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, 2001


                         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.  [ ]

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant as of March 1, 2002 was $20,421,335.

On  March  1,  2002,   7,648,363  shares  of  Registrant's   common  stock  were
outstanding.

                       Documents Incorporated By Reference

Portions of the annual proxy  statement for the year ended December 31, 2001 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............................     34

10   Directors and Executive Officers of the Registrant..................     34

11   Executive Compensation..............................................     34

12   Security Ownership of Certain Beneficial Owners and Management......     34

13   Certain Relationships and Related Transactions......................     34

14   Exhibits, Financial Statement Schedules, and
          Reports on Form 8-K............................................     34

     Signatures..........................................................     35





                                     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,  2002,  we serve our  customers  through a 350
person  direct  sales force in 159 sales  outlets  and three major  distribution
centers  located  in  23  states,   making  us  the  only  national  independent
distributor  in the  industry.  We have  approximately  15,000  customer  charge
accounts  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 32,000  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,  2001,  net sales were
$333.5 million and net income was $6.2 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  40,000  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
73.1% 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  40,000  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;

     o    improvements  in 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  39
acquisitions over the past ten 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
32,000  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  2001.
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
720  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 350,000 mix  formulas.  With  sophisticated
PC-based color matching  equipment and  specialists,  we provide  color-matching
services to our customers.

   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,  2002,  we  employed  approximately  1,530  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, 2002.

                                     Number        No. of         No. of
                                       Of          Sales       Distribution
   State                            Offices       Outlets         Centers
      Alabama.....................                    1
      Arizona.....................                    3
      California..................     1             28               1***
      Colorado....................                    4
      Connecticut.................                    3
      Delaware....................                    1
      Florida.....................     1*            39               1***
      Georgia.....................                    3
      Illinois....................                    5
      Indiana.....................     1              3
      Maryland....................                    4
      Massachusetts...............                    5
      Michigan....................     1*            12               1***
      Minnesota...................                    3
      New Jersey..................                    8
      North Carolina..............     1              6               1**
      Ohio........................                    2
      Oklahoma....................                    1
      Pennsylvania................                    3
      South Carolina..............                    6
      Texas.......................                   12
      Virginia....................                    3
      Wisconsin...................                    4
                                   ----------- --------------- --------------
        Total Offices, Sales
          Outlets and Distribution
          Centers                      5            159               4

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

**   Location  where a store and  distribution  center are combined  facilities;
     Greensboro, NC.

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

Our sales  outlets  range in size from 1,250 square feet to 14,800  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 18,000
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 2002 to 2008,
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 56) serves as the  Senior  Vice  President  of Sales for our
West Region.  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 37) 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 44)  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.

Charles VanSlaars (age 52) serves as the Senior Vice President of Marketing.  He
had  previously  served as the Senior  Vice  President  of Sales for our Eastern
Division, a position held from January 2001 until November 2001, and 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.



                                     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,
2001, 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
       ---------------------------------------------------------------
       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
       2001       March 31                      7.250           4.875
       2001       June 30                       9.000           6.000
       2001       September 30                  8.680           5.760
       2001       December 31                  10.270           7.250

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.


<PAGE>

ITEM 6 - SELECTED CONSOLIDATED FINANCIAL DATA

The following selected  consolidated  financial data as of December 31, 2001 and
2000 and for the years ended December 31, 2001, 2000, and 1999, are derived from
our  audited  consolidated  financial  statements  that are  included  elsewhere
herein. The selected  consolidated  financial data as of December 31, 1999, 1998
and 1997 and for the years ended December 31, 1998 and 1997 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>
                                                                                             Year Ended
                                                                                            December 31,
                                                              ----------------------------------------------------------------------

(In thousands, except per share data)                            2001(1)(2)      2000(1)(2)   1999(1)(2)     1998(1)(2)    1997(1)
                                                                 ----------      ----------   ----------     ----------    -------
<S>                                                            <C>             <C>          <C>            <C>           <C>
Per Share
     Net income before extraordinary loss
         Basic                                                 $        0.88   $      0.49  $      0.49    $     0.29    $     0.11
         Diluted                                               $        0.88   $      0.49  $      0.49    $     0.29    $     0.11
     Extraordinary loss on early extinguishment of debt, net
         Basic                                                 $        0.07   $         -  $         -    $        -    $        -
         Diluted                                               $        0.07   $         -  $         -    $        -    $        -
     Net income
         Basic                                                 $        0.81   $      0.49  $      0.49    $     0.29    $    0.11
         Diluted                                               $        0.81   $      0.49  $      0.49    $     0.29    $    0.11
     Pro forma net income (loss) (3)                           $           -   $         -  $         -    $     0.33    $   (1.01)


Statements of Operations Data
     Net sales                                                 $     333,468   $   337,213  $   324,490    $  309,946    $  130,175
     Gross margin                                              $     124,183   $   122,995  $   117,002    $  109,678    $   47,107
     Income from operations                                    $      21,695   $    19,572  $    18,745    $   15,895    $    3,832
     Net income before extraordinary loss                      $       6,703   $     3,727  $     3,711    $    1,988    $      656
     Extraordinary loss on early extinguishment of debt, net   $         495   $         -  $         -    $        -    $        -
     Net income                                                $       6,208   $     3,727  $     3,711    $    1,988    $      656
     Pro forma net income (loss) (3)                           $           -   $         -  $         -    $    2,459    $   (7,585)
     Weighted average shares
         outstanding - Diluted                                         7,648         7,551        7,545         6,780         5,994
     Pro forma weighted average
         shares outstanding - Diluted                                      -             -            -         7,536         7,536

                                                                                             December 31,
                                                              ----------------------------------------------------------------------

                                                                 2001(1)(2)      2000(1)(2)   1999(1)(2)     1998(1)(2)    1997(1)
                                                                 ----------      ----------   ----------     ----------    -------
Balance Sheet Data
     Net working capital                                       $      33,087   $    35,209  $    48,147    $   43,452    $   42,928
     Total assets                                              $     202,036   $   218,317  $   214,235    $  226,475    $  215,418
     Long-term debt                                            $      77,868   $    90,652  $   111,603    $  119,120    $  134,135
     Shareholders' equity                                      $      62,535   $    56,806  $    53,069    $   49,348    $   32,932

</TABLE>
--------------------
(1)  The operating  results for the years ended December 31, 2001,  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.

(2)  The operating  results for the years ended December 31, 2001,  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.

(3)  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 other  acquisitions  completed by the Company in
     1999,  2000 or 2001, as the impact of such  acquisitions  are not material.

