SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


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

                       For The Quarter Ended June 30, 2001

                         Commission File Number 0-23222


                               FINISHMASTER, INC.
             (Exact Name of Registrant as Specified in its Charter)


            Indiana                                             38-2252096
(State or other Jurisdiction of                              (I.R.S.  Employer
Incorporation or Organization)                            Identification Number)

54 Monument Circle, Suite 600, Indianapolis, IN                    46204
   (Address of principal executive offices)                     (Zip Code)

       Registrant's Telephone Number, including area code: (317) 237-3678



Indicate  by check  mark  whether  the  registrant  (1) has  filed  all  annual,
quarterly and other  reports  required to be filed by Section 13 or 15(d) of the
Securities  Exchange Act of 1934 during the preceding  twelve months and (2) has
been subject to the filing  requirements for at least the past 90 days.
Yes   X      No
---------    --------

On July 1, 2001, there were 7,637,559  shares of the  Registrant's  common stock
outstanding.






                               FINISHMASTER, INC.
                                    FORM 10-Q
                       For the Quarter Ended June 30, 2001


                                TABLE OF CONTENTS

                                                                         PAGE

Part I.  Financial Information                                              3

   Item 1.  Financial Statements (unaudited)

      Condensed Consolidated Balance Sheets                                 3

      Condensed Consolidated Statements of Operations                       4

      Condensed Consolidated Statements of Cash Flows                       5

      Notes to Condensed Consolidated Financial Statements                  6

   Item 2.  Management's Discussion and Analysis of Financial
            Condition and Results of Operations                             9

Part II.  Other Information                                                14

   Item 6.  Exhibits and Reports on Form 8-K                               14

Signatures                                                                 15
















PART I.  FINANCIAL INFORMATION


                               FINISHMASTER, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                        (in thousands, except share data)

                                                                           June 30,                December 31,
                                                                             2001                    2000 (1)
                                                                      -----------------          ----------------
ASSETS                                                                    (unaudited)
                                                                                             
Current Assets
     Cash                                                               $        2,180             $       1,513
     Accounts receivable, net of allowance for doubtful
        accounts of $1,356 and $1,337, respectively                             31,638                    29,063
     Inventory                                                                  50,527                    63,346
     Refundable income taxes                                                         -                       710
     Prepaid expenses and other current assets                                   6,644                     7,808
                                                                        --------------             -------------
          Total Current Assets                                                  90,989                   102,440

Property and Equipment, net                                                      8,720                     8,976

Other Assets
     Intangible assets, net                                                    104,539                   102,858
     Other                                                                       2,497                     4,043
                                                                        --------------             -------------
                                                                               107,036                   106,901
                                                                        --------------             -------------
                                                                        $      206,745             $     218,317
                                                                        ==============             =============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
     Accounts payable                                                   $       45,438             $      46,470
     Amounts due LDI                                                               730                       506
     Accrued compensation and benefits                                           6,936                     6,033
     Accrued expenses and other current liabilities                              2,534                     3,232
     Current maturities on long-term debt                                        6,380                    10,990
                                                                        --------------             -------------
          Total Current Liabilities                                             62,018                    67,231

Long-Term Debt, less current maturities                                         80,755                    90,652

Other Long-Term Liabilities                                                      3,850                     3,628

SHAREHOLDERS' EQUITY
     Preferred stock, no par value, 1,000,000 shares
        authorized; no shares issued or outstanding                                ---                       ---
     Common stock, $1 stated value, 25,000,000
        shares authorized; 7,637,559 and 7,540,804
        shares issued and outstanding                                            7,638                     7,540
     Additional paid-in capital                                                 27,936                    27,367
     Other comprehensive income (loss)                                           (172)                       ---
     Retained earnings                                                          24,720                    21,899
                                                                        --------------             -------------
                                                                                60,122                    56,806
                                                                        --------------             -------------
                                                                        $      206,745             $     218,317
                                                                        ==============             =============


(1) The year-end condensed balance sheet data was derived from audited financial
statements,  but does not include all disclosures required by generally accepted
accounting principles.

