<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K
(Mark One)
    [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
        ACT OF 1934 [FEE REQUIRED]

                  For the fiscal year ended December 31, 1997

                                       OR

    [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
        EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                    For the transition period from ___ to ___
                          Commission file number 1-9511

                          THE COAST DISTRIBUTION SYSTEM
             (Exact name of Registrant as specified in its charter)

             California                                 94-2490990
   (State or other jurisdiction of          (I.R.S. Employer Identification No.)
   incorporation or organization)

   1982 Zanker Road, San Jose, California                 95112
  (Address of principal executive offices)              (Zip Code)

                                 (408) 436-8611
              (Registrant's telephone number, including area code)

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

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<S>                                                       <C>
                                                                     (NAME OF EACH EXCHANGE ON
                (TITLE OF CLASS)                                         WHICH REGISTERED)
-------------------------------------------------         ------------------------------------------------
        Common Stock, without par value                               American Stock Exchange
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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/.

    As of March 17, 1998, the aggregate market value of the Common Stock held by
non-affiliates was approximately $11,180,000.

    As of March 17, 1998, a total of 5,246,879 shares of Registrant's Common
Stock were outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

    Part III of the Form 10-K is incorporated by reference from Registrant's
Definitive Proxy Statement for its 1998 Annual Meeting which is to be filed on
or before April 30, 1998.
<PAGE>   2
                                     PART I

ITEM 1.  BUSINESS

GENERAL

         The Coast Distribution System (the "Company") is the largest supplier
of replacement parts, supplies and accessories for recreational vehicles
("RVs"), and one of the largest suppliers of replacement parts, supplies and
accessories for boats, in North America. The Company supplies more than 25,000
products and serves more than 15,000 customers throughout the United States and
Canada, from 14 regional distribution centers in the United States that are
located in California, Texas, Oregon, Arizona, Colorado, Utah, Indiana,
Pennsylvania, New York, Georgia, Florida, Wisconsin and Alaska and 4 regional
distribution centers in Canada located, respectively, in Montreal, Toronto,
Calgary and Vancouver. Reference is made to Note I to the Consolidated Financial
Statements of the Company, contained elsewhere in this Report, for certain
information regarding the respective operating results of the Company's
operations in the United States and Canada in 1996 and 1997. The Company's
customers are comprised primarily of RV and boat dealers and RV and boating
parts supply stores and service centers ("After-Market Customers"), who resell
the products they purchase from the Company, at retail, to consumers that own or
use RVs and boats.

         In order to improve its competitive position and increase its
profitability, the Company has introduced into the marketplace a growing number
of products that have been designed specifically for the Company by independent
product design firms and are manufactured for the Company, generally on an
exclusive basis, by a number of different independent manufacturers (the
"proprietary products"). These proprietary products are marketed by the Company
under its own brand-names in competition with brand name products from
traditional suppliers. The Company is able to obtain the proprietary products at
prices that generally are below those it would have to pay for functionally
equivalent brand name products. Sales of proprietary products accounted for
approximately 23% of the Company's net sales in each of the fiscal years ended
December 31, 1996 and 1997. See "Business--Products--Proprietary Products."

         Although initially designed for sale to After-Market Customers, a
number of the Company's more recently designed proprietary products also are
suitable for installation as original equipment on RVs and boats at the time of
their manufacture. In addition, a number of the proprietary products have
applications in markets other than the RV and boating markets, such as the
automobile or leisure products markets. As a result, in 1997 the Company
established the DTS Manufacturing Division within the Company (the "DTS
Division") to implement programs to market and sell those proprietary products
to RV and boat manufacturers and to retail dealers and mass merchandisers in
other markets. Utilizing distinctive brand names and packaging, and in some
instances also different product designs, these proprietary products are
marketed separately, as products that are distinct, from the proprietary
products that are sold by the Company to RV and boating After-Market Customers.
The new DTS Division also will be identifying opportunities to design and
arrange for the manufacture of new proprietary products that can be installed as
original equipment on RVs and boats or that have applications in other markets.
To date, the operating results of the DTS Division have not been material. The
Company's RV and boating After-Market products business will continue to market
proprietary products designed for RV and boating After-Market Customers, under
the name "Coast Distribution".

         To provide its customers with a high level of service, the Company
utilizes a computer-based order entry and warehousing system which enables
customers to transmit orders either telephonically or electronically to the
Company, and enables the Company to prepare and invoice most orders within 24
hours of receipt. The Company also has established a national customer service
center to enable customers to obtain product information and place orders by
telephone using Company toll-free telephone numbers. In addition, the Company
has developed and implemented marketing and customer service programs through
which the Company provides its customers with catalogues and pricing and
promotional programs, all of which are designed to assist customers to increase
their profitability and to strengthen the Company's relationships with its
customers. The Company believes that the breadth of its product lines, the
proprietary products it is able to offer to its customers, the computer
integration of its operations and the marketing and customer support programs it
offers, distinguish it from other distributors of recreational vehicle and
boating parts, supplies and accessories. See "Business - Marketing and Sales."

<PAGE>   3
DEVELOPMENTS IN 1997

        Financial Performance. The factors that adversely affected the Company's
operating results in 1996 continued to affect the Company's operating results in
1997. The Company's sales declined by $3,334,000, or 2.4%, in 1997 due largely
to the inability of the Company to fully recapture market share that it lost in
1996 as a result of (i) the entry, as a competitor in the marketplace, of
Dometic Corporation ("Dometic"), which until 1996 had been the principal
supplier to the Company of recreational vehicle awnings, refrigerators and air
conditioners, and (ii) supply problems encountered in 1996 by new product
suppliers to the Company, including Recreation Vehicle Products, Inc., the
Company's current single source supplier of awnings; and increased price
competition within the RV and boating After-Market. See BUSINESS - Products
Arrangements with Manufacturers" in Part I of this Report and Management's
Discussion and Analysis of Financial Condition and Results of Operation in Part
II of this Report.

         Sale of Investments. In previous years, the Company had acquired
minority ownership interests in certain other companies that operated in the
same or related businesses, with a view to acquiring a controlling interest in
those companies if their operating results later warranted additional
investments by the Company. For example, in 1992 the Company acquired a minority
investment in a distributor of RV products in Canada and in 1994 acquired the
remaining shares of that company (which now operates as a wholly-owned
subsidiary under the name "Coast Canada"). The Company also had acquired a 35%
ownership interest in H. Burden Limited ("Burden"), a privately-owned
distributor of caravan and boating products in Western Europe, and a 34%
minority interest in HWH Corporation, a privately owned manufacturer of
hydraulic leveling devices and jacks and other products primarily for
recreational vehicles ("HWH"). During 1997 and in early 1998, the Company took
advantage of opportunities that arose to dispose of the minority investments
that it had made in Burden and HWH.

         The sale of the Company's investment in Burden took place on September
27, 1997 for a cash price to the Company of $4,198,000, plus a right to receive
additional cash payments of up to $330,000 if certain contingencies are
satisfied. The sale of the Company's investment in HWH was completed in
early 1998 for a cash price to the Company of $5,387,000. The proceeds of both
sales were used to reduce borrowings, pending use of the funds in its business.
For financial reporting purposes, the Company recorded losses on the sales of
its investments in Burden and HWH of $525,000 and $1,669,000, respectively.
See Management's Discussion and Analysis of Financial Condition and Results of
Operation in Part II of this Report.

         There were a number of factors that led the Company to decide to sell
its investments in Burden and HWH. Firstly, both investments were illiquid and
there was no assurance as to when opportunities to sell those investments, at
prices comparable to those being offered to the Company, might arise in the
future. Secondly, the Company had no prospect of acquiring control of either of
these two companies and therefore had no meaningful ability to control their
future performance. Finally, the sales would provide the Company with additional
financial resources that could be used (i) to reduce bank borrowings, thereby
strengthening the financial condition of the Company and reducing interest
expense, and (ii) to support the growth and to increase the competitiveness of
its core product supply business in North America.

         The Company continues to retain ownership interests in two foreign
distributors of RV parts, supplies and accessories, located respectively in
Sydney, Australia and Mexico City, Mexico. Both of these distributors are small,
each with annual sales in 1997 of less than $2,500,000, and neither of them is
material to the Company's operations or financial condition. The Company's
investments in these two companies are accounted for under the equity method of
accounting. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained in Part II of this Report.

         Delaware Reincorporation. In 1997, the Company's shareholders approved
a change in the Company's state of incorporation from California to Delaware.
That reincorporation is expected to become effective in April 1998. The
information regarding the effects of this change in the Company's state of
incorporation, set forth under the captions "The Charters and Bylaws of Coast
California and Coast Delaware" and "Significant Differences Between the
Corporation Laws of California and Delaware," at pages 15 to 27 of the Company's
Proxy Statement dated July 3, 1997, is incorporated herein by this reference.


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FORWARD LOOKING STATEMENTS

         This Report contains forward-looking information which reflects
management's current views of the Company's future financial performance. The
forward-looking information is subject to certain risks and uncertainties,
including but not limited to, the effects on future performance of changing
product supply relationships in the RV industry and the uncertainties created by
those changes; increased price competition within the industry; possible changes
in economic conditions, prevailing interest rates or gasoline prices, or the
occurrence of unusually severe winter weather conditions, all of which can
affect both the purchase and usage of recreational vehicles and boats and which,
in turn, affects purchases by consumers of the products that the Company sells;
and the Company's reliance on borrowings to fund a substantial portion of its
working capital requirements and capital expenditures. For information
concerning such factors and risks, see "BUSINESS - Products - Arrangements with
Manufacturers - Competition - Factors That Could Affect Future Performance" in
Part I, Item 1 of this Report; and Management's Discussion and Analysis of
Financial Condition and Results of Operation in Part II of this Report. Due to
such uncertainties and risks, readers are cautioned not to place undue reliance
on such forward-looking statements, which speak only as of the date of this
Report.

THE PARTS, SUPPLIES AND ACCESSORIES MARKETS

         Many manufacturers of replacement parts, supplies and accessories rely
on independent distributors, such as the Company, to market and distribute their
products or to augment their own product distribution operations. Distributors
relieve manufacturers of a portion of the costs associated with distribution of
their products while providing geographically dispersed selling, order
processing and delivery capabilities. At the same time, distributors offer
retailers access to a broad line of products and the convenience of rapid
delivery of orders.

         The market for RV parts, supplies and accessories distributed by the
Company includes both recreational vehicle dealers ("RV dealers") and RV supply
stores and service centers. Optional equipment and accessories, such as awnings,
trailer hitches, air conditioning units, water heaters and other appliances make
up a large proportion of the Company's sales to RV dealers, while recreational
vehicle replacement parts, maintenance supplies and smaller accessories make up
a larger proportion of the Company's sales to supply stores and service centers.
Although supply stores and service centers generally purchase lower cost
products than those sold to RV dealers, supply stores and service centers
generally order more frequently and purchase a wider variety of products than do
RV dealers. The market for boating parts, supplies and accessories is comprised
primarily of independent boat dealers that sell boats and boating parts,
supplies and accessories at retail. Independent boat dealers purchase primarily
replacement parts, boating supplies and smaller accessories from the Company.
See "Business - Products."

         Sales to RV and boat dealers generally have been more sensitive to
changes in economic conditions than have sales to supply stores and service
centers. During periods of higher interest rates or unemployment, consumers are
likely to postpone purchases of higher priced items such as RVs and boats and
higher priced accessories and convenience items such as appliances, awnings and
hitches. By contrast, continued demand among RV and boat owners for repair parts
and supplies, and increases in the total number of RVs and boats in use, have
increased the "aftermarket" for repair and maintenance items and for specialty
products and supplies. In addition, recreational vehicle manufacturers ("RV
manufacturers") have been increasing the number of accessories that they place
on their vehicles as original equipment at the time of manufacture. As a result,
in recent years sales of accessories to RV dealers have come to represent a less
significant percentage of the total product sales of After-Market distributors,
such as the Company.

         The Company's sales are also affected by weather conditions, because
the usage and purchase of RVs and boats decline in the winter months due to the
colder weather. As a result, the Company's operating income declines and it
sometimes incurs losses in the winter months, particularly in years in which
there are unusually severe winter weather conditions. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Seasonality and Inflation" in Part II of this Report.


                                       3
<PAGE>   5
PRODUCTS

         General. The Company carries a full line of more than 15,000
recreational vehicle parts, supplies and accessories which it purchases from
more than 500 manufacturers. Recreational vehicle products distributed by the
Company include awnings, antennae, vents, electrical items, towing equipment and
hitches, appliances such as air conditioners, refrigerators, ranges and
generators, LP gas equipment, portable toilets and plumbing parts, hardware and
tools, specialized recreational vehicle housewares, chemicals and supplies, and
various accessories, such as ladders, jacks, fans, load stabilizers, mirrors and
compressors. The Company also distributes various replacement parts and supplies
for manufactured housing, including tie-downs, skirting, windows and doors.

         The Company stocks boating and marine parts, supplies and accessories
at 13 of its 14 warehouse and distribution centers in the United States and at
all 4 of its distribution centers in Canada. Products distributed by the Company
include boat covers, stainless steel hardware, depth sounders, anchors, life
jackets and other marine safety equipment and fishing equipment.

