COAST DISTRIBUTION SYSTEM INC - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2000

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from _______ to _____
Commission file number 1-9511

THE COAST DISTRIBUTION SYSTEM, INC.
(Exact name of Registrant as specified in its charter)

Delaware 94-2490990
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

350 Woodview Avenue, Morgan Hill, California 95037
(Address of principal executive offices) (Zip Code)

(408) 782-6686
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, par value, $.001 per share American Stock Exchange
- ---------------------------------------- -----------------------
(Title of Class) (Name of Each Exchange on
Which Registered)

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 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. [ ]

As of March 16, 2001, the aggregate market value of the Common Stock
held by non-affiliates was approximately $2,680,000.

As of March 16, 2001, a total of 4,330,654 shares of Registrant's Common
Stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III of the Form 10-K is incorporated by reference from Registrant's
Definitive Proxy Statement for its Annual Meeting which is expected to be filed
on or before April 30, 2001.

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THE COAST DISTRIBUTION SYSTEM, INC.
ANNUAL REPORT ON FORM 10K
FOR THE YEAR ENDED DECEMBER 31, 2000

TABLE OF CONTENTS

Page No.

Forward Looking Statements ......................................................... 3

Part I.

Item 1. Business.............................................................. 3

Item 2. Properties............................................................ 7

Item 3. Legal Proceedings..................................................... 7

Item 4. Submission of Matters to a Vote of Securities Holders................. 7

Item 4A. Executive Officers of the Registrant.................................. 8

Part II.

Item 5. Market for Registrant's Common Stock and Related
Security Holder Matters............................................... 9

Item 6. Selected Financial Data .............................................. 10

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................. 11

Item 8. Financial Statements and Supplementary Data........................... 17

Report of Independent Public Accountants.............................. 18

Consolidated Balance Sheets at December 31, 2000 and 1999............. 19

Consolidated Statements of Operations
for the Years ended December 31, 2000, 1999 and 1998.................. 20

Consolidated Statements of Cash Flows
for the Years ended December 31, 2000, 1999 and 1998.................. 21

Consolidated Statements of Stockholders' Equity
for the Years ended December 31, 2000, 1999 and 1998.................. 22

Notes to Consolidated Financial Statements............................ 23

Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures................................................. 32

Part III.

Item 10. Directors and Executive Officers of the Registrant.................... 32

Item 11. Executive Compensation................................................ 32

Item 12. Security Ownership of Certain Beneficial Owners and Management........ 32

Item 13. Certain Relationships and Related Party Transactions.................. 32

Part IV.

Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K..... 33

Signatures............................................................................. S-1

Index to Exhibits...................................................................... E-1

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FORWARD LOOKING STATEMENTS

Statements contained in this Annual Report on Form 10-K (the "Report")
that are not historical facts or that discuss our expectations or beliefs
regarding our future operations or financial performance constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "1933 Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "1934 Act"). Forward-looking statements
are estimates of, or expectations or beliefs regarding our future operations and
future financial performance that are based on current information and that are
subject to a number of risks and uncertainties that could cause our actual
operating results in the future to differ significantly from those expected at
the current time. Those risks and uncertainties are described in Part II of this
Report under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Certain Factors That Could Affect Our
Future Financial Performance" and readers of this Report are urged to read the
cautionary statements contained in that Section of this Report.

PART I

ITEM 1. BUSINESS

GENERAL

The Coast Distribution System, Inc. (which, for convenience, will be
referred to in this Report as "we" or "us" or the "Company"), was incorporated
in California in November 1977, and reincorporated in Delaware in April 1998. We
believe that we are the largest wholesale supplier of replacement parts,
supplies and accessories for recreational vehicles ("RVs"), and one of the
largest wholesale suppliers of replacement parts, supplies and accessories for
boats, in North America. We supply more than 25,000 products and serve more than
15,000 customers throughout the United States and Canada, from 13 regional
distribution centers in the United States that are located in California, Texas,
Oregon, Arizona, Colorado, Utah, Indiana, Pennsylvania, New York, Georgia,
Florida and Wisconsin and 4 regional distribution centers in Canada located,
respectively, in Montreal, Toronto, Calgary and Vancouver. Reference is made to
Note H to the Consolidated Financial Statements of the Company, contained
elsewhere in this Report, for certain information regarding the respective
operating results of the Company's operations in the United States and Canada.
The Company's customers are comprised primarily of RV and boat dealers and RV
and boating parts supply stores and service centers ("After-Market Customers"),
who resell the products they purchase from the Company, at retail, to consumers
that own or use RVs and boats.

In order to improve our competitive position and increase our
profitability, we have introduced into the marketplace a number of products that
have been designed specifically for us by independent product design firms and
are manufactured for us, generally on an exclusive basis, by a number of
different independent manufacturers ("proprietary products"). These proprietary
products are marketed by us under our own brand-names in competition with brand
name products from traditional suppliers. We are able to obtain the proprietary
products at prices that generally are below those we would have to pay for
functionally equivalent brand name products. For additional information
regarding our proprietary products, see the section of this Report entitled
"Products--Proprietary Products" below.

Although initially designed for sale to After-Market Customers, a number
of our more recently designed proprietary products also are suitable for
installation as original equipment on RVs and boats at the time of their
manufacture. In addition, a number of the proprietary products have applications
in markets other than the RV and boating markets, such as the automobile or
outdoor furniture markets. As a result, in 1997 we established the DTS
Manufacturing Division within the Company (the "DTS Division") to implement
programs to market and sell those proprietary products to RV and boat
manufacturers and to retail dealers and mass merchandisers in other markets. For
additional information, see the section of this Report entitled "Products--The
DTS Division" below.

To provide our customers with a high level of service, we utilize a
computer-based order entry and warehousing system which enables customers to
transmit orders either telephonically or electronically to us, and enables us to
prepare and invoice most orders within 24 hours of receipt. We also have
established a national customer service center to enable customers to obtain
product information and place orders by telephone using Company toll-free
telephone numbers. We believe that the breadth of our product lines, the
proprietary products we

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are able to offer to our customers, the computer integration of our operations
and the customer support programs we offer, distinguishes us from other
distributors of RV and boating parts, supplies and accessories. See "Business -
Marketing and Sales."

THE PARTS, SUPPLIES AND ACCESSORIES AFTER-MARKETS

Many manufacturers of RV and boating replacement parts, supplies and
accessories rely on independent distributors, such as the Company, to market and
distribute their products or to augment their own product distribution
operations. Distributors relieve manufacturers of a portion of the costs
associated with distribution of their products while providing geographically
dispersed selling, order processing and delivery capabilities. At the same time,
distributors offer retailers access to a broad line of products and the
convenience of rapid delivery of orders.

The market for RV parts, supplies and accessories distributed by the
Company includes both RV dealers and RV supply stores and service centers. The
products that we sell include optional equipment and accessories, such as
awnings, trailer hitches, air conditioning units, water heaters and other
accessories, and replacement and repair parts and maintenance supplies. The
market for boating parts, supplies and accessories is comprised primarily of
independent boat dealers that sell boats and boating parts, supplies and
accessories at retail. Independent boat dealers purchase primarily replacement
parts, boating supplies and smaller accessories from the Company. See "Business
- - Products."

PRODUCTS

General. We carry a full line of more than 15,000 recreational vehicle
parts, supplies and accessories which we purchase from more than 500
manufacturers. Recreational vehicle products distributed by the Company include
awnings, antennae, vents, electrical items, towing equipment and hitches,
appliances such as air conditioners, refrigerators, ranges and generators, LP
gas equipment, portable toilets and plumbing parts, hardware and tools,
specialized recreational vehicle housewares, chemicals and supplies, and various
accessories, such as ladders, jacks, fans, load stabilizers, mirrors and
compressors.

We stock boating and marine parts, supplies and accessories at 12 of our
13 warehouse and distribution centers in the United States and at all 4 of our
distribution centers in Canada. Boating and marine products that we distribute
include boat covers, stainless steel hardware, depth sounders, anchors, life
jackets and other marine safety equipment and fishing equipment.

Proprietary Products. In order to improve our competitive position and
increase our profitability, we have introduced into the marketplace a number of
proprietary products, which are manufactured specifically for us, generally on
an exclusive basis, by a number of different independent manufacturers on a
private label basis. The proprietary products, which are designed for us by
independent professional product design firms or by the independent
manufacturers that we have retained to manufacture the products for us, include
trailer hitches, plastic wastewater tanks, portable toilets and toilet
chemicals, vent lids and stabilizing jacks. We market these proprietary products
under our own brand-names in competition with brand name products from
traditional suppliers, which usually sell their products to a number of
distributors and into other markets. However, our proprietary products currently
lack the same name brand recognition as the competitive products manufactured by
traditional domestic suppliers, which may have a limiting effect on unit sales
of and on the prices that we are able to charge for our proprietary products. It
also means that the costs of marketing the proprietary products generally is
greater than for brand-name products, which somewhat offsets the margin
advantage we gain on sales of our proprietary products.

The DTS Division. Although the Company's proprietary products were
initially designed for sale to After-Market Customers, a number of those
products also are suitable for installation as original equipment on RVs and
boats at the time of their manufacture or have applications in markets other
than the RV and boating markets, such as the automobile and outdoor furniture
markets. As a result, in 1997 the Company established the DTS Manufacturing
Division within the Company (the "DTS Division"), to implement programs to
market and sell those proprietary products to RV and boat manufacturers and to
retail dealers and mass merchandisers in other markets. Utilizing distinctive
brand names and packaging, these proprietary products are marketed separately,
as products that are distinct from the proprietary products that are sold by the
Company's "Coast Distribution" Division to RV

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and boating After-Market Customers. The DTS Division also will be identifying
opportunities to design and arrange for the manufacture of new proprietary
products that can be installed as original equipment on RVs and boats or that
have applications in other markets. To date, the operating results of the DTS
Division have not been material.

