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, 1996
                                       OR
          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
            For the transition period from ____________ to __________
                         Commission file number 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 7, 1997: 3059

Documents Incorporated by Reference: None

                                       -1-

<PAGE>


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

PART I.
Item 1.  Business

     J.B.  Poindexter & Co., Inc.  ("JBPCO") operates a variety of manufacturing
and wholesale  distribution  businesses.  JBPCO's subsidiaries consist of Morgan
Trailer Mfg Co., ("Morgan"), Truck Accessories Group, Inc., ("TAG"), Lowy Group,
Inc.  ("Lowy,"  or  "Lowy  Group"),   EFP  Corporation   ("EFP"),  and  Magnetic
Instruments Corp. ("Magnetic Instruments").

    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 million, 12 1/2% Senior Notes due 2004 (sometimes referred to herein as the
"Note  Offering")  and concurrent  with the Note Offering the Company  acquired,
from John B. Poindexter and various minority interests, TAG, Lowy Group, EFP and
Magnetic  Instruments.  The Company manages its assets on a decentralized basis,
with a small corporate staff providing strategic direction and support.

     The Company has three industry segments: Automotive (Morgan and TAG), Floor
Covering  (Lowy Group),  and Plastic and Precision  Machining  (EFP and Magnetic
Instruments).  See  Note  12 to the  Consolidated  Financial  Statements  of the
Company.

Automotive - 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
eighty-four authorized  distributors,  five manufacturing plants and two service
facilities are positioned in strategic  locations to provide  nationwide service
to its customers,  which include 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:

    Dry  Freight  Bodies  (Classes  3-7).  Dry  freight  bodies   typically  are
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

                                       -2-

<PAGE>


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

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 food 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.

    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.  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  equipment  parts and  offers a
comprehensive  service  program  through its own  facilities and its eighty four
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 34%, 42% and 40%
of the Company's total net sales in 1996, 1995 and 1994, respectively.

    Morgan's  revenue  stream  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,
ususally in late summer to early fall and tend to be the most volatile and price
sensitive aspect of Morgan's business.

    Morgan's two largest customers have 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  14%,  21%  and  24% of  the  Company's
consolidated  net sales  during the years 1996,  1995,  and 1994,  respectively.
Morgan's  business  strategy is designed,  in part, to expand its sales to other
customers in an effort to reduce its reliance on sales to these customers.

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

                                       -3-

<PAGE>


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

    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.

    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.  A
chassis  consists of an engine,  a frame with wheels and, in most cases,  a cab.
Accordingly,  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, 1996 and 1995,  Morgan's  total  backlog was
$50.2 million and $41.9  million,  respectively.  All of the products  under the
orders outstanding at December 31, 1996 are expected to be shipped during 1997.

    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 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.  The food industry is affected less
significantly  by economic  cycles than the other  industries  described  above.
Replacement of older vehicles in fleets  represents an important revenue source,
with replacement cycles varying from approximately four to six years,  depending
on the particular type of vehicle. 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 other,  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 time,
geographic proximity of manufacturing  facilities to customers,  warranty terms,
service and price.


                                       -4-

<PAGE>


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

Automotive - TAG

    During 1995, the name of the Company's subsidiary, Leer Inc., was changed to
Truck Accessories  Group,  Inc.  (together with its  subsidiaries,  "TAG").  The
Company completed the  reorganization  of the operating  structure of TAG during
1995.  TAG  established  two operating  divisions:  TAG  Manufacturing  Division
consisting of Leer  Manufacturing,  Gem Top, 20th Century  Fiberglass and Raider
Industries in Canada; and TAG Distribution  Division  consisting of retail (Leer
Retail) and wholesale distribution businesses (National Truck Accessories).

    TAG is the nation's  largest  manufacturer  and  distributor of pickup truck
caps and tonneau covers, which are fabricated  enclosures that fit over the beds
of pickup trucks,  converting the beds into weatherproof storage areas. Sales of
caps represented  approximately  21% of the Company's  consolidated net sales in
each of the prior three years. In addition,  TAG distributes  other  accessories
for light trucks,  minivans and sport utility  vehicles such as running  boards,
steps,  reinforced bumpers, wind deflectors,  bedliners,  hood shields,  visors,
bumper  covers and  roof-mounted  luggage  carriers.  TAG's eight  manufacturing
plants and network of over 600  independent  dealers,  44  company-owned  retail
stores  and four  wholesale  distribution  centers  provide a  national  network
through which its products are marketed to  individuals,  small  businesses  and
fleet operators.  Leer Retail has increased the number of  company-owned  stores
from 8 at the  beginning  of 1991  to 44 at the  end of  1996,  and  intends  to
increase  the number in the future.  Leer Retail  closed 4  uneconomical  stores
during 1996. TAG's net sales constituted 37%, 30% and 29% of the Company's total
net sales  during  1996,  1995 and 1994,  respectively.  Formed in 1971,  TAG is
headquartered in Elkhart, Indiana and was acquired in 1987.

    Customer and Sales.  Most  purchasers of TAG's products  (whether  purchased
from company-owned  stores or from dealers) are individuals.  TAG's products are
sold primarily  through its national  network of independent  dealers and though
its company-owned  stores.  TAG also sells its products in Canada and Europe. In
1996,  foreign sales  represented  less than 5% of TAG's total sales.  TAG has a
sales  and  marketing   staff  who,  among  other  things,   train  dealers  and
company-owned store personnel.

    Manufacturing  and  Supplies.  TAG  designs and  manufactures  caps in eight
manufacturing  facilities  located in California,  Indiana,  Minnesota,  Oregon,
Pennsylvania and Saskatchewan Canada.  Approximately 85% of the caps sold by TAG
are fiberglass,  with aluminum and steel 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 tend to correspond to the level of new pickup truck
sales.  Sales of accessories  are affected by sales of new pickup trucks,  sport
utility vehicles and minivans. Nationally, registrations of light trucks (pickup
trucks,  sport utility  vehicles and minivans)  have  increased  each year since
1991,  although there can be no assurance that those sales will increase further
or  maintain   current  levels  in  the  future.   For  example,   pickup  truck
registrations declined each

                                       -5-

<PAGE>


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

year from 1988 until 1991. Cap sales are seasonal,  with sales  typically  being
higher in the fall and spring than in the summer and winter.

    Competition.   The  cap  and  accessory  industry  is  highly   competitive.
Competitive factors include product  availability and exposure,  quality,  price
and  installation  services.  Competitors  in the  distribution  of  accessories
include other cap manufacturers,  auto parts stores, and mass merchants, such as
Wal-Mart and K-Mart who, in certain instances,  have the purchasing power to buy
and sell accessories at discount prices.

Floor Covering - Lowy Group

    Lowy  Group  which was  acquired  in 1991  operates  in the  floor  covering
business through three separate divisions:  Lowy Distribution (a wholesale floor
covering  distributor),  Blue Ridge (a carpet  manufacturer) and Courier (a dyer
and printer of carpeting).  Lowy Group's net sales comprised 17%, 17% and 20% of
the Company's total net consolidated sales in 1996, 1995 and 1994, respectively.

Lowy Distribution

    Lowy Distribution is a leading  wholesale floor covering  distributor in the
Midwest, serving twelve Midwestern states. It operates seven facilities, located
in Ankeny, Iowa near Des Moines;  Lenexa,  Kansas; New Brighton,  Minnesota near
Minneapolis; Omaha, Nebraska; and St. Louis and vicinity (three locations).

     Products.  Lowy Distribution 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  tiles,  wood  flooring,   ceramic  floor  and  wall  tiles  and
          accessories.

     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
          Distribution'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  Peerless  Carpet of Canada  and
          Milliken and Co. Lowy Distribution also offers private label carpeting
          marketed   under  the   "Americana"   and  "Essex   House"  names  and
          manufactured by various  suppliers,  including the Blue Ridge division
          of Lowy Group.

         Customers and Sales. Lowy Distribution  sells its products primarily to
floor  covering  retailers,   most  of  whom  are  privately  owned,  small-  to
medium-sized  dealers located away from major metropolitan  areas. These dealers
rely on  wholesalers,  such as Lowy  Distribution,  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 Distribution offers products manufactured
by a variety  of  suppliers.  Its  largest  supplier  is  Congoleum  Corporation
("Congoleum"), whose products represented approximately 35%, 30% and 30% of Lowy
Distribution's total revenue during each of

                                       -6-

<PAGE>


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

the last three years,  respectively.  Lowy  Distribution 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 Distribution at any time subject to certain notice requirements.  Lowy
Distribution  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
Distribution's  markets at any time. The loss of Congoleum as a supplier, or the
introduction of other Congoleum  distributors into Lowy Distribution's  markets,
could adversely affect Lowy Distribution's operations.

         Industry.  The wholesale  distribution of floor covering is affected by
the level of new home and remodeling  construction  activity.  Lowy Distribution
believes  that  approximately  two-thirds  of its  sales are  generated  by home
remodeling activities. The industry is also affected by consumer taste and floor
covering fashion trends.  During the 1980s,  carpet  manufacturers  increasingly
began shipping  products  directly from their mills to the end users,  bypassing
wholesale distribution such that management believes that a substantial majority
of carpet sales are now direct from the mill to end users. Excess  manufacturing
capacity in the carpet industry has resulted in relatively  level pricing during
the past several years, forcing manufacturers to reduce their distribution costs
in order to preserve their operating margins.  Lower freight costs occasioned by
the  deregulation  of the freight  industry and the emergence of discount carpet
retailers  have  bolstered  this  direct-to-customer   distribution  trend.  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   Distribution   competes   with  other   wholesale
distributors,  and large carpet and tile manufacturing  companies who sell their
products directly to their customers. The growth of large retail building supply
concerns that compete with Lowy Distribution's  retail floor covering customers,
coupled with direct selling activities by carpet and tile  manufacturers,  could
adversely  affect the floor  covering  wholesale  distribution  industry  in the
future.  Management  believes  that  the  ability  of floor  covering  wholesale
distributors  to carry broader  product lines and to provide  prompt service are
competitive  advantages to the wholesale  distributors.  Lowy  Distribution also
competes with several regional distributors.


                                       -7-

<PAGE>


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

  Blue Ridge

         Blue  Ridge  designs,  manufactures  and  markets  distinctive  mid- to
high-end commercial carpet and, to a limited extent, residential carpet for sale
throughout the United States and abroad. Formed in 1968, Blue Ridge is located
in Ellijay, Georgia.

         Products and Design.  At present,  Blue Ridge offers  approximately  40
styles of  commercial  carpeting  with an average  of 15 colors  per style.  Its
residential  carpet line currently consists of approximately 12 printed patterns
with a total of 35 colors.  Blue Ridge also  manufactures  custom  carpet (e.g.,
imprinting a company's  logo in the carpet) and custom  colors  within  existing
styles. Blue Ridge manufactures  "tufted" carpeting,  which is made by inserting
yarn  into  the  carpet  backing,  forming  loops  that  may or may  not be cut,
depending on the particular  carpet style being made (e.g., cut pile, level loop
or textured level loop carpeting).  All of Blue Ridge's commercial  carpeting is
offered and sold under the "Blue Ridge" brand name. Its residential carpeting is
manufactured for third parties who sell it under their own private labels.  Blue
Ridge designs all of the carpet that it offers except for certain carpet that is
custom made or sold under private labels.

         Customers  and Sales.  Blue  Ridge's  commercial  carpeting  is used by
businesses  and  organizations  with high  traffic  areas,  such as health  care
facilities  (nursing homes,  clinics and hospitals),  schools and  universities,
hotels and motels, restaurants and office buildings.

         Sales and marketing  efforts for the  commercial  line are conducted by
Blue  Ridge's  sales  force.  Blue Ridge  markets  its  commercial  market  line
primarily  through  architects,  designers and specifiers.  Management  oversees
marketing of the  residential  carpet  line,  which is marketed and sold through
distributors  and dealers.  Blue Ridge  maintains a sales office and showroom in
Chicago for use by architects,  designers and specifiers in the mid-central area
of the nation.

         Manufacturing and Supplies. Blue Ridge owns and operates an integrated,
185,000  square foot mill that  performs  tufting,  backing and finishing of its
products.  Dyeing and  printing  of  carpeting  is  performed  for Blue Ridge by
Courier.  Blue Ridge  maintains a  significant  inventory of raw  materials  and
carpet because of its commitment to deliver  products  quickly after receiving a
customer's order.

         Blue  Ridge  acquires  its nylon and other  fibers  for yarn from large
companies, primarily Allied-Signal,  Inc., and B.A.S.F. Corporation. Pursuant to
their licensing  arrangements with Blue Ridge, these suppliers periodically test
Blue Ridge's carpeting to ensure that appropriate  manufacturing  procedures are
being  followed.  Favorable  test  results are  required to enable Blue Ridge to
market its products using the supplier's brand names and to offer the supplier's
warranties.

         Industry.  Sales of  broadloom  carpeting in the  industry's  two major
markets,  residential and  commercial,  represent  approximately  75% and 25% of
total sales,  respectively.  According to an industry  survey, a majority of the
sales in the  commercial  market  in which  Blue  Ridge  competes  relate to the
modernization and renovation of facilities, with the remaining sales relating to
installations in new construction.  Excess capacity in the industry has resulted
in relatively level pricing during the past several years, forcing manufacturers
to reduce  manufacturing  costs through a higher degree of vertical  integration
and distribution costs by implementing factory-direct sales in order to preserve
their operating margins. Installations in new construction are affected by the

                                       -8-

<PAGE>


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

prevailing new construction  activity.  The industry is somewhat seasonal,  with
the second  and third  quarters  generally  having  higher  sales than the other
quarters.

         Competition.  With approximately 200 carpet manufacturers in the United
States, the carpet  manufacturing  industry is highly competitive.  The industry
competes also with other floor  covering  industries,  such as hardwood and tile
flooring. Management believes that both the consolidation of the carpet industry
and the use of direct marketing of commercial carpet to end-users will continue.
Nonetheless,  management  believes that smaller  companies,  such as Blue Ridge,
will continue to satisfy market niches. The principal competitive factors in the
industry are style,  quality,  price and service,  although  management believes
that  the  commercial   market  in  which  it   principally   operates  is  less
price-sensitive than the residential market.

  Courier

         Courier  dyes  and  prints   patterns  on  commercial  and  residential
carpeting that is  manufactured  by Blue Ridge and other  companies.  Management
believes that Courier's 66,000  square-foot  dyeing and printing plant is one of
the most modern facilities of its kind operating in the carpet industry.

         Services. The plant, located in Ellijay,  Georgia, is designed to print
and dye  carpeting  with  multi-color  patterns  and random color  effects.  Its
continuous  dyeing  line has the ability to place up to 14  different  colors on
carpet in the desired pattern. Moreover, in response to the industry's increased
use of  polyester  fibers in  residential  carpeting,  Courier  has  developed a
process  to dye  polyester  fiber.  Courier  also  owns  two "Jet  Beck"  dyeing
machines,  each of which is capable of dyeing in excess of 1,000 square yards of
carpet in a single dye lot, ensuring color consistency for large orders. Most of
Courier's  1996 net sales are generated by services  performed for  unaffiliated
manufacturers, with the remaining being performed for Blue Ridge.

Plastic and Precision Machining  - 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 less than 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.


                                       -9-

<PAGE>


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

         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 (such as the  transportation of an
          automotive dashboard from a components supplier to an assembly plant).
          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    Thermal  Insulation  Products.  EFP  manufactures  thermal  insulation
          products,  its StyroPak(R) products are used to transport sensitive or
          temperature  critical products or materials (such as drugs and certain
          food  products).  EFP sold the  StyroPak(R)  product  line of beverage
          coolers for retail consumption effective September 8, 1995.

     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,  beverage,  furniture,  appliance,  and  marine  industries,  among
others. EFP has a 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
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 intends to
utilize 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

                                      -10-

<PAGE>


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

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.

         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.

 Plastics and Precision Machining - Magnetic Instruments

         Magnetic  Instruments  is  a  manufacturer,  caster  and  assembler  of
precision metal parts used in the worldwide oil and gas exploration industry. In
November 1994, Magnetic Instruments opened an electronic assembly facility and a
prototype  machining  center in Houston.  The  electronic  assembly  facility is
operating under the name ElectroSpec.  Formed in 1963,  Magnetic  Instruments is
located in Brenham,  Texas and was acquired in 1992.  Magnetic  Instruments' net
sales made up less than 10% of the  Company's  net sales during each of the last
three years.

         Products.  Magnetic  Instruments  manufactures  various precision metal
parts  and  electro-mechanical  devices  that  are  utilized  in  a  variety  of
oilfield-related   applications.   Most  of  the   precision   parts   currently
manufactured  by  Magnetic  Instruments  are  utilized  in  connection  with the
exploration for oil and gas reserves. Parts produced by Magnetic Instruments are
utilized for complex  functions,  such as well bore  perforation and fracturing.
Its products are also  applicable  to many seismic and  geophysical  activities.
ElectroSpec  assembles  electronic  printed  circuit boards and  instrumentation
packages  for the same or similar  applications.  Management  believes  that the
addition of electronic  assembly  provides  additional  sales  opportunities  by
providing  turnkey  value-added  assemblies to its customers  which  incorporate
machined parts and electronics in the manufacture of their products.