         Proprietary Products. In order to improve its competitive position and
increase its profitability, the Company has introduced into the marketplace a
growing number of proprietary products, which are manufactured specifically for
the Company, generally on an exclusive basis, by a number of different
manufacturers (the "proprietary products"). The proprietary products, which are
designed for the Company by independent professional product design firms or by
the independent manufacturers retained to manufacture the products for the
Company, include trailer hitches, plastic wastewater tanks, portable toilets and
toilet chemicals, vent lids and stabilizing jacks. These proprietary products
are marketed by the Company under its own brand-names in competition with brand
name products from traditional suppliers, which usually sell their products to a
number of distributors and into other markets. Sales of proprietary products, on
which the Company has generally realized higher margins than on sales of
functionally equivalent name brand products, accounted for 23% of the Company's
net sales in 1997 and 1996. However, such products currently lack name brand
recognition, which may have a limiting effect on unit sales of and on the prices
that the Company is able to charge for such products. This lack of brand name
recognition also means that the costs to the Company of marketing the
proprietary products generally is greater than for brand-name products, which
somewhat offsets the margin advantage of the proprietary products. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Part II of this Report.

         The DTS Division. Although the Company's proprietary products were
initially designed for sale to After-Market Customers, a number of those
products also are suitable for installation as original equipment on RVs and
boats at the time of their manufacture or have applications in markets other
than the RV and boating markets, such as the automobile or leisure products
markets. As a result, in 1997 the Company established the DTS Manufacturing
Division within the Company (the "DTS Division"), to implement programs to
market and sell those proprietary products to RV and boat manufacturers and to
retail dealers and mass merchandisers in other markets. Utilizing distinctive
brand names and packaging, and in some instances also different product designs,
these proprietary products are marketed separately, as products that are
distinct, from the proprietary products that are sold by the Company's "Coast
Distribution" Division to RV and boating After-Market Customers. The new DTS
Division also will be identifying opportunities to design and arrange for the
manufacture of new proprietary products that can be installed as original
equipment on RVs and boats or that have applications in other markets. To date,
the operating results of the new DTS Division have not been material.

MARKETING AND SALES

         The Company's customers include (i) RV dealers, which primarily
purchase optional equipment and accessories for new recreational vehicles and
replacement and repair parts for their service departments, (ii) independent
recreational vehicle supply stores and service centers that purchase parts,
supplies and accessories for resale to owners of recreational vehicles and for
their service centers, and (iii) independent boat dealers that purchase small
accessories for new boats and replacement parts and boating supplies for resale
to boat owners and operators. The Company is not dependent on any single
customer for any material portion of its business. No single customer accounted
for as much as 5% of the Company's sales in 1995, 1996 or 1997.

         During the past several years, the Company has developed marketing and
customer service programs that are designed to assist its customers to increase
their profitability and also strengthen the relationships between the Company
and its customers.



                                       4
<PAGE>   6
         Customer Service Center and Computerized Order Entry and Warehousing
System. The Company has designed and implemented a computer-based order entry
and warehousing system which enables its larger customers to transmit orders
electronically to the Company's central computers and also enables the Company
to prepare and invoice most customer orders within 24 hours of receipt.
Approximately 1,000 of the Company's customers use this system to transmit
orders electronically to the Company's central data processing center using the
Company's toll-free telephone numbers.

         The Company also operates a national customer service center in San
Jose, California, which enables the Company's customers to obtain product
information and to place orders by telephone using the Company's toll-free
telephone numbers. With the exception of holidays, the customer service center
is operational for a total of 13 hours per day, Monday through Friday, and 8
hours on Saturdays and is staffed by sales personnel who are trained to promote
the sale of the Company's products and to handle customer service issues.
Currently, the number of customer calls handled by the national customer service
center, which can be accessed by virtually all of the Company's customers in the
United States and Canada, ranges from 2,000 to 6,000 per day and the customer
service center has enabled the Company not only to improve customer service, but
also to reduce selling expenses.

         Orders transmitted from customers either electronically or by telephone
to the national customer service center are input into the Company's IBM AS 400
computers and then are relayed to the regional distribution center selected by
the customer, where the products are selected, packed and shipped. At the time
the order is received, the customer is informed, either by electronic
confirmation, or by the sales person handling the customer's call at the
customer service center, that the order has been accepted and whether any items
are not currently in stock. In addition, the Company offers to participating
customers a "split shipment program" by which a customer's order for a product
that is not available from the Company's distribution center closest to the
customer, will be shipped to that customer from another of the Company's
distribution centers that has been pre-selected by that customer as a "back-up"
distribution center, when that product is available at that back-up distribution
center.

         The Company's computer system also prints retail price stickers which
are shipped with the products ordered by the customer. The price stickers
identify the part numbers and contain the customer's name and the customer's
retail prices for the parts which are provided to the Company by the customer
and stored in the Company's computer system. The Company's computerized ordering
system also enables it to provide customers with inventory costing data with
respect to items purchased from the Company.

DISTRIBUTION

        The Company's regional distribution and warehouse centers in North
America carry an inventory of up to approximately 15,000 recreational vehicle
parts, supplies and accessories. In addition, at 13 of the Company's
distribution centers in the United States and at all 4 of its distribution
centers in Canada, the Company carries, in varying quantities, up to
approximately 10,000 boating and marine parts, supplies and accessories. Each
regional distribution center is operated as a separate profit center.

        The Company relies primarily on independent freight companies to ship
its products.

ARRANGEMENTS WITH MANUFACTURERS

        General. The products which the Company distributes are purchased by it
from more than 600 different manufacturers. As is typical in the industry, in
most instances the Company acquires its products on a purchase order basis and
has no guaranteed price or delivery agreements with manufacturers, including the
manufacturers that supply proprietary products to the Company. As a result,
short-term inventory shortages can occur. The Company sometimes chooses to carry
only a single manufacturer's products for certain of the brand-name product
lines that it sells, although comparable products usually are available from
multiple sources. In addition, each of the proprietary products is obtained by
the Company from a single source manufacturer, although in most instances the
Company owns the tooling required for


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<PAGE>   7
their manufacture. Dependence on a single manufacturer for any product or line
of related products, however, presents some risks, including the inability to
readily obtain alternative product supply sources in the event a single source
supplier encounters quality or other production problems, which can, and in 1996
did, adversely affect the Company's sales, as certain of its manufacturers were
unable to meet the Company's product requirements (see "Recent Changes in
Relationships With Manufacturers").

        No manufacturer or supplier of products to the Company accounted for
more than 5% of the Company's product purchases in 1997, other than Recreation
Vehicle Products, Inc. ("RVP"). RVP supplies the Company with RV air
conditioners sold under the Coleman(R) brand name and awnings under the
Faulkner(R) brand name, the aggregate sales of which accounted for approximately
17% of the Company's net sales in 1997.

        Manufacturers generally warrant the products distributed by the Company
and allow the Company to return defective products, including those that have
been returned to the Company by its customers. The Company does not
independently warrant the products that it distributes.

         Recent Changes in Relationships with Manufacturers. During the
five-year period ended December 31, 1995, the Company purchased substantially
all of its requirements for RV air conditioners, awnings and refrigerators from
Dometic Corporation ("Dometic"), a division of White Consolidated Industries.
Sales of products purchased by the Company from Dometic accounted for 22% and
24%, respectively, of the Company's sales in 1994 and 1995. In August 1995,
Dometic notified the Company that Dometic had decided to integrate its
operations vertically and market its products directly to retail parts and
supply stores, service centers and RV dealers, in direct competition with the
Company beginning early in 1996, and, therefore, would be terminating its supply
agreement with the Company. Following that notification, in order to ensure that
the Company would have a source of supply for air conditioners and awnings, the
Company entered into a multi-year product distribution agreement with RVP, under
which RVP agreed to supply the Company with its requirements for RV air
conditioners and awnings for a minimum term of five (5) years, beginning in
1996.

        However, during 1996 RVP encountered manufacturing and supply problems
in its efforts to meet the Company's requirements for awnings. These problems,
coupled with Dometic's entry into the market as a competitor of Coast, resulted
in a substantial decline in the Company's sales of awning products in 1996.
Although these manufacturing and supply problems were largely remedied by the
end of 1996, the Company has been unable to recapture fully the share of the
awning aftermarket that it lost in 1996 as a result of these problems and the
increased competition created by Dometic's entry into the aftermarket. Since
awning sales generate relatively higher profit margins, than do other RV
accessories, such as air conditioners, the Company's sales and operating
margins, and therefore also its operating profits, continued to be adversely
affected in 1997 by the loss of awning sales that occurred in 1996. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operation."

        In 1996, the Company also began to encounter increased price competition
from other wholesale distributors of branded products that compete with the
Company's proprietary products. That increased price competition continued well
into 1997, adversely affecting the growth of the Company's sales of proprietary
products, which remained relatively unchanged in 1997 as compared to 1996. That
price competition also contributed to the declines in the Company's sales and
operating income in 1997.

        As a result of the changes that have occurred in supply relationships in
the industry, there will continue to be increased competition from Dometic and
other manufacturers and distributors in the future, which could adversely affect
product pricing and the Company's sales and operating margins. Additionally,
there is no assurance that other changes in supply arrangements will not occur
in the future or that the Company will be able to recapture fully the sales
volume lost to competitors in 1996 and 1997.

COMPETITION

         The Company faces significant competition. In addition to Dometic,
there are a number of national and regional distributors of recreational vehicle
and boating parts, supplies and accessories that compete with the Company. There
also are certain mass merchandisers, catalog houses and national and regional
retail chains specializing in the sale of


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<PAGE>   8
recreational vehicle or boating parts, supplies and accessories, that purchase
such products directly from manufacturers. Such mass merchandisers and national
and regional chains compete directly with the RV and boating supply stores and
service centers that purchase products from the Company. Such competition
affects both the volume of Company's sales, and the prices it is able to charge
for the products it sells, to such RV and boating supply stores. Additionally,
there is no assurance that other changes in supply relationships or new
alliances within the recreational or boating products industry will not occur
that would further increase competition. See "Products" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

         The Company, like most of its competitors, competes on the basis of the
quality, speed and reliability of its service, the breadth of its product lines
and price. The Company believes that it is highly competitive in each of those
areas.

CERTAIN FACTORS THAT COULD AFFECT FUTURE PERFORMANCE

         Changes in Industry Supply Relationships; Increases in Competition.
Since 1996 product supply relationships in the RV accessories market have
undergone significant change. The changes have led to increased competition and,
in 1996 created supply problems for the Company, which adversely affected its
sales and margins and caused the Company to sustain losses from operations not
only in 1996, but also in 1997. There is no assurance that the Company will be
able to recapture fully the sales it lost in 1996 and 1997 or that it will be
able to return to profitability in 1998. There also is no assurance that
additional changes, that would increase competition or create further
uncertainties or supply problems for the Company, as well as others in the
industry, will not occur in the future. See "BUSINESS--Products-- Arrangements
with Manufacturers--Competition" in Part I of this Report and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Part II of this Report.

         Cyclical Nature of Business. The Company's sales are affected directly
by the purchase and usage levels of RVs and boats which, in turn, depend, in
large measure, upon the extent of discretionary income available to consumers
and their confidence about economic conditions. Weather conditions also affect
the usage of RVs and boats. As a result, the Company's sales and operating
results can be, and in the past have been, adversely affected by recessionary
economic conditions, increases in interest rates which affect the availability
and affordability of financing for purchases of RVs and boats, increases in fuel
prices which affect the costs of using RVs and boats, and unusually adverse
winter weather conditions. The occurrence of adverse economic conditions,
increases in interest rates or fuel prices, or the onset of unusually severe
winter weather conditions affecting large regions of North America, could result
in declines in the Company's sales that would adversely affect the Company's
future operating results.

         Reliance on Borrowings; Debt Service Requirements. The Company has
financed its growth primarily with bank borrowings and institutional debt
financing and relies heavily on bank borrowings to fund working capital
requirements and capital expenditures. Although the Company did generate
approximately $1,544,000 of positive cash flow from operations in 1997 (despite
the decline in sales and the loss that it incurred during that year), and
expects to be able to continue to fund its working capital requirements and
capital expenditures in 1998 with a combination of internally generated funds
and available borrowings under its revolving bank credit line, the amount of its
outstanding borrowings could have adverse consequences for the Company in the
future. Among other things, (i) the Company is likely to find it more difficult
to obtain additional financing that might be needed to fund expansion or other
business opportunities; and (ii) a substantial portion of the Company's cash
flow from operations must be dedicated to the payment of principal and interest
on indebtedness, which makes the Company more vulnerable to general economic
downturns and competitive pressures. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."

EMPLOYEES

         At December 31, 1997, the Company had approximately 345 full-time
employees, which includes employees in Canada. During the peak summer months,
the Company also employs part-time workers at its regional distribution centers.
None of the Company's employees is represented by a labor union. The Company
believes that its relations with employees are good.


                                       7
<PAGE>   9
ITEM 2.  PROPERTIES

         The Company operates 14 regional distribution centers in 13 states in
the United States and 4 regional distribution centers, each located in a
different Province, in Canada. Except for one facility owned by the Company, all
of these facilities are leased under triple net leases which require the Company
to pay, in addition to rent, real property taxes, insurance and maintenance
costs. The following table sets forth certain information regarding these
facilities.



