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, 1999

[ ]    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 Identification No.)
  of Incorporation or Organization)

  220 Division Street, Kingston, Pensylvania                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 [ ] No [ X ]

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.  The registrant
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 31, 2000.

                      Documents Incorporated by Reference:

                                      None.

<PAGE>


Diamond is not subject to the reporting  requirements  of Section 13 or 15(d) of
the Securities  Exchange Act of 1934.  Any  forward-looking  statements  made by
Diamond herein are not guarantees of future performance,  and actual results may
differ materially from those in such  forward-looking  statements as a result of
various  factors.  The  factors  include  but are not  limited  to risk  factors
discussed under "Factors  Affecting  Future  Performance,"  beginning on page 6.
Capitalized  terms used herein but not defined herein have the meanings assigned
to them in Diamond's Offering  Memorandum  relating to the Notes dated March 26,
1998, unless otherwise indicated.

                                     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, 1999,  Diamond operated a network
of 226 automotive glass service centers, approximately 1,041 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, 1999 were $164.5 million and $13.8 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 segments 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 1999 sales to individual
consumers, commercial customers and insurance customers represented 28.6%, 41.5%
and 29.9% 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 segments.

         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 $33,000. In 1999, 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 1999,  Diamond's 102 mature service  centers  (service  centers open for four
years or longer)  averaged  approximately  $956,000  in sales and  approximately
$200,000 of branch  operating  profit per location.  For the year ended December
31, 1999,  approximately 82% of Diamond's service centers that had been open for
at least fifteen months 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

<PAGE>

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.

Recent Developments

         On  March  31,  1998,  Diamond  entered  into  a bank  facility  with a
syndicate of financial institutions,  which provided for borrowings of up to $35
million. On March 27, 2000, Diamond entered into a new revolving credit facility
with  The CIT  Group/Business  Credit,  Inc.,  as  lender,  which  provides  for
revolving advances ("Revolving Loans") of up to the lesser of:

o        $25,000,000; or

o    the sum of 85% of Diamond's Eligible Accounts Receivable (as defined in the
     new credit facility) plus 85% of Diamond's  Eligible  Inventory (as defined
     in the new credit facility), less certain reserves; or

o    an amount equal to 1.5 times Diamond's  EBITDA for the prior twelve months.
     For  purposes  of the new credit  facility,  EBITDA is defined as  earnings
     before interest, taxes, depreciation and amortization, plus any accrued and
     unpaid  management fees payable to Leonard Green & Partners,  L.P.  ("LGP")
     during the period.

         At the same time  Diamond  entered  into the new  credit  facility,  it
repaid outstanding borrowings under the old bank facility.

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 226 locations at the end of
1999.

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:

         o        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;

         o        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;

         o        each of the affiliated entities merged with and into Diamond;

         o        Green Equity Investors II, L.P. purchased:

                  (1)      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

                                      -2-

<PAGE>

                  (2)      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;

         o        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

         o        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.

         The above transactions were consummated on March 31, 1998, and together
constitute  the  "Recapitalization."  Concurrently  with  the  Recapitalization,
Diamond  issued the Notes and entered  into the old bank  facility,  under which
Diamond borrowed $12.5 million in connection with the Recapitalization.

Industry Overview

         The   automotive   glass   replacement   and  repair   industry  is  an
approximately $3.0 billion market. The market for the installation of automotive
glass is highly fragmented,  with  approximately  20,000 providers of automotive
glass replacement and repair services in the United States. Many participants in
the industry  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.

         Over the past 10 years,  management estimates that total industry sales
have grown at approximately  4.0% per year.  Replacement volume is influenced by
several factors,  including the total vehicle population and the number of miles
driven.  Severe  weather  and road  conditions  can  also  increase  demand  for
automotive glass repair and replacement. Fixing minor damage to a windshield may
be deferred by consumers  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 has been  attributable  primarily  to an  increase in the
aggregate  number  of  vehicles  on the road,  from  approximately  181  million
vehicles  in 1988 to  approximately  212  million  vehicles  in 1998,  and to an
increase in the  aggregate  number of miles  driven per  vehicle per year,  from
approximately 11,188 miles in 1988 to approximately 12,183 miles in 1998. Growth
in industry  sales has also been driven by the use of larger,  more  complex and
more expensive automotive glass in new vehicles.  In 1999,  management estimates
that industry  replacement  units decreased  approximately  3%, primarily due to
weak demand. This weaker demand had a negative impact on pricing and resulted in
a decrease in average revenue per installation unit.

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.

                                      -3-

<PAGE>

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
also 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 segments,  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 1999 sales to individual consumers, commercial customers
and  insurance  customers  represented  28.6%,  41.5% and 29.9% of total  sales,
respectively.   In  1999,   Diamond's  top  ten  customer   accounts   comprised
approximately  18.9% of total sales and no single customer account exceeded 6.0%
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
segment 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  segment  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.  A  substantial  portion  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   segment  customers  include  commercial  fleet  leasing
companies,  rental car companies,  car  dealerships,  body shops,  utilities and
government agencies.  Diamond's customers in the commercial segment include Avis
Rent-A-Car,   Inc.,   Enterprise   Rent-A-Car  and  Bell  Atlantic  Corporation.
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  which  participate  in these  networks have required that  automotive
glass  replacement  and repair  services  be  provided  by more than one service
provider  in order to  ensure  competitive  pricing  and high  quality  service.
Diamond is an

                                      -4-
<PAGE>

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 1,041 mobile installation vehicles.
In 1999,  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 the end of 1999,  Diamond's network comprised 226 service 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.  Generally,  Diamond's  service  center  locations are
approximately  2,600  square  feet in  size.  Due to weak  industry  conditions,
Diamond  opened 24 new service  centers in 1999, as compared to an average of 35
new service centers in the three years prior to 1999. Diamond currently plans to
open  approximately  4 new  service  centers in 2000  absent an  improvement  in
industry conditions.

         The following chart provides  information  concerning Diamond's service
center openings from 1990 to 1999:

                                                     Service       % Increase
            Year       Openings   Consolidations     Centers    Over Prior Year
                                   At Year End
            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%

         Service centers are typically staffed with  approximately  four persons
and 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 7
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  nightly  or weekly  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 over 75% of its sales with  internally  distributed  product,  with the
remainder  being  purchased  from the spot market.  Diamond's  highly  efficient
distribution  center network,  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.

