1
EXHIBIT 13.1

MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION

RESULTS OF OPERATIONS
- ---------------------
1996 COMPARED TO 1995
- ---------------------

Sales for 1996 increased by 9% from $407,412,000 in 1995 to $443,406,000.
Sales of power generation products increased by 15% from $132,213,000 to
$151,730,000. Sales of motor vehicle products increased by 8% from $145,463,000
to $157,276,000. Sales of industrial products increased by 4% from $129,736,000
to $134,400,000.
The power generation backlog at the beginning of 1996 was $69 million
compared to $74 million a year earlier. Bookings of new orders were up 28% in
1996 compared to 1995 from $127 million to $163 million. Sales were $152
million for 1996 compared to $132 million for 1995 leaving the backlog at the
end of 1996 at $80 million compared to $69 million a year ago. Bookings for the
year, as well as the year end backlog, were up even though there has been a
continuing weakness in the U.S. power generation market. Overseas demand for
the Company's power generation products was strong throughout the year and
there are still many promising booking prospects. The Company has been able to
capitalize on its ability to market and produce its products at numerous
foreign locations.
The increase in motor vehicle products sales in 1996 is a result of an
increase in the Company's sales content per vehicle produced in the automotive
industry and an increase in sales of motorcycle seating and accessories to
Harley-Davidson. The U.S. automobile industry built 2% fewer vehicles in 1996
than last year, however, the sales dollar content per vehicle improved in 1996
due to an increase in sales of the Company's moldable fiber insulation product,
Marabond(R). The U.S. automotive industry has announced a production schedule
for the first quarter of 1997 that is above the production level in the first
quarter of 1996. Dealer inventories at the end of 1996 are down to 69 days
compared to 73 days at the end of 1995. Whether or not the industry will build
the number of units called for in the schedule depends on retail vehicle sales
during the first quarter of 1997.
The increase in industrial products sales is principally due to
an improvement in the JacksonLea buff and compound business but also in the
Koller precision components operations and the Osborn brush business.
Operating income declined in 1996 from $29,679,000 in 1995 to $23,927,000
due to lower power generation earnings. Operating income for the power
generation products segment declined from $9,570,000 in 1995 to $2,069,000.
This decrease in power generation segment operating income is a result of lower
price levels, new product introductions, complexities involved on certain
foreign projects and costs involved in gearing up to handle a rapid increase in
bookings and backlog.
Operating income for the motor vehicle products segment improved from
$13,992,000 in 1995 to $14,481,000 due primarily to an improvement in operating
income for the Milsco seating business which is a result of a higher level of
sales of motorcycle seating and accessories to Harley-Davidson. Operating
income for the automotive businesses were about the same as last year even
though sales volume was 6% higher. Continuing price level pressure was the
primary reason for the lower operating income percentage for the automotive
operations.
Operating income for the industrial products segment improved from
$8,159,000 in 1995 to $9,473,000. This increase in operating income was
primarily a result of improved volume and profitability at JacksonLea, as well
as modest increases at both Osborn and Koller.
Corporate expenses increased in 1996 from $2,042,000 in 1995 to
$2,096,000. This increase is primarily due to an increase in salaries and other
expenses.
Interest expense decreased in 1996 from $9,932,000 in 1995 to $9,624,000.
This decrease in interest expense is a result of lower average debt outstanding
and slightly lower interest rates.
Other income for 1996 represents deferred financing cost amortization
more than offset by royalty income from foreign licensees of the Company's
industrial products. Other expense for 1995 represents deferred financing cost
amortization and peso devaluation losses, partially offset by royalty income.
The Company's effective income tax rate for 1996 was 39% as compared to
41.1% and 41.4% in 1995 and 1994, respectively. This decrease in the effective
income tax rate in 1996 was due principally to an increase in international
profits resulting in a lower overall tax rate.

RESULTS OF OPERATIONS
- ---------------------
1995 COMPARED TO 1994
- ---------------------

Sales for 1995 increased by 14% from $356,638,000 in 1994 to $407,412,000.
Sales of power generation products were about equal to the prior year,
increasing slightly from $132,205,000 to $132,213,000. Sales of motor vehicle
products increased by 44% from $100,816,000 to $145,463,000. Sales of
industrial products increased by 5% from $123,617,000 to $129,736,000.
Power generation sales were about equal to the prior year even though 1995
included a full year for Deltak, a manufacturer of heat recovery steam
generators and specialty boilers acquired January 31, 1994,

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JASON INCORPORATED 14
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2

- ---------------------------------------------------------------
DECEMBER 27 DECEMBER 29 DECEMBER 30
- ---------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------

Net Sales:
Power generation
products ......... $151,730 $132,213 $132,205
Motor vehicle
products ......... 157,276 145,463 100,816
Industrial
products ......... 134,400 129,736 123,617
$443,406 $407,412 $356,638

Operating Income:
Power generation
products ......... $ 2,069 $9,570 $ 9,123
Motor vehicle
products ......... 14,481 13,992 12,422
Industrial
products ......... 9,473 8,159 6,987
26,023 31,721 28,532
Corporate and
other expenses ... (2,096) (2,042) (1,689)
$ 23,927 $ 29,679 $ 26,843

Depreciation and Amortization:
Power generation
products ......... $ 3,748 $ 3,744 $ 3,472
Motor vehicle
products ......... 6,801 6,976 4,717
Industrial
products ......... 6,041 6,682 6,234
Corporate .......... 657 799 548
$ 17,247 $ 18,201 $ 14,971

Identifiable Assets:
Power generation
products ......... $ 85,822 $ 73,461 $ 75,726
Motor vehicle
products ......... 123,287 94,132 43,901
Industrial
products ......... 101,910 101,539 104,111
Corporate .......... 12,107 10,395 9,803
$323,126 $279,527 $233,541

