<PAGE>

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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                                   FORM 10-K
(Mark One)
[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
                                      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 333-62635

                       CENTURY MAINTENANCE SUPPLY, INC.
            (Exact name of registrant as specified in its charter)

                  Delaware                         76-0542935
       (State or other jurisdiction of          (I.R.S. Employer
       incorporation or organization)          Identification No.)

          10050 Cash Road, Suite 1                    77477
               Stafford, Texas                      (Zip Code)
  (Address of Principal Executive Offices)

                                (281) 208-2600
             (Registrant's telephone number, including area code)

       Securities Registered Pursuant to Section 12(b) of the Act: None

       Securities Registered Pursuant to Section 12(g) of the Act: None

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X]  No [_]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((S)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 [X].

     The aggregate market value of the Common Stock of the registrant held by
non-affiliates of the registrant is $7,435,350, the assumed fair market value
of the registrant's Common Stock at March 29, 2002 as determined by the Board of
Directors.

     As of March 29, 2002, the number of shares of the registrant's Common Stock
outstanding was 12,190,498. The registrant's Common Stock is not traded in a
public market.

                     DOCUMENTS INCORPORATED BY REFERENCE:

                                     None.

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                                    PART I

     This Annual Report on Form 10-K contains "forward-looking statements"
within the meaning of Section 27-A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.  These
statements include without limitation the words "believes," "anticipates,"
"estimates," "intends," "expects," and words of similar import.  All statements
other than statements of historical fact included in statements under "Item 1.
Business," "Item 2. Properties," "Item 3. Legal Proceedings" and "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operation" include forward-looking information and may reflect certain
judgements by management. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company or the maintenance, repair
and operations industry to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements.  Certain potential risks and uncertainties that may affect the
Company are set forth in the Company's Registration Statement on Form S-4, as
amended, effective January 21, 1999.  The Company disclaims any obligation to
update any such factors or to publicly announce the results of any revisions to
any of the forward-looking statements contained herein to reflect future events
or developments.

Item 1.   Business.

General

     Century Maintenance Supply, Inc., a Delaware corporation ("Century" or the
"Company"), is a leading distributor of maintenance, repair and operations
("MRO") supplies to the $2 billion multifamily apartment market.  Century offers
a broad selection of high quality MRO items, with prompt, free delivery provided
through the Company's extensive distribution network.  The Company currently
supplies over 4,600 name brand and private label items, including plumbing,
hardware, electrical, HVAC and lighting products, to over 33,800 active
customers in the United States.

     The Company markets its products to individual apartment maintenance
managers as well as to larger property management companies which own and/or
manage multiple apartment complexes.  Century provides free same-day or next-day
delivery on virtually all orders by delivering its products via Company-operated
trucks from 37 distribution centers which are strategically located in major
metropolitan markets throughout the United States.

Market Overview

     The Company operates in what it estimates to be the $10 billion MRO
industry, which includes such end-users as apartments, hotels/motels, nursing
homes, prisons, military installations, and schools and universities. The
Company currently markets substantially all of its products to the $2 billion
multifamily apartment segment of this industry, focusing specifically on markets
with at least 60,000 units and apartment complexes containing more than 50
units.  The Company services 37 such markets as of March 29, 2002.

     The MRO market is highly fragmented and has been traditionally served by a
variety of distribution channels, including numerous local or regional broad-
line suppliers, specialty and industrial suppliers, mail order catalog
companies, retail home centers, and traditional hardware stores.  Over the past
ten years, the apartment MRO market has shifted its purchasing from broad-line
suppliers and retailers serving a broad range of end-users and specialized
suppliers serving a discrete product segment of this market, such as plumbing,
HVAC or electrical products, to distributors focused on providing a high level
of customer service and a product mix tailored to meet the specific needs of the
apartment MRO market.

     The property management industry is consolidating.  Over the past few
years, the top 50 national apartment management companies have increased their
share of apartment units managed.  In addition, property managers are joining
national group purchasing organizations ("GPOs"), such as Buyers Access Group,
to gain the increased buying power that large volume purchasing offers.  As a
result of these trends, property management companies and GPOs are increasingly
purchasing MRO products from national suppliers who provide broad product
selection, convenient ordering, reliable delivery and other value-added
services.

                                       1
<PAGE>

     The apartment MRO market has historically been stable and non-cyclical, as
maintenance work is required regardless of  economic conditions.  Maintenance
managers must keep their apartments in good repair to retain existing tenants
and attract new ones (e.g., a leaky faucet must be repaired and a vacant
apartment must be refurbished).  The apartment MRO industry has been growing
over the past few years, primarily due to increased construction of new
apartment buildings and improved standard amenities in the typical apartment
unit.  These new features include microwave ovens, washers/dryers, miniblinds
and individual water heaters.  In addition to these amenities, properties are
upgrading the current inventory to compete with newer properties that include
these amenities as well as replacing outdated standard features, such as
cabinets and lighting.  These trends provide increased opportunity for
incremental sales for the apartment MRO suppliers.

     Labor represents a significantly larger component than supplies of the MRO
budget for a typical apartment complex.  Consequently, while competitive pricing
is an important criterion for selecting a distributor, maintenance managers
value convenient ordering, reliable, prompt delivery, extensive product
selection and other value-added services that allow them to use their budgeted
man-hours most efficiently.

Product Offerings

     The Company currently offers over 4,600 cataloged stock-keeping units
("SKUs"), providing a full range of MRO supplies to its customers, and
continually monitors its product offering to ensure its customers' needs are
met.  The Company offers high quality name brand and private label products in
the following core categories: (i) plumbing, (ii) hardware, (iii) HVAC equipment
and parts, (iv) lighting, (v) electrical, (vi) appliances and parts, (vii)
janitorial and (viii) pool items.

     Century's product offering includes several private branded products which
it believes provide it with a distinct competitive advantage in terms of
tailored products and favorable pricing.  These products, which include Boss(R)
janitorial supplies, Rio(R) ceiling fans, DuroGuard(R) air conditioning units,
Comfort Range(R) air conditioning units, and Aspen(R) faucets accounted for
7.8% of sales in 2001. The Company plans to continue to develop these products
over the next few years.

     The Company currently distributes user-friendly catalogs with approximately
4,600 cataloged items. Historically, the Company has added approximately 150
SKUs per year to its catalogs.  These products are usually recommended by local
salespeople and then reviewed by a panel at Century's headquarters.  Local
distribution center managers have the flexibility to offer selected non-catalog
items at their individual distribution centers.  For example, Century's Denver
distribution center stocks snow shovels and ice melt.

     The Company believes that its 4,600 catalogued SKUs represent those items
that are most likely to meet the everyday and ongoing needs of the apartment MRO
manager in the Company's target market.  The Company's core products represent
the basic continuing requirements of the apartment maintenance person which
change little from year to year.  Consequently, the Company attempts to minimize
its exposure to product obsolescence.

Customers

     Century's customers include local and regional apartment properties as well
as larger property management companies.  The Company maintains over 33,800
active accounts, an increase of more than 17,000 over the past five years.
Century defines an active account as a property that generates two or more
orders within a 12 month period.

     Century's management believes its customer satisfaction is illustrated by
the recurring revenues generated from its major accounts.  In 2001, sales to the
Company's top five customers increased by approximately 4.4% over the prior
year.

     The consolidation of the large apartment management companies is changing
the way business is conducted in the apartment MRO market.  The large apartment
management companies determine overall maintenance budgets and grant preferred
provider status to suppliers with competitive pricing, exceptional quality, and
a national presence.  Once a budget has been approved by a national management
company, local maintenance managers are primarily responsible for making the
actual MRO repair decisions and purchases.

                                       2
<PAGE>

     Many property management companies have joined GPOs such as Buyers Access
to replicate the purchasing advantages of the larger property managers.  Buyers
Access requires vendors to have a national presence in addition to a broad
product selection, competitive pricing, and a sophisticated billing system.
Century is a preferred provider to Buyers Access and nine out of the ten largest
apartment management companies.

Sales and Marketing

     Century's marketing and sales strategy is based on providing the best
possible quality service to its customers.  The Company's combination of inside
and outside salesforces provides it with what it believes to be a competitive
advantage over competitors that take orders at a centralized location.

     Outside Sales Staff.  Century employs 155 commission-based local outside
sales personnel, who are based at the Company's distribution centers and are
responsible for maintaining close customer relationships and generating new
business through regular visits.  Each local outside salesperson typically makes
15-20 sales visits per day.  The outside sales force generally does not take
customer orders, allowing it to focus on its core function. In addition, the
outside sales force provides customers with information on products and
promotions, provides value-added services such as assistance with inventory
management and training issues, and serves as the focal point for customer
feedback.

     Inside Sales Force.  The Company employs 118 inside salespeople who are
based locally or regionally and are primarily responsible for receiving customer
orders and providing technical support.  Additionally, the inside salespeople
provide customers with information on pricing and promotions as well as
installation procedures and other critical characteristics which help them
determine the products best suited to their specific needs.  The Company
encourages customers to place all orders with the inside sales staff in order to
allow the outside sales staff to focus on building customer relationships.
Providing a local/regional inside salesforce reinforces customer relations as
customers usually place orders with the same group of salespeople who are
familiar with the customers' needs and order history.

     National Sales Force.  The Company employs eight salespeople who are
responsible for fostering and maintaining relationships with national property
management companies and GPOs.  The national sales force negotiates contract
terms, including pricing and minimum purchase requirements.

     The Catalog.  The Century Maintenance Catalog includes over 4,600 SKUs and
is annually distributed to approximately 59,000 active and prospective
customers.  The catalogs are complete with drawings (of most products),
specifications and pricing which facilitate the ordering process and help the
customer select the appropriate product.

     Educational Classes.  Century provides educational classes to its customers
at most of its distribution centers.  Classes are offered in the areas of basic
electrical systems, A/C and heating, appliance repair, refrigeration control
circuits, pool chemistry and EPA refrigerant recovery.  Century has tested and
EPA certified over 20,000 technicians on refrigerant recovery.  The Company
charges a nominal fee to cover the cost of the EPA classes, and the other
classes are offered free of charge.

     Sales Terms.  Century's sales terms are generally net 30 days for customers
meeting its credit requirements.

Competition

     The Company believes that the principal competitive factors in the
distribution of repair and maintenance products to the apartment housing market
and similar markets are customer service, the quality of products offered,
reliability of delivery, product pricing and sales relationships.

     The Company competes in each of its regional markets with a number of
suppliers, including such national firms as Wilmar Industries, or Wilmar,
Maintenance Warehouse/America Corp., or Maintenance Warehouse, and Chad Supply,
a regional distributor primarily in the Southeast United States.  Wilmar and
Maintenance Warehouse are the Company's most direct competitors in terms of
product line and method of distribution.  The Company believes that it
distinguishes itself from these national competitors with its local sales focus
and direct delivery from

                                       3
<PAGE>

its local distribution centers. Management also believes that the Company's
strategies build a high degree of customer loyalty through its strong local
market presence. In addition, the Company competes with local or regional broad-
line suppliers, specialty and industrial suppliers, other mail order catalog
companies, retail home centers, and traditional hardware stores.

Distribution

     The Company delivers over 90% of its sales using its own fleet of trucks,
the most of any major competitor.  Each truck is driven by an employee who has a
working knowledge of the distribution center's products and customers.  The
Company operates its own fleet of trucks in order to maintain complete control
of the delivery process, an approach that the Company's management believes
makes it the most reliable in the industry. Management believes the additional
cost Century spends on operating its trucks is minimal considering the value-
added service it provides its customers.  Delivery is free for orders of $50 or
more.  Furthermore, the industry trend toward increased order size will benefit
companies like Century which operate their own fleet of trucks since each
delivery person can carry more items at little or no additional cost.

     Typically, orders are placed via toll free or local telephone calls to one
of the Company's inside salespeople located in the nearest call center.  The
inside salespeople confirm the availability of the product ordered and then
enter customer orders into the fully-computerized order processing system.  In
many locations, orders placed before 10:00 a.m. are delivered on the same day.
Orders placed before 5:00 p.m. are virtually always received by the customer on
the following day.

Operations

     In managing its inventory, Century seeks to maintain a steady balance
between providing the customer optimal service and limiting costs.  Century has
several mechanisms in place to track, measure, replenish and optimize the use of
inventory in all Company locations, including monthly tracking, physical counts,
and cycle counting.  In 2001, the Company estimates that it maintained an
average fill rate of over 97%.

     Century's distribution centers are monitored monthly by the finance,
operations, and purchasing departments at corporate headquarters.  Each center
is measured on deliveries, credits, expenses, customer contact, total sales,
inventory and surplus inventory dollars, and the percentage of non-catalog and
"dead" stock product.  In addition, locations are graded on sales/inventory
ratios and inventory turnover.  Furthermore, beginning in 1995, Century
instituted a cycle count program.  Locations are required to physically count
from 50 to 100 items four days per week, or approximately 200 days per year.

Suppliers and Purchasing

     Century currently purchases products from approximately 1,200 vendors.  In
2001, no Company vendor accounted for more than 5.1% of purchases in 2001, and
the top ten vendors accounted for approximately 29.6% of total purchases.

     The Company's use of volume purchasing has enabled it to benefit from
favorable pricing and payment terms in the past.  The benefit the Company
derives from volume-based terms is expected to increase as a result of increased
sales volume and further realization of efficiencies from the implementation of
a centralized purchasing department, which was completed in March 1999.

     The Company's management believes it has good relationships with its
vendors and, to date, has not experienced any difficulty obtaining products in
sufficient quantities at competitive prices.

MIS System

     Century's management and information system is a comprehensive sales,
order-entry, inventory and reporting system.

                                       4
<PAGE>

     The capabilities of the Century system allow the Company to analyze
historical customer buying patterns, in addition to managing the sales, credit
and collections, order-entry and financial reporting functions.  Optimal
inventory levels are calculated real-time on a per SKU basis.

Government Regulation and Environmental Matters

     The Company and its customers are subject to Federal and state regulation
in the United States, and some of the Company's vendors are located overseas and
are therefore subject to regulation by foreign governments.  The Company cannot
predict the extent to which future legislative and regulatory developments
concerning its practices and products may affect the Company.  The Company is
also subject to numerous Federal, state and local laws and regulations relating
to such matters as safe working conditions, fire hazard control and the handling
and disposal of hazardous or infectious materials or substances and emissions of
air pollutants.  The Company leases properties which are subject to
environmental laws and regulations.  There can be no assurance that the Company
will not be required to incur significant costs to comply with such laws and
regulations in the future or that such laws or regulations will not have a
material adverse effect upon the Company's business, financial condition or
results of operations.  The Company believes it is currently in material
compliance with all applicable laws and regulations.

Trademarks

     The Company is not able to register the trademarks "Century Maintenance
Supply" or "Century" with the United States Patent and Trademark Office because
a third party owns a federal registration for the mark "Century."  The Company,
at this time, is not prevented from using the Century name; however, it is
possible that this third party could bring an infringement action against the
Company for the use of the name.  If an infringement action were successful, it
is possible that the Company would be prohibited from using the Century name on
a regional, or possibly national, basis.

Employees

     As of March 29, 2002, the Company employed 917 full-time employees and 14
part-time employees. None of the Company's employees are represented by unions
and the Company considers its employee relations to be good.

Item 2.   Properties.

     The Company currently operates in 37 different geographic markets, each
with a distribution center ranging in size from 12,000 to 114,000 square feet.
The Company leases all of its distribution centers, with lease expiration dates
ranging from June 2002 to March 2007.  Management believes significant
additional capacity can be added at minimal cost to most of the locations
utilizing available contiguous space.

Item 3.   Legal Proceedings.

     The Company is party to lawsuits and other proceedings incidental to its
business.  While the results of such lawsuits and other proceedings cannot be
predicted with certainty, management does not expect that ultimate liabilities,
if any, will have a material adverse effect on the financial position, results
of operations, or cash flow of the Company.

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

     None.

                                       5
<PAGE>

                                    PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters.