MARKETING AND SALES

Our Customers. Our customers include (i) RV dealers, which primarily
purchase optional equipment and accessories for new recreational vehicles and
replacement and repair parts for their service departments, (ii) independent
recreational vehicle supply stores and service centers that purchase parts,
supplies and accessories for resale to owners of RVs and for their service
centers, and (iii) independent boat dealers that purchase small accessories for
new boats and replacement parts and boating supplies for resale to boat owners
and operators. We are not dependent on any single customer for any material
portion of our business and no single customer accounted for as much as 5% of
our sales in 1998, 1999 or 2000.

Customer Service Center and Computerized Order Entry and Warehousing
System. We have designed and implemented a computer-based order entry and
warehousing system which enables our customers to transmit orders electronically
to our central computers and also enables us to prepare and invoice most
customer orders within 24 hours of receipt.

We also operate a national customer sales and service center, located in
Northern California, through which our customers can obtain product information
and place orders by telephone using our toll-free telephone numbers. With the
exception of holidays, our customer sales and service center is operational for
a total of 13 hours per day, Monday through Friday, and 8 hours on Saturdays and
is staffed by sales personnel who are trained to promote the sale of our
products and to handle customer service issues. Currently, the number of
customer calls handled by our national customer sales and service center, which
can be accessed by virtually all of the Company's customers in the United States
and Canada, ranges from 2,000 to 6,000 per day and the customer service center
has enabled the Company not only to improve customer service, but also to reduce
selling expenses.

Orders transmitted from customers either electronically or by telephone
to the national customer sales and service center are input into our IBM AS 400
computer and then are relayed to the regional distribution center selected by
the customer, where the products are selected, packed and shipped. At the time
the order is received, the customer is informed, either by electronic
confirmation, or by the sales person handling the customer's call at the
customer service center, that the order has been accepted and whether any items
are not currently in stock. In addition, we offer to participating customers a
"split shipment program" by which a customer's order for a product that is not
available from the Company's distribution center closest to the customer, will
be shipped to that customer from another of the Company's distribution centers
that has been pre-selected by that customer as a "back-up" distribution center,
when that product is available at that back-up distribution center.

DISTRIBUTION

Our regional distribution and warehouse centers in North America carry
an inventory of up to approximately 15,000 recreational vehicle parts, supplies
and accessories. In addition, 12 of our distribution centers in the United
States and all 4 of our distribution centers in Canada stock, in varying
quantities, up to approximately 10,000 boating and marine parts, supplies and
accessories.

We rely primarily on independent freight companies to ship our products
to our customers.

ARRANGEMENTS WITH MANUFACTURERS

General. The products which we distribute are purchased from more than
500 different manufacturers. As is typical in the industry, in most instances we
acquires those products on a purchase order basis and we have no guaranteed
price or delivery agreements with manufacturers, including the manufacturers
that manufacture proprietary products for us. As a result, short-term inventory
shortages can occur. We sometimes choose to carry only a single manufacturer's
products for certain of the brand-name product lines that we sell, although
comparable products usually are available from multiple sources. In addition, we
obtain each of our proprietary products from a single source manufacturer,
although in most instances we own the tooling required for their manufacture.

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Dependence on a single manufacturer for any product or line of related products,
however, presents some risks, including the inability to readily obtain
alternative product supply sources in the event that a single source supplier
(i) encounters quality or other production problems, (ii) decides to enter into
an exclusive supply arrangement or alliance with a competing distributor, or
(iii) decides to vertically integrate its operations to include not only
manufacturing, but also distribution, of its products. A termination of a single
source supply relationship could adversely affect the Company's sales and
operating income, possibly to a significant extent.

No manufacturer or supplier of products to the Company accounted for
more than 5% of the Company's product purchases in 2000, other than Airxcel,
Inc. ("Airxcel"). Airxcel supplies the Company with its requirements for RV air
conditioners sold under the Coleman(R) brand name, under a multi-year product
supply agreement. The products supplied by Airxcel accounted for approximately
12% of the Company's net sales in 2000.

Manufacturers generally warrant the products distributed by the Company
and allow the Company to return defective products, including those that have
been returned to the Company by its customers. The Company does not
independently warrant the products that it distributes.

COMPETITION

The Company faces significant competition. There are a number of
national and regional distributors of recreational vehicle and boating parts,
supplies and accessories that compete with the Company. There also are certain
mass merchandisers, catalog houses and national and regional retail chains
specializing in the sale of recreational vehicle or boating parts, supplies and
accessories, that purchase such products directly from manufacturers. Such mass
merchandisers and national and regional chains compete directly with the RV and
boating supply stores and service centers that purchase products from the
Company. Such competition affects both the volume of the Company's sales, and
the prices it is able to charge for the products it sells, to such RV and
boating supply stores. Additionally, there is no assurance that changes in
supply relationships or new alliances within the recreational or boating
products industry will not occur that would further increase competition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Part II of this Report.

The Company, like most of its competitors, competes on the basis of the
quality, speed and reliability of its service, the breadth of its product lines
and price. The Company believes that it is highly competitive in each of those
areas.

EMPLOYEES

At December 31, 2000, the Company had approximately 355 full-time
employees, which includes employees in Canada. During the peak summer months,
the Company also employs part-time workers at its regional distribution centers.
None of the Company's employees is represented by a labor union. The Company
believes that its relations with employees are good.

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ITEM 2. PROPERTIES

The Company operates 13 regional distribution centers in 12 states in
the United States and 4 regional distribution centers, each located in a
different Province, in Canada. Except for one facility owned by the Company, all
of these facilities are leased under triple net leases which require the Company
to pay, in addition to rent, real property taxes, insurance and maintenance
costs. The following table sets forth certain information regarding those
facilities.

SQUARE LEASE
GEOGRAPHIC LOCATION FOOTAGE EXPIRATION DATE
------------------- ------- ---------------

Portland, Oregon.............. 72,000 Owned
Visalia, California........... 70,000 February 28, 2007
Fort Worth, Texas............. 90,670 April 30, 2004
San Antonio, Texas............ 27,300 April 30, 2003
Denver, Colorado.............. 50,000 September 30, 2004
Elkhart, Indiana.............. 109,000 December 31, 2005
Lancaster, Pennsylvania....... 64,900 February 29, 2004
Atlanta, Georgia.............. 66,800 August 31, 2004
Tampa, Florida................ 53,100 September 30, 2003
Phoenix, Arizona.............. 36,500 March 31, 2002
Salt Lake City, Utah.......... 37,800 March 31, 2003
Albany, New York.............. 52,500 April 30, 2004
Eau Claire, Wisconsin......... 36,000 July 31, 2001
Montreal, Quebec.............. 40,715 January 1, 2010
Toronto, Ontario.............. 34,020 December 1, 2001
Calgary, Alberta.............. 30,750 December 1, 2003
Vancouver, British Columbia... 22,839 June 1, 2004

In March 1999, the Company relocated its executive offices from San Jose
to Morgan Hill, California, a suburb of San Jose, where it now leases 26,000
square feet of office space. The Company's address is 350 Woodview Avenue,
Morgan Hill, California 95037 and its telephone number at that location is (408)
782-6686.

The Company also leases 1,500 square feet of office space in Seattle,
Washington and 2,000 square feet in Anchorage, Alaska where the Company
maintains sales offices.

ITEM 3. LEGAL PROCEEDINGS

The Company from time to time is named as a defendant, sometimes along
with product manufacturers and others, in product liability and personal injury
litigation. The Company believes that this type of litigation is incident to its
operations, and since it has insurance, and in many instances also indemnities
from manufacturers, covering any potential liability, it believes that such
litigation will not materially affect the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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EXECUTIVE OFFICERS OF REGISTRANT

NAME AGE POSITION
---- --- --------

Thomas R. McGuire....... 57 Chairman of the Board and Chief Executive
Officer
Sandra A. Knell......... 43 Executive Vice President - Finance and
Chief Financial Officer and Secretary
David A. Berger......... 47 Executive Vice President - Marketing --
Marine Products Division
Stephen Bartolotta...... 39 Executive Vice President - Strategic
Planning
Dennis A. Castagnola.... 53 Executive Vice President - Sales

Set forth below is certain information regarding the Company's executive
officers.

THOMAS R. MCGUIRE. Mr. McGuire is a founder of the Company and has been
Chairman of the Board and Chief Executive Officer of the Company since the
Company's inception. From 1981 until August 1985 he also served as the Company's
Chief Financial Officer and Secretary.

SANDRA A. KNELL. Mrs. Knell has been the Company's Executive Vice
President - Finance, Chief Financial Officer and Secretary since August 1985.
From 1984 until she joined the Company, Mrs. Knell was an Audit Manager, and for
the prior four years was a senior and staff accountant, with Grant Thornton LLP
(formerly Alexander Grant & Co.). Mrs. Knell is a Certified Public Accountant.

DAVID A. BERGER. Mr. Berger served as Executive Vice President -
Marketing from May 1988 until September 1993. Due to the growth of the Company's
marine products sales, in September 1993 the Company's marketing department was
restructured into two separate departments, one for marine products and the
other for RV products, and Mr. Berger was placed in charge of marketing for the
Company's marine products division. From August 1986 to May 1988, Mr. Berger was
Senior Vice President Purchasing of the Company. For the prior 14 years he held
various management positions with C/P Products Corp., a distributor of
recreational vehicle parts and accessories acquired by the Company in 1985.

