JORDAN INDUSTRIES INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

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

For fiscal year ended December 31, 1996 Commission File Number 33-24317

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

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

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

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

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

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

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

None

Indicated by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve (12) months (or for such shorter period that
the registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past ninety (90) days.

Yes X No

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

The number of shares outstanding of Registrant's Common Stock as of
March 28, 1997: 95,001.0004.
PART I

Item 1. BUSINESS

Jordan Industries, Inc. (the "Company") is a private holding company
which owns and manages a widely diversified group of operating companies. The
capital stock of the Company is held by its management and the partners,
principals, employees and affiliates of The Jordan Company (collectively, the
"Jordan Group"). The Company was formed in order to provide its subsidiaries
with long range planning, broader access to financial markets, and professional
and financial management, while permitting its subsidiaries' management broad
discretion in implementing their strategies and operating their day-to-day
businesses. The Company conducts its operations exclusively through its
subsidiaries.

The Company's business is divided into five groups. The Specialty
Printing and Labeling group ("SPL"), which had 1996 net sales of approximately
$109.6 million, consists of Sales Promotion Associates, Inc. ("SPAI"), Pamco
Printed Tape and Label Company, Inc. ("Pamco"), Valmark Industries, Inc.
("Valmark"), and Seaboard Folding Box, Inc. ("Seaboard"). The Motors and Gears
group, which had 1996 net sales of approximately $117.6 million, consists of
The Imperial Electric Company ("Imperial") and its subsidiaries, The Scott
Motors Company ("Scott"), and Gear Research, Inc. ("Gear"), and Merkle-Korff
Industries, Inc. ("Merkle-Korff"), which consists of Merkle-Korff, Inc. and
Barber-Colman Motors, ("Barber-Colman"). The Telecommunications Products
group, which had 1996 net sales of approximately $133.0 million, consists of
Dura-Line Corporation ("Dura-Line"), AIM Electronics Corporation ("AIM"),
Cambridge Products Corporation ("Cambridge"), Johnson Components, Inc.
("Johnson"), Diversified Wire and Cable, Inc. ("Diversified"), Viewsonics, Inc.
("Viewsonics"), Vitelec Electronics, Ltd. ("Vitelec"), Bond Holdings, Inc.
("Bond"), and Northern Technologies, Inc. ("Northern"). Welcome Home, Inc.
("Welcome Home"), had 1996 net sales of $81.9 million. The Consumer and
Industrial Products group, which had 1996 net sales of $159.5 million, includes
DACCO, Incorporated ("DACCO"), Sate-Lite Manufacturing Company ("Sate-Lite"),
Riverside Book and Bible Corporation ("Riverside"), Parsons Precision Products,
Inc. ("Parsons"), Hudson Lock, Inc. ("Hudson"), Beemak Plastics, Inc.
("Beemak"), Cape Craftsmen, Inc. ("Cape"), and Paw Print Mailing Services, Inc.
("Paw Print").

All of the foregoing corporations are collectively referred to herein as
the "Subsidiaries", and individually as a "Subsidiary". Certain of the
Subsidiaries are designated as "Restricted Subsidiaries" under the Company's
Indentures relating to the Company's 10 3/8% Senior Notes due 2003 and Senior
Subordinated Discount Debentures due 2005. These Subsidiaries are DACCO, Sate-
Lite, Riverside, Dura-Line, Parsons, Hudson, AIM, Cambridge, Beemak, Johnson,
Diversified, Viewsonics, Vitelec, Bond, and Northern. Generally, the Specialty
Printing and Labeling group and the Motors and Gears group and the Subsidiaries
therein are and include "Non-Restricted Subsidiaries" under the Company's
Indenture.

The Company is currently exploring a broad range of alternatives in
connection with recapitalizing, refinancing and extending the cash payment
obligations and maturities of the Company's indebtedness, which may include
selling, financing, recapitalizing, reclassifying, spinning-off or similar
transactions involving the Company's Subsidiaries, involving third party,
Company or affiliate, investors or purchasers. In structuring these
transactions, the Company believes that some of its Subsidiaries may
strategically and financially benefit from being partly or wholly separated
from the Company on a stand-alone, industry-focused basis. The timing and the
Company's determination whether to proceed with such recapitalization,
refinancing, extension or transactions will be subject to a number of
considerations, including market conditions, financing alternatives, tax
ramifications, acquisition and divestiture strategies and management philosophy
and resources. The Company, moreover, consistent with its announced
strategies, is constantly exploring, reviewing, discussing and negotiating
acquisition and divestiture opportunities, which may, from time to time, result
in understandings, letters of intent or agreements, including in connection
with the foregoing recapitalization, refinancing, extension and related
transactions. There can be no assurances as to the timing or the Company's
determination or ability to proceed with or close such recapitalization,
refinancing, extension, acquisitions, divestitures or transactions.

See Note 15 to the consolidated financial statements included elsewhere in this
Annual Report with respect to business segment information for 1996, 1995 and
1994.

The Company owned the following percentages of the common shares of the
subsidiaries as of March 31, 1997:

Subsidiary Percentage Ownership

Sate-Lite 98.6%
Welcome Home 66.7%
DACCO 100%
Riverside 100%
Parsons 85%
Dura-Line 100%
Hudson 100%
AIM 100%
Cambridge 100%
Beemak 100%
Vitelec 100%
Viewsonics 100%
Bond 80%
Northern 100%
Johnson 100%
Diversified 87.5%
Paw Print 100%
Cape 100%
Motors and Gears Holdings, Inc. 82.5% (1)
SPL 83.3% (2)

(1) Motors and Gears Holdings, Inc. indirectly holds 100% of the common
shares of Merkle-Korff and Imperial. Scott and Gear are owned through
Imperial, which holds 100% of the common shares of Scott and Gear.

(2) SPL holds 100% of the common shares of SPAI, Valmark and Seaboard, and
80% of the common shares of Pamco.

Specialty Printing and Labeling Group

SPAI. The Company's former subsidiaries, The Thos. D. Murphy Co.
("Murphy"), which was founded in 1889, and Shaw-Barton, Inc. ("Shaw-Barton"),
which was founded in 1940, merged to form JII/SPAI in March 1989. One-hundred
percent of JII/SPAI's assets were sold at arms length into SPL in August of
1995 and the Company was renamed Sales Promotion Associates, Inc. ("SPAI").
SPAI is a producer and distributor of calendars for corporate buyers and is a
distributor of corporate recognition, promotion and specialty advertising
products.

Approximately 56.7% of SPAI's 1996 net sales are derived from
distributing a broad variety of corporate recognition products, promotion and
specialty advertising products. These products include apparel, watches,
crystal, luggage, writing instruments, glassware, caps, cases, labels and other
items that are printed and identified with a particular corporate logo and/or
corporate advertising campaign. Approximately 31.4% of SPAI's 1996 net sales
are derived from the sale of a broad variety of calendars, including hanging,
desktop, and pocket calendars that are used internally by corporate customers
and distributed by them to their clients and customers. High quality artistic
calendars are also distributed. SPAI also manufactures and distributes soft-
cover school yearbooks for kindergarten through eighth grade.

SPAI assembles and finishes calendars that are printed both in-house as
well as by a number of outside printers. Facilities for in-house manufacturing
include a composing room, a camera room, a calendar finishing department, and
a full press room. Print stock, binding material, packaging and other
materials are supplied by a number of independent companies. Specialty
advertising products are purchased from more than 900 suppliers. Calendars
and specialty advertising products are sold through a 900 person sales force,
most of whom are independent contractors.

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

Valmark. Valmark, which was founded in 1976 and purchased by the Company
in 1994, is a specialty printer and manufacturer of pressure sensitive label
products for the electronics OEM market. Valmark's products include adhesive
backed labels, graphic panel overlays, multi-color membrane switches, and radio
frequency interference (RFI) shielding devices. Approximately 61% of Valmark's
1996 net sales are derived from the sale of graphic panel overlays and membrane
switches, 23% from labels, and 17% from shielding devices.

The specialty screen products sold in the electronics industry continue
to operate relatively free of foreign competition due to the high level of
communication and short time frame usually required to produce orders.
Currently, the majority of Valmark's customer base of approximately 850 is
located in the Northern California area.

Valmark sells to four primary markets: personal computers, general
electronics, turn-key services, and medical instrumentation. The sales to the
personal computer industry has experienced the most growth over recent years
due to Valmark's RFI shield protection capabilities. Sales to Apple Computer
of RFI devices represented approximately 18% of net sales in 1996.

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

Pamco. Pamco, which was founded in 1953 and purchased by the Company in
1994 is a manufacturer and distributor of a wide variety of printed tapes and
labels. Pamco offers a range of products from simple one and two-color labels,
such as basic bar codes and address labels to seven-color, varnish-finished
labels for products such as video games and food packaging. 100% of Pamco's
products are made to customers' specifications and 92% of all sales are
manufactured in-house. The remaining 10% of net sales are purchased printed
products and include business cards and stationary.

Pamco's products are marketed by a team of eighteen sales representatives
who focus on procuring new accounts. Existing accounts are serviced by nine
customer service representatives and five internal salespeople. Pamco's
customers represent several different industries with the five largest
accounting for approximately 21% of 1996 net sales.

Pamco competes in a highly-fragmented industry. Pamco emphasizes its
impressive turnaround time of 24 hours and its ability to accommodate rush
orders that other printers can not handle. Due to these characteristics, Pamco
has posted significant growth over recent years.

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

Seaboard sells directly to a broad customer base, located primarily east
of the Mississippi River, and operating in a variety of industries including
hardware, personal hygiene, toys, automotive supplies, food and drugs.
Seaboard's top 10 customers accounted for approximately 36.1% of sales in 1996.

Seaboard has exhibited consistent sales growth, high profit margins for
exceeding industry standards, and excellent operating capabilities. Seaboard
has established a highly successful program for buying and profitably
integrating smaller acquisitions.

Motors and Gears Group

Merkle-Korff. Merkle-Korff was founded in 1911 and was purchased, along
with its wholly-owned subsidiaries, Elmco Industries, Inc. and Mercury
Industries, Inc., by the Company in September 1995.

Merkle-Korff is a custom manufacturer of AC and DC motors and gear
motors. Merkle-Korff's products are used in a wide range of products including
refrigerators, freezers, dishwashers, vending machines, business machines,
pumps and compressors. Approximately 60% of Merkle-Korff's 1996 sales were
derived from the home appliance and vending machine market. Merkle-Korff's
prominent customers include General Electric Company, Whirlpool Corporation and
Dixie-Narco, Inc. The Company's top 10 customers represent approximately 61%
of total sales.

Barber-Colman. Barber-Colman was founded in 1894 and purchased by
Merkle-Korff in 1996.