     There is no established public trading market for the Company's Common
Stock.  As of March 29, 2001, all of the Common Stock of the Company is held by
42 holders of record.

     The following is a summary of the transactions engaged in by the Company
during the past three fiscal years involving sales of the Company's securities
that were not registered under the Securities Act:

     The Company did not issue or sell any shares of Common Stock in 1999 or
2001.  The Company did not grant any options in 1999 or 2001.

     From January 1, 2000 through December 31, 2000, the Company issued and sold
147,389 shares of Common Stock to employees upon the exercise of options to
purchase Common Stock for an exercise price of $1.74 per share for an aggregate
purchase price of approximately $347,281, which was paid with proceeds of loans
received from the Company in the principal amount of $297,242, bearing interest
at the rate of 0% over a term of 9 months.  These employees paid the balance of
the exercise price of the options in cash.

     The issuances described above were exempt from registration under the
Securities Act pursuant to Section 4(2) of the Securities Act as a transaction
by an issuer not involving a public offering or Rule 701 promulgated under the
Securities Act for securities sold by a company not subject to the reporting
requirements under the Securities Exchange Act of 1934 pursuant to certain
compensatory benefit plans and contracts relating to compensation.  Appropriate
legends were affixed to the stock certificates issued in these transactions and
there was no general solicitation or advertising.

     From January 1, 2000 through December 31, 2000, the Company granted non-
qualified options to purchase an aggregate of 90,900 shares of Common Stock to
its directors, officers and employees under the Company's 1998 Nonqualified
Stock Option Plan.  The issuances were exempt from the registration requirements
of the Securities Act either by virtue of (i) an exemption provided by Rule 701
promulgated under the Securities Act, or (ii) a "no-sale" theory under Section 5
of the Securities Act, since none of the optionees provided any consideration
for the grants (the sale of the underlying option shares occurs only when the
option is exercised and the purchase price for the shares is paid to the
Company.)

     No underwriter was employed with respect to any sales of securities of the
Company in the transactions described above.  No commissions or fees were paid
with respect to any such sales.

     The Company has not paid cash dividends to its stockholders and does not
intend to pay cash dividends to its stockholders in the foreseeable future. See
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
Operations--Liquidity and Capital Resources" for a discussion of restrictions on
the Company's ability to pay cash dividends.

                                       6
<PAGE>

Item 6.        Selected Financial Data.

     The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis and Results of Operations" and the
consolidated financial statements of the Company as of December 31, 2000 and
2001 and for the three years in the period ended December 31, 2001, included
elsewhere in this Report on Form 10-K.  The Operating Data, Cash Flow Data and
the Balance Sheet Data as of and for the years ended December 31, 1997, 1998,
1999, 2000 and 2001 are derived from audited consolidated financial statements
of the Company.  In 1998, the Company completed the Recapitalization (see "Item
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations--The Recapitalization"), which significantly affected 1998 financial
data.

<TABLE>
<CAPTION>
                                                                                        Fiscal Year
                                                          -----------------------------------------------------------------------
                                                              1997           1998           1999           2000           2001
                                                          -----------    -----------    -----------    -----------    -----------
                                                                                    (dollars in thousands)
<S>                                                       <C>            <C>            <C>            <C>            <C>
Operating Data:
Net sales.............................................    $   146,166   $    200,488    $   231,382    $   257,262    $   277,470
Cost of goods sold....................................        105,636        145,710        167,770        185,829        203,544
                                                          -----------   ------------    -----------    -----------    -----------
Gross profit..........................................         40,530         54,778         63,612         71,433         73,926
Operating expenses:
  Selling, general and administrative expenses
     ("SGA")..........................................         22,264         30,198         36,458         41,316         45,652
  Stock based compensation charges - SGA(a)...........          6,969          4,092             74             56             --
  Recapitalization expenses(b)........................             --          7,982             --             --             --
                                                          -----------   ------------    -----------    -----------    -----------
Total operating expenses..............................         29,233         42,272         36,532         41,372         45,652
                                                          -----------   ------------    -----------    -----------    -----------
Operating income......................................         11,297         12,506         27,080         30,061         28,274
Interest expense(c)...................................          1,147          5,327          9,310          9,681          7,586
                                                          -----------   ------------    -----------    -----------    -----------
Income before income taxes and minority interest......         10,150          7,179         17,770         20,380         20,688
Provision for income taxes(d).........................          6,370          5,380          6,970          7,928          7,639
                                                          -----------   ------------    -----------    -----------    -----------
Income before minority interest.......................          3,780          1,799         10,800         12,452         13,049
Minority interest in earnings of subsidiaries.........            848             --             --             --             --
                                                          -----------   ------------    -----------    -----------    -----------
Net income............................................    $     2,932   $      1,799    $    10,800    $    12,452    $    13,049
                                                          ===========   ============    ===========    ===========    ===========

Other Financial Data:
EBITDA(e).............................................    $    12,066   $     13,569    $    28,561    $    31,775    $    30,250
Adjusted EBITDA(f)....................................    $    19,035   $     25,643    $    28,635    $    31,831    $    30,250
Adjusted EBITDA margin(g).............................           13.0%          12.8%          12.4%          12.4%          10.9%
Depreciation & amortization...........................    $       769   $      1,063    $     1,481    $     1,700    $     1,976
Capital expenditures..................................    $     1,534   $        938    $     2,740    $     1,770    $       877
Ratio of Adjusted EBITDA to interest expense..........           16.6x           4.8x           3.1x           3.3x           4.0x
Ratio of total debt to Adjusted EBITDA................            1.0x           3.8x           3.3x           2.8x           2.6x
Other Data:
Distribution centers..................................             29             32             36             37             37
Comparable center sales growth(h).....................           20.8%          21.3%          12.4%           9.2%           7.4%
Active customers(i)...................................         24,521         27,300         30,500         31,250         33,830
</TABLE>

                                       7
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<TABLE>
<CAPTION>
                                                                                        Fiscal Year
                                                          -----------------------------------------------------------------------
                                                              1997           1998           1999           2000           2001
                                                          -----------    -----------    -----------    -----------    -----------
                                                                                    (dollars in thousands)
<S>                                                       <C>            <C>            <C>            <C>            <C>
Cash Flow Data:
Net cash provided by (used in) operating
 activities............................................   $     6,304   $    (12,616)   $     9,174    $     5,951    $    14,288
Net cash used in investing activities..................        (9,575)          (865)        (3,993)        (1,770)          (877)
Net cash provided by (used in) financing
 activities............................................         4,946         10,525         (5,325)        (7,676)       (12,645)

Balance Sheet Data:
Working capital........................................   $    25,617   $     37,921    $    40,131    $    37,478    $    37,943
Operating working capital(j)...........................        29,487         38,877         42,732         47,574         50,773
Total assets...........................................        57,254         73,867         80,440         85,166         81,513
Redeemable preferred stock.............................            --         37,309         42,908         44,509         51,063
Total debt.............................................        18,997         98,700         94,100         90,500         77,900
Stockholders' equity (deficit).........................        25,568        (81,816)       (77,798)       (71,092)       (65,312)
</TABLE>
______________________
(a) 1997 data reflects (i) charges of $6.3 million for the difference between
    the fair market value of stock exchanged by minority stockholders in
    connection with the Reorganization (as described below in "Item 7.
    Management's Discussion and Analysis of Financial Condition and Results of
    Operations") and the recorded basis of minority stockholder interests
    consisting of amounts paid by such stockholders for their stock in the
    Company's subsidiaries and their allocated earnings reflected as charges to
    minority interest in earnings of subsidiaries through June 30, 1997 and (ii)
    with respect to stock options granted in July 1997, charges of $0.6 million
    representing the difference between the fair market value of Common Stock
    and the exercise price of the related options at the respective date of
    grant.  1998 data reflects a charge of $4.1 million for the redemption of
    stock options as part of the Recapitalization for the difference between the
    redemption price and the exercise price of the stock options less any
    previously recognized charge related to the grant of the stock options.
    1999 and 2000 changes reflect the cost of unexercised stock options
    purchased from terminated employees.
(b) Transaction costs related to the Recapitalization that occurred in July of
    1998.
(c) Interest expense in 1998 through 2001 includes amortization of deferred
    financing fees.
(d) As part of the Common Control Mergers (as defined in Item 7) the Company
    acquired certain operations that were not previously subject to federal
    income taxes.  Income from these operations subsequent to the Reorganization
    are subject to federal income taxes.
(e) EBITDA represents net income before depreciation and amortization, interest
    expense and income tax expense.  EBITDA is not a measure of performance
    under accounting principles generally accepted in the United States of
    America, and should not be considered as a substitute for net income, cash
    flows from operating activities and other income or cash flow statement data
    prepared in accordance with accounting principles generally accepted in the
    United States of America, or as a measure of profitability or liquidity. The
    Company has included a measurement based on EBITDA because it is one way in
    which the Company monitors its performance and because it is commonly used
    by certain investors and analysts to (i) analyze and compare companies on
    the basis of operating performance, leverage and liquidity and (ii)
    determine a company's ability to service debt.  EBITDA should not be
    considered as an alternative to, or more meaningful than, income from
    operations or cash flow as an indication of the Company's operating
    performance, nor does it represent funds available for management's
    discretionary use.  EBITDA presented by the Company may not be comparable to
    EBITDA defined and presented by other companies.
(f) Adjusted EBITDA represents net income before depreciation and amortization,
    interest expense, income tax expense, recapitalization expenses and stock
    based compensation charges.  Adjusted EBITDA is not a measure of performance
    under accounting principles generally accepted in the United States of
    America, and should not be considered as a substitute for net income, cash
    flows from operating activities and other income or cash flow

                                       8
<PAGE>

    statement data prepared in accordance with accounting principles generally
    accepted in the United States of America, or as a measure of profitability
    or liquidity. The Company has included a measurement based on Adjusted
    EBITDA because it is one way in which the Company monitors its performance
    and because it is commonly used by certain investors and analysts to (i)
    analyze and compare companies on the basis of operating performance,
    leverage and liquidity and (ii) determine a company's ability to service
    debt. In addition, certain covenants in the Certificate of Designation are
    based upon a concept similar to Adjusted EBITDA. Adjusted EBITDA should not
    be considered as an alternative to, or more meaningful than, income from
    operations or cash flow as an indication of the Company's operating
    performance, nor does it represent funds available for management's
    discretionary use. Adjusted EBITDA presented by the Company may not be
    comparable to Adjusted EBITDA defined and presented by other companies.
(g) Represents ratio of Adjusted EBITDA to net sales.
(h) Does not include centers acquired through the Nationwide Acquisition (as
    described below in "Item 7. Management's Discussion and Analysis of
    Financial Condition and Results of Operations").
(i) Includes those customers who have placed at least two orders over the
    previous 12 month period.
(j) Operating working capital represents current assets, excluding cash, less
    current liabilities, excluding the current portion of long-term debt.

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

General

     Century has grown through a combination of increasing sales at its existing
distribution centers, by opening new distribution centers and through the
acquisition of Nationwide Apartment Supply, Inc. and Champion Blind and Drapery,
Inc.  As part of its strategy of expanding into new geographic markets, the
Company opened 22 new distribution centers from 1994 through 2001.
Historically, a typical center breaks even within three years of opening, and
operating margins continue to improve as the center's revenue grows.  In July
1997, the Company acquired Nationwide, which added 11 distribution centers
principally in the midwestern United States, three of which were consolidated
into existing Century centers.  In April 1999, the Company acquired Champion
Blind and Drapery, Inc. for a cash price of $1,550,000.

     On June 30, 1997, the Company acquired all of the outstanding minority
shareholder interests in each of the Company's subsidiaries in exchange for
common stock of the Company (the "Reorganization").  The exchanges were
completed at fair market value and resulted in the Company issuing 1,681,324
shares of common stock to the minority shareholders.

     On June 30, 1997, the Company purchased all of the assets of the general
maintenance supply operations of Century Airconditioning Supply, Inc. ("CAC"),
which were located in San Antonio and Austin, Texas (such acquired assets to be
called "SA/A"), with 1,702,703 shares of the Company's common stock.  The number
of shares was determined based on the fair value of the operations acquired
divided by the fair value per share of common stock of the Company.  Also on
June 30, 1997, the Company sold one of its subsidiaries, Air Management, Inc.
("Air Management"), which is in the heating and air conditioning business, to
CAC for $215,000.  The sales price was based on the fair value of the subsidiary
sold.  The transactions (the "Common Control Mergers") were conducted between
the Company and CAC, which were under common control prior to consummation of
the Recapitalization.  Therefore the transactions were recorded at historical
cost in a manner similar to pooling of interest.  As part of the Common Control
Mergers, the operations acquired were not previously subject to federal income
taxes.  Income from these operations subsequent to the June 30, 1997
transactions is subject to federal income taxes.

The Recapitalization

     On July 8, 1998, the Company completed a recapitalization (the
"Recapitalization") pursuant to which affiliates of Freeman Spogli & Co. LLC
("FS&Co.") invested $67.5 million, a director of the Company invested $750,000,
and a third party, The Parthenon Group, invested $125,000, in cash for common
stock of the Company (the "Common Stock Investment") and stockholders of the
Company (the "Continuing Stockholders") retained Common Stock with a value of
$54.2 million (based on the valuation of the Company used in the
Recapitalization). As part of the Recapitalization, shares of Series A 13 1/4%
Senior Exchangeable PIK Preferred Stock due 2010 of the Company (the "Initial
Preferred Stock") with an aggregate liquidation preference of $28.0 million
were sold in a

                                       9
<PAGE>

private placement to institutional investors. In addition, shares of Series B 13
1/4% Senior Exchangeable Preferred Stock of the Company with an aggregate
liquidation preference of $12.0 million were sold to FS&Co. and Dennis C.
Bearden, the Company's Chief Executive Officer at the time of the
Recapitalization, in a private placement that was consummated simultaneously
with the sale of the Initial Preferred Stock (the "Private Placement" and,
together with the sale of the Initial Preferred Stock, the "Sales of
Preferred"). Immediately following consummation of the Recapitalization, FS&Co.
and the Continuing Stockholders beneficially owned approximately 55.1% and 44.2%
of the outstanding Common Stock of the Company, respectively, and FS&Co. and Mr.
Bearden beneficially owned 10.0% and 20.0%, respectively, of the outstanding
preferred stock of the Company.

     On July 8, 1998, the Company entered into a credit agreement (the "Credit
Facility") providing for a $100.0 million secured term loan facility (the "Term
Loan Facility"), which was funded in connection with the consummation of the
Recapitalization, and a $25.0 million revolving loan facility (the "Revolving
Credit Facility").  The Revolving Credit Facility will be available to the
Company and its subsidiaries (i) for future working capital and general
corporate purposes, (ii) to finance certain permitted acquisitions, and (iii)
for issuing commercial and standby letters of credit.

     The sale of the Initial Preferred Stock and the Private Placement and the
application of the net proceeds from each, the payments to the Continuing
Stockholders and to option holders under the Recapitalization Agreement, the
Common Stock Investment and the related borrowings under the Credit Facility are
collectively referred to herein as the "Recapitalization."

     On February 19, 1999, the Initial Preferred Stock was exchanged for
Century's Series C 13 1/4% Senior Exchangeable PIK Preferred Stock (the
"Exchange Preferred Stock"), which was registered under the Securities Act
pursuant to Century's Registration Statement on Form S-4, as amended, effective
January 21, 1999.

Results of Operations

     The following tables set forth, for the periods indicated, certain income
and expense items expressed in dollars and as a percentage of the Company's net
sales.