<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 our 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,  2002,  we served  our
customers through 159 sales outlets and three major distribution centers located
in 23  states,  making  us the  only  national  independent  distributor  in the
industry.  We have approximately 15,000 customer charge accounts that we provide
a comprehensive  selection of brand name products  supplied by BASF,  DuPont, 3M
and PPG in addition to our own FinishMaster  PrivateBrand  refinishing accessory
products.  We typically are the primary source of supply to our customers and we
offer a broad range of services  designed to enhance the operating  efficiencies
and  competitive  positions of our customers and  suppliers.  Our operations are
currently  organized into five  geographical  regions.  We aggregate  these five
regions into a single reportable segment.

We  are  the  leading  consolidator  in  the  automotive  refinish  distribution
industry,  having  successfully  completed as of March 1, 2002  approximately 39
acquisitions over the past ten years, ranging from "add-on"  acquisitions to the
strategic acquisitions of Thompson,  AutoPaints,  and Badger Paint Plus, Inc. We
intend to continue our strategy of expanding through acquisitions.

On May 7, 2001,  we acquired the assets of Badger Paint Plus,  Inc., a Wisconsin
corporation,  Badger Paint Plus of the Twin Cities,  Inc.,  Badger Paint Plus of
Duluth, Inc., Badger Paint Plus of St. Cloud, Inc., Lakeland Sales, Inc., each a
Minnesota  corporation,  and Badger  Paint Plus of  Chicago,  Inc.,  an Illinois
corporation   (collectively  "Badger").   Badger,  like  FinishMaster,   was  an
aftermarket  distributor  of  automotive  paints,  coatings,  and  paint-related
accessories.  The purchase price,  including related acquisition costs, was $7.4
million and  includes  the issuance of 93,999  shares of our common  stock.  The
acquisition has been accounted for as a purchase and  accordingly,  the acquired
assets and liabilities  have been recorded at their estimated fair values on the
date of the  acquisition.  Goodwill  associated  with the  acquisition  is being
amortized  over 15 years and all other  intangible  assets are amortized  over 5
years.  Operating  results  of Badger  have been  included  in our  consolidated
financial statements from the effective date of the acquisition.

Results of Operations


-------------------------------------------------------------------------------
(In thousands)        2001        Change        2000       Change       1999
-------------------------------------------------------------------------------
Net sales           $  333,468    (1.1%)     $   337,213    3.9%     $  324,490

Continued  weakness  in demand for  automotive  paints and  related  accessories
impacted our net sales,  which decreased $3.7 million or 1.1% from 2000 to 2001.
During 2001, "same store sales" decreased  approximately 2.5% due to soft market
conditions throughout most of our distribution network.  Factors leading to this
softening  in  demand  included  slower  overall  economic  conditions;  flat to
declining  number  of  automobiles   being  repaired;   continued   productivity
improvements  in the use of automotive  paint by our  customers;  and changes in
vendor supported marketing programs used to attract and retain customers.  These
industry dynamics are not expected to reverse in the near term.

Net sales acquired through acquisitions  contributed  approximately $6.5 million
or 1.9% of the net sales variance between years. Two acquisitions were completed
during 2001, Badger in May and Scotty's Paint Supply, Inc. in December.

Net sales  increased  $12.7  million or 3.9% from 1999 to 2000 due  primarily to
acquisitions.  During  2000,  we  completed  six  acquisitions.  As a result  of
competitive  market conditions and flat industry demand, we experienced  minimal
"same store sales" growth.

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

-------------------------------------------------------------------------------
(In thousands)        2001        Change        2000       Change       1999
-------------------------------------------------------------------------------
Gross margin      $    124,183     1.0%     $  122,995      5.1%     $  117,002
Percentage of
  net sales              37.2%                   36.5%                    36.1%
-------------------------------------------------------------------------------

Gross margin dollars in 2001 increased $1.2 million, or 1.0% over the prior year
period.  Strong gross  margin as a percentage  of net sales more than offset the
negative  impact of lower net sales volume.  Gross margin as a percentage of net
sales increased 70 basis points to 37.2%,  positively  impacting  margin by $2.5
million for the year. Lower net sales volume negatively  impacted margin by $1.3
million.  The  improvement  in margin as a percentage of net sales was primarily
the result of improved  inventory  management  procedures,  supplier  purchasing
incentive  programs,  and large  inventory  purchases in late 2000 made prior to
manufacturers' price increases.  Margin is affected by purchasing  opportunities
presented to us by our vendors.  We do not anticipate being able to maintain our
2001  margin  levels  in  2002  as  a  result  of  less   favorable   purchasing
opportunities from our vendors which reduced the level of inventory purchased by
us in late 2001 prior to manufacturers' price increases.

Gross  margin in 2000  increased  $6.0  million  or 5.1% over 1999 due to higher
sales volume and improved margins.  Higher net sales volume positively  impacted
margin by $4.6 million.  Gross margin as a percentage of net sales  increased 40
basis  points  to 36.5%,  positively  impacting  margins  by $1.4  million.  The
improvement  in margin as a percentage  of net sales was primarily the result of
supplier incentive programs and the optimization of early payment discounts.


-------------------------------------------------------------------------------
(In thousands)        2001        Change        2000       Change       1999
-------------------------------------------------------------------------------
Operating expenses  $   52,485     0.6%     $   52,195      6.5%     $   49,029
Percentage of
  net sales              15.7%                   15.5%                    15.1%
-------------------------------------------------------------------------------

Operating expenses consist of wages, facility, vehicle and related costs for our
store and distribution locations.

Operating  expenses  increased  $0.3  million  or 0.6% from  2000 to 2001.  As a
percentage  of net sales,  operating  expenses  increased  from 15.5% in 2000 to
15.7% in  2001.  Excluding  the  operating  expenses  associated  with  acquired
operations in 2001,  operating expenses decreased $0.5 million between years due
primarily to reduced labor costs.

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 2000.


-------------------------------------------------------------------------------
(In thousands)        2001        Change        2000       Change       1999
-------------------------------------------------------------------------------
Selling, general and
 administrative
 expenses           $   44,111    (1.8%)    $   44,928      5.9%     $   42,436
Percentage of net
 sales                   13.2%                   13.3%                    13.1%
-------------------------------------------------------------------------------

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

SG&A expenses  decreased $0.8 million or 1.8% from 2000 to 2001. As a percentage
of net  sales,  SG&A  expenses  decreased  from  13.3% in 2000 to 13.2% in 2001.
Excluding the expenses  associated  with the acquired  operations in 2001,  SG&A
expenses  decreased  $1.4 million due  primarily to lower  communication  costs,
supply  expense,  bad debt expense and  professional  fees  associated  with the
implementation of our new computer systems in 2000.  Partially  offsetting these
decreases was higher costs associated with wages and benefits.

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.


