##### Table of Contents

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



---



FORM 10-Q



---



(Mark One)

|x | Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934.
|- | -----------------------------------------------------------------------------------------



For the quarterly period ended: December 31, 2004



or



| ̈ | Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934.
|- | ------------------------------------------------------------------------------------------



For the Transition period from
 to



Commission file number 0-28568



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KEYSTONE AUTOMOTIVE INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)



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|                                                              |  |                                       
|------------------------------------------------------------- |  | --------------------------------------
|California                                                    |  | 95-2920557                            
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. EmployerIdentification Number)



|                                         |  |           
|---------------------------------------- |  | ----------
|700 East Bonita Avenue, Pomona, CA       |  | 91767     
|(Address of principal executive offices) |  | (Zip Code)



(909) 624-8041

(Registrants telephone number including area code)



---



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 whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act). Yes x No ̈.



The number of shares outstanding of the registrants Common Stock, no par value, at February 7, 2005 was 15,755,000 shares.



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##### Table of Contents



KEYSTONE AUTOMOTIVE
INDUSTRIES, INC.



INDEX



|                              |  |                                                                                       |  |            
|----------------------------- |  | ------------------------------------------------------------------------------------- |  | -----------
|                              |  |                                                                                       |  | Page Number
|                              | 
|PART I. FINANCIAL INFORMATION |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Financial Statements                                                                  |  |            
|                              |  |                                                                                      
|                              |  | Condensed Consolidated Balance Sheets                                                 |  | 3          
|                              |  |                                                                                      
|                              |  | December 31, 2004 (unaudited) and March 26, 2004                                      |  |            
|                              |  |                                                                                      
|                              |  | Condensed Consolidated Statements of Income                                           |  | 4          
|                              |  |                                                                                      
|                              |  | Thirteen weeks (unaudited) and forty weeks (unaudited) ended December 31, 2004        |  |            
|                              |  |                                                                                      
|                              |  | Thirteen weeks (unaudited) and thirty-nine weeks (unaudited) ended December 26, 2003  |  |            
|                              |  |                                                                                      
|                              |  | Condensed Consolidated Statements of Cash Flows                                       |  | 5          
|                              |  |                                                                                      
|                              |  | Forty weeks (unaudited) ended December 31, 2004                                       |  |            
|                              |  |                                                                                      
|                              |  | Thirty-nine weeks (unaudited) ended December 26, 2003                                 |  |            
|                              |  |                                                                                      
|                              |  | Notes to Condensed Consolidated Financial Statements (unaudited)                      |  | 6          
|                              |  |                                                                                      
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 8          
|                              |  |                                                                                      
|Item 3.                       |  | Quantitative and Qualitative Disclosure About Market Risks                            |  | 12         
|                              |  |                                                                                      
|Item 4.                       |  | Controls and Procedures                                                               |  | 13         
|                              | 
|PART II OTHER INFORMATION     |  |                                                                                      
|                              |  |                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                     |  | 13         
|                              |  |                                                                                      
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 13         
|                              |  |                                                                                      
|Item 3.                       |  | Defaults upon Senior Securities                                                       |  | 13         
|                              |  |                                                                                      
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                   |  | 13         
|                              |  |                                                                                      
|Item 5.                       |  | Other Information                                                                     |  | 13         
|                              |  |                                                                                      
|Item 6.                       |  | Exhibits                                                                              |  | 16         
|                              | 
|Signatures                    |  | 17                                                                                   
|                              | 
|Certifications                |  |                                                                                      





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##### Table of Contents

PART IFINANCIAL INFORMATION



Item 1.    Financial Statements.

Keystone Automotive Industries, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share amounts)



|                                                                                                       |  |                  |         |   |               |   |         |  
|------------------------------------------------------------------------------------------------------ |  | ---------------- | ------- | - | ------------- | - | ------- | -
|                                                                                                       |  | December 31,2004 |         |   | March 26,2004 |  
|                                                                                                       |  | (Unaudited)      |         |   | (Note)        |  
|ASSETS                                                                                                 |  |                  |         |   |               |   |         |  
|Current Assets:                                                                                        |  |                  |         |   |               |   |         |  
|Cash and cash equivalents                                                                              |  | $                | 4,807   |   |               | $ | 3,176   |  
|Accounts receivable, net of allowance of $1,114 at December 2004 and $887 at March 2004                |  |                  | 48,239  |   |               |   | 44,005  |  
|Inventories, primarily finished goods                                                                  |  |                  | 113,901 |   |               |   | 107,221 |  
|Other current assets                                                                                   |  |                  | 7,837   |   |               |   | 11,532  |  
|                                                                                                       |  |                  |         |   |               |   |         |  
|Total current assets                                                                                   |  |                  | 174,784 |   |               |   | 165,934 |  
|Plant, property and equipment, net                                                                     |  |                  | 32,384  |   |               |   | 30,652  |  
|Goodwill                                                                                               |  |                  | 11,109  |   |               |   | 9,662   |  
|Other intangibles, net of accumulated amortization of $3,766 at December 2004 and $3,565 at March 2004 |  |                  | 1,008   |   |               |   | 1,323   |  
|Other assets                                                                                           |  |                  | 8,528   |   |               |   | 8,342   |  
|                                                                                                       |  |                  |         |   |               |   |         |  
|Total assets                                                                                           |  | $                | 227,813 |   |               | $ | 215,913 |  
|                                                                                                       |  |                  |         |   |               |   |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                   |  |                  |         |   |               |   |         |  
|Current Liabilities:                                                                                   |  |                  |         |   |               |   |         |  
|Credit facility                                                                                        |  | $                | 2,373   |   |               | $ | 10,000  |  
|Accounts payable                                                                                       |  |                  | 21,691  |   |               |   | 18,598  |  
|Accrued liabilities                                                                                    |  |                  | 15,828  |   |               |   | 14,477  |  
|Income tax liabilities                                                                                 |  |                  | 1,503   |   |               |   |        |  
|                                                                                                       |  |                  |         |   |               |   |         |  
|Total current liabilities                                                                              |  |                  | 41,395  |   |               |   | 43,075  |  
|Other long-term liabilities                                                                            |  |                  | 872     |   |               |   | 1,311   |  
|Commitments and contingencies                                                                          |  |                  |         |   |               |   |         |  
|Shareholders Equity:                                                                                  |  |                  |         |   |               |   |         |  
|Preferred stock, no par value:                                                                         |  |                  |         |   |               |   |         |  
|Authorized shares3,000,000                                                                            |  |                  |         |   |               |   |         |  
|None issued and outstanding                                                                            |  |                  |        |   |               |   |        |  
|Common stock, no par value:                                                                            |  |                  |         |   |               |   |         |  
|Authorized shares50,000,000                                                                           |  |                  |         |   |               |   |         |  
|Issued and outstanding shares 15,750,000 at December 2004 and 15,443,000 at March 2004                 |  |                  | 92,311  |   |               |   | 89,492  |  
|Restricted Stock                                                                                       |  |                  | 362     |   |               |   | 180     |  
|Additional paid-in capital                                                                             |  |                  | 5,967   |   |               |   | 5,967   |  
|Retained earnings                                                                                      |  |                  | 87,297  |   |               |   | 76,841  |  
|Accumulated other comprehensive loss                                                                   |  |                  | (391    | ) |               |   | (953    | )
|                                                                                                       |  |                  |         |   |               |   |         |  
|Total shareholders equity                                                                             |  |                  | 185,546 |   |               |   | 171,527 |  
|                                                                                                       |  |                  |         |   |               |   |         |  
|Total liabilities and shareholders equity                                                             |  | $                | 227,813 |   |               | $ | 215,913 |  
|                                                                                                       |  |                  |         |   |               |   |         |  



The accompanying notes
are an integral part of these condensed consolidated financial statements.



|      |  |                                                                                                                                                                                                                                                                                            
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NOTE: |  | The balance sheet at March 26, 2004 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by
accounting principles generally accepted in the United States for complete financial statements.



