SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                 --------------

                                    FORM 10-K

                       FOR ANNUAL AND TRANSITIONAL REPORTS
                       PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


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

         For the Fiscal Year Ended December 31, 2000

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

                          Commission File No. 333-33572

                        DIAMOND TRIUMPH AUTO GLASS, INC.
             (Exact Name of Registrant as Specified in Its Charter)


                 Delaware                                       23-2758853
       (State or Other Jurisdiction                          (I.R.S. Employer
     of Incorporation or Organization)                      Identification No.)

     220 Division Street, Kingston, Pennsylvania                     18704
      (Address of Principal Executive Office)                      (Zip Code)

       Registrant's telephone number, including area code: (570) 287-9915
                             ----------------------

               Securities registered pursuant to Section 12(b) of
                                    the Act:
                                      NONE

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

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


                                Yes [ X ] No [ ]


Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]


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


         There is no public  market  for the  registrant's  stock.  Diamond  had
1,000,000  shares of Common  Stock (the  "Common  Stock"),  par value  $0.01 per
share, and 35,000 shares of Series A 12% Senior Redeemable  Cumulative Preferred
Stock (the  "Preferred  Stock"),  par value $0.01 per share,  outstanding  as of
March 30, 2001.


                      Documents Incorporated by Reference:


                                      None.

<PAGE>

                                     PART I

ITEM 1.  BUSINESS

Overview

         Diamond is a leading  provider  of  automotive  glass  replacement  and
repair services in the Northeast, Mid-Atlantic, Midwest, Southeast and Southwest
regions of the United States.  At December 31, 2000,  Diamond operated a network
of 232 automotive glass service centers, approximately 1,069 mobile installation
vehicles and four distribution  centers in 39 states.  Diamond serves all of its
customers'  automotive glass replacement and repair needs, offering windshields,
tempered glass and other related  products.  Sales and EBITDA for the year ended
December 31, 2000 were $184.0 million and $18.4 million, respectively.

         Diamond  believes  that,  due to its  sole  focus on  automotive  glass
replacement  and  repair,  it has  one  of the  lowest  cost  structures  in the
automotive glass  replacement and repair industry.  Diamond's low cost structure
enables it to serve all  markets of the  industry,  which is  comprised  of: (1)
individual  consumers;  (2) commercial  customers,  including  commercial  fleet
leasing  and rental  car  companies,  car  dealers,  body  shops and  government
agencies;  and (3) insurance  customers,  including referrals from local agents,
claims offices and centralized call centers.  Diamond's 2000 sales to individual
consumers,  commercial and insurance customers represented  approximately 26.9%,
40.0% and 33.1% of total sales, respectively. While the two largest participants
in the industry  primarily focus on servicing  automotive glass insurance claims
(including  providing  related  insurance claims  processing  services) and also
manufacture automotive glass, Diamond has strategically positioned itself solely
as a provider of automotive glass  replacement and repair services to a balanced
mix of individual, commercial and insurance customers.

         Diamond's  sole  focus on  automotive  glass  replacement  and  repair,
combined  with  its  aggressive  cost  controls,  strong  purchasing  power  and
efficient internal  distribution  system,  have positioned Diamond as one of the
lowest cost providers of automotive glass replacement and repair services. These
competitive attributes,  together with localized marketing efforts, have enabled
Diamond's new service centers to quickly  establish a base of local consumer and
commercial  installation  business from which Diamond plans to grow all three of
its customer markets.

         Diamond's   financial    performance    reflects   attractive   service
center-level  economics.  The  cash  required  to  open  a new  service  center,
including  inventory net of trade payables,  averages $38,000. In 2000, over 75%
of Diamond's installations and repairs were performed by mobile technicians at a
customer's home or workplace. Due to the high percentage of mobile installations
and repairs which Diamond  performs,  service  centers are typically  located in
commercial or industrial areas, where rents are generally available at low cost.
In 2000,  Diamond's 140 mature service  centers  (service  centers open for four
years or longer)  averaged  approximately  $956,000  in sales and  approximately
$201,000 of branch  operating  profit per location.  For the year ended December
31, 2000,  approximately  94% of  Diamond's  mature  service  centers  achieved
positive branch operating profitability.

         Diamond believes that the high volume of its automotive glass purchases
positions  Diamond as an  important  customer  of the primary  automotive  glass
manufacturers,  thereby  reducing  Diamond's  exposure to product  shortages and
maximizing  its ability to  purchase  automotive  glass at the lowest  available
cost.   Diamond's  purchasing  program  utilizes  the  major  domestic  original
equipment  manufacturers  for truckload and spot  purchases,  and importation of
containers  from the  larger  manufacturers  throughout  the  world.  Management
believes that the scope and flexibility of Diamond's  purchasing program and its
efficient  distribution  system have enabled  Diamond to achieve  higher service
levels and a lower cost of goods than most of its competitors.

History

         Diamond was founded in 1923 by the  grandfather  of Kenneth  Levine and
Richard  Rutta,  Diamond's  Co-Chairmen  of the  Board  and  Co-Chief  Executive
Officers.  Diamond  continues to operate a service center at the location of its
original  store in  Scranton,  Pennsylvania.  Messrs.  Levine  and Rutta  joined
Diamond in 1979,  when Diamond  operated only one service  center,  and acquired
Diamond in 1987, when Diamond  operated ten service centers in Pennsylvania  and
New York. Under the management of Messrs. Levine and Rutta, Diamond has expanded
its service center and distribution network to serve 232 locations at the end of
2000.

<PAGE>

Recapitalization

         On January 15, 1998,  Diamond,  Kenneth  Levine,  Richard Rutta,  Green
Equity  Investors II, L.P. and certain  affiliated  entities of Diamond  entered
into a Second Amended and Restated Stock Purchase Agreement,  pursuant to which,
among other things, Green Equity Investors II, L.P. acquired 77.0% of the Common
Stock and 80.0% of the Preferred  Stock.  This  transaction  was  consummated on
March 31,  1998.  Concurrently  therewith,  Diamond  issued $100  million in the
aggregate principal amount of 9 1/4% Senior Notes (the "Notes") and entered into
a credit facility, under which Diamond borrowed $12.5 million.

Industry Overview

         The  market  for  the   installation  of  automotive  glass  is  highly
fragmented.  Many industry  participants  are small "mom and pop" installers who
compete less effectively against large,  geographically diversified providers of
automotive  glass  installation  services,  such as Diamond.  Consequently,  the
industry has been consolidating.

         Demand  for  automotive   glass  is  influenced  by  several   factors.
Replacement  volume increases as the total vehicle  population and the number of
miles driven  increases.  Severe  weather and road  conditions can also increase
demand for automotive glass repair and replacement. However, consumers may defer
fixing minor damage to a windshield until a vehicle trade-in, sale or inspection
for new license tags. Therefore, new automobile sales, turnover of used vehicles
and state automobile inspection laws influence automotive glass demand.

         Sales growth in the automotive  glass  replacement  and repair industry
has been  attributable  primarily  to an  increase  in the  aggregate  number of
vehicles on the road and to an increase in the aggregate  number of miles driven
per vehicle per year.  Growth in industry  sales has also been driven by the use
of larger, more complex and more expensive automotive glass in new vehicles.

Pricing

         The  price of  replacement  automotive  glass  is based on list  prices
developed by the National  Auto Glass  Specification  ("NAGS"),  an  independent
third  party.  NAGS  prices are  generally  changed  following  wholesale  price
increases  announced  by original  equipment  manufacturers.  Prices  charged by
participants  in the automotive  glass  replacement  industry are  independently
determined  using varying  percentage  discounts  from the NAGS price list.  The
impact of NAGS price  increases on Diamond's  financial  results  depends on the
level of discounts  Diamond  grants to its  customers and the level of discounts
that  Diamond can obtain from its glass  suppliers.  Effective  January 1, 1999,
NAGS  significantly  modified its published list prices in order to bring actual
prices more in line with published list prices. Although NAGS has not materially
modified its published list prices since January 1, 1999, NAGS has made periodic
modifications to its published list prices subsequent to that date.

Products

         Diamond's  primary  installation  products are  automotive  windshields
which are made of laminated safety glass. Safety glass consists of two layers of
glass bound together with a thin layer of vinyl which adds strength to the glass
and makes it very difficult for an object to penetrate a windshield upon impact.
As part of Diamond's commitment to serve all of its customers'  automotive glass
replacement needs, Diamond also offers tempered automotive glass. Tempered glass
is  generally  used for  side  and rear  automobile  and  truck  windows  and is
significantly  stronger than regular glass due to specialized  processing  which
causes tempered glass to shatter into dull-edged pebbles, reducing glass related
injuries. In addition, Diamond offers automotive glass repair services.

Customers and Marketing

         Diamond provides  automotive glass replacement  services to each of the
industry's  customer markets,  which include  individual  consumers,  commercial
customers  and  insurance  customers.  Management  believes  that in addition to
capturing additional consumer sales, broadening Diamond's service center network
and geographic coverage will facilitate Diamond's efforts to obtain an increased
share of the national insurance and fleet markets,  whose participants generally
establish   multiple   providers   for  their   automotive   glass   replacement
requirements.  Diamond's  2000 sales to  individual  consumers,  commercial  and
insurance customers  represented  approximately

                                      -2-

<PAGE>

26.9%, 40.0% and 33.1% of total sales, respectively.  In 2000, Diamond's top ten
customer  accounts  comprised  approximately  21.5% of total sales and no single
customer account exceeded 5.7% of total sales.

         Diamond's  marketing is conducted  through a  combination  of prominent
Yellow Pages  advertising  and by a direct  sales force of 143  representatives.
Yellow Pages  advertising is supported by customer service  representatives  and
extended hour call centers that answer  telephone  inquiries,  schedule  service
appointments  and  arrange  emergency  service.   Sales  representatives  market
Diamond's  services to insurance claim centers,  local agents,  fleet operators,
automobile  dealers  and body shops and have  established  relationships  at all
levels of the major insurance, fleet and rental car company organizations.

         Individual  Consumers.  The marketing focus to the individual  consumer
market is low price and speed of service.  Diamond's  consumer customers consist
of individuals who are not associated with a related automobile insurance claim.
Customers  in this  market  typically  do not have  automobile  glass  insurance
coverage,  have a high insurance  deductible or do not want to file a claim with
their insurance  carrier.  These  customers are primarily  concerned with price,
quality,   convenience  and  speed  of  service.  Substantial  portions  of  the
industry's  consumer  sales are  generated  as a result of  localized  marketing
efforts,  such as  Yellow  Pages  advertising.  In  order  to  attract  consumer
customers,  Diamond's Yellow Pages  advertisements are designed to appear in the
first group of display  advertisements and promote Diamond's competitive pricing
and  fast   mobile   service.   When  a  customer   calls,   Diamond's   service
representatives  are trained to  emphasize  Diamond's  low price  guarantee  and
prompt service capabilities.  The majority of Diamond's services can be provided
by its mobile installation technicians at a customer's home or workplace.

         Commercial  Customers.  Diamond markets to commercial customers through
its direct sales force,  which  emphasizes  high quality  service at a low cost.
Diamond's   commercial  market  customers   include   commercial  fleet  leasing
companies,  rental car companies,  car  dealerships,  body shops,  utilities and
government  agencies.  Diamond's customers in the commercial market include Avis
Rent-A-Car, Inc., Enterprise Rent-A-Car and Bell Atlantic Corporation (Verizon).
Management  believes that Diamond's  expanding  geographic  coverage will enable
Diamond to obtain an increased  share of the  national  fleet  automotive  glass
replacement business.

         Insurance Customers.  Diamond markets its services to all levels of the
insurance industry,  including local agents, claims offices and centralized call
centers.  In addition to marketing  directly to insurance  companies through its
direct sales force,  Diamond participates as an approved service provider within
glass replacement networks  administered by third parties,  including certain of
Diamond's  competitors.  These third party  networks  act as  outsourced  claims
administrators under contract to an insurance company.  Historically,  insurance
companies  that  participate  in these networks have required that more than one
service  provider provide  automotive  glass  replacement and repair services in
order to ensure  competitive  pricing and high  quality  service.  Diamond is an
approved service provider for many national insurance carriers,  including State
Farm Insurance Company, Nationwide Insurance Company, Allstate Insurance Company
and Travelers Property Casualty Corporation.

Service Centers

         Diamond's repair and  installation  service is performed either on-site
at a service  center  location or at a customer's  home or workplace by a mobile
technician.  Diamond operates  approximately 1,069 mobile installation vehicles.
In 2000,  over 75% of  Diamond's  installations  and repairs  were  performed by
mobile technicians at a customer's home or workplace. Due to the high percentage
of mobile installations and repairs which Diamond performs,  service centers are
typically located in commercial or industrial  areas,  where rents are generally
available at low cost.

         At December  31,  2000,  Diamond  operated a network of 232  automotive
glass service centers, approximately 1,069 mobile installation vehicles and four
distribution  centers  in 39 states  in the  Northeast,  Mid-Atlantic,  Midwest,
Southeast and Southwest regions of the United States.  These service centers are
operated under the following service marks:  Triumph Auto Glass and Diamond Auto
Glass in the Northeast and Mid-Atlantic;  and Triumph Auto Glass in the Midwest,
Southeast and Southwest. Any expansion into new states will be under the Triumph
Auto  Glass  registered  service  mark.  Due to  the  weak  industry  conditions
experienced  in 1999,  Diamond  was more  deliberate  with  its  service  center
expansion in 2000. Diamond opened seven new service centers in 2000, as compared
to an average of 32 new service centers in the four years prior to 2000. Diamond
will  continue  to be

                                      -3-

<PAGE>

deliberate  in its service  center  expansion  policy as compared to the average
number of service centers opened in the four years prior to 2000.

         The following chart provides  information  concerning Diamond's service
center openings from 1990 to 2000:

                                                 Service Centers     % Increase
           Year      Openings   Consolidations    At Year End    Over Prior Year
           ----      --------   --------------    -----------    ---------------
           1990....     6             --               24             33.3%
           1991....     7             --               31             29.2%
           1992....     12            --               43             38.7%
           1993....     17            --               60             39.5%
           1994....     31            --               91             51.7%
           1995....     17             3              105             15.4%
           1996....     39             2              142             35.2%
           1997....     33             1              174             22.5%
           1998....     33             1              206             18.4%
           1999....     24             4              226              9.7%
           2000....      7             1              232              2.7%


         Service  centers are open for  business  from 8:00 a.m. to 5:00 p.m. on
Monday  through  Friday and 8:00 a.m. to 12:00 p.m. on Saturday.  Service center
employees perform  installation  services and process customer  inquiries during
regular business hours.  After-hours customer inquiries are handled by Diamond's
emergency  and extended  hour call center.  Operators at this call center answer
customer inquiries,  schedule mobile installation services and arrange emergency
service from service centers throughout Diamond's network.

Distribution System

         Diamond  currently  operates  four  distribution  centers which operate
seven days a week and are located in  Kingston,  Pennsylvania;  Columbus,  Ohio;
Atlanta,  Georgia; and Rock Island,  Illinois.  Diamond's efficient distribution
system enables Diamond to make regular  deliveries to all of its service centers
both to replenish stock and to provide  automotive  glass that is not carried in
service center inventories. Through its distribution centers, Diamond supports a
significant portion of its sales with internally  distributed product,  with the
remainder  being  purchased  from the spot market.  Diamond's  highly  efficient
distribution system,  combined with a successful inventory management program at
its service  centers,  enables  Diamond to meet immediate  service  demands at a
lower cost than if larger  quantities  of  automotive  glass were required to be
purchased in the spot market.

Suppliers

         Diamond believes that the high volume of its automotive glass purchases
positions  Diamond as an  important  customer  of the primary  automotive  glass
manufacturers,  thereby  reducing  Diamond's  exposure to product  shortages and
maximizing  its ability to  purchase  automotive  glass at the lowest  available
cost.   Diamond's  purchasing  program  utilizes  the  major  domestic  original
equipment  manufacturers  for truckload and spot  purchases,  and importation of
containers  from the  larger  manufacturers  throughout  the  world.  Management
believes that the scope and flexibility of Diamond's  purchasing program and its
efficient  distribution  system have enabled  Diamond to achieve  higher service
levels and a lower cost of goods than those of most of its competitors.