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






                               FINISHMASTER, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (in thousands, except per share data)
                                   (unaudited)

                                                             Three Months Ended                     Six Months Ended
                                                                  June 30,                              June 30,
                                                       --------------------------------    -----------------------------------
                                                           2001              2000               2001               2000
                                                       --------------    --------------    --------------     ----------------
                                                                                                  
Net Sales                                              $      86,241      $     87,343     $     169,476      $       172,013

Cost of Sales                                                 54,581            55,984           107,463              110,721
                                                       --------------     -------------    --------------     ----------------

Gross Margin                                                  31,660            31,359            62,013               61,292
                                                       --------------     -------------    --------------     ----------------

Expenses
     Operating                                                13,312            13,325            26,651               26,772
     Selling, general and administrative                      11,041            11,033            21,912               21,359
     Amortization of intangible assets                         1,396             1,544             2,744                3,061
                                                       --------------     -------------    --------------     ----------------

                                                              25,749            25,902            51,307               51,192
                                                       --------------     -------------    --------------     ----------------

Income from Operations                                         5,911             5,457            10,706               10,100

Interest Expense, net                                          1,975             3,050             4,283                5,938
                                                       --------------    --------------    --------------     ----------------

Income Before Income Taxes and Extraordinary Loss              3,936             2,407             6,423                4,162
Income Tax Expense                                             1,954             1,346             3,107                2,197
                                                       --------------    --------------    --------------     ----------------

Net Income Before Extraordinary Loss                           1,982             1,061             3,316                1,965
Extraordinary Loss on Early Extinguishments of Debt,
   net of income tax benefit of $324                               -                 -               495                    -
                                                       --------------    --------------    --------------     ----------------

Net Income                                             $       1,982      $      1,061     $       2,821      $         1,965

                                                       ==============    ==============    ==============     ================


Net Income per Share - Basic and Diluted
       Net Income before Extraordinary loss            $        0.26      $       0.14     $        0.44      $          0.26
       Extraordinary loss, net of income taxes                     -                 -              0.07                    -
                                                       --------------    --------------    --------------     ----------------
       Net Income                                      $        0.26      $       0.14     $        0.37      $          0.26
                                                       ==============    ==============    ==============     ================


Weighted Average Shares Outstanding - Basic                    7,603             7,539             7,572                7,538
                                                       ==============    ==============    ==============     ================

Weighted Average Shares Outstanding - Diluted                  7,651             7,544             7,588                7,558
                                                       ==============    ==============    ==============     ================






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






                               FINISHMASTER, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (in thousands, unaudited)

                                                                                     Six Months Ended
                                                                                         June 30,
                                                                          ---------------------------------------
Operating Activities                                                            2001                  2000
                                                                          -----------------     -----------------
                                                                                            
   Net income                                                              $       2,821          $       1,965
   Adjustments to reconcile net income to net cash
       provided by operating activities:
         Depreciation and amortization                                             5,895                  5,307
         Changes in operating assets and liabilities:
            (excluding the impact of acquisitions):
                  Accounts receivable                                             (1,233)                (1,235)
                  Inventories                                                     15,183                  4,942
                  Prepaid expenses and other current assets                        2,312                 (1,050)
                  Accounts payable and accrued expenses                           (1,276)                (3,977)
                                                                           --------------         --------------
Net Cash Provided by Operating Activities                                         23,702                  5,952
                                                                           --------------         --------------

Investing Activities
  Business acquisitions and payments under earn-out provisions of prior
        acquisition agreements                                                    (4,447)                (1,650)
   Purchases of property and equipment                                              (446)                  (539)
   Other                                                                               -                   (217)
                                                                           --------------         --------------
Net Cash Used In Investing Activities                                             (4,893)                (2,406)
                                                                           --------------         --------------

Financing Activities
   Debt issuance costs                                                            (1,322)                  (159)
   Proceeds from debt                                                            116,575                 53,649
   Repayments of debt                                                           (133,395)               (56,723)
                                                                           --------------         --------------
Net Cash Used in Financing Activities                                            (18,142)                (3,233)
                                                                           --------------         --------------

Increase in Cash                                                                     667                    313

Cash at Beginning of Period                                                        1,513                    619
                                                                           --------------         --------------

Cash at End of Period                                                      $       2,180          $         932
                                                                           ==============         ==============