-------------------------------------------------------------------------------
(In thousands)        2001        Change        2000       Change       1999
-------------------------------------------------------------------------------
Amortization of
  intangible
  assets          $      5,892    (6.5%)    $    6,300     (7.2%)    $    6,792
Percentage of
  net sales               1.8%                    1.9%                     2.1%
-------------------------------------------------------------------------------

The decrease in amortization  expense among 1999, 2000 and 2001, was a result of
certain intangible assets,  principally non-compete  agreements,  becoming fully
amortized in those years.


-------------------------------------------------------------------------------
(In thousands)        2001        Change        2000       Change       1999
-------------------------------------------------------------------------------
Interest expense,
  net             $      8,547   (26.3%)    $   11,604      7.4%     $   10,802
Percentage of
  net sales               2.6%                    3.4%                     3.3%
-------------------------------------------------------------------------------

Interest  expense in 2001  decreased $3.1 million or 26.3% compared to the prior
year.  Lower  average  outstanding  borrowings  in 2001 of  approximately  $23.3
million  were the primary  contributor  to this  favorable  decrease in interest
expense.  Lower effective  interest rates of  approximately 25 basis points also
contributed to the decrease.

Interest  expense in 2000  increased $0.8 million or 7.4 % compared to the prior
year due to higher effective  interest rates of approximately  110 basis points,
partially offset by lower average  outstanding  borrowings.  Average outstanding
borrowings decreased $13.7 million during 2000.


-------------------------------------------------------------------------------
(In thousands)        2001        Change        2000       Change       1999
-------------------------------------------------------------------------------
Income tax expense  $    6,445    52.0%     $    4,241      0.2%     $    4,232
Percentage of
  net sales               1.9%                    1.3%                     1.3%
Effective tax rate       49.0%                   53.2%                    53.3%
-------------------------------------------------------------------------------

Higher income before income taxes was responsible  for the increased  income tax
expense  among 1999,  2000,  and 2001.  The  effective  tax rate varied from the
federal   statutory   rate  as  a  result  of  certain   expenses,   principally
nondeductible  intangible  amortization.  The decrease in the effective tax rate
between 2000 and 2001 was due to these  nondeductible  expenses remaining stable
in relation to the higher income before income taxes.


-------------------------------------------------------------------------------
(In thousands)        2001        Change        2000       Change       1999
-------------------------------------------------------------------------------
Extraordinary loss
 on early
 extinguishment of
 debt, net of tax   $      495        -     $        -         -     $        -
Percentage of net
 sales                    0.1%
--------------------------------------------------------------------------------

An extraordinary loss on the early  extinguishment of debt of $0.5 million,  net
of $0.3  million in income  tax  benefit,  resulted  from the  write-off  of the
unamortized  debt  issuance  costs  related to the early  extinguishment  of our
senior secured and senior subordinated credit facilities in March 2001.


-------------------------------------------------------------------------------
(In thousands,        2001        Change        2000       Change       1999
 except per
 share data)
-------------------------------------------------------------------------------
Net income        $      6,208    66.6%     $    3,727      0.4%     $    3,711
Percentage of
  net sales               1.9%                    1.1%                     1.1%
Net income
  per share       $       0.81    65.3%     $     0.49      0.0%     $     0.49
--------------------------------------------------------------------------------
Factors  contributing  to the  changes in net income and the  related  per share
amounts are discussed in the detail above.

Inflation and Other Economic Factors

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

Our business may be negatively  affected by cyclical  economic  downturns in the
markets in which we operate. Our financial  performance is also dependent on our
ability to acquire businesses and profitably integrate them into our operations.

Quantitative and Qualitative Disclosure about Market Risk

A review of our  financial  instruments  and risk  exposures  indicates  we have
exposure  to  interest  rate risk.  To reduce  this  exposure,  we entered  into
interest  rate swap  agreements  in March  2001 with  notional  amounts of $40.0
million. These agreements intend to convert our senior term credit facility from
a floating to a fixed  interest  rate  obligation.  The weighted  average  fixed
interest  rate  under  these   agreements   is  5.43%.   In  order  to  maintain
effectiveness,  the  quarterly  settlement  terms  of the  swap  agreements  are
established to match the interest  payments on the term credit  facility.  Based
upon the Company's  outstanding debt at December 31, 2001 and the term for which
current  interest  rates are fixed,  a 10%  increase  in  interest  rates  would
increase interest expense for 2002 by an estimated $0.1 million.

Seasonality and Quarterly Fluctuations

Our sales and  operating  results  have  varied  from  quarter to quarter due to
various  factors  and we expect  these  fluctuations  to  continue.  Among these
factors  are  seasonal  buying  patterns  of our  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,  our  financial  performance  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.  We also
take  advantage  of  periodic  special  incentive  programs  available  from our
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 our quarterly cash flows and operating  results.
Although we continue to investigate strategies to smooth the seasonal pattern of
our  quarterly  results of  operations,  there can be no assurance  that our net
sales,  results  of  operations  and cash  flows  will not  continue  to display
seasonal patterns.

Financial Condition, Liquidity and Capital Resources

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------
(In thousands)                                  2001             2000              1999
-----------------------------------------------------------------------------------------------
<S>                                         <C>              <C>                <C>
Net working capital                         $    33,087      $      35,209      $      48,147
Long-term debt                              $    77,868      $      90,652      $     111,603
Cash provided by operating activities       $    27,865      $      29,646      $       8,781
Cash used in investing activities           $    (5,853)     $      (5,059)     $      (2,371)
Cash used in financing activities           $   (20,548)     $     (23,693)     $      (6,800)
-----------------------------------------------------------------------------------------------
</TABLE>

Our  primary  sources  of funds over the past  three  years were from  operating
activities and  borrowings  under our credit  facilities.  Our principal uses of
cash were to fund  capital  expenditures,  acquisitions,  and the  repayment  of
outstanding borrowings.

Net cash generated from operating activities was $27.9 million in 2001, compared
with $29.6 million in 2000. This decrease was the result of a negative change in
operating  assets  and  liabilities,   primarily   accounts  payable  and  other
liabilities. This change in accounts payable and other liabilities resulted from
differences  in  payment  terms  between  years on large  "year  end"  inventory
purchases.  Partially offsetting this use of cash for accounts payable and other
liabilities was lower investments in inventory and prepaid and other assets. The
year-end inventory balance decreased as a result of lower inventory purchases in
late 2001 made prior to  manufacturers'  price  increases  compared to the prior
year period.

Net cash used in investing  activities  was $5.9 million in 2001,  compared with
$5.1 million in 2000 due to increased spending for acquisition activity.  During
2001, we completed two acquisitions  that utilized $5.0 million of cash compared
to six  acquisitions  and $1.9  million  of cash in the  prior  year.  Partially
offsetting  this  increase  was  lower  capital   spending  in  2001.  With  the
implementation  of a new  "point-of-sale"  computer  system  and a  consolidated
general ledger system in 2000, our capital  spending  requirements  were less in
the  current  year  period.  We estimate  that  capital  expenditures  for 2002,
principally for information technology equipment, will approximate $1.5 million.

