##### 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: June 30, 2006

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

KEYSTONE AUTOMOTIVE INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)



|                                                              |  |                                        
|------------------------------------------------------------- |  | ---------------------------------------
|California                                                    |  | 95-2920557                             
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. Employer Identification 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, a large accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act. (check one):

Large accelerated filer ̈Accelerated filer  x                    Non-accelerated filer ̈

Indicate by check mark whether the registrant is a shell company (as
described in Rule 12b-2 of the Exchange Act).    Yes ̈No  x

The number of shares outstanding of the registrants Common Stock, no par value, at August 4, 2006 was 16,246,546
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 as of June 30, 2006 (unaudited) and March 31, 2006                                            |  | 3          
|         |  |                                                                                                                                    
|         |  | Condensed Consolidated Statements of Income for the Thirteen weeks ended June 30, 2006 (unaudited) and July 1, 2005 (unaudited)     |  | 4          
|         |  |                                                                                                                                    
|         |  | Condensed Consolidated Statements of Cash Flows for the Thirteen weeks ended June 30, 2006 (unaudited) and July 1, 2005 (unaudited) |  | 5          
|         |  |                                                                                                                                    
|         |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                                                    |  | 6          
|         |  |                                                                                                                                    
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                               |  | 9          
|         |  |                                                                                                                                    
|Item 3.  |  | Quantitative and Qualitative Disclosure About Market Risks                                                                          |  | 12         
|         |  |                                                                                                                                    
|Item 4.  |  | Controls and Procedures                                                                                                             |  | 12         
|         |  |                                                                                                                                    
|PART II  |  | OTHER INFORMATION                                                                                                                   |  |            
|         |  |                                                                                                                                    
|Item 1.  |  | Legal Proceedings                                                                                                                   |  | 13         
|         |  |                                                                                                                                    
|Item 1A. |  | Risk Factors                                                                                                                        |  | 13         
|         |  |                                                                                                                                    
|Item 6.  |  | Exhibits                                                                                                                            |  | 14         



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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)



|                                                                                                   |  |              |         |               |   |        
|-------------------------------------------------------------------------------------------------- |  | ------------ | ------- | ------------- | - | -------
|                                                                                                   |  | June 30,2006 |         | March 31,2006
|                                                                                                   |  | (Unaudited)  |         | (Note)       
|ASSETS                                                                                             |  |              |         |               |   |        
|Current Assets:                                                                                    |  |              |         |               |   |        
|Cash and cash equivalents                                                                          |  | $            | 5,394   |               | $ | 4,733  
|Accounts receivable, net of allowance of $854 at June 2006 and $935 at March 2006                  |  |              | 55,490  |               |   | 56,774 
|Inventories, primarily finished goods                                                              |  |              | 126,032 |               |   | 128,458
|Other current assets                                                                               |  |              | 15,105  |               |   | 17,137 
|                                                                                                   |  |              |         |               |   |        
|Total current assets                                                                               |  |              | 202,021 |               |   | 207,102
|Plant, property and equipment, net                                                                 |  |              | 33,972  |               |   | 33,713 
|Goodwill                                                                                           |  |              | 39,446  |               |   | 39,369 
|Other intangibles, net of accumulated amortization of $1,655 at June 2006 and $1,544 at March 2006 |  |              | 1,291   |               |   | 1,402  
|Other assets                                                                                       |  |              | 7,344   |               |   | 7,104  
|                                                                                                   |  |              |         |               |   |        
|Total assets                                                                                       |  | $            | 284,074 |               | $ | 288,693
|                                                                                                   |  |              |         |               |   |        
|LIABILITIES AND SHAREHOLDERS EQUITY                                                               |  |              |         |               |   |        
|Current Liabilities:                                                                               |  |              |         |               |   |        
|Credit facility                                                                                    |  | $            | 167     |               | $ | 9,544  
|Accounts payable                                                                                   |  |              | 26,705  |               |   | 35,310 
|Accrued liabilities                                                                                |  |              | 24,913  |               |   | 19,519 
|                                                                                                   |  |              |         |               |   |        
|Total current liabilities                                                                          |  |              | 51,785  |               |   | 64,373 
|Other long-term liabilities                                                                        |  |              | 1,362   |               |   | 1,373  
|Commitments and contingencies                                                                      |  |              |        |               |   |       
|Shareholders Equity:                                                                              |  |              |         |               |   |        
|Preferred stock, no par value:                                                                     |  |              |         |               |   |        
|Authorized shares3,000                                                                            |  |              |         |               |   |        
|None issued and outstanding                                                                        |  |              |        |               |   |       
|Common stock, no par value:                                                                        |  |              |         |               |   |        
|Authorized shares50,000                                                                           |  |              |         |               |   |        
|Issued and outstanding shares 16,238 at June 2006 and 16,188 at March 2006                         |  |              | 99,350  |               |   | 97,956 
|Restricted Stock                                                                                   |  |              |        |               |   | 1,154  
|Additional paid-in capital                                                                         |  |              | 11,774  |               |   | 10,470 
|Retained earnings                                                                                  |  |              | 119,458 |               |   | 113,359
|Accumulated other comprehensive loss                                                               |  |              | 345     |               |   | 8      
|                                                                                                   |  |              |         |               |   |        
|Total shareholders equity                                                                         |  |              | 230,927 |               |   | 222,947
|                                                                                                   |  |              |         |               |   |        
|Total liabilities and shareholders equity                                                         |  | $            | 284,074 |               | $ | 288,693
|                                                                                                   |  |              |         |               |   |        

