  consists  of the Leer,  20th  Century  Fiberglass  (Century)  and  Raider
Industries Inc., (Raider) operating divisions; and TAG Distribution,  consisting
of retail  (Leer  Retail  and  Radco) and the  wholesale  distribution  business
(National Truck Accessories,  including Midwest Truck AfterMarket). During 1998,
the  Company  decided  to  dispose  of the TAG  Distribution  business  and has,
accordingly,   treated  it  as  discontinued  in  the   Consolidated   Financial
Statements. See Note 13 to the Consolidated Financial Statements of the Company.

     TAG Manufacturing is the nation's largest manufacturer of pickup truck caps
and tonneau  covers and its products  are  marketed  under the brand names Leer,
Raider,  LoRider and Century.  Caps and tonneau covers are fabricated enclosures
that fit over the beds of pickup trucks,  converting the beds into  weatherproof
storage  areas.  TAG's  eight  manufacturing  plants  and  network  of over  600
independent  dealers  provide a national  network through which its products are
marketed to individuals,  small businesses and fleet operators.  TAG's net sales
constituted  27%, 28% and 33% of the Company's total net sales during 1998, 1997
and 1996, respectively. Formed in 1971, TAG is headquartered in Elkhart, Indiana
and was acquired in 1987.

         Customer and Sales.  Most purchasers of TAG's products  (purchased from
dealers) are  individuals.  TAG's products are sold through its national network
of  independent  dealers.  TAG also sells its products in Canada and Europe.  In
1998, foreign sales (primarily in Canada) represented  approximately 8% of TAG's
total sales or less than 3% of the Company's total net sales.  During 1998, 1997
and 1996, TAG  Manufacturing  had  intercompany  sales of $12.7  million,  $13.7
million and $15.3 million, respectively, to TAG Distribution.  Under the current
plan of disposal for TAG Distribution,  a substantial portion of these sales may
not continue subsequent to the disposition.

         Manufacturing  and  Supplies.  TAG  designs and  manufactures  caps and
tonneaus  in seven  manufacturing  facilities  located in  California,  Indiana,
Pennsylvania and Saskatchewan, Canada. Approximately 85% of the caps sold by TAG
are  fiberglass,  with  aluminum  representing  the  balance.  TAG  maintains an
inventory of raw materials necessary to manufacture its products.  Raw materials
are obtained from a variety of sources and TAG has not  experienced  significant
shortages of materials in recent years. TAG purchases a substantial  majority of
its windows for caps from a single supplier.  Although the loss of that supplier
would disrupt TAG's production  activities until a replacement supplier could be
located,  management  does not  believe  that such loss  would  have a  material
adverse effect on the Company.

         Industry. Sales of caps and tonneaus tend to correspond to the level of
new pickup truck  sales.  Cap sales are  seasonal,  with sales  typically  being
higher in the spring and fall than in the summer and winter.

     Competition.  The cap and tonneau  cover  industry  is highly  competitive.
Competitive   factors  include   product   availability,   quality,   price  and
installation services.

                                       5
<PAGE>


EFP

         EFP molds and markets  expandable  foam plastics used  primarily by the
automotive,  electronics, furniture and appliance industries as packaging, shock
absorbing and materials handling products.  Management  believes that EFP is the
nation's third largest producer and marketer of custom-shaped, molded expandable
plastics.  Management  believes  that EFP's  competitive  strengths  include its
ability to  manufacture  high  quality  products  for  competitive  prices while
providing  excellent  service to its  customers,  including  timely  delivery of
products.  EFP's net sales made up approximately  10% of the Company's total net
sales during each of the last three years. Founded in 1954, EFP is headquartered
in Elkhart, Indiana and was acquired in 1985.

         Products.  EFP's products are manufactured from expandable  polystyrene
("EPS"),  expandable  polypropylene  ("EPP"),  expanded  polyethylene ("EPE"), a
copolymer of polyethylene  and polystyrene  ("Copolymer")  and certain high heat
resistant resins ("Resins"). EPP, EPE, Copolymer and Resins are each tougher and
more resilient, or have higher temperature  tolerances,  than EPS. Products made
from expandable  foams are lightweight and durable,  capable of absorbing shocks
and impacts, provide thermal insulation and are chemically neutral.

         EFP manufactures and markets the following products:

         o   Packaging and Shock Absorbing Products. EFP sells these products to
             other  manufacturers  who  use  them  to  package  and  ship a wide
             assortment of industrial and consumer products,  such as computers,
             television sets, toys, furniture, appliances and cameras. Virtually
             all of these products are custom-made to fit the "footprint" of the
             particular  product  or item  for  which  EFP's  product  is  being
             manufactured.  These  products are  manufactured  from EPS and EPP,
             with EPP being used for more fragile  products.  Sales of packaging
             and shock absorbing products  represent  approximately 75% of EFP's
             total sales.

         o   Material Handling  Products.  These products include reusable trays
             or containers that are used for transporting  components to or from
             a   customer's   manufacturing   facility.   EFP  also  offers  its
             Thin-Wall(TM)  products,  which are used as parts positioning trays
             for  robotic  or  automatic   product   assembly  (such  as  camera
             manufacturing).  Material handling products  generally are produced
             from EPS, EPP or Copolymer.

         o   Components. EFP provides materials manufactured from EPP, which are
             used as energy absorbing components of automobile bumpers. EFP also
             offers a line of its  Styro-Cast(R)  foam foundry  patterns used by
             foundries in the "lost foam" or "evaporative casting" metal pouring
             process.  During 1996, EFP began the production of door cores, with
             a molded-in metal frame,  for use in the mobile home  manufacturing
             industry.

     Customers  and  Sales.   EFP's   products  are  sold  to  the   automotive,
electronics, furniture, appliance and marine industries, among others. EFP has a
reasonably diversified customer base.

         EFP   utilizes  an  in-house   sales  force  and  engages   independent
representatives, from time to time, to provide supplemental sales support in the
marketing of EFP's packaging and shock absorbing  products.  EFP also employs an
engineering staff that assists  customers in the production,  design and testing


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of products.  Because  expanded  foams are very bulky,  freight  charges  impose
geographical  limitations on sales of those products.  Generally,  EFP considers
its  target  market  to  be  limited  to  a  300-mile  radius  surrounding  each
manufacturing  facility. In certain circumstances,  however, EFP has shipped its
products greater distances.

         Manufacturing and Supplies. EFP manufactures its products at facilities
located in  Indiana,  Wisconsin,  Alabama,  Tennessee  and Texas.  The Texas and
Tennessee   facilities   manufacture  products  primarily  for  Compaq  Computer
Corporation and Toshiba  Corporation,  respectively,  although EFP utilizes both
facilities to manufacture products for other customers as well.

         As is customary in the industry, EFP purchases its raw materials from a
variety  of  sources on a purchase  order  basis and not  pursuant  to long term
supply  contracts.  Raw material prices  fluctuate and EFP historically has been
affected  by price  increases  in the past but has not  experienced  significant
shortages of raw materials in recent years.

         EFP is ISO 9001 certified.  ISO 9001 is an  internationally  recognized
certification of production  practices and techniques  employed in manufacturing
processes.

         Industry.  Because most of EFP's products are  manufactured  for use by
other  industries,  economic  conditions,  which affect those other  industries,
generally will affect EFP's operations.  In particular,  growth or a downturn in
the automotive,  electronics,  furniture or appliance industries generally would
be expected to have a corresponding  effect on EFP's business,  as those are the
principal industries served by its packaging and shock absorbing products. Sales
of  EFP's  products  typically  are not  seasonal,  other  than  during a slight
downturn during the latter part of December and early January.

     Competition.  EFP competes with other molded,  expandable plastic producers
and  with  manufacturers  of  alternative   packaging  and  handling  materials,
including  paper,  corrugated  boxes  and  other  foam  products  (such  as soft
urethane).  Many of these  competitors,  particularly the paper  companies,  are
large  companies  having greater  financial  resources  than EFP.  Certain other
expandable  plastic  manufacturers have multiple  facilities.  EFP also competes
with other companies in the foundry patterns market. Competitive factors include
price, quality and timely delivery of products.

MIC Group

         MIC Group is a  manufacturer,  caster and assembler of precision  metal
parts used in the  worldwide  oil and gas,  aerospace  and  general  industries.
Formed in 1963, MIC Group is located in Brenham, Texas and was acquired in 1992.
MIC Group operates an electronic  assembly  facility in Houston,  which operates
under the name  ElectroSpec.  MIC Group's net sales made up less than 10% of the
Company's net sales during each of the last three years.

         Products.  MIC Group  manufactures  various  precision  metal parts and
electro-mechanical  devices that are utilized primarily in a variety of oilfield
applications  and  also  in the  aerospace  and  other  industries.  Most of the
precision parts  currently  manufactured by MIC Group are utilized in connection
with the exploration  for oil and gas reserves.  Parts produced by MIC Group are
utilized  for complex  functions,  such as well bore  logging,  perforation  and
fracturing.  Its products are also  applicable  to many seismic and  geophysical


                                       7
<PAGE>


activities.   ElectroSpec   assembles  electronic  printed  circuit  boards  and
instrumentation  packages  for the  same  or  similar  applications.  Electronic
assembly   provides   additional  sales   opportunities  by  providing   turnkey
value-added  assemblies to its  customers,  who  incorporate  machined parts and
electronics in the manufacture of their products.

         Customers.  MIC Group  sells its  products to  primarily  international
oilfield  services and  aerospace  companies.  MIC Group has one  customer  that
represents  approximately  57% of its total net sales during 1998.  The customer
has purchased  products and services from MIC Group for more than five years and
management considers relations with the customer to be good.

         Manufacturing  and  Supplies.  MIC Group  manufactures  its products in
Brenham,  Texas.  ElectroSpec is located in Houston,  Texas. Management believes
that MIC Group's manufacturing  capabilities are among the most sophisticated in
the   industry.    It   performs   a   broad   range   of   services   including
computer-controlled  precision  machining and welding,  electrostatic  discharge
machining,  electron beam welding,  trepanning and gun drilling.  MIC Group also
performs investment casting services.

         MIC  Group  is ISO  9002  certified.  ISO  9002  is an  internationally
recognized  certification  of production  practices and  techniques  employed in
manufacturing processes.

         Products are manufactured  primarily from non-magnetic stainless steel,
alloy  steels,  nickel-based  alloys,  titanium,  brass  and  beryllium  copper.
Materials  are  obtained  from a  variety  of  sources  and  MIC  Group  has not
experienced significant shortages in materials in recent years.

         Industry. Because a significant amount of MIC Group's products are sold
to large,  international oilfield service companies, MIC is not dependent solely
on the domestic oil and gas industry.  Rather, demand for equipment and services
supplied by those  oilfield  service  companies  and, in turn,  sales of related
parts  manufactured by MIC Group and  ElectroSpec,  are directly  related to the
level of worldwide oil and gas drilling  activity.  Aerospace  companies make up
the second largest  segment of business and that business  activity is dependent
on world economics and defense spending.

         Competition.  MIC Group competes with other  businesses  engaged in the
machining,  casting and manufacturing of parts and equipment utilized in the oil
and gas  exploration  industry,  aerospace and general  industry.  Technological
know-how  and  production  capacity are the primary  competitive  factors in MIC
Group's industry.

Discontinued Operation - TAG Distribution

         TAG Distribution distributes accessories for light trucks, minivans and
sport  utility  vehicles;  including  caps  and  tonneaus  manufactured  by  TAG
Manufacturing.  At December 31, 1998,  Leer Retail operated 35 retail stores and
National  Truck  Accessories  operated  six  wholesale   distribution   centers,
including Midwest Truck  AfterMarket.  The Company has decided to exit the truck
automotive accessory  distribution  business and has committed to a plan to sell
or close the wholesale and retail  businesses of TAG  Distribution.  As of March
19, 1999,  the Company has sold 14 retail  stores,  one  wholesale  distribution
center and closed one distribution  center.  The disposition of TAG Distribution
is expected to be substantially  complete by mid-1999. TAG Distribution has been


                                       8
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treated as a  discontinued  operation in the  Company's  Consolidated  Financial
Statements. See Note 13 to the Consolidated Financial Statements of the Company.

Discontinued Operation - Lowy

         Lowy,  which was  acquired  in 1991,  operates  in the  floor  covering
distribution  business.  The Company  has decided to sell the Lowy  distribution
business and, accordingly,  has classified it as a discontinued operation in the
Company's Consolidated Financial Statements.  Lowy included carpet manufacturing
and dyeing  operations  (Blue  Ridge and  Courier),  which were sold,  effective
August 31, 1998.  See Note 13 to the  Consolidated  Financial  Statements of the
Company.

         Lowy is a leading wholesale floor-covering distributor, in the Midwest,
serving twelve Midwestern states. It operates seven facilities, located in Iowa,
Kansas, Minnesota, Nebraska and three locations in Missouri.

          Products.  Lowy offers two broad categories of products, each of which
     includes multiple product lines and accessories:

          o    Hard Surface Products. Hard surface products include sheet vinyl,
               vinyl,  wood flooring,  ceramic floor, wall tiles and accessories
               and laminate flooring.

          o    Soft Surface  Products.  This  product  line  consists of carpet,
               padding  substrate  used in  carpet  installation,  area rugs and
               sundry   items,   such  as  carpet   cleaners  and   installation
               accessories.  Most of Lowy's  carpet  sales  are for  residential
               installation,  with the  balance  being  sales to the  commercial
               market.  Its carpet line is anchored  by carpet  manufactured  by
               Barrett,  the Beaulieu Group,  Miliken,  the Mohawk Group and the
               Shaw Group. Lowy Distribution also offers private label carpeting
               marketed  under  the  "Americana"  and  "Essex  House"  names and
               manufactured by various suppliers.

         Customers  and  Sales.  Lowy  sells  its  products  primarily  to floor
covering  retailers,  most of which are privately  owned,  small to medium-sized
dealers  located  away from major  metropolitan  areas.  These  dealers  rely on
wholesalers,  such as Lowy,  to provide a broad line of products  with  adequate
inventory  ready for  immediate  delivery  and to  provide  sales and  marketing
support.

         Inventory and Supplies.  Lowy offers products manufactured by a variety
of suppliers. Its largest supplier is Congoleum Corporation ("Congoleum"), whose
products represent  approximately 30% of Lowy's total revenue during each of the
last three years.  Lowy has  purchased  products from  Congoleum  since 1967 and
management  considers  its  relations  with  Congoleum to be good.  Nonetheless,
Congoleum  is  entitled to  terminate  its  relationship  with Lowy at any time,
subject to notice requirements.  Lowy is an exclusive distributor of Congoleum's
products in certain  markets and competes with other  Congoleum  distributors in
other markets.  Congoleum may appoint additional distributors of its products in
Lowy's  markets  at any  time.  The  loss of  Congoleum  as a  supplier,  or the
introduction  of  other  Congoleum   distributors  into  Lowy's  markets,  could
adversely affect Lowy's operations.

                                       9
<PAGE>


         Industry.  The wholesale  distribution of floor covering is affected by
the level of new home and  remodeling  construction  activity.  The  industry is
somewhat  seasonal,  with the second and third quarters  generally having higher
sales than the other quarters.

         Competition.  The floor  covering  wholesale  distribution  business is
highly  competitive.  Lowy competes with other  wholesale  distributors,  retail
building supply chains and large carpet and tile  manufacturing  companies,  who
sell their products directly to their customers.

Trademarks and Patents

         The Company owns rights to certain  presentations  of Leer's name (part
of TAG  Manufacturing),  which the  Company  believes  is  valuable  insofar  as
management  believes that it is recognized as being a leading  "brand name." The
Company also owns rights to certain other  trademarks and tradenames,  including
certain  presentations of Morgan's name. Although these and other trademarks and
tradenames  used by the Company help  customers  differentiate  Company  product
lines from those of  competitors,  the Company  believes that the  trademarks or
tradenames  themselves  are less  important to customers than the quality of the
products and services.

Employees

              At  February  28,  1999,  the  Company  had  approximately   3,300
full-time  employees.  Personnel are unionized in: Lowy Distribution's  Fridley,
Minnesota  (contract  expires May, 1999), St. Louis (contract  expires February,
2001) and Ankeny,  Iowa (contract expires December,  1999) warehouses  (covering
10, 14, and 7 persons, respectively);  EFP's Decatur, Alabama facility (covering
approximately  65 persons,  with a contract  expiring in August  2000);  and TAG
Manufacturing's Raider Industries facility in Canada (covering approximately 160
persons,  with a contract  expiring in December 2000). The Company believes that
relations with its employees are good.

Environmental Matters

         The Company's operations are subject to numerous environmental statutes
and  regulations,  including  laws and  regulations  affecting  its products and
addressing materials used in manufacturing the Company's products.  In addition,
certain of the  Company's  operations  are subject to  federal,  state and local
environmental  laws and regulations that impose  limitations on the discharge of
pollutants  into the air and water.  The Company  also  generates  non-hazardous
wastes. The Company has received occasional notices of noncompliance,  from time
to time,  with  respect  to its  operations,  which are  typically  resolved  by
correcting  the  conditions  and the  payment  of  minor  fines,  none of  which
individually  or in the  aggregate  has had a  material  adverse  effect  on the
Company.  However,  the Company  expects that the nature of its operations  will
continue to make it subject to increasingly stringent  environmental  regulatory
standards.  Although  the  Company  believes  it  has  made  sufficient  capital
expenditures to maintain  compliance with existing laws and regulations,  future
expenditures may be necessary,  as compliance  standards and technology  change.
Unforeseen significant expenditures required to maintain such future compliance,
including unforeseen liabilities,  could limit expansion,  or otherwise,  have a
material adverse effect on the Company's business and financial condition.

                                       10
<PAGE>


        Morgan has been named as a  potentially  responsible  party ("PRP") with
respect to the generation of hazardous materials alleged to have been handled or
disposed of at two Federal  Superfund sites in  Pennsylvania  and one in Kansas.
Although a precise  estimate of liability  cannot currently be made with respect
to these sites,  based upon information  known to Morgan,  the Company currently
believes that it's proportionate share, if any, of the ultimate costs related to
any  necessary  investigation  and remedial  work at those sites will not have a
material adverse effect on the Company.

         Since the 1980s and early 1990s,  products manufactured from expandable
polystyrene,  such as some  of the  products  manufactured  by  EFP,  have  been
criticized as being allegedly  harmful to the environment.  Although  management
believes that more recent  information  suggests that expandable  polystyrene is
not as  harmful to the  environment  as  reported  earlier,  negative  publicity
relating to the  material  has had,  and in the future  could  have,  an adverse
effect on EFP's business, although this publicity has not had a material adverse
effect on EFP's results of operations.