                                      -5-

<PAGE>

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 1999, no single supplier  represented more than 30%
of Diamond's  automotive glass purchases.  Due to the competitive  nature of the
automotive  glass  manufacturing  industry,  Diamond  does  not  anticipate  any
difficulty in sourcing its  automotive  glass  requirements  in the  foreseeable
future.

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,  1999,  Diamond  employed  1,610  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  highly   leveraged  and  has   significant   debt  service
obligations.   As  of  December  31,  1999,  Diamond's  aggregate   consolidated
indebtedness  was  approximately  $107.5  million (of which  approximately  $7.5
million represented aggregate outstanding  indebtedness under Diamond's old bank
facility), and Diamond had $43.0 million (liquidation preference) of outstanding
Preferred Stock and a stockholders' deficit of $78.2 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 new credit facility and the indenture  governing the Notes
                  contain certain restrictive financial and operating covenants;


                                      -6-
<PAGE>


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

         o        Diamond's  indebtedness   outstanding  under  the  new  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 new  credit  facility  and 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 new credit  facility)  with respect to
                  the assets securing such indebtedness. The new 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 new 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 new credit  facility is secured by a
first priority lien on substantially all of Diamond's  assets. In addition,  the
indenture  governing  the Notes will  restrict the amount of  indebtedness  that
subsidiaries are permitted to incur.


                                      -7-

<PAGE>

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 new 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;

         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 old bank facility  required Diamond to maintain  certain  financial
ratios,  including  interest  coverage and leverage ratios.  In August 1999, the
lenders of the old bank  facility  amended the old bank facility to increase the
permitted  maximum  leverage  ratio and decrease the minimum  interest  coverage
ratio. At December 31, 1999,  Diamond did not comply with the revised ratios set
forth in the old bank facility,  as amended.  Diamond received a waiver from the
lenders under the old bank facility with respect to this non-compliance. The new
credit facility  requires  Diamond to maintain minimum EBITDA (as defined in the
new 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 new 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 new  credit  facility,  in which case the lender  would,  among  other
things,  be entitled to elect to declare all amounts  owing under the new 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 new 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;

                                      -8-
<PAGE>

         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.

         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 new
credit facility prohibits Diamond from repurchasing any Notes,  unless and until
Diamond  has  paid the  indebtedness  under  the new  credit  facility  in full.
Diamond's  failure to  repurchase  the Notes would result in a default under the
indenture  governing the Notes and the new credit facility.  Diamond's inability
to pay the  indebtedness  under the new 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 new  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  resulting  from reduced demand for auto glass services and
lower  average  revenue per  installation  unit,  Diamond  opened 24 new service
centers in 1999,  as  compared  to an average of 35 new  service  centers in the
three years prior to 1999.  Diamond currently plans to open  approximately 4 new
service centers in 2000 absent an improvement in industry conditions.  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 new credit  facility,  should
enable it to finance the expenditures related to its expansion. However, Diamond
cannot assure you that:


                                      -9-
<PAGE>

         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 new credit facility are insufficient
to finance  the  expenditures  related to  Diamond's  expansion,  Diamond may 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 and income 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 18.4% in
fiscal 1999,  primarily reflecting the continued maturation of Diamond's service
centers and increased installation  productivity,  revenue per installation unit
decreased an average of 6% in 1999.  The decrease in Diamond's  average  revenue
per  installation  unit is primarily  attributable to weaker industry demand for
glass replacement  services,  due primarily to milder weather conditions,  which
resulted in price compression throughout the industry.

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 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.

                                      -10-
<PAGE>


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
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 EBITDA has declined due to industry conditions.

         In 1999,  Diamond's  EBITDA declined 25.4%.  The decrease in EBITDA was
primarily due to lower average revenue per installation  unit that was partially
offset  by  a  decrease  in  glass  product  costs,  increases  in  installation
productivity and the leveraging of service center,  corporate and administrative
expenses.  If Diamond  continues to experience  further  declines in revenue per
installation  unit,  Diamond would  experience  further declines in EBITDA which
could limit its ability to meet its ongoing  debt service  obligations.  The new
credit facility  requires  Diamond to maintain minimum EBITDA (as defined in the
new 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  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.  To date, no material product liability claims have been made against
Diamond  relating to its  replacement of  windshields.  However,  Diamond cannot
assure  you that  these  claims  will not be made in the  future.  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.

There is no  established  market  for the Notes and no  assurance  that a liquid
trading market will develop in the future.

         There is no existing market for the Notes, Diamond cannot assure you as
to the  liquidity of any markets that may develop for the Notes,  the ability of
holders of the Notes to sell their Notes or the price at which  holders would be
able to sell their Notes. Future trading prices of the Notes will depend on many
factors,  including,  among other things,  prevailing interest rates,  Diamond's
operating results and the market for similar securities.

The Notes are subject to restrictions on transfer.

         The  Notes  are  subject  to  the   restrictions  on  transfer.   These
restrictions are described in the legend to the Notes. In general, the Notes may
not be offered or sold unless: (1) they are registered under the Securities Act,
or (2) an exemption from the registration requirements of the Securities Act and
applicable  state  securities  laws is  available.  Diamond  does not  currently
anticipate that it will register the outstanding Notes under the Securities Act.


                                      -11-
<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...........               5              Nebraska..........            1
Arkansas..........               1              New Hampshire.....            5
Colorado..........               4              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..........            1
Indiana...........               7              Pennsylvania......           26
Iowa..............               3              Rhode Island......            1
Kansas............               2              South Carolina....            4
Kentucky..........               3              South Dakota......            1
Louisiana.........               3              Tennessee.........            5
Maine.............               3              Texas.............            5
Maryland..........               8              Utah..............            1
Massachusetts.....               9              Vermont...........            3
Michigan..........               8              Virginia..........           11
Minnesota.........               4              West Virginia.....            3
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.  In  addition,  management  believes  that
Diamond has appropriate  insurance  coverage to operate its business,  including
insurance for its mobile installation units and technicians.

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

         Not Applicable.


