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, 2001


[  ]        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,                             18704
              Pennsylvania                                    (Zip Code)
 (Address of Principal Executive Office)


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

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

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

                                      NONE

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

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

                                      NONE

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

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


                               Yes [ X ] No [ ]


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


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


      There is no public market for the registrant's stock. Diamond had
1,000,000 shares of Common Stock (the "Common Stock"), par value $0.01 per
share, and 35,000 shares of Series A 12% Senior Redeemable Cumulative Preferred
Stock (the "Preferred Stock"), par value $0.01 per share, outstanding as of
March 13, 2002.


                      Documents Incorporated by Reference:


                                      None.


<PAGE>

                                     PART I

ITEM 1.     BUSINESS

Overview

      Diamond is a leading provider of automotive glass replacement and repair
services in the United States. At December 31, 2001, Diamond operated a network
of 256 automotive glass service centers, approximately 1,153 mobile installation
vehicles and six distribution centers in 43 states. Diamond serves all of its
customers' automotive glass replacement and repair needs, offering windshields,
tempered glass and other related products. Sales, net income and EBITDA (income
before income taxes and extraordinary item, interest expense, depreciation and
amortization) for the year ended December 31, 2001, were $201.4 million, $5.0
million and $21.5 million, respectively.

      Diamond believes that, due to its sole focus on automotive glass
replacement and repair, it has one of the lowest cost structures in the
automotive glass replacement and repair industry. Diamond's low cost structure
enables it to serve all markets of the industry, which is comprised of: (1)
individual consumers; (2) commercial customers, including commercial fleet
leasing companies, rental car companies, car dealerships, body shops, utilities
and government agencies; and (3) insurance customers, including referrals from
local agents, claims offices and centralized call centers. Diamond's 2001 sales
to individual consumers, commercial customers and insurance customers
represented approximately 25.8%, 37.0% and 37.2% 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 services all three of its customer
markets.

      Diamond's financial performance reflects attractive service center-level
economics. The cash required to open a new service center, including inventory
net of trade payables, averages $39,900. In 2001, over 80% 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 2001, Diamond's 169 mature service centers (service centers open for four
years or longer) averaged approximately $949,000 in sales and approximately
$192,000 of branch operating profit per location. For the year ended December
31, 2001, approximately 92% of Diamond's mature service centers achieved
positive branch operating profitability. Management believes that, with enhanced
emphasis on marketing, personnel evaluation, effective cost controls and
inventory management, Diamond will increase this percentage of branch operating
profitability in mature service centers.

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


                                        1
<PAGE>

History

      Diamond was founded in 1923 by the grandfather of Kenneth Levine and
Richard Rutta, Diamond's Co-Chairmen of the Board. 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 256 locations at the end of 2001.

Recapitalization

      On January 15, 1998, Diamond, Kenneth Levine, Richard Rutta, Green Equity
Investors II, L.P. and certain affiliated entities of Diamond entered into a
Second Amended and Restated Stock Purchase Agreement, pursuant to which, among
other things, Green Equity Investors II, L.P. acquired 77.0% of the Common Stock
and 80.0% of the Preferred Stock. This transaction was consummated on March 31,
1998. Concurrently therewith, Diamond issued $100 million in aggregate principal
amount of 9 1/4% Senior Notes (the "Notes") and entered into a credit facility,
under which Diamond borrowed $12.5 million. See "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Significant
Accouting Policies -- Income Tax" for a discussion of the Internal Revenue
Service's proposed adjustments with respect to Diamond's tax treatment of the
recapitalization.

Industry Overview

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

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

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

Pricing

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


                                        2
<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
causes tempered glass to shatter into dull-edged pebbles, reducing glass related
injuries. In addition, Diamond offers automotive glass repair services.

Customers and Marketing

      Diamond provides automotive glass replacement services to each of the
industry's customer markets, which include individual consumers, commercial
customers and insurance customers. Management believes that, in addition to
capturing additional consumer sales, broadening Diamond's service center network
and geographic coverage will facilitate Diamond's efforts to obtain an increased
share of the national insurance and fleet markets, whose participants generally
establish multiple providers for their automotive glass replacement
requirements. In 2001, Diamond's top ten customer accounts comprised
approximately 22.1% of total sales and no single customer account exceeded 5.9%
of total sales.

      Diamond's marketing is conducted through a combination of prominent Yellow
Pages advertising and by a direct sales force of 163 representatives. Yellow
Pages advertising is supported by customer service representatives and extended
hour call centers that answer telephone inquiries, schedule service appointments
and arrange emergency service. Sales representatives market Diamond's services
to insurance claim centers, local agents, fleet operators, automobile dealers
and body shops and have established relationships at all levels of the major
insurance, fleet and rental car company organizations.

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

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

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

                                        3
<PAGE>

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. At December 31, 2001, Diamond operated a network of 256 automotive
glass service centers, approximately 1,153 mobile installation vehicles and six
distribution centers in 43 states. In 2001, over 80% 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.

      Diamond's automotive glass 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,
Southwest and Western. Any expansion into new states will be under the Triumph
Auto Glass registered service mark. The company opened 24 new service centers
and two distribution centers in 2001, and plans to continue in its current
service center expansion mode.

      The following chart provides information concerning Diamond's service
center openings from 1990 to 2001:

                                           Service       % Increase
                                           Centers       Over Prior
        Year    Openings   Consolidation   At Year End   Year
        ----    --------   -------------   -----------   ----------

        1990.....   6          --             24            33.3%
        1991.....   7          --             31            29.2%
        1992.....  12          --             43            38.7%
        1993.....  17          --             60            39.5%
        1994.....  31          --             91            51.7%
        1995.....  17           3             105           15.4%
        1996.....  39           2             142           35.2%
        1997.....  33           1             174           22.5%
        1998.....  33           1             206           18.4%
        1999.....  24           4             226           9.7%
        2000.....   7           1             232           2.7%
        2001.....  24          --             256           10.3%

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

Distribution System

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

                                        4
<PAGE>

Suppliers

      Management believes that the high volume of its automotive replacement
glass ("ARG") purchases position 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 ARG 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 foreign suppliers, and is continuing to
expand its supplier network by utilizing additional foreign suppliers in order
to guard against product shortages and to reduce the overall cost of ARG. In
2001, no single supplier represented more than 17% of Diamond's ARG purchases.
Due to the competitive nature of the automotive glass manufacturing industry,
Diamond does not anticipate any substantial difficulty in sourcing its ARG
requirements in the foreseeable future.

      On February 28, 2001, several U.S. glass manufacturers petitioned the
Federal Trade Commission requesting the imposition of antidumping duties on
imports of ARG windshields from the People's Republic of China. A duty
determination was issued on February 4, 2002 by the Department of Commerce, the
governing body that sets preliminary duty rates, ranging from 3.70% to 9.67% for
certain suppliers of Diamond located in the People's Republic of China.
Management believes that Diamond has significantly minimized any adverse impact
of these duty rates to its purchasing costs by shifting a substantial amount of
its ARG purchases from suppliers in the People's Republic of China to suppliers
in the People's Republic of China at the lower end of the duty range and to
suppliers located outside of the People's Republic of China.

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 three of which are
Safelite Glass Corporation, LYNX Services from PPG, L.L.C. and Harmon AutoGlass,
a division of Apogee Enterprises, Inc.

Employees

      As of December 31, 2001, Diamond employed 1,868 persons. None of Diamond's
employees are covered by a collective bargaining agreement, and Diamond believes
that its relationships with its employees are good.

                      FACTORS AFFECTING FUTURE PERFORMANCE

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

      Diamond is substantially leveraged and has significant debt service
obligations, which could impair its ability to pay the amounts due under the
Notes. As of December 31, 2001, Diamond's aggregate consolidated indebtedness
was approximately $100.0 million, and Diamond had $54.5 million (liquidation
preference) of outstanding Preferred Stock and a stockholders' deficit of $82.4
million.

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

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

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

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

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

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<PAGE>

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

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

      If Diamond is unable to generate sufficient cash flows from operations in
the future to service its indebtedness, it may be required to refinance all or a
portion of its indebtedness, including the Notes, or to obtain additional
financing or to dispose of material assets or discontinue certain of its
operations. The credit facility and the indenture governing the Notes restrict
Diamond's ability to sell assets and/or use the proceeds therefrom. Diamond
cannot give the assurance that any refinancing or asset sales would be possible
under its debt instruments existing at that time and that the proceeds which
Diamond could realize from such refinancing or asset sales would be sufficient
to meet its obligations then due or that Diamond could obtain any additional
financing.

The Notes are subordinated to Diamond's secured indebtedness.

      The Notes are:

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

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

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

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

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

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

                                        6
<PAGE>

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

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

The Notes are subject to fraudulent conveyance laws.

