<PAGE>

================================================================================


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 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 March 31, 2000

                                       Or

    / /    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

                        Commission File Number 333-58675


                               KEY COMPONENTS, LLC
             ------------------------------------------------------
             (Exact name of Registrant as Specified in its charter)

                  Delaware                               04-3425424
      -------------------------------         ---------------------------------
      (State or Other Jurisdiction of         (IRS Employer Identification No.)
       Incorporation or Organization)

    200 White Plains Road, Tarrytown NY                     10591
    -----------------------------------                     -----
  (Address of Principal Executive Offices)               (Zip Code)

                                 (914) 332-8088
              ----------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)

                          KEY COMPONENTS FINANCE CORP.
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

                  Delaware                                14-1805946
      -------------------------------          ---------------------------------
      (State or Other Jurisdiction of          (IRS Employer Identification No.)
       Incorporation or Organization)

    200 White Plains Road, Tarrytown NY                      10591
    -----------------------------------                   ----------
  (Address of Principal Executive Offices)                (Zip Code)

                                 (914) 332-8088
              ----------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)

     Indicate by check mark whether 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 registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                             /x/ Yes / / No

     As of May 12, 2000, all of the membership interests in Key Components, LLC
were owned by Key Components, Inc. and Keyhold, Inc., privately-held New York
corporations. All of the shares of common stock of Key Components Finance Corp.
were owned by Key Components, LLC.

================================================================================


<PAGE>


                        KEY COMPONENTS, LLC

                          Form 10-Q Index

                          March 31, 2000

                                                                           Page
                                                                          Number
                                                                          ------
PART I

Item 1. -- Consolidated Financial Statements:

           Balance Sheets................................................   2
           Statements of Income..........................................   3
           Statements of Cash Flows......................................   4
           Notes to Consolidated Financial Statements....................   5

Item 2. -- Management's Discussion and Analysis of Financial Condition
           and Results of Operations.....................................  12

Item 3. -- Quantitative and Qualitative Disclosures about Market Risk ...  18

PART  II

Item 6. -- Exhibits and Reports on Form 8-K..............................  19

Signatures ..............................................................  20



                                       1

<PAGE>


                         PART I -- FINANCIAL INFORMATION

Item 1 -- Consolidated Financial Statements

                      KEY COMPONENTS, LLC AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                           March 31,              December 31,
                                                                             2000                    1999
                                                                       ------------------      ------------------
<S>                                                                       <C>                     <C>
Assets:                                                                 (unaudited)
Current
   Cash and cash equivalents                                              $   6,088               $   4,171
   Accounts receivable, net of allowance for doubtful accounts
     of  $472 and $511 at March 31, 2000 and December 31, 1999,
     respectively                                                            22,291                  18,944
   Inventories                                                               23,146                  22,372
   Prepaid expenses and other current assets                                  1,188                   1,140
   Net assets of discontinued operations                                     10,719                  14,610
                                                                       ------------------      ------------------
     Total current assets                                                    63,432                  61,237

Property and equipment, net                                                  19,172                  19,038
Goodwill, net                                                                91,535                  92,098
Deferred financing costs, net                                                 5,800                   5,965
Intangibles, net                                                              1,088                   1,251
Other assets                                                                  1,024                     969
                                                                       ------------------      ------------------
                                                                           $182,051                $180,558
                                                                       ==================      ==================

Liabilities and Member's Equity:
Current
   Current portion of long-term debt and other long-term
     obligations                                                          $   4,669               $   4,759
   Accounts payable                                                           6,768                   6,372
   Accrued interest                                                           3,410                   1,660
   Accrued compensation                                                       4,201                   3,881
   Accrued expenses and other current liabilities                             3,400                   3,529
                                                                       ------------------      ------------------
     Total current liabilities                                               22,448                  20,201


Long term debt                                                              129,849                 131,362
Accrued stock appreciation rights liability                                   5,839                   5,898
Accrued lease costs - long term                                                 577                     586
                                                                       ------------------      ------------------
     Total liabilities                                                      158,713                 158,047

Redeemable member's equity                                                   13,100                  13,100

Member's equity                                                              10,238                   9,411
                                                                       ------------------      ------------------
                                                                           $182,051                $180,558
                                                                       ==================      ==================
</TABLE>

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

                                       2

<PAGE>



               KEY COMPONENTS, LLC AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF INCOME
                     (Unaudited, in thousands)


<TABLE>
<CAPTION>
                                                                  For the Three Months Ended March 31,
                                                                ----------------------------------------
                                                                      2000                  1999
                                                                ------------------    ------------------
<S>                                                                  <C>                   <C>
Net sales                                                            $39,529               $30,835
Cost of goods sold                                                    23,118                19,013
                                                                ------------------    ------------------
         Gross profit                                                 16,411                11,822

Selling, general and administrative expenses                           8,063                 6,577
                                                                ------------------    ------------------
         Income from operations                                        8,348                 5,245

Other income (expense):
   Other income                                                          210                   114
   Interest expense                                                   (3,428)               (3,503)
                                                                ------------------    ------------------
         Income before provision for income taxes                      5,130                 1,856
Provision for income taxes                                               303                   729
                                                                ------------------    ------------------
         Income from continuing operations                             4,827                 1,127
                                                                ------------------    ------------------
Loss from discontinued operations:
   (Loss) income from operations of the inverter business
   (less income taxes of $0 and $31, respectively)                       (23)                  308
   Loss on disposal of Heart and Cruising, including
      provision of $85 for operating losses during April 2000         (3,055)                    -
                                                                ------------------    ------------------
         (Loss) income from discontinued operations                   (3,078)                  308
                                                                ------------------    ------------------
         Net Income                                                  $ 1,749               $ 1,435
                                                                ==================    ==================
</TABLE>