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



|NOTE: | The balance sheet at March 31, 2006 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 per share amounts)

(Unaudited)



|                                            |  |                                    |         |   |                                   |   |         |  
|------------------------------------------- |  | ---------------------------------- | ------- | - | --------------------------------- | - | ------- | -
|                                            |  | Thirteen Weeks Ended June 30, 2006 |         |   | Thirteen Weeks Ended July 1,
2005 |  
|Net sales                                   |  | $                                  | 167,673 |   |                                   | $ | 144,781 |  
|Cost of sales                               |  |                                    | 93,605  |   |                                   |   | 80,628  |  
|                                            |  |                                    |         |   |                                   |   |         |  
|Gross profit                                |  |                                    | 74,068  |   |                                   |   | 64,153  |  
|Operating expenses:                         |  |                                    |         |   |                                   |   |         |  
|Selling and distribution                    |  |                                    | 48,428  |   |                                   |   | 43,499  |  
|General and administrative                  |  |                                    | 15,593  |   |                                   |   | 13,454  |  
|                                            |  |                                    |         |   |                                   |   |         |  
|Operating income                            |  |                                    | 10,047  |   |                                   |   | 7,200   |  
|Other income                                |  |                                    | 330     |   |                                   |   | 680     |  
|Interest expense                            |  |                                    | (186    | ) |                                   |   | (81     | )
|                                            |  |                                    |         |   |                                   |   |         |  
|Income before income taxes                  |  |                                    | 10,191  |   |                                   |   | 7,799   |  
|Income taxes                                |  |                                    | 4,092   |   |                                   |   | 3,077   |  
|                                            |  |                                    |         |   |                                   |   |         |  
|Net income                                  |  |                                    | 6,099   |   |                                   |   | 4,722   |  
|                                            |  |                                    |         |   |                                   |   |         |  
|Per Common Share:                           |  |                                    |         |   |                                   |   |         |  
|Net income per share:                       |  |                                    |         |   |                                   |   |         |  
|Basic                                       |  | $                                  | 0.38    |   |                                   | $ | 0.30    |  
|                                            |  |                                    |         |   |                                   |   |         |  
|Diluted                                     |  | $                                  | 0.37    |   |                                   | $ | 0.30    |  
|                                            |  |                                    |         |   |                                   |   |         |  
|Weighted average common shares outstanding: |  |                                    |         |   |                                   |   |         |  
|Basic                                       |  |                                    | 16,196  |   |                                   |   | 15,877  |  
|                                            |  |                                    |         |   |                                   |   |         |  
|Diluted                                     |  |                                    | 16,407  |   |                                   |   | 15,991  |  
|                                            |  |                                    |         |   |                                   |   |         |  

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



4



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Keystone Automotive Industries, Inc.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)



|                                                                                  |  |                                  |        |   |                                 |   |        |  
|--------------------------------------------------------------------------------- |  | -------------------------------- | ------ | - | ------------------------------- | - | ------ | -
|                                                                                  |  | ThirteenWeeks EndedJune 30, 2006 |        |   | ThirteenWeeks EndedJuly 1, 2005 |  
|Operating activities:                                                             |  |                                  |        |   |                                 |   |        |  
|Net income                                                                        |  | $                                | 6,099  |   |                                 | $ | 4,722  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                                  |        |   |                                 |   |        |  
|Depreciation and amortization                                                     |  |                                  | 2,372  |   |                                 |   | 1,818  |  
|Provision for losses on uncollectible accounts                                    |  |                                  | 177    |   |                                 |   | 278    |  
|Provision for write-down of inventories                                           |  |                                  | 550    |   |                                 |   | 930    |  
|Stock-based compensation                                                          |  |                                  | 558    |   |                                 |   | 102    |  
|Excess tax benefit from stock-based compensation                                  |  |                                  | (392   | ) |                                 |   |       |  
|Gain on sale of assets, net                                                       |  |                                  | (36    | ) |                                 |   | (28    | )
|Changes in operating assets and liabilities:                                      |  |                                  |        |   |                                 |   |        |  
|Accounts receivable                                                               |  |                                  | 1,107  |   |                                 |   | 694    |  
|Inventories                                                                       |  |                                  | 1,799  |   |                                 |   | (7,166 | )
|Other assets                                                                      |  |                                  | 2,165  |   |                                 |   | 171    |  
|Accounts payable                                                                  |  |                                  | (8,605 | ) |                                 |   | (2,035 | )
|Accrued liabilities                                                               |  |                                  | 5,739  |   |                                 |   | 2,787  |  
|                                                                                  |  |                                  |        |   |                                 |   |        |  
|Net cash provided by operating activities                                         |  |                                  | 11,533 |   |                                 |   | 2,273  |  
|Investing activities:                                                             |  |                                  |        |   |                                 |   |        |  
|Proceeds from sale of assets                                                      |  |                                  | 63     |   |                                 |   | 47     |  
|Acquisitions of certain distribution centers, net of cash received                |  |                                  |       |   |                                 |   | (655   | )
|Purchases of property, plant and equipment                                        |  |                                  | (2,547 | ) |                                 |   | (1,159 | )
|                                                                                  |  |                                  |        |   |                                 |   |        |  
|Net cash used in investing activities                                             |  |                                  | (2,484 | ) |                                 |   | (1,767 | )
|Financing activities:                                                             |  |                                  |        |   |                                 |   |        |  
|Other debt, net                                                                   |  |                                  |       |   |                                 |   | (15    | )
|(Payment) borrowings under the bank credit facility, net                          |  |                                  | (9,377 | ) |                                 |   | 1,081  |  
|Excess tax benefit from stock-based compensation                                  |  |                                  | 392    |   |                                 |   |       |  
|Net proceeds on option exercises                                                  |  |                                  | 597    |   |                                 |   | 255    |  
|                                                                                  |  |                                  |        |   |                                 |   |        |  
|Net cash (used in) provided by financing activities                               |  |                                  | (8,388 | ) |                                 |   | 1,321  |  
|                                                                                  |  |                                  |        |   |                                 |   |        |  
|Net increase in cash and cash equivalents                                         |  |                                  | 661    |   |                                 |   | 1,827  |  
|Cash and cash equivalents at beginning of period                                  |  |                                  | 4,733  |   |                                 |   | 4,054  |  
|                                                                                  |  |                                  |        |   |                                 |   |        |  
|Cash and cash equivalents at end of period                                        |  |                                  | 5,394  |   |                                 | $ | 5,881  |  
|                                                                                  |  |                                  |        |   |                                 |   |        |  
|Supplemental disclosures:                                                         |  |                                  |        |   |                                 |   |        |  
|Interest paid during the period                                                   |  | $                                | 186    |   |                                 | $ | 68     |  
|                                                                                  |  |                                  |        |   |                                 |   |        |  
|Income taxes paid during the period                                               |  | $                                | 695    |   |                                 | $ | 304    |  
|                                                                                  |  |                                  |        |   |                                 |   |        |  

