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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, 1999
                                      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

[ ]  Not applicable.

     The number of shares of Common Stock, par value $0.001 per share,
outstanding (the only class of common stock of the Company outstanding) was
12,061,639 as of March 29, 2000.  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 30,000 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 36 distribution centers which are strategically located in major
metropolitan markets throughout the United States.

Market Overview

     The Company operates in what the Company 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 in apartment complexes containing more than
50 units.  The Company services 36 such markets as of March 29, 2000.

     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.  The apartment
MRO market is also highly fragmented with approximately 50-60% of the
distributors being local or regional with most producing less than what the
Company estimates to be $5 million in sales.  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 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

                                       1
<PAGE>

products from national suppliers who provide broad product selection, convenient
ordering, reliable delivery and other value-added services.

     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 increased standard amenities in the typical apartment
unit.  These new features include microwave ovens, washers/dryers, miniblinds
and individual water heaters.  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

     Century currently offers over 4,300 cataloged stock-keeping units ("SKUs"),
providing a full range of MRO supplies to its customers.  Century 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
the Company believes provide it with a distinct competitive advantage in terms
of tailored products and favorable pricing.  These products, which include Sun
King(R) pool products, Boss(R) janitorial supplies, Rio(R) ceiling fans, and
DuroGuard air conditioning units, accounted for 6.6% of sales in 1999.  The
Company plans to continue its substantial development of 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
30,000 active accounts, an increase of more than 17,000 over the past four
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 1999, sales to the
Company's top five customers increased by approximately 22% 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.

                                       2
<PAGE>

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.

     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 134 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 salesforce generally does not take
customer orders, allowing it to focus on its core function.  In addition, the
outside salesforce 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 Salesforce.  The Company employs 100 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 information on pricing and promotions as well as installation
procedures and other critical characteristics which help them determine which
products are 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 six 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 Catalogs.  The Century Maintenance Catalog and the Century Maintenance
Supply A/C and Heating Parts Catalog include over 4,300 SKUs and are 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") and
Maintenance Warehouse/America Corp. ("Maintenance Warehouse").

                                       3
<PAGE>

Wilmar is the Company's most direct competitor in terms of product line and
method of distribution, while Maintenance Warehouse is primarily a mail-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 guaranteed to be 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 1999, 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.  Most locations are required to physically
count from 50 to 100 items four days per week, or approximately 200 days per
year, with the remainder of the distribution centers implementing a cycle
counting program since the completion of the conversion to the new MIS system.
See "--MIS System."

Suppliers and Purchasing

     Century currently purchases products from approximately 600 vendors.  In
1999, no Company vendor accounted for more than 5.5% of purchases in 1999, and
the top ten vendors accounted for approximately 35.0% 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 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.

                                       4
<PAGE>

MIS System

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

     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 is expected to increase 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 29, 2000, the Company employed 800 full-time employees and
24 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 36 different geographic markets, each
with a distribution center ranging in size from 12,100 to 114,000 square feet.
The Company leases all of its distribution centers, with lease expiration dates
ranging from June 2000 to December, 2004.  Management believes significant
additional capacity can be added at minimal cost to most of the locations
utilizing available contiguous space.  The Company recently moved its corporate
headquarters and the Houston distribution center to Stafford, Texas.  This new
114,000 square foot facility has allowed the Company to centralize corporate
functions such as purchasing, receivables, accounting, national sales, and
catalog production.

                                       5
<PAGE>

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.

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 13 holders of record.

     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.

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, 1998 and
1999 and for the three years in the period ended December 31, 1999, 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, 1995, 1996,
1997, 1998 and 1999 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 and Results of Operations--The
Recapitalization") which significantly affected 1998 financial data.

<TABLE>
<CAPTION>
                                                                                  Fiscal Year
                                            ------------------------------------------------------------------------------------
                                                  1995             1996              1997              1998              1999
                                                  ----             ----              ----              ----              ----
                                                                                (dollars in thousands)
<S>                                              <C>             <C>               <C>               <C>                <C>
Operating Data:
Net sales......................................  $80,115          $103,113          $146,166          $200,488          $231,382
Cost of goods sold.............................   59,201            75,552           105,636           145,710           167,770
                                                --------          --------          --------          --------          --------
Gross profit...................................   20,915            27,561            40,530            54,778            63,612
Operating expenses:
 Selling, general and administrative expenses..   15,256            17,271            22,264            30,198            36,458
 Recapitalization expenses(a)..................       --                --                --             7,982                --
 Stock based compensation charges(b)...........       --                --             6,969             4,092                74
                                                --------          --------          --------          --------          --------
Total operating expenses.......................   15,256            17,271            29,233            42,272            36,532
                                                --------          --------          --------          --------          --------
Operating income...............................    5,659            10,290            11,297            12,506            27,080
Interest expense(c)............................      790               865             1,147             5,327             9,310
                                                --------          --------          --------          --------          --------
Income before income taxes and minority
 interest......................................    4,869             9,425            10,150             7,179            17,770
Provision for income taxes(d)..................    1,359             2,798             6,370             5,380             6,970
                                                --------          --------          --------          --------          --------
Income before minority interest................    3,510             6,627             3,780             1,799            10,800
Minority interest in earnings of
subsidiaries...................................      682             1,237               848                --                --
                                                --------          --------          --------          --------          --------
Net income.....................................  $ 2,829          $  5,390          $  2,932          $  1,799          $ 10,800
                                                ========          ========          ========          ========         =========
</TABLE>


                                       7
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<TABLE>
<CAPTION>
                                                                                  Fiscal Year
                                            ------------------------------------------------------------------------------------
                                                  1995             1996              1997              1998              1999
                                                  ----             ----              ----              ----              ----
                                                                                (dollars in thousands)
<S>                                              <C>             <C>               <C>               <C>                <C>


Other Financial Data:
EBITDA(e)......................................  $ 6,031          $ 10,723          $ 12,066          $ 13,569          $ 28,561
Adj. EBITDA(f).................................  $ 6,031          $ 10,723          $ 19,035          $ 25,643          $ 28,635
Adj. EBITDA margin(g)..........................      7.5%             10.4%             13.0%             12.8%             12.4%
Depreciation & amortization....................  $   372          $    433          $    769          $  1,063          $  1,481
Capital expenditures...........................  $   461          $    513          $  1,534          $    937          $  2,740
Ratio of Adj. EBITDA to interest expense.......      7.6x             12.4x             16.6x              4.8x              3.1x
Ratio of total debt to Adj. EBITDA.............      1.6x              1.1x              1.0x              3.8x              3.3x
Other Data:
Distribution centers...........................       17                20                29                32                36
Comparable center sales growth(h)..............     28.2%             21.0%             20.8%             21.3%             12.4%
Active customers(i)............................   13,436            16,659            24,521            27,300            30,500
Cash Flow Data:
Net cash provided by (used in) operating
 activities....................................  $  (589)         $    785          $  6,304          $(12,616)         $  9,174
Net cash (used in) investing activities........     (458)             (493)           (9,575)             (865)           (3,993)
Net cash provided by (used in) financing
 activities....................................    1,088             2,083             4,946            10,525            (5,325)

