================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-K/A

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

                                       OR

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

         For the transition period from _________ to ____________
 
                         Commission File Number 0-23222


                               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 700, 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:

  Title of each class            Name of each exchange on which registered
          NONE                                     NONE

           Securities registered pursuant to Section 12(g) of the Act
                                  Common stock
                                (Title of Class)

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 (ss.  229.405 of this chapter) 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 February 28, 1998 $49,384,000.

At February 28, 1998,  there were  outstanding  5,993,640 shares of Registrant's
common stock.

                       Documents Incorporated By Reference

Portions of the annual proxy  statement for the year ended December 31, 1997 are
incorporated by reference into Part III.


================================================================================
<PAGE>

                                    PART II

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

The response to this item is submitted in a separate section of this report.



                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, as amended,  the  Registrant  has duly caused this amended
report to be signed on its behalf by the undersigned, thereto duly authorized.

                                        FINISHMASTER, INC.


June 15, 1998                          By: /s/  Roger A. Sorokin
                                            ------------------------------------
                                            Roger A. Sorokin
                                            Vice President-Finance and 
                                            Chief Financial Officer

<PAGE>





                           ANNUAL REPORT ON FORM 10-K
                        ITEM 8 and 14(a)(1) AND (2), (c),
                                     AND (d)
          LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
                                CERTAIN EXHIBITS
                          FINANCIAL STATEMENT SCHEDULE
                          YEAR ENDED DECEMBER 31, 1997
                               FINISHMASTER, INC.
                              INDIANAPOLIS, INDIANA


<PAGE>

FORM 10-K--ITEM 8 and 14(a)(1) AND (2)
FINISHMASTER, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE


The  following  consolidated  financial  statements  of  FinishMaster,  Inc. and
Subsidiaries are included in Item 8 of this Report:

                                                                       

Report of Independent Auditors                                         

Consolidated Balance Sheets                                            

Consolidated Statements of Operations                                  

Consolidated Statements of Cash Flows                                  

Consolidated Statements of Shareholders' Equity                        

Notes to Consolidated Financial Statements                             


     The following  consolidated  financial  statement schedule of FinishMaster,
Inc. and Subsidiaries is submitted herewith:

Schedule II                 


     All  other  schedules  for  which  provision  is  made  in  the  applicable
     accounting  regulation of the Securities and Exchange Commission are either
     included  within the financial  statements,  not required under the related
     instruction or are inapplicable and, therefore, have been omitted.





<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Stockholders
FinishMaster, Inc.



We have audited the  accompanying  consolidated  balance sheets of FinishMaster,
Inc. and  Subsidiaries  as of December  31, 1997 and December 31, 1996,  and the
related consolidated  statements of operations,  stockholders'  equity, and cash
flows for the year  ended  December  31,  1997 and the nine month  period  ended
December 31, 1996.  Our audits also  included the financial  statement  schedule
listed in the index at Item 14(a).  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
schedule based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards 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.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  consolidated  financial  position  of
FinishMaster,  Inc. and  Subsidiaries at December 31, 1997 and December 31, 1996
and the  consolidated  results of their  operations and their cash flows for the
year ended December 31, 1997 and the nine-month  period ended December 31, 1996,
in  conformity  with  generally  accepted  accounting  principles.  Also, in our
opinion,  the related financial statement schedule,  when considered in relation
to the  basic  financial  statements  taken as a whole,  presents  fairly in all
material respects the information set forth therein.



                          /s/ COOPERS & LYBRAND L.L.P.
                            COOPERS & LYBRAND L.L.P.



Grand Rapids, Michigan
March 20, 1998



<PAGE>


REPORT OF INDEPENDENT AUDITORS





Board of Directors and Stockholders
FinishMaster, Inc.



We  have  audited  the  accompanying   consolidated  statements  of  operations,
stockholders'  equity,  and cash flows of FinishMaster,  Inc. and Subsidiary for
the year ended March 31, 1996. These financial statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  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.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion,  consolidated  financial  statements  referred to above  present
fairly, in all material respects the consolidated results of operations and cash
flows of FinishMaster, Inc. and Subsidiary for the year ended March 31, 1996, in
conformity with generally accepted accounting principles.





                                                        /s/ ERNST & YOUNG L.L.P.
                                                        ERNST & YOUNG L.L.P.








