SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

       (X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                   For the fiscal year ended December 31, 2000


                         Commission File Number 0-23222

                               FINISHMASTER, INC.
             (Exact Name of Registrant as Specified in its Charter)

          Indiana                                        38-2252096
(State or other Jurisdiction of                       (I.R.S.  Employer
Incorporation or Organization)                      Identification Number)

54 Monument Circle, Suite 600, Indianapolis, IN            46204
  (Address of principal executive offices)              (Zip Code)

       Registrant's Telephone Number, including area code: (317) 237-3678

        Securities registered pursuant to Section 12(b) of the Act: None

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

                                                      Name of each exchange on
       Title of each class                               which registered
       -------------------                               ----------------
Common Stock - without par value                      Nasdaq Stock Market

Indicate  by check  mark  whether  the  registrant  (1) has  filed  all  annual,
quarterly and other  reports  required to be filed by Section 13 or 15(d) of the
Securities  Exchange Act of 1934 during the preceding  twelve months and (2) has
been subject to the filing requirements for at least the past 90 days.
Yes X      No ______

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

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant as of March 1, 2001 was $13,125,000.

On  March  1,  2001,   7,540,804  shares  of  Registrant's   common  stock  were
outstanding.

                       Documents Incorporated By Reference

Portions of the annual proxy  statement for the year ended December 31, 2000 are
incorporated by reference into Part III.

<PAGE>

                               FINISHMASTER, INC.
                           ANNUAL REPORT ON FORM 10-K
                                TABLE OF CONTENTS

ITEM                                                                      PAGE

1       Business............................................................. 3

2       Properties........................................................... 7

3       Legal Proceedings.................................................... 8

4       Submission of Matters to a Vote of Security Holders.................. 8

5       Market for Registrant's Common Equity and
             Related Shareholder Matters..................................... 9

6       Selected Consolidated Financial Data.................................10

7       Management's Discussion and Analysis of
             Financial Condition and Results of Operations...................11

8       Financial Statements and Supplemental Data...........................17

9       Changes in, and Disagreements with Accountants on
             Accounting and Financial Disclosure.............................31

10      Directors and Executive Officers of the Registrant...................31

11      Executive Compensation...............................................31

12      Security Ownership of Certain Beneficial Owners and Management.......31

13      Certain Relationships and Related Transactions.......................31

14      Exhibits, Financial Statement Schedules, and
             Reports on Form 8-K.............................................32

        Signatures...........................................................33


<PAGE>
                                     PART I

ITEM 1 - BUSINESS

General

We are the  leading  national  independent  distributor  of  automotive  paints,
coatings and  paint-related  accessories  primarily to the automotive  collision
repair  industry.  As of March  1,  2001,  we  serve  our  customers  through  a
290-person direct sales force in 156 sales outlets and three major  distribution
centers  located  in  22  states,   making  us  the  only  national  independent
distributor  in  the  industry.   We  have  over  35,000  customers   consisting
principally  of  collision  repair  shops and  automobile  dealers,  to which we
provide a comprehensive  selection of brand name products.  Our product offering
consists of over 37,000 stock keeping units ("SKUs"),  including  leading brands
of automotive  paints,  coatings,  thinners and reducers  manufactured  by BASF,
DuPont, and PPG and the leading brands of paint-related accessories manufactured
principally by 3M, such as masking materials, body fillers and cleaners. For the
year ended  December 31, 2000,  net sales were $337.2 million and net income was
$3.7 million.

Our vision is to expand our leadership position in the distribution of products,
services and technology that are recognized by customers as key factors in their
success.  We provide our  customers  with "local"  value-added  services such as
rapid  delivery,  technical  support,  product  training,  management  seminars,
computerized  color  matching,  inventory  management,  personnel  placement and
environmental  compliance  reporting.  These value-added  services are backed by
"national" expertise in the systems and technology of warehouse distribution and
supply chain  management,  and strategic  partnering with the  manufacturers  of
paint and  paint-related  accessories.  Our local  focus helps us respond to the
unique customer needs in various geographic markets. Our national network allows
us to provide better,  consistent  service at a lower cost than our competition.
In  addition,  we are able to  provide  certain  multi-site  customers,  such as
"collision  repair  shop"  chains  and  mega-dealerships,   with  efficient  and
consistent product  distribution  throughout their national or regional networks
at competitive prices.

We estimate the U.S. automotive paint and paint-related accessories distribution
after-market  ("distribution  after-market")  to be approximately  $2.5 billion,
with  automotive   collision  repair  shops  being  the  primary  customers  for
automotive  paint and  paint-related  accessories.  In addition  to  independent
collision   repair  shops  and  automobile   dealers,   we  supply  products  to
organizations that maintain their own automobile fleet, van conversion companies
and other  commercial/industrial  customers.  The  distribution  after-market is
supplied  by  a  small  number  of  manufacturers  of  paint  and  paint-related
accessories  and  serves  a  highly  fragmented  customer  base,  consisting  of
approximately  50,000  collision  repair shops alone. Our competitors tend to be
family-owned,  with one to three distribution sites and typically serve a highly
localized customer base.

We are an Indiana based corporation.  Our principal executive offices are leased
from LDI, Ltd. ("LDI"),  an Indiana limited  partnership,  which indirectly owns
74.1% of our outstanding  shares.  We believe that the terms of the lease are at
least  as  favorable  to us as  those  that  could be  obtained  by  arms-length
negotiations with an unaffiliated  third party. Our principal  executive offices
are located at 54 Monument Circle, Suite 600,  Indianapolis,  Indiana 46204, and
our telephone number is (317) 237-3678.

Industry Overview

We estimate the distribution  after-market to be approximately $2.5 billion. The
end  users  of  the  products  distributed  by us  are  principally  independent
collision repair shops and automobile dealers. Additionally,  organizations that
maintain  their  own  automobile  fleet,  van  conversion  companies  and  other
commercial/industrial  customers  make up a smaller  percentage  of our customer
base.  Automotive  paint and related  supplies,  in contrast to labor and parts,
represent  only a small  portion  (approximately  7-10%) of the total  cost of a
typical  collision  repair  job.  However,  while  paint is a  relatively  minor
component of the total repair cost,  we play a critical  role in the  customer's
level of satisfaction.

The  distribution  after-market  for  automotive  paint and related  supplies is
characterized  by a small  number of  manufacturers  of paint and  paint-related
accessories.  The five predominant manufacturers of automotive paint distributed
in the United States are Akzo Nobel, BASF, DuPont, PPG and The  Sherwin-Williams
Company.  In addition,  several other large foreign  manufacturers have recently
taken steps to expand the  distribution  of their  paint  products in the United
States.  3M is the predominant  manufacturer of paint-related  accessories which
include  refinishing  materials,  supplies,  accessories  and tools such as sand
paper, masking tape and paint masks.

The paint manufacturers  market is continuing to consolidate.  Specifically,  in
July 1999, PPG acquired Imperial Chemical Industries' global automotive refinish
and  industrial  coatings  business  and its  automotive  solvents  and thinners
business in North America.  In March 1999,  DuPont  acquired  Herberts Gmbh, the
coatings company of Hoechst.  The Herberts acquisition created the world's third
largest coatings company and the leading automotive coatings supplier.

While automotive paint  manufacturing is highly  concentrated,  automotive paint
distribution  and the end users of automotive  paint are highly  fragmented.  We
believe that a large number of  independent  distributors  of  automotive  paint
serve an aggregate of approximately  50,000  collision repair shops  nationwide.
Distributors,  which  tend to be  family-owned  with one to  three  distribution
sites,  typically serve a highly localized  customer base with each distribution
site  serving  customers  located  within  20 miles of the site  depending  upon
demographics, road access and geography.

Due  to  the  large  number  of end  users  and  their  increasing  demands  for
personalized  services,  such as  multiple  daily  deliveries,  assistance  with
color-mixing and matching,  and assistance with paint application techniques and
environmental  compliance reporting,  manufacturers  typically service end users
through distributors like us. Nevertheless, some of the paint manufacturers have
elected to operate  company-owned  distribution  facilities in selected markets,
including  markets in which we operate.  We believe,  however,  that the largest
automotive  paint  manufacturers  have  generally  avoided the cost of operating
their own distribution network due to their inability to offer multiple lines of
paint  which  prevents  them from  spreading  distribution  expenses  across the
market's  entire  potential  customer  base.   Consequently,   we  believe  that
independent  distributors  like us, which can sell the products of several paint
manufacturers,  are better  situated  to service  the end users'  needs than the
company owned distribution facilities of automotive paint manufacturers.

The market for paints and supplies for automotive  collision repairs has changed
significantly in recent years. Key factors affecting this market have been:

     o    a decline  in the  number of  vehicles  repaired  annually,  with this
          number stabilizing in recent years;

     o    improvements  and paint  application  technology and advances in paint
          system productivity;

     o    environmental  regulations  which have required the  reformulation  of
          paints and the use of more advanced equipment and facilities;

     o    automobile manufacturers' use of more complex and expensive automotive
          finishes; and

     o    an increase in the number of vehicles repaired by insurance companies'
          designated "direct repair providers".

Collision  repair  shops  have  been  forced  to  invest  in new  equipment  and
additional  training  of their  workers,  while  there has been a decline in the
number of repair jobs.  Accordingly,  there has been some  consolidation  in the
highly fragmented collision repair industry among end users of automotive paints
and  accessories.  In addition,  collision  repair shops and car dealerships are
seeking to improve  their  financial  performance  and  competitive  position by
developing  relationships  with  distributors  that can support their businesses
with  value-added  services.  This  demand  for higher  levels of  service  from
distributors,  combined with lower unit sales volume of paint and supplies,  has
resulted in a consolidation  among  after-market  distributors.  We have led the
consolidation   among   distributors  in  recent  years,   having  completed  36
acquisitions over the past nine years.

Although the automotive collision repair industry is experiencing a trend toward
consolidation,  we believe that our size and current position as a market leader
will enable us to continue to grow and remain  profitable.  We have been able to
offset the decline in unit volume by material price  increases that we have been
able to pass on to our customers due to the technological advancements in paints
and coatings.  In addition, we believe we will continue to attract new customers
due to our  value-added  services,  such as our experience in helping  customers
comply with environmental regulations.  This service, which we currently provide
in California and Colorado,  will be applicable in other geographic areas as the
U.S.  Environmental  Protection  Agency enacts volatile organic compound ("VOC")
regulations nationwide.

Products and Suppliers

We offer our  customers  a  comprehensive  selection  of  prominent  brand  name
products and our own  PrivateBrand  products.  The product line consists of over
37,000  SKUs,  including  the three  leading  brands of  automotive  paints  and
coatings and a leading brand of related accessories.  Our PrivateBrand  products
include some of the most frequently used refinishing accessories such as masking
materials, body fillers, thinners, reducers and cleaners.

We rely on four leading suppliers for the majority of our product  requirements.
BASF, DuPont, and PPG supply virtually all of our paint products,  and 3M is our
largest  supplier  of  paint-related  accessories.  Products  supplied  by BASF,
DuPont,  3M and PPG  accounted  for  approximately  85% of  purchases  in  2000.
Although  each of these  suppliers  generally  competes  with the  others  along
product  lines,  we do not believe the products are  completely  interchangeable
because of high brand loyalty among  customers  and their  brand-specific  color
matching  computer  systems.  We continuously  seek  opportunities  with new and
existing suppliers to supply the highest quality products.