Barber-Colman is a vertically integrated manufacturer of both alternating
current and direct current subfractional horsepower motors and gearmotors.
Barber-Colman's products serve a wide variety of applications, and they are
used as components in such products as vending machines, copiers, printers, ATM
machines, currency changers, X-Ray machines, peristaltic pumps, HVAC
activators, medical equipment, and others.

The majority of Barber-Colman's products are sold directly to OEM's,
however, management has initiated an effort to direct small orders to three
distributors. Each of these distributors is fully stocked with Barber-Colman's
standardized parts and equipment with their computerized catalog system which
facilitates the efficient selection of products and components at the
distributor level.

Imperial. Imperial manufactures elevator motors, floor care equipment
motors and automatic hose reel motors. Imperial was founded in 1889 and
acquired by the Jordan Group and Imperial's management in 1983. All of
Imperial's assets were sold at arms-length to Motors and Gears Industries, Inc.
in November 1996.

Imperial designs, manufactures and distributes specialty electric motors
for industrial and commercial use. Its products, AC and DC motors, generators
and permanent magnet motors are sold principally in the U.S. and Canada and to
a limited extent in Europe and Australia. Approximately 29% of Imperial's 1996
net sales were derived from elevator motors, ranging from 5 to 100 horsepower,
sold to major domestic elevator manufacturers. Approximately 69% of Imperial's
1996 net sales were derived from permanent magnet motors sold primarily to
domestic manufacturers of floor care equipment. The remaining 2% of Imperial's
1996 net sales came from sales of miscellaneous parts.

Otis Elevator Company, Westinghouse Corporation and other leading
elevator manufacturers have in recent years discontinued internal manufacturing
of motors and have turned to Imperial and other independent manufacturers. In
1996, Clark Industries, Inc. accounted for approximately 11% of Imperial's net
sales, and Imperial's top ten customers accounted for 55% of total net sales.
Imperial's products are marketed domestically by its management and three
independent sales representatives and internationally by management.

Imperial manufactures specialty motors with steel, magnets, copper wire,
castings and other components supplied by a variety of firms. In the elevator
motor market, Imperial competes with several firms of varying size. The other
markets in which Imperial competes are also highly competitive. However, the
Company's management believes that Imperial is able to effectively compete with
these firms on the basis of product reliability, price and customer service.

Scott. Scott was founded in 1982 and acquired by Imperial in August
1988. All of Scott's assets were sold at arms-length to Motors and Gears
Industries, Inc. in November 1996. Scott manufactures and sells floor care
machine motors; silicone controlled rectifier motors, which are variable speed
motors used in conveyers, machine tools, treadmills, mixers and metering pumps;
and low voltage DC motors.

Scott offers a number of standard motors designed for a variety of
applications. Scott also custom designs motors for special applications.
Scott manufactures many of the sub-assemblies, components and molds for its
products from raw materials, which gives it the ability to manufacture these
special application motors. Scott obtains these raw materials from a number
of independent sources.

Scott markets its products through an internal sales force of two and an
external sales force of representatives and distributors.

Gear. Gear manufactures precision gears and gear boxes for OEMs
requiring high precision commercial gears. Gear was founded in 1952 and
acquired by Imperial in November 1988. All of Gear's assets were sold at
arms-length to Motors and Gears Industries, Inc. in November 1996. Gear
manufactures precision gears for both AC and DC electric motors in a variety
of sizes. The gears are sold primarily to the food, floor care machine and
aerospace industries and to other manufacturers of machines and hydraulic
pumps. Gear's products are nationally advertised in trade journals and are
sold by one internal salesmen and one independent sales representative. Gear
precision machines its products from steel forgings and castings.

Gear competes primarily on the basis of quality. In addition, the
ability of Imperial, Scott and Gear to offer both electric motors and gear
boxes as a package, and to custom design these items for customers, may allow
all three subsidiaries to gain greater market penetration.

Telecommunications Products Group

Dura-Line. Dura-Line is a manufacturer and supplier of "Innerduct" pipe
through which fiber optic cable is installed and housed. Dura-Line sells this
product to major telecommunications companies throughout the world. Dura-Line
also manufactures flexible polyethylene water and natural gas pipe. Dura-Line
was founded in 1971 and acquired by the Jordan Group and Dura-Line's management
in 1985.

In 1996, approximately 98% of Dura-Line's net sales came from Innerduct.
Dura-Line sells to major telecommunications companies, such as SPT Telecom,
GTE, Bell South, and Pacific Telesis, each of which accounted for less than 10%
of Dura-Line's Innerduct net sales. Innerduct is marketed worldwide by Dura-
Line's management, ten manufacturing representatives and forty in-house sales
representatives. Dura-Line negotiates long-term contracts with major
telecommunications companies for its Innerduct product line. It competes for
these sales on the basis of technical innovation, price, quality and service.

In addition, approximately 2% of Dura-Line's 1996 net sales came from the
sale of polyethylene water and natural gas pipe to a variety of hardware
stores, contractors, plumbing supply firms and distributors. Dura-Line markets
its water and natural gas pipe products through sixty manufacturing
representatives in the Southern and Eastern U.S. The water and natural gas
pipe market is very competitive. Dura-Line competes on the basis of quality
and price with a number of regional and local firms.

Dura-Line's products are manufactured through the plastic extrusion
process. Dura-Line procures raw plastic for extrusion from a number of
independent suppliers. In March 1989, Dura-Line opened a new manufacturing
facility in the United Kingdom to manufacture products for sale to British
Telecom and other foreign customers. Approximately 47% of Dura-Line's net
sales are foreign sales. In late 1990, Dura-Line purchased a facility in Reno,
Nevada. This facility opened in early 1991 and has increased Dura-Line's
annual capacity by approximately 50%. In 1993, Dura-Line entered into joint
venture agreements in the Czech Republic and Israel to service Eastern Europe
and the Middle East more effectively. In early and late 1995, Dura-Line opened
subsidiaries in Mexico and China to manufacture and supply HDPE plastic conduit
systems to Central and South American markets as well as China and other Asian
markets. Dura-Line owns 100% of the equity in both subsidiaries. In August
1996, Dura-Line incorporated a subsidiary in India under a joint venture
agreement in which Dura-Line has the controlling interest. The subsidiary,
which has not yet commenced operations, was established to manufacture and
supply HDPE plastic conduit systems to India and neighboring countries.

AIM. AIM, which was founded in 1981 and acquired by the Company in May
1989, is an importer and manufacturer of electronic connectors, adapters,
switches, tools and other electronic hardware products for the commercial and
consumer electronics markets. Electronic connectors are AIM's main product,
representing more than 46% of AIM's 1996 net sales.

AIM's products are manufactured to its specifications overseas, primarily
in the Far East, and carry the "AIM" logo. Producers are under the supervision
of an AIM agent. The products are sold worldwide to electronics, electrical,
general line and industrial distributors. AIM has warehousing and order
processing systems that enable AIM to provide delivery on a 24-hour basis to
most customers.

AIM sells nationwide to approximately 2,000 distributors in the U.S. and
Central and South America. AIM uses a combination of fifteen manufacturers'
representative organizations and six factory direct salesmen to service
existing accounts and to locate new distributors. The customer base is very
broad, with the largest customer accounting for about 4% of sales. AIM also
mails product catalogs and other marketing pieces to current customers and
potential new accounts.

The two largest companies in the $13.0 billion domestic connector and
interconnect supply industry are AMP and Amphenol. AMP and Amphenol specialize
strictly in electronic device production. Small and mid-sized companies such
as AIM have captured significant market share during the past 10 years by
offering distributors better service on orders compared to the industry
leaders.

In 1994, AIM began to market manufactured cable and harness assemblies
made at its facility in Florida. The custom made assemblies are sold under the
"Prestige" trademark to a wide range of customers. Sales of cable and harness
assemblies are estimated to be approximately 12% of AIM's 1996 net sales.

Cambridge. Cambridge, which was founded in 1972 and acquired by the
Company in September 1989, is a domestic manufacturer of high-quality
electronic connectors, plugs, adapters, and other accessories. Cambridge is
primarily a designer and marketer of approximately 300 types of specialty radio
frequency (RF) coaxial electronic connectors for radio, mobile communications,
television and computer equipment. RF coaxial connectors are used to integrate
separate systems by connecting input-output power and signal transmission
sources. The systems in which RF connectors are used may be complex, but RF
connectors themselves serve a mechanical purpose which is technologically
straightforward. Cambridge is essentially an assembly operation. The primary
components of Cambridge's connector products are screw machine and diecast
parts which are purchased from approximately twenty suppliers. The production
process is highly automated, with direct labor accounting for only 6% of net
sales. Equipment consists of semi-automatic parts assembly and packaging
equipment which has been designed and manufactured by Cambridge.

Approximately 13% of Cambridge's connectors are manufactured according
to a design that allows users to affix the connector to the cable faster and
easier without the need for complicated tools and time-consuming soldering.
These connectors are marketed under the "FASTFIT" trademark.

Cambridge sells its products nationwide to 450 distributors, 100 OEMs,
and approximately 150 other various end-users. Cambridge uses a combination
of six manufacturers' representative organizations and five factory direct
salesmen located throughout North America. Cambridge's two largest customers
(excluding AIM) account for approximately 26% of 1996 net sales. Cambridge
also mails a large number of catalogs to current customers and potential new
accounts. Cambridge strongly emphasizes that it is an "American" producer of
high-quality electronic connectors.

Cambridge competes in the same market as AIM. Cambridge does not offer
the product selection of its large competitors; however, it competes
effectively by targeting distributors and manufacturers which require fast
service and prefer an American-made product.

Johnson. Purchased by the Company in 1996, Johnson was the Components
Division of E.F. Johnson Company, Inc., which was founded in 1953.

Johnson is a high-quality, fully integrated manufacturer of RF coaxial
connectors (60%) and electronic hardware (40%). Johnson specializes in
manufacturing miniature and sub-miniature RF connectors used primarily in
telecommunication, computer, and other OEM applications which require high
frequency ranges. The miniature and sub-miniature connector area is
experiencing excellent growth as the size of electronic card products continues
to shrink.

Johnson sells directly to OEM's (35%) in large orders while smaller
quantities are sold through over 80 distributors (65%) primarily in the United
States and Canada. Johnson's National Sales Manager coordinates the selling
efforts of three company employed Regional Sales Managers and 21 independent
representative organizations.

Diversified. Diversified was founded in 1988 and purchased by the
Company in 1996.

Diversified is a broad line provider and value added reseller of wire,
cable, and custom cable assemblies. Diversified's product offering is used in
local area networks (LAN's), custom cable assemblies, cable for electrical
applications, cable for sound and security, cable for OEM applications and
other miscellaneous cable applications.

Diversified sells its products through a skilled direct sales force. The
sales staff consists of 20 inside and 5 outside sales people, all of whom are
product and market specialists. Diversified markets and advertises its
products through various trade journals dependent on the marketplace.