Detroit, Michigan
April 18,1996

<PAGE>

                               FINISHMASTER, INC.
                           CONSOLIDATED BALANCE SHEETS
                      (in thousands, except share amounts)


<TABLE>
<CAPTION>
                                                                                        December 31,         December 31,
                                                                                            1997                 1996
                                                                                     -------------------- --------------------

ASSETS
CURRENT ASSETS
<S>                                                                                      <C>                  <C>
     Cash                                                                                $     364            $     300
     Accounts receivable, net of allowance for doubtful
         accounts of $2,247 and $700 respectively                                           28,744               12,752
     Inventory                                                                              53,442               24,828
     Refundable income taxes                                                                 1,299                   -
     Deferred income taxes                                                                   3,844                  474
     Prepaid expenses and other current assets                                               2,751                  785
                                                                                          --------               ------
                                                        TOTAL CURRENT ASSETS                90,444               39,139

PROPERTY AND EQUIPMENT
     Land                                                                                      368                  368
     Vehicles                                                                                1,082                   55
     Buildings and improvements                                                              3,797                3,105
     Machinery, equipment and fixtures                                                       9,065                5,909
                                                                                            ------               ------
                                                                                            14,312                9,437
     Accumulated depreciation                                                               (4,016)              (2,866)
                                                                                        -----------            ---------
                                                                                            10,296                6,571
OTHER ASSETS
     Intangible assets, net                                                                110,870               20,357
     Deferred income taxes                                                                   3,374                  289
     Other                                                                                     434                  121
                                                                                       -----------           ----------
                                                                                           114,678               20,767
                                                                                          --------             --------
                                                                                         $ 215,418             $ 66,477
                                                                                         =========             ========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
     Note payable, bank                                                              $         -             $    1,841
     Accounts payable                                                                       28,274                7,786
     Accrued expenses and other current liabilities                                         12,072                2,554
     Current maturities of long-term obligations                                             8,005                4,139
                                                                                            ------               ------
                                                   TOTAL CURRENT LIABILITIES                48,351               16,320

LONG-TERM OBLIGATIONS, less current maturities                                             134,135               17,831

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
     Preferred stock, no par value, 1,000,000 shares authorized;
         no shares issued and outstanding
     Common stock, $1 stated value; 10,000,000 shares authorized;
         5,992,640 and 6,000,140 shares issued and outstanding                              5,993                6,000
     Additional paid-in capital                                                             14,466               14,509
     Retained earnings                                                                      12,473               11,817
                                                                                           -------              -------
                                                                                            32,932               32,326
                                                                                          --------              -------
                                                                                         $ 215,418             $ 66,477
                                                                                         =========             ========
</TABLE>



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


<PAGE>

                               FINISHMASTER, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)


<TABLE>
<CAPTION>
                                                                                            Nine Months
                                                                        Year Ended             Ended             Year Ended
                                                                       December 31,         December 31,         March 31,
                                                                           1997                 1996               1996
                                                                    -------------------- ------------------- ------------------

<S>                                                                      <C>                  <C>                 <C>
NET SALES                                                                $130,175             $ 95,822            $107,511

COST OF SALES                                                              83,068               61,931              69,499
                                                                          -------              -------             -------
GROSS PROFIT                                                               47,107               33,891              38,012

EXPENSES:
   Operating                                                               20,568               15,313              16,382
   Selling, general and administrative                                     17,982               13,192              14,467
   Depreciation                                                             1,435                  755                 779
   Amortization of intangible assets                                        3,290                2,065               1,311
                                                                           ------               ------              ------
                                                                           43,275               31,325              32,939
                                                                          -------              -------             -------
                                            INCOME FROM OPERATIONS          3,832                2,566               5,073

OTHER INCOME (EXPENSE):
   Investment income                                                          128                   77                 183
   Interest expense                                                        (2,789)              (1,373)               (841)
                                                                          --------             --------          ---------
                                                                           (2,661)              (1,296)               (658)
                                                                         ---------             --------            --------

INCOME BEFORE INCOME TAXES                                                  1,171                1,270               4,415
   Income tax expense                                                         515                  610               1,766
                                                                          -------              -------              ------
                                                                         $    656             $    660             $ 2,649
                                                                         ========             ========             =======
NET INCOME

                              NET INCOME PER SHARE       - BASIC       $      .11           $      .11          $      .44
                                                                       ==========           ==========          ==========

                                                         - DILUTED     $      .11           $      .11          $      .44
                                                                       ==========           ==========          ==========

                               WEIGHTED AVERAGE SHARES OUTSTANDING          5,994                6,000               6,000
                                                                         ========            =========             =======

</TABLE>


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


<PAGE>



                               FINISHMASTER, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                          Nine months      Year ended
                                                             Year ended  ended December    March 31,
                                                            December 31,     31,
                                                                 1997        1996          1996
                                                           -------------------------------------------

OPERATING ACTIVITIES:
<S>                                                         <C>              <C>              <C>
  Net income                                                $    656         $    660         $  2,649

  Adjustments  to  reconcile  net  income
    to net cash  provided  by  (used  in)
    operating activities:
      Depreciation and amortization                            4,725            2,820            2,090
     Bad debt expense                                            859              798              548

     Deferred income taxes                                      (681)            (400)             (38)
      Changes in operating assets and liabilities:
         Account receivable                                    3,388            2,324           (1,997)
         Inventories                                          (1,456)            (815)            (778)
         Prepaids and other current assets                       177             (270)            (243)
         Accounts payable and other current liabilities       (6,411)          (2,775)          (2,694)
                                                            --------         --------         --------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES            1,257            2,342             (463)