         Diamond has  numerous  domestic  and  international  suppliers,  and is
continuing  to expand its  supplier  network  by  utilizing  additional  foreign
suppliers in order to hedge against product  shortages and to reduce the overall
cost of automotive glass. In 2000, no single supplier  represented more than 20%
of Diamond's  automotive glass purchases.  Due to the competitive  nature of the
automotive  glass  manufacturing  industry,  Diamond  does  not  anticipate  any
substantial  difficulty in sourcing its  automotive  glass  requirements  in the
foreseeable future.

                                      -4-

<PAGE>

Competition

         The  automotive  glass   replacement  and  repair  industry  is  highly
competitive, with customer decisions based on price, customer service, technical
capabilities,  quality,  advertising and geographic coverage. The competition in
the  industry  could  result  in  additional  pricing  pressures,   which  would
negatively  affect  Diamond's  results of  operations.  In addition,  certain of
Diamond's   competitors  provide  insurance  companies  with  claims  management
services,   including   computerized  referral  management,   policyholder  call
management,  electronic auditing and billing services and management  reporting.
While the  market is  generally  highly  fragmented,  Diamond  competes  against
several  other large  competitors  in this market,  the largest two of which are
Safelite  Glass  Corporation  and  Harmon   AutoGlass,   a  division  of  Apogee
Enterprises, Inc.

Employees

         As of December  31,  2000,  Diamond  employed  1,697  persons.  None of
Diamond's  employees  are  covered by a  collective  bargaining  agreement,  and
Diamond believes that its relationships with its employees are good.

                      FACTORS AFFECTING FUTURE PERFORMANCE

Diamond is substantially  leveraged and has significant debt service obligations
which could impair its ability to pay the amounts due under the Notes.

         Diamond is  substantially  leveraged and has  significant  debt service
obligations,  which could  impair its ability to pay the amounts due under its 9
1/4% Senior Notes.  As of December 31, 2000,  Diamond's  aggregate  consolidated
indebtedness  was  approximately  $100.5  million (of which  approximately  $0.5
million represented  aggregate  outstanding  indebtedness under Diamond's credit
facility), and Diamond had $48.4 million (liquidation preference) of outstanding
Preferred Stock and a stockholders' deficit of $81.3 million.

         The degree to which Diamond is leveraged may impair  Diamond's  ability
to pay the  amounts  due under  the  Notes.  Possible  adverse  consequences  of
Diamond's degree of leverage include the following:

          o         Diamond's ability to obtain additional financing for working
                    capital,  capital expenditures or general corporate purposes
                    may be impaired;

          o         a substantial portion of Diamond's cash flow from operations
                    goes  to  the  payment  of  interest  and  principal  on its
                    outstanding  debt,  thereby  reducing the funds available to
                    Diamond for other purposes;

          o         the credit  facility and the  indenture  governing the Notes
                    contain   certain   restrictive   financial   and  operating
                    covenants;

          o         Diamond's  indebtedness  under  the  credit  facility  is at
                    variable rates of interest,  which makes Diamond  vulnerable
                    to increases in interest rates;

          o         Diamond's indebtedness outstanding under the credit facility
                    is secured by a first priority lien on substantially  all of
                    its  assets  and  will  become  due  prior  to the  time the
                    principal on the Notes will become due;

          o         Diamond's  substantial  degree of  leverage  will  limit its
                    ability to adjust  rapidly to  changing  market  conditions,
                    reduce its ability to withstand competitive  pressures,  and
                    make  it more  vulnerable  in the  event  of a  downturn  in
                    general economic conditions,  repeated years of mild weather
                    conditions or other adverse events in its business.

         If Diamond is unable to generate  sufficient cash flows from operations
in the future to service its  indebtedness,  it may be required to refinance all
or a portion of its  indebtedness,  including the Notes, or to obtain additional
financing  or to  dispose  of  material  assets or  discontinue  certain  of its
operations.  The credit facility and

                                      -5-

<PAGE>

the indenture  governing  the Notes  restrict  Diamond's  ability to sell assets
and/or  use  the  proceeds  therefrom.   Diamond  cannot  assure  you  that  any
refinancing or asset sales would be possible under its debt instruments existing
at  that  time,  that  the  proceeds  which  Diamond  could  realize  from  such
refinancing or asset sales would be sufficient to meet its obligations  then due
or that Diamond could obtain any additional financing.

The Notes are subordinated to Diamond's secured indebtedness.

         The Notes are:

          o         senior,  unsecured  obligations  of  Diamond  and will  rank
                    senior in right and priority of payment to any  indebtedness
                    of Diamond  that by its terms is expressly  subordinated  to
                    the Notes.

          o         subordinated to secured  indebtedness of Diamond  (including
                    indebtedness  under the credit facility) with respect to the
                    assets  securing such  indebtedness.  The credit facility is
                    secured by a first  priority  lien on  substantially  all of
                    Diamond's assets.

          o         subordinated   to   claims   of   creditors   of   Diamond's
                    subsidiaries, except to the extent that holders of the Notes
                    may  be  creditors  of  such  subsidiaries  pursuant  to the
                    Guarantees.  Diamond  currently  has no  subsidiaries,  and,
                    accordingly, there are currently no Guarantees.

         Diamond's  obligations  with  respect to the Notes will be  guaranteed,
jointly and  severally,  on a senior,  unsecured  basis by certain of its future
subsidiaries.  Any obligations of Diamond's  subsidiaries  will be senior to the
claims of the  holders of the Notes  with  respect to the assets of any of these
subsidiaries,  except  to the  extent  that  the  holders  of the  Notes  may be
creditors of a subsidiary  pursuant to a Guarantee.  Any claim by the holders of
the Notes with respect to the assets of any subsidiary  will be  subordinated to
secured indebtedness  (including indebtedness under the credit facility) of that
subsidiary with respect to the assets securing such indebtedness.  The rights of
Diamond and its creditors,  including  holders of the Notes, to realize upon the
assets of any subsidiary upon that  subsidiary's  liquidation or  reorganization
(and the  consequent  rights of  holders  of the Notes to  participate  in those
assets)  will be subject  to the prior  claims of that  subsidiary's  creditors,
except to the extent  that  Diamond  may itself be a  creditor  with  recognized
claims  against that  subsidiary  or to the extent that the holders of the Notes
may be creditors with recognized claims against that subsidiary  pursuant to the
terms of a Guarantee (subject, however, to the prior claims of creditors holding
secured  indebtedness of any subsidiary with respect to the assets securing that
indebtedness).  The  credit  facility  is secured  by a first  priority  lien on
substantially all of Diamond's assets. In addition,  the indenture governing the
Notes restricts the amount of indebtedness  that  subsidiaries  are permitted to
incur.

Diamond  may not be able to comply with  certain  provisions  in the  agreements
governing  its  outstanding  debt that  restrict  Diamond's  actions and require
Diamond to maintain financial ratios.

         The credit  facility  and the  indenture  governing  the Notes  include
certain covenants that, among other things, restrict Diamond's ability to:

          o         make investments;

          o         incur additional indebtedness;

          o         grant liens;

          o         merge or consolidate with other companies;

          o         change the nature of its business;

          o         dispose of assets;

          o         make loans;

                                      -6-

<PAGE>

          o         pay dividends or redeem capital stock;

          o         guarantee the debts of other persons;

          o         make capital expenditures; and

          o         engage in transactions with affiliates.

         The credit  facility  requires  Diamond to maintain  minimum EBITDA (as
defined in the credit facility),  calculated monthly,  for each 12-month period,
ending as of the end of each month, of at least $10.5 million.

         Diamond's ability to comply with the minimum EBITDA requirement and the
other  provisions  of its credit  facility may be affected by events  beyond its
control.  Diamond's  breach of any of these  covenants could result in a default
under the credit facility,  in which case the lender would,  among other things,
be entitled to elect to declare  all  amounts  owing under the credit  facility,
together with accrued interest, to be due and payable. If Diamond were unable to
repay these borrowings,  the lender could proceed against its collateral. If the
indebtedness  under the credit facility were accelerated,  Diamond cannot assure
you that its assets would be sufficient to repay in full that  indebtedness  and
Diamond's other indebtedness, including the Notes.

The Notes are subject to fraudulent conveyance laws.

         Diamond's  obligations  under the Notes may be subject to review  under
relevant  federal  and state  fraudulent  conveyance  laws in the  event  that a
bankruptcy,  reorganization  or  rehabilitation  case by or on  behalf of unpaid
creditors of Diamond were to occur.  Under these laws,  Diamond's  obligation to
repay the Notes could be voided, or the Notes could be subordinated to all other
creditors  of  Diamond,  if, at the time  Diamond  issued the Notes,  any of the
following were true:

          o         Diamond intended to hinder, delay or defraud any existing or
                    future  creditor  or  contemplated  insolvency  in  order to
                    prefer one or more  creditors to the  exclusion in the whole
                    or in part of others;

          o         Diamond was insolvent or was rendered insolvent by reason of
                    issuing the Notes;

          o         Diamond  was  engaged  in a  business  or  transaction  with
                    unreasonably small capital; or

          o         Diamond  intended to incur, or believed that it would incur,
                    debts beyond its ability to pay those debts as they matured.

         In the event that in the future the Notes are  guaranteed by subsidiary
guarantors, the Guarantees may also be subject to review under federal and state
fraudulent  transfer  laws.  If a court were to  determine  that,  at the time a
subsidiary guarantor became liable under its Guarantee,  it satisfied certain of
the conditions  stated above,  the court could void the Guarantee and direct the
repayment of amounts paid thereunder.

         The measure of insolvency under fraudulent  conveyance  statutes varies
depending upon the laws of the jurisdiction being applied.  Generally,  however,
Diamond  would be  considered  insolvent  if, at the time it issued  the  Notes,
either (1) the sum of its debts was greater  than all of its  property at a fair
valuation;  or (2) if the present fair salable  value of its assets is less than
the amount that it would be required to pay on its existing debts as they become
absolute and matured.  The  obligations of each  Subsidiary  Guarantor under its
Guarantee,  however,  will be  limited  in a manner  intended  to avoid it being
deemed a fraudulent conveyance under applicable law.

         Additionally,  under federal  bankruptcy or applicable state insolvency
law, if a  bankruptcy  or  insolvency  proceeding  were  initiated by or against
Diamond  within 90 days after it made any payment with respect to the Notes,  or
if Diamond anticipated  becoming insolvent at the time of that payment, all or a
portion  of the  payment  could be avoided as a  preferential  transfer  and the
recipient of that payment could be required to return that payment.

                                      -7-

<PAGE>

         Diamond  does not know what  standard  a court  would use to  determine
whether Diamond was insolvent at the time the Notes were issued, nor can Diamond
assure you that a court would not find  Diamond to be  insolvent on that date or
that,  regardless  of  Diamond's  solvency,  that  the  issuances  of the  Notes
constituted fraudulent conveyances on another of the grounds summarized above.

Diamond  may not be able to comply  with its  obligations  under  the  indenture
governing the Notes to purchase all of the Notes upon a change of control.

         Upon the occurrence of a change of control, the indenture governing the
Notes requires Diamond to make an offer to repurchase all outstanding Notes at a
price equal to 101% of the aggregate  principal  amount  thereof,  together with
accrued and unpaid  interest  thereon to the date of  repurchase.  However,  the
credit facility prohibits Diamond from repurchasing any Notes,  unless and until
Diamond has paid the indebtedness  under the credit facility in full.  Diamond's
failure to  repurchase  the Notes would result in a default  under the indenture
governing  the Notes and the credit  facility.  Diamond's  inability  to pay the
indebtedness under the credit facility, if accelerated,  would also constitute a
default  under the  indenture  governing  the Notes,  which  could have  adverse
consequences  to Diamond  and to the  holders  of the  Notes.  In the event of a
change of  control,  Diamond  cannot  assure you that it would  have  sufficient
assets to  satisfy  all of its  obligations  under the credit  facility  and the
Notes.

Diamond's future expansion may be hindered by its lack of sufficient  capital or
other factors, which would adversely affect Diamond's continued growth.

         Diamond's  continued  growth  depends  to a  significant  degree on its
ability to open new service  centers in existing  and new markets and to operate
these service centers on a profitable  basis. In addition,  Diamond will require
additional  distribution  centers  as it  implements  its  program to expand its
service centers to achieve a nationwide  presence.  Diamond's  ability to expand
will depend,  in part, on business  conditions and the availability of qualified
managers  and  service  representatives,  and  sufficient  capital.  Due to weak
industry conditions  experienced in 1999, resulting from reduced demand for auto
glass services and lower average revenue per installation unit, Diamond was more
deliberate with its service center  expansion in 2000.  Diamond opened seven new
service  centers in 2000, as compared to an average of 32 new service centers in
the four years prior to 2000.  Diamond  will  continue to be  deliberate  in its
service  center  expansion  policy as compared to the average  number of service
centers  opened in the four years prior to 2000. A decline in Diamond's  overall
financial  performance may adversely impact its ability to expand in the future.
Diamond  expects that the net cash  generated  from  operations,  together  with
borrowings  under  the  credit  facility,   should  enable  it  to  finance  the
expenditures related to its expansion. However, Diamond cannot assure you that:

          o         it will possess sufficient funds to finance the expenditures
                    related to its expansion;

          o         new service centers can be opened on a timely basis;

          o         new service  centers can be operated on a profitable  basis;
                    or that

          o         Diamond will be able to hire, train and integrate employees.

         In the event net cash generated from  operations  together with working
capital  reserves and borrowings  under the credit facility are  insufficient to
finance  the  expenditures  related to  Diamond's  expansion,  Diamond  might be
required to reduce its expansion in the future.

Diamond's operating results are affected by seasonality and weather.

         Weather  has  historically  affected  Diamond's  sales,  net income and
EBITDA,  with severe weather  generating  increased sales, net income and EBITDA
and mild weather  resulting in lower sales, net income and EBITDA.  In addition,
Diamond's business is somewhat seasonal,  with the fourth quarter  traditionally
its slowest period of activity.  Diamond  believes  these  seasonal  trends will
continue for the  foreseeable  future.  Although  Diamond's  installation  units
increased by only 0.7% in fiscal 2000,  revenue per installation  unit increased
an average of 10.7% in 2000.  The  increase  in  Diamond's  average  revenue per
installation  unit is attributable

                                      -8-

<PAGE>

to the stabilization of price compression and to its sales mix.

Diamond  competes  against other large  companies that may be better equipped to
provide customers with automotive glass replacement and repair services.

         The  automotive  glass   replacement  and  repair  industry  is  highly
competitive, with customer decisions based on price, customer service, technical
capabilities,  quality,  advertising and geographic coverage. The competition in
the  industry  could  result  in  additional  pricing  pressures,   which  could
negatively  affect  Diamond's  results of  operations.  In addition,  certain of
Diamond's   competitors  provide  insurance  companies  with  claims  management
services,   including   computerized  referral  management,   policyholder  call
management,  electronic auditing and billing services and management  reporting.
While the market is generally highly  fragmented,  Diamond also competes against
several  other large  competitors  in this market,  the largest two of which are
Safelite  Glass  Corporation  and  Harmon   AutoGlass,   a  division  of  Apogee
Enterprises, Inc. Many of Diamond's competitors have substantially less leverage
than  Diamond,  which may allow  them  greater  flexibility  in  managing  their
operations.  Diamond  cannot  assure  you  that it will be able to  continue  to
compete     effectively    with    these    or    other     competitors.     See
"Business--Competition."

Diamond is dependent on its key personnel  and the loss of key  personnel  could
adversely affect its results of operations.

         Diamond's   success  is  largely   dependent  upon  the  abilities  and
experience of its senior  management  team,  including  Kenneth Levine,  Richard
Rutta,  Norman Harris and Michael A. Sumsky. The loss of services of one or more
of  these  senior   executives  could  adversely  affect  Diamond's  results  of
operations.

Ownership of Diamond is concentrated in Green Equity  Investors II, L.P.,  whose
interests may conflict with those of the holders of Notes.

         Green Equity Investors II, L.P., an investment  partnership  managed by
Leonard Green and Partners,  L.P. ("LGP"),  owns 77.0% of the outstanding shares
of  Diamond's  Common  Stock and 80.0% of the  outstanding  shares of  Diamond's
Series A 12% Senior Redeemable  Cumulative  Preferred Stock. As a result,  Green
Equity Investors II, L.P. has the power to elect all of the members of Diamond's
board of  directors,  to approve all  amendments  to  Diamond's  certificate  of
incorporation and bylaws and to effect fundamental  corporate  transactions such
as mergers, asset sales and public offerings. Diamond cannot assure you that the
interests  of  Green  Equity  Investors  II,  L.P.  will not  conflict  with the
interests  of the  holders  of the Notes.  See  "Security  Ownership  of Certain
Beneficial Owners and Management."