STEPHEN BARTOLOTTA. Mr. Bartolotta joined the Company in January 2000 as
Executive Vice President - Strategic Planning. From September 1995 to December
1999, he was a Senior Manager with the Strategic Services Division of Arthur
Andersen Consulting, Inc., in New York. From February 1993 to September 1995,
Mr. Bartolotta was a senior staff member with Arthur Andersen's business
advisory practice. From October 1987 to February 1993, he held various positions
with the Company, including Vice President and general manager of the Company's
Connecticut distribution center.

DENNIS A. CASTAGNOLA. Mr. Castagnola was appointed to his current
position of Executive Vice President - Sales in November 2000. From May 1994
through November 2000, he served as Senior Vice President - Proprietary
Products, where he directed the Company's proprietary products program. For the
prior 19 years, he held various positions with the Company, including Vice
President/Division Manager of the Company's Portland, Oregon Distribution
Center. In 1997, Mr. Castagnola was appointed as President of the Company's new
DTS Division which markets and supplies proprietary products to RV and boating
manufactures and to customers in markets other than the RV and boating
After-Market.

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PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS

The Company's shares of common stock are listed and trade on the
American Stock Exchange under the trading symbol "CRV."

The following table sets forth for the calendar quarters indicated the
range of the high and low sales prices per share of the Company's common stock
on the American Stock Exchange.

HIGH LOW

2000
First Quarter............................. $2.38 $1.88
Second Quarter............................ 2.25 1.13
Third Quarter............................. 1.75 1.00
Fourth Quarter............................ 1.44 0.63

1999
First Quarter............................. $3.38 $2.25
Second Quarter............................ 3.25 2.13
Third Quarter............................. 2.94 2.38
Fourth Quarter............................ 2.56 1.88

On March 16, 2001, the closing price per share of the Company's common
stock on the American Stock Exchange was $0.74 and there were approximately
1,200 holders of record of the Company's common stock.

DIVIDENDS AND SHARE REPURCHASES

The Company has a policy of retaining earnings to support the growth of
its business and, therefore, does not anticipate that any cash dividends will be
paid in the foreseeable future. In addition, payment of cash dividends by the
Company is restricted by its loan agreements. See Note D to the Company's
Consolidated Financial Statements.

In early 1999 the Company adopted an open market and private stock
repurchase program. We made purchases of $2,975,000 of shares under that
program, that were funded with borrowings under a term loan from the same lender
with which we have our revolving credit facility. We do not currently expect to
make any purchases of shares in 2001. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

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ITEM 6. SELECTED FINANCIAL DATA

The selected operating data set forth below for the fiscal years ended
December 31, 2000, 1999 and 1998, and the selected balance sheet data at
December 31, 2000 and 1999, are derived from the Company's audited financial
statements included elsewhere in this report and should be read in conjunction
with those financial statements. The selected financial data for the fiscal
years ended December 31, 1997 and 1996 and at December 31, 1998, 1997 and 1996
are derived from audited financial statements which are not included in this
report.

YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
2000 1999 1998 1997 1996
-------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)

OPERATING DATA:
Net Sales .............................................. $ 147,491 $ 154,800 $ 148,680 $ 135,952 $ 139,286
Cost of sales (including distribution costs) ........... 125,426 128,804 124,452 117,272 118,361
--------- --------- --------- --------- ---------
Gross margin ................................... 22,065 25,996 24,228 18,680 20,925
Selling, general and administrative expenses ........... 24,302 23,140 20,301 20,147 21,525
--------- --------- --------- --------- ---------
Operating margin ............................... (2,237) 2,856 3,927 (1,467) (600)
Equity in net earnings (loss) of affiliated companies .. 50 76 (170) 673 1,529
Other income (expense) ................................. (1,804) (2,386) (2,704) (5,775) (1,246)
--------- --------- --------- --------- ---------
Earnings (loss) before income taxes .................... (3,991) 546 1,053 (6,569) (317)
Income taxes (credits) ................................. (1,150) 536 927 (1,303) (194)
--------- --------- --------- --------- ---------
Net earnings (loss) ............................ $ (2,841) $ 10 $ 126 $ (5,266) $ (123)
========= ========= ========= ========= =========

Net earnings (loss) per share-diluted(1) ............... $ (.66) $ .00 $ .02 $ (1.01) $ (.03)
========= ========= ========= ========= =========
Weighted average number of shares ...................... 4,324 4,641 5,282 5,239 5,198
========= ========= ========= ========= =========

AT DECEMBER 31,
-----------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------
(IN THOUSANDS)
-----------------------------------------------------------

BALANCE SHEET DATA:
Working capital ........................................ $40,643 $45,653 $42,937 $48,999 $45,639
Total assets ........................................... 63,890 69,687 66,813 72,663 88,442
Long-term obligations(2) ............................... 25,140 28,105 23,175 29,726 33,771
Shareholders' equity ................................... 28,165 31,243 33,831 33,996 39,450

- ----------

(1) See Note J to the Company's Consolidated Financial Statements.

(2) Exclusive of current portion. For additional information regarding
long-term obligations, see Note D to the Company's Consolidated Financial
Statements.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

GENERAL

Factors Generally Affecting Sales of RV and Boating Products

We believe that the Company is the largest wholesale distributor of
replacement parts, accessories and supplies for recreational vehicles ("RVs"),
and one of the largest distributors of replacement parts, accessories and
supplies for boats, in North America. Our sales are made to retail parts and
supplies stores, service and repair establishments and new and used RV and boat
dealers ("After-Market Customers"). Our sales are affected primarily by (i)
usage of RVs and boats which affects the consumers' needs for and purchases of
replacement parts, repair services and supplies, and (ii) sales of new RVs and
boats, because consumers often "accessorize" their RVs and boats at the time of
purchase.

The usage and the purchase, by consumers, of RVs and boats depend, in
large measure, upon the extent of discretionary income available to consumers
and their confidence about economic conditions. Weather conditions also affect
the usage of RVs and boats. Additionally, shortages in the supply and increases
in the prices of gasoline also can lead to declines in the usage and purchases
of RVs and boats. As a result, our sales and operating results can be, and in
the past have been, adversely affected by recessionary economic conditions,
increases in interest rates, which affect the availability and affordability of
financing for purchases of RVs and boats, increases in the prices of gasoline,
and unusually adverse weather conditions. We believe that increases in interest
rates and gasoline prices which began in the second quarter of 2000, and growing
uncertainties among consumers about economic conditions beginning in the latter
part of the year, contributed to our poor financial performance in 2000.

RESULTS OF OPERATIONS

Net Sales. Net sales in 2000 declined by $7,309,000 or 4.7% as compared
to 1999. We believe that this decline, which began late in the second quarter of
2000, was primarily attributable to increases in gasoline prices and interest
rates which, coupled with growing uncertainties among consumers about the
economy during the latter part of the year, resulted in a decrease in both the
usage and purchase of recreational vehicles and, in turn, led to a decline in
purchases of our products by our customers in response to those conditions.

Net sales in 1999 increased by approximately $6,120,000 or 4.1% as
compared to 1998, due primarily to an increase, during the first half of 1999,
in consumer demand for the products we sell, which we believe resulted primarily
from increases in sales and usage of recreational vehicles and boats. Operating
results in 1999 also included a full year of sales from Marine Distributors, a
marine products distribution business that we acquired late in May 1998, the
sales of which were therefore not included in our operating results for the
first five months of 1998.

Gross Margin. Our gross margin declined to 15.0% of net sales in 2000
from 16.8% in 1999. This decline was due primarily to increased price
competition in the second half of the year in response to slowing sales in our
markets, the adverse effect of lower sales volume on fixed costs and a change in
the mix of our sales to a higher proportion of higher priced, but lower margin
accessories. By contrast, in 1999 our gross margins increased to 16.8% of net
sales from 16.3% in 1998, due primarily to (i) selected price increases on the
products that we sell, and (ii) the impact of fixed costs on a higher sales
base.

Selling, General and Administrative Expenses. As a percentage of net
sales, selling, general and administrative expenses increased to 16.5% for 2000
from 15.0% in 1999 and 13.7% in 1998. These increases were primarily
attributable to higher selling and marketing costs, as we expanded our marine
products marketing and sales efforts during 1999 and 2000, and due to expenses
that we incurred in connection with the installation and testing of a new
computer system in 1999 and the costs of integrating that system into our
operations and of improving the functionality of that system in 2000.

Nearly all of our corporate overhead costs are incurred in the United
States. A portion of those costs are allocated to our foreign operations to the
extent that they directly benefit from the expenses incurred.

11
12

Operating Income. The decline in operating income in 2000 was due
primarily to the combined effects of the decreases in sales and gross margin and
the increase in selling, general and administrative expenses. In 1999 the
increase in selling, general and administrative expenses more than offset the
improvements in our net sales and gross margin achieved during the year, and
therefore, operating income declined to $2,856,000 in 1999 as compared to
$3,927,000 in 1998.

Interest Expense. During 2000, interest expense increased by $635,000 or
27%, as compared to 1999. This increase was (i) primarily the result of
increases in average long-term borrowings outstanding during the first nine
months of 2000, which were used to fund operations and to fund repurchases of
shares of our common stock in the latter half of 1999, and (ii) to a lesser
extent, due to increases in interest rates during 2000. Interest expense in 1999
decreased by $291,000 or 11% as compared to 1998. This decrease was largely the
result of a reduction in the rate of interest that we paid on our revolving line
of credit. We will continue to rely on borrowings to fund a substantial portion
of our working capital requirements and future growth, and, as a result, we
anticipate that interest will continue to be a significant expense for us.

Other Income. Other income in 2000 was the result of a one-time sale of
one of our proprietary product lines to a recreational vehicle supplies
manufacturer, which has agreed to supply that product, along with products from
its other product lines to us in future periods.

Income Taxes. Our effective income tax rate is affected by the amount of
our expenses that are not deductible for income tax purposes and by varying tax
rates on income generated by our foreign subsidiaries.