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

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

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

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

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

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

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<PAGE>

      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
credit facility prohibits Diamond from repurchasing any Notes, unless and until
Diamond has paid the indebtedness under the credit facility in full. Diamond's
failure to repurchase the Notes would result in a default under the indenture
governing the Notes and the credit facility. Diamond's inability to pay the
indebtedness under the credit facility, if accelerated, would also constitute a
default under the indenture governing the Notes, which could have adverse
consequences to Diamond and to the holders of the Notes. In the event of a
change of control, Diamond cannot assure you that it would have sufficient
assets to satisfy all of its obligations under the credit facility and the
Notes.

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

      Diamond's continued growth depends to a significant degree on its ability
to open new service centers in existing and new markets and to operate these
service centers on a profitable basis. In addition, Diamond will require
additional distribution centers as it implements its program to expand its
service centers to achieve a nationwide presence. Diamond's ability to expand
will depend, in part, on business conditions and the availability of qualified
managers and service representatives, and sufficient capital. The company opened
24 new service centers and two distribution centers in 2001, and plans to
continue in its current service center expansion mode. A decline in Diamond's
overall financial performance may adversely impact its ability to expand in the
future. Diamond expects that the net cash generated from operations, together
with borrowings under the credit facility, should enable it to finance the
expenditures related to its expansion. However, Diamond cannot assure you that:

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

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

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

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

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

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<PAGE>

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

      Weather has historically affected Diamond's sales and net income, with
severe weather generating increased sales and net income and mild weather
resulting in lower sales and net income. In addition, Diamond's business is
somewhat seasonal, with the fourth quarter traditionally its slowest period of
activity. Diamond believes these seasonal trends will continue for the
foreseeable future. Although Diamond's installation units increased by only 2.7%
in fiscal 2001, revenue per installation unit increased an average of 7.2% in
2001. The increase in Diamond's average revenue per installation unit is
attributable to the stabilization of price compression and to its sales mix.

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

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

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

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

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

      Green Equity Investors II, L.P., an investment partnership managed by
Leonard Green and Partners, L.P. ("LGP"), owns 77.0% of the outstanding shares
of Diamond's Common Stock and 80.0% of the outstanding shares of Diamond's
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.

                                        9
<PAGE>

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

      The replacement of windshields entails risk of product liability claims,
particularly if the windshields Diamond uses in its business are defective.
Diamond is involved in legal proceedings in the ordinary course of its business.
Management believes that the amounts which may be awarded or assessed against
Diamond in connection with these matters, if any, will not have a material
adverse effect on Diamond's financial condition, operating results or liquidity.
In addition, management believes that Diamond has appropriate insurance coverage
to operate its business, including insurance for its mobile installation units
and technicians. However, a successful product liability claim (or series of
claims) against Diamond in excess of its insurance coverage could have a
material adverse affect on Diamond's business, financial condition and results
of operations.



                                       10
<PAGE>

ITEM 2.     PROPERTIES

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

                Facility             Function              Area in Square Feet
                --------             --------              -------------------

              Kingston, PA.......... Headquarters              121,000
                                     Distribution Center
                                     Call Center
              Columbus, OH.......... Distribution Center        26,000
                                     Call Center
              Atlanta, GA........... Distribution Center        20,000
              Rock Island, IL....... Distribution Center        16,000
              Dallas, TX............ Distribution Center        12,000
              Denver, CO............ Distribution Center         9,400
              Scranton, PA.......... Call Center                 5,000

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


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

Alabama......         6          Nevada.......         1
Arkansas.....         1          New Hampshire         5
California...         2          New Jersey...        11
Colorado.....         6          New Mexico...         1
Connecticut.          6          New York.....        28
Delaware.....         2          North Carolina.....   8
Florida......        11          Ohio.........        11
Georgia......         9          Oklahoma.....         2
Illinois.....         6          Oregon.......         3
Indiana......         7          Pennsylvania.        27
Iowa.........         3          Rhode Island.         1
Kansas.......         4          South Carolina.....   4
Kentucky.....         3          South Dakota.         1
Louisiana....         4          Tennessee....         5
Maine........         3          Texas........         9
Maryland.....         8          Utah.........         2
Massachusetts...     10          Vermont......         4
Michigan.....         8          Virginia.....        12
Minnesota....         3          West Virginia         5
Mississippi.          1          Washington...         2
Missouri.....         4          Wisconsin....         5
Nebraska.....         2

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

ITEM 3.     LEGAL PROCEEDINGS AND INSURANCE

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

                                       11
<PAGE>

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
Preferred Stock.

      At March 13, 2002, there were five holders of record of Diamond's Common
Stock and three holders of record of Diamond's Preferred Stock.

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



                                       13
<PAGE>

ITEM 6.     SELECTED FINANCIAL DATA

      The selected historical and unaudited pro forma condensed financial data
as of December 31, 1997, 1998, 1999, 2000 and 2001 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, 2000 and 2001, and for each of the years in the three year
period ended December 31, 2001, 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,
                                                                     ------------------------
                                                  1997          1998         1999           2000          2001
                                                  ----          ----         ----           ----          ----
                                                                      (dollars in thousands)
Statement of Operating Data:

<S>                                             <C>           <C>           <C>           <C>           <C>
Sales .......................................   $ 122,005     $ 149,609     $ 164,520     $ 184,015     $ 201,366

Cost of sales ...............................      36,702        43,851        51,456        56,585        58,049
                                                ---------     ---------     ---------     ---------     ---------
Gross profit ................................      85,303       105,758       113,064       127,430       143,317

Operating expenses ..........................      74,696        89,764       101,894       111,814       124,501
                                                ---------     ---------     ---------     ---------     ---------

Income from operations ......................      10,607        15,994        11,170        15,616        18,816

Interest income .............................        (184)         (120)          (31)          (57)         (191)

Interest expense ............................        --           8,162        11,054        10,674        10,305
                                                ---------     ---------     ---------     ---------     ---------

Net income before provision for

income taxes and extraordinary item .........      10,791         7,952           147         4,999         8,702

Provision for income taxes ..................        --             (37)          138         2,135         3,733

Extraordinary loss on extinguishment
of debt, net of income taxes of $336 ........        --            --            --             504          --
                                                ---------     ---------     ---------     ---------     ---------

Net income ..................................      10,791         7,989             9         2,360         4,969

Preferred stock dividends ...................        --           3,246         4,800         5,403         6,081
                                                ---------     ---------     ---------     ---------     ---------

Net income (loss) applicable to
common stockholders .........................   $  10,791     $   4,743     $  (4,791)    $  (3,043)    $  (1,112)
                                                =========     =========     =========     =========     =========

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

Pro forma provision for income taxes ........       4,316         3,181
                                                ---------     ---------

Pro forma net income ........................   $   6,475     $   4,771
                                                =========     =========

Other Data:
EBITDA(2).............................            $18,029     $  18,524     $  13,796     $  18,447     $  21,462

EBITDA margin ..............................         14.8%         12.4%          8.4%         10.0%         10.7%

Non-vehicle capital expenditures............      $ 1,514     $   1,856     $   1,892     $   1,076     $   2,915

Vehicle capital expenditures ................         859           673           479           182         1,300
                                                ---------     ---------     ---------     ---------     ---------
Total capital expenditures ..................       2,373         2,529         2,371         1,258         4,215

Ratio of earnings to fixed charges
(excluding preferred stock dividends)
(3) .........................................                     1.97x         1.01x         1.47x         1.84x

Service centers operated at period end ......         174           206           226           232           256

Balance Sheet Data (at period end):
Cash and cash equivalents ...................   $   6,255     $     301     $      94     $      25     $   6,592
Total assets ................................      36,687        90,692        87,519        87,995        91,846
Total debt ..................................        --         108,500       107,500       100,500       100,000
Redeemable cumulative preferred stock .......        --          38,246        43,046        48,449        54,530
Stockholders' equity (deficit) ..............      23,285       (73,441)      (78,232)      (81,275)      (82,387)
</TABLE>

                                       14
<PAGE>

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

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

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



                                       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 United States. At December 31, 2001, Diamond operated a network
of 256 automotive glass service centers, approximately 1,153 mobile installation
vehicles and six distribution centers in 43 states. Diamond serves all of its
customers' automotive glass replacement and repair needs, offering windshields,
tempered glass and other related products. Sales, net income and EBITDA for the
year ended December 31, 2001 were $201.4 million, $5.0 million and $21.5
million, respectively.

