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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, 2000

                                      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 30, 2001 as determined by the Board of
Directors.

     As of March 30, 2001, the number of shares of the registrant's Common Stock
outstanding  was 12,209,028. 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 4,300 name brand and private label items, including plumbing,
hardware, electrical, HVAC and lighting products, to over 31,000 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 30, 2001.

     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 4,300 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(TM) faucets accounted for
8.4% of sales in 2000. The Company plans to continue to develop these products
over the next few years.

     The Company currently distributes user-friendly catalogs with approximately
4,300 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 4,300 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

     The Company's customers include local and regional apartment properties as
well as larger property management companies. The Company maintains over 31,000
active accounts, an increase of more than 18,000 over the past five years.
Century defines an active account as a property that generates two or more
orders within a twelve month period.

     Century's management believes its customer satisfaction is illustrated by
the recurring revenues generated from its major accounts. In 2000, sales to the
Company's top five customers increased by approximately 11% 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 eight 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 149 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 110 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 seven 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 4,300 SKUs and
is annually distributed to approximately 50,000 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. The Company'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 ("Wilmar"),
Maintenance Warehouse/America Corp. ("Maintenance Warehouse") and Chad Supply, a
regional distributer primarily in the Southeast United States. Wilmar is the
Company's most direct competitor in terms of product line and method of
distribution, while Maintenance Warehouse is primarily a mail-

                                       3
<PAGE>

order company. The Company believes that it distinguishes itself from these
national competitors with its local sales focus and direct delivery from 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 $50.00
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 2000, 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 600 vendors. In
2000, no Company vendor accounted for more than 5.8% of purchases in 2000, and
the top ten vendors accounted for approximately 36% 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 new
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.

     Century has completed the installation of a new, fully integrated and
centralized system, which will provide all of the capabilities of the old
system, as well as integrate the whole Company together on one database and
network. The new system has increased efficiency through the centralization of
the purchasing, credit and collections functions. The Company's system includes
a second server, providing backup processing capability. Together with the new
operating software, Century now has the additional capabilities of a Windows-
based environment, more flexible invoicing and the ability to consolidate
multiple purchase orders from each distribution center and group them by product
category and vendor.

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 30, 2001, the Company employed 901 full-time employees and 27
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 12,320 to 114,000 square feet.
The Company leases all of its distribution centers, with lease expiration dates
ranging from April 2001 to November, 2005. 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 of the Company, or cash flow.

                                       5
<PAGE>

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

     None.

                                       6
<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. 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 in
2000 involving sales of the Company's securities that were not registered under
the Securities Act:

     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 in the past
three years, 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.

                                       7
<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, 1999 and
2000 and for the three years in the period ended December 31, 2000, 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, 1996, 1997,
1998, 1999 and 2000 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
                                                        --------------------------------------------------------------------
                                                          1996           1997           1998           1999           2000
                                                        --------       --------       --------       --------       --------
                                                                              (dollars in thousands)
<S>                                                     <C>            <C>            <C>            <C>            <C>
Operating Data:
Net sales............................................   $103,113       $146,166       $200,488       $231,382       $257,262
Cost of goods sold...................................     75,552        105,636        145,710        167,770        185,829
                                                        --------       --------       --------       --------       --------
Gross profit.........................................     27,561         40,530         54,778         63,612         71,433
Operating expenses:
   Selling, general and administrative expenses
    ("SGA")..........................................     17,271         22,264         30,198         36,458         41,316
   Stock based compensation charges - SGA(a).........         --          6,969          4,092             74             56
   Recapitalization expenses(b)......................         --             --          7,982             --             --
                                                        --------       --------       --------       --------       --------
Total operating expenses.............................     17,271         29,233         42,272         36,532         41,372
                                                        --------       --------       --------       --------       --------
Operating income.....................................     10,290         11,297         12,506         27,080         30,061
Interest expense(c)..................................        865          1,147          5,327          9,310          9,681
                                                        --------       --------       --------       --------       --------
Income before income taxes and minority interest.....      9,425         10,150          7,179         17,770         20,380
Provision for income taxes(d)........................      2,798          6,370          5,380          6,970          7,928
                                                        --------       --------       --------       --------       --------
Income before minority interest......................      6,627          3,780          1,799         10,800         12,452
Minority interest in earnings of subsidiaries........      1,237            848             --             --             --
                                                        --------       --------       --------       --------       --------
Net income...........................................   $  5,390       $  2,932       $  1,799       $ 10,800       $ 12,452
                                                        ========       ========       ========       ========       ========

Other Financial Data:
EBITDA(e)............................................   $ 10,723       $ 12,066       $ 13,569       $ 28,561       $ 31,775
Adj. EBITDA(f).......................................   $ 10,723       $ 19,035       $ 25,643       $ 28,635       $ 31,831
Adj. EBITDA margin(g)................................       10.4%          13.0%          12.8%          12.4%          12.4%
Depreciation & amortization..........................   $    433       $    769       $  1,063       $  1,481       $  1,700
Capital expenditures.................................   $    513       $  1,534       $    938       $  2,740       $  1,770
Ratio of Adj. EBITDA to interest expense.............       12.4x          16.6x           4.8x           3.1x          3.3x
Ratio of total debt to Adj. EBITDA...................        1.1x           1.0x           3.8x           3.3x          2.8x
Other Data:
Distribution centers.................................         20             29             32             36             37
Comparable center sales growth(h)....................       21.0%          20.8%          21.3%          12.4%           9.2%
Active customers(i)..................................     16,659         24,521         27,300         30,500         31,250
</TABLE>

                                       8
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<TABLE>
<CAPTION>
                                                                                       Fiscal Year
                                                                 ---------------------------------------------------------
                                                                   1996        1997         1998        1999        2000
                                                                 --------    --------     --------    --------    --------
                                                                                 (dollars in thousands)
<S>                                                              <C>         <C>          <C>         <C>         <C>
Cash Flow Data:
Net cash provided by (used in) operating activities............  $    785    $  6,304     $(12,616)   $  9,174    $  5,951
Net cash used in investing activities..........................      (493)     (9,575)        (865)     (3,993)     (1,770)
Net cash provided by (used in) financing activities............     2,083       4,946       10,525      (5,325)     (7,676)

Balance Sheet Data:
Working capital................................................  $ 14,456    $ 25,617     $ 37,921    $ 40,131    $ 38,232
Operating working capital(j)...................................    20,065      29,487       38,877      42,732      48,328
Total assets...................................................    32,936      57,254       73,867      80,440      85,165
Redeemable preferred stock.....................................        --          --       37,309      42,908      44,509
Total debt.....................................................    12,253      18,997       98,700      94,100      90,500
Stockholders' equity (deficit).................................    11,035      25,568      (81,816)    (77,798)    (71,093)
</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.
(b)  Transaction costs related to the Recapitalization that occurred in July of
     1998. See Note 1 to the Company's audited consolidated financial
     statements.
(c)  Interest expense in 1998 through 2000 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 generally accepted accounting principles, 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 generally accepted accounting principles, 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 generally accepted accounting principles, 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 generally accepted accounting principles, 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

                                       9
<PAGE>

     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 and
     note payable.