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


                                       3

<PAGE>


                      KEY COMPONENTS, LLC AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (Unaudited, in thousands)


<TABLE>
<CAPTION>
                                                                   For the Three Months Ended March 31,
                                                                  --------------------------------------
                                                                        2000                 1999
                                                                  -----------------     ----------------
<S>                                                                   <C>                   <C>
Cash flows from operating activities:
     Net income                                                       $ 1,749               $ 1,434
     Adjustments to reconcile net income to net cash provided
        by operating activities:
        Loss on discontinued operations                                 3,078                  (308)
        Allowance for doubtful accounts                                   (39)                  106
        Depreciation and amortization                                   1,910                 1,699
        Changes in assets and liabilities, net of acquisitions:
            Accounts receivable                                        (3,308)               (3,853)
            Inventories                                                  (774)                 (305)
            Prepaid expenses and other assets                            (103)                 (243)
            Accounts payable                                              396                 1,058
            Accrued expenses                                            1,807                 4,301
                                                                  -----------------     ----------------
            Net cash provided by continuing operations                  4,693                 4,197
            Net cash provided by discontinued operations                  813                   631
                                                                  -----------------     ----------------
     Net cash provided by operating activities                          5,529                 4,520
                                                                  -----------------     ----------------

Cash flows from investing activities:
     Acquisition of Valley Forge Corporation                                -               (82,441)
     Acquisition of G&H Technology, Inc.                                    -                (3,900)
     Proceeds from sale of Force 10 Marine Company                          -                 1,700
     Funding of assets held for sale                                        -                  (210)
     Capital expenditures                                              (1,026)                 (590)
                                                                  -----------------     ----------------
          Net cash used in investing activities                        (1,026)              (85,441)
                                                                  -----------------     ----------------

Cash flows from financing activities:
     Payments of long-term debt and capital lease obligations          (1,611)              (10,598)
     Proceeds from debt issued                                              -                82,639
     Deferred financing costs                                             (53)               (2,158)
     Capital contributions                                                  -                 3,259
     Member withdrawals                                                  (922)                  (11)
                                                                  -----------------     ----------------
         Net cash (used in) provided by financing activities           (2,586)               73,131
                                                                  -----------------     ----------------
Net increase (decrease) in cash and cash equivalents                    1,917                (7,790)
Cash and cash equivalents, beginning of period                          4,171                13,119
                                                                  -----------------     ----------------
Cash and cash equivalents, end of period                              $ 6,088               $ 5,329
                                                                  =================     ================
</TABLE>


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

                                       4

<PAGE>


                      KEY COMPONENTS, LLC AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

1.   Basis of Presentation

The consolidated financial statements as of and for the three months ended March
31, 2000 include the financial statements of Key Components, LLC ("KCLLC"), and
its wholly-owned subsidiaries (collectively the "Company"). All significant
intercompany transactions have been eliminated.

The Company is in the business of the manufacture and sale of custom engineered
essential componentry in a diverse array of end use markets. Through its two
business segments, mechanical engineered components and electrical components,
the Company targets its products to original equipment manufacturers. The
Company's mechanical engineered components, whose product offerings consist
primarily of medium security lock products and accessories, flexible shaft and
remote valve control components and turbo-charger actuators, are manufactured by
Hudson Lock, LLC ("Hudson"), ESP Lock Products, LLC ("ESP"), B.W. Elliott
Manufacturing, LLC ("BWE") and Gits Manufacturing, LLC ("Gits"). The Company's
electrical components, whose product offerings include specialty electrical
components including, but not limited to, weather- and corrosion-resistant
wiring devices and battery chargers and high-voltage utility switches, are
manufactured by Marine Industries, LLC ("Marinco"), Atlantic Guest, Inc.
("Guest") and Turner Electric, LLC ("Turner").

The Company also wholly owns two companies and has an interest of approximately
47% of a Dutch enterprise all in the business of manufacturing and selling power
inverters and related instrumentation. In November 1999, the Company had
determined to sell its interests in all three entities and has classified the
net assets of and operations related to these entities as discontinued (Note 2).

Key Components, Inc. ("KCI"), a New York corporation, holds the majority
membership interest in KCLLC. KCI holds no other assets other than its
investment in KCLLC and has no operations. As a result, all transactions of or
obligations related to KCI are reflected in the consolidated financial
statements of KCLLC.


The accompanying unaudited financial statements of the Company contain all
adjustments that are, in the opinion of management, necessary for a fair
statement of results for the interim periods presented. While certain
information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted, the Company believes that the disclosures herein
are adequate to make the information not misleading. The results of operations
for the interim periods are not necessarily indicative of the results for full
years. These financial statements should be read in conjunction with the
consolidated financial statements and notes thereto for the year ended December
31, 1999 included in the Company's Form 10-K.


2.   Acquisitions and Dispositions

During the three months ended March 31, 1999, the Company acquired the entities
described below, which were accounted for by the purchase method of accounting.
The results of their operations have been included in the consolidated financial
statements since their respective dates of acquisition.

On January 19, 1999, the Company acquired all of the outstanding shares of
Valley Forge Corporation ("VFC") for a purchase price of approximately $84.0
million (including the issuance of stock appreciation rights of approximately
$1.4 million) and assumed liabilities of approximately $21.7 million. In
conjunction with the acquisition, the Company repaid approximately $8.9 million
of VFC's

                                       5

<PAGE>


outstanding long-term debt out of the approximately $21.7 million of liabilities
assumed as part of the acquisition. VFC manufactured electrical and mechanical
engineered components sold to original equipment manufacturers ("OEM"), dealers,
and distributors. The Company recorded the excess purchase price over net assets
acquired of approximately $52.5 million as goodwill. The Company ascribed a
thirty-five year useful life to this goodwill.