INVESTING ACTIVITIES:
  Business acquisitions                                      (74,149)          (3,083)         (22,193)
  Purchases of property and equipment                           (697)            (620)            (762)
  Sale of marketable securities                                   --               --            6,906
  Other                                                           --              (11)            (313)
                                                            --------         --------         --------

NET CASH USED IN INVESTING ACTIVITIES                        (74,846)          (3,714)         (16,362)


FINANCING ACTIVITIES:

  Borrowings under note payable, bank                         20,603           21,256           14,162
  Repayments under note payable, bank                        (22,444)         (19,415)         (14,162)

  Purchase of common stock                                       (50)              --               --
  Acquisition financing                                       73,819            1,191           10,774
  Debt issuance costs                                         (1,689)              --               --

  Proceeds from long-term obligations                         41,951               --            7,809
  Repayment of long-term obligations                         (38,537)          (2,469)          (2,787)
                                                            --------         --------         --------
NET CASH PROVIDED BY FINANCING ACTIVITIES                     73,653              563           15,796
                                                            --------         --------         --------


INCREASE (DECREASE) IN CASH                                       64             (809)          (1,029)

CASH AT BEGINNING OF PERIOD                                      300            1,109            2,138
                                                            --------         --------         --------

CASH AT END OF PERIOD                                       $    364         $    300         $  1,109
                                                            ========         ========         ========



SUPPLEMENTAL  DISCLOSURE  OF CASH FLOW  INFORMATION  Cash paid during the period
for:
    Interest                                                $  2,192         $  1,313         $    762
                                                            ========         ========         ========

    Taxes                                                   $  1,520         $    687         $    774
                                                            ========         ========         ========
</TABLE>


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


<PAGE>



                               FINISHMASTER, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                         Additional        Net
                                                             Common       paid-in       Unrealized      Retained
                                                             Stock        Capital      Gain/(Loss)      Earnings      Totals
                                                          ------------- ------------- --------------- ------------- ------------

<S>                                                        <C>          <C>            <C>          <C>           <C>
BALANCES AT APRIL 1, 1995                                    $ 6,000      $ 14,508       $      (60)  $    8,508    $   28,956

Adjustment related to sale of marketable securities                                              60                         60

Net income for the year                                                                                    2,649         2,649
                                                             -------       -------        ---------      -------        ------

BALANCES AT MARCH 31, 1996                                     6,000        14,508                 -      11,157        31,665

Options exercised                                                                1                                            1

Net income for the nine month period                                                                         660           660
                                                             -------       -------        ---------      -------        ------

BALANCES AT DECEMBER 31, 1996                                  6,000        14,509                        11,817        32,326
                                                                                            -

Purchase of common stock                                          (7)          (43)
                                                                                                                           (50)

Net income for the year                                                                                      656           656
                                                             -------       -------        ---------      -------        ------

BALANCES AT DECEMBER 31, 1997                                $ 5,993      $ 14,466        $    -          $12,473      $32,932
                                                             =======      ========        ======          =======      =======
</TABLE>



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


<PAGE>

FINISHMASTER, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 December 31, 1997
the Company  operated  143 sales  outlets and three  distribution  centers in 22
states.  The  Company is  organized  into three major  geographic  regions - the
Southeastern,  Western  and  Central/Northeastern  Divisions.  The  Company  has
approximately 20,000 customers to which it provides a comprehensive selection of
brand name products supplied by DuPont, PPG, BASF and 3M, in addition to its own
FinishMaster  PrivateBrand refinishing accessory products. The Company is highly
dependent on a small number of key suppliers.

Majority  Stockholder:  On February 23, 1994,  the Company  completed an initial
public  offering of common stock on the NASDAQ national market under the trading
symbol "FMST." The Company sold 1.7 million shares of common stock at an initial
public offering price of $10.50 per share. The net proceeds from the offering of
approximately  $16.2  million were used by  FinishMaster  to fund  acquisitions,
repay indebtedness,  finance working capital and for general corporate purposes.
As a result of these  transactions,  4,045,000  shares or 67.4% of the Company's
outstanding stock was owned by Maxco, Inc.  ("Maxco") at March 31, 1996. On July
9, 1996, LDI AutoPaints, Inc. ("AutoPaints"), an Indiana corporation,  purchased
all of the shares of common stock owned by Maxco.  Effective  December 31, 1996,
LDI, Ltd.  ("LDI")  transferred to AutoPaints 100 shares of the Company which it
had  purchased  on the  open  market  in  August,  1995.  As a  result  of these
transactions,  AutoPaints'  ownership of FinishMaster stock was 4,045,100 shares
or 67.5% at December 31, 1997.

Use of Estimates:  The preparation of these consolidated financial statements in
conformity with generally accepted accounting  principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements  and  accompanying  notes.  Actual  results  could  differ from those
estimates.
   