Diamond's  results of  operations  may be  adversely  affected  by a downturn in
general economic conditions or an increase in fuel prices.

         Diamond's  revenues are dependent on the annual  number of  windshields
replaced, which in turn is influenced by the aggregate number of vehicles on the
road and the number of miles driven per vehicle per year. As a result, a general
economic  downturn or higher fuel prices could have a material adverse effect on
Diamond's results of operations.

Diamond's  business  involves the potential for product liability claims against
Diamond, which may adversely affect Diamond's business,  financial condition and
results of operations if the cost of those claims  exceeds  Diamond's  insurance
coverage.

         The  replacement  of  windshields  entails  risk of  product  liability
claims,  particularly  if the  windshields  Diamond  uses  in its  business  are
defective.  Diamond is involved in legal  proceedings in the ordinary  course of
its  business.  Management  believes  that the  amounts  which may be awarded or
assessed against Diamond in connection with these matters, if any, will not have
a material adverse effect on Diamond's financial condition, operating results or
liquidity.  In  addition,  management  believes  that  Diamond  has  appropriate
insurance coverage to operate its business.

                                      -9-

<PAGE>

However,  a successful  product  liability  claim (or series of claims)  against
Diamond in excess of its insurance coverage could have a material adverse affect
on Diamond's business, financial condition and results of operations.


                                      -10-

<PAGE>


ITEM 2.  PROPERTIES

         The  following   chart  provides   information   concerning   Diamond's
headquarters,  distribution  facilities and emergency call centers, all of which
are leased:

                                                                  Area in Square
                Facility                  Function                     Feet
                --------                  --------                     ----
            Kingston, PA.............  Headquarters                   121,000
                                       Distribution Center
                                       Call Center
            Columbus, OH.............  Distribution Center             26,000
            Atlanta, GA..............  Distribution Center             20,000
            Rock Island, IL..........  Distribution Center             16,000
            Scranton, PA.............  Call Center                      2,500

         The following  chart  provides  information  concerning  the number and
location of Diamond's service centers, all of which are leased:

                        Number of
                        Service                                     Number of
State                   Centers               State              Service Centers
-----                   -------               -----              ---------------

Alabama...........          6              Nebraska..........             1
Arkansas..........          1              New Hampshire.....             5
Colorado..........          5              New Jersey........            10
Connecticut.......          6              New Mexico........             1
Delaware..........          2              New York..........            27
Florida...........         10              North Carolina....             8
Georgia...........          9              Ohio..............            11
Illinois..........          6              Oklahoma..........             2
Indiana...........          7              Pennsylvania......            26
Iowa..............          3              Rhode Island......             1
Kansas............          3              South Carolina....             4
Kentucky..........          3              South Dakota......             1
Louisiana.........          3              Tennessee.........             5
Maine.............          3              Texas.............             6
Maryland..........          8              Utah..............             2
Massachusetts.....          9              Vermont...........             3
Michigan..........          8              Virginia..........            11
Minnesota.........          3              West Virginia.....             4
Mississippi.......          1              Wisconsin.........             5
Missouri..........          3

         Diamond believes that its facilities are adequate for its current needs
and that suitable additional  distribution centers and service locations will be
available to satisfy Diamond's expansion needs.

ITEM 3.  LEGAL PROCEEDINGS AND INSURANCE

         Diamond is involved in legal  proceedings in the ordinary course of its
business.  Management believes that the amounts which may be awarded or assessed
against  Diamond in  connection  with  these  matters,  if any,  will not have a
material adverse effect on Diamond's financial  condition,  operating results or
liquidity.  In  addition,  management  believes  that  Diamond  has  appropriate
insurance coverage to operate its business.

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

         Not Applicable.

                                      -11-

<PAGE>


                                     PART II

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

         There is no  established  public market for  Diamond's  Common Stock or
Series A 12% Senior Redeemable Cumulative Preferred Stock.

         At March 30,  2001,  there  were five  holders  of record of  Diamond's
Common  Stock and three  holders  of record  of  Diamond's  Series A 12%  Senior
Redeemable Cumulative Preferred Stock.

         Diamond's  ability to pay  dividends is limited by the credit  facility
and the Notes. Diamond does not currently intend to pay dividends on its capital
stock.  Any future  determination  to pay dividends will be at the discretion of
Diamond's  Board of Directors and will be dependent  upon  Diamond's  results of
operations, capital requirements,  financial condition, contractual restrictions
and other factors deemed relevant at the time by Diamond's Board of Directors.


                                      -12-

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         The selected  historical  and unaudited pro forma  condensed  financial
data as of December  31,  1996,  1997,  1998,  1999 and 2000 and for each of the
years then ended has been derived from Diamond's audited  financial  statements.
The report of KPMG LLP, independent  auditors, on Diamond's Financial Statements
as of December  31,  1999 and 2000,  and for each of the years in the three year
period ended December 31, 2000, is included elsewhere herein.

         This summary  historical  and unaudited pro forma  condensed  financial
data should be read in conjunction with "Management's Discussion and Analysis of
Financial   Condition  and  Results  of  Operations"  and  Diamond's   Financial
Statements  and the related  notes  thereto  appearing  elsewhere in this Annual
Report.
<TABLE>
<CAPTION>

                                                                         Years Ended December 31,
                                                                         ------------------------
                                                          1996        1997        1998        1999         2000
                                                          ----        ----        ----        -----        ----
                                                                          (dollars in thousands)
Statement of Operating Data:
<S>                                                       <C>         <C>         <C>          <C>         <C>
Sales..................................................   $101,355    $122,005    $149,609     $164,520    $184,015
Cost of sales..........................................     31,423      36,702      43,851       51,456      56,585
Gross profit...........................................     69,932      85,303     105,758      113,064     127,430
Operating expenses.....................................     56,883      74,696      89,764      101,894     111,814

Income from operations.................................     13,049      10,607      15,994       11,170      15,616
Interest income........................................       (109)       (184)       (120)         (31)        (57)
Interest expense.......................................         --          --       8,162       11,054      10,674
Net income before provision for income taxes and.......
     extraordinary item................................     13,158      10,791       7,952          147       4,999
Provision for income taxes.............................         --          --         (37)         138       2,135
Extraordinary loss on extinguishment of debt,
     net of income taxes of $336.......................         --          --          --           --         504
                                                           -------    --------    --------     --------     -------
Net income.............................................     13,158      10,791       7,989            9       2,360
Preferred stock dividends..............................         --          --       3,246        4,800       5,403
                                                           -------    --------    --------     --------     -------
Net income (loss) applicable to common stockholders....    $13,158     $10,791     $ 4,743    $  (4,791)  $  (3,043)
                                                           =======     =======     =======    =========   =========

Pro forma (1):
Historical income before provision for income taxes....    $13,158     $10,791      $7,952
Pro forma provision for income taxes...................      5,263       4,316       3,181
                                                           -------    --------    --------
Pro forma net income...................................    $ 7,895     $ 6,475     $ 4,771
                                                           =======     =======     =======

Other Data:
EBITDA(2)..............................................    $14,948     $18,029     $18,524      $13,796     $18,447
EBITDA margin..........................................      14.8%       14.8%       12.4%         8.4%       10.0%

Non-vehicle capital expenditures.......................    $ 1,616     $ 1,514     $ 1,856      $ 1,892     $ 1,076
Vehicle capital expenditures...........................      3,730         859         673          479         182
                                                           -------    --------    --------     --------     -------
Total capital expenditures.............................      5,346       2,373       2,529        2,371       1,258

Ratio of earnings to fixed charges (excluding
preferred stock dividends) (3).........................                              1.97x        1.01x       1.47x

Service centers operated at period end.................        142         174         206          226         232

Balance Sheet Data (at period end):
Cash and cash equivalents..............................    $ 5,393     $ 6,255       $ 301         $ 94        $ 25
Total assets...........................................     31,494      36,687      90,692       87,519      87,995
Total debt.............................................         --          --     108,500      107,500     100,500
Redeemable cumulative preferred stock..................         --          --      38,246       43,046      48,449
Stockholders' equity (deficit) ........................     24,294      23,285     (73,441)     (78,232)    (81,275)
</TABLE>

                                      -13-

<PAGE>

(1)   Prior  to  March  31,  1998,  Diamond  consisted  of S  corporations  and,
      accordingly,  federal and state  income taxes were  generally  paid at the
      stockholder  level only.  Upon  consummation of the  Recapitalization  (as
      defined under "Item 7.  Management's  Discussion and Analysis of Financial
      Condition and Results of Operation"), Diamond eliminated its S corporation
      status and, accordingly, is subject to federal and state income taxes.

(2)   EBITDA  represents  income  before  income taxes and  extraordinary  item,
      interest expense,  depreciation and amortization expense and non-recurring
      executive  compensation expense in 1997 of $5 million. While EBITDA is not
      intended to  represent  cash flow from  operations  as defined by GAAP and
      should not be  considered as an indicator of operating  performance  or an
      alternative  to cash flow (as measured by GAAP) as a measure of liquidity,
      it is included herein to provide  additional  information  with respect to
      Diamond's ability to meet its future debt service, capital expenditure and
      working capital requirements.

(3)   Ratio of earnings to fixed  charges  equals  pre-tax  income plus interest
      expense divided by interest expense.


                                      -14-

<PAGE>

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

Overview

         Diamond is a leading  provider  of  automotive  glass  replacement  and
repair services in the Northeast, Mid-Atlantic, Midwest, Southeast and Southwest
regions of the United States.  At December 31, 2000,  Diamond operated a network
of 232 automotive glass service centers, approximately 1,069 mobile installation
vehicles and four distribution  centers in 39 states.  Diamond serves all of its
customers'  automotive glass replacement and repair needs, offering windshields,
tempered glass and other related  products.  Sales and EBITDA for the year ended
December 31, 2000 were $184.0 million and $18.4 million, respectively.

         Diamond  believes  that,  due to its  sole  focus on  automotive  glass
replacement  and  repair,  it has  one  of the  lowest  cost  structures  in the
automotive glass  replacement and repair industry.  Diamond's low cost structure
enables it to serve all  markets of the  industry,  which is  comprised  of: (1)
individual  consumers;  (2) commercial  customers,  including  commercial  fleet
leasing  and rental  car  companies,  car  dealers,  body  shops and  government
agencies;  and (3) insurance  customers,  including referrals from local agents,
claims offices and centralized call centers.  Diamond's 2000 sales to individual
consumers,    commercial   customers   and   insurance   customers   represented
approximately 26.9%, 40.0% and 33.1% of total sales, respectively. While the two
largest  participants in the industry  primarily  focus on servicing  automotive
glass insurance claims (including  providing related insurance claims processing
services)  and also  manufacture  automotive  glass,  Diamond has  strategically
positioned  itself  solely as a provider of  automotive  glass  replacement  and
repair  services  to a balanced  mix of  individual,  commercial  and  insurance
customers.

Recapitalization

         On January 15, 1998,  Diamond,  Kenneth  Levine,  Richard Rutta,  Green
Equity  Investors II, L.P. and certain  affiliated  entities of Diamond  entered
into a Second Amended and Restated Stock Purchase Agreement,  pursuant to which,
among other things:  (1) Diamond declared and paid a dividend of 3,500 shares of
Series A 12% Senior Redeemable Cumulative Preferred Stock (equal to 10.0% of the
Series A 12% Senior Redeemable  Cumulative Preferred Stock outstanding after the
Recapitalization, as defined below) to each of Kenneth Levine and Richard Rutta;
(2)  Kenneth  Levine  and  Richard  Rutta  transferred  all  of the  issued  and
outstanding   shares  of  each  of  the   affiliated   entities  to  Diamond  in
consideration  for which  Diamond  issued  6,950,000  shares of Common  Stock to
Kenneth Levine and Richard Rutta;  (3) each of the  affiliated  entities  merged
with and into  Diamond;  (4) Green  Equity  Investors  II, L.P.  purchased:  (A)
770,000 shares of Common Stock,  equal to 77.0% of the Common Stock  outstanding
after the Recapitalization,  for aggregate consideration equal to $15.4 million,
and (B) 28,000  shares of Series A 12% Senior  Redeemable  Cumulative  Preferred
Stock,  equal  to  80.0%  of  the  Preferred  Stock  outstanding  following  the
Recapitalization,  for an aggregate  consideration of $28.0 million;  (5) Norman
Harris and Michael A. Sumsky  purchased an aggregate of 30,000  shares of Common
Stock, equal to 3.0% of the Common Stock outstanding after the Recapitalization,
for aggregate  consideration of $600,000;  and (6) Diamond redeemed from Kenneth
Levine and  Richard  Rutta all of the Common  Stock  owned by them  (other  than
100,000 shares owned by each of them) for approximately  $150.7 million in cash,
which  resulted in each of Kenneth  Levine and Richard Rutta owning 10.0% of the
Common Stock outstanding  after the  Recapitalization.  These  transactions were
consummated on March 31, 1998, and together  constitute the  "Recapitalization."
Concurrently  with the  Recapitalization,  Diamond  issued the Notes and entered
into a credit facility with a syndicate of financial  institutions,  under which
Diamond borrowed $12.5 million in connection with the Recapitalization.

Results of Operations

         The following  discussion  and analysis  should be read in  conjunction
with "Selected  Financial Data" and the audited Financial  Statements of Diamond
and the notes thereto included elsewhere in this Annual Report.

         The  following  table  summarizes   Diamond's   historical  results  of
operations and historical results of operations as a percentage of sales for the
years ended December 31, 1998, 1999 and 2000.

                                      -15-

<PAGE>
<TABLE>
<CAPTION>

                                                                        Years Ended December 31,
                                                       --------------------------------------------------
                                                             1998              1999              2000
                                                       ----------------    -------------    --------------
                                                       $         %         $        %       $        %
                                                       ------    ------    -----   -----    -----    -----
                                                                     (dollars in millions)
<S>                                                     <C>       <C>      <C>     <C>      <C>      <C>
      Sales.......................................      149.6     100.0    164.5   100.0    184.0    100.0
      Cost of Sales...............................       43.8      29.3     51.4    31.2     56.6     30.8
                                                       -------   -------  ------   -----    -----    -----

      Gross Profit................................      105.8      70.7    113.1    68.8    127.4     69.2
      Operating Expenses..........................       89.8      60.0    101.9    61.9    111.8     60.8
                                                       -------   -------  ------   -----    -----    -----
      Income from Operations......................       16.0      10.7     11.2     6.8     15.6      8.4

      Interest Income.............................      (0.1)       0.1      0.0     0.0    (0.1)      0.1
      Interest Expense............................        8.1       5.4     11.0     6.7     10.7      5.8
                                                       -------   -------  ------   -----    -----    -----
                                                          8.0       5.3     11.0     6.7     10.6      5.7
                                                       -------   -------  ------   -----    -----    -----
      Income before Provision for Income Taxes....
           and Extraordinary Item.................        8.0       5.3      0.2     0.1      5.0      2.7
      Provision for Income Taxes..................        0.0       0.0      0.2     0.1      2.1      1.1
      Extraordinary Loss on Debt Extinguishment,
           Net of Income Taxes of $0.3............        0.0       0.0      0.0     0.0      0.5      0.3
                                                       -------   -------  ------   -----    -----    -----
      Net Income..................................        8.0       5.3      0.0     0.0      2.4      1.3
                                                       =======   =======  ======   =====    =====    =====

      EBITDA (1)..................................       18.5      12.4     13.8     8.4     18.4     10.0
</TABLE>

(1)  EBITDA  represents  income before taxes and  extraordinary  item,  interest
     expense,  depreciation  and  amortization.  While EBITDA is not intended to
     represent  cash flow from  operations  as defined by GAAP and should not be
     considered as an indicator of operating  performance  or an  alternative to
     cash flow (as measured by GAAP) as a measure of  liquidity,  it is included
     herein to provide additional  information with respect to Diamond's ability
     to meet its future debt service,  capital  expenditure  and working capital
     requirements.

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

         Sales.  Sales for 2000 increased by $19.5 million,  or 11.9%, to $184.0
million from $164.5  million for 1999.  This  increase was  primarily  due to an
increase  in  sales  at  service  centers  opened  in 1998  and  1999.  Although
installation  units increased only 0.7%, revenue per installation unit increased
an average of 10.7%. The increase in Diamond's  average revenue per installation
unit is attributable to stabilization of price compression and to its sales mix.