At the time of the acquisition, the Company decided to sell two VFC
subsidiaries, Force 10 Marine Company ("Force 10") and Multiplex Technology,
Inc. ("Multiplex"). In accordance with Emerging Issues Task Force ("EITF")
Bulletin 87-11, the Company recorded the anticipated net proceeds from the sale
of these subsidiaries adjusted for the anticipated net cash outflows during the
holding period (date of acquisition to date of sale) as assets held for sale. In
addition, the net earnings from these subsidiaries during the holding period
were excluded from the operations of the Company, in accordance with EITF 87-11.
Such results and sale proceeds have been included in goodwill. The sale of Force
10 was completed on February 26, 1999 for proceeds before taxes of $1.7 million
in cash. Multiplex was sold on May 28, 1999 for proceeds before taxes of
approximately $4.3 million. The tax liability for the sales of Force 10 and
Multiplex was approximately $144,000.

In November 1999, management of the Company decided to withdraw from the
business of manufacturing and selling power inverters and related
instrumentation by selling its interests in Heart Interface Corporation
("Heart"), Cruising Equipment Company ("Cruising") and Mastervolt International
B.V. ("Mastervolt"), all of which were acquired as part of the VFC acquisition.
In accordance with Accounting Principles Board Opinion 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions," the Company recorded the net assets of Heart, Cruising, and
Mastervolt as net assets of discontinued operations and reported the results of
operations as loss from discontinued operations. In April 2000, the Company
consummated the sale of Heart and Cruising. The Company received approximately
$9.0 million in proceeds before any transaction related expenses. Of the $9.0
million of proceeds, $600,000 was placed in escrow in accordance with the
agreement. The Company recorded a loss on disposal of Heart and Cruising of
approximately $3.1 million. To the extent that cash is released from escrow
following the termination of the Company's obligations as defined in the
agreement, such funds will be recorded as a gain at that time.

The Company believes it will sell its interest in Mastervolt for book value,
however no definitive agreement has been signed to date.

The following table summarizes the net assets of the power inverter business as
of March 31, 2000.

                                                           (in thousands)
Accounts receivable                                          $  3,948
Inventory                                                       4,034
Other current assets and prepaid expenses                         141
Plant and equipment, net                                          887
Goodwill, net                                                   4,734
Other intangibles, net                                            134
Other assets                                                        2
Deferred tax assets                                               666
Bank overdraft                                                   (689)
Accounts payable                                               (1,223)
Accrued wages and related                                        (566)
Accrued expenses                                               (1,173)
Accrued loss on disposal                                       (3,055)
                                                        ---------------------
         Net assets of Heart and Cruising                       7,840
Investment in and notes receivable from Mastervolt              2,879
                                                        ---------------------
                                                              $10,719
                                                        =====================


The summary of the operations of the power inverter business for the three
months ended March 31, 2000 and 1999 is as follows:

<TABLE>
<CAPTION>
(in thousands)                                                            March 31,
                                                              -----------------------------------
                                                                   2000                 1999
                                                              -----------------------------------
<S>                                                               <C>                  <C>
Net sales                                                         $ 5,792              $4,241
                                                              -----------------------------------

(Loss) income from operations of the inverter business
  (less income taxes of $0 and $31, respectively)                     (23)                308
Loss on disposal of Heart and Cruising, including
  provision of $85 for operating losses during April 2000          (3,055)                  -
                                                              -----------------------------------
Net (loss) income of discontinued operations                      $(3,078)          $     308
                                                              ===================================
</TABLE>

On February 5, 1999, the Company acquired G&H Technology, Inc. ("G&H") for $4.0
million in cash and the assumption of certain liabilities. The Company recorded
goodwill of approximately $3.0 million in connection with the acquisition. The
Company integrated the G&H acquisition into its flexible shaft product line.

The acquisitions were financed with available Company resources and
approximately $82 million from the Company's $60 million term loan and a $40
million revolving credit facility. The term loan is payable in quarterly
installments through January 19, 2005. Current maturities of long-term debt at
March 31, 2000 included $4.5 million related to the term loan. The revolving
credit facility commitment (of which there were no borrowings outstanding at
March 31, 2000) is for six years. The term loan and revolving credit facility
bear interest at fluctuating interest rates determined by reference to the
agent's base rate plus an applicable margin which will vary from 1.50% to 2.25%.
The revolving credit facility also calls for a fee of 0.50% on the unused
portion of the facility.


                                       7

<PAGE>

3.   Inventories

Inventories consist of the following:


(In thousands)                              March 31,             December 31,
                                              2000                   1999
                                        ----------------      -----------------

Raw materials                               $11,839                $10,774
Work-in-process                               7,256                  6,401
Finished goods                                4,051                  5,197
                                        ----------------      -----------------
         Total inventory                    $23,146                $22,372
                                        ================      =================


4.   Operating Segments

The Company conducts its operations through two businesses, the manufacture and
sale of mechanical engineered components and electrical components. The
mechanical engineered components business manufactures flexible shaft products,
specialty locks and related accessories and turbo charger actuators and related
componentry. The electrical components business produces an array of electrical
componentry items for recreational and industrial applications and switches for
utility companies, which are utilized in industrial markets.