      Diamond believes that, due to its sole focus on automotive glass
replacement and repair, it has one of the lowest cost structures in the
automotive glass replacement and repair industry. Diamond's low cost structure
enables it to serve all markets of the industry, which is comprised of: (1)
individual consumers; (2) commercial customers, including commercial fleet
leasing companies, rental car companies, car dealerships, body shops, utilities
and government agencies; and (3) insurance customers, including referrals from
local agents, claims offices and centralized call centers. Diamond's 2001 sales
to individual consumers, commercial customers and insurance customers
represented approximately 25.8%, 37.0% and 37.2% 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
Preferred Stock (equal to 10.0% of the 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 Preferred Stock, equal to 80.0% of the Preferred Stock
outstanding following the Recapitalization, for an aggregate consideration of
$28.0 million; (5) Norman Harris and Michael A. Sumsky purchased an aggregate of
30,000 shares of Common Stock, equal to 3.0% of the Common Stock outstanding
after the Recapitalization, for aggregate consideration of $600,000; and (6)
Diamond redeemed from Kenneth Levine and Richard Rutta all of the Common Stock
owned by them (other than 100,000 shares owned by each of them) for
approximately $150.7 million in cash, which resulted in each of Kenneth Levine
and Richard Rutta owning 10.0% of the Common Stock outstanding after the
Recapitalization. These transactions were consummated on March 31, 1998, and
together constitute the "Recapitalization." Concurrently with the
Recapitalization, Diamond issued the Notes and entered into a credit facility
with a syndicate of financial institutions, under which Diamond borrowed $12.5
million in connection with the Recapitalization. See "-- Significant Accouting
Policies -- Income Tax" for a discussion of the Internal Revenue Service's
proposed adjustments with respect to Diamond's tax treatment of 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.


                                       16
<PAGE>

      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, 1999, 2000 and 2001.

<TABLE>
<CAPTION>

                                                            Years Ended December 31,
                                              --------------------------------------------------
                                                     1999             2000             2001
                                              ---------------    ----------      ---------------
                                                 $        %        $        %        $        %
                                              ------    -----    -----    -----   ------    ----
                                                              (dollars in millions)

<S>                                            <C>      <C>      <C>      <C>      <C>      <C>
Sales ....................................     164.5    100.0    184.0    100.0    201.4    100.0

Cost of Sales ............................      51.4     31.2     56.6     30.8     58.1     28.8
                                             -------    -----    -----    -----    -----    -----

Gross Profit .............................     113.1     68.8    127.4     69.2    143.3     71.2

Operating Expenses .......................     101.9     61.9    111.8     60.8    124.5     61.8
                                             -------    -----    -----    -----    -----    -----
Income from Operations ...................      11.2      6.8     15.6      8.4     18.8      9.4

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

Interest Expense .........................      11.0      6.7     10.7      5.8     10.3      5.1
                                             -------    -----    -----    -----    -----    -----
                                                11.0      6.7     10.6      5.7     10.1      5.0
                                             -------    -----    -----    -----    -----    -----

Income before Provision for Income Taxes
  and Extraordinary Item .................       0.2      0.1      5.0      2.7      8.7      4.3

Provision for Income Taxes ...............       0.2      0.1      2.1      1.1      3.7      1.8

Extraordinary Loss on Debt Extinguishment,
  Net of Income Taxes of $0.3 ............       0.0      0.0      0.5      0.3      0.0      0.0
                                             -------    -----    -----    -----    -----    -----

Net Income ...............................       0.0      0.0      2.4      1.3      5.0      2.5
                                             =======    =====    =====    =====    =====    =====

Net Loss Applicable to
  Common Stockholders ....................      (4.8)    (2.9)    (3.0)    (1.6)    (1.1)    (0.5)
                                             =======    =====    =====    =====    =====    =====

Net Income ...............................       0.0      0.0      2.4      1.3      5.0      2.5

Interest Expense .........................      11.0      6.7     10.7      5.8     10.3      5.1
Income Tax ...............................       0.2      0.1      2.1      1.1      3.7      1.8
Depreciation Expenses ....................       2.6      1.6      2.7      1.5      2.5      1.3
Extraordinary Loss on Debt Extinguishment,
  Net of Income Taxes of $0.3 ............       0.0      0.0      0.5      0.3      0.0      0.0
                                             -------    -----    -----    -----    -----    -----

EBITDA (1) ...............................      13.8      8.4     18.4     10.0     21.5     10.7
                                             =======    =====    =====    =====    =====    =====
</TABLE>

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

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

      Sales. Sales for 2001 increased by $17.4 million, or 9.5%, to $201.4
million from $184.0 million for 2000. The increase in sales was attributable to
an increase in installation units and revenue per installation unit. Although
installation units increased only 2.7%, due primarily to weaker demand, revenue
per installation unit increased an average of 7.2%. The increase in Diamond's
average revenue per installation unit is attributable to stabilization of price
compression and to its sales mix.

      Gross Profit. Gross profit for 2001 increased by $15.9 million, or 12.5%,
to $143.3 million from $127.4 million for 2000. Gross margin increased as a
percentage of sales to 71.2% for 2001 from 69.2% for 2000. The increase in gross
margin was primarily due to the increased level of sales and average revenue per
installation unit in 2001.

                                       17
<PAGE>

      Operating Expenses. Operating expenses for 2001 increased by $12.7
million, or 11.4%, to $124.5 million from $111.8 million for 2000. Operating
expenses increased as a percentage of sales to 61.8% for 2001 from 60.8% for
2000. The increase in operating expenses during 2001 was primarily due to higher
wage expense, primarily at the service center level caused by wage rate
pressures including increased medical insurance and workers compensation
insurance costs; costs related to service center and distribution center
expansion; an increase in vehicle related expenses including auto insurance and
increased promotional expense and occupancy costs. The increase in operating
expenses as a percentage of sales is primarily attributable to the increase in
operating expenses related to service center and distribution center expansion.

      Depreciation and amortization expense for 2001 decreased by $0.3 million,
or 10.7%, to $2.5 million from $2.8 million for 2000. This decrease is primarily
attributable to 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. This decrease in expense was
partially offset by a $0.1 million increase in amortization and depreciation
expense related to certain sales, billing and financial systems software and
computer hardware.

      Income from Operations. Income from operations for 2001 increased by $3.2
million, or 20.5%, to $18.8 million from $15.6 million for 2000. This increase
was primarily due to the increase in average revenue per installation unit and
was partially offset by an increase in operating expenses as discussed above.

      Interest Expense. Interest expense for 2001 decreased by $0.4 million, or
3.7%, to $10.3 million from $10.7 million for 2000. The decrease was due to a
reduction in outstanding borrowings under the credit facility during 2001.

      Net Income. Diamond recorded $5.0 million of net income in 2001 compared
to $2.4 million in 2000. Net income as a percentage of sales increased to 2.5%
for 2001 from 1.3% for 2000. The increase in net income and net income margin
during 2001 was primarily due to the impact of higher average revenue per
installation unit that was partially offset by an increase in operating expenses
and in the provision for income taxes.

      Net Loss Applicable to Common Stockholders. Net loss applicable to common
stockholders for 2001 decreased $1.9 million to $(1.1) million from $(3.0)
million for 2000. The decrease was primarily due to the increase in net income
as discussed above.

      EBITDA. EBITDA for 2001 increased by $3.1 million, or 16.8%, to $21.5
million from $18.4 million for 2000. EBITDA as a percentage of sales increased
to 10.7% for 2001 from 10.0% for 2000. The increase in EBITDA and EBITDA margin
during 2001 was primarily due to the impact of higher average revenue per
installation unit that was partially offset by an increase in operating expenses
as discussed above.

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

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

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

      Operating Expenses. Operating expenses for 2000 increased by $9.9 million,
or 9.7%, to $111.8 million from $101.9 million for 1999. Operating expenses
decreased as a percentage of sales to 60.8% for 2000 from 61.9% for 1999. The
increase in operating expenses during 2000 was primarily due to an increase in
wage expense caused

                                       18
<PAGE>

by certain wage rate pressures, including increased medical insurance and
workers compensation insurance costs, primarily at the service center level. The
increase in aggregate operating expenses was also due to an increase in vehicle
related expenses versus the prior year, resulting mainly from higher fuel costs
due to rising gas prices. The decrease in operating expenses as a percentage of
sales is attributable to an increase in average revenue per installation unit.

      Depreciation and amortization expense for 2000 increased by $0.2 million,
or 7.7%, to $2.8 million from $2.6 million for 1999. This increase is primarily
attributable to a $0.3 million increase in amortization and depreciation expense
related to certain sales, billing and financial systems software and computer
hardware. This increase in expense was partially offset by a $0.1 million
decrease in depreciation expense due to the inception of a master fleet leasing
program during 1997 for the lease of mobile installation and distribution
service vehicles.

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

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

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

      Net Loss Applicable to Common Stockholders. Net loss applicable to common
stockholders for 2000 decreased $1.8 million to $(3.0) million from $(4.8)
million for 1999. The decrease was primarily due to the increase in net income
as discussed above.

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

Liquidity and Capital Resources

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

      Net Cash Provided by Operating Activities. Net cash provided by operating
activities for 2001 increased $2.7 million to $11.2 million from $8.5 million
for 2000. The increase in cash provided by operating activities for 2001 was due
to an increase in Diamond's net earnings and a $3.7 million decrease in deferred
income taxes which was partially offset by a $2.2 million increase in inventory.
Net cash provided by operating activities for 2000 increased $5.2 million to
$8.5 million from $3.3 million for 1999. The increase in cash provided by
operating activities for 2000 was due to an increase in Diamond's net earnings
and a $4.0 million increase in accounts payable which was partially offset by a
$3.4 million increase in accounts receivable and a $2.0 million increase in
inventory.