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 2000. 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 (the "Nationwide Acquisition"), 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 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, in a private placement that
was consummated simultaneously with

                                       10
<PAGE>

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.  On July 14, 2000, the
Credit Facility was amended allowing the Company more flexibility in meeting
minimum leverage ratio, interest coverage ratio, fixed charge ratio, and
minimum EBITDA covenants thereunder.

     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
                                                        ----------------------------------
                                                           1998        1999        2000
                                                        ----------  ----------  ----------
<S>                                                     <C>         <C>         <C>
Net sales.............................................. $ 200,488   $ 231,382   $ 257,262
Cost of goods sold.....................................   145,710     167,770     185,829
                                                        ---------   ---------   ---------
 Gross profit..........................................    54,778      63,612      71,433
Selling, general and administrative expenses...........    30,198      36,458      41,316
Stock compensation charges - SGA.......................     4,092          74          56
Recapitalization expenses..............................     7,982          --          --
                                                        ---------   ---------   ---------
 Total operating expenses..............................    42,272      36,532      41,372
Operating income.......................................    12,506      27,080      30,061
Interest expense.......................................     5,327       9,310       9,681
                                                        ---------   ---------   ---------
Income before income taxes.............................     7,179      17,770      20,380
Provision for income taxes.............................     5,380       6,970       7,928
                                                        ---------   ---------   ---------
Net income............................................. $   1,799   $  10,800   $  12,452
                                                        =========   =========   =========
</TABLE>

                                       11
<PAGE>

<TABLE>
<CAPTION>
                                                                   Fiscal Year
                                                        ----------------------------------
                                                           1998        1999        2000
                                                        ----------  ----------  ----------
<S>                                                     <C>         <C>         <C>
Net sales..............................................    100.0%      100.0%      100.0%
Cost of goods sold.....................................     72.7        72.5        72.2
                                                          ------      ------      ------
 Gross profit..........................................     27.3        27.5        27.8
Selling, general and administrative expenses...........     15.1        15.8        16.1
Stock compensation charges - SGA.......................      2.0         0.0         0.0
Recapitalization expenses..............................      4.0          --          --
                                                          ------      ------      ------
 Total operating expenses..............................     21.1        15.8        16.1
Operating income.......................................      6.2        11.7        11.7
Interest expense.......................................      2.7         4.0         3.8
                                                          ------      ------      ------
Income before income taxes.............................      3.6         7.7         7.9
Provision for income taxes.............................      2.7         3.0         3.1
                                                          ------      ------      ------
Net income.............................................      0.9%        4.7%        4.8%
                                                          ======      ======      ======
</TABLE>

     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 slightly 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.

     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.

     Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

     Net sales for fiscal 1999 were $231.4 million, an increase of $30.9 million
or 15.4% over fiscal 1998.  This increase in net sales was primarily due to
comparable center growth, the opening of four new distribution centers and the
acquisition of Champion Blind and Drapery, Inc.

     The Company's gross profit for fiscal 1999 was $63.6 million, an increase
of $8.8 million or 16.1% over fiscal 1998.  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 27.5% in fiscal
1999 from 27.3% in fiscal 1998.

     Selling, general and administrative expense, consisting primarily of
payroll, occupancy and vehicle expenses totaled $36.5 million in fiscal 1999, an
increase of $6.3 million or 21.0% over fiscal 1998.  As a percentage of net
sales, selling, general and administrative expense increased to 15.8% in fiscal
1999 from 15.1% in fiscal 1998.  This increase was primarily due to the new
center openings, consolidation of certain administrative functions and the
conversion of the MIS system.

                                       12
<PAGE>

     Interest expense for fiscal 1999 was $9.3 million, an increase of $4.0
million or 74.8% from fiscal 1998, due to the additional debt incurred in the
Recapitalization.

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
2000, the Company opened 22 new distribution centers.  The Company has financed
its growth through a combination of internally generated funds and borrowings.

     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 primarily of capital
expenditures.  Net cash used in financing activities in fiscal 2000 was $7.7
million, comprised of repayments of long-term debt, the purchase of preferred
stock and the exercise of stock options.

     In fiscal 1999, net cash provided by 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.

     In fiscal 1998, net cash used in operating activities was $12.6 million due
primarily to expenses related to the Recapitalization and increased sales volume
which resulted in increased working capital needs.  Net cash used in investing
activities in fiscal 1998 was $0.9 million and was comprised of capital
expenditures and was partially offset by sales of property.  Net cash provided
by financing activities in fiscal 1998 was $10.5 million, related primarily to
the Recapitalization.

     The Company currently anticipates that its capital expenditures, excluding
potential acquisitions, for 2001 and 2002 will be approximately $2.0 million in
each year.  Inventories were $37.5 million as of December 31, 2000 and $33.5
million at December 31, 1999.  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 $28.7 million at
December 31, 2000 and $26.1 million at December 31, 1999.  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 $86.1
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 30, 2001, 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 $10.1 million, $13.6 million, $18.8 million, $28.5
million and $17.0 million over the next five 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.  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.  At March 30, 2001 the
interest rate for the Revolving Credit Facility was 9.25%, the Tranche A
Facility was 7.375% and the Tranche B Facility was 7.875%.  The interest rate
for the portion of the Term Loan Facility under the interest rate swap is 8.54%
for $13.875 million under the Tranche A Facility and

                                       13
<PAGE>

8.81% for $29.9 million under the Tranche B Facility. A commitment fee of 0.5%
per annum will be charged on the unused portion of the Credit Facility. The
loans under the Credit Facility are secured by a first 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 was amended on July 14, 2000 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 30, 2001, 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.  In 1999, the Company issued 53,656 shares of additional Exchange
Preferred Stock as payment-in-kind for dividends on the Exchange Preferred
Stock.  On January 1, 2000 and July 1, 2000 the Company issued 30,052 shares and
32,043 shares, respectively, of additional Exchange 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.