The Company evaluates performance and allocates resources based on profit or
loss from operations before interest, taxes and depreciation and amortization
("EBITDA"). In its calculation of EBITDA certain charges that management
determines as non-recurring are excluded. Segment information for three months
ended March 31, 2000 and 1999 is as follows:


<TABLE>
<CAPTION>
(In thousands)                                    Mechanical
                                                  Engineered              Electrical
                                                  Components              Components                 Total
                                              --------------------    --------------------    --------------------
<S>                                                  <C>                     <C>                     <C>
Three months ended March 31, 2000:
   Net sales from external customers                 $22,753                 $16,776                 $39,529
   Intersegment net sales                                 61                       -                      61
   Segment profit - EBITDA                             7,337                   3,643                  10,980
   Segment assets                                    109,006                  56,447                 165,453
   Depreciation and amortization                       1,163                     499                   1,662

Three months ended March 31, 1999:
   Net sales from external customers                 $19,706                 $11,129                 $30,835
   Intersegment net sales                                130                       -                     130
   Segment profit - EBITDA                             5,839                   1,960                   7,799
   Segment assets                                    113,218                  64,447                 177,665
   Depreciation and amortization                         986                     490                   1,476

December 31, 1999:
   Segment assets                                    $91,037                 $71,534                $162,571
</TABLE>


                                       8

<PAGE>


Reconciliation of Selected Segment Information to the Company's Consolidated
Totals:

<TABLE>
<CAPTION>
(In thousands)                                                             Three Months Ended March 31,
                                                                ----------------------------------------------------
                                                                         2000                        1999
                                                                ------------------------    ------------------------
<S>                                                                    <C>                         <C>
Profit or loss:
  Total profit from reportable segments                                $ 10,980                    $  7,799
  Reconciling  items:
     Corporate expenses                                                    (487)                       (521)
     Depreciation and amortization                                       (1,910)                     (1,699)
     Interest expense                                                    (3,428)                     (3,503)
     Management fee                                                        (225)                       (200)
     Non-recurring income (charges)                                         200                         (20)
                                                                ------------------------    ------------------------
Total consolidated income before taxes                                 $  5,130                    $  1,856
                                                                ========================    ========================

                                                                      March 31, 2000           December 31, 1999
                                                                ------------------------    ------------------------
Assets:
  Total assets for reportable segments                                 $165,453                    $162,571
  Unallocated amounts:
    Corporate assets                                                      5,879                       3,377
    Net assets of discontinued operations                                10,719                      14,610
                                                                ------------------------    ------------------------
Total consolidated assets                                              $182,051                    $180,558
                                                                ========================    ========================
</TABLE>

5.   Member's Equity

During the three months ended March 31, 2000, KCI made a withdrawal of
approximately $922,000. KCI used the proceeds to repurchase its common stock
from three shareholders. During the three months ended March 31, 1999, KCI
contributed approximately $3.3 million, which it had raised through the sale
newly issued shares of its common stock. The stock was principally sold to
existing shareholders and management of the Company.

6.   Provision for Income Taxes

For the three months ended March 31, 2000, the Company's provision for income
taxes relates primarily to Guest, which was not converted to LLC status during
1999 (Note 7). For the three months ended March 31, 1999 the tax provision
primarily relates to VFC's consolidated taxable income as a C corporation.
Through August 31, 1999, VFC (Note 2) and its subsidiaries were C corporations
and were responsible for paying taxes on their income. Effective August 31,
1999, VFC was merged into KCLLC and most of VFC's subsidiaries, as well as BWE,
Hudson and ESP, were converted to limited liability company ("LLC") status. Upon
election of LLC status by the subsidiaries, the members of KCLLC became
responsible for the taxes due on the income of the Company, apart from the
subsidiaries that remained C corporations. Since KCI is currently an S
corporation, the shareholders of KCI are personally responsible for the income
taxes on the income of KCLLC that is allocated to KCI.





                                       9
<PAGE>


7.     Subsequent Event

KCI and its shareholders have entered into an agreement ("Recapitalization
Agreement") with affiliates of Kelso & Company ("Kelso") pursuant to which,
among other things:

      o  KCI will be recapitalized with Common Stock and Class A Preferred
         Stock;

      o  KCI shareholders will exchange a portion of their KCI Common Stock, and
         certain option holders will exercise options and exchange the KCI
         Common Stock obtained thereby, for Class A Preferred Stock and
         immediately sell such Class A Preferred Stock to Kelso for cash;

      o  SGC Partners II LLC ("SG"), which owns all of the stock of Keyhold,
         Inc. ("Keyhold"), which owns approximately 11.02% of the shares of
         KCLLC, will exchange all of the stock of Keyhold for Class A Preferred
         Stock and immediately sell such Class A Preferred Stock to Kelso for
         cash;

      o  Holders of the KCI stock appreciation rights ("SAR's") will have the
         opportunity to elect to exercise their SAR's subject to their
         purchasing KCI common stock with (at their election) either 50% or 75%
         of the after-tax proceeds of such exercise. The cost of such exercise
         of the SAR's, net of the capital received from such purchase of KCI
         common stock, will be funded by cash received on the purchase by Kelso
         from KCI of preferred stock, and;

      o  At the closing, KCI, Kelso and certain shareholders of KCI will enter
         into a shareholders agreement ("Shareholders Agreement") and a
         registration rights agreement ("Registration Rights Agreement"); and
         KCI and Kelso will also enter into an Advisory Agreement pursuant to
         which Kelso will be entitled to an annual fee.