      Net Cash Used in Investing Activities. Net cash used in investing
activities for 2001 increased $2.8 million to $4.0 million used from $1.2
million used in investing activities for 2000. Net cash used in investing
activities for 2000 decreased $1.1 million to $1.2 million used from $2.3
million used in investing activities for 1999. The primary reason for these
variances was a change in capital expenditures.

                                       19
<PAGE>

      Net Cash Used in Financing Activities. Net cash used in financing
activities for 2001 decreased $6.7 million to $0.6 million from $7.3 million for
2000 due to less borrowings under the credit facility in 2001. Net cash used in
financing activities for 2000 increased $6.1 million to $7.3 million from $1.2
million for 1999 due to increased credit facility payments over borrowings in
2000.

      Capital Expenditures. Capital expenditures were $4.2 million for 2001 as
compared to $1.3 million for 2000 and $2.4 million for 1999. Excluding vehicle
capital expenditures, capital expenditures were $2.9 million for 2001 as
compared to $1.1 million for 2000 and $1.9 million for 1999. Capital
expenditures in 2001 were made primarily to fund the continued upgrade of
Diamond's management information systems. The most significant capital
expenditures contemplated over the next five years will be for the continued
enhancement and maintenance of Diamond's management information systems and the
continuation of Diamond's expansion program.

      Liquidity. Management believes that Diamond will have adequate capital
resources and liquidity to satisfy its debt service obligations, working capital
needs and capital expenditure requirements, including those related to the
opening of new service centers for the foreseeable future. Diamond's capital
resources and liquidity are expected to be provided by Diamond's net cash
provided by operating activities and borrowings under the credit facility. See
"-- Significant Accouting Policies -- Income Tax" for a discussion of the
Internal Revenue Service's proposed adjustments with respect to Diamond's tax
treatment of the Recapitalization.

Significant Accounting Policies

      The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expense during the reporting period.

      Certain accounting estimates and assumptions are particularly sensitive
because of their significance to the financial statements and the possibility
that future events affecting them may differ markedly. The accounting policies
of Diamond with the more significant estimates and judgements are described
below.

      Allowance for Doubtful Accounts. Diamond makes assumptions related to the
uncollectability of trade accounts receivable. Assumptions used are based on
aging of receivables, customer classification and historical company experience.

      Accrued Healthcare and Worker's Compensation Costs. Diamond makes
assumptions related to healthcare and worker's compensation cost accruals.
Assumptions are based on continued analysis of claim activity, time lag in
processing claims and employee census growth.

      Income Tax. 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. 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.

     On January 15, 1998, Diamond, Kenneth Levine, Richard Rutta, Green Equity
Investors II, L.P. and certain affiliated entities of Diamond entered into a
Second Amended and Restated Stock Purchase Agreement, pursuant to which, among
other things, Green Equity Investors II, L.P. and other investors acquired 80.0%
of the Common Stock and 80.0% of the Preferred Stock (the "Transaction"). The
Transaction was consummated on March 31, 1998. For tax purposes, the parties
made a joint election under Internal Revenue Code Sec. 338(h)(10), under which
the assets and liabilities of the affiliates were recorded at their fair market
values for tax purposes resulting in $118.5 million of tax deductible goodwill.
A financial statement deferred tax asset was also established on March 31, 1998
in the amount of approximately $44.8 million with a credit to additional paid-in
capital as the Transaction was recorded for financial statement purposes as a
recapitalization for which purchase accounting was not applied.

     The Internal Revenue Service has recently concluded its audit of the tax
periods ended December 31, 1998, 1999, and 2000. As a result of this audit, the
Internal Revenue Service issued a notice of proposed adjustments on February 20,
2002, which included a disallowance of the tax deductible goodwill resulting
from the aforementioned Transaction. The Internal Revenue Service has asserted
that the Transaction did not qualify as a stock purchase, and accordingly, that
the election under Internal Revenue Code Section 338(h)(10) was not valid. As a
result, tax deductible goodwill would not be recognizable by Diamond.

      The proposed adjustments by the Internal Revenue Service would result in
$3.8 million of federal tax deficiencies owed by Diamond for the period December
31, 1998 through December 31, 2000, plus possible interest and penalties and any
resultant increases in current state tax expense for this period. Additionally,
the deferred tax asset established in 1998 would be eliminated, as well as net
operating loss carryforwards from previous deductions of the tax goodwill. The
carrying amount of these assets at December 31, 2001 is approximately $39.1
million. In addition, Diamond would be responsible to fund a current federal tax
liability for 2001 of approximately $2.8 million, plus possible interest and
penalties, and any resultant increases in current state tax expense for 2001.

      Diamond strongly believes that the Transaction was properly accounted for,
and plans to appeal the Internal Revenue Service's proposed adjustment. If such
appeal were ultimately unsuccessful, the Internal Revenue Service's proposed
adjustment would have a material adverse affect on Diamond's liquidity, cash
flows, balance sheet and results of operations.


                                       20
<PAGE>

Contractual Obligations and Commercial Commitments

      The following summarizes Diamond's contractural cash obligations and other
commercial commitments as of December 31, 2001.

                                   Payments Due By Period (dollars in thousands)
                                   ---------------------------------------------

       Contractural Cash Obligations    Total    Less than 1 year  After 5 years
                                      --------   ----------------  -------------
       Long Term Debt                 $100,000         --            100,000
       Operating Leases                    738        738                 --
                                      --------------------------------------
       Total Contractual Cash
         Obligations                  $100,738        738            100,000
                                      ========        ===            =======


                                                     Amount of Commitment
                                                    Expiration Per Period
                                                    (dollars in thousands)
                                                 ---------------------------
       Other Commercial Commitments              Total Amts
                                                 Committed      1-3 years
                                                 ---------      ---------
       Standby Letters of Credit                     $2,924       2,924
       Operating Lease - Contingent Guaranteed
       Residual Value                                 7,583       7,583
                                                 ------------------------
       Total Commercial Commitments                 $10,507      10,507
                                                    =======      ======


Inflation

      Diamond believes that inflation has not had a material impact on its
results of operations for 1999, 2000 or 2001.

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."

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 three of which are Safelite Glass
Corporation, LYNX Services from PPG, L.L.C. 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'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.


                                       21
<PAGE>

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      Diamond has no material exporure to market risk.



                                       22

<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-18 hereof
as set forth below:

                          Index to Financial Statements

                                                                            Page
                                                                           ----

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

Balance Sheets, December 31, 2001 and 2000...............................  F-3

Statements of Operations for the Years Ended December 31, 2001,
  2000 and 1999..........................................................  F-5

Statements of Stockholders' Equity (Deficit) for the Years
  Ended December31, 2001, 2000 and 1999..................................  F-6

Statements of Cash Flows for the Years Ended
  December 31, 2001, 2000 and 1999.......................................  F-7

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


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

      None.



                                       23
<PAGE>

                                    PART III

ITEM 10.....DIRECTORS AND EXECUTIVE OFFICERS

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

     Name                 Age    Position
     ----                 ---    --------

Kenneth Levine...........  48    Co-Chairman of the Board and Director
Richard Rutta............  45    Co-Chairman of the Board and Director
Norman Harris............  47    Chief Executive Officer
Michael A. Sumsky........  43    President, Chief Financial Officer and
                                 General Counsel
Jonathan A. Seiffer......  30    Director
John G. Danhakl..........  46    Director
Jonathan D. Sokoloff.....  44    Director

      Kenneth Levine has been Diamond's Co-Chairman of the Board since March
1998 and a Director of Diamond since March 1987. Mr. Levine served as Co-Chief
Executive Officer from March 1998 until January 2002. Mr. Levine joined Diamond
in 1979 and served as Diamond's effective Co-President from 1987 to March 1998.
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 since March 1998
and a Director of Diamond since March 1987. Mr. Rutta served as Co-Chief
Executive Officer from March 1998 until January 2002. Mr. Rutta joined Diamond
in 1979 and served as Diamond's effective Co-President from 1987 to March 1998.
In 1987, Mr. Rutta, together with Kenneth Levine, purchased all of Diamond's
outstanding stock.

      Norman Harris was appointed Diamond's Chief Executive Officer in January
2002. Mr. Harris served as Diamond's Executive Vice President from 1995 until
March 1998 and as President from March 1998 until January 2002. 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 was appointed Diamond's President in January 2002. Mr.
Sumsky continues to serve as Chief Financial Officer and General Counsel as he
has since joining Diamond in 1995. Before his appointment as Diamond's
President, Mr. Sumsky served as Executive Vice President since 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.