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<CAPTION>
                                                SQUARE
            GEOGRAPHIC LOCATION                 FOOTAGE    LEASE EXPIRATION DATE
--------------------------------------------------------------------------------
<S>                                             <C>        <C>
Visalia, California...........................   70,000    February 28, 2007
Fort Worth, Texas.............................   90,670    April 30, 1999
San Antonio, Texas............................   46,600    April 30, 1998
Denver, Colorado..............................   50,000    September 30, 1999
Elkhart, Indiana..............................  109,000    December 31, 1999
Lancaster, Pennsylvania.......................   64,900    February 29, 1999
Atlanta, Georgia..............................   51,100    August 31, 1999
Tampa, Florida................................   53,100    September 30, 1998
Phoenix, Arizona..............................   36,500    March 31, 2002
Salt Lake City, Utah..........................   37,800    March 31, 2000
Portland, Oregon..............................   72,000    Owned
Albany, New York..............................   52,500    April 30, 2004
Eau Claire, Wisconsin.........................   36,000    July 31, 1998
Anchorage, Alaska.............................   13,200    December 31, 1999
Montreal, Quebec..............................   40,715    January 1, 2000
Toronto, Ontario..............................   34,020    December 1, 1998
Calgary, Alberta..............................   30,750    December 1, 1998
Vancouver, British Columbia...................   22,839    June 1, 1999
</TABLE>

         A total of twelve of the Company's existing distribution center leases
are scheduled to expire within the next two years. The Company plans to seek
renewals or extensions of those leases.

         The Company also leases 22,876 square feet of office space in San Jose,
California where its executive offices are located.

ITEM 3.  LEGAL PROCEEDINGS

         The Company from time to time is named as a defendant, sometimes along
with product manufacturers and others, in product liability and personal injury
litigation. The Company believes that this type of litigation is incident to its
operations, and since it has insurance or indemnities from manufacturers
covering any potential liability, it believes that such litigation will not
materially affect the Company.

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

    None.


                                       8
<PAGE>   10
EXECUTIVE OFFICERS OF REGISTRANT

<TABLE>
<CAPTION>
NAME                                                          AGE                     POSITION
--------------------------------------------------------  ------------      -----------------------------
<S>                                                       <C>               <C>
Thomas R. McGuire.......................................       54           Chairman of the Board and Chief Executive Officer

Sandra A. Knell.........................................       40           Executive Vice President - Finance
                                                                            and Chief Financial Officer and Secretary

Jeffrey R. Wannamaker...................................       37           Executive Vice President - Operations and President of
                                                                            the Coast Distribution Division of the Company

David A. Berger.........................................       44           Executive Vice President - Marine
                                                                            Sales and Marketing

Dennis A. Castagnola....................................       50           Senior Vice President - Proprietary Products and
                                                                            President of the DTS Division of the Company
</TABLE>



    Set forth below is certain information regarding the Company's executive
officers.

         THOMAS R. MCGUIRE. Mr. McGuire is a founder of the Company and for more
than five years has been Chairman of the Board and Chief Executive Officer of
the Company. From 1981 until August 1985 he also served as the Company's Chief
Financial Officer and Secretary.

         SANDRA A. KNELL. Mrs. Knell has been the Company's Executive Vice
President - Finance, Chief Financial Officer and Secretary since August 1985.
From 1984 until she joined the Company, Mrs. Knell was an Audit Manager, and for
the prior four years was a senior and staff accountant, with Grant Thornton LLP
(formerly Alexander Grant & Co.). Mrs. Knell is a Certified Public Accountant.

         JEFFREY R. WANNAMAKER. Mr. Wannamaker, who joined the Company in 1984,
has been Executive Vice President - Operations since 1995. From 1991 and until
his promotion to Executive Vice President, Mr. Wannamaker held the position of
Senior Vice President - Branch Operations of the Company. Prior to that time he
held various other management positions with the Company. In 1997, Mr.
Wannamaker was appointed as President of the Company's Coast Distribution
Division which markets and supplies products to RV and boating After-Market
Customers.

         DAVID A. BERGER. Mr. Berger served as Executive Vice President -
Marketing from May 1988 until September 1993. Due to the growth of the Company's
marine products sales, in September 1993 the Company's marketing department was
restructured into two separate departments, one for marine products and the
other for R.V. products, and Mr. Berger was placed in charge of marketing for
the Company's marine products division. From August 1986 to May 1988, Mr. Berger
was Senior Vice President Purchasing of the Company. For the prior 14 years he
held various management positions with C/P Products Corp., a distributor of
recreational vehicle parts and accessories acquired by the Company in 1985.

         DENNIS A. CASTAGNOLA. Mr. Castagnola was appointed to his current
position of Senior Vice President-Proprietary Products in May 1994, in which he
directs the Company's proprietary products program. From September 1993 until
May 1994, he served as Senior Vice President - R.V. Sales and Marketing. For the
prior 19 years, he held various positions with the Company, including Vice
President/Division Manager of the Company's Portland, Oregon Distribution
Center. In 1997, Mr. Castagnola was appointed as President of the Company's new
DTS Division which markets and supplies proprietary products to RV and boating
manufactures and to customers in markets other than the RV and boating
After-Market.


                                       9
<PAGE>   11
                                     PART II

ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS

         The Company's shares of common stock are listed and trade on the
American Stock Exchange under the trading symbol "CRV."

         The following table sets forth for the calendar quarters indicated the
range of the high and low sales prices per share of the Company's common stock
on the American Stock Exchange.


<TABLE>
<CAPTION>
                                                HIGH             LOW
                                               ------         ---------
<S>                                            <C>            <C>
                1996:

                  First Quarter......          $8-3/4         $ 5-13/16
                  Second Quarter.....           8-5/8           6-1/16
                  Third Quarter......           6-3/8           4-3/4
                  Fourth Quarter.....           5-1/2           3-5/8

                1997:

                  First Quarter......          $4-5/8         $ 3-5/8
                  Second Quarter.....           3-3/4           2-3/16
                  Third Quarter......           4               3-1/4
                  Fourth Quarter.....           4-1/2           2-7/8
</TABLE>


         On March 17, 1998, the closing price per share of the Company's common
stock on the American Stock Exchange was $2 3/4. There were approximately 1,305
holders of record of the Company's common stock as of March 7, 1998.

DIVIDENDS

         The Company has a policy of retaining earnings to support the growth of
its business and, therefore, does not anticipate that any cash dividends will be
paid in the foreseeable future. In addition, payment of cash dividends by the
Company is restricted by its loan agreements. See Note E to the Company's
Consolidated Financial Statements.


                                       10
<PAGE>   12
ITEM 6.  SELECTED FINANCIAL DATA

         The selected operating data set forth below for the fiscal years ended
December 31, 1997, 1996 and 1995, and the selected balance sheet data at
December 31, 1997 and 1996, are derived from the Company's audited financial
statements included elsewhere in this report and should be read in conjunction
with those financial statements. The selected financial data for the fiscal
years ended December 31, 1994 and 1993 and at December 31, 1995, 1994, and 1993
are derived from audited financial statements which are not included in this
report.


<TABLE>
<CAPTION>
                                                        YEAR ENDED DECEMBER 31,
                                   -------------------------------------------------------------
                                      1997         1996         1995        1994          1993
                                   ---------    ---------    ---------    ---------    ---------
                                                 (IN THOUSANDS EXCEPT PER SHARE DATA)
Operating Data:
--------------
<S>                                <C>          <C>          <C>          <C>          <C>
Net Sales ...................      $ 135,952    $ 139,286    $ 169,559    $ 177,774    $ 140,152
Cost of sales (including
distribution costs) .........        117,272      118,361      138,806      146,987      115,670
                                   ---------    ---------    ---------    ---------    ---------
          Gross margin ......         18,680       20,925       30,753       30,787       24,482
Selling, general and
administrative expenses .....         20,147       21,525       22,260       23,216       19,639
                                   ---------    ---------    ---------    ---------    ---------
     Operating margin .......         (1,467)        (600)       8,493        7,571        4,843

Equity in net earnings of
affiliated companies ........            673        1,529        1,204        1,237        1,504
Interest expense ............         (3,336)      (3,600)      (4,249)      (3,572)      (3,051)
Loss from sales of
investments in affiliates ...         (2,193)         --           --           --           --
Other .......................           (246)       2,354          (22)         177         (251)
                                   ---------    ---------    ---------    ---------    ---------
Earnings (loss) before
 income taxes ...............         (6,569)        (317)       5,426        5,413        3,045
Income taxes (credits) ......         (1,303)        (194)       2,082        1,828          608
                                   ---------    ---------    ---------    ---------    ---------
Net earnings (loss) .........      $  (5,266)   $    (123)   $   3,344    $   3,585    $   2,437
                                   =========    =========    =========    =========    =========
Net earnings (loss)
 per share-diluted (1) ......      $   (1.01)   $    (.03)   $     .64    $     .70    $     .53
                                   =========    =========    =========    =========    =========
Weighted average number
of shares ...................          5,239        5,198        5,205        5,186        4,879
                                   =========    =========    =========    =========    =========
</TABLE>
<TABLE>
<CAPTION>
                                                      AT DECEMBER 31,
                            ---------------------------------------------------------------
                               1997         1996           1995         1994          1993
                            ---------------------------------------------------------------
                                                     (IN THOUSANDS)
Balance Sheet Data:
------------------
<S>                         <C>          <C>            <C>          <C>           <C>
Working capital.......      $ 48,999     $ 45,639       $ 50,004     $ 42,127      $ 33,537
Total assets..........        72,663       88,442         92,136       85,957        69,135
Long-term obligations(2)      29,726       33,771         38,376       32,624        28,339
Shareholders' equity..        33,996       39,450         39,392       35,722        28,487
</TABLE>


----------
(1) See Note K to the Company's Consolidated Financial Statements.

(2) Exclusive of current portion. For additional information regarding long-term
    obligations, see Note E to the Company's Consolidated Financial Statements.


                                       11
<PAGE>   13
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

Factors Generally affecting sales of RV and Boating Products

         The Company is the largest wholesale distributor of replacement parts,
accessories and supplies for recreational vehicles ("RVs"), and one of the
largest distributors of replacement parts, accessories and supplies for boats,
in North America. Sales are made by the Company to retail parts and supplies
stores, service and repair establishments, and new and used RV and boat dealers
("After-Market Customers"). The Company's sales are affected primarily by (i)
usage of recreational vehicles and boats which affects the consumers' needs for
and purchase of replacement parts, repair services and supplies, and (ii) sales
of new recreational vehicles and boats, because consumers often "accessorize"
their recreational vehicles and boats at the time of purchase.

         The usage and the purchase, by consumers, of RVs and boats depend, in
large measure, upon the extent of discretionary income available to consumers
and their confidence about economic conditions. Weather conditions also affect
the usage of RVs and boats. As a result, the Company's sales and operating
results can be, and in the past have been, adversely affected by recessionary
economic conditions, increases in interest rates, which affect the availability
and affordability of financing for purchases of RVs and boats, and increases in
gasoline prices and unusually adverse winter weather conditions which adversely
affect the use of RVs and boats. The occurrence of adverse economic conditions,
increases in interest rates or gasoline prices, or the onset of unusually severe
winter weather conditions affecting large regions of North America, could result
in declines in the Company's sales that would adversely affect the Company's
future operating results.

Factors Affecting Recent Operating Results

         Changes in Supply Relationships in the RV After-Market. During the
five-year period ended December 31, 1995, the Company purchased substantially
all of its requirements for RV air conditioners, awnings and refrigerators from
Dometic Corporation ("Dometic"), a division of White Consolidated Industries.
Sales of such products accounted for 22% and 24%, respectively, of the Company's
sales in 1994 and 1995. During the first quarter of 1996, Dometic terminated its
supply agreement with the Company (as well as its supply agreements with other
independent distributors ("After-Market Distributors")) as a result of its
decision to integrate its operations vertically by marketing its products
directly to After-Market Customers in direct competition with the Company and
other After-Market distributors of RV products. In response to that action by
Dometic, the Company entered into a supply contract with RVP, which
manufacturers air conditions under the Coleman brand name and awnings under the
Faulkner brand name. Under that contract, RVP agreed to supply all of the
Company's requirements for RV air conditioners and awnings for a minimum term of
five years, commencing in 1996.

         As a result of both the magnitude and timing of these changes in supply
relationships and the introduction, at the same time, of a number of new
proprietary products, RVP and certain of the Company's proprietary product
manufacturers encountered difficulties in meeting the Company's requirements for
their products for the spring and summer months of 1996, when demand from
After-Market customers is at its highest (see "Seasonality and Inflation"). In
addition, the Company encountered increased competition within the RV products
After-Market due to Dometic's entry as a competitor in that market and increased
price competition from other distributors seeking to regain market share lost to
the Company's proprietary products and to Dometic. Since the supply problems
encountered by the Company primarily affected its supply of, and therefore its
ability to meet customer demand for, higher margin products, the supply problems
and the increased competition adversely affected the Company's sales and
margins, particularly in the last three quarters of 1996, as the Company lost
sales of such products to its competitors.

         Although the supply problems encountered in 1996 were largely remedied
by the end of 1996, those problems adversely affected the Company's operating
results in 1997, as the Company was unable to recapture market share for the
higher margin products that were affected by those problems. In addition, the
increased price competition which began in 1996 continued into 1997. As a
result, sales and operating margins declined, causing the Company to sustain a


                                       12
<PAGE>   14
$1,467,000 loss from operations in 1997. Although the Company expects some
improvement in operating results in 1998, the conditions that caused the losses
in 1996 and 1997 are expected to have a residual adverse effect on operating
results, and the Company could sustain losses again, in 1998. There also is no
assurance that additional changes within the After-Market, that would increase
competition or create further supply or other problems for the Company, will not
occur in the future.