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##### Table of Contents

Keystone Automotive Industries, Inc.

Condensed Consolidated Statements of Income

(In thousands, except share and per share amounts)

(Unaudited)



|                                            |  |                                        |            |   |                                     |   |            |                                    |  |   |                                        |   |  |   |            |  
|------------------------------------------- |  | -------------------------------------- | ---------- | - | ----------------------------------- | - | ---------- | ---------------------------------- |  | - | -------------------------------------- | - |  | - | ---------- | -
|                                            |  | Thirteen Weeks Ended December 31, 2004 |            |   | ThirteenWeeks EndedDecember 26,2003 |   |            | Forty Weeks Ended December 31,2004 |  |   | Thirty-nineWeeks EndedDecember 26,2003 |  
|Net sales                                   |  | $                                      | 136,631    |   |                                     | $ | 126,277    |                                    |  | $ | 405,156                                |   |  | $ | 361,040    |  
|Cost of sales                               |  |                                        | 76,819     |   |                                     |   | 70,717     |                                    |  |   | 229,128                                |   |  |   | 203,679    |  
|                                            |  |                                        |            |   |                                     |   |            |                                    |  |   |                                        |   |  |   |            |  
|Gross profit                                |  |                                        | 59,812     |   |                                     |   | 55,560     |                                    |  |   | 176,028                                |   |  |   | 157,361    |  
|Operating expenses:                         |  |                                        |            |   |                                     |   |            |                                    |  |   |                                        |   |  |   |            |  
|Selling and distribution                    |  |                                        | 40,379     |   |                                     |   | 37,101     |                                    |  |   | 121,479                                |   |  |   | 107,801    |  
|General and administrative                  |  |                                        | 13,166     |   |                                     |   | 11,360     |                                    |  |   | 39,169                                 |   |  |   | 32,020     |  
|                                            |  |                                        |            |   |                                     |   |            |                                    |  |   |                                        |   |  |   |            |  
|Operating income                            |  |                                        | 6,267      |   |                                     |   | 7,099      |                                    |  |   | 15,380                                 |   |  |   | 17,540     |  
|Other income                                |  |                                        | 402        |   |                                     |   | 485        |                                    |  |   | 2,102                                  |   |  |   | 1,678      |  
|Interest expense                            |  |                                        | (58        | ) |                                     |   | (188       | )                                  |  |   | (216                                   | ) |  |   | (528       | )
|                                            |  |                                        |            |   |                                     |   |            |                                    |  |   |                                        |   |  |   |            |  
|Income before income taxes                  |  |                                        | 6,611      |   |                                     |   | 7,396      |                                    |  |   | 17,266                                 |   |  |   | 18,690     |  
|Income taxes                                |  |                                        | 2,599      |   |                                     |   | 2,889      |                                    |  |   | 6,810                                  |   |  |   | 7,316      |  
|                                            |  |                                        |            |   |                                     |   |            |                                    |  |   |                                        |   |  |   |            |  
|Net income                                  |  | $                                      | 4,012      |   |                                     | $ | 4,507      |                                    |  | $ | 10,456                                 |   |  | $ | 11,374     |  
|                                            |  |                                        |            |   |                                     |   |            |                                    |  |   |                                        |   |  |   |            |  
|Per Common Share:                           |  |                                        |            |   |                                     |   |            |                                    |  |   |                                        |   |  |   |            |  
|Net income per share:                       |  |                                        |            |   |                                     |   |            |                                    |  |   |                                        |   |  |   |            |  
|Basic                                       |  | $                                      | .26        |   |                                     | $ | .30        |                                    |  | $ | .67                                    |   |  | $ | .76        |  
|                                            |  |                                        |            |   |                                     |   |            |                                    |  |   |                                        |   |  |   |            |  
|Diluted                                     |  | $                                      | .25        |   |                                     | $ | .29        |                                    |  | $ | .66                                    |   |  | $ | .75        |  
|                                            |  |                                        |            |   |                                     |   |            |                                    |  |   |                                        |   |  |   |            |  
|Weighted average common shares outstanding: |  |                                        |            |   |                                     |   |            |                                    |  |   |                                        |   |  |   |            |  
|Basic                                       |  |                                        | 15,699,000 |   |                                     |   | 15,064,000 |                                    |  |   | 15,597,000                             |   |  |   | 14,901,000 |  
|                                            |  |                                        |            |   |                                     |   |            |                                    |  |   |                                        |   |  |   |            |  
|Diluted                                     |  |                                        | 15,844,000 |   |                                     |   | 15,464,000 |                                    |  |   | 15,776,000                             |   |  |   | 15,214,000 |  
|                                            |  |                                        |            |   |                                     |   |            |                                    |  |   |                                        |   |  |   |            |  



The accompanying notes
are an integral part of these condensed consolidated financial statements.



4



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##### Table of Contents

Keystone Automotive Industries, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



|                                                                                     |  |                                  |        |   |                                          |   |         |  
|------------------------------------------------------------------------------------ |  | -------------------------------- | ------ | - | ---------------------------------------- | - | ------- | -
|                                                                                     |  | FortyWeeks EndedDecember 31,2004 |        |   | Thirty-nine Weeks Ended December 26,2003 |  
|Operating activities:                                                                |  |                                  |        |   |                                          |   |         |  
|Net income                                                                           |  | $                                | 10,456 |   |                                          | $ | 11,374  |  
|Adjustments to reconcile net income to net cash provided by operating activities:    |  |                                  |        |   |                                          |   |         |  
|Depreciation and amortization                                                        |  |                                  | 5,729  |   |                                          |   | 4,822   |  
|Provision for losses on uncollectible accounts                                       |  |                                  | 300    |   |                                          |   | 766     |  
|Provision for write-down of inventories                                              |  |                                  | 1,830  |   |                                          |   | 1,084   |  
|Gain on sale of assets                                                               |  |                                  | (33    | ) |                                          |   | (53     | )
|Changes in operating assets and liabilities, net of effect of business acquisitions: |  |                                  |        |   |                                          |   |         |  
|Accounts receivable, net                                                             |  |                                  | (4,136 | ) |                                          |   | (1,781  | )
|Inventories                                                                          |  |                                  | (7,926 | ) |                                          |   | 939     |  
|Other assets                                                                         |  |                                  | 3,446  |   |                                          |   | 1,948   |  
|Accounts payable and accrued liabilities                                             |  |                                  | 5,622  |   |                                          |   | (5,028  | )
|                                                                                     |  |                                  |        |   |                                          |   |         |  
|Net cash provided by operating activities                                            |  |                                  | 15,288 |   |                                          |   | 14,071  |  
|Investing activities:                                                                |  |                                  |        |   |                                          |   |         |  
|Proceeds from sale of assets                                                         |  |                                  | 462    |   |                                          |   | 135     |  
|Purchases of property, plant and equipment                                           |  |                                  | (6,899 | ) |                                          |   | (9,668  | )
|Acquisitions of certain service centers, net of cash received                        |  |                                  | (2,401 | ) |                                          |   | (12,641 | )
|                                                                                     |  |                                  |        |   |                                          |   |         |  
|Net cash used in investing activities                                                |  |                                  | (8,838 | ) |                                          |   | (22,174 | )
|Financing activities:                                                                |  |                                  |        |   |                                          |   |         |  
|(Payments) borrowings on credit facility                                             |  |                                  | (7,627 | ) |                                          |   | 2,287   |  
|Other debt, net                                                                      |  |                                  | (11    | ) |                                          |   | (9      | )
|Net proceeds on option exercise                                                      |  |                                  | 2,819  |   |                                          |   | 5,020   |  
|                                                                                     |  |                                  |        |   |                                          |   |         |  
|Net cash (used in) provided by financing activities                                  |  |                                  | (4,819 | ) |                                          |   | 7,298   |  
|                                                                                     |  |                                  |        |   |                                          |   |         |  
|Net increase(decrease) in cash and cash equivalents                                  |  |                                  | 1,631  |   |                                          |   | (805    | )
|Cash and cash equivalents at beginning of period                                     |  |                                  | 3,176  |   |                                          |   | 3,658   |  
|                                                                                     |  |                                  |        |   |                                          |   |         |  
|Cash and cash equivalents at end of period                                           |  | $                                | 4,807  |   |                                          | $ | 2,853   |  
|                                                                                     |  |                                  |        |   |                                          |   |         |  
|Supplemental disclosures                                                             |  |                                  |        |   |                                          |   |         |  
|Interest paid during the period                                                      |  | $                                | 224    |   |                                          | $ | 514     |  
|                                                                                     |  |                                  |        |   |                                          |   |         |  
|Income taxes paid during the period                                                  |  | $                                | 2,441  |   |                                          | $ | 5,759   |  
|                                                                                     |  |                                  |        |   |                                          |   |         |  



The accompanying notes
are an integral part of these condensed consolidated financial statements.