         Gross  Profit.  Gross profit for 2000  increased by $14.3  million,  or
12.6%, to $127.4 million from $113.1 million for 1999. Gross margin increased as
a  percentage  of sales to 69.2% for 2000 from 68.8% for 1999.  The  increase in
gross  margin was  primarily  due to the  increased  level of sales and  average
revenue per installation unit in 2000.

         Operating  Expenses.  Operating  expenses  for 2000  increased  by $9.9
million,  or 9.7%,  to $111.8  million from $101.9  million for 1999.  Operating
expenses  decreased  as a  percentage  of sales to 60.8% for 2000 from 61.9% for
1999.  The increase in operating  expenses  during 2000 was  primarily due to an
increase  in wage  expense  caused by  certain  wage rate  pressures,  including
increased medical insurance and workers compensation  insurance costs, primarily
at the service center level.  The increase in aggregate  operating  expenses was
also due to an  increase  in vehicle  related  expenses  versus the prior  year,
resulting  mainly from higher fuel costs due to rising gas prices.  The decrease
in operating expenses as a percentage of sales is attributable to an increase in
average revenue per installation unit.

         Depreciation  and  amortization  expense  for  2000  increased  by $0.2
million,  or 7.7%, to $2.8 million from $2.6 million for 1999.  This increase is
primarily   attributable  to  a  $0.3  million   increase  in  amortization  and
depreciation  expense  related to certain sales,  billing and financial  systems
software and computer hardware.

                                      -16-

<PAGE>

This  increase in expense was  partially  offset by a $0.1  million  decrease in
depreciation  expense due to the  inception  of a master fleet  leasing  program
during  1997 for the  lease of  mobile  installation  and  distribution  service
vehicles.

         Income from  Operations.  Income from  operations for 2000 increased by
$4.4  million,  or 39.3%,  to $15.6  million from $11.2  million for 1999.  This
increase was primarily due to the increase in average  revenue per  installation
unit and was partially offset by an increase in operating  expenses as discussed
above.

         Interest Expense.  Interest expense for 2000 decreased by $0.3 million,
or 2.7%, to $10.7 million from $11.0 million for 1999. The decrease was due to a
reduction in outstanding borrowings under the credit facility during 2000.

         Net  Income.  Diamond  recorded  $2.4  million  of net  income  in 2000
compared to a minimal  amount of net income in 1999.  Net income as a percentage
of sales  increased  to 1.3% for 2000 from 0.0% for 1999.  The  increase  in net
income and net income  margin  during  2000 was  primarily  due to the impact of
higher average  revenue per  installation  unit that was partially  offset by an
increase in operating expenses and in the provision for income taxes.

         EBITDA.  EBITDA for 2000 increased by $4.6 million,  or 33.3%, to $18.4
million from $13.8 million for 1999.  EBITDA as a percentage of sales  increased
to 10.0% for 2000 from 8.4% for 1999.  The increase in EBITDA and EBITDA  margin
during  2000 was  primarily  due to the  impact of higher  average  revenue  per
installation unit that was partially offset by an increase in operating expenses
as discussed above.

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

         Sales.  Sales for 1999 increased by $14.9 million,  or 10.0%, to $164.5
million from $149.6  million for 1998.  This  increase was  primarily  due to an
increase  in  sales  at  service  centers  opened  in 1998  and  1999.  Although
installation   units  increased  18.4%,   primarily   reflecting  the  continued
maturation of Diamond's service centers and increased installation productivity,
revenue  per  installation  unit  decreased  an average of 6%. The  decrease  in
Diamond's  average revenue per installation  unit was primarily  attributable to
weaker industry demand for glass replacement  services,  due primarily to milder
weather conditions, which resulted in price compression throughout the industry.

         Gross Profit. Gross profit for 1999 increased by $7.3 million, or 6.9%,
to $113.1  million from $105.8  million for 1998.  Gross  margin  decreased as a
percentage of sales to 68.8% for 1999 from 70.7% for 1998. The decrease in gross
margin was primarily due to price  compression  throughout  the industry,  which
adversely  affected average revenue per installation unit. The adverse impact of
price compression was partially offset by a decrease in glass product costs.

         Operating  Expenses.  Operating  expenses  for 1999  increased by $12.1
million,  or 13.5%,  to $101.9  million from $89.8  million for 1998.  Operating
expenses  increased  as a  percentage  of sales to 61.9% for 1999 from 60.0% for
1998.  The increase in operating  expenses  during 1999 was  primarily due to an
increase in expenses related to the continued expansion of Diamond's service and
distribution  center  network  which  resulted  in an  increase  in service  and
distribution  center  payroll  and other  operating  expenses,  such as  vehicle
operating leases and rent. The increase in operating expenses as a percentage of
sales is  attributable to a decrease in average  revenue per  installation  unit
which was partially offset by an average decrease of 4% in operating expense per
installation unit due to the leveraging of certain service center, corporate and
administrative expenses. In addition, operating expenses in 1999 included a full
year of costs related to senior management salaries and the management fees paid
to LGP compared to the inclusion of nine months of these costs in 1998 following
the consummation of the Recapitalization.

         Depreciation  and  amortization  expense  for  1999  increased  by $0.2
million,  or 8.3%, to $2.6 million from $2.4 million for 1998.  This increase is
attributable to a $0.5 million  increase in amortization  expense related to the
implementation  of certain  sales,  billing and  financial  systems  software in
February 1999. The increase in amortization expense was offset by a $0.5 million
decrease in depreciation  expense due to the inception of a master fleet leasing
program  during  1997 for the  lease of  mobile  installation  and  distribution
service vehicles.

                                      -17-

<PAGE>

         Income from  Operations.  Income from  operations for 1999 decreased by
$4.8  million,  or 30.0%,  to $11.2  million from $16.0  million for 1998.  This
decrease was  primarily due to the decline in average  revenue per  installation
unit  discussed  above that was partially  offset by a decrease in glass product
costs,  an increase in installation  productivity  and the leveraging of certain
service center, corporate and administrative expenses.

         Interest Expense.  Interest expense for 1999 increased by $2.9 million,
or 35.8%, to $11.0 million from $8.1 million for 1998. In 1999, Diamond incurred
a full year of  interest  expense  compared to the  inclusion  of nine months of
interest expense in 1998 following the consummation of the Recapitalization.

         Net  Income.  Diamond  recorded a minimal  amount of net income in 1999
compared to $8.0 million of net income in 1998.  Net income as a  percentage  of
sales  decreased to 0.0% for 1999 from 5.3% for 1998. The decrease in net income
and net income margin  during 1999 was  primarily  due to the adverse  impact of
lower  average  revenue per  installation  unit that was  partially  offset by a
decrease in glass product costs,  an increase in installation  productivity  and
the leveraging of certain service center, corporate and administrative expenses.

         EBITDA.  EBITDA for 1999 decreased by $4.7 million,  or 25.4%, to $13.8
million from $18.5 million for 1998.  EBITDA as a percentage of sales  decreased
to 8.4% for 1999 from 12.4% for 1998.  The decrease in EBITDA and EBITDA  margin
during 1999 was primarily due to the adverse impact of lower average revenue per
installation  unit that was  partially  offset by a  decrease  in glass  product
costs,  an increase in installation  productivity  and the leveraging of certain
service center, corporate and administrative expenses.

Liquidity and Capital Resources

         Diamond's need for liquidity will arise primarily from interest payable
on the  Notes,  the  credit  facility  and  the  funding  of  Diamond's  capital
expenditures and working capital requirements.  There are no mandatory principal
payments  on the Notes prior to their  maturity on April 1, 2008 and,  except to
the extent that the amount  outstanding  under the credit  facility  exceeds the
borrowing  base, no required  payments of principal on the credit facility prior
to its expiration on March 27, 2004.

         Net  Cash  Provided  by  Operating  Activities.  Net cash  provided  by
operating  activities  for 2000 increased $5.2 million to $8.5 million from $3.3
million for 1999. The increase in cash provided by operating activities for 2000
was due to an increase in Diamond's net earnings and a $4.0 million  increase in
accounts  payable  which was  partially  offset by a $3.4  million  increase  in
accounts receivable and a $2.0 million increase in inventory.  Net cash provided
by operating  activities  for 1999  decreased  $1.9 million to $3.3 million from
$5.2 million for 1998. The decrease in cash provided by operating activities for
1999 was due to a decrease in Diamond's net earnings, a $1.4 million increase in
inventory and a $1.6 million  decrease in accounts payable which was offset by a
$1.9 million decrease in accounts receivable.

         Net Cash  Provided  by/Used in Investing  Activities.  Net cash used in
investing  activities  for 2000 decreased $1.1 million to $1.2 million used from
$2.3 million used in investing  activities  for 1999. Net cash used in investing
activities  for 1999  decreased  $2.8  million  to $2.3  million  used from $0.5
million provided by investing  activities for 1998. The primary reason for these
variances was a decrease in capital  expenditures in 2000 and the elimination in
1998 of a due from  related  company  of $2.9  million  in  connection  with the
Recapitalization.

         Net Cash  Used in  Financing  Activities.  Net cash  used in  financing
activities for 2000 increased $6.1 million to $7.3 million from $1.2 million for
1999. The reason for this variance was the increase in credit facility  payments
over  proceeds  from $1.0 million in 1999 to $7.0 million in 2000.  The net cash
used in financing  activities for 1999  decreased  $10.4 million to $1.2 million
from  $11.6   million  for  1998.   The  reason  for  this   variance   was  the
Recapitalization,  in which $97.0  million was received from the issuance of the
Notes,  $12.5  million  from a credit  facility  with a syndicate  of  financial
institutions,  $28.0  million from the sale of  preferred  stock to Green Equity
Investors  II, L.P.  and $16.0  million  from the sale of common  stock to Green
Equity Investors II, L.P., Norman Harris and Michael A. Sumsky.  This was offset
by distributions to stockholders of $4.6 million, the repurchase of common stock
for $150.7 million and deferred loan costs of $5.8 million principally resulting
from the issuance of the Notes. In addition,  Diamond repaid $4.0 million of the
$12.5 million borrowed under this credit facility during 1998 in connection with
the Recapitalization.

                                      -18-

<PAGE>

         Capital  Expenditures.  Net capital  expenditures were $1.3 million for
2000 as compared to $2.4 million for 1999 and $2.5  million for 1998.  Excluding
vehicle capital expenditures, capital expenditures were $1.1 million for 2000 as
compared  to  $1.9  million  for  1999  and  $1.8  million  for  1998.   Capital
expenditures  in 2000 were  made  primarily  to fund the  continued  upgrade  of
Diamond's   management   information   systems.  The  most  significant  capital
expenditures  contemplated  over the next five years  will be for the  continued
enhancement and maintenance of Diamond's management  information systems and the
continuation of Diamond's expansion program. It is anticipated that Diamond will
annually  incur  approximately  $3.0 to $3.5  million  in  capital  expenditures
primarily  to expand  its  management  information  systems  with the  remaining
portion used to expand its service and distribution center network.

         Liquidity.  Management believes that Diamond will have adequate capital
resources and liquidity to satisfy its debt service obligations, working capital
needs and  capital  expenditure  requirements,  including  those  related to the
opening of new service centers for the  foreseeable  future.  Diamond's  capital
resources  and  liquidity  are  expected to be provided  by  Diamond's  net cash
provided by operating activities and borrowings under the credit facility.

Inflation

         Diamond  believes that  inflation has not had a material  impact on its
results of operations for 1998, 1999 or 2000.

Effect of Weather Conditions and Seasonality

         Weather  has  historically  affected  Diamond's  sales,  net income and
EBITDA,  with severe weather  generating  increased sales, net income and EBITDA
and mild weather  resulting in lower sales, net income and EBITDA.  In addition,
Diamond's business is somewhat seasonal,  with the fourth quarter  traditionally
its slowest  period of activity.  Diamond  believes  such  seasonal  trends will
continue for the foreseeable future. See "--Sales."

ITEM 7A.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Diamond is subject to potential  market risk exposure  derived from its
practice of purchasing automotive replacement glass ("ARG") windshields from the
People's   Republic  of  China.  On  February  28,  2001,   several  U.S.  glass
manufacturers petitioned the Federal Trade Commission (the "FTC") requesting the
imposition of Antidumping Duties on imports of ARG windshields from the People's
Republic of China.  Diamond's  purchasing  process utilizes a broad vendor base.
The majority of the Diamond's annual  windshield  purchases are from sources not
located  in the  People's  Republic  of China,  with  which  already-established
flexible  purchasing  terms exist.  Management  believes that it is premature to
assess the  potential  impact of the FTC's  ongoing  investigation  on  Diamond.
Diamond has no other material exposure to market risk.


                                      -19-

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS

         The following financial statements of Diamond, together with the report
of the  independent  auditors  thereon,  are presented on pages F-1 through F-19
hereof as set forth below:

                          Index to Financial Statements

                                                                           Page
                                                                           ----

Independent Auditors' Report............................................    F-2

Balance Sheets, December 31, 2000 and 1999..............................    F-3

Statements of Operations for the Years Ended
December 31, 2000, 1999 and 1998........................................    F-5

Statements of Stockholders' Equity (Deficit) for the
Years Ended December 31, 2000, 1999 and 1998............................    F-6

Statements of Cash Flows for the Years Ended
December 31, 2000, 1999 and 1998........................................    F-7

Notes to Financial Statements...........................................    F-8


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

         None.


                                      -20-

<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

         The following table sets forth certain information concerning Diamond's
directors and executive officers:

       Name                             Age      Position
       ----                             ---      --------
Kenneth Levine ......................   47       Co-Chairman of the Board,
                                                 Co-Chief Executive Officer and
                                                 Director

Richard Rutta  ......................   44       Co-Chairman of the Board,
                                                 Co-Chief Executive Officer and
                                                 Director

Norman Harris  ......................   46       President

Michael A. Sumsky....................   42       Executive Vice President, Chief
                                                 Financial Officer and General
                                                 Counsel
Gregory J. Annick....................   37       Director

John G. Danhakl  ....................   45       Director

Jonathan D. Sokoloff.................   43       Director

         Kenneth Levine has been Diamond's Co-Chairman of the Board and Co-Chief
Executive  Officer  since March 1998 and a Director of Diamond since March 1987.
Mr.  Levine  joined  Diamond  in 1979  and has  served  as  Diamond's  effective
Co-President  since 1987. In 1987,  Mr.  Levine,  together  with Richard  Rutta,
purchased all of Diamond's outstanding stock.

         Richard Rutta has been Diamond's  Co-Chairman of the Board and Co-Chief
Executive  Officer  since March 1998 and a Director of Diamond since March 1987.
Mr.  Rutta  joined  Diamond  in  1979  and has  served  as  Diamond's  effective
Co-President  since 1987.  In 1987,  Mr. Rutta,  together  with Kenneth  Levine,
purchased all of Diamond's outstanding stock.

         Norman Harris has been Diamond's President since March 1998. Mr. Harris
has served as Diamond's Executive Vice President from 1995 until March 1998. Mr.
Harris  joined  Diamond in 1993.  From 1991 through  1993,  Mr. Harris served as
President of Inveauto  C.A. of Maracay,  Venezuela,  a fabricator  of automotive
glass and parts. From 1977 until 1991, Mr. Harris was employed by Safelite Glass
Corporation.

         Michael A. Sumsky has been Diamond's  Executive Vice  President,  Chief
Financial  Officer and General Counsel since joining  Diamond in 1995.  Prior to
joining Diamond,  Mr. Sumsky was the co-founder of a distributorship of seasonal
gift electronics and other consumer products since 1991. Mr. Sumsky was employed
by Emerson Radio Corporation in various financial and legal capacities from 1986
to 1989 and from 1990 to 1991. From 1989 to 1990, Mr. Sumsky was an associate at
Parker, Duryee, Rosoff & Haft, a New York City law firm.

         Gregory J. Annick has been a Director of Diamond since March 1998.  Mr.
Annick  has been an  executive  officer of LGP,  a  merchant  banking  firm that
manages Green Equity  Investors  II, L.P.,  since the formation of LGP and Green
Equity  Investors II, L.P. in 1994.  Mr. Annick joined a  merchant-banking  firm
affiliated  with LGP as an  associate in 1989,  became a principal in 1993,  and
through a corporation  became a partner in 1994.  From 1988 to 1989,  Mr. Annick
was an  associate  with  the  merchant  banking  firm  of  Gibbons,  Green,  van
Amerongen.  Prior  thereto,  Mr.  Annick was a financial  analyst in mergers and
acquisitions with Goldman,  Sachs & Co. Mr. Annick is also a director of several
private companies.