The consummation of the transactions contemplated by the Recapitalization
Agreement is subject to the satisfaction or waiver of certain conditions, as
defined in the agreement. The Recapitalization Agreement may be terminated (a)
by agreement of Kelso and a majority of the shareholders of KCI ("Requisite
Sellers"); (b) by Kelso if a breach thereof by KCI, the KCI shareholders or SG
is not cured within 30 days after notice, if KCI's lenders have not consented to
the transaction on or before May 19, 2000, or if the transaction is not
consummated before September 30, 2000; (c) by the Requisite Sellers if a breach
thereof by Kelso is not cured within 30 days after notice, if KCI's lenders have
not consented to the transaction on or before May 19, 2000, or if the
transaction is not consummated before September 30, 2000; or (d) by SG if the
transaction is not consummated before September 30, 2000.



                                       10

<PAGE>



Upon the consummation of the Recapitalization, Kelso will own all of the Class A
Preferred Stock, which will constitute approximately 67.2% of the total equity
of KCI on an as converted and fully diluted basis. The Class A Preferred Stock
is not entitled to vote for the election of directors, is entitled to designate
two members of KCI's seven member Board of Directors, is entitled to certain
approval rights, is convertible into Common Stock at Kelso's option, has a
liquidation preference equal to its purchase price, bears a 1% dividend payable
in kind, and is redeemable at the option of the holder after June 2, 2009.
Current KCI shareholders and key employees will own all of the Common Stock,
which, together with the options held by such persons, will constitute the fully
diluted balance of the equity. The total amount of Class A Preferred Stock to be
purchased by Kelso will be approximately $110,000,000, of which approximately
$4,500,000 will be purchased from KCI and the balance from shareholders and
option holders. The Company will pay up to approximately $9 million of expenses
in connection with the transaction.




                                       11

<PAGE>


Item 2 -- Management's Discussion and Analysis of Financial Condition and
          Results of Operations

Introduction

The Company is a leading manufacturer of custom-engineered essential componentry
for application in a diverse array of end-use products. The Company targets
original equipment manufacturer ("OEM") markets where the Company believes its
value-added engineering and manufacturing capabilities, along with its timely
delivery, reliability and customer service, enable it to differentiate the
Company from its competitors and enhance profitability. The Company operates in
two business segments, the manufacture of mechanical engineered components which
produces flexible shaft products, specialty lock products and related
accessories and turbo charger actuators and related componentry. The electrical
components business produces an array of electrical componentry items for
recreational and industrial applications and switches for utility companies,
which are utilized in industrial markets.

Three Months Ended March 31,2000 compared to Three Months Ended March 31, 1999

Net Sales: Net sales increased by approximately $8.7 million, or 28.2%, from
approximately $30.8 million for the three months ended March 31,1999 to
approximately $39.5 million for the three months ended March 31,2000. Net sales
of the mechanical engineered components business increased by approximately $3.0
million, or 15.5%, from approximately $19.7 million for the three months ended
March 31,1999 to approximately $22.7 million for the three months ended March
31, 2000. Net sales of the electrical components business increased by
approximately $5.7 million, or 50.7%, from approximately $11.1 million for the
three months ended March 31,1999 to approximately $16.8 million for the three
months ended March 31, 2000.

The increase in net sales in the mechanical components business is primarily
related to the Company's actuator product line, which was acquired as part of
the VFC acquisition. The three months ended March 31, 2000 reflect the results
of operations for the full period whereas the three months ended March 31, 1999
only reflects the results of operations from January 19, 1999. In addition, the
increase in net sales of the mechanical component business was due to sales
growth in its core markets as well as the integration of the G&H acquisition.

The growth in sales of the electrical components business, which the Company
entered into as a result of the VFC acquisition, is largely due to the inclusion
of the results of operations of this business for the full quarter in 2000
versus the three months ended March 31, 1999 which reflect the results of
operations from January 19, 1999. In addition, the electrical components
business continues to experience growth in product sales designed for industrial
markets.

Gross Profit: Gross profit increased by approximately $4.6 million, or 38.8%,
from approximately $11.8 million for the three months ended March 31,1999 to
approximately $16.4 million for the three months ended March 31,2000. Gross
profit for the mechanical engineered components business increased by
approximately $1.8 million or 24.9% from approximately $7.3 million for the
three months ended March 31,1999 to approximately $9.1 million for the three
months ended March 31, 2000. Gross profit for the electrical components business
increased by approximately $2.7 million or 61.0% from approximately $4.6 million
for the three months ended March 31, 1999 to approximately $7.3 million for the
three months ended March 31, 2000.

Gross profit, as a percentage of net sales, increased 3.2% from 38.3% for the
three months ended March 31, 1999 to 41.5% for the three months ended March 31,
2000. Gross profit, as a percentage of net sales, for the mechanical engineered
components business increased 1.0% from 38.9% for the three months ended March
31, 1999 to 39.9% for the three months ended March 31, 2000. Gross profit, as a
percentage of net sales, for the electrical component business increased 3.6%
from 40.1% for the three months ended March 31, 1999 to 43.7% for the three
months ended March 31, 2000.


                                       12
<PAGE>

The increase in the gross profit and gross profit percentage for the mechanical
components business are primarily related to the inclusion of the actuator
product line for the full quarter in 2000 versus 1999 which only reflects the
results from January 19, 1999. In addition, as a result of the addition of the
acuator product line's Thailand facility, which commenced operations in the
second quarter of 1999, the mechanical components business has experienced an
increase in its gross profit percentage related to lower direct labor costs.

The margins for the electrical components business are generally higher as a
result of the nature of the customer base to which the electrical components
business targets a significant amount of its products. The increase in gross
profit dollars is primarily related to the inclusion of the results of
operations of the electrical components business for the full quarter in 2000
versus 1999, which only reflects the results from January 19, 1999. The increase
in gross profit percentage in the electrical components business is primarily
related to product mix.