5



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##### Table of Contents



Keystone Automotive Industries, Inc.



Notes to Condensed Consolidated Financial Statements

(Unaudited)

December 31, 2004



|1. | Basis of Presentation
|-- | ---------------------



The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States for
interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States
for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring accruals considered necessary for fair presentation, with respect to the interim financial statements, have been included. The
results of operations for the 40-week period ended December 31, 2004 are not necessarily indicative of the results that may be expected for the full year ending April 1, 2005. For further information, refer to the financial statements and footnotes
thereto for the year ended March 26, 2004, included in Keystone Automotive Industries, Inc.s (the Company) report on Form 10-K filed with the Securities and Exchange Commission on June 9, 2004.



|2. | Fiscal Year
|-- | -----------



The Company uses a 52/53 week fiscal year. The Companys current fiscal year ends on April 1, 2005. The operating results for the nine-month period
ended December 31, 2004 contained forty weeks as compared to the same period in the prior fiscal year which contained thirty-nine weeks.



|3. | Income Taxes
|-- | ------------



The income tax provision for interim periods is based on an estimated effective annual income tax rate.



|4. | Recently Issued Accounting Pronouncements
|-- | -----------------------------------------



On October 13, 2004, the Financial Accounting Standards Board (FASB) concluded that the Proposed Statement of Financial Accounting Standards,
Share-Based Payment, which would require all companies to measure compensation cost for all share-based payments (including employee stock options) at fair value, would be effective for public companies for interim or annual periods beginning
after June 15, 2005. The Company could adopt the new standard in one of two ways  the modified prospective transition method or the modified retrospective transition method. Assuming this new standard is implemented as scheduled, the Company
will adopt this new standard in the third calendar quarter of 2005 and is currently evaluating the effect that the adoption of this standard will have on its financial position and results of operations.



In November 2004, the FASB issued FASB Statement No. 151, Inventory
Costs (FASB 151), an amendment of ARB No. 43, Chapter 4. The amendments made by FASB 151 clarify that abnormal amounts of idle facility expense, freight, handling costs, and wasted materials (spoilage) should be recognized as
current-period charges and require the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. FASB 151 is the result of a broader effort by the FASB to improve the comparability of
cross-border financial reporting by working with the International Accounting Standards Board toward development of a single set of high-quality accounting standards. The guidance is effective for inventory costs incurred during fiscal years
beginning after June 15, 2005. The Company intends to adopt FASB 151 in fiscal 2007.



6



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##### Table of Contents

|5. | Acquisitions
|-- | ------------



The results of operations for the three and nine months ended December 31, 2004 reflect the operations from certain businesses acquired in January, April,
June and November 2004, as of the date of each acquisition. No results relating to these acquisitions were included with respect to the third quarter and first nine months of fiscal 2004. The unaudited pro forma results for the third quarter and the
first nine months of fiscal 2005, assuming these acquisitions had been made at the beginning of fiscal 2005, would not be materially different from the results presented.



|6. | Shareholders Equity
|-- | --------------------



Statement of Accounting Standards (SFAS) No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure, which amended
SFAS No. 123, Accounting for Stock-Based Compensation, provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. If the Company had elected to
recognize compensation cost based on fair value, the pro forma net income amounts would have been as set forth below:



|                                          |  |                                         |       |   |                                         |   |       |                                        |  |   |        |   |  |   |        |  
|----------------------------------------- |  | --------------------------------------- | ----- | - | --------------------------------------- | - | ----- | -------------------------------------- |  | - | ------ | - |  | - | ------ | -
|                                          |  | Thirteen Weeks Ended                    |       |   | FortyWeeks EndedDecember 31,2004        |   |       | Thirty-nineWeeks EndedDecember 26,2003 | 
|                                          |  | December 31,2004                        |       |   | December 26,2003                        |   |       |                                       
|                                          |  | (in thousands, except per share amount) |       |   | (in thousands, except per share amount) |  
|Pro forma:                                |  |                                         |       |   |                                         |   |       |                                        |  |   |        |   |  |   |        |  
|Net income  as reported                  |  | $                                       | 4,012 |   |                                         | $ | 4,507 |                                        |  | $ | 10,456 |   |  | $ | 11,374 |  
|Add: Stock based compensation             |  |                                         | 64    |   |                                         |   | 28    |                                        |  |   | 157    |   |  |   | 36     |  
|Less: Fair value stock-based compensation |  |                                         | (117  | ) |                                         |   | (161  | )                                      |  |   | (430   | ) |  |   | (499   | )
|                                          |  |                                         |       |   |                                         |   |       |                                        |  |   |        |   |  |   |        |  
|Net income  pro forma                    |  | $                                       | 3,959 |   |                                         | $ | 4,374 |                                        |  | $ | 10,183 |   |  | $ | 10,911 |  
|Net income per share  as reported:       |  |                                         |       |   |                                         |   |       |                                        |  |   |        |   |  |   |        |  
|Basic                                     |  | $                                       | .26   |   |                                         | $ | .30   |                                        |  | $ | .67    |   |  | $ | .76    |  
|Diluted                                   |  | $                                       | .25   |   |                                         | $ | .29   |                                        |  | $ | .66    |   |  | $ | .75    |  
|Net income per share  pro forma:         |  |                                         |       |   |                                         |   |       |                                        |  |   |        |   |  |   |        |  
|Basic                                     |  | $                                       | .25   |   |                                         | $ | .29   |                                        |  | $ | .65    |   |  | $ | .73    |  
|Diluted                                   |  | $                                       | .25   |   |                                         | $ | .28   |                                        |  | $ | .65    |   |  | $ | .72    |  



On June 1, 2004, in
consideration for joining the Company, the Company issued to Richard L. Keister, who became the President and Chief Executive Officer of the Company in August 2004, 30,000 restricted shares of Common Stock. The restrictions lapse as to 7,500 shares
on each anniversary of the issuance. The closing price of the Companys Common Stock on the date of issue of such restricted shares was $27.46. On August 18, 2004, the Company issued restricted stock to each of its Directors other than the
Chief Executive Officer. Each Director was given 1,364 shares with a value of $30,000. These restricted shares had a fair market value of $22.00 on the date of issue and will be restricted for approximately one year.