LIQUIDITY AND CAPITAL RESOURCES

We finance our working capital requirements for our operations primarily
with borrowings under a long-term revolving credit facility from a bank and
internally generated funds. We also have $4,167,000 of outstanding borrowings
under a term loan that we obtained from the same bank, a substantial portion of
the proceeds of which were used to fund repurchases of our shares in the latter
part of 1999. Under the terms of the revolving credit facility, which expires in
May 2003, we may borrow up to the lesser of (i) $35,000,000 with a seasonal
increase to $45,000,000 between March 1 and June 20 of each year, or (ii) an
amount equal to 80% of eligible accounts receivable and 50% of eligible
inventory (the "borrowing base"). Interest on the revolving credit facility is
payable at the bank's prime rate plus 75 basis points or, at the Company's
option but subject to certain limitations, borrowings will bear interest at the
bank's LIBOR rate, plus 250 basis points. Interest on the term loan is payable
at the bank's prime rate plus 125 basis points or at the bank's LIBOR rate, plus
300 basis points.

At March 15, 2001, outstanding borrowings under the revolving credit
facility and the term loan totaled $32,950,000. Borrowings under the credit
facility and term loan are secured by substantially all of the Company's assets
and rank senior in priority to other indebtedness of the Company.

We believe that available credit under our revolving credit facility and
term loan, together with internally generated funds, will be sufficient to
enable us to meet our working capital requirements and other cash requirements
over the next twelve months. We do not presently anticipate any material
increases in our cash requirements or material changes in our sources of funds
in the foreseeable future.

We generally use cash for, rather than generate cash from, operations in
the first half of the year, because we build inventories, and accounts
receivables increase, as our customers begin increasing their product purchases
for the spring and summer selling seasons. See "Seasonality and Inflation"
below.

Net cash provided by operating activities was $1,426,000 in 2000, as
compared to $777,000 in 1999 and $5,194,000 in 1998. Accounts receivable
collections slowed during 2000, as compared to 1999, due largely to sales
declines experienced by our customers primarily are a result of a slowing in
consumer usage and purchases of recreational vehicles and boats in apparent
response to increases in gasoline prices and interest rates and economic
uncertainties in the second half of 2000.

12
13

During the second half of 2000, we began the implementation of a new
inventory management strategy which contributed to a reduction of $5,312,000 in
inventory during 2000 as compared to an increase of $2,124,000 for 1999. The
strategy also enabled us to accelerate our payments to our vendors, which has
resulted in a reduction in our accounts payable in 2000 of $1,610,000 as
compared to an increase in accounts payable of $3,281,000 in 1999.

Capital expenditures were $1,265,000 in 2000 as compared to $1,465,000
in 1999 and $258,000 in 1998. The increases in capital expenditures in 2000 and
1999 were related to the acquisition and installation of the Company's new
computer system and improvements made in its functionality during 2000. During
1998 we received proceeds of $5,388,000 from the sale of an investment. In May
1998, we used cash of $1,142,000 to acquire the inventory of Marine
Distributors, Inc., a distributor of marine products.

Borrowings under our credit facility decreased by $781,000 in 2000, as
compared to an increase of $5,095,000 in 1999 and a decrease of $5,376,000 in
1998. In June 1999, we made the final payment, in the amount of $2,334,000, on
our outstanding senior subordinated notes. In early 1999, we began an open
market and private stock repurchase program and, during 1999, we purchased
1,012,304 of shares of our common stock. We do not currently expect to make any
purchases of shares during 2001.

We lease the majority of our facilities and certain of our equipment
under non-cancelable operating leases. In 2000, rent expense under all operating
leases totaled approximately $3,308,000. Our future lease commitments are
described in Note E of Notes to the Company's Consolidated Financial Statements
included elsewhere in this Report.

SEASONALITY AND INFLATION

Seasonality. Sales of recreational vehicle and boating parts, supplies
and accessories are seasonal. We have significantly higher sales during the
six-month period from March through August than we do during the remainder of
the year. Because a substantial portion of the Company's expenses are fixed,
operating income declines and the Company sometimes incurs losses and must rely
more heavily on borrowings to fund operating requirements in months when sales
are lower.

13
14

The following table presents unaudited quarterly financial information
for each of the fiscal years ended December 31, 2000 and 1999. This information
has been prepared by us on a basis consistent with our audited financial
statements included elsewhere in this Report. The information includes all
necessary adjustments, consisting only of normal recurring adjustments, that
management considers necessary for a fair presentation of the unaudited
quarterly operating results when read in conjunction with the consolidated
financial statements and notes thereto included elsewhere in this Report. These
quarterly operating results are not necessarily indicative of results that may
be expected in future periods.

QUARTER ENDED
---------------------------------
(UNAUDITED) MARCH 31, 2000 JUNE 30, 2000 SEPTEMBER 30, 2000 DECEMBER 31, 2000
-------------- ------------- ------------------ -----------------

Revenues $43,872 $46,940 $37,076 $19,603
Gross profit 8,114 7,220 5,180 1,551
Net earnings (loss) 413 311 (957) (2,608)
Net earnings (loss) per share - diluted $ 0.10 $ 0.07 $ (0.22) $ (0.60)

QUARTER ENDED
---------------------------------
(UNAUDITED) MARCH 31, 1999 JUNE 30, 1999 SEPTEMBER 30, 1999 DECEMBER 31, 1999
-------------- ------------- ------------------ -----------------

Revenues $41,129 $49,624 $41,407 $22,640
Gross Profit 7,130 9,381 6,172 3,313
Net earnings (loss) 340 1,155 (163) (1,322)
Net earnings (loss) per share - diluted $ 0.07 $ 0.25 $ (0.04) $ (0.31)

Inflation. Generally, we have been able to pass inflationary price
increases on to our customers. However, inflation also may cause or may be
accompanied by increases in gasoline prices and interest rates. Such increases,
or even the prospect of increase in the price or shortages in the supply of
gasoline, can adversely affect the purchase and usage of RVs and boats, which
can result in a decline in the demand for our products. We believe that the
decrease in our net sales in the second half of 2000 was due in part to
increases in interest rates and gasoline prices.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our exposure to market risk with respect to financial instruments is
primarily related to changes in interest rates with respect to borrowing
activities, which may adversely affect our financial position, results of
operations and cash flows. To a lesser degree, we are exposed to market risk
from foreign currency fluctuations associated with the our Canadian operations
and our Canadian currency denominated debt. We do not use financial instruments
for trading or other speculative purposes and are not party to any derivative
financial instruments.

In seeking to minimize the risks from interest rate fluctuations, we
manage exposures through our regular operating and financing activities. The
fair value of borrowings under our revolving credit facility approximate the
carrying value of such obligations. As of December 31, 2000, we had outstanding
$25.6 million under our revolving credit facility.

We sometimes enter into forward exchange agreements to reduce the effect
of foreign currency fluctuations on a portion of our inventory purchases in
Canada for our Canadian operations. The gains and losses on these contracts are
reflected in earnings in the period during which the transactions being hedged
are recognized. We believe that these agreements do not subject us to
significant market risk from exchange rate movements because the agreements
offset gains and losses on the balances and transactions being hedged. As of
December 31, 2000, there were no such agreements outstanding.

Approximately 20% of our debt is denominated in Canadian currency, which
also exposes us to market risk associated with exchange rate movements.
Historically, we have not used derivative financial instruments to manage our
exposure to foreign currency rate fluctuations since the market risk associated
with our foreign currency denominated debt has not been considered significant.

14
15

This Report contains forward-looking information which reflects
Management's current views of future financial performance. The forward-looking
information is subject to certain risks and uncertainties, including, but not
limited to, the effect on future performance of changing product supply
relationships in the industry and the uncertainties created by those changes;
the potential for increased price competition; possible changes in economic
conditions, prevailing interest rates or gasoline prices, or the occurrence of
unusually severe weather conditions, that can affect both the purchase and usage
of RVs and boats and which, in turn, affects purchases by consumers of the
products that the Company sells. For information concerning such factors and
risks, see the foregoing discussion in this section of this Report titled,
"Management's Discussion and Analysis of Financial Condition and Results of
Operation." Due to such uncertainties and risks, readers are cautioned not to
place undue reliance on such forward-looking statements, which speak only as of
the date of this Report.

CERTAIN FACTORS THAT COULD AFFECT OUR FUTURE FINANCIAL PERFORMANCE

Statements contained in this Annual Report that are not historical facts
or that discuss our expectations or beliefs regarding our future operations or
future financial performance constitute "forward-looking statements."
Forward-looking statements are estimates of future performance that are based
upon current information and that are subject to a number of risks and
uncertainties that could cause our actual operating results or financial
performance in future periods to differ significantly from those expected at the
current time. Those risks and uncertainties include, although they are not
limited to, the following:

Our Business is Subject to Various Economic and Climatic Influences. Our
sales are affected directly by the purchase and usage levels of RVs and boats.
The purchase and, in particular, the usage of RVs and boats, are affected by
weather conditions. As a result, our sales and operating results ordinarily
decline in the winter months and we sometimes incur losses in these periods of
the year. Purchases and usage of RVs and boats also are affected by consumers'
level of discretionary income and their confidence about economic conditions and
changes in interest rates and in the availability and cost of gasoline. As a
result, our sales and operating results can be, and in the past have been,
adversely affected by the following:

- Loss of confidence among consumers regarding economic conditions and
the onset of economic recessions, which affect the willingness of
consumers to purchase and use their RVs and boats;

- Increases in interest rates which affect the availability and
affordability of financing for RVs and boats;

- Increases in the costs and shortages in the supply of gasoline
which affect the costs of using and the ability to use RVs and
boats; and

- Unusually severe or extended winter weather conditions, which can
reduce the usage of RV and boats for periods extending beyond the
ordinary winter months or to regions that ordinarily encounter
milder winter weather conditions.