Item 2.  Properties

         The  Company  owns or leases the  following  manufacturing,  office and
sales facilities as of March 19, 1999:
                                                                 Owned
                                                     Approximate  or      Lease
    Location                    Principal Use        Square Feet Leased Expir-
                                                                        ation(a)
Morgan:
 Ehrenberg, Arizona ...........   Manufacturing          125,000   Owned    --
 Rydal, Georgia ...............   Manufacturing           85,000   Leased   1999
 Ephrata, Pennsylvania ........   Manufacturing           50,000   Owned    --
 Morgantown, Pennsylvania .....   Manufacturing           62,900   Leased   1999
 Morgantown, Pennsylvania .....   Office & manufacturing 261,500   Owned    --
 Corsicana, Texas .............   Manufacturing           60,000   Owned    --
 Janesville, Wisconsin ........   Manufacturing           23,000   Leased   1999
 Janesville, Wisconsin ........   Manufacturing           32,000   Owned    --
 Clackamas, Oregon ............   Manufacturing           78,000   Leased   2003
TAG Manufacturing:
 Woodland, California .........   Manufacturing           92,000   Leased   2001
 Elkhart, Indiana .............   Office & research       17,500   Owned    --
 Elkhart, Indiana .............   Manufacturing          139,000   Leased   2001
 Milton, Pennsylvania .........   Manufacturing          102,000   Leased   2001
 Elkhart, Indiana .............   Manufacturing           91,900   Owned    --
 Elkhart, Indiana .............   Office & manufacturing  18,400   Leased   1999
 Drinkwater, Saskatchewan, Canada Office & manufacturing  72,000   Owned    --
 Moose Jaw, Saskatchewan, Canada  Manufacturing           87,000   Leased   2005
EFP:
 Decatur, Alabama .............   Manufacturing          175,000   Leased   1999
 Elkhart, Indiana .............   Office & manufacturing 211,600   Owned    --
 Elkhart, Indiana .............   Manufacturing           24,900   Leased   1999
 Gordonsville, Tennessee ......   Manufacturing           40,000   Leased   2001
 Marlin, Texas ................   Manufacturing           73,000   Leased   2001
 Waukesha, Wisconsin ..........   Manufacturing           13,850   Leased   2000
MIC Group:
 Brenham, Texas ...............   Office & manufacturing  75,500   Owned    --
 Houston, Texas ...............   Manufacturing            9,600   Leased   2000


(a)      Including all renewal terms.

         The Company  utilizes  principally  all of its  facilities and believes
that its  facilities are adequate for its current needs and are capable of being
utilized at higher capacities to supply increased demand, if necessary.


                                       11
<PAGE>


Item 3.  Legal Proceedings


         The  Company  is  involved  in  various  lawsuits,  which  arise in the
ordinary course of business. In the opinion of management,  the ultimate outcome
of these lawsuits will not have a material adverse effect on the Company.

         EFP is subject to a lawsuit concerning the supply of natural gas to one
of its  manufacturing  plants.  The utility  company  has  alleged  that EFP was
under-billed by approximately  $500,000 over a four-year  period, as a result of
errors made by the utility  company.  The Company is aggressively  defending the
suit and believes that its resolution will not have a material adverse effect on
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
fourth quarter of the fiscal year covered by this report.


PART II


Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters


         The  registrant's  common  equity is  privately  held and not  publicly
traded.  As of March 19,  1999,  one  individual  owned all of the  registrant's
issued and outstanding common equity.  During the last three fiscal years, JBPCO
paid no cash dividends.

         The  registrant's  ability to pay  dividends  on its  common  equity is
restricted to the extent  described in the Senior Note  Indenture,  dated of May
23, 1994,  pertaining to the  registrant's 12 1/2% Senior Notes due 2004 and the
Loan and Security Agreement,  dated as of June 28, 1996, with Congress Financial
Corporation, as lender.



Item 6.  Selected Financial Data

         The  historical  financial data  presented  below,  for the years ended
December  31,  1998,  1997,  1996,  1995 and 1994,  are derived from the audited
Consolidated  Financial  Statements  of the Company.  The data  presented  below
should be read in  conjunction  with  Management's  Discussion  and  Analysis of
Financial  Condition and Results of Operations  and the  Consolidated  Financial
Statements  of  the  Company  and  notes  thereto.   The  historical   financial
information  presented below has been restated to reflect the discontinuation of


                                       12
<PAGE>


TAG Distribution and Lowy. The financial  information is not directly comparable
due to the acquisitions of Century and Raider in June 1995.

                                               Year Ended December 31,
                                 (Dollars in Millions, Except Per Share Amounts)
                                      1998     1997     1996     1995      1994
Operating Data:
Net sales ........................   $ 365.3  $ 338.6  $ 310.9  $ 329.5  $ 278.9
Cost of sales ....................     310.1    280.2    257.1    283.6    229.0
Selling, general and
   administrative expense ........      47.6     48.4     44.7     43.9     34.3
Closed and excess facility costs .       0.3      1.4      1.0      --       --
Other (income) expense ...........      (0.4)    (0.4)     0.1     (1.0)     --
                                       -----    -----    -----    -----    -----
Operating income .................       7.7      9.0      8.0      3.0     15.6
Interest expense .................      15.7     15.8     14.5     14.2      9.3
Income tax provision (benefit) ...       0.7      1.0     (1.0)    (2.9)     3.0
                                       -----    -----    -----    -----    -----
Income (loss) before extraordinary
 loss and discontinued operations .... (8.7)     (7.8)    (5.5)    (8.3)    3.3
Income (loss) from discontinued
 operations .......................... (3.4)      0.2     (0.6)    (0.2)    2.2
Extraordinary loss ...................  --        --      (0.3)     --     (2.1)
                                        ---       ---      ---      ---     ---
Net income (loss) ...................$(12.1)     (7.6)   $(6.4)   $(8.5) $  3.4
                                        ===       ===      ===      ===     ===

Earnings (loss) per share            $(3,973) $(2,467) $(2,097) $ 2,790   $1,503
                                       ======  ======   ======   ======   ======
Cash dividends per share                $ --    $ --     $ --     $ --    $2,910
                                        =====   =====   ======   ======   ======

Balance Sheet Data
    (at period end):
Working capital .................    $  15.0  $   2.3   $  1.4  $   7.1  $  36.8
Total assets ....................      133.9    161.2    162.9    169.0    159.8
Total long-term obligations .....      102.9    103.3    103.7    105.6    109.0
Stockholder's equity (deficit) ..    $ (17.2) $  (4.7)  $  3.0  $   9.5  $  17.8

Cash Flow Data:
    Net cash provided by (used in)
       operating activities ........  $ 11.7  $  (2.5)  $ 10.7  $  (8.2)$ (1.7)
    Capital expenditures ...........     6.3      7.3      8.1     11.9     9.2
    Net cash provided by (used in)
       investing activities ........    10.3     (6.4)    (7.5)  (19.0)   (14.5)
    Net cash provided by (used in)
        financing activities .......   (23.1)     9.5     (2.3)   19.8     23.5
    Depreciation and amortization (a)   10.6     11.6     11.2    10.5      8.2




                                       13
<PAGE>


Other Data:
EBITDA (b) ........................    $17.2    $20.9    $17.1   $10.5   $ 21.6
Consolidated EBITDA
       Coverage Ratio (c) .........    1.1x     1.3x     1.2x     0.7x     2.3x

(a)       Depreciation and amortization  excludes  amortization of debt issuance
          cost of $0.9  million,  $0.8 million,  $0.7 million,  $0.7 million and
          $0.4 million in 1998, 1997, 1996, 1995 and 1994, respectively.

(b)      "EBITDA" from continuing  operations is net income increased by the sum
         of interest  expense,  income taxes,  depreciation and amortization and
         other  non-cash  items as defined in the  Indenture  pertaining  to the
         Senior  Notes.  EBITDA is not  included  herein as  operating  data and
         should  not  be  construed  as  an  alternative  to  operating   income
         (determined   in  accordance   with   generally   accepted   accounting
         principles) as an indicator of the Company's operating performance. The
         Company has included  EBITDA from continuing  operations  because it is
         relevant for determining compliance under the Indenture and because the
         Company understands that it is one measure used by certain investors to
         analyze the Company's  operating  cash flow and  historical  ability to
         service its indebtedness.

(c)      "Consolidated  EBITDA  Coverage  Ratio"  is the  ratio of  EBITDA  from
         continuing  operations of JBPCO and its subsidiaries that guarantee the
         Notes,  to interest  expense that is used in the Indenture to limit the
         amount of  indebtedness  that the  Company  may  incur.  Certain of the
         Company's  subsidiaries  are not guarantors of the Notes, see Note 8 of
         Notes to Consolidated Financial Statements.

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

         The  following  discussion  of the  Company's  financial  condition and
results  of  operations  should  be read in  conjunction  with the  Consolidated
Financial Statements of the Company and the notes thereto.

Basis of Financial Statements

         During 1998, the Company committed to plans for disposing of Lowy Group
and TAG  Distribution.  As of December 31, 1998, the Company has disposed of the
Blue Ridge/Courier  operations of Lowy and certain portions of TAG Distribution.
The Company plans to dispose of the remaining  portions of these  business lines
in 1999. Accordingly,  the remaining operations of Lowy and TAG Distribution are
being held for sale and the related  operating  results have been  classified as
discontinued operations in the Consolidated Financial Statements for all periods
presented. As a result, the Company recorded a loss from discontinued operations
of $3.4  million,  net of  taxes in 1998.  The  components  of this net loss are
discussed   further   under  the   captions   "Discontinued   Operations  -  TAG
Distribution" and  "Discontinued  Operations - Lowy Group" and in Note 13 to the
Consolidated Financial Statements.

                                       14
<PAGE>



Overview

         The Company  operates in various  industries  and considers each of its
main operating  subsidiaries  a separate  business  segment.  The businesses are
dependent on various factors  reflecting general economic  conditions  including
corporate profitability,  consumer spending patterns, sales of truck chassis and
new pickup trucks and the level of oil and gas exploration  activity.  Net sales
at Morgan and EFP increased 32% and 21%, respectively over the three-year period
ended December 31, 1998, as each segment  experienced  increased  demand for its
products.  Sales at TAG Manufacturing  decreased 6% during 1997 compared to 1996
as  manufacturing  quality  problems at the Leer operations and the closure of a
Leer  manufacturing   facility  caused  a  reduction  in  sales.   However,  TAG
Manufacturing sales during 1998 recovered to 1996 levels. The MIC Group business
segment experienced a decline in activity during 1998 as a result of the decline
in the level of world-wide oil and gas exploration activity.

         The following  table  represents  the net sales,  operating  income and
operating margins for each business segment and on a consolidated basis.

                                      Years Ended December 31,             
                                      1998      1997      1996
                                      ----      ----      ----
                                        (Dollars in Millions)

Net Sales:
    Morgan   ......................  $201.1    $181.7    $152.1
    TAG Manufacturing..............    99.3      95.4     101.9
    EFP............................    38.0      33.0      31.4
    MIC Group......................    26.9      28.5      25.5
                                   --------   --------  --------
   Consolidated...................   $365.3    $338.6    $310.9  
                                    =======    =======  ========

Operating Income (Loss):
    Morgan.........................   $ 2.8     $ 8.6     $ 6.3
    TAG Manufacturing..............     2.2      (4.5)     (3.3)
    EFP............................     4.0       3.0       2.7
    MIC Group......................     1.5       4.7       4.8
    JBPCO..........................    (2.8)     (2.8)     (2.5)
                                     -------    -------  -------
    Consolidated...................   $ 7.7     $ 9.0     $ 8.0  
                                      ======    =======  =======

Operating Margins:
    Morgan.........................    1%        5%        4%
    TAG Manufacturing..............    2%       (5)%      (3)%
    EFP............................   10%        9%        9%
    MIC Group......................    6%       17%       19%
    Consolidated...................    2%        3%        3%

         Net sales  include  $14.5  million,  $15.6  million and $17.0  million,
respectively,  from  intercompany  sales  to TAG  Distribution,  which  has been
classified as a discontinued operation.  As a result,  operating income includes
approximately $2.9 million, $3.1 million and $3.4 million, respectively, related


                                       15
<PAGE>


to profits on these sales.  Since TAG  Distribution's  results of operations are
classified as discontinued,  the  intercompany  sales do not eliminate on a line
item basis in the accompanying consolidated statement of operations. However, on
a  consolidated  basis,  such  intercompany  transactions  are eliminated in the
accompanying  Consolidated  Statement of Operations  for each period  presented.
Under the  current  plan of  disposition  for TAG  Distribution,  a  substantial
portion of these sales may not continue subsequent to the disposition.

         During 1998,  MIC Group closed a facility and incurred  charges of $0.3
million,   which  was  included  in  operating   income  for  the  period.   TAG
manufacturing operating income included $0.8 million and $1.0 million of charges
during the years ended December 31, 1997 and 1996, respectively, associated with
the closure or write-down in carrying value of certain excess facilities. During
1997,  Morgan  wrote down the  carrying  value of its facility in Mexico by $0.5
million.


Results of Operations

Consolidated Operating Results from Continuing Operations

Comparison of 1998 to 1997

         Net sales  increased  8% to $365.3  million in 1998  compared to $338.6
million in 1997. The increase was due primarily to Morgan, whose sales increased
11% or $19.4 million. EFP and TAG Manufacturing  recorded sales increases of 15%
or $5.0 million and 6% or $5.0 million, respectively. Sales decreased 6% or $1.7
million at MIC Group.

         Cost of sales  increased  11% to $310.1  million  in 1998  from  $280.2
million in 1997. Gross profits  decreased 5% to $55.2 million (15% of net sales)
in 1998  compared to $58.4  million (17% of net sales) in 1997.  The decrease in
gross  profits was due  primarily to Morgan and MIC Group,  whose gross  profits
decreased 22% or $5.6 million and 34% or $2.7 million,  respectively,  partially
offset by increases at EFP of 22% or $1.5  million and at TAG  Manufacturing  of
20% or $3.7 million.

         Selling,  general  and  administrative  expense  decreased  2% to $47.6
million (13% of net sales) in 1998  compared to $48.4 million (14% of net sales)
in 1997.  The decrease was due  primarily to an 11% or $2.3 million  decrease at
TAG Manufacturing.

         Operating income decreased 14% to $7.7 million in 1998 compared to $9.0
million in 1997. TAG Manufacturing's  operating income increased $6.8 million to
$2.2 million in 1998  compared to an operating  loss of $4.6 million in 1997 and
EFP's operating income increased 31% or $1.0 million. Operating income decreased
67% or $5.8 million at Morgan and 67% or $3.2 million at MIC Group.

         Interest  expense  decreased  1% to $15.7  million in 1998  compared to
$15.8 million in 1997 and weighted average total debt decreased approximately 5%
to $132.0 million during 1998 compared to $139.0 million during 1997.

                                       16
<PAGE>


         The Company recorded an income tax expense of $0.7 million for the year
ended  December 31, 1998  compared to a $1.0 million  expense  during 1997.  The
income tax expense of $0.7 million in 1998  represents  state and foreign income
taxes  payable.  The  Company's  income tax  provision  differs from the federal
statutory rate  principally  due to a $3.6 million  increase in the deferred tax
valuation allowance relating to net operating losses that may not be realizable.
See Note 10 of Notes to the Consolidated Financial Statements.

Comparison of 1997 to 1996

         Net sales  increased  9% to $338.6  million in 1997  compared to $310.9
million in 1996. The increase was due primarily to Morgan, whose sales increased
19% or $29.6  million and  increases  at MIC Group of 12% or $3.1 million and at
EFP of 5% or $1.5 million. TAG Manufacturing sales decreased $6.5 million or 6%.

         Cost of sales  increased  9% to  $280.2  million  in 1997  from  $257.1
million in 1996,  and gross  profits  increased 8% to $58.4  million (17% of net
sales) in 1997 compared to $53.8 million (17% of net sales) in 1996. Morgan, EFP
and MIC Group recorded 26%, 9% and 2% increases in gross profits, respectively.

     Selling,  general and administrative  expense increased 8% to $48.4 million
(14% of net sales) in 1997 compared to $44.7 million (14% of net sales) in 1996.

         The Company  recorded  Closed and Excess Facility Costs of $1.4 million
and  $1.0  million   during  the  years  ended   December  31,  1997  and  1996,
respectively.  During  1997,  Morgan  considered  selling  its idle  facility in
Mexico.  Accordingly,  Morgan  began  marketing  the property  and,  based on an
estimate  of the fair value less the cost to sell the  property,  wrote down the
carrying  value  by  $0.6  million.  In  1996,  TAG  Manufacturing   closed  two
manufacturing  facilities,  resulting  in a charge of $1.0  million for the year
ended December  31,1996,  and additional  charges during the year ended December
31, 1997 of $0.8 million.

         Operating income increased 12% to $9.0 million in 1997 compared to $8.0
million in 1996.  Operating  losses at TAG  Manufacturing  increased 39% to $4.6
million during 1997 compared to $3.3 million during 1996.

         Interest  expense  increased  9% to $15.8  million in 1997  compared to
$14.5  million in 1996 and average  total debt  increased  5% to $139.0  million
during 1997 compared to $132.3 million in 1996.

         The Company  recorded an  aggregate  income tax expense for  continuing
operations  of $1.0 million for the year ended  December 31, 1997  compared to a
$1.0  million  benefit  during  1996.  See Note 11 of Notes to the  Consolidated
Financial Statements.




                                       17
<PAGE>


Business Segment Results

Morgan

         During 1998, the Company  appointed a new president of Morgan (See Part
III of the Company's Annual Report on Form 10-k). Subsequently,  new key members
of management  were appointed,  including a Vice President of Operations,  Chief
Financial  Officer and a Vice President of Human Resources.  Morgan acquired Gem
Top from TAG,  effective June 30,1997.  Gem Top  manufactures  pickup truck caps
primarily for  commercial  customers,  which  compliments  the Morgan  business.
Morgan's operating results have been restated to include Gem Top for all periods
presented.

Comparison of 1998 to 1997

         Net sales  increased  11% to $201.1  million in 1998 compared to $181.7
million in 1997.  Shipments of van body units  increased  13% to 26,600 units in
1998  compared to 23,600 units during  1997.  Consumer  Rental Sales (as defined
under Part I, Item I - Business)  decreased 18% to $18.7 million and  Commercial
Sales  increased  22% to $158.1  million in 1998  compared  to 1997.  Backlog at
December  31, 1998 was $73.3  million  compared  to $55.2  million at the end of
1997. The increase in backlog  reflects  continued  demand for Morgan  products.
However,  Morgan depends upon chassis  manufacturers  for timely delivery of its
customers' chassis.  Approximately $13.2 million of backlog at December 31, 1998
is a result of delayed chassis deliveries.

         Cost of sales  increased  16% to $181.2  million  in 1998  compared  to
$156.1  million in 1997.  Gross  profits  decreased 22% or $5.6 million to $20.0
million (10% of net sales) compared to $25.6 million (14% of net sales) in 1997.
The gross  profit  margin  decreased as a result of the  increased  material and
overhead costs as a percentage of sales and less favorable pricing on certain of
Morgan's  products.  Corrective action taken by the new management team included
the  re-negotiation  of raw material supply  arrangements and of certain product
pricing.

         Selling,  general  and  administrative  expense  increased  1% to $17.2
million (9% of net sales) in 1998 compared to $17.0 million (9% of net sales) in
1997.  Selling  expense  increased 10% to $8.9 million  primarily as a result of
increased sales commissions on higher sales. General and administrative  expense
remained  approximately  the same in 1998  compared to 1997. An 18% reduction in
general and administrative personnel and the related cost reductions were offset
by  severance  payments  and  increased  relocation  costs  associated  with new
management personnel.

         Morgan's  operating  income  decreased  67% to $2.8  million (1% of net
sales) in 1998  compared to $8.6 million (5% of net sales) in 1997.  The decline
in  operating  income  was due  primarily  to the  reasons  cited  above for the
reduction in gross profits.