Whenever  practical,  we make  purchases  from  suppliers  in large  volumes  to
maximize  volume  discounts.  In addition,  we participate in periodic,  special
incentive programs  available from suppliers.  These programs provide additional
purchase  discounts  and  extended  payment  terms in exchange  for large volume
purchases.  We also benefit from  supplier-provided  early payment discounts and
from other supplier-supported programs.

Services

We offer  comprehensive  value-added  services  designed to assist  customers in
operating their businesses more effectively. These services include:

   Rapid Delivery

Products are delivered to customers  using our delivery  fleet of  approximately
750  trucks.   We  offer  multiple  daily  deliveries  to  meet  our  customers'
just-in-time   inventory  needs.  Customer  concerns  for  product  availability
typically  take priority over all other  competitive  considerations,  including
price.

   Technical Support

Our technical support personnel demonstrate and recommend products. In addition,
they  assist  customers  with  problems  related  to  their  particular  product
applications.  Equipment  specialists provide information to customers regarding
their heavy equipment requirements, such as spray booths and frame straightening
equipment.

   Product Training

As  a  result  of  increasing   regulations,   manufacturers   have   introduced
technologically  advanced,  lower VOC paints,  which require  significantly more
sophisticated  application techniques. We provide training to customers in order
to teach them the  techniques  required  to work with these  products.  Training
sessions are typically  conducted  jointly by us and by one or more of our major
suppliers at the customer's location or at an off-site location.

   Management Seminars

Management  seminars  are  conducted  at  convenient  locations  to  inform  our
customers about environmental regulations and compliance,  techniques to improve
productivity, and industry trends.

   Color Matching

The growing number of paint colors is a challenge for the refinishing  industry.
DuPont,  for example,  has more than 120,000 mix  formulas.  With  sophisticated
PC-based color matching  equipment and  specialists,  we provide  color-matching
services to our customers.

<PAGE>

   Inventory Management

We perform monthly physical  inventories for customers who request this service.
We also provide customers with management information reports on product usage.

   Assistance with Environmental Compliance Reporting

All states have air  quality  regulations  that  mandate  paint and  application
methods which result in reduced atmospheric emissions of paint and other related
materials.  In  California  in  particular,  we  arrange  demonstrations  of new
products  and  application  techniques  designed  to  comply  with  air  quality
regulations.  In addition,  in California and Colorado,  we assist our customers
with environmental  reporting requirements by providing special reports designed
to simplify their  compliance.  The EPA has proposed  regulations to control VOC
emissions  from  automobile  refinishing  nationwide  and,  accordingly,  we are
considering an expansion of these programs.

   Personnel Placement

Certain of our locations assist our customers with filling  employment  openings
and/or persons  seeking  employment  with collision  repair shops located in the
market served.  Upon request from a customer to fill an opening,  we may provide
the  names  of one or  more  persons  for the  position.  Similar  services  are
available to persons seeking  employment.  We do not charge for this service but
benefit from enhanced relationships with our customers and their employees.

Competition

The distribution  after-market of the automotive  refinishing industry is highly
fragmented  and  competitive  with  many  independent   distributors   competing
primarily on the basis of technical  assistance and expertise,  price,  speed of
delivery  and  breadth  of  product  offering.  There  are no other  independent
national distributors of automotive refinish paints and accessories. There are a
number  of  independent  regional  distributors,  many of  which  are in  direct
competition with us on a regional or local level. Competition in the purchase of
independent  distributors  and  sales  outlets  may occur  between  us and other
automotive  refinishing  distributors  that are  also  pursuing  growth  through
acquisitions.

We may also encounter  significant  sales  competition from new market entrants,
automotive paint  manufacturers,  buying groups or other large distributors that
may seek to enter such  markets or may seek to  compete  with us for  attractive
acquisition candidates. Although the largest automotive paint manufacturers have
generally not operated their own distributors, or have done so only on a limited
basis,  they may decide to expand  such  activity in the  future.  For  example,
Sherwin-Williams  distributes  its  own  automotive  paints  through  its  sales
outlets. In addition, BASF, one of our principal suppliers,  also distributes in
certain  markets  through  its own  outlets  in North  America.  While we do not
believe  that  current   direct   distribution   efforts  by  automotive   paint
manufacturers have  significantly  affected our sales, there can be no assurance
that we will not  encounter  increased  competition  in the future.  We may also
compete with our  suppliers in selling to certain large volume end users such as
van converters, small manufacturers and large fleet operators.

Employees

As of March 1,  2001,  we  employed  approximately  1,520  persons on a full and
part-time  basis.  None of the employees are covered by a collective  bargaining
agreement, and we consider our relations with our employees to be good.

Governmental and Environmental Regulations

We are subject to various federal,  state and local laws and regulations.  These
regulations  impose  requirements  on our  customers  and  us.  Pursuant  to the
regulations  of  the  U.S.   Department  of  Transportation  and  certain  state
transportation  departments, a license is required to transport our products and
annual permits are required due to the classification of certain of our products
as  "hazardous."  Various  state and federal  regulatory  agencies,  such as the
Occupational   Safety  and   Health   Administration   and  the  United   States
Environmental  Protection  Agency,  have  jurisdiction over the operation of our
distribution centers and sales outlets. These agencies require us to comply with
various  governmental  regulations,  including worker safety laws, community and
employee  "right-to-know"  laws and  laws  regarding  clean  air and  water.  In
addition, state and local fire and environmental regulations extensively control
the design and operation of our  facilities,  the sale of our products,  and the
application of these products by our customers. Such regulations are complex and
subject to change.  Regulatory or legislative changes may cause future increases
in our operating costs or otherwise negatively affect operations.

ITEM 2 - PROPERTIES

The following  table sets forth  certain  information  regarding the  facilities
operated by us as of March 1, 2001.

                                           Number       No. of        No. of
                                             Of         Sales       Distribution
State                                      Offices      Outlets       Centers
   Alabama...............................                  1
   Arizona...............................                  3
   California............................    1            29             1***
   Colorado..............................                  5             1**
   Connecticut...........................                  3
   Delaware..............................                  1
   Florida...............................    1*           38             1***
   Georgia...............................                  3
   Illinois..............................                  4
   Indiana...............................    1             3
   Maryland..............................                  4
   Massachusetts.........................                  5
     Michigan............................    1*           12             1***
   New Jersey............................                  8
   North Carolina........................                  6             1**
   Ohio..................................                  2
   Oklahoma..............................                  1
   Pennsylvania..........................                  3
   South Carolina........................                  6
   Texas.................................                 12
   Virginia..............................                  3
   Wisconsin.............................                  4
                                         ---------------------------------------
       Total Offices, Sales Outlets and
           Distribution Centers              4           156             5
                                             =           ===             =
 --------------

*    Locations where an office and distribution center are combined  facilities.
     Includes Kentwood, MI and Ft. Lauderdale FL.

**   Locations where a store and  distribution  center are combined  facilities.
     Includes Greensboro, NC and Westminster, CO.

***  Denotes major distribution center.  Includes Kentwood,  MI; Ft. Lauderdale,
     FL; and Los Angeles, CA.

Our sales  outlets  range in size from 1,200 square feet to 15,000  square feet.
Some of the larger sales  outlets are also used as "drop ship" points from which
we supply other sales outlets. Sales outlets consist of inventory storage areas,
mixing  facilities,  display and counter  space and,  in some  instances,  sales
office  space.  Sales  outlets  are  strategically  located in major  markets to
maximize  market  penetration,  transportation  logistics  and overall  customer
service. Our distribution centers range in size from 5,000 square feet to 38,500
square feet.  The  distribution  centers are equipped  with  efficient  material
handling and storage equipment.

We own the  distribution  center and two sales  outlets in  Michigan,  one sales
outlet in Indiana,  and one in Florida.  The  remainder of the sales outlets and
the other distribution centers are leased with terms expiring from 2001 to 2007,
with  options to renew.  We  typically  assume the lease of the former  owner in
acquisitions.  In a number of  instances,  our sales outlets are leased from the
former  owners of  businesses  acquired by us. We believe that all of our leases
are at fair market  rates,  that  presently  no single  lease is material to our
operations,  and that alternative sites are presently available at market rates.
We are leasing  approximately  15,000  square feet of executive  offices for our
national headquarters located in Indianapolis, Indiana.

ITEM 3 - LEGAL PROCEEDINGS

In January 1999,  we were named in an unfair  business  practices  lawsuit by an
automotive paint distributor  located in the State of California.  The plaintiff
in such suit  alleged that we offered,  in a manner that injured the  plaintiff,
rebates and cash bonuses to businesses in the Southern  California area if those
businesses  would buy  exclusively  from us and use our products.  The plaintiff
claimed damages in the amount of $3.8 million,  trebled to $11.4 million. During
2000,  the court granted  summary  judgment in our favor.  The plaintiff has not
appealed the judgment against it, and the decision is now final.

We are  subject to various  claims and  contingencies  arising out of the normal
course  of  business,  including  those  relating  to  commercial  transactions,
environmental, product liability, automobile, taxes, discrimination,  employment
and other matters. Our management believes that the ultimate liability,  if any,
in excess of amounts already provided or covered by insurance,  is not likely to
have a material adverse effect on our financial condition, results of operations
or cash flows.

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

None.

ADDITIONAL ITEM - EXECUTIVE OFFICERS OF THE REGISTRANT

The following sets forth certain  information  concerning the executive officers
of the Company who are not also directors:

Thomas E. Case (age 55) serves as the  Senior  Vice  President  of Sales for our
West Division. He had previously served as the Senior Vice President and general
manager of our Western  Division from June 1998 to January 2001. Mr. Case joined
us upon  completion of our  acquisition of Thompson in November 1997.  Formerly,
Mr. Case was a Vice  President of Thompson and served as the general  manager of
Thompson's California Division.

J.A.  Lacy (age 36) serves as our Senior Vice  President of  Operations.  He had
previously  served as the Senior Vice  President of Planning and Marketing  from
January  1999 to January  2001.  From January  1997 to December  1998,  Mr. Lacy
served as  President  of  Tucker  Rocky  Distributing  Canada,  Inc.,  a leading
after-market  distributor  of motorcycle  components and  accessories.  Prior to
this, Mr. Lacy was Vice President of J. Walter Thompson, an advertising agency.

Robert  R.  Millard  (age 43)  joined  us in  October  1998 as the  Senior  Vice
President of Finance,  Chief Financial  Officer,  Secretary and Treasurer.  From
February 1996 until  September  1998,  Mr.  Millard  served as Vice President of
Finance,   Chief  Financial  Officer,   Secretary  and  Treasurer  of  Personnel
Management,   Inc.,  a  publicly  held  personnel   staffing  company  based  in
Indianapolis,  Indiana. From July 1991 until January 1996, Mr. Millard served as
the Corporate Controller of Lacy Diversified  Industries,  Ltd., an affiliate of
LDI.

Roger A.  Sorokin (age 60) serves as our Senior Vice  President of  Acquisitions
and Development  since November 1998. Prior to this date, Mr. Sorokin had served
as our Vice President of Finance for more than the previous five years.