Capital Expenditures:
Power generation
products ......... $ 1,318 $ 2,472 $ 2,149
Motor vehicle
products ......... 11,964 9,249 8,345
Industrial
products ......... 4,398 4,216 3,895
Corporate .......... 3 22 19
$ 17,683 $ 15,959 $ 14,408

compared to eleven months in 1994. Including Deltak for a full year in
1994 would result in power generation sales of $137,233,000 compared to
$132,213,000 in 1995, a decrease of 4%. The power generation backlog at the
beginning of 1995 was $74 million compared to $104 million a year earlier.
Bookings were up 18% in 1995 compared to 1994 from $108 million to $127
million. Sales were $132 million for 1995 compared to $137 million for 1994
leaving the backlog at the end of 1995 at $69 million compared to $74 million
in the prior year. Backlog was down from the prior year as a result of a
continuing weakness in the U.S. power generation market and delays of several
large overseas booking prospects caused by financing, contract terms and other
factors.
The increase in motor vehicle products sales in 1995 was primarily
a result of the inclusion of Milsco Manufacturing, acquired on January 3, 1995.
Excluding Milsco, sales for the segment were down 1% compared to last year. The
U.S. automobile industry built 2% fewer vehicles in 1995 than in 1994, however,
the sales dollar content per vehicle improved in 1995 due to an increase in
sales of the Company's moldable fiber insulation product, Marabond(R).
The increase in industrial products sales was a result of an improvement
in the Koller precision components operations as well as an improvement in the
Osborn brush business. Sales for the JacksonLea buff and compound business were
about the same as the prior year.
Operating income improved in 1995 from $26,843,000 in 1994 to $29,679,000.
Operating income for the power generation products segment improved from
$9,123,000 in 1994 to $9,570,000. This improvement in power generation segment
operating income was a result of a mix of higher margin projects for exhaust
systems and dampers which more than offset a mix of lower margin projects for
heat recovery steam generators.
Operating income for the motor vehicle products segment improved from
$12,422,000 in 1994 to $13,992,000 due to the addition of Milsco, acquired
January 3, 1995. Excluding Milsco, segment operating income declined from
$12,422,000 last year to $7,563,000 due to lower automotive industry production
levels, downward pressure on price levels, a less profitable product mix at
Sackner Products, rising material costs, start-up costs associated with a new
facility and lower earnings from the Mexican joint venture due to the peso
devaluation and its effect on the Mexican economy.
Operating income for the industrial products segment improved from
$6,987,000 in 1994 to $8,159,000. This increase in operating income was a
result of improved volume and profitability at the Osborn brush and Koller
precision components operations, offset by higher material costs at the
Company's JacksonLea operation.

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JASON INCORPORATED 15
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3
Corporate expenses increased in 1995 from $1,689,000 in 1994 to
$2,042,000. This increase was primarily due to an increase in salaries and
other expenses.
Interest expense increased in 1995 from $7,313,000 in 1994 to $9,932,000.
This increase in interest expense was a result of increased borrowings made in
connection with the acquisition of Milsco Manufacturing on January 3, 1995
($45.5 million purchase price).
Other expense for 1995 represented deferred financing cost amortization
and peso devaluation losses, partially offset by royalty income from foreign
licensees of the Company's industrial products. Other expense for 1994
represented deferred financing cost amortization offset by royalty income.
The Company's effective income tax rate for 1995 was 41.1% as compared to
41.4% and 38.8% in 1994 and 1993, respectively. This increase in the effective
income tax rate in 1994 was due principally to non deductible goodwill
resulting from recent acquisitions.

LIQUIDITY AND CAPITAL RESOURCES
During 1996, the Company satisfied the capital requirements of its
operations with internally generated funds and additional borrowings under its
revolving loan agreement with its banks. For the foreseeable future, the
Company believes it will generate funds from operations to meet the capital
requirements of its existing operations. As of December 27, 1996 the Company
had available unused borrowing capacity of $35 million under its bank revolving
loan facility.
During 1995, the Company satisfied the capital requirements of its
operations with internally generated funds. In the first quarter of 1995, the
purchase price for Milsco amounting to $45.5 million was financed by an
extension of the Company's bank revolving loan facility and $17 million of
proceeds from the issuance of convertible notes to several of the former
shareholders of Milsco. In May 1995, the Company completed a $20 million
private debt placement with an insurance company, the proceeds of which were
used to pay down the revolving loan. The revolving loan commitment was then
reduced from $115 million to $95 million.
During 1996, working capital increased by $18,367,000 from $47,670,000 at
December 29, 1995 to $66,037,000 at December 27, 1996. This increase was a
result of strong bookings in power generation requiring an increase in working
capital for new jobs in progress plus working capital acquired in connection
with the acquisition of Suroflex GmbH on October 31, 1996. During 1996, the
Company generated $6,899,000 in cash from operations. The Company anticipates
generating higher cash flow from operations during 1997.
In 1996 and 1995, the Company made capital expenditures of $17,683,000 and
$15,959,000, respectively. The major 1996 expenditures were in the motor
vehicle segment for equipment to support new Marabond(R) programs at Janesville
Products and for plant and office additions to support an increased level of
business at Milsco. The major 1995 expenditures were in the motor vehicle
products segment for equipment at Janesville Products to support new molded
Marabond(R) programs and to improve efficiency and at Koller, Milsco and
Sackner to support new programs at those locations. No significant commitments
were outstanding as of December 27, 1996.

SEASONALITY
U.S. auto makers traditionally shut down for the annual model changeover
in the third quarter. In addition, adjustments to production schedules are made
throughout the year based on retail auto sales and the level of dealer
inventories. These seasonal patterns affect the Company's motor vehicle
products operations most significantly but also have somewhat of an impact on
industrial products due to the effect on automotive suppliers which use the
Company's industrial products.

FORWARD LOOKING STATEMENTS
Statements in this Annual Report regarding the future performance of the
Company or management's opinions or beliefs constitute forward-looking
statements which are subject to certain risks and uncertainties that could
cause actual future results and developments to differ materially from those
currently projected. Such risks and uncertainties include, but are not limited
to, the effectiveness of tighter management controls in the Power Generation
business, the timing of the Company's new product introductions and market
receptivity to such products, changes in auto maker production schedules,
delays in customer delivery requirements and general economic conditions in the
Company's market segments.