<TABLE>
<CAPTION>
                                                                                Fiscal Year
                                                                      ---------------------------------
                                                                         1999        2000       2001
                                                                      ----------   ---------  ---------
<S>                                                                   <C>          <C>        <C>
Net sales..........................................................   $   231,382  $ 257,262  $ 277,470
Cost of goods sold.................................................       167,770    185,829    203,544
                                                                      -----------  ---------  ---------
 Gross profit......................................................        63,612     71,433     73,926
Selling, general and administrative expenses ("SGA")...............        36,458     41,316     45,652
Stock compensation charges - SGA...................................            74         56         --
                                                                      -----------  ---------  ---------
 Total operating expenses..........................................        36,532     41,372     45,652
Operating income...................................................        27,080     30,061     28,274
Interest expense...................................................         9,310      9,681      7,586
                                                                      -----------  ---------  ---------
Income before income taxes.........................................        17,770     20,380     20,688
Provision for income taxes.........................................         6,970      7,928      7,639
                                                                      -----------  ---------  ---------
Net income.........................................................   $    10,800  $  12,452  $  13,049
                                                                      ===========  =========  =========
</TABLE>

                                       10
<PAGE>

                                                               Fiscal Year
                                                         ----------------------
                                                           1999    2000    2001
                                                         ------   -----   -----
Net sales..............................................   100.0%  100.0%  100.0%
Cost of goods sold.....................................    72.5    72.2    73.4
                                                         ------   -----   -----
   Gross profit........................................    27.5    27.8    26.6
Selling, general and administrative expenses ("SGA")...    15.8    16.1    16.5
Stock compensation charges - SGA.......................     0.0     0.0     0.0
                                                         ------   -----   -----
   Total operating expenses............................    15.8    16.1    16.5
Operating income.......................................    11.7    11.7    10.2
Interest expense.......................................     4.0     3.8     2.7
                                                         ------   -----   -----
Income before income taxes.............................     7.7     7.9     7.5
Provision for income taxes.............................     3.0     3.1     2.8
                                                         ------   -----   -----
Net income.............................................     4.7%    4.8%    4.7%
                                                         ======   =====   =====


     Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

     Net sales for fiscal 2001 were $277.5 million, an increase of $20.2 million
or 7.9% over fiscal 2000.  This increase in net sales was primarily due to
comparable center growth and the opening of a new distribution center in Salt
Lake City.

     The Company's gross profit for fiscal 2001 was $73.9 million, an increase
of $2.5 million or 3.5% over fiscal 2000. This increase in gross profit was
primarily due to the increase in net sales as discussed above. As a percentage
of net sales, the Company's gross profit decreased to 26.6% in fiscal 2001 from
27.8% in fiscal 2000. The decrease in gross profit percentage was primarily due
to a $1.0 million charge to inventory obsolescence in the fourth quarter of 2001
related to the Company's efforts to customize inventory at individual locations.

     Selling, general and administrative expenses consisting primarily of
payroll, occupancy and vehicle expenses totaled $45.7 million in fiscal 2001, an
increase of $4.3 million or 10.5% over fiscal 2000.  As a percentage of net
sales, selling, general and administrative expense increased to 16.5% in fiscal
2001 from 16.1% in fiscal 2000.  This increase was primarily due to the new
center opening and expansion of the blind business.

     Interest expense for fiscal 2001 was $7.6 million, a decrease of $2.1
million or 21.6% from fiscal 2000, primarily due to a decrease in market
interest rates and average outstanding balances owed on the Company's credit
facility.

     Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

     Net sales for fiscal 2000 were $257.3 million, an increase of $25.9 million
or 11.2% over fiscal 1999. This increase in net sales was primarily due to
comparable center growth, the opening of four new distribution centers in 1999
and one new center in 2000 and the acquisition of Champion Blind and Drapery,
Inc. in April of 1999.

     The Company's gross profit for fiscal 2000 was $71.4 million, an increase
of $7.8 million or 12.3% over fiscal 1999.  This increase in gross profit was
primarily due to the increase in net sales as discussed above.  As a percentage
of net sales, the Company's gross profit increased slightly to 27.8% in fiscal
2000 from 27.5% in fiscal 1999.

     Selling, general and administrative expense, consisting primarily of
payroll, occupancy and vehicle expenses totaled $41.3 million in fiscal 2000, an
increase of $4.9 million or 13.3% over fiscal 1999.  As a percentage of net
sales, selling, general and administrative expense increased to 16.1% in fiscal
2000 from 15.8% in fiscal 1999.  This increase was primarily due to the new
center openings and expansion of the blind business.

                                       11
<PAGE>

     Interest expense for fiscal 2000 was $9.7 million, an increase of $0.4
million or 4.0% from fiscal 1999, due to an increase in interest rates on the
Company's variable rate debt.

Liquidity and Capital Resources

     The Company's primary capital requirements have been the funding of its
continued distribution center expansion program, inventory requirements and the
development and implementation of customized information systems. From 1994 to
2001, the Company opened 22 new distribution centers. The Company has financed
its growth through a combination of internally generated funds and borrowings.

     In fiscal 2001, net cash provided by operating activities was $14.3 million
due primarily to increasing sales volume.  Net cash used in investing activities
in fiscal 2001 was $.9 million and was comprised of capital expenditures.  Net
cash used in financing activities in fiscal 2001 was $12.6 million, comprised of
repayments of our credit facility long-term debt and the purchase of treasury
stock.

     In fiscal 2000, net cash provided by operating activities was $6.0 million
due primarily to increasing sales volume. Net cash used in investing activities
in fiscal 2000 was $1.8 million and was comprised of capital expenditures.  Net
cash used in financing activities in fiscal 2000 was $7.7 million, comprised
primarily of repayments of long-term debt, the purchase of preferred stock and
the exercise of stock options.

     In fiscal 1999, net cash used in operating activities was $9.2 million due
primarily to increasing sales volume.  Net cash used in investing activities in
fiscal 1999 was $4.0 million and was comprised of capital expenditures and the
acquisition of Champion Blind and Drapery, Inc.  Net cash used in financing
activities in fiscal 1999 was $5.3 million, comprised of repayments of long-term
debt and the purchase of treasury stock.

     The Company currently anticipates that its capital expenditures, excluding
potential acquisitions, for 2002 and 2003 will be approximately $2.0 million in
each year. Inventories, net of allowances, were $35.9 million as of December 31,
2001 and $37.5 million at December 31, 2000. In order to meet the needs of its
customers, the Company must maintain inventories sufficient to permit same day
or next day filling of most orders. The Company anticipates that its inventory
levels will continue to increase primarily to support higher sales volumes and
new center openings. Trade accounts receivable, net of allowances were $26.6
million at December 31, 2001 and $28.7 million at December 31, 2000. The Company
generally offers 30-day credit terms to its customers. The Company's working
capital requirements are typically higher in the second and third quarters to
meet seasonal demand. This is due primarily to the fact that more people move
during the summer months when school is out, causing apartment managers to
purchase more supplies to make apartments ready for new occupants. Also, hot
summer months translate into a higher volume of HVAC sales due to the need for
air conditioning parts.

     The Company has outstanding indebtedness consisting of borrowings of $77.9
million under the Term Loan Facility. The Company has access to a total of $25.0
million through the Revolving Credit Facility. As of March 29, 2002, the Company
had no outstanding borrowings under the Revolving Credit Facility. The Tranche A
Term Facility will mature on July 8, 2003 and the Tranche B Term Facility will
mature on July 8, 2005. Annual required principal payments on the Term Loan
Facility are $13.6 million, $18.8 million, $28.5 million and $17.0 million over
the next four years. The Revolving Credit Facility will mature on July 8,
2003. The interest rate under the Credit Facility is variable and based, at the
option of the Company, upon either a Eurodollar rate plus 2.5% (for the
Revolving Credit Facility and the Tranche A Term Facility) and 2.75% (for the
Tranche B Term Facility) per annum or a base rate plus 1.5% (for the Revolving
Credit Facility and the Tranche A Term Facility) and 1.75% (for the Tranche B
Term Facility) per annum. Pursuant to the terms of the credit facility, because
the Company achieved certain performance goals, rates under the Tranche A Term
Facility and the Revolving Credit Facility and the commitment fee have been
reduced in increments as agreed. The Company also covenanted to enter into
specified interest rate protection arrangements, including interest rate swaps,
to reduce the Company's exposure to fluctuations in the rates of interest
payable under the Credit Facility for the first three years. In mid-July, 1998,
the Company entered into such interest rate swap transactions with respect to
$50.0 million of borrowings under the Term Loan Facility, which became effective
September 30, 1998 and expired on September 28, 2001. At March 29, 2002 the
interest rate for the Revolving Credit Facility was 6.00%, the Tranche A
Facility was between 4.125% and 4.3125% and the Tranche B Facility was between
4.625% and 4.8125%. A commitment fee of 0.4375% per annum will be charged on the
unused portion of the Credit Facility. The loans under the Credit Facility are
collateralized by a first

                                       12
<PAGE>

priority security interest in substantially all tangible and intangible assets
of the Company and its subsidiaries (including the capital stock of the
Company's subsidiaries).

     Borrowings under the Credit Facility are required to be prepaid with (a)
75% (or 50% upon satisfaction of a debt to adjusted EBITDA ratio) of the
Company's Excess Cash Flow, (b) 100% of the net proceeds of issuances of debt
obligations of the Company and its subsidiaries, (c) 100% of the net cash
proceeds from asset dispositions of the Company and its subsidiaries, (d) 50% of
the net proceeds of issuances of equity of the Company and its subsidiaries,
except that if an equity issuance occurs other than as part of a Public Equity
Offering (as defined) of the Company's Common Stock, then 100% of the net
proceeds of such offering are required to be applied to prepay the Credit
Facility, and (e) 100% of the net proceeds from insurance recoveries over $1.0
million and condemnations, after application of such insurance recoveries or
condemnation proceeds to repair the property involved. "Excess Cash Flow," for
any period, means EBITDA (as defined) for such period, less the sum of (a)(i)
permitted capital expenditures, (ii) taxes, (iii) consolidated interest expense,
(iv) increases in Adjusted Working Capital (as defined) for such period, (v)
scheduled and mandatory payments of debts, (vi) voluntary prepayments of the
Term Loan Facility, (vii) payments in connection with purchases of the Company's
Capital Stock; (viii) cash consideration paid for certain permitted acquisitions
(but excluding cash consideration funded by a borrowing under the Revolving
Credit Facility), and (ix) cash dividends paid on the Exchange Preferred Stock
to the extent permitted by the Credit Facility, plus the sum of: (b)(i)
decreases in adjusted working capital for such period, (ii) refunds of taxes
paid in prior periods, and (iii) proceeds of certain indebtedness.

     The Credit Facility contains covenants restricting the ability of the
Company and the Company's subsidiaries to, among other things, (i) incur
additional debt, (ii) declare dividends or redeem or repurchase capital stock,
(iii) prepay, redeem or purchase debt, (iv) incur liens, (v) make loans and
investments, (vi) make capital expenditures, (vii) engage in mergers,
acquisitions and asset sales and (viii) engage in transactions with affiliates.
The Company is also required to comply with financial covenants with respect to
(a) limits on annual aggregate capital expenditures, (b) a fixed charge coverage
ratio, (c) a maximum leverage ratio, (d) a minimum EBITDA and (e) an interest
coverage ratio. The Credit Facility has been subsequently amended to provide the
Company more flexibility in meeting the maximum leverage ratio, interest
coverage ratio, fixed charge ratio, and minimum EBITDA covenants thereunder. The
Company is in compliance, as of March 29, 2002, with the provisions of the
Credit Facility.

     In connection with the Recapitalization, the Company issued 280,000 shares
of its Initial Preferred Stock with an aggregate liquidation preference of $28.0
million, and 120,000 shares of preferred stock issued pursuant to the Private
Placement, with an aggregate liquidation preference of $12.0 million. On
February 19, 1999, the Initial Preferred Stock was exchanged for the Company's
Series C 13 1/4% Senior Exchangeable PIK Preferred Stock due 2010 which has been
registered under the Securities Act pursuant to the Company's Registration
Statement on Form S-4, as amended, effective January 21, 1999 (File Number 333-
62635). At the election of the Company, dividends on the Exchange Preferred
Stock may be paid in kind until July 1, 2003 and thereafter must be paid in
cash. Since January 1, 1999, the Company has issued 214,236 shares of
additional preferred stock as payment-in-kind for dividends on the Exchange
Preferred Stock. The Credit Facility currently prohibits the payment of cash
dividends on the Exchange Preferred Stock. The Exchange Preferred Stock is
mandatorily redeemable upon a change of control and on July 1, 2010. In
September 2000, the Company repurchased 51,573 shares of its redeemable
exchangeable preferred stock for $3,906,655.

     The Company is a holding company and relies on dividends and other
distributions from its subsidiaries as its primary source of liquidity. The
Company does not have and in the future may not have any assets other than the
capital stock of its subsidiaries. The ability of subsidiaries of the Company to
make payments to the Company when required may be restricted by law and
restricted or prohibited under the terms of the Credit Facility and future
indebtedness of the Company. No assurance can be made that subsidiaries of the
Company will be able to pay cash dividends or make other distributions to the
Company.

     The Company believes that, based on current levels of operations and
anticipated growth, its cash from operations, together with other available
sources of liquidity, including borrowings under the Revolving Credit Facility,
will be sufficient to fund its debt service obligations and implement its growth
strategy over the next 12 months. The Company or its affiliates may, from time
to time depending on market conditions, purchase, refinance or otherwise  retire
certain of the Company's outstanding debt and/or equity securities in the open
market or by other means through open market purchases, privately negotiated
purchases or exchanges, redemptions or  otherwise, in each case, without public
announcement or prior notice to the holders thereof, and if initiated or
commenced, such purchases or offers to purchase may be discontinued at any time.

                                       13
<PAGE>

New Accounting Standards

     The Company is exposed to variability of future cash flows related to
interest rate risk on its existing long-term debt and has entered into interest
rate swap agreements to hedge their exposure. These interest rate swap
agreements terminated on September 28, 2001.

     The Company adopted Statement of Financial Accounting Standard ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging Activities," on January
1, 2001.  SFAS No. 133 requires that all derivatives be recognized as either
assets or liabilities and measured at fair value, and changes in the fair value
of derivatives are reported in current earnings, unless the derivative is
designated and effective as a hedge.  If the intended use of the derivative is
to hedge the exposure to changes in the fair value of an asset, a liability or a
firm commitment, then changes in the fair value of the derivative instrument
will generally be offset in the income statement by changes in the hedged item's
fair value.  However, if the intended use of the derivative is to hedge the
exposure to variability in expected future cash flows, then changes in the fair
value of the derivative instrument will generally be reported in Other
Comprehensive Income (OCI).  The gains and losses on the derivative instrument
that are reported as OCI will be reclassified to earnings in the periods in
which earnings are impacted by the hedged item.

     There was no impact on the Company's results of operations from the January
1, 2001 implementation of SFAS No. 133.  The net of tax cumulative-effect
adjustment reducing OCI and stockholders' equity was approximately $578,000 on
January 1, 2001.  For 2001, the Company recorded a net of tax gain on these cash
flow hedges of approximately $711,000 on termination of the agreements.

     In July 2001, the FASB issued SFAS No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets."  SFAS No. 141 establishes
new standards for accounting and reporting requirements for business
combinations and requires the purchase method of accounting be used for all
business combinations initiated after June 30, 2001.  Use of the pooling-of-
interests method is prohibited.  SFAS No. 142, "Goodwill and Other Intangible
Assets," supersedes APB opinion No. 17, "Intangible Assets."  SFAS No. 142
establishes new standards for goodwill acquired in a business combination and
eliminates amortization of goodwill and instead sets forth methods to
periodically evaluate goodwill for impairment.  The Company expects to adopt
this statement during the first quarter of 2002.  The adoption of SFAS No. 141
had no effect on our consolidated financial position or results of operations.
We do not believe the adoption of SFAS No. 142 will have a significant effect on
our consolidated financial position or results of operations.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets."  SFAS No. 144 addresses financial
accounting and reporting for the impairment and disposal of long-lived assets.
The Company expects to adopt this statement during the first quarter of 2002.
We do not believe the adoption of this statement will have a significant effect
on our consolidated financial position or results of operations.

Item 7A.       Quantitative and Qualitative Disclosures About Market Risks.