|7. | Sales By Product
|-- | ----------------



|                            |  |                      |       |   |                                  |   |       |                                        |  |   |       |   |  |   |      
|--------------------------- |  | -------------------- | ----- | - | -------------------------------- | - | ----- | -------------------------------------- |  | - | ----- | - |  | - | -----
|                            |  | Thirteen Weeks Ended |       |   | FortyWeeks EndedDecember 31,2004 |   |       | Thirty-nineWeeks EndedDecember 26,2003
|                            |  | December 31,2004     |       |   | December 26,2003                 |   |       |                                       
|                            |  | (in millions)        |       |   | (in millions)                   
|Automotive body parts       |  | $                    | 73.3  |   |                                  | $ | 66.6  |                                        |  | $ | 210.0 |   |  | $ | 183.4
|Bumpers                     |  |                      | 39.8  |   |                                  |   | 36.2  |                                        |  |   | 118.7 |   |  |   | 104.2
|Paint and related materials |  |                      | 13.8  |   |                                  |   | 14.2  |                                        |  |   | 45.9  |   |  |   | 44.3 
|Wheels and related products |  |                      | 10.2  |   |                                  |   | 9.4   |                                        |  |   | 31.0  |   |  |   | 28.6 
|Other                       |  |                      | (0.5  | ) |                                  |   | (0.1  | )                                      |  |   | (0.5  | ) |  |   | 0.5  
|                            |  |                      |       |   |                                  |   |       |                                        |  |   |       |   |  |   |      
|Net Sales                   |  | $                    | 136.6 |   |                                  | $ | 126.3 |                                        |  | $ | 405.1 |   |  | $ | 361.0
|                            |  |                      |       |   |                                  |   |       |                                        |  |   |       |   |  |   |      



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|8. | Employee Benefit Plans
|-- | ----------------------



The Company has suspended its defined benefit pension plan (the Plan) which provided pension benefits to all non-union employees. Plan
benefits are based on an employees years of service and the compensation during the five years of employment which would yield the highest average compensation. Effective in April 1997, the Company suspended the accrual of future benefits.



The net periodic pension cost for the Companys benefit
plan was as follows:



|                                           |  |                      |     |   |                                  |   |     |                                       |  |   |      |   |  |   |      |  
|------------------------------------------ |  | -------------------- | --- | - | -------------------------------- | - | --- | ------------------------------------- |  | - | ---- | - |  | - | ---- | -
|                                           |  | Thirteen Weeks Ended |     |   | Forty WeeksEndedDecember 31,2004 |   |     | Thirty-nineWeeksEndedDecember 26,2003 | 
|                                           |  | December 31,2004     |     |   | December 26,2003                 |   |     |                                      
|                                           |  | (in thousands)       |     |   | (in thousands)                   |  
|Service cost                               |  | $                    |    |   |                                  | $ |    |                                       |  | $ |     |   |  | $ |     |  
|Interest cost                              |  |                      | 67  |   |                                  |   | 76  |                                       |  |   | 202  |   |  |   | 228  |  
|Expected return on plan assets             |  |                      | (73 | ) |                                  |   | (63 | )                                     |  |   | (219 | ) |  |   | (189 | )
|Recognized net actuarial (gains) or losses |  |                      | 18  |   |                                  |   | 32  |                                       |  |   | 54   |   |  |   | 96   |  
|Prior service cost recognized              |  |                      |    |   |                                  |   |    |                                       |  |   |     |   |  |   |     |  
|                                           |  |                      |     |   |                                  |   |     |                                       |  |   |      |   |  |   |      |  
|                                           |  | $                    | 12  |   |                                  | $ | 45  |                                       |  | $ | 37   |   |  | $ | 135  |  
|                                           |  |                      |     |   |                                  |   |     |                                       |  |   |      |   |  |   |      |  

---

|(1) | In addition, for the nine months ended December 31, 2004 an additional amount of $264,000 was
expensed, representing an anticipated settlement charge during the fiscal year ending April 1, 2005. The total amount expensed for the nine months ended December 31, 2004 was $301,000.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Item 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- | -------------------------------------------------------------------------------------



Except for the historical information contained herein, certain matters addressed in this Item 2 constitute
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements are subject to a variety of risks
and uncertainties that could cause actual results to differ materially from those anticipated by the Companys management. The Private Securities Litigation Reform Act of 1995 (the Act) provides certain safe harbor
provisions for forward-looking statements. All forward-looking statements made in this Quarterly Report on Form 10-Q are made pursuant to the Act and are subject to the cautionary statements set forth herein and in the Companys Annual Report
on Form 10-K for the year ended March 26, 2004, on file with the Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statements to reflect future events or circumstances.



Overview



The Company is the leading distributor of aftermarket collision parts used in the repair of automobiles and light trucks in
North America, with 129 locations throughout the United States and Canada. These product offerings, consisting of more than 19,000 stock keeping units, are manufactured by independent manufacturers and are sold primarily to collision repair shops.
Approximately 85% of all of the collision repair work is paid for in part through insurance claims. As a consequence, the Company is dependent upon the acceptance of its products in the first instance by insurance companies and then by the collision
repair shops performing the repairs.



Before 1980,
substantially all collision replacements parts were manufactured by original equipment manufacturers (OEMs). Since then, aftermarket parts, which generally sell for between 20% and 40% less than comparable OEM parts, have provided a
lower cost alternative to insurance companies seeking to contain the escalating cost of collision repairs. However, aftermarket collision parts still only account for approximately 13% of the collision parts market, which is still dominated by the
OEMs.



Because of the Companys dependence on the
acceptance of its products by insurance companies, its business is vulnerable to actions that impact the insurance industry. During the past five years, the Companys sales and profits have been adversely impacted by class action litigation
against insurance companies for specifying aftermarket parts rather than OEM parts when adjusting claims for damage to insured vehicles and a concerted effort, generally led by the OEMs, their dealer network and some collision repair shops, to have
legislation passed at the state level restricting or eliminating the use of aftermarket parts in the repair of damaged vehicles. See Part II. Item 5. Other Information, below.



Other important risks which may impact the Companys financial results include the fact that because the Companys
business is dependent on a continued source of supply of many automotive body parts which at present are only available from Taiwan, it is vulnerable to any disruptions in shipping, increased shipping costs and the relationship of the U.S. dollar to
the New Taiwan dollar.



Growth opportunities for the Company
include expanding its geographical coverage and increasing its penetration of existing markets through acquisitions, as well as greenfield openings; internal growth and expanding into new product markets, such as retail sales through retail parts
distributors and offering the Companys products on the web. For example, during the last fiscal year, the Company completed two acquisitions in Canada expanding its operations from Vancouver, Canada into the Toronto, Montreal and Ottawa areas
of Canada.



Challenges currently facing the Company include
controlling costs, managing its growth and integrating its acquisitions. Other challenges for the Company at this time, include escalating costs of audits, Sarbanes-Oxley compliance, health care and commercial insurance.



The Companys financial position remains strong, as evidenced by a
current ratio (current assets to current liabilities) of 4.2:1 and by the generation of substantial cash flows from operations.



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General



The first nine months of fiscal 2005 contained 40 weeks as compared to 39 weeks for the first nine months of fiscal 2004. Consequently, comparisons of
certain results may not be meaningful.



In September 2004, the
Company voluntarily suspended the sale of aftermarket headlamps for the Ford Taurus (96  04) and for the General Motors Pontiac Grand Am (99  04) as a result of independent tests indicating that these headlamps do
not fully comply with federal standards. The Companys primary supplier of these headlamps has advised the Company that it is working to bring the headlamps into compliance with federal standards. As a result of the publication of the
independent test results, a number insurance companies have indicated that they have also suspended the use of the non-complying aftermarket headlamps in repairing damaged vehicles. In addition, the Company believes that several other
insurance companies may have discontinued specifying all aftermarket lights in vehicle repair.



Sales of headlamps for the Taurus and Grand Am during the last 12 months constituted less than one-half a percent of the Companys total sales, and the sales of all headlamps during the period constituted
approximately 12 percent of total sales.



While sales to date
have not been materially affected by recent suspension actions by certain insurance companies, sales of aftermarket lighting products decreased slightly in the quarter ended December 31, 2004 as compared to the quarter ended December 26, 2003.
Sales of lighting products increased by approximately 6.2% from the second to the third quarter of the current fiscal year. Prior to the third quarter, the Company had generally been experiencing double digit growth rates in the sale of lighting
products on a year-to-year comparison. A continuation of this trend could have an adverse impact on the Companys rate of growth.