Viewsonics. Viewsonics was founded in 1974 and purchased by the Company
in 1996.

Viewsonics designs, manufactures and markets branded cable TV, electronic
network components, and electronic security components mainly for the "drop"
or home connection portion of the CATV infrastructure. Viewsonics develops,
warehouses, and sells its products out of its Florida facility. Viewsonics
sources the majority of its products from China, 60% of which is manufactured
in Viewsonics' Shanghai facility, and the remaining 40% manufactured by
subcontractors. Viewsonics has also developed manufacturing capabilities in
St. Petersburg, Russia. This overseas procurement has allowed Viewsonics to
lower production costs and it has also positioned Viewsonics to exploit the
overseas CATV component markets as they develop.

Viewsonics sells 50% of its products to Multi System Operations (MSO's),
including companies such as Time/Warner, Cencast, Continental Cablevision, and
TCI. Viewsonics also sells to a network of distributors, six of whom account
for the majority of the other 50% of sales.

Vitelec. Vitelec was founded in 1987 and purchased by a wholly owned
subsidiary of the Company, Jordan Telecommunications Product Group Europe
(JTPGE) in 1996.

Vitelec is an importer, packager and master distributor of over 400 RF
connectors, plugs, jacks, sockets, adapters and terminators sold to the
commercial and consumer electronics markets. Vitelec's RF products are
subcontract manufactured for them in Taiwan. Vitelec, through its Vidata
subsidiary, also distributes LAN and WAN cabling, connectors, converters, and
the accessories for data communication networks.

Vitelec sells it products via 5 company employed sales people, four in-
house and one located in Paris, France. Vitelec has customers in 42 countries.
The largest customer accounts for 10% of sales, with the rest of the customer
base being very fragmented and no one customer accounting for more than 1% of
sales.

Bond. Bond was founded in 1988 and 80% of the outstanding shares of Bond
were purchased by the Company in 1996.

Bond designs, engineers and manufactures high-quality custom electronic
cables and connector sub-assemblies for computer-related and telecommunications
customers. All of Bond's products are custom and are specifically designed to
meet a customer's needs. Bond has three fully-integrated, independent
manufacturing facilities. Bond has rapidly become an industry leader due to
its commitment to high quality, competitively priced products offered in
conjunction with outstanding and dependable service.

Bond has established two separate, very profitable sales agencies in
Northern and Southern California to represent them. Bond is continuing to
actively solicit strategic new customers located throughout the United States
via an independent sales representative network. In 1996, Bond's single
largest customer accounted for approximately 20% of sales.

Northern. Northern was founded in 1985 and was purchased by the Company
in 1996.

Northern designs, manufactures and markets power conditioning and power
protection equipment for primarily telecommunication applications, such as
cellular and Personal Communication System (PCS) networks. Northern also
offers a variety of products including voltage regulators, uninterruptible
power supplies, isolation transformers, and grounding devices to protect any
power critical application.

Northern sells on a direct basis through its own highly technical in-house
sales force of 23 employees, who are supported by seven application
engineers and four product development engineers. Northern sells to such large
telecom OEM's as Sprint, Motorola, Lucent, Erickson and Nokia. Northern's
largest customer accounted for 53.4% of sales in 1996 and its 10 largest
customers accounted for 78.0% of sales.

Welcome Home (See Notes 3 and 4 to the Consolidated Financial Statements.)

Welcome Home is a national, specialty retailer of decorative home
furnishing accessories. Welcome Home was acquired by the Company in 1991.

Welcome Home's stores are located primarily in high-end designer outlet
malls. Their products include textiles, afghans, framed art, picture frames,
wood, seasonal and other merchandise targeted to gift-buying and value-
conscious consumers. Welcome Home sells its merchandise through 186 retail
stores located throughout the United States and Canada.

Welcome Home's emphasis is on outlets located in malls where upscale
manufacturers such as Ralph Lauren, Liz Claiborne, Ann Klein, Harve Bernard,
Van Huesen, and others are located.

There is no direct competition for Welcome Home on a national basis.
Comparable companies with similar product lines do not compete in the value-
retail segment of the market.

Consumer and Industrial Products Group

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

Approximately 78% of DACCO's products are classified as "hard" products,
which primarily consist of torque converters and hydraulic pumps that have been
rebuilt or remanufactured by DACCO. The torque converter, which replaces a
clutch in an automatic transmission, transfers power from the engine to the
drive shaft. The hydraulic pump supplies oil to all the systems in the
transmission.

DACCO's primary supply of used torque converters is its customers. As
a part of each sale, DACCO recovers the used torque converter which is being
replaced with its remanufactured converter. DACCO also purchases used torque
converters from automobile salvage companies. Other hard parts, such as clutch
plates and fly wheels, are purchased from outside suppliers.

Approximately 22% of DACCO's products are classified as "soft" products,
such as sealing rings, bushings, washers, filter kits and rubber components.
Approximately 11,000 soft products are purchased from a number of vendors and
are re-sold in a broad variety of packages, configurations and kits.

DACCO's customers are automotive transmission parts distributors and
transmission repair shops and mechanics. DACCO has fifty-one independent sales
representatives who accounted for approximately 70% of DACCO's net sales in
1996. These sales representatives sell nationwide to independent warehouse
distributors and to transmission repair shops. DACCO also owns and operates
thirty-one distribution centers which sell directly to transmission shops.
DACCO distribution centers average 3,000 - 5,000 square feet, cover a 50 to 100
mile selling radius and sell approximately 42% hard products and 58% soft
products. In 1996 no single customer accounted for more than 2% of DACCO's net
sales.

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

Sate-Lite. Sate-Lite manufactures safety reflectors for bicycle and
commercial truck manufacturers, as well as plastic parts for bicycle
manufacturers and colorants for the thermoplastics industry. Sate-Lite was
founded in 1968 and acquired by the Jordan Group and Sate-Lite's management in
1985.

Bicycle reflectors and plastic bicycle parts accounted for approximately
38% of Sate-Lite's net sales in 1996. Sales of triangular flares and specialty
reflectors and lenses to commercial truck customers accounted for approximately
38% of 1996 net sales. The remainder of Sate-Lite's net sales were derived
primarily from the sale of colorants to the thermoplastics industry.

Sate-Lite's bicycle products are sold directly to a number of original
equipment manufacturers ("OEMs"). The two largest OEM customers for bicycle
products are the Huffy Corporation and Murray/Ohio Manufacturing Company, which
accounted for approximately 21% of Sate-Lite's fiscal 1996 net sales. The
triangular flares and other truck reflector products are also sold to a broad
range of OEM customers. Colorants are sold primarily to mid-western custom
molded plastic parts manufacturers. In 1996, Sate-Lite's ten largest customers
accounted for approximately 56% of net sales.

Sate-Lite's products are marketed on a nationwide basis by its
management. Sales to foreign customers are handled directly by management and
by independent trading companies on a commission basis. In 1996, Sate-Lite's
export net sales accounted for approximately 10% of its total net sales.
Export sales were principally to China and Canada.

The principal raw materials used in manufacturing Sate-Lite's products
are plastic resins, adhesives, metal fasteners and color pigments. Sate-Lite
obtains these materials from several independent suppliers.

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

Riverside. Riverside is a publisher of Bibles and a distributor of
Bibles, religious books and music recordings. Riverside was founded in 1943
and acquired by the Company in 1988.

Approximately 69% of Riverside's business consists of products published
by other companies. Riverside sells world-wide to more than 12,000
wholesaler, religious and trade book store customers, utilizing an in-house
telemarketing system, four independent sales representative groups and printed
sales media. In addition, Riverside sells a small percentage of its products
through direct mail and to retail customers. No single customer accounted for
more than 5% of Riverside's 1995 net sales.

Riverside also provides Bible indexing, warehousing, inventory and
shipping services for domestic book publishers and music producers. Riverside
competes with larger firms, including the Zondervan Corporation, The Thomas
Nelson Company, Spring Arbor Distributors and Ingram Book Company, on the basis
of price, product line and customer service.

Parsons. Parsons is a diversified supplier of hot formed titanium parts,
precision machined parts and fabricated components for the U.S. aerospace
industry. Parsons was founded in 1959 and acquired by the Jordan Group and
Parsons' management in 1984.

Approximately 55% of Parsons' 1996 net sales came from sales to The
Boeing Company. Parsons employs precision machining, welding/fabrication and
sheet metal forming processes to manufacture its products at its facilities in
Parsons, Kansas. Parsons continues to invest in its titanium hot forming
operation, which permits Parsons to participate in the aerospace market for
precision titanium components.

Parsons uses metals, including stainless steel, aluminum and titanium to
fabricate its products. These materials are either supplied by Parsons'
customers or obtained from a number of outside sources.

Parsons sells its products directly to a broad base of aerospace and
military customers, relying on longstanding associations and Parsons'
reputation for high quality and service.

Hudson. Hudson, which was founded in 1963 and acquired by the Company
in April 1989, is a fully integrated manufacturer of custom and specialty
medium security locks. Hudson produces cam, switch and latch locks for use in
office furniture, mail boxes, point-of-sale terminals and a variety of other
products.

Hudson manufactures customized lock housings and lock cores from
customized molds. Tooling is originally purchased by Hudson from outside
manufacturers, then cleaned and reworked on a regular basis at Hudson's own
repair and maintenance shop. Customized tooling is especially valuable to
Hudson because customers cannot easily switch lock suppliers without incurring
substantial costs associated with the design and manufacture of new molds.

Hudson sells mainly to OEMs such as IBM, AT&T and Herman Miller. In
addition, Hudson sells to postal services in Canada and the United States. The
top 10 customers represented about 41% of Hudson's net sales in 1995. In
addition to OEMs, Hudson sells to the locksmith trade industry through a
distributor.

The $150 million medium/low security lock industry is mature and highly
fragmented with a stable number of well-established competitors. Quality and
service are important selling points. Price is less important due to the
lock's small value relative to the customer's complete product. Foreign
competition is not strong as a result of the customized nature of the locks.
Major competitors are Chicago Lock, National Cabinet Lock, Fort Lock and ESP
Corporation.

Beemak. Beemak, which was founded in 1951 and acquired by the Company
in July 1989, is an integrated manufacturer of specialty "take-one" point-of-
purchase brochure, folder and application display holders. Beemak sells these
proprietary products to approximately 20,000 customers around the world. In
addition, Beemak produces a small amount of custom injection molded plastics
parts for outside customers on a contract manufacturing basis.

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

Beemak has no sales force. All sales originate from Beemak's extensive
on-going advertising campaign and reputation. Beemak sells to distributors,
major companies, and even competitors which resell the product under a
different name. Beemak has been very successful providing excellent service
on orders of all sizes, especially small orders. Beemak's average order size
was approximately $400 in 1996.

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

Cape Craftsman. Cape was founded in 1991 and purchased by the Company
in 1996.