Net cash used in financing  activities was $20.5 million in 2001,  compared with
$23.7 million in 2000.  Lower debt repayments of $4.3 million,  partially offset
by  higher  debt  issuance  costs  of $1.1  million  were  the  primary  factors
contributing  to the  decrease  in net cash used in  financing  activities.  The
decrease in debt repayments was a result of lower net cash provided by operating
activities  and  increased  spending on  acquisitions.  The use of cash for debt
issuance costs was related to the refinancing of our credit  facilities in March
2001.

Total  capitalization  at December 31, 2001,  was $148.0  million,  comprised of
$85.5 million of debt and $62.5 million of equity. Debt as a percentage of total
capitalization  was 57.8% compared to 64.1% in the prior year. 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,  2001,  we had term  credit and  revolving  credit  facilities
totaling $58.9 million and senior subordinated debt of $19.9 million. We were in
compliance  with the  covenants  underlying  these  credit  facilities,  and had
availability  under  our  revolving  credit  facility  of  $25.0  million  as of
year-end.

Based on current and  projected  operating  results  and giving  effect to total
indebtedness, we believe 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

In June 2001,  the Financial  Accounting  Standards  Board issued  Statements of
Financial Accounting Standards No. 141, ("FAS 141"), "Business Combinations" and
Statement of Financial  Accounting Standard No. 142, ("FAS 142"),  "Goodwill and
Other Intangible  Assets".  Under FAS 142,  goodwill and intangible  assets with
indefinite  lives are no longer  amortized  but are  reviewed  annually (or more
frequently if impairment indicators arise) for impairment.  Separable intangible
assets  that  are not  deemed  to have  indefinite  lives  will  continue  to be
amortized over their useful lives (but with no maximum life).  The  amortization
provisions of FAS 142 apply to goodwill and  intangible  assets  acquired  after
June 30, 2001. With respect to goodwill and intangible  assets acquired prior to
July 1, 2001, we are required to adopt FAS 142 effective January 1, 2002. We are
currently  evaluating the effect that adoption of the provisions of FAS 142 that
are  effective  January  1, 2002  will have on our  results  of  operations  and
financial position.

In August 2001,the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standard  No. 143,  ("FAS  143"),  "Accounting  for Asset
Retirement  Obligations".   FAS  143  addresses  the  financial  accounting  and
reporting obligations  associated with the retirement of tangible assets and the
associated  asset  retirement  costs.  It requires  companies to record the fair
value of a liability for an asset  retirement  obligation in the period in which
it is incurred, which is adjusted to its present value each period. In addition,
companies  must  capitalize a  corresponding  amount by increasing  the carrying
amount of the related  long-lived  asset,  which is depreciated  over the useful
life of the related  asset.  We will adopt FAS 143 on January 1, 2002, and we do
not expect that this  Standard will have a material  effect on our  consolidated
financial statements or results of operations.

In October 2001, the Financial  Accounting  Standards Board issued Statements of
Financial  Accounting  Standards  No.  144,  Accounting  for the  Impairment  or
Disposal of  Long-Lived  Assets  ("FAS  144").  FAS 144 modifies and expands the
financial  accounting and reporting for the impairment or disposal of long-lived
assets other than goodwill,  which is specifically addressed by FAS 142. FAS 144
maintains the requirement that an impairment loss be recognized for a long-lived
asset to be held  and used if its  carrying  value is not  recoverable  from its
undiscounted  cash flows,  with the recognized  impairment  being the difference
between  the  carrying  amount  and fair  value of the  asset.  With  respect to
long-lived  assets to be disposed of other than by sale,  FAS 144 requires  that
the asset be  considered  held and used until it is  actually  disposed  of, but
requires that its depreciable life be revised in accordance with APB Opinion No.
20. FAS 144 will be effective for us in the first quarter of 2002, and it is not
expected to have a material effect on our consolidated  financial  statements or
results of operations.

Forward-Looking Statements

This Report contains  certain  forward-looking  statements  pertaining to, among
other things,  our future results of operations,  cash flow needs and liquidity,
acquisitions,   and  other  aspects  of  our  business.   We  may  make  similar
forward-looking statements from time to time. These statements are based largely
on  our  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 our business
strategy or an inability to execute this strategy due to changes in our 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.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


Financial Statements:                                                       Page

       Report of Independent Accountants                                     18

       Consolidated Balance Sheets                                           19

       Consolidated Statements of Operations                                 20

       Consolidated Statements of Cash Flows                                 21

       Consolidated Statements of Shareholders' Equity                       22

       Notes to Consolidated Financial Statements                            23

       Financial Statement Schedule:

             Schedule II - Valuation and Qualifying Accounts                 37

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, 2001 and 2000, and the
results of their  operations and their cash flows for each of the three years in
the period ended  December 31, 2001 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
February 19, 2002


<PAGE>

<TABLE>
<CAPTION>
CONSOLIDATED
BALANCE SHEETS
FinishMaster, Inc.
                                                                         December 31,         December 31,
(In thousands, except share amounts)                                             2001                 2000

ASSETS
Current assets
<S>                                                                  <C>                  <C>
      Cash                                                           $          2,977     $          1,513
      Accounts receivable, net of allowance for doubtful
           accounts of $1,434 and $1,337, respectively                         28,401               29,063
      Inventory                                                                50,096               63,346
      Refundable income taxes                                                     543                  710
      Deferred income taxes                                                     3,947                3,459
      Prepaid expenses and other current assets                                 3,627                4,349
                                                                     -----------------------------------------
      Total current assets                                                     89,591              102,440

Property and equipment
      Land                                                                        368                  368
      Vehicles                                                                  1,205                1,432
      Buildings and improvements                                                6,291                5,903
      Machinery, equipment and fixtures                                        12,682               11,922
                                                                     -----------------------------------------
                                                                               20,546               19,625
      Accumulated depreciation                                                (12,715)             (10,649)
                                                                     -----------------------------------------
                                                                                7,831                8,976

Other assets
      Intangible assets, net                                                  102,273              102,858
      Deferred income taxes                                                     1,770                1,870
      Other                                                                       571                2,173
                                                                     -----------------------------------------
                                                                              104,614              106,901
                                                                     -----------------------------------------
                                                                     $        202,036     $        218,317
                                                                     =========================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
      Accounts payable                                               $         37,383     $         46,470
      Amounts due to LDI                                                          812                  506
      Accrued compensation and benefits                                         8,578                6,033
      Other accrued expenses and current liabilities                            2,124                3,232
      Current maturities of long-term debt                                      7,607               10,990
                                                                     -----------------------------------------
      Total current liabilities                                                56,504               67,231