Charles  Stephenson  (age 47) has  terminated  his  employment  with the Company
effective  January  31,  2001.  He had served as the Senior Vice  President  and
general manager of our Central/Northeastern Division from October 1997 until his
resignation.  Mr.  Stephenson  served as our Vice  President of  Marketing  from
August  1997 to October  1997.  Prior to joining  us, Mr.  Stephenson  served as
Director of Sales of Sherwin-Williams  Auto Finishes Inc. from September 1994 to
August 1997 and as its Regional Director of the Western Region from October 1991
to September 1994.

Charles  VanSlaars (age 51) serves as the Senior Vice President of Sales for our
East Division. He had previously served as the Senior Vice President and general
manager  of our  Southeastern  Division,  a  position  he held from June 1998 to
January  2001.  From  June  1996  until May  1998,  Mr.  VanSlaars  served as an
executive  officer of LDI AutoPaints,  Inc. From 1994 until 1996, Mr.  VanSlaars
served  as  Vice  President  of  Parts  Depot  Company,  L.P.,  a  Florida-based
distributor of auto paints.

<PAGE>

                                     PART II


ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Our common stock trades on The NASDAQ Stock Market  (SmallCap  Market) under the
symbol FMST. The number of beneficial owners of our common stock at December 31,
2000, was approximately 350.

The range of high and low closing prices  reported by NASDAQ for the last twelve
quarters were:

Year             Quarter Ended                High                Low
--------------------------------------------------------------------------

1998             March 31                      11.750               7.750
1998             June 30                       10.750               8.625
1998             September 30                  10.000               5.250
1998             December 31                    7.375               3.500
1999             March 31                       7.000               5.625
1999             June 30                        6.000               4.750
1999             September 30                   7.375               5.688
1999             December 31                    7.938               5.750
2000             March 31                       8.000               6.750
2000             June 30                        8.000               4.750
2000             September 30                   7.000               5.250
2000             December 31                    7.000               4.700

No cash  dividends on common stock have been paid during any period and none are
expected to be paid in the foreseeable  future.  We anticipate that all earnings
and other cash resources will be retained by us for investment in our business.

On June 30, 1998, we completed the acquisition by merger of LDI AutoPaints, Inc.
("AutoPaints")  in exchange for the  issuance of 1,542,416  shares of our common
stock.  Such  shares  were  issued  to Lacy  Distribution,  Inc.,  our  majority
shareholder  and a wholly  owned  subsidiary  of LDI.  Such  shares  were issued
pursuant to the  exemption  provided in Section  4(2) of the  Securities  Act of
1933, as amended.

<PAGE>

ITEM 6 - SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data as of and for the years ended
December 31, 2000,  1999,  and 1998,  are derived from our audited  consolidated
financial   statements  that  are  included   elsewhere  herein.   The  selected
consolidated financial data as of and for the year ended December 31, 1997, nine
months  ended  December  31,  1996,  and for the year ended  March 31,  1996 are
derived  from our  audited  consolidated  financial  statements,  which  are not
included  herein.  The  financial  data should be read in  conjunction  with our
audited consolidated financial statements and notes thereto,  included elsewhere
herein,  and with "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations."
<TABLE>
<CAPTION>

                                                                                           Nine Months      Fiscal
                                                                Year Ended                    Ended       Year Ended
                                                               December 31,                December 31,    March 31,
                                            -----------------------------------------------------------   ----------
(In thousands, except per share data)        2000(2)(3)  1999(2)(3)  1998(2)(3)   1997(2)      1996(1)      1996
                                             ----------  ----------  -----------  -------      -------      ----
<S>                                         <C>         <C>         <C>         <C>          <C>          <C>
Per Share
       Net income
            Basic                           $    0.49   $    0.49   $   0.29    $    0.11    $    0.11    $    0.44
            Diluted                         $    0.49   $    0.49   $   0.29    $    0.11    $    0.11    $    0.44
       Pro forma net income (loss) (4)      $       -   $       -   $   0.33    $   (1.01)   $       -    $       -


Statements of Operations Data
       Net sales                            $ 337,213   $ 324,490  $ 309,946    $ 130,175    $  95,822    $ 107,511
       Gross margin                         $ 122,995   $ 117,002  $ 109,678    $  47,107    $  33,891    $  38,012
       Income from operations               $  19,572   $  18,745  $  15,895    $   3,832    $   2,566    $   5,073
       Net income                           $   3,727   $   3,711  $   1,988    $     656    $     660    $   2,649
       Pro forma net income (loss) (4)      $       -   $       -  $   2,459    $  (7,585)   $       -    $       -
       Weighted average shares
           outstanding - Diluted                7,551       7,545      6,780        5,994        6,000        6,000
       Pro forma weighted average
           shares outstanding - Diluted             -           -      7,536        7,536            -            -

                                                                     December 31,                         March 31,
                                            ----------------------------------------------------------    ---------
                                             2000(2)(3)  1999(2)(3)  1998(2)(3)  1997(2)      1996(1)       1996
                                             ----------  ----------  ----------  -------      --------      ----
Balance Sheet Data
       Net working capital                  $  35,209   $  48,147  $  43,452    $  42,928    $  22,819    $  25,036
       Total assets                         $ 218,317   $ 214,235  $ 226,475    $ 215,418    $  66,477    $  66,772
       Long-term debt                       $  90,652   $ 111,603  $ 119,120    $ 134,135    $  17,831    $  19,605
       Shareholders' equity                 $  56,806   $  53,069  $  49,348    $  32,932    $  32,326    $  31,665
</TABLE>

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

(1)  We changed our fiscal year end from March 31 to December 31,  effective for
     the period ended December 31, 1996.

(2)  The operating results for the years ended December 31, 2000, 1999, 1998 and
     1997 are affected by the  acquisition of Thompson on November 21, 1997. The
     operating  results of Thompson are included in our  consolidated  operating
     results since the acquisition date.

(3)  The operating  results for the year ended December 31, 2000, 1999, and 1998
     are  affected  by the  acquisition  of  AutoPaints  on June 30,  1998.  The
     operating results of AutoPaints are included in our consolidated  operating
     results since the acquisition date.

(4)  Pro forma amounts for the years ended  December 31, 1998 and 1997 have been
     prepared to give effect to the  acquisitions  of Thompson and AutoPaints as
     if the  transactions  had  occurred on January 1, 1997.  These  amounts are
     unaudited and are presented for  informational  purposes only. No pro forma
     amounts are  presented  for  acquisitions  in 2000 or 1999 as the impact of
     such  acquisitions  are not material.  The  unaudited  pro forma  financial
     amounts  should  be  read  in  conjunction  with  Item  7  -  "Management's
     Discussion and Analysis of Financial Condition and Results of Operations."


<PAGE>

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations

The following  discussion and analysis about the Company's  financial  condition
and results of operations  should be read in conjunction  with the  consolidated
financial statements and related notes presented in this annual report.

Overview

FinishMaster,  Inc. is the leading independent distributor of automotive paints,
coatings and  paint-related  accessories  primarily to the automotive  collision
repair  industry in the United  States.  As of March 1, 2001, the Company serves
its  customers  through 156 sales outlets and three major  distribution  centers
located in 22 states, making it the only national independent distributor in the
industry. The Company has over 35,000 customers that it provides a comprehensive
selection  of  brand  name  products  supplied  by BASF,  DuPont,  3M and PPG in
addition to its own FinishMaster  PrivateBrand  refinishing  accessory products.
The Company is  typically  the  primary  source of supply to its  customers  and
offers a broad range of services designed to enhance the operating  efficiencies
and  competitive  positions  of  its  customers  and  suppliers.  The  Company's
operations are currently  organized into two  geographical  divisions:  East and
West. The Company aggregates its two divisions into a single reportable segment.

The  Company  is  the  leading   consolidator  in  the  automotive   refinishing
distribution  industry,  having  successfully  completed  as of  March  1,  2001
approximately  36 acquisitions  over the past nine years,  ranging from "add-on"
acquisitions to the strategic acquisitions of Thompson and AutoPaints.

On June 30, 1998, the Company  completed the acquisition by merger of AutoPaints
in  exchange  for the  issuance of 1.5 million  shares of the  Company's  common
stock.  Since AutoPaints was acquired from the Company's  majority  shareholder,
the acquisition  constituted a transaction  within a controlled group. Thus, the
acquisition was accounted for using the historical cost basis of AutoPaints' net
assets, which approximated $14.4 million at the date of acquisition.

The Company intends to continue its strategy of expanding through  acquisitions.
The Company completed six (6) acquisitions during both 2000 and 1999.

Results of Operations

As a  result  of the  acquisition  of  AutoPaints  and its  significance  to the
Company's  results of operations,  pro forma results of operations are presented
for the year ended December 31, 1998. The Company  believes that for purposes of
Management's  Discussion and Analysis,  a more meaningful  understanding  of the
Company's performance can be obtained by comparing the pro forma results for all
years.  Pro  forma  amounts  for 2000 and 1999 are  consistent  with  historical
results as the pro forma  effects of the six  acquisitions  completed in each of
the years are not material.

The unaudited  pro forma  consolidated  amounts for the year ended  December 31,
1998 have been  prepared to give effect to the  acquisition  of AutoPaints as if
the  transaction  had occurred on January 1, 1998. In calculating  the pro forma
amounts,  the  historical  amounts of  AutoPaints  for the entire year have been
included  with those of the  Company.  The  unaudited  pro forma  amounts do not
purport to be indicative  of the results of operations  that would have actually
been  obtained  if the  transactions  had  occurred  on January 1, 1998,  or the
results of operations that may be obtained in the future.

Net Sales
--------------------------------------------------------------------------------
(In thousands)        2000      Change        1999         Change        1998
--------------------------------------------------------------------------------
Historical        $ 337,213      3.9%      $ 324,490        4.7%      $ 309,946
--------------------------------------------------------------------------------
Pro forma         $ 337,213      3.9%      $ 324,490        0.9%      $ 321,710
--------------------------------------------------------------------------------

Net sales  increased $12.7 million or 3.9% from 1999 to 2000 due to "same outlet
sales"  growth and  acquisitions.  "Same outlet sales" grew  approximately  2.4%
while net sales acquired through  acquisitions  contributed  approximately 1.5%.
During 2000, the Company completed six acquisitions.

Pro  forma  net  sales  increased  $2.8  million  or 0.9%  from 1998 to 1999 due
primarily to acquisitions.  During 1999, the Company completed six acquisitions.
The  Company  experienced  minimal  "same  outlet  sales"  growth as a result of
competitive market conditions and flat industry demand.

Approximately  70% of net sales consisted of automotive paint products while the
remaining portion was paint-related accessories.

Gross Margin
--------------------------------------------------------------------------------
(In thousands)             2000      Change     1999      Change       1998

--------------------------------------------------------------------------------
Historical               $ 122,995    5.1%    $ 117,002    6.7%     $ 109,678
Percentage of net sales      36.5%                36.1%                 35.4%
--------------------------------------------------------------------------------
Pro forma                $ 122,995    5.1%    $ 117,002    2.5%     $ 114,199
Percentage of net sales      36.5%                36.1%                 35.5%
--------------------------------------------------------------------------------

Gross  margin for 2000  increased  $6.0  million or 5.1% over 1999 due to higher
sales  volume of $4.6 million and improved  margins of $1.4  million.  Pro forma
gross margin for 1999  increased  $2.8 million or 2.5% over 1998 due to improved
margins of $1.8 million and higher sales volume of $1.0 million. Gross margin as
a percentage  of net sales has  improved  over the last two years as a result of
supplier incentive programs and the optimization of early payment discounts.