Cape is a manufacturer and importer of gifts, wooden furniture, framed
art, and other accessories. Cape manufactures in North Carolina, and imports
from Mexico and the Far East.

Cape sells its products through one in-house salesperson and forty
independent sales representatives. Approximately 77% of Capes sales in 1996
were to Welcome Home, an affiliated entity.

Paw Print. Paw Print was founded in 1982 and was purchased by the
Company in 1996.

Paw Print is a fast growing, highly profitable value-added provider of
business communication services for short-term, time-sensitive projects. Paw
Print provides database management, mail list merge and purge, bar-coding,
inserting of personalized letters, folding, gluing, addressing, labeling,
sorting, cartage, and fulfillment for direct mailings. Paw Print charges for
each of these individual services depending on the complexity and time
sensitivity of each project. Paw Print is widely recognized throughout the
industry as being able to reliably execute complex mailings within 24 to 72
hours.

Paw Print's customers include Cellular One, CompuServe, Victoria's
Secret, Ameritech and DDB Needham, among others. In 1996, Paw Print's largest
customer accounted for 3.0% of sales and its 10 largest customer accounted for
18.5% of sales.

Backlog

As of December 31, 1996, the Company had a backlog of approximately
$75 million, compared with $53 million as of December 31, 1995. The current
backlog is primarily due to motor sales at Merkle-Korff and Barber-Colman,
Boeing sales at Parsons, and connector sales at Johnson and Bond. Management
believes that the backlog may not be indicative of future sales.

Seasonality

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

Research and Development

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

Patents, Trademarks, Copyrights and Licenses

Sate-Lite has U.S. patents for certain elements of its triangular flares
and for securing reflectors on bicycle wheels. Dura-Line has a U.S. patent for
producing a form of Innerduct which is lubricated to permit easier installation
of fiber optic cable. The Company also owns and licenses other patents,
trademarks and copyrights. However, management believes that none of the
Subsidiaries' operations is dependent to any significant extent upon any single
or related group of patents, trademarks or copyrights.

Employees

As of December 31, 1996, the Company and the Subsidiaries employed
approximately 6,218 people. Approximately 759 of these employees were members
of labor unions at Sate-Lite, Gear, Imperial, SPAI, Seaboard, Merkle-Korff, and
Dura-Line. The above Subsidiaries have not experienced any work stoppages in
the past five years as a result of labor disruptions. The Company believes
that the Subsidiaries' relations with its employees are good.

Environmental Regulations

The Company is subject to certain federal, state and local environmental
laws and regulations. DACCO is a potentially responsible party ("PRP") at the
John P. Saad & Sons site in Nashville, Tennessee (the "Saad Site").

DACCO and a number of other PRPs have entered into a consent agreement
with the Environmental Protection Agency (the "EPA"), dated April 18, 1990,
relating to the clean-up of the Saad Site (the "Consent Agreement"). All work
was completed under this consent agreement. DACCO's interim allocation of
expenses relating to the clean up is currently 1.48 percent. Total expenses
incurred by the PRP group through January 1997 are approximately $4.1 million.
These expenses include removal costs, engineering and attorney fees, but do not
include administrative oversight costs incurred by the EPA or the State of
Tennessee ("the State"). The EPA at both the Federal and State levels has
incurred administrative oversight costs through January 1997 of approximately
$.9 million. DACCO is not responsible for any costs incurred by the State of
Tennessee.

Additional work under the Consent Agreement proceeded under a Unilateral
Administrative Order for Removal Response Activities dated July 28, 1995. This
work has been completed and DACCO has paid in full its share of total expenses
related to the clean-up efforts. It is not likely that the EPA will make any
further removal requirements.

Item 2. PROPERTIES.

The Company leases approximately 18,950 square feet of office space for
its headquarters in Illinois. The principal properties of each Subsidiary of
the Company, the location, the primary use, the capacity, and ownership status
thereof, are set forth in the table below:

Square Owned/
Company Location Use Feet Leased

AIM................... Sunrise, FL Manufacturing/Administration 28,000 Leased

Barber-Colman......... Crystal Lake, IL Manufacturing 47,000 Leased
Darlington, WI Manufacturing 68,000 Leased
Belvidere, IL Administration 12,500 Leased

Beemak................ Gardena, CA Manufacturing (2 buildings) 34,500 Leased

Bond.................. Anaheim, CA Manufacturing/Administrative 16,000 Leased
Fremont, CA Manufacturing/Administrative 17,000 Leased
Austin, TX Administrative 2,000 Leased

Cambridge............. Windsor, CT Manufacturing 7,000 Leased

Cape Craftsmen........ Elizabethtown, NC Manufacturing 230,200 Leased
Wilmington, NC Administrative 8,500 Leased

DACCO................. Cookeville, TN Administration/Manufacturing140,000 Owned
Huntland, TN Manufacturing 65,000 Owned
Rancho Cucamonga, CA Manufacturing 40,000 Owned

Diversified........... Troy, MI Administrative/Assembly 40,000 Leased
Nashville, TN Administrative/Warehouse 6,000 Leased

Dura-Line............. Middlesboro, KY Manufacturing/Administration 31,000 Owned
Grimsby, U.K. Manufacturing/Administration 30,000 Owned
Sparks, NV Manufacturing 20,000 Owned
Zlin, Czech Republic Manufacturing/Administration 10,000 Leased
Knoxville, TN Administrative 10,000 Leased
Tel Aviv, Israel Administrative/Manufacturing10,000 Leased
Queretaro, Mexico Administrative/Manufacturing 43,000 Leased
Mexico City, Mexico Administrative 2,000 Leased

Shanghai, China Manufacturing 35,000 Owned
Shanghai, China Administrative 1,000 Leased
Goa, India Manufacturing 35,000 Owned
Dehli, India Administrative 20,000 Leased
Moscow, Russia Administrative 1,000 Leased

Gear.................. Grand Rapids, MI Manufacturing/Administration/
Storage 38,000 Owned

Hudson................ Hudson, MA Manufacturing/Administration 218,000 Owned
Grand Rapids, MI Storage 5,000 Leased

Imperial.............. Akron, OH Manufacturing/Administration 43,000 Owned
Middleport, OH Manufacturing 85,000 Owned
Northampton, OH Manufacturing 60,000 Leased

Johnson............... Waseca, MN Manufacturing/Administration 70,000 Leased

Merkle-Korff..........Des Plaines, IL Manufacturing/Administration35,000Leased
Des Plaines, IL Manufacturing/Administration 45,000Leased
Richland Center, WI Manufacturing/Administration45,000Leased

Northern..............Liberty Lake, WA Manufacturing/Administration27,000Leased

Pamco................. Des Plaines, IL Manufacturing/Administration24,500Owned

Parsons............... Parsons, KS Manufacturing/Administration97,500Owned

Paw Print............. Elk Grove, IL Administration 12,000 Leased
Elk Grove, IL Production 12,000 Leased

Riverside............. Iowa Falls, IA Distribution/Administration 65,900Leased
Sparks, NV Distribution 35,500Leased

Sate-Lite............. Niles, IL Manufacturing/Administration120,000Leased

Scott................. Alamogordo, NM Manufacturing/Administration/15,000Leased
Storage

Seaboard.............. Fitchburg, MA Administrative/Manufacturing260,000 Owned
Miami, FL Manufacturing 90,000 Owned
Brentwood, NY Manufacturing 35,000 Leased
Brooklyn, NY Manufacturing 35,000 Leased
Bohemia, NY Manufacturing 20,000 Leased

SPAI.................. Red Oak, IA Manufacturing/Administration
(four buildings) 136,500 Owned
Coshocton, OH Manufacturing/Administration 240,000 Owned

Valmark............... Fremont, CA Manufacturing/Administration 46,000 Leased
Fremont, CA Manufacturing/Administration 15,000 Leased

Viewsonics............ Boca Raton, FL Administration/Warehouse 15,000 Leased
Shanghai, China Manufacturing 38,000 Leased
Petersburg, USSR Administration/Manufacturing 4,000 Leased

Vitelec............... Bordon Hunts, U.K. Administration/Warehouse 9,500 Owned
Paris, France Administration 2,000 Leased

Welcome Home.......... Wilmington, NC Administration/Storage 18,000 Leased
(two buildings)

DACCO also owns or leases thirty-one distribution centers, which average
3,000 to 5,000 square feet in size. DACCO maintains four distribution centers
in Florida, California, and Tennessee, two distribution centers in Illinois,
Arizona, Michigan, and Alabama, and the remaining distribution centers are
located in Colorado, Indiana, Minnesota, Missouri, Nebraska, New Jersey, West
Virginia, Ohio, Oklahoma, South Carolina, and Texas.

Welcome Home also leases approximately 186 retail stores as of December
31, 1996, which range from 2,400 to 4,600 square feet in size. Welcome Home
has stores in 41 states in the United States.

AIM's Sunrise, Florida facility is leased from the former Vice President
of AIM, and Merkle-Korff's facilities are leased from the Chairman of Merkle-
Korff. Northern's Liberty Lake, Washington facility is leased from a general
partnership consisting of the former owners. The Company believes that the
terms of these leases are comparable to those which would have been obtained
by the Company had these leases been entered into with an unaffiliated third
party.

None of the Company's significant existing leases are scheduled to expire
prior to 1997. The Company believes that its existing leased facilities are
adequate for the operations of the Company and its subsidiaries.

Item 3. LEGAL PROCEEDINGS

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

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

No matters were submitted to a vote of security holders during the fiscal
year ended December 31, 1996.

PART II

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

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

(b) At December 31, 1996, there were 17 record holders of the Company's
Common Stock.

(c) The Company has not declared any cash dividends on its Common Stock since
the Company's formation in May, 1988. The Indenture (the "Indenture"),
dated as of July 23, 1993, by and between the Company and First Bank
National Association, as Trustee, with respect to the 10 3/8% Senior
Notes and the 11 3/4% Senior Subordinated Discount Debentures contain
restrictions on the Company's ability to declare or pay dividends on its
capital stock. The Indenture prohibits the declaration or payment of any
dividends or the making of any distribution by the Company or any
Restricted Subsidiary (as defined in the Indenture) other than dividends
or distributions payable in stock of the Company or a Subsidiary and
other than dividends or distributions payable to the Company.

Item 6. SELECTED FINANCIAL DATA

The following table presents selected operating, balance sheet and other
data of the Company and its subsidiaries as of and for the five years ended
December 31, 1996. The financial data of the Company and its subsidiaries as
of and for the years ended December 31, 1992 through 1996 were derived from the
consolidated financial statements of the Company and its subsidiaries.