Principles of Consolidation:  The consolidated financial statements,  identified
as FinishMaster,  Inc., include the consolidated accounts of FinishMaster, Inc.,
Thompson PBE,  Inc., and  Refinishers  Warehouse,  Inc.,  which are wholly owned
subsidiaries.  Sales by Refinishers  Warehouse are primarily to FinishMaster and
are eliminated in  consolidation.  All other  significant  intercompany,  equity
accounts  and  transactions  are  eliminated.   References  to  the  Company  or
FinishMaster throughout this report relate to the consolidated entity.
    
Transactions with Majority Shareholder:  AutoPaints is a wholly-owned subsidiary
of Lacy  Distribution,  which is, in turn,  a  wholly-owned  subsidiary  of LDI.
Pursuant to an arrangement between the Company and AutoPaints,  the Company pays
AutoPaints  for services it provides to the Company.  During the period  between
July 10, 1996 and  December 31, 1997,  AutoPaints  has provided  services to the
Company to support  certain  managerial  tasks.  Accordingly,  the Company  paid
$291,000 to AutoPaints  during the year ended December 31, 1997, and $262,000 in
the  nine  months  ended  December  31,  1996  in  return  for the  services  of
AutoPaints.
   
Prior to July 9, 1996,  Maxco  provided to the  Company  certain  services.  The
services  included  central  purchasing  of all  insurance,  including  employee
benefit  coverages,  general and  automobile  liability,  property and casualty.
Accordingly,  the Company paid  $1,723,000  to Maxco  during the period  between
January  1, 1996 and July 9, 1996 for these  services.  The  amounts  charged by
Maxco and AutoPaints are representative of arm's length prices.
    
Receivables:  Trade  accounts  receivable  represent  amounts due primarily from
automotive body repair shops and  dealerships.  Trade  receivables are typically
not collateralized.  No single customer exceeds 10% of the Company's receivables
at December 31, 1997.

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 are stated on the basis of
cost and include  expenditures  for new facilities and equipment and those which
materially extend the useful lives of existing facilities and equipment.

Expenditures  for normal  repairs and  maintenance  are charged to operations as
incurred.  Depreciation  is  computed  by  the  straight-line  method  over  the
following range of estimated useful lives:

          Vehicles                                5 Years
          Building & Improvement                  Up to 40 Years
          Leasehold Improvement                   Life of Lease
          Machinery, Equipment & Fixtures         3 to 10 Years
<PAGE>

1. SIGNIFICANT ACCOUNTING POLICIES (Continued)


Income Taxes: Deferred income taxes are recognized for the temporary differences
between the tax bases of assets and liabilities  and their  financial  reporting
amounts. The income tax provision is the tax  payable/recoverable for the period
and the change during the period in deferred tax assets and liabilities.

Intangibles:  Intangibles  primarily  consist  of the  excess  of cost over fair
market value of net assets of acquired businesses.  Intangible assets, including
non-compete  agreements,  are  amortized on a  straight-line  basis over periods
ranging from 5 to 30 years.  Debt issuance  costs are amortized over the term of
the debt agreement.

The  carrying  value of goodwill is  periodically  reviewed to  determine  if an
impairment  has  occurred.  The Company  measures the  potential  impairment  of
recorded  goodwill based on the estimated  undiscounted cash flows of the entity
acquired over the remaining amortization period.

Advertising:  Advertising  costs are  expensed as  incurred.  The  amounts  were
immaterial for all periods presented.

Recent  Accounting  Pronouncements:  In June of 1997,  the Financial  Accounting
Standards  Board issued  Statement of Financial  Accounting  Standards  No. 130,
"Reporting  Comprehensive  Income." This statement establishes standards for the
reporting  and display of  comprehensive  income and its  components  within the
financial  statements.  Comprehensive  income  includes  items  such as  foreign
currency items, minimum pension liability adjustments,  and unrealized gains and
losses on certain  investments in debt and equity securities.  This statement is
effective   for  fiscal  years   beginning   after   December  15,  1997,   with
reclassification of prior periods required.

In June of 1997, the Financial  Accounting  Standards Board issued Statements of
Financial  Accounting  Standards  No.  131,  "Disclosure  about  Segments  of an
Enterprise and Related  Information." This statement  establishes  standards for
the way in which public entities report  information about operating segments in
annual  financial   statements.   It  also  establishes  standards  for  related
disclosures about products and services,  geographic areas, and major customers.
This  statement  requires  that  general-purpose  financial  statements  include
selected information reported on a single basis of segmentation.  This statement
is  effective  for  fiscal  years   beginning  after  December  15,  1997,  with
restatement of comparative information for earlier years being required.

The Company is currently evaluating the impact of these pronouncements.

Reclassification:  Certain  reclassifications  have been reflected in prior year
amounts to conform with the presentation of corresponding amounts in the current
period.