     Quantitative Disclosures.  The Company is exposed to certain market risks
inherent in its financial instruments.  These instruments arise from
transactions entered into in the normal course of business and, in some cases,
relate to the Company's acquisitions of related businesses.  Certain of the
Company's financial instruments are fixed rate, short-term investments which are
held to maturity.  The Company is subject to interest rate risk on its existing
long-term debt and any future financing requirements.  The Company's variable
rate debt relates to borrowings under the Credit Facility (see "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources").

     The following table presents the future principal cash flows and weighted-
average interest rates expected on Century's existing long-term debt
instruments.

                                       14
<PAGE>

             Principal (Notional) Amount by Expected Maturity Date
                           (as of December 31, 2001)

<TABLE>
<CAPTION>
                                                                                                                         Fair Value
                                                                                                                         at Dec 31,
                            Fiscal 2002   Fiscal 2003   Fiscal 2004   Fiscal 2005    Fiscal 2006   Thereafter   Total       2001
                           ------------- ------------- ------------- -------------  ------------- ------------ -------  ------------
                                                                 (dollars in thousands)
<S>                        <C>           <C>           <C>           <C>            <C>           <C>           <C>     <C>
Long-term Debt,
including current portion

 Variable Rate Debt.....    $   13,000    $    7,000    $       --    $       --     $  --         $  --       $ 20,000     $ 20,000

 Interest Rate..........    LIBOR+2.50%   LIBOR+2.50%

Long-term Debt,
including current portion
 Variable Rate Debt.....    $      600    $   11,800    $   28,500    $   17,000     $  --         $  --       $ 57,900     $ 57,900
 Interest Rate..........    LIBOR+2.75%   LIBOR+2.75%   LIBOR+2.75%   LIBOR+2.75%
</TABLE>

     Qualitative Disclosures.  The Company's primary exposure relates to (1)
interest rate risk on long-term and short-term borrowings, (2) the Company's
ability to pay or refinance long-term borrowings at maturity at market rates,
(3) the impact of interest rate movements on the Company's ability to meet
interest expense requirements and exceed financial covenants and (4) the impact
of interest rate movements on the Company's ability to obtain adequate financing
to fund future acquisitions.  The Company manages interest rate risk on its
outstanding long-term and short-term debt through the use of variable rate debt.
While the Company cannot predict or manage its ability to refinance existing
debt or the impact interest rate movements will have on its existing debt,
management evaluates the Company's financial position on an ongoing basis.

Item 8.        Financial Statements and Supplementary Data.

     See the Index included at "Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K."

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

     None.

                                       15
<PAGE>

                                   PART III

Item 10.       Directors and Executive Officers of the Registrant.

     The following table sets forth information regarding the executive officers
and directors of the Company as of March 29, 2002:



Name                          Age      Position with the Company
----                          ---      -------------------------
Joseph Semmer................  65      Chief Executive Officer and Director

Richard E. Penick............  45      Chief Financial Officer and Director

Don R. Hodina................  48      Chief Operating Officer

Dennis C. Bearden............  51      Director

Mark J. Doran................  38      Director

William C. Johnson...........  62      Director

Jon D. Ralph.................  37      Director

J. Frederick Simmons.........  47      Director

Ronald P. Spogli.............  54      Director


     Joseph Semmer is Chief Executive Officer and director of the Company. Mr
Semmer assumed these roles in January 2002 when he joined the Company. Prior to
joining the Company, Mr. Semmer was the Chief Executive Officer of Hall-Mark
Electronics, an $800 million Dallas-based distributor of electronic components
and systems, where he spent over 25 years.

     Richard E. Penick is Chief Financial Officer, a position he has held since
joining the Company in September 1992, and became a director in July 1998.
Prior to joining the Company, Mr. Penick was a principal for the accounting firm
of Penick and Penick.  He has provided accounting and other professional
services to Mr. Bearden and the Company since 1977.  Mr. Penick is a Certified
Public Accountant.

     Don R. Hodina is Chief Operating Officer, a position he has held since
February 2000.  Mr. Hodina has been with the Company since July 1997 following
the acquisition of Nationwide Apartment Supply.  Mr. Hodina served as President
of Nationwide from its inception in 1992 until February 2000.  In 1985, Mr.
Hodina formed Maintenance Headquarters in Indianapolis which became Nationwide
Apartment Supply in 1992.

     Dennis C. Bearden has served as a director of the Company since the
Company's inception in 1988. Mr. Bearden also served as the Chief Executive
Officer of the Company since the Company's inception in 1988 to January 2002.
Mr. Bearden entered the multifamily apartment market in 1973 by forming Century
Airconditioning Supply, Inc., which sold air conditioning components to
apartment communities in the Houston area.

     Mark J. Doran has served as a director of the Company since July 1998. Mr.
Doran joined an affiliate of FS&Co. in 1988 and became a general partner in
1998, where his responsibilities include analyzing potential investments and
participating in strategic and financial initiatives as they relate to portfolio
companies. Prior to joining FS&Co., Mr. Doran spent two years at Kidder, Peabody
& Co. Incorporated where he served as a Corporate Finance Analyst in the High
Yield Bond Department. Mr. Doran is also a director of Advance Auto Parts, Inc.

     William C. Johnson has served as a director of the Company since July 1998.
Mr. Johnson served as Chief Executive Officer of Grolier Incorporated, a
publishing and printing company, from March 1990 to December 1994, and served as
Chairman of the Board and Chief Executive Officer of Fingerhut Corporation, a
retail catalog company, from 1982 to 1989.  Mr. Johnson was a director of
Brylane Inc., a retail catalog company, from 1994 to 1999 and served as its Vice
Chairman from June 1995 to April 1998.

                                       16
<PAGE>

     Jon D. Ralph has served as a director of the Company since July 1998.  Mr.
Ralph joined an affiliate of FS&Co. in 1989 and became a general partner in
January 1998, where his responsibilities include analyzing potential investments
and participating in strategic and financial initiatives as they relate to
portfolio companies. Prior to joining FS&Co., Mr. Ralph spent three years at
Morgan Stanley & Co. Incorporated where he served as an Analyst in the
Investment Banking Division.  Mr. Ralph is also a director of  The Pantry, Inc.,
River Holding Corp. and Hudson Respiratory Care Inc.

     J. Frederick Simmons has served as a director of the Company since July
1998.  Mr. Simmons joined an affiliate of FS&Co. in 1986 and became a general
partner in 1991, where his responsibilities include analyzing potential
investments and participating in strategic and financial initiatives as they
relate to portfolio companies.

     Ronald P. Spogli has served as a director of the Company since July 1998.
Mr. Spogli is a founding partner  of an affiliate of FS&Co., which he founded in
1983, where his responsibilities include analyzing potential investments and
participating in strategic and financial initiatives as they relate to portfolio
companies.  Mr. Spogli also serves on the Boards of Directors of AFC
Enterprises, Inc., Galyan's Trading Company, Inc., Hudson Respiratory Care Inc.,
Advance Stores Company, Incorporated and Advance Auto Parts, Inc.

     Directors of the Company are elected annually and hold office until the
next annual meeting of stockholders and until their successors are duly elected
and qualified.  The Board of Directors has no current or proposed committees.

     Executive Officers are elected by, and serve at the discretion of the Board
of Directors.  The Company has entered into employment agreements with certain
of its executive officers.  See "Employment Agreements with Messrs. Bearden and
Penick."  There are no family relationships among any of our directors or
executive officers.

Item 11.       Executive Compensation.

     The following table sets forth the compensation earned by the Company's
Chief Executive Officer and the two other most highly compensated executive
officers who earned salary and bonus in excess of $100,000 for services rendered
in all capacities to the Company and its subsidiaries for the fiscal years ended
December 31, 1999, 2000 and 2001 (collectively, the "Named Executive Officers").

                          Summary Compensation Table

<TABLE>
<CAPTION>
                                                                                               Long-Term
                                                                                             Compensation
                                                        Annual Compensation                     Awards
                                             -----------------------------------------       ------------
                                                                                              Securities
                                  Fiscal                                 Other Annual         Underlying          All Other
  Name and Principal Position      Year        Salary         Bonus    Compensation(1)       Options/SARs      Compensation(2)
-----------------------------     ------     ----------     --------   ---------------       ------------      ---------------
<S>                              <C>        <C>            <C>        <C>                   <C>                <C>
Dennis C. Bearden(3).........      2001      $  105,769     $     --          $    --                --            $ 11,731
   Chief Executive Officer         2000         125,000           --               --                --              12,750
                                   1999         125,000           --               --                --              12,750


Richard E. Penick............      2001      $  115,000     $     --          $    --                --            $ 12,100
   Chief Financial Officer         2000         115,000           --               --             4,800(4)          228,783
                                   1999         115,000       50,000               --                --              12,750


Don R. Hodina................      2001      $  150,000     $     --          $    --                --            $ 11,615
   Chief Operating Officer         2000         146,344           --               --                --              12,750
                                   1999         104,840           --               --                --              12,750
</TABLE>

                                       17
<PAGE>

_______________
(1)  During 2001, no Named Executive Officer received perquisites and other
     personal benefits, securities or property in an aggregate amount in excess
     of the lesser of $50,000 or 10% of the total of such Officer's salary and
     bonus nor did any such Officer receive any restricted stock award or stock
     appreciation right.
(2)  Represents (a) the annual lease table value of company car and matching
     contributions by the Company under its 401(k) plan, in the amount of
     $12,750 each for Mr. Bearden, Mr. Penick and Mr. Hodina, respectively, for
     1999, 2000 and 2001, and (b) the value of options under the Company's 1997
     Stock Incentive Plan that were exercised by Mr. Penick in July 2000 in the
     amount of $216,033. See "--Stock Option Plan--1997 Stock Incentive Plan."
(3)  Joseph Semmer replaced Mr. Bearden as the Chief Executive Officer of the
     Company on January 21, 2002.
(4)  Represents Options granted under the 1998 Nonqualified Stock Option Plan in
     2000.

Option Grants in the Last Fiscal Year

        The Company did not grant any options during the year ended December 31,
2001.

Aggregated Option Exercises and Fiscal Year-End Option Values

        The following table sets forth information with respect to option
exercises during the year ended December 31, 2001 and the number and value of
exercisable and unexercisable options held as of December 31, 2001 by each of
the Named Executive Officers.

  Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
                                    Values

<TABLE>
<CAPTION>
                                                            Number of Securities
                                                           Underlying Unexercised                 Value of Unexercised
                                                                 Options at                     In-the-Money Options at
                                                              December 31, 2001                   December 31, 2001(1)
                                                       ------------------------------       --------------------------------
                         Shares
                       Acquired on        Value
       Name              Exercise       Realized       Exercisable      Unexercisable       Exercisable        Unexercisable
------------------     -----------      --------       -----------      -------------       -----------        -------------
<S>                    <C>             <C>             <C>             <C>                  <C>               <C>

Richard E. Penick               --            --             7,200             45,600                --                   --
</TABLE>
_______________
(1)  Value is determined by subtracting the exercise price from the fair market
     value of a share of Century's Common Stock, which as of December 31, 2001
     was $10.00, as determined by the Company.

Employment Agreements with Messrs. Bearden and Penick

        On July 8, 1998, the Company entered into employment agreements with
Dennis C. Bearden and Richard E. Penick, and a noncompete agreement with Mr.
Bearden (which noncompete agreement also binds Century Airconditioning Supply,
Inc. and Air Management Supply, Inc. See "Item 13. Certain Relationships and
Related Transactions--Noncompete Agreement"). Mr. Bearden and Mr. Penick receive
an annual base salary in the amount of $105,769 and $115,000, respectively, as
well as an annual cash bonus (either pursuant to a bonus or incentive plan of
the Company or otherwise) in an amount to be determined by the Board (or a
committee thereof) in its sole discretion. Pursuant to the employment
agreements, in the event that employment is terminated by the Company without
"cause" (as defined therein), or if the employee resigns for "good reason" (as
defined therein), the Company will be required to pay such employee's base
salary (and to continue certain benefits) for 24 months, and to pay a portion of
the employee's annual bonus, based on the previous year's bonus, accrued up to
the date of termination. In addition, in the event that employment is terminated
by the Company without "cause" or if the employee resigns for "good reason," and
a Change in Control (as defined therein) of the Company has occurred within the
two year period preceding such date of termination, then, in addition to the
obligations of the Company to continue such employee's benefits and to pay the
portion of the employee's annual bonus as described above, but in lieu of the
Company's obligation to continue to pay such employee's base salary for the 24-
month period following such date of termination, the Company shall be required
to pay to the employee, in a lump sum in cash within 30 days after the date of
such termination, an amount equal to two times the sum of the employee's base
salary (as in effect on the date of termination or such higher rate as may have
been in effect at any time during the 90 day period preceding the date of
termination) and the annual bonus paid to such employee for the Company's last
full fiscal year. The employment

                                       18
<PAGE>

agreements also impose restrictions relating to the disclosure of confidential
information and prohibit the employee from knowingly becoming involved in a
conflict of interest with the Company.

Compensation of Directors

     Directors of the Company receive no compensation as directors.  Directors
are reimbursed for their reasonable expenses in attending meetings.

Retirement Plan

     Employees of the Company may contribute to a 401(k) plan. Employees must
have 12 months of service and must have attained age 21 to be eligible to
participate in the 401(k) plan and may contribute a minimum of 2.0%, up to a
maximum of 15.0% of their annual compensation. The Company matches contributions
at a rate of 50.0% for contributions by the employee, up to 8.0% of such
employee's compensation. The Company contributed approximately, $447,000,
$382,000 and $492,000 in 1999, 2000 and 2001 respectively, as matching funds to
the plan. No discretionary, lump-sum contributions were made in 1999, 2000 and
2001.

Compensation Committee Interlocks and Insider Participation

     The Board of Directors of the Company determines the compensation of the
executive officers.

Stock Option Plan

     1997 Incentive Stock Plan

     In July 1997, the Company established the 1997 Incentive Stock Plan (the
"Stock Option Plan"), pursuant to which options may be granted to eligible
employees of the Company or its subsidiaries for the purchase of an aggregate of
1,000,000 shares of Common Stock of the Company. The Stock Option Plan is
administered by the Board of Directors (the "Board"). The Board has the power to
determine which eligible employees will receive stock option rights, the timing
and manner of the grant of such rights, the exercise price, the number of shares
to be covered by the option, and the type and terms of the options. The Board
may, at any time, terminate or amend the Stock Option Plan, provided that no
such amendment may adversely affect the rights of optionees with regard to
outstanding options. All outstanding options under the Stock Option Plan were
exercised on July 1, 2000. See "Item 13. Transactions with Management."

     1998 Nonqualified Stock Option Plan

     In connection with the Recapitalization, the Company adopted the 1998
Nonqualified Stock Option Plan, (the "Nonqualified Stock Option Plan"), pursuant
to which options may be granted to eligible employees of the Company for the
purchase of an aggregate of 1,642,500 shares or 13% of Common Stock of the
Company. The Nonqualified Stock Option Plan is administered by the Board. The
Nonqualified Stock Option Plan and each outstanding option thereunder are
subject to termination in the event of a change in control of Century, as more
particularly described in the Nonqualified Stock Option Plan. In addition, all
options granted pursuant to the Nonqualified Stock Option Plan terminate 30 days
after termination of employment (unless termination was for cause, in which
event an option terminates immediately) or 180 days in the event of termination
due to death or disability. The sale of shares received upon the exercise of
options are subject to rights of refusal first in favor of the Company and then
in favor of Mr. Bearden and FS&Co., on a pro rata basis. In addition, any shares
received upon exercise of an option are subject to a repurchase right in favor
of the Company at the greater of cost or book value for a period of six months
after termination of the optionee's employment (provided, that if employment is
terminated due to death or disability, such shares shall be repurchased for fair
market value as determined in good faith by the Board). Shares received upon the
exercise of options are subject to certain obligations to sell at the request of
FS&Co., should FS&Co. propose to sell all or a substantial portion of its
interest in the Company to a third-party buyer (with the purchase terms for the
optionee and FS&Co. to be identical), or should the optionee's employment or
other relationship with the Company terminate. Such shares also possess certain
co-sale rights in favor of the optionee should FS&Co. propose to sell all or any
portion of its interest in the Company to a third-party buyer, upon

                                       19
<PAGE>

the same terms as those offered by such buyer to FS&Co. The rights of first
refusal, repurchase rights and co-sale rights will terminate upon the Company's
initial public offering.