Year Ended December 31,
(Dollars in thousands)
1996 1995 1994 1993 1992
Operating data:(1)
Net sales.................. $601,567 $507,311 $424,391 $358,611 $327,321
Cost of sales, excluding
depreciation.............. 375,745 320,653 262,730 221,518 202,215
Gross profit, excluding
depreciation.............. 225,822 186,658 161,661 137,093 125,106
Selling, general and
administrative expense.... 150,951 121,371 97,428 80,496 75,060
Operating income .......... 13,392 32,360 42,944 36,387 22,762
Interest expense........... 63,340 46,974 40,887 41,049 37,024
Interest income ........... (2,538) (2,841) (1,471) (1,845) (963)
Income (loss) before income
taxes, minority interest,
and extraordinary items... (47,410) (11,773) 27,689 (2,817) (13,299)
Income (loss) before extra-
ordinary items........... (51,884) (7,470) 23,741 (3,483) (14,412)
Net income (loss) (2) $(55,690) $ (7,470)$ 23,741 $(29,675)$(14,412)

Balance sheet data (at end of period):
Cash and cash equivalents $ 32,797 $ 41,253 $ 56,386 $ 68,273 $ 8,886
Working capital........... 123,479 115,387 123,395 121,490 65,694
Total assets.............. 681,885 532,384 398,474 338,509 268,674
Long-term debt
(less current portion)... 687,936 513,690 380,966 356,981 262,055
Shareholders' equity (net
capital deficiency)(3)... $(128,406)$(74,479)$(66,867)$(90,669)$(60,873)

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

(2) Net loss in 1993 includes an extraordinary loss of $26,192 related to the
Company's refinancing. Net income in 1994 includes a gain from the sale
of a partial interest in Welcome Home of $24,161. Net loss in 1995
includes $6,929 of restructuring and non-recurring charges related to
Welcome Home. Net loss in 1996 includes compensation expense related to
a stock appreciation right and other compensation agreements of $9,822,
the loss on the purchase of an affiliate, $4,488, and restructuring
charges related to Welcome Home, $8,106, and other non-recurring changes,
$4,136.

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

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

Historical Results of Operations

Summarized below are the historical net sales, operating income and
operating margin (as defined below) for each of the Company's business groups
for the fiscal years ended December 31, 1996, 1995 and 1994. This discussion
should be read in conjunction with the historical consolidated financial
statements and the related notes thereto contained elsewhere in this Annual
Report.

In 1995, The Company's business segments were realigned into five
distinct groups. In 1996, Dura-Line was moved from the Consumer and Industrial
Products segment to the Telecommunications Products sgement. Prior period
results were also realigned into these new groups in order to provide accurate
comparisons between periods.

Year ended December 31,
1996 1995 1994
(dollars in thousands)
Net Sales:
Specialty Printing & Labeling.. $109,587 $ 96,514 $ 82,828
Motors and Gears............... 117,571 54,218 36,854
Telecommunications Products.... 132,999 98,777 66,128
Welcome Home................... 81,855 93,166 81,654
Consumer and Industrial Products 159,555 164,636 156,927
Total ..................... $601,567 $507,311 $424,391

Operating Income (1):
Specialty Printing & Labeling.. 7,078 $ 8,067 $ 5,522
Motors and Gears............... 26,164 12,236 9,484
Telecommunications Products.... 12,985 17,774 11,996
Welcome Home................... (15,975) (10,066) 7,076
Consumer and Industrial Products 18,446 21,987 22,440
Total .................... $ 48,698 $ 49,998 $ 56,518

Operating Margin (2):
Specialty Printing & Labeling.. 6.5% 8.4% 6.7%
Motors and Gears............... 22.3% 22.6% 25.7%
Telecommunications Products.... 9.8% 18.0% 18.1%
Welcome Home................... (19.5%) (10.8)% 8.7%
Consumer and Industrial Products 11.6% 13.4 % 14.3%
Combined (1)................... 8.1% 9.9 % 13.3%

(1) Before corporate overhead of $26,946, the write-off of $4,488 in notes
receivable resulting from the Cape Craftsmen acquisition and the charge
of $3,872 for a compensation agreement for the year ended December 31,
1996, and corporate overhead of $17,638 and $13,574 for the years ended
December 31, 1995 and 1994, respectively. The Telecommunications
Products' operating income includes the AIM and Cambridge SARA expense
of $5,422 for the year ended December 31, 1996, and $400 for the year
ended December 31, 1995.

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

Specialty Printing & Labeling. As of December 31, 1996, the Specialty
Printing and Labeling group consisted of SPAI, Valmark, Pamco, and Seaboard.

1996 Compared to 1995. Net sales increased $13.1 million or 13.6%.
Sales increased due to the 1996 acquisition of Seaboard, which contributed
$17.8 million in sales. The Seaboard acquisition was offset by sales declines
at Valmark, $4.5 million, and Pamco, $.3 million. The sales decline at Valmark
is primarily due to lower sales of shielding devices to Apple Computer.

Operating income decreased $1.0 million or 12.2%. The decrease in operating
income is due to decreases at SPAI, $.6 million, Valmark, $1.9 million, and
Pamco, $.8 million. These decreases were partially offset by the acquisition
of Seaboard, which contributed $2.3 million in operating income during 1996.
The decrease in operating income at SPAI is due to higher selling, general and
administrative expenses, which should contribute to future sales. The decrease
at Valmark is due to lower sales, while the decrease at Pamco is due to lower
sales and a lower gross margin stemming from price pressures coupled with
higher operating costs. Operating margin decreased from 8.4% to 6.5% due to
lower gross margins and increased selling, general and administrative expense
mentioned above.

1995 Compared to 1994. Net sales increased $13.7 million or 16.5%.
Operating income increased $2.5 million or 46.1%. The increase in sales was
due to increased sales of all product lines at Valmark, $8.0 million, and
twelve months of sales at Pamco (Pamco was acquired in May of 1994), $6.7
million, partially offset by a decrease in ad-specialty sales at SPAI, $1.0
million. Operating margin increased to 8.4% from 6.7% due primarily to
increased sales.

Motors and Gears. As of December 31, 1996, the Motors and Gears group
consisted of Imperial, Scott, Gear, Merkle-Korff, and Barber-Colman.

1996 Compared to 1995. Net sales increased $63.4 million or 116.8%, and
operating income increased $14.0 million or 113.8%.

The increase in net sales is partially due to the acquisition of Barber-Colman
in March of 1996 which reported sales of $17.6 million from its acquisition
date through the end of the year. The group also benefitted from a full year
of the results of Merkle-Korff which was purchased in September 1995. Merkle-
Korff had sales of $59.6 million for the full year of 1996 as compared to $14.1
million for the period from the acquisition date to the end of 1995. This
accounted for $45.4 million of the current year increase. In addition, Scott's
sales increased $.4 million due to higher motor sales.

The increase in operating income was partially attributable to the acquisition
of Barber-Colman, which contributed $1.7 million of operating income to the
current years results. Also, operating income for the entire year for Merkle-
Korff was $15.2 million as compared to $2.6 million for the period from the
acquisition date to the end of 1995. This accounted for $12.6 million of the
current year's increase. The above were partially offset by decreases in
operating income at Imperial and Gear of $.2 million and $.3 million
respectively. Operating margin decreased from 22.6% to 22.3% due to the
addition of Barber-Colman, which operates at a lower operating margin than the
rest of the group.

1995 Compared to 1994. Net sales increased $17.4 million or 47.1%.
Operating income increased $2.8 million or 29.0%. The increase in sales was
partially due to the acquisition of Merkle-Korff in September 1995 which added
$14.1 million to the segment's net sales. In addition, sales of permanent
magnet motors at Imperial increased $3.2 million. Operating margin decreased
to 22.6% from 25.7% due to increased material costs at Imperial, and the
amortization of goodwill at Merkle-Korff.

Telecommunications Products. As of December 31, 1996, the
Telecommunications Products group consisted of Dura-Line, AIM, Cambridge,
Johnson, Diversified, Viewsonics, Vitelec, Bond, and Northern.

1996 Compared to 1995. Net sales increased $34.2 million or 34.6%. The
increase in sales was due primarily to the following 1996 acquisitions: Johnson
Components, $16.9 million, Diversified, $13.9 million, Viewsonics, $5.1
million, Vitelec, $2.4 million, and Bond, $3.6 million. Partially offsetting
the sales increase were decreased sales of Innerduct at Dura-Line, $5.9
million, and lower sales of connectors at AIM and Cambridge, $.2 million and
$.8 million, respectively. The decrease in Innerduct sales at Dura-Line is due
to a general market slowdown in the U.S. and U.K. due to uncertainty
surrounding the anticipated effects of the Telecom Act. The decreased
Innerduct sales in the U.S. and U.K. were partially offset by increased sales
of $10.7 million or 90% in the Czech Republic, where the Czech subsidiary has
approximately an 80% share of the Czech market, plus the opening of the Mexico
and China operations in 1996, which contributed $1.1 million and $.3 million
to net sales, respectively.

Operating income decreased $4.8 million or 27.0%. The decrease in operating
income is due primarily to Dura-Line, $5.0 million, and AIM, $4.4 million.
Partially offsetting the decrease in operating income are the 1996
acquisitions: Johnson, $2.9 million, Diversified, $.7 million, Vitelec, $.4
million, and Bond, $.2 million. Cambridge also helped to partially offset the
decrease with a $.3 million increase in operating income. The decrease at AIM
is due to increased compensation expense of $5.0 million related to a Stock
Appreciation Rights Agreement ("SARA") (see footnote 21). The decrease at
Dura-Line is due to lower sales coupled with increased operating costs related
to Dura-Line's global expansion, $1.9 million. Excluding AIM's SARA expense,
operating income for the group would have increased $.3 million or 1.7%.

In addition to the effect of AIM's SARA expense, the decline in the group's
operating margin is partially attributable to (1) the acquisition of
Diversified, which operates at a lower margin as compared to other companies
in the group, and (2) a lower margin at Dura-Line due to higher operating costs
primarily associated with international expansion.

1995 Compared to 1994. Net sales increased $32.7 million or 49.4%.
Operating income increased $5.8 million or 48.2%. The sales increase was due
to increased sales of Innerduct at Dura-Line, $31.2 million, primarily due to
a full year of operations at the Company's facility in the Czech Republic, as
well as increased connector sales at Aim, $1.5 million. The increase in
operating income is due entirely to increased sales at Dura-Line. The operating
margin remained consistent at 18.0%.

Welcome Home. (See Footnote 3 in the Consolidated Financial Statements.)

1996 Compared to 1995. Sales decreased $11.3 million or 12.1%. The
decrease in sales is due to a downturn in outlet mall traffic and the closing
of 26 stores in 1996 related to the company's reorganization efforts.
Operating income decreased $5.9 million or 58.7% due to lower sales, higher
operating costs, and non-recurring restructuring charges. The decrease in
operating income caused by the above factors was partially offset by an
improvement in the gross margin to 40.5% from 38.3% stemming from less
markdowns in 1996. The operating margin decreased from (10.8%) to (19.5%).