Selling, General and Administrative Expenses: SG&A expenses increased by
approximately $1.5 million or 22.6%, from approximately $6.6 million for the
three months ended March 31, 1999 to approximately $8.1 million for the three
months ended March 31, 2000. SG&A expenses for the mechanical components
business increased by approximately $383,000 or 15.4%, from approximately $2.5
million for the three months ended March 31, 1999 to approximately $2.9 million
for the three months ended March 31, 2000. SG&A expenses for the electrical
components business increased by approximately $1.1 million or 36.3%, from
approximately $3.1 million for the three months ended March 31, 1999 to
approximately $4.2 million for the three months ended March 31, 2000.

SG&A, as a percentage of net sales, decreased by 0.9% from 21.3% for the three
months ended March 31, 1999, to 20.4% for the three months ended March 31, 2000.
SG&A, as a percentage of net sales, for the mechanical engineered components
business remained at 12.7% for the three months ended March 31, 2000 and 1999.
SG&A, as a percentage of net sales, for the electrical components business
decreased by 2.6% from 27.6% for the three months ended March 31, 1999, to 25.0%
for the three months ended March 31, 2000. The decrease in the electrical
components business SG&A as a percentage of net sales is primarily related to
the business business' ability to support top line growth on its established
infrastructure. In addition, the electrical components business benefitted from
its formulation of its specialty electric product line through the integration
of Marinco, Guest and certain product lines of Glendinning. The S,G&A expenses
of the electrical components business is generally higher than those of the
mechanical components business as a result of the electrical components business
being required to maintain higher levels of sales and marketing expenses due to
the businesses to which it targets its products.

Income from Operations: Income from operations increased by approximately $3.1
million, or 59.2% from approximately $5.2 million for the three months ended
March 31, 1999 to approximately $8.3 million for the three months ended March
31, 2000. This increase is the sum of the increase in gross profit of
approximately $4.6 million less the increase in SG&A expenses of approximately
$1.5 million for the reasons discussed above.

Interest Expense: Interest expense decreased by approximately $75,000, or 2.1%,
from approximately $3.5 million for the three months ended March 31, 1999 to
approximately $3.4 million for the three months ended March 31, 2000. This
decrease is due to lower levels of outstanding borrowing during the three months
ended March 31, 2000 versus the three months ended March 31, 1999, as a result
of the Company not having any borrowing outstanding under its revolving credit
facility during the current quarter. In addition, through March 31, 2000, the
Company had repaid $6.5 million of principal of the Company's $60 million term
loan. During January 1999, the Company amended its then current borrowing
facilities (see Liquidity and Capital Resources below) in order to finance a
large portion of the VFC acquisition as well as the G&H acquisition.


                                       13

<PAGE>


Provision for Income Taxes: The provision for income taxes decreased by
approximately $426,000, or 58.4% from approximately $729,000 for the three
months ended March 31,1999 to approximately $303,000 for the three months ended
March 31, 2000. This decrease is primarily related to the conversion of most of
the subsidiaries acquired as part of the VFC acquisition to LLC status effective
August 31, 1999. Upon election of LLC status by the subsidiaries, the members of
KCLLC became responsible for the taxes due on the income of the Company, apart
from the subsidiaries that remained C corporations. Through August 31, 1999 VFC
and its subsidiaries were C corporations for tax purposes. As of March 31, 2000
the Company's continuing operations only include a provision for taxes on the
income of one C corporation.

Income from continuing operations: Income from continuing operations increased
by approximately $3.7 million, or 328.3%, from approximately $1.1 million for
the three months ended March 31, 1999 to approximately $4.8 million for the
three months ended March 31, 2000. The increase is primarily the result of an
increase in income from operations of approximately $3.1 million and a decrease
in interest expense and the provision for taxes of approximately $75,000 and
$426,000, respectively, due to the factors discussed above.

Loss from discontinued operations: Loss from discontinued operations increased
by approximately $3.4 million for the three months ended March 31, 2000. In
April 2000, the Company consummated the sale of Heart and Cruising. The Company
received approximately $9.0 million in proceeds before any transaction related
expenses. Of the $9.0 million of proceeds, $600,000 was placed in escrow in
accordance with the agreement. The Company recorded a loss on disposal of Heart
and Cruising of approximately $3.0 million. To the extent that cash is released
from escrow, such funds will be recorded as a gain at that time.

Net Income: Net income increased by approximately $314,000, or 21.8%, from
approximately $1.4 million for the three months ended March 31, 1999 to
approximately $1.7 million for the three months ended March 31, 2000. The
increase is the result of the sum of an increase in income from continuing
operations of approximately $3.7 million and an increase in loss from
discontinued operations of approximately $3.4 million, due to the factors
discussed above.


Liquidity and Capital Resources


The Company has historically generated funds from its operations, and its
working capital requirements generally have not materially fluctuated from
quarter to quarter. The Company's other main source of liquidity is derived from
the Company's term loan and revolving credit facility. In January 1999, the
Company amended its former acquisition and revolving loans with a new
$60-million term loan and a $40-million revolving credit facility. The term loan
is payable in quarterly installments through January 19, 2005. Current
maturities of long-term debt at March 31, 2000 included $4.5 million related to
the term loan. The revolving credit facility commitment (of which there were no
borrowings outstanding at March 31, 2000) is for six years. The term loan and
revolving credit facility bear interest at fluctuating interest rates determined
by reference to the agent's base rate plus an applicable margin which will vary
from 1.50% to 2.25%.