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









FINISHMASTER, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.   ORGANIZATION

Basis of Presentation:  The interim  financial  statements are unaudited but, in
the  opinion  of  management,  reflect  all  adjustments  necessary  for a  fair
presentation of financial position, results of operations and cash flows for the
periods  presented.  These  adjustments  consist of normal  recurring items. The
results of operations for any interim period are not  necessarily  indicative of
results for the full year. The condensed  consolidated  financial statements and
notes are  presented as permitted by the  requirements  for Form 10-Q and do not
contain  certain  information  included  in the  Company's  annual  consolidated
financial  statements  and notes.  This Form 10-Q should be read in  conjunction
with the Company's  consolidated  financial statements and notes included in its
2000 Annual Report on Form 10-K.

Nature of Business:  FinishMaster, Inc. ("the Company" or "FinishMaster") is the
leading national distributor of automotive paints,  coatings,  and paint-related
accessories to the automotive  collision repair  industry.  As of June 30, 2001,
the Company operated 159 sales outlets and three major  distribution  centers in
23 states and is  organized  into two major  geographical  divisions  - East and
West.  The  Company  aggregates  its  two  geographic  divisions  into a  single
reportable segment. The Company has over 35,000 customers to which it provides a
comprehensive  selection of brand name products supplied by BASF, DuPont, 3M and
PPG, in addition to its own  FinishMaster  Private Brand  refinishing  accessory
products.  The Company is highly dependent on the key suppliers  outlined above,
which account for approximately 85% of the Company's purchases.

Principles of Consolidation:  The Company's  consolidated  financial  statements
include the accounts of FinishMaster and its wholly owned  subsidiaries from the
dates of their respective  acquisition.  All significant  inter-company accounts
and transactions have been eliminated. References to the Company or FinishMaster
throughout this report relate to the consolidated entity.

Majority  Shareholder:  Lacy  Distribution,  Inc.  ("Distribution"),  an Indiana
corporation,  is a  wholly-owned  subsidiary  of LDI, Ltd.  ("LDI"),  an Indiana
limited  partnership,  and is the  majority  shareholder  of  the  Company  with
5,587,516 shares of common stock,  representing  73.2% of the outstanding shares
at June 30, 2001. LDI and Distribution  are  collectively  referred to herein as
"LDI."

Use of Estimates:  The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and  assumptions  that affect the  reported  amounts of assets and  liabilities,
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Derivative  Instruments and Hedging Activities:  The Company utilizes derivative
financial  instruments,  principally interest rate swaps, to reduce its exposure
to fluctuations in interest rates. These instruments are recorded on the balance
sheet at their fair value. Changes in the fair value are recorded each period in
the Other Comprehensive Income (Loss) section of Shareholders' Equity.

Shipping  and  Handling  Fees  and  Costs:  The  Company  includes  the  cost of
delivering the product to the customer in the Operating  Expense  section of the
Consolidated  Statements of Operations.  Total delivery costs primarily  include
wages,  benefits,  vehicle costs, and freight. The total delivery costs incurred
for the six months ended June 31, 2001 and 2000,  are  estimated at $8.8 million
and $8.9 million, respectively.

Reclassification:  Certain amounts in the consolidated financial statements have
been reclassified to conform to the current year presentation.







2.   ACQUISITIONS

On May 7, 2001,  the Company  acquired the assets of Badger Paint Plus,  Inc., a
Wisconsin corporation,  Badger Paint Plus of the Twin Cities, Inc., Badger Paint
Plus of Duluth,  Inc.,  Badger Paint Plus of St. Cloud,  Inc.,  Lakeland  Sales,
Inc., each a Minnesota  corporation,  and Badger Paint Plus of Chicago, Inc., an
Illinois corporation (collectively "Badger"). Badger, like FinishMaster,  was an
aftermarket  distributor  of  automotive  paints,  coatings,  and  paint-related
accessories.  The purchase price,  including related acquisition costs, was $7.2
million  and  includes  the  issuance  of 93,999  shares of common  stock of the
Company.  The acquisition has been accounted for as a purchase and  accordingly,
the acquired assets and  liabilities  have been recorded at their estimated fair
values on the date of the acquisition.  Goodwill associated with the acquisition
is being amortized over 15 years. Operating results of Badger have been included
in the Company's  consolidated  financial  statements from the effective date of
the acquisition.