On January 21, 1997, Welcome Home filed a voluntary petition for relief under
Chapter 11 ("Chapter 11") of title 11 of the United States code in the United
States Bankruptcy Court for the Southern District of New York ("Bankruptcy
Court").

1995 Compared to 1994. Net sales increased $11.5 million or 14.1%.
Operating income decreased $17.1 million when 1995 is compared to 1994. The
increase in net sales was due to 26 net additional stores in 1995. The
decrease in operating income was due to the restructuring and other non-recur
ring charges of $6.9 million, an 8.1% decrease in same store sales,
increased markdowns leading to a lower gross profit and higher corporate
expenses. The above items also negatively impacted operating margin which
dropped to -10.8% from 8.7%.

Consumer and Industrial Products. As of December 31, 1996, the Consumer
and Industrial Products group consisted of DACCO, Sate-Lite, Riverside, Dura-
Line, Parsons, Hudson, Beemak, Cape, and Paw Print.

1996 Compared to 1995. Net sales decreased $5.1 million or 3.1%. The
decrease in net sales is due to decreased scrap sales at DACCO, $1.0 million,
lower sales of (a) mag wheels to bicycle manufacturers, $.8 million, (b)
emergency warning triangles, $.4 million, and (c) colorants to the
thermoplastics industry, $.3 million at Sate-Lite, decreased sales of bibles
and religious books, $4.8 million, and contract distribution sales, $4.1
million at Riverside, decreased lock sales at Hudson, $.7 million, and lower
POG sales at Beemak, $2.5 million. Partially offsetting the decrease in net
sales are the acquisitions of Cape and Paw Print, which contributed sales of
$1.3 million and $1.6 million during 1996, respectively, increased sales of
rebuilt converters and other hard parts at DACCO, $4.8 million, and $1.2
million, respectively, and increased sales of titanium parts at Parsons, $1.1
million.

The sales decreases are due to (a) industry buying trends, uncertainty
surrounding safety regulations, and price competition from competitors at Sate-
Lite (b) increased competition coupled with a downturn in the religious market
at Riverside, and (c) a new IBM product line in 1995 coupled with lower 1996
sales to Kryptonite at Hudson. Sales of POGS at Beemak during 1995 are
isolated to that year, when Beemak took advantage of the short-lived interest
in POGS. Sales increases at DACCO are due primarily to the company's strong
market presence and good market conditions in general, while sales increases
at Parsons are due to strong Boeing activity.

Operating income decreased $3.5 million or 16.1%. The decrease in operating
income is due to lower operating income at: Sate-Lite, $.8 million, Riverside,
$2.5 million, Hudson, $1.3 million, and Beemak, $1.0 million. These decreases
are partially offset by increased operating income at DACCO, $2.0 million, and
Parsons, $.8 million. The decreases in operating income are due to lower sales
as well as certain non-recurring charges at Sate-Lite and Beemak, $1.0 million
collectively, higher operating costs at Riverside, and compensation expense
related to a stock appreciation right plan at Hudson, $.5 million. Increased
operating income at DACCO was due to higher sales and steady margins, while
operating income at Parsons increased due to higher sales and a higher gross
margin. The decrease in the operating margin is driven by overall lower sales
and the effect of non-recurring charges.

1995 Compared to 1994. Net sales increased $7.7 million or 4.9%.
Operating income decreased $.5 million or 2.2%. The sales increase was due to
higher sales of rebuilt converters and other parts at DACCO, $1.0 million, and
$1.6 million, respectively; foreign bicycle sales at Sate-Lite, $.2 million;
books, audio tapes and music, and contract distribution at Riverside, $.1
million, $.4 million, and $2.4 million, respectively; titanium and fabricated
parts at Parsons, $1.8 million, and $.2 million, respectively; and POGS and
fabricated products at Beemak, $2.0 million and $.5 million, respectively.
These increases were partially offset by a decrease in domestic bicycle sales
at Sate-Lite, $3.1 million. Operating margin was decreased to 13.4% from 14.3%
primarily due to higher operating costs at Riverside and lower margins on POG
sales at Beemak.

Consolidated Operating Results. (see Consolidated Statements of
Operations).

1996 Compared to 1995. Consolidated net sales increased $94.3 million
or 18.6%. The increase is primarily due to the 1996 acquisitions of Seaboard
in the Specialty Printing and Labeling group, Johnson, Diversified, Viewsonics,
Vitelec, and Bond in the Telecommunications Products group, Barber-Colman in
the Motors and Gears group, and Cape and Paw Print in the Consumer and
Industrial Products group. Sales also increased from the benefit of a full
year of sales at Merkle-Korff, increased sales of rebuilt converters and other
hard parts at DACCO, and increased sales of titanium parts to Boeing at
Parsons. Partially offsetting the sales increases were lower sales at Welcome
Home, decreased sales of shielding devices to Apple Computer at Valmark, lower
sales of Innerduct at Dura-Line, and lower sales of connectors at AIM and
Cambridge.

Operating income decreased $19.0 million or 58.8%. The decrease is primarily
due to increased corporate expenses, the write-off in notes receivable related
to the Cape acquisition, higher compensation expense related to compensation
agreements and stock appreciation rights plans at AIM, Cambridge, and Hudson,
$9.4 million, collectively, lower sales and increased global expansion costs
at Dura-Line, lower sales at Valmark, lower sales due to store closings and
increased restructuring charges at Welcome Home, lower sales and higher
operating costs at Riverside, and certain non-recurring charges at Beemak and
Sate-Lite. These decreases were partially offset by the 1996 acquisitions, a
full year of operations at Merkle-Korff, increased operating income at DACCO
due to higher sales, and higher operating income at Parsons due to higher
Boeing sales. Consolidated operating margin decreased to 2.2% from 6.4% due
to the above factors. If the decrease in operating income at Welcome Home,
$5.9 million, the increase in compensation expense related to SARA and other
compensation agreements, $9.4 million, the loss on the purchase of Cape
Craftsmen, $4.5 million, and other non-recurring changes of $4.1 million are
excluded from the above analysis, operating income would have increased $4.9
million or 15.1%.

Interest expense increased $16.4 million or 34.8% primarily due to increased
revolver borrowings at the corporate level as well as Welcome Home and the
inclusion of a full year of interest on Merkle-Korff debt and interest on the
Motors and Gears, Inc. Senior Notes issued in 1996.

Interest income decreased $.3 million or 10.6% due to lower average cash
balances stemming primarily from 1996 acquisition activity.

1995 Compared to 1994. Net sales increased 19.5% and operating income
decreased 24.6%. The sales increase was primarily due to the increased number
of stores at Welcome Home, increased sales of Innerduct at Dura-Line, shielding
devices, labels and membrane switches at Valmark, and the acquisition of
Merkle-Korff in September 1995. The operating income decrease was partially
due to the restructuring and other non-recurring charges at Welcome Home.
Management fees and other increased $2.1 million due to higher management fees
and the write-down of the Dize note receivable.

Interest expense increased $6.1 million due to higher outstanding debt
balances from additional capital leases and new third party debt held at
Welcome Home, Merkle-Korff and SPL.

Interest income increased $1.8 million due to higher average cash
balances.

Liquidity and Capital Resources

The Company had approximately $123.5 million of working capital at the
end of 1996 compared to approximately $115.4 million at the end of 1995. The
increase in working capital from 1995 to 1996 was primarily due to higher
receivables, inventory, and other current assets of $17.0 million, $23.9
million, and $2.1 million, respectively, lower accounts payable, $2.0 million,
and lower current portion of long-term debt, $2.7 million. These increases in
working capital are partially offset by higher accrued expenses, $26.1 million,
higher taxes payable, $3.6 million, increased other current liabilities of $1.4
million, and decreased cash balances of $8.5 million.

The Company has acquired businesses through leveraged buyouts, and as a
result has significant debt in relation to total capitalization. See
"Business". Most of this acquisition debt was initially financed through the
issuance of bonds which were subsequently refinanced in 1993. See Note 10 to
the Consolidated Financial Statements.

In connection with each acquisition of a subsidiary, the subsidiary
entered into intercompany notes, and intercompany management and tax sharing
agreements, which permit the subsidiaries, including the majority-owned
subsidiaries, substantial flexibility in moving funds from the subsidiaries to
the Company.

Management expects continued growth in net sales and operating income in
1996. Capital spending levels in 1997 are anticipated to be consistent with
1996 levels and, along with working capital requirements, will be financed
internally out of operating cash flow. Operating margins and operating cash
flow are expected to be favorably impacted by ongoing cost reduction programs,
improved efficiencies and sales growth. Management believes that the Company's
cash on hand and anticipated funds from operations will be sufficient to cover
its working capital, capital expenditures, debt service requirements and other
fixed charges obligations for at least the next 12 months.

The Company's net cash provided by operating activities for the year
ended December 31, 1996, increased $6.9 million versus the same period in 1995.
The increase in cash provided by operating activities is due to an increase in
restructuring charges, $2.2 million, an increase in depreciation and
amortization, $8.8 million, an increase in the amortization of deferred
financing costs, $1.3 million, an increase in the provision for income taxes,
$6.4 million, a loss on the acquisition of an affiliate in 1996, $4.5 million,
a decrease in minority interest of $1.9 million, an extraordinary loss in 1996,
$3.8 million, an increase in non-cash interest, $1.3 million, a decrease in
accounts receivable, $22.0 million, a decrease in inventories, $6.2 million,
a lower increase in non-current assets, $.9 million, and a lower decrease in
other, $.1 million. These increases in operating cash flow were partially
offset by an increase in the operating loss, $48.2 million, a higher increase
in prepaids and other current assets, $.7 million, a lower increase in current
liabilities, $1.4 million, the absence of non-cash, non-recurring charges, $1.0
million, and a decrease in non-current liabilities, $1.2 million.

The net cash used in investing activities for the year ended December 31,
1996, increased $30.0 million versus the same period in 1995. The increase in
the net cash used in investing activities is due to increased capital
expenditures, $2.1 million, the absence of proceeds from asset sale, $.7
million, and increased acquisition of subsidiaries, $48.2 million. These
increases were partially offset by lower notes receivable from affiliates, $8.2
million, higher cash acquired in the purchase of subsidiaries, $5.2 million,
lower acquisition of minority interest and other, $6.0 million, and the absence
of an investment in Fannie May Holdings, $1.7 million.

The net cash provided by financing activities for the year ended December
31, 1996, increased $30.1 million versus the same period in 1995. The increase
in net cash provided by financing activities is due to proceeds from the
issuance of Senior Notes at Motors and Gears, Inc., $170.0 million, an increase
in proceeds from revolving credit facilities, net, $33.7 million, and an
increase in other borrowing, $.6 million. These increases are offset by
decreases in proceeds of debt issuances at SPL Holdings and MK Holdings, $20.0
million and $52.5 million, respectively, an increase in payment of financing
costs, $9.5 million, and an increase in the repayment of long-term debt, $92.1
million.