         Customers.   Magnetic  Instruments  sells  its  products  primarily  to
international  oilfield service  companies.  Magnetic  Instruments' four largest
customers represented  approximately 69% of its total net sales during 1996. All
of these  customers  have been customers of Magnetic  Instruments  for more than
five years, and management considers relations with them to be good. ElectroSpec
markets to many of the same  customers as Magnetic  Instruments.  As part of its
business strategy,  Magnetic  Instruments is seeking to expand its customer base
beyond the oil and gas industry, although there can be no assurance that it will
be successful in those efforts.


                                      -11-

<PAGE>


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

         Manufacturing  and  Supplies.  Magnetic  Instruments  manufactures  its
products in a 75,500 square-foot manufacturing facility located approximately 70
miles  northwest  of  Houston,  Texas,  which  is a key  center  for oil and gas
exploration and production. The prototype machining facility and ElectroSpec are
in two manufacturing  facilities located in Houston totaling 16,750 square feet.
Management believes that Magnetic  Instruments'  manufacturing  capabilities are
among the most  sophisticated  in the  industry.  It  performs a broad  range of
computer-controlled  precision  machining and welding,  including  electrostatic
discharge  machining,  electron  beam  welding,  trepanning,  gun  drilling  and
investment casting.

         Magnetic  Instruments  obtained ISO 9000 certification during 1994. ISO
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 Magnetic  Instruments  has
not experienced significant shortages in materials in recent years.

         Industry.  Because  Magnetic  Instruments'  products are sold to large,
international oilfield service companies,  Magnetic Instruments 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 Magnetic Instruments and ElectroSpec, are directly
related  to the level of  worldwide  oil and gas  drilling  activity.  Worldwide
drilling  activity  increased  during  1996  thereby  increasing  the demand for
services from oilfield  service  companies  which, in turn,  increased  Magnetic
Instruments' sales. Some of Magnetic  Instruments'  customers have subcontracted
to Magnetic  Instruments  the  manufacturing  of precision  components that they
formerly manufactured themselves.

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

Trademarks and Patents

         The Company owns rights to certain  presentations  of Leer's name which
the Company  believes  is valuable  insofar as  management  believes  that it is
recognized as being a leading "brand name." Leer has learned that another person
claims to own the "Leer" name in Mexico;  Leer has  challenged  the  validity of
that  person's  rights to the name in Mexico.  Until this claim is  resolved  it
could, or if it is resolved  against Leer it would,  adversely affect Leer's use
of the "Leer"  name in Mexico.  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. The Company also holds patents on
certain products which,  although  valuable to the Company,  are not critical to
the Company's operations. In addition, Blue Ridge uses, with permission, certain
of its suppliers' tradenames and trademarks which are important to its business.

                                      -12-

<PAGE>


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

Employees

         At January 31,  1997,  the Company had  approximately  3,500  permanent
employees.   Personnel  are  unionized  in  Lowy  Distribution's  New  Brighton,
Minnesota (contract expires May 1999), St. Louis (contract expires January 1998)
and Ankeny,  Iowa (contract expires December 1999) warehouses  (covering 12, 13,
and 8 persons,  respectively)  and EFP's  Decatur,  Alabama  facility  (covering
approximately 100 persons, with a contract expiring in August 1997). 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.

         Morgan  was  named as a  potentially  responsible  party  ("PRP")  with
respect to its alleged disposal of certain  solvents at the Industrial  Solvents
and Chemical Co. state hazardous waste site in Newberry, Township,  Pennsylvania
("ISCC site") and at the Berks  Associates  Waste  Recovery  Superfund Site near
Douglasville, Pennsylvania ("Berks site"). Under the Comprehensive Environmental
Response  Compensation and Liability Act of 1980 and the Pennsylvania  Hazardous
Sites Clean-Up Act, past and present site owners and operators, transporters and
waste generators are all potentially jointly and severally responsible for clean
up costs. However,  typically,  the generator portion of the costs are allocated
between  generators,  with each  generator  bearing costs  proportionate  to the
volume and nature of the wastes it disposed  of at the site.  Although a precise
estimate of  liability  cannot  currently  be made with  respect to these sites,
based upon information  known to Morgan,  the agreements  Morgan is party to and
including  the size of the waste  sites,  their  years of  operation,  the large
number of past users and potentially  responsible  parties of some of the sites,
the alleged waste  contribution  by Morgan at some of these sites and the nature
of the  substances  alleged  to be  present  at the  waste  sites,  the  Company
currently  believes that Morgan'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.


          National Steel Service Company (NSSC), a company into which Morgan was
merged in December  1992,  has been listed as a  potentially  responsible  party
("PRP") at the Wichita Brass Co.,

                                      -13-

<PAGE>


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

Inc. National Priority List site at 29th & Mead in Wichita, Kansas. Although the
extent of  NSSC's  liability,  if any,  is not  known at this  time,  management
currently  believes that NSSC's allocated share of the ultimate costs related to
any  necessary  investigation  and  remedial  work at this  site will not have a
material  adverse  effect on the Company.  The Company is not aware of any other
significant pending environmental claims pertaining to NSSC.

         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 suggest 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.

                                      -14-

<PAGE>

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

Item 2.       Properties

         The Company owns or leases the following  manufacturing,  distribution,
office and sales facilities:
<TABLE>
<CAPTION>
                                                                               Owned
                                                                 Approximate     or      Lease
          Location                    Principal Use              Square Feet   Leased   Expiration(a)
<S>                                 <C>                          <C>           <C>      <C>
Morgan:
 Ehrenberg, Arizona .............   Manufacturing                  125,000     Owned       --
 Fontana, California ............   Sales and service                9,000     Leased     2001
 Tampa, Florida .................   Sales and service               13,500     Owned       --
 Rydal, Georgia .................   Manufacturing                   85,000     Leased     1999
 Cary, North Carolina ...........   Sales                            1,218     Leased     2000
 Ephrata, Pennsylvania ..........   Manufacturing                   50,000     Owned       --
 Morgantown, Pennsylvania .......   Manufacturing                   62,900     Leased     1997
 Morgantown, Pennsylvania .......   Office & manufacturing         261,500     Owned       --
 Morgantown, Pennsylvania .......   Sales and service                9,600     Leased     1997
 Corsicana, Texas ...............   Manufacturing                   60,000     Owned       --
 Janesville, Wisconsin ..........   Manufacturing                   23,000     Leased     1998
 Janesville, Wisconsin ..........   Manufacturing                   32,000     Owned       --
Leer:
 Woodland, California ...........   Manufacturing                   92,000     Leased     2007
 Elkhart, Indiana ...............   Office & research               17,500     Owned       --
 Elkhart, Indiana ...............   Manufacturing                  139,000     Leased     2007
 Milton, Pennsylvania ...........   Manufacturing                  102,000     Leased     2007
Century/Raider/GemTop:
 Elkhart, Indiana ...............   Manufacturing                   91,900     Owned       --
 Elkhart, Indiana ...............   Office                          18,400     Leased     2005
 Clackamas, Oregon ..............   Manufacturing                   78,000     Leased     1998
 Drinkwater, Saskatchewan, Canada   Office & manufacturing          72,000     Owned       --
 Moose Jaw, Saskatchewan, Canada    Manufacturing                   87,000     Leased     2005
 Moose Jaw, Saskatchewan, Canada    Truck repair                     5,000     Leased     1997
Leer Retail: (b)
 Brainerd, Minnesota ............   Manufacturing & sales           11,900     Leased     1999
 Houston, Texas .................   Office & sales                   6,300     Leased     2000
NTA:
 Woodland, California ...........   Office & warehouse              31,000     Leased     1999
 Conyers, Georgia ...............   Office & warehouse              13,000     Leased     1999
 Elkhart, Indiana ...............   Office & warehouse              57,000     Leased     2000
 Milton, Pennsylvania ...........   Office & warehouse              21,000     Leased     1998
Lowy Distribution:
 Ankeny, Iowa ...................   Warehouse, office & showroom    30,000     Owned       --
 Lenexa, Kansas .................   Warehouse, office & showroom    12,000     Leased     1997
 New Brighton, Minnesota ........   Warehouse, office & showroom   120,000     Owned       --
 St. Louis, Missouri ............   Warehouse, office & showroom    85,000     Owned       --
 St. Louis, Missouri ............   Warehouse, office & showroom    45,000     Owned       --
 St. Louis, Missouri ............   Warehouse, office & showroom    14,000     Leased     1997
 Omaha, Nebraska ................   Warehouse, office & showroom     7,000     Leased     1998
Blue Ridge:
 Ellijay, Georgia ...............   Office & manufacturing         195,000     Owned       --
 Ellijay, Georgia ...............   Truck shop                       3,500     Owned       --
 Chicago, Illinois ..............   Office & showroom                2,300     Leased     1999
Courier:
 Ellijay, Georgia ...............   Office & manufacturing          66,000     Owned       --
EFP:
 Decatur, Alabama ...............   Manufacturing                  175,000     Leased     1999
 Elkhart, Indiana ...............   Office & manufacturing         211,600     Owned       --
 Elkhart, Indiana ...............   Manufacturing                   24,900     Leased     1997
 Gordonsville, Tennessee ........   Manufacturing                   40,000     Leased     2001
 Marlin, Texas ..................   Manufacturing                   73,000     Leased     1998
 Waukesha, Wisconsin ............   Manufacturing                   13,850     Leased     1997
Magnetic Instruments:
 Brenham, Texas .................   Office & manufacturing          75,500     Owned       --
 Houston, Texas .................   Manufacturing                   16,750     Leased     1998

---------------
<FN>

(a)      Including all renewal terms.
(b)      In  addition,   Leer  leases  44   company-owned   stores   aggregating
         approximately  100,000  square  feet  pursuant  to  leases  with  terms
         averaging approximately nine years (including renewal options).
</FN>
</TABLE>
                                      -15-
<PAGE>


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

         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.

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.

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 1997, one individual owned all of the  registrant's  issued
and outstanding  common equity.  During the last two 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 Indenture,  dated as 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.

                                      -16-

<PAGE>


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


Item 6.           Selected Financial Data

         The  historical  financial  data  presented  below for the years  ended
December  31,  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 Results of Operations
and Financial Condition and the Consolidated Financial Statements of the Company
and notes thereto.  The financial  information is not directly comparable due to
the acquisitions of Magnetic  Instruments (June 1992), Gem-Top Mfg., Inc. (March
1993), Radco (December 1994), 20th Century Fiberglass,  Century Distributing and
Raider Industries (June 1995).

<TABLE>
<CAPTION>

                                                           Year Ended December 31,
                                              (Dollars in Millions, Except Per Share Amounts)
                                            1996        1995        1994        1993        1992
                                           ------      ------      ------      ------      ------
<S>                                      <C>         <C>         <C>         <C>         <C>
Operating Data:
     Net sales .....................     $  432.4    $  450.7    $  386.6    $  327.4    $  279.3
     Cost of sales .................        338.0       365.3       301.3       254.9       219.0
     Selling, general and
       administrative expense.......         84.0        82.0        64.9        56.0        48.3
     Plant closure expenses ........          1.4          --         --           --          --
     Other (income) expense ........         (0.1)       (1.2)        0.4         1.2         0.4
                                         --------    --------    --------    --------    --------
     Operating income ..............          9.1         4.6        20.0        15.3        11.6
     Interest expense ..............         16.2        15.9        11.5         6.4         6.8
     Income tax provision (benefit)          (1.0)       (2.8)        3.0         2.3         1.2
     Minority interests ............           --          --          --        (0.1)        0.1
                                         --------    --------    --------    --------    --------
     Income (loss) before
       extraordinary loss ..........         (6.1)       (8.5)        5.5         6.7         3.5
     Extraordinary loss ............          0.3          --         2.1          --          --
                                         --------    --------    --------    --------    --------
     Net income (loss) .............     $   (6.4)   $   (8.5)   $    3.4    $    6.7    $    3.5
                                         ========    ========    ========    ========    ========
     Earnings (loss) per share .....     $ (2,097)   $ (2,790)   $  1,503    $  6,656    $  3,546
                                         ========    ========    ========    ========    ========
     Cash dividends per share.......           --    $     --    $  2,910    $  1,136    $    693
                                         ========    ========    ========    ========    ========

Pro Forma for Taxes (a):
     Income (loss) before income
       taxes, minority interests and
       extraordinary loss ..........     $   (7.1)   $  (11.2)   $    8.5    $    8.9    $    4.8
     Income tax provision (benefit)          (1.0)       (2.8)        3.5         3.7         1.7
     Minority interests ............           --          --          --        (0.1)        0.1
     Extraordinary loss ............          0.3          --         2.1          --          --
                                         --------    --------    --------    --------    --------
     Net income (loss) .............     $   (6.4)   $   (8.5)   $    2.9    $    5.3    $    3.0
                                         ========    ========    ========    ========    ========
</TABLE>


                                      -17-

<PAGE>


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

<TABLE>
<CAPTION>

                                                                     Year Ended December 31,
                                                                      (Dollars in Millions)
                                                1996        1995        1994        1993        1992
                                             --------    --------    --------    --------    --------
<S>                                          <C>         <C>         <C>         <C>         <C>
Balance Sheet Data (at period end):
         Working capital .................   $   22.4    $   29.4    $   56.6    $   19.6    $   12.3
         Total assets ....................      173.5       180.8       173.2       139.8       115.2
         Total long term obligations .....      105.6       107.6       106.9        75.9        68.9
         Stockholder's equity ............   $    3.0    $    9.5    $   17.8    $   15.2    $    6.5

Other Data:
         EBITDA (b)(c) ...................   $   20.9    $   15.1    $   28.2    $   23.1    $   18.0
         Capital expenditures ............        8.1        11.9         9.2         9.8         4.2
         Depreciation and amortization (c)       11.2        10.5         8.2         7.8         6.4
         Consolidated EBITDA
         Coverage Ratio (d) ..............       1.3x        1.0x        2.5x        3.6x        2.7x

<FN>
(a)      Pro Forma for Taxes data reflect the Company's  income taxes (benefits)
         assuming that Lowy Group and Magnetic  Instruments,  which had been "S"
         corporations  prior to May 16,  1994,  were  taxable  "C"  corporations
         during the relevant periods.  Lowy Group and Magnetic  Instruments were
         taxable "C" corporations, effective May 16, 1994.

(b)      "EBITDA" means earnings  before  deducting  interest  expense,  taxes,
         depreciation and amortization and minority interests 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  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)      Depreciation and amortization  excludes  amortization of debt issuance
         cost of $0.7 million,  $0.7 million and $0.4 million in 1996, 1995 and
         1994, respectively.

(d)      "Consolidated  EBITDA  Coverage  Ratio"  is the  ratio  of  EBITDA  to
         interest  expense that is used in the Indenture to limit the amount of
         indebtedness that the Company may incur.
</FN>
</TABLE>

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 its subsidiaries, Morgan, TAG, Lowy, EFP
and Magnetic Instruments (the Subsidiaries) and the notes thereto.


                                      -18-

<PAGE>


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


Basis of Financial Statements

         Concurrently  with the initial public  offering of $100.0  million,  12
1/2% Senior Notes due 2004,  (the "Senior  Notes"),  effective May 23, 1994, the
Company acquired TAG, Lowy, EFP and Magnetic Instruments from John B. Poindexter
and  certain  minority  interests.   The  historical,   Consolidated   Financial
Statements  reflect  the  acquisition  of the  Subsidiaries  as an  exchange  of
interests in companies  under common control in a manner similar to a pooling of
interests,  except that each  subsidiary  is included  only from the date of Mr.
Poindexter's purchase of his interest therein.

Overview

         The Company  has grown from 1992  through  1996,  both  internally  and
through  acquisitions  (Magnetic  Instruments  and Gem-Top were acquired in June
1992 and March 1993,  respectively).  During 1994, the Company acquired Radco, a
pick up truck accessory retailer, and Tile by Design, a wholesale floor covering
distributor.  TAG  acquired  the  businesses  and  assets  of  three  companies,
effective June 30, 1995:  20th Century  Fiberglass,  a  manufacturer  of pick up
truck caps, Century Distributing, a wholesaler of light truck accessories,  both
based in Elkhart,  Indiana,  and Raider  Industries,  a manufacturer  of pick up
truck caps and tonneau covers based in  Drinkwater,  Saskatchewan,  Canada.  Net
sales increased from $279.3 million in 1992 to $450.7 million in 1995,  however,
decreased to $432.4 million during 1996.  Operating  income increased from $11.6
million in 1992 to $20.0  million  in 1994,  however,  during  1995 and 1996 TAG
incurred operating losses of $12.1 million and $6.9 million, respectively, which
reduced the  Company's  consolidated  operating  income to $4.6 million and $9.1
million respectively.