3.  NET INCOME PER SHARE

The following  table sets forth the  computation of basic and diluted net income
per share:




(in thousands, except per share data)              Three Months Ended June 30,                 Six Months Ended June 30,
                                              --------------------------------------      -------------------------------------
                                                    2001                 2000                   2001                2000
                                              -----------------    -----------------      -----------------    ----------------
Numerator:
                                                                                                    
   Net income                                  $         1,982      $         1,061        $         2,821      $        1,965
                                               ================     ================       ================     ===============
Denominator:
   Basic-weighted average shares                         7,603                7,539                  7,572               7,538
   Effect of dilutive stock options                         48                    5                     16                  20
                                               ----------------     ----------------       ----------------     ---------------
   Diluted-weighted average shares                       7,651                7,544                  7,588               7,558
                                               ================     ================       ================     ===============

Basic net income per share                     $          0.26      $          0.14        $          0.37      $         0.26
                                               ================     ================       ================     ===============

Diluted net income per share                   $          0.26      $          0.14        $          0.37      $         0.26
                                               ================     ================       ================     ===============


4.   COMMITMENTS AND CONTINGENCIES

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

The Company is subject to various  claims and  contingencies  arising out of the
normal course of business,  including those relating to commercial transactions,
environmental, product liability, automobile, taxes, discrimination,  employment
and other matters.  Management believes that the ultimate liability,  if any, in
excess of amounts  already  provided or covered by  insurance,  is not likely to
have a material adverse effect on the Company's financial condition,  results of
operations or cash flows.






5.   LONG-TERM DEBT

On March 29, 2001, the Company  entered into a new $100.0 million senior secured
credit  facility  with a  syndicate  of banks  and a new  $20.0  million  senior
subordinated  term  credit  facility  with LDI.  The new senior  secured  credit
facility  consists of a $40.0  million term credit  facility and a $60.0 million
revolving credit facility.  The term credit facility,  which expires on June 30,
2006,  requires  quarterly  principal  payments that increase in amount over the
term of the loan.  Quarterly  principal payments begin on June 30, 2001, and are
$1.0 million per quarter in 2001.  The revolving  credit  facility is limited to
the lesser of (1) $60.0  million  less letter of credit  obligations,  or (2) 80
percent of eligible  accounts  receivable plus 65 percent of eligible  inventory
less letter of credit  obligations and a reserve for three months facility rent.
Principal is due on June 30, 2006. Both the revolving credit and term facilities
are subject to interest rates,  which fluctuate based on the Company's  Leverage
Ratio, as defined in the Credit  Facility,  which range from 1.75% to 2.75% over
LIBOR or 0.00% to 0.75% over prime.  For a period of six months  after the close
of the transaction, the interest rate is fixed at LIBOR plus 3.00%.

To convert the  Company's  new senior term credit  facility from a floating to a
fixed  interest  rate  obligation,  the Company  entered into interest rate swap
agreements with notional  amounts of $40.0 million.  The weighted  average fixed
interest rate under these  agreements  is 5.43%.  The current  quarterly  period
change in the fair value of the interest rate swap was $0.2  million,  which was
recorded  in the Other  Comprehensive  Income  (Loss)  section of  Shareholders'
Equity.

Concurrent with funding the senior secured credit  facility,  the Company repaid
its $30.0 million senior  subordinated  term credit  facility and entered into a
new $20.0  million  senior  subordinated  term  credit  facility  with LDI.  All
outstanding  principal  is due on  March  29,  2007,  and  interest  is  payable
quarterly at a rate of 12.2% per annum.