The Company's net cash provided by operating activities for the year
ended December 31, 1995 decreased $1.0 million versus the same period in 1994.
Cash provided by operating activities decreased due to the absence of a gain
on the sale of a partial interest in a subsidiary in 1995, $24.2 million, an
increase in restructuring charges, $5.9 million, an increase in other non-
recurring charges, $1.0 million, an increase in depreciation and amortization,
$2.6 million, an increase in non-cash interest, $1.2 million, a lower increase
in inventory, $8.0 million, a lower increase in prepaids and other current
assets, $1.1 million, a lower increase in non-current assets, $1.4 million, and
an increase in non-current liabilities, $.7 million. The sources of operating
cash were offset by a net loss of $7.5 million in 1995 compared to net income
of $23.7 million in 1994, lower minority interest $4.5 million, a higher
increase in accounts receivable, $1.7 million, an increase in the benefit from
deferred income taxes, $4.2 million, and a lower increase in accounts payable,
accrued liabilities and advanced deposits, $5.5 million.

The net cash used in investing activities for the year ended December 31,
1995 increased $112.4 million versus the same period in 1994. This increase
was due to higher capital expenditures, $3.2 million, higher notes receivable
from affiliates, $11.2 million, higher acquisition of subsidiaries due to the
Merkle-Korff transaction in 1995 versus the Valmark and Pamco transactions in
1994, $66.3 million, the absence of the proceeds from sale of a partial
interest in a subsidiary in 1995, $26.5 million, lower cash acquired in the
purchase of subsidiaries, $.3 million, higher acquisition of minority
interests, $4.0 million, and the investment in Fannie May Holdings, $1.7
million, partially offset by proceeds from an asset sale, $.7 million.

The net cash provided by financing activities for the year ended December
31, 1995 increased $110.1 million versus the same period in 1994. The increase
was due to the SPL Holdings debt issuance, $33.0 million, the M-K Holdings debt
issuance, $72.5 million, proceeds from lines of credit, $7.2 million, and other
borrowing, $1.5 million, partially offset by higher financing costs, $.8
million, and higher long-term debt payments, $3.4 million.

The Company is, and expects to continue to be, in compliance with the
provisions of the Indentures relating to the Company's Senior Notes and Senior
Subordinated Discount Debentures.

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

Impact of Inflation

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

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Page No.

Reports of Independent Auditors .................. 30

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 Changes in
Shareholders' Equity (Net Capital Deficiency)
for the years ended December 31, 1996, 1995
and 1994...................................... 35

Consolidated Statements of Cash Flows for the
years ended December 31, 1996, 1995 and 1994.. 36

Notes to Consolidated Financial Statements........ 38

Report of Independent Auditors

The Board of Directors and Shareholders
Jordan Industries, Inc.

We have audited the accompanying consolidated balance sheets of Jordan
Industries, Inc. as of December 31, 1996 and 1995, and the related consolidated
statements of operations, shareholders' equity (net capital deficiency), and
cash flows for each of the three years in the period ended December 31, 1996.
Our audits also included the financial statement schedule listed in the index
at Item 14(a). These financial statements and schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and the schedule based on our audits. We did not
audit the financial statements of certain subsidiaries whose statements reflect
total assets constituting 5% in 1996, and net sales constituting 3% in 1996 of
the related consolidated totals. Those statements were audited by other
auditors whose reports have been furnished to us, and our opinion, insofar as
it relates to data included for these subsidiaries, are based solely on the
reports of the other auditors.

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

In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material
respects, the consolidated financial position of Jordan Industries, Inc. at
December 31, 1996 and 1995, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles. Also, in
our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

/s/ Ernst & Young LLP
Ernst & Young LLP

Chicago, Illinois
March 27, 1997

INDEPENDENT AUDITOR'S REPORT

Board of Directors
Paw Print Mailing List Services, Inc.
Elk Grove Village, Illinois

We have audited the accompanying balance sheet of PAW PRINT MAILING LIST
SERVICES, INC. as of December 31, 1996, and the related statements of loss and
accumulated deficit and cash flows for the period from November 9, 1996
(inception) through December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PAW PRINT MAILING LIST
SERVICES, INC. as of December 31, 1996, and the results of its operations and
its cash flows for the period from November 9, 1996 (inception) through
December 31, 1996 in conformity with generally accepted accounting principles.

/s/ Blackman Kallick Bartelstein, LLP
BLACKMAN KALLICK BARTELSTEIN, LLP

February 11, 1997

INDEPENDENT AUDITORS' REPORT

Board of Directors
Diversified Wire & Cable, Inc.
Troy, Michigan

We have audited the accompanying balance sheet of Diversified Wire & Cable,
Inc., as of December 31, 1996 and the related statement of operations, changes
in stockholders' equity and cash flows for the period June 25, 1996
(Commencement of Operations) through December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion of these financial statements based on
our audit.

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

In our opinion the financial statements referred to above present fairly, in
all material respects, the financial position of Diversified Wire & Cable, Inc.
as of December 31, 1996, and the results of its operations, the changes in
stockholders' equity and its cash flows for the period June 25, 1996 through
December 31, 1996 in conformity with generally accepted accounting principles.

/s/ Mellen, Smith & Pivoz, P.C.
MELLEN, SMITH & PIVOZ, P.C.

February 13, 1997
JORDAN INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)

December 31,
1996 1995
ASSETS
Current assets:
Cash and cash equivalents $ 32,797 $ 41,253
Accounts receivable, net of allowance
of $2,683 and $1,306 in 1996 and 1995,
respectively 89,301 72,324
Inventories 108,132 84,259
Prepaid expenses and other current assets 9,703 7,566
Total current assets 239,933 205,402

Property, plant and equipment, net 111,040 91,422
Investments in and advances to affiliates 14,222 23,087
Goodwill, net 266,436 183,441
Other assets 50,254 29,032
Total Assets $ 681,885 $532,384

LIABILITIES AND SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)

Current liabilities:
Notes payable and lines of credit $ 856 $ 526
Accounts payable 47,036 49,086
Accrued liabilities 57,910 26,867
Advance deposits 1,900 1,830
Current portion of long-term debt 8,752 11,705
Total current liabilities 116,454 90,015

Long-term debt 687,936 513,690
Other noncurrent liabilities 3,572 2,402
Deferred income taxes 1,444 -
Minority interest 885 757

Shareholders' equity (net capital deficiency):
7% cumulative preferred stock at liquidation
value of $10,000 per share:
issued and outstanding - 187.5 shares 1,875 1,875
Common stock $.01 par value:
authorized - 100,000 shares
issued and outstanding - 95,001 shares
in 1996 and 93,501 shares in 1995 1 1
Additional paid-in capital 2,557 1,097
Note receivable from officer (1,460) -
Retained earnings (accumulated deficit) (131,379) (77,452)
Total shareholders' equity (net capital
deficiency) (128,406) (74,479)
Total Liabilities and Shareholders' Equity
(Net Capital Deficiency) $ 681,885 $532,384

See accompanying notes.

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

Year ended December 31,
1996 1995 1994

Net sales $601,567 $507,311 $424,391
Cost of sales, excluding depreciation 375,745 320,653 262,730
Selling, general and administrative expense 150,951 121,371 97,428

Depreciation 18,939 12,891 10,568
Amortization of goodwill and other
intangibles 11,499 8,793 8,531
Stock appreciation right and compensation
agreements 9,822 400 -
Loss on purchase of an affiliated company 4,488 - -
Management fees and other 4,489 3,914 2,190
Restructuring charges 8,106 5,913 -
Other non-recurring charges 4,136 1,016 -
Operating income 13,392 32,360 42,944

Other (income) and expenses:
Interest expense 63,340 46,974 40,887
Interest income (2,538) (2,841) (1,042)
Interest income from affiliate - - (429)
Gain on sale of a partial interest
in a subsidiary - - (24,161)
Total other expenses 60,802 44,133 15,255

(Loss) income before income taxes, minority
interest, and extraordinary item (47,410) (11,773) 27,689
Provision (benefit) for income taxes 4,415 (2,446) 1,332
(Loss) income before minority interest and
extraordinary item (51,825) (9,327) 26,357
Minority interest 59 (1,857) 2,616
(Loss) income before extraordinary item (51,884) (7,470) 23,741
Extraordinary loss 3,806 - -
Net (loss) income $(55,690) $(7,470) $ 23,741

See accompanying notes.

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

Total
Share-
7% Cumulative Retained holders'
Preferred Stock Common Stock Note Earnings Equity
Additional Receivable (Accumu- (Net Cap-
Number of Number of Paid-in from lated ital Def-
Shares Amount Shares Amount Capital officer Deficit) iciency)

Balance at January 1, 1994 187.5 $1,875 93,501 $1 $1,097 - $(93,642) $(90,669)
Net loss - - - - - - (23,741) (23,741)
Cumulative translation
adjustment - - - - - - 201 201
Dividends declared on
preferred stock of
subsidiary - - - - - - (140) (140)

Balance at December 31, 1994 187.5 1,875 93,501 1 1,097 - (69,840) (66,867)
Net Income - - - - - - (7,470) (7,470)
Cumulative translation
adjustment - - - - - - (97) (97)
Dividends declared on
preferred stock of
subsidiary - - - - - - (45) (45)

Balance at December 31, 1995 187.5 1,875 93,501 1 1,097 - (77,452) (74,479)
Net loss - - - - - - (55,690) (55,690)
Cumulative translation
adjustment - - - - - - 1,763 1,763
Common stock issuance - - 1,500 - 1,460 (1,460) - -
Balance at December 31, 1996 187.5 $1,875 95,001 $1 $2,557 $ (1,460) $(131,379)$(128,406)

See accompanying notes.

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

Year Ended December 31,
1996 1995 1994
Cash flows from operating activities:
Net (loss) income $ (55,690) $( 7,470) $23,741
Adjustments to reconcile net (loss) income
to net cash provided by operating
activities:
Gain on sale of a partial interest
in a subsidiary - - (24,161)
Restructuring charges 8,106 5,913 -
Other non-recurring charges - 1,016 -
Amortization of deferred financing
costs 3,001 1,743 1,405
Depreciation and amortization 30,438 21,684 19,099
Provision for (Benefit from)
deferred income taxes 2,184 (4,247) (962)
Loss on acquisition of affiliated
company 4,488 - -
Minority interest 59 (1,857) 2,616
Extraordinary loss 3,806 - -
Non-cash interest 11,987 10,694 9,544
Changes in operating assets and
liabilities (net of acquisitions):
Accounts receivable 13,894 (8,084) (6,362)
Inventories 796 (5,430) (13,394)
Prepaid expenses and other current
assets (851) (170) (1,317)
Non-current assets (1,071) (2,020) (2,495)
Accounts payable, accrued liabilities,
and other current liabilities 2,560 3,856 9,247
Advance deposits 69 169 303
Non-current liabilities (526) 679 -
Other (146) (266) (82)

Net cash provided by operating activities 23,104 16,210 17,182

Cash flows from investing activities:
Capital expenditures (17,395) (15,276) (12,112)
Notes receivable from affiliates (5,263) (13,424) (2,254)
Acquisitions of subsidiaries (150,360)(102,125) (35,872)
Cash acquired in purchase of subsidiaries 5,869 696 953
Net proceeds from sale of a partial interest
in a subsidiary - - 26,544
Acquisitions of minority interests and other (81) (6,117) (2,143)
Investment in Fannie May Holdings - (1,722) -
Proceeds from asset sale - 732 -
Net cash (used in) investing activities (167,230) (137,236) (24,884)

(Continued on following page.)
See accompanying notes.