                                      -12-
<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 27,  2000,  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  new  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.


                                      -13-

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         The selected  historical  and unaudited pro forma  condensed  financial
data as of December  31,  1995,  1996,  1997,  1998 and 1999 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,  1998 and 1999,  and for each of the years in the three year
period ended December 31, 1999, 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,
                                                                      ------------------------
                                                           1995          1996         1997          1998          1999
                                                           ----          ----         ----          -----         ----
                                                                       (dollars in thousands)
Statement of Operating Data:
<S>                                                     <C>           <C>           <C>           <C>           <C>
Sales ...............................................   $  68,102     $ 101,355     $ 122,005     $ 149,609     $ 164,520
Cost of sales .......................................      20,697        31,423        36,702        43,851        51,456
                                                        ---------     ---------     ---------     ---------     ---------

Gross profit ........................................      47,405        69,932        85,303       105,758       113,064
Operating expenses ..................................      40,470        56,883        74,696        89,764       101,894
                                                        ---------     ---------     ---------     ---------     ---------

Income from operations ..............................       6,935        13,049        10,607        15,994        11,170
Interest income .....................................         (54)         (109)         (184)         (120)          (31)
Interest expense ....................................          --            --            --         8,162        11,054
Pre-tax income ......................................       6,989        13,158        10,791         7,952           147
Provision for income taxes ..........................          --            --            --           (37)          138
                                                        ---------     ---------     ---------     ---------     ---------
Net income ..........................................   $   6,989     $  13,158     $  10,791     $   7,989     $       9
                                                        =========     =========     =========     =========     =========

Pro forma (1):
Historical income before provision for income taxes .   $   6,989        13,158     $  10,791     $   7,952

Pro forma provision for income taxes ................       2,796         5,263         4,316         3,181
                                                        ---------     ---------     ---------     ---------
Pro forma net income ................................   $   4,193     $   7,895     $   6,475     $   4,771
                                                        =========     =========     =========     =========

Other Data:
EBITDA(2) ...........................................   $   8,284     $  14,948     $  18,029     $  18,524     $  13,796
EBITDA margin .......................................        12.2%         14.8%         14.8%         12.4%          8.4%

Non-vehicle capital expenditures ....................   $     356     $   1,616     $   1,514     $   1,856     $   1,892
Vehicle capital expenditures ........................       1,425         3,730           859           673           479
                                                        ---------     ---------     ---------     ---------     ---------
Total capital expenditures ..........................       1,781         5,346         2,373         2,529         2,371

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

Service centers operated at period end ..............         105           142           174           206           226

Balance Sheet Data (at period end):
Cash and cash equivalents ...........................   $   4,100     $   5,393     $   6,255     $     301     $      94
Total assets ........................................      21,069        31,494        36,687        90,692        87,519
Total debt ..........................................          --            --            --       108,500       107,500
Stockholders' equity (deficit) ......................      15,728        24,294        23,285       (73,441)      (78,232)
</TABLE>

(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  "Business--Recapitalization"),  Diamond  eliminated  its  S
     corporation status and, accordingly, is subject to federal and state income
     taxes.

                                      -14-

<PAGE>

(2)  EBITDA   represents   income  before  income   taxes,   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.


                                      -15-

<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, 1999,  Diamond operated a network
of 226 automotive glass service centers, approximately 1,041 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, 1999 were $164.5 million and $13.8 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 segments 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 1999 sales to individual
consumers, commercial customers and insurance customers represented 28.6%, 41.5%
and 29.9% 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 the old bank  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, 1997, 1998 and 1999.

                                      -16-

<PAGE>
<TABLE>
<CAPTION>

                          `                                             Years Ended December 31,
                                                                        ------------------------
                                                             1997              1998              1999
                                                             ----              ----              ----
                                                         $        %         $       %        $       %
                                                     -----------------------------------------------------
                                                                     (dollars in millions)
<S>                                                     <C>       <C>      <C>     <C>      <C>      <C>
      Sales.......................................      122.0     100.0    149.6   100.0    164.5    100.0
      Cost of Sales...............................       36.7      30.1     43.8    29.3     51.4     31.2
                                                       ------     -----    -----   -----    -----    -----

      Gross Profit................................       85.3      69.9    105.8    70.7    113.1     68.8
      Operating Expenses..........................       74.7      61.2     89.8    60.0    101.9     61.9
                                                       ------     -----    -----   -----    -----    -----
      Income from Operations......................       10.6       8.7     16.0    10.7     11.2      6.8

      Interest Income.............................       (0.2)      0.2     (0.1)    0.1      0.0      0.0

      Interest Expense............................        0.0       0.0     8.1      5.4     11.0      6.7
                                                       ------     -----    -----   -----    -----    -----
                                                         (0.2)      0.2     8.0      5.3     11.0      6.7
                                                       ------     -----    -----   -----    -----    -----

      Income before provision for income taxes....       10.8       8.9      8.0     5.3      0.2      0.1
      Provision for income taxes..................        0.0       0.0      0.0     0.0      0.2      0.1
                                                        -----    ------    -----   -----     ----      ---
      Net income..................................       10.8       8.9      8.0     5.3      0.0      0.0
                                                        =====    ======    =====   =====     ====     ====

      EBITDA (1)..................................       18.0      14.8     18.5    12.4     13.8      8.4
</TABLE>

(1)  EBITDA represents income before taxes,  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.

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 is 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  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.

                                      -17-

<PAGE>

         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.

         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 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 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 service
center, corporate and administrative expenses.

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

         Sales.  Sales for 1998 increased by $27.6 million,  or 22.6%, to $149.6
million from $122.0  million for 1997.  This  increase was  primarily  due to an
increase in sales at service centers opened in 1996, 1997 and 1998.

         Gross  Profit.  Gross profit for 1998  increased by $20.5  million,  or
24.0%, to $105.8 million from $85.3 million for 1997.  Gross profit increased as
a  percentage  of sales to 70.7% for 1998 from 69.9% for 1997.  The  increase in
gross profit and gross margin  during 1998 was  primarily  due to an increase in
Diamond's sales and an increase in average revenue per installation unit.