These conditions also often lead to increased price competition in our markets
which could force us to reduce our prices, thereby reducing sales revenue and
our margins. All of these conditions contributed to the decline in our sales and
the losses we incurred in the year ended December 31, 2000 and are likely to
impact our operating results in the year ending December 31, 2001.

We Rely on Bank Borrowings To Finance Our Business. We rely heavily on
bank borrowings to fund our working capital requirements and capital
expenditures. Our outstanding borrowings could harm us in the future. We may
find it more difficult to obtain additional financing to fund expansion or take
advantage of other business opportunities, and we use a substantial portion of
our cash flow from operations to pay the principal and interest on our debt.
Therefore, our existing debt makes us more vulnerable to general economic
downturns and competitive pressures and, as discussed in the Section of this
Report entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations, the interest we have to pay on such debt impacts our
operating results.

15
16
The Effects of Possible Changes in Supply Relationships in Our
Markets. As is the customary practice in our markets, in most instances we do
not have long term supply contracts with our product suppliers. As a result,
product suppliers are free to change the terms on which they will sell us
products or to discontinue supplying us with products altogether, because they
may choose to distribute their products directly to after-market dealers or
because they might choose to establish exclusive supply relationships with other
distributors. Additionally, manufacturers of new RVs and boats may choose to
incorporate optional equipment on their RVs and boats at the time of manufacture
that, historically, were provided to their dealers by distributors such as the
Company. Any of these occurrences could result in increased competition in our
markets or reduce the number of products we are able to offer our customers,
which could cause our sales to decline and could result in lower margins.

Electricity Supply Shortages. California is currently
experiencing a tightening in the supply of electricity to the state and there
have already been a few rolling power outages or "blackouts" in the past few
months and more are expected during the summer months when electricity usage is
typically at its peak. Power outages could disrupt our operations, increase our
operating costs and reduce the productivity of our operations. Power outages
also could interfere with the ability of customers to reach our national sales
and customer service center which is located in Northern California and could
result in the shut down of our computer systems that could cause financial and
operating data to be lost and slow down our ability to fill customer orders. We
have developed contingency plans to deal with such power outages that include
the use of alternative energy generating equipment to provide power to essential
systems and we have back up computer systems at certain of our distribution
centers located outside of California that can be used during power outages.
However, we do not know and cannot predict the frequency or duration of the
power outages that may occur and, therefore, despite our contingency plans, such
outages could adversely affect our future operating results.

Due to these and other possible uncertainties and risks, readers are
cautioned not to place undue reliance on forward-looking statements contained in
this Report, which speak only as of the date of this Annual Report. We also
disclaim any obligation to update forward looking information contained in this
Report.

16
17

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

THE COAST DISTRIBUTION SYSTEM, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1999

PAGE
----

Consolidated Financial Statements:

Report of Independent Certified Public Accountants..................................................... 18

Consolidated Balance Sheets, December 31, 2000 and 1999................................................ 19

Consolidated Statements of Operations for the Years Ended December 31, 2000, 1999 and 1998............. 20

Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998............. 21

Consolidated Statement of Shareholders' Equity for the Years Ended December 31, 2000, 1999 and 1998.... 22

Notes to Consolidated Financial Statements............................................................. 23

Financial Statement Schedules:

Schedule II - Valuation and Qualifying Accounts for the Years Ended December 31, 2000, 1999 and 1998... 31

(Other Financial Statement Schedules are omitted as the information is not
required, is not material or is otherwise furnished.)

17
18

REPORT OF INDEPENDENT ACCOUNTANTS

Board of Directors and Shareholders The Coast Distribution System, Inc.

We have audited the accompanying consolidated balance sheets of The Coast
Distribution System, Inc. and Subsidiaries as of December 31, 2000 and 1999, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the three years in the period ended December 31, 2000.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of The Coast
Distribution System, Inc. and Subsidiaries as of December 31, 2000 and 1999, and
the consolidated results of their operations and their consolidated cash flows
for each of the three years in the period ended December 31, 2000, in conformity
with accounting principles generally accepted in the United States of America.

We have also audited Schedule II of The Coast Distribution System, Inc. and
Subsidiaries for each of the three years in the period ended December 31, 2000.
In our opinion this schedule presents fairly, in all material respects, the
information required to be set forth therein.

/s/ Grant Thornton LLP

San Jose, California
March 15, 2001

18
19

THE COAST DISTRIBUTION SYSTEM, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands Except Per Share Amounts)

AS OF
DECEMBER 31,
--------------------
2000 1999
-------- --------

ASSETS
Current Assets
Cash ........................................................................ $ 539 $ 641
Accounts receivable (less allowance for doubtful receivables of $1,040
in 2000 and $890 in 1999) ................................................... 12,996 12,981
Inventories ................................................................. 33,343 38,655
Prepaid expenses ............................................................ 799 1,067
Deferred income taxes ....................................................... 2,397 1,743
Income tax refunds receivable ............................................... 893 652
-------- --------
Total current assets .................................................. 50,967 55,739
Property, Plant and Equipment ................................................. 4,139 4,364
Other Assets
Costs in excess of net assets of acquired businesses ........................ 7,061 7,584
Other ....................................................................... 1,723 2,000
-------- --------
Total other assets .................................................... 8,784 9,584
-------- --------
$ 63,890 $ 69,687
======== ========
LIABILITIES
Current Liabilities
Accounts payable ............................................................ $ 6,138 $ 7,748
Accrued liabilities ......................................................... 2,423 2,050
Current maturities of long-term obligations ................................. 1,763 288
-------- --------
Total current liabilities ............................................. 10,324 10,086
Long-Term Obligations ......................................................... 25,140 28,105
Deferred Income Taxes ......................................................... 213 102
Commitments ................................................................... -- --
Redeemable Preferred Stock of Subsidiary ...................................... 48 151

STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; authorized: 5,000,000 shares; none issued
or outstanding ................................................................ -- --
Common stock, $.001 par value; authorized: 20,000,0000 million shares;
4,330,654 and 4,302,846 issued as of December 31, 2000 and 1999, respectively.. 16,800 16,751
Accumulated other comprehensive income (loss) ................................. (650) (367)
Retained earnings ............................................................. 12,015 14,859
-------- --------
Total Stockholders Equity ............................................. 28,165 31,243
-------- --------
$ 63,890 $ 69,687
======== ========

The accompanying notes are an integral part of these financial statements

19
20

THE COAST DISTRIBUTION SYSTEM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31,
---------------------------------------
2000 1999 1998
--------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)

Net sales .............................................. $ 147,491 $ 154,800 $ 148,680
Cost of products sold (including distribution costs) ... 125,426 128,804 124,452
--------- --------- ---------
Gross margin ....................................... 22,065 25,996 24,228
Selling, general and administrative expenses ........... 24,302 23,140 20,301
--------- --------- ---------
Operating margin ................................... (2,237) 2,856 3,927
Equity in net earnings (loss) of affiliated companies... 50 76 (170)
Other Income (expense)
Interest expense ..................................... (3,006) (2,371) (2,662)
Other ................................................ 1,202 (15) (42)
--------- --------- ---------
Earnings (loss) before income taxes .................... (3,991) 546 1,053
Income tax provision (benefit) ..................... (1,150) 536 927
--------- --------- ---------
Net earnings (loss) ............................ $ (2,841) $ 10 $ 126
========= ========= =========

Earnings (loss) per share:
Basic .............................................. $ (.66) $ .00 $ .02
========= ========= =========
Diluted ............................................ $ (.66) $ .00 $ .02
========= ========= =========

The accompanying notes are an integral part of these financial statements

20
21

THE COAST DISTRIBUTION SYSTEM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

YEAR ENDED DECEMBER 31,
-------------------------------
2000 1999 1998
---- ---- ----

Cash flows from operating activities:
Net earnings (loss) .............................................................. $(2,841) $ 10 $ 126
Adjustments to reconcile net earnings (loss) to net cash provided by
operating activities
Depreciation ................................................................... 881 928 972
Amortization ................................................................... 646 634 604
Loss from sale of equipment .................................................... 24 5 51
Equity in net earnings (loss) of affiliated companies, net of distributions .... (35) (76) 170
Gain from sale of product line ................................................. (1,078) -- --
Deferred income taxes .......................................................... (572) (37) (344)
Change in assets and liabilities net of effects from business acquisitions:
Accounts receivable .......................................................... 299 (569) (1,144)
Inventory .................................................................... 5,312 (2,124) 1,267
Prepaids and tax refunds receivable .......................................... 27 (1,245) 1,944
Accounts payable ............................................................. (1,610) 3,281 1,226
Accrued liabilities .......................................................... 373 (30) 322
------- ------- -------
4,401 (687) 3,615
------- ------- -------
Net cash provided by operating activities ................................ 1,426 777 5,194

Cash flows from investing activities:
Proceeds from sale of property and equipment ................................... 622 174 11
Proceeds from sale of product line ............................................. 400 -- --
Increase (decrease) in other assets ............................................ 485 1,019 (705)
Acquisitions of businesses, net of cash acquired ............................... -- -- (1,142)
Proceeds from sale of investments in affiliates ................................ -- -- 5,388
------- ------- -------
Capital expenditures ........................................................... (1,265) (1,465) (258)
------- ------- -------
Net cash provided by (used in) investing activities ...................... 242 (272) 3,294