Operating Expenses
--------------------------------------------------------------------------------
(In thousands)              2000     Change      1999     Change       1998
--------------------------------------------------------------------------------
Historical                $ 52,195    6.5%    $  49,029   (1.0%)    $  49,518
Percentage of net sales      15.5%                15.1%                 16.0%
--------------------------------------------------------------------------------
Pro forma                 $ 52,195    6.5%    $  49,029   (4.1%)    $  51,103
Percentage of net sales      15.5%                15.1%                 15.9%
--------------------------------------------------------------------------------

Operating expenses consist of wages, facility, vehicle and related costs for the
Company's store and distribution locations.

Operating  expenses as a percentage of net sales increased from 15.1% in 1999 to
15.5%  in 2000  due  primarily  to  higher  vehicle  fuel  costs  and  increased
depreciation  expense  associated  with the new  point-of-sale  computer  system
implemented during the current year.

Pro forma operating expenses as a percentage of net sales improved from 15.9% in
1998 to 15.1% in 1999 as a  result  of  management's  focus  during  the year on
increased productivity and cost containment.

Selling, General and Administrative Expenses
--------------------------------------------------------------------------------
(In thousands)              2000     Change      1999     Change       1998
--------------------------------------------------------------------------------
Historical               $  44,928    5.9%    $  42,436   12.3%     $  37,789
Percentage of net sales      13.3%                13.1%                 12.2%
--------------------------------------------------------------------------------
Pro forma                $  44,928    5.9%    $  42,436    7.7%     $  39,404
Percentage of net sales      13.3%                13.1%                 12.2%
--------------------------------------------------------------------------------

Selling,   general  and  administrative   expenses  ("SG&A")  consist  of  costs
associated  with  the  Company's   corporate  support  staff  and  expenses  for
commissions, wages, and customer sales support activities.

SG&A  expenses as a percentage of net sales  increased  from 13.1% to 13.3% from
1999 to 2000 as a result of increased  wages and benefit costs,  higher bad debt
expenses and increased costs associated with attracting and retaining customers.

Pro forma SG&A  expenses as a percentage  of net sales  increased  from 12.2% in
1998 to 13.1% in 1999 as a result of higher selling  expenses,  finalization  of
staffing requirements at the Company's corporate  headquarters,  increased costs
associated  with  attracting and retaining  customers,  and higher  professional
fees.

Amortization of Intangible Assets
--------------------------------------------------------------------------------
(In thousands)               2000    Change      1999     Change        1998
--------------------------------------------------------------------------------
Historical                $  6,300   (7.2%)    $  6,792    4.9%      $  6,476
Percentage of net sales       1.9%                 2.1%                  2.1%
--------------------------------------------------------------------------------
Pro forma                 $  6,300   (7.2%)    $  6,792   (2.9%)     $  6,996
Percentage of net sales       1.9%                 2.1%                  2.2%
--------------------------------------------------------------------------------

The decrease in amortization  expense between 1999 and 2000, and the decrease in
pro forma  amortization  expense  between  1998 and 1999 was a result of certain
intangible assets, principally non-compete agreements,  becoming fully amortized
in those years.

Interest Expense, net
--------------------------------------------------------------------------------
(In thousands)             2000      Change      1999     Change       1998
--------------------------------------------------------------------------------
Historical               $  11,604     7.4%   $  10,802   (5.9%)    $  11,475
Percentage of net sales       3.4%                 3.3%                  3.7%
--------------------------------------------------------------------------------
Pro forma                $  11,604    7.4%    $  10,802   (6.2%)    $  11,510
Percentage of net sales       3.4%                 3.3%                  3.6%
--------------------------------------------------------------------------------

The $0.8 million or 7.4% increase in interest  expense between 2000 and 1999 was
due to increased  interest rates of  approximately  110 basis points,  partially
offset by lower average outstanding borrowings. The Company repaid $25.3 million
of outstanding borrowings during 2000.

The $0.7 million or 6.2% decrease in pro forma interest expense between 1999 and
1998 was due to lower  outstanding  borrowings.  The implied  interest  rates on
these borrowings  remained  relatively  stable between years. The Company repaid
$6.9 million of outstanding borrowings in 1999.

Income Tax Expense
--------------------------------------------------------------------------------
(In thousands)               2000    Change      1999     Change       1998
--------------------------------------------------------------------------------
Historical                $  4,241    0.2%     $  4,232   74.0%      $  2,432
Percentage of net sales       1.3%                 1.3%                  0.8%
Effective tax rate           53.2%                53.3%                 55.0%
--------------------------------------------------------------------------------
Pro forma                 $  4,241    0.2%     $  4,232   55.2%      $  2,727
Percentage of net sales       1.3%                 1.3%                  0.8%
Effective tax rate           53.2%                53.3%                 52.6%
--------------------------------------------------------------------------------

The increase in income tax expense  between 1999 and 2000,  and pro forma income
tax expense  between 1998 and 1999 was directly  attributable  to higher  income
before income taxes.  The effective tax rate has remained flat over the periods,
and has varied from the statutory rates because of certain expenses, principally
nondeductible intangible amortization.

<PAGE>

Net Income and Income Per Share
--------------------------------------------------------------------------------
(In thousands, except       2000     Change      1999     Change       1998
per share data)
--------------------------------------------------------------------------------
Historical net income     $  3,727    0.4%     $  3,711   86.7%      $  1,988
Percentage of net sales       1.1%                 1.1%                  0.6%
Net income per share      $   0.49    0.0%     $   0.49   69.0%      $   0.29
--------------------------------------------------------------------------------
Pro forma net income      $  3,727    0.4%     $  3,711   50.9%      $  2,459
Percentage of net sales       1.1%                 1.1%                  0.8%
Pro forma net income
    per share             $   .049    0.0%     $   0.49   48.5%      $   0.33
--------------------------------------------------------------------------------

Factors  contributing  to the changes in net income and pro forma net income and
the related per share amounts are discussed in the detail above.

Inflation and Other Economic Factors

Inflation  affects  FinishMaster's  cost of materials  sold,  salaries and other
related  costs  of  distribution.   To  the  extent  permitted  by  competition,
FinishMaster has offset these higher costs of materials  through selective price
increases.

The Company's business may be negatively affected by cyclical economic downturns
in the markets in which it operates. The Company's financial performance is also
dependent on its ability to acquire  businesses  and  profitably  integrate them
into its operations.

Quantitative and Qualitative Disclosure about Market Risk

The  Company  did not have  significant  holdings  of  derivative  financial  or
commodity  based  instruments  at  December  31,  2000 or 1999.  A review of the
Company's other financial  instruments and risk exposures  indicated the Company
has exposure to interest rate risk. Based upon the Company's outstanding debt at
December 31, 2000 and the term for which current interest rates are fixed, a 10%
increase  in  interest  rates  would  increase  interest  expense for 2001 by an
estimated $0.4 million.

Seasonality and Quarterly Fluctuations

The Company's  sales and  operating  results have varied from quarter to quarter
due to various factors and the Company  expects these  fluctuations to continue.
Among these factors are seasonal buying patterns of the Company's  customers and
the timing of acquisitions. Historically, sales have slowed in the late fall and
winter of each year largely due to inclement  weather and the reduced  number of
business days during the holiday season. As a result,  financial performance for
the Company is generally  lower during the December and March quarters  compared
to the June and September quarters. In addition,  the timing of acquisitions may
cause substantial fluctuations of operating results from quarter to quarter. The
Company takes advantage of periodic special  incentive  programs  available from
its  suppliers  that extend the due date of  inventory  purchases  beyond  terms
normally available with large volume purchases. The timing of these programs can
contribute to fluctuations in the Company's  quarterly cash flows.  Although the
Company  continues to investigate  strategies to smooth the seasonal  pattern of
its  quarterly  results  of  operations,  there  can be no  assurance  that  the
Company's net sales,  results of operations  and cash flows will not continue to
display seasonal patterns.

Financial Condition, Liquidity and Capital Resources
--------------------------------------------------------------------------------
(In thousands)                             2000          1999            1998
--------------------------------------------------------------------------------
Net working capital                     $  35,209     $  48,147      $   43,452
Long-term debt                          $  90,652     $ 111,603      $  119,120
Cash provided by operating activities   $  29,646     $   8,781      $   16,094
Cash used in investing activities       $  (5,059)    $  (2,371)     $     (663)
Cash used in financing activities       $ (23,693)    $  (6,800)     $  (14,786)
--------------------------------------------------------------------------------

The  Company's  primary  sources of funds  over the past  three  years were from
operations and borrowings under its credit facilities.  The Company's  principal
uses of cash were to fund working capital,  capital expenditures,  acquisitions,
and the repayment of outstanding borrowings.

Net cash generated from operating  activities was $29.6 million in 2000 compared
with $8.8 million in 1999.  This increase was the result of a positive change in
operating  assets  and  liabilities,   primarily   accounts  payable  and  other
liabilities. The increase in cash flows of $21.3 million in accounts payable and
other  liabilities  resulted from  differences in payment terms between years on
large "year end" inventory  purchases.  Partially  offsetting  this increase was
higher investment in inventory, prepaid and other assets.

Net cash used in investing  activities  was $5.1 million in 2000  compared  with
$2.4 million in 1999. The increase was primarily the result of increased capital
spending for the implementation of a new  "point-of-sale"  computer system and a
consolidated   general  ledger  system.   The  Company  estimates  that  capital
expenditures for 2001,  principally for information  technology equipment,  will
approximate $2.0 million.

Net cash used in financing  activities was $23.7 million in 2000,  compared with
$6.8 million in 1999, primarily from the repayment of debt. The increase in debt
repayments  was a result of improved  working  capital  management and favorable
payment terms with our vendors on "year end" inventory purchases.

Total  capitalization  at December 31, 2000,  was $158.4  million,  comprised of
$101.6  million of debt and $56.8  million of equity.  Debt as a  percentage  of
total  capitalization  decreased from 69.9% to 64.1% between 1999 and 2000. This
improvement was  attributable  to the increase in equity  resulting from current
year net income, along with the decrease in debt resulting from repayments.

At  December  31,  2000,  the  Company  had term  credit  and  revolving  credit
facilities  totaling $65.4 million and senior  subordinated debt of $30 million.
The  Company  was  in  compliance  with  the  covenants  underlying  its  credit
facilities,  and had  availability  under its revolving credit facility of $24.9
million as of year end. The Company also had availability under its acquisitions
revolving credit facility of $5.7 million.

Based on current and  projected  operating  results  and giving  effect to total
indebtedness,  the Company  believes  that cash flow from  operations  and funds
available  from  lenders and other  creditors  will provide  adequate  funds for
ongoing operations, debt service and planned capital expenditures.

Other Matters

The Company has reviewed the impact and subsequent  disclosure  requirements  of
Statement of Financial  Accounting  Standards  (SFAS) No. 133,  "Accounting  for
Derivative  Instruments and Hedging Activities" and does not expect it to have a
material impact on the financial condition or results of operations.