      Jonathan A. Seiffer has been a Director of Diamond since November 2001.
Mr. Seiffer has been a partner of Leonard Green & Partners, L.P. ("LGP"), since
January 1999. From December 1997 through January 1999, Mr. Seiffer was a Vice
President of LGP. From October 1994 through December 1997, Mr. Seiffer was an
associate at LGP. Prior to October 1994, Mr. Seiffer was a member of the
corporate finance department of Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"). Mr. Seiffer is also a director of Gart Sports Company,
Dollar Financial Group, Inc. and Liberty Group Publishing, Inc.

      John G. Danhakl has been a Director of Diamond since March 1998. Mr.
Danhakl has been a partner of LGP since 1995. Mr. Danhakl had previously been a
Managing Director at 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., Pet-Co Animal Supplies, Inc., Leslie's Poolmart, Inc., Big 5
Corporation, Communications and Power Industries, Inc., Liberty Group
Publishing, Inc., VCA Antech, Inc. and several private companies.

      Jonathan D. Sokoloff has been a Director of Diamond since March 1998. Mr.
Sokoloff has been a partner 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

                                       24
<PAGE>

director of Twinlab Corporation, Gart Sports Company, Rite Aid Corporation,
Dollar Financial Group, Inc. and several private companies.

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

ITEM 11.    EXECUTIVE COMPENSATION

Executive Compensation

      Summary Compensation Table. The following table provides information about
the compensation paid by Diamond to its Co-Chairman of the Board and its two
other executive officers during the fiscal years ended December 31, 1999, 2000
and 2001. The Co-Chairman of the Board 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          Salary               Compensation   Options/   Compensation
       Position       Year      ($)       Bonus        ($)        SARs (#)      ($)
                                          ($)
------------------------------------------------------------------------------------------
<S>                    <C>    <C>        <C>         <C>          <C>       <C>
Kenneth Levine .....   2001   $300,000       --       --          --         $3,400 (2)
  Co-Chairman of the
Board and Director .   2000   $300,000       --       --          --         $3,168 (2)
                       1999   $300,000       --       --          --         $3,168 (2)

------------------------------------------------------------------------------------------
Richard Rutta ......   2001   $300,000       --       --          --         $3,400 (2)
  Co-Chairman of the
Board and Director .   2000   $300,000       --       --          --         $3,168 (2)
                       1999   $300,000       --       --          --         $3,168 (2)

------------------------------------------------------------------------------------------
Norman Harris ......   2001   $311,539   $149,356(1)  --          --         $3,400 (2)
  Chief Executive
  Officer ..........   2000   $275,000   $100,000(1)  --          --         $3,168 (2)
                       1999   $275,000       --       --          --         $3,168 (2)

------------------------------------------------------------------------------------------
Michael A. Sumsky ..   2001   $286,539   $149,356(1)  --          --         $3,400 (2)
  President,
Chief Financial ....   2000   $250,000   $100,000(1)  --          --         $2,711 (2)
Officer and General
  Counsel ..........   1999   $250,000       --       --          --         $2,711 (2)
------------------------------------------------------------------------------------------
</TABLE>

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

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

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

      Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values. The following table provides information regarding the exercise price of
stock options during the fiscal year ended December 31, 2001 for each of
Diamond's Named Executive Officers and the year-end value of unexercised options
held by the Named Executive Officers.

                                       25
<PAGE>

--------------------------------------------------------------------------------
                                                    Number of       Value of
                                                   Securities      Unexercised
                                                   Underlying     In-the-Money
                                                   Unexercised    Options/SARs
                     Shares                       Options/SARs      at Fiscal
      Name         Acquired on   Value Realized     at Fiscal     Year-End ($)
                  Exercise (#)         ($)        Year-End (#)    Exercisable/
                                                  Exercisable/    Unexercisable
                                                  Unexercisable
--------------------------------------------------------------------------------
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.              -               -             0/450            0/0
Sumsky
--------------------------------------------------------------------------------

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. Danhakl, Sokoloff and Seiffer, 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, 2001, the Board of Directors
had granted options to purchase a total of 29,575 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.

                                       26
<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 provided for the following:

      (1)   An initial term of three years which began on March 31, 1998 and
            ended on March 31, 2001.

      (2)   In addition to his base salary, for each calendar year beginning on
            January 1, 1998, each executive was 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 was terminated by Diamond for cause (as
            defined in the employment agreement) or in the event the executive
            resigned, Diamond would pay the executive the executive's base
            salary through the date of termination.

      (4)   In the event the executive was terminated due to death or disability
            (as defined in the employment agreement), the executive would
            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 was terminated by Diamond for any other
            reason than as provided in clauses (3) and (4) above, the executive
            would receive:

            o     his base salary through the date of termination;

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

                                       27
<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 the executive's employment period under
                  the employment agreement and (2) such time as the executive
                  would have obtained other permanent employment for
                  compensation in an amount reasonably comparable to his base
                  salary with Diamond.

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

      The employment agreements with Messrs. Harris and Sumsky discussed above
terminated on March 31, 2001. From that date onward, employment between Diamond
and each of Messrs. Harris and Sumsky are at-will for both parties.


                                       28


<PAGE>

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table provides information regarding the beneficial
ownership of Diamond's Common Stock and Preferred Stock, as of March 14, 2002,
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 Preferred Stock indicated.

<TABLE>
<CAPTION>

    --------------------------------------------------------------------------------
                                      Common Stock            Preferred Stock
                                   Beneficially Owned        Beneficially Owned
    --------------------------------------------------------------------------------
                                Number of     Percentage   Number of    Percentage of
       Name                      Shares        of Class     Shares       Shares Class
    --------------------------------------------------------------------------------
<S>                              <C>            <C>         <C>            <C>
    Green Equity Investors       770,000        77.0%       28,000         80.0%
    II, L.P. (1)
    -----------------------------------------------------------------------------
    Jonathan A. Seiffer (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         770,000        77.0%       28,000         80.0%
    (1)(2)
    -----------------------------------------------------------------------------
    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          1,000,000       100.0%       35,000       100.00%
    executive officers as a
    group (7 persons)(3)
    -----------------------------------------------------------------------------
</TABLE>

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

(2)   The shares shown as beneficially owned by Messrs. Seiffer, Danhakl and
      Sokoloff represent the 770,000 shares of Common Stock and the 28,000
      shares of 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, Jonathan A. Seiffer and John M. Baumer
      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. Seiffer, 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.


                                       29
<PAGE>

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED RECAPITALIZATION

Management Services Agreement

      In connection with the Recapitalization, on March 31, 1998, Diamond
entered into a Management Services Agreement with LGP pursuant to which LGP
receives an annual management fee of $685,000. This fee is subordinated in right
of payment to the Notes. The Management Services Agreement also provides that
LGP may receive reasonable and customary fees and reasonable expenses from time
to time for providing financing, advisory and investment banking services to
Diamond in connection with major financial transactions.

Lease

      Kenneth Levine and Richard Rutta are the sole partners of a partnership
which leases to Diamond. 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 $530,000, $551,000 and $573,000 in 1999, 2000 and
2001, 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.


                                       30
<PAGE>

                                     PART IV

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

(a)    Financial Statements

      (1)   All financial statements of Diamond for the year ended December 31,
            2001 are filed herewith. See Item 8 of this Annual Report for a list
            of such financial statements.

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

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

(b)    Reports on Form 8-K.

      Not applicable.

(c)    Exhibits.

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

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

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

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

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

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

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

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

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

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

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

                                       31
<PAGE>

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

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

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

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

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

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

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

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

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

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

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

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

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

(2)   Incorporated by reference to Diamond's Annual Report on Form 10-K for the
      fiscal year ended December 31, 1999.



                                       32
<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-Chairman of the Board

Dated: March 13, 2002


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 dates indicated.

         Signature                Title(s)                         Date
         ---------                --------                         ----

 /s/  Kenneth Levine              Co-Chairman of the Board       March 13, 2002
------------------------------    and Director
      Kenneth Levine


/s/ Richard Rutta                 Co-Chairman of the Board       March 13, 2002
------------------------------    and Director
      Richard Rutta


/s/ Norman Harris                 Chief Executive Officer        March 13, 2002
------------------------------
      Norman Harris


 /s/ Michael A. Sumsky            President, Chief Financial     March 13, 2002
------------------------------    Officer and General Counsel
     Michael A. Sumsky


                                  Director                       March 13, 2002
/s/ Jonathan Seiffer
------------------------------
      Jonathan Seiffer


/s/ John G. Danhakl               Director                       March 13, 2002
------------------------------
      John G. Danhakl


/s/ Jonathan D. Sokoloff          Director                       March 13, 2002
------------------------------
      Jonathan D. Sokoloff


                                       33

<PAGE>

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

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



                                       34

<PAGE>


                          INDEX TO FINANCIAL STATEMENTS


                                                                            Page
                                                                           ----

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

Balance Sheets, December 31, 2001 and 2000...............................  F-3

Statements of Operations for the Years Ended December 31, 2001,
  2000 and 1999..........................................................  F-5

Statements of Stockholders' Equity (Deficit) for the Years
  Ended December 31, 2001, 2000 and 1999.................................  F-6

Statements of Cash Flows for the Years Ended December 31, 2001,
2000 and 1999............................................................  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, 2001 and 2000, 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, 2001. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

      In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Diamond Triumph Auto Glass,
Inc. as of December 31, 2001 and 2000, and the results of its operations and its
cash flows for each of the years in the three year period ended December 31,
2001, in conformity with accounting principles generally accepted in the United
States of America.