In January 2005, a Taiwanese manufacturer of aftermarket replacement hoods for the Hyundai Elantra, model years 2001-2003, announced a voluntary recall of
hoods sold during 2004. The hoods are being recalled because of a possible faulty hood latch. The manufacturer has agreed to reimburse distributors and body shops for costs incurred in connection with the recall. The Company is assisting the
manufacturer in facilitating the recall and has notified its body shop customers who purchased these hoods during 2004. The Company does not believe that it will experience any material losses as a result of its participation in the recall process.



Critical Accounting Policies



General. The Companys discussion and analysis of its
financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial
statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates
its estimates, including those related to product returns, bad debts, inventories, intangible assets, income taxes, insurance, pensions and contingencies and litigation. The Company bases its estimates on historical experience and on various other
assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different
assumptions or conditions.



The Company believes that the
following critical accounting policies affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.



Bad Debt. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make
required payments. The Company adjusts its allowance monthly based upon a formula relating to the aging of its receivables. If the financial condition of the Companys customers were to deteriorate, resulting in an impairment of their ability
to make payments, additional allowances may be required.



Inventory. The Company writes down its inventory for estimated obsolete or unmarketable inventory equal to the difference between the cost of the inventory and its estimated market value based upon assumptions about future
demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.



Deferred Taxes. The Company records a valuation allowance to reduce its deferred tax assets to the amount that
is more likely than not to be realized. While the Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event the Company were to determine
that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax assets would increase income in the period such determination was made. Likewise, should the Company
determine that it would not be able to realize all or



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part of its net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination were
made.



Insurance. The Companys main
insurance programs (medical, dental, workers compensation and vehicle) are designed as large deductible programs. Through these programs, the Company self-insures losses up to a deductible limit and purchases stop-loss insurance to protect
against losses that are over the deductible. The stop-loss insurance is purchased on an individual and aggregate basis. The amount of the deductible has risen significantly in the last two years resulting in a shift of risk from the insurance
carrier to the Company. The Company estimates its cost for these programs and maintains reserves for incurred, but not reported, losses. If the Company were to experience an increase in claims activity over anticipated amounts, and its reserves were
not sufficient, additional reserves may be required, which would have an unanticipated impact on future earnings.



Results of Operations



The following table sets forth for the periods indicated, certain selected income statement items as a percentage of net sales.



|                                    |  |                                     |   |  |                                     |   |  |                                  |   |  |                                        |  
|----------------------------------- |  | ----------------------------------- | - |  | ----------------------------------- | - |  | -------------------------------- | - |  | -------------------------------------- | -
|                                    |  | ThirteenWeeks EndedDecember 31,2004 |   |  | ThirteenWeeks EndedDecember 26,2003 |   |  | FortyWeeks EndedDecember 31,2004 |   |  | Thirty-nineWeeks EndedDecember 26,2003 |  
|Net sales                           |  | 100.0                               | % |  | 100.0                               | % |  | 100.0                            | % |  | 100.0                                  | %
|Cost of sales                       |  | 56.2                                |   |  | 56.0                                |   |  | 56.6                             |   |  | 56.4                                   |  
|                                    |  |                                     |   |  |                                     |   |  |                                  |   |  |                                        |  
|Gross profit                        |  | 43.8                                |   |  | 44.0                                |   |  | 43.4                             |   |  | 43.6                                   |  
|Selling and distribution expenses   |  | 29.6                                |   |  | 29.4                                |   |  | 30.0                             |   |  | 29.9                                   |  
|General and administrative expenses |  | 9.7                                 |   |  | 9.0                                 |   |  | 9.6                              |   |  | 8.9                                    |  
|Other income                        |  | .3                                  |   |  | .4                                  |   |  | .5                               |   |  | .5                                     |  
|Interest expense, net               |  |                                    |   |  | (0.1                                | ) |  |                                 |   |  | (0.1                                   | )
|                                    |  |                                     |   |  |                                     |   |  |                                  |   |  |                                        |  
|Income before income taxes          |  | 4.8                                 |   |  | 5.9                                 |   |  | 4.3                              |   |  | 5.2                                    |  
|Income taxes                        |  | 1.9                                 |   |  | 2.3                                 |   |  | 1.7                              |   |  | 2.0                                    |  
|                                    |  |                                     |   |  |                                     |   |  |                                  |   |  |                                        |  
|Net income (loss)                   |  | 2.9                                 | % |  | 3.6                                 | % |  | 2.6                              | % |  | 3.2                                    | %
|                                    |  |                                     |   |  |                                     |   |  |                                  |   |  |                                        |  



Thirteen weeks ended December
31, 2004 compared to thirteen weeks ended December 26, 2003



Net sales were $136.6 million for the quarter ended December 31, 2004 (the 2004 Quarter) compared to $126.3 million for the quarter ended December 26, 2003 (the 2003 Quarter), an increase of $10.3 million or 8.2%.
The increase in net sales was due primarily to increases in sales of automotive body parts and bumpers. During the 2004 Quarter as compared to the 2003 Quarter, sales of automotive body parts (including fenders, hoods, headlights, radiators, grilles
and other crash parts) increased by $6.7 million (an increase of 10.1%); sales of new and recycled bumpers increased by $3.6 million (an increase of 9.9%); sales of paint and related materials decreased by $0.4 million (a decrease of 2.8%) and sales
of remanufactured wheels and related products increased by $0.8 million (an increase of 8.5%). During the 2004 Quarter, the Company began to feel the impact of certain insurers not specifying aftermarket lighting when adjusting claims for insured
vehicles as sales of lighting decreased slightly from the 2003 Quarter, whereas on a year-to-year comparative basis the Company had generally been experiencing double digit growth rates on its lighting sales. Lighting sales in the 2004 Quarter,
however, did increase by 6.2% over sales in the second quarter of this fiscal year. The increases in net sales continue to be attributable primarily to the fact that insurance companies are generally specifying more aftermarket parts in the repair
of damaged vehicles. See Part II. Item 5 below.



Gross profit
increased in the 2004 Quarter to $59.8 million (43.8% of net sales) from $55.6 million (44.0% of net sales) in the 2003 Quarter, an increase of $4.2 million, or 7.6%, primarily as a result of the increase in net sales and price increases. Gross
profit as a percentage of net sales in the second quarter of fiscal 2005 was 43.2%. The gross profit during the 2004 Quarter was negatively impacted by an increase in inventory reserves of $600,000. The Company is considering a reduction in the
wheel inventory and in the 2004 Quarter, it set aside $600,000 for wheel product it considers obsolete or in excess. Upon completion of its evaluation, the obsolete and excess inventory will be scrapped or sold at less than cost. It is anticipated
that the evaluation will be completed in the fourth quarter of fiscal 2005 and may result in the setting aside of additional reserves. The Companys gross profit margin has fluctuated, and may continue to fluctuate, depending on a number of
factors, including changes in product mix, competition and currency exchange rates.



Selling and distribution expenses increased to $40.4 million (29.6% of net sales) in the 2004 Quarter from $37.1 million (29.4% of net sales) in the 2003 Quarter, an increase of $3.3 million, or 8.9%. The increase in
selling and distribution expenses reflects increased sales and these expenses were negatively impacted on a comparative basis by a number of factors, the most significant of which were increased freight of $600,000 and increased fuel costs of
$600,000.



General and administrative expenses increased to
$13.2 million (9.7% of net sales) in the 2004 Quarter compared to $11.4 million (9.0% of net sales) in the 2003 Quarter, an increase of $1.8 million, or 15.8%. The increase was primarily due to increased sales and increases in wages and salaries, as
well as minor increases in a number of other categories. Salaries and wages, including



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benefits, increased by $1.1 million over the comparable 2003 Quarter as a result of an increase in administrative and operating personnel as well as the
costs associated with hiring a new chief executive officer. During the 2004 Quarter, executive-level salaries were significantly higher on a comparative basis as certain additional personnel necessary to implement the new chief executive
officers plans for the Company were hired.