Cash flows from financing activities:
Net borrowings (repayments) under notes payable and line-of credit agreements .. (781) 5,095 (5,376)
Proceeds from issuance of long-term debt ....................................... -- 136 50
Repayment of long-term debt .................................................... (707) (2,715) (2,779)
Issuance of common stock under employee stock purchase and stock option plans .. 49 86 81
Retirement of common stock ..................................................... -- (2,975) --
Redemption of redeemable preferred stock of subsidiary ......................... (97) (96) (96)
Dividends on preferred stock of subsidiary ..................................... (3) (7) (12)
------- ------- -------
Net cash used in financing activities ....................................... (1,539) (476) (8,132)
Effect of exchange rate changes on cash .......................................... (231) 177 (229)
------- ------- -------
Net Increase (Decrease) in Cash .......................................... (102) 206 127

Cash beginning of year ........................................................... 641 435 308
------- ------- -------
Cash end of year ................................................................. $ 539 $ 641 $ 435
======= ======= =======

Supplemental disclosures of cash flow information:
Cash paid (received) during the year for:
Interest ..................................................................... $ 3,043 $ 2,341 $ 2,671
Income taxes ................................................................. (112) 1,313 (920)

The accompanying notes are an integral part of these financial statements

21
22

THE COAST DISTRIBUTION SYSTEM, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

ACCUMULATED
OTHER
RETAINED COMPREHENSIVE
THREE YEARS ENDED DECEMBER 31, 2000 COMMON STOCK EARNINGS INCOME (LOSS) TOTAL
----------------------------------- ---------------------- -------- ------------- --------
(DOLLARS IN THOUSANDS)

Balance at January 1, 1998 ................................... 5,246,879 $ 19,559 $ 14,742 $ (305) $ 33,996

Net earnings for the year .................................... -- -- 126 -- 126
Foreign currency translation adjustments ..................... -- -- -- (360) (360)
--------
Comprehensive loss ........................................... (234)
--------
Issuance of common stock under employee stock
purchase plan ........................................... 32,975 81 -- -- 81
Dividends on preferred stock of subsidiary ................... -- -- (12) -- (12)
---------- -------- -------- -------- --------
Balance at December 31, 1998 ................................. 5,279,854 19,640 14,856 (665) 33,831

Net earnings for the year .................................... -- -- 10 -- 10
Foreign currency translation adjustments ..................... -- -- -- 298 298
--------
Comprehensive earnings ....................................... 308
--------
Issuance of common stock under employee stock purchase plan .. 35,296 86 -- -- 86
Retirement of common stock ................................... (1,012,304) (2,975) -- -- (2,975)
Dividends on preferred stock of subsidiary ................... -- -- (7) -- (7)
---------- -------- -------- -------- --------
Balance at December 31, 1999 ................................. 4,302,846 16,751 14,859 (367) 31,243

Net loss for the year ........................................ -- -- (2,841) -- (2,841)
Foreign currency translation adjustments ..................... -- -- -- (283) (283)
--------
Comprehensive loss ........................................... (3,124)
--------
Issuance of common stock under employee stock purchase plan .. 27,808 49 -- -- 49
Dividends on preferred stock of subsidiary ................... -- -- (3) -- (3)
---------- -------- -------- -------- --------
Balance at December 31, 2000 ................................. 4,330,654 $ 16,800 $ 12,015 $ (650) $ 28,165
========== ======== ======== ======== ========

The accompanying notes are an integral part of these financial statements

22
23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE A: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the preparation of
the accompanying consolidated financial statements follows:

1. Principles of Consolidation. The Company consolidates the accounts of its
wholly-owned subsidiaries, The Coast Distribution System (Canada) Inc.
("Coast Canada") and Eura-Asia Recreational Vehicle Accessories Taiwan
Company. Investments in unconsolidated affiliates are accounted for by the
equity method. All material intercompany transactions have been eliminated.

2. Inventories. Inventories are stated at the lower of cost (determined on a
first-in, first-out basis) or net realizable value. The Company regularly
assesses the appropriateness of the inventory valuations with particular
attention to obsolete, slow-moving and non-saleable inventory. Inventories
consist primarily of recreational replacement parts, supplies and
accessories held for resale.

3. Property, Plant and Equipment. Property, plant and equipment are stated at
cost less accumulated depreciation and amortization. Depreciation and
amortization are provided for in amounts sufficient to relate the cost of
depreciable assets to operations over their estimated service lives,
principally on a straight-line basis. The estimated lives used in
determining depreciation and amortization are:

Buildings and improvements 40 years
Warehouse and office equipment 5-7 years
Automobiles 3-5 years

Leasehold improvements are amortized over the lives of the respective leases
or the service lives of the improvements, whichever is shorter. Currently
the amortization periods range from 5 to 15 years.

4. Revenue Recognition. Revenue from sales of products is recognized upon
shipment.

5. Segment Reporting. The Company has one operating segment which is the
distribution of recreational replacement parts, supplies and accessories.
The Company distributes its products from 17 distribution centers located
throughout the United States and Canada. No single customer accounted for
10% or more of the Company's revenues in 2000, 1999 or 1998.

6. Intangible Assets. The costs in excess of net assets of acquired businesses
are being amortized on a straight-line basis using periods ranging from four
to thirty years. At December 31, 2000 and 1999, the accumulated amortization
applicable to intangible assets was approximately $7,009,000 and $6,364,000,
respectively. We review the valuation and amortization of intangibles on an
ongoing basis and we evaluate the recoverability of intangibles based on the
undiscounted cash flows generated by the acquired businesses to determine
whether impairment has occurred. If we determine that an impairment has
occurred, it is our policy to reduce the recorded value of the intangible
asset to its fair market value.

7. Foreign Currency Translation. Exchange adjustments resulting from foreign
currency transactions are generally recognized in net earnings, whereas
adjustments resulting from the translation of financial statements are
reflected as a separate component of stockholders' equity. Net foreign
currency transaction gains or losses are not material in any of the years
presented. The functional currency of the Company's Canadian subsidiary is
the Canadian dollar.

8. Forward Exchange Contracts. On a selective basis, the Company enters into
forward exchange contracts to reduce the effect of foreign currency
fluctuations on a portion of the inventory purchases of Coast Canada. The
gains or losses on these contracts are included in earnings in the period
when the related transactions being hedged are recognized. The contracts do
not subject the Company to significant market risk from exchange rate
movements because the contracts offset gains and losses on the balances and
transactions being hedged. At December 31, 2000, there were no forward
exchange contracts outstanding.

23
24

9. Income Taxes. The Company provides a deferred tax expense or benefit equal
to the net change in the deferred tax liability or asset during the year.
Deferred income taxes represent tax loss and credit carryforwards and future
net tax effects resulting from temporary differences between the financial
statement and tax basis of assets and liabilities, using enacted tax rates.
A valuation allowance is provided against deferred tax assets when
realization of the asset is not expected to occur.

10. Use of Estimates. In preparing financial statements in conformity with
accounting principles generally accepted in the United States of America,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements, as well as
revenues and expenses during the reporting period. Actual results could
differ from those estimates.

11. Earnings per Share. Basic earnings per share are computed using the weighted
average number of common shares outstanding during the period. Diluted
earnings per share are computed using the weighted average number of common
shares and potentially dilutive securities outstanding during the period.
Potentially dilutive securities consist of the incremental common shares
issuable on exercise of stock options (using the treasury stock method).
Potentially dilutive securities are excluded from the computation if their
effect is anti-dilutive.

NOTE B: PROPERTY, PLANT AND EQUIPMENT

Property and equipment consist of the following at December 31:

2000 1999
------- -------
(In thousands)

Buildings ....................................... $ 1,425 $ 2,486
Warehouse equipment ............................. 3,572 3,716
Office equipment ................................ 5,131 4,061
Leasehold improvements .......................... 906 909
Automobiles ..................................... 99 55
------- -------
11,133 11,227
Less accumulated depreciation and amortization .. 7,479 7,500
------- -------

3,654 3,727
Land ............................................ 485 637
------- -------
$ 4,139 $ 4,364
======= =======

NOTE C: SALE OF INVESTMENTS IN AFFILIATED COMPANY

Prior to February 1998, the Company owned 34% of HWH Corporation. In
February 1998, HWH repurchased all of the HWH shares owned by the Company for
$5,388,000. The carrying value of the investment was $7,057,000 and, as of
December 31, 1997, the investment was written down to its net realizable value,
resulting in a loss.

24
25

NOTE D: LONG-TERM OBLIGATIONS

Long-term obligations consist of the following at December 31:

2000 1999
------- -------
(In thousands)

Secured notes payable to bank due May 31, 2003 $25,559 $26,340
8.75% note collateralized by a deed of trust on land and building, due
in monthly installments of $14, final payment due in November 2012 1,241 1,297
10% note collateralized by a deed of trust on land and building, due
in monthly installments of $11, final payment made in October 2000 -- 510
Other 103 246
------- -------
26,903 28,393
Current portion 1,763 288
------- -------
$25,140 $28,105
======= =======

Subsequent to 2001 annual maturities of long-term obligations (in
thousands) are $1,765 in 2002, $22,332 in 2003, $86 in 2004, $88 in 2005 and
$869 due thereafter.

Secured Notes Payable to Bank

The secured notes payable to bank evidence borrowings under a revolving
credit facility and term borrowings, which are collateralized by substantially
all of the Company's assets. The Company may borrow up to the lesser of (i)
$45,000,000 with a seasonal reduction to $35,000,000 between June 20 and March 1
of each year, or (ii) an amount equal 80% of the value of its eligible accounts
receivable and 50% of the value of its eligible inventory (the "Borrowing
Base"). Interest on revolving credit line borrowings is payable at the bank's
prime rate plus 75 basis points or, at the Company's option but subject to
certain limitations, borrowings will bear interest at the bank's LIBOR rate plus
250 basis points. Interest on the term borrowings is payable at the bank's prime
rate plus 125 basis points or at the Bank's LIBOR rate plus 300 basis points.