Balance Sheet Data:
Working capital................................  $ 9,413          $ 14,456          $ 25,617          $ 37,921          $ 40,131
Operating working capital(j)...................   13,778            20,065            29,487            38,877            42,732
Total assets...................................   22,981            32,936            57,254            73,867            80,440
Redeemable preferred stock.....................       --                --                --            37,309            42,908
Total debt.....................................    9,385            12,253            18,997            98,700            94,100
Stockholders' equity (deficit).................    6,578            11,035            25,568           (81,816)          (77,798)
</TABLE>
______________________
(a) Transaction costs related to the Recapitalization.  See Note 1 to the
    Company's audited consolidated financial statements.
(b) 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 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.
(c) Interest expense in 1998 and 1999 includes amortization of deferred
    financing fees.
(d) As part of the Common Control Mergers (as defined in Note 8 to the Company's
    audited consolidated financial statements) 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

                                       8
<PAGE>

    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 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 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 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 21 new distribution centers from 1994 through 1999.
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

                                       9
<PAGE>

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 the sale of the Initial
Preferred Stock (the "Private Placement" and, together with the sale of the
Initial Preferred Stock, the "Sales of Preferred").  Immediately following
consummation of the Recapitalization, FS&Co. and the Continuing Stockholders
beneficially owned approximately 55.1% and 44.2% of the outstanding common stock
of the Company, respectively, and FS&Co. and Mr. Bearden beneficially owned
10.0% and 20.0% respectively of the outstanding preferred stock of the Company.

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

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

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

                                       10
<PAGE>

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
                                                         ----------------------------
                                                         1997        1998        1999
                                                         ----        ----        ----

<S>                                                     <C>           <C>         <C>
Net sales............................................  $146,166    $200,488    $231,382
Cost of goods sold...................................   105,636     145,710     167,770
                                                       --------    --------    --------
 Gross profit........................................    40,530      54,778      63,612
Selling, general and administrative expenses.........    22,264      30,198      36,458
Recapitalization expenses............................        --       7,982          --
Stock compensation charges...........................     6,969       4,092          74
                                                       --------    --------    --------
 Total operating expenses............................    29,233      42,272      36,532
Operating income.....................................    11,297      12,506      27,080
Interest expense.....................................     1,147       5,327       9,310
                                                       --------    --------    --------
Income before income taxes and minority interest.....    10,150       7,179      17,770
Provision for income taxes...........................     6,370       5,380       6,970
                                                       --------    --------    --------
Income before minority interest......................  $  3,780    $  1,799    $ 10,800
                                                       ========    ========    ========
</TABLE>

<TABLE>
                                                                   Fiscal Year
                                                         ----------------------------
                                                         1997        1998        1999
                                                         ----        ----        ----
<S>                                                      <C>          <C>         <C>
Net sales...........................................    100.0%       100.0%     100.0%
Cost of goods sold..................................     72.3         72.7       72.5
                                                       -------     --------    ------
 Gross profit.......................................     27.7         27.3       27.5
Selling, general and administrative expenses........     15.2         15.1       15.8
Recapitalization expenses...........................       --          4.0         --
Stock compensation charges..........................      4.8          2.0        0.0
                                                       -------     --------    -------
 Total operating expenses...........................     20.0         21.1       15.8
Operating income....................................      7.7          6.2       11.7
Interest expense....................................      0.8          2.7        4.0
                                                       -------     --------    -------
Income before income taxes and minority interest....      6.9          3.6        7.7
Provision for income taxes..........................      4.4          2.7        3.0
                                                       -------     --------    -------
Income before minority interest.....................      2.6%         0.9%       4.7%
                                                       =======     ========    =======
</TABLE>

     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.

                                       11
<PAGE>

     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 20.9% 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.

     Interest expense for fiscal 1999 was $9.3 million, an increase of $4.0
million or 75.5% from fiscal 1998, due to the additional debt incurred in the
Recapitalization.

     Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

     Net sales for fiscal 1998 were $200.5 million, an increase of $54.3 million
or 37.2% over fiscal 1997.  This increase in net sales was primarily due to the
Nationwide Acquisition, comparable center growth and the opening of three new
distribution centers.  The Nationwide Acquisition, which was consummated on July
11, 1997, added 11 new centers (three of which were consolidated into existing
centers in November 1997) and contributed $39.6 million in net sales in fiscal
1998 as compared to $18.9 million in net sales for fiscal 1997.  Additionally, a
new center in Fort Worth, Texas was opened in the first quarter of fiscal 1998,
and centers in Miami, Florida and Oklahoma City, Oklahoma were opened in the
third quarter of fiscal 1998.

     The Company's gross profit for fiscal 1998 was $54.8 million, an increase
of $14.2 million or 35.2% over fiscal 1997.  As a percentage of net sales, the
Company's gross profit decreased to 27.3% in fiscal 1998 from 27.7% in fiscal
1997.  This decrease in gross profit as a percentage of net sales was due
primarily to an increase in indirect cost in the new distribution centers, such
as labor and freight.  The decrease is also attributable to increased use of
temporary labor to accommodate higher HVAC sales during the third quarter of
fiscal 1998.

     Selling, general and administrative expense, consisting primarily of
payroll, occupancy related and vehicle base expenses totaled $30.2 million in
fiscal 1998, an increase of $7.9 million or 35.6% over fiscal 1997.  Of this
amount, $2.8 million was attributable to the Nationwide Acquisition.  As a
percentage of net sales, selling, general and administrative expense decreased
to 15.1% in fiscal 1998 from 15.2% in fiscal 1997.  This decrease was primarily
driven by improved efficiencies realized after the Nationwide Acquisition and by
the continued leveraging of the Company's infrastructure as sales per warehouse
increased, offset by the cost of new center openings, primarily in the third
quarter of fiscal 1998.

     Interest expense for fiscal 1998 was $5.3 million, an increase of $4.2
million or 364.4% from fiscal 1997, due to the additional debt incurred in the
Nationwide Acquisition and in the Recapitalization during 1998.

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
1999, the Company opened 21 new distribution centers.  The Company has financed
its growth through a combination of internally generated funds and borrowings.

     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.

                                       12
<PAGE>

     In fiscal 1997, net cash provided by operating activities was $6.3 million,
increasing from $0.8 million in fiscal 1996 due primarily to increasing sales
volume.  Net cash used for investing activities in fiscal 1997 was $9.6 million
and was comprised of capital expenditures and Nationwide Acquisition expenses,
partially offset by sales of property. Net cash provided by financing activities
in fiscal 1997 was $4.9 million and was comprised primarily of net borrowings.

     The Company currently anticipates that its capital expenditures for 2000
and 2001 will be $2.0 million in each year.  Inventories were $33.5 million as
of December 31, 1999 and $34.7 million at December 31, 1998.  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 increase primarily to support higher sales
volumes and new center openings.  Trade accounts receivable, net of allowances
were $26.1 million at December 31, 1999 and $19.1 million at December 31, 1998.
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 $94.1
million under the Term Loan Facility.  In addition to its operating cash flow,
the Company has access to a total of $25.0 million through the Revolving Credit
Facility.  As of March 29, 2000, the Company had no outstanding borrowings under
the Revolving Credit Facility.  The Tranche A Term Facility will mature on the
fifth anniversary of initial borrowing and the Tranche B Term Facility will
mature on the seventh anniversary of initial borrowing.  Annual required
principal payments on the Term Loan Facility on each anniversary of initial
borrowing will be $3.6 million, $4.6 million, $7.6 million, $12.6 million, $14.6
million, $23.0 million and $34.0 million.  The Revolving Credit Facility will
mature on the fifth anniversary of the Credit Facility.  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.  If the
Company achieves performance goals as agreed upon, rates under the Tranche A
Term Facility and the Revolving Credit Facility will be 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 29, 2000 the
interest rate for the Revolving Credit Facility was 10.5%, the Tranche A
Facility was 8.6875% and the Tranche B Facility was 8.9375%.  The interest rate
for the portion of the Term Loan Facility under the interest rate swap is 8.54%
for $17.5 million under the Tranche A Facility and 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 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 therein) 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 therein) 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 therein) 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,

                                       13
<PAGE>

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 others, (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 Company is in compliance, as of March 29, 2000, with the
material 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.  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.  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.