As a result
of the above factors, the Company experienced a decrease in net income for the 2004 Quarter of $4.0 million (2.9% of net sales) compared to net income of $4.5 million (3.6% of net sales) for the 2003 Quarter.



Forty weeks ended December 31, 2004 compared to thirty-nine weeks ended December 26,
2003



Because the periods being compared differ in
length by one week, results, other than percentages, may not be meaningful.



Net sales were $405.2 million for the forty weeks ended December 31, 2004 (the 2004 Nine Months) compared to $361.0 million for the thirty-nine weeks ended December 26, 2003 (the 2003 Nine
Months), an increase of $44.2 million, or 12.2%. This increase consisted of increases of $26.6 million in sales of automotive body parts (including fenders, hood, headlights, radiators, grilles, and other crash parts); $14.5 million in sales
of new and recycled bumpers; $2.4 million in sales of remanufactured wheels and related products and an increase of $1.6 million in sales of paint and related materials. These changes represent increases of approximately 14.5%, 13.9%, 8.4% and 3.6%,
respectively, over the prior year period, which was one week shorter in duration. See the 2004 Quarter comparison above for a discussion of lighting sales.



Gross profit increased in the 2004 Nine Months to $176.0 million (43.4% of net sales) from $157.4 million (43.6% of net sales) in the 2003 Nine Months, an
increase of $18.6 million, or 11.8%, primarily as a result of the increase in net sales and price increases. See the 2004 Quarter comparison above for a discussion of a wheel inventory reserve taken in the 2004 Quarter. Upon completion of its
evaluation of its wheel inventory, the Company may set aside additional reserves in the fourth quarter of fiscal 2005. The Companys gross profit margin has fluctuated, and may continue to fluctuate, depending on a number of factors, including
changes in product mix, competition and currency exchange rates.



Selling and distribution expenses increased to $121.5 million (30.0% of net sales) in the 2004 Nine Months from $107.8 million (29.9% of sales) in the 2003 Nine Months, an increase of 12.7%. The increase in these expenses was generally the
result of increased sales and these expenses were negatively impacted on a comparative basis by increased selling wages and salaries, including benefits, of $4.2 million, increased fuel costs of $1.2 million, increased remove and replace costs of
$800,000 and freight costs of $1.4 million.



General and
administrative expenses increased to $39.2 million (9.6% of net sales) in the 2004 Nine Months from $32.0 million (8.9% of net sales) in the 2003 Nine Months, an increase of 22.5%. The increase was primarily due to increased sales and increases in
wages and salaries, including benefits. See the 2004 Quarter comparison above.



As a result of the above factors, the Company experienced a decrease in net income for the 2004 Nine Months of $10.5 million (2.6% of net sales) compared to a net income of $11.4 million (3.2% of net sales) for the
2003 Nine Months.



Variability of Quarterly Results and Seasonality



The Company has experienced, and expects to continue to
experience, variations in its sales and profitability from quarter to quarter due, in part, to the timing and integration of acquisitions and the seasonal nature of the Companys business. The number of collision repairs is directly impacted by
the weather. Accordingly, the Companys sales generally are highest during the five-month period from December to April. The impact of seasonality has reduced somewhat as the Company has become more geographically diversified. Other factors
that influence quarterly variations include the number of business days during the holiday seasons, the timing of the introduction of new products, the level of consumer acceptance of new products, general economic conditions that affect consumer
spending, the timing of supplier price changes and the timing of expenditures in anticipation of increased sales and customer delivery requirements.



Liquidity and Capital Resources



The Companys primary use of funds over the past two years has been for acquisitions, the development and implementation of an enterprise-wide
management information system and the paydown of bank borrowings. At December 31, 2004, working capital was $133.4 million, compared to $122.9 million at March 26, 2004. The increase in working capital is primarily the result of cash generated from
operating activities and the exercise of stock options. The Company financed its working capital requirements and the acquisitions completed during the first nine months of fiscal 2005 from cash flow from operations and the proceeds from the
exercise of stock options.



During the forty weeks ended
December 31, 2004, the Companys cash and cash equivalents increased by $1.6 million. This increase is the result of an increase in cash provided by operating activities of $15.3 million resulting primarily from the elimination of $7.8 million
of non-cash expenses from the reported net income of $10.5 million and by subtracting $3.0 million of decreased cash as a result of increases in accounts receivable and inventory, partially offset by decreases in accounts payable and other assets.
The most significant non-cash expenses were depreciation and amortization. This increase was partially offset by (i) a decrease in cash used in investing activities of $8.8 million, primarily as a result of cash used to purchase equipment primarily
related to the implementation of



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the Companys enterprise software system and to acquire additional locations and (ii) a decrease in cash used in financing activities of $4.8 million.
The decrease in cash provided by financing activities resulted from the repayment of borrowings under the Companys credit facility partially offset by cash proceeds from the exercise of stock options.



The Company has in place a secured credit facility with a commercial lender
that provides for a $40.0 million revolving line of credit, which balance is due on July 1, 2006. Advances under the revolving line of credit bear interest either at LIBOR plus 1.0% or at the lenders prime rate. At December 31, 2004, $2.4
million was outstanding under the revolving line of credit, with an interest rate of 5.25%. The revolving line of credit is subject to certain restrictive covenants set forth in the loan agreement, which requires, among other things, that the
Company maintain certain financial ratios. The Company was in compliance with all such covenants at December 31, 2004, and at the date of the filing of this Quarterly Report. The $7.6 million reduction in the amount outstanding under the
Companys revolving line of credit during the first nine months of fiscal 2005 was the result of cash flow from operations and proceeds from the exercise of stock options. In December 2003, the Company caused its commercial lender to renew a
$4.3 million letter of credit to the Companys primary insurer to secure the Companys deductible reimbursement obligations. In March 2004, an additional letter of credit for $3.1 million was issued to the Companys primary insurers
also to secure deductible reimbursement obligations. The aggregate amount of these letters of credit reduces the funds available under the Companys credit facility. The $7.4 million letters of credit were renewed at December 31, 2004. At
December 31, 2004, $30.2 million was available to the Company under the revolving line of credit.



The Company believes that its existing working capital, anticipated cash flow from operations and funds anticipated to be available under its revolving
line of credit will enable it to finance its operations, including the costs related to the installation of the new enterprise-wide management information system (see Part II. Item 5. Other Information  Prelude Software System Installation)
and possible acquisitions for at least the next 12 months. However, the Companys liquidity expectations are subject to numerous factors, many of which are beyond the Companys control. Anticipated cash flow from operations is subject to
the risks of the business, the most significant of which are discussed under Other Information below. The availability of funds under the Companys revolving line of credit could also be restricted or eliminated in the event that
the Company does not maintain the financial ratios required under the Credit Agreement. These ratios include such items as amount of indebtedness, earnings before interest, taxes and depreciation and amortization, net worth and the current ratio. In
the event that the Companys operations do not meet expectations, it is possible that needed liquidity will not be available under the credit facility.



Inflation



The Company does not believe that the relatively moderate rates of inflation over the past three years have had a significant effect on its net sales or
its profitability.



Long-Lived Assets



Goodwill, which represents the excess of cost over the fair value of net
assets acquired, amounted to $11.1 million at December 31, 2004, or approximately 4.9% of total assets or 6.0% of consolidated shareholders equity. Goodwill amounted to $9.7 million at March 26, 2004, or approximately 4.5% of total assets or
5.6% of consolidated shareholders equity. The increase in goodwill from March 26, 2004 was the result of the completion of two acquisitions.