         Operating  Expenses.  Operating  expenses  for 1998  increased by $15.1
million,  or 20.2%,  to $89.8  million  from $74.7  million for 1997.  Operating
expenses  decreased  as a  percentage  of sales to 60.0% for 1998 from 61.2% for
1997.  The decrease in operating  expenses as a percentage  of sales during 1998
was  primarily due to a  non-recurring  executive  compensation  expense of $5.0
million accrued for in 1997. Excluding the non-recurring  executive compensation
expense in 1997,  operating expenses increased as a percentage of sales to 60.0%
for 1998 from 57.1% for 1997. The increase in operating expenses during 1998 was
primarily due to an increase in expenses  related to the continued  expansion of
Diamond's service and distribution center network. During 1998, Diamond added 32
net new service centers;  opened distribution  centers in Rock Island,  Illinois
and  Atlanta,  Georgia and  consolidated  its  Raleigh,  North  Carolina and its
Orlando,   Florida   distribution   centers  into  Diamond's  Atlanta,   Georgia
distribution center. The increase in operating expenses as a percentage of sales
is  primarily  attributable  to an increase in service and  distribution  center
network  payroll and other  operating  expenses  combined with weaker demand for
auto glass  installation  services.  In  addition,  since April 1998 Diamond has
incurred additional costs related to increases in senior management salaries, an
accrual  for  an  incentive  based  bonus  program  for  senior  management  and
management fees paid to LGP.

         Depreciation  and  amortization  expense  for  1998  increased  by $0.2
million,  or 9.1%, to $2.4 million from $2.2 million for 1997. In 1998,  Diamond
commenced  amortization of certain software related to the  implementation  of a
new point of sale  system  for the  service  center  network.  The  increase  in
amortization  expense  was offset by a

                                      -18-
<PAGE>

$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 1998 increased by
$5.4 million, or 50.9%, to $16.0 million from $10.6 million for 1997.  Excluding
the impact of the non-recurring  executive  compensation expense of $5.0 million
in 1997, income from operations for 1998 increased by $0.4 million,  or 2.6%, to
$16.0 million from $15.6 million for 1997.

         Interest Expense. Interest expense for 1998 was $8.1 million due to the
consummation of the Recapitalization compared to no interest expense for 1997.

         Net Income.  Net income for 1998 decreased $2.8 million,  or 25.9%,  to
$8.0 million from $10.8 million for 1997.  The primary  reason for this decrease
was  attributable  to interest  expense of $8.1 million.  This was offset with a
$5.4 million increase in income from operations.

         EBITDA.  EBITDA for 1998  increased by $0.5 million,  or 2.8%, to $18.5
million from $18.0 million for 1997.  EBITDA as a percentage of sales  decreased
to 12.4% for 1998 from 14.8% for 1997.  The  increase in EBITDA  during 1998 was
primarily due to the increase in sales and gross profit,  which was offset by an
increase in operating  expenses.  The decrease in EBITDA  margin  during 1998 is
primarily  attributable  to an increase in the service and  distribution  center
network  payroll and other  operating  expenses  combined with weaker demand for
auto glass installation services. During 1998, Diamond incurred additional costs
related to increases in senior management salaries,  an accrual for an incentive
based bonus program for senior  management and management  fees paid to LGP. The
decrease in EBITDA margin for 1998 related primarily to an increase in operating
expenses which was partially offset by an increase in gross margin.

Liquidity and Capital Resources

         Diamond's need for liquidity will arise primarily from interest payable
on the Notes,  the new 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  borrowing  base under the new credit  facility  exceeds the
amount  outstanding  thereunder,  no required  payments of  principal on the new
credit facility prior to its expiration on March 27, 2004.

         Net  Cash  Provided  by  Operating  Activities.  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 due to newly implemented  accounts
receivable  and billing  systems which  improved the accuracy and  timeliness of
customer  billings  and  improved  post-billing  collection  efforts.  Net  cash
provided  by  operating  activities  for 1998  decreased  $10.5  million to $5.2
million from $15.7 million for 1997.  The decrease in cash provided by operating
activities  for 1998 was  primarily  due to a decrease in Diamond's net earnings
and an increase in working capital requirements.

         Net Cash  Provided  by/Used in Investing  Activities.  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.  Net cash provided by
investing  activities  for 1998 increased $3.6 million to $0.5 million from $3.1
million  used in investing  activities  for 1997.  The primary  reason for these
variances  was 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 1999  decreased  $10.4 million to $1.2 million from $11.6 million
for 1998,  while net cash used in financing  activities  for 1998 decreased $0.2
million to $11.6  million  from  $11.8  million  for 1997.  The reason for these
variances was the Recapitalization, in which $97.0 million was received from the
issuance of the Notes,  $12.5 million from the old bank facility,  $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

                                      -19-
<PAGE>

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 received from the old
bank facility during 1998 in connection with the Recapitalization.

         Capital  Expenditures.  Net capital  expenditures were $2.4 million for
1999 as compared to $2.5 million for 1998 and $2.4  million for 1997.  Excluding
vehicle capital expenditures, capital expenditures were $1.9 million for 1999 as
compared  to  $1.8  million  for  1998  and  $1.5  million  for  1997.   Capital
expenditures  in 1999 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
development of Diamond's  nationwide  expansion program.  It is anticipated that
Diamond  will  annually  incur  approximately  $2.5 to $3.0  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.  Diamond's  capital  resources and liquidity are
expected to be provided by Diamond's net cash  provided by operating  activities
and borrowings under the new credit facility.

Inflation

         Diamond  believes that  inflation has not had a material  impact on its
results of operations for 1997, 1998 or 1999.

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."


                                      -20-
<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, 1999 and 1998...............................   F-3

Statements of Operations for the Years Ended
  December 31, 1999, 1998 and 1997......................................    F-5

Statements of Stockholders' Equity (Deficit) for the Years Ended
  December 31, 1999, 1998 and 1997......................................    F-6

Statements of Cash Flows for the Years Ended
  December 31, 1999, 1998 and 1997.....................................     F-7

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


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

         None.