     Options to purchase 5.0% of the initial outstanding shares of Century's
Common Stock ("Time Vesting Options"), which can be granted in 1.0% annual
increments, would vest over a three-year period from date of grant in equal
annual installments or, alternatively, granted options will vest in full upon a
sale of the Company. Time Vesting Options will terminate on the seven-year
anniversary of the grant date. These options will be granted at an exercise
price equal to the then estimated fair market value of the Company's Common
Stock (as determined by the Board). As discussed below, the Company granted a
portion of these Time Vesting Options on June 15, 2000 to certain employees to
purchase 90,900 shares of Common Stock of the Company at an exercise price of
$10.00 per share with an expiration date of seven years after the date of grant.
These Time Vesting Options vest over a three-year period, with the first vesting
date occurring on July 9, 2000 and all options vesting in full on July 9, 2002.
No compensation expense was recorded at the date of grant of these Time Vesting
Options. In addition, options to purchase 50,000 shares of the Company's Common
Stock at an exercise price of $10.00 per share were granted to Mr. Johnson, who
became a director of the Company upon consummation of the Recapitalization,
which options were fully vested on the date of grant.

     Options to purchase approximately 6.5% of the initial outstanding shares of
the Company's Common Stock at an exercise price of $10.00 per share
("Performance Options") are earned in installments based upon satisfaction of
financial performance targets over a four-year period. The Performance Options
will terminate on the seven-year anniversary of the grant date.

     In addition, options to purchase approximately 1.5% of the initial
outstanding shares of the Company's Common Stock at an exercise price of $10.00
per share ("Bearden Performance Options") have been granted to Mr. Bearden and
are earned in installments based upon satisfaction of financial performance
targets over a three-year period. However, the Bearden Performance Options will
not become exercisable until one year after the vesting date, which is the same
date such options are earned (except in the event of a sale of the Company, in
which case the one year delay will become inapplicable), and will terminate on
the seven-year anniversary of the grant date.

     On July 1, 2000, certain employees exercised options issued by the Company
on July 1, 1997 to purchase 147,389 shares of common stock, with an exercise
price of $1.74 per share. Richard Penick exercised options to purchase 34,510
shares of common stock and received a loan from the Company in the amount of
$60,047 to pay the exercise price for the options. The loan was paid in full on
April 1, 2001.

     As of December 31, 2001, options representing the right to purchase an
aggregate of 510,200 shares of the Company's Common Stock have been granted
under the Option Plan to individuals other than the Named Executive Officers set
forth in the table above. 437,000 of these options are Performance Options and
73,200 of these options are Time Vested Options, as described above.

     On January 21, 2002, the Company granted to Joseph Semmer, Century's newly
appointed Chief Executive Officer, a non-qualified option to purchase up to
190,000 shares of Common Stock. 40,000 shares subject to the option are
immediately exercisable at an exercise price of $10.00 per share. The remaining
shares subject to the option become exercisable over the next three years on the
anniversary of the date of grant at exercise prices between $10.00 and $15.00
per share. The option will terminate on the seven-year anniversary of the grant
date.

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

     The following table sets forth certain information, as of March 29, 2002,
with respect to the beneficial ownership of capital stock of the Company by (i)
each person who beneficially owns more than 5% of such shares, (ii) each of the
Named Executive Officers, (iii) each director of the Company and (iv) all of the
Named Executive Officers and directors of the Company as a group.

     Beneficial ownership is determined in accordance with the rules of the SEC.
In computing the number of shares beneficially owned by a person and the
percentage of ownership held by that person, the shares of Common Stock subject
to options and warrants held by that person that are currently exercisable or
will become exercisable within 60 days after March 29, 2002 are deemed
outstanding, while these shares are not deemed outstanding for

                                       20
<PAGE>

computing percentage ownership of any other person. Unless otherwise indicated
in the footnotes below, the persons and entities named in the table have sole
voting and investment power with respect to all shares beneficially owned,
subject to community property laws where applicable. The address for those
individuals for which an address is not otherwise indicated is c/o Century
Maintenance Supply, Inc., 10050 Cash Road, Suite 1, Stafford, Texas 77477.

     The percentages of Common Stock and Series B Preferred Stock beneficially
owned are based on 12,190,498 shares of Common Stock and 187,561.64 shares of
Series B Preferred Stock outstanding as of March 29, 2002.

<TABLE>
<CAPTION>
                                                                                                                 Percent of all
                                                                                                                    Preferred
                                             Shares of Common      Percent of          Shares of Series B             Stock
      Name of Beneficial Owner                     Stock              Class             Preferred Stock            Outstanding
-----------------------------------------    ----------------      ----------          ------------------        --------------
<S>                                          <C>                  <C>                 <C>                       <C>

Freeman Spogli & Co. LLC(1)..............        6,912,501            55.8%                 62,520.54(7)              11.1%
   Ronald P. Spogli(1)
   J. Frederick Simmons(1)
   Mark J. Doran(1)
   Jon D. Ralph(1)

Dennis C. Bearden(2).....................        3,749,999            30.3%                125,041.10(7)              22.2%

Joseph Semmer(3).........................           60,000             0.5%                        --                   --

Don R. Hodina............................               --              --                         --                   --

Richard E. Penick(4).....................           57,565             0.5%                        --                   --

William C. Johnson(5)....................          127,083             1.0%                        --                   --

All Named Executive Officers and
 directors of the Company as a group
 (8 individuals)(6)......................       10,907,148            88.1%                187,561.64(7)              33.3%
</TABLE>
_____________________
(1)  Represents shares of Common Stock that are held of record by FS Equity
     Partners IV, L.P. ("FSEP IV").  As general partner of FSEP IV, FS Capital
     Partners LLC ("FS Capital LLC") has the sole power to vote and dispose of
     the shares owned by FSEP IV.  Messrs. Spogli, Simmons, Doran and Ralph and
     Bradford M. Freeman, William M. Wardlaw, John M. Roth, Charles P. Rullman
     and Todd W. Halloran are the sole managing members of FS Capital LLC, and,
     as such, may be deemed to be the beneficial owners of the shares of the
     Common Stock and rights to acquire the Common Stock owned by FSEP IV.  The
     business address of Freeman Spogli & Co.  LLC, FSEP IV, FS Capital LLC, and
     its sole managing member is 11100 Santa Monica Boulevard, Suite 1900, Los
     Angeles, California 90025.
(2)  Consists of 3,749,999 shares of Common Stock held by Century
     Airconditioning Supply, Inc., an entity that is wholly-owned by Mr.
     Bearden.
(3)  Includes 40,000 shares of Common Stock issuable upon the exercise of
     options which are exercisable within 60 days of March 29, 2002.
(4)  Includes 7,200 shares of Common Stock issuable upon the exercise of options
     which are exercisable within 60 days of March 29, 2002.
(5)  Includes 52,083 shares of Common Stock issuable upon the exercise of
     options which are exercisable within 60 days of March 29, 2002.
(6)  Includes 6,912,501 shares of Common Stock and 62,520.54 shares of Series B
     Preferred Stock held by affiliates of Freeman Spogli & Co. LLC and 99,283
     shares of Common Stock issuable with respect to options granted to
     executive officers and directors that are exercisable within 60 days of
     March 29, 2002.
(7)  Stockholders of Series B Preferred Stock received payment in kind dividends
     that are issued in fractional shares semi-annually.  The number of shares
     listed in the chart was rounded to two decimal places.

                                       21
<PAGE>

Item 13.       Certain Relationships and Related Transactions.

Stockholders' Agreement

     Amended Stockholders Agreement

     The stockholders of the Company's Common Stock were parties to a
stockholders' agreement with the Company and Mr. Bearden which was amended and
restated in July 1998 (the "Amended Stockholders' Agreement").  Under the
Amended Stockholders' Agreement, all Continuing Stockholders (other than Mr.
Bearden) were granted "tag along" rights which provide that if FS&Co. or Mr.
Bearden sell all or any part of their shares of the Company's Common Stock to a
third party, the non-selling stockholders have the right to sell up to the same
percentage of their shares to that third party on the same terms and conditions.
The non-selling stockholders only have tag along rights on a sale by Mr. Bearden
if FS&Co. exercises its own tag along rights. These rights terminate upon the
Company's initial public offering.

     Continuing Stockholders (other than Mr. Bearden) are subject to a "drag
along" obligation which provides that if FS&Co. wishes to sell all of its Common
Stock of the Company to a third party, FS&Co. may cause such Continuing
Stockholders to sell all of their capital stock (common or preferred) to such
third party on the same terms and conditions.

     The Amended Stockholders' Agreement also contains a right of first refusal
first in favor of the Company, then in favor of Mr. Bearden and FS&Co. on a pro
rata basis, and then in favor of the Company's other stockholders (other than
holders of the Exchange Preferred Stock) on a pro rata basis, as well as certain
transfer restrictions and obligations on termination (including repurchase
rights upon the death, divorce or termination of employment of a Continuing
Stockholder that operate in a manner substantially identical to the right of
first refusal).

     There are employees of the Company who hold Existing Options who do not
currently own any of the Company's Common Stock.  See "Item 11.  1998
Nonqualified Stock Option Plan."  If these employees exercise their options, the
shares received upon exercise will become subject to the Amended Stockholders'
Agreement.

     New Stockholders Agreement

     In July 1998, FS&Co., Mr. Bearden and Century Airconditioning Supply, Inc.
("CAC") entered into a new stockholders agreement (the "Stockholders
Agreement"). Under the Stockholders Agreement, FS&Co. and Mr. Bearden have the
right to purchase their pro rata share of certain new issuances of capital stock
by the Company. These rights will terminate upon the Company's initial public
offering or once such party's percentage ownership in the Company (calculated on
a fully diluted basis) falls below 10%. In addition, the Stockholders Agreement
provides that if FS&Co. or Mr. Bearden sells all or any part of their shares in
the Company to a third party, the non-selling party has the right to sell up to
the same percentage of their shares to that third party on the same terms and
conditions. These rights terminate upon the Company's initial public offering.
If FS&Co. wishes to sell its entire interest in the Company, it has the right to
cause Mr. Bearden to sell all of his shares of capital stock (common or
preferred) to such third party on the same terms and conditions. These rights
terminate once FS&Co.'s percentage ownership in the Company (calculated on a
fully diluted basis) drops below 20% or drops below the percentage then held by
Mr. Bearden (provided that no effect shall be given to any shares purchased by
Mr. Bearden after the closing of the Recapitalization). In the Stockholders
Agreement, FS&Co. will receive a right of first offer with respect to proposed
sales of capital stock of the Company by Mr. Bearden or CAC, and CAC will
transfer its securities of the Company to Mr. Bearden should Mr. Bearden ever
fail to control 100% of the outstanding capital stock of CAC. These rights
terminate in the same manner as FS&Co.'s drag along obligation described above.
In the Stockholders' Agreement, each of FS&Co. and Mr. Bearden agreed not to
pledge, hypothecate or otherwise encumber any capital stock of the Company held
by them, and also agreed not to transfer shares to a third party, except for
certain transfers to affiliates (or to a family trust established by Mr.
Bearden) or transfers by FS&Co. to its partners after the Company's initial
public offering.

     The Stockholders Agreement provides that the Board of Directors of the
Company shall initially consist of five members nominated by FS&Co. and three
members nominated by Mr. Bearden. The members of the Board will include two
independent directors if necessary in connection with the Company's initial
public offering, which

                                       22
<PAGE>

directors will be elected by a majority of the Board and reasonably acceptable
to Mr. Bearden. Notwithstanding the foregoing, the Stockholders Agreement
provides that no action of the Company, which under Delaware law would have
required the prior approval of a majority of the Company's stockholders, will be
taken unless and until a meeting of the Company's Board of Directors will have
been held upon prior notice duly given in accordance with the bylaws of the
Company. The rights of FS&Co. and Mr. Bearden described in this paragraph will
terminate once such parties' percentage ownership in the Company (calculated on
a fully diluted basis) drops below 20% and 10%, respectively.

     The Stockholders Agreement provides that at any time beginning six months
after the Company's initial public offering, each of FS&Co. and Mr. Bearden
shall have the right to two demand registrations; provided, that to the extent
that either of FS&Co. or Mr. Bearden wishes to join in the other's demand
registration, then the parties shall participate together in such registration
on a pro rata basis.  Following the Company's initial public offering, FS&Co.,
Mr. Bearden and the Company's other stockholders shall have customary piggyback
registration rights; provided, that such stockholders (other than Mr. Bearden)
may be excluded from any such offering, at the discretion of the underwriters
participating in such offering, if such underwriters determine that the
inclusion of such stockholders would adversely impact the relevant offering.
Each of the Company's stockholders (including FS&Co. and Mr. Bearden) agreed to
a lockup period of up to six months if imposed by an underwriter in connection
with the Company's initial public offering and for any other period requested by
an underwriter for any other offering.  The Company will pay all customary fees
and expenses in connection with such registrations.

     On January 21, 2002, the Stockholders Agreement was amended to include
Joseph Semmer as a party, in connection with his purchase of Common Stock and
appointment as Chief Executive Officer.

Payments Relating to the Recapitalization

     Executive officers of the Company who are also stockholders received
payments of an aggregate of approximately $155.5 million in connection with the
Recapitalization, including payments to Messrs. Bearden, Penick and Hodina in
the amount of $152.2 million, $0.7 million and $1.1 million, respectively.  All
Continuing Stockholders and Company option holders, including such executive
officers, received payments of approximately $178.3 million in connection with
the Recapitalization.  FS&Co. received a transaction fee of $4.0 million.

     In addition, pursuant to the Recapitalization, FS&Co. received an option to
purchase 167,382 shares of the Company's Common Stock from Century
Airconditioning Supply, Inc. ("CAC") at a purchase price of $10.00 per share.
CAC, an entity entirely owned by Mr. Bearden, is currently a stockholder of the
Company.  This option was exercised by FS&Co. on February 25, 1999.

     Mr. Johnson received a fully vested option to purchase 50,000 shares of
Common Stock at an exercise price of $10.00 per share in connection with the
Recapitalization.

     Approximately $3.3 million of borrowings and accrued interest pursuant to
the Company's indebtedness to Mr. Bearden and approximately $5.6 million of
borrowings and accrued interest pursuant to the Company's indebtedness to Mr.
Hodina were repaid pursuant to the Recapitalization.

Transactions with Management

     The Company leases facilities in Houston, Phoenix, San Antonio, Tucson, and
Newport News from Dennis C. Bearden, the former Chief Executive Officer of the
Company, or an entity affiliated with or controlled by Mr. Bearden. All of these
leases are at market terms. Lease expense for leases with affiliates has been
$0.6 million, $0.8 million, $0.8 million and $0.4 million for fiscal 1998, 1999,
2000 and 2001, respectively. In addition, the Company was a party to the Common
Control Mergers.

     On July 1, 2000, certain employees exercised options to purchase 147,389
shares of Common Stock granted pursuant to the Company's 1997 Stock Incentive
Plan for an exercise price of $1.74 per share.  Mr. Penick exercised options to
purchase 34,510 shares of Common Stock and received a loan from the Company in
the amount of $60,047 to pay the exercise price for the options.  The loan bears
interest at  0% and has a term of 9 months.  The loan was paid in full on April
1, 2001.

                                       23
<PAGE>

     Effective April 1, 2001, the Company repurchased 31,013 shares of common
stock from certain employee stockholders for $248,104.  These shares of common
stock were repurchased by the Company in lieu of repayment by such stockholders
of outstanding amounts owed to the Company pursuant to short term loans issued
to such stockholders in connection with the exercise of options by them in July
2000.  Effective July 13, 2001, the Company repurchased 7,517 shares of common
stock from a stockholder for $45,102.  These shares have been placed in
treasury.