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



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Keystone Automotive Industries, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

June 30, 2006



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

The accompanying unaudited
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions of 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 13-week period ended June 30, 2006 are not necessarily indicative of
the results that may be expected for the full year ending March 30, 2007. For further information, refer to the financial statements and footnotes thereto for the year ended March 31, 2006, included in the Keystone Automotive Industries,
Inc. Form 10-K filed with the Securities and Exchange Commission on June 14, 2006.



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

The Company uses a 52/53 week fiscal
year. The Companys current fiscal year, which is a 52-week year, ends on the last Friday in March.



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

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



|4. | New Accounting Standards
|-- | ------------------------

In April 2005, the United
States Securities and Exchange Commission (SEC) approved a new rule that delayed the effective date of Statement of Financial Accounting Standards (SFAS) No. 123R, Share-Based Payment. Except for this deferral of
the effective date, the guidance in SFAS No. 123R was unchanged. Under the SECs rule, SFAS No. 123R became effective for the Company for annual, rather than interim, periods that began after June 15, 2005. The Company began
applying this Statement in accordance with the modified-prospective transition method of SFAS No. 123R. The implementation of this standard is further discussed in Note 6, Stock Compensation Plans.

Also, in November 2005, the Financial Accounting Standards Board (FASB) issued FASB Staff Position No. FAS-123R-3 (FSP 123R-3),
Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards. FSP 123R-3 provides an elective alternative transition method for calculating the pool of excess tax benefits available to absorb tax deficiencies
recognized subsequent to the adoption of FAS 123R. Companies may take up to one year from the effective date of FSP 123R-3 to evaluate the available transition alternatives and make a one-time election as to which method to adopt. The Company is
currently in the process of evaluating the alternative methods.



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

In October 2005, the Company acquired
substantially all of the assets of Veng USA LLC, a distributor of aftermarket collision replacement parts in the Northeast. Veng USA LLC had locations in Seekonk and Woburn, Massachusetts; Manchester and Milford, Connecticut; Manchester, New
Hampshire and Auburn, Maine. The total purchase price of Veng USA LLC was approximately $36.5 million in cash, net of cash received. This acquisition was accounted for under the purchase method of accounting and accordingly the assets acquired
and liabilities assumed were recorded at their estimated fair value as of the date of the acquisition. The excess of the purchase price over the estimated fair values of the net assets acquired resulted in goodwill of approximately
$27.5 million.