6.   RECENT ACCOUNTING PRONOUNCEMENT

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




ITEM 2

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS




Net Sales
                                 Three Months Ended June 30,                        Six Months Ended June 30,
-------------------------------------------------------------------------------------------------------------------------
(In thousands)               2001           Change          2000               2001           Change           2000

-------------------------------------------------------------------------------------------------------------------------
                                                                                          
Net Sales                 $   86,241        (1.3%)        $   87,343         $  169,476       (1.5%)        $   172,013
-------------------------------------------------------------------------------------------------------------------------


Net sales for the second quarter  decreased  $1.1 million,  or 1.3%, and for the
first half of 2001,  $2.5  million,  or 1.5% due primarily to a decline in "same
store  sales"  on a  year-to-date  basis  of  approximately  1.5%.  The  Company
experienced soft market conditions  throughout most of its distribution network.
Factors  leading to the  softening in demand  include  slower  overall  economic
conditions;  continued productivity  improvements in the use of automotive paint
by our customers;  flat to declining number of automobiles  being repaired;  and
changes  in vendor  supported  marketing  programs  used to  attract  and retain
customers.




Gross Margin
                                   Three Months Ended June 30,                        Six Months Ended June 30,
-------------------------------------------------------------------------------------------------------------------------
(In thousands)                 2001          Change          2000               2001           Change           2000

-------------------------------------------------------------------------------------------------------------------------
                                                                                          
Gross Margin              $   31,660          1.0%        $   31,359         $   62,013         1.2%        $    61,292
Percentage of net sales        36.7%                           35.9%              36.6%                           35.6%
-------------------------------------------------------------------------------------------------------------------------



Gross margin increased $0.3 million,  or 1.0% for the second quarter of 2001 and
$0.7  million,  or 1.2% for the first  half of 2001  compared  to the prior year
periods.  Strong  margin as a  percentage  of net sales  more  than  offset  the
negative  impact of lower net sales volume.  Gross margin as a percentage of net
sales increased 80 basis points to 36.7%,  positively  impacting  margin by $0.7
million for the quarter,  and  increased  100 basis points to 36.6%,  positively
impacting  margin by $1.6  million  for the first half of 2001.  Lower net sales
volume  negatively  impacted  margin by $0.4  million  and $0.9  million for the
quarter and first half of 2001,  respectively.  The  improvement  in margin as a
percentage  of net sales is primarily  the result of large  inventory  purchases
made prior to manufacturers'  price increases and the implementation of improved
inventory   management   procedures.   Margin  can  be  affected  by  purchasing
opportunities  presented to the Company by its vendors. The Company's ability to
maintain  the strong  margin  realized  during the first six months is dependent
upon the availability of favorable  purchasing programs from its vendors and its
ability to recover future vendor price increases from its customers.






Operating Expenses
                                 Three Months Ended June 30,                        Six Months Ended June 30,
-------------------------------------------------------------------------------------------------------------------------
(In thousands)               2001           Change          2000               2001           Change           2000

-------------------------------------------------------------------------------------------------------------------------
                                                                                          
Operating Expenses        $   13,312        (0.1%)        $   13,325         $   26,651       (0.5%)        $    26,772
Percentage of net sales        15.4%                           15.3%              15.7%                           15.6%
-------------------------------------------------------------------------------------------------------------------------


Operating expenses consist of wages, facility, vehicle and related costs for the
Company's  branch  and  distribution  locations.  Operating  expenses  decreased
slightly  for the  second  quarter  and the  first  half of 2001 as a result  of
reduced labor,  communication  and supplies costs.  Partially  offsetting  these
items were higher utility, freight, and vehicle expenses due to increased energy
costs for gasoline,  natural gas and electricity,  increased  vehicle  insurance
costs and higher vehicle lease costs.




Selling, General and
   Administrative Expenses
                                    Three Months Ended June 30,                        Six Months Ended June 30,
-------------------------------------------------------------------------------------------------------------------------
(In thousands)                  2001           Change          2000               2001           Change           2000

-------------------------------------------------------------------------------------------------------------------------
                                                                                          
Selling, General and
  Administrative Expenses $   11,041          0.1%        $   11,033         $   21,912         2.6%        $    21,359
Percentage of net sales        12.8%                           12.6%              12.9%                           12.4%
-------------------------------------------------------------------------------------------------------------------------



Selling,   general  and  administrative   expenses  ("SG&A")  consist  of  costs
associated  with  the  Company's  corporate  support  staff,  and  expenses  for
commissions, wages, and customer sales support activities. SG&A expenses for the
second  quarter  of 2001  remained  flat  compared  to the  prior  year  period.
Increased costs  associated with attracting and retaining  customers,  wages and
benefits,  and vehicle insurance were offset by lower data  communication  costs
and depreciation expense.