                                      -21-

<PAGE>


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

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

        Name                            Age      Position
        ----                            ---      --------
Kenneth Levine ......................   46       Co-Chairman of the Board,
                                                   Co-Chief Executive Officer
                                                   and Director
Richard Rutta........................   43       Co-Chairman of the Board,
                                                   Co-Chief Executive Officer
                                                   and Director
Norman Harris........................   45       President
Michael A. Sumsky....................   41       Executive Vice President,
                                                   Chief Financial Officer and
                                                   General Counsel
Gregory J. Annick....................   36       Director
John G. Danhakl  ....................   44       Director
Jonathan D. Sokoloff.................   42       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.

                                      -22-

<PAGE>

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

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,
1997, 1998 and 1999. 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                   1999     $300,000         -                -                  -            $3,168 (3)
     Co-Chairman of the Board    1998     $249,331    $85,386 (1)           -                  -            $3,168 (3)
and Co-Chief Executive Officer   1997     $106,000         -               (2)                 -            $3,168 (3)
-----------------------------------------------------------------------------------------------------------------------
Richard Rutta                    1999     $300,000         -                -                  -            $3,168 (3)
     Co-Chairman of the Board    1998     $249,331    $85,386 (1)           -                  -            $3,168 (3)
and Co-Chief Executive Officer   1997     $106,000         -               (2)                 -            $3,168 (3)
-----------------------------------------------------------------------------------------------------------------------
Norman Harris                    1999     $275,000         -                -                  -            $3,168 (3)
     President                   1998     $256,962    $70,016 (1)           -                 450           $3,168 (3)
                                 1997     $212,000         -               (2)                 -            $2,721 (3)
-----------------------------------------------------------------------------------------------------------------------
Michael A. Sumsky                1999     $250,000         -                -                  -            $2,711 (3)
     Executive Vice President,   1998     $221,893    $70,016 (1)           -                 450           $2,324 (3)
Chief Financial Officer and      1997     $148,400         -               (2)                 -            $2,182 (3)
General Counsel
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

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

         (2)      During 1997,  Diamond  accrued an aggregate of $5.0 million in
                  non-recurring  executive  compensation for the Named Executive
                  Officers, which was paid in 1998.

         (3)      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, 1999 for each
of Diamond's  Named  Executive  Officers and the year-end  value of  unexercised
options held by the Named Executive Officers.

                                      -23-
<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, 1999,  the Board of Directors
had granted  options to purchase a total of 27,175  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.

                                      -24-
<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

                                      -25-
<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.

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,  2000,  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
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 TRANSACTIONS

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. See "Business - Recapitalization".

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 $513,000, $535,000 and $556,000 in
1997, 1998 and 1999, 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)      (1)      All  financial  statements  of  Diamond  for  the  year  ended
                  December  31,  1999  are  filed  herewith.  See Item 8 of this
                  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.

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.

                                      -28-

<PAGE>

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

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.

27 (2)           Financial Data Schedule.



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

(2)      Filed herewith.

                                      -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

Date: April 11, 2000


         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,   April 11, 2000
-------------------------------      Co-Chief Executive
         Kenneth Levine              Officer and Director

/s/ Richard Rutta                    Co-Chairman  of the Board,  April 11, 2000
-------------------------------      Co-Chief  Executive
         Richard Rutta               Officer and Director

/s/ Michael A. Sumsky                Executive Vice President,   April 11, 2000
-------------------------------      Chief Financial Officer
         Michael A. Sumsky           and General Counsel

/s/ Norman Harris                    President                   April 11, 2000
-------------------------------
         Norman Harris

/s/ Gregory J. Annick                Director                    April 11, 2000
-------------------------------
         Gregory J. Annick

/s/ John G. Danhakl                  Director                    April 11, 2000
-------------------------------
         John G. Danhakl

/s/ Jonathan D. Sokoloff             Director                    April 11, 2000
-------------------------------
         Jonathan D. Sokoloff

                                      -30-

<PAGE>


                          INDEX TO FINANCIAL STATEMENTS


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

Balance Sheets, December 31, 1999 and 1998.............................    F-3

Statements of Operations for the Years Ended
     December 31, 1999, 1998 and 1997..................................    F-5

Statements of Stockholders' Equity (Deficit) for the
     Years Ended December 31, 1999, 1998 and 1997......................    F-6

Statements of Cash Flows for the Years Ended
     December 31, 1999, 1998 and 1997..................................    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, 1999 and 1998, 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, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Diamond Triumph Auto Glass,
Inc. as of December 31, 1999 and 1998, and the results of its operations and its
cash flows for each of the years in the three year period ended December 31,
1999, in conformity with generally accepted accounting principles.


                                  /s/ KPMG LLP

Allentown, Pennsylvania

February 22, 2000, except for Note 12 which is as of March 27, 2000



                                      F-2
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                                 Balance Sheets

                           December 31, 1999 and 1998

                             (Dollars in Thousands)



<TABLE>
<CAPTION>
                            Assets                                 1999        1998
                                                                 --------    --------
<S>                                                              <C>              <C>
Current assets:
    Cash and cash equivalents                                    $     94         301
    Accounts receivable, less allowance for doubtful accounts
       of $956 and $800 for 1999 and 1998 respectively             10,895      12,727
    Other receivables                                                 189       1,610
    Inventories                                                    12,620      11,264
    Prepaid expenses                                                  962         841
    Deferred income taxes                                           3,081       2,826
                                                                 --------    --------

            Total current assets                                   27,841      29,569
                                                                 --------    --------

Equipment and leasehold improvements:
    Vehicles                                                       10,289      11,040
    Computers and office equipment                                  3,173       2,667
    Computer software                                               3,901       2,566
    Other equipment                                                   524         488
    Leasehold improvements                                            140         123
                                                                 --------    --------

                                                                   18,027      16,884
    Accumulated depreciation and amortization                     (10,334)     (8,906)
                                                                 --------    --------

            Net equipment and leasehold improvements                7,693       7,978

Deferred loan costs and senior notes discount, net                  7,502       8,152
Deferred income taxes                                              44,082      44,619
Other assets                                                          401         374
                                                                 --------    --------

Total assets                                                     $ 87,519      90,692
                                                                 ========    ========
</TABLE>


                                      F-3
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                                 Balance Sheets