Comparison of 1997 to 1996

         Net sales  increased  19% to $181.7  million in 1997 compared to $152.1
million in 1996.  Shipments of van body units  increased  26% to 23,600 units in
1997 compared to 18,700 units during 1996.  Consumer  Rental Sales increased 65%
to $22.9 million and  Commercial  Sales  increased 10% to $131.3 million in 1997


                                       18
<PAGE>


compared to 1996.  Backlog at December  31, 1997 was $55.2  million  compared to
$50.2 million at the end of 1996.  The increase in backlog  reflects an increase
in consumer rental orders following a downturn in that business during 1996.

         Cost of sales  increased  19% to $156.1  million  in 1997  compared  to
$131.7  million in 1996 as a result of the  increase  in units  produced.  Gross
profits  increased  26% or $5.2  million  to $25.6  million  (14% of net  sales)
compared  to $20.4  million  (13% of net  sales) in 1996.  Gross  profit  margin
increased  slightly as a result of  slightly  lower raw  material  costs and the
implementation of selling price increases.

         Selling,  general and  administrative  expense  increased  23% to $17.0
million (9% of net sales) in 1997 compared to $13.8 million (9% of net sales) in
1996.  General and  administrative  expense increased 50% or $3.0 million due to
increased personnel and the related costs.

     Due to increased net sales, Morgan's operating income increased 35% to $8.6
million in 1997  compared to $6.3 million in 1996. As a percentage of net sales,
operating income increased to 5% in 1997 compared to 4% in 1996.

TAG Manufacturing

         TAG historically was comprised of two divisions:  TAG Manufacturing and
TAG Distribution. As a result of continued losses from TAG Distribution.  During
1998,  management  committed  to a formal  plan to dispose of those  operations.
Therefore, the following discussion excludes TAG Distribution.

         The following discussion also excludes the operations of Gem Top, which
was  acquired  by Morgan in June 1997.  TAG  Manufacturing's  results  have been
restated to exclude Gem Top for all periods presented.

Comparison of 1998 to 1997

         Net sales for TAG  Manufacturing  increased 4% to $99.4 million in 1998
compared to $95.4 million in 1997. Net sales included  intercompany sales to TAG
Distribution  of $12.7 million in 1998  compared to $13.7  million in 1997.  TAG
Manufacturing's  net third party sales increased 6% to $86.7 million during 1998
compared to $81.7  million  during 1997.  Total  shipments of caps and tonneaus,
including  shipments to TAG Distribution were 175,000 units during 1998 compared
to 162,000  units in 1997.  The increase in units  shipped is  primarily  due to
improved quality, more favorable product mix and product pricing.

        Cost of  sales  was  $78.0  million  in 1998  and  1997.  Gross  profits
increased  20% to $21.4 million (21% of net sales) during 1998 compared to $17.7
million (19% of net sales)  during 1997.  The increase in gross  profits was due
primarily to a decrease in warranty costs as a result of improved quality at the
Leer division and a 3% decrease in material costs as a percentage of sales.

         Selling,  general and  administrative  expense  decreased  11% to $19.6
million  (20% of net sales)  during 1998  compared to $21.9  million (23% of net
sales) during 1997.  General and  administrative  expense  decreased 18% or $1.4


                                       19
<PAGE>


million, primarily as a result of a reduction in corporate overhead costs.

         TAG  Manufacturing  incurred  an  operating  profit  for the year ended
December 31, 1998 of $2.2 million  compared to an operating loss of $4.6 million
in 1997. The  improvement in operating  performance  was primarily the result of
higher shipments and lower direct costs resulting in improved gross profits.

Comparison of 1997 to 1996

         Net sales for TAG  Manufacturing  decreased 6% to $95.4 million in 1997
compared  to  $101.9   million  in  1996.  TAG   Manufacturing   sales  included
intercompany  sales to TAG  Distribution  of  $13.7  million  in 1997 and  $15.3
million in 1996.  Total shipments of caps and tonneaus,  including  shipments to
TAG  Distribution,  were 162,000  units during 1997 compared to 174,000 units in
1996.  The decline in units shipped was primarily a result of the closing of the
Leer plant in the  Southeastern  United States and a decline in national  market
share.  Raider recorded an 8,900 unit or 44% increase in shipments and Century's
shipments were consistent with the prior year.

         Cost of sales  decreased  $5.1  million  (6%) to $77.7  million in 1997
compared to $82.7 million in 1996.  Gross profits  decreased 7% to $17.7 million
(19% of net sales)  during  1997  compared to $19.2  million  (19% of net sales)
during 1996.  The decrease in gross  profits was  primarily due to a decrease of
$3.1  million or 29% at Leer  Manufacturing  as a result of  increased  material
costs arising from product quality problems.

         Selling,  general  and  administrative  expense  increased  2% to $21.9
million  (23% of net sales)  during 1997  compared to $21.6  million (21% of net
sales) during 1996. Selling expense increased 4% or $0.5 million, primarily as a
result of increased delivery costs.

     TAG  Manufacturing  incurred an operating  loss for the year ended December
31, 1997 of $4.6 million compared to an operating loss of $3.3 million in 1996.

         The Leer  Manufacturing  plant in the  Southeastern  United  States was
closed during the last quarter of 1996 due to inefficient operations. Production
was  transferred  to the remaining TAG  Manufacturing  plants with an associated
reduction in overhead costs.  Including costs of closing another minor facility,
total closure costs of approximately $1.0 million were charged to expense during
1996 as Closed and Excess Facility Cost.

EFP

Comparison of 1998 to 1997

         Net sales  increased  15% to $38.0  million in 1998  compared  to $33.0
million in 1997.  EFP's Packaging and Shock Absorbing  product (as defined under
Part I, Item I - Business)  sales  increased  $4.0  million,  on the strength of
increased shipments to customers in the consumer electronic industry.

                                       20
<PAGE>


         Cost of sales increased 14% to $29.4 million in 1998 from $25.9 million
in 1997.  Accordingly,  gross profits  increased 22% to $8.6 million (23% of net
sales) in 1998 compared to $7.1 million (21% of net sales) in 1997. The increase
in gross profits was due to a decrease in material  costs and improved  overhead
absorption on higher sales volume.

         Selling,  general  and  administrative  expense  increased  14% to $4.6
million  (12% of net sales) in 1998  compared to $4.0 million (12% of net sales)
in  1997,  primarily  due to  increased  general  and  administrative  expenses,
including higher incentive based costs.

         EFP's operating income increased 31% to $4.0 million (10% of net sales)
in 1998  compared to $3.0  million (9% of net sales) in 1997,  primarily  due to
increased gross profits on higher sales.

Comparison of 1997 to 1996

         Net sales  increased  5% to $33.0  million  in 1997  compared  to $31.5
million in 1996.  EFP's  Components (as defined under Part I, Item I - Business)
sales  increased  $1.9 million,  on the strength of new business,  including the
door core business started in 1996.

         Cost of sales  increased 4% to $25.9 million in 1997 from $25.0 million
in 1996.  Accordingly,  gross  profits  increased 9% to $7.1 million (21% of net
sales) in 1997 compared to $6.5 million (21% of net sales) in 1996. The increase
in gross profits was due to a decrease in material  costs,  which were partially
offset by higher labor costs resulting from changes in product mix.

     Selling,  general and  administrative  expense increased 6% to $4.0 million
(12% of net sales) in 1997 compared to $3.8 million (12% of net sales) in 1996.

     EFP's operating  income  increased 11% to $3.0 million (9% of net sales) in
1997 compared to $2.7 million (9% of net sales) in 1996.


MIC Group

         During  1998,  the Company  appointed a new  President of MIC Group and
subsequently  appointed a new Vice  President  of Sales and a Vice  President of
Quality.

Comparison of 1998 to 1997

         Net sales  decreased  6% to $26.9  million  in 1998  compared  to $28.6
million in 1997.  The  decrease  was  attributable  to reduced  demand for MIC's
products  and  services  caused  by  lower  levels  of  activity  in the  energy
exploration  and production  business.  The decline in levels of activity in the
energy business  accelerated in the second half of 1998 and continued into 1999.
MIC Group is increasing efforts to diversify its revenue base outside the energy
business.

         Cost of sales  increased 5% to $21.6  million in 1998 compared to $20.6
million in 1997. Gross profits  decreased 34% to $5.3 million (20% of net sales)
in 1998  compared to $8.0 million (28% of net sales) in 1997.  During the fourth


                                       21
<PAGE>


quarter of 1998,  in response to a 33% decline in sales,  measures were taken to
reduce direct costs, including a 25% reduction in labor personnel.
Further measures are being implemented.

         Selling,  general  and  administrative  expense  increased  6% to  $3.5
million (13% of net sales)  compared to $3.3 million (11% of net sales) in 1997,
primarily due to increased  sales  personnel and related costs  associated  with
efforts to diversify the customer base into the non-energy business.

     During the year ended  December  31,  1998,  the Houston  machine  shop was
closed resulting in costs of $0.3 million included in Closed and Excess Facility
Costs.

     Operating  income  decreased  67% to $1.5 million (6% of net sales)  during
1998 compared to $4.7 million (17% of net sales) in 1997.

Comparison of 1997 to 1996

         Net sales  increased  12% to $28.6  million in 1997  compared  to $25.5
million in 1996. The increase was  attributable to greater demand for Magnetic's
products  and  services  due to  increased  levels  of  activity  in the  energy
exploration and production business.

         Cost of sales  increased 17% to $20.6 million in 1997 compared to $17.6
million in 1996. Accordingly, gross profits increased 2% to $8.0 million (28% of
net sales) in 1997  compared to $7.8 million  (31% of net sales) in 1996.  Labor
costs increased $1.4 million or 18%, primarily due to increased training costs.

         Selling,  general  and  administrative  expense  increased  6% to  $3.3
million (11% of net sales)  compared to $3.0 million (12% of net sales) in 1996,
principally because of increased sales, personnel and related costs.

     Operating  income  decreased 1% to $4.7  million (17% of net sales)  during
1997 compared to $4.8 million (19% of net sales) in 1996.

Discontinued Operations - TAG Distribution

         TAG  Distribution  incurred  operating  losses  of $2.4  million,  $5.4
million and $2.8 million during 1998, 1997 and 1996,  respectively.  As a result
of  continued  losses  from  TAG  Distribution,  on April  2,  1998,  management
committed  to a formal  plan to dispose of TAG  Distribution.  Accordingly,  the
results of operations of TAG  Distribution  have been classified as discontinued
operations in the accompanying  financial  statements for all periods presented.
The plan of disposal is expected to be substantially completed by the end of the
second  quarter of 1999.  In  addition,  the net assets and  liabilities  of TAG
Distribution,  which are expected to be disposed of, have been segregated within
the  accompanying  consolidated  balance  sheets as "net assets of  discontinued
operations."  As of March 19, 1999, the Company has sold one wholesale  location
and 14 retail locations.  Two wholesale  locations and two retail locations have
been closed.

         As a  result  of  this  plan,  the  Company  recorded  a  loss  on  TAG
Distribution's  discontinued  operations  of $12.0  million,  net of  applicable
taxes,  in 1998. This net loss is comprised of $1.2 million related to losses on


                                       22
<PAGE>


operations  prior to April 2, 1998,  and $10.8 million  related to the estimated
loss on disposal,  each net of applicable taxes. The Company estimates that this
loss on disposal will include losses of $2.8 million for  operations  from April
2,  1998  through  the  disposal  date and $8.0  million  for the  excess of the
carrying  value of assets  over  estimated  net  realizable  value,  each net of
applicable taxes.

        Effective January 29, 1999 in accordance with the plan of disposal,  the
Company  sold the  business  and assets of Radco,  which were part of the retail
operations of TAG Distribution. Proceeds of approximately $1.2 million were used
to repay borrowings  under the revolving credit agreement  entered into by Radco
during  1997.  Effective  on the same date,  Radco  changed its name to Welshman
Industries, Inc.

Comparison of 1998 to 1997

        TAG  Distribution  net sales  increased 6% to $58.5 million  during 1998
compared to $54.9 million in 1997. At Leer Retail,  sales  decreased 5% to $35.4
million and at National Truck Accessories, wholesale sales increased 30% or $5.3
million.  Sales of Midwest Truck  AfterMarket,  Inc.,  acquired in October 1997,
increased $6.3 million during 1998 compared to the two months of 1997.

        Cost of sales  increased  $3.4  million  (9%) to $40.8  million  in 1998
compared to $37.4 million in 1997.  Gross profits  increased 1% to $17.7 million
(30% of net sales)  during  1998  compared to $17.5  million  (32% of net sales)
during 1997.

        Selling,  general  and  administrative  expense  decreased  17% to $19.0
million  (33% of net sales)  during 1998  compared to $22.9  million (42% of net
sales) during 1997.  General and  administrative  expense  decreased 39% or $3.0
million,  primarily as a result of eliminating the costs associated with the TAG
Distribution headquarters office in Houston.

     TAG Distribution incurred an operating loss for the year ended December 31,
1998 of $2.4 million compared to an operating loss of $5.4 million in 1997.

Comparison of 1997 to 1996

        TAG  Distribution  net sales  decreased 18% to $55.0 million during 1997
compared to $67.1 million  during 1996. At Leer Retail,  sales  decreased 13% to
$37.2 million as same store sales decreased  approximately  6%, primarily due to
lower cap sales.  Leer Retail  closed six stores  between July 1996 and December
1997,  which reduced sales  approximately  $2.8 million  during 1997 compared to
1996.  Wholesale sales decreased 27% or $6.7 million,  primarily due to softness
in regional  markets and loss of customers  resulting from a  reorganization  of
service areas late in 1996.  Effective October 31, 1997, TAG acquired the assets
of Midwest  Truck  AfterMarket,  Inc.,  a wholesale  distributor  of light truck
accessories  based in Tulsa,  Oklahoma,  for  approximately  $2.7  million.  The
acquisition  provided  the  wholesale  operations  of  TAG  Distribution  with a
presence in a geographical market not previously served.

                                       23
<PAGE>


        Cost of sales  decreased  $9.0  million  (19%) to $37.4  million in 1997
compared to $46.4 million in 1996. Gross profits  decreased 16% to $17.5 million
(32% of net sales)  during  1997  compared to $20.8  million  (31% of net sales)
during  1996.  The  decrease  in gross  profits was due  primarily  to the $12.1
million decline in sales.

        Selling,  general  and  administrative  expense  decreased  2% to  $22.9
million  (42% of net sales)  during 1997  compared to $23.3  million (35% of net
sales) during 1996. Selling expense decreased 15% or $2.7 million primarily as a
result of a $1.7  million  (13%)  decrease  in selling  expense at Leer  Retail,
resulting from the closure of six stores during 1997. General and administrative
expense  increased 41% or $2.2 million primarily as a result of costs associated
with the headquarters office in Houston.

        During the year ended  December 31, 1997,  TAG  Distribution  closed the
headquarters in Houston and eight  unprofitable  retail stores at a cost of $1.0
million.

        TAG Distribution  incurred an operating loss for the year ended December
31, 1997 of $5.4 million  compared to an operating loss of $2.8 million in 1996.
The decline in operating performance was primarily the result of lower sales and
the costs  associated with the closing and  consolidation  of various stores and
administrative activities.

Discontinued Operations - Lowy Group

         The sale of the Blue  Ridge/Courier  division of Lowy was completed and
was effective on August 31, 1998, resulting in a gain of $6.5 million. Effective
September  8,  1998,  the  Company  decided  to  pursue  a plan to sell the Lowy
Distribution  division of Lowy.  Accordingly,  the operations of Lowy Group have
been classified as discontinued in the Consolidated Financial Statements for all
periods presented. The net assets and liabilities of Lowy, which are expected to
be  disposed  of,  have been  segregated  within the  accompanying  consolidated
balance sheets as "net assets of discontinued operations." Because the assets of
Blue  Ridge/Courier  were sold during the period,  the  following  discussion is
related to the operations of Lowy Distribution only.

         The Company  expects to break even from the  operations of Lowy through
the disposal  date.  The  anticipated  sales  proceeds from the disposal of Lowy
Distribution's  assets are expected to equal or exceed their  carrying  value at
December 31, 1998.

Comparison of 1998 to 1997

         Net sales  decreased  5% to $36.1  million  in 1998  compared  to $37.9
million  in 1997,  primarily  due to poor  sales of carpet  and  vinyl  products
partially offset by increased wood flooring sales.

     Cost of sales  decreased  4% to $27.9  million  in 1998  compared  to $29.2
million in 1997.  Gross profits  decreased 6% to $8.2 million (23% of net sales)
in 1998 compared to $8.7 million (23% of net sales) in 1997.

                                       24
<PAGE>


         Selling,  general  and  administrative  expense  decreased  7% to  $8.0
million  (22% of net sales) in 1998  compared to $8.5 million (22% of net sales)
in 1997,  due  primarily  to a  decrease  in  selling  expense  as a result of a
reduction in sales personnel and related costs.

        Lowy  sold  two  properties  during  1997,  recognizing  a gain  of $2.7
million,  which was included in Other  Income,  for the year ended  December 31,
1997. A warehouse facility near Minneapolis, Minnesota was sold, effective March
31, 1997,  and the operations  moved to a new location  during the quarter ended
June 30, 1997. Effective June 30, 1997, Lowy Distribution sold and leased back a
warehouse facility in Ankeny, Iowa.

     Lowy Group's  operating  income,  excluding the gains from the sale of real
estate, was $0.3 million (1% of net sales) in 1998 and 1997.

Comparison of 1997 to 1996

         Net sales  decreased  9% to $37.9  million  in 1997  compared  to $41.5
million in 1996.  Cost of sales decreased 9% to $29.2 million in 1997 from $32.1
million in 1996. Accordingly, gross profits decreased 7% to $8.7 million (23% of
net sales) in 1997 compared to $9.4 million (23% of net sales) in 1996.

     Selling,  general and  administrative  expense decreased 3% to $8.5 million
(22% of net sales) in 1997 compared to $8.8 million (21% of net sales) in 1996.

     Lowy  Group's  operating  income,  excluding  the gains on the sale of real
estate  during 1997 of $2.7  million,  decreased  50% to $0.3 million (1% of net
sales) in 1997 compared to $0.6 million (2% of net sales) in 1996.

Liquidity and Capital Resources

         During 1998, net cash provided by operations was $11.7 million compared
to net cash used of $2.5 million during 1997. Overall changes in working capital
provided  cash of $14.1  million  during 1998  primarily  due to a reduction  in
working capital at Morgan of $4.4 million.  Cash provided by operations was used
to pay  down  revolver  borrowings  and to  fund  capital  expenditures  of $6.3
million.

         The  Company's  ability to borrow under its  Revolving  Loan  Agreement
depends on the amount of  eligible  collateral,  which is  dependent  on certain
advance rates applied to the value of accounts  receivables  and  inventory.  At
March 13, 1999,  the Company had unused  available  borrowing  capacity of $20.7
million under the terms of the Revolving Loan  Agreement.  At December 31, 1998,
the  Company  had total  borrowing  capacity of $43.3  million,  of which,  $3.7
million   was  used  to  secure   letters   of  credit  and   foreign   exchange
accommodations. At December 31, 1998, the Company had unused available borrowing
capacity  of  approximately  $22.0  million.  On August 31,  1998,  the  Company
completed  the sale of the assets of Blue  Ridge/Courier  and proceeds  from the
sale of  approximately  $15.3  million were used to repay  borrowings  under the
Revolving Loan Agreement.