The following unaudited proforma information presents the results of operations of the Company as if the acquisition
had taken place at the beginning of the applicable period.



|                           |  |                                 |        
|-------------------------- |  | ------------------------------- | -------
|                           |  | ThirteenWeeks EndedJuly 1, 2005
|Net sales                  |  | $                               | 153,735
|Net income                 |  |                                 | 5,024  
|Earnings per diluted share |  | $                               | 0.31   
|                           |  |                                 |        

In addition, in June of 2005, the Company acquired certain assets of S&E Auto Panels, LLC, a
distributor of aftermarket collision replacement parts in Dexter, Missouri. The unaudited proforma results for the first quarter of fiscal 2006, assuming this acquisition had been made at the beginning of fiscal year 2006, would not be materially
different from the results reported.



|6. | Stock Compensation Plans
|-- | ------------------------

The Company adopted its
2005 Omnibus Incentive Plan (the 2005 Plan) in August 2005, pursuant to which awards of nonqualified stock options, service-based shares and performance-based shares have been made. The 2005 Plan replaced the Companys 1996 Employee
Stock Incentive Plan (the 1996 Plan). The 2005 Plan as adopted authorized the issuance of up to 1,850,000 shares and, as of June 30, 2006, approximately 1.3 million shares remained available for grant under the 2005 Plan plus shares
awarded under the 1996 Plan to the extent outstanding awards are forfeited, expire or otherwise terminate without the issuance of shares. Of the share authorization under the 2005 Plan, an aggregate of 740,000 full-value shares may be awarded and at
June 30, 2006, 523,945 shares remain available for grant as full-value awards (service-based and performance-based shares).

Prior to April
1, 2006, the Company accounted for its stock-based compensation plans as prescribed by Accounting Principles Board, or APB, Opinion No. 25, Accounting for Stock Issued to Employees, or APB No. 25. Accordingly, the Company recorded no
compensation cost in its statements of operations prior to fiscal 2007 for its fixed price stock option grants as the exercise price equaled the fair market value of the underlying stock on the grant date.

On April 1, 2006, the Company adopted the provisions of SFAS No. 123 (revised 2004), Share-Based Payment, or SFAS No. 123R. SFAS No. 123R
replaces SFAS No. 123 and supersedes APB Opinion No. 25 and subsequently issued stock option related guidance. The Company elected to use the modified-prospective transition method of implementation. Under this transition method, stock-based
compensation expense for the thirteen weeks ended June 30, 2006 included compensation expense for all stock-based awards granted subsequent to April 1, 2006 based on the grant-date fair value estimated in accordance with the provisions of SFAS No.
123R, and compensation expense for all stock-based awards granted prior to but unvested as of April 1, 2006 based on the grant-date fair value estimated in accordance with the original provisions of SFAS No. 123.



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The Company uses the Black-Scholes option-pricing model to value all options and the straight-line method
to amortize this fair value as compensation cost over the requisite service period. Total stock-based compensation expense included in general and administrative expenses in the Companys statement of operations for the thirteen weeks ended
June 30, 2006 was $0.3 million. The related income tax benefit was $0.1 million. The Company did not record any stock-based compensation expense related to stock options for the thirteen weeks ended July 1, 2005. In accordance with the
modified-prospective transition method of SFAS No. 123R, the Company has not restated prior periods.

As a result of adopting SFAS No. 123R
on April 1, 2006, the Companys earnings before income tax expense and net earnings for the thirteen weeks ended June 30, 2006, were 0.3 million and $0.2 million lower, respectively, than if the Company had continued to account for stock-based
compensation under APB No. 25. The related impact in 2006 to basic and diluted earnings per share was approximately $0.01.

Prior to
adoption of SFAS No. 123R, the Company reported all income tax benefits resulting from the exercise of stock options as operating cash inflows in its consolidated statements of cash flow. In accordance with SFAS No. 123R, the Company revised its
statement of cash flows presentation to include the excess tax benefits from the exercise of stock options as financing cash inflows rather than operating cash inflows. Accordingly, for the thirteen weeks ended June 30, 2006, the Company reported
$0.4 million of excess tax benefits as a financing cash inflow.

The following table reflects the impact on net income and earnings per
share as if the Company had applied the fair value based method of recognizing stock-based compensation costs as prescribed by SFAS No. 123 for the thirteen weeks ending July 1, 2005.



|                                                        |  |                                                                      |       |  
|------------------------------------------------------- |  | -------------------------------------------------------------------- | ----- | -
|                                                        |  | Thirteen WeeksEnded July 1, 2005 (thousands, exceptper share amount) |      
|                                                        | 
|Pro forma:                                              |  |                                                                      |       |  
|Net income  as reported                                |  | $                                                                    | 4,722 |  
|Add: Stock-based compensation as reported in net income |  |                                                                      | 62    |  
|Less: Fair value stock-based compensation               |  |                                                                      | (148  | )
|                                                        |  |                                                                      |       |  
|Net income  pro forma                                  |  | $                                                                    | 4,636 |  
|Net income per share  as reported:                     |  |                                                                      |       |  
|Basic                                                   |  | $                                                                    | 0.30  |  
|Diluted                                                 |  | $                                                                    | 0.30  |  
|Net income per share  pro forma:                       |  |                                                                      |       |  
|Basic                                                   |  | $                                                                    | 0.29  |  
|Diluted                                                 |  | $                                                                    | 0.29  |  