Long-term debt, less current maturities                                        77,868               90,652
Other long-term liabilities                                                     5,129                3,628
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;
           7,638,863 and 7,540,804 shares issued and outstanding                7,638                7,540
      Additional paid-in capital                                               27,936               27,367
      Accumulated comprehensive loss                                           (1,146)                   -
      Retained earnings                                                        28,107               21,899
                                                                     -----------------------------------------
                                                                               62,535               56,806
                                                                     -----------------------------------------
                                                                     $        202,036     $        218,317
                                                                    =========================================
</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)                                         2001                 2000               1999

<S>                                                                <C>                  <C>                  <C>
Net sales                                                          $       333,468      $       337,213      $     324,490
Cost of sales                                                              209,285              214,218            207,488
                                                                  --------------------------------------------------------------
Gross margin                                                               124,183              122,995            117,002

Expenses
      Operating                                                             52,485               52,195             49,029
      Selling, general and administrative                                   44,111               44,928             42,436
      Amortization of intangible assets                                      5,892                6,300              6,792
                                                                  --------------------------------------------------------------
                                                                           102,488              103,423             98,257
                                                                  --------------------------------------------------------------
Income from operations                                                      21,695               19,572             18,745


Interest expense, net                                                        8,547               11,604             10,802
                                                                  --------------------------------------------------------------


Income before income taxes                                                  13,148                7,968              7,943
Income tax expense                                                           6,445                4,241              4,232
                                                                  --------------------------------------------------------------

Net income before extraordinary loss                               $         6,703      $         3,727      $       3,711
Extraordinary loss on early extinguishment of debt, net of tax
benefit of $324                                                                495                    -                  -
                                                                  ==============================================================
Net income                                                         $         6,208      $         3,727      $       3,711
                                                                  ==============================================================

Net income per share - Basic and Diluted
       Net income before extraordinary loss                        $          0.88      $          0.49      $        0.49
       Extraordinary loss, net of income taxes                     $          0.07      $             -      $           -
                                                                  -------------------  -------------------  -----------------
       Net income per share (Note 10):
         Basic                                                     $          0.81      $          0.49      $        0.49
                                                                  ==============================================================
         Diluted                                                   $          0.81      $          0.49      $        0.49
                                                                  ==============================================================

Weighted average shares outstanding - Basic                                  7,638                7,540              7,536
                                                                  ==============================================================
Weighted average shares outstanding - Diluted                                7,648                7,551              7,545
                                                                  ==============================================================

</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)                                                                2001                 2000               1999

Operating activities
<S>                                                                <C>                  <C>                  <C>
      Net income                                                   $         6,208      $         3,727      $       3,711
      Adjustments to reconcile net income to net cash
        provided by operating activities:
           Depreciation and amortization                                    10,418               11,144             11,019
           Deferred income taxes                                              (388)                 222              1,125
           Loss on extinguishment of debt                                      495                    -                  -
           Other                                                               (97)                   -                  -
           Gain on disposal of property and equipment                          (18)                   -                  -
           Changes in operating assets and liabilities
             (excluding the impact of acquisitions):
              Accounts receivable, net                                       2,182                1,854                785
              Inventories                                                   15,976               (4,530)             1,639
              Prepaid and other assets                                         552               (4,091)               440
              Accounts payable and other liabilities                        (7,463)              21,320             (9,938)
                                                                  --------------------------------------------------------------
Net cash provided by operating activities                                   27,865               29,646              8,781

Investing activities
      Business acquisitions and payments under
           earn-out provisions for prior acquisitions                       (5,001)              (1,853)            (1,280)
      Purchases of property and equipment                                     (703)              (3,110)              (973)
      Proceeds from disposal of property and equipment                          39                   10                 20
      Other                                                                   (188)                (106)              (138)
                                                                  --------------------------------------------------------------
Net cash used in investing activities                                       (5,853)              (5,059)            (2,371)

Financing activities
      Proceeds from the exercise of stock options                                7                    -                  -
      Debt issuance costs                                                   (1,284)                (166)              (155)
      Proceeds from debt                                                   167,448               95,357             98,280
      Repayment of debt                                                   (186,719)            (118,884)          (104,925)
                                                                  --------------------------------------------------------------
Net cash used in financing activities                                      (20,548)             (23,693)            (6,800)
                                                                  --------------------------------------------------------------
Increase(decrease) in cash                                                   1,464                  894               (390)
Cash at beginning of period                                                  1,513                  619              1,009
                                                                  --------------------------------------------------------------
Cash at end of period                                              $         2,977      $         1,513      $         619
                                                                  ==============================================================
Supplemental disclosure of cash flow information
      Cash paid during the period for:
           Interest                                                $         9,464      $        10,687      $      10,998
                                                                  ==============================================================
           Taxes                                                   $         6,009      $         4,230      $       2,158
                                                                  ==============================================================
</TABLE>


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

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS
OF SHAREHOLDERS' EQUITY
FinishMaster, Inc.

                                                                                                   Accumulated
                                                Common           Paid-in          Retained        Comprehensive
(In thousands)                                   Stock           Capital          Earnings            Loss               Totals
                                             ---------------  ----------------  --------------  -------------------  ---------------

<S>                                          <C>              <C>               <C>             <C>                  <C>
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
Comprehensive income (loss):
    Net income for the year                              -                  -           6,208                   -             6,208
    Other comprehensive income (loss):
          Interest rate swap                             -                  -               -             (1,146)            (1,146)
                                                                                                                     ---------------
Total comprehensive income (loss)                                                                                    $        5,062
Stock grants issued and options exercised               98                569               -                  -                667
                                             ---------------  ----------------  --------------  -------------------  ---------------

Balances at December 31, 2001                $       7,638    $        27,936   $      28,107   $         (1,146)    $       62,535
                                             =======================================================================================
</TABLE>

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 February 15,
2002,  the Company  operated  159 sales  outlets  and three  major  distribution
centers in 23 states and is  organized  into five major  geographical  regions -
North East,  Florida/Texas,  Mid-Atlantic,  Central,  and  Western.  The Company
aggregates its five geographic  regions into a single  reportable  segment.  The
Company has approximately 15,000 customer charge accounts 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 85% 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:  Lacy  Distribution,  Inc.  ("Distribution"),  an Indiana
corporation, which is an indirect wholly-owned subsidiary of LDI, Ltd., ("LDI"),
an Indiana limited  partnership,  owns 5,587,516  shares of the Company's common
stock,  representing  73.1% of the outstanding  shares at December 31, 2001, and
74.1% of the outstanding  shares at December 31, 2000, and 1999.  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  $782,000,  $183,000,  and  $158,000  for the years ended
December 31, 2001, 2000, and 1999, respectively. In addition, the Company leases
from LDI its corporate office space.  Lease expense and payments for repairs and
maintenance to LDI totaled approximately  $206,000,  $202,000,  and $214,000 for
the years ended December 31, 2001, 2000 and 1999, 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, 2001, and 2000,  checks drawn on future  deposits and borrowings of
$3,863,000 and $10,622,000,  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  collision  repair  shops  and  dealerships.  Trade  receivables  are
typically not  collateralized.  No single customer  exceeds 10% of the Company's
receivables at December 31, 2001.