                                       25
<PAGE>


     The initial term of the  three-year  Revolving  Loan Agreement ends in June
1999,  however,  the agreement  provides for borrowings on a year to year basis,
unless sooner terminated by the Company or lender,  provided that the lender may
at its option extend the renewal date to a fourth year.  On March 29, 1999,  the
Company was  notified by the lender,  in  writing,  that it is  exercising  this
option thus extending the agreement to June 2000.

        The Company's Radco  subsidiary (part of TAG  Distribution),  which is a
non-guarantor  subsidiary  under the terms of the bond  indenture,  concurrently
with the  acquisition  of  substantially  all the assets of MTA,  entered into a
three-year  revolving  credit  agreement  with the  Company's  revolving  credit
lender.  The agreement provided for borrowings of up to the lesser of $5,000,000
or an amount  based on advance  rates  applied to the total  amounts of eligible
accounts  receivable and inventories of Radco.  At December 31, 1998,  Radco had
total  borrowings  of  approximately  $1.6 million  under the  revolving  credit
agreement.  Effective  January 29,  1999,  the business and assets of Radco were
sold to third parties.  Net proceeds of approximately  $1.2 million were used to
pay down borrowings under the Revolving Credit Agreement.  At December 31, 1998,
accounts  due under the  facility  are  included in "Net Assets of  Discontinued
Operations".

         As discussed in Notes 7 and 8 to the Consolidated Financial Statements,
the Company's  Revolving Loan Agreement and Senior Notes Indenture  restrict the
ability of the  Company to dispose of assets,  incur  debt,  pay  dividends  and
restrict certain corporate activities.

         The Company believes that it has adequate resources to meet its working
capital and capital  expenditure  requirements  consistent  with past trends and
practices.  The Company also  believes  that its cash balances and the borrowing
availability  under the Revolving  Credit  Agreement  will satisfy the Company's
cash requirements for the foreseeable future,  given its anticipated  additional
capital expenditure and working capital requirements and its known obligations.

Year 2000

         The Year 2000 (Y2K)  issue is the  result of  computer  programs  being
written  using two digits  rather  than four to define a specific  year.  Absent
corrective  actions,  a computer  program that has date  sensitive  software may
recognize  a date using "00" as the year 1900  rather  than the year 2000.  This
could result in system  failure or  miscalculations  resulting in disruptions to
operations.

         The Company's plan to resolve the Y2K issue involves the following four
phases:  assessment,  remediation,  testing,  and  implementation.  Based on the
recently completed assessment of continuing  operations,  the Company determined
that it will be  required  to  modify or  replace  significant  portions  of its
software and certain  hardware so that those systems will properly utilize dates
beyond December 31, 1999 at certain of the companies  subsidiaries.  The Company
expects to have all remediated systems fully tested and implemented by September
30, 1999.  The Company  believes  that with  modifications  or  replacements  of
existing software and certain hardware, the Y2K issue can be mitigated.

         The Company has queried its  significant  suppliers and  subcontractors
that do not share  information  systems with the Company (external  agents).  To
date, the Company is not aware of any external agent with a Y2K issue that would


                                       26
<PAGE>


materially  impact the  Company's  results of  operations,  liquidity or capital
resources.

         The Company has and will continue to utilize both internal and external
resources to reprogram or replace,  test and  implement  software and  operating
equipment for Y2K modifications.  The total cost of the Y2K project is estimated
at $1.5 million and is being funded through operating cash flows.  Approximately
20% of the cost is to  replace  equipment  and the  remainder  is to  upgrade or
reprogram  software.  The majority of these costs are being expended as incurred
and are not  expected  to have a  material  impact on the  Company's  results of
operations   or  financial   position.   To  date,   the  Company  has  incurred
approximately $0.7 million related to all phases of the Y2K project.

         The  Company  believes  that the Y2K  issue  will not pose  significant
operational  problems  for the  Company.  However,  if all Y2K  problems are not
identified and corrected in a timely manner, there can be no assurances that the
Y2K issue will not have a material  adverse  effect on the Company's  results of
operations  or adversely  affect the  Company's  relationships  with  customers,
suppliers or other parties. In addition,  there can be no assurance that outside
third parties, including customers,  suppliers, utility and government entities,
will be in compliance  with all Y2K issues.  The Company  believes that the most
likely worse case Y2K  scenario,  if one were to occur,  would be the  temporary
inability of third party suppliers, such as utility providers, telecommunication
companies and other critical  suppliers to continue providing their products and
services.  The  failure of these  third  party  suppliers  to  provide  on-going
services  could  have a  material  adverse  effect on the  Company's  results of
operations.

         Management of the Company believes it has an effective program in place
to resolve the Y2K issue in a timely manner.  However, the Company currently has
no contingency  plans in place in the event it or any of its major  suppliers do
not complete all phases of the Y2K  program.  The Company  plans to evaluate the
status of the  completion  of its Y2K project and those of key  suppliers in the
second quarter of 1999 and determine whether such a plan is necessary.

Other Matters

         The  Company  is  significantly  leveraged  and  had  a  $17.2  million
stockholder's  deficit at December 31, 1998. Through its floating rate debt, the
Company is subject to  interest  rate  fluctuations.  The  Company  operates  in
cyclical businesses and the markets for its products are highly competitive.  In
addition,  the Company places significant  reliance on a relatively small number
of customers,  with two customers  accounting for 26% of 1998  consolidated  net
sales.  The  combination  of these  factors,  which are  outside  the  Company's
control,  cause it to be subject to changes in economic  trends and new business
developments.

         The Company has net operating loss carryforwards of approximately $34.0
million for U.S. federal income tax purposes at December 31, 1998, which, if not
utilized,  will begin to expire in 2002.  The Company  has  recorded a valuation
allowance  of $5.0  million and $2.1  million as of  December  31,1998 and 1997,
respectively,  against  the net  operating  loss  carryforwards  as the  Company
believes that the  corresponding  deferred tax asset may not be realizable.  The
Company has considered prudent and feasible tax planning strategies in assessing
the need for the valuation allowance. The Company has assumed approximately $7.5
million of benefits  attributable to such tax planning  strategies.  The Company


                                       27
<PAGE>


believes that after  consideration  of its options  concerning the operations of
TAG, which incurred significant losses during 1998, 1997 and 1996, and other tax
planning strategies,  that sufficient future taxable income will be generated to
utilize the deferred tax asset.  In the event the Company were to determine,  in
the future, that any such tax planning  strategies would not be implemented,  an
adjustment  to the  deferred  tax asset would be charged to income in the period
the determination was made.

         Inflation  historically  has  not  materially  affected  the  Company's
business,  although  raw  materials  and  general  operating  expenses,  such as
salaries and employee benefits,  are subject to normal  inflationary  pressures.
The Company believes that,  generally,  it has been able to increase its selling
prices to offset increases in costs due to inflation.

        Morgan has been named as a  potentially  responsible  party ("PRP") with
respect to the generation of hazardous materials alleged to have been handled or
disposed of at two Federal  Superfund sites in  Pennsylvania  and one in Kansas.
Although a precise  estimate of liability  cannot currently be made with respect
to these sites,  based upon information  known to Morgan,  the Company currently
believes that it's proportionate share, if any, of the ultimate costs related to
any  necessary  investigation  and remedial  work at those sites will not have a
material adverse effect on the Company.

         Certain of the  Company's  operations  utilize  paints and  solvents in
their  businesses.  Also, raw materials used by EFP contain pentane,  which is a
volatile  organic  compound  subject  to  regulation  under  the  Clean Air Act.
Although the Company believes that it has made sufficient  capital  expenditures
to maintain  compliance with existing laws and regulations,  future expenditures
may be necessary if and when compliance standards and technology change.

         Although  all of the  Subsidiaries  have  reviewed  the benefits of the
adoption of ISO 9000,  an  internationally  recognized  certification  regarding
production  practices and techniques employed in manufacturing  processes,  only
MIC Group and EFP, at its facility in Indiana, have obtained certification.  The
implementation of this standard is in recognition of the international nature of
a  number  of MIC  Group's  customers  as well as being  reflective  of the high
precision  nature of the  services  of both  companies.  Morgan  and the  Raider
division  of TAG have plans to  implement  the  standard  and EFP,  at its other
locations,  within the next two years. The Company believes that, except for MIC
Group and EFP, none of the customers of the Company have requested or expect the
adoption by the Company of ISO 9000.

         The Company pays fees to a corporation,  owned by Mr. Poindexter,  for,
among other  things,  services  provided by Messrs.  Poindexter  and Magee.  The
Company  charges  the  Subsidiaries  for their use of funds and for  stewardship
services provided to them by the Company.


Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

         The Company is subject to certain market risks, including interest rate
risk and foreign  currency  risk.  The adverse  effects of potential  changes in
these market risks are discussed  below. The sensitivity  analyses  presented do
not consider the effects that such adverse changes may have on overall  economic


                                       28
<PAGE>


activity,  nor do  they  consider  additional  actions  management  may  take to
mitigate the Company's exposure to such changes.  Actual results may differ. See
the Notes to the  Consolidated  Financial  Statements  for a description  of the
Company's  accounting  policies and other information related to these financial
instruments.

Interest Rates

         Variable-Rate   Debt.  As  of  December  31,  1998,   the  Company  had
approximately  $16.8 million  outstanding  under a $55.0  million,  asset-based,
revolving credit  facility.  The interest rate on this revolving credit facility
is based upon a spread above either the Prime Interest Rate or London  Interbank
Overnight Rate (LIBOR),  which rate is determined at the Company's  option.  The
amount   outstanding   under  this  revolving  credit  facility  will  fluctuate
throughout  the year based upon  working  capital  requirements.  Based upon the
$16.8 million  outstanding  under the revolving  credit facility at December 31,
1998, a 1.0% change in the interest rate (from the December 31, 1998 rate) would
cause a change in interest  expense of  approximately  $0.2 million on an annual
basis. The Company's  objective in maintaining these variable rate borrowings is
the flexibility  obtained  regarding early repayment without penalties and lower
overall cost as compared with fixed-rate borrowings.

         Fixed-Rate Debt. As of December 31, 1998, the Company had approximately
$100.0 million of 12 1/2% Senior Notes,  long-term  debt,  outstanding,  with an
estimated  fair value of  approximately  $94.0 million based upon their publicly
traded value at that date. Market risk,  estimated as the potential  increase in
fair value resulting from a hypothetical  1.0% decrease in interest  rates,  was
approximately $3.7 million as of December 31, 1998.

Foreign Currency

         Raider Industries, a division of TAG Manufacturing, has a manufacturing
plant in Canada,  which generated revenues of approximately $16.0 million during
the year ended December 31, 1998. The functional  currency of Raider  Industries
is the local currency  (Canadian  dollar).  Management does not currently employ
risk management techniques to manage this potential exposure to foreign currency
fluctuations,  however,  the vast majority of goods  manufactured  in Canada are
imported and sold to customers in the United States.  Therefore,  a weakening of
the United States dollar in relation to the Canadian  dollar may have the effect
of decreasing Raider  Industries' gross margin,  assuming that the United States
sales price remains unchanged.

         In addition,  Morgan purchases certain raw materials from a supplier in
the  United  Kingdom,  which  approximated  $6.6  million  during the year ended
December  31,  1998.  The result of a uniform 25%  weakening in the value of the
United  States  dollar from  December  31,  1998 levels  relative to the British
Sterling  would  result  in an  estimated  increase  in  cost of  goods  sold of
approximately  $1.3  million  for  the  year  ended  December  31,  1999  before
considering any risk reduction instruments. However, Morgan manages its exposure
to changes in foreign currency  exchange rates by entering into foreign currency
exchange contracts. Morgan's risk management objective is to reduce its exposure
to the effects of changes in exchange rates between the firm purchase commitment
date and the  settlement  of the  purchased  inventory  item. As of December 31,
1998, the Company had foreign currency exchange contracts with a notional amount
of approximately $1.1 million outstanding and a fair value of less than $5,000.

                                       29
<PAGE>


Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

         Forward-looking   statements   in  this   report,   including   without
limitation, statements relating to the Company's plans, strategies,  objectives,
expectations,  intentions  and adequacy of  resources,  are made pursuant to the
safe harbor provisions of the Private Securities  Litigation Reform Act of 1995.
Investors are cautioned that such  forward-looking  statements involve risks and
uncertainties,  including without limitation,  the following:  (1) the Company's
plans, strategies, objectives, expectations and intentions are subject to change
at any time at the discretion of the Company; (2) any sale of a business unit is
subject  to  many  factors  including  terms  considered   satisfactory  to  the
management of the Company; and (3) other risks and uncertainties  indicated from
time  to  time  in the  Company's  filings  with  the  Securities  and  Exchange
Commission.


Item 8.  Financial Statements and Supplementary Data

Index to Financial Statements:                                         Page

Report of Independent Auditors ................................         31
Consolidated Balance Sheets as of December 31, 1998 and 1997...         32
Consolidated Statements of Operations for the years ended
     December 31, 1998, 1997 and 1996..........................         33
Consolidated Statements of Cash Flows for the years ended
     December 31, 1998, 1997 and 1996..........................         34
Consolidated Statements of Stockholder's Deficit for the years ended
     December 31, 1998, 1997 and 1996..........................         35
Notes to Consolidated Financial Statements.....................         36



                                       30
<PAGE>






                         REPORT OF INDEPENDENT AUDITORS



Board of Directors and Stockholder
J.B. Poindexter & Co., Inc.

We have audited the accompanying  consolidated balance sheets of J.B. Poindexter
& Co.,  Inc. and  subsidiaries  as of December 31, 1998 and 1997 and the related
consolidated statements of operations,  stockholder's deficit and cash flows for
each of the three years in the period ended December 31, 1998.  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 consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial position of J.B.
Poindexter & Co.,  Inc. and  subsidiaries  at December 31, 1998 and 1997 and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity  with generally
accepted accounting principles.

                                                   ERNST & YOUNG LLP

Houston, Texas
March 29, 1999


                                       31
<PAGE>
                  J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                             (Dollars in thousands)

                                     ASSETS
                                                                 December 31,  
                                                               1998       1997 
                                                             --------  ---------
Current assets
     Restricted cash .....................................   $  2,194   $  3,191
     Accounts receivable, net of allowance for doubtful
       accounts of $710 and $1,426, respectively .........     26,289     28,401
     Inventories, net ....................................     31,094     29,960
     Deferred income taxes ...............................      3,071      2,277
     Prepaid expenses and other ..........................        559      1,048
                                                             --------   --------
              Total current assets .......................     63,207     64,877
Property, plant and equipment, net .......................     38,198     41,085
Net assets of discontinued operations ....................      8,844     28,744
Goodwill, net ............................................     14,517     15,405
Deferred income taxes ....................................      4,465      5,259
Other assets .............................................      4,744      5,829
                                                             --------   --------
Total assets .............................................   $133,975   $161,199
                                                             ========   ========

                      LIABILITIES AND STOCKHOLDER'S DEFICIT

Current liabilities
     Short-term debt ..................................     $   --      $    428
     Current portion of long-term debt ................        1,019       1,173
     Borrowings under the revolving credit facility ...       16,813      38,154
     Accounts payable .................................       17,771       9,948
     Accrued compensation and benefits ................        4,648       4,175
     Accrued income taxes .............................          483        --
     Other accrued liabilities ........................        7,471       8,718
                                                            --------    --------
              Total current liabilities ...............       48,205      62,596
                                                            --------    --------
Noncurrent liabilities
     Long-term debt, less current portion .............      100,386     101,404
     Employee benefit obligations and other ...........        2,583       1,940
                                                            --------    --------
            Total noncurrent liabilities ............        102,969     103,344
                                                            --------    --------
Commitments and contingencies
Stockholder's deficit
     Common stock and paid-in capital .................      16,486      16,486
     Cumulative other comprehensive income ............        (491)       (186)
     Accumulated deficit ..............................     (33,194)    (21,041)
                                                            --------    --------
            Total stockholder's deficit .............       (17,199)     (4,741)
                                                            --------    --------
            Total liabilities and stockholder's deficit    $133,975    $161,199
                                                            ========    ========


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



                                       32
<PAGE>






                  J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (Dollars in thousands except per share amounts)

                                               Year Ended December 31,          

                                                1998         1997         1996 
                                                ----         ----         ----

Net sales ..................................   $365,327    $338,559    $310,924
Cost of sales ..............................    310,094     280,193     257,065
                                               --------    --------    --------
Gross profit ...............................     55,233      58,366      53,859
Selling, general and administrative expense      47,651      48,455      44,833
Closed and excess facility costs ...........        335       1,364       1,001
Other (income) expense, net ................       (431)       (405)         53
                                               --------    --------    --------
Operating income ...........................      7,678       8,952       7,972
Interest expense ...........................     15,648      15,775      14,484
                                               --------    --------    --------
Loss from continuing operations before income
   taxes and extraordinary loss ............     (7,970)     (6,823)     (6,512)
Income tax provision (benefit) .............        744         947        (991)
                                               --------    --------    --------
Loss from continuing operations before
    extraordinary loss .....................     (8,714)     (7,770)     (5,521)
Income (loss) from discontinued operations,
         net of applicable taxes ...........     (3,439)        224        (633)
Extraordinary loss on early extinguishment of
    debt, net of income tax benefit of $135        --          --          (260)
                                               --------    --------    --------
Net loss ...................................   $(12,153)   $ (7,546)   $ (6,414)
                                               ========    ========    ========

Basic and diluted loss per share:
Loss from continuing operations before
     extraordinary loss ....................   $ (2,849)   $ (2,540)   $ (1,805)
Income (loss) from discontinued operations,
     net of applicable taxes ...............     (1,124)         73        (207)
Extraordinary loss, net of applicable taxes .      --          --           (85)
                                               --------    --------    --------
Net loss ...................................   $ (3,973)   $ (2,467)   $ (2,097)
                                               ========    ========    ========

Weighted average shares outstanding ...........  3,059      3,059      3,059
                                                =======   ========   ========











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



                                       33
<PAGE>

                  J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                                             Year Ended December 31,
                                                                                           1998      1997        1996
<S>                                                                                   <C>         <C>         <C>
Net loss ...........................................................................   $(12,153)   $ (7,546)   $ (6,414)
Adjustments to reconcile net loss to net
      cash provided by (used in) operating activities:
  Depreciation and amortization ....................................................     11,535      12,382      11,862
  Provision for write-down of assets of
       discontinued operations .....................................................      5,505        --          --
  Gain on sale of discontinued operations ..........................................     (6,529)       --          --
  Extraordinary loss on early extinguishment of debt,
      net of tax ...................................................................       --          --           260
  Closed and excess facility costs .................................................         47       1,834        --
  (Gain) loss on sale of facilities and equipment ..................................         23      (2,545)         19
  Deferred federal income tax provision (benefit) ..................................       --           226      (1,725)
  Other ............................................................................       (801)        347         303
Increase  (decrease)  in  assets  and liabilities  net
  of the  effect  ofacquisitions:
  Accounts receivable ..............................................................      2,093      (4,903)      2,590
  Inventories ......................................................................      1,206      (1,077)      3,325
  Prepaid expenses and other .......................................................       --           485         160
  Accounts payable .................................................................      7,765        (151)        798
  Accrued income taxes .............................................................        297        (378)          9
  Other accrued liabilities ........................................................      2,757      (1,189)       (500)
                                                                                        --------    --------    --------
      Net cash provided by (used in) operating activities ..........................     11,745      (2,515)     10,687
                                                                                        --------    --------    --------
Cash flows provided by (used in) investing activities:
  Purchase of businesses, net of cash acquired .....................................       --        (2,700)       --
  Proceeds from disposition of business, facilities
      and equipment ................................................................     16,164       3,674         416
  Acquisition of property, plant and equipment .....................................     (6,226)     (7,262)     (8,091)
  Other ............................................................................        397        (145)        178
                                                                                        --------    --------    --------
      Net cash provided by (used in) investing activities ..........................     10,335      (6,433)     (7,497)
                                                                                        --------    --------    --------
Cash flows provided by (used in) financing activities:
  Net (payments) proceeds of revolving lines of
      credit and short term debt ...................................................    (21,758)     11,037         683
  Payments of long-term debt and capital leases ....................................     (1,319)     (1,298)     (2,228)
  Debt issuance costs ..............................................................       --          (207)       (752)
                                                                                        --------    --------    --------
      Net cash provided (used in) financing activities .............................    (23,077)      9,532      (2,297)
                                                                                        --------    --------    --------
           Increase (decrease) in restricted cash ..................................       (997)        584         893
Restricted cash beginning of period ................................................      3,191       2,607       1,714
                                                                                        --------    --------    --------
Restricted cash end of period ......................................................   $  2,194    $  3,191    $  2,607
                                                                                        ========    ========    ========
Supplemental information:
  Cash paid for income taxes .......................................................   $    633    $  1,526    $  1,010
                                                                                        ========    ========    ========
  Cash paid for interest cost ......................................................   $ 15,615    $ 15,029    $ 16,211
                                                                                        ========    ========    ========

</TABLE>
             
              The accompanying notes are an integral part of these
                       consolidated financial statements.