Allentown, Pennsylvania                                         /s/ KPMG LLP
February 22, 2002


                                       F-2
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                                 Balance Sheets

                           December 31, 2001 and 2000

                 (Dollars in Thousands except per share amounts)


                         Assets                               2001       2000
                                                           ---------   ---------

Current assets:
       Cash and cash equivalents                          $  6,592          25
       Accounts receivable, less allowance for doubtful
       accounts of $213 and $462 for 2001 and 2000
          respectively                                      11,596      13,977
       Other receivables                                       387         373
       Inventories                                          16,757      14,581
       Prepaid expenses                                      1,383       1,084
       Deferred income taxes                                 3,540       3,285
                                                          --------    --------

                            Total current assets            40,255      33,325
                                                          --------    --------

Equipment and leasehold improvements:
       Vehicles                                              8,027       9,632
       Computers and office equipment                        3,898       3,274
       Computer software                                     5,968       4,277
       Other equipment                                         636         563
       Leasehold improvements                                  481         319
                                                          --------    --------

                                                            19,010      18,065
       Accumulated depreciation and amortization           (11,211)    (11,911)
                                                          --------    --------

                           Net equipment and leasehold
                            improvements                     7,799       6,154

Unamortized deferred loan costs and senior notes
  discount, net                                              5,183       6,073
Deferred income taxes                                       38,111      42,039
Other assets                                                   498         404
                                                          --------    --------

Total assets                                              $ 91,846      87,995
                                                          ========    ========


                                       F-3
<PAGE>

<TABLE>
<CAPTION>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                                 Balance Sheets

                           December 31, 2001 and 2000

                 (Dollars in Thousands except per share amounts)


     Liabilities and Stockholders' Equity (Deficit)          2001         2000
                                                          ------------ ------------
<S>                                                               <C>             <C>

Current liabilities:
       Accounts payable                                           $  10,640       11,952
       Accrued expenses
              Payroll and related items                               4,678        4,226
              Accrued interest                                        2,317        2,329
              Accrued income taxes                                    1,679        1,322
              Other                                                     389          492
                                                                  ---------    ---------
                     Total accrued expenses                           9,063        8,369
                                                                  ---------    ---------

                            Total current liabilities                19,703       20,321
                                                                  ---------    ---------

Long-term debt:
       Bank facility                                                   --            500
       Senior notes                                                 100,000      100,000
                                                                  ---------    ---------
              Total long-term debt                                  100,000      100,500
                                                                  ---------    ---------

                            Total liabilities                       119,703      120,821
                                                                  ---------    ---------

Series A 12% senior redeemable cumulative preferred stock
  - par value $0.01 per share; authorized 100,000 shares;
  issued and outstanding 35,000 in 2001 and 2000, at
  liquidation preference value                                      54,530       48,449
                                                                  ---------    ---------

Stockholders' equity (deficit):
       Common stock, 2001 and 2000 - par value $0.01
       per share; authorized 1,100,000 shares;
       issued and outstanding 1,000,000 shares                           10           10
       Additional paid-in capital                                    41,263       47,344
       Retained earnings (accumulated deficit)                     (123,660)    (128,629)
                                                                  ---------    ---------

                           Total stockholders' equity (deficit)     (82,387)     (81,275)
                                                                  ---------    ---------

Total liabilities and stockholders' equity (deficit)              $  91,846       87,995
                                                                  =========    =========

See accompanying notes to financial statements.
</TABLE>


                                       F-4
<PAGE>

<TABLE>
<CAPTION>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                            Statements of Operations

                  Years Ended December 31, 2001, 2000 and 1999

                 (Dollars in Thousands except per share amounts)


                                                     2001          2000         1999
                                                  ----------    ---------    ---------

<S>                                                <C>            <C>          <C>
Net sales                                          $ 201,366      184,015      164,520
Cost of sales                                         58,049       56,585       51,456
                                                   ---------    ---------    ---------

        Gross profit                                 143,317      127,430      113,064
                                                   ---------    ---------    ---------

Operating expenses:
  Payroll                                             75,232       67,786       61,434
  Advertising and promotional                         11,783       11,027       10,349
  Other operating expenses                            35,031       30,227       27,516
  Depreciation and amortization                        2,455        2,774        2,595
                                                   ---------    ---------    ---------

                                                     124,501      111,814      101,894
                                                   ---------    ---------    ---------

        Income from operations                        18,816       15,616       11,170

Other (income) expense:
  Interest income                                       (191)         (57)         (31)
  Interest expense                                    10,305       10,674       11,054
                                                   ---------    ---------    ---------

                                                      10,114       10,617       11,023
                                                   ---------    ---------    ---------

        Income before provision for income taxes       8,702        4,999          147

Provision for income taxes                             3,733        2,135          138
                                                   ---------    ---------    ---------

        Net income before extraordinary item           4,969        2,864            9

        Extraordinary loss on extinguishment of
          debt, net income taxes of $336                --            504         --
                                                   ---------    ---------    ---------

        Net Income                                     4,969        2,360            9
                                                   ---------    ---------    ---------

Preferred stock dividends                              6,081        5,403        4,800
                                                   ---------    ---------    ---------

Net loss applicable to common stockholders         $  (1,112)      (3,043)      (4,791)
                                                   =========    =========    =========
</TABLE>

See accompanying notes to financial statements


                                       F-5
<PAGE>

<TABLE>
<CAPTION>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                  Statements of Stockholders' Equity (Deficit)

                  Years Ended December 31, 2001, 2000 and 1999

                 (Dollars in Thousands except per share amounts)


                                                                                       Retained
                                                     Common stock          Additional  earnings
                                                   -----------------        paid-in   (accumulated
                                                   Shares      Amount       capital     deficit)      Total
                                                   ------      ------       -------    -----------    -----

<S>                                              <C>         <C>           <C>         <C>            <C>
Balance, December 31, 1998                        1,000,000   $      10      57,547     (130,998)     (73,441)

Net income                                             --          --          --              9            9

Preferred stock dividends                              --          --        (4,800)        --         (4,800)
                                                  ---------   ---------   ---------    ---------    ---------

Balance, December 31, 1999                        1,000,000          10      52,747     (130,989)     (78,232)

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

Preferred stock dividends                              --          --        (5,403)        --         (5,403)

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

Balance, December 31, 2000                        1,000,000          10      47,344     (128,629)     (81,275)
                                                  ---------   ---------   ---------    ---------    ---------

Net income                                             --          --          --          4,969        4,969

Preferred stock dividends                              --          --        (6,081)        --         (6,081)
                                                  ---------   ---------   ---------    ---------    ---------

Balance, December 31, 2001                        1,000,000   $      10      41,263     (123,660)     (82,387)
                                                  =========   =========   =========    =========    =========
</TABLE>

See accompanying notes to financial statements


                                       F-6
<PAGE>

<TABLE>
<CAPTION>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 2001, 2000 and 1999

                 (Dollars in Thousands except per share amounts)


                                                      2001         2000        1999
                                                    --------     --------     -------

Cash flows from operating activities:
<S>                                                 <C>          <C>         <C>
  Net income                                        $  4,969       2,360           9
                                                    --------     -------      ------
  Adjustments to reconcile net income to net
    cash provided by operating activities:
     Depreciation and other amortization               2,455       2,774       2,595
     Amortization of deferred loan costs and
     senior notes discount                               945         920         882
     Extraordinary loss on extinguishment of
     debt                                               --           840        --
     Provision for doubtful accounts                     860         101       1,341
     (Gain) on sale of fixed assets                     (148)        (32)        (32)
     Changes in assets and liabilities:
      (Increase) decrease in accounts and
      other receivables                                1,507      (3,367)      1,912
      (Increase) in inventories                       (2,176)     (1,961)     (1,356)
      (Increase) decrease in prepaid expenses           (299)       (122)       (121)
      Increase (decrease) in accounts payable         (1,312)      4,002      (1,635)
      Increase (decrease) in accrued expenses            694       1,114        (546)
      Decrease in deferred income taxes                3,673       1,839         282

      Total adjustments                                6,199       6,108       3,322

      Net cash provided by operating activities       11,168       8,468       3,331
                                                    --------     -------      ------

Cash flows from investing activities:
  Capital expenditures                                (4,215)     (1,258)     (2,371)
  Proceeds from sale of equipment                        263          55          92
  (Increase) decrease in other assets                    (94)         (3)        (27)
                                                    --------     -------      ------

      Net cash used in investing activities           (4,046)     (1,206)     (2,306)
                                                    --------     -------      ------

Cash flows from financing activities:
  Net proceeds from bank facility                      2,500      12,750      26,000
  Payments on bank facility                           (3,000)    (19,750)    (27,000)
  Deferred loan costs                                    (55)       (331)       (232)
                                                    --------     -------      ------

      Net cash used in financing activities             (555)     (7,331)     (1,232)
                                                    --------     -------      ------

      Net (decrease) increase in cash and cash
      equivalents                                      6,567         (69)       (207)

Cash and cash equivalents, beginning of year              25          94         301
                                                    --------     -------      ------

Cash and cash equivalents, end of year              $  6,592          25          94
                                                    ========     =======      ======
</TABLE>

See accompanying notes to financial statements.