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.

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 2001,  2000 and 1999 was  $2,287,000,  $2,215,000  and
$2,427,000, 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 2001 and 2000, the Company  capitalized  approximately $0 and $2,223,000,
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:  The Company utilizes derivative
financial  instruments,  principally interest rate swaps, to reduce its exposure
to fluctuations in interest rates. These instruments are recorded on the balance
sheet at their fair value. Changes in the fair value are recorded each period in
the Accumulated Comprehensive Loss section of Shareholders' Equity.

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
2001, 2000, and 1999 are estimated at $16,974,000, $17,564,000, and $17,035,000,
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 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)                                                             2001               2000                1999

<S>                                                             <C>                 <C>                 <C>
Accounts receivable                                             $         1,520     $          782      $          708
Inventory                                                                 2,670              1,985                 725
Equipment and other                                                         506                370                 202
Intangible assets                                                         5,076              1,278                 650
                                                                ----------------------------------------------------------
                                                                          9,772              4,415               2,285

Less liabilities assumed                                                  1,075                513                 714
                                                                ----------------------------------------------------------
Acquisition price                                                         8,697              3,902               1,571
Acquisition debt                                                          3,046              2,049                 291
Stock grants                                                                650                  -                   -
                                                                ----------------------------------------------------------
Net assets of businesses acquired, net of acquisition debt      $         5,001     $        1,853      $        1,280
                                                                ==========================================================
Number of acquisitions                                                        2                  6                   6
                                                                ----------------------------------------------------------
</TABLE>

During 2001, the Company completed two  acquisitions:  Badger and Scotty's Paint
Supply,  Inc. The  acquisitions  involved  operations  in  Minnesota,  Illinois,
Wisconsin, and Florida, and were funded with cash, debt and common stock.

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.


3.   INTANGIBLE ASSETS

Intangible assets consisted of the following:

                                              December  31,        December 31,
(In thousands)                                        2001                2000

Goodwill                                  $        125,121     $       121,018
Non-compete agreements                              12,426              12,262
Other intangible                                       573                   -
Debt issuance costs                                  1,329               2,179
                                          --------------------------------------
                                                   139,449             135,459
Less accumulated amortization                       37,176              32,601
                                          --------------------------------------

Intangible assets, net                    $        102,273     $       102,858
                                          ======================================


4.   LONG-TERM DEBT

Long-term debt consisted of the following:
<TABLE>
<CAPTION>
                                                                 December 31,        December 31,
(In thousands)                                                          2001                2000

<S>                                                         <C>                  <C>
Revolving Credit Facility                                   $         21,590     $        35,100
Acquisition Revolving Credit Facility                                      -               1,797
Term Credit Facility                                                  37,000              28,495
Senior Subordinated Debt                                              19,850              30,000
Notes payable to former owners of acquired businesses
      with interest at various rates up to 10%, due at
      various dates through 2007                                       5,578               4,624
Other long-term financing at various rates, due at
       various dates through 2010                                      1,457               1,626
                                                            ----------------------------------------
                                                                      85,475             101,642
Less current maturities                                                7,607              10,990
                                                            ----------------------------------------

                                                            $         77,868     $        90,652
                                                            ========================================
</TABLE>

Revolving  Credit  Facility:  On March 29, 2001, the Company  entered into a new
$100.0 million senior secured credit facility with a syndicate of banks. The new
senior secured credit  facility  consists of $40.0 million term credit  facility
and a $60.0 million revolving credit facility.  The revolving credit facility is
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  less  letter of credit  obligations  and a reserve  for three  months
facility  rent.  Principal is due on June 30, 2006.  Interest  rates and payment
dates are  variable  based  upon  interest  rate and term  options  selected  by
management.  Interest rates at December 31, 2001 on outstanding revolving credit
borrowings  varied from 4.17% to 5.00%.  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 2001 was 2.25% over LIBOR or 0.25% over
prime in the case of Floating  Rate  Advances.  For a period of six months after
the close of the  transaction,  the interest rate was fixed at LIBOR plus 3.00%.
The Company is charged an annual  administrative  fee of $35,000,  and an annual
commitment  fee,  payable  monthly,  that ranges  between 0.375% and 0.5% of the
unused  portion of the  revolving  line of credit.  At December  31,  2001,  the
Company had $25.0 million of available  borrowings  under its  revolving  credit
facility.

Term Credit Facility:  The term loan,  which expires on June 30, 2006,  requires
quarterly  principal payments that began on June 30, 2001.  Quarterly  principal
payments  in 2001 were $1.0  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, 2001 were at 4.84% 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. To convert the
Company's new senior term credit  facility  from a floating to a fixed  interest
rate obligation, the Company entered into interest rate swap agreements in March
2001 with notional amounts of $40.0 million. The notional amounts under the swap
agreements  are  reduced   according  to  the  senior  term  credit   facility's
amortization  schedule.  The weighted  average  fixed  interest rate under these
agreements  is  5.43%.  In  order  to  maintain  effectiveness,   the  quarterly
settlement  terms of the swap  agreements are  established to match the interest
payments  on the term  credit  facility.  The  decrease in the fair value of the
interest  rate  swap  from the date of  inception  was $1.1  million,  which was
recorded in the  Accumulated  Comprehensive  Loss  section of the  Shareholders'
Equity.

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 maximum senior debt 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.  If any
default  as  described  in the  credit  facilities  occurs  with  respect to the
Company,  the obligations of the lenders to make additional loans  automatically
terminates and the outstanding obligations become immediately due and payable.

As of  December  31,  2001 and 2000,  the  Company  was in  compliance  with its
covenants.

Senior  Subordinated  Debt:  Concurrent  with funding the senior  secured credit
facility,  the Company repaid its $30.0 million senior  subordinated term credit
facility and entered into a new $20.0 million  senior  subordinated  term credit
facility  with LDI. All  outstanding  principal  is due on March 29,  2007,  and
interest is paid quarterly at a rate of 12.0% per annum.

Early  Extinquishment of Debt: An extraordinary loss on the early extinguishment
of debt of $0.5  million,  net of $0.3 million in income tax  benefit,  resulted
from the write-off of the  unamortized  debt issuance costs related to the early
extinguishment of our senior secured and senior  subordinated  credit facilities
in March 2001.