                                       34
<PAGE>




                  J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
              FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 and 1998
                  (Dollars in thousands, except share amounts)


                             Shares of  Common  Retained    Other
                              Common  Stock and Earnings Comprehensive
                              Stock    Paid-in  (Deficit)   Income       Total 
                                       Capital


December 31, 1995 .........     3,059  $ 16,486  $ (7,081)  $     46   $  9,451
                                                                       --------
    Net loss ..............      --        --      (6,414)      --       (6,414)
     Translation adjustment      --        --        --           (7)        (7)
                                                                       --------
     Comprehensive income .      --        --        --         --       (6,421)
                             --------  --------   --------   --------   --------
December 31, 1996 .........     3,059    16,486   (13,495)        39      3,030
                             --------  --------   --------   --------   --------
     Net loss .............     --        --       (7,546)      --       (7,546)
     Translation adjustment      --        --        --         (225)      (225)
                                                                        --------
     Comprehensive income .      --        --        --         --       (7,771)
                             --------  --------   --------   --------   --------
December 31, 1997 .........     3,059    16,486   (21,041)      (186)    (4,741)
                                                                        --------
     Net loss .............      --        --     (12,153)       --     (12,153)
     Translation adjustment      --        --        --         (305)      (305)
                                                                        --------
     Comprehensive income .      --        --        --         --      (12,458)
                             --------  --------   --------   --------   --------
December 31, 1998 .........     3,059  $ 16,486  $(33,194)  $   (491)  $(17,199)
                             ========  ========   ========   ========   ========



















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





                                       35
<PAGE>





                  J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Organization & Business:

     J.B.   Poindexter  &  Co.,  Inc.   ("JBPCO")  and  its  subsidiaries   (the
"Subsidiaries",  and  together  with JBPCO,  the  "Company")  operate  primarily
manufacturing and wholesale distribution businesses.  JBPCO and the Subsidiaries
are controlled by John B. Poindexter.

       Morgan Trailer  Manufacturing Co.  ("Morgan")  Acquired January 12, 1990,
Morgan   manufactures  truck  bodies  for  dry  freight  and  refrigerated  vans
(excluding  those  made for  pickup  trucks  and  tractor-trailer  trucks).  Its
customers  include  rental  companies,  truck dealers and companies that operate
fleets of delivery vehicles.

       Effective   July   1,1997,   Morgan   acquired  the  assets  of  Gem  Top
Manufacturing,  Inc. ("Gem Top") from the Truck Accessories  Group, Inc. Gem Top
manufactures and distributes light truck caps primarily to commercial  customers
and was  originally  acquired on March 16, 1993.  Since both companies are under
common  control  the  acquisition  was  accounted  for in a manner  similar to a
pooling of interests.

       Truck Accessories Group, Inc. ("TAG") Acquired on August 14, 1987, TAG is
a manufacturer of pickup truck "caps" and tonneau  covers,  which are fabricated
enclosures  that fit over the open beds of pickup  trucks,  converting  the beds
into weatherproof  storage areas. TAG operations are organized into two separate
and distinct  operating  divisions:  TAG Manufacturing and TAG Distribution (See
Note 13).

       TAG  Manufacturing  includes Leer, which was acquired on August 14, 1987,
20th Century Fiberglass (Century),  which was acquired June 29, 1995, and Raider
Industries Inc. (Raider),  a Saskatchewan,  Canada corporation that acquired the
cap manufacturing businesses of Raider and LoRider on June 30, 1995.

       EFP Corporation ("EFP") Acquired on August 2, 1985, EFP molds and markets
expandable foam products which are used as casting  patterns,  packaging,  shock
absorbing  and  materials   handling  products   primarily  by  the  automotive,
electronics,  furniture,  appliance and other  industries.  It also manufactures
products  used as thermal  insulators.  On August 31, 1992,  EFP acquired  Astro
Pattern  Corporation's  ("Astro")  assets.  Astro's  assets  are used to produce
machine tooling and wood patterns primarily for the foundry industry.

       MIC  Group  ("MIC  Group")  Acquired  on June 19,  1992,  MIC  Group is a
manufacturer,  investment  caster and assembler of precision metal parts for use
in the worldwide oil and gas exploration, aerospace and general industries.

       Discontinued Operations

        The following  operations  have been  presented as  discontinued  in the
accompanying consolidated financial statements. See a further discussion at Note
13.

       Truck  Accessories  Group  Distribution  Division  Acquired on August 14,
1987, as part of the TAG acquisition,  TAG Distribution operates as a retail and
wholesale  distributor of products  manufactured by TAG  Manufacturing and other
suppliers. Management has committed to a plan to dispose of TAG Distribution.

                                       36
<PAGE>
       
       TAG Distribution  includes Radco  Industries,  Inc.,  ("Radco") which was
acquired on December 28, 1994, Century  Distributing which was acquired June 29,
1995,  and Midwest  Truck After Market  ("MTA")  which was acquired  October 31,
1997.

       Lowy Group,  Inc.  ("Lowy Group")  Acquired  August 30, 1991,  Lowy Group
operates  in the floor  covering  business  serving  all or a portion  of twelve
Midwestern  states  through  six company  operated  facilities.  Management  has
committed  to  a  plan  to  dispose  of  Lowy.  Lowy  Group  included  the  Blue
Ridge/Courier  division,  which was a carpet manufacturing and dyeing operation,
and was sold effective August 31, 1998.

2. Summary of Significant Accounting Policies:

       Principles of Consolidation.  The consolidated  financial statements have
been prepared in accordance with generally accepted accounting  principles.  All
intercompany accounts and transactions have been eliminated in consolidation.

       Restricted Cash. At December 31, 1998 and 1997,  substantially all of the
Company's  cash is  restricted  pursuant  to the terms of the  revolving  credit
facility (See Note 7).

       Cash and Cash  Equivalents.  For the  purposes of the  statement  of cash
flows,  the Company  considers all highly liquid  investments with maturities of
three months or less when purchased to be cash equivalents.

       Accounts  Receivable.  Accounts receivable are stated net of an allowance
for doubtful accounts.  During the years ended December 31, 1998, 1997 and 1996,
the Company charged to expense, $242,000, $696,000, and $552,000,  respectively,
as a provision for doubtful  accounts and deducted from the allowance  $958,000,
$694,000 and $1,124,000, respectively, for write-offs of bad debts.

     Inventories. Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out (FIFO) method.

       Property, Plant and Equipment.  Property, plant and equipment,  including
property  under capital  leases,  are stated at cost. The cost of property under
capital leases represents the present value of the future minimum lease payments
at the  inception of the lease.  Depreciation  and  amortization  is computed by
using the straight-line method over the estimated useful lives of the applicable
assets for financial  reporting purposes and accelerated  methods for income tax
purposes. The cost of maintenance and repairs is charged to operating expense as
incurred and the cost of major  replacements  and  significant  improvements  is
capitalized.

       Warranty. Morgan provides product warranties for periods up to ten years.
TAG provides a warranty period, exclusive to the original truck owner, which is,
in general  but with  exclusions,  one year for parts,  five years for paint and
lifetime for  structure.  A provision for warranty  costs is included in cost of
sales when goods are sold based on historical experience.

       Income Taxes.  The Company accounts for income taxes under the provisions
of Statement of Financial  Accounting  Standards  (SFAS) No. 109. Under SFAS No.
109,  deferred tax assets and  liabilities  are computed based on the difference


                                       37
<PAGE>

between the financial  statement and income tax bases of assets and  liabilities
using the enacted tax rates.  Deferred  income tax expenses or credits are based
on the changes in the deferred tax asset or liability from period to period.

       Net Sales  Recognition.  Net sales are  recognized  upon  shipment of the
product to  customers,  except for Morgan where  revenue is  recognized  and the
customer is billed upon final body assembly and quality inspection.
Adjustments to arrive at net sales include allowances for discounts and returns.

       Earnings  per Share.  Earnings  per share is  calculated  by dividing net
income by the weighted average number of shares  outstanding  during the period.
No common stock equivalents exist.

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

       Foreign  Exchange  Currency  Contracts.   Morgan  uses  foreign  exchange
currency  contracts to hedge the foreign  currency risk  associated with British
Sterling inventory purchases. Any such gains or losses on these contracts, which
qualify as accounting  hedges,  are deferred and recognized  when the underlying
inventory is sold.

       Recently  Issued  Accounting  Standards.  In  June  1998,  the  Financial
Accounting Standards Board (FASB) issued SFAS No. 133, Accounting for Derivative
Instruments  and Hedging  Activities,  which is required to be adopted in fiscal
years  beginning  after June 15, 1999.  Because of the Company's  limited use of
derivatives to manage its exposure to  fluctuations  in foreign  exchange rates,
management  does not anticipate that the adoption of the new statement will have
a significant effect on earnings or the financial position of the Company.

     In  March  1998,  the  Accounting   Standards  Executive  Committee  issued
Statement  of  Position  ("SOP")  98-1,  Accounting  for the  Costs of  Computer
Software  Developed  or Obtained  for  Internal  Use.  This  statement  provides
guidance on  accounting  for the costs of  software  developed  or obtained  for
internal use and is  effective  for fiscal years  beginning  after  December 15,
1998.  The  Company  will  adopt  this  standard  in the first  quarter of 1999.
Management  does not believe its adoption will have a significant  effect on the
Company's  financial  statements,  as the Company's policies are consistent with
this standard.

3.  Segment Data:

     The  Company  operates  and  manages  its  subsidiaries   individually  and
considers each subsidiary a separate  business  segment.  The Company  evaluates
performance  and  allocates  resources  based on the  operating  income  of each
subsidiary.  The accounting policies of the reportable business segments are the
same as those described in the summary of significant accounting policies. Other
than  sales  between  TAG  Manufacturing  and  TAG  Distribution,  there  are no
significant inter-segment sales. For a description of each business segment, see
Note 1. The  following is a summary of the  business  segment data for the years
ended December 31, 1998, 1997 and 1996 (dollars in thousands):


                                       38
<PAGE>

Net Sales ......................            1998            1997            1996
Morgan .........................        $201,126        $181,652        $152,073
TAG Manufacturing ..............          99,357          95,391         101,927
EFP ............................          37,986          32,954          31,444
MIC Group ......................          26,858          28,562          25,480
                                        --------        --------        --------
Net Sales ......................        $365,327        $338,559        $310,924
                                        ========        ========        ========

Operating Income (Loss)
Morgan .........................        $  2,781        $  8,531        $  6,312
TAG Manufacturing ..............           2,165          (4,559)        (3,340)
EFP ............................           3,971           3,031           2,737
MIC Group ......................           1,542           4,732           4,799
JBPCO (Corporate) ..............          (2,781)         (2,783)        (2,536)
                                         --------        --------       --------
Operating Income ...............        $  7,678        $  8,952        $  7,972
                                         ========        ========       ========

Depreciation and Amortization Expense
Morgan..........................        $  2,326        $  2,424        $  2,335
TAG Manufacturing...............           4,312           4,279           3,674
EFP.............................           1,684           1,853           1,928
MIC Group.......................             944           1,230           1,440
JBPCO (Corporate)...............           1,039             945             675
Discontinued operations.........           1,230           1,651           1,810
                                       ---------       ---------         -------
Depreciation and Amortization Expense    $11,535         $12,382         $11,862
                                         =======         =======         =======

Total Assets
Morgan...............................   $ 60,454        $ 65,205       $  58,399
TAG Manufacturing....................     35,656          37,142          37,680
EFP..................................     16,233          14,253          14,930
MIC Group............................      9,078          10,500          10,144
JBPCO (Corporate)....................      3,710           5,355           9,364
Net assets of discontinued operations      8,844          28,744          32,999
                                      ----------      ----------       ---------
Identifiable Assets..................   $133,975        $161,199        $163,516
                                        ========        ========        ========

Capital Expenditures
Morgan...............................    $ 2,646         $ 3,071         $ 2,448
TAG Manufacturing....................      1,820           2,392           3,283
EFP..................................        510             478             523
MIC Group.............................       392             750           1,141
JBPCO (Corporate).....................        27             101              32
Discontinued operations...............       831             470             664
                                       ---------       ---------       ---------
Capital Expenditures..................   $ 6,226         $ 7,262         $ 8,091
                                         =======         =======         =======

      Net sales include $14,497,000, $15,630,000 and $17,025,000,  respectively,
from  intercompany  sales to TAG  Distribution,  which has been  classified as a
discontinued  operation.  As a result,  operating income included  approximately
$2,900,000, $3,100,000 and $3,400,000, respectively, related to profits on these


                                       39
<PAGE>

sales.  Since  TAG  Distribution's  results  of  operations  are  classified  as
discontinued,  the  intercompany  sales do not eliminate on a line item basis in
the  accompanying   consolidated   statement  of  operations.   However,   on  a
consolidated  basis,  such  intercompany  transactions  are  eliminated  in  the
accompanying  consolidated  statement of operations  for each period  presented.
Under the  current  plan of  disposition  for TAG  Distribution,  a  substantial
portion of these sales may not continue subsequent to the disposition.

      During 1998, MIC Group closed a facility and incurred charges of $335,000,
which was  included  in  operating  income for the period.  TAG  Manufacturing's
operating income included  $805,000 and $1,001,000 of charges,  during the years
ended December 31, 1997 and 1996,  respectively,  associated with the closure or
write-down in carrying value of certain excess  facilities.  During 1997, Morgan
wrote down the carrying  value of its facility in Mexico by $559,000,  which was
included in operating income for the period.

        Morgan has two  customers  (truck  leasing  and rental  companies)  that
accounted for, on a combined basis,  approximately  40-45% of Morgan's net sales
during  1998,  1997 and  1996,  respectively.  EFP has  three  customers  in the
electronics  industry that accounted for approximately 37%, 28% and 25% of EFP's
net sales in 1998,  1997 and  1996,  respectively.  MIC  Group  has an  industry
concentration, pertaining to international oil field service companies, with one
customer  in 1998,  three  customers  in 1997 and four  customers  in 1996  that
accounted  for  approximately  57%,  53%  and  69% of  MIC  Group's  net  sales,
respectively.

        The Company's  operations are located  principally in the United States.
However, Raider Industries, Inc., a subsidiary of TAG manufacturing,  is located
in Canada and  Acero-Tec,  S.A. de C.V., a subsidiary  of Morgan,  is located in
Mexico. The following  information  pertains to these foreign subsidiaries as of
December 31. (dollars in thousands):

                                                    1998             1997
                                                    ----             ----

   Long lived assets............                   $5,296           $5,839
                                                   ======           ======

         Consolidated net sales include $11,118,000,  $11,084,000 and $8,458,000
in 1998, 1997 and 1996, respectively,  for sales to customers outside the United
States.


                                       40
<PAGE>

4.  Inventories:

   Consolidated net inventories consist of the following (dollars in thousands):

                                                            December 31,   
                                                       1998             1997   
                                                    ----------       ----------
FIFO Basis Inventory:
        Raw Materials......................           $19,549        $14,398
        Work in Process....................             4,296          6,103
        Finished Goods.....................             7,249          9,459
                                                    ---------      ---------
Total Inventory............................           $31,094        $29,960
                                                      =======        =======


        Inventories  are stated  net of an  allowance  for  excess and  obsolete
inventory   of   $1,214,000   and  $852,000  at  December  31,  1998  and  1997,
respectively.  During the years ended  December  31,  1998,  1997 and 1996,  the
Company charged to expense $1,176,000, $923,000 and $2,052,000, respectively, as
a provision  for excess and obsolete  inventory  and deducted from the allowance
$814,000, $1,635,000 and $1,389,000,  respectively, for write-offs of excess and
obsolete inventory.


5.       Long Lived Assets


        Property,  plant  and  equipment,  as of  December  31,  1998 and  1997,
consisted of the following (dollars in thousands):
                                        Range of Useful Lives  1998       1997  
                                        --------------------- -------    -------
  Land................................         --          $   3,598    $  3,636
  Buildings and improvements..........        5-32            19,330      19,433
  Machinery and equipment.............        3-10            51,516      50,037
  Furniture and fixtures..............        2-10             8,623       6,770
  Transportation equipment............        2-10             3,337       3,480
  Leasehold improvements..............        3-10             3,884       3,631
  Construction in progress............         --              2,541       2,795
                                                            --------    --------
                                                             92,829       89,782
                                                            --------    --------
 Accumulated depreciation and amortization                  (54,631)    (48,697)
  Property, plant and equipment, net..                     $ 38,198     $ 41,085
                                                           =========   =========

     Depreciation  expense was  $8,122,000,  $8,550,000  and  $8,000,000 for the
years ended December 31, 1998, 1997 and 1996, respectively.


                                       41
<PAGE>





        Other assets and  goodwill as of December 31, 1998 and 1997,  consist of
the following (dollars in thousands):
<TABLE>
<CAPTION>
                                                              1998                                     1997                
                                              ---------------------------------      -------------------------------------
                                Amortization     Accumulated         Net Book           Accumulated             Net Book
                                    Period       Amortization          Value            Amortization             Value   
<S>                                <C>           <C>               <C>                   <C>                  <C>    
Other Assets:
  Cash surrender value of
    life insurance............          -         $     -          $  1,123               $    -               $  1,009
  Agreements not-to-compete            3-6           1,244              531                   888                   888
  Debt issuance costs and other        3-10          3,022            3,090                 2,216                 3,932 
                                                    -------          -------               -------             ----------
Total.........................                      $4,266         $  4,744                $3,104              $  5,829 
                                                    =======         ========               ========             =========
Goodwill......................        25-40         $7,937          $14,517                $7,049               $15,405
                                                    =======         ========               ========             =========
</TABLE>

       Goodwill is being amortized on a straight-line basis over forty years for
Morgan and twenty-five years for TAG Manufacturing.