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

                                      -19-

<PAGE>


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

<TABLE>
<CAPTION>

                                             Years Ended December 31,
                                               (Dollars in Millions)
                                            1996       1995       1994
                                           ------     ------     ------
<S>                                      <C>        <C>        <C>
Net Sales:
                  Morgan .............   $  145.5   $  187.7   $  154.5
                  TAG ................      158.6      137.5      111.4
                  Lowy ...............       71.3       75.0       77.4
                  EFP ................       31.5       30.2       30.6
                  Magnetic Instruments       25.5       20.3       12.7
                                           ------     ------     ------
                  Consolidated .......   $  432.4   $  450.7   $  386.6
                                           ======     ======     ======

Operating Income (Loss):
                  Morgan .............   $    7.1   $    9.9   $    8.2
                  TAG ................       (6.9)     (12.1)       4.5
                  Lowy ...............        3.9        4.9        5.9
                  EFP ................        2.7        1.7        1.5
                  Magnetic Instruments        4.8        2.9        1.3
                  JBPCO ..............       (2.5)      (2.7)      (1.4)
                                           ------     ------     ------
                  Consolidated .......   $    9.1   $    4.6   $   20.0
                                           ======     ======     ======

Operating Margins:
                  Morgan .............        4.9%       5.2%       5.3%
                  TAG ................       (4.4)      (8.8)       4.0
                  Lowy ...............        5.5        6.6        7.6
                  EFP ................        8.6        5.7        4.9
                  Magnetic Instruments       18.8       14.4       10.2
                                           ------     ------     ------
                  Consolidated .......        2.0%       1.0%       5.2%
                                           ======     ======     ======
</TABLE>

Results of Operations
Consolidated Operating Results

Comparison of 1996 to 1995


         Net sales  decreased  4% to $432.4  million in 1996  compared to $450.7
million in 1995. The decrease was due primarily to Morgan whose sales  decreased
22% or $42.2 million partially offset by increases of $21.1 million (15%) at TAG
and $5.2 million (26%) at Magnetic Instruments.

         Cost of sales  decreased  8% to  $338.0  million  in 1996  from  $365.3
million in 1995,  and gross profit  increased  11% to $94.4  million (22% of net
sales) in 1996  compared  to $85.4  million  (19% of net  sales)  in 1995.  EFP,
Magnetic  Instruments  and TAG  recorded  47%,  38% and 37%  increases  in gross
profit, respectively.

         Selling,  general  and  administrative  expense  increased  3% to $84.1
million (19% of net sales) in 1996  compared to $82.0 million (18% of net sales)
in 1995.

                                      -20-

<PAGE>


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


         Operating income increased 95% to $9.1 million in 1996 compared to $4.6
million in 1995.  Operating losses at TAG decreased 43% to $6.9 million compared
to $12.1 million during 1995. The Company's management took steps to improve the
operating  results of TAG  including  closing an  inefficient  plant and certain
unprofitable  retail locations resulting in closure costs of $1.4 million during
1996.

         Interest  expense  increased  2% to $16.2  million in 1996  compared to
$15.9 million in 1995, average total debt increased 9% to $134.6 million during
1996 compared to $123.2 million during 1995.

         The Company  recorded an  aggregate  income tax benefit of $1.1 million
for the year ended  December 31, 1996 compared to a $2.7 million  benefit during
1995. See Note 11 of Notes to the Consolidated Financial Statements.

Comparison of 1995 to 1994

         The Company made three acquisitions during June 1995. TAG acquired 20th
Century  Fiberglass  and  Century  Distributing,  which are a  manufacturer  and
wholesaler,  respectively,  of pick up  caps  and  accessories,  both  based  in
Elkhart, Indiana and Raider, a Canadian manufacturer of pick up caps and tonneau
covers.

         Net sales  increased  17% to $450.7  million in 1995 compared to $386.6
million in 1994. The increase was due primarily to Morgan whose sales  increased
22% or $33.2 million.

         Cost of sales  increased  21% to $365.3  million  in 1995  from  $301.3
million in 1994,  and gross profit  decreased less than 1% to $85.4 million (19%
of net sales) in 1995 compared to $85.3 million (22% of net sales) in 1994.

         Selling,  general and  administrative  expense  increased  26% to $82.0
million (18% of net sales) in 1995  compared to $64.9 million (17% of net sales)
in 1994.

         Due to an  operating  loss of $12.1  million at TAG,  operating  income
decreased  77% to $4.6  million  (1.0% of net sales) in 1995  compared  to $20.0
million (5.2% of net sales) in 1994.

         Interest  expense  increased  38% to $15.9  million in 1995 compared to
$11.5  million in 1994,  because of  increased  interest  cost  associated  with
additional  borrowings  required to finance  operations  and  acquisitions,  and
higher interest rates  associated with the Company's Senior Notes issued May 23,
1994,  compared  to the  interest  rates on the debt  retired  on that date with
proceeds of the Senior Notes.

         The Company recorded an income tax benefit of $2.7 million for the year
ended  December 31, 1995 compared to an expense of $3.0 million during 1994. The
benefit  represents  an estimate of the future value of deductions to be used to
reduce future taxable income.




                                      -21-

<PAGE>


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


Morgan

Comparison of 1996 to 1995

         Net sales  decreased  22% to $145.5  million in 1996 compared to $187.7
million in 1995.  Shipments of van body units  decreased  25% to 18,647 units in
1996  compared to 25,016 units during  1995.  Consumer  Rental Sales (as defined
under  Business)  decreased 60% to $13.9 million and Commercial  Sales decreased
12% to $117.7 million in 1996 compared to 1995. Backlog at December 31, 1996 was
$50.2  million  compared to $41.8  million at the end of 1995.  The  increase in
backlog  reflects an increase in consumer  rental orders  following the cyclical
downturn in that business.

         Cost of sales  decreased  23% to $126.1  million  in 1996  compared  to
$163.4  million in 1995 as a result of the  decrease  in units  produced.  Gross
profit  decreased  $4.9  million or 20% compared to 1995.  Gross profit  margins
increased  slightly as a result of  slightly  lower raw  material  costs and the
implemention of selling price increases.

         Selling,  general and  administrative  expense  decreased  14% to $12.3
million (9% of net sales) in 1996 compared to $14.4 million (8% of net sales) in
1995.  Selling  expense  decreased  11% and General and  Administrative  expense
decreased 18% as Morgan continued to develop the Commercial Sales business.

         Morgan's  operating  income  decreased  28% to  $7.1  million  in  1996
compared to $9.9 million in 1995 due to its decreased net sales. As a percentage
of net sales, operating income remained at 5% in 1996 the same as in 1995.

Comparison of 1995 to 1994

         Net sales  increased  22% to $187.7  million in 1995 compared to $154.5
million in 1994.  Shipments of van body units  increased  23% to 25,016 units in
1995  compared to 20,310 units during  1994.  Consumer  Rental Sales (as defined
under  Business)  increased 43% to $34.7 million and Commercial  Sales increased
14% to $134.4 million in 1995 compared to 1994. Backlog at December 31, 1995 was
$41.8  million  compared  to $63.7  million at the end of 1994.  The  decline in
backlog reflected a cyclical downturn in Class 3 through Class 7 truck sales.

         Cost of sales  increased  22% to $163.4  million  in 1995  compared  to
$134.1  million in 1994 as a result of the  increase  in units  produced.  Gross
profit  increased  $3.9  million or 19% compared to 1994.  Gross profit  margins
declined  slightly  as a result of  increased  raw  material  costs and delay in
implementing selling price increases.

         Selling,  general and  administrative  expense  increased  16% to $14.4
million (8% of net sales) in 1995 compared to $12.4 million (8% of net sales) in
1994.  Selling expense  increased 27% primarily as a result of additional  sales
personnel and the  associated  costs in  anticipation  of efforts during 1996 to
increase   Commercial  Sales.   General  and  administrative   expense  remained
consistent with the prior year.


                                      -22-

<PAGE>


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


         Morgan's  operating  income  increased  21% to  $9.9  million  in  1995
compared to $8.2  million in 1994 due  primarily to  increased  net sales.  As a
percentage of net sales,  operating  income remained at 5.3% in 1995 the same as
in 1994.

TAG

Comparison of 1996 to 1995

         Total  net  sales  for TAG  increased  15% to  $158.6  million  in 1996
compared  to  $137.5  million  in 1995.  TAG  Manufacturing  Division  net sales
increased  21% to $91.5 million  during 1996  compared to $75.9  million  during
1995. Net sales during 1995 include sales of 20th Century  Fiberglass and Raider
Industries for the six months subsequent to their acquisition  during June 1995.
Combined net sales for 20th Century  Fiberglass and Raider Industries were $36.0
million for the year ended  December 31, 1996  compared to $17.6 million for the
six months ended December 31,1995.

           TAG  Distribution  Division net sales  increased 9% to $67.1  million
during 1996 compared to $61.6 million during 1995,  operations  acquired  during
June 1995 increased sales approximately $3.2 million for the year ended December
31, 1996  compared to 1995.  Leer Retail sales  increased  $2.9 million (7%) and
wholesale sales, excluding Century Distribution,  remained flat. TAG closed four
unprofitable  stores during 1996,  resulting in closure  costs of  approximately
$0.3 million.

         Cost of sales  increased  $10.1 million (9%) to $117.7  million in 1996
compared to $107.6 million in 1995.  Gross profit increased 37% to $40.9 million
(26% of net sales)  during  1996  compared to $29.9  million  (22% of net sales)
during 1995. The increase was due primarily to the TAG Manufacturing Division as
product mix changes and efforts to improve  product  quality and delivery  times
were  reflected  in lower cost of sales . Also during  1996,  TAG  Manufacturing
Division eliminated the production of plastic caps.

         Selling,  general and  administrative  expense  increased  10% to $46.4
million  (29% of net sales)  during 1996  compared to $42.1  million (31% of net
sales) during 1995. Selling expense increased 5% or $0.9 million and general and
administrative  expense increased 14% or $3.4 million,  primarily as a result of
the inclusion of  operations,  acquired  during June 1995,  for twelve months of
1996.

         TAG incurred an operating  loss for the year ended December 31, 1996 of
$6.9  million  compared  to an  operating  loss of $12.1  million  in 1995.  The
improvement  in operating  performance  was  primarily  the result of efforts to
remedy  manufacturing  problems  associated with the introduction of new product
lines, product design changes and paint finishing processes.

         The  Company  continues  to respond in a number of ways to correct  the
manufacturing  problems  encountered  by TAG  during  1996  and  1995.  The Leer
Manufacturing plant in the Southeastern United States was closed during the last
quarter of 1996 due to inefficient  operations.  Production has been transferred
to the  remaining  TAG  Manufacturing  plants with an  associated  reduction  in
overhead  costs.  Including  costs of closing the Gem Top East  facility,  total
closure costs of approximately $1.1 million were charged to expense during 1996.
Management has taken steps

                                      -23-

<PAGE>


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


to address  the  manufacturing  problems  including  among  others,  redesigning
certain products and implementing  additional quality control procedures.  Other
improvement measures are being evaluated.

Comparison of 1995 to 1994

         Total  net  sales  for TAG  increased  23% to  $137.5  million  in 1995
compared to $111.4 million in 1994. Excluding operations acquired June 30, 1995,
sales increased $3.2 million or 3%.

         TAG incurred an operating  loss for the year ended December 31, 1995 of
$12.1 million compared to an operating profit of $4.5 million in 1994. Excluding
acquired operations the TAG operating loss was approximately $13.2 million.  The
decline in comparable operating income of $17.7 million includes $2.9 million in
non-cash  charges  related to increased  bad debt,  inventory  obsolescence  and
warranty  reserves.  The  reduction in operating  performance  was primarily the
result of manufacturing problems associated with the introduction of new product
lines,  product design  changes and paint  finishing  processes.  These problems
contributed to higher product returns and production delays.

         During 1995,  compared to 1994,  retail sales  increased  $10.3 million
(35%) and  wholesale  sales,  excluding  Century  Distribution,  increased  $1.0
million (5%),  however,  manufacturing  sales declined $8.1 million  (12%).  TAG
operated 48 company  owned retail  stores at December 31, 1995.  The increase in
retail sales was primarily attributable to the acquisition of eight Radco stores
during December 1994 which contributed $8.0 million in sales during 1995 and the
addition  of  seven  new  stores  opened  during  the  year.  TAG  closed  three
unprofitable stores during 1995.

         TAG operated four wholesale distribution centers and nine manufacturing
locations,  including  three from the acquisition of Century/  Raider.  The Leer
manufacturing  locations  shipped  approximately  125,000 units during 1995, 14%
less than during 1994 due to the problems referred to above.

         Cost of sales  increased  $29.6 million (38%) to $107.7 million in 1995
compared to $78.1 million in 1994.  Excluding operations acquired June 30, 1995,
cost  of  sales  increased  approximately  $12.0  million  (15%).  Gross  profit
decreased  $3.5  million  (10%),  or  $8.7  million  (26%)  excluding   acquired
operations.  The decrease was due primarily to  manufacturing  costs  associated
with the problems  referred to above.  The gross  profit from retail  operations
increased $3.6 million or 43%, including $2.3 million from Radco stores acquired
December 1994.

         Selling,  general and  administrative  expense  increased  46% to $42.1
million  during  1995.   Excluding  acquired   operations,   expenses  increased
approximately  $9.0  million  or 31% to  $37.8  million.  Selling,  general  and
administrative  expense includes  approximately $1.0 million of non-cash charges
related to increased bad debt reserves.  The establishment of separate operating
divisions and the  centralization of certain functions at the Leer manufacturing
division  increased  general  and  administrative  expenses  approximately  $3.6
million during 1995.  Additional  delivery costs associated with product returns
increased  costs  approximately  $1.2 million.  Selling  expense  increased $2.7
million,  excluding  acquired  operations,  to  $16.2  million  or 14% of  sales
compared

                                      -24-

<PAGE>


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


to 12% of sales in 1994. The increase is primarily attributable to Radco selling
expense of $2.5 million.

         The Company  responded  in a number of ways in an effort to correct the
manufacturing  problems encountered by TAG during 1995. Senior management of the
Leer manufacturing division was changed significantly  including the replacement
of the division's  President and Chief Financial Officer. At the same time, Leer
filled a number of senior  positions  which in the past remained  vacant.  Those
positions included a Director of Engineering,  Director of Quality Assurance,  a
Director of Human Resources and a Manager of Credit and Collections. In addition
to changing the make-up and breadth of its senior management,  the Leer division
also  allocated   more   responsibilities   to  the  General   Managers  of  the
manufacturing plants.

Lowy Group

Comparison of 1996 to 1995

         Net sales  decreased  5% to $71.3  million  in 1996  compared  to $75.0
million in 1995. Sales from the floor covering  distribution  business  declined
$4.3 million (9%) and carpet manufacturing activity sales increased $0.6 million
(2%).

         Cost of sales  decreased 5% to $51.5 million in 1996 from $54.0 million
in 1995.  Accordingly,  gross profit  decreased 6% to $19.8  million (28% of net
sales) in 1996 compared to $21.0 million (28% of net sales) in 1995.

         Selling,  general  and  administrative  expense  decreased  2% to $15.9
million (22% of net sales) in 1996  compared to $16.2 million (21% of net sales)
in 1995.  The decrease was due  primarily to lower  expenses  associated  with a
reduction in personnel  partially  offset by higher sample expense and increased
fixed selling costs.

         Lowy Group's  operating income decreased 21% to $3.9 million (6% of net
sales) in 1996 compared to $4.9 million (7% of net sales) in 1995.

Comparison of 1995 to 1994

         Net sales  decreased  3% to $75.0  million  in 1995  compared  to $77.4
million in 1994. Sales from the floor covering  distribution  business  declined
$1.9 million (4%) carpet  manufacturing  activity  sales  declined  $0.5 million
(1%).

         Cost of sales  decreased 2% to $54.0 million in 1995 from $55.3 million
in 1994.  Accordingly,  gross profit  decreased 9% to $21.0  million (28% of net
sales) in 1995  compared  to $22.1  million  (29% of net  sales)  in 1994.  Lowy
benefited from lower  material costs in 1994 as a result of purchasing  material
at unusually favorable terms which were not available in 1995.

         Selling,  general  and  administrative  expense  increased  2% to $16.2
million (21% of net sales) in 1995  compared to $15.9 million (21% of net sales)
in 1994. The increase was due primarily to

                                      -25-

<PAGE>


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


increased carpet sample expense,  partially offset by lower selling expense as a
result of lower commission  payments and lower costs associated with a reduction
in sales personnel.

         Lowy Group's  operating income decreased 17% to $4.9 million (7% of net
sales) in 1995 compared to $5.9 million (8% of net sales) in 1994.

EFP
Comparison of 1996 to 1995

         Net sales  increased  4% to $31.5  million  in 1996  compared  to $30.2
million in 1995.  EFP's  Components (as defined under  Business) sales increased
$3.9  million,  on the strength of new business,  offset by decreased  Styrocast
business and the absence of revenue from the beverage  cooler  business  sold in
1995.

         Cost of sales  decreased 3% to $25.0 million in 1996 from $25.8 million
in 1995.  Accordingly,  gross profit  increased  47% to $6.5 million (21% of net
sales) in 1996 compared to $4.4 million (15% of net sales) in 1995. The decrease
in cost of sales was due to a decrease in labor costs as a result of the sale of
the beverage cooler product line.

         Selling,  general and administrative expense remained $3.8 million (12%
of net sales) in 1996  compared to $3.8 million (13% of net sales) in 1995.  The
decrease  in  expense  as a  percentage  of net  sales is  primarily  due to the
elimination of the beverage product line.

         EFP's operating  income increased 58% to $2.7 million (9% of net sales)
in 1996 compared to $1.7 million (6% of net sales) in 1995.

Comparison of 1995 to 1994

         Net sales  decreased  1% to $30.2  million  in 1995  compared  to $30.6
million in 1994.  Packaging  sales increased  approximately  $3.4 million during
1995 which  offset the  anticipated  reduction  in  Styro-Cast  business of $3.8
million during 1995.  During September 1995 EFP sold its beverage cooler product
line which decreased sales approximately $0.1 million during the last quarter of
1995.