Other intangible assets, consisting primarily of covenants not to compete obtained in acquisitions, which have finite lives, will continue to be amortized
over the finite life of such intangible assets. As of December 31, 2004, other intangible assets amounted to $1.0 million. For each of the quarters ended December 31, 2004 and December 26, 2003, amortization of other intangible assets was
approximately $0.1 million. For each of the nine-month periods ended December 31, 2004 and December 26, 2003, amortization of other intangible assets was approximately $.03 million.



The Company reviews the recoverability of its long-lived assets as required by SFAS No. 144 and makes assumptions regarding
estimated future cash flows and other factors to determine the fair value of the respective assets. If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges for these assets not
previously recorded.



Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK



The Companys results of operations are exposed to changes in interest rates primarily with respect to borrowings under its credit facility, under which rates are tied to the prime rate or LIBOR. Under its
current policies, the Company does not use interest rate derivative instruments to manage exposure to interest rate changes. Based on the current levels of debt, the exposure to interest rate fluctuations is not considered to be material. The
Company is also exposed to currency fluctuations, primarily with respect to its product purchases in Taiwan. While all transactions with Taiwan are conducted in U.S. dollars, changes in the relationship between the U.S. dollar and the New Taiwan
dollar might impact the price of products purchased in Taiwan. The Company might not be able to pass on any price increases to customers. Under its present policies, the Company does not attempt to hedge its currency exchange rate exposure.



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Item 4. CONTROLS AND PROCEDURES



The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Companys Securities Exchange Act of 1934 (Exchange Act) reports is recorded, processed,
summarized and reported within the time periods specified in the SECs rules and forms, and that such information is accumulated and communicated to the Companys management, including its Chief Executive Office and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated,
can provide only reasonable assurance of achieving the desired control objectives and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.



As required by Exchange Act Rule 13a-15(b), the Company carried out an
evaluation, under the supervision and with the participation of the Companys management, including the Companys Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Companys
disclosure controls and procedures as of the end of the period covered by this Report. Based on the foregoing, the Companys Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and
procedures were effective at the reasonable assurance level.



There has been no change in the Companys internal controls over financial reporting during the Companys third quarter ended December 31, 2004 that has materially affected, or is reasonably likely to materially affect, the
Companys internal controls over financial reporting.



However, as a result of evaluating its internal controls for purposes of Section 404 of the Sarbanes-Oxley Act of 2002, the Company has discovered certain control deficiencies. The Company has not completed its Section 404 evaluation and
there can be no assurance that additional control deficiencies will not be found and that one or more control deficiencies, separately or in the aggregate, may not represent either a significant deficiency or a material weakness.



PART II - OTHER INFORMATION



|Item 1. | Legal Proceedings.
|------- | ------------------



As previously disclosed, in November 2002, General Motors Corporation instituted suit against the Company and a Taiwan-based manufacturer in the Federal
District Court for the Eastern District of Michigan, Southern Division. The complaint alleges that the Company is distributing replacement grilles for General Motors vehicles with a placeholder matched exactly to the Chevrolet Bow
Tie design emblem and the GMC mark emblem, which infringes on General Motors federal, state and common law trademarks. The suit claims this violates the Lanham Act and constitutes unfair competition under Michigan law. Recent
General Motors court filings have disclosed that General Motors is seeking compensatory damages of between $2.0 million and $2.3 million as well as certain equitable relief, including an injunction. In December 2003, General Motors moved for
summary judgment on two of the Companys nine affirmative defenses. In April 2004, the Court granted in part and denied in part General Motors motion. The Companys main defenses of functionality and failure of the placeholder to act
as a trademark were preserved. A portion of the Companys implied license defense was dismissed. In May 2004, General Motors moved for summary judgment on the Companys affirmative defenses of laches and acquiescence. The Court upheld the
Companys affirmative defense of laches and dismissed the affirmative defense of acquiescence. In September 2004, General Motors moved for summary judgment on the Companys defenses of waiver, ratification and unclean hands. On November 5,
2004, the Company moved for summary judgment on the issues of liability and damages and on the same date, General Motors moved for summary judgement on the issue of liability. A hearing date for the motions has been set for the first week in May
2005.



Discovery has closed in the case. The Company believes
that it has meritorious defenses and intends to defend its business practices. The Company believes that the products in question constitute an immaterial percentage of total sales. Consequently, the Company believes that whatever the outcome of the
case, it will not have a material adverse impact on the Companys operations or financial condition.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds.None.
|------- | -----------------------------------------------------------------



|Item 3. | Defaults Upon Senior Securities.None
|------- | ------------------------------------



|Item 4. | Submission of Matters to a Vote of Security Holders.None
|------- | --------------------------------------------------------



|Item 5. | Other Information.
|------- | ------------------



Litigation Impacting Aftermarket Collision Replacement Parts. Over the past fifteen years, there have been numerous lawsuits brought relating to
the use of aftermarket parts in repairing motor vehicles. Initially, these cases were brought primarily by automobile manufacturers (OEMs) against manufacturers and distributors of aftermarket parts seeking to protect their trademarks, copyrights
and other proprietary interests in replacement parts. In more recent years, class action attorneys have commenced numerous cases against insurance companies, primarily alleging a violation of the insurance contract and state consumer protection laws
because of the specification of aftermarket crash parts for the repair of policyholders vehicles. Plaintiffs attorneys allege that aftermarket parts are inferior to OEM parts and thus are incapable of restoring a vehicle to its
pre-loss condition as required by many insurance policies.



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The leading case involving aftermarket crash parts - Avery v. State Farm Insurance Company - was
brought in Marion, Illinois in July 1997 (Madison County). In that case, plaintiffs asserted claims for breach of contract, consumer fraud and equitable relief relating to State Farms practice at that time of sometimes specifying
aftermarket parts rather than OEM parts when adjusting claims for the damage to insured vehicles. Plaintiffs alleged that this practice breached State Farms insurance agreements with its policyholders and was a violation of the Illinois
Consumer Fraud and Deceptive Business Practices Act. In October 1999, after a lengthy trial, the jury in Avery awarded plaintiffs compensatory damages of approximately $586 million. In addition, the judge assessed punitive damages against
State Farm of over $600 million. In April 2001, the Appellate Court of Illinois, Fifth District, upheld the verdict, reducing damages by $130 million, resulting in an aggregate award of $1.06 billion. Thereafter, a Petition for Allowance of Appeal
to the Illinois Supreme Court was filed by State Farm. In October 2002, the Illinois Supreme Court agreed to hear the appeal. The parties have filed their briefs and conducted oral argument. A decision by the Illinois Supreme Court was expected by
now, so a decision could be forthcoming at any time.



Shortly
after the verdict in the Avery case in October 1999, State Farm and many other insurance companies suspended their practice of specifying non-OEM crash parts on repair estimates. While many insurance companies are again specifying certain
aftermarket parts in the repair of insured vehicles, State Farm, the nations largest automobile insurer, has not. The State Farm decision has had, and continues to have, an adverse impact on the Companys sales and net income.



Currently, there are a number of other aftermarket parts cases pending in
various jurisdictions across the country, including a statewide class action against the Farmers Group in the state of California. The Company has not been made a party in any of these cases. There can be no assurance, however, that the Company will
not be brought into one of these cases or some other aftermarket parts case in the future.



On January 30, 2000, a class action was filed in Quebec against two auto insurers, Groupe Desjardins, ING Canada and AXA Canada, relating to their specification of aftermarket parts in the repair of vehicles. The case
is modeled after the State Farm case and the plaintiffs are relying in part on the judgment in that case. In December 2004, the parties in the action reached a settlement agreement, which is expected to have little, if any, impact on the use of
aftermarket collision parts in Canada. The agreement is subject to court approval.