         Sales of Burden and HWH Investments. In September 1997 the Company sold
its minority ownership interest in H. Burden Limited ("Burden"), which
distributes RV and boating accessories, parts and supplies in Western Europe for
a cash purchase price of $4,198,000, plus a right to receive additional payments
of up to $330,000 if certain contingencies are satisfied. In early 1998, the
Company completed the sale of its minority ownership interest in HWH
Corporation, a privately owned manufacturer of after-market products for
recreational vehicles ("HWH"), for a cash price of $5,387,000. (See "Business -
Developments in 1997" in Part I of this Report, for a discussion of the
principal reasons that led the Company to sell those investments.) Although the
amounts received from each of these sales exceeded the Company's cost of
acquiring those investments, for financial reporting purposes the Company
reported (non-cash) losses on those sales of $525,000 and $1,669,000,
respectively, because the carrying values of those investments had been
increased over the years by the Company's proportionate share of the earnings of
Burden and HWH. Those earnings were included in the Company's operating results
under the equity method of accounting.

         Those losses, coupled with the Company's loss from operations, were the
principal causes of the net loss sustained by the Company in 1997.

RESULTS OF OPERATIONS

         Net Sales. Net sales in 1997 decreased by approximately $3,334,000 or
2.4% as compared to 1996, due primarily to (i) the continuing adverse effects of
the changes in supply relationships that occurred in 1996; (ii) continuing of
increased price competition that began in 1996; and (iii) adverse weather
conditions which affected the Northern United States and Canada in the first
half of 1997.

         Net sales in 1996 decreased by approximately $30,273,000 or 17.9% as
compared to 1995. This sales decrease was due to a number of factors, including
(i) changes in supply relationships that occurred in 1996; (ii) increased price
competition due to Dometic's entry into the marketplace as a vertically
integrated supplier to After-Market customers and price reductions by other
distributors on various third-party name brand products; and (iii) slowness in
sales of new recreational vehicles, during the year, which adversely affected
sales of accessories distributed by the Company.

         Gross Margin. The Company's gross margin decreased to 13.7% of net
sales in 1997 as compared to 15.0% in 1996 and 18.1% in 1995. These declines
were due primarily to (i) changes in product mix to a greater proportion of
lower margin products that were attributable primarily to the changes in supply
relationships and product supply problems that occurred in 1996 and increased
price competition which, as discussed above, also adversely affected the
Company's sales revenue in 1997; and (iii) the impact of fixed costs on a lower
sales base, the combined effect of which more than offset the more favorable
margins which the Company realizes on sales of its proprietary products.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses were 14.8% of net sales in 1997, 15.5% in 1996, and
13.1% in 1995. In absolute dollars, these expenses declined by approximately
$1,378,000 in 1997 and $735,000 in 1996, as compared to their respective prior
years. These decreases were primarily a result of increased efficiencies
associated with the Company's national call and service center, a reduction of
the Company's telephone expenses and the expiration of certain non-competition
agreements that were obtained by the Company in connection with its acquisition
of other businesses in previous years.

         Operating Income (Loss). Due to the combined effects of the decreases
in sales and gross margin during 1996 and 1997, the Company's sustained a loss
from operations of $1,467,000 in 1997 as compared to a loss from operations of
$600,000 in 1996. In 1995 the Company generated income from operations of
$8,493,000.


                                       13
<PAGE>   15
         Equity in Net Earnings of Affiliated Companies. As described above, the
Company's minority ownership interests in Burden and HWH (as well as in two
other companies which are not material to the Company's operations) have been
accounted for under the equity method of accounting. Due to the sales of its
investments in Burden and HWH, the Company expects that, in the future, its
equity in the earnings (loss) of affiliates will not be material to its
operating results.

         Interest Expense. Interest expense is ordinarily the most significant
component of Other income (expense). During 1997, interest expense decreased by
$264,000 or 7.3%, as compared to 1996. This decrease was the result of
reductions in average long-term borrowings outstanding during year as compared
to 1996 due to the Company's inventory reduction program and the sale of its
investment in Burden, the proceeds of which were used initially to reduce
borrowings and provide additional credit availability for operations.

         During 1996, interest expense decreased by $649,000 or 15.3%, as
compared to 1995 as a result of: (i) a decrease in the rate of interest charged
under the Company's revolving bank credit facility, and (ii) reductions in
average long-term borrowings outstanding during the second half of 1996 as
compared to the same period in 1995.

         The Company will continue to rely on borrowings to fund a substantial
portion of its working capital requirements and future growth and, as a result,
it anticipates that interest will continue to be a significant expense for the
Company.

         Loss from Sales of Investments in Affiliates. Although the Company
received net cash proceeds from the sales of its investments in Burden and HWH
of approximately $4,198,000 and $5,387,000 respectively, for financial reporting
purposes, the Company recorded losses on those sales of approximately $525,000
and $1,669,000, respectively. Those losses represent, in each case, the excess
of the respective amounts at which each of those investments was carried on the
books of the Company for financial reporting purposes over the respective prices
at which those investments were sold. Under applicable accounting principles,
the Company's investments in Burden and HWH were carried at amounts equal to the
sum of (i) the respective amounts paid by the Company for such investments, plus
(ii) the proportionate share of the cumulative earnings of Burden and HWH,
respectively, that were allocated to the Company during the respective periods
that the Company held such investments.

         By contrast, in 1996, other income included $2,122,000 of non-recurring
net proceeds from a favorable settlement of a lawsuit recorded in the second
quarter of 1996.

LIQUIDITY AND CAPITAL RESOURCES

         The Company finances the working capital requirements for its
operations primarily with borrowings under a long-term revolving bank credit
facility and internally generated funds. Under that credit facility, the Company
is entitled to borrow up to the lesser of (i) an amount equal to 80% of its
eligible accounts receivable and 50% of its eligible inventory (the "borrowing
base") or (ii) $50,000,000 (which will decrease to $35,000,000 effective on and
after May 22, 1998 and will be subject to seasonal reductions to $30,000,000
during the months from October 1 to January 1 each year). Borrowings under the
credit facility bear interest at a per annum rate of interest equal to the
bank's prime rate, plus 0.50%, or, at the Company's option, but subject to
certain limitations, at the bank's available LIBOR rate, plus 2.0% per annum,
until March 30, 1998, when they will increase to prime plus 0.75% and LIBOR plus
2.5%, respectively. The reduction, to $35,000,000, of the maximum borrowings
permitted under the credit facility and the increase in applicable interest
rates were agreed on by the Company and the lender in March 1998, as part of an
amendment agreement that also relaxes certain loan covenants applicable to the
Company retroactive to December 31, 1997 and extends the maturity of the credit
line to the year 2001.

                                       14
<PAGE>   16
         At March 6, 1998, outstanding borrowings under this credit facility
were $26,325,000. Borrowings under the credit facility are secured by
substantially all of the Company's assets and rank senior in priority to other
indebtedness of the Company and the agreement governing the credit facility (the
"Credit Agreement") contains certain restrictive covenants. The Company was in
compliance with those covenants, as retroactively amended, at December 31, 1997,
the most recent date as of which compliance with such covenants was required to
be determined under the Credit Agreement.

         In 1997 and 1996, reductions in inventories enabled the Company to
generate cash from operating activities of $1,544,000 in 1997 and $4,182,000 in
1996. Excluding non-cash charges, operating cash flow declined in 1995 primarily
as a result of increases in inventory levels due to the addition of newly
introduced proprietary products and the opening of three new warehouse and
distribution centers. The Company anticipates that it will be able to reduce
inventories further in 1998 and, as a result, expects to generate cash flow from
operations in 1998.

         Net cash provided by investing activities was $3,615,000 in 1997, as
compared to net cash used in investing activities of $1,082,000 in 1996 and
$3,597,000 in 1995. During 1997, the Company received proceeds of $4,198,000
from the sale of its investment in Burden. The Company used cash of $687,000 in
1996 and $668,000 in 1995 to acquire additional shares of Burden. Capital
expenditures were $456,000 in 1997, $445,000 in 1996, and $1,862,000) in 1995.
Capital expenditures during these years related principally to the acquisition
of warehouse equipment, the establishment and equipping of the national customer
service center, and additional investments in data processing equipment.

         The Company leases the majority of its facilities and certain of its
equipment under noncancelable operating leases. In 1997, rent expense under all
operating leases was approximately $2.8 million. The Company's future lease
commitments are discussed in Note F to the Company's Consolidated Financial
Statements contained elsewhere in this Report.

         Borrowings under the Company's revolving line of credit decreased by
$2,835,000 in 1997 and $1,068,000 in 1996 as compared to the previous year. The
Company made a principal payment of $2,333,000 on its outstanding senior
subordinated notes in 1997 and 1996, principally with borrowings under its long
term revolving bank credit facility. The Company is required to make two
additional principal payments, on the those subordinated notes, each in the
principal amount of $2,334,000, in June 1998 and 1999, respectively.

         The Company believes that available credit under its revolving credit
facility, together with internally generated funds, will be sufficient to enable
the Company to meet its working capital requirements and other fixed charges
over the next 12 months, as well as to make the June 1998 principal payment on
the subordinated notes.

SEASONALITY AND INFLATION

         Seasonality. Sales of recreational vehicle and boating parts,
accessories and supplies are seasonal. The Company has significantly higher
sales during the six-month period from April through September than it does
during the remainder of the year. Because a substantial portion of the Company's
expenses are fixed, operating income declines and the Company sometimes incurs
losses in the winter months when sales are lower, particularly in years in which
there occurs unusually severe winter weather conditions in large regions of
North America.


                                       15
<PAGE>   17
         Set forth below is a summary of quarterly financial data for the two
years ended December 31, 1997, which indicates the effects on operating results
of the seasonality of the Company's business.

<TABLE>
<CAPTION>
                                               QUARTER ENDED
                            -----------------------------------------------
                               MARCH       JUNE       SEPTEMBER   DECEMBER
                               1997        1997          1997       1997
                            ----------   ---------    ---------   ---------
     (UNAUDITED)                   (IN THOUSANDS EXCEPT PER SHARE DATA)
<S>                         <C>          <C>          <C>         <C>
Revenues..................  $   35,205   $  41,600    $  37,847   $  21,300
Gross profit..............       5,533       5,983        5,133       2,031
Net earnings (loss).......         (92)        (51)      (1,450)     (3,673)
Net earnings (loss) per
share.....................  $     (.02)  $    (.01)   $    (.28)  $    (.70)
</TABLE>


<TABLE>
<CAPTION>
                                                QUARTER ENDED
                            --------------------------------------------------
                               MARCH        JUNE       SEPTEMBER     DECEMBER
                               1996         1996         1996          1996
                            ----------   ----------   ----------    ----------
        (UNAUDITED)                 (IN THOUSANDS EXCEPT PER SHARE DATA)
<S>                         <C>          <C>          <C>           <C>
Revenues..................  $   37,380   $   42,159   $   37,552    $   22,195
Gross profit..............       7,501        6,145        4,769         2,510
Net earnings (loss).......         763        1,155         (464)       (1,577)
Net earnings (loss) per
share.....................  $      .15   $      .22   $     (.09)   $     (.30)
</TABLE>

         Inflation. Generally, the Company has been able to pass inflationary
price increases on to its customers. However, inflation also may cause or may be
accompanied by increases in gasoline prices and interest rates. Such increases
adversely affect the purchase and usage of recreational vehicles and boats,
which can adversely affect sales of the Company's products.

YEAR 2000.

         The Company is currently working to resolve the potential impact of the
year 2000 on the processing of date-sensitive information by the Company's
computerized information systems. The year 2000 problem is the result of
computer programs being written using two digits (rather than four) to define
the applicable year. Any of the Company's computer programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000, which could result in miscalculations or system failures.
Based on preliminary information, the costs of addressing the potential problems
are not currently expected to have a material adverse effect on the Company's
financial position, liquidity or results of operations in future periods.
However, if the Company, or its customers or vendors, are unable to resolve such
processing issues in a timely manner, it could pose a material financial risk.
Accordingly, the Company plans to devote the necessary resources to resolve all
significant year 2000 issues in a timely manner.

FORWARD LOOKING INFORMATION.

         This Report contains forward-looking information which reflects
Management's current view of future financial performance. The forward-looking
information is subject to certain risks and uncertainties, including but not
limited, to, the effects on future performance of the changing product supply
relationships in the industry and the uncertainties created by those changes;
the potential for increased price competition; possible changes in economic
conditions, prevailing interest rates or gasoline prices, or the occurrence of
unusually severe winter weather conditions, that can affect both the purchase
and usage of recreational vehicles and boats and which, in turn, affects
purchases by consumers of the products that the Company sells. See "Business --
Certain Factors that could Affect Future Performance in Part I of this Report.
Due to such uncertainties and risks, readers are cautioned not to place undue
reliance on such forward-looking statements, which speak only as of the date of
this Report.


                                       16
<PAGE>   18
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                     THE COAST DISTRIBUTION SYSTEM AND SUBSIDIARIES
                      INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                       FOR THE THREE YEARS ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
                                                                                                                          PAGE
                                                                                                                          ----
<S>                                                                                                                       <C>
         Consolidated Financial Statements:

                  Report of Independent Certified Public Accountants...............................................        18

                  Consolidated Balance Sheets, December 31, 1997 and 1996..........................................        19

                  Consolidated Statements of Operations for the Years Ended
                    December 31, 1997, 1996 and 1995...............................................................        20

                  Consolidated Statements of Cash Flows
                    for the Years Ended December 31, 1997, 1996 and 1995...........................................        21

                  Consolidated Statement of Shareholders' Equity for the
                    Years Ended December 31, 1997, 1996 and 1995...................................................        23

                  Notes to Consolidated Financial Statements.......................................................        24

         Financial Statement Schedules:

                  Schedule II - Valuation and Qualifying Accounts
                    for the Years Ended December 31, 1997, 1996 and 1995...........................................        34
</TABLE>

                  (Other Financial Statement Schedules are omitted as the
                  information is not required, is not material or is otherwise
                  furnished.)