The following table summarizes the fixed stock option transactions for the thirteen weeks ended
June 30, 2006:



|                             |  |                  |   |  |                                 |       |                                                        |      |                                         |   |       
|---------------------------- |  | ---------------- | - |  | ------------------------------- | ----- | ------------------------------------------------------ | ---- | --------------------------------------- | - | ------
|                             |  | Number ofOptions |   |  | Weighted-Average Exercise Price |       | Weighted-Average Remaining Contractual
Term (in years) |      | Aggregate Intrinsic Value(in thousands)
|Fixed Price Stock Options:   |  |                  |   |  |                                 |       |                                                        |      |                                         |   |       
|Outstanding at April 1, 2006 |  | 515,256          |   |  | $                               | 20.15 |                                                        |      |                                         |   |       
|Granted                      |  | 217,315          |   |  |                                 | 35.94 |                                                        |      |                                         |   |       
|Exercised                    |  | (42,550          | ) |  |                                 | 17.17 |                                                        |      |                                         |   |       
|                             |  |                  |   |  |                                 |       |                                                        |      |                                         |   |       
|Outstanding at June 30, 2006 |  | 690,021          |   |  | $                               | 25.30 |                                                        | 7.62 |                                         | $ | 11,673
|                             |  |                  |   |  |                                 |       |                                                        |      |                                         |   |       
|Exercisable at June 30, 2006 |  | 239,206          |   |  | $                               | 16.19 |                                                        | 4.52 |                                         | $ | 6,227 
|                             |  |                  |   |  |                                 |       |                                                        |      |                                         |   |       

The aggregate intrinsic value in the preceding table is based on the Companys closing stock
price of $42.22 as of the last trading day of the period ended June 30, 2006. The aggregate intrinsic value of options (the amount by which the market price of the stock on the date of exercise exceeded the exercise price of the option) exercised
during the thirteen weeks ended June 30, 2006 and July 1, 2005 was $0.9 million and $0.5 million, respectively. As of June 30, 2006, there was $4.9 million of unrecognized compensation expense related to non-vested fixed price stock options that is
expected to be recognized over a weighted-average period of 2.1 years.



7



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##### Table of Contents

The fair value of stock options granted during the thirteen weeks ending June 30, 2006 was $16.21
per share and no options were granted for the thirteen weeks ending July 1, 2005. The fair value of each stock option was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:



|                                           |  |                                  |  
|------------------------------------------ |  | -------------------------------- | -
|                                           |  | ThirteenWeeks EndedJune 30, 2006 |  
|Black-Scholes Option Valuation Assumptions |  |                                  |  
|Risk free interest rate(1)                 |  | 5.03                             | %
|Expected life in years(2)                  |  | 5.25                             |  
|Expected volatility(3)                     |  | 41.59                            | %
|Expected dividend yield                    |  | 0                                | %

---

|(1) | The risk-free interest rate is based on a U.S. Treasury constant maturity interest rate whose
term is consistent with the expected life of the Companys stock options.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The expected life of the Companys stock options represents the estimated period of time until exercise and is based on historical experience of such awards.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Expected volatility is based on the historical volatility of the Companys common stock for the period consistent with the life of the Companys stock
options.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

The Companys service-based share awards have a vesting period of one to four years. Compensation expense,
representing the fair market value of the shares at the date of grant, net of assumptions regarding estimated future forfeitures, is charged to earnings over the vesting period. Compensation expense included in general and administrative expenses in
the Companys statement of operations, relating to these stock grants was $0.2 million and $0.1 million for the thirteen weeks ended June 30, 2006 and July 1, 2005, respectively.

The following table summarizes the service-based stock transactions for the thirteen weeks ended June 30, 2006:



|                               |  |                 |   |  |                                      |      
|------------------------------ |  | --------------- | - |  | ------------------------------------ | -----
|                               |  | Numberof Shares |   |  | Weighted-AverageGrant Date FairValue
|Shares of Service-Based Stock: |  |                 |   |  |                                      |      
|Outstanding at April 1, 2006   |  | 81,022          |   |  | $                                    | 27.63
|Granted                        |  | 57,115          |   |  |                                      | 38.54
|Vested                         |  | (7,500          | ) |  |                                      | 27.46
|Forfeited                      |  | (1,900          | ) |  |                                      | 27.70
|                               |  |                 |   |  |                                      |      
|Outstanding at June 30, 2006   |  | 128,737         |   |  | $                                    | 32.47
|                               |  |                 |   |  |                                      |      

The Companys performance-based share awards entitle participants to acquire shares of Common
Stock upon the attainment of specific performance goals over a fixed performance period. Compensation expense, representing the fair market value of the shares at the date of the grant, net of assumptions regarding future forfeitures and the
likelihood that the performance targets will be attained, is charged to earnings over the performance period. Compensation expense of less than $0.1 million was recognized for the thirteen weeks ended June 30, 2006 and was included in general and
administrative expenses in the Companys statement of operations for that period. No awards of performance-based shares had been made prior to the quarter ended June 30, 2006.

The following table summarizes the performance-based share transactions for the thirteen weeks ended June 30, 2006:

|                                   |  |                 |  |                                      |      
|---------------------------------- |  | --------------- |  | ------------------------------------ | -----
|                                   |  | Numberof Shares |  | Weighted-AverageGrant Date FairValue
|Shares of Performance-Based Stock: |  |                 |  |                                      |      
|Outstanding at April 1, 2006       |  |                |  |                                      |     
|Granted(1)                         |  | 108,840         |  | $                                    | 35.94
|Earned                             |  |                |  |                                      |     
|                                   |  |                 |  |                                      |      
|Outstanding at June 30, 2006       |  | 108,840         |  | $                                    | 35.94
|                                   |  |                 |  |                                      |      



---

|(1) | Under the grant, from zero to 108,840 shares may be earned, with the target performance
resulting in the issuance of 54,420 shares. For compensation expense purposes, the Company assumed that the target performance would be met with no forfeitures.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of June 30, 2006, there was $5.1 million of unrecognized compensation expense related to service-based and performance-based shares that is expected
to be recognized over a weighted-average period of approximately 3.1 years.