        In accordance with FASB Statement No. 121, Accounting for the Impairment
of Long-Lived  Assets and for  Long-Lived  Assets to be Disposed of, the Company
records  impairment  losses on long-lived  assets used in operations when events
and circumstances  indicate that the assets may be impaired and the undiscounted
cash flows  estimated to be generated by those assets are less than the carrying
amounts of those assets.  During the twelve months ended December 31, 1998, 1997
and 1996, the Leer division of TAG  Manufacturing  incurred  operating losses of
approximately $1,036,000,  $7,462,000 and $4,546,000,  respectively. Even though
the operating  performance of the Leer division of TAG  Manufacturing  indicated
that  approximately  $13,082,000  of assets of certain of its  operations may be
impaired,  an  estimate  of the  future  undiscounted  cashflows  from  the Leer
division of TAG  Manufacturing  indicated that the carrying values of the assets
would be expected to be recovered  over the useful life of the assets.  However,
it is possible that the estimate of undiscounted  future  cashflows could change
in the future requiring recognition of an impairment loss.

        During 1998, MIC Group closed its Houston machining  facility  resulting
in a charge of  $335,000  included  in Closed and Excess  Facility  Costs in the
accompanying  consolidated statements of operations.  Of these charges,  $47,000
was non-cash expenses related to the write-down of assets. At December 31, 1998,
accrued expenses  included  $234,000 with respect to lease  obligations that run
through December 1999.

        During 1997,  Morgan committed to a plan to dispose of its idle facility
in Mexico.  Accordingly,  Morgan began  marketing the property and,  based on an
estimate  of the fair value less the cost to sell the  property,  wrote down the
carrying  value by $559,000  which was  included  in Closed and Excess  Facility
Costs in the  accompanying  consolidated  statement of  operations  for the year
ended  December  31,  1997.  The  Mexico  facility  has  a  net  book  value  of
approximately  $1,200,000  at December  31, 1998 and 1997,  which is included in
Property, Plant and Equipment.

       In 1996, TAG  Manufacturing  closed its plant in the Southwestern  United
States,  resulting  in a charge of  $1,001,000  for the year ended  December 31,
1996. Additional expenses of $805,000 were incurred during 1997, with respect to
these  facilities.  Both such charges are included in Closed and Excess Facility


                                       42
<PAGE>

Costs  in the  accompanying  consolidated  statements  of  operations.  Of these
charges, $476,000 in 1997 and $453,000 in 1996 were non-cash expenses related to
the  write-down or disposal of assets during those years.  At December 31, 1998,
accrued expenses included $162,000 with respect to lease obligations,  which run
through September 1999.

6.       Short-term debt:

     Short-term debt as of December 31, 1998 and 1997, consists of the following
(dollars in thousands):                                    1998          1997 
                                                           ----          ----
Morgan: Bankers' acceptances generally 180 day terms 
        with interest rates ranging from 4.9% to 7.7%...   $ -           $428
                                                           =====         ====

7.         Revolving Credit Agreements:

     Amounts outstanding under the Revolving Credit Agreement as of December 31,
1998 and 1997 were (in thousands):

                                                          1998            1997
                                                          ----            ----
Revolving loan due June 2000........................    $16,813       $ 38,154
                                                        =======       ========

     On June 28, 1996,  the Company  entered into a  three-year  senior  secured
revolving loan agreement  (Revolving Loan Agreement)  providing for borrowing by
its  Subsidiaries  of up to  $50,000,000,  which was  subsequently  increased to
$55,000,000,  effective  May 13, 1998.  At the  conclusion  of the initial three
years (June  1999),  the  agreement  provides for  borrowings  on a year to year
basis,  unless  sooner  terminated  by the Company or lender  provided  that the
lender may, at its option,  extend the  renewal  date of the  agreement  to four
years from the original  inception  of the  agreement.  On March 29,  1999,  the
Company was  notified by the lender,  in  writing,  that it is  exercising  this
option and thus extending the agreement to June 2000.

        The  Revolving  Loan  Agreement  allows the Company to borrow  funds and
provides  for the  guarantee of letters of credit and certain  foreign  exchange
contracts,  issued by the Company's banks, up to the lesser of $55,000,000 or an
amount based on advance rates applied to the total amounts of eligible  accounts
receivable  and  inventories  of the  Subsidiaries.  The  advance  rates vary by
subsidiary and range between 75% and 85% for receivables and between 40% and 60%
for inventory.  The Revolving Loan Agreement  provides for borrowing at variable
rates of interest, based on either LIBOR (London Interbank Offered Rate, 5.0% at
December 31, 1998) or U.S. prime rate (7.75% at December 31, 1998).  Interest is
payable  monthly  including  a fee of  one-half  of one percent on the amount of
unused  borrowings.  The Subsidiaries are guarantors of this  indebtedness,  and
inventory and  receivables  are pledged under the Revolving Loan  Agreement.  At
December 31, 1998, the Company had total borrowings of $16,813,000,  and letters
of credit and foreign exchange accommodations of $3,742,000 outstanding pursuant
to the Revolving  Loan  Agreement.  At December 31, 1998,  the Company's  unused
available  borrowing  under the Revolving Loan Agreement  totaled  approximately
$22,745,000.

        During the year ended  December 31, 1996,  the Company wrote off certain


                                       43
<PAGE>

capitalized financing costs and recorded an extraordinary loss of $260,000,  net
of tax benefits, as a result of refinancing the revolver debt.
        The Revolving Loan Agreement contains  provisions allowing the lender to
accelerate debt repayment upon the occurrence of an event the lender  determines
to represent a material adverse change. Accordingly,  balances outstanding under
the  Revolving  Loan  Agreement  are  classified  as  current  liabilities.  The
Revolving Loan Agreement also contains restrictive covenants, which, among other
things, restrict the ability of the Company to dispose of assets, incur debt and
restrict certain corporate activities.  At December 31, 1998, the Company was in
compliance with all covenants of the Revolving Loan  Agreement.  At December 31,
1998, the Company was prohibited  from paying  dividends  under the terms of the
Revolving Loan Agreement. Additionally, the Company's cash balance is restricted
under the terms of the Revolving Loan  Agreement.  Effective  February 12, 1999,
the  Company  obtained  a waiver  from the  lender  permitting  the  Company  to
repurchase up to  $10,000,000  of its 12 1/2% Senior notes (See Note 8), subject
to certain conditions.

        Radco is a non-guarantor  of the Company's Senior Notes (See Note 8) and
is not a Subsidiary  Guarantor  under the terms of the Company's  Revolving Loan
Agreement.  Concurrent with the acquisition of  substantially  all the assets of
MTA, Radco entered into a three-year  revolving credit  agreement  providing for
borrowings of up to the lesser of $5,000,000 or an amount based on advance rates
applied to the total amounts of eligible accounts  receivable and inventories of
Radco and MTA. At December 31, 1998,  Radco had total  borrowings of $1,629,000,
and unused available  borrowing  capacity totaling  approximately  $0.2 million.
Radco is part of TAG  Distribution  and it is  anticipated  that  the  remaining
balance  outstanding  under the Radco  facility  will be  repaid  from  proceeds
derived from the disposal of MTA. Accordingly,  the borrowings,  under the Radco
revolving  loan   agreement,   are  included  in  "Net  Assets  of  Discontinued
Operations."  Effective  January 29, 1999,  the assets and  operations  of Radco
(excluding MTA) were sold and proceeds of approximately  $1,200,000 were used to
repay borrowings under the Radco facility.


8.  Long-term debt and Note Offering:

     Long-term  debt as of December 31, 1998 and 1997  consists of the following
(dollars in the table in thousands):

                                                          1998            1997
JBPCO:                                                    ----            ----  
        12 1/2% Senior Notes due 2004..............     $100,000        $100,000
                                                        --------        --------

TAG Manufacturing:
   Note payable, due June 15, 2000, monthly principal 
   payment of $26,666 plus interest at U.S. prime, 
  (7.75% at December 31, 1998)......................       480              800
    Obligations under various non-compete agreements..     629              984
        Obligations under capital leases..............      82              196
                                                       ---------       ---------
                                                         1,191            1,980
                                                       ---------       ---------
Morgan:
  Capital lease obligation due in monthly installments 
    of $17,704 including interest at 8.2%,
     through May 10, 1998............................      -                 90
                                                       ---------       ---------

                                       44
<PAGE>

EFP:
 Various equipment notes, due in monthly or annual 
   installments, interest from 8.12% to 10%, with 
   maturities from May 1997 to September 1999, 
   each collateralized by specific assets...........       214              478
                                                       --------        ---------

MIC Group:
  Covenant not-to-compete...........................       -                 29
                                                      ---------        ---------
      Total long-term debt..........................   101,405          102,577
       Less current portion    .....................     1,019            1,173
                                                      ---------        ---------
      Long-term debt, less current portion..........  $100,386         $101,404
                                                      =========        =========

        The Senior Notes Indenture contains restrictive covenants,  which, among
other  things,  restrict the ability of the Company to dispose of assets,  incur
debt and restrict  certain  corporate  activities.  At December  31,  1998,  the
Company was in  compliance  with all  covenants of the Senior  Notes  Indenture.
Under the terms of the Senior Notes Indenture,  proceeds in excess of $2,000,000
from the sale of assets, including the stock of the Company's subsidiaries,  are
required to be used to repay  borrowings  under the  Revolving  Loan  Agreement.
Proceeds in excess of amounts outstanding under the Revolving Loan Agreement may
be  re-invested  in assets of the Company  within one year of the asset sale. At
December 31, 1998, the Company was prohibited  from paying  dividends  under the
terms of the Senior Notes Indenture.

        The Company's  obligations under the Senior Notes are guaranteed by each
directly wholly owned  Subsidiary of JBPCO (the "Subsidiary  Guarantors").  Each
guarantee is a senior  unsecured  obligation of the  Subsidiary  providing  such
Guarantee and ranks pari passu with all other senior  unsecured  indebtedness of
such  subsidiary.   In  addition,   the  Subsidiary   Guarantors  guarantee  the
indebtedness  outstanding  under the Revolving  Loan  Agreement and have pledged
substantially  all  of  their  assets.  Separate  financial  statements  of  the
Subsidiary Guarantors are not included because (a) all the Subsidiary Guarantors
provide  the  Guarantees,  and (b) the  Subsidiary  Guarantors  are  jointly and
severally liable on a full and unconditional basis.

        The Company's non-guarantor  subsidiaries are Radco Industries (acquired
by TAG in  December  1994 and include MTA  acquired  in October  1997),  Tile by
Design  (acquired  by  Lowy in  November  1994),  and  Acero-Tec,  S.A.  de C.V.
(Morgan's Mexico subsidiary).  The net assets and operating results of Radco and
Tile by Design are included in discontinued  operations.  Effective  January 29,
1999, the assets and  operations of Radco were sold.  The Company  believes that
separate  financial  statements or other  disclosures  of the guarantors are not
material to the investors.  Acero-Tec,  S.A. de C.V., is the only  non-guarantor
subsidiary  not  classified  as a  discontinued  operation and for which the net
assets and operating results have been segregated in the accompanying  financial
statements. Acero-Tec, S.A. de C.V. has total assets of approximately $1,200,000
at December 31, 1998,  and the results of its  operations  were not  significant
during the three years then ended.

        The  Company  estimates  the fair value of the 12 1/2%  Senior  Notes at
December 31, 1998 to be $94,000,000 based on their publicly traded value at that
date compared to a recorded amount of $100,000,000 as of December 31, 1998.

                                       45
<PAGE>

        Subsequently to December 31, 1998, the Company  purchased  $8,000,000 of
its 2004 12 1/2% Senior Notes for an aggregate  purchase price of  approximately
$7,700,000. The Company will record an extraordinary gain on the purchase of the
Senior  Notes of  approximately  $300,000  in 1999.  The  Company's  decision to
purchase and hold the Senior Notes or to sell the Senior Notes will be dependent
upon the interest rate arbitrage  between the Senior Notes and borrowings  under
the Revolving Loan Agreement and market  conditions.  The purchases were made in
the open  market,  the  company  does not  intend to cancel or redeem the Senior
Notes and may re-sell the Senior Notes in the open market at a future date.


     Maturities.  Aggregate  principal  payments on long-term  debt for the next
five  years  subsequent  to  December  31,  1998,  are as  follows  (dollars  in
thousands):

1999 .................................................                  $  1,019
2000 .................................................                       386
2001 .................................................                      --
2002 .................................................                      --
2003 .................................................                      --
2004 .................................................                   100,000
                                                                        --------
                                                                        $101,405
                                                                        ========
9.      Operating Leases:

         The Company leases certain manufacturing facilities and equipment under
noncancelable  operating  leases certain of which contain renewal  options.  The
future minimum lease payments for the next five years subsequent to December 31,
1998 are as follows (dollars in thousands):

1999 ..................................................                  $ 5,994
2000 ..................................................                    4,514
2001 ..................................................                    3,283
2002 ..................................................                    1,754
2003 ..................................................                      952
                                                                         -------
                                                                         $16,497
                                                                         =======
  
         Total  rental  expense  included  in  continuing  operations  under all
operating  leases was $4,852,000,  $5,453,000 and $4,929,000 for the years ended
December 31, 1998, 1997 and 1996, respectively.



                                       46
<PAGE>

10.    Income Taxes:

     The income tax provision  (benefit) consists of the following for the years
ended December 31, 1998, 1997 and 1996 (dollars in thousands):

                                             1998           1997           1996
                                             ----           ----           ----
Current:
Federal ...........................           $--            $--           $--
State .............................            248            721           734
Foreign ...........................            496            --            --

Deferred:
Federal ...........................            -              525        (1,799)
State .............................            -             (299)           74
Foreign ...........................            -             --              -- 
                                               -           ------         ------
Income tax provision (benefit).....         $  744        $   947         $(991)
                                            =======       =======         ======

         The following table  reconciles the  differences  between the statutory
Federal  income tax rate and the effective tax rate for the years ended December
31, 1998, 1997 and 1996 (Dollars in thousands):
<TABLE>
<CAPTION>

                                            1998              1997              1996       
                                        -------------     ------------  ----------------
                                          Amount    %     Amount    %      Amount     %
<S>                                      <C>      <C>     <C>       <C>    <C>       <C>
Tax provision (benefit) at statutory
     federal income tax rate...........  $(2,710)   34%  $ (2,320)   34% $ (2,214)    34%
Valuation allowance....................    2,397   (30)     1,277   (19)     -
Goodwill amortization..................      234    (2)       239    (4)      335     (5)
Non deductible expenses................       86    (1)       196    (3)     -
Expiration of ITC......................       -               663   (10)     -
State income taxes, net of federal
     income tax benefit................      167    (2)       268    (4)      301     (5)
Intangible asset write-down............      317    (3)        -              -
Foreign income and withholding
     taxes, net of federal benefit.....      346    (4)       173    (2)      368     (6)
Other..................................      (93)   (1)       451    (6)      219     (3)
                                          -------  -----   ------- -----   -------  -----
Provision (benefit) for income
     Taxes and effective tax rates.....   $  744    (9%)   $  947   (14%)  $ (991)    15%
                                          =======  =====   ======= =====   =======  =====

</TABLE>

                                       47
<PAGE>









         Deferred  taxes  are  based on the  estimated  future  tax  effects  of
differences  between  the  financial  statements  and tax  basis of  assets  and
liabilities  given the  provisions of the enacted tax laws. The net deferred tax
assets and  liabilities  as of December  31, 1998 and 1997 are  comprised of the
following (dollars in thousands):
                                                            1998           1997
                                                            ----           ----
Current deferred tax (assets):
Allowance for doubtful accounts ....................      $  (579)      $  (994)
Employee benefit accruals and reserves .............         (853)       (1,031)
Warranty liabilities ...............................         (215)         --
Excess facility costs ..............................       (1,242)         (252)
Other ..............................................         (182)         --   
                                                          -------       -------
   Total current deferred tax (assets)..............       (3,071)       (2,277)
                                                          -------       --------

Long term deferred tax (assets):
Tax benefit carryforwards ....................         (12,720)         (10,635)
Warranty liabilities .........................          (1,109)          (1,235)
Non-compete agreements .......................            --               (579)
Other ........................................            (670)            (198)
Intangible write-off .........................          (1,181)            --
Valuation allowance ..........................           5,236            2,312
                                                       -------          -------
   Total long term deferred tax (asset).......         (10,444)        (10,335)

Long term deferred tax liabilities:
Depreciation and amortization.................           4,161           3,645
Other.........................................           1,818           1,431
                                                     ---------       ---------
Total long term deferred tax liability........           5,979           5,076
                                                     ---------       ---------
   Net long term deferred tax (asset).........          (4,465)         (5,259)
                                                     ----------      ----------
           Net deferred tax assets............        $ (7,536)       $ (7,536)
                                                     ==========      ==========

       Tax Carryforwards. The Company has investment tax credit carryforwards of
approximately  $189,000 for U.S. federal income tax purposes,  which will expire
between  1999 and 2001 if not  previously  utilized.  The company has recorded a
valuation  allowance of $189,000 against the investment tax credit  carryforward
as the Company  believes  that the  corresponding  deferred tax asset may not be
realizable.  The Company has  alternative  minimum tax credit  carryforwards  of
approximately  $817,000  for U.S.  federal  income  tax  purposes,  which may be
carried forward  indefinitely.  The  utilization of the alternative  minimum tax
credit  carryforward is restricted to the taxable income of one  Subsidiary.  In
addition,  the Company has net operating  loss  carryforwards  of  approximately
$34.0 million for U.S.  federal income tax purposes at December 31, 1998,  which
if not  utilized,  will  begin to expire in 2002.  The  Company  has  recorded a
valuation  allowance  of $5.0 million and $2.1  million,  during the years ended
December  31,  1998 and  1997,  respectively,  against  the net  operating  loss
carryforwards as the Company believes that the corresponding  deferred tax asset
may not be realizable.

       The Company has considered  prudent and feasible tax planning  strategies
in  assessing  the need for the  valuation  allowance.  The  Company has assumed
approximately  $7.5  million  of  benefits  attributable  to such  tax  planning


                                       48
<PAGE>

strategies.  In the event the Company  were to  determine in the future that any
such tax planning  strategies  would not be  implemented,  an  adjustment to the
deferred  tax asset would be charged to income in the period such  determination
was made.

11.  Common Stock:

         As of December 31, 1998 and 1997, there were 100,000 shares  authorized
and 3,059 shares  outstanding of JBPCO common stock with a par value of $.01 per
share.  JBPCO was  incorporated  in Delaware.  No other classes of common stock,
preferred stock or common stock equivalents exist.

12.  Employee Benefit Plans:

Defined Contribution Plans

         JBPCO  401(k)  Plan.  The  JBPCO-sponsored  401(k)  savings plan allows
participating  employees to contribute  through  salary  deductions up to 15% of
gross pay and provides for Company  matching  contributions up to two percent of
gross  pay as well the  opportunity  for an annual  discretionary  contribution.
Vesting in the Company matching contribution is 20% per year over the first five
years.  The Company incurred  expenses of $1,250,000,  $1,355,000 and $1,426,000
during the years ended December 31, 1998, 1997 and 1996, respectively, including
administrative fees of approximately $75,000 in each year.