                           December 31, 1999 and 1998

                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                   Liabilities and Stockholders' Equity (Deficit)                   1999         1998
                                                                                  ---------    ---------
<S>                                                                               <C>              <C>
Current liabilities:
    Accounts payable                                                              $   7,950        9,586
    Accrued expenses
       Payroll and related items                                                      3,314        3,166
       Accrued interest                                                               2,363        2,326
       Accrued income taxes                                                           1,216        1,955
       Other                                                                            362          354
                                                                                  ---------    ---------
          Total accrued expenses                                                      7,255        7,801
                                                                                  ---------    ---------

            Total current liabilities                                                15,205       17,387
                                                                                  ---------    ---------

Long-term debt:
    Bank facility                                                                     7,500        8,500
    Senior notes                                                                    100,000      100,000
                                                                                  ---------    ---------
       Total long-term debt                                                         107,500      108,500
                                                                                  ---------    ---------

            Total liabilities                                                       122,705      125,887
                                                                                  ---------    ---------

Series A 12% senior redeemable cumulative preferred stock - par
    value $0.01 per share; authorized 100,000 shares; issued and
    outstanding 35,000 in 1999 and 1998, at liquidation preference value             43,046       38,246
                                                                                  ---------    ---------

Stockholders' equity (deficit):
    Common stock, 1999 and 1998- par value $0.01 per share; authorized
       1,100,000 shares; issued and outstanding 1,000,000 shares                         10           10
    Additional paid-in capital                                                       52,747       57,547
    Retained earnings (accumulated deficit)                                        (130,989)    (130,998)
                                                                                  ---------    ---------

            Total stockholders' equity (deficit)                                    (78,232)     (73,441)
                                                                                  ---------    ---------

Total liabilities and stockholders' equity (deficit)                              $  87,519       90,692
                                                                                  =========    =========
</TABLE>

See accompanying notes to financial statements.


                                      F-4
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                            Statements of Operations

                  Years Ended December 31, 1999, 1998 and 1997

                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                1999         1998         1997
                                                             ---------    ---------    ---------
<S>                                                          <C>            <C>          <C>
Net sales                                                    $ 164,520      149,609      122,005
Cost of sales                                                   51,456       43,851       36,702
                                                             ---------    ---------    ---------

            Gross profit                                       113,064      105,758       85,303
                                                             ---------    ---------    ---------

Operating expenses:
    Payroll                                                     61,434       54,377       47,653
    Advertising and promotional                                 10,349        9,499        7,360
    Other operating expenses                                    27,516       23,478       17,445
    Depreciation and amortization                                2,595        2,410        2,238
                                                             ---------    ---------    ---------

                                                               101,894       89,764       74,696
                                                             ---------    ---------    ---------

            Income from operations                              11,170       15,994       10,607

Other (income) expense:
    Interest income                                                (31)        (120)        (184)
    Interest expense                                            11,054        8,162           --
                                                             ---------    ---------    ---------

                                                                11,023        8,042         (184)
                                                             ---------    ---------    ---------

            Income before provision for income taxes               147        7,952       10,791

Provision for income taxes                                         138          (37)          --
                                                             ---------    ---------    ---------

            Net income                                               9        7,989       10,791

Preferred stock dividends                                        4,800        3,246           --
                                                             ---------    ---------    ---------

Net (loss) income applicable to common stockholders          $  (4,791)       4,743       10,791
                                                             =========    =========    =========


    Historical income before provision for income taxes                   $   7,952       10,791
    Pro forma provision for taxes                                             3,181        4,316
                                                                          ---------    ---------

    Pro forma net income                                                      4,771        6,475
    Preferred stock dividends                                                 3,246           --
                                                                          ---------    ---------

    Pro forma net income applicable to common stockholders                $   1,525        6,475
                                                                          =========    =========
</TABLE>

See accompanying notes to financial statements.


                                      F-5
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                  Statements of Stockholders' Equity (Deficit)

                  Years Ended December 31, 1999, 1998 and 1997

                             (Dollars in Thousands)


<TABLE>
<CAPTION>                                                                       Retained
                                          Common stock          Additional      earnings
                                     ------------------------     paid-in    (accumulated
                                       Shares        Amount       capital       deficit)        Total
                                     ----------    ----------    ----------    ----------    ----------
<S>                                   <C>          <C>               <C>         <C>            <C>
Balance at December 31, 1996              2,300             4          --          24,290        24,294

Issuance of common stock                   --            --            --            --            --

Net income                                 --            --            --          10,791        10,791

Distributions to stockholders              --            --            --         (11,800)      (11,800)
                                     ----------    ----------    ----------    ----------    ----------

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)
                                     ==========    ==========    ==========    ==========    ==========
</TABLE>

See accompanying notes to financial statements.


                                      F-6
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                            Statements of Cash Flows

                  Years ended December 31, 1999, 1998 and 1997

                             (Dollars in Thousands)

<TABLE>
<CAPTION>
                                                                              1999        1998        1997
                                                                            --------    --------    --------
<S>                                                                         <C>            <C>        <C>
Cash flows from operating activities:
    Net income                                                              $      9       7,989      10,791
                                                                            --------    --------    --------
    Adjustments to reconcile net income to net cash
       provided by operating activities:
          Depreciation and other amortization                                  2,595       2,410       2,238
          Amortization of deferred loan costs and senior notes discount          882         661        --
          Provision for doubtful accounts                                      1,341       1,063         662
          (Gain) on sale of fixed assets                                         (32)        (40)         (2)
          Changes in assets and liabilities:
            Decrease (increase) in accounts and other receivables              1,912      (5,586)     (4,824)
            (Increase) decrease in inventories                                (1,356)     (3,027)        886
            (Increase) decrease in prepaid expenses                             (121)        363        (207)
            (Decrease) increase in accounts payable                           (1,635)      3,655         911
            (Decrease) increase in accrued expenses                             (546)     (2,339)      5,290
            Increase in deferred income taxes                                    282          25        --
                                                                            --------    --------    --------

            Total adjustments                                                  3,322      (2,815)      4,954
                                                                            --------    --------    --------

            Net cash provided by operating activities                          3,331       5,174      15,745
                                                                            --------    --------    --------

Cash flows from investing activities:
    Capital expenditures                                                      (2,371)     (2,529)     (2,373)
    Proceeds from sale of equipment                                               92         186         105
    (Increase) decrease in other assets                                          (27)        (69)         83
    Due from (to) related company                                               --         2,866        (898)
                                                                            --------    --------    --------