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

     The Company believes that, based on current levels of operations and
anticipated growth, its cash from operations, together with other available
sources of liquidity, including borrowings under the Revolving Credit Facility,
will be sufficient to fund its debt service obligations and implement its growth
strategy over the next 12 months.

Year 2000 Readiness Disclosure

     We have designed our computer network for use in the year 2000 and beyond.
As of March 29, 2000, we had not experienced any significant issues as a result
of year 2000 problems and do not anticipate incurring material costs in future
periods due to such issues.  The Company relies, directly and indirectly, on the
external systems of various independent business enterprises, such as its
customers, suppliers, creditors, financial organizations, and of governments,
for the accurate exchange of data and related information.  As of March 29,
2000, the Company has not been affected as a result of any disruption in the
operation of the various third-party enterprises with which the Company
interacts.  Although most year 2000 problems should have become evident on
January 1, 2000, additional year 2000-related problems may become evident only
after this date.  For example, some software programs may have difficulty
resolving the so-called "century leap year" algorithm which will also occur
during the year 2000.  We do not have any specific contingency plans for any
year 2000 problems should such problems arise in the future.

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 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.

                                       14
<PAGE>

     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, 1999)

<TABLE>
<CAPTION>
                                Fiscal 2000   Fiscal 2001   Fiscal 2002   Fiscal 2003    Fiscal 2004     Thereafter      Total
                                -----------   -----------   -----------   -----------    -----------     ----------      -----
<S>                             <C>           <C>           <C>            <C>            <C>             <C>            <C>
                                                                  (Dollars in thousands)
Liabilities
Long-term Debt, including
 current portion
 Variable Rate Debt......    $      5,500      $ 9,500       $13,000       $ 7,000    $         --       $        --    $ 35,000

 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        $   600       $11,800    $     28,500       $     17,000   $ 59,100

 Interest Rate...........       LIBOR+2.75%   LIBOR+2.75%   LIBOR+2.75%  LIBOR+2.75%   LIBOR+2.75%        LIBOR+2.75%

Interest Rate Derivative
 Instruments Related to
 Debt
Interest Rate Swaps
 Pay Fixed/Receive Variable
  (Notional Amounts)(a)....  $    16,656      $13,875
 Pay Rate..................        8.54%        8.54%
 Receive Rate..............     LIBOR+2.50%   LIBOR+2.50%

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

<TABLE>
<CAPTION>
                                 Fair
                                Value at
                                Dec 31,
                                 1999
                                --------

<S>                              <C>
Liabilities
Long-term Debt, including
 current portion

 Variable Rate Debt......        $35,000
 Interest Rate...........

[LIBOR + 2.50%] Long-term
 Debt, including current
 portion
 Variable Rate Debt......        $59,100
 Interest Rate...........

[LIBOR + 2.75%] Interest
 Rate Derivative Instruments
 Related to Debt
Interest Rate Swaps
 Pay Fixed/Receive Variable
  (Notional Amounts)(a)..
 Pay Rate................
 Receive Rate............        $   181

Interest Rate Swaps
 Pay Fixed/Receive Variable
(Notional Amounts).......
 Pay Rate................
 Receive Rate............        $   284
</TABLE>
_____________________
(a)  Notional amounts are averages of the quarterly settlement amounts which
     decline quarterly over the life of the swap from $18 million at December
     31, 1999 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."
                                       15
<PAGE>

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

     None.

                                       16
<PAGE>

                                    PART III

Item 10.    Directors and Executive Officers of the Registrant.

     The following table sets forth information regarding the executive officers
and directors of the Company as of March 29, 2000:

Name                      Age        Position with the Company
-----------------------   ---   ------------------------------------
Dennis C. Bearden......    49   Chief Executive Officer and Director
Richard E. Penick......    43   Chief Financial Officer and Director
Don R. Hodina..........    46   Chief Operating Officer
Mark J. Doran..........    36   Director
William C. Johnson.....    60   Director
Jon D. Ralph...........    35   Director
J. Frederick Simmons...    45   Director
Ronald P. Spogli.......    52   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 forming Century
Airconditioning Supply, 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 of the Company
after the Recapitalization.  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 the 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 became a director of the Company in connection with the
Recapitalization.  Mr. Doran joined an affiliate of FS&Co. in 1988 and became a
Principal 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. 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., Advance Holding Corporation and Advance Stores
Company, Incorporated.

     William C. Johnson became a director of the Company in connection with the
Recapitalization.  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 became a director of the Company in connection with the
Recapitalization.  Mr. Ralph joined an affiliate of FS&Co. in 1989 and became a
Principal 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.

                                       17
<PAGE>

     J. Frederick Simmons became a director of the Company in connection with
the Recapitalization. Mr. Simmons joined an affiliate of FS&Co. in 1986 and
became a Principal 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 became a director of the Company in connection with the
Recapitalization.  Mr. Spogli is a founding principal of an affiliate of FS&Co.,
which was 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., River Holding Corp., 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 services rendered
in all capacities to the Company and its subsidiaries for the fiscal year ended
December 31, 1999 (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..........        1999    $125,000     $  --            $  --             $      --             $   12,750 (1)
 Chief Executive Officer           1998     125,000        --               --               180,000 (3)             12,750
                                   1997     125,000        --               --                    --                 12,500


Richard E. Penick.........         1999    $115,000    $50,000           $  --                    --             $   12,750 (1)
Chief Financial Officer            1998     106,923     50,000              --                48,000 (3)            296,629
                                   1997      95,000         --              --                34,510 (4)             11,050

Don R. Hodina.............         1999    $104,840      $  --           $  --                    --             $   12,750 (1)
 Chief Operating Officer           1998      99,996         --              --                    -- (3)          1,124,476
                                   1997     111,027         --              --               161,048 (4)             12,132
</TABLE>
_____________________
(1)   During 1999, 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 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, and
      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" and Note 10 to the Company's audited
      consolidated financial statements.
(3)   Represents Options granted under the 1998 Stock Option Plan.

                                       18
<PAGE>

(4) Represents Options granted under the 1997 Stock Incentive Plan.

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 will 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 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,
$297,000, $403,000 and $447,000 in 1997, 1998 and 1999 respectively, as matching
funds to the plan.  No discretionary, lump-sum contributions were made in 1997,
1998 and 1999.

Compensation Committee Interlocks and Insider Participation

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

Stock Option Plan

     1997 Stock Incentive Plan

     In July 1998, the Company entered into agreements with substantially all of
the holders of outstanding options to purchase common stock of the Company
("Existing Options") previously granted under the Company's 1997 Stock Incentive
Plan.  Under these agreements, options to purchase fewer than 1,500 shares of
the Company's common stock (before the stock split pursuant to the
Recapitalization) were canceled for the right to receive a cash payment per
share equal to the difference between the cash merger consideration of
approximately $23 per share (the "Cash Merger Consideration") and the exercise
price per share (the "Cash Option Consideration").  For options to purchase
1,500 or

                                       19
<PAGE>

more shares of the Company's common stock, 50% were retained by the
holders and remain outstanding and were adjusted for the stock split, and 50%
were canceled for the right to receive the Cash Option Consideration.