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##### Table of Contents

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



|                            |  |                                  |       |                                 |   |      
|--------------------------- |  | -------------------------------- | ----- | ------------------------------- | - | -----
|                            |  | ThirteenWeeks EndedJune 30,
2006 |       | ThirteenWeeks EndedJuly 1,
2005
|                            |  | (in millions)                   
|Automotive body parts       |  | $                                | 87.1  |                                 | $ | 72.5 
|Bumpers                     |  |                                  | 49.5  |                                 |   | 43.3 
|Paint and related materials |  |                                  | 16.0  |                                 |   | 15.7 
|Wheels and related products |  |                                  | 14.2  |                                 |   | 12.3 
|Other                       |  |                                  | 0.9   |                                 |   | 1.0  
|                            |  |                                  |       |                                 |   |      
|Net Sales                   |  | $                                | 167.7 |                                 | $ | 144.8
|                            |  |                                  |       |                                 |   |      



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

The Company has suspended
its defined benefit pension plan (the Plan) to provide 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(1)Weeks EndedJune 30, 2006 |      |   | Thirteen(1)Weeks EndedJuly 1, 2005 |  
|                                           |  | (in thousands)                      |     
|Service cost                               |  | $                                   | 33   |   |                                    | $ | 30  |  
|Interest cost                              |  |                                     | 75   |   |                                    |   | 74  |  
|Expected return on plan assets             |  |                                     | (100 | ) |                                    |   | (94 | )
|Recognized net actuarial (gains) or losses |  |                                     | 36   |   |                                    |   | 56  |  
|Prior service cost recognized              |  |                                     |     |   |                                    |   | 175 |  
|                                           |  |                                     |      |   |                                    |   |     |  
|                                           |  | $                                   | 44   |   |                                    | $ | 241 |  
|                                           |  |                                     |      |   |                                    |   |     |  

---

|(1) | The total amount expensed for the quarters ended June 30, 2006 and July 1, 2005 was $44,000 and $241,000, respectively.
|--- | -----------------------------------------------------------------------------------------------------------------------



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

General

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 statement set forth herein and in the
Companys Form 10-K for the year ended March 31, 2006, on file with the Securities and Exchange Commission.

The following
discussion should be read along with the unaudited condensed consolidated financial statements included in the Form 10-Q, as well as the Companys 2006 Annual Report on Form 10-K filed with the Securities and Exchange Commission, which provides
a more thorough discussion of the Companys products and services, industry outlook and business trends.

Critical Accounting Policies

The Companys financial statements have been prepared in conformity with accounting principles generally accepted in the United
States. The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements as well
as the reported amounts of revenues and expenses during the reporting period. Estimates have been prepared on the basis of the most current and best available information. Actual results could differ materially from those estimates.



9



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##### Table of Contents

During the first quarter of fiscal 2007, the Company consistently applied the critical accounting
policies discussed in its annual report on Form 10-K for the year ended March 31, 2006. For a complete discussion regarding these critical accounting policies, refer to this annual report on Form 10-K. In addition to these critical accounting
policies, the Company has added Share-Based Payments as a critical accounting policy upon the adoption of SFAS No. 123R as of April 1, 2006.

Share-Based Payment

The Company accounts for our stock-based compensation plans as prescribed by the air value provisions
of SFAS No. 123R and uses the Black-Scholes option-pricing model to determine the fair value of its stock options. This model requires the input of certain assumptions, including the expected life of stock options, expected stock price
volatility and the estimate of stock option forfeitures. If actual results are different from these assumptions, the stock-based compensation expense reported in the Companys financial statements may not be representative of the actual
economic cost of the stock-based compensation. In addition, significant changes in these assumptions could materially impact the Companys stock-based compensation expense on future awards.

Results of Operations

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



|                                    |  |                                  |   |  |                                 |  
|----------------------------------- |  | -------------------------------- | - |  | ------------------------------- | -
|                                    |  | ThirteenWeeks EndedJune 30, 2006 |   |  | ThirteenWeeks EndedJuly 1, 2005 |  
|Net sales                           |  | 100.0                            | % |  | 100.0                           | %
|Cost of sales                       |  | 55.8                             |   |  | 55.7                            |  
|                                    |  |                                  |   |  |                                 |  
|Gross profit                        |  | 44.2                             |   |  | 44.3                            |  
|Selling and distribution expenses   |  | 28.9                             |   |  | 30.0                            |  
|General and administrative expenses |  | 9.3                              |   |  | 9.3                             |  
|Other income                        |  | 0.2                              |   |  | 0.5                             |  
|Interest expense                    |  | (0.1                             | ) |  | (0.1                            | )
|                                    |  |                                  |   |  |                                 |  
|Income before income taxes          |  | 6.1                              |   |  | 5.4                             |  
|Income taxes                        |  | 2.5                              |   |  | 2.1                             |  
|                                    |  |                                  |   |  |                                 |  
|Net income                          |  | 3.6                              | % |  | 3.3                             | %
|                                    |  |                                  |   |  |                                 |  