         John G.  Danhakl has been a Director of Diamond  since March 1998.  Mr.
Danhakl  has been an  executive  officer  of LGP since  1995.  Mr.  Danhakl  had
previously been a Managing Director at Donaldson,  Lufkin & Jenrette  Securities
Corporation  ( "DLJ ") and had been with DLJ since 1990.  Prior to joining  DLJ,
Mr.  Danhakl was a Vice  President  at Drexel  Burnham  Lambert  Incorporated  (
"Drexel  "). Mr.  Danhakl is also a director of Twinlab  Corporation,  The Arden
Group, Inc. and several private companies.

         Jonathan D.  Sokoloff has been a Director of Diamond  since March 1998.
Mr.  Sokoloff has been an executive  officer of LGP since its formation in 1994.
Since  1990,  Mr.  Sokoloff  had  been  a  partner  at a  merchant-banking  firm
affiliated  with LGP. Mr.  Sokoloff had previously  been a Managing  Director at
Drexel.  Mr.  Sokoloff  is also a director of Twinlab  Corporation,  Gart Sports
Company, Rite Aid Corporation and several private companies.

         Except for Messrs.  Levine and Rutta, who are first cousins,  no family
relationship exists between any of Diamond's officers or directors.

                                      -21-

<PAGE>

ITEM 11. EXECUTIVE COMPENSATION

Executive Compensation

         Summary  Compensation  Table. The following table provides  information
about the compensation  paid by Diamond to its Co-Chief  Executive  Officers and
its two other  executive  officers  during the fiscal  years ended  December 31,
1998, 1999 and 2000. The Co-Chief Executive Officers and the two other executive
officers  of  Diamond  are  collectively  referred  to as the  "Named  Executive
Officers."

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                                                                                           Long-Term
                                                                                         Compensation
                                                      Annual Compensation                   Awards
                                          --------------------------------------------   --------------
                                                                          Other           Securities           All
                                                                         Annual           Underlying          Other
   Name and Principal Position            Salary ($)                  Compensation         Options/        Compensation
                                  Year                 Bonus ($)           ($)             SARs (#)            ($)
--------------------------------------------------------------------------------------------------------------------------
<S>                              <C>      <C>          <C>            <C>                 <C>               <C>
Kenneth Levine                   2000     $300,000         -                -                  -            $3,168 (2)
     Co-Chairman of the Board    1999     $300,000         -                -                  -            $3,168 (2)
and Co-Chief Executive Officer   1998     $249,331    $85,386 (1)           -                  -            $3,168 (2)
--------------------------------------------------------------------------------------------------------------------------
Richard Rutta                    2000     $300,000         -                -                  -            $3,168 (2)
     Co-Chairman of the Board    1999     $300,000         -                -                  -            $3,168 (2)
and Co-Chief Executive Officer   1998     $249,331    $85,386 (1)           -                  -            $3,168 (2)
--------------------------------------------------------------------------------------------------------------------------
Norman Harris                    2000     $275,000     $100,000 (1)         -                  -            $3,168 (2)
     President                   1999     $275,000         -                -                  -            $3,168 (2)
                                 1998     $256,962    $70,016 (1)           -                 450           $3,168 (2)
--------------------------------------------------------------------------------------------------------------------------
Michael A. Sumsky                2000     $250,000     $100,000 (1)         -                  -            $2,711 (2)
     Executive Vice President,   1999     $250,000         -                -                  -            $2,711 (2)
Chief Financial Officer and      1998     $221,893    $70,016 (1)           -                 450           $2,324 (2)
General Counsel
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

------------------
      (1)   This  bonus  was  earned  in the  year  indicated,  but  paid in the
            immediately subsequent year.

      (2)   Represents  Diamond's  net  contribution  on  behalf  of  the  Named
            Executive Officer to Diamond's 401(k) Profit Sharing Plan.

         Aggregated  Option  Exercises  in Last Fiscal Year and Fiscal  Year-End
Option Values. The following table provides  information  regarding the exercise
price of stock options  during the fiscal year ended  December 31, 2000 for each
of Diamond's  Named  Executive  Officers and the year-end  value of  unexercised
options held by the Named Executive Officers.

                                      -22-

<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
                                                                         Number of Securities   Value of Unexercised
                                                                              Underlying            In-the-Money
                                                                              Unexercised          Options/SARs at
                                                                            Options/SARs at      Fiscal Year-End ($)
                           Shares Acquired on                             Fiscal Year-End (#)       Exercisable/
          Name                Exercise (#)         Value Realized ($)        Exercisable/           Unexercisable
                                                                             Unexercisable
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
<S>                         <C>                   <C>                     <C>                      <C>
Kenneth Levine                     N/A                    N/A                     N/A                    N/A
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Richard Rutta                      N/A                    N/A                     N/A                    N/A
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Norman Harris                       -                      -                     0/450                   0/0
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Michael A. Sumsky                   -                      -                     0/450                   0/0
----------------------------------------------------------------------------------------------------------------------
</TABLE>

Committees of the Board of Directors

         There are no committees of the Board of Directors.

Compensation of Directors

         Diamond's officers, as well as Messrs. Annick, Danhakl and Sokoloff, do
not receive any  compensation  directly for their service on Diamond's  Board of
Directors.  Diamond has  agreed,  however,  to pay LGP certain  fees for various
management,  consulting and financial planning services, including assistance in
strategic  planning,  providing market and financial  analyses,  negotiating and
structuring  financing  and  exploring  expansion  opportunities.  See  "Certain
Relationships and Related Transactions."

Stock Option Plan

         In  September  1998,  Diamond's  Board of  Directors  and  stockholders
approved and adopted the Diamond Triumph Auto Glass,  Inc. 1998 Management Stock
Option  Plan (the "1998  Plan").  The purpose of the 1998 Plan is to provide key
employees  of Diamond and its  subsidiaries  with an  incentive to remain in the
service  of  Diamond  or  its  subsidiaries,   to  enhance  Diamond's  long-term
performance and to afford key employees the opportunity to acquire a proprietary
interest in Diamond. Currently, the 1998 Plan is administered by Diamond's Board
of Directors.  An aggregate of 30,000 shares of Common Stock are  authorized for
issuance  under the 1998 Plan.  As of December 31, 2000,  the Board of Directors
had granted  options to purchase a total of 28,425  shares of Common Stock under
the 1998 Plan. These options vest in five equal annual installments,  commencing
on the  first  anniversary  of the  date of  grant.  Vested  options  may not be
exercised  until the earlier of: (1) 90 days after  Diamond's  Common  Stock has
become  publicly  traded and (2) 91 days prior to the tenth  anniversary  of the
date of grant. The 1998 Plan expires in September 2008.

Employment Agreements

         On March 31, 1998, Diamond entered into employment agreements with each
of Kenneth  Levine and Richard Rutta pursuant to which they each agreed to serve
as the Co-Chairmen of the Board and Co-Chief Executive Officers of Diamond. Each
of the agreements with Messrs. Levine and Rutta provide for the following:

      (1)   An initial term of five years beginning on March 31, 1998 and ending
            on March 31, 2003.

      (2)   An annual base salary of $300,000, subject to annual review based on
            Diamond's and the  executive's  performance.  In addition,  for each
            calendar  year  beginning  on  January 1, 1998,  each  executive  is
            entitled  to  receive  an  annual  bonus  equal to a  percentage  of
            Diamond's  EBITDA in excess of specified  thresholds,  not to exceed
            $450,000.

      (3)   In the event the  executive is  terminated  by Diamond for cause (as
            defined in the  employment  agreement) or in the event the executive
            resigns,  Diamond will pay the executive the executive's base salary
            through the date of termination.

                                      -23-

<PAGE>

      (4)   In the event the executive is terminated  due to death or disability
            (as  defined  in  the  employment  agreement),  the  executive  will
            receive:

            o     his base  salary  for a period of 12  months  (but in no event
                  beyond March 31, 2003); and

            o     the  amount  of  any  bonus   payable   through  the  date  of
                  termination.

      (5)   In the event the  executive is  terminated  by Diamond for any other
            reason than as provided in clauses (3) and (4) above,  the executive
            will receive:

            o     his base salary through the date of termination;

            o     the  amount  of  any  bonus   payable   through  the  date  of
                  termination; and

            o     in lieu of any further  compensation,  severance  pay equal to
                  the  base  salary  that the  executive  would  have  otherwise
                  received   during  the  period   beginning   on  the  date  of
                  termination  and ending on the  earlier  of (1) the  scheduled
                  termination  date of executive's  employment  period under the
                  employment  agreement  and  (2)  such  time  as the  executive
                  obtains other permanent employment.

      (6)   Customary  non-competition and  non-solicitation  provisions,  which
            provisions  survive  for  one  year  after  the  termination  of the
            executive's employment,  and customary non-disclosure and assignment
            of inventions provisions.

         On March 31, 1998,  Diamond  entered into an employment  agreement with
Norman  Harris  pursuant to which Mr. Harris agreed to serve as the President of
Diamond  at an annual  salary of  $275,000,  subject to annual  review  based on
Diamond's  and the  executive's  performance.  On March 31,  1998,  Diamond also
entered into an employment  agreement  with Michael A. Sumsky  pursuant to which
Mr. Sumsky  agreed to serve as the Executive  Vice  President,  Chief  Financial
Officer and General Counsel of Diamond at an annual salary of $250,000,  subject
to annual review based on Diamond's and the executive's performance. Each of the
agreements with Messrs. Harris and Sumsky also provide for the following:

      (1)   An  initial  term of three  years  beginning  on March 31,  1998 and
            ending on March 31, 2001.

      (2)   In addition to his base salary,  for each calendar year beginning on
            January 1, 1998,  each  executive  is  entitled to receive an annual
            bonus  equal to a  percentage  of  Diamond's  EBITDA  in  excess  of
            specified thresholds, not to exceed $375,000.

      (3)   In the event the  executive is  terminated  by Diamond for cause (as
            defined in the  employment  agreement) or in the event the executive
            resigns,  Diamond will pay the executive the executive's base salary
            through the date of termination.

      (4)   In the event the executive is terminated  due to death or disability
            (as  defined  in  the  employment  agreement),  the  executive  will
            receive:

            o     his base  salary  for a period of 12  months  (but in no event
                  beyond March 31, 2001); and

            o     the  amount  of  any  bonus   payable   through  the  date  of
                  termination.

      (5)   In the event the  executive is  terminated  by Diamond for any other
            reason than as provided in clauses (3) and (4) above,  the executive
            will receive:

            o     his base salary through the date of termination;

            o     the  amount  of  any  bonus   payable   through  the  date  of
                  termination; and

                                      -24-

<PAGE>

            o     in lieu of any further  compensation,  severance  pay equal to
                  the  base  salary  that the  executive  would  have  otherwise
                  received   during  the  period   beginning   on  the  date  of
                  termination  and ending on the  earlier  of (1) the  scheduled
                  termination  date of executive's  employment  period under the
                  employment  agreement  and  (2)  such  time  as the  executive
                  obtains other  permanent  employment  for  compensation  in an
                  amount reasonably comparable to his base salary with Diamond.

      (6)   Customary     non-competition,      non-solicitation     provisions,
            non-disclosure and assignment of inventions provisions.

         The employment  agreements with Messrs.  Harris and Sumsky as discussed
above will cease on March 31, 2001. From that date onward employment between the
Company and Messrs. Harris and Sumsky becomes at-will for both parties.



                                      -25-

<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following  table  provides  information  regarding  the  beneficial
ownership  of  Diamond's  Common  Stock  and  Series  A  12%  Senior  Redeemable
Cumulative  Preferred Stock (referred to in the table as the "Series A Preferred
Stock"),  as of March 30,  2001,  by (1) each person  known by Diamond to be the
beneficial  owner of more than 5% of the Common Stock,  (2) each  director,  (3)
Diamond's Named Executive Officers,  and (4) all of Diamond's executive officers
and  directors as a group.  Except as indicated in the  footnotes to this table,
Diamond  believes  that the  persons  named in this table  have sole  voting and
investment  power with respect to all of the shares of Common Stock and Series A
12% Senior Redeemable Cumulative Preferred Stock indicated.
<TABLE>
<CAPTION>

      -------------------------------------- --------------------------------- ---------------------------------------
                                                       Common Stock                   Series A Preferred Stock
                                                    Beneficially Owned                   Beneficially Owned
      -------------------------------------- --------------- ----------------- ------------------- -------------------
                                               Number of      Percentage of        Number of         Percentage of
                      Name                       Shares           Class              Shares              Class
      -------------------------------------- --------------- ----------------- ------------------- -------------------
<S>                                             <C>               <C>                <C>                 <C>
      Green Equity Investors II, L.P. (1)         770,000           77.0%              28,000              80.0%
      -------------------------------------- -------------   ----------------- ------------------- -------------------
      Gregory J. Annick (1)(2)                    770,000           77.0%              28,000              80.0%
      -------------------------------------- -------------   ---------------   ------------------- -------------------
      John G. Danhakl (1)(2)                      770,000           77.0%              28,000              80.0%
      -------------------------------------- -------------   ---------------   ------------------- -------------------
      Jonathan D. Sokoloff (1)(2)                 770,000           77.0%              28,000              80.0%
      -------------------------------------- -------------   ---------------   ------------------- -------------------
      Kenneth Levine                              100,000           10.0%               3,500              10.0%
      -------------------------------------- -------------   ---------------   ------------------- -------------------
      Richard Rutta                               100,000           10.0%               3,500              10.0%
      -------------------------------------- -------------   ---------------   ------------------- -------------------
      Norman Harris                                15,000            1.5%                   -
      -------------------------------------- -------------   ---------------   ------------------- -------------------
      Michael Sumsky                               15,000            1.5%                   -
      -------------------------------------- -------------   ---------------   ------------------- -------------------
      All directors and executive officers      1,000,000          100.0%              35,000            100.00%
      as a group
      (7 persons)(3)
      -------------------------------------- -------------   ---------------   ------------------- -------------------
</TABLE>

(1)   The address of Green Equity Investors II, L.P. and Messrs. Annick, Danhakl
      and Sokoloff is 11111 Santa  Monica  Boulevard,  Suite 2000,  Los Angeles,
      California 90025.

(2)   The shares  shown as  beneficially  owned by Messrs.  Annick,  Danhakl and
      Sokoloff  represent  the  770,000  shares of Common  Stock and the  28,000
      shares  of  Series A  Preferred  Stock  owned of  record  by Green  Equity
      Investors II, L.P. Green Equity  Investors II, L.P. is a Delaware  limited
      partnership  managed by LGP, which is an affiliate of the general  partner
      of Green Equity  Investors II, L.P. Each of Leonard I. Green,  Jonathan D.
      Sokoloff,  John G. Danhakl,  Peter J. Nolan and Gregory J. Annick,  either
      directly (whether through  ownership  interest or position) or through one
      or more  intermediaries,  may be deemed to  control  LGP and such  general
      partner.  LGP and such general partner may be deemed to control the voting
      and  disposition  of the  shares of  Common  Stock  owned by Green  Equity
      Investors II, L.P. As such,  Messrs.  Annick,  Danhakl and Sokoloff may be
      deemed to have  shared  voting and  investment  power with  respect to all
      shares held by Green Equity Investors II, L.P.  However,  such individuals
      disclaim  beneficial  ownership  of the  securities  held by Green  Equity
      Investors  II, L.P.,  except to the extent of their  respective  pecuniary
      interests therein.

(3)   Includes the shares referred to in Note 2 above.


                                      -26-

<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED RECAPITALIZATION

Management Services Agreement

         In  connection  with  the  Recapitalization,  Diamond  entered  into  a
Management  Services Agreement with LGP pursuant to which LGP receives an annual
management fee of $685,000.  This fee is subordinated in right of payment to the
Notes.  The  Management  Services  Agreement  also provides that LGP may receive
reasonable  and  customary  fees and  reasonable  expenses from time to time for
providing  financing,  advisory and  investment  banking  services to Diamond in
connection with major financial transactions.

Lease

         Kenneth Levine and Richard Rutta are the sole partners of a partnership
which leases to Diamond,  on an arm's length basis,  Diamond's  headquarters and
distribution facility in Kingston, Pennsylvania and 18 service center locations.
Following the Recapitalization, at Diamond's request, Kenneth Levine and Richard
Rutta  caused the  partnership  to renew or extend the leases on the  facilities
through December 31, 2010, on terms substantially similar to those applicable to
those  facilities on January 15, 1998,  provided that the monthly rental amounts
increase 4.0% each calendar year beginning  January 1, 1999.  Rental payments to
the partnership for the facilities aggregated $510,000, $530,000 and $551,000 in
1998, 1999 and 2000, respectively.