     1998 Stock Option Plan

     In July 1998, the Company adopted a new stock option plan (the "Option
Plan"), permitting grants of options to purchase approximately 13% of Century's
common stock.  The 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 Option Plan.  In addition, all options granted
pursuant to the 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.

     Options to purchase 5.0% of the initial outstanding shares of Century's
common stock ("Time Vesting Options"), which will be granted in 1.0% annual
increments, will 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).  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") will be 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
will be 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.

     No stock option grants were made to any of the Named Executive Officers in
the year ended December 31, 1999.

     Options representing the right to purchase an aggregate of 507,000 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.  All of these options are Performance Options.

                                       20
<PAGE>

Aggregated Option Exercises and Fiscal Year-End Option Values

     No options were exercised in fiscal 1999.  See "--Summary Compensation
Table" for payments received in connection with the cancellation of Options in
connection with the Recapitalization.  The following table sets forth
information with respect to  exercisable and unexercisable options held as of
December 31, 1999 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
                                                                                   Options at
                          Shares                                              December 31, 1999(#)
                       Acquired on                 Value                  ---------------------------------
      Name             Exercise(#)               Realized($)              Exercisable         Unexercisable
-----------------      -----------               -----------              -----------         -------------

<S>                    <C>                      <C>                       <C>                 <C>
Dennis C. Bearden....           --                      --                        --               180,000
Richard E. Penick....           --                      --                  38,510(2)               44,000
Don R. Hodina........           --                      --                 161,048(3)                  --
</TABLE>

<TABLE>
<CAPTION>
                                            Value of Unexercised
                                           In-the-Money Options at
                                           December 31, 1999($)(1)
                                       ---------------------------------
                                        Exercisable        Unexercisable
                                        -------------      -------------

<S>                                    <C>                 <C>
Dennis C. Bearden.................       $    --                $0
Richard E. Penick.................        285,053                0
Don R. Hodina.....................      1,120,894                0
</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,
    1999 was $10.00, as determined by the Company.
(2) 34,510 Options were granted under the 1997 Stock Incentive Plan, all of
    which are vested and exercisable, and 48,000 Options were granted under the
    1998 Stock Option Plan, 4,000 of which are vested and exercisable.
(3) All options were granted under the 1997 Stock Incentive Plan, all of which
    are vested and exercisable.

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

     The following table sets forth certain information, as of March 29, 2000,
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 Named
Executive Officers and directors of the Company as a group.

<TABLE>
<CAPTION>
                                                                                                               Percent of
                                                                                    Shares of Series         all Preferred
                                        Shares of Common          Percent of           B Preferred                Stock
Name of Beneficial Owner                     Stock                   Class                Stock                Outstanding
------------------------                ----------------          -----------       ----------------         -------------
<S>                                       <C>                       <C>               <C>                      <C>
Freeman Spogli & Co. LLC(1)...........      6,912,501              54.8%                40,000                      10.0%
 Ronald P. Spogli(1)
 J. Frederick Simmons(1)
 Mark J. Doran(1)
 Jon D. Ralph(1)
Dennis C. Bearden(3)(4)...............      3,749,999              29.7%                80,000                      20.0%
Richard E. Penick(3)..................         69,822 (5)             *                     --                        --
Don R. Hodina(3)......................        161,048 (5)           1.3%                    --                        --
William C. Johnson(2).................        127,083               1.0%                    --                        --
All Named Executive Officers and
 directors of the Company as a
 group (8 individuals)                     11,020,453              87.3%                    --                        --
</TABLE>

                                                     Footnotes on following page

                                       21
<PAGE>

_____________________
*    Less than 1%.
(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)  Includes an option to purchase 50,000 shares that is vested and
     exercisable.
(3)  The business address of these individuals is Century Maintenance Supply,
     Inc., 10050 Cash Road, Suite 1, Stafford, Texas 77477.
(4)  Includes Common Stock held by Century Airconditionng Supply, Inc., an
     entity wholly owned by Mr. Bearden.
(5)  Shares of Common Stock for Richard E. Penick and Don R. Hodina represent
     shares that are held of record plus any shares issuable pursuant to options
     held by the person in question that may be exercised within 60 days after
     the date of this Report.  Mr. Penick holds options to purchase (i) 34,510
     shares of Common Stock at a purchase price of $1.74 per share, all of which
     are vested and exercisable; and (ii) 48,000 shares of Common Stock at a
     purchase price of $10.00 per share, 4,000 of which are vested and
     exercisable.  Mr. Hodina holds options to purchase 161,048 shares of Common
     Stock at a purchase price of $3.04 per share, all of which are vested and
     exercisable.

Item 13.    Certain Relationships and Related Transactions.

Shareholders' Agreement

     Amended Shareholders Agreement

     The stockholders of the Company's common stock were party 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.

     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 provides that no Continuing Stockholder
(other than Mr. Bearden) may sell any of its capital stock in the Company for a
period of two years after the Recapitalization; this limitation terminates upon
the Company's initial public offering.  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.  Stock Option
Plan."  If these employees exercise their options, the shares received upon
exercise will become subject to the Amended Shareholders' Agreement.

                                       22
<PAGE>

     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.  In addition, for a period of two years from the closing of the
Recapitalization, unless consented to by Mr. Bearden, FS&Co. will not sell its
capital stock in the Company to certain competitors of the Company; provided,
that in the event that the Company's actual operating cash flow during any 12
month period during such two year period exceeds certain targets projected by
management (as defined in the Shareholders' Agreement), FS&Co. will then be
allowed to sell its capital stock to any potential acquiror, including such
competitors.  These restrictions upon transfer terminate on the earlier of two
years after consummation of the Recapitalization or upon the Company's initial
public offering; provided, that FS&Co. and Mr. Bearden will remain subject to
the lockup periods described below.

     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 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.

                                       23
<PAGE>

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 the Named Executive Officers (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 and $.8 million for fiscal 1997, 1998 and 1999,
respectively.  In addition, the Company was a party to the Common Control
Mergers.  See Note 8 to the audited consolidated financial statements of the
Company.

     In connection with the Recapitalization, stock options with a value of
approximately $3.0 million (net of the exercise price) remain outstanding.  Such
stock options, together with the common stock being retained by the Continuing
Stockholders, represents approximately 44.1% of the common stock of the Company
on a fully-diluted basis.

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 share
some administrative services, for which CAC pays 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 and $.1 million for
fiscal 1997, 1998 and 1999, 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.

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 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

                                       24
<PAGE>

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, 1998 and December 31,1999.............  F-3
                 Consolidated Statements of Income for the Years Ended December 31,1997
                  December 31, 1998 and December 31, 1999.............................................  F-5
                 Consolidated Statements of Changes in Stockholders' Equity (Deficit) for the Years
                  December 31, 1997, December 31, 1998 and December 31, 1999..........................  F-6
                 Consolidated Statements of Cash Flows for the Years Ended December 31, 1997,
                  December 31, 1998 and December 31, 1999.............................................  F-7
                 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 Acquistion 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 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.
       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.
       21.1*      Subsidiaries of Century.
       24.1       Power of Attorney (included on the signature pages hereof).
       27.1       Financial Data Schedule.
___________________________
* 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).