2.  NET INCOME PER SHARE

In February of 1997, the Financial  Accounting  Standards Board issued Statement
of Financial  Accounting Standards No. 128, "Earnings per Share". This Statement
simplifies  the  standards  for  computing  earnings  per share,  replacing  the
presentation of primary earnings per share with a presentation of basic earnings
per share.  SFAS No. 128 also  requires dual  presentation  of basic and diluted
earnings per share on the face of the income  statement  for all  entities  with
complex  capital  structures.  Basic  earnings per share is computed by dividing
income available to common stockholders by the weighted-average number of common
shares  outstanding  for the  period.  Diluted  earnings  per share is  computed
similarly to fully  diluted  earnings per share  pursuant to APB Opinion No. 15,
"Earnings per Share", which is superseded by this Statement.



<PAGE>


2. NET  INCOME  PER  SHARE  (continued)
The following  table sets forth the  computation of basic and diluted net income
per share (in thousands except per share data):

<TABLE>
<CAPTION>
                                   Nine Months
                                          Year Ended           Ended        Year Ended March 31,
                                       December 31, 1997    December 31,            1996
                                                                1996
                                       ------------------ ----------------- ------------------
Numerator:
<S>                                        <C>                 <C>                 <C>
    NET INCOME                             $  656              $  660              $2,649
                                           ------              ------              ------

Denominator:
    BASIC-WEIGHTED AVERAGE SHARES           5,994               6,000               6,000
Effect of dilutive securities:
    EMPLOYEE STOCK OPTIONS                     --                  --                  46

  DILUTED-WEIGHTED AVERAGE SHARES           5,994               6,000               6,046
                                           ------              ------              ------

Basic net income per share                 $ 0.11              $ 0.11              $ 0.44
                                           ======              ======              ======


Diluted net income per share               $ 0.11              $ 0.11              $ 0.44
                                           ======              ======              ======
</TABLE>



The effect of employee  stock  options on the  calculation  of weighted  average
shares  outstanding  for purposes of determining  diluted  earnings per share is
antidilutive  for the year ended  December  31, 1997 and the nine  months  ended
December 31, 1996.


3.  ACQUISITIONS

The following table  summarizes the assets  acquired and liabilities  assumed in
acquisitions  made  by  FinishMaster  in each of the  periods  presented.  These
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.  Operating  results of acquired
entities have been included in FinishMaster's  consolidated financial statements
as of the respective date of purchase.

<TABLE>
<CAPTION>
                                                                                          Nine Months
                                                                      Year Ended        ended December      Year Ended
                                                                     December 31,             31,           March 31,
                                                                         1997                1996             1996
                                                                  -------------------- ----------------- ----------------
                                                                                      (in thousands)

<S>                                                                  <C>                    <C>               <C>
Accounts receivable                                                  $   20,239             $    755          $  3,229
Inventory                                                                27,158                  511             8,500
Deferred taxes                                                            6,082                  -                 -
Equipment and other                                                       8,029                  456             1,492
Intangible assets                                                        91,629                2,617            13,247
                                                                         ------                -----            ------
                                                                        153,137                4,339            26,468
Liabilities assumed                                                      78,988                1,256             4,275
                                                                        -------               ------            ------
                                             ACQUISITION PRICE           74,149                3,083            22,193
Acquisition debt                                                         73,819                1,191            10,774
                                                                        -------               ------           -------
                            NET ASSETS OF BUSINESSES ACQUIRED,
                                       NET OF ACQUISITION DEBT       $      330             $  1,892          $ 11,419
                                                                     ==========             ========          ========

Number of acquisitions                                                        3                    1                16
</TABLE>


<PAGE>


3.  ACQUISITIONS (continued)

On November 21, 1997, the Company acquired  substantially all of the outstanding
common  stock of  Thompson  PBE,  Inc.  for  $8.00  per  share.  Thompson,  like
FinishMaster,  is an aftermarket  distributor of automotive paints, coatings and
related supplies. The total purchase price, including related acquisition costs,
was  $73,471,000.  The Company funded the acquisition with a combination of bank
financing and  subordinated  borrowings  from LDI. The acquisition was accounted
for as a purchase and  accordingly,  the purchase  price was allocated to assets
acquired and  liabilities  assumed based upon their estimated fair values at the
date of  acquisition.  Goodwill  resulting  from the  acquisition of Thompson is
being amortized over 30 years.

   
The following table sets forth the unaudited pro forma results of operations for
the  current  period  in which  acquisitions  occurred  and for the  immediately
preceding period as if the acquisitions were consummated at the beginning of the
immediately preceding period. The unaudited pro forma results of operations data
consists of the historical  results of the Company as adjusted to give effect to
additional  interest,  depreciation  and  amortization  expense arising from the
acquisitions.  This  pro  forma  information  does  not  include  reductions  to
operating  expense  resulting from the  elimination  of duplicate  functions and
facilities directly attributable to the acquisitions. This pro forma information
does  not  purport  to be  indicative  what  results  would  have  been  had the
acquisitions  been made as of those  dates or of results  which may occur in the
future.
    