                                       17
<PAGE>   19
                       REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors and Shareholders
The Coast Distribution System

We have audited the accompanying consolidated balance sheets of The Coast
Distribution System and Subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Coast
Distribution System and Subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.

We have also audited Schedule II of The Coast Distribution System and
Subsidiaries for each of the three years in the period ended December 31, 1997.
In our opinion this schedule presents fairly, in all material respects, the
information required to be set forth herein.

/s/ Grant Thornton LLP

San Jose, California
February 27, 1998



                                       18
<PAGE>   20
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of December 31,                                                   1997            1996
------------------------------------------------------------------------------------------
                                                                    (dollars in thousands)
<S>                                                                <C>             <C>
ASSETS
   CURRENT ASSETS
       Cash                                                        $   308         $   214
       Accounts receivable (less allowance for
         doubtful receivables of $1,080 in
         1997 and $1,086 in 1996)                                   11,268          13,285
       Inventories                                                  37,581          43,193
       Prepaid expenses                                                676             426
       Deferred income taxes                                         1,980           2,038
       Investment in affiliate                                       3,888             --
       Income tax refunds receivable                                 1,703             883
                                                                   -------         -------
         Total current assets                                       57,404          60,039
   PROPERTY, PLANT & EQUIPMENT                                       4,709           5,355
   OTHER ASSETS                                                        409          12,458
       Investments in affiliates                                     8,466           9,048
       Costs in excess of net assets of acquired                       --               35
        businesses                                                   1,675           1,507
                                                                   -------         -------
       Non-competition agreements                                   10,550          23,048
                                                                   -------         -------
       Other                                                       $72,663         $88,442
                                                                   =======         =======


LIABILITIES
   CURRENT LIABILITIES
       Accounts payable                                            $ 3,421         $ 7,322
       Accrued liabilities                                           2,226           1,911
       Notes payable                                                   --            1,500
       Current maturities of long-term obligations                   2,758           3,667
                                                                   -------         -------
         Total current liabilities                                   8,405          14,400
   LONG-TERM OBLIGATIONS                                            29,726          33,771
   DEFERRED INCOME TAXES                                               182             348
   COMMITMENTS                                                         --              --
   REDEEMABLE PREFERRED STOCK OF SUBSIDIARY                            354             473
   SHAREHOLDERS' EQUITY
         Common stock, no par value; authorized
          10,000,000 shares; issued and
          outstanding, 5,246,879 shares in
          1997 and 5,210,723 shares in 1996                         19,559          19,440
         Cumulative translation adjustment                            (305)            (11)
         Retained earnings                                          14,742          20,021
                                                                   -------         -------
                                                                    33,996          39,450
                                                                   -------         -------
                                                                   $72,663         $88,442
                                                                   =======         =======
</TABLE>



        The accompanying notes are an integral part of these statements.


                                       19
<PAGE>   21
                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
Year Ended December 31,                                              1997           1996           1995
-------------------------------------------------------------------------------------------------------------
<S>                                                              <C>            <C>            <C>
                                                          (dollars in thousands, except for per share amounts)
Net sales                                                        $ 135,952      $ 139,286      $ 169,559
Cost of products sold (including distribution costs)               117,272        118,361        138,806
                                                                 ---------      ---------      ---------
Gross margin                                                        18,680         20,925         30,753
Selling, general and administrative expenses                        20,147         21,525         22,260
                                                                 ---------      ---------      ---------
Operating margin                                                    (1,467)          (600)         8,493
Equity in net earnings of affiliated companies                         673          1,529          1,204
Other income (expense)
  Interest expense                                                  (3,336)        (3,600)        (4,249)
  Loss from sale of investments in affiliates                       (2,193)           --             --
  Other                                                               (246)         2,354            (22)
                                                                 ---------      ---------      ---------
Earnings (loss) before income taxes                                 (6,569)          (317)         5,426
  Income tax provision (benefit)                                    (1,303)          (194)         2,082
                                                                 ---------      ---------      ---------
Net earnings (loss)                                              $  (5,266)     $    (123)     $   3,344
                                                                 =========      =========      =========
Earnings (loss) per share:
  Basic                                                          $   (1.01)     $    (.03)     $     .65
                                                                 =========      =========      =========
  Diluted                                                        $   (1.01)     $    (.03)     $     .64
                                                                 =========      =========      =========

</TABLE>



        The accompanying notes are an integral part of these statements.


                                       20
<PAGE>   22
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
Year Ended December 31,                                        1997        1996        1995
----------------------------------------------------------------------------------------------
                                                                   (dollars in thousands)
<S>                                                          <C>         <C>         <C>
Cash flows from operating activities:
  Net earnings (loss)                                        $(5,266)    $  (123)    $ 3,344
  Adjustment to reconcile net earnings (loss) to
    net cash provided (used) by operating activities:
      Depreciation                                             1,015       1,166       1,180
      Amortization                                               608       1,084       1,501
      Gain from sale of equipment                                 (9)        (62)         (4)
      Equity in net earnings of affiliated companies,
        net of dividends                                        (148)       (950)       (645)
      Loss from sale of investments in affiliates              2,193        --          --
      Deferred income taxes                                      227        (110)         18
      Change in assets and liabilities net of
        effects from business acquisitions:
         Accounts receivable                                   2,299      (1,202)      1,194
         Inventory                                             5,612       5,032      (5,647)
         Prepaids and tax refunds receivable                    (924)       (505)         80
         Accounts payable                                     (3,901)        (54)        422
         Accrued liabilities                                    (162)        (94)     (1,259)
                                                             -------     -------     -------
                                                               2,924       3,177      (5,210)
                                                             -------     -------     -------

      Net cash provided by operating
        activities                                             1,544       4,182         184

Cash flows from investing activities:
  Proceeds from sale of equipment                                 45         124          17
  Decrease (increase) in other assets                           (172)         66        (797)
  Acquisitions of businesses, net of cash acquired              --          (827)       (955)
  Proceeds from sale of investment                             4,198        --          --
  Capital expenditures                                          (456)       (445)     (1,862)
                                                             -------     -------     -------
      Net cash provided (used) in
        investing activities                                   3,615      (1,082)     (3,597)

Cash flows from financing activities:
  Net borrowings (repayments) under notes
    payable and line-of-credit agreements                     (2,835)     (1,068)      6,477
  Proceeds from issuance of long-term debt                       259         161         361
  Repayment of long-term debt                                 (2,372)     (2,613)     (3,448)
  Issuance of common stock under employee
    stock purchase and stock option plans                        119         285         716
  Repurchase of common stock                                    --          --          (589)
  Income tax benefit of exercise of stock options               --          --            88
  Redemption of redeemable preferred stock
    of subsidiary                                               (103)       (106)        (71)
  Dividends on preferred stock of subsidiary                     (13)        (18)        (33)
                                                             -------     -------     -------
    Net cash provided (used) by financing activities          (4,945)     (3,359)      3,501
</TABLE>


        The accompanying notes are an integral part of these statements.



                                       21
<PAGE>   23
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year Ended December 31,                                  1997        1996        1995
-----------------------------------------------------------------------------------------
                                                           (dollars in thousands)
<S>                                                   <C>         <C>         <C>
Effect of exchange rate changes on cash               $  (120)    $   (28)    $  --
                                                      -------     -------     -------
NET INCREASE (DECREASE) IN CASH                            94        (287)         88


Cash beginning of year                                    214         501         413
                                                      -------     -------     -------
Cash end of year                                      $   308     $   214     $   501
                                                      =======     =======     =======
Supplemental disclosures of cash flow information:
  Cash paid during the year for:
    Interest                                          $ 3,312     $ 3,733     $ 4,329
    Income taxes                                         (608)        673       2,072
</TABLE>


        The accompanying notes are an integral part of these statements.


                                       22
<PAGE>   24
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                      Cumulative
                                                        Common          Retained      Translation
Three Years Ended December 31, 1997                      Stock          Earnings      Adjustment         Total
------------------------------------------------------------------------------------------------------------------
                                                                           (dollars in thousands)
<S>                                                    <C>              <C>              <C>           <C>
Balance at January 1, 1995                             $ 18,940         $ 16,851         $ (69)        $ 35,722
Net earnings for the year                                    --            3,344            --            3,344
Foreign currency translation adjustments                     --               --           144              144
Issuance of common stock under employee
  stock purchase plan                                       171               --            --              171
Exercise of stock options                                   545               --            --              545
Repurchase of common stock                                 (589)              --            --             (589)
Income tax benefit of exercise of non-qualified
  stock options                                              88               --            --               88
Dividends on preferred stock of subsidiary                   --              (33)           --              (33)
                                                       --------         --------         -----         --------
Balance at December 31, 1995                             19,155           20,162            75           39,392
Net loss for the year                                        --             (123)           --             (123)
Foreign currency translation adjustments                     --               --           (86)             (86)
Issuance of common stock under employee
  stock purchase plan                                       198               --            --              198
Exercise of stock options                                    87               --            --               87
Dividends on preferred stock of subsidiary                   --              (18)           --              (18)
                                                       --------         --------         -----         --------
Balance at December 31, 1996                             19,440           20,021           (11)          39,450
Net loss for the year                                        --           (5,266)           --           (5,266)
Foreign currency translation adjustments                     --               --          (294)            (294)
Issuance of common stock under employee
  stock purchase plan                                       119               --            --              119
Dividends on preferred stock of subsidiary                   --              (13)           --              (13)
                                                       --------         --------         -----         --------
Balance at December 31, 1997                           $ 19,559         $ 14,742         $(305)        $ 33,996
                                                       ========         ========         =====         ========
</TABLE>







         The accompanying notes are an integral part of this statement.


                                       23
<PAGE>   25
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES


         A summary of the significant accounting policies applied in the
preparation of the accompanying consolidated financial statements follows.

1. Principles of Consolidation. The Company consolidates the accounts of its
wholly-owned subsidiary, The Coast Distribution System (Canada) Inc. ("Coast
Canada"). Investments in unconsolidated affiliates (Note D) are accounted for by
the equity method. Operations of affiliates outside the United States and Canada
are generally included for periods within three months of the Company's year-end
to ensure preparation of consolidated financial statements on a timely basis.
All material intercompany transactions have been eliminated.

2. Inventories. Inventories are stated at the lower of cost (determined on a
first-in, first-out basis) or market. Inventories consist primarily of
recreational replacement parts, supplies and accessories held for resale.

3. Property, Plant and Equipment. Property, plant and equipment are stated at
cost less accumulated depreciation and amortization. Depreciation and
amortization are provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives, principally
on a straight-line basis. The estimated lives used in determining depreciation
and amortization are:

            Buildings and improvements          12-40  years
            Warehouse and office equipment      5-7    years
            Automobiles                         3-5    years


Leasehold improvements are amortized over the lives of the respective leases or
the service lives of the improvements, whichever is shorter. Currently the
amortization periods range from 5 to 17 years.

4. Revenue Recognition. Revenue from sales of product is recognized upon
shipment.

5. Industry Segment. The Company operates in one industry segment which is the
distribution of recreational replacement parts, supplies and accessories. The
Company distributes its product from 18 distribution centers located throughout
the United States and Canada. No single customer accounted for 10% or more of
the Company's revenues in 1997, 1996, or 1995.

6. Intangible Assets. The costs in excess of net assets of acquired businesses
are being amortized on a straight-line basis using periods ranging from four to
thirty years. Non-competition agreements are being amortized on a straight-line
basis over seven years. At December 31, 1997 and 1996, the accumulated
amortization applicable to intangible assets was approximately $4,898,000 and
$5,369,000 respectively. On an ongoing basis, management reviews the valuation
and amortization of intangibles. As part of this review, the Company evaluates
the recoverability of the intangibles based upon the operating income generated
by the related acquired businesses to determine if impairment has occurred.

7. Foreign Currency Translation. Exchange adjustments resulting from foreign
currency transactions are generally recognized in net earnings, whereas
adjustments resulting from the translation of financial statements are reflected
as a separate component of shareholders' equity. Net foreign currency
transaction gains or losses are not material in any of the years presented.


8. Forward Exchange Contracts. On a selective basis, the Company enters into
forward exchange contracts to reduce the impact of foreign currency fluctuations
on a portion of the inventory purchases of its subsidiary. The gains or losses
on these contracts are included in earnings in the period when the related
transactions being hedged are recognized. The contracts do not subject the
Company to significant market risk from exchange rate movements because the
contracts offset gains and losses on the balances and transactions being hedged.
At December 31, 1997, there were no forward exchange contracts outstanding.

9. Income Taxes. The Company provides a deferred tax expense or benefit equal to
the net change in the deferred tax liability or asset during the year. Deferred
income taxes represent tax credit carryforwards and future net tax effects
resulting from temporary differences between the financial statement and tax
basis of assets and liabilities, using enacted tax rates in effect for the year
in which the differences are expected to reverse. A valuation allowance is
provided against deferred tax assets when realization of the asset is not
expected to occur.