 (b)      Current Reports on Form 8-K.

          None.


                                       26
<PAGE>

Independent Auditors' Report

Century Maintenance Supply, Inc.

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


                                       DELOITTE & TOUCHE LLP


Houston, Texas
March 17, 2000




                                      F-1

<PAGE>
                        Report of Independent Auditors

Board of Directors
Century Maintenance Supply, Inc.

We have audited the accompanying consolidated balance sheets of Century
Maintenance Supply, Inc. (formerly Century Air Supply, Inc.), and subsidiaries
as of December 31, 1998, and the related consolidated statements of income,
changes in stockholders' equity (deficit), and cash flows for each of the two
years in the period 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 audits.

We conducted our audits 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 audits provide a reasonable basis
for our opinion.

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




                                            ERNST & YOUNG LLP


Houston, Texas
March 12, 1999

                                      F-2

<PAGE>

                        Century Maintenance Supply, Inc.

                          Consolidated Balance Sheets
                                 (In Thousands)



<TABLE>
<CAPTION>
                                                    December 31
                                                -------------------

                                                  1998       1999
                                                --------   --------
<S>                                           <C>         <C>
Current assets:
 Cash and cash equivalents....................  $ 3,643     $ 3,499
 Trade accounts receivable, net...............   19,302      26,087
 Inventory, net...............................   34,714      33,547
 Deferred income taxes........................      918         748
 Prepaid expenses and other current assets....    3,321       3,262
                                                -------     -------
Total current assets..........................   61,898      67,143
Goodwill, net.................................    5,350       6,367
Deferred financing costs......................    3,437       2,682
Other assets..................................      641         212
Property and equipment:
 Buildings and improvements...................      240         283
 Furniture and fixtures.......................    1,312       1,710
 Machinery and equipment......................    4,256       6,271
                                                -------     -------
                                                  5,808       8,264
 Less accumulated depreciation................   (3,267)     (4,228)
                                                -------     -------
Net property and equipment....................    2,541       4,036
                                                -------     -------
Total assets..................................  $73,867     $80,440
                                                =======     =======
</TABLE>

See accompanying notes.

                                      F-3
<PAGE>

                       Century Maintenance Supply, Inc.

                    Consolidated Balance Sheets (continued)
                       (In Thousands, except share data)
<TABLE>
<CAPTION>
                                                                        December 31
                                                                ------------------------
                                                                    1998         1999
                                                                ----------    ----------
<S>                                                            <C>          <C>
Current liabilities:
 Accounts payable, trade........................................  $  10,474    $  10,792
 Income taxes payable...........................................      2,280        3,590
 Accrued expenses...............................................      4,076        3,525
 Current portion of long-term debt..............................      4,600        6,100
 Dividends payable..............................................      2,547        3,005
                                                                  ---------    ---------
    Total current liabilities...................................     23,977       27,012
Long-term debt, less current portion............................     94,100       88,000
Deferred income taxes...........................................        297          318
Commitments and contingencies (see Note 4)

Redeemable exchangeable preferred stock, net $100 par value:
    Authorized shares -- 2,000,000
    Issued and outstanding shares -- 400,000 and 453,650 at
      December 31, 1998 and 1999................................     37,309       42,908

Stockholders' deficit:
 Common Stock, $0.001 par value:
    Authorized shares -- 15,000,000 issued and outstanding
      shares -- 12,443,147......................................         12           12
    Additional paid-in capital..................................     70,759       70,759
    Treasury stock, at cost.....................................       (500)      (1,225)
    Accumulated deficit.........................................   (152,087)    (147,344)
                                                                  ---------    ---------
Total stockholders' deficit.....................................    (81,816)     (77,798)
                                                                  ---------    ---------
Total liabilities and stockholders' deficit.....................  $  73,867    $  80,440
                                                                  =========    =========
</TABLE>
See accompanying notes.

                                      F-4
<PAGE>

                        Century Maintenance Supply, Inc.

                       Consolidated Statements of Income
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                         Year ended December 31
                                                   ----------------------------------
                                                      1997        1998        1999
                                                   ---------    ---------   ---------
<S>                                                <C>          <C>         <C>
Net sales.........................................  $146,166     $200,488    $231,382
Cost of goods sold................................   105,636      145,710     167,770
                                                    --------     --------    --------
Gross profit......................................    40,530       54,778      63,612
Selling, general, and administrative expenses.....    22,264       30,198      36,458
Recapitalization expenses.........................        --        7,982          --
Stock based compensation charges..................     6,969        4,092          74
                                                    --------     --------    --------
Operating income..................................    11,297       12,506      27,080
Interest expense..................................     1,147        5,327       9,310
                                                    --------     --------    --------
Income before income taxes and minority
 interest.........................................    10,150        7,179      17,770
Provision (benefit) for income taxes:
 Current..........................................     6,457        5,475       6,779
 Deferred.........................................       (87)         (95)        191
                                                    --------     --------    --------
                                                       6,370        5,380       6,970
                                                    --------     --------    --------
Income before minority interest...................     3,780        1,799      10,800

Minority interest in earnings of subsidiaries.....       848           --          --
                                                    --------     --------    --------
Net income........................................  $  2,932     $  1,799    $ 10,800
                                                    ========     ========    ========
Pro forma information (unaudited):
 Historical income before income taxes and
   minority interest..............................  $ 10,150
 Pro forma provision for income taxes
   (unaudited)....................................     6,664
                                                    --------

Pro forma income before minority interest
   (unaudited)....................................     3,486

Minority interest in earnings of subsidiaries.....       848
                                                    --------
Pro forma net income (unaudited)..................  $  2,638
                                                    ========
</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       Common     Additional   Treasury     Retained          Total
                               Shares         Stock      Paid-In      Stock       Earnings      Stockholders'
                            Outstanding                  Capital                  (Deficit)    Equity (Deficit)
                            -----------     --------   ----------   ----------   ----------   -----------------
<S>                         <C>            <C>       <C>           <C>         <C>           <C>
Balances at January 1,
 1997.................       19,138,612    $      19    $     654    $      --    $  10,361     $  11,034

Issuance of common
 shares for minority
 shares at June 30,
 1997.................        3,868,188            4       10,625           --           --        10,629

Stock options
 granted..............               --           --          626           --           --           626

Contribution..........               --           --           --           --          347           347

  Net income..........               --           --           --           --        2,932         2,932
                             ----------    ---------    ---------    ---------    ---------     ---------
Balances at
 December 31, 1997....       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..               --           --           --         (725)           --         (725)
 stock, at cost

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)
                             ==========    =========    =========    =========    =========     =========
</TABLE>

See accompanying notes.

                                      F-6
<PAGE>

                        Century Maintenance Supply, Inc.