<TABLE>
<CAPTION>
                                               Year Ended              Nine Months Ended      
                                                December                   December           
                                                31, 1997                      31,             
                                                                             1996
                                              --------------------- --------------------
                                                 (in thousands except per share data)

<S>                                               <C>                       <C>               
   
Net sales                                         $  317,594                $ 245,112         
Net income (loss)                                    (7,669)                  (3,321)         
Net income (loss) per common share - Basic       $    (1.28)              $    (0.55)         
                                   - Diluted     $    (1.28)              $    (0.55)         
Weighted average number of common shares              5,994                    6,000          
    

</TABLE>


4. INTANGIBLE ASSETS

Intangible assets consisted of the following (in thousands):



                                        December 31, 1997    December 31, 1996
                                        -----------------    -----------------

Goodwill                                   $107,673              $ 16,044
Non-compete agreements                       11,080                10,860
Debt issuance costs                           1,689                    --
                                           --------              --------

                                            120,442                26,904
Less accumulated amortization                 9,572                 6,547
                                           --------              --------
Intangible assets, net                     $110,870              $ 20,357
                                           ========              ========





<PAGE>



5.  LONG-TERM OBLIGATIONS

Long-term obligations consisted of the following:

<TABLE>
<CAPTION>
                                                                              December 31,       December 31,
                                                                                  1997              1996
                                                                             --------------- -- --------------
                                                                                      (in thousands)

<S>                                                                            <C>                <C>
Notes payable to former owners of acquired businesses with
     interest at various rates up to 12%, due 1998 though 2007                 $ 18,353           $ 12,911
Note payable to bank under line of credit with interest
     rate not exceeding the prime interest rate, refinanced in 1997
                                                                                      -              7,288
Term credit facility payable to bank, bearing interest at 8.16%,
     payments 1999 through 2003                                                  40,000                  -
Revolving credit facility bearing interest at 8.16 to 9.5%,
     due November 2003                                                           51,479                  -
Senior subordinated debt payable to LDI at 9.0%,
     due May 2004                                                                30,000                  -
Other long-term financing at various rates                                        2,308              1,771
                                                                             ----------         ----------
                                                                                142,140             21,970
Less current maturities                                                           8,005              4,139
                                                                              ---------          ---------
                                                                               $134,135           $ 17,831
                                                                               ========           ========
</TABLE>


Revolving  Credit  Facility:  The Company has a revolving credit facility with a
bank, limited to the lesser of $60 million less letter of credit obligations, or
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 November 19, 2003. Interest rates and payment
dates are variable  based upon  interest  rate options  selected by  management.
Interest  rates at December  31, 1997  varied from 8.16% to 9.5%.  The  interest
rates  are  2.25%  over  LIBOR or 1% over  prime in the  case of  Floating  Rate
Advances. The Company is charged an annual administrative fee of $50,000, and an
annual  commitment fee,  payable  monthly,  of 0.5% on the unused portion of the
revolving credit facility.

Term  Credit  Facility:  The term loan  requires  quarterly  principal  payments
beginning  March 31, 1999.  Interest  rates and payment dates are variable based
upon interest rate options selected by management. The interest rate at December
31, 1997 was 8.16%. This rate is 2.25% over LIBOR.

Substantially  all of the Company's assets serve as collateral for the revolving
credit  facility  and term credit  facility.  These  credit  agreements  contain
various covenants  pertaining to, among other things,  achieving a minimum fixed
coverage ratio, a leverage ratio,  and an interest  expense  coverage ratio. The
covenants  also  limit  purchases  and  sales of  assets,  restrict  payment  of
dividends  and direct the use of excess  cash flow.  These  quarterly  covenants
become  effective  with the period  ending March 31, 1998. As a condition of the
amended  bank credit  facility of $100  million,  LDI agreed to make by June 30,
1998 an additional equity investment of $14 million or such lesser amount as may
be  acceptable  to the  Company's  bank.  The  Company  intends to satisfy  this
requirement through an acquisition of LDI AutoPaints  ("AutoPaints") in exchange
for equity in the Company. (See Note 10).

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


The aggregate  principal payments for the next five years subsequent to December
31, 1997 are as follows, in thousands:

                             1998                  $     8,005
                             1999                        9,513
                             2000                       10,725
                             2001                       10,104
                             2002                       10,494
                             Thereafter                 93,299
                                                   -----------
                                                   $   142,140
                                                   ===========


<PAGE>

5.  LONG-TERM OBLIGATIONS (continued)

The Company is  currently  pursuing  other  financing  arrangements.  Should the
Company be successful in implementing  favorable financing terms,  proceeds will
be used to retire  certain  bank term  loans,  a portion of amounts  outstanding
under the revolving  credit facility and the  subordinated  debt payable to LDI.
Early  retirement of indebtedness  will result in an  extraordinary  loss in the
amount of the net book value of  capitalized  debt issue costs.  At December 31,
1997 unamortized debt issue costs were approximately $1.6 million.