         Cost of sales  increased 5% to $25.8 million in 1995 from $24.6 million
in 1994.  Accordingly,  gross profit  decreased  27% to $4.4 million (15% of net
sales) in 1995 compared to $6.0 million (20% of net sales) in 1994. The increase
in cost of sales was due to  increased  raw  material  costs  associated  with a
change in product mix and increased raw material prices. Labor costs declined as
a result of product mix changes.

         Selling,  general  and  administrative  expense  decreased  14% to $3.8
million  (13% of net sales) in 1995  compared to $4.4 million (14% of net sales)
in  1994  due  primarily  to a  $0.6  million  (22%)  decrease  in  general  and
administrative expense associated with a reduction in personnel.


                                      -26-

<PAGE>


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


         EFP's operating  income increased 13% to $1.7 million (6% of net sales)
in 1995 compared to $1.5 million (5% of net sales) in 1994. Excluding the income
attributable to the sale of EFP's beverage cooler product line, operating income
declined by 47% to $0.7 million.


Magnetic Instruments

Comparison of 1996 to 1995

         Net sales  increased  26% to $25.5  million in 1996  compared  to $20.3
million in 1995.  The  increase  was  attributable  to an  increased  demand for
Magnetic's  products and  services  due to  increased  levels of activity in the
energy exploration and production business.

         Cost of sales  increased 21% to $17.6 million in 1996 compared to $14.5
million in 1995. Accordingly, gross profit increased 38% to $7.8 million (31% of
net  sales) in 1996  compared  to $5.7  million  (28% of net  sales) in 1995 due
primarily to a higher volume of sales in 1996.

         Selling,  general  and  administrative  expense  increased  18% to $3.0
million (12% of net sales)  compared to $2.6 million (12% of net sales) in 1995,
principally  because  of  increased  sales  commission  payments  and  increased
personnel costs.

         Operating  income  increased 65% to $4.8 million during 1996, or 19% of
net sales, compared to $2.9 million or 14% of net sales in 1995.

Comparison of 1995 to 1994

         Net sales  increased  60% to $20.3  million in 1995  compared  to $12.7
million in 1994. The increase was primarily  attributable to an increased demand
for Magnetic's  products and services due to increased levels of activity in the
energy exploration and production business.

         Cost of sales  increased  56% to $14.5 million in 1995 compared to $9.3
million in 1994. Accordingly,  gross profit increased 70% to 5.7 million (29% of
net sales) in 1995  compared to $3.4 million (27% of net sales) in 1994 due to a
higher volume of sales in 1995.

         Selling,  general  and  administrative  expense  increased  18% to $2.6
million (12% of net sales)  compared to $2.2 million (17% of net sales) in 1994,
primarily because of increased  general and  administrative  expense  associated
with increased  personnel  costs as well as attorneys'  fees  associated  with a
lawsuit against Magnetic.

         Operating  income  increased to $2.9 million during 1995, or 14% of net
sales, compared to $1.3 million or 10% of net sales in 1994.




                                      -27-

<PAGE>


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


Liquidity and Capital Resources

         During 1996 net cash provided by operations  increased $18.9 million to
$10.7 million  compared to net cash used by  operations  of $8.2 million  during
1995.  Overall changes in working  capital  provided cash of $6.4 million during
1996 compared to using cash of $5.8 million during 1995. The improvement was due
primarily to a decrease in working capital  requirements and improved  operating
results  during 1996. The cash provided by operations in 1996 was used primarily
to fund  capital  expenditures  of $8.1  million  and  debt  repayments  of $2.2
million.

         At December 31, 1995, the Revolving Credit  Agreement,  entered into on
May 23,  1994,  contained  numerous  restrictive  covenants  which,  among other
things,  restricted  the  ability of the  Company to dispose of assets and incur
debt and restrict certain  corporate  activities.  In addition,  the Company was
required to maintain specified financial covenants including a minimum net worth
and debt coverage ratio. At December 31, 1995, the Company was not in compliance
with the minimum net worth  requirements or the debt coverage ratio as specified
by the Revolving  Credit  Agreement and borrowings by certain  subsidiaries  had
exceeded their borrowing base.

         The covenant violations as of December 31, 1995 primarily resulted from
the  Company  incurring  a net  loss of $8.5  million  in 1995,  which  included
significant losses at TAG, as a result of manufacturing problems associated with
new product  development,  design changes and paint finishing  processes.  These
problems  contributed  to higher than  normal  product  returns  and  production
delays.  Management of JBPCO and TAG,  began taking steps during 1995 to address
these  problems  including,  among  others,  redesigning  certain  products  and
implementing  additional  quality  control  procedures  and closing  inefficient
operations.  In  addition,  during 1996,  TAG  Manufacturing  Division  closed a
manufacturing  facility and TAG Distribution closed certain  unprofitable retail
locations resulting in a total charge of $1.4 million.

           Subsequent to December 31, 1995, upon  determination of the available
borrowing  base,  the  Company  took  action to conform  the  borrowings  of the
subsidiaries to the limits of the then available  borrowing  bases. In addition,
the lenders  agreed to waive the covenant  violations and to amend the financial
covenants of the Revolving  Credit  Agreement  through its May 1997  expiration,
subject to the completion of certain documentation requirements.

         On June 28, 1996, the Company entered into a new secured revolving loan
agreement  (Revolving Loan Agreement) with a new lender providing for borrowings
by its Subsidiaries of up to $50,000,000.  The arrangement 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
$50,000,000  or a percentage  of eligible  accounts  receivable  and of eligible
inventory  of the  Subsidiaries.  The  Revolving  Loan  Agreement  provides  for
borrowings at variable rates of interest,  based on either Core States Bank N.A.
prime rate or LIBOR and expires June 28, 1999. Interest is payable monthly.  The
Subsidiaries  are  guarantors  of  this  indebtedness  to  which  inventory  and
receivables are pledged.

         Effective  June 28, 1996,  the Company used  proceeds of $24.3  million
from the Revolving Loan Agreement to repay all  indebtedness  outstanding  under
the  Revolving  Credit  Agreement  entered into on May 23, 1994.  The ability to
borrow under the Revolving Loan Agreement depends

                                      -28-

<PAGE>


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


on the amount of eligible  collateral  which  depends on certain  advance  rates
applied to the value of accounts receivables and inventory. At March 7, 1997 the
Company had unused available borrowing capacity of $13.7 million under the terms
of the  Revolving  Loan  Agreement.  At December  31, 1996 the Company had total
borrowing  capacity of $43.8  million,  of which $8.2 million was used to secure
letters of credit and $0.9 million was used to secure trade finance  borrowings.
Additionally,  $28.2 million had been borrowed to fund  operations  resulting in
unused available borrowing capacity of $9.9 million.

         As discussed in Notes 8 and 9 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,  and 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.  Although there are no
assurances, the Company's management believes that operational issues related to
TAG will be resolved resulting in the Company maintaining adequate liquidity.

Other Matters

         The Company is significantly  leveraged (debt  represented 95% of total
capitalization  at December  31,  1996).  Through its  floating  rate debt,  the
Company will be 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 few number of
customers with two customers  accounting for 14% of 1996 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.

         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 under various
environmental laws (See Note 15 of Notes to Consolidated  Financial Statements),
with  respect  to two  different  sites,  and  has  been  requested  to  provide
information to the Environmental  Protection Agency with respect to those sites.
Under the Comprehensive Environmental Response Compensation and Liability Act of
1980 and the  Pennsylvania  Hazardous  Sites Clean-Up Act, past and present site
owners and operators,  transporters  and waste  generators  are all  potentially
jointly and severally  responsible for clean up costs. However,  typically,  the
generator  portion  of the costs are  allocated  between  generators,  with each
generator bearing costs  proportionate to the volume and nature of the wastes it
disposed of at the site. Although the extent of Morgan's  liability,  if any, is
not known at this time,  management  currently  believes that Morgan's allocated
share of the ultimate costs related to any necessary  investigation and remedial
work at these sites will not have a material adverse effect on

                                      -29-

<PAGE>


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


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 as compliance standards and technology change. In addition,  as
discussed  in Note 15, the  Company is aware of  certain  environmental  matters
pertaining to NSSC.

         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
Magnetic  Instruments has obtained  certification.  Its  implementation  of this
standard  is in  recognition  of the  international  nature  of a number  of its
customers  as well as being  reflective  of the  high  precision  nature  of its
services. EFP has plans to implement the standard within the next two years. The
Company  believes  that,  except for Magnetic  Instruments  and EFP, none of the
customers of the Company have requested or expect the adoption by the Company of
ISO 9000.

         The Subsidiaries have historically made payments to a partnership and a
corporation  controlled  by Mr.  Poindexter  in the form of  allocated  overhead
expenses, consulting services and management fees. Upon consummation of the Note
Offering,  the Company pays fees to that  corporation  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 8.           Financial Statements and Supplementary Data

Index to Financial Statements:                                       Page

Report of Independent Auditors (Ernst & Young LLP) ................   31
Report of Independent Public Accountants (Arthur Andersen LLP) ....   32
Consolidated Balance Sheets as of December 31, 1996 and 1995 ......   33
Consolidated Statements of Operations for the years ended
     December 31, 1996, 1995 and 1994 .............................   34
Consolidated Statements of Cash Flows for the years ended
     December 31, 1996, 1995 and 1994 .............................   35
Consolidated Statements of Stockholder's Equity for the years ended
     December 31, 1996, 1995 and 1994 .............................   36
Notes to Consolidated Financial Statements ........................   37


                                      -30-

<PAGE>



                         REPORT OF INDEPENDENT AUDITORS



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

We have audited the accompanying consolidated balance sheet of J.B. Poindexter &
Co., Inc. and subsidiaries as of December 31, 1996 and the related  consolidated
statements of operations,  cash flows and stockholder's equity for the year then
ended.  These  financial  statements  are the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated financial position of J.B. Poindexter &
Co., Inc. and subsidiaries at December 31, 1996 and the consolidated  results of
their  operations  and their cash flows for the year then ended,  in  conformity
with generally accepted accounting principles.




                                                               ERNST & YOUNG LLP

Houston, Texas
February 21, 1997

















                                      -31-

<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To J.B. Poindexter & Co., Inc.:

We have audited the accompanying  consolidated balance sheets of J.B. Poindexter
& Co., Inc. (a Delaware  Corporation) and subsidiaries,  as of December 31, 1995
and 1994, and the related consolidated statements of operations,  cash flows and
stockholder's  equity for each of the two years in the period ended December 31,
1995.  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  consolidated  financial  statements are
free of material  misstatement.  An audit includes  examining,  on a test basis,
evidence  supporting the amounts and disclosures in the  consolidated  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.

As  discussed  in  Note 8,  the  Company  incurred  a  significant  loss in 1995
attributable to losses by one of its subsidiaries.  As a result,  JBPCO violated
certain financial covenants of its revolving credit agreement.  The lenders have
agreed to waive the covenant  violations  and amended  financial  covenants have
been established through expiration of the facility in May 1997. The steps taken
by Company  management to address certain  operational  issues of the subsidiary
are also discussed in Note 8.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial  position of J.B.  Poindexter &
Co., Inc. and  subsidiaries as of December 31, 1995 and 1994, and the results of
their  operations  and their  cash flows for each of the two years in the period
ended  December  31,  1995 in  conformity  with  generally  accepted  accounting
principles.



ARTHUR ANDERSEN LLP

Houston, Texas
March 29, 1996

                                      -32-

<PAGE>


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

                                     ASSETS
                                                                            December 31,
                                                                          1996        1995
                                                                      ---------   ---------
<S>                                                                   <C>         <C>
Current assets
     Restricted cash ..............................................   $   2,607   $   1,714
     Accounts receivable, net of allowance for doubtful accounts of
              $1,863 and $2,626 respectively ......................      31,258      33,848
     Inventories, net .............................................      48,612      51,937
     Deferred income taxes ........................................       2,588       3,417
     Prepaid expenses and other ...................................       2,139       2,299
                                                                      ---------   ---------
              Total current assets ................................      87,204      93,215
Property, plant and equipment, net ................................      51,097      52,746
Goodwill, net .....................................................      21,773      22,860
Deferred income taxes .............................................       5,174       2,470
Other assets ......................................................       8,233       9,503
                                                                      ---------   ---------
              Total assets ........................................   $ 173,481   $ 180,794
                                                                      =========   =========

                      LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities
     Short-term debt ..............................................   $     917   $   4,184
     Current portion of long-term debt ............................       1,885       2,337
     Borrowings under revolving credit facility ...................      28,238      24,288
     Accounts payable .............................................      14,624      13,826
     Accrued compensation and benefits ............................       7,427       6,726
     Accrued income taxes .........................................         372         363
     Accrued warranty liabilities .................................       2,799       2,660
     Other accrued liabilities ....................................       8,576       9,400
                                                                      ---------   ---------
              Total current liabilities ...........................      64,838      63,784
                                                                      ---------   ---------
Noncurrent liabilities
     Long-term debt, less current portion .........................     102,767     104,543
     Employee benefit obligations and other .......................       2,846       3,016
                                                                      ---------   ---------
              Total noncurrent liabilities ........................     105,613     107,559
                                                                      ---------   ---------
Commitments and contingencies
Stockholder's equity
     Common stock and paid-in capital .............................      16,486      16,486
     Cumulative translation adjustment ............................          39          46
     Accumulated deficit ..........................................     (13,495)     (7,081)
                                                                      ---------   ---------
              Total stockholder's equity ..........................       3,030       9,451
                                                                      ---------   ---------
              Total liabilities and stockholder's equity ..........   $ 173,481   $ 180,794
                                                                      =========   =========
<FN>

              The accompanying notes are an integral part of these
                       consolidated financial statements.
</FN>
</TABLE>
                                      -33-

<PAGE>


                  J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 (Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
                                                                  Year Ended December 31,
                                                              1996         1995         1994
                                                          ---------    ---------    ---------
<S>                                                       <C>          <C>          <C>
Net sales .............................................   $ 432,387    $ 450,716    $ 386,645
Cost of sales .........................................     337,957      365,313      301,338
                                                          ---------    ---------    ---------
Gross profit ..........................................      94,430       85,403       85,307
Selling, general and administrative expense ...........      84,062       81,971       64,915
Plant closure expenses ................................       1,375         --           --
Other  (income) expense, net ..........................         (76)      (1,211)         384
                                                          ---------    ---------    ---------
Operating income ......................................       9,069        4,643       20,008
Interest expense ......................................      16,214       15,901       11,481
                                                          ---------    ---------    ---------
Income (loss) before income taxes, minority
    interests and extraordinary loss ..................      (7,145)     (11,258)       8,527
Income tax provision (benefit) ........................        (991)      (2,722)       3,027
                                                          ---------    ---------    ---------
Income (loss) before minority interests
    and extraordinary loss ............................      (6,154)      (8,536)       5,500
Minority interests ....................................        --           --             37
Extraordinary loss on early extinguishment of
    debt, net of income tax benefit of $135 in 1996 and
    $935 in 1994 ......................................         260         --          2,066
                                                          ---------    ---------    ---------
Net income (loss) .....................................   $  (6,414)   $  (8,536)   $   3,397
                                                          =========    =========    =========

Earnings (loss) per share:
    Income (loss) before extraordinary loss ...........   $  (2,012)   $  (2,790)   $   2,418
    Extraordinary loss ................................         (85)        --           (915)
                                                          ---------    ---------    ---------
    Net income (loss) .................................   $  (2,097)   $  (2,790)   $   1,503
                                                          =========    =========    =========

Weighted average shares outstanding ...................       3,059        3,059        2,259
                                                          =========    =========    =========
<FN>

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

                                      -34-

<PAGE>


                  J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                               Year Ended December 31,
                                                                            1996        1995        1994
                                                                         --------    --------    --------
<S>                                                                      <C>         <C>         <C>
Net income (loss) ....................................................   $ (6,414)   $ (8,536)   $  3,397
Adjustments to reconcile net income (loss) to net
         cash provided by (used in) operating activities:
     Minority interests ..............................................       --          --            37
     Depreciation and amortization ...................................     11,862      11,155       8,617
     Extraordinary loss on early extinguishment of debt,
         net of tax ..................................................        260        --         2,066
     Gain (loss)  on sale of equipment ...............................         19      (1,144)        (12)
     Deferred federal income tax provision (benefit) .................     (1,875)     (3,875)       (850)
     Other ...........................................................        453          96        (146)
Increase (decrease) in operating cash flows resulting from changes in:
     Accounts receivable .............................................      2,590         923      (5,904)
     Inventories .....................................................      3,325       5,126     (11,512)
     Prepaid expenses and other ......................................        160          71       1,309
     Accounts payable ................................................        798     (13,430)     (1,222)
     Accrued income taxes ............................................          9         224       2,748
     Other accrued liabilities .......................................       (500)      1,229        (274)
                                                                         --------    --------    --------
         Net cash provided by (used in) operating activities .........     10,687      (8,161)     (1,746)
                                                                         --------    --------    --------
Cash flows used in investing activities:
     Purchase of businesses, net of cash acquired ....................       --       (10,277)     (3,739)
     Purchase of minority interests ..................................       --          --        (2,360)
     Proceeds from disposition of equipment ..........................        416       2,988         131
     Proceeds from sale of short-term investments ....................       --           180       1,160
     Acquisition of property, plant and equipment ....................     (8,091)    (11,870)     (9,218)
     Other ...........................................................        178         (34)       (428)
                                                                         --------    --------    --------
         Net cash used in investing activities .......................     (7,497)    (19,013)    (14,454)
                                                                         --------    --------    --------
Cash flows provided by financing activities:
     Net proceeds (payments) of revolving lines of credit ............        683      21,615     (25,476)
     Proceeds of long-term debt and capital leases ...................       --          --        95,316
     Payment penalties on extinguishment of debt .....................       --          --        (1,827)
     Payments of long-term debt and capital leases ...................     (2,228)     (1,848)    (37,828)
     Dividends to majority stockholder ...............................       --          --        (6,574)
     Distributions to minority stockholder ...........................       --          --          (165)
     Debt issuance costs .............................................       (752)       --          --
                                                                         --------    --------    --------
         Net cash provided (used in) financing activities ............     (2,297)     19,767      23,446
                                                                         --------    --------    --------
              Increase (decrease) in restricted cash and
                  cash equivilents ...................................        893      (7,407)      7,246
Restricted cash and cash equivalents, beginning of period ............      1,714       9,121       1,875
                                                                         --------    --------    --------
Restricted cash and cash equivalents, end of period ..................   $  2,607    $  1,714    $  9,121
                                                                         ========    ========    ========
Supplemental information:
     Cash paid for income taxes ......................................   $  1,010    $    937    $    896
                                                                         ========    ========    ========
     Cash paid for interest cost .....................................   $ 16,211    $ 14,873    $  9,522
                                                                         ========    ========    ========
<FN>
              The accompanying notes are an integral part of these
                       consolidated financial statements.
</FN>
</TABLE>
                                      -35-