                                       24
<PAGE>   26
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. Use of Estimates. In preparing financial statements in conformity with
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements, as well as revenues and expenses during the
reporting period. Actual results could differ from those estimates.

11. Recently Issued Accounting Standards. In June 1997, the FASB issued SFAS No.
130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its components
in the financial statements. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements for
earlier periods provided for comparative purposes is required. Coast is in the
process of determining its preferred format. The adoption of SFAS No. 130 will
have no impact on Coast's consolidated results of operations, financial position
or cash flows.

In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131 establishes
standards for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. SFAS No. 131 is effective for financial statements for fiscal years
beginning after December 15, 1997. Financial statement disclosures for prior
periods are required to be restated. Coast is in the process of evaluating the
disclosure requirements. The adoption of SFAS No. 131 will have no impact on
Coast's consolidated results of operations, financial position or cash flows.

NOTE B: ACQUISITIONS

         H. BURDEN LIMITED - In 1993, the Company began acquiring shares of H.
Burden Limited ("Burden"). In 1996 the Company increased its ownership to 35% of
the outstanding shares. The cumulative purchase price paid for the shares was
$4,025,000. The investment in Burden was accounted for by the equity method and,
accordingly, the equity in net earnings of Burden was included in the Company's
consolidated statements of operations from the date of acquisition through
September 30, 1996. In September 1997, the Company sold its investment for
$4,528,000. The carrying value of the investment was $5,003,000, and the sale
resulted in a loss which is shown net of related selling expenses.

         Pro forma results of operations assuming the Burden acquisition had
occurred as of the beginning of each respective year presented have not been
presented as such results do not differ materially from the reported results of
operations.

NOTE C: PROPERTY, PLANT & EQUIPMENT

         Property and equipment consists of the following at December 31:

<TABLE>
<CAPTION>
                                    1997             1996
-------------------------------------------------------------
                                    (dollars in thousands)
<S>                              <C>              <C>
Buildings                        $ 2,791          $ 2,791
Warehouse equipment                3,434            3,305
Office equipment                   4,427            4,686
Leasehold improvements               744              922
Automobiles                           55               73
                                 -------          -------
                                  11,451           11,777
Less accumulated depreciation
 and amortization                  7,379            7,059
                                 -------          -------
                                   4,072            4,718
Land                                 637              637
                                 -------          -------
                                 $ 4,709          $ 5,355
                                 =======          =======
</TABLE>


NOTE D: INVESTMENTS IN AFFILIATED
COMPANIES

         The Company's 34% investment in HWH Corporation is accounted for using
the equity method of accounting. In February 1998, HWH repurchased all of the
shares Coast owned for $5,388,000. The carrying value of the investment was
$7,057,000 and, as of December 31,1997, the investment was written down to its
net realizable value, resulting in a loss. Summarized financial information of
HWH at December 31, 1996 and for each of the two years in the period ended
December 31, 1996, is presented as follows:


                                       25
<PAGE>   27
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Condensed Balance Sheet
As of December 31, 1996
--------------------------------------------------------
                               (dollars in thousands)
<S>                                          <C>
Cash and cash equivalents                    $ 1,626
Investments                                    1,719
Receivables                                    4,029
Inventory                                      9,052
Other current assets                             659
Investments and long-term receivables          2,187
Property and equipment                         1,251
Other assets                                     100
                                             -------
                                             $20,623
                                             =======

Current liabilities                          $ 2,789
Long-term debt                                   120
Shareholders' equity                          17,714
                                             -------
                                             $20,623
                                             =======
</TABLE>
<TABLE>
<CAPTION>
Condensed Statements of Earnings
Year Ended December 31,             1996           1995
-----------------------------------------------------------
                                  (dollars in thousands)
<S>                               <C>            <C>
Net sales                         $32,279        $30,946
Cost of goods sold                 21,544         20,829
                                  -------        -------
Gross margin                       10,735         10,117
Selling, general and
  administrative expenses           6,837          6,069
Other income                          375            534
                                  -------        -------
Earnings before income
  taxes                             4,273          4,582
Provision for income taxes          1,535          1,584
                                  -------        -------
  Net earnings                    $ 2,738        $ 2,998
                                  =======        =======
</TABLE>

         Summarized financial information of Burden at September 30, 1996 and
for the years ended September 30, 1996 and 1995 is presented as follows:
<TABLE>
<CAPTION>
Condensed Balance Sheet
As of September 30,                               1996
----------------------------------------------------------
                                 (dollars in thousands)
<S>                                             <C>
Cash                                            $   168
Receivables                                       8,540
Inventory                                        14,023
Other current assets                                498
Property and equipment                           11,297
Other assets                                        --
                                                -------
                                                $34,526
                                                =======
Current maturities                              $ 5,635
Other current liabilities                         8,408
Long-term debt                                    8,403
Shareholders' equity                             12,080
                                                -------
                                                $34,526
                                                =======
</TABLE>
<TABLE>
<CAPTION>
Condensed Statements of Earnings
Year Ended September 30,              1996           1995
-------------------------------------------------------------
                                    (dollars in thousands)
<S>                                 <C>            <C>
Net sales                           $64,526        $59,617
Cost of goods sold                   52,316         47,771
                                    -------        -------
Gross margin                         12,210         11,846
Selling, general and
  administrative expenses             8,818          9,276
Other (income) expense                  803            947
                                    -------        -------
Earnings before income taxes          2,589          1,623
Provision for income taxes            1,030            642
                                    -------        -------
  Net earnings                      $ 1,559        $   981
                                    =======        =======
</TABLE>
                                       26
<PAGE>   28
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         The Company has investments in two joint ventures, Coast to Coast RV
Services doing business in Australia and Accessorios Para Campers y Autobuses,
S.A De C.V. doing business in Mexico. The Company also has an investment in
Eur-Asia Recreational Vehicle Accessories Taiwan Company, a Taiwan corporation.
These investments are being accounted for using the equity method of accounting.

         The Company's investments in unconsolidated affiliates are summarized
as follows:

<TABLE>
<CAPTION>
                                       HWH           Burden         Other
-----------------------------------------------------------------------------
                                             (dollars in thousands)
<S>                                 <C>             <C>             <C>
Balance at 1/1/96                   $ 6,378         $ 4,004         $ 509
  Investments                            --             687            --
  Equity in earnings (loss),
   net of goodwill
   amortization                         852             512           165
  Dividends received                   (525)            (48)           --
  Translation adjustments                --             (84)            8
Balance at 12/31/96                   6,705           5,071           682
  Investments                            --              --            --
  Equity in earnings (loss),
    net of goodwill
    amortization                        877              --          (203)
  Dividends received                   (525)             --            --
  Translation adjustments                --             (67)          (70)
  Sale/writedown
    of investment                    (1,669)         (5,004)           --
Balance at 12/31/97                 $ 5,388         $    --         $ 409
</TABLE>

NOTE E: LONG-TERM OBLIGATIONS


<TABLE>
<CAPTION>
Long-term obligations consist of the following at
December 31:                               1997           1996
                                          (dollars in thousands)
-------------------------------------------------------------------
<S>                                      <C>            <C>
Secured note payable to bank             $25,121        $27,956
11.2% senior subordinated
 secured notes - due June 1, 1999          4,668          7,001

8.75% note collateralized
 by a deed of trust on land
 and building, due in
 monthly installments of
 $13, final payment due in
 November 2012                             1,346             --

11.25% note collateralized
 by a deed of trust on land
 and building, due in
 monthly installments of
 $7, remaining principal
 due in November 1997                         --            602

11.625% note collateralized
 by a deed of trust on land
 and building, due in
 monthly installments of
 $5, remaining principal
 due in November 1997                         --            433

10% note collateralized
 by a deed of trust on land
 and building, due in
 monthly installments of
 $11, final payment
 due in September 2004                       663            728
Other note payable                           126            183
Capital lease obligations                    560            535
                                         -------        -------
                                          32,484         37,438
Current portion                            2,758          3,667
                                         -------        -------
                                         $29,726        $33,771
                                         =======        =======
</TABLE>



         Subsequent to 1998, annual maturities of long-term obligations (in
thousands) are $2,698 in 1999, $25,405 in 2000, $162 in 2001, $173 in 2002, and
$1,288 due thereafter.

                                       27
<PAGE>   29
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Secured Note Payable to Bank

         The secured note payable to bank represents a revolving credit
agreement, collateralized by substantially all assets of the Company. The
Company may borrow up to the lesser of (i) $50,000,000 or (ii) an amount equal
to 80% of the value of their eligible accounts receivable and 50% of the value
of their eligible inventory. Interest is payable at LIBOR, (6% at December 31,
1997) plus 200 basis points.

         In March 1998 the Company amended its credit facility. Under the terms
of this revision, the credit facility will decrease to $35,000,000 on May 22,
1998 with a seasonal reduction to $30,000,000 between October 1 and January 1 of
each year. The amendment also modified certain of the Company's financial
covenants and changed the interest rate the Company pays to LIBOR plus 250 basis
points.

11.2% Senior Subordinated Secured Notes Due June 1, 1999

         The notes are collateralized by substantially all of the assets of the
Company and bear interest at 11.2%. The notes require semiannual interest
payments on June 1 and December 1 of each year. Annual principal payments of
$2,333,000 commenced June 1, 1994 and continue through June 1, 1999.

         The note agreements relating to the secured note payable to bank and to
the 11.2% senior subordinated secured notes contain certain restrictive
covenants. Included are covenants regarding profitability, minimum liquidity
ratios, restrictions on investments, and limitations on indebtedness, payment of
dividends, long-term leases, and mergers and consolidations.

         The Company is in compliance with all the covenants, some of which were
revised by the amended agreement.

NOTE F: COMMITMENTS

Operating Leases

         The Company leases its corporate offices, certain warehouse facilities,
and data processing equipment. These leases are classified as operating leases
as they do not meet the capitalization criteria of Statement of Financial
Accounting Standards No. 13, "Accounting for Leases". The office and warehouse
leases expire over the next ten years and the equipment leases expire over the
next five years. Minimum future rental commitments under non-cancelable
operating leases having an initial or remaining term in excess of one year as of
December 31, 1997 are as follows:

<TABLE>
<CAPTION>
Year Ending
December 31,      Equipment     Facilities     Total
----------------------------------------------------------
                        (dollars in thousands)
<S>               <C>           <C>           <C>
      1998        $  123        $2,395        $2,518
      1999            57         1,523         1,580
      2000            15           604           619
      2001             8           577           585
      2002             1           354           355
      Thereafter    --             836           836
                  ------        ------        ------
                  $  204        $6,289        $6,493
                  ======        ======        ======
</TABLE>

         Rent expense charged to operations amounted to (in thousands) $2,758 in
1997, $3,116 in 1996, and $3,144 in 1995.


                                       28
<PAGE>   30
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE G: STOCK OPTION AND
STOCK PURCHASE PLANS

Stock Option Plans

         The Company has in effect a 1987 Nonqualified Stock Option Plan and a
1993 Stock Option and Incentive Plan ("the plans") which authorize the issuance
of options to purchase 700,000 shares of the Company's common stock to key
management employees of the Company and members of the Company's Board of
Directors. The plans are accounted for under the provisions of APB No. 25 and
generally provide that option prices will not be less than fair market value per
share on the date the option is granted, or 110% of fair market value in the
case of an option granted to any employee who, at the time of the grant, owns or
is deemed to own more than 10% of the total combined voting power of all classes
of stock of the Company. Accordingly, no compensation cost has been recognized
for the plans. Had compensation cost for the plans been determined based on the
fair value of the options at the grant dates consistent with the method of
Statement of Financial Accounting Standards 123, Accounting for Stock-Based
Compensation ("SFAS 123"), the Company's net earnings (loss) and earnings (loss)
per share would have been reduced to the pro forma amounts indicated below. Pro
forma amounts may not be indicative of pro forma results in future periods
because the pro forma amounts below do not include pro forma compensation cost
for options granted prior to January 1, 1995.