                                       14
<PAGE>

     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.

New Accounting Standard

     In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued. The Company was required to adopt this standard
by 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.

     The Company has determined the effect of implementing SFAS No. 133 is a
charge to OCI of $946,942. There was no impact on the Company's results of
operations from the implementation of SFAS No. 133.

     The Company adopted Emerging Issues Task Force Issue No. 00-10 ("EITF No.
00-10") "Accounting for Shipping and Handling Fees and Costs" during the fourth
quarter of 2000. EITF No. 00-10 addresses how shipping and handling fees should
be classified in the income statement. The adoption of EITF No. 00-10 had no
effect on the Company's classification of shipping and handling fees.

     The Company adopted the provisions of Staff Accounting Bulletin ("SAB") No.
101 issued by the Staff of the Securities and Exchange Commission. The impact of
adopting SAB No. 101 was not material to the Company.

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").  Notional amounts related to
interest rate swaps are used to calculate cash flows to be exchanged under the
swap agreement.

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

             Principal (Notional) Amount by Expected Maturity Date
                           (as of December 31, 2000)

<TABLE>
<CAPTION>
                                                                                                                         Fair Value
                                                                                                                         at Dec 31,
                              Fiscal 2001   Fiscal 2002   Fiscal 2003   Fiscal 2004   Fiscal 2005   Thereafter    Total     2000
                            --------------------------------------------------------------------------------------------------------
                                                                (Dollars in Thousands)
<S>                          <C>           <C>           <C>           <C>           <C>           <C>            <C>    <C>
Liabilities
Long-term Debt,
including current portion
    Variable Rate Debt....   $     9,500   $    13,000   $     7,000   $        --   $        --   $        --    $29,500    $29,500
    Interest Rate.........    LIBOR+2.50%   LIBOR+2.50%   LIBOR+2.50%   LIBOR+2.50%

Long-term Debt,
including current portion
    Variable Rate Debt....   $       600   $       600   $    11,800   $    28,500   $    17,000   $        --    $58,500    $58,500
    Interest Rate.........    LIBOR+2.75%   LIBOR+2.75%   LIBOR+2.75%   LIBOR+2.75%   LIBOR+2.75%   LIBOR+2.75%

</TABLE>

                                       15
<PAGE>

<TABLE>
<CAPTION>

Interest Rate Derivative
Instruments Related to
Debt
Interest Rate Swaps

                                                                                                                       at Dec 31,
                              Fiscal 2001  Fiscal 2002  Fiscal 2003   Fiscal 2004   Fiscal 2005   Thereafter   Total      2000
                              -----------  -----------  -----------   -----------   -----------   ----------  ------   ----------
<S>                           <C>          <C>          <C>           <C>           <C>           <C>         <C>      <C>
                                                                (Dollars in thousands)

  Pay Fixed/Receive
  Variable (Notional
  Amounts)(a)..............        $13,875
  Pay Rate.................           8.54%
  Receive Rate.............    LIBOR+2.50%                                                                                $   313

Interest Rate Swaps
  Pay Fixed/Receive
  Variable (Notional
  Amounts).................        $29,925
  Pay Rate.................           8.81%
  Receive Rate.............     LIBOR+2.75%                                                                               $   634
</TABLE>

_____________________
(a)  Notional amounts are averages of the quarterly settlement amounts which
     decline quarterly over the life of the swap from $14.7 million at December
     31, 2000 to $13 million at September 30, 2001.

        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
and interest rate swaps. While the Company can not 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 Report of Form 8-K."

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

        None.

                                   PART III

Item 10.  Directors and Executive Officers of the Registrant.

        The following table sets forth information regarding the executive
officers and directors of the Company as of March 30, 2001:


Name                         Age     Position with the Company
----                         ---     -------------------------
Dennis C. Bearden..........   50     Chief Executive Officer and Director
Richard E. Penick..........   44     Chief Financial Officer and Director
Don R. Hodina..............   47     Chief Operating Officer
Mark J. Doran..............   37     Director
William C. Johnson.........   61     Director
Jon D. Ralph...............   36     Director
J. Frederick Simmons.......   46     Director
Ronald P. Spogli...........   53     Director

        Dennis C. Bearden is Chief Executive Officer and director of the
Company. Mr. Bearden has held these positions since the Company's inception in
1988. Mr. Bearden entered the multifamily apartment market in 1973 by

                                       16
<PAGE>

forming Century Airconditioning Supply, Inc., which sold air conditioning
components to apartment communities in the Houston area.

     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.

     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 AFC Enterprises, Inc. and
Advance Stores Company Incorporated.

     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.

     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 Envirosource, Inc.,
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. Mr. Simmons is also a director of Envirosource,
Inc.

     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., Envirosource, Inc. and Hudson Respiratory Care 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."

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

                                       17
<PAGE>

services rendered in all capacities to the Company and its subsidiaries for the
fiscal years ended December 31, 1998, 1999 and 2000 (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                        2000     $125,000    $     --           $  --               --        $    12,750
 Chief Executive Officer                 1999      125,000          --              --               --             12,750
                                         1998      125,000          --              --          180,000(3)          12,750

Richard E. Penick                        2000     $115,000    $     --           $  --            4,800(3)     $   228,783
 Chief Financial Officer                 1999      115,000      50,000              --               --             12,750
                                         1998      106,923      50,000              --           48,000(3)         296,629

Don R. Hodina                            2000     $146,344    $     --           $  --               --        $    12,750
 Chief Operating Officer                 1999      104,840          --              --               --             12,750
                                         1998       99,996          --              --               --          1,124,476
</TABLE>

_______________
(1)  During 2000, 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
     1998, 1999 and 2000, (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, and (c) the value of options under the Company's 1997
     Stock Incentive Plan that were canceled for a cash payment in July 1998 in
     connection with the Recapitalization, in the amounts of $0, $288,102 and
     $1,120,476 for Mr. Bearden, Mr. Penick and Mr. Hodina, respectively. See
     "--Stock Option Plan--1997 Stock Incentive Plan."
(3)  Represents Options granted under the 1998 Nonqualified Stock Option Plan in
     1998 and 2000.