Forward-Looking Statements

This Report contains  certain  forward-looking  statements  pertaining to, among
other things,  the Company's  future results of operations,  cash flow needs and
liquidity, acquisitions, and other aspects of its business. The Company may make
similar forward-looking statements from time to time. These statements are based
largely on the  Company's  current  expectations  and are subject to a number of
risks and  uncertainties.  Actual  results  could differ  materially  from these
forward-looking  statements.  Important  factors to consider in evaluating  such
forward-looking  statements include changes in external market factors,  changes
in the Company's  business  strategy or an inability to execute its strategy due
to changes in its  industry or the economy in general,  difficulties  associated
with  assimilating  acquisitions,  the emergence of new or growing  competitors,
seasonal and quarterly  fluctuations,  governmental  regulations,  the potential
loss of key suppliers,  and various other competitive factors. In light of these
risks and uncertainties,  there can be no assurance that the future developments
described  in the  forward-looking  statements  contained in this Report will in
fact occur.

<PAGE>

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Financial Statements:                                                       Page

   Report of Independent Accountants                                         17

   Consolidated Balance Sheets                                               18

   Consolidated Statements of Operations                                     19

   Consolidated Statements of Cash Flows                                     20

   Consolidated Statements of Shareholders' Equity                           21

   Notes to Consolidated Financial Statements                                22

   Financial Statement Schedule:

         Schedule II - Valuation and Qualifying Accounts                     35

All other  schedules are omitted because they are not applicable or the required
information is shown in the financial statements or the notes thereto.


<PAGE>

Report of Independent Accountants

To the Board of Directors and Shareholders of FinishMaster, Inc.:

In our opinion, the consolidated financial statements listed in the accompanying
index  present  fairly,  in all material  respects,  the  financial  position of
FinishMaster,  Inc. and its  subsidiaries at December 31, 2000 and 1999, and the
results of their  operations and their cash flows for each of the three years in
the period ended  December 31, 2000 in  conformity  with  accounting  principles
generally accepted in the United States of America. In addition, in our opinion,
the financial  statement  schedule  listed in the  accompanying  index  presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.  These financial
statements  and  financial  statement  schedule  are the  responsibility  of the
Company's  management;  our  responsibility  is to  express  an opinion on these
financial  statements and financial  statement  schedule based on our audits. We
conducted our audits of these  statements in accordance with auditing  standards
generally  accepted in the United States of America,  which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements,  assessing the accounting  principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Indianapolis, Indiana
March 2, 2001


<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED
BALANCE SHEETS
FinishMaster, Inc.
                                                                       December 31,         December 31,
(In thousands, except share amounts)                                           2000                 1999
<S>                                                                <C>                  <C>
ASSETS
Current assets
      Cash                                                         $          1,513     $            619
      Accounts receivable, net of allowance for doubtful
           accounts of $1,337 and $1,419, respectively                       29,063               30,135
      Inventory                                                              63,346               56,830
      Refundable income taxes                                                   710                  295
      Deferred income taxes                                                   3,459                3,301
      Prepaid expenses and other current assets                               4,349                3,328
                                                                   -----------------------------------------
      Total current assets                                                  102,440               94,508

Property and equipment
      Land                                                                      368                  368
      Vehicles                                                                1,432                1,244
      Buildings and improvements                                              5,903                5,489
      Machinery, equipment and fixtures                                      11,922                8,845
                                                                   -----------------------------------------
                                                                             19,625               15,946
      Accumulated depreciation                                              (10,649)              (8,226)
                                                                   -----------------------------------------
                                                                              8,976                7,720

Other assets
      Intangible assets, net                                                102,858              108,115
      Deferred income taxes                                                   1,870                2,250
      Other                                                                   2,173                1,642
                                                                   -----------------------------------------
                                                                            106,901              112,007
                                                                   -----------------------------------------
                                                                   $        218,317     $        214,235
                                                                   =========================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
      Accounts payable                                             $         46,470     $         25,856
      Amounts due to LDI                                                        506                  767
      Accrued compensation and benefits                                       6,033                5,312
      Other accrued expenses and current liabilities                          3,232                2,908
      Current maturities of long-term debt                                   10,990               11,518
                                                                   -----------------------------------------
      Total current liabilities                                              67,231               46,361

Long-term debt, less current maturities                                      90,652              111,603
Other long-term liabilities                                                   3,628                3,202
Commitments and contingencies (Note 8)
Shareholders' equity
      Preferred stock, no par value; 1,000,000 shares authorized;
           no shares issued and outstanding                                       -                    -
      Common stock, $1 stated value; 25,000,000 shares authorized;
           7,540,804 and 7,537,636 shares issued and outstanding              7,540                7,538
      Additional paid-in capital                                             27,367               27,359
      Retained earnings                                                      21,899               18,172
                                                                   -----------------------------------------
                                                                             56,806               53,069
                                                                   -----------------------------------------
                                                                   $        218,317     $        214,235
                                                                   =========================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS
OF OPERATIONS
FinishMaster, Inc.

                                                                 Year                 Year                 Year
                                                                Ended                Ended                Ended
                                                         December 31,         December 31,          December 31,
(In thousands, except per share data)                            2000                 1999                 1998
<S>                                                  <C>                  <C>                  <C>
Net sales                                            $        337,213     $        324,490     $        309,946
Cost of sales                                                 214,218              207,488              200,268
                                                     --------------------------------------------------------------
Gross margin                                                  122,995              117,002              109,678

Expenses
      Operating                                                52,195               49,029               49,518
      Selling, general and administrative                      44,928               42,436               37,789
      Amortization of intangible assets                         6,300                6,792                6,476
                                                     --------------------------------------------------------------
                                                              103,423               98,257               93,783
                                                     --------------------------------------------------------------
Income from operations                                         19,572               18,745               15,895

Interest expense, net                                          11,604               10,802               11,475
                                                     --------------------------------------------------------------

Income before income taxes                                      7,968                7,943                4,420
Income tax expense                                              4,241                4,232                2,432
                                                     --------------------------------------------------------------
Net income                                           $          3,727     $          3,711     $          1,988
                                                     ==============================================================

Net income per share (Note 10):
      Basic                                          $           0.49     $           0.49     $           0.29
                                                     ==============================================================
      Diluted                                        $           0.49     $           0.49     $           0.29
                                                     ==============================================================
Weighted average shares outstanding - Basic                     7,540                7,536                6,775
                                                     ==============================================================
Weighted average shares outstanding - Diluted                   7,551                7,545                6,780
                                                     ==============================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.

<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS
OF CASH FLOWS
FinishMaster, Inc.
                                                                                 Year           Year             Year
                                                                                Ended          Ended            Ended
                                                                          December 31,   December 31,     December 31,
(In thousands)                                                                   2000           1999             1998

Operating activities
<S>                                                                      <C>               <C>                 <C>
      Net income                                                         $      3,727      $   3,711           $ 1,988
      Adjustments to reconcile net income to net cash
        provided by operating activities:
           Depreciation and amortization                                       11,144         11,019            10,464
           Deferred income taxes                                                  222          1,125             2,249
           Changes in operating assets and liabilities
             (excluding the impact of acquisitions):
              Accounts receivable, net                                          1,854            785               758
              Inventories                                                      (4,530)         1,639               (15)
              Prepaid and other assets                                         (4,091)           440            (1,740)
              Accounts payable and other liabilities                           21,320         (9,938)            2,390
                                                                         ----------------------------------------------
Net cash provided by operating activities                                      29,646          8,781            16,094

Investing activities
      Business acquisitions and payments under
           earn-out provisions for prior acquisitions                          (1,853)        (1,280)             (191)
      Purchases of property and equipment                                      (3,110)          (973)           (1,844)
      Proceeds from disposal of property and equipment                             10             20                58
      Cash acquired through merger with LDI
           AutoPaints, Inc.                                                         -              -             1,786
      Other                                                                      (106)          (138)             (472)
                                                                         ----------------------------------------------
Net cash used in investing activities                                          (5,059)        (2,371)             (663)

Financing activities
      Proceeds from the exercise of stock options                                   -              -                 7
      Debt issuance costs                                                        (166)          (155)             (168)
      Proceeds from debt                                                       95,357         98,280            43,300
      Repayment of debt                                                      (118,884)      (104,925)          (57,925)
                                                                         ----------------------------------------------
Net cash used in financing activities                                         (23,693)        (6,800)          (14,786)
                                                                         ----------------------------------------------
Increase(decrease) in cash                                                        894           (390)              645
Cash at beginning of period                                                       619          1,009               364
                                                                         ----------------------------------------------
Cash at end of period                                                    $      1,513      $     619           $ 1,009
                                                                         ==============================================
Supplemental disclosure of cash flow information
      Cash paid (received) during the
      period for:
           Interest                                                      $     10,687      $  10,998           $10,360
                                                                         ==============================================
           Taxes                                                         $      4,230      $   2,158           $  (291)
                                                                         ==============================================
Non-cash activities
      Acquisition of LDI AutoPaints, Inc.:
           Assets acquired                                                                                     $17,667
           Less liabilities assumed                                                                              3,246
                                                                                                               --------
           Equity purchased                                                                                     14,421
           Less cash acquired in transaction                                                                     1,786
                                                                                                               --------
           Net assets acquired, excluding cash                                                                 $12,635
                                                                         ==============================================
      Earn-out adjustments for prior acquisitions                        $          -      $       -           $   810
                                                                         ==============================================
</TABLE>

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

<PAGE>

CONSOLIDATED STATEMENTS
OF SHAREHOLDERS' EQUITY
FinishMaster, Inc.

                                                Additional
                                      Common       Paid-in   Retained
(In thousands)                         Stock       Capital   Earnings    Totals


Balances at December 31, 1997            5,993     14,466     12,473      32,932
Options exercised                            1          6          -           7
Issuance of stock related
   to merger of
   LDI AutoPaints, Inc.                  1,542     12,879          -      14,421
Net income for the year                      -          -      1,988       1,988
                                      ------------------------------------------

Balances at December 31, 1998            7,536     27,351     14,461      49,348
Stock grants issued                          2          8          -          10
Net income for the year                      -         -       3,711       3,711
                                      ------------------------------------------

Balances at December 31, 1999         $  7,538   $ 27,359   $ 18,172    $ 53,069
Stock grants issued                          2          8          -          10
Net income for the year                      -         -       3,727       3,727
                                      ------------------------------------------

Balances at December 31, 2000         $  7,540   $ 27,367   $ 21,899    $ 56,806
                                      ==========================================


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

<PAGE>

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
FinishMaster, Inc.


1.       SIGNIFICANT ACCOUNTING POLICIES

Nature of Business:  FinishMaster, Inc. ("the Company" or "FinishMaster") is the
leading national distributor of automotive paints,  coatings,  and paint-related
accessories to the automotive  collision repair  industry.  As of March 1, 2001,
the Company operated 156 sales outlets and three major  distribution  centers in
22 states and is  organized  into two major  geographical  divisions  - East and
West.  The  Company  aggregates  its  two  geographic  divisions  into a  single
reportable segment. The Company has over 35,000 customers to which it provides a
comprehensive  selection of brand name products supplied by BASF, DuPont, 3M and
PPG, in  addition to its own  FinishMaster  PrivateBrand  refinishing  accessory
products.  The Company is highly dependent on the key suppliers  outlined above,
which account for approximately 80% of the Company's purchases.