                     Consolidated Statements of Cash Flows
                                 (In Thousands)

<TABLE>
<CAPTION>
                                                                   Year ended December 31
                                                           -----------------------------------
                                                                1997        1998        1999
                                                          ---------   ----------    ----------
<S>                                                        <C>        <C>          <C>
Operating activities:
 Net income.................................................  $ 2,932    $   1,799     $10,800
 Adjustments to reconcile net income to net cash
  provided by (used in) operating activities:
    Compensation expense related to stock transactions......    6,969           --          --
    Provision (benefit) for deferred income taxes...........      (87)         (95)        191
    Depreciation and amortization...........................      769        1,063       1,481
    Bad debt expense........................................      238          409         434
    Loss on sale of property and equipment..................       11           21          --
    Minority interest in earnings of subsidiaries...........      848           --          --
 Changes in operating assets and liabilities net of
  effects of acquisitions:
    Accounts receivable.....................................   (1,034)      (3,260)     (7,219)
    Inventory...............................................   (5,558)     (10,814)      1,167
    Prepaid expenses and other assets.......................     (255)      (6,212)      1,243
    Accounts payable........................................    1,270        3,113         318
    Accrued expenses........................................      (89)       1,074        (551)
    Income taxes payable....................................      290          286       1,310
                                                             --------     --------    --------
       Net cash provided by (used in) operating activities..    6,304      (12,616)      9,174
Investing activities:
 Purchases of property and equipment........................   (1,534)        (938)     (2,740)
 Cash paid for acquisition, net.............................   (8,740)          --      (1,253)
 Proceeds from sale of property and equipment...............      699           73          --
                                                             --------     --------    --------
       Net cash used in investing activities................   (9,575)        (865)     (3,993)
Financing activities:
 Net borrowings (payments) under revolving line of credit...      299       (8,800)         --
 Proceeds from long-term debt...............................    6,650      100,000          --
 Repayments of long-term debt...............................   (2,350)     (11,347)     (4,600)
 Purchase of stock options, net of compensation expense.....       --         (388)         --
 Sale of common stock.......................................       --       68,326          --
 Sale of preferred stock, net...............................       --       37,197          --
 Repurchase of stock........................................       --     (174,463)       (725)
 Capital contributions......................................      347           --          --
                                                             --------     --------    --------
       Net cash provided by (used in) financing activities..    4,946       10,525      (5,325)
                                                             --------     --------    --------
Net increase (decrease) in cash.............................    1,675       (2,956)       (144)
Cash and cash equivalents at beginning of year..............    4,924        6,599       3,643
                                                             --------     --------    --------
Cash and cash equivalents at end of year....................  $ 6,599    $   3,643     $ 3,499
                                                             ========     ========    ========
</TABLE>

See accompanying notes.

                                      F-7
<PAGE>

                       Century Maintenance Supply, Inc.

                  Notes to Consolidated Financial Statements
             For the Years Ended December 31, 1999, 1998 and 1997

1.  Summary of Significant Accounting Policies

Description of Business

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

Principles of Consolidation

On June 30, 1997, CMS was incorporated under the laws of the State of Delaware.
Century Air Supply, Inc. ("CAS"), was incorporated on January 21, 1976 under the
laws of the State of Texas.  At the same time as the incorporation of CMS, all
of the outstanding shareholders of CAS exchanged all of their shares of common
stock for CMS common stock at a ratio of 6,616 for 1.  Share amounts in the
consolidated financial statements and accompanying notes have been restated to
reflect the reorganization.

On June 30, 1997, the Company purchased all assets of the general maintenance
supply operations of an affiliated company, Century Airconditioning Supply, Inc.
("CAC"), with 3,917,372 shares of the Company's common stock.  Also, on June 30,
1997, the Company sold one of its subsidiaries in the heating and air
conditioning business to CAC for $215,000.  These transactions were conducted
between the Company and CAC, which were under common control, and, as such, the
transactions were recorded at historical cost in a manner similar to a pooling
of interests.  All periods presented have been restated to reflect these
transactions (see Note 8).

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.

                                      F-8
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)

  . 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 9). 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.

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 and the reserve
was $354,000 and $204,000 at December 31, 1998 and 1999, respectively.

Allowance for Doubtful Accounts

The Company periodically evaluates the creditworthiness of its customers.  The
Company's allowance for doubtful accounts is based on current market conditions
and losses on uncollectible accounts have consistently been within management's
expectations.  The allowance for doubtful accounts was $755,940, $996,968, and
$1,193,003 at December 31, 1997, 1998, and 1999 respectively.  Net writeoffs of
uncollectible accounts were $35,024, $154,520 and $237,843 for the years ended
December 31, 1997, 1998 and 1999, 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 $669,308, $875,235, and $1,245,268 for 1997, 1998, and
1999, 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 $100,000, $187,944 and $235,419 for 1997,
1998, and 1999, respectively, and accumulated amortization was $287,944 and
$523,363 at December 31, 1998 and 1999, respectively.

                                      F-9
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)

Revenue Recognition

Revenue is recognized upon delivery of inventory to customers.

Income Taxes

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

Statement of Cash Flows

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

<TABLE>
<CAPTION>
                                  1997          1998          1999
                               -----------   -----------   -----------
<S>                            <C>           <C>           <C>
Supplemental information:
     Interest paid...........  $ 1,338,000   $ 4,431,000   $ 9,310,000
                               ===========   ===========   ===========
     Taxes paid..............  $ 4,335,000   $ 4,649,000   $ 6,800,000
                               ===========   ===========   ===========
</TABLE>

Advertising Costs

The Company expenses all advertising costs as incurred.  Advertising expense was
approximately $416,000, $660,000, and $381,000 for the years ended December 31,
1997, 1998, and 1999, 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

The Company accounts for stock-based compensation arrangements with employees
under the provisions of Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees.

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 1999, the Financial Accounting Standards Board ("FASB") issued SFAS 137,
Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133.  SFAS 137 defers the effective date

                                      F-10
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)

of SFAS 133, Accounting for Derivative Instruments and Hedging Activities, to
January 1, 2001. The Company is currently reviewing SFAS 133 and plans to adopt
SFAS 133 as of January 1, 2001, and has yet to quantify the effects of adoption
on its financial statements.

2.  Related Parties

The Company purchases and sells various inventory items at cost from and to 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
collects 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 $1,178,546 and $908,862 for 1997,
$1,191,328 and $1,453,420 for 1998, and $141,953 and $754,998 for 1999,
respectively.   Management and administrative fee income charged to CAC amounted
to $284,746, $294,400, and $0  for 1997, 1998, and 1999, respectively.  The
Company had lease expense to related parties amounting to $567,180 for 1998 and
$848,208 for 1999.

The Company paid interest on long-term debt of approximately $210,000, $635,000,
and $0 to an officer and former majority stockholder in 1997, 1998, and 1999,
respectively.

The Company paid interest on long-term debt of approximately $253,000 and
$329,000 to an employee and former owner of Nationwide Apartment Supply, Inc.,
and Fairview Wholesale Supply, Inc. (collectively, "Nationwide"), in 1997 and
1998, respectively.  No such payments were made in 1999.

3.  Long-Term Debt and Notes Payable

Long-term debt consisted of the following:

<TABLE>
<CAPTION>
                                            December 31
                                        1998           1999
                                    ------------   ------------
<S>                                 <C>            <C>

Long-term debt:
    Tranche A Facility (see below).. $39,000,000    $35,000,000
    Tranche B Facility (see below)..  59,700,000     59,100,000
                                     -----------    -----------
                                      98,700,000     94,100,000
Less current portion................   4,600,000      6,100,000
                                     -----------    -----------
                                     $94,100,000    $88,000,000
                                     ===========    ===========
</TABLE>

On July 8, 1998, as part of the Recapitalization, the Company entered into a new
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
new 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, 1999 the effective rate was 8.6875% and 8.9375% for the Tranche
A facility and Tranche B Term facility, respectively.  If the Company

                                      F-11
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)

achieves certain performance goals, rates under the Tranche A Term Facility and
the Revolving Facility will be reduced. A commitment fee of 0.5% per annum will
be charged on the unused portion of the new Revolving Credit Facility. The
Company has paid commitment fees of $61,111 and $116,257 in 1998 and 1999,
respectively.