Prior Credit  Facilities:  Prior to March 29, 2001,  the Company had 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.
Interest rates and payment dates were 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 were subject to interest rates,  which fluctuated 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 were 2.00% over LIBOR or 0.50%
over prime based upon the Company's Leverage Ratio as of September 30, 2000. The
Company  was  charged an annual  administrative  fee of  $50,000,  and an annual
commitment fee, payable monthly, that ranged 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.

The Company also had a revolving  credit  facility  with a syndicate of banks to
finance  future  business  acquisitions.  Interest rates and payments were based
upon  one  of  two  options  selected  by  management:  LIBOR  plus  3.0%  or an
alternative  base  rate  that was  prime  plus 1%.  The  Company  was  charged a
commitment fee of 0.5% on the average daily unused portion of the facility,  due
quarterly. This facility was cancelled on March 29, 2001.

The Company also had a term credit  facility that required  quarterly  principal
payments beginning on March 31, 1999.  Quarterly principal payments in 2000 were
$1.5 million. Interest rates and payment dates were 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 were subject
to interest rates,  which fluctuated  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 was 2.00% over LIBOR based upon the Company's  Leverage  Ratio
as of September 30, 2000. This facility was refinanced on March 29, 2001.

The aggregate  principal payments for the next five years subsequent to December
31, 2001 are as follows:

(In thousands)

2002                                                                   7,607
2003                                                                   7,449
2004                                                                   9,312
2005                                                                  10,966
2006                                                                  29,102
Thereafter                                                            21,039
                                                              ---------------
                                                              $       85,475
                                                              ===============

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  on a  graduated  scale up to 25% of each  $1.00
contributed  by  employees  up to 6% of  their  annual  compensation.  Effective
January 1, 2002, the Company doubled the graduated scale up to 50% of each $1.00
contributed  by  employees  up to  6%  of  their  annual  compensation.  Company
contributions charged to operations under the Plan were approximately  $316,000,
$279,000,  and  $213,000 for the years ended  December 31, 2001,  2000 and 1999,
respectively.  In  addition,  the Company  may  contribute  to the Plan,  at the
discretion  of  the  Board  of  Directors,  an  additional  amount  up  to 4% of
employees' annual compensation.  In 2001, a discretionary  contribution of 2% of
employees'  annual  compensation  was  awarded  in the  amount of  $895,000;  no
discretionary contribution was made in 2000.

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.  Certain  stock
options  granted in 2001,  2000,  and 1999 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:

<TABLE>
<CAPTION>
                                                                              Year                Year              Year
                                                                             Ended               Ended             Ended
                                                                       December 31,        December 31,      December 31,
(In thousands, except per share data)                                         2001                2000              1999
<S>                                                                  <C>               <C>                <C>
Net income before extraordinary loss
      As reported                                                    $       6,703     $         3,727    $        3,711
      Pro forma                                                      $       6,538     $         3,135    $        3,201

Extraordinary loss on early extinguishment of debt, net
      As reported                                                    $         495     $             -    $            -
      Pro forma                                                      $         495     $             -    $            -

Net income
      As reported                                                    $       6,208     $         3,727    $        3,711
      Pro forma                                                      $       6,043     $         3,135    $        3,201

Net income per share before extraordinary loss
      As reported, Basic                                             $        0.88     $          0.49    $         0.49
      As reported, Diluted                                           $        0.88     $          0.49    $         0.49

      Pro forma, Basic                                               $        0.86     $          0.42    $         0.42
      Pro forma, Diluted                                             $        0.86     $          0.42    $         0.42

Extraordinary loss on early extinguishment of debt, net
      As reported                                                    $        0.07     $             -    $            -
      Pro forma                                                      $        0.07     $             -    $            -

Net income per share
      As reported, Basic                                             $        0.81     $          0.49    $         0.49
      As reported, Diluted                                           $        0.81     $          0.49    $         0.49

      Pro forma, Basic                                               $        0.79     $          0.42    $         0.42
      Pro forma, Diluted                                             $        0.79     $          0.42    $         0.42
</TABLE>


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,  2001,  2000,  and 1999  respectively:  risk free
interest rate of 5.0%, 6.4%, and 5.6%; no dividend yield;  expected option lives
of nine years; and stock price volatility of 42.9%, 48.5%, and 50.4%.

<TABLE>
<CAPTION>
                                              December 31,                 December 31,                 December 31,
                                                  2001                         2000                         1999
                                                  ----                         ----                         ----
                                                        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             612,334   $        8.13      524,034   $        8.35      426,490   $        8.89
Granted                                    15,936   $        7.74       92,200   $        7.28      100,024   $        6.03
Exercised                                   1,000   $        6.59            -   $           -            -   $           -
Forfeited                                  34,090   $        7.87        3,900   $        8.50        2,480   $        8.96
                                       --------------------------------------------------------------------------------------
Outstanding-end of year                   593,180   $        8.14      612,334   $        8.13      524,034   $        8.35
                                       ======================================================================================

Exercisable-end of year                   578,780   $        8.06      563,534   $        8.06      363,034   $        8.61
                                       ======================================================================================
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                               Exercise Price Range
                                           --------------------------------------------------------------

                                              $5.34-$8.25         $10.25-$11.55             Total
                                           -------------------  -------------------  --------------------
<S>                                                  <C>                  <C>                   <C>
Options outstanding                                  396,060              197,120               593,180
Weighted average exercise price            $            6.80    $           10.83    $             8.14
Average remaining contractual life                 7.5 years            4.5 years             6.6 years
Options exercisable                                  396,060              182,720               578,780
Weighted average exercise price            $            6.80    $           10.81    $             8.06
</TABLE>

The  weighted-average  fair value of  options  granted  during  the years  ended
December 31, 2001,  2000,  and 1999 were $4.66,  $4.75,  and $3.84,  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 and 1999 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 and
$3.67 per option at December  31,  2000 and 1999,  respectively.  The  remaining
contractual life of options outstanding at December 31, 2001 is 6.6 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)                    2001                2000                1999

Current:
      Federal          $         5,562     $         3,202     $         2,383
      State                      1,272                 817                 724
                      ----------------------------------------------------------
                                 6,834               4,019               3,107
                      ----------------------------------------------------------
Deferred:
      Federal                     (334)                193                 952
      State                        (55)                 29                 173
                      ----------------------------------------------------------
                                  (389)                222               1,125
                      ----------------------------------------------------------
                       $         6,445     $         4,241     $         4,232
                      ==========================================================

The  total  provision  for  federal  and state  income  taxes  consisted  of the
following:
<TABLE>
<CAPTION>
                                                                               Year                Year                 Year
                                                                              Ended               Ended                Ended
                                                                        December 31,        December 31,         December 31,
(In thousands)                                                                 2001                2000                 1999