Option Grants in the Last Fiscal Year

       The following table provides summary information regarding stock options
granted during the year ended December 31, 2000 to each of the Company's Named
Executive Officers. The potential realizable value is calculated assuming that
the fair market value of the Company's Common Stock appreciates at the indicated
annual rate compounded annually for the entire term of the option, and that the
option is exercised and sold on the last day of its term for the appreciated
stock price. The assumed rates of appreciation are mandated by the rules of the
SEC and do not represent the Company's estimate of the future prices or market
value of the Company's Common Stock.

                                       18
<PAGE>

                     Option Grants in the Last Fiscal Year

<TABLE>
<CAPTION>
                                      Percent of
                                         Total                                  Potential Realizable Value at
                        Number of       Options                                     Assumed Annual Rates of
                        Securities     Granted to                               Price Appreciation for Option
                        Underlying     Employees                                            Term
                         Options       in Fiscal                                -----------------------------
      Name              Granted(1)        Year        Exercise   Expiration           5%              10%
-----------------       ----------    -----------     --------   ----------     ------------      -----------
<S>                     <C>           <C>             <C>        <C>            <C>               <C>
Richard E. Penick.....     4,800          5.3%         $10.00     6/15/07           $4.07            $9.49
</TABLE>

_______________
(1) Option grants were made under the 1998 Nonqualified Stock Option Plan and
    are exercisable in three equal annual increments beginning on July 9, 2000.

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, 2000 and the number and value of exercisable
and unexercisable options held as of December 31, 2000 by each of the Named
Executive Officers.

    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
                                Shares                           December 31, 2000(#)             December 31, 2000($)(1)
                              Acquired on         Value       --------------------------       ----------------------------
         Name                 Exercise(#)      Realized($)    Exercisable  Unexercisable       Exercisable    Unexercisable
----------------------        -----------      -----------    -----------  -------------       -----------    -------------
<S>                           <C>              <C>            <C>          <C>                 <C>            <C>
Dennis C. Bearden.....             --                --            --        180,000              $  --           $  --
Richard E. Penick.....         34,510(2)        216,033         5,600         47,200                 --              --
</TABLE>

_______________
(1) Value is determined by subtracting the exercise price from the fair market
    value of a share of the Company's Common Stock, which as of December 31,
    2000 was $10.00, as determined by the Company.
(2) Represents 34,510 shares that were acquired upon the exercise of options
    granted under the 1997 Stock Incentive Plan and 52,800 Options granted under
    the 1998 Stock Option Plan, 5,600 of which are vested and exercisable.


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 $125,000 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

                                       19
<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, $403,000,
$447,000 and $382,000 in 1998, 1999 and 2000 respectively, as matching funds to
the plan. No discretionary, lump-sum contributions were made in 1998, 1999 and
2000.

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 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.

                                       20
<PAGE>

     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 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.

     As of December 31, 2000, options representing the right to purchase an
aggregate of 536,400 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. 456,000 of these options are Performance Options and
80,400 of these options are Time Vested Options, as described above.

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

     The following table sets forth certain information, as of March 30, 2001,
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 30, 2001 are deemed
outstanding, while these shares are not deemed outstanding for 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 12,209,028 shares of Common Stock and 164,977.96 shares of
Series B Preferred Stock outstanding as of March 30, 2001.

                                       21
<PAGE>

<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            56.1%             54,992.65(5)             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             30.4%            109,985.31(5)             22.2%
Don R. Hodina....................................            --              --                      --                  --
Richard E. Penick(3).............................        63,470              1.0%                    --                  --
William C. Johnson(4)............................       127,083              1.0%                    --                  --
All Named Executive Officers and.................    10,853,053             88.5%            164,977.96(5)             33.3%
 directors of the Company as a group
 (8 individuals)(6)
</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 members 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 5,600 shares of Common Stock issuable upon the exercise of options
     which are exercisable within 60 days of March 30, 2001.
(4)  Includes 52,083 shares of Common Stock issuable upon the exercise of
     options which are exercisable within 60 days of March 30, 2001.
(5)  Shareholders 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.
(6)  Includes 6,912,501 shares of Common Stock and 54,992.65 shares of Series B
     Preferred Stock held by affiliates of Freeman Spogli & Co. LLC and 57,683
     shares of Common Stock issuable with respect to options granted to
     executive officers and directors that are exercisable within 60 days of
     March 30, 2001.

Item 13.  Certain Relationships and Related Transactions.

Shareholders' Agreement

     Amended Shareholders Agreement

     The stockholders of the Company's Common Stock were parties to a
shareholders' agreement with the Company and Mr. Bearden which was amended and
restated in July 1998 (the "Amended Shareholders' Agreement").  Under the
Amended Shareholders' 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.

                                       22
<PAGE>

     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 Shareholders' 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. Nonqualified
Stock Option Plan." If these employees exercise their options, the shares
received upon exercise will become subject to the Amended Shareholders'
Agreement.

     New Shareholders' Agreement

     In July 1998, FS&Co., Mr. Bearden and Century Airconditioning Supply, Inc.
("CAC") entered into a new shareholders' agreement (the "Shareholders'
Agreement"). Under the Shareholders' 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 Shareholders 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 Shareholders'
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 Shareholders' 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 Shareholders' 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 directors will be elected by a majority of the Board and
reasonably acceptable to Mr. Bearden. Notwithstanding the foregoing, the
Shareholders' 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 Shareholders' 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

                                       23
<PAGE>

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.

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 shareholder 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 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 $0.5
million, $0.6 million, $0.8 million and $0.8 million for fiscal 1997, 1998, 1999
and 2000, 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.

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, $1.2 million, $0.1 million and
$0.05 million for fiscal 1997, 1998, 1999 and 2000, respectively. CAC paid
management fees to the Company (with respect to shared administrative services)
of $0.3 million in 1997 and 1998. No management fees were paid by CAC to the
Company in 1999 and 2000.