Stockholders Agreement

         On March 31, 1998,  Green Equity  Investors II, L.P.,  Kenneth  Levine,
Richard  Rutta  and  Diamond   entered  into  a  Stockholders   Agreement.   The
Stockholders  Agreement  generally  restricts the  transferability  of shares of
Common  Stock  held by  Kenneth  Levine  and  Richard  Rutta.  The  Stockholders
Agreement  also  establishes  a right of first  refusal in favor of Green Equity
Investors II, L.P. or Diamond in the event Kenneth  Levine or Richard Rutta seek
to transfer any of their  shares of Common Stock to a third party  pursuant to a
bona fide offer.  In  addition,  Green  Equity  Investors  II, L.P.  has certain
"drag-along"  rights and certain sales of Common Stock by Green Equity Investors
II, L.P. are subject to  "tag-along"  rights of Kenneth Levine and Richard Rutta
to participate  in those sales.  The  Stockholders  Agreement also grants demand
registration   rights  to  Green  Equity   Investors   II,  L.P.  and  piggyback
registration  rights to Green  Equity  Investors  II, L.P.,  Kenneth  Levine and
Richard Rutta.

         Pursuant to the  Stockholders  Agreement,  Green Equity  Investors  II,
L.P.,  Kenneth  Levine and  Richard  Rutta have  agreed to vote their  shares of
Common  Stock in favor of the  election  of each of Kenneth  Levine and  Richard
Rutta as a  director  of  Diamond  so long as they  are  executive  officers  of
Diamond.

         Subject to early  termination of the provisions  described above (other
than those relating to  registration  rights) at the time, if any, as the Common
Stock is publicly  held,  the  Stockholders  Agreement  terminates  on the tenth
anniversary of the date thereof.

Management Share Agreements

         On March 31, 1998,  Diamond and Green Equity Investors II, L.P. entered
into Management  Subscription  and  Stockholders  Agreements with each of Norman
Harris  and  Michael  A.  Sumsky,  which  are  collectively  referred  to as the
"Management Share Agreements." Pursuant to the Management Share Agreements,  the
shares  of  Common  Stock  purchased  by  Messrs.   Harris  and  Sumsky  in  the
transactions  related to the  Recapitalization  are subject to various  transfer
restrictions and purchase  rights.  The Management Share Agreements also contain
certain "piggyback," registration rights, "tag-along" sale rights,  "drag-along"
sale obligations and a right of first refusal in favor of Green Equity Investors
II, L.P. or Diamond in the event Messrs. Harris or Sumsky seek to transfer their
shares of Common Stock to a third party pursuant to a bona fide offer.


                                      -27-

<PAGE>

                                     PART IV

ITEM 14.         EXHIBITS, FINANCIAL STATEMENTS, AND REPORTS ON FORM 8-K

(a)    Financial Statements

     (1) All  financial  statements  of Diamond for the year ended  December 31,
         2000 are filed herewith. See Item 8 of this Annual Report for a list of
         such financial statements.

     (2) All  financial  statement  schedules  have been omitted as the required
         information  is  inapplicable  or has been  included  in the  financial
         statements and notes thereto.

     (3) Exhibits - See response to paragraph (c) below.

(b)    Reports on Form 8-K.

         Not applicable.

(c)    Exhibits.

     Exhibit
     Number                     Description
     ------                     -----------

     2.1 (1)      Second Amended and Restated Stock Purchase and Sale Agreement,
                  dated as of January 15, 1998, by and among, VGMC Corp.,  Green
                  Equity Investors II, L.P.,  Diamond Triumph Auto Glass,  Inc.,
                  Triumph Auto Glass,  Inc.,  Diamond Auto Glass Works,  Inc., A
                  Above  Average Glass  Company by Diamond,  inc.,  A-AA Triumph
                  Auto Glass,  Inc.,  Scranton Holdings,  Inc.,  Diamond/Triumph
                  Auto Export  Sales Co. Inc.,  A-Auto  Glass by Triumph,  Inc.,
                  A-Auto Glass Company by Diamond,  Inc. and Kenneth  Levine and
                  Richard Rutta.

     3.1 (1)      Amended and Restated Certification of Incorporation of Diamond
                  Triumph Auto Glass, Inc.

     3.2 (1)      Certificate of Designations of Series A 12% Senior  Redeemable
                  Cumulative Preferred Stock of Diamond Triumph Auto Glass, Inc.

     3.3 (1)      Certificate of Amendment of Certificate  of  Incorporation  of
                  Diamond Triumph Auto Glass, Inc., dated April 28, 1998.

     3.4 (1)      Certificate of Amendment of Certificate  of  Incorporation  of
                  Diamond Triumph Auto Glass, Inc., dated September 15, 1998.

     3.5 (1)      By-laws of Diamond Triumph Auto Glass, Inc.

     4.1 (1)      Indenture, dated as of March 31, 1998, between Diamond Triumph
                  Auto Glass,  Inc., as Issuer,  and State Street Bank and Trust
                  Company,  as Trustee,  regarding  the 91/4%  Senior  Notes Due
                  2008.

     4.2 (1)      Registration  Rights  Agreement,  dated as of March 31,  1998,
                  among Diamond  Triumph Auto Glass,  Inc.,  First Union Capital
                  Markets, a division of Wheat First Securities,  Inc., BT Alex.
                  Brown Incorporated and Donaldson, Lufkin & Jenrette Securities
                  Corporation.

     4.3 (1)      Note Purchase  Agreement,  dated March 26, 1998, among Diamond
                  Triumph  Auto Glass,  Inc.,  First Union  Capital  Markets,  a
                  division  of Wheat  First  Securities,  Inc.,  BT Alex.  Brown
                  Incorporated  and  Donaldson,  Lufkin  &  Jenrette  Securities
                  Corporation.

     10.1 (1)     Management Subscription and Stockholders  Agreement,  dated as
                  of March 31, 1998,  among  Diamond  Triumph Auto Glass,  Inc.,
                  Green Equity Investors II, L.P. and Norman Harris.

                                      -28-

<PAGE>

     10.2 (1)     Management Subscription and Stockholders  Agreement,  dated as
                  of March 31, 1998,  among  Diamond  Triumph Auto Glass,  Inc.,
                  Green Equity Investors II, L.P. and Michael Sumsky.

     10.3 (1)     Stockholders  Agreement,  dated as of March  31,  1998,  among
                  Green Equity Investors II, L.P., Kenneth Levine, Richard Rutta
                  and Diamond Triumph Auto Glass, Inc.

     10.4 (1)     Employment  Agreement,  dated as of March  31,  1998,  between
                  Diamond Triumph Auto Glass, Inc. and Kenneth Levine.

     10.5 (1)     Employment  Agreement,  dated as of March  31,  1998,  between
                  Diamond Triumph Auto Glass, Inc. and Richard Rutta.

     10.6 (1)     Employment  Agreement,  dated as of March  31,  1998,  between
                  Diamond Triumph Auto Glass, Inc. and Norman Harris.

     10.7 (1)     Employment  Agreement,  dated as of March  31,  1998,  between
                  Diamond Triumph Auto Glass, Inc. and Michael Sumsky.

     10.8 (1)     Non-Competition  Agreement,  dated  March  31,  1998,  between
                  Kenneth Levine and Diamond Triumph Auto Glass, Inc.

     10.9 (1)     Non-Competition  Agreement,  dated  March  31,  1998,  between
                  Richard Rutta and Diamond Triumph Auto Glass, Inc.

     10.10 (1)    Management  Services  Agreement,  dated as of March 31,  1998,
                  between Diamond  Triumph Auto Glass,  Inc. and Leonard Green &
                  Partners, L.P.

     10.11 (2)    Finance  Agreement,  dated  March 27,  2000,  between  The CIT
                  Business  Group/Business Credit, Inc. and Diamond Triumph Auto
                  Glass, Inc.

     10.12 (1)    Diamond Triumph Auto Glass,  Inc. 1998 Management Stock Option
                  Plan.

---------------------------
     (1) Incorporated by reference to Diamond's  Registration  Statement on Form
         S-4 filed with the SEC on March 30, 2000.


                                      -29-

<PAGE>


                                   SIGNATURES

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

                                           DIAMOND TRIUMPH AUTO GLASS, INC.


                                           By: /s/ Kenneth Levine
                                              ---------------------------------
                                              Name:  Kenneth Levine
                                              Title: Co-Chief Executive Officer

Dated: March 30, 2001


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

         Signature                  Title(s)                    Date
         ---------                  --------                    ----
 /s/ Kenneth Levine                 Co-Chairman of the Board,    March 30, 2001
-------------------------------     Co-Chief
         Kenneth Levine             Executive Officer and
                                    Director

  /s/ Richard Rutta                 Co-Chairman of the Board,    March 30, 2001
-------------------------------     Co-Chief
         Richard Rutta              Executive Officer and
                                    Director

 /s/ Michael A. Sumsky              Executive Vice President,    March 30, 2001
-------------------------------     Chief Financial Officer
         Michael A. Sumsky          and General Counsel


/s/ Norman Harris
-------------------------------     President                    March 30, 2001
         Norman Harris

/s/ Gregory J. Annick               Director                     March 30, 2001
-------------------------------
         Gregory J. Annick

/s/ John G. Danhakl                  Director                     March 30, 2001
-------------------------------
         John G. Danhakl

/s/  Jonathan D. Sokoloff            Director                     March 30, 2001
-------------------------------
         Jonathan D. Sokoloff


                                      -30-

<PAGE>

SUPPLEMENTAL  INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT

         The  registrant  has not sent an annual report or proxy material to its
security holders.



                                      -31-

<PAGE>

                          INDEX TO FINANCIAL STATEMENTS


                                                                            Page
                                                                            ----

Independent Auditors' Report.............................................    F-2

Balance Sheets, December 31, 2000 and 1999...............................    F-3

Statements of Operations for the Years Ended
December 31, 2000, 1999 and 1998.........................................    F-5

Statements of Stockholders' Equity (Deficit) for the
Years Ended December 31, 2000, 1999 and 1998.............................    F-6

Statements of Cash Flows for the Years Ended
December 31, 2000, 1999 and 1998.........................................    F-7

Notes to Financial Statements............................................    F-8


                                       F-1

<PAGE>

                          Independent Auditors' Report



The Board of Directors
Diamond Triumph Auto Glass, Inc.:


         We have audited the accompanying balance sheets of Diamond Triumph Auto
Glass,  Inc. as of December  31, 2000 and 1999,  and the related  statements  of
operations,  stockholders' equity (deficit) and cash flows for each of the years
in the three year period ended December 31, 2000. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

         In our opinion,  the  financial  statements  referred to above  present
fairly, in all material respects, the financial position of Diamond Triumph Auto
Glass,  Inc. as of December 31, 2000 and 1999, and the results of its operations
and its cash flows for each of the years in the three year period ended December
31, 2000, in conformity with  accounting  principles  generally  accepted in the
United States of America.





/s/ KPMG LLP
Allentown, Pennsylvania
February 22, 2001


                                       F-2

<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                                 Balance Sheets

                           December 31, 2000 and 1999

                 (Dollars in Thousands except per share amounts)

<TABLE>
<CAPTION>

                                      Assets                                          2000        1999
                                                                                   ----------   ---------
Current assets:
<S>                                                                                <C>               <C>
          Cash and cash equivalents                                                $     25          94
          Accounts receivable, less allowance for doubtful accounts
                    of $462 and $956 for 2000 and 1999 respectively                  13,977      10,895
          Other receivables                                                             373         189
          Inventories                                                                14,581      12,620
          Prepaid expenses                                                            1,084         962
          Deferred income taxes                                                       3,285       3,081
                                                                                   --------    --------
                                        Total current assets                         33,325      27,841
                                                                                   --------    --------
Equipment and leasehold improvements:
          Vehicles                                                                    9,632      10,289
          Computers and office equipment                                              3,274       3,173
          Computer software                                                           4,277       3,901
          Other equipment                                                               563         524
          Leasehold improvements                                                        319         140
                                                                                   --------    --------
                                                                                     18,065      18,027
          Accumulated depreciation and amortization                                 (11,911)    (10,334)
                                                                                   --------    --------
                                        Net equipment and leasehold improvements      6,154       7,693

Unamortized deferred loan costs and senior notes discount, net                        6,073       7,502
Deferred income taxes                                                                42,039      44,082
Other assets                                                                            404         401
                                                                                   --------    --------
Total assets                                                                       $ 87,995      87,519
                                                                                   ========    ========
</TABLE>


                                       F-3

<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                                 Balance Sheets

                           December 31, 2000 and 1999

                 (Dollars in Thousands except per share amounts)
<TABLE>
<CAPTION>

                 Liabilities and Stockholders' Equity (Deficit)                   2000         1999
                                                                               ----------    ---------
Current liabilities:
<S>                                                                             <C>              <C>
           Accounts payable                                                     $  11,952        7,950
           Accrued expenses
                     Payroll and related items                                      4,246        3,314
                     Accrued interest                                               2,329        2,363
                     Accrued income taxes                                           1,322        1,216
                     Other                                                            492          362
                                                                                ---------    ---------
                               Total accrued expenses                               8,169        7,255
                                                                                ---------    ---------
                                         Total current liabilities                 20,321       15,205
                                                                                ---------    ---------
Long-term debt:
           Credit facility                                                            500        7,500
           Senior notes                                                           100,000      100,000
                                                                                ---------    ---------
                     Total long-term debt                                         100,500      107,500
                                                                                ---------    ---------
                                         Total liabilities                        120,821      122,705
                                                                                ---------    ---------
Series     A 12% senior redeemable  cumulative preferred stock - par value $0.01
           per share;  authorized 100,000 shares;  issued and outstanding 35,000
           in 2000 and 1999, at liquidation preference value                       48,449       43,046
                                                                                ---------    ---------
Stockholders' equity (deficit):
           Common stock, 2000 and 1999- par value $0.01
                     per share; authorized 1,100,000 shares; issued
                     and outstanding 1,000,000 shares                                  10           10
           Additional paid-in capital                                              47,344       52,747
           Retained earnings (accumulated deficit)                               (128,629)    (130,989)
                                                                                ---------    ---------
                                         Total stockholders' equity (deficit)     (81,275)     (78,232)
                                                                                ---------    ---------
Total liabilities and stockholders' equity (deficit)                            $  87,995       87,519
                                                                                =========    =========
</TABLE>

See accompanying notes to financial statements.


                                       F-4

<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                            Statements of Operations

                  Years Ended December 31, 2000, 1999 and 1998

                 (Dollars in Thousands except per share amounts)
<TABLE>
<CAPTION>

                                                                    2000               1999               1998
                                                            ------------------- ------------------ ------------------
<S>                                                       <C>                          <C>                <C>
Net sales                                                 $         184,015            164,520            149,609
Cost of sales                                                        56,585             51,456             43,851
                                                            ------------------- ------------------ ------------------
           Gross profit                                             127,430            113,064            105,758
                                                            ------------------- ------------------ ------------------
Operating expenses:
   Payroll                                                           67,786             61,434             54,377
   Advertising and promotional                                       11,027             10,349              9,499
   Other operating expenses                                          30,227             27,516             23,478
   Depreciation and amortization                                      2,774              2,595              2,410
                                                            ------------------- ------------------ ------------------
                                                                    111,814            101,894             89,764
                                                            ------------------- ------------------ ------------------
           Income from operations                                    15,616             11,170             15,994

Other (income) expense:
   Interest income                                                      (57)               (31)              (120)
   Interest expense                                                  10,674             11,054              8,162
                                                            ------------------- ------------------ ------------------
                                                                     10,617             11,023              8,042
                                                            ------------------- ------------------ ------------------
           Income before provision for income taxes and
                extraordinary item                                    4,999                147              7,952
Provision for income taxes                                            2,135                138                (37)
                                                            ------------------- ------------------ ------------------
           Net income before extraordinary item                       2,864                  9              7,989
           Extraordinary loss on extinguishment of debt,
              net of income taxes of $336                               504                --                 --
                                                            ------------------- ------------------ ------------------
           Net Income                                                 2,360                  9              7,989
                                                            ------------------- ------------------ ------------------
Preferred stock dividends                                             5,403              4,800              3,246
                                                            ------------------- ------------------ ------------------
Net (loss) income applicable to common stockholders       $          (3,043)            (4,791)             4,743
                                                            =================== ================== ==================

   Historical income before provision for income taxes                                           $          7,952
   Pro forma provision for taxes                                                                            3,181
                                                                                                   ------------------
   Pro forma net income                                                                                     4,771
   Preferred stock dividends                                                                                3,246
                                                                                                   ------------------
   Pro forma net income applicable to common stockholders                                        $          1,525
                                                                                                   ==================
</TABLE>

See accompanying notes to financial statements.