The note agreements contain certain restrictive covenants. Included are
covenants regarding profitability, minimum liquidity ratios, restrictions on
investments, and limitations on indebtedness, on payment of dividends, and on
mergers and consolidations. The Company is in compliance with all the covenants.

NOTE E: COMMITMENTS

Operating Leases

The Company leases its corporate offices, certain warehouse facilities,
and data processing equipment. These leases are classified as operating leases
as they do not meet the capitalization criteria of Statement of Financial
Accounting Standards No. 13, "Accounting for Leases." The office and warehouse
leases expire over the next ten years and the equipment leases expire over the
next four years.

25
26

Minimum future rental commitments under non-cancelable operating leases
having an initial or remaining term in excess of one year as of December 31,
2000 are as follows:

YEAR ENDING DECEMBER 31, EQUIPMENT FACILITIES TOTAL
------------------------ --------- ---------- -----
(IN THOUSANDS)

2001 $ 342 $ 2,745 $ 3,087
2002 332 2,489 2,821
2003 300 2,401 2,701
2004 50 1,631 1,681
2005 -- 838 838
Thereafter -- 3,458 3,458
------ ------- -------
$1,024 $13,562 $14,586
====== ======= =======

Rent expense charged to operations amounted to (in thousands) $3,308 in
2000, $3,380 in 1999 and $2,889 in 1998.

NOTE F: STOCK OPTIONS AND STOCK PURCHASE PLANS

Stock Option Plans

The Company has in effect a 1987 Nonqualified Stock Option Plan, a 1993
Stock Option and Incentive Plan and a 1999 Stock Incentive Plan ("the plans"),
which authorize the issuance of options to purchase, 1,000,000 shares of the
Company's common stock to key management employees of the Company and members of
the Company's Board of Directors. The plans are accounted for under the
provisions of APB No. 25 and generally provide that option prices will not be
less than quoted market prices per share on the date the options are granted, or
110% thereof in the case of an option granted to any employee who, at the time
of the grant, owns or is deemed to own more than 10% of the total combined
voting power of all classes of stock of the Company. Accordingly, no
compensation cost has been recognized for the plans. Had compensation cost for
the plans been determined based on fair value of the options granted as of the
respective dates of their grant, consistent with the method prescribed in
Statement of SFAS No. 123, Accounting for Stock-Based Compensation, the
Company's net earnings (loss) and earnings (loss) per share would have been
reduced to the pro forma amounts indicated below.

2000 1999 1998
---------------------------
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE AMOUNTS)

Net earnings (loss) attributable to common shareholders
As reported ................................... $(2,844) $ 3 $ 114
Pro forma ..................................... (2,926) (73) 53

Per share - Basic
As reported ................................... $ (.66) $ .00 $0.02
Pro forma ..................................... (.68) (.02) 0.01

Per share - Diluted
As reported ................................... $ (.66) $ .00 $ .02
Pro forma ..................................... (.68) (.02) .01

The fair value of each option grant is estimated on the weighted average
on the date of grant using the Black-Scholes options-pricing model with the
following assumptions used: no expected dividends; expected volatility of 147%
for 2000, 71% for 1999 and 70% for 1998; risk-free interest rates of 6.6%, 5.2%
and 6.0%; for 2000, 1999 and 1998, respectively; an expected forfeiture rate of
33% for 2000, 37% for 1999 and 46% for 1998; and expected lives of 5 years in
2000 and 4 years in 1999 and 1998. A summary of the status of the Company's
stock option plans is presented below:

26
27

2000 1999 1998
------------------- ------------------ ------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------- -------- ------- -------- ------- --------

Outstanding at beginning of year 548,500 $4.23 479,500 $4.69 335,700 $5.67
Granted 156,000 2.01 97,000 2.26 183,000 3.18
Exercised -- -- -- -- -- --
Forfeited (5,000) 4.77 (28,000) 5.33 (39,200) 5.93
------- ------- -------
Outstanding at end of year 699,500 3.73 548,500 4.23 479,500 4.69

Weighted average fair value of
options granted during the year $1.84 $1.29 $1.79

The following information applies to options outstanding at December 31,
2000:

WEIGHTED WEIGHTED AVERAGE WEIGHTED
OPTIONS AVERAGE REMAINING CONTRACTUAL OPTIONS AVERAGE
RANGE OUTSTANDING EXERCISE PRICE LIFE (YEARS) EXERCISABLE EXERCISE PRICE
----- ----------- -------------- --------------------- ----------- --------------

$1.50-$3.50 432,000 $2.56 8 235,200 $2.61
$4.13-$7.88 267,500 5.62 5 238,700 5.80
-------- -------
699,500 $3.73 473,900 $4.22

Employee Stock Purchase Plan

The Company has in effect a 1997 Employee Stock Purchase Plan which
provides for the issuance of up to 400,000 of the Company's shares of common
stock to permanent employees who have met certain minimum employment criteria
and that own less than 5% of the Company's outstanding shares. Those employee
may elect to have a specified sum deducted from their payroll to fund purchases
of shares under the Plan over 12 month offering periods. At the end of each
offering period, shares are purchased for the participants, with the amounts
deducted from their payroll, at a price per share equal to 85% of the lower of
the fair market value at the beginning or the end of the offering period. The
weighted average per share fair values of the awards were $0.30, $0.58 and $0.80
for the years ended December 31, 2000, 1999 and 1998, respectively. At December
31, 2000, 303,921 shares remained remain available for issuance in future
offering periods under this plan.

NOTE G: EMPLOYEE BENEFIT PLAN

The Company has a 401(k) profit sharing plan in which all full-time
employees are eligible to participate beginning with the first quarter following
the completion of six months of employment. The plan allows participants to make
pretax contributions and apply for and secure loans from their account. The plan
provides for the Company to make discretionary contributions to be determined
annually. The Company contributed $102,236 in 2000, $86,441 in 1999 and $65,825
in 1998 to this plan.

27
28

NOTE H: FOREIGN OPERATIONS

A summary of the Company's operations by geographic area is presented
below:

2000 1999
-------- --------
(IN THOUSANDS)

Sales to external customers
United States $123,845 $130,063
Canada 23,646 24,737
Operating margin
United States $ (2,960) $ 1,588
Canada 736 1,252
Other (13) 16
Identifiable assets
United States $ 55,359 $ 60,322
Canada 7,882 8,658
Other 649 707

NOTE I: INCOME TAXES

Pretax income (loss) for the years ending December 31 was taxed under
the following jurisdictions:

2000 1999 1998
------- ----- -----
(IN THOUSANDS)

Domestic $(4,330) $(308) $ (276)
Foreign 339 854 1,329
------- ----- ------
$(3,991) $ 546 $1,053
======= ===== ======

The provisions (benefit) for income taxes is summarized as follows for
the year ended December 31:

2000 1999 1998
------- ----- ------
(IN THOUSANDS)

Current:
Federal $ (771) $ 77 $ 577
State 16 78 98
Foreign 177 418 596
------- ----- ------
(578) 573 1,271
------- ----- ------
Deferred:
Federal (427) (10) (402)
State (145) (1) 66
Foreign -- (26) (8)
------- ----- ------
(572) (37) (344)
------- ----- ------
Income tax provision (benefit) $(1,150) $ 536 $ 927
======= ===== ======

The total operating loss carryforwards available for state income tax
purposes at December 31, 2000 aggregated $5,810,000. The earliest carryforwards
begin to expire in 2002.

28
29

Deferred tax assets (liabilities) are comprised of the following at
December 31:

2000 1999 1998
------- ------- -------
(IN THOUSANDS)

Deferred tax assets
Inventory capitalization $ 810 $ 786 $ 892
Bad debt provision 344 306 314
Inventory reserve 510 502 457
Property, plant and equipment 72 54 21
Loss carryforwards 770 176 196
Other 59 71 43
------- ------- -------
Gross deferred tax assets 2,565 1,895 1,923
Less valuation allowance (75) (88) (100)
------- ------- -------
2,490 1,807 1,823
------- ------- -------
Deferred tax liabilities
Investment in affiliates (2) -- --
Property, plant and equipment (211) (102) (156)
------- ------- -------
Gross deferred tax liabilities (213) (102) (156)
------- ------- -------
Net deferred tax assets $ 2,277 $ 1,705 $ 1,667
======= ======= =======

A reconciliation between actual tax expense (benefit) for the year and
expected tax expense (benefit) is as follows:

2000 1999 1998
------- ------- -------
(IN THOUSANDS)

Earnings (loss) before income taxes $(3,991) $ 546 $ 1,053
------- ------- -------
Expected income tax expense at 34% (1,357) 186 358
Higher rates on earnings of foreign 45 84 121
operations
Goodwill amortization and other non-deductible
expenses 281 242 254
State Taxes (net of federal benefit) (104) 38 78
Change in valuation allowance (13) (12) 40
Exclusion of earnings of foreign affiliates (22) (16) 31
Other 20 14 45
------- ------- -------
Income tax provision $(1,150) $ 536 $ 927
======= ======= =======

Deferred income taxes have not been provided on the undistributed
earnings of foreign subsidiaries or foreign joint ventures as they have been and
will continue to be reinvested. Where it is contemplated that earnings will not
be reinvested, the Company believes U.S. foreign tax credits would largely
eliminate any U.S. tax.

29
30

NOTE J: EARNINGS PER SHARE

FOR THE YEAR ENDED DECEMBER 31,
-------------------------------
2000 1999 1998
------- ------- -------
(IN THOUSANDS)

Numerator:
Net earnings (loss) $(2,841) $ 10 $ 126
Dividends on preferred shares of subsidiary (3) (7) (12)
------- ------- -------

Numerator for basic earnings (loss) per share $(2,844) $ 3 $ 114
======= ======= =======

Numerator for diluted earnings (loss) per share $(2,844) $ 3 $ 114
======= ======= =======

Denominator:
Weighted average shares outstanding 4,324 4,633 5,275

Dilutive effect of stock options -- 8 7
------- ------- -------
Denominator for diluted earnings (loss) per share 4,324 4,641 5,282
======= ======= =======

A total of 699,500 options in 2000, 452,500 options in 1999, and 288,500
options in 1998 were excluded from the computation of diluted earnings per share
because either (1) the options' exercise price was greater than the average
market price of the common shares, or (2) the inclusion of the options in 2000
would have been antidilutive because the Company experienced a net loss in that
year.