Noncompete Agreement

     Mr. Bearden is the sole shareholder 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

                                       24
<PAGE>

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 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:

               Reports of Independent Auditors for Century Maintenance Supply, Inc........................    F-1
               Consolidated Balance Sheets as of December 31, 1999 and December 31, 2000..................    F-3
               Consolidated Statements of Income for the Years Ended December 31, 1998,...................    F-5
                 December 31, 1999 and December 31, 2000
               Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the Years.........    F-6
                 December 31, 1998, December 31, 1999 and December 31, 2000
               Consolidated Statements of Cash Flows for the Years Ended December 31, 1998,...............    F-7
                 December 31, 1999 and December 31, 2000
               Notes to Consolidated Financial Statements.................................................    F-8
</TABLE>

          (2)  Schedules.

               None.

          (3)  Exhibits.

   2.1*        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
               shareholders of the Company.
   2.2*        First Amendment to Agreement and Plan of Merger dated June 19,
               1998 among Century Acquisition Corporation, Bearden, FSEP IV, the
               Company, and the shareholders of the Company.
   3.1*        Amended and Restated Certificate of Incorporation of Century.
   3.2*        Amended and Restated Bylaws of Century.
   3.3*        Certificate of Designation by Century dated July 8, 1998.
   4.1*        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*        Registration Agreement dated July 8, 1998 between Century and
               Salomon Brothers Inc.
  10.1*        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*        Security Agreement dated as of July 8, 1998 between the Company
               and Citicorp.
  10.3*        Pledge Agreement dated as of July 8, 1998 between the Company and
               Citicorp.
  10.4*        Subsidiary Guarantee Agreement dated as of July 8, 1998 between
               the Company and Citicorp.
  10.5*        Indemnity, Subrogation and Contribution Agreement dated as of
               July 8, 1998 between the Company and Citicorp.
  10.6*        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*        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*     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*     Registration Rights Agreement dated July 8, 1998 among FSEP IV,
               Bearden, Century AC, the Company and certain stockholders of the
               Company.
     10.10*    Preferred Stock Registration Rights Agreement dated July 8, 1998
               among FSEP IV, Bearden and the Company.
     10.11*    Preferred Stock Subscription Agreement dated July 8, 1998 among
               the Company, FSEP IV and Bearden.
     10.12*    1998 Nonqualified Stock Option Plan.
     10.13*    1997 Incentive Stock Plan.
     10.14*    Form of Nonqualified Stock Option Agreement for 1998 Nonqualified
               Stock Option Plan.
     10.15*    Form of Agreement for 1997 Incentive Stock Plan.
     10.16*    Executive Employment Agreement dated July 8, 1998 between Century
               Maintenance Supply, Inc. and Bearden.
     10.17*    Executive Employment Agreement dated July 8, 1998 between Century
               Maintenance Supply, Inc. and Richard E. Penick.
      10.18*   Non-competition Agreement dated July 8, 1998 among Bearden,
               Century AC, Air Management Supply, Inc. and Century.
     10.19**   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.
     21.1*     Subsidiaries of Century.
     24.1      Power of Attorney (included on the signature pages hereof).

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

      (b)   Current Reports on Form 8-K.

            None.

                                       27
<PAGE>

Independent Auditors' Report

To the Directors & Shareholders of Century Maintenance Supply, Inc.

We have audited the accompanying consolidated balance sheets of Century
Maintenance Supply, Inc. and subsidiaries as of December 31, 1999 and 2000, and
the related consolidated statements of income, stockholders' equity (deficit),
and cash flows for the years then ended.  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, 1999 and 2000, and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.


/s/ DELOITTE & TOUCHE LLP

Houston, Texas
March 30, 2001

                                      F-1
<PAGE>

                         Report of Independent Auditors

Board of Directors
Century Maintenance Supply, Inc.

We have audited the accompanying consolidated statements of income,
stockholders' equity (deficit), and cash flows of Century Maintenance Supply,
Inc., and subsidiaries for the year ended December 31, 1998.  These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated results of operations and cash flows of
Century Maintenance Supply, Inc. and subsidiaries for the year ended December
31, 1998, in conformity with accounting principles generally accepted in the
United States.


                                         /s/ ERNST & YOUNG LLP

Houston, Texas
March 12, 1999

                                      F-2
<PAGE>

                       Century Maintenance Supply, Inc.

                          Consolidated Balance Sheets
                                (In Thousands)

<TABLE>
<CAPTION>
                                                   December 31
                                               -------------------
                                                 1999       2000
                                               --------   --------
<S>                                            <C>        <C>
Current assets:
  Cash and cash equivalents..................  $  3,499   $      4
  Trade accounts receivable, net.............    26,087     28,745
  Inventory, net.............................    33,547     37,482
  Deferred income taxes......................       748        558
  Prepaid expenses and other current assets..     3,262      5,292
                                               --------   --------
Total current assets.........................    67,143     72,081
Goodwill, net................................     6,367      6,175
Deferred financing costs.....................     2,682      2,028
Other assets.................................       212        303
Property and equipment:
  Buildings and improvements.................       283        395
  Furniture and fixtures.....................     1,710      1,979
  Machinery and equipment....................     6,271      7,591
                                               --------   --------
                                                  8,264      9,965
Less accumulated depreciation................    (4,228)    (5,666)
                                               --------   --------
  Net property and equipment.................     4,036      4,298
  Deferred income taxes......................        --        280
                                               --------   --------
  Total assets...............................  $ 80,440   $ 85,165
                                               ========   ========
</TABLE>

See accompanying notes.

                                      F-3
<PAGE>

                       Century Maintenance Supply, Inc.