            Net cash (used in) provided by investing activities               (2,306)        454      (3,083)
                                                                            --------    --------    --------

Cash flows from financing activities:
    Net proceeds from issuance of senior notes                                  --        97,000        --
    Net proceeds from bank facility                                           26,000      18,500        --
    Proceeds from issuance of preferred stock                                   --        28,000        --
    Distributions to stockholders, net                                          --        (4,597)    (11,800)
    Payments on bank facility                                                (27,000)    (10,000)       --
    Issuance of common stock                                                    --        16,000        --
    Deferred loan costs                                                         (232)     (5,813)       --
    Repurchase of common stock                                                  --      (150,672)       --
                                                                            --------    --------    --------

            Net cash used in financing activities                             (1,232)    (11,582)    (11,800)
                                                                            --------    --------    --------
            Net (decrease) increase in cash and cash equivalents                (207)     (5,954)        862

Cash and cash equivalents, beginning of year                                     301       6,255       5,393
                                                                            --------    --------    --------

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

See accompanying notes to financial statements.


                                      F-7
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 1999, 1998 and 1997

                             (Dollars in Thousands)


(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, 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") (See Note 12 - Subsequent
     Event).

     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, 1999, the Company operated a network of 226 service
     centers and four distribution centers in 39 states.



                                      F-8
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 1999, 1998 and 1997

                             (Dollars in Thousands)


(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 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 1999 and 1998, the Company commenced amortizing the
          software costs over the estimated useful life of five years.
          Unamortized computer software costs were $3,218 and $2,503 at December
          31, 1999 and 1998, respectively. Amortization expense in 1999 and 1998
          for capitalized computer software costs was $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, 1999, 1998 and 1997

                             (Dollars in Thousands)


     (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. Costs
          and accumulated amortization are summarized as follows:

                                                    Accumulated
          December 31, 1999                 Amount  Amortization  Balance
          -----------------                 ------  ------------  -------

          Deferred loan costs              $  6,013      1,017      4,996
          Discount on senior notes            3,000        525      2,475
                                           --------   --------   --------
                                           $  9,013      1,542      7,471
                                           ========   ========   ========

          December 31, 1998
          -----------------

          Deferred loan costs              $  5,813        436      5,377
          Discount on senior notes            3,000        225      2,775
                                           --------   --------   --------
                                           $  8,813        661      8,152
                                           ========   ========   ========

     (f)  Revenue Recognition

          Revenue from auto glass installation and related services is
          recognized when the installation is complete or the service is
          performed.

     (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 $8,150, $7,444
          and $5,902 in 1999, 1998 and 1997, 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.


                                      F-10
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 1999, 1998 and 1997

                             (Dollars in Thousands)


(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 Old Bank
     Facility approximates fair value based on borrowing rates available to the
     Company for loans with similar terms. On March 27, 2000, the Company
     replaced the Old Bank Facility with the new Credit Facility (See Note 12 -
     Subsequent Event). 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 $70,000 and
     $100,000 at December 31, 1999 and 1998, respectively. The fair value of the
     Company's Series A 12% Senior Redeemable Cumulative Preferred Stock
     approximates the liquidation preference.

(4)  Long -Term Debt

     Long-term debt consists of the following:

                                                1999            1998
                                              --------        --------
          Bank facility                       $  7,500           8,500
          Senior notes                         100,000         100,000
                                              --------        --------

          Total                               $107,500         108,500
                                              ========        ========

     The Old Bank Facility was scheduled to expire on April 1, 2003 and provided
     for borrowings of up to $35,000. Borrowings under the Old Bank Facility
     bore interest, at the Company's discretion, at either the Base Rate, as
     defined, or at the Eurodollar Rate, plus a margin of 1.50% for the Base
     Rate and 2.50% for the Eurodollar Rate from August 13, 1999. Prior to
     August 13, 1999, borrowings under the Old Bank Facility bore interest, at
     the Company's discretion, at either the Base Rate, as defined, or at the
     Eurodollar Rate, plus a margin of 1.00% for the Base Rate and 2.00% for the
     Eurodollar Rate. In addition, a commitment fee of 0.375% was charged
     against any unused balance of the Old Bank Facility. The effective interest
     rate on borrowings under the Old Bank Facility ranged from 9.00% to 10.00%
     as of December 31, 1999. Interest rates were subject to increases or
     reductions based upon the Company meeting certain financial tests. The
     proceeds of the Old Bank Facility were available for working capital
     requirements and for general corporate purposes, including permitted
     acquisitions. A portion of the Old Bank Facility not to exceed $5,000 was
     available for the issuance of letters of credit, which generally have an
     initial term of one year or less. The Company had $852 and $673 in
     outstanding letters of credit at December 31, 1999 and 1998, respectively.
     The Old Bank Facility was secured by first priority security interests in
     all of the tangible and intangible assets of the Company. In addition, the
     Old Bank Facility contained certain restrictive covenants including, among
     other things, the maintenance of certain debt coverage ratios, as well as
     restrictions on additional indebtedness, dividends and certain other
     significant transactions. At December 31, 1999, the Company was not in
     compliance with certain financial covenants of its Old Bank Facility and
     received a waiver from its lenders. As previously described, the Company
     replaced the Old Bank Facility with the new Credit Facility, which is the
     basis for the classification of the debt as long-term debt.



                                      F-11
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 1999, 1998 and 1997

                             (Dollars in Thousands)


     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, 1999.

     Maturities of long-term debt are as follows:

           2000                             $       --
           2001                                     --
           2002                                     --
           2003                                     --
           2004                                   7,500
           Thereafter                           100,000
                                            -----------

                                            $   107,500
                                            ===========

(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 new
     Credit Facility or the terms of the Note Indenture.


                                      F-12
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 1999, 1998 and 1997

                             (Dollars in Thousands)


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

     At December 31, 1999 and 1998 the liquidation value of the Preferred Stock
     recorded on the Company's Balance Sheet was $43,046 and $38,246,
     respectively, which includes dividends of $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 1999, 1998 and 1997
     aggregated $4,419, $3,931 and $3,135, respectively, of which $556, $535 and
     $513, 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 $2,587, $1,808
     and $539 for the years ended December 31, 1999, 1998 and 1997,
     respectively.