SG&A  expenses  for the  first  half of 2001  increased  $0.6  million,  or 2.6%
compared  to the prior  year  period as a result  of higher  labor and  employee
benefit  costs,  higher  bank  charges,  and  increased  costs  associated  with
attracting and retaining customers.




Amortization of Intangible Assets
                                 Three Months Ended June 30,                        Six Months Ended June 30,
-------------------------------------------------------------------------------------------------------------------------
(In thousands)               2001           Change          2000               2001           Change           2000

-------------------------------------------------------------------------------------------------------------------------
                                                                                          
Amortization of
     Intangible Assets    $    1,396        (9.6%)        $    1,544         $    2,744       (10.4%)       $     3,061
Percentage of net sales         1.6%                            1.8%               1.6%                            1.8%
-------------------------------------------------------------------------------------------------------------------------



Intangible  amortization  expense for the second quarter decreased $0.1 million,
or 9.6%, and for the first half of 2001, $0.3 million,  or 10.4%, as a result of
certain intangible assets,  principally non-compete  agreements,  becoming fully
amortized.






Interest Expense, net
                                 Three Months Ended June 30,                        Six Months Ended June 30,
-------------------------------------------------------------------------------------------------------------------------
(In thousands)               2001           Change          2000               2001           Change           2000

-------------------------------------------------------------------------------------------------------------------------
                                                                                          
Interest Expense, net     $    1,975       (35.2%)        $    3,050         $    4,283       (27.9%)       $     5,938
Percentage of net sales         2.3%                            3.5%               2.5%                            3.5%
-------------------------------------------------------------------------------------------------------------------------


Interest  expense for the second quarter  decreased $1.1 million,  or 35.2%, and
for the first  half of 2001,  $1.7  million,  or 27.9%,  primarily  due to lower
average outstanding  borrowings.  Average  outstanding  borrowings were lower by
$38.4 million and $32.2 million compared to the prior year for the three and six
month periods ended June 30, 2001, respectively.  Lower effective interest rates
in the current year  periods  also  contributed  to the  favorable  decreases in
interest expense.





Income Tax Expense
                                 Three Months Ended June 30,                        Six Months Ended June 30,
-------------------------------------------------------------------------------------------------------------------------
(In thousands)               2001           Change          2000               2001           Change           2000

-------------------------------------------------------------------------------------------------------------------------
                                                                                          
Income Tax Expense        $    1,954         45.2%        $    1,346         $    3,107        41.4%        $     2,197
Percentage of net sales         2.3%                            1.5%               1.8%                            1.3%
Effective tax rate             49.6%                           55.9%              48.4%                           52.8%
-------------------------------------------------------------------------------------------------------------------------



Income tax expense increased $0.6 million, or 45.2%, for the second quarter, and
for the first half of 2001,  $0.9 million,  or 41.4% due to higher income before
income taxes. The effective tax rate varied from the federal statutory rate as a
result of certain expenses,  principally  nondeductible intangible amortization.
In 2000,  the Company's  effective  tax rate for the year was 53.2%.  A slightly
lower effective tax rate is anticipated for 2001.





Net Income and Income Per Share
                                 Three Months Ended June 30,                        Six Months Ended June 30,
-------------------------------------------------------------------------------------------------------------------------
(In thousands)               2001           Change          2000               2001           Change           2000

-------------------------------------------------------------------------------------------------------------------------
                                                                                          
Net Income                $    1,982         86.8%        $    1,061         $    2,821        43.6%        $     1,965
Percentage of net sales         2.3%                            1.2%               1.7%                            1.1%
Net income per share      $     0.26                      $     0.14         $     0.37                     $      0.26
-------------------------------------------------------------------------------------------------------------------------



Factors  contributing  to the  changes in net income and the  related  per share
amounts are discussed above.