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JASON INCORPORATED 16
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4
CONSOLIDATED STATEMENTS OF INCOME

(in thousands except per share data) FOR THE YEAR ENDED
- --------------------------------------------------------------------------------------------
DECEMBER 27 DECEMBER 29 DECEMBER 30
- --------------------------------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------------------------------

Net sales ........................................ $443,406 $407,412 $356,638
Cost of sales .................................... 357,552 319,188 279,003
Gross profit ..................................... 85,854 88,224 77,635
Selling and administrative expenses .............. 61,927 58,545 50,792
Operating income ................................. 23,927 29,679 26,843
Interest expense ................................. (9,624) (9,932) (7,313)
Other income (expense) ........................... 231 (185) (208)

Income before income taxes and cumulative
effect of change in accounting principle ........ 14,534 19,562 19,322
Provision for income taxes ....................... (5,668) (8,031) (7,995)

Income before cumulative effect of change
in accounting principle ......................... 8,866 11,531 11,327
Cumulative effect of change in accounting
principle, net of income taxes (Note 10)......... -- -- (212)

Net income ....................................... $8,866 $11,531 $11,115

Earnings per share:
Income before cumulative effect of
change in accounting principle ................. $.43 $.56 $.55
Cumulative effect of change in
accounting principle ........................... -- -- (.01)

Net income ....................................... $.43 $.56 $.54

CONSOLIDATED STATEMENTS OF
SHAREHOLDERS' EQUITY

FOREIGN
ADDITIONAL CURRENCY
COMMON CONTRIBUTED RETAINED TRANSLATION
(in thousands) STOCK CAPITAL EARNINGS ADJUSTMENT TOTAL
- ------------------------------------------------------------------------------------------------

Balance at December 31, 1993 .............. $1,464 $17,633 $29,111 $ (34) $48,174
Net income ................................ -- -- 11,115 -- 11,115
Common stock private placement ............ 136 14,636 -- -- 14,772
Effect of exchange rates .................. -- -- -- (76) (76)
Stock split ............................... 402 (402) -- -- --
Exercise of options ....................... 6 380 -- -- 386

Balance at December 30, 1994 .............. 2,008 32,247 40,226 (110) 74,371
Net income ................................ -- -- 11,531 -- 11,531
Effect of exchange rates .................. -- -- -- 36 36
Exercise of options ....................... 5 275 -- -- 280

Balance at December 29, 1995 .............. 2,013 32,522 51,757 (74) 86,218
Net income ................................ -- -- 8,866 -- 8,866
Effect of exchange rates .................. -- -- -- 28 28
Exercise of options ....................... 3 149 -- -- 152
Balance at December 27, 1996 .............. $2,016 $32,671 $60,623 $ (46) $95,264

The accompanying notes are an integral part of the financial statements.

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JASON INCORPORATED 17
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5
CONSOLIDATED BALANCE SHEETS

ASSETS
(in thousands)
- ---------------------------------------------------------------------------------------------
DECEMBER 27 DECEMBER 29
- ---------------------------------------------------------------------------------------------
1996 1995
- ---------------------------------------------------------------------------------------------
CURRENT ASSETS

Cash and cash equivalents .......................................... $ 2,978 $ 1,890
Accounts receivable -- net ......................................... 61,483 54,819
Inventories ........................................................ 37,839 35,602
Costs and earnings in excess of billings on uncompleted contracts .. 21,626 9,999
Income taxes receivable ............................................ 2,250 --
Deferred income taxes .............................................. 7,795 8,045
Other current assets ............................................... 6,029 4,179
Total current assets .............................................. 140,000 114,534

PROPERTY, PLANT AND EQUIPMENT
Cost ............................................................... 158,057 124,322
Less -- accumulated depreciation ................................... (66,624) (55,512)
Net property, plant and equipment ................................. 91,433 68,810

INTANGIBLE ASSETS -- NET ............................................ 89,876 94,171
OTHER ASSETS ........................................................ 1,817 2,012
Total non-current assets .......................................... 91,693 96,183
$323,126 $279,527

LIABILITIES AND SHAREHOLDERS' EQUITY
(in thousands)
- ---------------------------------------------------------------------------------------------
DECEMBER 27 DECEMBER 29
- ---------------------------------------------------------------------------------------------
1996 1995
- ---------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Current portion of long-term debt .................................. $ 3,917 $ 3,386
Accounts payable ................................................... 31,397 27,361
Accrued compensation and employee benefits ......................... 13,050 12,553
Accrued warranty ................................................... 4,434 3,289
Accrued interest ................................................... 1,580 1,275
Accrued income taxes ............................................... -- 1,968
Billings in excess of costs and earnings on uncompleted contracts .. 9,570 8,995
Other current liabilities .......................................... 10,015 8,037
Total current liabilities ......................................... 73,963 66,864

REVOLVING LOAN ...................................................... 42,190 27,010
OTHER LONG-TERM DEBT ................................................ 92,277 83,057
POSTRETIREMENT HEALTH AND OTHER BENEFITS ............................ 5,985 5,868
DEFERRED INCOME TAXES ............................................... 8,544 8,062
OTHER LONG-TERM LIABILITIES ......................................... 4,903 2,448
Total liabilities ................................................. 227,862 193,309

COMMITMENTS AND CONTINGENCIES (Note 7)
SHAREHOLDERS' EQUITY
Common stock and additional contributed capital .................... 34,687 34,535
Retained earnings .................................................. 60,623 51,757
Foreign currency translation adjustment ............................ (46) (74)
Total shareholders' equity ........................................ 95,264 86,218
$323,126 $279,527

The accompanying notes are an integral part of the financial statements.

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JASON INCORPORATED 18
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6
CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands) FOR THE YEAR ENDED
- ------------------------------------------------------------------------------------------------------------------------------
DECEMBER 27 DECEMBER 29 DECEMBER 30
- ------------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ........................................................................... $ 8,866 $ 11,531 $ 11,115
Adjustments to reconcile net income to net cash provided by operating activities:
Cumulative effect of change in accounting principle .............................. -- -- 212
Depreciation ..................................................................... 11,775 12,145 10,049
Amortization ..................................................................... 5,472 6,056 4,922
Equity in net income of affiliates ............................................... (75) (35) (62)
Deferred income taxes ............................................................ 900 (530) (951)
(Gain) loss on sale of property, plant and equipment ............................. (91) 266 19
Increase (decrease) in cash, excluding effects of acquisitions, due to changes in:
Accounts receivable ............................................................ (5,353) (2,325) 12,554
Inventories .................................................................... (642) (567) (2,115)
Costs and earnings in excess of billings on uncompleted contracts .............. (11,627) (1,632) 2,012
Income taxes receivable ........................................................ (2,250) -- --
Other current assets ........................................................... (1,710) 2,369 (3,232)
Other assets ................................................................... (574) 4,163 (606)
Accounts payable ............................................................... 2,088 2,812 (2,600)
Accrued compensation and employee benefits ..................................... (669) (612) 2,930
Accrued warranty ............................................................... 1,145 (2,078) (749)
Accrued interest ............................................................... (104) 153 403
Accrued income taxes ........................................................... (2,136) 1,657 (183)
Billings in excess of costs and earnings on uncompleted contracts .............. 575 (5,213) 5,846
Other liabilities .............................................................. 1,309 336 630
Total adjustments ............................................................ (1,967) 16,965 29,079
Net cash provided by operating activities ............................................ 6,899 28,496 40,194