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

<TABLE>
<CAPTION>                                                                              December 31
                                                                                  ---------------------
                                                                                     1999        2000
                                                                                  ---------   ---------
      <S>                                                                         <C>         <C>
      Current liabilities:
         Accounts payable, trade................................................  $  10,792   $  14,117
         Revolving credit facility..............................................         --       2,500
         Income taxes payable...................................................      3,590          13
         Accrued expenses.......................................................      3,525       4,044
         Current portion of long-term debt......................................      6,100      10,100
         Dividends payable......................................................      3,005       3,075
                                                                                  ---------   ---------
            Total current liabilities...........................................     27,012      33,849
      Long-term debt, less current portion......................................     88,000      77,900
      Deferred income taxes.....................................................        318          --
      Commitments and contingencies (see note 4)

      Redeemable exchangeable preferred stock, net $100 par value:
            Authorized shares -- 2,000,000
            Issued and outstanding shares -- 453,650 and 464,171 at
                December 31, 1999 and 2000......................................     42,908      44,509

      Stockholders' deficit:
         Common Stock, $0.001 par value:
            Authorized shares -- 15,000,000
            Issued and outstanding shares -- 12,443,147 and
                12,590,536 at December 31, 1999 and 2000........................         12          13
            Additional paid-in capital..........................................     70,759      71,176
            Treasury stock, at cost.............................................     (1,225)     (1,811)
            Accumulated deficit.................................................   (147,344)   (140,470)
                                                                                  ---------   ---------
      Total stockholders' deficit...............................................    (77,798)    (71,093)
                                                                                  ---------   ---------
      Total liabilities and stockholders' deficit...............................  $  80,440   $  85,165
                                                                                  =========   =========
</TABLE>

See accompanying notes.

                                      F-4
<PAGE>

                       Century Maintenance Supply, Inc.

                       Consolidated Statements of Income
                                (In Thousands)



<TABLE>
<CAPTION>
                                                                               Year Ended December 31
                                                                       ------------------------------------
                                                                          1998          1999         2000
                                                                       --------      --------      --------
       <S>                                                             <C>           <C>           <C>
       Net sales....................................................   $200,488      $231,382      $257,262
       Cost of goods sold...........................................    145,710       167,770       185,829
                                                                       --------      --------      --------
       Gross profit.................................................     54,778        63,612        71,433
       Selling, general, and administrative expenses ("SGA")........     30,198        36,458        41,316
       SGA - Stock based compensation charges.......................      4,092            74            56
       Recapitalization expenses....................................      7,982            --            --
                                                                       --------      --------      --------
       Operating income.............................................     12,506        27,080        30,061
       Interest expense.............................................      5,327         9,310         9,681
                                                                       --------      --------      --------
       Income before income taxes...................................      7,179        17,770        20,380

       Provision for income taxes...................................      5,380         6,970         7,928
                                                                       --------      --------      --------
       Net income...................................................   $  1,799      $ 10,800      $ 12,452
                                                                       ========      ========      ========
</TABLE>

See accompanying notes.

                                      F-5
<PAGE>

                       Century Maintenance Supply, Inc.

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



<TABLE>
<CAPTION>
                                                    Number of             Additional               Retained         Total
                                                      Shares     Common     Paid-In    Treasury    Earnings     Stockholders'
                                                   Outstanding    Stock     Capital      Stock     (Deficit)   Equity (Deficit)
                                                   -----------   ------   ----------   --------    ---------   ----------------
<S>                                                <C>           <C>      <C>          <C>         <C>         <C>
Balances at January 1, 1998......................   23,006,800       23       11,905         --       13,640            25,568
                                                   -----------    -----      -------    -------    ---------         ---------
    Purchase of treasury stock, at cost..........           --       --           --       (500)          --              (500)
    Proceeds from sale of Common Stock...........    6,832,619        6       68,319         --           --            68,325
    Purchase of Common Stock as part of
       recapitalization..........................  (17,396,272)     (17)      (9,078)        --     (164,867)         (173,962)
    Purchase of Common Stock options.............           --       --         (387)        --           --              (387)
    Preferred dividends..........................           --       --           --         --       (2,659)           (2,659)
    Net income...................................           --       --           --         --        1,799             1,799
                                                   -----------    -----      -------    -------    ---------         ---------
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)        $ (71,093)
                                                   ===========    -----      =======    =======    =========         =========
</TABLE>

See accompanying notes.

                                      F-6
<PAGE>

                       Century Maintenance Supply, Inc.

                     Consolidated Statements of Cash Flows
                                (In Thousands)

<TABLE>
<CAPTION>
                                                                                         Year Ended December 31
                                                                                    -------------------------------
                                                                                       1998       1999       2000
                                                                                    ---------    -------    -------
<S>                                                                                 <C>          <C>        <C>
Operating activities:
  Net income.....................................................................   $   1,799    $10,800    $12,452
  Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
       Provision (benefit) for deferred income taxes.............................         (95)       191       (408)
       Depreciation and amortization.............................................       1,063      1,481      1,700
       Bad debt expense..........................................................         409        434        706
       Loss on sale of property and equipment....................................          21         --         --
  Changes in operating assets and liabilities net of
    effects of acquisitions:
       Accounts receivable.......................................................      (3,260)    (7,219)    (3,364)
       Inventory.................................................................     (10,814)     1,167     (3,935)
       Prepaid expenses and other assets.........................................      (6,212)     1,243     (1,467)
       Accounts payable..........................................................       3,113        318      3,325
       Accrued expenses..........................................................       1,074       (551)       519
       Income taxes payable......................................................         286      1,310     (3,577)
                                                                                    ---------    -------    -------
          Net cash provided by (used in) operating activities....................     (12,616)     9,174      5,951

Investing activities:
  Purchases of property and equipment............................................        (938)    (2,740)    (1,770)
  Cash paid for acquisition, net.................................................          --     (1,253)        --
  Proceeds from sale of property and equipment...................................          73         --         --
                                                                                    ---------    -------    -------
          Net cash used in investing activities..................................        (865)    (3,993)    (1,770)

Financing activities:
  Net borrowings (payments) under revolving line of credit.......................      (8,800)        --      2,500
  Proceeds from long-term debt...................................................     100,000         --         --
  Repayments of long-term debt...................................................     (11,347)    (4,600)    (6,100)
  Purchase of stock options, net of compensation expense.........................        (388)        --         --
  Issuance of Common Stock and exercise of stock options.........................      68,326         --        417
    including tax benefit
  Sale (purchase) of preferred stock, net........................................      37,197         --     (3,907)
  Repurchase of common stock.....................................................    (174,463)      (725)      (586)
                                                                                    ---------    -------    -------
          Net cash provided by (used in) financing activities....................      10,525     (5,325)    (7,676)
                                                                                    ---------    -------    -------
Net decrease in cash.............................................................      (2,956)      (144)    (3,495)
Cash and cash equivalents at beginning of year...................................       6,599      3,643      3,499
                                                                                    ---------    -------    -------
Cash and cash equivalents at end of year.........................................   $   3,643    $ 3,499    $     4
                                                                                    =========    =======    =======
</TABLE>

See accompanying notes.