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


6.  EMPLOYEE SAVINGS PLAN

The  Company  has an  Employee  Savings  Plan  which  covers  substantially  all
employees who have met certain  requirements as to date of service.  The Company
currently  contributes  $0.25 for each $1  contributed  by employees up to 6% of
their annual  compensation.  In  addition,  the Company may  contribute,  at the
discretion  of the Board of Directors,  an additional  amount equal to 1% of the
employees'  annual  compensation.  Company  contributions  charged to operations
under the Plan were  approximately  $182,000  for year ended  December 31, 1997,
$189,000 for the nine months  ended  December 31, 1996 and $198,000 for the year
ended March 31, 1996.


7.  STOCK OPTIONS

On November  30,  1993,  an  Employee  Stock  Option Plan was  ratified to grant
options on up to 600,000 shares of the Company's  common stock to officers,  key
employees and non-employee  directors of the Company.  All options granted under
this plan have been  granted at a price equal to the market price at the date of
the grant. All options granted have a maximum life of ten years from the date of
the grant and are fully vested at the date of issue.

The Company recognizes  compensation expense related to its stock option plan in
accordance with APB No. 25 "Accounting  for Stock Issued to Employees."  Options
are granted at not less than the fair market value of the Company's common stock
on the date of grant, therefore, no compensation is recognized. Had compensation
expense been  determined at the date of the grant based on the fair value of the
awards  consistent  the  Statement of Financial  Accounting  Standards  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 Ended December         Nine Months         Year Ended March
                                                       31,             Ended December 31,            31,
                                                       1997                    1996                   1996
                                              ----------------------- ----------------------- ---------------------
Net Income                                                   (in thousands, except per share data)
<S>                                                   <C>                     <C>                    <C>
    As Reported                                       $ 656                   $ 660                  $ 2,649
    Pro Forma                                         $ 523                   $ 660                  $ 2,010

Net income per share
    As Reported          - Basic                      $ 0.11                  $ 0.11                  $ 0.44


                         - Diluted                    $ 0.11                  $ 0.11                  $ 0.44

    Pro Forma            - Basic                      $ 0.09                  $ 0.11                  $ 0.34
                         - Diluted                    $ 0.09                  $ 0.11                  $ 0.33

</TABLE>

<PAGE>



7.  STOCK OPTIONS (continued)

The fair value of each option grant was estimated on the date of grant using the
Black-Scholes  option pricing model with the following  assumptions for December
31, 1997, December 31, 1996 and March 31, 1996 respectively:  risk free interest
rate of 5.5,  5.7 and 5.7  percent;  no dividend  yield for all years;  expected
lives of 9, 8 and 8 years; and volatility of 46.8 percent for all years.  Option
valuation models, like the stock price Black-Scholes model, require the input of
highly  subjective  assumptions  including the expected stock price  volatility.
Because changes in the subjective  input  assumptions can materially  affect the
fair value  estimate,  in  management's  opinion,  the  existing  models may not
necessarily  provide a  reliable  single  measure of the fair value of its stock
options.

<TABLE>
                                      December 31, 1997                December 31, 1996                March 31, 1996
                                  -----------------------------     ----------------------------      -------------------------
                                                  Weighted-Avg.                   Weighted-Avg.                  Weighted-Avg.
                                  Options        Exercise Price     Options       Exercise Price      Options    Exercise Price
                                  -------        --------------     -------       --------------      -------    --------------
<S>                                <C>             <C>              <C>             <C>             <C>             <C>
Outstanding-beginning of
year
                                   169,310         $ 10.71          222,085         $10.72            123,800         $10.50
Granted                             45,000          $ 7.00                -              -             99,500         $11.00
Exercised                               -                -              140         $10.50                  -              -
Forfeited                            4,310          $10.50           52,635         $10.76              1,215         $10.50
                                  -------           ------           -------        ------            -------         ------
Outstanding and
exercisable-end of year
($7.00 to $11.00 per share)
                                  210,000           $ 9.92           169,310        $10.71            222,085         $10.72
                                  =======           ======           =======        ======            =======         ======
</TABLE>


The  weighted-average  fair  value of  options  granted  during  the year  ended
December  31,  1997 and  March  31,  1996  were  $4.85  and  $6.65  per  option,
respectively.  The remaining contractual life of options outstanding at December
31, 1997 is 8.3 years.



8.  INCOME TAXES

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

                    Year Ended      Nine Months Ended      Year Ended
                December 31, 1997   December 31, 1996    March 31,1996
             --------------------   -----------------    -------------

Current:
   Federal         $ 1,010                $   778           $ 1,477
   State               186                    232               327

Deferred              (681)                  (400)              (38)
                   -------                -------           -------
                   $   515                $   610           $ 1,766
                   =======                =======           =======






<PAGE>



8.  INCOME TAXES (continued)

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 Ended        Nine Months Ended      Year Ended
                               December 31, 1997    December 31, 1996    March 31, 1996
                              ------------------    -----------------    ---------------
<S>                                  <C>                  <C>               <C>
Federal statutory tax rate           34.0%                34.0%             34.0%
State tax provision                   6.8                  8.3               4.9
Other                                 3.3                  5.7
                                                                             1.1
                              ==================    =================    ===============
Effective tax rate                   44.1%                48.0%             40.0%
                              ==================    =================    ===============
</TABLE>