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of property, plant and equipment ............................ 199 313 303
Acquisition of property, plant and equipment ....................................... (17,683) (15,959) (14,408)
Plant and equipment insurance proceeds ............................................. -- -- 4,589
Investment in joint ventures ....................................................... (72) -- (150)
Other, net ......................................................................... 30 36 (76)
Net cash used for investing activities, excluding acquisitions ....................... (17,526) (15,610) (9,742)
Net cash (used) provided before financing activities, excluding acquisitions ......... (10,627) 12,886 30,452
Acquisition of net assets ............................................................ (231) (45,536) (25,891)
Net cash (used) provided before financing activities ................................. (10,858) (32,650) 4,561

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving loans ...................................................... 129,270 131,988 122,602
Repayments on revolving loans ...................................................... (114,090) (132,013) (161,563)
Proceeds from convertible notes .................................................... -- 17,057 --
Proceeds from issuance of senior secured notes ..................................... -- 20,000 25,000
Repayments of senior notes ......................................................... (2,000) (2,000) (2,000)
Repayments of senior subordinated notes ............................................ (1,250) (1,250) (1,250)
Repayments of other long-term debt ................................................. (136) (591) (2,476)
Proceeds from common stock private placement ....................................... -- -- 14,772
Proceeds from issuance of common stock ............................................. 152 280 386
Net cash provided by (used for) financing activities ................................. 11,946 33,471 (4,529)
Net increase in cash and cash equivalents ............................................ 1,088 821 32
Cash and cash equivalents, beginning of year ....................................... 1,890 1,069 1,037
Cash and cash equivalents, end of year ............................................. $ 2,978 $ 1,890 $ 1,069
Cash paid during the year for:
Interest ........................................................................... $ 9,568 $ 9,826 $ 6,910
Income taxes ....................................................................... $ 9,068 $ 7,183 $ 8,489

The accompanying notes are an integral part of the financial statements.

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JASON INCORPORATED 19
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7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE ONE
- --------------------------------------------
SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
- --------------------------------------------

PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements
include the accounts of all wholly-owned and majority-owned subsidiaries. All
significant intercompany transactions and balances have been eliminated.
CASH AND CASH EQUIVALENTS -- For purposes of the Consolidated Statements
of Cash Flows, the Company considers all investments with a maturity of three
months or less at the time of purchase to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- The carrying amounts in the
Consolidated Balance Sheets for cash and cash equivalents, accounts receivable,
accounts payable and long-term debt instruments approximate their fair market
value.
INVENTORIES -- Inventories are stated at the lower of cost (first-in,
first-out) or market.
PROPERTY, PLANT AND EQUIPMENT -- Property, plant and equipment are stated
at cost and are depreciated over estimated useful lives on a straight-line
basis for financial reporting purposes and accelerated methods for income tax
purposes. Leasehold improvements are amortized over the term of the respective
leases using the straight-line method. Expenditures for maintenance and repairs
are charged to operations as incurred. Renewals and betterments are
capitalized.
REVENUE RECOGNITION -- Sales are recorded at the time of shipment;
however, within the Power Generation segment, certain sales are recognized
under percentage-of-completion methods of accounting.
INTANGIBLE ASSETS -- Intangible assets are comprised of the following
(in thousands):

DECEMBER 27 DECEMBER 29
- -------------------------------------------------------------
1996 1995
- -------------------------------------------------------------

Goodwill ......................... $93,246 $92,571
Other intangible assets .......... 18,975 18,888
112,221 111,459
Less--accumulated amortization ... (22,345) (17,288)
$89,876 $94,171

Other intangible assets include patents, computer software, engineering
drawings, trademarks and covenants not-to-compete. Intangible assets are being
amortized over their respective estimated useful lives ranging from 5-30 years.
The Company reviews the carrying value of intangible assets for impairment
whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. Measurement of any impairment would include a
comparison of estimated future operating cash flows anticipated to be generated
during the remaining life of the intangible assets to the net carrying value of
the intangible assets.

DEFERRED FINANCING COSTS --Expenses associated with the issuance of debt
instruments are capitalized by the Company and amortized over the respective
terms of the debt instruments. Net deferred financing costs included in other
assets at December 27, 1996 and December 29, 1995 were $957,000 and $1,322,000,
respectively.
EARNINGS PER SHARE -- Earnings per share are computed using the weighted
average number of common and common equivalent shares outstanding during the
period. On April 27, 1994, the Company declared a five for four common stock
split. The effects of the common stock split are reflected in the share and
earnings per share data for all periods presented. The weighted average number
of common and common equivalent shares outstanding were 20,595,000 for 1996,
20,642,000 for 1995, and 20,590,000 for 1994.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those estimates.

NOTE TWO
- ------------
ACQUISITIONS
- ------------

Effective October 31, 1996, the Company acquired 51% of the stock of
Suroflex GmbH ("Suroflex") for approximately $2.9 million, including cash of
$2.7 million and acquisition costs. Suroflex is a German manufacturer of
nonwoven insulation products for the automotive industry. In connection with
this acquisition, the Company was provided a ten year option to purchase the
remaining 49% interest in Suroflex for 4 million Deutsche Marks (approximately
$2.6 million at December 27, 1996). The holders of the 49% interest were also
provided the right to require the Company to purchase their 49% ownership
interest but only if Suroflex were to achieve certain minimum future income
levels. The required purchase price is dependent upon these future income
levels but in no event will exceed the amount of the Company's purchase option.
Effective January 3, 1995, the Company acquired the assets and business of
Milsco Manufacturing ("Milsco") for approximately $45.5 million, including
acquisition costs. Milsco is a manufacturer of seats for the motorcycle,
construction, agricultural and lawn/turf care industries serving the motor
vehicle products market.
The aforementioned acquisitions have been accounted for using the purchase
method and, accordingly, their operating results are included in the Company's
consolidated financial statements since their respective acquisition dates. The
purchase prices were allocated to the assets acquired and liabilities assumed
based upon their estimated fair values. The purchase prices were allocated as
follows (in thousands):

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8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUROFLEX MILSCO
- ----------------------------------------------------------

Working capital, excluding cash ...... $ 3,046 $ 4,939
Fixed assets ......................... 16,436 8,371
Other assets ......................... -- 1,561
Intangible assets .................... 261 30,952
Liabilities assumed .................. (19,512) (287)
$45,231 $45,536

The operating results of the Company as reported in the Consolidated
Statements of Income for the years ended December 27, 1996 and December 29,
1995 would not differ significantly if the purchase of Suroflex had occurred at
the beginning of 1995.