                                      F-7
<PAGE>

                       Century Maintenance Supply, Inc.

                  Notes to Consolidated Financial Statements
             For the Years Ended December 31, 1998, 1999 and 2000


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.

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 shareholder 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.

Stock Split

On July 8, 1998, the Company completed a 2.30068 to 1 Common Stock split in
connection with the Recapitalization. The consolidated financial statements and
accompanying notes have been restated to reflect the Common Stock split.

                                      F-8
<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
$204,000 at both December 31, 1999 and 2000.

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 $996,968, $1,193,003 and
$1,013,607 at December 31, 1998, 1999, and 2000 respectively. Net writeoffs of
uncollectible accounts were $154,520, $237,843 and $885,133 for the years ended
December 31, 1998, 1999 and 2000, 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 $875,235, $1,245,268 and $1,507,197 for 1998, 1999, and
2000, 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 $187,944, $235,419 and $192,231 for 1998,
1999, and 2000, respectively, and accumulated amortization was $478,220 and
$670,451 at December 31, 1999 and 2000, 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-9
<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.

                                      1998        1999         2000
                                  -----------  ----------   ----------

Supplemental information:
    Interest paid...............  $4,431,000   $9,310,000   $9,607,000
                                  ==========   ==========   ==========

    Taxes paid..................  $4,649,000   $6,800,000   $5,043,000
                                  ==========   ==========   ==========

Advertising Costs

The Company expenses all advertising costs as incurred. Advertising expense was
approximately $660,000, $381,000 and $834,042 for the years ended December 31,
1998, 1999, and 2000, 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. See Note 3 for fair
value of interest rate swap agreements.

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.

Effective July 1, 2000, the Financial Accounting Standards Board ("FASB") issued
FIN 44, "Accounting for Certain Transactions involving Stock Compensation", an
interpretation of APB No. 25. Under the interpretation, certain modifications to
fixed stock options or awards which were made subsequent to December 15, 1998,
and were not exercised prior to July 1, 2000, require that the awards be
accounted for as variable until they are exercised, forfeited, or expired.

                                      F-10
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)


This interpretation has no impact on current accounting for options of the
Company.

Use of Estimates

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

New Accounting Standard

In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued. The Company was required to adopt this standard by
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 flow, 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 in OCI will be reclassified to earnings in the periods in
which earnings are impacted by the hedged item.

The Company has determined the effect of implementing SFAS No. 133. The
cumulative-effect adjustment is a charge to OCI of $946,942 at January 1, 2001.
There was no impact on the Company's results of operations from the
implementation of SFAS No. 133.

The Company adopted Emerging Issues Task Force Issue No. 00-10 ("EITF No. 00-
10") "Accounting for Shipping and Handling Fees and Costs" during the fourth
quarter of 2000.  EITF No. 00-10 addresses how shipping and handling fees should
be classified in the income statement.  The adoption of EITF No. 00-10 had no
effect on the Company's classification of shipping and handling fees.

The Company adopted the provisions of Staff Accounting Bulletin ("SAB") No. 101
issued by the Staff of the Securities and Exchange Commission.  The impact of
adopting SAB No. 101 was not material to the Company.


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 an officer of the Company, extends credit under
standard terms in connection with these sales, and collected management and
administrative fees from CAC. 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 $1,191,328 and $1,453,420 for 1998,
and $141,953 and $754,998 for 1999, and $43,840 and $616,963 for 2000,
respectively. Management and administrative fees charged to CAC amounted to
$294,400 for 1998. No such payments were made in 1999 or 2000. The Company had
lease expense to related parties amounting to $567,180 for 1998, $848,208 for
1999 and $927,685 for 2000.

The Company paid interest on long-term debt of approximately $635,000 to an
officer and former majority stockholder in 1998.  No such payments were made in
1999 or 2000.

                                      F-11
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)


The Company paid interest on long-term debt of approximately $329,000 to an
employee and former owner of Nationwide Apartment Supply, Inc., and Fairview
Wholesale Supply, Inc. (collectively, "Nationwide"), in 1998. No such payments
were made in 1999 or 2000.

3.  Long-Term Debt and Notes Payable

Long-term debt consisted of the following:

                                                       December 31

                                                   1999          2000
                                               -----------   -----------
Long-term debt:
  Tranche A Facility (see below).............. $35,000,000   $29,500,000
  Tranche B Facility (see below)..............  59,100,000    58,500,000
                                               -----------   -----------
                                                94,100,000    88,000,000
Less current portion..........................   6,100,000    10,100,000
                                               -----------   -----------
                                               $88,000,000   $77,900,000
                                               ===========   ===========


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, 2000 the effective rate was 8.75% and 9.25% 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
0.5% per annum will be charged on the unused portion of the Revolving Credit
Facility. The Company has paid commitment fees of $116,257 and $103,770 in 1999
and 2000, 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 $754,348 and $767,169 as interest expense in December
31, 1999 and 2000, 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. 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 $92,000 and $307,000 in 1998 and 1999, respectively and a
benefit of $174,000 in 2000 related to the interest rate swap agreements. At
December 31, 2000, the fair value of the interest rate swaps under the first
agreement and the second agreement was $633,588 and $313,354, respectively.