                                       F-5

<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                  Statements of Stockholders' Equity (Deficit)

                  Years Ended December 31, 2000, 1999 and 1998

                 (Dollars in Thousands except per share amounts)

<TABLE>
<CAPTION>
                                                                                            Retained
                                                  Common stock            Additional        earnings
                                                                            paid-in       (accumulated
                                              Shares           Amount       capital         deficit)           Total
                                         ------------------ ------------ -------------- ----------------- --------------
<S>                                           <C>              <C>           <C>             <C>              <C>
Balance, December 31, 1997                        2,300             4           --             23,281           23,285

Net income                                         --            --             --              7,989            7,989

Distributions to stockholders                      --            --             --            (11,597)         (11,597)

Reclassification of common stock                698,500             6           --                 (6)            --

Common stock issued as stock
   purchase shares                            6,950,000            69           --                (69)            --

Sale of common stock                            800,000             8         15,992             --             16,000

Redemption of stockholders'
   common stock and
   recapitalization followed by
   cancellation of treasury stock
   including income tax effects              (7,450,800)          (77)        44,801         (150,596)        (105,872)

Preferred stock dividends                          --            --           (3,246)            --             (3,246)
                                             ----------    ----------     ----------       ----------       ----------
Balance, December 31, 1998                    1,000,000            10         57,547         (130,998)         (73,441)

Net income                                         --            --             --                  9                9

Preferred stock dividends                          --            --           (4,800)            --             (4,800)
                                             ----------    ----------     ----------       ----------       ----------
Balance, December 31, 1999                    1,000,000    $       10         52,747         (130,989)         (78,232)

Net income                                         --            --             --              2,360            2,360

Preferred stock dividends                          --            --           (5,403)            --             (5,403)
                                             ----------    ----------     ----------       ----------       ----------
Balance, December 31, 2000                    1,000,000    $       10         47,344         (128,629)         (81,275)
                                             ==========    ==========     ==========       ==========       ==========
</TABLE>

See accompanying notes to financial statements.


                                       F-6

<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 2000, 1999 and 1998

                 (Dollars in Thousands except per share amounts)
<TABLE>
<CAPTION>

                                                                                              2000            1999           1998
                                                                                             --------       --------        -------
Cash flows from operating activities:
<S>                                                                                          <C>            <C>            <C>
   Net income                                                                                $  2,360              9          7,989
                                                                                             --------       --------        -------
   Adjustments  to  reconcile  net  income  to net cash  provided  by  operating
      activities:
        Depreciation and other amortization                                                     2,774          2,595          2,410
        Amortization of deferred loan costs and senior notes discount                             920            882            661
        Extraordinary loss on extinguishment of debt, excluding income taxes                      840           --             --
        Provision for doubtful accounts                                                           101          1,341          1,063
        (Gain) on sale of fixed assets                                                            (32)           (32)           (40)
        Changes in assets and liabilities:
           (Increase) decrease in accounts and other receivables                               (3,367)         1,912         (5,586)
           (Increase) in inventories                                                           (1,961)        (1,356)        (3,027)
           (Increase) decrease in prepaid expenses                                               (122)          (121)           363
           Increase (decrease) in accounts payable                                              4,002         (1,635)         3,655
           Increase (decrease) in accrued expenses                                              1,114           (546)        (2,339)
           Increase in deferred income taxes                                                    1,839            282             25
                                                                                             --------       --------       --------
           Total adjustments                                                                    6,108          3,322         (2,815)
                                                                                             --------       --------       --------
           Net cash provided by operating activities                                            8,468          3,331          5,174
                                                                                             --------       --------       --------
Cash flows from investing activities:
   Capital expenditures                                                                        (1,258)        (2,371)        (2,529)
   Proceeds from sale of equipment                                                                 55             92            186
   (Increase) decrease in other assets                                                             (3)           (27)           (69)
   Due from (to) related company                                                                 --             --            2,866
                                                                                             --------       --------       --------
           Net cash (used in) provided by investing activities                                 (1,206)        (2,306)           454
                                                                                             --------       --------       --------
Cash flows from financing activities:
   Net proceeds from issuance of senior notes                                                    --             --           97,000
   Net proceeds from credit facility                                                           12,750         26,000         18,500
   Proceeds from issuance of preferred stock                                                     --             --           28,000
   Distributions to stockholders, net                                                            --             --           (4,597)
   Payments on bank facility                                                                  (19,750)       (27,000)       (10,000)
   Issuance of common stock                                                                      --             --           16,000
   Deferred loan costs                                                                           (331)          (232)        (5,813)
   Repurchase of common stock                                                                    --             --         (150,672)
                                                                                             --------       --------       --------
           Net cash used in financing activities                                               (7,331)        (1,232)       (11,582)

           Net (decrease) in cash and cash equivalents                                            (69)          (207)        (5,954)

Cash and cash equivalents, beginning of year                                                       94            301          6,255
                                                                                             --------       --------       --------
Cash and cash equivalents, end of year                                                       $     25             94            301
                                                                                             ========       ========       ========
</TABLE>

See accompanying notes to financial statements.


                                       F-7

<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 2000, 1999 and 1998

                 (Dollars in Thousands except per share amounts)

(1)     Description of Entity, Basis of Presentation and Recapitalization

        Prior to March 31,  1998,  Diamond  Triumph Auto Glass,  Inc.  (formerly
        Diamond Auto Glass Works,  Inc. and  affiliates)  included  Diamond Auto
        Glass Works, Inc., Triumph Auto Glass, Inc., Triumph Auto Glass of Ohio,
        Inc., A Above Average Auto Glass Company by Diamond,  Inc., A-AA Triumph
        Auto Glass,  Inc.,  and  Scranton  Holding  Co., all of which were owned
        equally by two stockholders.  All significant  intercompany balances and
        transactions were eliminated in combination prior to March 31, 1998.

        The Company,  Kenneth Levine and Richard Rutta  (together,  the "Company
        Principals"),  Green  Equity  Investors  II, L.P.  ("GEI"),  and certain
        affiliated entities of the Company (the "Affiliated  Companies") entered
        into a Second Amended and Restated  Stock  Purchase and Sale  Agreement,
        dated as of  January  15,  1998 and which was  consummated  on March 31,
        1998,  pursuant to which,  among other things,  (a) the Company declared
        and paid a dividend  of 3,500  shares  ($3,500) of  Preferred  Stock (as
        defined in Note 5), to each of the Company Principals, equal to 10.0% of
        the Preferred Stock to be outstanding following the Recapitalization (as
        hereinafter defined);  (b) the Company Principals transferred all of the
        issued and  outstanding  shares of each of the  Affiliated  Companies to
        Diamond and as consideration for such transfers Diamond issued 6,950,000
        shares of Common  Stock (the  "Stock  Purchase  Shares")  to the Company
        Principals;  (c) certain  Affiliated  Companies merged with and into the
        Company (the  "Merger");  (d) GEI  purchased (i)  approximately  770,000
        shares of Common Stock,  equal to 77.0% of the Common Stock  outstanding
        following the Recapitalization,  for aggregate consideration of $15,400,
        and  (ii)  28,000  shares  of  Preferred  Stock,  equal  to 80.0% of the
        Preferred  Stock  outstanding   following  the   Recapitalization,   for
        aggregate consideration of $28,000; (e) certain members of the Company's
        management purchased 30,000 shares of Common Stock, equal to 3.0% of the
        Common Stock outstanding following the  Recapitalization,  for aggregate
        consideration  of $600;  and (f) the Company  redeemed  from the Company
        Principals all of the Stock  Purchase  Shares and other shares of Common
        Stock owned by them (other than  100,000  shares  owned by each of them)
        for cash,  resulting in each of the Company  Principals  owning 10.0% of
        the  Common  Stock to be  outstanding  following  the  Recapitalization.
        Concurrently,  with the  consummation of the  transactions  set forth in
        clauses  (a)  through  (f) above (the  "Recapitalization"),  the Company
        issued  $100,000  in  aggregate  principal  amount of senior  notes in a
        private  placement  (the "Note  Offering")  and entered into a five year
        $35,000  revolving  credit  facility  (the "Old Bank  Facility")  with a
        syndicate of financial  institutions,  of which  $12,500 was borrowed in
        connection with the Recapitalization.

        On March 27, 2000, the Company replaced the Old Bank Facility with a new
        revolving credit facility (the "Credit Facility").

        The Company,  headquartered in Kingston,  Pennsylvania, is a provider of
        automotive  glass  replacement  and repair  services  in the  Northeast,
        Mid-Atlantic,  Midwest,  Southwest and  Southeast  regions of the United
        States.  At December  31,  2000,  the Company  operated a network of 232
        automotive   glass   service   centers,   approximately   1,069   mobile
        installation vehicles and four distribution centers in 39 states.


                                       F-8


<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 2000, 1999 and 1998

                 (Dollars in Thousands except per share amounts)


(2)    Summary of Significant Accounting Policies

       (a)    Cash and Cash Equivalents

              Investments  with original  maturities of three months or less are
              considered cash equivalents.

       (b)    Inventories

              Inventories  are  stated at the lower of cost or  market.  Cost is
              determined using the rolling average method with costs incurred on
              a first-in, first-out basis.

       (c)    Equipment and Leasehold Improvements

              Equipment  and  leasehold   improvements  are  recorded  at  cost.
              Depreciation    and   amortization   is   calculated   using   the
              straight-line method over the following useful lives:

                        Vehicles                                    5 years
                        Computers and office equipment              5-7 years
                        Computer software                           3-5 years
                        Other equipment                             5 years
                        Leasehold improvements                      39 years

              Costs  in  2000,  1999  and 1998  related  to the  development  of
              software  for  a  new  back  office  sales  audit  and   financial
              accounting system and point of sale system were capitalized.  Upon
              completion  of each of the  projects in 2000,  1999 and 1998,  the
              Company commenced amortizing the software costs over the estimated
              useful life of five years.  Unamortized  computer  software  costs
              were  $2,818,  $3,218 and $2,503 at December  31,  2000,  1999 and
              1998,  respectively.  Amortization  expense in 2000, 1999 and 1998
              for  capitalized  computer  software costs was $844, $620 and $61,
              respectively.

       (d)    Income Taxes

              Effective   March  31,  1998,  the  date  of  conversion   from  S
              Corporation  status to C Corporation  status,  the Company adopted
              Statement  of  Financial  Accounting  Standards  (SFAS)  No.  109,
              Accounting  for  Income  Taxes,  and has  reported  the  effect of
              recognizing  deferred  tax  assets and  liabilities  in income tax
              expense in the 1998 statement of operations.

              Under the asset and liability method of SFAS No. 109, deferred tax
              assets  and   liabilities   are  recognized  for  the  future  tax
              consequences  attributable  to  differences  between the financial
              statement  carrying amounts of existing assets and liabilities and
              their  respective tax bases.  Deferred tax assets and  liabilities
              are measured  using enacted tax rates expected to apply to taxable
              income  in the  years in which  those  temporary  differences  are
              expected  to be  recovered  or settled.  Under SFAS No.  109,  the
              effect on deferred tax assets and  liabilities  of a change in tax
              rates is  recognized  in income in the period  that  includes  the
              enactment date of any change.


                                       F-9

<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 2000, 1999 and 1998

                 (Dollars in Thousands except per share amounts)


       (e)    Deferred Loan Costs and Senior Notes Discount

              Deferred loan costs and senior notes  discount are amortized  over
              the life of the related debt and included in interest expense.

       (f)    Revenue Recognition

              Revenue  from auto glass  installation  and  related  services  is
              recognized  when the  installation  is  complete or the service is
              performed.  The Company  provides  for an  allowance  for accounts
              receivable.  The provision for doubtful  accounts was $101, $1,341
              and $1,063 and write offs against the allowance were $595,  $1,185
              and $837 in 2000, 1999 and 1998 respectively.

       (g)    Advertising

              The Company expenses all advertising costs as incurred.  The costs
              of yellow  pages  advertising  are expensed at the time the yellow
              pages  phone book is  published.  Total  advertising  expense  was
              $8,287, $8,150 and $7,444 in 2000, 1999 and 1998, respectively.

       (h)    Impairment of Long-Lived Assets

              The Company accounts for long-lived  assets in accordance with the
              provisions  of SFAS No. 121,  "Accounting  For the  Impairment  of
              Long-lived  Assets and For  Long-lived  Assets to Be Disposed Of".
              Under the provisions of this statement,  the Company has evaluated
              its long-lived assets for financial impairment,  and will continue
              to evaluate  them as events or changes in  circumstances  indicate
              that  the  carrying  amount  of  such  assets  may  not  be  fully
              recoverable.

        (i)   Use of Estimates

              Management  of the  Company  has made a number  of  estimates  and
              assumptions  relating to the  reporting of assets and  liabilities
              and the  disclosure of contingent  assets and  liabilities  at the
              date of the  financial  statements  and the  reported  amounts  of
              revenues and expenses during the reporting period.  Actual results
              could differ from those estimates.


(3)    Fair Value of Financial Instruments

       For purposes of estimating the fair value of financial  instruments,  the
       Company has determined that the carrying  amounts recorded on the balance
       sheet approximate the fair value for cash and cash equivalents,  accounts
       and  other   receivables   and  current   liabilities.   In  making  this
       determination,  the Company  considered the short-term  maturity of those
       assets and  liabilities.  The  carrying  amount of the  Company's  Credit
       Facility  approximates  fair value based on borrowing  rates available to
       the Company for loans with similar terms. The fair value of the Company's
       senior  notes is  estimated  based on quoted  market  prices for those or
       similar investments. The estimated fair value of the Corporation's senior
       notes is $77,000,  $70,000 and $100,000 at December  31,  2000,  1999 and
       1998,  respectively.  The fair value of the Company's Series A 12% Senior
       Redeemable   Cumulative  Preferred  Stock  approximates  the  liquidation
       preference.

                                      F-10

<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 2000, 1999 and 1998

                 (Dollars in Thousands except per share amounts)


(4)    Long -Term Debt

       Long-term debt consists of the following:

                                   2000             1999             1998
                               ------------------------------------------------
Bank facility                $        --             7,500            8,500
Credit facility                       500              --               --
Senior notes                      100,000          100,000          100,000
                               ------------------------------------------------
Total                        $    100,500          107,500          108,500
                               ================================================


       On March 27,  2000,  the Company  entered into the credit  facility.  The
       Credit  Facility  defined in Note 1 has an initial term of four years and
       provides for revolving advances of up to the lesser of: (1) $25,000;  (2)
       the sum of 85% of the Company's Eligible Accounts  Receivable (as defined
       in the Credit Facility) plus 85% of the Company's  Eligible Inventory (as
       defined in the Credit Facility),  less certain reserves; or (3) an amount
       equal to 1.5  times  the  Company's  EBITDA  (as  defined  in the  Credit
       Facility) for the prior twelve months.  A portion of the Credit Facility,
       not to exceed $3,000, is available for the issuance of letters of credit,
       which generally have an initial term of one year or less. The Company had
       $2,598 in outstanding letters of credit at December 31, 2000.  Borrowings
       under the Credit Facility bear interest, at the Company's discretion,  at
       either the Chase Manhattan Bank Rate (as defined in the credit  facility)
       or LIBOR,  plus a margin of 0.50% for the Chase  Manhattan Rate and 2.25%
       for the LIBOR Rate.  In addition,  a  commitment  fee of 0.25% is charged
       against any unused balance of the credit facility. The effective interest
       rate on  borrowings  under the Credit  Facility was 10.0% at December 31,
       2000.  Interest rates are subjected to increases or reductions based upon
       the Company  meeting  certain EBITDA  levels.  The proceeds of the Credit
       Facility are available for working capital  requirements  and for general
       corporate  purposes.  The Credit  Facility  is secured by first  priority
       security  interests in all of the tangible and  intangible  assets of the
       Company.  In addition,  the Credit Facility contains certain  restrictive
       covenants  including,  among other things,  the  maintenance of a minimum
       EBITDA  level for the prior twelve  months,  as well as  restrictions  on
       additional   indebtedness,   dividends  and  certain  other   significant
       transactions.  The  Company was in  compliance  with these  covenants  at
       December 31, 2000.