NOTE THREE
- -------------------
ACCOUNTS RECEIVABLE
- -------------------
Accounts receivable consisted of the following (in thousands):

DECEMBER 27 DECEMBER 29
- ------------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------------

Accounts receivable .............. $63,531 $57,536
Allowance for doubtful accounts .. (2,048) (2,717)
$61,483 $54,819

NOTE FOUR
- -----------
INVENTORIES
- -----------
Inventories consisted of the following (in thousands):

DECEMBER 27 DECEMBER 29
- ------------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------------

Raw materials .................... $18,588 $18,134
Work-in-process .................. 4,898 4,519
Finished goods ................... 14,353 12,949
$37,839 $35,602

NOTE FIVE
- -----------------------------
PROPERTY, PLANT AND EQUIPMENT
- -----------------------------
Property, plant and equipment consisted of the following (in thousands):

DECEMBER 27 DECEMBER 29
- ------------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------------

Land and improvements ............ $ 2,782 $ 1,997
Buildings and improvements ....... 33,361 18,881
Machinery and equipment .......... 117,020 96,368
Construction in progress ......... 4,894 7,076
158,057 124,322
Less--accumulated depreciation .. (66,624) (55,512)
$ 91,433 $ 68,810

NOTE SIX
- ------------------------
REVOLVING LOAN AGREEMENT
AND OTHER LONG-TERM DEBT
- ------------------------
The revolving loan and other long-term debt consisted of the following
(in thousands):

DECEMBER 27 DECEMBER 29
- ------------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------------

Revolving loan ............. $42,190 $27,010
- ------------------------------------------------------------------------
Convertible notes .......... $17,057 $17,057
Senior note--1995 ......... 20,000 20,000
Senior note--1994 ......... 25,000 25,000
Senior notes--1992 ........ 16,000 16,000
Senior notes--1989 ........ -- 2,000
Senior subordinated notes .. 5,000 6,250
Suroflex notes ............. 13,137 --
Other ...................... -- 136
96,194 86,443
Less--current maturities .. (3,917) (3,386)
Other long-term debt ....... $92,277 $83,057

The revolving loan facility provides for borrowings of up to $95 million
at December 27, 1996. Maximum borrowings under the revolving loan facility
decrease to $85 million on December 31, 1997, to $70 million on December 31,
1998 and to $50 million on December 31, 1999. Letters of credit outstanding
($17.4 million at December 27, 1996) on the Company's behalf reduce
availability under the facility. Borrowings under the revolving loan agreement
mature on December 31, 2000 and bear interest at either a floating rate based
upon the bank's prime rate or a Eurodollar rate plus 1.0% (the average rate on
outstanding borrowings was 7.4% at December 27, 1996). A commitment fee of
.375% per annum on the unused portion of the revolving loan facility is payable
on a quarterly basis.
During 1995, in conjunction with the acquisition of Milsco (see Note 2),
the Company issued $17,057,000 of convertible notes to the former Milsco
shareholders. The notes bear interest at 7% payable quarterly. The principal
portion of the notes are payable on January 3, 1999. At any time after January
31, 1996, and prior to payment in full of the principal amount of the notes,
the holders may convert all or any portion of the outstanding notes into shares
of the Company's $.10 par value common stock. The number of common shares to be
received by the holder is obtained by dividing the outstanding principal
balance of the notes on the date of conversion by the conversion price of
$11.25 per common share.
During 1995, the Company entered into a $20,000,000 senior note agreement
with an insurance company. The senior note bears interest at 7.34% payable
quarterly. The principal portion of the note is payable in seven equal annual
installments of $2,857,143 commencing May 31, 1999. The note proceeds were used
to reduce amounts outstanding under the revolving loan used to finance the
Milsco acquisition (see Note 2).

---------------------
JASON INCORPORATED 21
---------------------
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During 1994, the Company entered into a $25,000,000 senior note agreement
with an insurance company. The senior note bears interest at 7.72% payable
quarterly. The principal portion of the note is payable in thirteen equal
semi-annual installments of $1,923,077 commencing April 27, 1998. The note
proceeds were used to reduce amounts outstanding under the revolving loan.
During 1992, the Company entered into a $16,000,000 senior note agreement
with two insurance companies. These senior notes bear interest at 7.65% payable
semiannually. The notes are payable in six equal annual installments of
$2,667,000 commencing December 1, 1997.
As of December 27, 1996, the interest rate on the 1989 senior subordinated
notes was 11.775%. The senior subordinated notes are payable in equal annual
installments of $1,250,000 in October of each year with interest payable
semiannually. Under the terms of these agreements, the interest rate decreases
as the Company's leverage ratio decreases.
The 1989 senior notes were payable in equal annual installments of
$2,000,000 in October of each year with interest payable semiannually. The
senior notes were paid in full in October, 1996.
Long-term debt of $13.1 million, held principally by German banks, was
outstanding at the time of the Company's acquisition of Suroflex (see Note 2).
These obligations are not guaranteed by the Company and there is no requirement
for the Company to repay these obligations in the event Suroflex would be
unable to do so. In connection with the acquisition, the repayment terms were
modified to eliminate principal repayments through 1999. Thereafter, annual
payments will be required in an amount equal to the excess of 49% of the pretax
income of Suroflex over interest paid on the aforementioned obligations.
Amounts outstanding under the debt agreements bear interest at a weighted
average interest rate of 5.52% and are secured by substantially all of the
assets of Suroflex. Because of the uncertainty surrounding the repayment of
these obligations in years 2000 and 2001, no amounts have been presented in the
table of debt maturities summarized below.
Future annual maturities of long-term debt, excluding the revolving loan
and the Suroflex notes, are as follows (in thousands):

1997 ........ $ 3,917
1998 ........ 7,764
1999 ........ 27,678
2000 ........ 10,621
2001 ........ 9,371
Thereafter .. 23,706
$83,057

All of the Company's lending agreements contain restrictions, including
limitations on dividends, capital expenditures, new indebtedness and
disposition of assets. The agreements also contain various leverage, interest
coverage, fixed charge coverage, working capital and net worth requirements,
among others. The Company's revolving loan and other long-term debt is secured
by substantially all Company assets.