The new credit facility contains certain non-financial and financial covenants.
The Company incurred approximately $4,552,000 of costs as part of obtaining the
new credit facility which have been recorded as deferred financing costs. The
Company amortizes the costs over the average life of the new credit facility.
The Company recognized amortization of $360,961 and $754,348 as interest expense
in December 31, 1998 and 1999, 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 new
credit facility.  Under the terms of the first agreement, the Company pays 8.81%
on notional principal of $18,000,000 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 through December 31, 1998 related to the
interest rate swap agreements.  At December 31, 1998, the fair value of the
interest rate swaps under the first agreement and the second agreement was
$284,474 and $181,248, respectively.


Maturities of long-term debt at December 31, 1999 are summarized as follows:

<TABLE>
<S>                                                  <C>
2000.................................................     $ 6,100,000
2001.................................................      10,100,000
2002.................................................      13,600,000
2003.................................................      18,800,000
2004.................................................      28,500,000
Thereafter...........................................      17,000,000
                                                          -----------
                                                          $94,100,000
                                                          ===========
</TABLE>

4.  Commitments and Contingencies

The Company leases store and distribution center facilities in 36 locations
under operating leases that expire over the next five years.  The Company also
leases vehicles under operating leases.

Future minimum payments under these operating leases are as follows:

              <TABLE>
              <CAPTION>
              Year ending December 31

              <S>                          <C>
              2000.......................   $ 3,817,695
              2001.......................     3,651,308
              2002.......................     2,901,099
              2003.......................     1,779,419
              2004.......................       308,865
              Thereafter.................            --
                                            -----------
                                            $12,458,386
                                            ===========
              </TABLE>

                                      F-12
<PAGE>


                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)


Rental expenses for 1997, 1998, and 1999 were $2,556,757, $3,672,009, and
$4,903,166, 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 of the Company, or cash flow.


5.  Income Taxes

The provision (benefit) for income taxes for the years ended December 31, 1997,
1998, and 1999 consisted of the following:

<TABLE>
<CAPTION>
                               1997           1998          1999
                            ----------     ----------     ----------
<S>                        <C>             <C>            <C>
Current:
   Federal................  $5,729,375     $4,800,962     $5,176,897
   State..................     727,272        674,434      1,601,980
                            ----------     ----------     ----------
                             6,456,647      5,475,396      6,778,877
Deferred:
   Federal................    (121,725)       (60,253)       169,429
   State..................      34,536        (34,942)        21,308
                            ----------     ----------     ----------
                               (87,189)       (95,195)       190,737
                            ----------     ----------     ----------
                            $6,369,458     $5,380,201     $6,969,614
                            ==========     ==========     ==========
</TABLE>

The differences between income taxes computed at the federal statutory income
tax rate and the provision for income taxes for the years ended December 31,
1997, 1998, and 1999 are as follows:

<TABLE>
<CAPTION>
                                                       1997           1998          1999
                                                   -----------     ----------     ----------
<S>                                                <C>            <C>            <C>
Income tax computed at federal statutory
  income tax rate.................................  $3,552,400     $2,580,856     $6,219,500
State income taxes, net of federal benefit........     514,950        424,590        516,307
Nontaxable income due to S-corporation status.....    (356,270)            --             --
Nondeductible compensation expense................   2,439,262             --             --
Nondeductible recapitalization expenses...........          --      2,423,867             --
Amortization of nondeductible goodwill............      35,000         65,780         82,397
Nondeductible portion of business meals
  and entertainment...............................      29,341         42,897         42,194
Stock option redemption...........................          --       (135,623)            --
Other.............................................     154,775        (22,166)       109,216
                                                    ----------     ----------     ----------
Provision for income taxes........................  $6,369,458     $5,380,201     $6,969,614
                                                    ==========     ==========     ==========
</TABLE>

Deferred tax assets and liabilities as of December 31, 1998 and 1999 comprised
the following:

                                      F-13
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)


<TABLE>
<CAPTION>
                                             1998         1999
                                          ---------    ---------
<S>                                       <C>          <C>
Deferred tax assets:
   Bad debt allowances.................   $ 418,204    $ 470,856
   Accrued bonuses.....................     132,580       35,641
   Accrued franchise taxes.............     216,772      237,592
   Inventory and sales return reserves.     143,877      139,717
   Net operating loss carryforwards....      53,463           --
   Other...............................       2,849        2,904
                                           --------     --------
Total deferred tax assets..............     967,745      886,710
Deferred tax liabilities:
   Depreciation expense................    (222,304)    (317,719)
   Inventory basis.....................    (123,961)    (120,378)
   Other...............................        (556)     (18,426)
                                           --------     --------
Total deferred tax liabilities.........    (346,821)    (456,523)
                                           --------     --------
Net deferred tax assets................   $ 620,924    $ 430,187
                                           ========     ========
</TABLE>


6.  Pro Forma Provision for Income Taxes 1997 (Unaudited)

As mentioned in Note 8, the Company acquired all of the assets of the general
maintenance supply operations of CAC and has restated the financial statements
for the periods presented to reflect the transaction in a manner similar to a
pooling of interests.  The operations that the Company acquired were part of an
S corporation and were not subject to federal income taxes.  To reflect the
earnings of the restated financial statements of the Company on an after-tax
basis since the operations are now all part of a C corporation, an unaudited pro
forma provision for income tax has been included in the accompanying statements
of income.  The provision was computed as if the Company were a C corporation
and responsible for its federal and state income taxes.

7.  Minority Interest Shareholders

The Company permitted certain of its employees to purchase common stock of
certain subsidiaries of the Company and become minority shareholders of such
subsidiaries.  The employees each signed a Buy/Sell Agreement (the "Agreement")
at the date of purchase that provided the Company the absolute and irrevocable
right to call the common stock at any time at book value and a right of first of
refusal at book value.  The employees were able to purchase the common stock at
the book value per common share of the respective subsidiary or at par value if
book value was less than zero.  Due to the book value call provision in the
Agreement, no compensation was recorded at the time the shares were sold.  The
Company has accounted for the stock purchases in a manner similar to stock
appreciation rights (SARs) using variable plan accounting and has recorded a
charge each year equivalent to the increase in book value per common share
calculated in accordance with the Agreement.  The charge has been reflected in
the consolidated financial statements as minority interest in earnings of
subsidiaries.

On June 30, 1997, the Company acquired all of the outstanding minority
shareholder interests in each of the Company's subsidiaries with common stock of
the Company.  The exchanges were completed at fair value and resulted in the
Company distributing 3,868,188 shares of common stock to the minority
shareholders.  The Company could have

                                      F-14
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)


repurchased such shares in accordance with the Agreement at book value which
would have been at an amount substantially less than fair value. However, the
Company elected to exchange the minority shareholders' interest into parent
company stock based upon fair value in order to reward employees for prior
services that led to the Company's growth. Because of this, the Company recorded
compensation expense of $6,343,536 for the difference between the fair value of
the stock exchanged and the recorded basis of minority shareholder interests
consisting of amounts paid by the minority shareholders for their stock in the
subsidiaries and their allocated earnings (increases in book value) reflected as
charges to minority interest in earnings of subsidiaries.