                                      F-12
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)

Maturities of long-term debt at December 31, 2000 are summarized as follows:


2001......................................................  $10,100,000
2002......................................................   13,600,000
2003......................................................   18,800,000
2004......................................................   28,500,000
2005......................................................   17,000,000
                                                            -----------
                                                            $88,000,000
                                                            ===========

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:

                   Year Ending December 31


                   2001.......................................  3,875,456
                   2002.......................................  3,063,559
                   2003.......................................  2,045,051
                   2004.......................................    526,924
                   2005.......................................    160,911
                                                               ----------
                                                               $9,671,901
                                                               ==========

Rental expenses for 1998, 1999, and 2000 were $3,672,009, $4,903,166, and
$5,741,690, 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, 1998,
1999, and 2000 consisted of the following:


                                            1998         1999         2000
                                        ----------    ----------   ----------
Current:
   Federal............................  $4,800,962    $5,176,897   $7,583,261
   State..............................     674,434     1,601,980      753,067
                                        ----------    ----------   ----------
                                         5,475,396     6,778,877    8,336,328
Deferred:
   Federal............................     (60,253)      169,429     (386,518)

                                      F-13
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)


                                         1998          1999         2000
                                      ----------    ----------   ----------

     State...........................    (34,942)       21,308      (21,810)
                                      ----------    ----------   ----------
                                         (95,195)      190,737     (408,328)
                                      ----------    ----------   ----------
                                      $5,380,201    $6,969,614   $7,928,000
                                      ==========    ==========   ==========

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,
1998, 1999, and 2000 are as follows:

<TABLE>
<CAPTION>
                                                                                   1998          1999         2000
                                                                                ----------    ----------   ----------
<S>                                                                             <C>           <C>          <C>
Income tax computed at federal statutory income tax rate......................  $2,580,856    $6,219,500   $7,157,929
State income taxes, net of federal benefit....................................     424,590       516,307      461,362
Nondeductible recapitalization expenses.......................................   2,423,867            --           --
Amortization of nondeductible goodwill........................................      65,780        82,397       72,358
Nondeductible portion of business meals and entertainment.....................      42,897        42,194       36,513
Stock option redemption.......................................................    (135,623)           --           --
Other.........................................................................     (22,166)      109,216      199,838
                                                                                ----------    ----------   ----------
Provision for income taxes....................................................  $5,380,201    $6,969,614   $7,928,000
                                                                                ==========    ==========   ==========
</TABLE>

Deferred tax assets and liabilities as of December 31, 1999 and 2000 comprised
the following:

<TABLE>
<CAPTION>
                                                                                                 1999          2000
                                                                                              ----------    ---------
<S>                                                                                           <C>          <C>
Deferred tax assets:
  Bad debt allowances.....................................................................    $  470,856    $ 401,115
  Accrued bonuses.........................................................................        35,641       45,240
  Accrued franchise taxes.................................................................       237,592        2,056
  Inventory and sales return reserves.....................................................       139,717      135,254
  Property, plant, and equipment..........................................................            --      280,234
  Other...................................................................................         2,904           --
                                                                                              ----------    ---------
Total deferred tax assets.................................................................       886,710      863,899
Deferred tax liabilities:
  Depreciation expense....................................................................      (317,719)          --
  Inventory basis.........................................................................      (120,378)          --
  Other...................................................................................       (18,426)     (25,382)
                                                                                              ----------    ---------
Total deferred tax liabilities............................................................      (456,523)     (25,382)
                                                                                              ----------    ---------
Net deferred tax assets...................................................................    $  430,187    $ 838,517
                                                                                              ==========    =========
</TABLE>

6.  Acquisition

                                      F-14
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)

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

Effective March 29, 1998, the Company repurchased 193,170 shares of Common Stock
from a stockholder for $500,000, and effective June 1, 1999, repurchased 90,634
shares from a stockholder for $725,072 and effective January 14, 2000,
repurchased 97,727 shares from a stockholder for $586,362. These shares have
been placed in treasury stock.

As part of the Recapitalization the Company sold the $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 $112,000, $234,000 and $549,000 in 1998, 1999
and 2000, respectively to retained earnings as part of 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 "Company 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 options 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 the grant.
The Company also grated 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).

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 shareholder 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.

                                      F-15
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)

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.

The weighted average remaining contractual life of all outstanding options at
December 31, 1998, 1999 and 2000 was 6, 5 and 5.5 years, respectively.  Changes
in the outstanding options granted pursuant to the Stock Option Plan are
summarized in the table below:

<TABLE>
<CAPTION>
                                                      Weighted
                                                       Average
                                                      Exercise       Weighted
                                                        Price      Average Fair
                                          Number of      Per        Value Per
                                            Shares      Share         Share
                                          ---------   ---------    ------------
<S>                                       <C>         <C>          <C>
Outstanding at December 31, 1997........    942,428   $    2.18    $       1.12
   Repurchased July 8, 1998.............   (545,146)  $    2.13    $         --
   Granted July 9, 1998.................    692,000   $   10.00    $       2.27
   Granted July 9, 1998.................     50,000   $   10.00    $       2.27
   Granted July 9, 1998.................    180,000   $   10.00    $       2.27
                                          ---------   ---------    ------------

Outstanding at December 31, 1998........  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
                                          =========   =========    ============
</TABLE>

                                      F-16
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)

The following summarizes information related to stock options outstanding at
December 31, 2000:

<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....................     844,200       $ 10.00        4.7 years     122,483      $ 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, 1998, 1999 and 2000, 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
                                    -----------------------------------------
                                        1998           1999          2000
                                    ------------   ------------  ------------
<S>                                 <C>            <C>           <C>
Net income as reported.............  $1,799,273     $10,800,486   $12,452,084

Pro forma net income...............  $1,698,048     $10,800,486   $12,405,309
</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, 1998, 1999, and
2000, 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  $403,000, $447,247 and $381,558 in 1998, 1999
and 2000, respectively, as matching funds to the plan.  No discretionary, lump-
sum contributions were made in 1998, 1999 and 2000.

                                      F-17
<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.



April 2, 2001                       By: /s/ Richard E. Penick
                                        ---------------------
                                        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/ Dennis C. Bearden                Chief Executive Officer                        April 2, 2001
------------------------------       and Director (Principal Executive Officer)
      Dennis C. Bearden

/s/ Richard E. Penick                Chief Financial Officer and Director           April 2, 2001
------------------------------       (Principal Financial and Accounting
      Richard E. Penick              Officer)

/s/ Mark J. Doran                    Director                                       April 2, 2001
------------------------------
      Mark J. Doran

/s/ William C. Johnson               Director                                       April 2, 2001
______________________________
      William C. Johnson

/s/ Jon D. Ralph                     Director                                       April 2, 2001
------------------------------
      Jon D. Ralph

/s/ J. Frederick Simmons             Director                                       April 2, 2001
------------------------------
      J. Frederick Simmons

/s/ Ronald P. Spogli                 Director                                       April 2, 2001
------------------------------
      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