NOTE SEVEN
- -----------------
LEASE OBLIGATIONS
- -----------------

The Company leases machinery, transportation equipment, and office,
warehouse and manufacturing facilities which expire at various dates.
Future minimum lease payments under operating leases at December 27, 1996
are (in thousands):

1997 ............................. $ 6,297
1998 ............................. 5,407
1999 ............................. 4,042
2000 ............................. 3,340
2001 ............................. 2,045
Subsequent to 2001 ............... 2,044
Total minimum lease payments ..... $23,175

Total rental expense for all operating leases was as follows (in thousands):
For the year ended
December 27, 1996 ................ $ 6,667
December 29, 1995 ................ $ 5,993
December 30, 1994 ................ $ 5,810

NOTE EIGHT
- --------------------
SHAREHOLDERS' EQUITY
- --------------------

COMMON STOCK -- The Company has authorized 30,000,000 shares of $.10 par
value common stock of which 20,159,573 and 20,122,293 shares were issued and
outstanding at December 27, 1996 and December 29, 1995, respectively.
STOCK OPTION PLAN -- On April 16, 1987, the Company adopted a nonqualified
stock option plan. The plan provides for the issuance of up to 2,687,500 shares
of common stock to executives and other key employees. The option price
generally equals the fair market value of the common shares on the day of the
grant and an option's maximum term is ten years. Substantially all options
granted vest ratably over a three-year period. Transactions and options
outstanding under this plan, after restatement for the effects of the stock
splits, were:

PRICE
OPTIONS PER SHARE

- -------------------------------------------------------------
Outstanding at December 31, 1993 .. 1,137,268 $ 1.30-$10.20
Granted .......................... 215,250 $ 8.16-$10.20
Exercised ........................ (67,280) $ 1.30-$ 3.66
Cancelled ........................ (9,375) $ 6.88-$10.20

Outstanding at December 30, 1994 .. 1,275,863 $ 1.30-$10.20
Granted .......................... 238,750 $ 6.75-$ 8.50
Exercised ........................ (44,868) $ 1.58-$ 6.40
Cancelled ........................ (34,251) $ 6.40-$10.20

Outstanding at December 29, 1995 .. 1,435,494 $ 1.30-$10.20
Granted .......................... 165,500 $ 6.50-$ 7.50
Exercised ........................ (37,280) $ 1.29-$ 6.08
Cancelled ........................ (6,500) $ 8.25-$10.20

Outstanding at December 27, 1996... 1,557,214 $ 1.30-$10.20

Exercisable at December 27, 1996... 910,214 $ 1.30-$10.20

---------------------
JASON INCORPORATED 22
---------------------
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized for
options granted under the stock option plan. Had compensation cost been
determined based on the fair value at the grant date for awards in 1995 and
1996 consistent with the provisions of SFAS No. 123, the Company's pro forma
net income and earnings per share would have been as presented below (in
thousands):

FOR THE YEAR ENDED
- -------------------------------------------------------------------
DECEMBER 27 DECEMBER 29
- -------------------------------------------------------------------
1996 1995
- -------------------------------------------------------------------

Net income -- as reported ............ $8,866 $11,531
Net income -- pro forma .............. 8,712 11,376
Net income per share -- as reported .. .43 .56
Net income per share -- pro forma .... .42 .55

The fair value of each option granted is estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions
used for grants in 1996:

Expected stock price volatility 30.27%
Risk-free interest rate 6.31%
Expected life of options 7 years

The weighted average exercise prices per share for options outstanding and
exercisable at December 27, 1996 are $5.61 and $4.38, respectively. The
weighted average contractual life of options outstanding at December 27, 1996
is 6.17 years. The weighted average fair value of options granted during 1996
is $3.05 per share.

NOTE NINE
- ------------
INCOME TAXES
- ------------

The Company calculates its income tax provision in accordance with SFAS
109, "Accounting for Income Taxes." SFAS 109 is an asset and liability approach
that requires recognition of deferred tax assets and liabilities for the
expected future consequences of differences between the financial reporting and
tax bases of assets and liabilities.
The Company's income before income taxes and cumulative effect of change
in accounting principle consisted of the following (in thousands):

FOR THE YEAR ENDED
- ----------------------------------------------------------
December 27 December 29 December 30
- ----------------------------------------------------------
1996 1995 1994
- ----------------------------------------------------------

Domestic .. $14,266 $19,127 $18,883
Foreign ... 268 435 439
$14,534 $19,562 $19,322

The Company's provision for income taxes consisted of the following
(in thousands):

FOR THE YEAR ENDED
- --------------------------------------------------------------------
December 27 December 29 December 30
- --------------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------------

Current
Federal ......................... $3,774 $6,802 $6,807
State ........................... 900 1,600 1,400
Foreign ......................... 94 159 75
4,768 8,561 8,282
Deferred
Federal ......................... 700 (400) (247)
State ........................... 200 (130) (36)
Foreign ......................... -- -- (4)
900 (530) (287)
$5,668 $8,031 $7,995

The reconciliation between the Federal statutory tax rate expressed as a
percent of pre-tax income and the effective tax rate is as follows:

FOR THE YEAR ENDED
- --------------------------------------------------------------
December 27 December 29 December 30
- --------------------------------------------------------------
1996 1995 1994
- --------------------------------------------------------------

Federal statutory
tax rate ........... 35.0% 35.0% 35.0%
State income taxes,
net of federal
benefit ............ 5.2 4.9 4.7
Nondeductible
amortization of
intangible assets .. 3.9 2.9 2.9
Foreign sales
corporation benefit (3.9) (1.8) (1.1)
Other ................ (1.2) .1 (.1)
39.0% 41.1% 41.4%

Deferred income taxes are provided for the temporary differences between
the financial reporting and tax bases of the Company's assets and liabilities.
The Company's temporary differences which give rise to deferred tax assets and
liabilities are as follows (in thousands):

DECEMBER 27 DECEMBER 29
- ---------------------------------------------------------------------
1996 1995
- ---------------------------------------------------------------------

Deferred tax assets:
Accrued expenses and reserves ......... $ 4,416 $ 4,994
Postretirement and postemployment
benefits ............................ 2,308 2,320
Employee benefits ..................... 2,112 2,036
Foreign operating loss carryforwards .. 12,450 --
Other ................................. 1,267 1,015
Valuation allowance ................... (12,450) --
10,103 10,365
Deferred tax liabilities:
Property, plant and equipment ......... (7,942) (8,084)
Intangible assets ..................... (1,140) (886)
Other ................................. (1,770) (1,412)
(10,852) (10,382)
Net deferred tax liability .............. $ (749) $ (17)

---------------------
JASON INCORPORATED 23
---------------------

11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The deferred tax asset valuation allowance is related entirely to
certain of the Company's foreign operations, including German net operating
loss carryforwards acquired in connection with the Suroflex transaction
totaling approximately $25,900,000 and for which a valuation allowance was
provided at the time of the acquisition. At December 27, 1996, the Company's
foreign subsidiaries had approximately $27,900,000 in net operating losses
available for carryforward; approximately $2,000,000 of such carryforwards
expire at various times through 2001 while the remainder of these carryforwards
are available for an unlimited period.