The Company's remaining liquidity demands will be for capital expenditures,
general corporate purposes, and principal and interest payments on its
outstanding debt. The Company's $80 million of senior notes requires semiannual
interest payments on the outstanding principal. The term loan requires quarterly


                                       14

<PAGE>

principal and interest payments. Under its new revolving credit facility, the
Company has the option to lock in a specified interest rate by entering into a
contract, which rolls over at different time intervals, usually within 90 days.
As the underlying contract comes up for renewal, the interest associated with
the contract becomes due. As of March 31, 2000, the Company had no outstanding
commitments for capital expenditures and anticipates further capital
expenditures of approximately $3.0 million for the remainder of fiscal 2000. The
expenditures are needed primarily to maintain its facilities, expand its
production capacity in order to take advantage of profitable market
opportunities, and to further automate its production processes to maximize
profitability. To the extent cash flow from operations is insufficient to cover
the Company's capital expenditures, debt service, and other general
requirements, the Company would seek to utilize its borrowing availability under
its existing revolving credit facility.

In connection with the Company's desire to continue to grow through acquisition
and be a leading supplier of essential componentry, KCI and its shareholders
have entered into an agreement ("Recapitalization Agreement") with affiliates of
Kelso & Company ("Kelso") pursuant to which, among other things:

      o  KCI will be recapitalized with Common Stock and Class A Preferred
         Stock;

      o  KCI shareholders will exchange a portion of their KCI Common Stock, and
         certain option holders will exercise options and exchange the KCI
         Common Stock obtained thereby, for Class A Preferred Stock and
         immediately sell such Class A Preferred Stock to Kelso for cash;

      o  SGC Partners II LLC ("SG"), which owns all of the stock of Keyhold,
         Inc. ("Keyhold"), which owns approximately 11.02% of the shares of
         KCLLC, will exchange all of the stock of Keyhold for Class A Preferred
         Stock and immediately sell such Class A Preferred Stock to Kelso for
         cash;

      o  Holders of the KCI stock appreciation rights ("SAR's") will have the
         opportunity to elect to exercise their SAR's subject to their
         purchasing KCI common stock with (at their election) either 50% or 75%
         of their after-tax proceeds of such exercise. The cost of such exercise
         of the SAR's, net of the capital received from such purchase of KCI
         common stock, will be funded by cash received on the purchase by Kelso
         from KCI of preferred stock, and;

      o  At the closing, KCI, Kelso and certain shareholders of KCI will enter
         into a shareholders agreement ("Shareholders Agreement") and a
         registration rights agreement ("Registration Rights Agreement"); and
         KCI and Kelso will also enter into an Advisory Agreement pursuant to
         which Kelso will be entitled to an annual fee.

      The consummation of the transactions contemplated by the Recapitalization
Agreement is subject to the satisfaction or waiver of certain conditions, as
defined in the agreement. The Recapitalization Agreement may be terminated (a)
by agreement of Kelso and a majority of the shareholders of KCI ("Requisite
Sellers"); (b) by Kelso if a breach thereof by KCI, the KCI shareholders or SG
is not cured within 30 days after notice, if KCI's lenders have not consented to
the transaction on or before May 19, 2000, or if the transaction is not
consummated before September 30, 2000; (c) by the Requisite Sellers if a breach
thereof by Kelso is not cured within 30 days after notice, if KCI's lenders have
not consented to the transaction on or before May 19, 2000, or if the
transaction is not consummated before September 30, 2000; or (d) by SG if the
transaction is not consummated before September 30, 2000.



                                       15

<PAGE>

Upon the consummation of the Recapitalization, Kelso will own all of the Class A
Preferred Stock, which will constitute approximately 67.2% of the total equity
of KCI on an as converted and fully diluted basis. The Class A Preferred Stock
is not entitled to vote for the election of directors, is entitled to designate
two memebers of KCI's seven member Board of Directors, is entitled to certain
approval rights, is convertible into Common Stock at Kelso's option, has a
liquidation preference equal to its purchase price, bears a 1% dividend payable
in kind, and is redeemable at the option of the holder after June 2, 2009.
Current KCI shareholders and key employees will own all of the Common Stock,
which, together with the options held by such persons, will constitute the fully
diluted balance of the equity. The total amount of Class A Preferred Stock to be
purchased by Kelso will be approximately $110,000,000, of which approximately
$4,500,000 will be purchased from KCI and the balance from shareholders and
option holders. The Company will pay up to approximately $9 million of expenses
in connection with the transaction.

Cash flows provided by operating activities were approximately $5.5 million and
$4.5 million for the three months ended March 31, 2000 and 1999, respectively.
The net increase of $1.0 million over the prior period is the sum of a increase
in cash provided by continuing operations of approximately $827,000 and an
increase in cash provided by operating activities of approximately $182,000. The
increase in cash provided by continuing operations primarily related to an
increase in net income plus non cash charges of approximately $3.4 million
mostly offset by a reduction in the increase in accounts payable and accrued
expenses of approximately $3.1 million. The reduction in the increase in
accounts payable and accrued expenses was primarily due to the Company's level
of accrued interest being consistent during 2000 whereas in 1999 the Company
experienced a significant increase in this accrual related to its recently
amended financing arrangements. As described above, the Company primarily pays
interest on a semi-annual and quarterly basis.

Cash flows used in investing activities were approximately $1.0 and $85.4
million for the three months ended March 31, 2000 and 1999, respectively. The
primary reason for the decrease in investing activities was the acquisitions of
VFC and G&H, completed during the three months ended March 31, 1999. The Company
also sold Force 10 during that same period, which it had acquired as part of
VFC, for $1.7 million in cash. Capital expenditures for the three months ended
March 31, 2000 and 1999 were approximately $1.0 million and $590,000,
respectively.