Thirteen weeks ended June 30, 2006 compared to thirteen weeks ended July 1, 2005

Net sales were $167.7 million for the 13-week quarter ended June 30, 2006 (the 2006 Quarter) compared to $144.8 million for the 13-week
quarter ended July 1, 2005 (the 2005 Quarter), an increase of $22.9 million or 15.8%. During the 2006 Quarter, sales of automotive body parts (including fenders, hoods, headlights, radiators, grilles and other crash parts),
increased by $14.6 million (an increase of 20.1%), sales of new and recycled bumpers increased by $6.2 million (an increase of 14.3%), sales of wheels and related materials increased by $1.9 million or 15.5% and sales of paint and related materials
increased by $0.3 million (an increase of 1.9%).

Same store sales increased 10.8% during the 2006 Quarter, primarily as a result of the
insurance companies continuing to increase the specification of aftermarket parts in the repair of insured vehicles, improvements in the Companys in-stock positions and price increases instituted in the third quarter of fiscal 2006.

Gross profit increased in the 2006 Quarter to $74.1 million (44.2% of net sales) from $64.2 million (44.3% of net sales) in the 2005
Quarter, an increase of 15.4%. Gross profit as a percentage of net sales decreased to 44.2% in the 2006 Quarter from 44.3% in the 2005 Quarter, due primarily to cross-dock expenses of approximately $1.3 million. The implementation of cross-docks has
resulted in the elimination of certain expenses previously included in selling and distribution costs, which have been replaced with logistical expenses reflected in cost of sales. These expenses were partially offset by a more favorable product
mix, price adjustments made during the third quarter of fiscal 2006 and lower inventory control costs. The Companys gross profit margin has fluctuated, and is expected to continue to fluctuate, depending on a number of factors, including
changes in product prices, product mix, competition and the strength of the United States dollar relative to the Taiwanese dollar.

Selling
and distribution expenses increased to $48.4 million (28.9% of net sales) in the 2006 Quarter from $43.5 million (30.0% of net sales) in the 2005 Quarter, an increase of 11.3%. The decrease in these expenses as a percentage of net sales was due in
part to the elimination of certain costs as a result of the implementation of cross-docks, partially offset by higher fuel costs.



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##### Table of Contents

General and administrative expenses increased to $15.6 million (9.3% of net sales) in the 2006 Quarter
from $13.5 million (9.3% of net sales) in the 2005 Quarter, an increase of 15.9%. As a percentage of sales, these expenses were flat compared to the 2005 Quarter, although the 2006 Quarter was impacted by the adoption of SFAS No. 123R,
Shared Based Payment, by $0.3 million.

Other income decreased $0.3 million for the 2006 Quarter, primarily due to the shift in
reporting vendor discounts to Cost of sales. Other income for the 2006 Quarter was made up of a number of components, but primarily finance fees from past-due customer accounts.

Interest expense increased during the 2006 Quarter, reflecting the higher credit facility balance, primarily due to funding a portion of the purchase of
Veng USA LLC.

As a result of the above factors, the Company experienced an increase in net income in the 2006 Quarter to $6.1 million, as
compared to net income of $4.7 million in the 2005 Quarter.

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 Keystone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 Keystone has become more geographically diversified. Other factors which 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, for the development and implementation of an enterprise-wide
management information system and for working capital to finance increased sales levels. At June 30, 2006, working capital was $150.2 million compared to $142.7 million at March 31, 2006. The Company has financed its working capital
requirements primarily from cash flow from operations.

During the three months ended June 30, 2006, the Companys cash and cash
equivalents increased by $0.7 million, while the Company reduced its borrowings under its bank credit facility by $9.4 million. This increase is the result of (i) an increase in cash provided by operating activities of $11.5 million,
offset by (ii) a increase in cash used in financing activities of $8.4 million and cash used in investing activities of $2.5 million (primarily as a result of cash used to purchase property and equipment). The increase in cash used in financing
activities resulted primarily from payments under the Companys credit facility partially offset by cash proceeds from the exercise of stock options. The increase in cash provided by operating activities resulted primarily from the elimination
of $3.2 million of non-cash expenses from the reported net income of $6.1 million. The most significant non-cash expenses were depreciation and amortization and the provision for a write-down of inventories.

The Company has in place a $75.0 million revolving secured line of credit with commercial lenders that matures on October 14, 2010. The Company has
the option to expand the credit facility to $100.0 million. Advances under the revolving line of credit bear interest either at LIBOR plus 0.75% or at the lenders prime rate. At June 30, 2006, $0.2 million had been drawn down under the
line of credit. The line of credit is subject to certain restrictive covenants set forth in the loan agreement, which requires that the Company maintain certain financial ratios. The Company was in compliance with all such covenants at June 30,
2006. The Company has outstanding lines of credit in the aggregate amount of $13.1 million issued to its primary insurers to secure the Companys deductible reimbursement obligations. The amount of these letters of credit reduces the funds
available under the Companys credit facility.