       The Old Bank  Facility  was  scheduled  to  expire  on April 1,  2003 and
       provided for borrowings of up to $35,000.  As previously  described,  the
       Company  replaced the Old Bank Facility with the Credit Facility on March
       27,  2000.  In  connection  with  the  early  retirement  of the Old Bank
       Facility, the Company incurred an extraordinary loss of $840, offset by a
       tax benefit of $336, on the extinguishments of debt, primarily consisting
       of the write-off of deferred loan costs.

       The Senior Notes  mature on April 1, 2008 and bear  interest at a rate of
       9.25% per annum.  The Senior  Notes and the  obligations  of the  Company
       under the indenture governing the senior notes (the "Note Indenture") are
       unconditionally guaranteed on a senior, unsecured basis by any Subsidiary
       Guarantor,  of which  there are  currently  none.  The  senior  notes are
       callable after five years at a premium to par which declines to par after
       eight  years.  Upon a change of  control,  as  defined,  the  Company  is
       required  to offer to redeem  the senior  notes at 101% of the  principal
       amount plus accrued and unpaid interest.  Restrictive covenants contained
       in the  Note  Indenture  include,  among  other  things,  limitations  on
       additional  indebtedness,   investments,   dividends  and  certain  other
       significant  transactions.  The Company was in  compliance  with all such
       covenants as of December 31, 2000.

                                      F-11-

<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 2000, 1999 and 1998

                 (Dollars in Thousands except per share amounts)


       Maturities of long-term debt are as follows:

                   2001                  $      --
                   2002                         --
                   2003                         --
                   2004                         500
                   2005                         --
                   Thereafter               100,000
                                          ---------
                                         $  100,500
                                          =========


Deferred loan costs and accumulated amortization are summarized as follows:

                                                                     Accumulated
      December 31, 2000              Amount     Amortization         Balance
      -----------------              ------     ------------         -------
      Deferred loan costs            $5,330         1,432             3,898
      Discount on senior notes        3,000           825             2,175
                                     ------        ------            ------
                                     $8,330         2,257             6,073
                                     ======        ======            ======

      December 31, 1999
      Deferred loan costs            $6,044         1,017             5,027
      Discount on senior notes        3,000           525             2,475
                                     ------        ------             -----
                                     $9,044         1,542             7,502
                                     ======        ======             =====


(5)    Preferred Stock

       On March 27, 1998, the Company's Board of Directors adopted a Certificate
       of  Designation  creating  $35,000  in  Series  A 12%  Senior  Redeemable
       Cumulative  Preferred Stock (the "Preferred Stock").  The Preferred Stock
       has a liquidation  preference  over the Common Stock equal to the initial
       liquidation  value  of  the  Preferred  Stock  plus  accrued  and  unpaid
       dividends  thereon.  The  Preferred  Stock will be  subject to  mandatory
       redemption on April 1, 2010 at 100% of the liquidation value plus accrued
       and unpaid dividends.  The Company may, at its option, redeem at any time
       the  Preferred  Stock,  in whole or in part,  at 100% of the  liquidation
       value plus  accrued  and unpaid  dividends.  Upon a Change of Control (as
       defined),  the Company must offer to repurchase  the  Preferred  Stock at
       100%  of  its  liquidation  value  plus  accrued  and  unpaid  dividends,
       provided,  however, that the Company shall not be obligated to (and shall
       not) offer to repurchase  the Preferred  Stock if such  repurchase  would
       violate  the  terms  of the  credit  facility  or the  terms  of the Note
       Indenture.

       The Preferred Stock bears  cumulative  quarterly  dividends at a rate per
       annum  equal to 12.0% of the  liquidation  value.  Dividends  may, at the
       option  of the  Company,  be  paid  in  cash  or by  adding  to the  then
       liquidation value of the Preferred Stock an amount equal to the dividends
       then  accrued  and  payable.  The terms of the  Preferred  Stock  contain
       restrictions on distributions and on purchases of junior securities.  The
       Preferred  Stock has no voting  rights with respect to general  corporate
       matters  except as provided by law or for certain  class voting rights in
       connection with the issuance of senior or parity equity securities of the

                                      F-12

<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 2000, 1999 and 1998

                 (Dollars in Thousands except per share amounts)


       Company and any amendments to the Company's  Certificate of Incorporation
       that adversely affect the rights of the Preferred Stock.

       At  December  31,  2000,  1999  and  1998  the  liquidation  value of the
       Preferred  Stock  recorded on the  Company's  Balance  Sheet was $48,449,
       $43,046 and $38,246,  respectively,  which includes dividends of $13,449,
       $8,046 and $3,246, respectively, added to the liquidation value.

(6)    Commitments and Related Party Transactions

       The Company leases service center and warehouse  space and is responsible
       for all related  occupancy  costs.  Rental expense in 2000, 1999 and 1998
       aggregated $4,605, $4,419 and $3,931,  respectively,  of which $551, $530
       and $510,  respectively,  were for realty owned by two  stockholders  and
       executive officers.  Certain of the leases with unrelated parties contain
       various renewal options, and right of refusal purchase options.

       In addition,  the Company leases certain  vehicles under operating leases
       having lease terms of 367 days. The leases have renewal options for up to
       eight  years.  Total rent  expense  for such  leases  amounted to $2,994,
       $2,587 and $1,808 for the years ended  December 31, 2000,  1999 and 1998,
       respectively.

       Total lease commitments, including vehicles, are as follows:

                                       Third          Related
                                      parties         parties           Total
                                   --------------  ---------------  -----------
                      2001       $      5,113              572           5,685
                      2002              3,239              595           3,834
                      2003              1,417              619           2,036
                      2004                487              644           1,131
                      2005                124              335             459


       The Company  entered  into a Management  Services  Agreement on March 31,
       1998 with a related  party  pursuant to which the Company  pays an annual
       fee of $685.  Expense  under this  agreement  was $685,  $685 and $514 in
       2000, 1999 and 1998, respectively.

       The Company  has  employment  agreements  with  certain of its  executive
       officers (some of whom are also  stockholders)  which expire on March 31,
       2001 and 2003.

(7)    Stock Option Plan

       In September 1998, the Board of Directors and stockholders of the Company
       approved  and adopted the Diamond  Triumph  Auto Glass 1998 Stock  Option
       Plan (the "1998  Plan").  The 1998 Plan  provides  for the  issuance of a
       total of 30,000  authorized  and unissued  shares of common stock.  As of
       December 31, 2000,  the Board of Directors had granted  28,425 options to
       key employees of the Company with an exercise  price of $20.00 per share,
       which  approximates  fair value at the date of grant.  The  options  vest
       evenly over five years and may not be exercised  until the earlier of (a)
       90 days after the Company's  Common Stock has become  publicly  traded or
       (b) 91 days prior to the tenth  anniversary of the date of the grant. The
       1998 Plan expires in September 2008.

                                      F-13

<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 2000, 1999 and 1998

                 (Dollars in Thousands except per share amounts)


       The Company  applies APB Opinion No. 25 in  accounting  for the 1998 Plan
       and, accordingly,  no compensation cost has been recognized for its stock
       options in the financial statements. Had the Company determined its stock
       options  under SFAS No. 123,  the  Company's  net income  would have been
       changed to the pro forma amounts indicated below.

                                      Years Ended December 31,
                                  2000        1999         1998
                                --------   ----------    ---------

As reported                   $   2,360         9          7,987
Pro forma                         2,344        (6)         7,985


       The per share fair value of stock options  granted during fiscal 1998 was
       $2.84 on the date of grant and was  determined  using  the  Black-Scholes
       option-pricing model based upon the following assumptions:

                                                                            1998
                                                          ----------------

Expected dividend yield                                              0.00    %
Expected volatility                                                  0.00    %
Risk-free rate                                                       4.65    %
Expected  life (in years)                                            9.75


       Summarized stock option data is as follows:

                                            Exercise            Shares
                                              Price          Under Option
                                          -------------    ---------------

Outstanding at December 31, 1997        $       --                  --
    Granted                                   20.00              27,125
    Exercised                                   --                  --
    Cancelled                                   --                  --
                                                           ----------------
Outstanding at December 31, 1998              20.00              27,125
    Granted                                     --                  --
    Exercised                                   --                  --
    Cancelled                                   --               (3,000)
                                                           ----------------
Outstanding at December 31, 1999              20.00              24,125
    Granted                                   20.00               5,500
    Exercised                                   --                  --
    Cancelled                                 20.00              (1,200)
                                                           ----------------
Outstanding at December 31, 2000              20.00              28,425
                                                           ================

Exercisable                             $       --                  --


                                      F-14

<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 2000, 1999 and 1998

                 (Dollars in Thousands except per share amounts)


(8)    Income Taxes

       Prior to the consummation of the Merger, all of the Affiliated  Companies
       were S  Corporations  and as such federal and state taxes were  generally
       paid at the  stockholder  level only.  There was no provision  for income
       taxes through the consummation of the Merger on March 31, 1998.

       As discussed in Note 2, the Company  adopted SFAS No. 109 as of March 31,
       1998. The effect of recognizing  deferred tax assets and liabilities from
       other than the Merger  transaction as of March 31, 1998 was the recording
       of net  deferred  tax assets of $1,643,  reflected as a reduction in 1998
       income tax expense.

       Upon  consummation  of the Merger,  the Affiliated  Companies  terminated
       their S  Corporation  status.  The Merger was treated as a taxable  asset
       acquisition  of the merged  Affiliated  Companies  for  Federal and state
       income tax purposes and as a  recapitalization  for financial  accounting
       purposes.  For Federal and state income tax purposes,  the purchase price
       was allocated  among the various  merged  Affiliated  Companies and their
       respective  assets and liabilities based on the respective fair values as
       of the closing of the Merger.  This  resulted in  different  book and tax
       asset bases for the assets of these companies, which resulted in deferred
       tax  assets of  approximately  $44,801  credited  to  additional  paid-in
       capital.

Income tax expense consists of:
<TABLE>
<CAPTION>

                                                                   Applicable To
                                    ----------------------------------------------------------------------
                                                                                          Extraordinary
                                                    Continuing Operation                     Items
                                    ----------------------------------------------------  ----------------
                                        Current          Deferred            Total           Deferred
                                    ----------------  ----------------  ----------------  ----------------
<S>                              <C>                 <C>                <C>               <C>
Year ended December 31, 2000:
    Federal                         $        --              1,630             1,630                 (260)
    State                                       (40)           545               505                  (76)
                                      --------------    --------------  ----------------  ----------------
                                    $           (40)         2,175             2,135                 (336)
                                      ==============    ==============  ================  ================
</TABLE>

                                         Current       Deferred         Total
                                      ------------   -----------     -----------
Year ended December 31, 1999:
Federal                              $        --            107          107
State                                       (144)           175           31
                                       ----------    -----------     -----------
                                     $      (144)           282          138
                                       ==========    ===========     ===========

Year ended December 31, 1998:
Federal                              $       161           (302)        (141)
State                                        446           (342)         104
                                       ----------    -----------     -----------
                                     $       607           (644)         (37)
                                       ==========    ===========     ===========


       Income tax expense applicable to continuing  operations differed from the
       amounts  computed  by  applying  the U.S.  federal  income tax rate of 34
       percent to pretax income as a result of the following:

                                      F-15

<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 2000, 1999 and 1998

                 (Dollars in Thousands except per share amounts)
<TABLE>
<CAPTION>

                                                                       2000          1999           1998
                                                                   -------------  ------------  -------------

<S>                                                              <C>                    <C>         <C>
Computed "expected" tax expense                                  $     1,700            50          2,704
Increase (reduction) in income taxes resulting from:
    State income taxes, net of federal income tax benefit                333            21             68

    Recognition of deferred tax due to change in tax status                            --          (1,643)

    Pretax income applicable to portion of year as S Corporation
       for which income taxes have not been provided                                   --          (1,572)

    Permanent items                                                       73            67            173

    Other, net                                                            29           --             233
                                                                   -------------  ------------  -------------
                                                                 $     2,135           138            (37)
                                                                   =============  ============  =============
</TABLE>

       The tax effects of temporary  differences  that give rise to  significant
       portions of the deferred  assets and deferred tax liabilities at December
       31, 2000 and 1999 are presented below.

Deferred tax assets:                                            2000      1999
                                                              --------  --------
    Accounts receivable, principally due to
       allowance for doubtful accounts                         $   185      382
    Inventories, principally due to additional
       costs inventoried for tax                                   801      651

    Intangibles                                                 38,723   41,885

    Prepaid advertising expenses not yet
       deducted for tax purposes                                 1,708    1,650

    Net operating loss and alternative minimum
       tax credit carryforward                                   4,193    3,130

    Liabilities and accruals for financial reporting purposes      635      420
                                                               -------  -------
       Total gross deferred tax assets                          46,245   48,118
                                                               -------  -------
Deferred tax liabilities:
    Plant and equipment, principally due to differences
       in depreciation and capitalized interest                    921      955
                                                               -------  --------
       Total gross deferred tax liabilities                        921      955
                                                               -------  --------
       Net deferred tax assets                                 $45,324   47,163
                                                               =======  ========

       There was no valuation  allowance  for deferred tax assets as of December
       31, 2000 or 1999. In assessing the  realizability of deferred tax assets,
       management considers whether it is more likely than not that some portion
       or all of the  deferred  tax assets will not be  realized.  The  ultimate
       realization  of deferred tax assets is dependent  upon the  generation of
       future taxable income during periods in which those temporary differences
       become  deductible.  Management  considers  the  reversal of deferred tax
       liabilities, projected future taxable income, and tax planning strategies
       in making this  assessment.  In order to realize the deferred tax assets,
       the Company will need to generate future taxable income of  approximately
       $110,000 prior to expiration of the 15-year  amortization  period for the
       intangible assets in 2012 and the subsequent net operating loss

                                      F-16

<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 2000, 1999 and 1998

                 (Dollars in Thousands except per share amounts)


       carryforward  period of 20 years.  Taxable  income  (loss)  for the years
       ended December 31, 2000, 1999 and 1998 was $(2,800),  $(8,000) and $4,500
       respectively.  Based  upon the level of  historical  taxable  income  and
       projections  of future  taxable  income over the period the  deferred tax
       assets are deductible, management believes it is more likely than not the
       Company will realize the benefits of these  deductible  differences.  The
       amount of the deferred tax assets considered  realizable,  however, could
       be reduced in the near term if estimates of future  taxable income during
       the amortization period are reduced.

(9)    Employee Benefit Plans

       The Company has a defined  contribution  plan  covering all employees who
       meet  the age and  service  requirements.  Contributions  to the plan are
       determined  by the Company and are based upon a percentage  of the annual
       compensation  of all  participants.  The  expense  related  to  the  plan
       amounted to $286, $292 and $250 for 2000, 1999 and 1998, respectively.

(10)   Supplemental Cash Flow Information

                                           2000         1999          1998
                                       ------------   ---------    -----------
Interest paid                          $   9,759        10,090        5,175
Income taxes paid                            --            --           202
                                        ===========   =========    ===========
Non cash investing and financing
  activiies:
     Preferred stock dividends         $   5,403         4,800         3,246
     Deferred tax assets                      --            --        44,801
     Distribution of preferred stock          --            --         7,000
                                        ===========   =========    ===========

(11)   Legal Proceedings

       The Company is involved in various  claims and legal  actions  arising in
       the  ordinary  course of  business.  In the  opinion of  management,  the
       ultimate  disposition  of these matters will not have a material  adverse
       effect on the Company's financial, results of operations or liquidity.

(12)   Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
                                                        First       Second      Third        Fourth
                       2000                            Quarter      Quarter     Quarter      Quarter       Total
---------------------------------------------------- ------------ ------------ -----------  ----------- ------------
<S>                                                      <C>          <C>         <C>          <C>         <C>
Net sales                                                $44,665      $49,153     $48,628      $41,569     $184,015
Gross profit                                              30,801       33,746      33,822       29,061      127,430
Net income (loss) before extraordinary item                1,197        1,970       1,305       (1,608)       2,864
Net income (loss)                                            693        1,970       1,305       (1,608)       2,360
Net (loss) income applicable to common stockholders         (599)         641         (65)      (3,020)      (3,043)

                       1999
----------------------------------------------------
Net sales                                                $41,412      $43,361     $43,848      $35,899     $164,520
Gross profit                                              28,570       30,133      30,210       24,151      113,064
Net income (loss)                                          1,259        1,164         438       (2,852)           9
Net income (loss) applicable to common stockholders          112          (18)       (779)      (4,106)      (4,791)
</TABLE>

                                      F-17