Cash flows from financing activities used net cash of approximately $2.6 million
during the three months ended March 31, 2000 and provided net cash of $73.1
million for the three months ended March 31, 1999. The $75.7 net decrease is
primarily attributable to proceeds received under the Company's new term loan
and revolving credit facility during the first quarter of 1999. This was offset
by the repayment of approximately $10.6 million of long-term debt and other
long-term obligations, the most significant portion being the repayment of
approximately $8.9 million of VFC's long-term debt, made in conjunction with the
acquisition. In connection with the new debt facilities, the Company incurred
approximately $2.2 million of deferred financing costs during the three months
ended March 31, 1999. The Company also realized proceeds of approximately $3.3
million due to the sale of its capital stock during the three months ended March
31, 1999, whereas in the three months ended March 31, 2000, the Company paid a
capital withdrawal of approximately $922,000. The Company also made payments on
its long-term debt of approximately $1.6 million during the three months ended
March 31, 2000.

In April 2000, the Company received approximately $9.0 million in proceeds
before any transaction related expenses. Of the $9.0 million of proceeds,
$600,000 was placed in escrow in accordance with the agreement. The Company will
use these funds for general corporate purposes.



                                       16

<PAGE>


Management believes that the Company's cash flow from operations, together with
its borrowing availability under its existing credit facilities, will be
adequate to meet its anticipated capital requirements for the foreseeable
future.


New Accounting Pronouncement

The Financial Accounting Standards Board ("FASB") has issued FASB Interpretation
No. 44, Accounting for Certain Transactions involving Stock Compensation, an
interpretation of Accounting Principles Board Opinion No. 25. This
interpretation clarifies the application of APB No. 25 for certain issues. While
the Company accounts for its stock compensation transactions with its employees
under APB No. 25, this statement is not expected to have a material impact on
the Company's consolidated financial statements. This interpretation is
effective July 1, 2000.

Inflation

Inflation has not been material to the Company's operations for the periods
presented.

Backlog

The Company's backlog of orders as of March 31, 2000 was approximately $29
million. The Company includes in its backlog only those orders for which it has
accepted purchase orders. However, backlog is not necessarily indicative of
future sales. A substantial portion of the Company's sales have a
three-to-eight-week lead time and, therefore, only a small portion of orders, in
relation to the annual sales of the Company, are in backlog at any point in
time. In addition, purchase orders can generally be cancelled at any time
without penalty.

Forward-Looking Statements

This report contains forward-looking statements based on current expectations
that involve a number of risks and uncertainties. Generally, forward-looking
statements include words or phrases such as "management anticipates," "the
Company believes," "the Company anticipates," and words and phrases of similar
impact, and include but are not limited to statements regarding future
operations and business environment. The forward-looking statements are made
pursuant to safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. The factors that could cause actual results to differ materially
from the forward-looking statements include the following: (i) industry
conditions and competition, (ii) operational risks and insurance, (iii)
environmental liabilities which may arise in the future and not covered by
insurance or indemnity, (iv) the impact of current and future laws and
government regulations, and (v) the risks described from time to time in the
Company's reports to the Securities and Exchange Commission.


                                       17


<PAGE>

Item 3 -- Quantitative and Qualitative Disclosures about Market Risk

The Company's primary exposure to market risk is related to the variability in
interest rates associated with the Company's outstanding term loan and the
$40-million revolving credit facility. Under both the term loan and the
revolving credit facility, the Company has the option to lock in a certain
interest rate based on either the agent's base rate, which is equivalent to
prime, or LIBOR plus an applicable margin specified in the agreement.
Principally all of the borrowings under the term loan, which had $53.5 million
outstanding as of March 31, 2000, are locked in at approximately 8.9% until July
2000, when the underlying LIBOR contract is up for renewal. The Company had no
borrowings outstanding under its revolving credit facility during the three
months ended March 31, 2000.

The senior notes bear a fixed rate of interest and therefore are not subject to
market risk. The Company does not trade in derivative financial instruments.




<PAGE>


                           Part II - Other Information

Item 6 -- Exhibits and Reports on Form 8-K

              (a) Exhibits


                           10.31        Recapitalization agreement among KELSO
                                        Investment Associates VI, L.P., KEP VI,
                                        LLC, Key Components, Inc., the
                                        shareholders of Key Components, Inc.,
                                        and SGC Partners II, LLC dated May 8,
                                        2000.

                           27.1         Financial Data Schedule

               (b)  Reports on Form 8-K


                      None

<PAGE>



                            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.

                                            KEY COMPONENTS, LLC


Date: May 12, 2000                          By: /s/ CLAY B. LIFFLANDER
                                               ---------------------------------
                                                  Clay B. Lifflander
                                                  Chief Executive Officer


Date: May 12, 2000                          By:  /s/ ROBERT B. KAY
                                               ---------------------------------
                                                  Robert B. Kay
                                                  President


Date: May 12, 2000                          By:  /s/ KEITH A. MCGOWAN
                                               ---------------------------------
                                                  Keith A. McGowan
                                                  Chief Financial Officer




                            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.

                                               KEY COMPONENTS FINANCE CORP.


Date: May 12, 2000                             By: /s/ CLAY B. LIFFLANDER
                                               ---------------------------------
                                                     Clay B. Lifflander
                                                     Chief Executive Officer


Date: May 12, 2000                             By: /s/ ROBERT B. KAY
                                               ---------------------------------
                                                     Robert B. Kay
                                                     President

Date: May 12, 2000                             By: /s/ KEITH A. MCGOWAN
                                               ---------------------------------
                                                     Keith A. McGowan
                                                     Chief Financial Officer