NOTE TEN
- ----------------------
EMPLOYEE BENEFIT PLANS
- ----------------------

The Company maintains three defined benefit pension plans covering certain
union employees at two of its divisions. Additionally, the Company maintains
savings and profit sharing plans for the majority of employees not covered by
union defined benefit plans.
Net pension (benefit) expense for the defined benefit plans includes
the following components (in thousands):

FOR THE YEAR ENDED
- ---------------------------------------------------------------
December 27 December 29 December 30
- ---------------------------------------------------------------
1996 1995 1994
- ---------------------------------------------------------------

Service cost........... $ 20 $ 97 $ 75
Interest on projected
benefit obligation... 277 274 246
Actual return on
plan assets.......... (415) (644) 39
Net amortization
and deferral......... 112 375 (315)
Net pension
(benefit) expense.... $ (6) $ 102 $ 45

The funded status of the plans was as follows (in thousands):

FOR THE YEAR ENDED
- ------------------------------------------------------------------------
DECEMBER 27 DECEMBER 29
- ------------------------------------------------------------------------
1996 1995
- ------------------------------------------------------------------------

Actuarial present value of:
Vested benefit obligation ................ $3,795 $3,706

Accumulated benefit obligation ........... $3,836 $3,739

Projected benefit obligation ............... $3,836 $3,739
Plan assets at fair value .................. 3,849 3,676

Assets (greater) less than projected
benefit obligation ....................... (13) 63
Unrecognized net transition liability ...... (51) (62)
Unrecognized net gain ...................... 275 264
Additional minimum liability ............... 46 --

Accrued pension liability .................. $ 257 $ 265

The projected benefit obligation was determined using assumed discount
rates ranging from 7.5% to 7.75% at December 27, 1996 and 7.0% to 7.75% at
December 29, 1995, and an assumed long-term rate of return on plan assets
ranging from 7.0% to 9.0% at December 27, 1996 and December 29, 1995. Plan
assets consist principally of common stocks and government obligations.
The Company also provides postretirement health care benefits and life
insurance coverage to certain eligible employees at one of its divisions. The
Company accounts for these benefits in accordance with SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions". Under
SFAS No. 106, the costs of retiree health care benefits and life insurance
coverage are accrued over the employee service periods.
The net postretirement benefit expense includes the following components
(in thousands):

FOR THE YEAR ENDED
- --------------------------------------------------------------------------
DECEMBER 27 DECEMBER 29
- --------------------------------------------------------------------------
1996 1995
- --------------------------------------------------------------------------

Service cost for benefits earned
during the year ........................... $ 65 $ 64
Interest on accumulated postretirement
benefit obligation ........................ 395 398
Net postretirement benefit expense .......... $460 $462

Presently, the Company's postretirement benefit plans are not funded.
The status of the Company's plans is as follows (in thousands):

FOR THE YEAR ENDED
- ----------------------------------------------------------------------------
DECEMBER 27 DECEMBER 29
- ----------------------------------------------------------------------------
1996 1995
- ----------------------------------------------------------------------------

Actuarial present value of accumulated
postretirement benefit obligation:
Retirees .................................. $3,477 $3,786
Other active plan participants ............ 1,589 1,525
5,066 5,311
Unrecognized net gain ....................... 665 349

Accrued postretirement benefit obligation ... $5,731 $5,660

The discount rate used in determining the accumulated postretirement
benefit obligation was 7.75% at December 27, 1996 and December 29, 1995. The
assumed health care cost trend rates used in measuring the accumulated
postretirement benefit obligation were 8.0% and 6.0% for the hourly and
salaried plans, respectively, at December 27, 1996 and 9.0% and 6.5% for the
hourly and salaried plans, respectively, at December 29, 1995. It was assumed
that these rates will decline to 1% over periods of 30 years and 25 years for
the hourly and salaried plans at December 27, 1996 and December 29, 1995.
The health care cost trend rate assumption has a significant effect on the
amounts reported. To illustrate, a one percentage-point increase in the assumed
health care cost trend rate would increase the accumulated postretirement
benefit obligation as of December 27, 1996 by approximately $346,000 and would
increase the net postretirement benefit expense for 1996 by approximately
$40,000.
---------------------
JASON INCORPORATED 24
---------------------

12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Effective January 1, 1994, the Company adopted SFAS No. 112, "Employers'
Accounting for Postemployment Benefits" which requires employers to account for
the cost of providing certain benefits to former or inactive employees after
employment but before retirement on an accrual basis.
The Company's postemployment obligations consist primarily of disability
benefits. Adoption of this standard resulted in a one time transition
obligation charge of $353,000 ($212,000 or $.01 per share on an after tax
basis). In accordance with the requirements of SFAS No. 112, the transition
obligation was charged to 1994 income as a cumulative effect of a change in
accounting principle.
The Company maintains an incentive compensation plan which provides for
incentive payments to certain employees upon the achievement of defined
operating results. Incentive compensation expense totaled $2,277,000,
$2,943,000 and $2,888,000 in 1996, 1995 and 1994, respectively. These amounts
are included in accrued compensation and employee benefits in the accompanying
balance sheets.