     Total lease commitments, including vehicles, are as follows:

                                  Third             Related
                                 parties            parties          Total
                              -------------     ---------------  --------------

               2000             $   5,764              562             6,326
               2001                 3,930              539             4,469
               2002                 2,368              561             2,929
               2003                 1,102              583             1,685
               2004                   333              606               939


     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 and $514 in 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.


                                      F-13
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 1999, 1998 and 1997

                             (Dollars in Thousands)


(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. In 1998, the Board
     of Directors granted 27,175 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. No options were granted in 1999. 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.

     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,
                                                 1999           1998
                                               ---------      ---------

          Net income:
              As reported                      $       9          7,987
              Pro forma                               (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



                                      F-14
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 1999, 1998 and 1997

                             (Dollars in Thousands)


     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               --         27,125
              Granted                                    --           --
              Exercised                                  --           --
              Cancelled                                  --         (3,000)
                                                                  --------
          Outstanding at December 31, 1999              20.00       24,125
                                                                  ========
          Exercisable                              $     --           --


(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 of Diamond Auto Glass Works, Inc., Triumph
     Auto Glass, Inc., A Above Average Auto Glass Company by Diamond, Inc., A-AA
     Triumph Auto Glass, Inc., and Scranton Holding Co. into Diamond Triumph
     Auto Glass, Inc. (formerly Triumph Auto Glass of Ohio, Inc.) 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.


                                      F-15
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 1999, 1998 and 1997

                             (Dollars in Thousands)


       Income tax expense consists of:

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

                                          $   (144)        282        138
                                          ========    ========   ========


                                          Current     Deferred    Total
                                          --------    --------   --------
          Year ended December 31, 1998:
              Federal                     $    161        (302)      (141)
              State                            446        (342)       104
                                          --------    --------   --------

                                          $    607        (644)       (37)
                                          ========    ========   ========


     Income tax expense 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:

<TABLE>
<CAPTION>
                                                                     1999      1998
                                                                   ------    ------
<S>                                                                <C>        <C>
Computed "expected" tax expense                                    $   50     2,704
Increase (reduction) in income taxes resulting from:
    State income taxes, net of federal income tax benefit              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                                                    67       173

    Other, net                                                         --       233
                                                                   ------    ------

                                                                   $  138       (37)
                                                                   ======    ======
</TABLE>


                                      F-16
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 1999, 1998 and 1997

                             (Dollars in Thousands)


     The tax effects of temporary differences that give rise to significant
     portions of the deferred assets and deferred tax liabilities at December
     31, 1999 and 1998 are presented below.


<TABLE>
<CAPTION>
                                                                           1999       1998
                                                                          -------   -------
<S>                                                                       <C>        <C>
          Deferred tax assets:
              Accounts receivable, principally due to
                 allowance for doubtful accounts                          $   382       320
              Inventories, principally due to additional
                 costs inventoried for tax                                    651       741

              Intangibles                                                  41,885    45,046

              Prepaid Advertising expenses not yet
                 deducted for tax purposes                                  1,650     1,501

              Net operating loss and alternative minimum
                 tax credit carryforward                                    3,130        83

              Liabilities and accruals for financial reporting purposes       420       269
                                                                          -------   -------

                 Total gross deferred tax assets                           48,118    47,960
                                                                          -------   -------

          Deferred tax liabilities:
              Plant and equipment, principally due to differences
                 in depreciation and capitalized interest                     955       515
                                                                          -------   -------

                 Total gross deferred tax liabilities                         955       515
                                                                          -------   -------

                 Net deferred tax assets                                  $47,163    47,445
                                                                          =======   =======
</TABLE>


     There was no valuation allowance for deferred tax assets as of December 31,
     1999 or 1998, or March 31, 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 $115,000 prior to expiration of the 15-year amortization
     period for the intangible assets in 2012 and the subsequent net operating
     loss carryforward period of 20 years. Taxable income (loss) for the years
     ended December 31, 1999, 1998 and 1997 was $(8,000), $4,500 and $9,000,
     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.



                                      F-17
<PAGE>


                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 1999, 1998 and 1997

                             (Dollars in Thousands)


(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 $292,
     $250 and $206 for 1999, 1998 and 1997, respectively.

(10) Supplemental Cash Flow Information

<TABLE>
<CAPTION>
                                                         1999      1998      1997
                                                        -------   -------   -------
<S>                                                     <C>         <C>          <C>
          Interest paid                                 $10,090     5,175        --
          Income taxes paid                                  --       202        --
                                                        =======   =======   =======

          Noncash investing and financing activities:
              Preferred stock dividends                 $ 4,800     3,246        --
              Deferred tax assets                            --    44,801        --
              Distribution of preferred stock                --     7,000        --
                                                        =======   =======   =======
</TABLE>


(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 position, results of operations or liquidity.

(12) Subsequent Event

     On March 27, 2000, the Company entered into the new Credit Facility. The
     new Credit Facility 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 new Credit
     Facility) plus 85% of the Company's Eligible Inventory (as defined in the
     new Credit Facility), less certain reserves; or (3) an amount equal to 1.5
     times the Company's EBITDA (as defined in the new Credit Facility) for the
     prior twelve months. A portion of the new Credit Facility, not to exceed
     $3,000, is available for the issuance of letters of credit. Borrowings
     under the new Credit Facility bear interest, at the Company's discretion,
     at either the Chase Manhattan Bank Rate (as defined in the new 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 new Credit Facility. Interest rates are
     subjected to increases or reductions based upon the Company meeting certain
     EBITDA levels. The proceeds of the new Credit Facility are available for
     working capital requirements and for general corporate purposes. The new
     Credit Facility is secured by first priority security interests in all of
     the tangible and intangible assets of the Company. In addition, the new
     Credit Facility contains certain restrictive covenants including, among
     other things, the


                                      F-18
<PAGE>


                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 1999, 1998 and 1997

                             (Dollars in Thousands)


     maintenance of a minimum EBITDA level for the prior twelve months, as well
     as restrictions on additional indebtedness, dividends and certain other
     significant transactions.



                                      F-19