                                       F-7
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 2001, 2000 and 1999

                 (Dollars in Thousands except per share amounts)


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

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

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

     The Company, headquartered in Kingston, Pennsylvania, is a provider of
     automotive glass replacement and repair services in the Northeast,
     Mid-Atlantic, Midwest, Southwest, Southeast and Western regions of the
     United States. At December 31, 2001, the Company operated a network of 256
     automotive glass service centers, approximately 1,153 mobile installation
     vehicles and six distribution centers in 43 states.



                                       F-8
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 2001, 2000 and 1999

                 (Dollars in Thousands except per share amounts)


(2)  Summary of Significant Accounting Policies

     (a) Cash and Cash Equivalents

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

     (b) Inventories

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

     (c) Equipment and Leasehold Improvements

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

                        Vehicles                              5 years
                        Computers and office equipment        5-7 years
                        Computer software                     3-5 years
                        Other equipment                       5 years
                        Leasehold improvements                10 years

         Costs in 2001, 2000 and 1999 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 2001, 2000 and 1999, the Company commenced amortizing the
         software costs over the estimated useful life of five years.
         Unamortized computer software costs were $3,490, $2,818 and $3,218 at
         December 31, 2001, 2000 and 1999, respectively. Amortization expense in
         2001, 2000 and 1999 for capitalized computer software costs was $952,
         $844 and $620, respectively.

     (d) Income Taxes

         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, 2001, 2000 and 1999

                 (Dollars in Thousands except per share amounts)


     (e) Deferred Loan Costs and Senior Notes Discount

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

     (f) Revenue Recognition

         Revenue from auto glass installation and related services is recognized
         when the installation is complete or the service is performed. The
         Company provides for an allowance for accounts receivable. The
         provision for doubtful accounts was $860, $101 and $1,341 and write
         offs against the allowance were $1,109, $595 and $1,185 in 2001, 2000
         and 1999 respectively.

     (g) Advertising

         The Company expenses all advertising costs as incurred. The costs of
         yellow pages advertising are expensed at the time the yellow pages
         phone book is published. Total advertising expense was $8,364, $8,287
         and $8,150 in 2001, 2000 and 1999, 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.

     (j) Recent Accounting Pronouncements

         In 2001, Diamond implemented Statement of Financial Accounting
         Standards ("SFAS") No. 144, "Accounting for the Impairment of
         Disposition of Long-Lived Assets". This standard establishes one
         accounting model to be used for measuring impairment of long-lived
         assets. The company does not expect adoption of SFAS No. 144 to have a
         material impact on its financial statements.


(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 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 $92,000,
     $77,000 and $70,000 at December 31, 2001, 2000 and 1999, respectively. The
     fair value of the Company's Preferred Stock approximates the liquidation
     preference.


                                      F-10
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 2001, 2000 and 1999

                 (Dollars in Thousands except per share amounts)


(4)  Long -Term Debt

     Long-term debt consists of the following:

                                  2001        2000       1999
                               -----------------------------------

     Bank Facility           $      --         --        7,500
     Credit Facility                --         500         --
     Senior Notes               100,000    100,000     100,000
                               -----------------------------------

     Total                   $  100,000    100,500     107,500
                               ===================================


     On March 27, 2000, the Company entered into the Credit Facility, which has
     an initial term of four years and provides for revolving advances of up to
     the lesser of: (1) $25,000; (2) the sum of 85% of the Company's Eligible
     Accounts Receivable (as defined in the Credit Facility) plus 85% of the
     Company's Eligible Inventory (as defined in the Credit Facility), less
     certain reserves; or (3) an amount equal to 1.5 times the Company's EBITDA
     (as defined in the Credit Facility) for the prior twelve months. A portion
     of the Credit Facility, not to exceed $5,000, is available for the issuance
     of letters of credit, which generally have an initial term of one year or
     less. The Company had $2,924 in outstanding letters of credit at December
     31, 2001. Borrowings under the Credit Facility bear interest, at the
     Company's discretion, at either the Chase Manhattan Bank Rate (as defined
     in the Credit Facility) or LIBOR, plus a margin of 0.25% for the Chase
     Manhattan Rate and 2.00% for the LIBOR Rate. In addition, a commitment fee
     of 0.25% is charged against any unused balance of the Credit Facility. The
     effective interest rate on borrowings available under the Credit Facility
     was 5.25% at December 31, 2001. Interest rates are subjected to increases
     or reductions based upon the Company meeting certain EBITDA levels. The
     proceeds of the Credit Facility are available for working capital
     requirements and for general corporate purposes. The Credit Facility is
     secured by first priority security interests in all of the tangible and
     intangible assets of the Company. In addition, the Credit Facility contains
     certain restrictive covenants including, among other things, the
     maintenance of a minimum EBITDA level for the prior twelve months, as well
     as restrictions on additional indebtedness, dividends and certain other
     significant transactions. The Company was in compliance with these
     covenants at December 31, 2001.

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

     The senior notes mature on April 1, 2008 and bear interest at a rate of
     9.25% per annum. The senior notes and the obligations of the Company under
     the indenture governing the senior notes (the "Note Indenture") are
     unconditionally guaranteed on a senior, unsecured basis by any subsidiary
     guarantor, of which there are currently none. The senior notes are callable
     after five years at a premium to par which declines to par after eight
     years. Upon a change of control, as defined in the Note Indenture, 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

                                      F-11
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 2001, 2000 and 1999

                 (Dollars in Thousands except per share amounts)


      indebtedness, investments, dividends and certain other significant
      transactions. The Company was in compliance with all such covenants as of
      December 31, 2001.


     Maturities of long-term debt are as follows:


                  2002                    $      --
                  2003                           --
                  2004                           --
                  2005                           --
                  2006                           --
                  Thereafter                100,000
                                          ---------
                                          $ 100,000
                                          ==========


     Deferred loan costs and accumulated amortization are summarized as follows:


                                                     Accumulated
         December 31, 2001               Amount      Amortization    Balance
         -----------------               ------      ------------    -------
         Deferred loan costs            $5,385          2,076         3,309
         Discount on senior notes        3,000          1,125         1,875
                                        ------          -----        ------
                                        $8,385          3,201         5,184
                                        ======         ======        ======


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


(5)  Preferred Stock

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

     The Preferred Stock bears cumulative quarterly dividends at a rate per
     annum equal to 12.0% of the liquidation value. Dividends may, at the option
     of the Company, be paid in cash or by adding to the then

                                      F-12
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 2001, 2000 and 1999

                 (Dollars in Thousands except per share amounts)


     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, 2001, 2000 and 1999 the liquidation value of the Preferred
     Stock recorded on the Company's balance sheet was $54,530, $48,449 and
     $43,046, respectively, which includes dividends of $19,530, $13,449 and
     $8,046, 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 2001, 2000 and 1999
     aggregated $5,058, $4,605 and $4,419, respectively, of which $573, $551 and
     $530, 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 monthly renewal options
     over periods of up to eight years. Total rent expense for such leases
     amounted to $3,513, $2,994 and $2,587 for the years ended December 31,
     2001, 2000 and 1999, respectively.

     Total lease commitments, including vehicles, are as follows:


                                          Real Estate
                           -------------------------------------------
                                        Third      Related
                           Vehicles    parties     parties     Total
                           ---------   -------     --------    -------

                2002       $     738     3,324        595      4,657
                2003              --     1,348        619      1,967
                2004              --       583        644      1,227
                2005              --       191        335        526
                2006              --        81         --         81


     The vehicle lease agreement also provides for terminal lease payment for
     guaranteed residual values reduced by actual proceeds from the vehicle sale
     in the event the lease is not renewed over periods ranging from four to
     eight years. The contingent guaranteed residual value payment commitment
     was $7,583 at December 31, 2001.

     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 annually in 2001, 2000 and
     1999.

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

     The Company's stockholders have entered into a Stockholders Agreement and a
     Management Share Agreement which restricts the transferability of certain
     shares, establishes rights of first refusal, and establishes rights among
     the parties to the agreements.