<PAGE>



                  J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
                     FOR THE YEARS ENDED DECEMBER 31, 1994,
                      1995 and 1996 (Dollars in thousands,
                              except share amounts)
<TABLE>
<CAPTION>


                                                   Shares of     Common      Retained     Currency
                                                    Common     Stock and     Earnings    Translation
                                                    Stock  Paid-in Capital   (Deficit)   Adjustment        Total
                                                   -------   ----------    ----------    ----------    ----------
<S>                                                <C>       <C>           <C>           <C>           <C>
December 31 , 1993 ..........................        1,000   $   10,616    $    4,613    $     --      $   15,229
         Stock issued to acquire subsidiaries        2,059         --            --            --
         Contribution of note due shareholder         --          4,685          --            --           4,685
         Redemption of minority interest ....         --           (249)         --            --            (249)
         Dividends ..........................         --           --          (6,574)         --          (6,574)
         Capital contributions ..............         --          1,434          --            --           1,434
         Pension liability adjustment .......         --           --            (110)         --            (110)
         Net income .........................         --           --           3,397          --           3,397
                                                   -------   ----------    ----------    ----------    ----------
December 31, 1994 ...........................        3,059       16,486         1,326          --          17,812
         Net loss ...........................         --           --          (8,536)         --          (8,536)
         Pension liability adjustment .......         --           --             129          --             129
         Translation adjustment .............         --           --            --              46            46
                                                   -------   ----------    ----------    ----------    ----------
December 31, 1995 ...........................        3,059       16,486        (7,081)           46         9,451
         Net loss ...........................         --           --          (6,414)         --          (6,414)
         Translation adjustment .............         --           --            --              (7)           (7)
                                                   -------   ----------    ----------    ----------    ----------
December 31, 1996 ...........................        3,059   $   16,486    $  (13,495)   $       39    $    3,030
                                                   =======   ==========    ==========    ==========    ==========






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

                                      -36-

<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, with Morgan
Trailer  Manufacturing  Co.,  being  JBPCO's only  subsidiary  prior to the Note
Offering  (See  Note  9).  In order  to  enhance  the  financial  and  operating
flexibility  of the companies,  prior to the Note Offering  discussed in Note 9,
JBPCO acquired  ownership of the other  Subsidiaries  in exchange for additional
stock of JBPCO.  The  historical  consolidated  financial  statements  presented
herein reflect the  acquisition of the  Subsidiaries as an exchange of interests
in companies under common control in a manner similar to a pooling of interests,
except that each  Subsidiary is included only from the date of Mr.  Poindexter's
purchase of his  interest  therein.  The  purchase of minority  interests in the
Subsidiaries  that was funded by a portion of the offering proceeds was recorded
on May 23, 1994.  Such  minority  interests  were  reflected  in the  historical
consolidated  financial  statements  based  on  the  minority  interest  owners'
proportionate ownership of the respective Subsidiaries for the applicable period
prior to May 23, 1994.


    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.  Morgan merged into National  Steel Service Center
(NSSC) in December  1993,  and the surviving  entity assumed the Morgan name and
business.  NSSC,  acquired in 1986, ceased operations and completed the sale its
principal operating assets 1993.

    Truck Accessories Group,  Inc.,  ("TAG") (formerly Leer, Inc.).  Acquired on
August 14, 1987,  TAG is a manufacturer  and  distributor 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.  In
addition,  TAG  distributes  other  accessories  for light trucks,  minivans and
sports utility vehicles.

    Gem-Top  Manufacturing,  Inc.  ("Gem-Top") was acquired by TAG on August 31,
1993.  Gem-Top  is in the  same  line of  business  as TAG  and the  acquisition
resulted  in  expanded  product  lines  and  distribution  area for  TAG.  Radco
Industries,  Inc.,  ("Radco") was acquired on December 28, 1994. Radco is in the
same line of business as TAG. 20th Century  Fiberglass and Century  Distributing
were acquired June 29, 1995.  Raider  Industries  Ltd., a  Saskatchewan,  Canada
corporation  was formed during 1995 to acquire a cap  manufacturing  business in
Canada on June 30, 1995.

    During  1995,  the TAG  operations  were  organized  into two  separate  and
distinct operating divisions: TAG Manufacturing Division,  manufactures caps and
tonneau  covers  and  certain  other  accessories;  TAG  Distribution  Division,
operates as a retail and wholesale  distributor of products  manufactured by TAG
divisions and other suppliers.

    As  discussed  in Note 8, in 1996  TAG  Manufacturing  Division  closed  two
manufacturing facilities and TAG Distribution closed certain unprofitable retail
locations,  resulting in a charge of  $1,375,000.  The charge for plant closures
included a write down of assets of $453,000 and an accrual of approximately

                                      -37-

<PAGE>


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


$922,000 for remaining  lease  obligations,  severance and various other closure
costs.  Approximately $340,000 of the accrued expenses were paid in 1996 and the
remainder will be paid in 1997.

    Lowy  Group,  Inc.  ("Lowy  Group")  Acquired  August 30,  1991,  Lowy Group
operates  in  the  floor  covering   business  through  three  divisions.   Lowy
Distribution  is a wholesale  floor  covering  distributor  that serves all or a
portion of twelve Midwestern states through six company-owned  facilities.  Blue
Ridge Carpet Mills designs, manufactures and markets mid- to high-end commercial
carpeting for sale  throughout  the United States and abroad.  Courier  Division
uses state of the art  equipment  to dye and print  patterns on  commercial  and
residential  carpeting that is  manufactured  by Blue Ridge and other  unrelated
companies.

    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.

    On  September  8,  1995,  EFP sold  certain  assets  related  to its line of
beverage cooler products and recognized a net gain of $1,040,000.

     Magnetic Instruments Corp.  ("Magnetic  Instruments")  Acquired on June 19,
1992, Magnetic Instruments is a manufacturer, investment caster and assembler of
precision metal parts for use in the worldwide oil and gas exploration industry.


2. Summary of Significant Accounting Policies:

     Principles  of  Consolidation.   The  historical   consolidated   financial
statements are presented on the basis described in Note 1.

    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, 1996 and 1995,  substantially  all of the
Company's  cash is  restricted  pursuant  to the terms of the  revolving  credit
facility (See Note 8).

    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, 1996, 1995 and 1994, the
Company  charged  to  expense  and other  accounts,  $723,000,  $2,079,000,  and
$349,000,  respectively,  as a provision for doubtful accounts and deducted from
the allowance $1,486,000,  $714,000, and $360,000,  respectively, for write-offs
of bad debts.


                                      -38-

<PAGE>


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


    Inventories.  Inventories are stated at the lower of cost or market. Cost is
determined  by the  last-in,  first-out  (LIFO)  method  for  certain  operating
companies  and by the  first-in,  first-out  (FIFO)  method  by other  operating
companies. During the year ended December 31, 1995, Morgan and a division of TAG
changed  from  LIFO  to  FIFO  which  did  not  have a  material  effect  on the
accompanying consolidated financial statements.

    Property,  Plant &  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.  Certain Subsidiaries (Morgan, TAG and Lowy Group) provide product
warranties  for  periods  up to ten  years,  except  for TAG in  which  case the
warranty  period,  exclusive to the original truck owner, 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 and the estimated warranty liability is adjusted
based on current performance.  Actual warranty costs could differ from estimates
made.

    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 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 are estimated 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.






                                      -39-

<PAGE>


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


    Foreign Currency Translation. The functional currency of a subsidiary of one
of the Company's  Subsidiaries is the applicable local currency. The translation
of the  foreign  currency  into U.S.  Dollars is  performed  for  balance  sheet
accounts  using the  exchange  rate in effect at the balance  sheet date and for
income statement accounts using a weighted average exchange rate for the period.
The gains or losses  resulting from such  translation are included as a separate
component of stockholder's equity.


3.  Acquisitions:


    During June 1995, the Company's TAG subsidiary acquired substantially all of
the  assets  of  five  companies:   20th  Century   Fiberglass,   Inc.,  Century
Distributing,  Inc.,  Brown Industries  Ltd.,  Pro-More  Industries Ltd., and Lo
Rider Industries Inc. The aggregate purchase price approximated $10.3 million in
cash and TAG assumed  liabilities  of  approximately  $8.5 million of which $1.6
million was repaid in full at closing.  The results of all  businesses  acquired
during the year ended December 31, 1995, have been included in the  consolidated
financial statements from the dates of acquisition.

    The Company's  consolidated  results of operations on an unaudited pro forma
basis, as though the businesses acquired during the year ended December 31, 1995
had been  acquired on January 1, 1994,  are as follows  (Dollars  in  thousands,
except per share amounts):

                                                              1995       1994
                                                          (Unaudited)(Unaudited)

Net sales ..............................................   $ 474,415    $432,970
Operating income .......................................       5,647      22,545
Income (loss) before extraordinary loss ................      (8,261)      6,213
Net income (loss) ......................................      (8,261)      4,147
Income (loss) per common and common equivalent share
     before extraordinary loss .........................      (2,651)      2,750

Net income (loss) ......................................   $  (2,651)      1,835

    These pro forma results are presented for informational purposes only and do
not  purport to show the  actual  results  which  would  have  occurred  had the
business  combinations  been  consummated on January 1, 1995, nor should they be
viewed as indicative of future results of operations.

    Additionally  on December 27, 1994,  TAG acquired the  outstanding  stock of
Radco  Industries,  Inc.  ("Radco"),  a manufacturer  and retail  distributor of
aluminum and  fiberglass  truck cap and accessory  products.  The purchase price
approximated $3.3 million in cash.


                                      -40-

<PAGE>


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


4.  Inventories:
   Consolidated net inventories consist of the following (Dollars in thousands):
                                                               December 31,
                                                         1996              1995
                                                         ----              ----
FIFO Basis Inventory:
        Raw Materials ......................           $13,231           $19,267
        Work in Process ....................            12,052             8,904
        Finished Goods .....................            12,436            13,588
                                                        ------            ------
                                                        37,719            40,949
                                                        ------            ------
LIFO Basis Inventory:
        Raw Materials ......................             2,041             2,245
        Work in Process ....................             1,595             1,529
        Finished Goods .....................             7,257             7,214
                                                         -----             -----
                                                        10,893            10,988
                                                        ------            ------
Total Inventory ............................           $48,612           $51,937
                                                       =======           =======

        If the FIFO method had been used for all inventory, inventory would have
approximated  inventory  valued on a LIFO basis at  December  31, 1996 and would
have been $352,000 greater than reported at December 31, 1995.

        Inventories  are stated  net of an  allowance  for  excess and  obsolete
inventory  of  $1,754,000   and  $1,028,000  at  December  31,  1996  and  1995,
respectively.  During the years ended  December  31,  1996,  1995 and 1994,  the
Company  charged  to  expense  and other  accounts  $2,453,000,  $1,795,000  and
$313,000,  respectively,  as a provision  for excess and obsolete  inventory and
deducted from the allowance  $1,727,000,  $1,341,000 and $122,000,  respectively
for write-offs of excess and obsolete inventory.


5.  Property, Plant and Equipment:

        Property,  plant  and  equipment  as of  December  31,  1996  and  1995,
consisted of the following (Dollars in thousands):

                                     Range of Useful Lives    1996        1995
                                     --------------------- --------    --------
Land ......................................    --          $  4,122    $  4,163
Buildings and improvements ................   5-32           21,012      20,626
Machinery and equipment ...................   3-10           50,332      47,546
Furniture and fixtures ....................   2-10            7,385       6,550
Transportation equipment ..................   2-10            4,129       3,884
Leasehold improvements ....................   3-10            5,449       5,215
Construction in progress ..................    --             3,647       1,470
                                                           --------    --------
                                                             96,076      89,454
Accumulated depreciation and amortization .                 (44,979)    (36,708)
                                                           --------    --------
Property, plant and equipment, net ........                $ 51,097    $ 52,746
                                                           ========    ========


                                      -41-

<PAGE>


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


        Depreciation  expense was $9,191,000,  $8,364,000 and $6,867,000 for the
years ended December 31, 1996, 1995 and 1994, respectively.


6.  Other Assets and Goodwill:

        Other assets and  goodwill as of December 31, 1996 and 1995,  consist of
the following (Dollars in thousands):
<TABLE>
<CAPTION>
                                                            1996                       1995
                                                -------------------------  ------------------------
                               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 ...............    --          $      --    $    2,077   $      --    $    2,002
  Agreements not-to-compete ......   3-6               3,467        1,581        2,466        2,582
  Debt issuance costs and other ..   3-10              1,426        4,575        1,349        4,919
                                                  ----------   ----------   ----------   ----------
Total ............................                $    4,893   $    8,233   $    3,815   $    9,503
                                                  ==========   ==========   ==========   ==========

Goodwill .........................   25-40        $    6,727   $   21,773   $    5,640   $   22,860
                                                  ==========   ==========   ==========   ==========
</TABLE>


       Goodwill is being amortized on a straight-line basis over forty years for
Morgan and twenty-five years for TAG. The carrying value of the intangible asset
is reviewed if the facts and circumstances  suggest it may be impaired.  If this
review  indicates  that  this  intangible  asset  will  not be  recoverable,  as
determined   based  upon  the   undiscounted   cash  flows  over  the  remaining
amortization  periods,  the carrying value is reduced by the estimated shortfall
of cash flows.


7.     Short-term debt:

     Short-term debt as of December 31, 1996 and 1995, consists of the following
(Dollars in thousands):
                                                            1996           1995
                                                          -------        -------
   Morgan:
        Bankers' acceptances generally 180 day terms
        with interest rates ranging from 4.9% to 7.7%....   $ 917        $ 4,184
                                                          =======        =======

                                      -42-

<PAGE>


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


8.      Revolving Credit Agreement:

        Amounts  outstanding under the Revolving Credit Agreement as of December
31, 1996 and 1995 were (in thousands):
                                                             1996          1995
                                                           -------       -------
$50,000,000 revolving loan due June 1999 ...........       $28,238       $  --
$50,000,000 revolving loan due May 1997 ............          --          24,288
                                                           -------       -------
                Total ..............................       $28,238       $24,288
                                                           =======       =======

        On May 23, 1994,  concurrently  with the consummation of the public debt
offering  discussed  in  Note 9,  the  Company  entered  into a  senior  secured
revolving credit agreement (Revolving Credit Agreement) providing for borrowings
by its  Subsidiaries  of up to $50.0  million.  The Revolving  Credit  Agreement
provided for  borrowings  at variable  rates of interest,  based on either LIBOR
(London Interbank Offered Rate) or U.S. prime rate.

        The Revolving Credit Agreement contained numerous restrictive  covenants
which,  among other things,  restricted the ability of the Company to dispose of
assets and incur debt and restrict certain  corporate  activities.  In addition,
the Company was required to maintain specified  financial  covenants including a
minimum net worth and debt coverage ratio. At December 31, 1995, the Company was
not in compliance with the minimum net worth  requirements or, the debt coverage
ratio as specified by the Revolving  Credit  Agreement and certain  Subsidiaries
exceeded their borrowing base.

        The covenant  violations as of December 31, 1995 primarily resulted from
the  Company  incurring  a net  loss  of  $8,536,000  in  1995,  which  included
significant  losses  at TAG,  primarily  as a result of  manufacturing  problems
associated with new product development,  design changes and the paint finishing
processes.  These problems contributed to higher than normal product returns and
production delays.  Management of JBPCO and Truck Accessories Group, Inc., began
taking steps during 1995 to address  these  problems  including,  among  others,
redesigning  certain  products  and  implementing   additional  quality  control
procedures.  In addition,  during 1996, TAG  Manufacturing  Division  closed two
manufacturing facilities and TAG Distribution closed certain unprofitable retail
locations resulting in a charge of $1,375,000. (See Note 1).