The stockholders' agreement signed by employee shareholders of the Company in
connection with the exchange of minority interest subsidiary stock contains a
provision whereby stock can be repurchased at book value if an employee
shareholder's employment terminates.  While the Company reserves the right to
exercise its rights under the agreement if an employee shareholder's employment
is terminated, it is the Company's intent to do so at fair value other than upon
termination for cause.

As described above, the compensation charge recorded at the time of the exchange
resulted in a new measurement date for the stock received, and, in accordance
with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees ("APB 25"), no further variable plan charges will be recorded.

8.  Acquisitions and Transactions Among Entities Under Common Control

On June 30, 1997, the Company purchased all of the assets of the general
maintenance supply operations of CAC, which were located in San Antonio and
Austin, Texas (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"), 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.

Both transactions described in the previous two paragraphs were conducted
between the Company and CAC which were under common control at June 30, 1997
(collectively called "Common Control Mergers"); therefore, the transactions were
recorded at historical cost in a manner similar to a pooling of interests.  All
periods presented have been restated to reflect the transactions.  Separate
results of operations of each of the entities under common control throughout
the periods are depicted on the following page.

<TABLE>
<CAPTION>
                                                                         Adjustments
                                    CMS       Add:  SA/A   Less:  Air        (1)         Combined
                                -----------   ----------   -----------   ------------   -----------
<S>                             <C>           <C>          <C>           <C>            <C>
Year ended December 31,
 1997

 Sales (2)..................... $144,640,182  $ 7,703,681   $ 5,488,875    $ (689,279)  $146,165,709
 Income (loss) before taxes
  and minority interest........ $ 8,732,486   $1,017,915    $  (399,312)   $        --  $ 10,149,713
 Net income (loss)............. $ 1,676,640   $1,017,915    $  (237,519)   $        --  $  2,932,074
</TABLE>

(1)  The adjustments reflect sales transactions between the entities that need
     to be eliminated upon combination.

(2)  SA/A and Air financial information for 1997 is for the period from January
     1, 1997 through June 30, 1997.

In regard to the purchase of the assets of the general maintenance supply
operations of CAC, any net cash provided by or used in the operations before the
acquisition have been reflected in the restated statement of stockholders'
equity as

                                      F-15
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)


either distributions or contributions. Also, a net deferred tax asset of $36,300
was recorded on July 1, 1997 as part of the acquisition.

On July 11, 1997, the Company acquired all of the issued and outstanding common
stock of Nationwide for approximately $9,160,000.  The seller also received
322,045 options to purchase common stock of the Company at $3.04 per share.  The
acquisition was accounted for using the purchase method of accounting and
resulted in goodwill of approximately $5,787,000.  The following unaudited pro
forma results of operations have been prepared assuming the acquisition had
occurred as of the beginning of 1997. Those results are not necessarily
indicative of results of the future operations nor of results that would have
occurred had the acquisition been consummated as of the beginning of 1997.

<TABLE>
<CAPTION>
                                                               Year ended
                                                              December 31,
                                                                  1997
                                                            ---------------
<S>                                                           <C>
Net sales...................................................   $166,011,000

Net income..................................................   $  4,028,000
</TABLE>

9.  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.  These shares have been placed in
treasury stock.

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.

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.  The 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.
Through December 31, 1998, the Company has accreted approximately $112,000 to
retained earnings as part of dividends accrued.

10.  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 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.

                                      F-16
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)


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 granted 322,095 non-qualified, fully vested stock options to
purchase Common Stock, with an exercise price of $3.04 per common share and with
an expiration date of three years after the date of grant on July 11, 1997 (see
Note 8).  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, 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.  The grant is being recorded using variable plan
accounting and as of December 31, 1998, no compensation expense has been
recorded as fair value did not exceed the exercise price.

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.  None of these options have vested as
of December 31, 1999.  The grant is being recorded using variable plan
accounting and as of December 31, 1999, no compensation expense has been
recorded.

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.

The weighted average remaining contractual life of all outstanding options at
December 31, 1997, 1998 and 1999 was 2.5, 6 and 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, 1996.......        --           $  --           $  --
Granted July 1, 1997...................      620,333        $ 1.74          $1.12
Granted July 11, 1997..................      322,095        $ 3.04          $1.12
</TABLE>

                                      F-17
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)

<TABLE>                                                       Weighted
<CAPTION>                                                            Average           Weighted
                                                                   Exercise 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
                                                ===========        ===========         ==========
</TABLE>

The following summarizes information related to stock options outstanding at
December 31, 1999:

<TABLE>
<CAPTION>

                                              Options Outstanding                        Options Exercisable
                             -------------------------------------------------     ------------------------------
                                                                    Weighted                            Options
                                                Weighted             Average                            Weighted
                                                Average             Remaining                           Average
                                                Exercise           Contractual                          Exercise
Range of Exercise Prices     Options             Price                Life             Options            Price
------------------------     --------          ----------        -------------         -------         ---------
<S>                      <C>                  <C>              <C>                 <C>                <C>
$  10.00 - $10.00.......      785,000             $10.00            5.5 years          96,250             $10.00
$   1.74 - $ 3.04.......      368,684             $ 2.31             .5 years         338,684             $ 2.31
                            ---------                                                 -------
$   1.74 - $10.00.......    1,153,684             $ 7.54            5.0 years         434,934             $ 3.90
                            =========                                                 =======
</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 5.8% and 5.2%, a dividend yield of 0% and 0%, and expected life
of 1.5 years and 5 years for 1997 and 1998, respectively.  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, 1997, 1998 and 1999, 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
                            -------------------------------------------
                                1997           1998         1999
                            -----------    ----------   ---------------
<S>                         <C>           <C>           <C>
Net income as reported....   $2,932,074    $1,799,273    10,800,486
-----------------------------------------------------------------------
</TABLE>

                                      F-18
<PAGE>

                       Century Maintenance Supply, Inc.

            Notes to Consolidated Financial Statements (continued)

<TABLE>

<S>                         <C>            <C>           <C>
Pro forma net income....     $2,876,614    $1,698,048      $10,800,486
</TABLE>

The 322,095 stock options granted on July 11, 1997 were part of the
consideration for the acquisition of Nationwide (see Note 8).  The minimum value
method resulted in no additional purchase consideration using the same
assumptions noted above.

11.  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, 1997, 1998, and
1999, the Company made no contribution 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  $297,000, $403,000 and $447,247 in 1997, 1998
and 1999, respectively, as matching funds to the plan.  No discretionary, lump-
sum contributions were made in 1997, 1998 and 1999.

                                      F-19
<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.



March 29, 2000                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                             March 29, 2000
---------------------------      and Director (Principal Executive Officer)
Dennis C. Bearden

/s/ Richard E. Penick            Chief Financial Officer and Director                March 29, 2000
---------------------------      (Principal Financial and Accounting
Richard E. Penick                Officer)


/s/ Mark J. Doran                Director                                            March 29, 2000
---------------------------
Mark J. Doran

/s/ William C. Johnson           Director                                            March 29, 2000
----------------------------
William C. Johnson

/s/ Jon D. Ralph                 Director                                            March 29, 2000
---------------------------
Jon D. Ralph

/s/ J. Frederick Simmons         Director                                            March 29, 2000
---------------------------
J. Frederick Simmons

/s/ Ronald P. Spogli             Director                                            March 29, 2000
---------------------------
Ronald P. Spogli
</TABLE>

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.

                                      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