<TABLE>
<CAPTION>
                            1997       1996      1995
-----------------------------------------------------------
                              (dollars in thousands)
<S>                       <C>        <C>        <C>
Net Earnings (loss)
 attributable to
 Common Shareholders
   As reported            $(5,279)   $  (141)    3,338
   Pro Forma               (5,351)      (211)    3,250
Per share - Basic
   As reported            $ (1.01)   $ (0.03)   $ 0.65
   Pro Forma                (1.02)     (0.04)     0.64
Per share - Diluted
   As reported            $ (1.01)   $ (0.03)   $ 0.64
   Pro Forma                (1.02)     (0.04)     0.63
</TABLE>


The fair value of each option grant is estimated on the date of grant using the
Black-Scholes options-pricing model with the following weighted-average
assumptions used: no expected dividends; expected volatility of 50% for 1997 and
45% for 1996 and 1995; risk-free interest rates of 6.2%, 6.1%, and 7.2%; an
expected forfeiture rate of 46%; and expected lives of 4 years. A summary of the
status of the Company's stock option plans is presented below:



<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
                                                 1997                              1996                            1995
                                   ------------------------------------------------------------------------------------------------
                                                  Weighted Average                 Weighted Average                Weighted Average
                                    Shares         Exercise Price      Shares       Exercise Price     Shares       Exercise Price
                                   ------------------------------------------------------------------------------------------------
<S>                                <C>            <C>                  <C>         <C>               <C>           <C>
Outstanding at
  beginning of year                183,200         $        7.03       198,250         $   6.00       432,709         $   5.75
Granted                            163,500                  4.09        10,000             5.63        97,500             6.94
Exercised                             --                               (24,675)            3.50      (151,034)            3.57
Forfeited                          (11,000)                 5.08          (375)            3.62      (180,925)            6.93
                                   -------                             -------                       --------
Outstanding at end
  of year                          335,700                  5.67       183,200             7.03       198,250             6.00
Weighted average fair
  value of options granted
  during the year                                  $        1.87                       $   2.40                       $   3.05
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>




The following information applies to options outstanding at December 31, 1997:
<TABLE>
<CAPTION>

                                                      Weighted Average
                  Options     Weighted Average      Remaining Contractual     Options      Weighted Average
    Range       Outstanding    Exercise Price            Life (Years)       Exercisable      Exercise Price
---------------------------------------------------------------------------------------------------------------
<S>             <C>           <C>                   <C>                     <C>            <C>
$3.50 - $6.50     213,200          $4.61                      8               96,400             $5.20
$7.13 - $7.88     122,500           7.48                      5               79,000              7.58
                  -------          -----                                     -------             -----
                  335,700          $5.67                                     175,400             $6.27
</TABLE>


                                       29

<PAGE>   31
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Employee Stock Purchase Plans

     The Company had in effect a 1987 Employee Stock Purchase Plan and a 1997
Employee Stock Purchase Plan under which 850,000 shares of the Company's common
stock were reserved for issuance to all permanent employees who have met minimum
employment criteria. Employees who do not own 5% or more of the outstanding
shares are eligible to participate through payroll deductions. At the end of
each offering period, shares are purchased by the participants at 85% of the
lower of the fair market value at the beginning or the end of the offering
period. During the years ended December 31, 1997 and 1996, 36,156 and 30,619
shares, respectively, of common stock were issued under the 1987 Employee Stock
Purchase Plan. The 1987 plan expired on October 13, 1997. At December 31, 1997
400,000 shares under the 1997 plan remain available for issuance in future
offering periods.

NOTE H: EMPLOYEE BENEFIT PLAN

     The Company has a 401(K) profit sharing plan in which all full-time
employees are eligible to participate on the first quarter following completion
of six months of employment. The plan allows participants to make pretax
contributions and apply for and secure loans from their account. The plan
provides for the Company to make discretionary contributions to be determined
annually. The Company contributed $54,364 in 1997, $39,803 in 1996, and $41,299
in 1995.

NOTE I: FOREIGN OPERATIONS

     A summary of the Company's operations by geographic area is presented
below:
<TABLE>
<CAPTION>
                                                                            1997                        1996
--------------------------------------------------------------------------------------------------------------
                                                                                 (dollars in thousands)
<S>                                                                      <C>                         <C>
Net Sales
   United States                                                         $ 115,283                   $ 120,957
   Canada                                                                   21,389                      19,295
   Eliminations                                                               (720)                       (966)

Operating Margin
   United States                                                            (1,989)                     (1,013)
   Canada                                                                      571                         478
   Eliminations                                                                (49)                        (65)

Identifiable Assets
   United States                                                            67,706                      82,711
   Canada                                                                    8,534                       8,873
   Eliminations                                                             (3,577)                     (3,142)
</TABLE>

     Transfers between geographic areas have not been presented as they are not
significant.

NOTE J: INCOME TAXES

     Pretax income (loss) for the years ended December 31 was taxed under the
following jurisdictions:
<TABLE>
<CAPTION>
                                                  1997                         1996                        1995
----------------------------------------------------------------------------------------------------------------
                                                                    (dollars in thousands)
<S>                                             <C>                          <C>                           <C>
Domestic                                        $(6,842)                     $  (378)                      $4,486
Foreign                                             273                           61                          940
                                                --------                     --------                      ------
                                                $(6,569)                     $  (317)                      $5,426
                                                ========                     ========                      ======
</TABLE>

     The provision (benefit) for income taxes is summarized as follows for the
year ended December 31:

<TABLE>
<CAPTION>
                                                  1997                         1996                        1995
-----------------------------------------------------------------------------------------------------------------
<S>                                             <C>                         <C>                          <C>
Current:                                                            (dollars in thousands)
         Federal                                $(1,619)                 $  (137)                         $ 1,386
         State                                      (19)                      12                              273
         Foreign                                    108                       41                              405
                                                -------                  -------                          -------
                                                 (1,530)                     (84)                           2,064
                                                -------                  -------                          -------

Deferred:
         Federal                                    412                     (129)                             (44)
         State                                     (152)                      14                               62
         Foreign                                    (33)                       5                               --
                                                -------                  -------                          -------
                                                    227                     (110)                              18
                                                -------                  -------                          -------

Income tax
         provision                              $(1,303)                 $  (194)                         $ 2,082
                                                =======                  =======                          =======
</TABLE>

     The total operating loss carryforwards available for state income tax
purposes at December 31, 1997 aggregate $4,120,000. The earliest carryforwards
begin to expire in 1999.


                                       30
<PAGE>   32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     Deferred tax assets (liabilities) are comprised of the following at
December 31:

<TABLE>
<CAPTION>
                                            1997           1996           1995
------------------------------------------------------------------------------
                                                  (dollars in thousands)
<S>                                      <C>            <C>            <C>
Deferred tax assets
 Inventory
  capitalization                         $   936        $ 1,034        $   918
 Bad debt provision                          382            382            345
 Inventory reserve                           427            507            403
 Property, plant and
  equipment                                 --                1             41
 Loss carryforwards                          261            145            181
 Other                                        34             45             11
                                         -------        -------        -------
 Gross deferred
  tax assets                               2,040          2,114          1,899
 Less valuation
  allowance                                  (60)           (72)           (76)
                                         -------        -------        -------
                                         $ 1,980        $ 2,042        $ 1,823
                                         -------        -------        -------

Deferred tax liabilities
 Investment in
   affiliates                            $  (474)       $  (257)       $  (233)
 Property, plant and
   equipment                                (182)           (91)           (82)
                                         -------        -------        -------
 Gross deferred
   tax liabilities                          (656)          (348)          (315)
                                         -------        -------        -------
 Net deferred
   tax assets                            $ 1,324        $ 1,694        $ 1,508
                                         =======        =======        =======
</TABLE>

     A reconciliation between actual tax expense(benefit) for the year and
expected tax expense(benefit) is as follows:

<TABLE>
<CAPTION>
                                                       1997         1996           1995
----------------------------------------------------------------------------------------
                                                            (dollars in thousands)
<S>                                                 <C>            <C>          <C>
Earnings (loss) before
    income taxes                                    $(6,569)       $(317)       $ 5,426
                                                    -------        -----        -------
Expected income tax
    expense at 34%                                   (2,233)        (108)         1,845
Higher rates on earnings
  of foreign operations                                 (34)           8             69
Goodwill amortization                                   231          229            267
Dividend exclusion on
  earnings of affiliate                                (143)        (242)          (269)
Temporary differences related to sold
  affiliates not previously recognized                  913         --             --
State taxes
  (net of federal benefit)                             (129)          44            225
Decrease in valuation
   allowance                                            (12)          (4)            (6)
Exclusion of earnings of
  foreign affiliates                                     65         (133)           (71)
 Other                                                   39           12             22
                                                    -------        -----        -------
Income tax provision                                $(1,303)       $(194)       $ 2,082
                                                    =======        =====        =======
</TABLE>

Deferred income taxes have not been provided on the undistributed earnings of
foreign subsidiaries or foreign joint ventures as they have been and will
continue to be reinvested. Where it is contemplated that earnings will not be
reinvested, the Company believes U.S. foreign tax credits would largely
eliminate any U.S. tax.


                                       31
<PAGE>   33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE K: EARNINGS PER SHARE

<TABLE>
<CAPTION>
                                       For the Year Ended December 31, 1997
------------------------------------------------------------------------------------------------------
                                            Income                  Shares                  Per-Share
                                          (Numerator)            (Denominator)                Amount
------------------------------------------------------------------------------------------------------
                                               (dollars in thousands, except per share amounts)
<S>                                        <C>                     <C>                        <C>
Net loss                                   $(5,266)
  Preferred
    dividends                                  (13)
                                           -------
Net loss
  attributable to common
  shareholders                             $(5,279)
                                           =======
Basic and diluted earnings
  (loss) per share                         $(5,279)                5,239,152                  ($1.01)
                                           =======                 =========                  ======
</TABLE>
<TABLE>
<CAPTION>

                                  For the Year Ended December 31, 1996
------------------------------------------------------------------------------------------------------
                                            Income                  Shares                  Per-Share
                                          (Numerator)            (Denominator)                Amount
------------------------------------------------------------------------------------------------------
                                               (dollars in thousands, except per share amounts)
<S>                                          <C>                  <C>                        <C>
Net loss                                     $(123)
 Preferred
   dividends                                   (18)
                                             -----
Net loss
   attributable to
   common shareholders                       $(141)
                                             =====
Basic and diluted earnings
   (loss) per share                          $(141)                5,198,402                  ($0.03)
                                             =====                 =========                  ======
</TABLE>
<TABLE>
<CAPTION>
                                    For the Year Ended December 31, 1995
------------------------------------------------------------------------------------------------------
                                             Income                  Shares                 Per-Share
                                          (Numerator)            (Denominator)                Amount
------------------------------------------------------------------------------------------------------
                                                (dollars in thousands, except per share amounts)
<S>                                          <C>                  <C>                        <C>
Net earnings                                 $  3,344
   Preferred
     dividends                                    (33)
                                             --------
Net earnings
   available to common
   shareholders                              $  3,311
                                             ========
Basic Earnings
   per share                                 $  3,311             5,101,117                  $0.65
                                                                                             =====
Effect of Dilutive
   Securities
     Stock options                                                   51,745
     Convertible debt                              27                51,712
                                             --------
Diluted earnings
   per share                                 $  3,338             5,204,574                  $0.64
                                             ========             =========                  =====
</TABLE>

     Options to purchase 335,700, 183,200 and 198,250 shares of common stock
were outstanding during the years 1997, 1996 and 1995, respectively. Not all of
these options were included in the computation of diluted EPS because either 1)
the options' exercise price was greater than the average market price of the
common shares, or 2) the inclusion of the options in 1997 or 1996 would have
been antidilutive because the company experienced a net loss in those years.

NOTE L: ACCRUED LIABILITIES

     Accrued liabilities consist of the following at December 31:

<TABLE>
<CAPTION>
                                               1997                   1996
------------------------------------------------------------------------------
                                                 (dollars in thousands)

<S>                                          <C>                    <C>
Payroll and related benefits                 $  641                 $  723
Rent                                            127                    267
Income and other taxes                          890                    461
Other                                           568                    460
                                             ------                 ------
                                             $2,226                 $1,911
                                             ======                 ======
</TABLE>

NOTE M: NOTES PAYABLE

     At December 31, 1997 and 1996 the Company owed HWH $1,500,000. The notes
payable are due on demand and interest is paid monthly at the Company's current
rate payable on its secured note payable to bank (see note E). At December 31,
1997 the note has been reclassified and netted against the HWH investment.


                                       32
<PAGE>   34
NOTE N: FINANCIAL INSTRUMENTS

     The fair values of financial instruments, other than long-term debt,
closely approximate their carrying value. Investments in affiliates, other than
HWH, consists of securities for which a reasonable estimate of fair value could
not be made as no quoted market prices for the securities exist and the costs of
determining fair value would be excessive. The investment in HWH is carried at
fair value, at December 31, 1997. As of December 31, 1997, the estimated fair
value of long-term debt, based on the current rates offered to the Company for
debt of the same remaining maturities, exceeds the carrying value by
approximately $126,000.

NOTE O: SIGNIFICANT CONCENTRATIONS

     The Company's ability to satisfy demand for its products may be limited by
the availability of those products from the Company's suppliers. In 1995 the
Company entered into a multi-year supply agreement with Recreational Vehicle
Products, Inc. ("RVP"), which manufactures air conditioners under the Coleman(R)
brand name and awnings under the Faulkner(R) brand name. RVP is the Company's
principal supplier of these products, the sales of which accounted for
approximately 17% and 15% of the Company's net sales in 1997 and 1996.

NOTE P: OTHER INCOME

     Other income in 1996 consists primarily of the proceeds to the Company from
the favorable settlement of a lawsuit with a former leading supplier. The
resultant gain is shown net of certain expenses incurred as a result of the
Company's involvement in the lawsuit.


                                       33
<PAGE>   35
SCHEDULE II


                 THE COAST DISTRIBUTION SYSTEM AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS
                        December 31, 1995, 1996 and 1997

<TABLE>
<CAPTION>
                                                             BALANCE,                                BALANCE,
                                                           BEGINNING OF                               END OF
                                   DESCRIPTION               PERIOD      ADDITIONS   DEDUCTIONS(1)    PERIOD
                         --------------------------------  ------------  ---------   -------------  ----------
<S>                                                        <C>           <C>         <C>            <C>
                         Allowance for doubtful accounts:

                         Year Ended December 31, 1995      $ 1,140,000   $ 161,000   $ 364,000      $  937,000
                         Year Ended December 31, 1996      $   937,000   $ 534,000   $ 385,000      $1,086,000
                         Year Ended December 31, 1997      $ 1,086,000   $ 307,000   $ 313,000      $1,080,000
</TABLE>

-------------------
(1)      Write-off of doubtful accounts against the allowance and recoveries.