          Subsequent to December 31, 1995, upon  determination  of the available
borrowing  base,  the  Company  took  action to conform  the  borrowings  of the
subsidiaries  to within  the limits of the then  available  borrowing  base.  In
addition,  the lenders agreed to waive the covenant  violations and to amend the
financial  covenants  of the  Revolving  Credit  Agreement  through its May 1997
expiration, subject to the completion of certain documentation requirements. The
Revolving  Credit  Agreement was further  amended whereby the lenders were to be
provided with a security  interest in certain of the Company's  property,  plant
and  equipment  in return for which the  Company and its  subsidiaries  would be
allowed  to  borrow an  additional  $5,500,000  under  the  terms of the  credit
facility,  subject to certain  limitations,  including the $50,000,000  limit on
total borrowings.  At that time, the ability of the Company to maintain adequate
liquidity,  comply  with the credit  agreements  and achieve  successful  future
operations  depended primarily on the Truck Accessories Group, Inc.'s ability to
remedy the manufacturing  problems discussed above and significantly improve its
operating

                                      -43-

<PAGE>


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


results  during 1996, as well as the other  Subsidiaries  continuing to maintain
levels of  operating  results such that  liquidity  requirements  and  financial
covenants would be met on a consolidated basis.

        On  June  28,  1996,  the  Company  entered  into a new  senior  secured
revolving loan agreement  (Revolving Loan Agreement)  providing for borrowing by
its  Subsidiaries  of  up  to  $50.0  million.  The  Company  used  proceeds  of
$24,321,000  from  the  Revolving  Loan  Agreement  to  repay  all  indebtedness
outstanding  under the Revolving Credit  Agreement.  The arrangement  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  $50,000,000  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 percent and 85 percent for
receivables  and between 40 percent and 60 percent for inventory.  The Revolving
Loan Agreement  provides for borrowing at variable  rates of interest,  based on
either LIBOR (London  Interbank  Offered Rate, 5.4 percent at December 31, 1996)
or U.S.  prime rate (8.25  percent at December 31,  1996),  and expires June 28,
1999.  Interest is payable  monthly  including a fee of one half  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,  1996,  the  Company  had  total   borrowings  of
$28,238,000,  bank  acceptances  of  $917,000  and letters of credit and foreign
exchange accommodations of $5,878,140 outstanding pursuant to the Revolving Loan
Agreement.  At December 31, 1996, the Company's unused available borrowing under
the Revolving Loan Agreement totaled approximately $9,938,000.

        The Company wrote off certain  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 a  current  liability.  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, 1996, 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.


                                      -44-

<PAGE>


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


9.  Long-term debt and Note Offering:

        Long-term  debt  as of  December  31,  1996  and  1995  consists  of the
following (Dollars in the table in thousands):
<TABLE>
<CAPTION>
                                                                                     1996       1995
                                                                                   --------   --------
<S>                                                                                <C>        <C>
JBPCO:
        12 1/2% Senior Notes due 2004 ..........................................   $100,000   $100,000
                                                                                   --------   --------

TAG:
        Note payable, due June 15, 2000, monthly principal payments
           of $26,666 plus interest at U.S. prime, (8.25% at
            December 31, 1996) .................................................      1,120      1,440
        Obligations under various non-compete agreements .......................      1,490      2,092
        Obligations under capital leases .......................................        589        958
                                                                                   --------   --------
                                                                                      3,199      4,490
                                                                                   --------   --------
Morgan:
        Capital lease obligation due in monthly installments of $17,704
           including interest at 8.2%, through May 10, 1998 ....................        284        464
        Other ..................................................................         28         54
                                                                                   --------   --------
                                                                                        312        518
                                                                                   --------   --------
Lowy Group:
        Life  insurance  policy  loans,  secured  by the  cash  surrender  value
           accumulated on each policy,  balances are payable at the  termination
           of the policy. Interest rates range from 5%
           to 8.6% .............................................................        184        184
        Term note payable to a vendor ..........................................        --          91
        Other ..................................................................          3         15
                                                                                   --------   --------
                                                                                        187        290
                                                                                   --------   --------

EFP:
        Various equipment notes, due in monthly or annual installments, interest
           from 8.12% to 10%, with maturities from May 1997 to
           September 1997, each collateralized by specific assets ..............        678        885
        Other ..................................................................         83        137
                                                                                   --------   --------
                                                                                        761      1,022
                                                                                   --------   --------
Magnetic Instruments:
        Covenant not-to-compete with previous  shareholders  originating on June
           19, 1992 in the amount of $2,000,000 payable over 6 years
           in equal monthly installments .......................................        193        560
                                                                                   --------   --------
                                                                                        193        560
                                                                                   --------   --------

        Total long-term debt ...................................................    104,652    106,880
        Less current portion ...................................................      1,885      2,337
                                                                                   --------   --------
        Long-term debt, less current portion ...................................   $102,767   $104,543
                                                                                   ========   ========
</TABLE>

                                      -45-

<PAGE>


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



        On May 23, 1994 the Company completed the Note Offering of $100 million,
12 1/2 % Senior Notes due in 2004 (the "Senior  Notes")  with  interest  payable
semiannually.   The  net  proceeds  of  the  Note  Offering,   of  approximately
$95,000,000,  were used to: (1) repay outstanding  long-term debt of the Company
of $76,581,000  including interest and prepayment  penalties,  which represented
substantially  all of the  previous  debt then  outstanding,  (2)  purchase  all
minority  interests in the  Subsidiaries  and JBPCO,  for an aggregate  price of
$2,360,000,   and  (3)  fund  the  payment  of  $5,429,000  of  "S"  corporation
shareholder  dividend  promissory notes. The prepayment  penalties together with
the  write-off  of related  deferred  debt  issuance  costs,  net of related tax
benefits,  resulted in an extraordinary loss of $2,066,000 during the year ended
December 31, 1994.

        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,  1996,  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.  Condensed  financial
information for the Subsidiary  Guarantors and  non-guarantor  subsidiaries as a
group is included in Note 17.

        The Company  estimates  the fair value of the 12 1/2% Senior Notes to be
$107,000,000  based on their publicly traded value at December 31, 1996 compared
to a recorded amount of $100,000,000 as of December 31, 1996.

     Maturities.  Aggregate  principal  payments on long-term  debt for the next
five years subsequent to December 31, 1996, are as follows (In thousands):

1997 ..................................................                 $  1,885
1998 ..................................................                    1,233
1999 ..................................................                      975
2000 ..................................................                      375
2001 ..................................................                     --
Thereafter ............................................                  100,184
                                                                        --------
                                                                        $104,652
                                                                        ========



                                      -46-

<PAGE>


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


10. 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,
1996 are as follows (Dollars in thousands):

1997 .................................................                   $ 7,022
1998 .................................................                     5,220
1999 .................................................                     3,851
2000 .................................................                     1,682
2001 .................................................                       942
                                                                         -------
                                                                         $18,717
                                                                         =======

     Total rental expense under all operating leases was $7,694,000,  $7,617,000
and  $5,640,000  for  the  years  ended  December  31,  1996,   1995  and  1994,
respectively.

11. Income Taxes:

         The income tax  provision  (benefit)  consists of the following for the
years ended December 31, 1996, 1995 and 1994 (Dollars in thousands):

                                               1996          1995          1994
                                            -------       -------       -------
Current:
 Federal .............................      $  --         $  --         $ 1,114
 State ...............................          884         1,172           849
Deferred:
 Federal .............................       (1,945)       (3,666)        1,092
 State ...............................           70          (146)          (28)
 Foreign .............................         --             (82)         --
                                            -------       -------       -------
Income tax provision (benefit) .......      $  (991)      $(2,722)      $ 3,027
                                            =======       =======       =======



                                      -47-

<PAGE>


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


         The following table  reconciles the  differences  between the statutory
Federal  income tax rate and the effective tax rate for the years ended December
31, 1996, 1995 and 1994 (Dollars in thousands):
<TABLE>
<CAPTION>
                                                 1996               1995               1994
                                            ---------------    ---------------    ---------------
                                             Amount      %      Amount      %      Amount      %
                                            -------    ----    -------    ----    -------    ----
<S>                                         <C>        <C>     <C>        <C>     <C>        <C>
Tax provision (benefit) at statutory
   Federal income tax rate ..............   $(2,430)    34%    $(3,828)    34%    $ 2,899     34%
Goodwill amortization ...................       335     (5)        268     (2)        215      3
Tax effect of "S" corporations ..........       --                 --                (459)    (5)
State income taxes, net of Federal income
 tax benefit ............................       517     (7)        980     (9)        642      7
Losses (profit) from foreign corporations       368     (5)       --       --         --      --
Other ...................................       219     (3)       (142)     1        (270)    (3)
                                            -------    ----    -------    ----    -------    ----
Provision (benefit) for income taxes
  and effective tax rates ...............   $  (991)    14%    $(2,722)    24%    $ 3,027     36%
                                            =======    ====    =======    ====    =======    ====
</TABLE>

         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, 1996 and 1995 are  comprised of the
following (Dollars in thousands):

                                                           1996           1995
                                                        --------        -------
Current deferred tax (assets):
Allowance for doubtful accounts .................       $   (764)       $(1,171)
Employee benefit accruals and reserves ..........           (997)        (1,198)
Warranty liabilities ............................           (118)          (946)
Plant closure costs .............................           (328)          --
Other ...........................................           (381)          (102)
                                                        --------        -------
   Total current deferred tax (assets) ..........         (2,588)        (3,417)

Long term deferred tax (assets):
Tax benefit carryforwards .......................        (10,343)        (8,143)
Warranty liabilities ............................           (932)          (192)
Other ...........................................           --           (1,029)
Valuation allowance .............................          1,035          1,035
                                                        --------        -------
   Total long term deferred tax (asset) .........        (10,240)        (8,329)

Long term deferred tax liabilities:
Depreciation and amortization ...................          4,603          5,159
Other ...........................................            463            700
                                                        --------        -------
   Net long term deferred tax (asset) ...........         (5,174)        (2,470)
                                                        --------        -------
           Net deferred tax assets ..............       $ (7,762)       $(5,887)
                                                        ========        =======




                                      -48-

<PAGE>


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



         Tax Carryforwards.  The Company has investment tax credit carryforwards
of approximately $852,000 for U.S. federal income tax purposes which will expire
between  1997 and 2001 if not  previously  utilized.  The company has recorded a
valuation  allowance of $327,000 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 $583,000 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  $26.2 million
for U.S.  federal  income  tax  purposes  at  December  31,  1996,  which if not
utilized,  will expire at various dates through 2011. The Company has recorded a
valuation  allowance of $708,000 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  $9.3 million ($10.3 million net of a valuation  allowance of $1.0
million) of benefits attributable to such tax planning 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.


         Unaudited   Pro  Forma   Operating   Data   Adjusted   for   Nontaxable
Subsidiaries.  Two Subsidiaries  (Lowy Group and Magnetic  Instruments) were "S"
corporations  which paid no  corporate  income  tax  during the period  prior to
acquisition  by JBPCO.  The  unaudited  pro forma net  income for the year ended
December 31, 1994 was  $2,897,000  assuming Lowy Group and Magnetic  Instruments
had been tax paying "C"  corporations  at 34% for the  entire  periods  and as a
result  reflect an increased 1994 effective tax rate from 36% to 41%. Lowy Group
and  Magnetic  Instruments  became  tax  paying  corporations  as  part  of  the
consolidated  tax return of JBPCO upon JBPCO's  acquisition of the  Subsidiaries
(See Note 1).



                                      -49-

<PAGE>


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


12. Segment Data:

         The Company  operates in three  industry  segments:  Automotive,  Floor
Covering and Plastics and Other. The Automotive segment includes Morgan and TAG,
the Floor  Covering  segment  includes  Lowy  Group and the  Plastics  and Other
segment includes EFP and Magnetic Instruments.  The Company operates principally
in only one geographic  segment (the United States).  The following is a summary
of the  industry  segment data for the years ended  December 31, 1996,  1995 and
1994 (Dollars in thousands):
<TABLE>
<CAPTION>
                                               Operating     Identifiable   Depreciation/     Capital
                                Net Sales        Income          Assets     Amortization    Expenditures
                               ----------     ----------      ----------     ----------     ----------
<S>                            <C>            <C>             <C>            <C>            <C>
1996:
 Automotive* .............     $  304,119     $      138      $  115,594     $    7,207     $    6,093
 Floor Covering ..........         71,343          3,927          23,815            617            304
 Plastics and Other ......         56,925          7,539          25,074          3,363          1,650
  JBPCO ..................           --           (2,535)          8,998            832             32
                               ----------     ----------      ----------     ----------     ----------
    Consolidated .........     $  432,387     $    9,069      $  173,481     $   12,019     $    8,079
                               ==========     ==========      ==========     ==========     ==========

1995:
 Automotive ..............     $  325,249     $   (2,227)     $  121,196     $    6,400     $    8,128
 Floor Covering ..........         74,955          4,944          24,018            678            875
 Plastics and Other ......         50,512          4,644          26,024          3,308          2,704
 JBPCO ...................           --           (2,718)          9,556            769            163
                               ----------     ----------      ----------     ----------     ----------
    Consolidated .........     $  450,716     $    4,643      $  180,794     $   11,155     $   11,870
                               ==========     ==========      ==========     ==========     ==========

1994:
 Automotive ..............     $  265,906     $   12,708      $  107,852     $    4,441     $    6,155
 Floor Covering ..........         77,427          5,890          26,182            711            388
 Plastics and Other ......         43,312          2,846          25,122          2,992          2,627
JBPCO ....................           --           (1,436)         14,008            473             48
                               ----------     ----------      ----------     ----------     ----------
    Consolidated .........     $  386,645     $   20,008      $  173,164     $    8,617     $    9,218
                               ==========     ==========      ==========     ==========     ==========

<FN>
*  Includes  a  $1,375,000   charge  associated  with  the  closure  of  certain
manufacturing and retail facilities.
</FN>
</TABLE>

13.  Stockholder's Equity:

         As of December 31, 1996 and 1995, 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.

         Since  the  date  of  Mr.   Poindexter's   initial  investment  in  the
Subsidiaries,  he has acquired  portions of the minority interest in a series of
transactions.  These step purchases were accounted for as additions to the total
purchase  price  and  allocated  to the  assets  of the  respective  subsidiary.
Minority  interests  in the  Subsidiaries  are  reflected  in  the  consolidated
financial  statements based on their  proportionate  ownership of the respective
Subsidiaries for the applicable  period.  JBPCO purchased the remaining minority
interests

                                      -50-

<PAGE>


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


in the Subsidiaries  with a portion of the funds provided by the issuance of the
Senior Notes (See Note 9).

         The Company recorded capital  contributions for (1) amounts contributed
to fund  initial  purchases of  Subsidiaries,  (2) amounts  contributed  to fund
purchases  of  minority   interest  and  (3)   subsequent   additional   capital
contributions.  In addition,  the 1994 capital contribution  included income tax
benefits  of NSSC of  approximately  $1.4  million,  which  was  used to  offset
consolidated taxable income.

14.  Employee Benefit Plans:

Defined Contribution Plans

         JBPCO  401(k)  Plan.  Effective  January  1,  1996,  substantially  all
employees  of the Company are  eligible to  participate  in the  JBPCO-sponsored
401(k)  savings  plan.  This plan allows  participating  employees to contribute
through salary reductions up to 15 percent of gross pay and provides for Company
matching  contributions  up to two  percent  of gross  pay as well as an  annual
discretions  contribution.  Vesting in the Company  matching  contribution is 20
percent per year over the first five years.  The  Company  incurred  expenses of
$1,426,000  during the year ended  December 31, 1996,  including  administrative
fees of approximately $74,000.

         The  Subsidiaries  (except  Magnetic  Instruments)  had various defined
contribution  plans for their  employees  prior to January  1,  1996.  Effective
January 1, 1996  certain of these plans were merged into the JBPCO 401 (k) plan.
Total employer  contributions to defined contribution plans for all Subsidiaries
were $40,000,  $932,000 and $999,000 for the years ended December 31, 1996, 1995
and 1994, respectively. Each Subsidiary's plan is summarized below.

         Morgan.  Morgan had a profit participation  program for certain members
of management which provided for payments to participants in 1995. This plan was
terminated in 1995. Morgan maintains a separate  noncontributory  profit sharing
plan which provides for an annual contribution at the discretion of the board of
directors.  This plan and the JBPCO 401(k) plan are administered  under a master
trust agreement which became effective January 1, 1996.  Contributions are based
on the earnings of Morgan as defined under the plan agreement.

         TAG.  TAG had a profit  sharing  plan  that  covers  substantially  all
full-time  employees  which was  merged  into the JBPCO  401(k)  plan  effective
January 1, 1996.

         Lowy   Group.   Certain   warehouse   employees    participate   in   a
collectively-bargained,  multi-employer  defined  contribution  pension  plan to
which the Lowy Group makes required  payments.  The basis for  contributions and
the amount contributed is set forth in the collectively-bargained contract. Lowy
Group  makes  discretionary  contributions  to  individual  retirement  accounts
established by and for the benefit of certain non-union employees.

     EFP.  Certain  employees of EFP who are covered by a collective  bargaining
agreement,  participate in a defined contribution  retirement plan whereby EFP's
contribution  is based on the number of hours worked.  Employees of EFP who were
not covered by the collective bargaining agreement were eligible to

                                      -51-

<PAGE>


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


participate  in the  employer-sponsored  401(k) profit  sharing plan,  which was
merged into the JBPCO 401(k) plan effective January 1,1996.