Defined Benefit Plans

         Morgan,  EFP and Lowy had defined benefit plans as discussed below. The
other Subsidiaries do not have any defined benefit plans.

         Morgan.  Morgan  assumed  future  sponsorship  of the NSSC  (Morgan was
merged into NSSC during 1993) pension plan and  continues to make  contributions
to the plan in accordance with the funding  requirements of the Internal Revenue
Service.  No further benefits have accrued subsequent to February 12, 1992. Plan
assets  consist  primarily  of  investments  in two bank  funds  and the plan is
overfunded by approximately $193,000.

         Gem Top, a division  of Morgan,  had a defined  benefit  plan  covering
hourly  employees  working at least  1,000  hours per year.  The plan was frozen
effective  March  31,  1996,  and at  December  31,  1998 and 1997  plan  assets
approximated projected benefit obligations.

         EFP.  EFP  had  a  defined  benefit  plan  covering  substantially  all
full-time employees of one of its divisions.  This plan was terminated effective
April 15,  1996 and the assets  distributed  effective  October  10,  1996.  The
Company  realized  a  gain,   during  the  year  ended  December  31,  1996,  of
approximately $200,000 upon termination of the plan.

         Lowy Group.  Lowy Group has an unfunded  executive defined benefit plan
whereby deferred  compensation  agreements  provide a fixed amount of retirement
benefits  to  key  corporate  and  sales  employees.   The  accumulated  benefit
obligation  related to this plan were  approximately  $926,000 and $1,800,000 at
December 31, 1998 and 1997,  respectively.  Lowy Group makes no contributions to
the plan and no assets are held in trust to secure benefits  accumulating in the
plan.  Lowy Group does,  however,  maintain life insurance  policies to fund the



                                       49
<PAGE>
plan obligations and accumulate cash surrender values.  The cash surrender value
of life  insurance  policies,  of which  Lowy  Group  was  beneficiary,  totaled
$1,015,000  and $1,647,000 at December 31, 1998 and 1997,  respectively,  and is
included  in  "Net  assets  of  discontinued  operations"  in  the  accompanying
consolidated  balance sheets.  Payments made to retired  individuals in the plan
were $522,000,  $142,000 and $136,000 in 1998, 1997 and 1996, respectively.  The
benefits are based on the  employee's  age at  retirement  and the fixed monthly
benefit amount  specified in each individual  deferred  compensation  agreement.
Lowy Group sold the assets with Blue Ridge/Courier division effective August 31,
1998. The accumulated  benefit  obligation assumed by the acquirer of the assets
was $421,000 as of August 31, 1998.

         The following table sets forth the funded status and amounts recognized
in the Company's  consolidated  balance sheets as of December 31, 1998 and 1997,
and the  significant  assumptions  used in  accounting  for the defined  benefit
plans. The Company's  funding policy for all plans is to make the minimum annual
contributions required by applicable regulations. (dollars in thousands):

                                                         1998            1997
                                                         ----            ----
  Change in benefit obligation

  Benefit obligation at beginning of year.........     $5,284            $5,143
  Service cost....................................        147               235
  Interest cost...................................        252               249
  Actuarial losses................................        288                80
  Benefits paid...................................       (773)             (423)
  Benefits assumed by acquirer....................       (421)              -   
                                                     ---------       -----------
  Benefit obligation at end of year...............     $4,777            $5,284
                                                       ------         ----------

  Change in plan assets

  Fair value of plan assets at beginning of year..     $3,943            $3,512
  Actual return on plan assets....................        800               699
  Company contributions...........................         33                15 
  Expenses........................................        (30)               (2)
  Benefits paid...................................       (251)             (281)
                                                    ---------         ----------
  Fair value of plan assets at end of year........      4,495             3,943 
                                                    ---------         ----------
  Funded status of the plans (underfunded)........       (282)           (1,341)
  Unrecognized net gains..........................       (518)             (359)
                                                    ---------         ----------
  Accrued benefit cost............................     $ (800)          $(1,700)
                                                    =========           ========


         The Lowy Group plan is the only  underfunded plan included in the above
table.  Lowy Group maintains life insurance  policies with cash surrender values
of $963,000 and $1,647,000 at December 31, 1998 and 1997, respectively,  to fund
plan  obligations  of $968,000 and  $1,766,000 as of December 31, 1998 and 1997,
respectively.


                                       50
<PAGE>

                                                      1998               1997  
                                                    --------           --------
 Weighted-average assumptions
 as of December 31:

 Discount rate................................        6.8%              7.5%
 Expected return on plan assets...............        8.0%              8.0%


                                               1998        1997         1996   
                                             -------      -------     --------
 Components of net periodic
 benefit cost

 Service cost............................    $  66        $  67        $  75
 Interest cost...........................      385          373          342
 Expected return on plan assets..........     (274)        (341)        (338)
 Recognized net actuarial (gains)/losses.      (57)          44         (216)
                                            -------       ------       ------
 Net periodic benefit cost...............     $121         $143        $(137)  
                                            =======       ======       ======

13.      Discontinued Operations

         Truck Accessories Group (TAG Distribution Division).  TAG comprises two
operating divisions: TAG Manufacturing and TAG Distribution.  Effective April 2,
1998, the Company  committed to a formal plan to sell principally all the assets
less  certain  liabilities  of  TAG.  However,  based  upon  improved  operating
performance, the Company decided, during the third quarter of 1998 to retain TAG
Manufacturing and continue with the disposal of TAG Distribution.

         TAG Manufacturing  produces pickup truck caps and tonneau covers, while
TAG Distribution  distributes accessories and pickup truck caps for light trucks
through retail outlets and distribution  centers. TAG Distribution's  results of
operations  have been reported as  discontinued  operations in the  consolidated
financial statements for all periods presented.  In addition, the net assets and
liabilities of TAG Distribution, which are expected to be disposed of, have been
segregated within the accompanying consolidated balance sheets as "net assets of
discontinued  operations."  The plan of disposal is expected to be substantially
complete by the end of the third quarter of 1999.

         As of March 19, 1999,  the Company has sold one wholesale  location and
13 retail locations,  including the eight stores,  which were part of Radco. Two
wholesale locations and two retail locations have been closed. Effective January
29,  1999,  the Company  sold the  business  and assets of Radco,  and  realized
proceeds of approximately $1.2 million in line with the Company's estimate.  The
proceeds  were used to repay  borrowings  under the revolving  credit  agreement
entered into by Radco during 1997.


                                       51
<PAGE>
     Condensed financial information related to TAG Distribution at December 31,
1998 and 1997 is as follows (in thousands):
                                               December 31,        December 31,
                                                  1998                 1997     
                                              ----------------    --------------
     Net assets of discontinued operations:
          Current assets....................     $9,438             $11,809
          Property, net.....................      2,137               2,394
          Intangible assets.................        466               6,319
                                               ----------          ---------
          Total Assets.......................    12,041              20,522
          Less current liabilities...........     7,946               5,483
          Less long-term liabilities.........       800                 697
                                                ---------          ----------
     Net Assets..............................   $ 3,295             $14,342
                                                =======             =======

     TAG Distribution revenues were $58,446,000, $54,884,000 and $67,125,000 for
the twelve months ended December 31, 1998,  1997 and 1996,  respectively.  As of
December 31, 1998, the Company had recorded an estimated loss on disposal of TAG
Distribution of approximately $10,811,000, net of applicable income taxes, which
included a provision for estimated operating losses through the disposal date of
$2,849,000.  The  estimated  loss on disposal of TAG  Distribution  included the
write-down of the related goodwill of $5,505,000.  At December 31, 1998, accrued
expenses  included   $3,925,000  with  respect  to  severance  costs  and  lease
obligations,  which run through October 2005.  Substantially all of this accrual
will be paid in 1999. The income (loss) from discontinued  operations related to
TAG  Distribution,  during the twelve months ended  December 31, 1998,  1997 and
1996, were as follows (in thousands):

                                                     For the Twelve Months
                                                             Ended              
                                                    1998        1997       1996
                                                    ----        ----       ----
Loss from TAG Distribution's operations less
     applicable income taxes of
     $-0-, $-0- and $(1,060), respectively......$ (1,180)     $(5,857)   $ 2,373
Loss on disposal of TAG, including provision of
     $2,849 for estimated operating losses through
     disposal date, less applicable income
     taxes of $-0-.............................. (10,811)       -           -  
                                                 --------     --------  --------
                                                $(11,991)     $(5,857)   $ 2,373
                                                =========     ========  ========

       Losses from operations of TAG  Distribution  include  interest expense of
$717,000,  $495,000 and $603,000  related to the borrowings of TAG  Distribution
under the Revolving  Loan  Agreement  for the twelve  months ended  December 31,
1998, 1997 and 1996,  respectively.  The borrowings are anticipated to be repaid
using the proceeds from the sale of TAG Distribution.

       In 1997,  TAG  Distribution  closed  eight  unprofitable  stores  and its
administrative  office.  The closure of these  excess  facilities  resulted in a
charge  of  $945,000  for the  year  ended  December  31,  1997.  In  1996,  TAG
Distribution  closed four unprofitable  stores resulting in a charge of $298,000
for the year ended December 31, 1996. Of these charges,  approximately  $579,000
in 1997 and $182,000 in 1996 were non-cash expenses related to the write-down or
disposal of assets during those years.  At December 31, 1997,  accrued  expenses


                                       52
<PAGE>
included $100,000 with respect to severance costs and lease  obligations,  which
run through September 1999.

       Lowy Group. Lowy comprised two operating  divisions:  Blue  Ridge/Courier
and Lowy  Distribution.  Effective  June 8, 1998, the Company signed a letter of
intent to sell  certain  assets and  liabilities  of Blue  Ridge/Courier,  which
transaction closed on August 31, 1998. The Company realized net cash proceeds of
approximately  $15.8 million and recognized a pre-tax gain of approximately $6.5
million on the disposal. Additionally, the Company committed to a formal plan to
dispose of the  remaining  division of Lowy,  Lowy  Distribution,  on August 24,
1998.  The Company  expects to realize  proceeds  from the planned  sale of Lowy
Distribution  equal to the related assets and liabilities  carrying  value,  and
also has estimated that the division's results of operations will at least break
even through the disposal date.

       Blue Ridge/Courier and Lowy Distribution  divisions together  constituted
the Company's Floor Covering segment, which designed,  manufactured and marketed
commercial  and  residential  floor  covering.   Accordingly,  such  results  of
operations  have been reported as  discontinued  operations in the  consolidated
financial statements for the periods presented.  In addition, the net assets and
liabilities,  which are expected to be disposed of, have been segregated  within
the consolidated balance sheets as "net assets of discontinued operations."

       Condensed  financial  information  related to Lowy at  December  31, 1997
(consisting of both the Blue Ridge/Courier and Lowy Distribution  divisions) and
Lowy Distribution at December 31, 1998, is as follows (in thousands):
                                               December 31,        December 31,
                                                  1998                 1997     
                                              --------------      --------------
   Current assets...................            $  7,517            $ 17,240
   Property, net....................                 473               2,849
   Long-term assets.................               1,498               2,748
                                                ---------          ----------
   Total assets.....................               9,488              22,837
   Less current liabilities.........               2,659               6,036
   Less long-term liabilities.......               1,280               2,399
                                                ---------          ----------
   Net assets........................           $  5,549            $ 14,402 
                                                =========          ==========

       Lowy revenues  were  $56,891,000,  $69,724,000  and  $71,343,000  for the
twelve months ended December 31, 1998, 1997 and 1996,  respectively.  The income
from discontinued operations was as follows related to Lowy (in thousands):
                                                    For the Twelve Months
                                                           Ended 
                                                    1998     1997     1996
                                                    ----     ----     ----
Net income from operations of Lowy, less
     applicable income taxes of $262,
     $446 and $1,060, respectively............    $2,052    $6,081   $1,740
Gain on disposal of assets of the Blue Ridge/
     Courier division, less applicable taxes
     of $-0-..................................     6,500       -        -    
                                                  ------    ------   ------
                                                  $8,552    $6,081   $1,740 
                                                  ======    ======   ======

                                       53
<PAGE>

         Net income of Lowy includes interest expense of $218,000,  $624,000 and
$1,127,000  related to the borrowings of Lowy under the Revolving Loan Agreement
for the twelve months ended December 31, 1998, 1997 and 1996, respectively.  The
related  borrowings  were repaid  using the  proceeds  from the sale of the Blue
Ridge/Courier  division. Net income of Lowy for the twelve months ended December
31, 1997, includes a gain on the sale of certain real estate of $3,000,000.

14. Acquisitions:

        Effective  October  31,  1997  Radco,  a  subsidiary  of  TAG,  acquired
substantially all of the assets of MTA in a purchase business combination.  MTA,
based in Tulsa, Oklahoma, was a wholesale distributor of light truck and vehicle
accessories.  Radco paid  approximately  $2.5  million of which $2.1 million was
paid in cash and $0.5 million  evidenced by a 9%  promissory  note payable in 20
consecutive quarterly installments of principal and interest. Radco also assumed
$100,000 in closing costs.

        Concurrently  with  the  acquisition,  Radco  entered  into a five  year
non-compete agreement and a six month consulting agreement with the owner of MTA
pursuant  to which  the  owner  will be  compensated  for  providing  continuing
services  to,  and not  competing  with,  Radco.  Radco  will  pay the  owner an
aggregate of $100,000 each year under the terms of the non-compete agreement.

        During 1998, the company's  management committed to a plan to dispose of
TAG Distribution,  which includes MTA. Accordingly, the results of operations of
MTA,  subsequent  to the date of  acquisition,  are  included  in the Loss  from
Discontinued  Operations.  The  inclusion of the results of operations of MTA as
though MTA had been acquired  January 1, 1996 for all periods  presented,  would
not materially change the Consolidated Results of Operations.

15.  Commitments and Contingencies:

        Claims and  Lawsuits.  The  Company is  involved  in certain  claims and
lawsuits arising in the normal course of business. In the opinion of management,
the ultimate resolution of these matters will not have a material adverse effect
on the financial position or results of operations of the Company.

        EFP is subject to a lawsuit  concerning the supply of natural gas to one
of its  manufacturing  plants.  The utility  company  has  alleged  that EFP was
under-billed by  approximately  $500,000 over a four-year  period as a result of
errors made by the utility  company.  The Company is aggressively  defending the
suit and  believes  that it will  not  have a  material  adverse  effect  on the
Company.

        Letters of Credit and Other Commitments.  The Company had $3,541,000 and
$3,950,000  in standby  letters of credit  outstanding  at December 31, 1998 and
1997, respectively, primarily securing the Company's insurance programs.

        Foreign  Currency  Exchange  Contracts.  The Company  purchases  foreign
exchange  currency  contracts that enable it to hedge certain  British  Sterling
denomination  inventory purchases.  As of December 31, 1998 and 1997, Morgan had
outstanding  foreign  exchange  currency  contracts  with a  notional  amount of
$1,078,000 and  $2,100,000,  respectively,  and a fair value of less than $5,000
for each of the periods. The gains or losses on such activity during each of the
years ended December 31, 1998, 1997 and 1996 was not material.

                                       54
<PAGE>

        Environmental   Matters.   Morgan  has  been  named  as  a   potentially
responsible party ("PRP") with respect to the generation of hazardous  materials
alleged to have been  handled or disposed of at two Federal  Superfund  sites in
Pennsylvania and one in Kansas.  Although a precise estimate of liability cannot
currently be made with respect to these sites,  based upon information  known to
Morgan, the Company currently believes that it's proportionate share, if any, of
the ultimate costs related to any necessary  investigation  and remedial work at
those sites will not have a material adverse effect on the Company.

        Certain of the Company's operations utilize paints and solvents in their
businesses. Also, raw materials used by EFP contain pentane, which is a volatile
organic  compound  subject to regulation  under the Clean Air Act.  Although the
Company  believes that it has made sufficient  capital  expenditures to maintain
compliance  with  existing  laws and  regulations,  future  expenditures  may be
necessary if and when compliance standards and technology change.

        Self-Insured Risks. The Subsidiaries  utilize a combination of insurance
coverage and self-insurance  programs for health care and workers  compensation.
The Company has  reserves  recorded to cover the  self-insured  portion of these
risks based on known facts and historical  trends and  management  believes that
such reserves are adequate and the ultimate resolution of these matters will not
have a  material  adverse  effect  on  the  financial  position  or  results  of
operations of the Company.

16. Related Party Transactions:

        Concurrently with the Note Offering on May 23, 1994, the Company entered
into  a  Management  Services  Agreement  with  Southwestern  Holdings,  Inc.  a
corporation ("Southwestern") owned by Mr. Poindexter. Pursuant to the Management
Services  Agreement,  Southwestern  provides services to the Company,  including
those of Mr. Poindexter and Mr. Magee its Chief Financial  Officer.  The Company
pays to Southwestern approximately $600,000 per year for these services, subject
to annual  automatic  increases based upon the consumer price index. The Company
may also pay a  discretionary  annual bonus to  Southwestern  subject to certain
limitations,  none was paid in 1998, 1997 or 1996. The Company and  Subsidiaries
use certain  facilities  provided by Southwestern  for meetings and conferences.
The Company did not use the  facilities  during 1998,  1997 or 1996. The Company
paid  Southwestern  approximately  $619,000,  $613,000 and $600,000 during 1998,
1997 and 1996,  respectively.  Radco, which is not a restricted subsidiary under
the terms of the Bond Indenture or a guarantor  under the terms of the Company's
Revolving Loan Agreement,  paid Southwestern Holdings $85,000 and $60,000 during
1998 and 1997, respectively, for certain services.

     Mr.  Poindexter  and Mr.  Magee are officers of JBPCO and are partners in a
partnership that leases to Morgan certain real property in Georgia.  Morgan paid
$222,000 in rent to the  partnership  in 1998 and 1997 and $200,000  during 1996
pursuant to such lease.

        TAG  Manufacturing  leases  certain real estate in Canada from an entity
controlled by an executive  vice  president of TAG. Total lease expense for that
facility  was   $108,000,   $117,000  and  $114,000  in  1998,   1997and   1996,
respectively.

                                       55
<PAGE>


                  J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES


Item 9.  Changes in and  Disagreements  with  Accountants  on
            Accounting and Financial Disclosure as discussed in Form
            8K filed on October 11, 1996.
            
            None.

PART III.

Item 10.      Directors and Executive Officers of the Registrant

         The  directors  and  executive  officers  of the  Company are set forth
below.  All directors hold office until the next annual meeting of  stockholders
of the  Company  or until  their  successors  are duly  elected  and  qualified.
Executive  officers  of the  Company  are  appointed  by the Board of  Directors
annually and serve at the discretion of the Board of Directors.