NOTE ELEVEN
- --------------------------------------------------------------------------------
SEGMENT INFORMATION
- --------------------------------------------------------------------------------

Reference is made to pages 14 through 16 for segment financial data and an
unaudited description and discussion of the Company's business segments.
Power generation products include businesses which are designers and
manufacturers of auxiliary equipment for gas turbine power plant installations.
Sales to three major gas turbine manufacturers amounted to approximately 12% of
the Company's consolidated sales in 1996 and 1995. Receivables outstanding with
these customers represented approximately 13% and 10% of the Company's December
27, 1996 and December 29, 1995 accounts receivable balances, respectively.
Motor vehicle products include businesses which are manufacturers of
nonwoven fiber padding for the automotive industry and, beginning in 1995,
seating products for motorcycles and a broad array of other mobile equipment
(see Note 2). The four largest customers of this segment comprised
approximately 16% and 15% of the Company's consolidated sales in 1996 and 1995,
respectively. Receivables outstanding with these customers represented
approximately 13% and 11% of the Company's accounts receivable balance at
December 27, 1996 and December 29, 1995, respectively.
Industrial products include businesses which are manufacturers of
finishing products for industrial applications and of precision components for
original equipment manufacturers throughout the world.
The Company's export sales by geographic area are summarized below
(in thousands):

FOR THE YEAR ENDED
---------------------------------------------------------------------------
December 27 December 29 December 30
---------------------------------------------------------------------------
1996 1995 1994
---------------------------------------------------------------------------

Asia ............ $61,339 $42,474 $30,264
Middle East ..... 7,574 4,787 8,380
Canada and Mexico 14,078 7,626 10,741
Other ........... 13,782 8,065 11,666
$96,773 $62,952 $61,051

Information regarding the Company's geographic areas is summarized below
(in thousands). Amounts presented in the eliminations column represent sales
between geographic areas primarily comprised of sales made by the Company's
operations in the United States.

CANADA
AND
UNITED STATES EUROPE MEXICO ELIMINATIONS TOTAL
- ------------------------------------------------------------------------------------------------------------------------------

Year Ended December 27, 1996
Sales to unaffiliated customers $425,399 $27,144 $6,121 ($15,258) $443,406
Operating income (loss) 23,366 719 (158) -- 23,927
Identifiable assets 285,678 34,082 3,366 -- 323,126
Year Ended December 29, 1995
Sales to unaffiliated customers $393,771 $10,761 $5,277 ($ 2,397) $407,412
Operating income (loss) 29,117 629 (67) -- 29,679
Identifiable assets 271,167 5,811 2,549 -- 279,527
Year Ended December 30, 1994
Sales to unaffiliated customers $348,141 $ 6,203 $6,862 ( $4,568) $356,638
Operating income 26,126 96 621 -- 26,843
Identifiable assets 224,112 4,298 5,131 -- 233,541

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

---------------------
JASON INCORPORATED 25
---------------------
13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE TWELVE
- -------------------------------------------------------------------------------
INTERIM FINANCIAL INFORMATION (UNAUDITED)
- -------------------------------------------------------------------------------
Summarized quarterly financial data for 1996 and 1995 are presented
below (in thousands of dollars, except per share amounts):

1996
- --------------------------------------------------------------------------------------------------------------------------------
Net sales ............................... $104,631 $111,034 $106,730 $121,011 $443,406
Gross profit ............................ 21,458 23,114 21,322 19,960 85,854
Net income .............................. 2,609 2,866 2,270 1,121 8,866
Earnings per share ...................... .13 .14 .11 .05 .43

QUARTER
- --------------------------------------------------------------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH TOTAL
- --------------------------------------------------------------------------------------------------------------------------------
1995
- --------------------------------------------------------------------------------------------------------------------------------
Net sales ............................... $108,666 $107,233 $96,453 $95,060 $407,412
Gross profit ............................ 23,912 23,409 19,003 21,900 88,224
Net income .............................. 3,416 3,463 1,406 3,246 11,531
Earnings per share (1) .................. .17 .17 .07 .16 .56

(1) The sum of the quarterly earnings per share does not equal the total
for the year due to rounding.

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Jason Incorporated

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Jason
Incorporated and its subsidiaries at December 27, 1996 and December 29, 1995,
and the results of their operations and their cash flows for each of the three
years in the period ended December 27, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.

As discussed in Note 10 to the consolidated financial statements, the Company
changed its method of accounting for postemployment benefits effective January
1, 1994.

/s/ Price Waterhouse LLP
Milwaukee, Wisconsin

January 31, 1997

-----------------------------
JASON INCORPORATED 26
-----------------------------
14

SELECTED FINANCIAL DATA

OPERATING RESULTS
(in thousands except per share data) December 27 December 29 December 30 December 31 December 25
- ------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------

Net sales ................................ $443,406 $407,412 $356,638 $235,397 $206,977
Cost of sales ............................ 357,552 319,188 279,003 183,516 161,699
Gross profit ............................. 85,854 88,224 77,635 51,881 45,278
Operating income ......................... 23,927 29,679 26,843 17,690 13,929
Interest expense ......................... (9,624) (9,932) (7,313) (3,901) (3,788)
Fire insurance gain ...................... -- -- -- 2,192 --
Other income (expense) ................... 231 (185) (208) (70) (369)
Income before income taxes and cumulative
effect of change in accounting
principles .............................. 14,534 19,562 19,322 15,911 9,772
Income before cumulative effect of change
in accounting principles ................ 8,866 11,531 11,327 9,743 6,010
Net income ............................... $ 8,866 $ 11,531 $ 11,115 $ 6,496 $ 6,010
Earnings per share (1)
Income before cumulative effect of change
in accounting principles .............. $ .43 $ .56 $ .55 $ .52 $ .32
Net income .............................. $ .43 $ .56 $ .54 $ .34 $ .32

BALANCE SHEET DATA
(in thousands) December 27 December 29 December 30 December 31 December 25
- ------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------
Total assets ............................. $323,126 $279,527 $233,541 $197,374 $111,953
Long-term debt ........................... $134,467 $110,067 $ 76,422 $ 93,922 $ 36,346
Working capital .......................... $ 66,037 $ 47,670 $ 35,136 $ 53,360 $ 30,174
Shareholders' equity ..................... $ 95,264 $ 86,218 $ 74,371 $ 48,174 $ 41,331

(1) See Note 1 of financial statements.
No cash dividends have been declared on the Company's common stock for the
years presented.

---------------------
JASON INCORPORATED 27
---------------------
15

COMMON STOCK MARKET PRICES

- --------------------------------
HIGH LOW
- --------------------------------

1995
- --------------------------------
First Quarter ... $ 9 3/4 $7 3/4
Second Quarter .. 10 1/4 8
Third Quarter ... 11 7 3/8
Fourth Quarter .. 9 6
- --------------------------------
1996
- --------------------------------
First Quarter ... $ 7 1/2 $5 5/8
Second Quarter .. 8 1/2 $6 3/4
Third Quarter ... 8 3/4 $6 3/4
Fourth Quarter .. 8 1/4 6

As of February 17, 1997, there were 269 shareholders of record and
approximately 1,500 beneficial shareholders.

---------------------
JASON INCORPORATED 28
---------------------