                                      F-13
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 2001, 2000 and 1999

                 (Dollars in Thousands except per share amounts)



(7)  Stock Option Plan

     In September 1998, the Board of Directors and stockholders of the Company
     approved and adopted the Diamond Triumph Auto Glass 1998 Stock Option Plan
     (the "1998 Plan"). The 1998 Plan provides for the issuance of a total of
     30,000 authorized and unissued shares of common stock. As of December 31,
     2001, the Board of Directors had granted 29,575 options to key employees of
     the Company with an exercise price of $20.00 per share, which approximates
     fair value at the date of grant. The options vest evenly over five years
     and may not be exercised until the earlier of (a) 90 days after the
     Company's Common Stock has become publicly traded or (b) 91 days prior to
     the tenth anniversary of the date of the grant. The 1998 Plan expires in
     September 2008.

     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,
                                            2001         2000       1999
                                         ---------     --------    -------
Net income:
   As reported                           $   4,969       2,360        9
   Pro forma                                 4,963       2,344       (6)


     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:


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


     Summarized stock option data is as follows:


                                      F-14
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 2001, 2000 and 1999

                 (Dollars in Thousands except per share amounts)


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

Outstanding at December 31, 1998   20.00        27,125
   Granted                           --            --
   Exercised                         --            --
   Cancelled                         --         (3,000)
                                              ---------
Outstanding at December 31, 1999   20.00        24,125
   Granted                         20.00         5,500
   Exercised                         --            --
   Cancelled                       20.00        (1,200)
                                              ----------
Outstanding at December 31, 2000   20.00        28,425
   Granted                         20.00         2,000
   Exercised                         --            --
   Cancelled                       20.00          (850)
                                              ----------
Outstanding at December 31, 2001                29,575
                                              ==========

Exercisable                     $    --            --


(8)  Income Taxes

     On January 15, 1998, Diamond, Kenneth Levine, Richard Rutta, Green Equity
     Investors II, L.P. and certain affiliated entities of Diamond entered into
     a Second Amended and Restated Stock Purchase Agreement, pursuant to which,
     among other things, Green Equity Investors II, L.P. and other investors
     acquired 80.0% of the Common Stock and 80.0% of the Preferred Stock (the
     "Transaction"). The Transaction was consummated on March 31, 1998. For tax
     purposes, the parties made a joint election under Internal Revenue Code
     Sec. 338(h)(10), under which the assets and liabilities of the affiliates
     were recorded at their fair market values for tax purposes resulting in
     $118.5 million of tax deductible goodwill. A financial statement deferred
     tax asset was also established on March 31, 1998 in the amount of
     approximately $44.8 million with a credit to additional paid-in capital as
     the Transaction was recorded for financial statement purposes as a
     recapitalization for which purchase accounting was not applied.

     The Internal Revenue Service has recently concluded its audit of the tax
     periods ended December 31, 1998, 1999, and 2000. As a result of this audit,
     the Internal Revenue Service issued a notice of proposed adjustments on
     February 20, 2002, which included a disallowance of the tax deductible
     goodwill resulting from the aforementioned Transaction. The Internal
     Revenue Service has asserted that the Transaction did not qualify as a
     stock purchase, and accordingly, that the election under Internal Revenue
     Code Section 338(h)(10) was not valid. As a result, tax deductible goodwill
     would not be recognizable by Diamond.

     The proposed adjustments by the Internal Revenue Service would result in
     $3.8 million of federal tax deficiencies owed by Diamond for the period
     December 31, 1998 through December 31, 2000, plus possible interest and
     penalties and any resultant increases in current state tax expense for this
     period. Additionally, the deferred tax asset established in 1998 would be
     eliminated, as well as net operating loss carryforwards from previous
     deductions of the tax goodwill. The carrying amount of these assets at
     December 31, 2001 is approximately $39.1 million. In addition, Diamond
     would be responsible to fund a current federal tax liability for 2001 of
     approximately $2.8 million, plus possible interest and penalties, and any
     resultant increases in current state tax expense for 2001.

     Diamond strongly believes that the Transaction was properly accounted for,
     and plans to appeal the Internal Revenue Service's proposed adjustment. If
     such appeal were ultimately unsuccessful, the Internal Revenue Service's
     proposed adjustment would have a material adverse affect on Diamond's
     liquidity, cash flows, balance sheet and results of operations.

                                      F-15
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 2001, 2000 and 1999

                 (Dollars in Thousands except per share amounts)

Income tax expense consists of:


                                        Applicable To
                              -----------------------------------
                               Current     Deferred     Total
                              ----------  ----------- -----------

Year ended December 31, 2001:
   Federal                  $     --        2,799       2,799
   State                          61          874         935
                              ----------  ----------- -----------
                            $     61        3,673       3,734
                              ==========  =========== ===========


                                             Applicable To
                             ------------------------------------------------
                                                                   Extraordinary
                                        Continuing Operation         Items
                             ------------------------------------ -----------
                              Current     Deferred      Total      Deferred
                             -----------  ----------  ----------- -----------

Year ended December 31, 2000:
   Federal                  $        --    1,630        1,630           (260)
   State                            (40)     545          505            (76)
                             -----------  ----------  ----------- -----------

                            $       (40)   2,175        2,135           (336)
                             ===========  ==========  =========== ===========


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

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



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


                                      F-16
<PAGE>

                        DIAMOND TRIUMPH AUTO GLASS, INC.

                          Notes to Financial Statements

                  Years Ended December 31, 2001, 2000 and 1999

                 (Dollars in Thousands except per share amounts)


                                              2001     2000       1999
                                             ------   -------   ---------

Computed "expected" tax expense              $2,959     1,700        50
Increase (reduction) in income taxes
  resulting from:
    State income taxes, net of federal
      income tax benefit                        617       333        21

   Permanent items                              129        73        67

   Other, net                                    28        29        --
                                             ------    ------   -------
                                             $3,733     2,135       138
                                             ======    ======   =======


     The tax effects of temporary differences that give rise to significant
     portions of the deferred assets and deferred tax liabilities at December
     31, 2001 and 2000 are presented below.


Deferred tax assets:                                   2001         2000
                                                    ---------     --------
   Accounts receivable, principally due to
     allowance for doubtful accounts               $       85          185
   Inventories, principally due to additional
     costs inventoried for tax                            955          801

   Intangibles for tax purposes                        35,562       38,723

   Advertising expenses not yet
     deducted for tax purposes                          1,818        1,708

   Net operating loss and alternative minimum
     tax credit carryforward                            3,505        4,193

   Liabilities and accruals for financial
      reporting purposes                                  750          635
                                                   -----------  -----------

     Total gross deferred tax assets                   42,675       46,245
                                                   -----------  -----------

Deferred tax liabilities:
   Plant and equipment, principally due to
     differences in depreciation and capitalized
     interest                                           1,024          921
                                                   -----------  -----------

     Total gross deferred tax liabilities               1,024          921
                                                   -----------  -----------

     Net deferred tax assets                       $   41,651       45,324
                                                   ===========  ===========


     There was no valuation allowance for deferred tax assets as of December 31,
     2001 or 2000. 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 (excluding reversal of
     deferred tax assets) of approximately $102,000 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. 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, 2001, 2000 and 1999

                 (Dollars in Thousands except per share amounts)


(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 $389, $286
     and $292 for 2001, 2000 and 1999, respectively.

(10) Supplemental Cash Flow Information

                                                 2001        2000        1999
                                               ---------   --------    ---------

Interest paid                                   $  9,327     9,759       10,090

Noncash investing and financing activities:
   Preferred stock dividends                    $  6,081     5,403        4,800


(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 financials, results of operations or liquidity.

(12) Quarterly Financial Data (Unaudited)

<TABLE>
<CAPTION>

                                                 First       Second       Third        Fourth
                2001                            Quarter     Quarter      Quarter       Quarter        Total
-------------------------------------------    --------     ---------    ---------    ---------    ---------

<S>                                            <C>          <C>          <C>          <C>          <C>
Net sales                                      $  50,057    $  55,849    $  52,304    $  43,156    $ 201,366
Gross profit                                      35,726       40,338       37,088       30,165      143,317
Net income (loss)                                  1,983        3,613        1,494       (2,121)       4,969
Net income (loss) applicable to common
  stockholders                                       530        2,116          (48)      (3,710)      (1,112)

                2000
-------------------------------------------
Net Sales                                      $  44,665    $  49,153    $  48,628    $  41,569      184,015
Gross profit                                      30,801       33,746       33,822       29,061      127,430
Net income (loss) before extraordinary             1,197        1,970        1,305       (1,608)       2,864
Net income (loss)                                    693        1,970        1,305       (1,608)       2,360
Net (loss) income applicable to common
  stockholders                                      (599)         641          (65)      (3,020)      (3,043)

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


                                      F-18