A substantial portion of the Companys business consists of the distribution of aftermarket crash parts to collision repair shops. The vast majority of the customers of the repair shops are covered by insurance
policies. In the event that the State Farm verdict is repeated in other similar cases, with the result that aftermarket crash parts are no longer specified by insurance companies to repair insured vehicles, the aggregate cost to consumers will be
substantial and the impact on the Company would be material and adverse. Should this occur, OEMs would likely have monopoly pricing power with respect to many of the products required to repair damaged vehicles. In addition, if the Company were to
become a defendant in one or more aftermarket parts cases, the costs of defense and the potential for liability could have a material adverse impact on the Company.



The Company believes that substantially all of the aftermarket crash parts that it distributes are of similar quality to OEM
crash parts and when installed in a competent manner by collision repair shops, vehicles are restored to their pre-loss condition. In addition, the Company provides a limited warranty against defects in materials and workmanship with
respect to the parts it distributes for as long as the owner at the time repairs are made continues to own the vehicle.



Federal and State Action. During the past five years, legislation has been introduced or considered in over 25 states seeking to prohibit or limit
the use of aftermarket parts in collision repair work and/or require special disclosure to consumers before using aftermarket parts. During 2004, 34 separate bills were introduced in 16 states. Bills were only passed in Florida and Michigan, the
provisions of which should not have a material impact on the Company. Consistent with prior years, the Company anticipates that bills potentially impacting the aftermarket collision parts business will be introduced in a number of states during
2005. The Company actively works with state legislators and regulatory officials to make them aware of the value to the consuming public of having available a viable alternative to OEM collision parts.



At the present time, legislation regulating the use of aftermarket parts has
been adopted in over 40 states. The most common form of regulation, adopted in 35 states, requires disclosure to the vehicle owner that aftermarket crash parts will be used in the repair of the vehicle. An estimated 21 states require the aftermarket
part to have the name or logo of the manufacturer affixed to the part. A few states (i) require some form of consent from the vehicle owner before aftermarket parts can be used in the repair, (ii) require that before an aftermarket part can be used
in the repair of the vehicle, the part must generally be equal or equivalent in fit, quality and performance to the original equipment part it is replacing or (iii) require the use, under certain circumstances, of aftermarket parts which have been
certified by an independent testing facility to be of like kind and quality to the original equipment part. Some states require a combination of the types of regulations described above.



To date, state laws have not had a material impact on the Companys overall business. If a number of states were to
adopt legislation prohibiting or further restricting the use of aftermarket crash parts, such adoption could have a material adverse impact on the Company.



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Prelude Software System Installation. The Company has completed the installation of its
enterprise-wide management information system, consolidating the 13 systems under which the Company once operated. As of February 1, 2005, only Canada and the most recently acquired locations remain on separate systems. This has been an extremely
costly and time-consuming process and additional effort will be required to maximize the efficiency and utilization of the system.



Management installed the system at five locations in California starting on July 1, 2002 as beta sites and the Company began rolling out the system to
other locations in July 2002. At the end of January 2005, the final legacy system was rolled up and all locations except for the Canadian and the most recently acquired locations are on the Prelude system. It is anticipated that the roll-out of the
Prelude system with respect to the Canadian locations will occur in April 2006. Roll-out of the most recently acquired domestic locations is expected in June 2005.



It is estimated that total costs from inception through the complete roll-out have been approximately $19.5 million, which
includes hardware, software, infrastructure and employee related expenses. Through December 31, 2004, the Company had capitalized approximately $13.5 million of these costs, primarily relating to software licenses and hardware. The balance of the
costs have been expensed as incurred.



Continued Acceptance
of Aftermarket Collision Replacement Parts. Based upon industry sources, the Company estimates that approximately 85% of automobile collision repair work is paid for in part by insurance; accordingly, the Companys business is highly
dependent upon the continued acceptance of aftermarket collision replacement parts by the insurance industry and the governmental agencies that regulate insurance companies and the ability of insurers to recommend the use of such parts for collision
repair jobs, as opposed to OEM parts. As described above, the use of many of the products distributed by the Company is being disputed in various forums. See Managements Discussion and Analysis of Financial Conditions and Results of
Operations  General above for a discussion of issues concerning aftermarket headlamps.



Dependence on Key and Foreign Suppliers. The Company is dependent on a relatively small number of suppliers. Although alternative suppliers exist
for substantially all products distributed by the Company, the loss of any one supplier could have a material adverse effect on the Company until alternative suppliers are located and have commenced providing products. In fiscal 2004, approximately
62% of the products distributed by the Company were manufactured in the United States or Canada and approximately 38% were imported directly or indirectly from manufacturers in Taiwan. As a result, the Companys operations are subject to the
customary risks of doing business abroad, including, among other things, transportation delays (see below) political instability, expropriation, currency fluctuations and the imposition of tariffs, import and export controls and other non-tariff
barriers (including changes in the allocation of quotas), as well as the uncertainty regarding future relations between China and Taiwan.



Shipping. The Companys operations are dependent on a continued source of supply of the many automotive body parts which are presently only
available from Taiwan. These products are transported to the United States aboard container ships which dock primarily in the Los Angeles, California area. Any disruption in shipping for any prolonged period, such as might result from an act of
terrorism or labor strike, would likely have a material adverse impact on the Companys sales and earnings. Hostilities between China and Taiwan could also have an adverse impact on the Companys source of supply. In addition, contracts
with shipping companies are negotiated on an annual basis normally beginning in April. Although the recently negotiated contracts did not reflect any material price increases, a material increase in shipping rates could adversely impact the
Companys results of operations. Finally, because of the increase in global shipping, the Company is concerned that sufficient containers will be available to transport inventory. Delays in receiving needed inventory could have a material
adverse impact on the Company.



Decline in the Number of
Collision Repairs. While the number of collision repairs has declined in recent years, and may continue to do so in the future, the cost of repair of a vehicle has continued to increase. The decline in the number of vehicles being repaired is
due to, among other things, automotive safety improvements, more rigorous enforcement of stricter drunk driving laws resulting in fewer accidents and the increase in unit body construction and higher collision repair costs resulting in a larger
number of automobiles being declared a total loss in lieu of being repaired. Recent innovations such as impact detection devices available on certain vehicles could also result in less collisions. The continuation of such decline may have a material
adverse effect on the Company.



Volatility of Stock
Price. The trading price of the Companys Common Stock may be subject to significant fluctuations as a result of variations in the Companys actual or anticipated operating results, changes in general market conditions and other
factors. In recent years, the stock market generally has experienced significant price and volume fluctuations which often have been unrelated or disproportionate to the operating performance of a specific company or industry. There can be no
assurance that the market price of the Companys Common Stock will not decline below the current market price. The results of operations for the quarter ended July 2, 2004 were below the expectations of public market analysts and as a result,
the price of the Company Common Stock has been adversely affected. There can be no assurance that results in the future may not disappoint and cause a further erosion of the stock price.



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##### Table of Contents

|Item 6. | Exhibits.
|------- | ---------



a. Exhibits



|            |  |                                                                                                                                                                                                                          
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                              
|            | 
|31.1*       |  | Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 signed by the Chief
Executive Officer, filed herewith.
|            | 
|31.2*       |  | Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 signed by the Chief
Financial Officer, filed herewith.
|            | 
|32.1*      |  | Statement Required by 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 signed by the Chief Executive Officer, filed herewith.                                                
|            | 
|32.2*      |  | Statement Required by 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 signed by the Chief Financial Officer, filed herewith.                                                

---

|* | Filed herewith
|- | --------------

| | Not deemed filed for purposes of Section 18 of the Exchange Act or otherwise subject to liabilities of that section and not deemed to be incorporated by reference into
any filing under the Securities Act of 1933 or the Exchange Act, except to the extent Registrant specifically incorporates it by reference.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES



Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



KEYSTONE AUTOMOTIVE INDUSTRIES, INC.By:

/s/    JOHN M. PALUMBOJohn M. PalumboChief Financial Officer(Duly Authorized Officer and Principal Financial and Accounting Officer)




Date: February 9, 2005



17