Transactions with Mr. Semmer

     On January 21, 2002, Joseph Semmer was appointed the Chief Executive
Officer of the Company and elected as a member of the board of directors of the
Company.  In connection with this appointment, Mr. Semmer was granted a non-
qualified option to purchase 190,000 shares of Common Stock and purchased 20,000
shares of Common Stock at a purchase price of $10.00.  Mr. Semmer paid one-half
of the purchase price in cash and one-half with a promissory note secured by
pledging 10,000 of the shares of Common Stock purchased by him.  The promissory
note accrues interest at a rate of 2.75% per annum and is payable in full on
April 21, 2003. Mr. Semmer also entered into a Severance Agreement in connection
with his appointment.  The Severance Agreement provides that if Mr. Semmer is
terminated (i) without cause (as defined in the agreement) or (ii) pursuant to a
Qualifying Resignation (as defined in the agreement), he will receive a
severance payment equal to 18 months' base salary determined at the annual rate
in effect at the time of termination and the full bonus for the year in which
the termination occurred.  The severance payment will be paid over an 18 month
period and will be reduced by the amount of any other monthly base compensation
that Mr. Semmer earns during that period.

Transactions with Century Airconditioning Supply

     The Company makes convenience sales of inventory, at cost, to CAC and
purchases inventory, at cost, from CAC.  In addition, CAC and the Company shared
some administrative services, for which CAC paid the Company a management fee
equal to a percentage of CAC's sales.  The Company's revenues attributable to
sales of inventory to CAC were $1.2 million, $0.1 million, $0.05 million and
$0.04 million for fiscal 1998, 1999, 2000 and 2001, respectively. CAC paid
management fees to the Company (with respect to shared administrative services)
of $0.3 million in 1998.  No management fees were paid by CAC to the Company in
1999, 2000 and 2001.

Noncompete Agreement

     Mr. Bearden is the sole stockholder of CAC, which in turn controls Air
Management Supply, Inc. ("Air Management").  Both CAC and Air Management compete
with the Company in certain sub-markets and with regard to certain products and
customers.  In connection with the Recapitalization, Mr. Bearden, CAC and Air
Management entered into a noncompete agreement with the Company whereby they
agreed, for a period continuing until the earlier of ten years or the
termination of Mr. Bearden's employment agreement other than for "cause," and
subject to certain exceptions, not to compete with the Company, to preserve its
confidential information, not to recruit or employ employees of the Company, and
not to solicit customers or suppliers of the Company for competitors.  In
particular, and subject to certain exceptions, Mr. Bearden, CAC and Air
Management are prohibited from selling maintenance supplies (which as defined
excludes HVAC, appliance parts and refrigeration parts) not only to apartments
but also to hotels, prisons, nursing homes, hospitals, military installations
and schools and universities.  In addition, the Company agreed not to sell HVAC
in southeast Texas (as defined therein) if such sales would cause the aggregate
amount of HVAC sales by the Company for the immediately preceding 12 months to
exceed 12% of the Company's total sales in southeast Texas during the same
period.

Private Placement and Registration Rights

     Mr. Bearden purchased 80,000 shares of the Series B Preferred Stock with a
$8.0 million aggregate liquidation preference, and FS&Co. purchased 40,000
shares of such Series B Preferred Stock with a $4.0 million aggregate
liquidation preference from the Company.  In connection with the Private
Placement, the Company entered into an agreement (the "Private Registration
Agreement") which provides that the Company will, upon the request of each of
Mr. Bearden (or transferee of such shares) and FS&Co. (or its transferees), file
and use its best efforts to cause to become effective registration statements
for the Series B Preferred Stock, or, if issued, the Exchange Debentures
issuable in exchange therefor (the "Private Registration Statements").  The
Private Registration

                                       24
<PAGE>

Agreement also provides that (i) the Company will bear all costs and expenses
associated with filing the Private Registration Statements and using its best
efforts to cause them to become effective and (ii) the Company will not file the
Private Registration Statements until any exchange offer registration statement
or resale shelf registration statement required by the Registration Rights
Agreement have ceased to be effective and are no longer required to be
effective.

     In addition, in the event that a Voting Rights Triggering Event (as defined
in the Company's Certificate of Designation) occurs with respect to the Exchange
Preferred Stock issued in exchange therefor, or with respect to the Series B
Preferred Stock, the holders of the Exchange Preferred Stock and the holders of
the Series B Preferred Stock will vote together as one class to elect the two
additional directors provided for in the Certificate of Designation.  Because
Mr. Bearden and FS&Co. own securities representing 30% of such class, they may
be able to exert significant influence on the results of any such election.

                                       25
<PAGE>

                                    PART IV

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

<TABLE>
<CAPTION>

      (a)     Documents filed as part of this report:                                                          Page
                                                                                                              ----
      <S>                                                                                                     <C>
             (1)    Index to the Consolidated Financial Statements:

                    Independent Auditors' Report for Century Maintenance Supply, Inc.....................      F-1

                    Consolidated Balance Sheets as of December 31, 2000 and December 31, 2001............      F-2

                    Consolidated Statements of Income for the Years Ended December 31, 1999,
                      December 31, 2000 and December 31, 2001............................................      F-4

                    Consolidated Statements of Changes in Stockholders' Deficit for the Years
                      December 31, 1999, December 31, 2000 and December 31, 2001.........................      F-5

                    Consolidated Statements of Cash Flows for the Years Ended December 31, 1999,
                      December 31, 2000 and December 31, 2001............................................      F-6

                    Notes to Consolidated Financial Statements...........................................      F-7
</TABLE>


             (2)    Schedules.

                    None.

             (3)    Exhibits.


     2.1(1)         Agreement and Plan of Merger dated as of May 5, 1998 among
                    Century Acquisition Corporation, Dennis C. Bearden
                    ("Bearden"), FS Equity Partners IV, LP ("FSEP IV"), the
                    Company, and the stockholders of the Company.
     2.2(1)         First Amendment to Agreement and Plan of Merger dated June
                    19, 1998 among Century Acquisition Corporation, Bearden,
                    FSEP IV, the Company, and the stockholders of the Company.
     3.1(1)         Amended and Restated Certificate of Incorporation of
                    Century.
     3.2(1)         Amended and Restated Bylaws of Century.
     3.3(1)         Certificate of Designation by Century dated July 8, 1998.
     4.1(1)         Exchange Indenture dated as of July 8, 1998 between Century
                    and United States Trust Company of New York, as Trustee,
                    with respect to the 13 1/4% Senior Subordinated Exchange
                    Debentures due 2010 (including form of 13 1/4% Senior
                    Subordinated Exchange Debenture due 2010).
     4.2(1)         Registration Agreement dated July 8, 1998 between Century
                    and Salomon Brothers Inc.
     10.1(1)        Credit Agreement dated as of July 8, 1998 (the "Credit
                    Agreement") among the Company, the lenders party thereto,
                    Salomon Brothers Inc. and Citicorp USA, Inc. ("Citicorp").
     10.2(1)        Security Agreement dated as of July 8, 1998 between the
                    Company and Citicorp.
     10.3(1)        Pledge Agreement dated as of July 8, 1998 between the
                    Company and Citicorp.
     10.4(1)        Subsidiary Guarantee Agreement dated as of July 8, 1998
                    between the Company and Citicorp.
     10.5(1)        Indemnity, Subrogation and Contribution Agreement dated as
                    of July 8, 1998 between the Company and Citicorp.
     10.6(1)        Amended and Restated Stockholders' Agreement dated as of May
                    5, 1998 among FSEP IV, Bearden, the Company and certain of
                    its stockholders and their spouses.
     10.7(1)        Second Amended and Restated Stockholders' Agreement dated as
                    of July 8, 1998 among FSEP IV, Bearden, the Company and
                    certain of its stockholders and their spouses.

                                       26
<PAGE>

     10.8(1)        Stockholders Agreement dated July 8, 1998 among FSEP IV,
                    William C. Johnson ("Johnson"), The Parthenon Group,
                    Bearden, Century Airconditioning Supply, Inc. ("Century AC")
                    and the Company.
     10.9(1)        Registration Rights Agreement dated July 8, 1998 among FSEP
                    IV, Bearden, Century AC, the Company and certain
                    stockholders of the Company.
     10.10(1)       Preferred Stock Registration Rights Agreement dated July 8,
                    1998 among FSEP IV, Bearden and the Company.
     10.11(1)       Preferred Stock Subscription Agreement dated July 8, 1998
                    among the Company, FSEP IV and Bearden.
     10.12(1)       1998 Nonqualified Stock Option Plan.
     10.13(1)       1997 Incentive Stock Plan.
     10.14(1)       Form of Nonqualified Stock Option Agreement for 1998
                    Nonqualified Stock Option Plan.
     10.15(1)       Form of Agreement for 1997 Incentive Stock Plan.
     10.16(1)       Executive Employment Agreement dated July 8, 1998 between
                    Century Maintenance Supply, Inc. and Bearden.
     10.17(1)       Executive Employment Agreement dated July 8, 1998 between
                    Century Maintenance Supply, Inc. and Richard E. Penick.
     10.18(1)       Non-competition Agreement dated July 8, 1998 among Bearden,
                    Century AC, Air Management Supply, Inc. and the Company.
     10.19(2)       Amendment No. 1 to Credit Agreement dated as of July 14,
                    2000, by and among the Company, the lenders party thereto,
                    Salomon Brothers Inc. and Citicorp.
     10.20          First Amendment to Stockholders Agreement dated January 21,
                    2002.
     10.21          Severance Agreement dated January 21, 2002 between the
                    Company and Joseph Semmer.
     21.1(1)        Subsidiaries of Century.
     24.1           Power of Attorney (included on the signature pages hereof).

___________________________
(1) Incorporated by reference to the exhibit designated by the same number in
    the Form S-4 filed by the Company on September 1, 1998 (File No. 333-62635).
(2) Incorporated by reference to the exhibit designated by the same number in
    the Form 10Q/A filed by the Company on December 13, 2000.

     (b)  Current Reports on Form 8-K.

          None.

                                       27
<PAGE>

Independent Auditors' Report

To the Directors and Stockholders of
Century Maintenance Supply, Inc.

We have audited the accompanying consolidated balance sheets of Century
Maintenance Supply, Inc. and subsidiaries (the "Company") as of December 31,
2000 and 2001, and the related consolidated statements of income, stockholders'
deficit, and cash flows for each of the three years in the period ended December
31, 2001. 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 audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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, such consolidated financial statements present fairly, in all
material respects, the financial position of Century Maintenance Supply, Inc.
and subsidiaries as of December 31, 2000 and 2001, 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.




Houston, Texas
March 22, 2002

                                      F-1
<PAGE>

                       Century Maintenance Supply, Inc.

                          Consolidated Balance Sheets
                                (In Thousands)



                                                               December 31
                                                            ------------------
                                                              2000       2001
                                                            --------   -------
       Current assets:
         Cash and cash equivalents.......................   $     4    $   770
         Trade accounts receivable, net..................    28,745     26,635
         Inventories, net................................    37,482     35,878
         Deferred income taxes...........................       558        880
         Prepaid expenses and other current assets.......     4,538      5,242
                                                            -------    -------
       Total current assets..............................    71,327     69,405
       Goodwill, net.....................................     6,175      5,946
       Deferred financing costs..........................     2,782      2,000
       Other assets......................................       303        390
       Property and equipment:
         Buildings and improvements......................       395        500
         Furniture and fixtures..........................     1,979      2,092
         Machinery and equipment.........................     7,591      7,304
                                                            -------    -------
                                                              9,965      9,896
         Less accumulated depreciation...................    (5,666)    (6,468)
                                                            -------    -------
       Net property and equipment........................     4,299      3,428
       Deferred income taxes.............................       280        344
                                                            -------    -------
       Total assets......................................   $85,166    $81,513
                                                            =======    =======

See accompanying notes.

                                      F-2
<PAGE>

                       Century Maintenance Supply, Inc.

                    Consolidated Balance Sheets (continued)
                       (In Thousands, except share data)



                                                               December 31
                                                          ---------------------
                                                             2000        2001
                                                          ----------  ---------
    Current liabilities:
      Accounts payable, trade...........................  $  14,117   $   9,966
      Revolving credit facility.........................      2,500          --
      Income taxes payable..............................         13         812
      Accrued expenses..................................      4,044       3,588
      Current portion of long-term debt.................     10,100      13,600
      Dividends payable.................................      3,075       3,496
                                                          ---------   ---------
       Total current liabilities........................     33,849      31,462
    Long-term debt, less current portion................     77,900      64,300
    Commitments and contingencies (see note 4)

    Redeemable exchangeable preferred stock, net
       $100 par value:
       Authorized shares -- 2,000,000
       Issued and outstanding shares -- 464,171 and
         527,706 at December 31, 2000 and 2001..........     44,509      51,063

    Stockholders' deficit:
      Common Stock, $0.001 par value:
       Authorized shares -- 15,000,000
       Issued shares -- 12,590,536 at December 31,
         2000 and 2001..................................         13          13
       Additional paid-in capital.......................     71,176      71,176
       Treasury stock, 381,531 and 420,061 shares
         at December 31, 2000 and 2001, at cost.........     (1,811)     (2,105)
       Accumulated deficit..............................   (140,470)   (134,396)
                                                          ---------   ---------
    Total stockholders' deficit.........................    (71,092)    (65,312)
                                                          ---------   ---------
    Total liabilities and stockholders' deficit.........  $  85,166   $  81,513
                                                          =========   =========


See accompanying notes.

                                      F-3
<PAGE>

                       Century Maintenance Supply, Inc.

                       Consolidated Statements of Income
                                (In Thousands)



                                                      Year ended December 31
                                                  ------------------------------
                                                    1999       2000       2001
                                                  --------   --------   --------

       Net sales................................  $231,382   $257,262   $277,470
       Cost of goods sold.......................   167,770    185,829    203,544
                                                  --------   --------   --------
       Gross profit.............................    63,612     71,433     73,926
       Selling, general, and administrative
        expenses ("SGA")........................    36,458     41,316     45,652
       SGA - Stock based compensation charges...        74         56         --
                                                  --------   --------   --------
       Operating income.........................    27,080     30,061     28,274
       Interest expense.........................     9,310      9,681      7,586
                                                  --------   --------   --------
       Income before income taxes...............    17,770     20,380     20,688
       Provision for income taxes...............     6,970      7,928      7,639
                                                  --------   --------   --------
       Net income...............................  $ 10,800   $ 12,452   $ 13,049
                                                  ========   ========   ========

See accompanying notes.

                                      F-4
<PAGE>

                       Century Maintenance Supply, Inc.

          Consolidated Statements of Changes in Stockholders' Deficit
                       (In Thousands, except share data)



<TABLE>
<CAPTION>

                                                       Number of           Additional                               Total
                                                        Shares     Common   Paid-In    Treasury     Accumulated Stockholders'
                                                        Issued     Stock    Capital     Stock         Deficit      Deficit
                                                      ----------  ------- ----------- ---------     -----------   ---------
<S>                                                   <C>         <C>     <C>         <C>           <C>           <C>
Balances at December 31, 1998......................    12,443,147     12      70,759      (500)      (152,087)     (81,816)
    Purchase of treasury stock, at cost............            --     --          --      (725)            --         (725)
    Preferred dividends............................            --     --          --        --         (6,057)      (6,057)
    Net income.....................................            --     --          --        --         10,800       10,800
                                                      -----------  -----     -------   -------      ---------     --------

Balances at  December 31, 1999                         12,443,147  $  12     $70,759   $(1,225)     $(147,344)    $(77,798)
    Purchase of treasury stock, at cost............            --     --          --      (586)            --         (586)
    Purchase of preferred stock....................            --     --          --        --            926          926
    Exercise of stock options, including tax
     benefit.......................................       147,389      1         417        --             --          418
    Preferred dividends............................            --     --          --        --         (6,505)      (6,505)
    Net income.....................................            --     --          --        --         12,452       12,452
                                                      -----------  -----     -------   -------      ---------     --------

Balances at December 31, 2000......................    12,590,536     13      71,176    (1,811)      (140,470)     (71,092)
  Purchase of Treasury Stock, at cost..............            --     --          --      (294)            --         (294)
  Preferred dividends..............................            --     --          --        --         (6,975)      (6,975)
  Net income.......................................            --     --          --        --         13,049       13,049
                                                      -----------  -----     -------   -------      ---------     --------
Balances at December 31, 2001                          12,590,536  $  13     $71,176   $(2,105)     $(134,396)    $(65,312)
                                                      ===========  =====     =======   =======      =========     ========
</TABLE>

See accompanying notes.