<TABLE>
<CAPTION>
                                                          BALANCE,                                BALANCE,
                                                        BEGINNING OF                               END OF
                                   DESCRIPTION             PERIOD     ADDITIONS   DEDUCTIONS(1)    PERIOD
                          --------------------------    ------------  ---------   ------------   -----------
<S>                                                     <C>           <C>         <C>            <C>
                          Allowance for obsolete or
                          slow-moving inventory:

                          Year Ended December 31, 1995  $   998,000  $  594,000   $   269,000    $ 1,323,000
                          Year Ended December 31, 1996  $ 1,323,000  $  427,000   $   380,000    $ 1,370,000
                          Year Ended December 31, 1997  $ 1,370,000  $  432,000   $   325,000    $ 1,477,000
</TABLE>

-------------------
(1)      Write-off of slow-moving or obsolete inventory or sale of inventory at
         reduced margin.



                                       34
<PAGE>   36
ITEM 9.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

           None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Except for information concerning the Company's executive officers
which is included in Part I of this Report, the information required by Item 10
is incorporated by reference from the Company's definitive proxy statement to be
filed with the Commission on or before April 30, 1998 for the Company's 1998
annual shareholders' meeting.

ITEM 11. EXECUTIVE COMPENSATION

         The information required by Item 11 is incorporated herein by reference
from the Company's definitive proxy statement to be filed with the Commission on
or before April 30, 1998 for the Company's 1998 annual shareholders' meeting.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by Item 12 is incorporated herein by reference
from the Company's definitive proxy statement to be filed with the Commission on
or before April 30, 1998 for the Company's 1998 annual meeting.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by Item 13 is incorporated herein by reference
from the Company's definitive proxy statement to be filed with the Commission on
or before April 30, 1998 for the Company's 1998 annual shareholders' meeting.


                                       35
<PAGE>   37
                                     PART IV


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

         (a)      The following documents are filed as part of this Report:

                  (1)      Financial Statements. The Consolidated Financial
Statements of The Coast Distribution System and Financial Statement Schedules:
See Index to Financial Statements on Page 17.

                  (2)      Exhibits. See Index to Exhibits, elsewhere in this
Report, for a list and description of (i) exhibits previously filed by the
Company with the Commission and (ii) the exhibits being filed with this Report.

                  Compensation Plans and Arrangements. Set forth below is a list
         of Compensation Plans and Arrangements that have been filed as exhibits
         with the Commission, together with the respective exhibit numbers
         thereof:

                  1983 Employee Stock Option Plan, as amended
                  -- See Exhibit 10.17

                  Nonqualified Stock Option Plan - 1987 -- See Exhibit 10.22

                  1987 Employee Stock Purchase Plan, as amended
                  -- See Exhibit 10.32

                  1993 Stock Option and Incentive Plan, as amended
                  -- See Exhibit 10.31


         (b) Current Reports on Form 8-K. On October 8, 1997, the Company filed
a Current Report on Form 8-K dated September 27, 1997, under Item 5 ("Other
Events"), reporting the sale of its investment in Burden on September 27, 1997.
The Company did not file any other reports on Form 8-K during the quarter ended
December 31, 1997.


                                       36
<PAGE>   38
                                   SIGNATURES

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

Dated:  March 27, 1998                 THE COAST DISTRIBUTION SYSTEM

                                       By:  /s/ Thomas R. McGuire
                                            ------------------------------------
                                            Thomas R. McGuire,
                                            Chairman and Chief Executive Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report on Form 10-K has been signed below by the following persons in the
capacities and on the dates indicated.

         Each person whose signature to this Report appears below hereby
appoints Thomas R. McGuire, Jeff Wannamaker and Sandra A. Knell, or any of them,
individually, to act severally as attorneys-in-fact and agents, with power of
substitution and resubstitution, for each of them, to sign on his behalf,
individually and in the capacities stated below, and to file any and all
amendments to this Annual Report, which amendment or amendments may make changes
and additions as such attorneys-in-fact may deem necessary or appropriate.

          SIGNATURE                      TITLE                       DATE


   /s/Thomas R. McGuire       Chairman of the Board of           March 27, 1998
 --------------------------   Directors, Chief Executive
       Thomas R. McGuire      Officer and Director


    /s/Sandra A. Knell        Executive Vice President           March 27, 1998
 --------------------------   (Principal Financial and
       Sandra A. Knell        Principal Accounting
                              Officer)


    /s/John E. Turco          Director                           March 27, 1998
 --------------------------
       John E. Turco

    /s/                       Director                           March __, 1998
 --------------------------
       Louis B. Sullivan

    /s/Robert S. Throop       Director                           March 27, 1998
 --------------------------
       Robert S. Throop


    /s/Ben A. Frydman         Director                           March 27, 1998
 --------------------------
       Ben A. Frydman


    /s/Brian P. Friedman      Director                           March 27, 1998
 --------------------------
       Brian P. Friedman


                                      S-1
<PAGE>   39
                                INDEX TO EXHIBITS
<TABLE>
<CAPTION>
                                                                                                              SEQUENTIALLY
  EXHIBIT                                                                                                       NUMBERED
  NUMBER                                                                                                          PAGE
------------                                                                                                ----------------
<S>           <C>                                                                                           <C>
     3.1*     Articles of Incorporation of the Company, as currently in effect.                                    --

     3.2*     Bylaws of the Company, as currently in effect.                                                       --

   10.1**     Bank of America NT&SA Loan Agreement (Receivables and Inventory).                                    --

   10.2**     Bank of America NT&SA Master Note.                                                                   --

   10.3**     Bank of America NT&SA Security Agreement (Receivables and Inventory).                                --

   10.4**     Bank of America NT&SA Security Agreement (Equipment and Farm Products).                              --

   10.5**     Continuing Guarantee of Indebtedness of Coast R.V., Inc. by Coast Fabrication, Inc.                  --

   10.6**     Continuing Guarantee of Indebtedness of Coast R.V., Inc. by Thomas R. McGuire.                       --

   10.7**     1983 Employee Incentive Stock Option Plan.                                                           --

   10.8**     Industrial Lease Agreement dated May 30, 1978.                                                       --

  10.10**     Standard Lease Agreement dated July 19, 1983.                                                        --

    10.11     Agreement of Purchase and Sale dated September 13, 1984, among the Company, Trailer                  --
              Equipment Distributors, Inc. ("Tedco") and its Principal Shareholder.  (Incorporated by
              reference to the same numbered exhibit in the Company's Current Report on Form 8-K
              dated September 26, 1984.)

    10.12     Lease Agreement dated September 26, 1984, by and between the Company and Tedco.                      --
              (Incorporated by reference to the same numbered exhibit in the Company's Current Report
              on Form 8-K dated September 26, 1984.)

    10.13     Option Agreement, with form of Real Estate Purchase Agreement attached, relating to the              --
              warehouse and office facility being leased by the Company from Tedco.  (Incorporated by
              reference to the same numbered exhibit in the Company's Current Report on Form 8-K
              dated September 26, 1984.)

    10.14     Bank Loan Agreement dated July 19, 1984, between the Company and Bank of America NT&SA.              --
              (Incorporated by reference to the same numbered exhibit in the Company's Annual Report
              on Form 10-K for the fiscal year ended December 31, 1984.)

    10.15     Agreement of Purchase and sale dated May 3, 1985, between the Company and Rogers                     --
              Distributing Corporation.  (Incorporated by reference to the same numbered exhibit in
              the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1985.)

    10.16     Stock Purchase Agreement dated April 29, 1985, among the Company and certain purchasers              --
              named therein.  (Incorporated by reference to the same numbered exhibit in the
              Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1985.)

   10.17*     Amended and Restated 1983 Employee Stock Option Plan.                                                --
</TABLE>



                                      E-1
<PAGE>   40
<TABLE>
<S>           <C>                                                                                                  <C>
    10.18     Agreement of Purchase and Sale dated June 25, 1985, between Coast R.V., Inc. and                     --
              Coachmen Industries, Inc.  (Incorporated by reference to the same numbered exhibit in
              the Company's Current Report on Form 8-K dated June 28, 1985.)

    10.19     Loan and Security Agreement dated June 28, 1985, between Coast R.V., Inc. and Mellon                 --
              Financial Services Corporation.   (Incorporated by reference to the same numbered
              exhibit in the Company's Current Report on Form 8-K dated June 28, 1985.)

    10.20     Note Purchase Agreement dated June 27, 1985 relating to the Company's 11.5% Convertible              --
              Subordinated Notes due 1993.   (Incorporated by reference to the same numbered exhibit
              in the Company's Current Report on Form 8-K dated June 28, 1985.)

    10.21     Amendment No. 2 dated February 29, 1988 to Loan and Security Agreement between Coast                 --
              R.V., Inc. and Mellon Financial Services Corporation.  (Incorporated by reference to
              the same numbered exhibit in the Company's Annual Report on Form 10-K dated March 28,
              1988.)
                                                                                                                   --

    10.22     Nonqualified Stock Option Plan - 1987.  (Incorporated by reference to Exhibit 4.1 in
              the Company's Registration Statement on Form S-8 (File No. 33-15322) filed with the
              Commission on June 25, 1987.)

    10.23     1987 Employee Stock Purchase Plan.  (Incorporated by reference to Exhibit 4.1 in the
              Company's Registration Statement on Form S-8 (File No. 33-18696) filed with the
              Commission on December 1, 1987.)
                                                                                                                   --
    10.24     Agreement of Purchase and Sale of Assets dated as of March 24,
              1988 entered into between the Company and SunWest Wholesale
              Distributors. (Incorporated by reference to the same numbered
              exhibit to the Company's Current Report on Form 8-K dated April 1,
              1988.)

    10.25     Note Agreement dated as of March 15, 1988 between the Company and Massachusetts Mutual               --
              Life Insurance Company and MassMutual Corporate Investors.  (Incorporated by reference
              to the same numbered exhibit to the Company's Current Report on Form 10-K dated
              April 1, 1988.)

    10.26     Stock Purchase Agreement dated as of May 22, 1989 relating to the acquisition of shares              --
              of HWH Corporation.  (Incorporated by reference to the same numbered exhibit to the
              Company's Current Report on Form 8-K dated May 24, 1989.)

    10.27     Letter Agreement between Company and Furman Selz relating to HWH Shares.  (Incorporated              --
              by reference to the same numbered exhibit to the Company's Current Report on Form 8-K
              dated May 24, 1989.)

    10.28     Note Agreement dated as of June 1, 1989 relating to sale and issuance of $14,000,000 of              --
              10-year Subordinated Notes and $1,000,000 of 6-year Convertible Subordinated Notes.
              (Incorporated by reference to the same numbered exhibit to the Company's Current Report
              on Form 8-K dated August 17, 1989.)

    10.29     Asset Purchase Agreement dated as of August 17, 1989 which provides for the acquisition              --
              of substantially all of the assets of Griffin's Outboard Marine, Inc.  (Incorporated by
              reference to the same numbered exhibit to the Company's Current Report on Form 8-K
              dated August 17, 1989.)
</TABLE>


                                      E-2
<PAGE>   41
<TABLE>
<S>           <C>                                                                                                  <C>
    10.30     Amendment dated September 22, 1989 to Griffin's Outboard Marine Asset Purchase                       --
              Agreement.  (Incorporated by reference to the same numbered exhibit to the Company's
              Current Report on Form 8-K dated September 22, 1989.)

    10.31     1993 Stock Option and Incentive Plan.  (Incorporated by reference to Exhibit 4.3 to the              --
              Company's Registration Statement on Form S-8 (File No. 33-64582) filed with the
              Commission on June 17, 1993.)

    10.32     Share Option Agreement dated as of March 19, 1993, among the Company, H. Burden                      --
              Limited ("Burden) and the shareholders of Burden, pursuant to which the Company has
              acquired common shares, and may acquire additional common shares, of Burden.
              (Incorporated by reference from Exhibit 2.1 to the Company's Current Report on Form 8-K
              dated April 29, 1994.)

    10.33     Second Amended and Restated Loan Agreement between the Company and Mellon Bank,                      --
              together with First Amendment thereto (Incorporated by reference to Exhibit 10.1 to the
              Company's Quarterly Report on Form 10-Q for the Quarter ended June 30, 1995).

    10.34     Distribution Agreement dated October 11, 1995 between the Company and Recreation                     --
              Vehicle Products, Inc. (Incorporated by reference to Exhibit 10.1 to the Company's
              Quarterly Report on Form 10-Q for the Quarter ended September 30, 1995).

    21        Subsidiaries.                                                                                        --

    23.1      Consent of Grant Thornton, LLP, Independent Certified Public Accountants, re Consolidated
              Financial Statements of The Coast Distribution System.                                               --

    24        Power of Attorney - Included on Signature Page.                                                      --

    27.1      1997 Financial Data Sheet.

    27.2      1996 Restated Financial Data Sheet.                                                                  --

    27.3      1995 Restated Financial Data Sheet.                                                                          --

    99.1      Pages 15 to 27 of the Company's Proxy Statement dated July 3, 1997 (Incorporated by reference
              from the Company's Notice of Annual Meeting and Proxy Statement dated July 3, 1997.
              As Filed in 1997's.                                                                                  --
</TABLE>

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

*        Incorporated by reference to the same numbered exhibit in the Company's
         Registration Statement on Form S-1 (File No. 33-4393) filed with the
         Commission on March 28, 1986.

**       Incorporated by reference to the same numbered exhibit in the Company's
         Registration Statement No. 2-86420LA on Form S-18.



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