         Substantially  all  employees of EFP's Astro  division are covered by a
defined  contribution  plan.  The Money  Purchase  Pension Plan  requires EFP to
contribute  four and one half  percent  of each  participant's  compensation  as
defined in the plan agreement.  Vesting is based on years of service.  Effective
January 1, 1996, the EFP Astro division's  401(k) profit sharing plan was merged
into  the  Company's  401(k)  plan.  Also,   effective   January  1,  1996,  the
contribution  percentage to the money  purchase  pension plan was reduced to two
and one half percent.

  Defined Benefit Plans

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

         Morgan.  Morgan assumed future sponsorship of the NSSC pension plan and
continues  to make  contributions  to the plan in  accordance  with the  funding
requirements  of the Internal  Revenue  Service.  The 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 $136,000.

         Lowy Group.  Lowy Group has an unfunded  executive defined benefit plan
whereby  deferred  compensation  contracts  provide a fixed amount of retirement
benefits  to  key  corporate  and  sales  employees.   The  accumulated  benefit
obligation  related to this plan is  approximately  $1.7 million at December 31,
1996 and 1995. 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 plan  obligations  and
accumulate  cash surrender  values.  The cash surrender  value of life insurance
policies of which Lowy Group was beneficiary  totaled  $1,560,000 and $1,588,000
at  December  31,  1996  and  1995,  respectively,  and  is  included  in  other
non-current assets in the accompanying consolidated balance sheet. Payments made
to retired individuals in the plan were $136,000, $147,000 and $148,513 in 1996,
1995 and 1994,  respectively.  The benefits are based on the  employee's  age at
retirement  and the fixed monthly  benefit amount  specified in each  individual
deferred compensation  contract. The actuarial present value of projected future
benefits attributed to employee service to date represents the projected benefit
obligation in the following table.

         EFP.  EFP  had  a  defined  benefit  plan  covering  substantially  all
full-time employees of one of its divisions.  Benefits under the plan were based
on years of service and a percentage of the employee's average monthly earnings.
This plan was  terminated  effective  April 15, 1996 and the assets  distributed
effective  October  10,  1996.  The  Company  realized  a gain of  approximately
$200,000 upon termination of the plan. Participants of this plan are eligible to
participate in the J.B.  Poindexter & Co., Inc. 401(k) plan effective January 1,
1996.

         TAG. TAG had a defined  benefit plan covering  hourly  employees of Gem
Top  working at least  1,000 hours per year.  The normal  retirement  benefit is
equal to $20 per month for each year of service.  Normal  retirement  date is 65
years of age. The plan was frozen effective March 31, 1996, and at December

                                      -52-

<PAGE>


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


31, 1996 plan assets approximated projected benefit obligations.

         The  components  of net periodic  pension cost for the defined  benefit
plans of the Company are as follows (Dollars in thousands):

                                                   1996        1995        1994
                                                 ------      ------      ------
Service costs benefits earned during the year   $    75     $   254     $   272
Interest costs on projected benefit obligation      342         575         552
Actual return on plan assets .................     (338)     (1,031)        240
Net amortization & deferral and other costs ..     (216)        544      (1,039)
                                                 ------      ------      ------
Net pension expense (income) .................  $  (137)    $   342     $    25
                                                 ======      ======      ======

         The following table sets forth the funded status and amounts recognized
in the Company's  consolidated  balance sheets as of December 31, 1996 and 1995,
and the significant assumptions used in accounting for the defined benefit plans
(Dollars in table in thousands):
<TABLE>
<CAPTION>
                                                                            1996            1995
                                                                           ------          ------
<S>                                                                    <C>             <C>
Accumulated benefit obligations ..................................     $    5,137      $    8,447
                                                                       ==========      ==========
Projected benefit obligations for services
  rendered to date, including vested benefits
  of $3,367,000 and $6,624,000 ...................................     $    5,137      $    9,486
Plan assets at fair value ........................................          3,511           6,479
                                                                       ----------      ----------
Projected benefit obligation in excess of plan assets ............         (1,626)         (3,007)
Unrecognized net (gain) loss from past experience
  different from that assumed and effects
  of changes in assumptions ......................................            (27)          1,299
Prior service cost not yet recognized in net periodic pension cost           --               (27)
Unrecognized transition cost .....................................           --              (366)
                                                                       ----------      ----------
Accrued pension liabilities ......................................     $   (1,653)     $   (2,101)
                                                                       ==========      ==========
Cash surrender value of Lowy Group's life insurance policies .....     $    1,560      $    1,588
                                                                       ==========      ==========
Major assumptions at measurement dates:
 Discount rate ...................................................                     5.2% to 8.0%
 Expected long-term rate of return on plan assets ................                     7.5% to 9.0%
</TABLE>


       In accordance with SFAS No. 87, "Employers' Accounting for Pensions," the
Company recorded an increase in equity of $129,000,  to recognize a reduction in
the minimum liability in 1995.



                                      -53-

<PAGE>


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


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.

        In  February  1995,  a lawsuit  was filed  against  Magnetic,  JBPCO and
another entity unrelated to the Company, except through common ownership, by two
companies  under  common  ownership  alleging  violation  of  a  confidentiality
agreement  entered  into in 1994 when  Magnetic  and JBPCO were  considering  an
acquisition of the two companies.  The lawsuit was settled by all parties during
1996 and the action dismissed with prejudice.

        Concentration  of Credit  Risk.  Concentration  of credit risk exists in
three Subsidiaries. Morgan has two customers (truck rental companies) accounting
for  approximately  40%, 50% and 50% of Morgan's net sales during 1996, 1995 and
1994, respectively and 14%, 21% and 20% of consolidated net sales, respectively.
EFP has two customers in the electronics  industry  accounting for approximately
21% and 20% of EFP's net sales in 1996 and 1995,  respectively  and 2% and 1% of
consolidated  net sales,  respectively.  Magnetic  Instruments  has an  industry
concentration  pertaining to international  oil field service companies and four
customers represent  approximately 69%, 79% and 71% of Magnetic Instruments' net
sales and 4%, 3% and 3% of consolidated net sales in 1996, 1995 and 1994.

        Letters  of  Credit  and Other  Commitments.  Morgan  had  approximately
$1,628,000  and  $2,932,000 in letters of credit  outstanding as of December 31,
1996 and 1995. The Company had  $4,250,000 and $3,025,000 in standby  letters of
credit  outstanding  at December 31, 1996 and 1995,  respectively,  securing the
Company's insurance programs.

        Environmental   Matters.   Morgan  has  been  named  as  a   potentially
responsible  party  ("PRP")  with  respect to its  alleged  disposal  of certain
solvents at the Industrial  Solvents and Chemical Co. state hazardous waste site
in Newberry  Township,  Pennsylvania  ("ISCC site") and at the Berks  Associates
Waste Recovery  Superfund Site near Douglasville,  Pennsylvania  ("Berks site").
Under the Comprehensive Environmental Response Compensation and Liability Act of
1980 and the  Pennsylvania  Hazardous  Sites Clean-Up Act, past and present site
owners and operators,  transporters  and waste  generators  are all  potentially
jointly and severally  responsible for clean up costs. However,  typically,  the
generator  portion  of the costs are  allocated  between  generators,  with each
generator bearing costs  proportionate to the volume and nature of the wastes it
disposed  of at the  site.  Although  a precise  estimate  of  liability  cannot
currently be made with respect to these sites,  based upon information  known to
Morgan,  the  agreements  Morgan is party to and including the size of the waste
sites, their years of operation,  the large number of past users and potentially
responsible  parties of some of the sites,  the alleged  waste  contribution  by
Morgan at some of these  sites and the  nature of the  substances  alleged to be
present  at the waste  sites,  the  Company  currently  believes  that  Morgan'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.


     NSSC has been  listed as a  potentially  responsible  party at the  Wichita
Brass Co., Inc. National

                                      -54-

<PAGE>


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


Priority  List site at 29th & Mead in Wichita,  Kansas.  Although  the extent of
NSSC's  liability,  if any,  is not  known at this  time,  management  currently
believes  that  NSSC's  allocated  share of the  ultimate  costs  related to any
necessary  investigation and remedial work at this site will not have a material
adverse effect on the Company. The Company is not aware of any other significant
pending environmental claims pertaining to NSSC.

        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 portion of certain risks not covered by insurance are summarized as follows:
Workers compensation  individual deductibles range from $100,000 to $250,000 and
health care  individual  deductibles  range from $25,000 to $75,000 with certain
Subsidiaries  self-insuring  up to $1,000,000  (aggregate  stop-loss) under both
workers compensation and health care coverage.

        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,  $63,000  was paid in 1995  and none was paid in 1996 or 1994.  The
Company and  Subsidiaries  use certain  facilities  provided by Southwestern for
meetings and  conferences,  the Company did not use the facilities  during 1996,
the Company paid Southwestern $23,000 during 1995 for the use of the facilities.
The Company  paid  Southwestern  approximately  $600,000,  $653,000 and $366,000
during  1996,  1995 and  1994,  respectively.  During  1995,  the  Company  paid
approximately  $16,000  to a company  owned by Mr.  Poindexter  for the use of a
private  plane to  transport  company  employees to the  facilities  provided by
Southwestern.  A subsidiary of the Company, 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 $50,000 during
1996 for certain services.

     During the period prior to the Note Offering,  certain Subsidiaries paid an
affiliated limited partnership,  of which Mr. Poindexter is a limited partner, a
fee for managerial and support services. Certain Subsidiaries

                                      -55-

<PAGE>


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


also reimbursed the limited  partnership for expenses  incurred on their behalf,
which  totaled  $580,000 in 1994.  In  addition,  certain  subsidiaries  paid an
affiliated  company,  owned by Mr.  Poindexter,  management and consulting  fees
which  totaled  approximately  $1,121,000  during 1994.  These  agreements  were
terminated upon the consummation of the Note Offering.

        Mr.  Poindexter,  Mr.  Magee of JBPCO and  certain  members of  Morgan's
management  are partners in a partnership  that leases  certain real property in
Georgia to Morgan. Morgan paid approximately $200,000 in rent to the partnership
in 1996, 1995 and 1994 pursuant to such lease.

        The  Company  paid   management  fees  of  $192,000  during  1994  to  a
corporation controlled by a former officer of the Company. The Subsidiaries also
paid approximately $20,000 to this corporation as expense  reimbursements during
1994. In addition,  Lowy Group has agreed to pay to the former  officer  $18,000
per year for 10 years after his July 1994  retirement as a consultant.  Further,
Morgan has agreed to pay the former officer  $25,000 per year for 15 years after
his July 1994 retirement as a consultant.  Morgan provides health  insurance for
the consultant and his spouse.

        TAG leases  certain  real estate and  purchases  raw  materials  from an
entity which is partially  owned by a former  minority  interest  shareholder of
TAG. Total lease expense was $1,197,000 in 1994.  Total related party  purchases
were  $3,022,000 in 1994. TAG also had a consulting  agreement with that founder
providing for the payment of consulting fees on a per diem basis (with a maximum
fee of  approximately  $100,000  per  year).  TAG  paid  approximately  $100,000
pursuant to that agreement during each of 1995 and 1994.  During 1994 TAG repaid
$0.3  million  to its  founder  under a demand  note with  proceeds  of the Note
Offering.

        TAG leases certain real estate in Canada from an entity controlled by an
executive vice president of TAG. Total lease expense was $114,000 and $64,000 in
1996 and 1995, respectively.

        Mr. Magee, who prior to May 23, 1994, owned  approximately 1%, 3% and 2%
of the common stock of JBPCO, Magnetic Instruments and Lowy Group, respectively,
sold  those  shares  to the  Company  concurrent  with  the Note  Offering.  The
aggregate  negotiated  sales price was $1.1 million,  paid with a portion of the
proceeds from the Note Offering. In addition,  approximately $1.3 million of the
Note Offering proceeds were used to purchase minority  interests in TAG owned by
certain  members of TAG's  management  and TAG's  founder.  The prices  that the
Company paid for those shares were  negotiated  amounts and did not  necessarily
reflect  the actual  fair  market  value of the shares  being  purchased  by the
Company.  Approximately  $5.0 million of the proceeds of the Note  Offering were
used to repay  indebtedness owed to certain of the minority  shareholders of TAG
and former shareholders of Morgan.

17. Supplemental Guarantor Information:

        The Company's  obligations under the Senior Notes are guaranteed by each
directly  wholly-owned   Subsidiary  of  JBPCO.  In  addition,   the  Subsidiary
Guarantors  guarantee the  indebtedness  outstanding  under the  Revolving  Loan
Agreement.  The  Indenture and Revolving  Loan  Agreement  provides for acquired
subsidiaries  subsequent to the issuance of the Senior Notes to be designated as
guarantors of the Senior Notes, provided certain financial ratio tests are met.

                                      -56-

<PAGE>


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


        The  following  consolidating  financial  information  is presented  for
purposes of complying with the reporting  requirements of the parent company and
the Guarantor Subsidiaries. The financial information includes condensed balance
sheet  information as of December 31, 1996 and 1995 and condensed  operating and
cash flow  statements  information  for each of the three years then ended.  The
Company's  non-guarantor  subsidiaries are Radco Industries  (acquired  December
1994), Tile by Design (acquired November 1, 1994), and Acero-Tech,  S.A. de C.V.
The Company believes that separate financial  statements or other disclosures of
the guarantors are not material to the investors.

Consolidating Condensed Balance Sheet Information:
<TABLE>
<CAPTION>
                                                       December 31, 1996

                                        Guarantor  Non-guarantor  JBPCO and
                                      Subsidiaries  Subsidiaries Eliminations  Consolidated
                                      ------------  ------------ ------------  ------------
<S>                                     <C>          <C>          <C>           <C>
Assets
        Current assets .............    $ 86,220     $  1,336     $   (352)     $ 87,204
        Noncurrent assets ..........      75,724        3,961        6,592        86,277
                                        --------     --------     --------      --------
        Total assets ...............    $161,944     $  5,297     $  6,240      $173,481
                                        ========     ========     ========      ========
Liabilities and Equity
        Current liabilities ........    $ 62,641     $    569     $  1,628      $ 64,838
        Noncurrent liabilities .....       1,903        3,710      100,000       105,613
        Stockholder's equity .......      97,400        1,018      (95,388)        3,030
                                        --------     --------     --------      --------
        Total liabilities and equity    $161,944     $  5,297     $  6,240      $173,481
                                        ========     ========     ========      ========
</TABLE>
<TABLE>
<CAPTION>
                                                       December 31, 1995

                                        Guarantor  Non-guarantor  JBPCO and
                                      Subsidiaries  Subsidiaries Eliminations  Consolidated
<S>                                     <C>          <C>          <C>           <C>
Assets
        Current assets..............    $ 88,997     $  2,752     $  1,466      $ 93,215
        Noncurrent assets ..........      75,307        4,182        8,090        87,579
                                        --------     --------     --------      --------
                                        $164,304     $  6,934     $  9,556      $180,794
                                        ========     ========     ========      ========
Liabilities and Equity
        Current liabilities.........    $ 62,513     $  1,123     $    148      $ 63,784
        Noncurrent liabilities .....       3,203        4,356      100,000       107,559
        Stockholder's equity .......      98,588        1,455      (90,592)        9,451
                                        --------     --------     --------      --------
        Total liabilities and equity    $164,304     $  6,934     $  9,556      $180,794
                                        ========     ========     ========      ========
</TABLE>



                                      -57-

<PAGE>


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


Consolidating Condensed Income Statement Information for the Year ended:

                                December 31, 1996

                          Guarantor   Non-guarantor  JBPCO and
                        Subsidiaries  Subsidiaries  Eliminations  Consolidated

Net sales ...........     $ 421,275      $ 11,112      $  --       $ 432,387
Cost of sales .......       330,206         7,751         --         337,957
Income (loss) before
   extraordinary item        (7,099)         (437)      1,382         (6,154)
Net loss ............        (7,099)         (437)      1,122         (6,414)

                                December 31, 1995

                          Guarantor   Non-guarantor  JBPCO and
                        Subsidiaries  Subsidiaries  Eliminations  Consolidated

Net sales ...........     $ 440,104      $ 10,612      $  --       $ 450,716
Cost of sales .......       357,628         7,685         --         365,313
Income (loss) before
   extraordinary item       (10,884)         (586)      2,934         (8,536)
Net income (loss) ...       (10,884)         (586)      2,934         (8,536)


                                December 31, 1994

                          Guarantor   Non-guarantor  JBPCO and
                        Subsidiaries  Subsidiaries  Eliminations  Consolidated

Net sales ...........     $ 386,406     $     239      $  --       $ 386,645
Cost of sales .......       301,176           162         --         301,338
Income (loss) before
   minority interest
   and extraordinary item     7,890          (352)     (2,038)         5,500
Net income (loss) ...         5,824          (352)     (2,075)         3,397









                                      -58-

<PAGE>


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


Consolidating Condensed Statement of Cash Flows Information for the Year ended:
<TABLE>
<CAPTION>