Seasonality and Quarterly Fluctuations

The Company's  sales and  operating  results have varied from quarter to quarter
due to various factors and the Company  expects these  fluctuations to continue.
Among these factors are seasonal buying patterns of the Company's  customers and
the timing of acquisitions. Historically, sales have slowed in the late fall and
winter of each year largely due to inclement  weather and the reduced  number of
business days during the holiday season. In addition, the timing of acquisitions
may cause substantial fluctuations of operating results from quarter to quarter.
The Company takes advantage of periodic  special  incentive  programs  available
from its suppliers that extend the due date of inventory  purchases beyond terms
normally available with large volume purchases. The timing of these programs can
contribute to fluctuations in the Company's  quarterly cash flows.  There can be
no assurance that the Company's net sales,  results of operations and cash flows
will not continue to display seasonal patterns.


Financial Condition, Liquidity and Capital Resources

(In thousands)                                June 30,            December 31,
                                                2001                  2000
--------------------------------------------------------------------------------
Working capital                           $     28,971            $    35,209
Long-term debt                            $     80,755            $    90,652
--------------------------------------------------------------------------------

                                        Six Months Ended June 30,
--------------------------------------------------------------------------------
(In thousands)                                  2001                  2000
--------------------------------------------------------------------------------
Cash provided by operating activities     $     23,702            $     5,952
Cash used in investing activities         $     (4,893)           $    (2,406)
Cash used in financing activities         $    (18,142)           $    (3,233)
--------------------------------------------------------------------------------

The Company's  primary sources of funds are from operations and borrowings under
its credit facilities.  The Company's principal uses of cash are to fund working
capital,  capital expenditures,  acquisitions,  and the repayment of outstanding
borrowings.

Net cash generated from operating  activities was $23.7 million in the first six
months of 2001  compared  with $6.0 million in 2000 due  primarily to a positive
change in operating assets and  liabilities.  This positive change resulted from
the sale of  inventory  prior  to its  payment.  Favorable  payment  terms  were
obtained by the Company from its vendors on end of year inventory purchases.

Net cash used in investing  activities,  primarily  for  acquisitions,  was $4.9
million in the first six months of 2001,  compared to $2.4  million in 2000.  In
2001, $4.2 million of cash was used for the acquisition of Badger.

Net cash used by financing  activities,  primarily the repayment of  borrowings,
was $18.1  million in the first six months of 2001,  compared to $3.2 million in
the prior year  period.  The  increase  in net debt  repayments  was a result of
improved cash flows from operating activities. The use of cash for debt issuance
costs related to the new credit facilities was $1.3 million.

Total  capitalization  at June 30, 2001, was $147.3 million,  comprised of $87.1
million  of debt and $60.1  million  of equity.  Debt as a  percentage  of total
capitalization  was 59.2% at June 30, 2001  compared  to 64.1% at  December  31,
2000.

On March 29, 2001, the Company  entered into a new $100.0 million senior secured
credit  facility  with a  syndication  of banks and a new $20.0  million  senior
subordinated  term  credit  facility  with LDI.  The new senior  secured  credit
facility  consists of a $40.0  million term credit  facility and a $60.0 million
revolving credit facility.  The term credit facility,  which expires on June 30,
2006,  requires  quarterly  principal  payments that increase in amount over the
term of the loan.  Quarterly  principal payments are $1.0 million per quarter in
2001,  beginning on June 30, 2001. The revolving  credit  facility is limited to
the lesser of (1) $60.0  million  less letter of credit  obligations,  or (2) 80
percent of eligible  accounts  receivable plus 65 percent of eligible  inventory
less letter of credit  obligations and a reserve for three months facility rent.
Principal is due on June 30, 2006. Both the revolving credit and term facilities
are subject to interest rates,  which fluctuate based on the Company's  Leverage
Ratio, as defined in the Credit  Facility,  which range from 1.75% to 2.75% over
LIBOR or 0.00% to 0.75% over prime.  For a period of six months  after the close
of the transaction, the interest rate is fixed at LIBOR plus 3.00%.

To convert the  Company's  new senior term credit  facility from a floating to a
fixed  interest  rate  obligation,  the Company  entered into interest rate swap
agreements with notional  amounts of $40.0 million.  The weighted  average fixed
interest rate under these  agreements  is 5.43%.  The current  quarterly  period
change in the fair value of the interest rate swap was $0.2  million,  which was
recorded  in the Other  Comprehensive  Income  (Loss)  section of  Shareholders'
Equity.