NOTE K: ACCRUED LIABILITIES

Accrued liabilities consist of the following at December 31:

2000 1999
------ -------
(IN THOUSANDS)

Payroll and related benefits $ 597 $ 484
Rent 263 162
Income and other taxes 450 608
Other 1,113 796
------ -------
$2,423 $ 2,050
====== =======

NOTE L: FINANCIAL INSTRUMENTS

Financial instruments that potentially subject the Company to
concentration of credit risk consist principally of trade receivables. The
amounts reported for cash, accounts receivable, short-term borrowings, accounts
payable and accrued liabilities approximate the fair value due to their short
maturities. Investments in affiliates consist of securities for which a
reasonable estimate of fair value could not be made as no quoted market prices
for the securities exist and the costs of determining fair value would be
excessive. As of December 31, 2000, the estimated fair value of long-term debt,
based on the current rates offered to the Company for debt of the same remaining
maturities, is less than the carrying value by approximately $87,000.

NOTE M: SIGNIFICANT CONCENTRATIONS

The Company's ability to satisfy demand for its products may be limited
by the availability of those products from the Company's suppliers. In 1995 the
Company entered into a multi-year supply agreement with Airxcel, Inc. (formerly
Recreational Vehicle Products, Inc.), which manufactures air conditioners under
the Coleman(R) brand name. Airxcel is the Company's principal supplier of these
products, the sales of which accounted for approximately 12%, 13% and 17% of the
Company's net sales in 2000, 1999 and 1998, respectively.

30
31
NOTE N: OTHER INCOME

Other income in 2000 consists primarily of the price at which we sold one of
our proprietary product lines to a supplier that has agreed to supply us with
products from that product line and products from its other product lines in the
future. The sales price was $1,078,000, of which $400,000 was paid in cash and
the remaining $678,000 is to be paid in 2001 and 2002 pursuant to a promissory
note issued to us by that supplier.

SCHEDULE II

THE COAST DISTRIBUTION SYSTEM, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
December 31, 1998, 1999 and 2000

BALANCE AT BALANCE AT
BEGINNING OF END OF
DESCRIPTION PERIOD ADDITIONS DEDUCTIONS(1) PERIOD
----------- ------------ --------- ------------- ----------

Allowance for doubtful accounts:
Year Ended December 31, 1998 $1,080,000 $209,000 $399,000 $ 890,000
Year Ended December 31, 1999 $ 890,000 $259,000 $259,000 $ 890,000
Year Ended December 31, 2000 $ 890,000 $830,000 $680,000 $1,040,000

------------
(1) Write-off of doubtful accounts against the allowance and recoveries.

BALANCE AT BALANCE AT
BEGINNING OF END OF
DESCRIPTION PERIOD ADDITIONS DEDUCTIONS(1) PERIOD
----------- ------------ --------- ------------- ----------

Allowance for obsolete or slow-moving inventory:
Year Ended December 31, 1998 $1,477,000 $334,000 $247,000 $1,564,000
Year Ended December 31, 1999 $1,564,000 $508,000 $423,000 $1,649,000
Year Ended December 31, 2000 $1,649,000 $582,000 $501,000 $1,730,000

------------

(1) Write-off of slow-moving or obsolete inventory or sale of inventory at
reduced margin.

BALANCE AT BALANCE AT
BEGINNING OF END OF
DESCRIPTION PERIOD ADDITIONS DEDUCTIONS(1) PERIOD
----------- ------------ --------- ------------- ----------

Valuation allowance for deferred tax assets:
Year Ended December 31, 1998 $ 60,000 $46,000 $ 6,000 $100,000
Year Ended December 31, 1999 $100,000 $12,000 $24,000 $ 88,000
Year Ended December 31, 2000 $ 88,000 $ -- $13,000 $ 75,000

------------

(1) Net operating loss carryforwards used or expired.

31
32

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Except for information concerning the Company's executive officers which
is included in Part I of this Report, the information required by Item 10 is
incorporated by reference from the Company's definitive proxy statement expected
to be filed with the Commission on or before April 30, 2001 for the Company's
annual shareholders' meeting.

ITEM 11. EXECUTIVE COMPENSATION

The information required by Item 11 is incorporated herein by reference
from the Company's definitive proxy statement expected to be filed with the
Commission on or before April 30, 2001 for the Company's annual shareholders'
meeting.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by Item 12 is incorporated herein by reference
from the Company's definitive proxy statement expected to be filed with the
Commission on or before April 30, 2001 for the Company's annual shareholders'
meeting.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

The information required by Item 13 is incorporated herein by reference
from the Company's definitive proxy statement expected to be filed with the
Commission on or before April 30, 2001 for the Company's annual shareholders'
meeting.

32
33

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as part of this Report:

(1) Financial Statements. The Consolidated Financial Statements of
The Coast Distribution System, Inc. and Financial Statement
Schedules: See Index to Financial Statements on Page 17 of
this Report.

(2) Exhibits. See Index to Exhibits, elsewhere in this Report, for
a list and description of (i) exhibits previously filed by the
Company with the Commission and (ii) the exhibits being filed
with this Report.

Compensation Plans and Arrangements. Set forth below is a list
of Compensation Plans and Arrangements that have been filed as
exhibits with the Commission, together with the respective
exhibit numbers thereof:

Nonqualified Stock Option Plan - 1987 Exhibit 10.32
1993 Stock Option and Incentive Plan, as amended Exhibit 10.31
1997 Employee Stock Purchase Plan Exhibit 10.35
1999 Employee Stock Option Plan Exhibit 10.36

(b) Current Reports on Form 8-K.

The Company did not file any reports on Form 8-K during the
quarter ended December 31, 2000.

33
34

SIGNATURES

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

Dated: March 29, 2001

THE COAST DISTRIBUTION SYSTEM, INC.

By: /s/ THOMAS R. MCGUIRE
------------------------------------
Thomas R. McGuire, Chairman and Chief
Executive Officer

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

Each person whose signature to this Report appears below hereby appoints
Thomas R. McGuire and Sandra A. Knell, and either of them, individually, to act
severally as attorneys-in-fact and agents, with power of substitution and
resubstitution, for each of them, to sign on his behalf, individually and in the
capacities stated below, and to file any and all amendments to this Annual
Report, which amendment or amendments may make changes and additions as such
attorneys-in-fact may deem necessary or appropriate.

SIGNATURE TITLE DATE
--------- ----- ----

/s/ THOMAS R. MCGUIRE Chairman of the Board of Directors, March 29, 2001
- ----------------------------------- Chief Executive Officer and Director
Thomas R. McGuire

/s/ SANDRA A. KNELL Executive Vice President (Principal March 29, 2001
- ----------------------------------- Financial and Principal Accounting Officer)
Sandra A. Knell

/s/ ROBERT S. THROOP Director March 29, 2001
- -----------------------------------
Robert S. Throop

Director March , 2001
- -----------------------------------
John W. Casey

/s/ BEN A. FRYDMAN Director March 29, 2001
- -----------------------------------
Ben A. Frydman

S-1
35

INDEX TO EXHIBITS

EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------

3.1A Certificate of Incorporation of the Company as filed with the
Delaware Secretary of State on July 1, 1997 and as in effect
since that date (incorporated by reference to Exhibit B to the
Company's Definitive Proxy Statement dated and filed with the
SEC on July 3, 1997)

3.2 Bylaws of the Company as adopted on July 1, 1997 and as in
effect since that date (incorporated by reference to Exhibit C
to the Company's Definitive Proxy Statement dated and filed with
the SEC on July 3, 1997).

10.18 Agreement of Purchase and Sale dated June 25, 1985, between
Coast R.V., Inc. and Coachmen Industries, Inc. (Incorporated by
reference to the same numbered exhibit in the Company's Current
Report on Form 8-K dated June 28, 1985.)

10.31 1993 Stock Option and Incentive Plan. (Incorporated by reference
to Exhibit 4.3 to the Company's Registration Statement on Form
S-8 (File No. 33-64582) filed with the SEC on June 17, 1993.)

10.33 Second Amended and Restated Loan Agreement between the Company
and Mellon Bank, together with First Amendment thereto
(Incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the Quarter ended June 30,
1995).

10.34 Distribution Agreement dated October 11, 1995 between the
Company and Recreation Vehicle Products, Inc. (Incorporated by
reference to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the Quarter ended September 30, 1995).

10.35 1997 Employee Stock Purchase Plan (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form S-8
(No. 333-55933 filed with the Commission on June 3, 1998

10.36 1999 Stock Incentive Plan (Incorporated by reference to Exhibit
10.36 to the Company's Annual Report on Form 10K for the year
ended December 31, 2000).

10.37 Agreement and Plan of Merger dated as of April 29, 1998, between
the Company and The Coast Distribution System, a California
corporation and the Company's predecessor ("Coast California")
pursuant to which its reincorporation in Delaware was
accomplished (incorporated by reference to Exhibit A to the
Company's Definitive Proxy Statement dated and filed with the
SEC on July 3, 1997).

21 Subsidiaries.

23.1 Consent of Grant Thornton LLP, Independent Certified Public
Accountants, re Consolidated Financial Statements of The Coast
Distribution System, Inc.

24 Power of Attorney - Included on Signature Page.

E-1