                                December 31, 1996

                                               Guarantor        Non-guarantor         JBPCO and
                                             Subsidiaries        Subsidiaries        Eliminations      Consolidated
<S>                                             <C>                <C>                <C>                <C>
Net cash provided (used) by
     operating activities ............          $ 10,326           $   (416)          $    777           $ 10,687
                                                --------           --------           --------           --------
Capital expenditures .................            (8,048)               (11)               (32)            (8,091)
Other ................................               594               --                 --                  594
                                                --------           --------           --------           --------
Net cash used in
     investing activities ............            (7,454)               (11)               (32)            (7,497)
                                                --------           --------           --------           --------
Net proceeds of
     revolving lines of credit .......               683               --                 --                  683
Net payments long-term
     debt and capital leases .........            (2,106)              (122)              --               (2,228)
Other ................................              (156)               156               (752)              (752)
                                                --------           --------           --------           --------
Net cash provided (used ) by
     financing activities ............            (1,579)                34               (752)            (2,297)
                                                --------           --------           --------           --------
Increase (decrease) in restricted
     cash and cash equivalents .......          $  1,293           $   (393)          $     (7)          $    893
                                                ========           ========           ========           ========
</TABLE>
<TABLE>
<CAPTION>

                                December 31,1995

                                               Guarantor        Non-guarantor         JBPCO and
                                             Subsidiaries        Subsidiaries        Eliminations      Consolidated
<S>                                             <C>                <C>                <C>                <C>
Net cash provided (used) by
     operating activities ............          $ (8,245)          $   (507)          $    591           $ (8,161)
                                                --------           --------           --------           --------
Capital expenditures .................           (11,045)              (662)              (163)           (11,870)
Purchase of business .................           (10,277)              --                 --              (10,277)
Proceeds from sale of assets .........             2,988               --                 --                2,988
Other ................................                19               --                  127                146
                                                --------           --------           --------           --------
Net cash used in investing activities            (18,315)              (662)               (36)           (19,013)
                                                --------           --------           --------           --------
Net proceeds of
     revolving lines of credit .......            21,615               --                 --               21,615
Net payments of long-term
     debt and capital leases .........            (1,473)              (375)              --               (1,848)
Intercompany transfers ...............             5,663                838             (6,501)              --
                                                --------           --------           --------           --------
Net cash provided (used ) by
     financing activities ............            25,805                463             (6,501)            19,767
                                                --------           --------           --------           --------
Decrease in restricted cash and cash
     equivalents .....................          $   (755)          $   (706)          $ (5,946)          $ (7,407)
                                                ========           ========           ========           ========
</TABLE>

                                      -59-

<PAGE>


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

<TABLE>
<CAPTION>
                                December 31,1994

                                               Guarantor        Non-guarantor         JBPCO and
                                             Subsidiaries        Subsidiaries        Eliminations      Consolidated
<S>                                             <C>                <C>                <C>                <C>
Net cash provided (used) by
     operating activities ............          $  1,005           $   (331)          $ (2,420)          $ (1,746)
                                                --------           --------           --------           --------
Capital expenditures .................            (8,067)            (1,103)               (48)            (9,218)
Purchase of business .................              --               (3,739)              --               (3,739)
Purchase of minority interests .......              --                 --               (2,360)            (2,360)
Other ................................              (297)              --                1,160                863
                                                --------           --------           --------           --------
Net cash used in investing activities             (8,364)            (4,842)            (1,248)           (14,454)
                                                --------           --------           --------           --------
Net payments of
     revolving lines of credit .......           (25,476)              --                 --              (25,476)
Net proceeds (payments) of long-
     term debt and capital leases ....           (37,392)              --               94,880             57,488
Intercompany transfers ...............            79,090              5,032            (84,122)              --
Dividends and distributions paid .....            (6,739)              --                 --               (6,739)
Other ................................            (1,827)              --                 --               (1,827)
                                                --------           --------           --------           --------
Net cash provided by
     financing activities ............             7,656              5,032             10,758             23,446
                                                --------           --------           --------           --------
Increase (decrease) in restricted cash
     and cash equivalents ............          $    297           $   (141)          $  7,090           $  7,246
                                                ========           ========           ========           ========
</TABLE>


Item 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
     Financial Disclosure as discussed in Form 8K filed on October 11, 1996.

         As discussed in Form 8K filed on October 11, 1996, during October 1996,
the Company engaged Ernst & Young LLP as the Company's  independent  auditors to
audit the Company's  consolidated financial statements for the fiscal year ended
December  31,  1996.  The Company  chose not to renew the  engagement  of Arthur
Andersen LLP, who previously served as the Company's independent  auditors.  The
change of independent auditors was approved by the Company's Board of Directors.

         In  connection  with the  audits of the  Company  for the  years  ended
December 31, 1994 and 1995 and since such time, there were no disagreements with
Arthur  Andersen  LLP on any  matter  of  accounting  principles  or  practices,
financial statement  disclosure,  or auditing scope or procedure,  which, if not
resolved to the  satisfaction  of Arthur  Andersen LLP, would have caused Arthur
Andersen LLP to make  reference  to the subject  matter of the  disagreement  in
connection with its report.







                                      -60-

<PAGE>


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


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      52       Chairman of the Board, President and
                                           Chief Executive Officer
Stephen P. Magee        49       Chief Financial Officer, Treasurer and Director
W.J. Bowen              75       Director

         John B.  Poindexter has served as Chairman of the Board and Director of
the Company since 1988 and Chief Executive  Officer since 1994.  Since 1985, Mr.
Poindexter has been 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  Director of the Company
since 1988 and Chief Financial Officer since 1994.

     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. He is a member of the board of directors
of Tejas Power Corporation.

         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
      ----              ---      --------
James R. Chandler       61       President of EFP
Norman E. Gibbs, Jr.    57       President of Blue Ridge and Courier
Mike Hart               50       President of Lowy Distribution
Lorri Palko             37       President of Morgan


                                      -61-

<PAGE>


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


         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.

         Norman E. Gibbs,  Jr. has served as  President  of Blue Ridge & Courier
since the Company's acquisition of Lowy Group in 1991 and has more than 25 years
of  experience  in the  carpet  manufacturing  industry.  From  1973  until  the
Company's  acquisition  of Lowy  Group,  Mr.  Gibbs  served  successively  as an
Executive Vice  President and President of Blue Ridge and,  since 1981,  Courier
for their former owners.

     J. Michael  Hart,  was named  President of Lowy Group Inc. on June 2, 1995.
Mr. Hart has held a variety of positions  during his thirty year career with the
company  and  served as  Executive  Vice  President  immediately  preceding  his
appointment to this current position.

         Lorri Palko has served as President of Morgan since September 19, 1994.
From 1984 through 1994 Lorri Palko held various management  positions at Morgan,
including Chief Financial Officer from December 1992 to September 1994.

Item 11.  Executive Compensation

         The  following  table  sets forth  certain  information  regarding  the
compensation  paid to the Company's  Chief  Executive  Officer and the two other
executive officers whose total annual salary and bonus are anticipated to exceed
$100,000 for the fiscal years ended December 31, 1996, 1995 and 1994:

                           Summary Compensation Table

                                      Annual Compensation            All Other
                                   -------------------------
Name and Principal Position        Year     Salary     Bonus       Compensation
---------------------------        ----     ------     -----       ------------
John B. Poindexter                 1996     $ (a)      $ --           $ --
     Chairman of the Board and     1995       (a)
     Chief Executive Officer .     1994       (a)

Stephen P. Magee                   1996     $ (a)      $(b)           $ --
     Chief Financial Officer .     1995       (a)
                                   1994       (a)


(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."  Historically,
     Messrs.  Poindexter and Magee did not receive  salaries from the Company or
     any of the Subsidiaries.  Rather,  these services were provided pursuant to
     certain management agreements that were terminated upon consummation of the
     Note Offering. See "Certain Transactions."

(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.

                                      -62-

<PAGE>


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


         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, Magee are covered by health
insurance 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
discretionary annual bonus to Southwestern for the provision of Mr. Poindexter'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.  Pursuant to this agreement,  the Company paid Southwestern
$63,000 and in 1995 and none in 1996 and 1994.

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 14 to the Consolidated Financial Statements for the Company.

Compensation Committee Interlocks and Insider Participation

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

                                      -63-

<PAGE>


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


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 (5 persons)                                   3,059            100%

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

Item 13.  Certain Relationships and Related Transactions

     Messrs. Poindexter and Magee and certain members of Morgan's management are
members of a partnership ("Bartow") that leases certain real property in Georgia
to  Morgan.  During  each of 1996,  1995 and  1994,  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,  $63,000 was paid in 1995 and
none  was  paid in 1996 or  1994.  The  Company  and  Subsidiaries  use  certain
facilities  provided by Southwestern for meetings and  conferences,  the Company
did not use the facilities  during 1996, the Company paid  Southwestern  $23,000
during  1995  for the  use of the  facilities.  The  Company  paid  Southwestern
approximately  $600,000,  $653,000  and  $366,000  during  1996,  1995 and 1994,
respectively.



                                      -64-

<PAGE>


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


The Company  believes that the amounts paid by it to Southwestern for the use of
these  facilities is a market rate. A subsidiary of the Company,  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 $50,000 during 1996 for certain services.

     A corporation owned by Mr. Poindexter has an airplane that the Company used
from time to time in 1995. During 1995, the Company paid  approximately  $16,000
for the use of the airplane and may use the airplane in the future.  The Company
believes that the amount it paid for the use of the airplane was a market rate.

     TAG purchases  certain raw materials from an entity in which TAG's founder,
who was a  minority  interest  holder in TAG prior to the Note  Offering,  has a
minority interest. During 1994, TAG paid $3.0 million to that entity and intends
to continue  to  purchase  raw  materials  from that  entity in the future.  TAG
believes that the amounts paid to that entity represent competitive market rates
for those raw materials.

     TAG leases  certain real estate in Canada from an entity  controlled  by an
executive  vice  president of TAG. Total lease expenses was $114,000 and $64,000
in 1996 and 1995, respectively.


                                      -65-

<PAGE>


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



Part IV.

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(e)      Loan and Agency Agreement dated as of May 23, 1994, among J.B.
                  Poindexter & Co., Inc., Meridian Bank as Agent and the Banks
                  (as defined therein)

     10.1.1(f)    First  Amendment to Loan and Agency  Agreement dated as of May
                  11, 1995, among J.B.  Poindexter & Co., Inc., Meridian Bank as
                  Agent and the Banks (as defined therein)


     10.1.2(f)    Second  Amendment  to Loan and  Agency  Agreement  dated as of
                  September  19,  1995,  among  J.B.  Poindexter  &  Co.,  Inc.,
                  Meridian  Bank as Agent and the Banks  (as  defined  therein).
                  Incorporated by reference to Exhibit 10.1 to Form 10-Q for the
                  quarterly  period ended  September 30, 1995, as filed with the
                  Commission on November 14, 1995

     10.1.3(f)    Third  Amendment  to Loan  and  Agency  Agreement  dated as of
                  December 29, 1995, among J.B. Poindexter & Co., Inc., Meridian
                  Bank as Agent and the Banks (as defined therein)

                                      -66-

<PAGE>


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


     10.1.4(g)    Fourth Amendment to Loan and Agency Agreement dated as of
                  March 29, 1996, among J.B. Poindexter & Co., Inc. Meridian
                  Bank as Agent and the Banks (as defined therein).

     10.1.5(h)    Loan and Security  Agreement by and among  Congress  Financial
                  Corporation  and J.B.  Poindexter & Co., Inc.,  dated June 28,
                  1996.

     10.23(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

     10.32(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

     10.41(a)     Carpet Manufacturing Licensing Agreement, dated August 29,
                  1991, between Allied-Signal, Inc. and Lowy Group, Inc.

     10.42(a)     Confidential Distributor Agreement, dated as of January 1,
                  1988, between Congoleum Corporation and Lowy Enterprises, as
                  assigned to Lowy Group, Inc. pursuant to an Instrument of
                  Consent and Assignment, dated as of August 30, 1991, between
                  Lowy Group, Inc. and Congoleum Corporation

     10.43(a)     Confidential Ceramic Tile Distributor Agreement, dated as of
                  June 1, 1992, between Congoleum Corporation and Lowy Group,
                  Inc.

     10.44(a)     Employment Agreement, dated January 1, 1994, between Lowy
                  Group, Inc. and Norman E. Gibbs, Jr.

     10.46(a)     Non-competition Agreement, dated as of August 30, 1991,
                  between Lowy Group, Inc. and Norman E. Gibbs, Jr.



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


     10.84(a)     Tax Benefit  Agreement,  dated October 26, 1993, among Traxxon
                  Holdings,  Inc., Traxxon, Inc., National Steel Service Center,
                  Inc., Morgan Trailer Holdings, Inc., Morgan Trailer Mfg.
                  Co. and the Creditor Representative (as defined therein)

     10.85(a)     Tax Sharing Agreement, dated October 26, 1993, among Traxxon
                  Holdings, Inc., Traxxon, Inc., National Service Center, Inc.,
                  Morgan Trailer Holdings, Inc. and Morgan Trailer Mfg. Co.

     10.86(e)     Management Services Agreement dated as of May 23, 1994,
                  between J.B. Poindexter & Co., Inc. and Southwestern Holdings,
                  Inc.

     10.92(b)     Second Amendment to Loan and Security Agreement, dated
                  February 22, 1994

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



     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

     21.1         Subsidiaries of the Registrant
     27.1         Financial data schedule
     99.1(g)      Waiver letter with respect to the Loan and Agency Agreement,
                  dated as of March 27, 1996, among J.B. Poindexter & Co., Inc.,
                  Meridian Bank as Agent and the Banks (as defined therein).

------------------------
(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.
------------------------

(b)  Reports of Form 8-K.  The Company filed the following reports on Form 8-K
     during the year:

     1)  Form 8-K filed with the  Commission  on October  7, 1996,  reporting  a
         change in the Company's certifying accountant (Item 4)
     2)  Form 8-K/A filed with the Commission on October 11, 1996, filed Item 7,
         Exhibit  (16),  the letter of response from Arthur  Andersen,  LLP, the
         Company's former independent auditors.


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

                                   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 26, 1997                        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 26, 1997                        John B. Poindexter
                                            John B. Poindexter
                                            Chairman and Chief Executive Officer
                                            and Director
                                            (Principal Executive Officer)

Date: March 26, 1997                        Stephen P. Magee
                                            Stephen P. Magee
                                            Chief Financial Officer and Director
                                            (Principal Financial Officer)

Date: March 26, 1997                        W.J. Bowen
                                            W.J. Bowen
                                            Director

Date: March 26, 1997                        Robert S. Whatley
                                            Robert S. Whatley
                                            Chief Accounting Officer
                                            (Principal Accounting Officer)







                                      -70-

<PAGE>



                  Subsidiaries of J. B. Poindexter & Co., Inc.



1.       EFP Corporation, a Delaware corporation

         a.       EFP Corporation also operates under the following names:

                  i.       Astro Pattern Corporation
                  ii.      Engineered Foam Plastics



2.       Lowy Group, Inc., a Delaware corporation

         a.       Tile By Design, Inc., a Delaware corporation, is a
                  wholly-owned subsidiary of Lowy Group, Inc.

         b.       Lowy Group, Inc. also operates under the following names:

                  i.       Blue Ridge Carpet Mills
                  ii.      Courier
                  iii.     Fred T. Lowy Distributors Division
                  iv.      Lowy Enterprises of Minnesota
                  v.       Fred Lowy Linoleum & Rug
                  vi.      Flooring Distributors
                  vii.     Lowy Distributors



3.       Magnetic Instruments Corp., a Delaware corporation

         a.       Magnetic Instruments Corp. also operates under the name
                  Electrospec.



4.       Morgan Trailer Mfg. Co., a New Jersey corporation

         a.       Acero-Tec S.A. de C.V., a Monterry, Nuevo Leon, Mexico
                  corporation, is a subsidiary of Morgan Trailer Mfg. Co.

         b.       Morgan Trailer Mfg. Co. also operates under the name Morgan
                  Corporation.




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<PAGE>


5.       Truck Accessories Group, Inc., a Delaware corporation, f/k/a Leer,
         Inc., f/k/a Leer Holdings Inc.

         a.       Subsidiaries of Truck Accessories Group, Inc. include:

                  i.       Raider Industries Inc., a Saskatchewan, Canada
                           corporation, is a wholly-owned subsidiary of Truck
                           Accessories Group, Inc.
                                    (a)     Raider Industries Inc. also operates
                                            under the following names:
                                                     1)       Lo Rider
                                                     2)       Raider
                  ii.      Leer Acquisition Company, Inc., a Delaware
                           corporation, is a wholly-owned subsidiary of Truck
                           Accessories Group, Inc.
                                    (a)     Radco Industries, Inc., a Minnesota
                                            corporation, is a wholly-owned
                                            subsidiary of Leer Acquisition
                                            Company, Inc.



         b.       Truck Accessories Group, Inc. also operates under the
                  following names:

                  i.       20th Century Fiberglass
                  ii.      Century Fiberglass
                  iii.     Gem-Top Mfg.
                  iv.      Leer
                  v.       Leer Corporate
                  vi.      Leer East
                  vii.     Leer Midwest
                  viii.    Leer Retail
                  ix.      Leer Southeast
                  x.       Leer Specialty Products
                  xi.      Leer Truck Accessory Centers
                  xii.     Leer West
                  xiii.    National Truck Accessories
                  xiv.     National Truck Accessories Headquarters
                  xv.      National Truck Accessories Midwest
                  xvi.     National Truck Accessories Southeast
                  xvii.    National Truck Accessories West


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