Principles of Consolidation:  The Company's  consolidated  financial  statements
include the accounts of FinishMaster and its wholly owned  subsidiaries from the
dates of their respective acquisition. All significant intercompany accounts and
transactions  have been  eliminated.  References to the Company or  FinishMaster
throughout this report relate to the consolidated entity.

Majority  Shareholder:  From July 9, 1996, the date of acquisition,  to June 29,
1998,   AutoPaints  owned  4,045,100   shares  of  FinishMaster   common  stock,
representing  a  67.5%  ownership  interest  in the  Company.  AutoPaints  was a
wholly-owned subsidiary of Lacy Distribution, Inc. ("Distribution"),  an Indiana
corporation, which is an indirect wholly-owned subsidiary of LDI, Ltd., ("LDI"),
an Indiana limited partnership.  Effective June 30, 1998,  AutoPaints was merged
into the Company in exchange for the issuance of an additional  1,542,416 shares
of FinishMaster common stock. Upon completion of this transaction,  Distribution
became the majority  shareholder of the Company with 5,587,516  shares of common
stock,  representing  74.1% of the outstanding shares at December 31, 2000, 1999
and 1998.  Throughout  the  remainder  of these  financial  statements,  LDI and
Distribution are collectively referred to as "LDI."

Transactions  with Majority  Shareholder:  The Company  reimburses  its majority
shareholder,  LDI, for the cost of insurance and certain other  expenses.  Those
expenses  amounted  to  $183,000,  $158,000,  and  $538,000  for the years ended
December 31, 2000, 1999, and 1998, respectively. In addition, the Company leases
from LDI its corporate office space to which it moved in 1998. Lease expense and
payments  for repairs and  maintenance  to LDI totaled  approximately  $202,000,
$214,000,  and  $105,000 for the years ended  December 31, 2000,  1999 and 1998,
respectively. The Company also has subordinated debt payable to LDI (see Note 4,
Long-Term Debt).

Use of Estimates:  The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and  assumptions  that affect the  reported  amounts of assets and  liabilities,
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents:  The Company considers all highly liquid  investments
with an original  maturity of three  months or less to be cash  equivalents.  At
December 31, 2000, and 1999,  checks drawn on future  deposits and borrowings of
$10,622,000 and $3,300,000,  respectively,  were classified as accounts payable.
These amounts represent outstanding checks in excess of funds on deposit.

Receivables:  Trade accounts  receivable  represents  amounts due primarily from
automotive body repair shops and  dealerships.  Trade  receivables are typically
not collateralized.  No single customer exceeds 10% of the Company's receivables
at December 31, 2000.

Inventories:  Inventories are stated at the lower of first-in, first-out cost or
market and  consist  primarily  of  purchased  paint and  refinishing  supplies.
Substantially, all inventories consist of finished goods.

<PAGE>

Properties  and  Depreciation:  Property  and  equipment  is  stated at cost and
includes  expenditures  for new  facilities,  equipment  and  improvements  that
materially extend the useful lives of existing assets.

Expenditures  for  normal  repairs  and  maintenance  are  charged to expense as
incurred.  Depreciation  is computed  using a combination of  straight-line  and
accelerated methods over the following range of estimated useful lives:

Buildings & improvements....................................   Up to 30 years
Vehicles....................................................    Up to 5 years
Leasehold improvements......................................    Life of lease
Machinery, equipment & fixtures.............................    3 to 12 years

Depreciation  expense for 2000,  1999 and 1998 was  $2,215,000,  $2,427,000  and
$2,772,000, respectively.

Revenue  Recognition:  Revenues from product sales are recognized at the time of
shipment or delivery to the  customer.  The company has reviewed the  accounting
and disclosure  requirements of Staff Accounting Bulletin (SAB) No. 101 "Revenue
Recognition  in  Financial   Statements"  and  has  determined  that  it  is  in
compliance.

Income Taxes: Deferred income taxes are recognized for the temporary differences
between the tax basis of assets and liabilities  and their  financial  reporting
amounts in accordance  with the provisions of Statement of Financial  Accounting
Standards  ("SFAS")  No.  109,  "Accounting  for Income  Taxes."  The income tax
provision is the tax payable for the period and the change  during the period in
deferred tax assets and liabilities.

Intangibles:  Intangibles  consist primarily of the excess of cost over the fair
market  value of net  assets of  acquired  businesses  ("goodwill").  Intangible
assets,  including  goodwill  and  non-compete  agreements,  are  amortized on a
straight-line basis over periods ranging from 5 to 30 years. The majority of the
Company's  goodwill  relates to its November 1997 acquisition of Thompson and is
being  amortized over 30 years.  The carrying value of goodwill is  periodically
reviewed to determine if an impairment  has occurred.  The Company  measures for
potential  impairment of recorded  goodwill based on the estimated  undiscounted
cash flows of acquired entities over the remaining  amortization  period. If the
estimated  future  undiscounted  cash flows are less than the carrying amount of
such goodwill,  an impairment  would be deemed to have occurred and a loss would
be recognized. Such loss would be determined based upon expected discounted cash
flows or market  prices.  Debt issuance costs are amortized over the term of the
related debt agreements.

Internal Use Software: Costs incurred to develop or obtain software for internal
use within the business are  capitalized  in accordance  with the  provisions of
Accounting Standards Executive Committee Statement of Position 98-1, "Accounting
for the Costs of Computer  Software  Developed or Obtained  for  Internal  Use."
During  2000 and 1999,  the Company  capitalized  approximately  $2,223,000  and
$589,000,  respectively,  of costs  related  to  efforts  to migrate to a single
information technology platform. Once placed in service, software costs incurred
are depreciated over their estimated useful life that range from 3 to 5 years.

Derivative  Instruments and Hedging Activities:  As the Company is not routinely
involved in  derivative  and hedging  activities,  the  adoption of SFAS No. 133
"Accounting for Derivative  Instruments and Hedging Activities" beginning in the
first quarter of 2001 is not expected to have a material impact on the financial
condition or results of operations.

Shipping  and  Handling  Fees  and  Costs:  The  Company  includes  the  cost of
delivering the product to the customer in the operating  expense  section of the
consolidated  statements of  operations.  The total  delivery costs incurred for
2000, 1999, and 1998 are estimated at $17,564,000, $17,035,000, and $16,465,000,
respectively.

Reclassification:  Certain amounts in the consolidated financial statements have
been reclassified to conform to the current year presentation.

2.       ACQUISITIONS

The following table  summarizes the assets  acquired and liabilities  assumed in
acquisitions  made  by  FinishMaster  in  each  of the  periods  presented.  All
acquisitions,  except for the merger with AutoPaints  discussed below, have been
accounted for as purchases and accordingly,  the acquired assets and liabilities
have been recorded at their  estimated fair values at the dates of  acquisition.
Intangible assets related to goodwill and covenants not to compete were recorded
with each  acquisition,  if appropriate.  Operating results of acquired entities
have been included in FinishMaster's  consolidated financial statements from the
respective date of purchase.


<TABLE>
<CAPTION>
                                                                          Year            Year           Year
                                                                         Ended           Ended          Ended
                                                                   December 31,    December 31,   December 31,
(In thousands)                                                            2000            1999           1998

<S>                                                               <C>             <C>             <C>
Accounts receivable                                               $       782     $       708     $    2,225
Inventory                                                               1,985             725          4,389
Deferred taxes                                                              -               -            535
Equipment and other                                                       370             202          3,128
Intangible assets                                                       1,278             650          7,390
                                                                  ----------------------------------------------
                                                                        4,415           2,285         17,667

Less liabilities assumed                                                  513             714          3,246
                                                                  ----------------------------------------------

Acquisition price                                                       3,902           1,571         14,421
Acquisition debt                                                        2,049             291              -
                                                                  ----------------------------------------------

Net assets of businesses acquired, net of acquisition debt        $     1,853     $     1,280     $   14,421
                                                                  ==============================================

Number of acquisitions                                                      6               6              1
                                                                  ----------------------------------------------
</TABLE>


During 2000, the Company completed six acquisitions.  The acquisitions  occurred
in California,  South Carolina,  Washington DC, Ohio and Texas,  and were funded
with cash and debt.

During 1999, the Company completed six acquisitions.  The acquisitions  occurred
in Illinois, New Jersey and Texas, and were funded with cash and debt.

On June 30, 1998, the Company  completed the acquisition by merger of AutoPaints
pursuant  to which the  Company  merged  with  AutoPaints  and  issued to LDI an
additional 1,542,416 shares of common stock. Since this was a transaction within
a controlled  group,  the  acquisition of AutoPaints was accounted for using its
historical cost basis.  Equity  securities issued to LDI in exchange for the net
assets of  AutoPaints  were  recorded  at the  historical  cost basis of the net
assets acquired as of the effective date of the transaction.

The following table sets forth the unaudited pro forma results of operations for
1998 for the acquisition  occurring during such period as if the transaction was
consummated  as of January 1, 1998.  The  acquisitions  in 2000 and 1999 did not
have a  significant  impact on the  Company's  unaudited  results of  operations
including  sales,  net income and  earnings  per share,  and  therefore  are not
presented in the table. The unaudited pro forma results of operations consist of
the historical  results of the Company and the acquired  entity,  as adjusted to
give  effect to  additional  interest,  depreciation  and  amortization  expense
arising  from the  acquisitions.  This pro forma  information  does not  include
reductions to operating  expenses  resulting  from the  elimination of duplicate
functions and facilities  directly  attributable to the  acquisitions.  This pro
forma  information  does not purport to be indicative of the combined results of
operations which would have actually been obtained had the acquisition been made
as of that date, or which may be obtained in the future.

<TABLE>
<CAPTION>

                                                                                            Year
                                                                                           Ended
                                                                                     December 31,
(In thousands)                                                                              1998
<S>                                                         <C>                  <C>
Pro forma net sales                                                              $       321,710
Pro forma net income (loss)                                                      $         2,459
Pro forma net income (loss) per common share:
      Basic                                                                      $          0.33
      Diluted                                                                    $          0.33
Weighted average number of common shares - Diluted                                         7,536

3.       INTANGIBLE ASSETS

Intangible assets consisted of the following:
                                                                December  31,        December 31,
(In thousands)                                                          2000                1999

Goodwill                                                    $        121,018     $       120,364
Non-compete agreements                                                12,262              11,534
Debt issuance costs                                                    2,179               2,013
                                                            ----------------------------------------
                                                                     135,459             133,911
Less accumulated amortization                                         32,601              25,796
                                                            ----------------------------------------

Intangible assets, net                                      $        102,858     $       108,115
                                                            ========================================

4.       LONG-TERM DEBT

Long-term debt consisted of the following:
                                                                 December 31,        December 31,
(In thousands)                                                          2000                1999

Revolving Credit Facility                                   $         35,100     $        48,900
Acquisition Revolving Credit Facility                                  1,797                   -
Term Credit Facility                                                  28,495              35,495
Senior Subordinated Debt                                              30,000              30,000
Notes payable to former owners of acquired businesses
      with interest at various rates up to 11%, due at
      various dates through 2007                                       4,624               6,905
Other long-term financing at various rates, due at
       various dates through 2010                                      1,626               1,821
                                                            ----------------------------------------
                                                                     101,642             123,121
Less current maturities                                               10,990              11,518
                                                            ----------------------------------------

                                                            $         90,652     $       111,603
                                                            ========================================
</TABLE>

Revolving  Credit  Facility:  The Company has a revolving credit facility with a
syndicate  of banks,  limited to the lesser of (1) $60  million  less  letter of
credit  obligations,  or (2) 80 percent of eligible accounts  receivable plus 65
percent  of  eligible   inventory  plus  $7.5  million  less  letter  of  credit
obligations  and a reserve for three months  facility rent.  Principal is due on
November  19, 2003.  Interest  rates and payment  dates are variable  based upon
interest  rate  and term  options  selected  by  management.  Interest  rates at
December 31, 2000 on outstanding  revolving credit  borrowings varied from 8.91%
to 10.25%.  Revolving  credit  borrowings are subject to interest  rates,  which
fluctuate  based on the  Company's  Leverage  Ratio,  as  defined  in the Credit
Facility,  which in 2000 was 2.25% over LIBOR or 0.75% over prime in the case of
Floating Rate  Advances.  Effective  January 1, 2001, the interest rates will be
2.00% over LIBOR or 0.50% over prime based upon the Company's  Leverage Ratio as
of September 30, 2000.  The Company is charged an annual  administrative  fee of
$50,000, and an annual commitment fee, payable monthly, that ranges between 0.2%
and 0.5% of the unused portion of the revolving line of credit.  At December 31,
2000, the Company had $24.9 million of available  borrowings under its revolving
credit facility.