         Name                Age        Position
John B. Poindexter           54         Chairman of the Board, President and 
                                        Chief Executive Officer
W.J. Bowen                   77         Director
Stephen P. Magee             51         Director, Executive Vice President,
                                        Chief Financial Officer and Treasurer
M. James Levine              44         Senior Vice President
R.S. Whatley                 47         Vice President, Controller
L.T. Wolfe                   50         Vice President Administration

         John B.  Poindexter has served as Chairman of the Board and Director of
the Company since 1988 and Chief Executive Officer since 1994. From 1985 through
1996, Mr. Poindexter was the majority limited partner of J.B.  Poindexter & Co.,
L.P., a privately held,  long-term equity  investment and management firm formed
by Mr.  Poindexter.  From 1983 through 1985, he was co-managing  partner of KD/P
Equities, a privately held equity investment firm that he co-founded.  From 1976
through 1985, Mr. Poindexter  worked for Smith Barney,  Harris Upham & Co. While
with  Smith  Barney,  he became a senior  vice  president  for its Smith  Barney
Venture Corporation and Smith Barney Capital Corporation ("SBCC") affiliates and
a partner in First Century Partnership II, an investment fund managed by SBCC.

         Stephen P. Magee has served as Treasurer  and a Director of the Company
since the Company was formed in 1988 and Chief Financial Officer since 1994.

     M. James  Levine has served as Senior  Vice  President  since  April  1998.
Previously,  Mr.  Levine held senior  positions  at Norton,  a  manufacturer  of
engineered abrasive products.

     W.J.  Bowen retired in 1992 as the Chairman of the Board of Transco  Energy
Company ("Transco"),  a diversified energy company based in Houston,  Texas. Mr.
Bowen  served  as Chief  Executive  Officer  of  Transco  from  1974  until  his
retirement from that position in 1987.

     R.S.  Whatley  has served as Vice  President,  Controller  since June 1994.
Previously Mr.  Whatley held senior  financial  positions  with Vinmar,  Inc., a
chemical  trading company and Weatherford  International,  an oilfield  services
company.

     Larry T. Wolfe has served as Vice President of Administration  since May of
1995.   Previously  Mr.  Wolfe  was  Vice  President  of  Human   Resources  and
Administrative Services of Transco Energy Company.

                                       56
<PAGE>

         Directors  who are  officers or employees of the Company do not receive
fees for serving as  directors.  The Company pays $20,000 per year as director's
fees to each outside director.



Other Significant Persons


         Although not an executive officer of the Company, each of the following
persons is an officer of the referenced Subsidiary or division thereof and is an
important contributor to the Company's operations:


         Name                Age            Position
Martin Brown                 43             President of TAG Manufacturing
Nelson Byman                 52             President of MIC Group
James R. Chandler            63             President of EFP
Peter K. Hunt                52             President of Morgan


         Martin Brown was named  President of TAG  Manufacturing  in March 1998.
Mr. Brown was the previous owner of Raider and LoRider,  acquired by the Company
in June 1995. He has served as President of Raider Industries since June 1995.


         Nelson Byman has 24 years of engineering and management  experience and
was most  recently  Vice  President/General  Manager of a domestic  division  of
Weatherford/Enterra, a manufacturer of oilfield related equipment.


         James R.  Chandler has served as President of EFP since 1978.  Prior to
1978, Mr. Chandler worked in various marketing and executive  positions with the
Ames  Division of Miles  Laboratories,  Inc.  and in the  management  consulting
section of Price Waterhouse & Co.


         Peter K. Hunt has served as President  of Morgan since April 1998.  Mr.
Hunt has 28 years of engineering and management experience and was most recently
Senior Vice President and General  Manager of the  Industrial  Products Group of
Greenfield Industries.


                                       57
<PAGE>

Item 11.  Executive Compensation

         The  following  table  sets forth  certain  information  regarding  the
compensation  paid to the  Company's  Chief  Executive  Officer  and  the  other
executive officers whose total annual salary and bonus are anticipated to exceed
$100,000 for the fiscal years ended December 31, 1998, 1997 and 1996:

                                         Summary Compensation Table
                                     Annual Compensation    All Other
 Name and Principal Position        Year Salary   Bonus    Compensation
 ---------------------------        ---- ------   -----    ------------
 John B. Poindexter                1998 $  (a)   $   -     $    -
    Chairman of the Board and      1997    (a)
    Chief Executive Officer        1996    (a)
 Stephen P. Magee                  1998 $  (a)   $  (b)    $    -
    Chief Financial Officer        1997    (a)
                                   1996    (a)
 M. James Levine                   1998 $156,218           $77,393(c)
 R.S. Whatley Controller           1998 $115,000 $   -     $
                                   1997 $105,000 $   -     $     -
 L.T. Wolfe Vice President
      Administration               1998 $168,000 $   -     $     -
                                   1997 $165,000 $   -     $     -

(a)  Messrs.  Poindexter  and Magee do not receive  salaries  from the  Company.
     Rather, their services are provided to the Company pursuant to a Management
     Services Agreement. See "Management Services Agreement."

(b)  It is anticipated  that Mr. Magee will be eligible to receive in the future
     an annual bonus pursuant to the incentive plan described below.

(c)  Other compensation  includes moving expenses of $77,393 and the related tax
     of $31,648.

         The Company  implemented  an  incentive  plan  covering  certain of its
executive  officers.  Although  the  precise  terms of that  plan  have not been
established,  the Company  anticipates that it will be similar to the Subsidiary
Incentive Plans described below. Messrs. Poindexter and Magee are covered by the
various insurance programs provided by Morgan to its employees.

Management Services Agreement

         Concurrently  with  the  Note  Offering,  the  Company  entered  into a
Management Services Agreement with a corporation  ("Southwestern")  owned by Mr.
Poindexter. Pursuant to the Management Services Agreement, Southwestern provides
services to the Company,  including  those of Mr.  Poindexter  who serves as the
Company's Chairman of the Board and Chief Executive Officer and of Mr. Magee who
serves  as its  Chief  Financial  Officer.  The  Company  pays  to  Southwestern
approximately $600,000 per year for these services,  subject to annual automatic
increases  based  upon  the  consumer  price  index.   The  Company  may  pay  a


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<PAGE>

discretionary annual bonus to Southwestern for the provision of Mr. Poindexter's
and Mr.  Magee's  services  and may  increase  the annual fee payable  above the
automatic annual increase, in each case subject to certain limitations, if after
giving effect to such payment and/or increase the Company's  Consolidated EBITDA
Coverage Ratio is 2.00 to 1 or higher.

Subsidiary Incentive Plans

         The Company has adopted an incentive  compensation  plan for members of
upper  management  of  each of its  Subsidiaries  (collectively  the  "Incentive
Plans") to provide for the payments of annual  bonuses based upon the attainment
of  performance-based  goals.  Eligible  employees will be entitled to receive a
bonus if the Subsidiary  attains or surpasses a stated  percentage (which varies
by Subsidiary) of that Subsidiary's  budgeted pre-tax profit, with the amount of
bonus being tied to the Subsidiary's actual pre-tax profits.  Individual bonuses
are then  allocated  among the eligible  employees  based upon their  individual
achievement of stated  performance  objectives.  The Subsidiaries  also maintain
certain other benefit plans for their  respective  officers and  employees.  See
Note 15 to the Consolidated Financial Statements for the Company.

Compensation Committee Interlocks and Insider Participation

         The Company does not have a compensation committee.  Instead, executive
compensation review decisions are made by the entire board of directors.

Item 12.  Security of Ownership of Certain Beneficial Owners and Management

                                                 Beneficial Ownership
                                               Number           Percent
Directors, Officers and 5% Stockholders       of Shares         of Class
---------------------------------------       ---------         --------
John B. Poindexter                             3,059             100%
     c/o J.B. Poindexter & Co., Inc.
     1100 Louisiana, Suite 5400
     Houston, Texas  77002

Stephen P. Magee                                 --               --
     c/o J.B. Poindexter & Co., Inc.
     1100 Louisiana, Suite 5400
     Houston, Texas  77002

W.J. Bowen                                       --               --
     c/o J.B. Poindexter & Co., Inc.
     1100 Louisiana, Suite 5400
     Houston, Texas  77002

All directors and officers as a
group (6 persons)                              3,059              100%

          Mr.  Poindexter has sole voting and  investment  power with respect to
     all shares that he beneficially  owns. 

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<PAGE>


Item 13. Certain  Relationships and Related Transactions

         Messrs.  Poindexter  and Magee are members of a partnership  ("Bartow")
that leases  certain  real  property in Georgia to Morgan.  During each of 1998,
1997 and 1996, Morgan paid approximately $200,000 as rent to Bartow, and it will
continue to pay such rent to Bartow in the future. The Company believes that the
rent paid by Morgan to Bartow is a competitive market rate for the location.

        The  Company has  entered  into a  Management  Services  Agreement  with
Southwestern  Holdings,  Inc.  a  corporation   ("Southwestern")  owned  by  Mr.
Poindexter. Pursuant to the Management Services Agreement, Southwestern provides
services to the Company,  including  those of Mr.  Poindexter  and Mr. Magee its
Chief Financial Officer. The Company pays to Southwestern approximately $600,000
per year for these services,  subject to annual  automatic  increases based upon
the consumer price index. The Company may also pay a discretionary  annual bonus
to Southwestern subject to certain limitations. The Company and Subsidiaries use
certain  facilities  provided by Southwestern for meetings and conferences.  For
all  services and facility  use,  the Company  paid  Southwestern  approximately
$619,000, $613,000 and $600,000 during 1998, 1997 and 1996, respectively.

         The Company  believes that the amounts paid by it to  Southwestern  for
the use of these facilities is a market rate.  Radco,  which is not a restricted
subsidiary  under the terms of the Senior Notes  Indenture or a guarantor  under
the terms of the Company's Revolving Loan Agreement,  paid Southwestern Holdings
$85,0000,  $60,000 and $-0- during 1998, 1997 and 1996, respectively for certain
services.

         TAG  Manufacturing  leases certain real estate in Canada from an entity
controlled  by an executive  vice  president of TAG  Manufacturing.  Total lease
expenses was $108,000 and $117,000 in 1998 and 1997,  respectively,  the Company
considers this to be a market rate for the property.

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)(1)   Financial Statements-None, other than as previously listed in response
         to Item 8.
(a)(2)   Financial Statement Schedules -  None
(a)(3)   Exhibits
3.1(a)   Second Restated Certificate of Incorporation
3.1.1(e) Certificate  of First  Amendment  to Second  Restated  Certificate  of
         Incorporation.
3.2(a)   Amended and Restated Bylaws
4.1(e)   Form of 12 1/2% Senior Note due 2004 (included in Exhibit 4.2)
4.2(e)   Indenture dated as of May 23, 1994
4.2.1(f) First Supplemental Indenture dated as of May 11, 1995.  Incorporated by
         reference  to Exhibit 4.1 to the Form 10-Q for the  quarterly  period 
         ended June 30, 1995, as filed with the Commission on August 15, 1995
4.2.2(f) Second  Supplemental  Indenture  dated  as of June  26,  1995.
         Incorporated  by reference to Exhibit 4.2 to the Form 10-Q for
         the  quarterly  period ended June 30, 1995,  as filed with the
         Commission on August 15, 1995.
4.3(a)   List of certain promissory notes
10.1.5(h)Loan and Security  Agreement by and among  Congress  Financial
         Corporation  and J.B.  Poindexter & Co., Inc.,  dated June 28,
         1996.
10.1.6(j)Amendment  No. 1 to Loan and  Security  Agreement by and among
         Congress  Financial  Corporation  and J.B.  Poindexter  & Co.,
         Inc., dated May 13, 1998.


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<PAGE>

10.23(a) Lease  Agreement,  dated as of March  29,  1990,  between  Bartow
         Partners,  L.P. and Morgan  Trailer  Manufacturing  Co.,  d/b/a Morgan
         Corporation,  as amended by the First  Amendment  to Lease  Agreement,
         dated June 13, 1991
10.24(a) Form of Salary  Continuance  Agreement for director level  employees of
         Morgan Trailer Mfg. Co.
10.25(a) Form of Salary  Continuance  Agreement  for officers of Morgan  Trailer
         Mfg. Co.
10.26(a) Form of Incentive Plan for certain employees of the Subsidiaries
10.27(a) Morgan  Trailer  Mfg.  Co.  Long-Term  Management  Equity  Appreciation
         Program
10.32(a) Lease Agreement,  dated August 14, 1987, between C&D Realty Partnership
         and Leer, Inc., as amended by the Lease Option and Amendment Agreement,
         dated as of August 14, 1992
10.33(a) Lease Agreement,  dated August 14, 1987, between J&R Realty Company and
         Leer, Inc.
10.34(a) Lease Agreement,  dated August 14, 1987, between BCD Realty Partnership
         with Leer,Inc., as amended by the Lease Option and Amendment Agreement,
         dated as of August 14, 1992 (missing page 2 of Amendment)
10.35(a) Lease  Agreement,  dated August 14,  1987,  between John M. Collins and
         Leer, Inc.,  as  amended  by  the Lease Option and Amendment Agreement,
         dated as  of  August 14,  1992,  and  the Addendum to Lease  Agreement,
         dated as of August 1, 1993
10.36(a) Lease agreement,  dated August 14, 1987, between PCD Realty Partnership
         and Leer, Inc., as amended by the Lease Option and Amendment Agreement,
         dated as of August 14, 1992
10.86(e) Management  Services  Agreement dated as of May 23, 1994,  between J.B.
         Poindexter & Co., Inc. and Southwestern Holdings, Inc.
10.102(f)Asset Purchase Agreement,  dated as of June 15, 1995, among Leer Inc.,
         20th Century Fiberglass, Inc., Steven E.Robinson and Ronald E.Hickman.
         Incorporated by reference to Exhibit 10.1 to the current report on Form
         8-K, dated June 29, 1995, as filed with the Commission on September 11,
         1995
10.103(f)Promissory  Note,  dated  June  29,  1995,  executed  by  Leer,  Inc.
         Incorporated by reference to Exhibit 10.2 to the current report on Form
         8-K, dated June 29, 1995, as filed with the Commission on September 11,
         1995
10.104(f)Asset Purchase  Agreement,  dated as of June 15, 1995 among Leer Inc.,
         Century Distributing, Inc., Steven E. Robinson  and Ronald E.  Hickman.
         Incorporated by reference to Exhibit 10.3 to the current report on Form
         8-K, dated June 29, 1995, as filed with the Commission on September 11,
         1995
10.105(f)Consulting  Agreement,  dated as of June 29, 1995,  between Leer, Inc.
         and Steven E.Robinson. Incorporated by reference to Exhibit 10.4 to the
         current report on Form 8-K, dated  June 29,  1995,  as  filed  with the
         Commission on September 11, 1995
10.106(f)Consulting  Agreement,  dated as of June 29, 1995,  between Leer, Inc.
         and Ronald E. Hickman. Incorporated by reference to Exhibit 10.5 to the
         current  report  on Form  8-K,  dated June 29, 1995, as filed  with the
         Commission on September 11, 1995.
10.107(f)Non-Competition  Agreement,  dated as of June 29, 1995, between Leer,
         Inc.and Steven E.Robinson. Incorporated by reference to Exhibit 10.6 to
         the current report on Form 8-K, dated June 29, 1995,  as filed with the
         Commission on September 11, 1995.
10.108(f)Non-Competition Agreement,  dated  as  of June 29, 1995, between Leer,
         Inc. and Ronald E.Hickman. Incorporated by reference to Exhibit 10.7 to
         the  current report on Form 8-K, dated June 29, 1995, as filed with the
         Commission on September 11, 1995.
10.109(f)Share  Purchase  Agreement  dated as of June 30, 1995,  between Raider
         Industries, Inc. and Martin Brown

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<PAGE>

10.110(f)Asset  Purchase  Agreement  dated as of June 30, 1995,  by and between
         Raider Industries Inc., Pro-More  Industries  Ltd.,  Brown Industries
        (1976) Ltd. and Martin Brown
10.111(i)Loan  and  Security  Agreement  by  and  between  Congress  Financial
         Corporation and Radco Industries Inc., dated October 31,1997
10.112(i)Asset  Purchase  Agreement  by and among  Radco  Industries  Inc.  and
         Midwest TruckAfter Market and William J. Avery, Sr. and Sarah A. Avery,
         dated October 31.1997.
10.113 Asset Purchase Agreement by and among Lowy Group, Inc., J.B. Poindexter &
       Co., Inc. and Blue Ridge Acquisition Company, LLC, dated August 31, 1998.
21.1   Subsidiaries of the Registrant
27.1   Financial data schedule
27.2   Restated financial data schedule for the years 1997 and 1996

(a)  Incorporated by reference to the Company's  Registration  Statement on Form
     S-1 (No. 33-75154) as filed with the Commission on February 10, 1994
(b)  Incorporated by reference to the Company's  Amendment No. 1 to Registration
     Statement (No. 33-75154) as filed with the Commission on February 24, 1994
(c)  Incorporated by reference to the Company's  Amendment No. 2 to Registration
     Statement (No. 33-75154) as filed with the Commission on March 23, 1994
(d)  Incorporated by reference to the Company's  Amendment No. 3 to Registration
     Statement (No. 33-75154) as filed with the Commission on May 16, 1994
(e)  Incorporated  by reference to the Company's  Annual Report on Form 10-K for
     the year ended December 31, 1994, as filed with the Commission on March 31,
     1995.
(f)  Incorporated  by reference to the Company's  Annual Report on form 10-K for
     the year ended December 31, 1995, as filed with the Commission on March 29,
     1996.
(g)  Incorporated  by reference to the Company's  Quarterly  Report on Form 10-Q
     for the quarter ended March 31, 1996,  as filed with the  Commission on May
     10, 1996.
(h)  Incorporated  by reference to the Company's  Quarterly  Report on Form 10-Q
     for the quarter ended June 30, 1996, as filed with the Commission on August
     13, 1996.
(i)  Incorporated  by reference to the Company's  Annual Report of Form 10-K for
     the year ended December 31, 1997, as filed with the Commission of March 30,
     1998.
(j)  Incorporated  by reference to the Company's  Quarterly  Report on Form 10-Q
     for the quarter ended June 30, 1998, as filed with the Commission on August
     14, 1998.
---------------
(b)  Reports of Form 8-K. The Company  filed the  following  reports on Form 8-K
     during the year:
         
     None

Supplemental  Information to Be Furnished With Reports Filed Pursuant to Section
15 (d) of the Act by Registrants Which Have Not Registered  Securities  Pursuant
to Section 12 of the Act.

The  registrant  has not delivered to its security  holders any annual report to
security holders  covering the last fiscal year, proxy statement,  form of proxy
or other proxy soliciting material (as described under this caption in Form 10-K
as promulgated by the Securities and Exchange  Commission).  A copy of this Form
10-K will be sent to each registered  holder of the  registrant's 12 1/2% Senior
Notes due 2004.




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<PAGE>




                                   SIGNATURES



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

                                   J.B. POINDEXTER & CO., INC.


Date: March 29, 1999               By: John B. Poindexter                     
                                   -------------------------------------------
                                   John B. Poindexter, Chairman of the
                                   Board and Chief Executive Officer


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



Date: March 29, 1999           John B. Poindexter
                               ------------------
                               John B. Poindexter
                               Chairman and Chief Executive Officer and Director
                               (Principal Executive Officer)

Date: March 29, 1999           Stephen P. Magee
                               ----------------
                               Stephen P. Magee
                               Chief Financial Officer and Director
                               (Principal Financial Officer)

Date: March 29, 1999           W.J. Bowen
                               -----------                              
                               W.J. Bowen
                               Director

Date: March 29, 1999           Robert S. Whatley
                               -----------------
                               Robert S. Whatley
                               Chief Accounting Officer
                               (Principal Accounting Officer)






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