                                      F-5
<PAGE>

                       Century Maintenance Supply, Inc.

                     Consolidated Statements of Cash Flows
                                (In Thousands)

<TABLE>
<CAPTION>
                                                                                   Year ended December 31
                                                                               ------------------------------
                                                                                 1999       2000      2001
                                                                               --------   --------  ---------
<S>                                                                            <C>        <C>       <C>
Operating activities:
  Net income................................................................   $10,800    $12,452   $ 13,049
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Provision (benefit) for deferred income taxes.........................       191       (408)      (386)
      Depreciation and amortization.........................................     1,481      1,700      1,976
      Bad debt expense......................................................       434        706        808
  Changes in operating assets and liabilities, net of effects
    of acquisition:
      Accounts receivable...................................................    (7,219)    (3,364)     1,302
      Inventory.............................................................     1,167     (3,935)     1,604
      Prepaid expenses and other assets.....................................     1,243     (1,467)      (257)
      Accounts payable......................................................       318      3,325     (4,151)
      Accrued expenses......................................................      (551)      (519)      (456)
      Income taxes payable..................................................     1,310     (3,577)       799
                                                                               -------    -------   --------
        Net cash provided by operating activities...........................     9,174      5,951     14,288
Investing activities:
  Purchases of property and equipment.......................................    (2,740)    (1,770)      (877)
  Cash paid for acquisition, net............................................    (1,253)        --         --
                                                                               -------    -------   --------
        Net cash used in investing activities...............................    (3,993)    (1,770)      (877)
Financing activities:
  Net borrowings (payments) under revolving line of credit..................        --      2,500     (2,500)
  Repayments of long-term debt..............................................    (4,600)    (6,100)   (10,100)
  Issuance of Common Stock and exercise of stock options
    including tax benefit...................................................        --        417         --
  Purchase of preferred stock, net..........................................        --     (3,907)        --
  Repurchase of common stock................................................      (725)      (586)       (45)
                                                                               -------    -------   --------
        Net cash used in financing activities...............................    (5,325)    (7,676)   (12,645)
                                                                               -------    -------   --------
Net (decrease) increase in cash.............................................      (144)    (3,495)       766
Cash and cash equivalents at beginning of year..............................     3,643      3,499          4
                                                                               -------    -------   --------
Cash and cash equivalents at end of year....................................   $ 3,499    $     4   $    770
                                                                               =======    =======   ========
</TABLE>


See accompanying notes.

                                      F-6
<PAGE>

                       Century Maintenance Supply, Inc.

                  Notes to Consolidated Financial Statements
             For the Years Ended December 31, 1999, 2000 and 2001


1.  Summary of Significant Accounting Policies

Description of Business

Century Maintenance Supply, Inc., a Delaware Corporation (the "Company" or
"CMS") distributes general maintenance supplies and air conditioning and heating
equipment and parts to apartment complexes throughout the United States.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the
Company and its subsidiaries.  All significant intercompany balances and
transactions have been eliminated in consolidation.

Recapitalization

Effective July 8, 1998, the Company completed a recapitalization of the Company
pursuant to an agreement and plan of merger ("Recapitalization").  The
transaction occurred as follows:

.. FS Equity Partners IV, L.P. ("FSEP IV"), formed Century Acquisition
  Corporation, a Delaware corporation ("Acquisition Co.") on April 21, 1998.

.. FSEP IV made an equity contribution of approximately $67,451,000 to
  Acquisition Co. and two other investors contributed a total of approximately
  $875,000 to Acquisition Co. (the "Equity Investment"). All of the outstanding
  capital stock of Acquisition Co. was held by FSEP IV and certain investors
  thereof.

.. The Company issued $40,000,000 of Senior Exchangeable PIK Preferred Stock (the
  "Preferred Stock"), of which $12,000,000 was purchased by affiliated parties.

.. The Company obtained new secured term loan facilities with an aggregate
  principal amount of $100,000,000 (see Note 3).

.. Acquisition Co. was merged into the Company (with the Company as the surviving
  corporation) and Acquisition Co.'s outstanding capital stock was converted
  into 6,832,619 newly issued shares of the Company.

.. The Company applied the proceeds of the Equity Investment of $68,326,054,
  proceeds of the secured term loan facilities of $100,000,000 and the proceeds
  of the sale of the Preferred Stock of $40,000,000 to convert 17,396,272 shares
  of the Company held by the primary stockholder and the management owners
  (certain management employees of the Company) and certain options into cash of
  approximately $182,580,000, and paid costs and expenses associated with the
  Recapitalization which totaled approximately $14,280,000. Of the $14,280,000
  of costs and expenses, approximately $7,982,000 was expensed and the
  remainder, related to the Preferred Stock and the new credit facility, was
  offset against the proceeds or capitalized as deferred financing costs (see
  Notes 3 and 7). The Company also purchased 545,146 options to purchase shares
  of Common Stock from employees for $4,479,128 (net of exercise price)
  resulting in a compensation charge of $4,091,633.


                                      F-7
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)


Inventories

Inventories consist wholly of finished goods and are stated at cost, applied on
the first-in, first-out method of pricing, which is not in excess of market.
The Company periodically evaluates its reserve for obsolescence.  The reserve
was $179,000 and $1,179,000 at December 31, 2000 and 2001, respectively.

Allowance for Doubtful Accounts

The Company periodically evaluates the creditworthiness of its customers.  The
Company's allowance for doubtful accounts is based on current market conditions
and losses on uncollectible accounts have consistently been within management's
expectations.  The allowance for doubtful accounts was $1,193,003, $1,013,607
and $1,220,336 at December 31, 1999, 2000 and 2001 respectively.  Net writeoffs
of uncollectible accounts were $237,843, $885,133 and $601,318 for the years
ended December 31, 1999, 2000 and 2001, respectively.

Property and Equipment

Property and equipment are recorded at cost.  Maintenance and repairs are
charged to expense as incurred, and renewals and improvements are capitalized.
The cost of property and equipment sold or otherwise retired and the accumulated
depreciation applicable thereto are eliminated from the accounts, and the
resulting profit or loss is reflected in operations.

The cost of property and equipment is depreciated over the estimated useful
lives of the related assets. Depreciation is computed using the straight-line
method.  The estimated useful lives of property and equipment are as follows:

Leasehold improvements                                  3-10 years
Furniture and fixtures                                  5-7 years
Machinery and equipment                                 3-8 years

Depreciation expense was $1,245,268, $1,507,197 and $1,746,569 for 1999, 2000
and 2001, respectively.

Intangible Assets

Intangible assets consist primarily of goodwill associated with businesses
acquired in 1997 and 1999.  Goodwill is amortized on a straight-line basis over
30 years.  Amortization expense was $235,419, $192,231 and $229,214 for 1999,
2000 and 2001, respectively, and accumulated amortization was $670,451and
$896,123 at December 31, 2000 and 2001, respectively.

Impairment of Long-Lived Assets

Property and equipment and other long-lived assets, such as goodwill, are
reviewed for impairment whenever events or changes in business circumstances
indicate the carrying values of the assets may not be recoverable. Impairment
losses would be recorded when the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amount of those assets.

Revenue Recognition

Revenue is recognized upon delivery of inventory to customers.  The Company's
revenue recognition practices conform with those described in Staff Accounting
Bulletin No. 101 issued by the staff of the Securities and Exchange Commission.

                                      F-8
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)


Income Taxes

The Company follows the asset and liability method of accounting for income
taxes.  Under this method, deferred income tax assets and liabilities are
determined based on differences between the financial statement basis and income
tax basis of assets and liabilities using enacted tax rates in effect for the
year in which the differences are expected to reverse.

Statement of Cash Flows

The Company considers all highly liquid investments with maturities of three
months or less when purchased to be cash equivalents.

<TABLE>
<CAPTION>

                                              1999         2000          2001
                                           ----------   ----------   -----------
<S>                                        <C>          <C>          <C>
Supplemental information:
   Interest paid.........................  $9,310,000   $9,607,000    $7,274,000
                                           ==========   ==========    ==========
   Taxes paid............................  $6,800,000   $5,043,000    $7,227,000
                                           ==========   ==========    ==========
Noncash transaction:
   Treasury stock acquired for
      repayment of notes receivables.....  $        -   $        -    $  248,000
                                           ==========   ==========    ==========

</TABLE>

Advertising Costs

The Company expenses all advertising costs as incurred.  Advertising expense was
approximately $381,000, $834,000 and $870,000 for the years ended December 31,
1999, 2000 and 2001, respectively.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, and
accounts payable approximate their fair values due to the short-term maturities
of these instruments.

The carrying amounts of borrowings pursuant to the Company's Revolving Credit
Facility and the Term Loan Facility approximate fair value because the rates on
such agreements are variable, based on current market rates.

Stock-Based Compensation

Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation," ("Statement 123") encourages, but does not require,
companies to record compensation cost for stock-based employee compensation
plans at fair value.  The Company has chosen to continue to account for stock-
based compensation using the intrinsic value method prescribed in Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations.  Accordingly, compensation cost for
stock options is measured as the excess, if any, of the quoted market price of
the Company's stock at the date of the grant over the amount an employee must
pay to acquire the stock.

                                      F-9
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)


Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes.  Actual results could differ from
those estimates.

New Accounting Standards

     The Company is exposed to variability of future cash flows related to
interest rate risk on its existing long-term debt and has entered into interest
rate swap agreements to hedge their exposure.  These interest rate swap
agreements terminated on September 28, 2001.

     The Company adopted Statement of Financial Accounting Standard ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging Activities" on January
1, 2001.  SFAS No. 133 requires that all derivatives be recognized as either
assets or liabilities and measured at fair value, and changes in the fair value
of derivatives are reported in current earnings, unless the derivative is
designated and effective as a hedge.  If the intended use of the derivative is
to hedge the exposure to changes in the fair value of an asset, a liability or a
firm commitment, then changes in the fair value of the derivative instrument
will generally be offset in the income statement by changes in the hedged item's
fair value.  However, if the intended use of the derivative is to hedge the
exposure to variability in expected future cash flows, then changes in the fair
value of the derivative instrument will generally be reported in Other
Comprehensive Income (OCI).  The gains and losses on the derivative instrument
that are reported as OCI will be reclassified to earnings in the periods in
which earnings are impacted by the hedged item.

     There was no impact on the Company's results of operations from the January
1, 2001 implementation of SFAS No. 133.  The net of tax cumulative-effect
adjustment reducing OCI and stockholders' equity was approximately $578,000 on
January 1, 2001.  For 2001, the Company recorded a net of tax gain on these cash
flow hedges of approximately $711,000 on termination of the agreements.

     In July 2001, the FASB issued SFAS No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets."  SFAS No. 141 establishes
new standards for accounting and reporting requirements for business
combinations and requires the purchase method of accounting be used for all
business combinations initiated after June 30, 2001.  Use of the pooling-of-
interests method is prohibited.  SFAS No. 142, "Goodwill and Other Intangible
Assets," supersedes APB opinion No. 17, "Intangible Assets."  SFAS No. 142
establishes new standards for goodwill acquired in a business combination and
eliminates amortization of goodwill and instead sets forth methods to
periodically evaluate goodwill for impairment. The Company will adopt this
statement during the first quarter of 2002. The adoption of SFAS No. 141 had no
effect on our consolidated financial position or results of operations. We do
not believe the adoption of SFAS No. 142 will have a significant effect on our
consolidated financial position or results of operations.

     In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets."  SFAS No. 144 addresses financial
accounting and reporting for the impairment and disposal of long-lived assets.
The Company will adopt this statement during the first quarter of 2002. We do
not believe the adoption of this statement will have a significant effect on our
consolidated financial position or results of operations.

Reclassification

     Certain of the 2000 amounts on the accompanying consolidated balance sheet
have been reclassified to conform to the 2001 presentation.

2.   Related Parties

The Company purchases and sells various inventory items at cost from and to
Century Airconditioning Supply, Inc. ("CAC"), which is a stockholder of the
Company and is wholly-owned by a director of the Company, extends credit under
standard terms in connection with these sales, and collected management and
administrative fees from CAC.

                                      F-10
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)


The Company paid off certain notes payable to the former majority stockholder of
the Company in connection with the recapitalization.

Sales to and purchases from CAC amounted to $141,953 and $754,998 for 1999, and
$43,840 and $616,963 for 2000, and $41,745 and $269,686 for 2001, respectively.
The Company had lease expense to related parties amounting to $848,208 for 1999,
$927,685 for 2000 and $831,046 for 2001.


3.  Long-Term Debt and Notes Payable

Long-term debt consisted of the following:

<TABLE>
<CAPTION>
                                                              December 31

                                                           2000          2001
                                                       -----------   -----------
<S>                                                    <C>           <C>
Long-term debt:
  Tranche A Facility (see below).....................  $29,500,000   $20,000,000
                                                       -----------   -----------
  Tranche B Facility (see below).....................   58,500,000    57,900,000
                                                       -----------   -----------

                                                        88,000,000    77,900,000
Less current portion.................................   10,100,000    13,600,000
                                                       -----------   -----------
                                                       $77,900,000   $64,300,000
                                                       ===========   ===========
</TABLE>

On July 8, 1998, as part of the Recapitalization, the Company entered into a
credit facility, providing for $100.0 million of secured term loan facilities
and a $25.0 million revolving loan facility (the "Revolving Credit Facility").
The term loan facility consists of a $40.0 million Tranche A Term Facility and a
$60.0 million Tranche B Term Facility (collectively called the "Term Loan
Facility").  The Term Loan Facility will amortize over a five-year period for
the Tranche A Term Facility and a seven-year period for the Tranche B Term
Facility, and the Revolving Credit Facility will mature on July 8, 2003.  The
payments increase over the amortization periods.  The interest rate under the
credit facility is variable and based, at the option of the Company, upon either
a Eurodollar rate plus 2.5% or a base rate plus 1.5% (for the Revolving Credit
Facility and the Tranche A Term Facility) and the Eurodollar rate plus 2.75% or
a base rate plus 1.75% (for the Tranche B Term Facility) per annum.  As of
December 31, 2001 the effective rate was between 4.375% and 4.5625% and between
4.687% and 5.0625% for the Tranche A facility and Tranche B Term facility,
respectively. If the Company achieves certain performance goals, rates under the
Tranche A Term Facility, the Revolving Facility and the commitment fee will be
reduced. A commitment fee of 0.4375% per annum will be charged on the unused
portion of the Revolving Credit Facility. The Company has paid commitment fees
of $103,770 and $99,361 in 2000 and 2001, respectively.

The credit facility contains certain non-financial and financial covenants
including restrictions on the ability to incur additional debt, declare
dividends, purchase treasury stock and capital expenditures.  The credit
facility is collateralized by substantially all assets of the Company.  The
Company incurred approximately $4,552,000 of costs as part of obtaining the
credit facility which have been recorded as deferred financing costs.  The
Company amortizes the costs over the average life of the credit facility.  The
Company recognized amortization of $767,169 and $782,321 as interest expense in
December 31, 2000 and 2001, respectively.

Effective September 30, 1998, the Company entered into two three-year interest
swap agreements to reduce a portion of its interest rate exposure on its credit
facility which terminated on September 20, 2001.  Under the terms of the first
agreement, the Company pays 8.81% on notional principal of $29,925,000 and
receives LIBOR plus 2.75% on the notional balance.  Under the terms of the
second agreement, the Company pays 8.54% on a notional balance of $20,000,000
which declines to $13,000,000 in 2001, and receives LIBOR plus 2.5% on the
notional balance.  The Company recognized interest expense of $307,000 in 1999,
a benefit of $174,000 in 2000 and an expense of

                                      F-11
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)


$326,830 in 2001, respectively, related to the interest rate swap agreements. On
termination of these agreements, the Company recorded a net of tax gain on these
cash flow hedges of approximately $711,000.