Acquisitions  Revolving  Credit  Facility:  The Company  has a revolving  credit
facility  with a syndicate  of banks to finance  future  business  acquisitions.
Interest  rates and  payments  are based  upon one of two  options  selected  by
management,  LIBOR plus 3.0% or an alternative  base rate that is prime plus 1%.
The  Company is charged a  commitment  fee of 0.5% on the average  daily  unused
portion of the facility, due quarterly. This credit facility expires in February
2002.

<PAGE>

Term  Credit  Facility:  The term loan,  which  expires on  November  19,  2003,
requires quarterly  principal  payments that began on March 31, 1999.  Quarterly
principal  payments in 2000 were $1.5  million and  increase in amount each year
over the  remaining  term of the  loan.  Interest  rates and  payment  dates are
variable  based upon  interest  rate and term  options  selected by  management.
Interest  rates  at  December  31,  2000  were  at  8.98%  on  outstanding  term
borrowings. Term borrowings are subject to interest rates, which fluctuate based
on the Company's  Leverage  Ratio, as defined in the Credit  Facility,  of 2.25%
over LIBOR.  Effective  January 1, 2001,  the  interest  rate will be 2.00% over
LIBOR based upon the Company's Leverage Ratio as of September 30, 2000.

Combined  Facilities:  Substantially  all  of  the  Company's  assets  serve  as
collateral for the revolving  credit  facility and term credit  facility.  These
credit agreements contain various quarterly and annual covenants  pertaining to,
among other things,  achieving a minimum fixed charge  coverage ratio, a maximum
leverage  ratio,  a  minimum  interest  expense  coverage  ratio  and a  minimum
consolidated  net worth level.  The covenants also limit  purchases and sales of
assets and restrict payment of dividends.

As of December 31, 2000, the Company was in compliance with its covenants.

Senior  Subordinated Debt: The senior  subordinated debt owed to LDI and two LDI
affiliated trusts matures May 19, 2004. Interest accrues at 9.0% annually and is
payable  quarterly.  The subordinated debt is expressly  subordinate in right of
payment to all senior indebtedness.

The aggregate  principal payments for the next five years subsequent to December
31, 2000 are as follows:

(In thousands)

2001                                                          $          10,990
2002                                                                     11,066
2003                                                                     47,319
2004                                                                     30,673
2005                                                                        268
Thereafter                                                                1,326
                                                              ------------------
                                                              $         101,642
                                                              ==================

The carrying amounts of certain  financial  instruments  such as cash,  accounts
receivable,  accounts payable, and long-term debt approximate their fair values.
The fair value of long-term debt is estimated  using  discounted  cash flows and
the  Company's  current  incremental   borrowing  rates  for  similar  types  of
arrangements.

5.       EMPLOYEE SAVINGS PLAN

The Company has an Employee  Savings Plan ("Plan"),  which covers  substantially
all  employees  who have met certain  requirements  as to date of  service.  The
Company  currently  contributes up to 25% of each $1.00 contributed by employees
up to 6% of their annual compensation.  In addition, the Company may contribute,
at the  discretion of the Board of Directors,  an additional  amount up to 4% of
employees'  annual  compensation.  Company  contributions  charged to operations
under the Plan were  approximately  $279,000,  $213,000  and  $191,000 for years
ended December 31, 2000, 1999 and 1998, respectively.  Employees of Thompson and
AutoPaints were merged into the plan during 1999 and 1998, respectively.

6.       STOCK OPTIONS

The Company has a stock  option plan that was amended on April 29,  1999,  under
which officers, key employees,  and directors may be granted options to purchase
stock. The amendments  included  increasing the number of shares of common stock
reserved  for  issuance  under the plan from 600,000 to 750,000 and changing the
method for  determining  the exercise price of the options on the date of grant.
All options  granted  under this plan have been granted at a price not less than
the fair market  value of the  Company's  common  stock on the date of grant and
have a maximum life of ten years from the date of the grant. All grants prior to
1998 were fully vested at the date of issue.  Certain stock  options  granted in
2000,  1999 and 1998 were also fully  vested at the date of issue,  while others
vest over periods ranging from one to four years.

The Company recognizes  compensation expense related to its stock option plan in
accordance with APB Opinion No. 25,  "Accounting for Stock Issued to Employees."
Options  are  granted  at a price  not less  than the fair  market  value of the
Company's common stock on the date of grant,  therefore, no compensation expense
is recognized.  Had  compensation  expense been  determined at the date of grant
based on the fair value of the awards consistent with SFAS No. 123,  "Accounting
for Stock Based Compensation," the Company's net income and net income per share
would have been  reduced to the pro forma  amounts  indicated  in the  following
table:


                                              Year           Year          Year
                                             Ended          Ended         Ended
                                       December 31,   December 31,  December 31,
                                              2000           1999          1998
(In thousands, except per share data)
Net income:
      As reported                         $  3,727      $    3,711      $  1,988
      Pro forma                           $  3,135      $    3,201      $  1,299

Net income per share:
      As reported, Basic                  $   0.49      $     0.49      $   0.29
      As reported, Diluted                $   0.49      $     0.49      $   0.29

      Pro forma, Basic                    $   0.42      $     0.42      $   0.19
      Pro forma, Diluted                  $   0.42      $     0.42      $   0.19

The fair value of each  option  granted was  estimated  on the date of the grant
using the Black-Scholes option pricing model with the following  assumptions for
the years ended  December  31,  2000,  1999,  and 1998  respectively:  Risk free
interest rate of 6.4%, 5.6%, and 5.0%; no dividend yield;  expected option lives
of nine years; and stock price volatility of 48.5%, 50.4%, and 49.6%.
<TABLE>
<CAPTION>
                                                    December 31,                 December 31,                 December 31,
                                                        2000                         1999                         1998
                                                        ----                         ----                         ----

                                                              Weighted                      Weighted                     Weighted
                                                              -Average                      -Average                     -Average
                                                              Exercise                      Exercise                     Exercise
                                                Options          Price       Options           Price      Options           Price

<S>                                             <C>       <C>                <C>       <C>                <C>       <C>
Outstanding-beginning of year                   524,034   $        8.35      426,490   $        8.89      210,000   $        9.92
Granted                                          92,200   $        7.28      100,024   $        6.03      263,800   $        8.38
Exercised                                             -   $           -            -   $           -          800   $        8.25
Forfeited                                         3,900   $        8.50        2,480   $        8.96       46,510   $       10.65

                                             --------------------------------------------------------------------------------------
Outstanding-end of year                         612,334   $        8.13      524,034   $        8.35      426,490   $        8.89
                                             ======================================================================================

Exercisable-end of year                         563,534   $        8.06      363,034   $        8.61      260,890   $        9.09
                                             ======================================================================================
</TABLE>
<TABLE>
<CAPTION>

                                                                  Exercise Price Range
                                              --------------------------------------------------------------

                                                 $5.34-$8.25         $10.25-$11.55             Total
                                              -------------------  -------------------  --------------------
<S>                                                     <C>                  <C>                   <C>
Options outstanding                                     412,624              199,710               612,334
Weighted average exercise price               $            6.83    $           10.82    $             8.13
Average remaining contractual life                    8.1 years            7.9 years             8.1 years
Options exercisable                                     392,624              170,910               563,534
Weighted average exercise price               $            6.88    $           10.78    $             8.06
</TABLE>

The  weighted-average  fair value of  options  granted  during  the years  ended
December  31,  2000,  1999,  and 1998 were $4.75,  $3.84,  and $4.62 per option,
respectively,  where the exercise price of the options  equaled the market price
on the date of grant.  Certain  options were granted during 2000,  1999 and 1998
where the exercise  price of the options  exceeded the market value of the stock
on the date of grant.  The  weighted-average  fair  value of these  options  was
$4.61,  $3.67  and  $6.51  per  option  at  December  31,  2000,  1999 and 1998,
respectively.  The remaining contractual life of options outstanding at December
31, 2000 is 8.1 years.

7.       INCOME TAXES

The provision for federal and state income taxes consisted of the following:

                                 Year             Year              Year
                                Ended            Ended             Ended
                          December 31,     December 31,      December 31,
(In thousands)                   2000             1999              1998

Current:
      Federal            $      3,202     $       2,383     $         96
      State                       817               724               87
                         ---------------------------------------------------
                                4,019             3,107              183
                         ---------------------------------------------------
Deferred:
      Federal                     193               952             2,082
      State                        29               173               167
                         ---------------------------------------------------
                                  222             1,125             2,249
                         ---------------------------------------------------

                         $      4,241     $       4,232     $       2,432
                         ===================================================


The reconciliation of income taxes computed at the federal statutory tax rate to
the Company's effective tax rate is as follows:
<TABLE>
<CAPTION>

                                                      Year                 Year                   Year
                                                     Ended                Ended                  Ended
                                               December 31,         December 31,          December 31,
                                                      2000                 1999                   1998

<S>                                                  <C>                  <C>                  <C>
   Federal statutory tax rate                        34.0%                34.0%                34.0%
   State tax provision                                7.0%                 7.5%                 3.8%
   Nondeductible intangible amortization              8.4%                 8.4%                14.7%
   Other                                              3.8%                 3.4%                 2.5%
                                             --------------------------------------------------------------
Effective tax rate                                   53.2%                53.3%                55.0%
                                             ==============================================================
</TABLE>

Significant components of the Company's deferred tax assets as of December 31,
2000, and 1999 are as follows:

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

Deferred tax assets:
      Depreciation                                $         553    $         887
      Amortization of intangibles                         1,167            1,450
      Allowances                                            856              838
      Inventory                                           1,065              915
      Accrued expenses and other                          1,688            1,461
                                                  ------------------------------
                                                  $       5,329    $       5,551
                                                  ==============================
<PAGE>

8.     COMMITMENTS AND CONTINGENCIES

FinishMaster occupies facilities and uses equipment and vehicles under operating
lease agreements  requiring annual rental payments  approximating  the following
amounts for the five years subsequent to December 31, 2000:

(In thousands)

2001                                                    $           7,540
2002                                                                6,092
2003                                                                4,680
2004                                                                3,445
2005                                                                2,077
Thereafter                                                            858
                                                        ------------------

                                                        $          24,692
                                                        ==================

Rent  expense  charged  to  operations,  including  short-term  leases,  totaled
approximately $8.4 million,  $8.5 million,  and $6.3 million for the years ended
December 31, 2000, 1999, and 1998, respectively.