<S>                                                                 <C>                  <C>                  <C>
      Provision / (Benefit) from continuing operations              $         6,445      $        4,241       $        4,232
      Provision / (Benefit) from extraordinary charge                          (324)                  -                    -
                                                                    ------------------------------------------------------------
                                                                    $         6,121      $        4,241       $        4,232
                                                                    ------------------------------------------------------------
</TABLE>


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,
                                                            2001                 2000                 1999
<S>                                                        <C>                  <C>                  <C>
      Federal statutory tax rate                           34.0%                34.0%                34.0%
      State tax provision                                   7.0%                 7.0%                 7.5%
      Nondeductible intangible amortization                 6.3%                 8.4%                 8.4%
      Other                                                 1.7%                 3.8%                 3.4%
                                                 -------------------------------------------------------------
Effective tax rate                                         49.0%                53.2%                53.3%
                                                 =============================================================
</TABLE>

Significant  components of the Company's  deferred tax assets as of December 31,
2001, and 2000 are as follows:

                                               December 31,        December 31,
(In thousands)                                        2001                2000

Deferred tax assets:
      Depreciation                        $          1,038    $            553
      Amortization of intangibles                      634               1,167
      Allowances                                     1,264                 856
      Inventory                                      1,398               1,065
      Accrued expenses and other                     1,383               1,688
                                          --------------------------------------
                                          $          5,717    $          5,329
                                          ======================================

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, 2001:

(In thousands)

2002                                                            $        7,928
2003                                                                     6,621
2004                                                                     4,577
2005                                                                     2,928
2006                                                                     1,295
Thereafter                                                                 670
                                                                ---------------
                                                                $       24,019
                                                                ===============

Rent  expense  charged  to  operations,  including  short-term  leases,  totaled
approximately $8.5 million,  $8.4 million,  and $8.5 million for the years ended
December 31, 2001, 2000, and 1999, 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 payment 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, the Company was 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,
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.

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)                      2001              2001                 2001                 2001
                                                   ----------------  ----------------   ------------------  -------------------
<S>                                                <C>               <C>                <C>                 <C>
Net sales                                          $      83,235     $      86,241      $       83,706      $         80,286
Gross margin                                              30,353            31,660              31,531                30,639
Income from operations                                     4,795             5,911               5,617                 5,372
Income before income taxes                                 2,487             3,936               3,208                 3,517
Net income before extraordinary loss                       1,334             1,982               1,619                 1,768
Net income                                         $         839     $       1,982      $        1,619      $          1,768
Net income before extraordinary loss - Diluted     $        0.18     $        0.26      $         0.21      $           0.23
Extraordinary loss, net of tax - Diluted                    0.07                 -                   -                     -
                                                      -------------     -------------      ---------------     ----------------
Net income per share - Diluted                     $        0.11     $        0.26      $         0.21      $           0.23


                                                                               Three Months ended
                                                   ----------------------------------------------------------------------------
                                                        March 31,          June 30,        September 30,         December 31,
(In thousands,  except per share data)                      2000              2000                 2000                 2000
                                                   ----------------  ----------------   ------------------  -------------------

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
</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)                                              2001               2000                1999
<S>                                                                     <C>                 <C>                 <C>
Numerator:
      Net income before extraordinary loss                              $         6,703     $        3,727      $        3,711
      Extraordinary loss on early extinguishment of debt, net of tax
        benefit of $324                                                             495                  -                   -
                                                                        ----------------------------------------------------------
      Net income                                                        $         6,208     $        3,727      $        3,711
                                                                        ----------------------------------------------------------
Denominator:
      Basic-weighted average shares                                               7,638              7,540               7,536
      Effect of dilutive stock options                                               10                 11                   9
                                                                        ----------------------------------------------------------
      Diluted-weighted average shares                                             7,648              7,551               7,545
                                                                        ----------------------------------------------------------
Net income per share - Basic and Diluted
       Net income before extraordinary loss                             $          0.88     $         0.49      $         0.49
       Extraordinary loss, net of tax benefit                                      0.07                  -                   -
                                                                        ----------------------------------------------------------
Basic net income per share                                              $          0.81     $         0.49      $         0.49
                                                                        ==========================================================
Diluted net income per share                                            $          0.81     $         0.49      $         0.49
                                                                        ==========================================================
</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, 2001.


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, 2001.


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, 2001.

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, 2001.


                                     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, 2002                        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, 2002        Chairman of the Board and
                                                       Chief Executive Officer
(2)      Principal Financial
       and Accounting Officer:

/s/ Robert R. Millard
---------------------
Robert R. Millard                March 28, 2002        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, 2002        Director

/s/ Thomas U. Young
-------------------
Thomas U.  Young                 March 28, 2002        Director

/s/ David N. Shane
------------------
David Shane                      March 28, 2002        Director

/s/ Margot L. Eccles
--------------------
Margot L.  Eccles                March 28, 2002        Director

/s/ Wes N. Dearbaugh
--------------------
Wes N. Dearbaugh                 March 28, 2002        Director

/s/ Peter L. Frechette
----------------------
Peter L.  Frechette              March 28, 2002        Director

/s/ David W. Knall
------------------
David W. Knall                   March 28, 2002        Director

/s/ Michael L. Smith
--------------------
Michael L.  Smith                March 28, 2002        Director

/s/ Walter S. Wiseman
---------------------
Walter S.  Wiseman               March 28, 2002        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

    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 (previously filed with form 10-K dated March 29,
               2001)

    21*        Subsidiaries of the Registrant

    23*        Consent of Independent Accountants

    99(a)      Credit   Agreement,   dated  as  of   March   29,   2001,   among
               FinishMaster,  Inc., the  Institutions  from Time to Time Parties
               Thereto as Lenders and  National  City Bank of Indiana,  as Agent
               (previously filed with Form 10-Q dated May 14, 2001)

    99(b)*     First  Amendment  to Credit  Agreement  dated as  of December 14,
               2001 among FinishMaster, Inc., the Institutions from Time to Time
               Parties Thereto as lenders and National City Bank of Indiana,  as
               agent

    99(c)      Subordinated  Note Agreement,  dated as of March 29, 2001, by and
               between  FinishMaster,  Inc. and LDI, Ltd. (previously filed with
               Form 10-Q dated May 14, 2001)

    *filed herein



<PAGE>

         Schedule II - Valuation and Qualifying Accounts (In thousands)

<TABLE>
<CAPTION>
                                                               Charged                       Balance
                                               Balance at      to Costs                      at End
                                               Beginning         and                           of
Description                                    of Period       Expenses   Deductions         Period
-----------------------------------------------------------------------------------------------------
<S>                                            <C>            <C>         <C>              <C>
Year ended December 31, 2001:
     Allowance for doubtful accounts           $   1,337      $    723    $     626 (A)    $   1,434

Year ended December 31, 2000:
     Allowance for doubtful accounts           $   1,419      $  1,011    $   1,093 (A)    $   1,337

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

</TABLE>

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