Maturities of long-term debt at December 31, 2001 are summarized as follows:

<TABLE>
<S>                                                         <C>
2002................................................        13,600,000
2003................................................        18,800,000
2004................................................        28,500,000
2005................................................        17,000,000
                                                       ---------------
                                                       $    77,900,000
                                                       ===============
</TABLE>

4.  Commitments and Contingencies

The Company leases store and distribution center facilities in 37 locations
under operating leases that expire over the next five years.  The Company also
leases vehicles under operating leases.

Future minimum payments under these operating leases are as follows:

<TABLE>
<CAPTION>
          Year Ending December 31
          <S>                                     <C>
          2002..................................    4,281,547
          2003..................................    3,052,257
          2004..................................    1,385,992
          2005..................................      551,854
          2006..................................      233,666
                                                  -----------
                                                  $ 9,505,316
                                                  ===========
</TABLE>

Rental expenses for 1999, 2000 and 2001 were $4,903,166, $5,741,690 and
$6,175,145, respectively.

The Company is party to lawsuits and other proceedings incidental to its
business.  While the results of such lawsuits and other proceedings cannot be
predicted with certainty, management does not expect that ultimate liabilities,
if any, will have a material adverse effect on the financial position, results
of operations, or cash flow of the Company.

5.  Income Taxes

The provision (benefit) for income taxes for the years ended December 31, 1999,
2000 and 2001 consisted of the following:

<TABLE>
<CAPTION>
                                        1999         2000          2001
                                     -----------  -----------   -----------
<S>                                  <C>          <C>           <C>
Current:
  Federal                            $ 5,176,897  $ 7,583,261   $ 7,332,150
  State                                1,601,980      753,067       693,945
                                     -----------  -----------   -----------
                                       6,778,877    8,336,328     8,026,095
</TABLE>

                                      F-12
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)

<TABLE>
<CAPTION>
                                        1999         2000          2001
                                     -----------  -----------   -----------
<S>                                  <C>          <C>           <C>
Deferred:
  Federal..........................     169,429     (386,518)     (353,676)
  State............................      21,308      (21,810)      (33,390)
                                     ----------   ----------    ----------
                                        190,737     (408,328)     (387,066)
                                     ----------   ----------    ----------
                                     $6,969,614   $7,928,000    $7,639,029
                                     ==========   ==========    ==========
</TABLE>

The differences between income taxes computed at the federal statutory income
tax rate and the provision for income taxes for the years ended December 31,
1999, 2000 and 2001 are as follows:

<TABLE>
<CAPTION>
                                                       1999         2000         2001
                                                     ----------   ----------   ----------
<S>                                                  <C>          <C>          <C>
Income tax computed at federal statutory
  income tax rate..................................  $6,219,500   $7,157,929   $7,104,945
State income taxes, net of federal benefit.........     516,307      461,362      429,361
Amortization of nondeductible goodwill.............      82,397       72,358       80,226
Nondeductible portion of business meals
  and entertainment................................      42,194       36,513       47,526
Other..............................................     109,216      199,838      (23,029)
                                                     ----------   ----------   ----------
Provision for income taxes.........................  $6,969,614   $7,928,000   $7,639,029
                                                     ==========   ==========   ==========
</TABLE>

Deferred tax assets and liabilities as of December 31, 2000 and 2001 comprised
the following:

<TABLE>
<CAPTION>
                                                        2000        2001
                                                     ---------   -----------
<S>                                                  <C>         <C>
Deferred tax assets:
  Bad debt allowances...............................  $401,115    $  466,259
  Accrued bonuses...................................    45,240            --
  Accrued franchise taxes...........................     2,056            --
  Inventory and sales return reserves...............   135,254       450,465
  Property, plant, and equipment....................   280,234       344,929
                                                      --------    ----------
Total deferred tax assets...........................   863,899     1,261,653
Deferred tax liabilities:
  Other.............................................   (25,382)      (37,069)
                                                      --------    ----------
Total deferred tax liabilities......................   (25,382)      (37,069)
                                                      --------    ----------
Net deferred tax assets.............................  $838,517    $1,224,584
                                                      ========    ==========
</TABLE>

                                      F-13
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)


6.  Acquisition

In April 1999, the Company acquired 100% of the Common Stock of Champion Blind
and Drapery, Inc. in a business combination accounted for as a purchase.  The
purchase price was $1,550,000, which was paid in cash, and resulted in goodwill
of approximately $1,100,000 being recorded.  The historical operations of
Champion Blind and Drapery, Inc. for periods prior to the acquisition are not
material to the operations of the Company.

7.  Stockholders' Equity

In 1999, 2000 and 2001, the Company purchased 90,635 shares of Common Stock for
$725,092 in cash, 97,727 shares for $586,362 in cash and 7,517 shares for
$45,102 in cash, respectively, from stockholders. Additionally, in 2001, the
Company acquired 31,013 shares of Common Stock for the repayment of notes
receivable of $248,104 from certain stockholders. These shares have been placed
in treasury stock.

As part of the Recapitalization the Company sold $40.0 million of 13.25% Senior
Exchangeable PIK (Payment-in-kind) Preferred Stock of which $12.0 million was
sold to affiliates of the Company.  The Preferred stock is due in 2010 with an
aggregate liquidation preference of $40.00 million or $100 per share.  Dividends
are payable semiannually in cash, except that on each dividend payment date on
or prior to July 1, 2003, dividends may be paid, at the Company's option, by
issuance of additional shares of preferred stock.  Preferred stock is subject to
mandatory redemption at its liquidation preference, plus accumulated and unpaid
dividends, on July 1, 2010.  The Company may redeem the preferred stock in
accordance with certain redemption provisions at a date earlier than July 1,
2010. If the Company elects to redeem the preferred stock on or before July 1,
2003, the redemption price will be 113.25% of the liquidation preference price
of $100 per share.  Holders of preferred stock have no voting rights.

At any time, the Company may, at its option, exchange all of the shares of
preferred stock then outstanding for Exchange Debentures in a principal amount
equal to the liquidation preference of the shares being exchanged. The exchange
debentures would have interest of 13.25% and would be due in 2010.  The
Company's credit facility currently prohibits the Company from exchanging the
preferred stock.  The Company incurred approximately $2,803,000 of costs as part
of the sale of the preferred stock which has been offset against the proceeds.
The Company has accreted approximately $234,000, $549,000 and $200,409 in 1999,
2000 and 2001, respectively to retained earnings as part of the dividends
accrued.  Included in the 2000 accretion is $324,000 related to the repurchase
of Preferred Stock in 2000.

8.  Employee Stock Option Plan

In July 1997, the Company established the 1997 Incentive Stock Plan (the "Stock
Option Plan"), pursuant to which options may be granted to eligible employees of
the company or its subsidiaries for the purchase of an aggregate of 1,000,000
shares of common stock of the Company (the "Common Stock").  The Stock Option
Plan is administered by the Board of Directors (the "Board").  The Board has the
power to determine which eligible employees will receive stock option rights,
the timing and manner of the grant of such rights, the exercise price, the
number of shares to be covered by the option, and the type and terms of the
options.  The Board may, at any time, terminate or amend the Stock Option Plan,
provided that no such amendment may adversely affect the rights of optionees
with regard to outstanding options.

On July 1, 1997, the Company granted 620,033 non-qualified, fully vested stock
options to purchase Common Stock with an exercise price of $1.74 per common
share with an expiration date of three years after the date of grant.  The grant
of options resulted in compensation expense of $625,240 for the excess of the
fair value of the Common Stock over the exercise price at the date of grant.
The Company also granted 322,095 non-qualified, fully vested stock options to
purchase Common Stock, with an exercise price of $3.04 per common share and with
an expiration date of three years after the date of grant on July 11, 1997.  As
part of the Recapitalization, the Company repurchased 545,146 of the outstanding
options and recognized a compensation charge of $4,091,633 (see Note 1).

                                      F-14
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)

In connection with the Recapitalization, the Company adopted the 1998
Nonqualified  Stock Option Plan (the "Nonqualified Stock Option Plan"), pursuant
to which options may be granted to eligible employees of the Company for the
purchase of an aggregate of 1,642,500 shares of Common Stock of the Company.
The 1998 Nonqualified Stock Option Plan is administered by the Board of
Directors (the "Board").  On July 9, 1998, the Company granted 692,000 non-
qualified stock options to purchase Common Stock with an exercise price of
$10.00 per common share with an expiration date of seven years after the date of
grant.  The stock options become exercisable over a four-year period based on
the Company meeting certain financial goals each year or on a cumulative basis
over the four-year period as set forth in the stock option agreement.  Effective
December 31, 1998, the Board of Directors approved the vesting of 57,667 options
to purchase Common Stock under the 1998 Nonqualified Stock Option Plan.

On July 9, 1998, under the 1998 Nonqualified Stock Option Plan, the Company
granted a primary stockholder 180,000 non-qualified stock options to purchase
Common Stock of the Company with an exercise price of $10.00 per common share
with an expiration date of seven years after the grant date.  The stock options
become exercisable over a three-year period based on the Company meeting certain
financial goals each year or on a cumulative basis over the three-year period as
set forth in the stock option agreement.

In connection with the Recapitalization, the Company granted to a new director
of the Company 50,000 non-qualified stock options to purchase Common Stock of
the Company.  The stock options have an exercise price of $10.00 per common
share with an expiration of 7 years after the grant date and are fully vested
and exercisable.

On June 15, 2000, the Company granted non-qualified options to purchase 90,900
shares of Common Stock of the Company at an exercise price of $10.00 per share
with an expiration date of seven years after the date of grant. The stock
options granted vest over a three year period, with the first vesting date
occurring on July 9, 2000 and all options vesting in full on July 9, 2002.

Changes in the outstanding options granted pursuant to the Stock Option Plan are
summarized in the table below:

<TABLE>
<CAPTION>
                                                         Weighted
                                                         Average        Weighted
                                                      Exercise Price  Average Fair
                                          Number Of        Per         Value Per
                                            Shares        Share          Share
                                        ------------------------------------------
<S>                                     <C>           <C>             <C>
Outstanding at January 1, 1999........    1,319,282    $    7.67      $    1.92
  Repurchased June 1, 1999............      (11,503)   $    1.74      $      --
  Forfeitures - 1999..................     (154,095)   $    9.08      $    1.74
                                        -----------    ---------      ---------

Outstanding at December 31, 1999......    1,153,684    $    7.54      $    1.90
                                        -----------    ---------      ---------

Granted - June 2000...................       90,900    $   10.00      $    2.70
Forfeitures - 2000....................     (200,797)   $    4.09      $    1.31
Exercised - July 2000.................     (199,587)   $    1.74      $    1.12
                                        -----------    ---------
Outstanding at December 31, 2000......      844,200    $   10.00      $    2.31
                                        -----------    ---------      ---------
Forfeitures - 2001....................     (206,200)   $   10.00      $    2.29
                                        -----------    ---------      ---------
Outstanding at December 31, 2001......      638,000    $   10.00      $    2.32
                                        ===========    =========      =========
</TABLE>

                                      F-15
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)


The following summarizes information related to stock options outstanding at
December 31, 2001:

<TABLE>
<CAPTION>
                                          Options Outstanding        Options Exercisable
                             ------------------------------------- -----------------------
                                                        Weighted
                                           Weighted     Average                 Weighted
                                            Average    Remaining                 Average
                                           Exercise   Contractual               Exercise
    Exercise Price             Options       Price        Life      Options       Price
--------------------------   ----------    --------   ------------ ---------    ----------
<S>                           <C>           <C>          <C>       <C>          <C>
$10.00                        638,000       $10.00       3.7       144,500      $10.00
</TABLE>

The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25"), and related interpretations
in accounting for stock-based compensation arrangements.

Pro forma information regarding net income per share is required by FASB
Statement No. 123, Accounting for Stock-Based Compensation ("FAS 123"), which
also requires that the information be determined as if the Company had accounted
for its employee stock options granted under the fair value method of FAS 123.
The fair value for these options was estimated at the date of grant using the
minimum value option pricing model using the following assumptions:  risk-free
interest rate of 5.2% and 6.5% for 1998 and 2000, respectively, a dividend yield
of 0% and an expected life of 5 years for both 1998 and 2000.  Because the
Company's employee stock options have characteristics significantly different
from those of traded options and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.  The Company's pro
forma information for the years ended December 31, 1999, 2000 and 2001, as if
the Company had accounted for its employee stock options granted under the fair
value method prescribed by FAS 123, follows:

<TABLE>
<CAPTION>
                                                  Year Ended December 31
                                          --------------------------------------
                                             1999          2000          2001
                                          -----------   -----------   ----------
<S>                                       <C>           <C>           <C>
Net income as reported..................  $10,800,486   $12,452,084   $13,049,416
Pro forma net income....................  $10,800,486   $12,405,309   $12,979,216
</TABLE>

9.  Profit Sharing Plan and Defined Contribution Plan

CAC sponsors a noncontributory, defined contribution profit sharing plan for the
benefit of all eligible employees (as defined in the plan agreement), in which
subsidiaries participate.  The annual contribution to the plan is determined at
the discretion of the Board.  For the years ended December 31, 1999, 2000 and
2001, the Company made no contributions to the plan.

The Company sponsors a 401(k) savings and retirement plan which is open to all
employees who have attained age 21 and who have completed one full year of
service.  Each employee may contribute a minimum of 2%, up to a maximum of 15%,
of basic compensation.  The Company matches contributions at a rate of 50% for
contributions by the employee up to 8% of an employee's compensation.  The
Company contributed approximately $447,247, $381,558 and $491,591 in 1999, 2000
and 2001, respectively, as matching funds to the plan.  No discretionary, lump-
sum contributions were made in 1999, 2000 and 2001.

                                      F-16
<PAGE>

                                   SIGNATURE

     Pursuant to the requirements of Section 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.

                                   CENTURY MAINTENANCE SUPPLY, INC.

                                     By: /s/ Richard E. Penick
March 29, 2002                          ________________________________________
                                        Richard E. Penick
                                        Chief Financial Officer, Vice President
                                        and Assistant Secretary

                               POWER OF ATTORNEY

  KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Richard E. Penick his true and lawful attorney-in-fact
with full power of substitution and resubstitution, for him or her and in his or
her name, place and stead, in any and all capacities, to sign any and all
amendments to this Report on Form 10-K and to file same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agents, and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

  Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report on Form 10-K has been signed by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
     Signature                                Title                                  Date
<S>                           <C>                                               <C>
   /s/ Joseph Semmer
___________________________   Chief Executive Officer                           March 29, 2002
       Joseph Semmer          and Director (Principal Executive Officer)


 /s/ Richard E. Penick
___________________________   Chief Financial Officer and Director              March 29, 2002
     Richard E. Penick        (Principal Financial and Accounting
                              Officer)

 /s/ Dennis C. Bearden
___________________________   Director                                          March 29, 2002
     Dennis C. Bearden

  /s/ Mark J. Doran
___________________________   Director                                          March 29, 2002
       Mark J. Doran

 /s/ William C. Johnson
___________________________   Director                                          March 29, 2002
     William C. Johnson

   /s/ Jon D. Ralph
___________________________   Director                                          March 29, 2002
        Jon D. Ralph

/s/ J. Frederick Simmons
___________________________   Director                                          March 29, 2002
    J. Frederick Simmons

  /s/ Ronald P. Spogli
___________________________   Director                                          March 29, 2002
      Ronald P. Spogli
</TABLE>

                                     II-1
<PAGE>

   Supplemental Information to be Furnished With Reports filed Pursuant to
      Section 15(d) of the Act by Registrants Which Have Not Registered
                 Securities Pursuant to Section 12 of the Act.

     Other than this Report on Form 10-K, no other annual report and no proxy
materials have been sent or will be furnished to the Company's security holders.

                                     II-2