The Company is dependent on four main  suppliers  for the purchases of the paint
and related  supplies that it  distributes.  A loss of one of the suppliers or a
disruption in the supply of the products  provided could have a material adverse
effect on the Company's  operating results.  The suppliers also provide purchase
discounts,  prompt  payment  discounts,  extended  terms,  and  other  incentive
programs to the Company. To the extent these programs are changed or terminated,
there could be a material adverse impact to the Company.

In January 1999,  we were named in an unfair  business  practices  lawsuit by an
automotive paint distributor  located in the State of California.  The plaintiff
in such suit  alleged that we offered,  in a manner that injured the  plaintiff,
rebates and cash bonuses to businesses in the Southern  California area if those
businesses  would buy  exclusively  from us and use our products.  The plaintiff
claimed damages in the amount of $3.8 million,  trebled to $11.4 million. During
2000,  the court granted  summary  judgment in our favor.  The plaintiff has not
appealed the judgment against it, and the decision is now final.

The Company is subject to various  claims and  contingencies  arising out of the
normal course of business,  including those relating to commercial transactions,
product and  vehicle  liability,  taxes,  discrimination,  employment  and other
matters.  Management believes that the ultimate liability,  if any, in excess of
amounts  already  provided  or  covered  by  insurance,  is not likely to have a
material  adverse  effect  on the  Company's  financial  condition,  results  of
operations or cash flows.

<PAGE>
9.     QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following table presents the quarterly results of operations for each period
presented.
<TABLE>
<CAPTION>
                                                                                      Three Months ended
                                                          --------------------------------------------------------------------------
                                                              March 31,            June 30,      September 30,         December 31,
(In thousands,  except per share data)                             2000                2000               2000                 2000
                                                          ----------------  ----------------   ------------------  -----------------
<S>                                                       <C>               <C>                <C>                 <C>
Net sales                                                 $      84,670     $      87,343      $       85,600      $         79,600
Gross margin                                              $      29,933     $      31,359      $       31,391      $         30,312
Income from operations                                    $       4,643     $       5,457      $        4,980      $          4,492
Income before income taxes                                $       1,755     $       2,407      $        2,012      $          1,794
Net income                                                $         904     $       1,061      $          957      $            805
Net income per share - Diluted                            $        0.12     $        0.14      $         0.13      $           0.10

                                                                                      Three Months ended
                                                          --------------------------------------------------------------------------
                                                              March 31,          June 30,        September 30,         December 31,
(In thousands,  except per share data)                             1999              1999                 1999                 1999
                                                          ----------------  ----------------   ------------------  -----------------

Net sales                                                 $      80,106     $      83,212      $       82,460      $         78,712
Gross margin                                              $      28,620     $      29,777      $       29,878      $         28,727
Income from operations                                    $       5,073     $       5,270      $        4,728      $          3,674
Income before income taxes                                $       2,326     $       2,609      $        2,076      $            932
Net income                                                $       1,176     $       1,302      $        1,051      $            182
Net income per share - Diluted                            $        0.16     $        0.17      $         0.14      $           0.02
</TABLE>

10.        NET INCOME PER SHARE

In 1997,  the Company  adopted the  provisions  of SFAS No. 128,  "Earnings  Per
Share."  SFAS No. 128  requires  disclosure  of basic and diluted  earnings  per
share.  Basic  earnings  per share is  computed  by  dividing  net income by the
weighted  average number of common shares  outstanding  for the period.  Diluted
earnings per share is computed based upon the weighted  average number of common
shares outstanding,  adjusted for the effect of dilutive stock options.  All net
income per share amounts  reported  herein are in accordance with the provisions
of this Statement.

The following  table sets forth the  computation of basic and diluted net income
per share:
<TABLE>
<CAPTION>

                                                                 Year                Year                Year
                                                                Ended               Ended               Ended
                                                         December 31,        December 31,        December 31,
(In thousands, except per share data)                            2000                1999                1998

Numerator:
<S>                                                   <C>                 <C>                 <C>
      Net income                                      $         3,727     $         3,711     $         1,988
                                                      -----------------------------------------------------------
Denominator:
      Basic-weighted average shares                             7,540               7,536               6,775

      Effect of dilutive stock options                             11                   9                   5
                                                      -----------------------------------------------------------
      Diluted-weighted average shares                           7,551               7,545               6,780
                                                      -----------------------------------------------------------

Basic net income per share                            $          0.49     $          0.49     $          0.29
                                                      ===========================================================

Diluted net income per share                          $          0.49     $          0.49     $          0.29
                                                      ===========================================================
</TABLE>

For all  years  presented,  antidilutive  stock  options  were  excluded  in the
determination of dilutive earnings per share.

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

None.


                                    PART III


ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Item 10 is  incorporated  by reference from the  Registrant's  definitive  proxy
statement to be filed within 120 days of December 31, 2000.


ITEM 11 - EXECUTIVE COMPENSATION

Item 11 is  incorporated  by reference from the  Registrant's  definitive  proxy
statement to be filed within 120 days of December 31, 2000.


ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Item 12 is  incorporated  by reference from the  Registrant's  definitive  proxy
statement to be filed within 120 days of December 31, 2000.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Item 13 is  incorporated  by reference from the  Registrant's  definitive  proxy
statement to be filed within 120 days of December 31, 2000.


                                     PART IV


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

(a)  The following  documents have been filed as a part of this report, or where
     noted, incorporated by reference:

     (1)  Financial  Statements:  The Consolidated  Financial  Statements of the
          Company are included in Item 8 of this report.

     (2)  Financial Statement  Schedule:  The financial statement schedule filed
          in  response  to Item 8 and Item  14(d) of Form  10-K is listed in the
          Index to Consolidated  Financial Statements included in Item 8 of this
          report.

     (3)  The Exhibits  filed herewith or  incorporated  herein by reference are
          set forth in the Exhibit Index on page 35.

(b)  Reports on Form 8-K: None

<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) 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.

Date    March 28, 2001                        FINISHMASTER, INC.

                                              By: /s/ Robert R. Millard
                                                 ----------------------
                                                    Robert R. Millard

                                                 Senior Vice President, Finance
                                                 And Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.

              Signature                      Date                 Title
--------------------------------------------------------------------------------
(1)    Principal Executive Officer:

/s/ Andre B. Lacy
-----------------
Andre B.  Lacy                         March 28, 2001     Chairman of the Board

(2)      Principal Financial
         and Accounting Officer:

/s/ Robert R. Millard
---------------------
Robert R. Millard                      March 28, 2001     Senior Vice President,
                                                          Finance and Chief
                                                          Financial Officer
(3)    A Majority of the
       Board of Directors:

/s/ Andre B. Lacy
-----------------
Andre B.  Lacy                         March 28, 2001     Director

/s/ Thomas U. Young
-------------------
Thomas U.  Young                       March 28, 2001     Director

/s/ Margot L. Eccles
--------------------
Margot L.  Eccles                      March 28, 2001     Director

/s/ Wes N. Dearbaugh
--------------------
Wes N. Dearbaugh                       March 28, 2001     Director

/s/ Peter L. Frechette
----------------------
Peter L.  Frechette                    March 28, 2001     Director

/s/ David W. Knall
------------------
David W. Knall                         March 28, 2001     Director

/s/ Michael L. Smith
--------------------
Michael L.  Smith                      March 28, 2001     Director

/s/ Walter S. Wiseman
---------------------
Walter S.  Wiseman                     March 28, 2001     Director


<PAGE>

                       FINISHMASTER, INC. AND SUBSIDIARIES
                           ANNUAL REPORT ON FORM 10-K

EXHIBITS


Exhibit No.       Description of Document

      2.1      Agreement and Plan of Merger,  dated as of October 14, 1997,
               by  and   among   FinishMaster,   Inc.,   FMST   Acquisition
               Corporation   and  Thompson  PBE,  Inc.   (incorporated   by
               reference  to Exhibit  (c)(2) of Schedule  14D-1  previously
               filed by FMST Acquisition Corporation on October 21, 1997).

      2.2      Agreement  and Plan of Merger,  dated  February 16, 1998, by
               and among FinishMaster,  Inc., LDI AutoPaints, Inc. and Lacy
               Distribution,  Inc.  (previously  filed with Form 10-K dated
               March 31, 1998)

      3.1      Articles of Incorporation of FinishMaster,  Inc., an Indiana
               corporation, as amended June 30, 1998 (previously filed with
               Form 10-Q dated August 14, 1998)

      3.2      Amended and Restated Code of Bylaws of  FinishMaster,  Inc.,
               an Indiana  corporation  (previously  filed with Form 10-K/A
               dated April 14, 1998)

     10.1      FinishMaster,  Inc.  Stock Option Plan (Amended and Restated
               as of April 29, 1999)  (previously  filed with  Registrant's
               proxy statement on Schedule 14/A dated April 9, 1999)

     10.2*     FinishMaster,  Inc.  Deferred  Compensation Plan dated as of
               November 1, 2000

     21*       Subsidiaries of the Registrant

     23*       Consent of Independent Accountants

     99(a)     Amended and Restated Credit Agreement,  dated as of February
               1, 2000, among  FinishMaster,  Inc., the  Institutions  from
               Time to Time  Parties  Thereto  as  Lenders  and  Bank  One,
               Indiana,  N.A.,  as Agent  (previously  filed with Form 10-K
               dated March 29, 2001)

     99(b)     Subordinated Note Agreement,  dated as of November 19, 1997,
               by and between FinishMaster,  Inc. and LDI, Ltd. (previously
               filed with Form 8-K dated December 3, 1997)

     *filed herein


<PAGE>
<TABLE>
<CAPTION>

       Schedule II - Valuation and Qualifying Accounts (In thousands)

                                                            Additions
                                               -------------------------------
                                                                                                                        Balance
                                               Balance at      Charged to      Charged to                               at End
                                               Beginning       Costs and       Other                                      of
Description                                    of Period       Expenses        Accounts              Deductions         Period
-----------------------------------------------------------------------------------------------------------------------------------
Year ended December 31, 2000:
<S>                                            <C>              <C>              <C>                   <C>                 <C
     Allowance for doubtful accounts           $    1,419      $   1,011       $         0          $    1,093  (B)    $    1,337

Year ended December 31, 1999:
     Allowance for doubtful accounts           $    1,680      $     433       $         0  (A)     $      694  (B)    $    1,419

Year ended December 31, 1998:
     Allowance for doubtful accounts           $    2,247      $     464       $       147  (A)     $    1,178  (B)    $    1,680
</TABLE>

(A) Represents allowance for doubtful accounts of acquired entities.

(B) Represents uncollectible accounts written off, less recoveries.