Significant  components of the Company's  deferred tax assets and liabilities as
of December 31, 1997 and 1996 are as follows (in thousands):

                                        December 31, 1997    December 31, 1996
                                        -----------------    -----------------

   Deferred tax assets
     Depreciation                           $  712
     Amortization of intangibles             1,023                  $  647
     Allowance for doubtful accounts         1,106                     277
     Inventory                               1,770                     190
     Accrued expenses                        2,555
     Other, net                                 52                      23
                                            ------                  ------

                                             7,218                   1,137
   Deferred tax liabilities
     Depreciation                               --                     374
                                            ------                  ------
                                            $7,218                  $  763
                                            ======                  ======



9.  CONTINGENCIES AND COMMITMENTS

FinishMaster  occupies  facilities  and uses  equipment  under  operating  lease
agreements requiring annual rental payments  approximating the following amounts
(in thousands) for the five years subsequent to December 31, 1997:


                               1998               $   6,610
                               1999                   5,484
                               2000                   2,857
                               2001                   1,115
                               2002                     463
                               Thereafter               998
                                                 ----------
                                                  $  17,527
                                                  =========


Rent expense  charged to operations,  including  short-term  leases,  aggregated
$3,831,963, $2,724,621, and $2,500,101 for the year ended December 31, 1997, the
nine  months  ended  December  31,  1996,  and the year  ended  March 31,  1996,
respectively.

On January  14,  1998,  the Company  announced  the  planned  relocation  of its
administrative  headquarters from the Kentwood,  Michigan distribution center to
new office  space  located in  Indianapolis,  Indiana that will be leased by the
Company from LDI. The Company anticipates  incurring  relocation and integration
costs in 1998 in conjunction  with the  combination of certain stores and moving
of administrative functions.


<PAGE>

9.  CONTINGENCIES AND COMMITMENTS (continued)

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

The Company has three  agreements  with warehouse  suppliers for the purchase of
certain  paint and non-paint  supplies in specified  geographic  locations.  The
agreements provide for aggregate  specified minimum purchases of $8.1 million in
1998, $7.8 million in 1999 and 2000, and $2.8 million in 2001, 2002 and 2003.
The agreements expire in 1999, 2000, and 2003.

FinishMaster  is not involved in any material  legal  actions as of December 31,
1997.


10.  SUBSEQUENT EVENT

On February 16, 1998, the Company,  AutoPaints and LDI entered into an Agreement
and Plan of Merger (the "Merger Agreement"). Pursuant to the terms of the Merger
Agreement,  which is  subject to the  approval  of the  Company's  shareholders,
AutoPaints  will merge with and into the Company,  and the Company will issue an
additional  1,542,416  shares of the common  stock of the  Company  to LDI.  The
Company  will also seek  shareholder  approval  for an increase in the number of
authorized  common  shares from 10 million to 25 million  shares.  The financial
position,  results  of  operations  and cash flows of  AutoPaints  have not been
reflected in the consolidated  financial statements of FinishMaster as of or for
the year ended December 31, 1997.

On March 27, 1998 the  Company  entered  into a  subordinated  revolving  credit
agreement  with LDI for $10.0  million to fund working  capital and  acquisition
needs.  Principal is due March 27, 1999.  Interest  rates and payment  dates are
variable based upon interest options selected by management.  The interest rates
are 2.25% over LIBOR or 1.0% over prime in the case of floating  rate  advances.
Holders of subordinated  debt are expressly made subordinate in right of payment
of all senior indebtedness.


<PAGE>

                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

                                 (In Thousands)


<TABLE>
<CAPTION>
----------------------------------------- ---------------- --------------------------------- ------------------ -----------------
                     COL. A                   COL. B                    COL. C                    COL. D             COL. E
----------------------------------------- ---------------- --------------------------------- ------------------ -----------------
                                                                      ADDITIONS
                                                           ---------------------------------

                                                                              Charged to
                                            Balance at       Charged to          Other
                                           Beginning of       Costs and       Accounts--     Deductions--DescribeBalance at End
                   DESCRIPTION                Period          Expenses         Describe                            of Period
----------------------------------------- ---------------- ---------------- ---------------- ------------------ -----------------
<S>                                               <C>                <C>         <C>              <C>                   <C>   
Year ended December 31, 1997:
       Allowance for doubtful accounts            $  700             $859        $1,758  (A)      $1,070  (B)           $2,247
                                                  ------             ----        ------           ------                ------

Nine months ended December 31, 1996:
       Allowance for doubtful accounts            $  350             $798                           $448  (B)             $700
                                                  ------             ----                           ----                  ----

Year ended March 31, 1996:
       Allowance for doubtful accounts            $  260             $548                           $458  (B)             $350
                                                  ------             ----                           ----                  ----
</TABLE>


(A)  Represents allowance for doubtful accounts from acquisition.

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