The Company believes that its existing working capital, anticipated cash flow from
operations and funds anticipated to be available under its line of credit will enable it to finance its operations, including 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 Item 1A  Risk Factors in the
Companys Form 10-K for the year ended March 31, 2006 and under Part II, Item 1A  Risk Factors below. The availability of funds under the Companys 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 items related to the 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 may not be available under the credit facility.



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##### Table of Contents

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 $39.4 million at June 30, 2006, or approximately 13.9% of total assets or 17.1% of consolidated shareholders equity. Goodwill amounted to $39.4 million at March 31, 2006, or approximately 13.6% of total assets
or 17.7% of consolidated shareholders equity.

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. As of June 30, 2006, other intangible assets amounted to $1.3 million. For each of the quarters ended June 30, 2006 and July 1, 2005,
amortization of other intangible assets was approximately $0.1 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.

New Accounting Standards

See Note 4 to Notes to Condensed Consolidated Financial Statements.



|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, where interest 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 and its operations in Canada. 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. The consolidated balance sheets and statements of income of our Canadian operations are translated into U.S.
dollars at the current and average exchange rates, respectively. Under its present policies, the Company does not attempt to hedge its currency exchange rate exposure.



|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 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.

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 June 30, 2006, 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 have been no changes in
the Companys internal controls over financial reporting that occurred during the Companys most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Companys internal
control over financial reporting.



12



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##### Table of Contents

PART II - OTHER INFORMATION



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

As previously disclosed,
in November 2002 General Motors Corporation instituted a 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 filings have disclosed that it is seeking compensatory damages of between $2.0 and $2.3 million as
well as certain equitable relief, including an injunction. 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 judgment on the issue of liability. After a hearing in May 2005, the Court granted the Companys motion for summary judgment and dismissed
General Motors complaint. On May 24, 2005, General Motors filed a Notice of Appeal. On June 30, 2006, the Federal Court of Appeals for the Sixth Circuit affirmed the District Courts finding that the Companys replacement
grilles did not cause customer confusion as to the source of the grilles and that there was no point of sale infringement. The Court of Appeals referred back to the District Court the narrow question as to whether portions of the emblem
placeholder visible around or under an installed emblem might cause confusion among downstream observers. No date for further proceedings has been set.

On December 2, 2005, Ford Global Technologies, LLC (Ford) filed a complaint with the United States International Trade Commission (USITC) against the Company and five other named
Respondents, including four Taiwan-based manufacturers. On December 12, 2005, Ford filed an Amended Complaint. Both the Complaint and the Amended Complaint charge the Company and the other Respondents with infringement of 14 design patents that
Ford alleges cover eight parts on the 2004-2005 Ford F-150 truck (the Ford Design Patents). Ford has asked the USITC to issue a permanent general exclusion order excluding from entry into the United States all automotive parts that
infringe the Ford Design Patents and that are imported into the United States, sold for importation in the United States, or sold within the United States after importation. Ford also seeks a permanent order directing the Company and the other
Respondents to cease and desist from, among other things, selling, marketing, advertising, distributing and offering for sale imported automotive parts that infringe the Ford Design Patents. On December 28, 2005, the USITC issued a Notice of
Investigation based on Fords Amended Complaint. The USITCs Notice of Investigation was published in the Federal Register on January 4, 2006. On January 23, 2006, the Company filed its Response to the Complaint and Notice of
Investigation. In the Response, the Company denies, among other things, that any of the Ford Design Patents is valid and/or enforceable and, accordingly, denies each and every allegation of infringement. The Company further asserts several
affirmative defenses, any of which, if successful, would preclude the USITC from granting any of Fords requested relief. The Administrative Law Judge (ALJ) recently struck the Companys affirmative defenses of patent
exhaustion, permissible repair, license and patent misuse. This interlocutory ruling will eventually be reviewed by the USITC Commissioners following the ALJs ruling on the overall investigation. The ALJs ruling does not impact the
Companys other affirmative defenses. Additionally, the ALJ has recently granted Fords request to drop four patents from the investigation. A hearing before the ALJ is scheduled for August 2006. The deadline for the ALJs ruling is
December 4, 2006. The deadline for a determination by the USITC is March 5, 2007. The Company will continue to vigorously defend this action. To date, the Companys sales of these parts have been minimal, but as the design for the
2004 model is incorporated into later year models of the F-150 and these trucks have been on the road longer, the sale of aftermarket replacement parts will increase substantially. If the USITC were to uphold each of the remaining 10 design patents
in question, it is not anticipated that the loss of sales of these parts over time would be materially adverse to the financial condition or results of operations of the Company. However, depending upon the nature and extent of any adverse ruling,
other car manufacturers may attempt to assert similar allegations based upon design patents on a significant number of parts for several of its models, which over time could have a material adverse impact on the entire aftermarket parts industry.



|Item 1A. | Risk Factors.
|-------- | -------------

There have been no material
changes in our risk factors from those disclosed in Part 1, Item 1A, in the Companys Annual Report on Form 10-K for the year ended March 31, 2006.



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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.                                                



14



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SIGNATURES

Pursuant to the requirements of the Securities and 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/ Jeffrey T. GrayJeffrey T. GrayChief Financial Officer(Duly Authorized Officer and Principal Financial and Accounting Officer)


Date: August 8, 2006



15