Concurrent with funding the senior secured credit  facility,  the Company repaid
its $30.0 million senior  subordinated  term credit  facility and entered into a
new $20.0  million  senior  subordinated  term  credit  facility  with LDI.  All
outstanding  principal  is due on  March  29,  2007,  and  interest  is  payable
quarterly at a rate of 12.2% per annum.

The  Company  was  in  compliance  with  the  covenants  underlying  its  credit
facilities, and had estimated availability under its revolving credit facilities
of $31.6 million as of July 1, 2001, based upon the June 30, 2001 borrowing base
calculation.

Based on current and  projected  operating  results  and giving  effect to total
indebtedness,  the Company  believes  that cash flow from  operations  and funds
available  from  lenders and other  creditors  will provide  adequate  funds for
ongoing operations, debt service and planned capital expenditures.

Forward-Looking Statements

This Report contains  certain  forward-looking  statements  pertaining to, among
other things,  the Company's  future results of operations,  cash flow needs and
liquidity, acquisitions, and other aspects of its business. The Company may make
similar forward-looking statements from time to time. These statements are based
largely on the  Company's  current  expectations  and are subject to a number of
risks and  uncertainties.  Actual  results  could differ  materially  from these
forward-looking  statements.  Important  factors to consider in evaluating  such
forward-looking  statements include changes in external market factors,  changes
in the Company's  business  strategy or an inability to execute its strategy due
to changes in its  industry or the economy  generally,  difficulties  associated
with  assimilating  acquisitions,  the emergence of new or growing  competitors,
seasonal and quarterly  fluctuations,  governmental  regulations,  the potential
loss of key suppliers,  and various other competitive factors. In light of these
risks and uncertainties,  there can be no assurance that the future developments
described  in the  forward-looking  statements  contained in this Report will in
fact occur.





PART II - OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K

(a)       Exhibits.  The following exhibits,  unless otherwise  indicated,  have
          been filed as exhibits to documents otherwise filed by the Registrant,
          and are hereby incorporated by reference.

Exhibit No.         Description of Document
-----------         -----------------------

       2.1          Agreement and Plan of Merger,  dated as of October 14, 1997,
                    by  and   among   FinishMaster,   Inc.,   FMST   Acquisition
                    Corporation   and  Thompson  PBE,  Inc.   (incorporated   by
                    reference  to Exhibit  (c)(2) of Schedule  14D-1  previously
                    filed by FMST Acquisition Corporation on October 21, 1997).

       2.2          Agreement  and Plan of Merger,  dated  February 16, 1998, by
                    and among FinishMaster,  Inc., LDI AutoPaints, Inc. and Lacy
                    Distribution,  Inc.  (previously  filed with Form 10-K dated
                    March 31, 1998)

       3.1          Articles of Incorporation of FinishMaster,  Inc., an Indiana
                    corporation, as amended June 30, 1998 (previously filed with
                    Form 10-Q dated August 14, 1998)

       3.2          Amended and Restated Code of Bylaws of  FinishMaster,  Inc.,
                    an Indiana  corporation  (previously  filed with Form 10-K/A
                    dated April 14, 1998)

      10.1          FinishMaster,  Inc.  Stock Option Plan (Amended and Restated
                    as of April 29, 1999)  (previously  filed with  Registrant's
                    proxy statement on Schedule 14/A dated April 9, 1999)

        21          Subsidiaries of the Registrant  (previously  filed with Form
                    10-K dated March 30, 2000)

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

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

                    * filed herein.


(b)       Reports  on Form 8-K.  There  were no reports on Form 8-K filed in the
          quarter ended June 30, 2001.








                                   SIGNATURES

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

Date    August 14, 2001                  FINISHMASTER, INC.

                                         By: /s/ Wesley N. Dearbaugh
                                         ---------------------------

                                         Wesley N. Dearbaugh
                                         President and Chief Operating Officer


                                         By: /s/ Robert R. Millard
                                         -------------------------

                                         Robert R. Millard
                                         Senior Vice President and
                                         Chief Financial Officer