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

(continued)

Year Ended December 31,
1996 1995 1994
Cash flows from financing activities:
Proceeds of debt issuance - SPL Holdings,
Inc. $ 13,000 $ 33,000 $ -
Proceeds of debt issuance - MK Holdings,
Inc. 20,000 72,500 -
Proceeds of debt issuance - Motors and
Gears, Inc. 170,000 - -
Proceeds from revolving credit facilities,
net 40,909 7,213 -
Payment of financing costs (11,858) (2,322) (1,561)
Repayment of long-term debt (98,143) (6,020) (2,624)
Other borrowing 2,107 1,522 -

Net cash provided by (used in) financing
activities 136,015 105,893 (4,185)

Foreign currency translation (345) - -
Net (decrease) increase in cash and cash
equivalents (8,456) (15,133) (11,887)
Cash and cash equivalents at beginning
of year 41,253 56,386 68,273
Cash and cash equivalents at end of year $ 32,797 $ 41,253 $ 56,386

Supplemental disclosures of cash flow
information:

Cash paid during the year for:

Interest $45,563 $ 33,360 $ 29,839
Income taxes, net $ 2,603 $ 1,801 $ 2,213

Noncash investing activities:

Capital leases $ 5,543 $ 19,151 $ 7,422

See accompanying notes.

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

Note 1 - Organization

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

The Company's business is divided into five groups. The Specialty Printing and
Labeling group consists of Sales Promotion Associates, Inc. ("SPAI"), Valmark
Industries, Inc. ("Valmark"), Pamco Printed Tape and Label Co., Inc. ("Pamco")
and Seaboard Folding Box, Inc. ("Seaboard"). The Motors and Gears group
consists of The Imperial Electric Company ("Imperial") and its subsidiaries,
The Scott Motors Company ("Scott") and Gear Research, Inc. ("Gear"), and
Merkle-Korff Industries, Inc. ("Merkle-Korff"), which consists of Merkle-Korff,
Inc. and Barber-Colman Motors, Inc. ("Barber-Colman"). The Telecommunications
Products Group consists of Dura-Line Corporation ("Dura-Line"), AIM Electronics
Corporation ("AIM"), Cambridge Products Corporation ("Cambridge"), Johnson
Components, Inc. ("Johnson"), Diversified Wire and Cable, Inc. ("Diversified"),
Viewsonics, Inc. ("Viewsonics"), Vitelec Electronics Ltd. ("Vitelec"), Bond
Holdings, Inc. ("Bond"), and Northern Technologies, Inc. ("Northern"). Welcome
Home, Inc. ("Welcome Home") is managed on a stand-alone basis and the remaining
businesses comprise the Company's Consumer and Industrial Products group. This
group consists of DACCO, Incorporated ("DACCO"), Sate-Lite Manufacturing
Company ("Sate-Lite"), Riverside Book and Bible House, Inc. ("Riverside"),
Parsons Precision Products, Inc. ("Parsons"), Hudson Lock, Inc. ("Hudson"),
Beemak Plastics, Inc. ("Beemak"), Cape Craftsmen, Inc. ("Cape"), and Paw Print
Mailing Services, Inc. ("Paw Print"). All of the foregoing corporations are
collectively referred to herein as the "Subsidiaries," and individually as a
"Subsidiary."

Note 2 - Significant accounting policies

Principles of consolidation

The consolidated financial statements include the accounts of the Company and
subsidiaries. All significant intercompany balances and transactions have been
eliminated.

Inventories

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

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

Depreciation and amortization

Property, plant and equipment - Depreciation and amortization of property,
plant and equipment is calculated using estimated useful lives, or over the
life of the underlying leases, if less, using the straight-line method.

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

Machinery and equipment 3-10 years
Buildings and improvements 7-35 years
Furniture & fixtures 5-10 years
Leaseholds Life of Lease

Goodwill - Goodwill is being amortized on the straight-line basis over periods
ranging from 15 to 40 years. Goodwill at December 31, 1996 and 1995 is net of
accumulated amortization of $22,765, and $15,845, respectively.

Other assets

Patents are amortized over the remainder of their legal lives, which
approximate their useful lives, on the straight-line basis. Deferred financing
costs amounting to $23,008 and $9,703, net of accumulated amortization of
$6,317 and $3,686 at December 31, 1996 and 1995, respectively, are amortized
over the terms of the loans or, if shorter, the period such loans are expected
to be outstanding. Non-compete covenants and customer lists amounting to
$9,518 and $5,705, net of accumulated amortization of $44,626 and $42,648 at
December 31, 1996 and 1995, respectively, are amortized on the straight-line
basis over their estimated useful lives, ranging from three to ten years.
Organizational costs are amortized over five years.

Adoption of FAS 121

In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 ("FAS 121"), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of".
FAS 121 requires, among other things, that the Company consider whether
indicators of impairment of long-lived assets held for use are present, that
if such indicators are present the Company determine whether the sum of the
estimated undiscounted future cash flows attributable to such assets is less
than their carrying amount, and if so, that the Company recognize an impairment
loss based on the excess of the carrying amount of the assets over their fair
value.

The Company adopted the provisions of FAS 121 in the fourth quarter of 1995.
Accordingly, the Company evaluated the ongoing value of its long-lived assets
as of December 31, 1996, and December 31, 1995. It was determined that in
1995, Welcome Home had certain leasehold improvements and furniture and
fixtures located in unprofitable stores with carrying values of $1,016 that
were impaired and that given the nature of such items, their estimated fair

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

value was insignificant. Accordingly, Welcome Home recorded an impairment loss
on such assets in the fourth quarter of 1995 of $1,016. This amount is
included in "other non-recurring charges" in the 1995 consolidated statement
of operations. The Company determined that an impairment loss was not incurred
on long-lived assets for the year ended December 31, 1996, and therefore no
such loss has been recorded during 1996. See Note 4 related to the Welcome
Home restructuring.

Income taxes

The Company provides for deferred income taxes as temporary differences arise
in recording income and expenses between financial reporting and tax reporting.
The Company has not provided for U.S. Federal and State Income Taxes on
undistributed earnings of foreign subsidiaries to the extent the undistributed
earnings are considered to be permanently reinvested.

Cash and cash equivalents

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

At December 31, 1996, the Company's cash balance included $1,550 which is being
held as collateral with respect to a capital lease. A certain cash balance is
required to remain intact throughout the term of the lease which expires on
November 17, 1998. An additional $3,000 is being held as collateral with
regard to the Company's investment in Fannie May.

Use of estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.

Reclassification

Certain amounts in the 1995 financial statements have been reclassified to
conform with the presentation in 1996.

Realignment of segment reporting

In 1995, The Company's business segments were realigned into five distinct
groups. In 1996, Dura-Line was moved from the Consumer and Industrial Products
segment to the Telecommunications Products segment. Prior period results were
also realigned into these new groups in order to provide accurate comparisons
between periods.

Note 3 - Welcome Home Chapter 11 Filing

On January 21, 1997, Welcome Home filed a voluntary petition for relief under
Chapter 11 ("Chapter 11") of title 11 of the United States code in the United
States Bankruptcy Court for the Southern District of New York ("Bankruptcy
Court"). In Chapter 11, Welcome Home will continue to manage its affairs and
operate its business as a debtor-in-possession while it develops a
reorganization plan that will restructure its operations and allow it to emerge
from Chapter 11. As a debtor-in-possession in Chapter 11, Welcome Home may not
engage in transactions outside of the ordinary course of business without
approval of the Bankruptcy Court.

Subsequent to the filing, Welcome Home reached an agreement with Fleet Capital
Corporation to provide secured debtor-in-possession financing in the form of
a credit facility. The credit facility provides for borrowings dependent upon
Welcome Home's level of inventory with maximum borrowings of $12,750. The
agreement grants a security interest in substantially all assets. Advances
under the facility bear interest at the prime rate plus 1.5%. The agreement
will terminate on March 31, 1998.

As a result of Welcome Home's Chapter 11 filing, the Company no longer has the
ability to control the operations and financial affairs of Welcome Home.
Accordingly, the Company will no longer consolidate Welcome Home in its
financial statements as of January 21, 1997, the date of the filing.

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

Year Ended December 31,
1996 1995 1994
Net sales $ 81,855 $ 93,166 $81,654
Operating income $(15,975) $(10,066) $ 7,076
Income (loss) before income taxes $(18,154) $(11,586) $ 4,836

The assets and liabilities of Welcome Home included in the consolidated results
of the Company at December 31, 1996 is as follows:

December 31, 1996
Cash and cash equivalents $ 612
Inventories 16,291
Prepaids and other assets 575
Property and equipment, net 8,563
Other assets 222
Total assets $ 26,263

Accounts payable 4,104
Accrued expenses 7,723
Intercompany payable to the Company 15,622
Credit line 10,123
Capital leases 927
Total liabilities 38,499

Excess of liabilities over assets
at December 31, 1996 12,236
Elimination of intercompany payables (15,622)
Net assets included at December 31, 1996 $ 3,386

The amounts listed in the table do not reflect any adjustments resulting from
the Welcome Home bankruptcy filings. Certain items, however, would be
significantly impacted by a liquidation of Welcome Home. The ultimate
disposition of the amounts are not expected to be finalized until the
resolution of the Welcome Home bankruptcy proceedings, the timing of which
cannot currently be estimated.

Cape Craftsmen, a consolidated subsidiary of the Company, would also be
adversely affected by a liquidation of Welcome Home. Currently 77% of Cape's
sales are to Welcome Home. Net assets included in the consolidated financial
statements are $2.4 million after intercompany eliminations.

Note 4 - Restructuring charges

In the fourth quarter of 1995, Welcome Home adopted a restructuring plan which
has continued into 1996. The major elements of the plan include a change in
Welcome Home's merchandising strategy and the liquidation of merchandise which
is not consistent with that strategy, closing unprofitable stores, and
strengthening the Company's executi