<PAGE>

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                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION


                                   FORM 10-K

(Mark One)
[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934
                  For the fiscal year ended December 30, 2000
                                      OR

[_]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934
             For the transition period from _________ to ________.

                       Commission file number 333-56031

                          ADVANCE HOLDING CORPORATION
            (Exact name of registrant as specified in its charter)



                   Virginia                               54-1622754
        (State or other jurisdiction of                (I.R.S. Employer
        incorporation or organization)               Identification No.)

               5673 Airport Road                            24012
               Roanoke, Virginia                         (Zip Code)
   (Address of Principal Executive Offices)

                                (540) 362-4911
             (Registrant's telephone number, including area code)

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


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

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

Yes [X] No [_]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [_] Not Applicable.

     As of March 30, 2001, the registrant had outstanding 28,280,550 shares of
Class A Common Stock, par value $0.01 per share (the only class of common stock
of the registrant outstanding). The registrant's Class A Common Stock is not
traded in a public market.

     Aggregate market value of the registrant's voting and nonvoting Class A
Common Stock: Not Applicable.

                   Documents Incorporated by Reference: None

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<PAGE>

                                    PART I

        This Annual Report on Form 10-K contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These statements
include without limitation the words "believes," "anticipates," "estimates,"
"intends," "expects," and words of similar import. All statements other than
statements of historical fact included in statements under "Item 1. Business,"
"Item 2. Properties," "Item 3. Legal Proceedings" and "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations"
include forward-looking information and may reflect certain judgments by
management. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of Holding and the Company or the automotive aftermarket
industry to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. These
potential risks and uncertainties include, but are not limited to; those
identified in the "Risk Factors" section of this Form 10-K located at the end of
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations." Holding disclaims any obligation to update any such factors or
to publicly announce the results of any revisions to any of the forward-looking
statements contained herein to reflect future events or developments.

Item 1.     Business.

General

        Advance Holding Corporation ("Holding") conducts all of its operations
through its wholly owned subsidiary, Advance Stores Company, Incorporated and
its subsidiaries (the "Company"). As of December 30, 2000, the Company operated
1,728 stores in 37 states, Puerto Rico and the Virgin Islands operating under
the "Advance Auto Parts" and "Western Auto" names (the "Retail" segment).
Advance Auto Parts is the second largest specialty retailer of automotive parts,
accessories and maintenance items in the United States, and based on store
count, the Company believes it is the largest retailer in a majority of its
markets. The Western Auto stores (the "Service Stores") included in the Retail
segment offer automotive parts, accessories and service as well as home and
garden merchandise. The Company also operates a wholesale distribution network
which includes distribution services of automotive parts and accessories and
home and garden merchandise to approximately 590 independently-owned dealer
stores in 48 states and one Company-owned retail store in California all
operating under the "Western Auto" trade name (the "Wholesale segment"). Since
fiscal 1999, the Company has derived over 90% of its total revenues from the
retail sale of automotive parts and accessories. For fiscal 1998 and prior
(before the Western Auto Supply Company Merger in November 1998), 100% of the
Company's total revenues were derived from the retail sale of automotive parts
and accessories.

        The Company was formed in 1929. In the 1980s, the Company sharpened its
marketing focus to target sales of automotive parts and accessories to
"do-it-yourself" ("DIY") customers and accelerated its growth strategy. From the
1980s through the present, the Company has grown significantly through new store
openings and strategic acquisitions. In 1996, the Company began to aggressively
expand its sales to "do-it-for-me" ("DIFM") customers by implementing a
commercial sales program ("Commercial Program") in the Retail segment. The
Commercial Program includes specific marketing to attract additional DIFM
customers and delivery of parts and accessories to third party automotive
service and repair providers in certain markets ("Commercial Delivery").

Recapitalization

        In April 1998, Holding consummated its recapitalization (the
"Recapitalization"). See Note 15 to "Item 8. Financial Statements" for a
detailed discussion of the Recapitalization.

Western Merger

        In November 1998, Holding completed a Plan of Merger (the "Western
Merger") with Sears, Roebuck and Co. ("Sears") to acquire Western Auto Supply
Company ("Western"). As consideration in the Western Merger, the Company issued
to Sears 11,474,606 shares of Common Stock of Holding (the "Holding Common
Stock") and paid Sears $185.0 million in cash. Certain existing stockholders of
Holding invested an additional $70.0 million in equity to fund a portion of the
cash purchase price, the remainder of which was funded through additional
borrowings under

                                       1
<PAGE>

the Company's Credit Facility (the "Credit Facility") and cash on hand. See Note
16 to "Item 8. Financial Statements" for further discussion of the Western
Merger.

        The integration of Western included converting a net 545 Parts America
stores (the "Parts America Conversion") to Advance Auto Parts stores, adding a
net 39 Western Auto stores and began supplying Western Auto dealer stores in 48
states. In addition, the Company consolidated duplicative facilities, integrated
certain administrative and support functions into its corporate headquarters,
separated or relocated certain employees and integrated the management
information systems of the combined companies.

Store Operations

        Retail Operations

        The Company's domestic stores are generally located in or adjacent to
good visibility, high traffic strip shopping centers. These stores generally
range in size from 5,000 to 10,000 square feet, averaging approximately 7,500
square feet, and currently stock between 16,000 and 21,000 stock keeping units
("SKUs"). In addition, approximately 115,000 SKUs that are not stocked at the
store level are available on a next or same day basis to virtually all domestic
stores through the Company's PDQ(R) network. During fiscal 2000, the Company
initiated a Mini-PDQ(R) concept that utilizes existing space in certain stores
to ensure the availability of regional specific products to all stores in their
demographic market. On average a Mini-PDQ(R) makes an additional 7,500 to 12,000
SKUs available on a same day basis in these markets.

        Additionally, as of December 30, 2000, the Company had 1,209 of the
total Retail stores participating in Commerical Delivery. Commercial Delivery
utilizes store employees to take orders from commercial customers and deliver
the orders in designated vehicles assigned to the participating stores.

        The Company's domestic stores are divided into three regions, which are
managed by Senior Vice Presidents who are supported by 10 Regional Vice
Presidents. Reporting to the Regional Vice Presidents are Division Managers who
have direct responsibilities for store operations. A typical division consists
of 14 to 18 stores. Depending on store size and sales volume, each store is
staffed by 8 to 30 employees under the leadership of a Store Manager. Stores
are generally open seven days a week from 8:00 a.m. to 8:00 p.m.

        The Service Stores in Puerto Rico and the Virgin Islands comprise a
fourth region of the Retail segment and are managed by one Senior Vice President
who is supported by a Vice President, six District Managers, Store Managers and
field personnel. These stores average approximately 16,000 square feet and stock
approximately 21,000 SKUs of automotive and home and garden merchandise, and are
staffed with up to 60 employees depending on store size and sales volume. The
store hours are generally 7:00 a.m. to 8:00 p.m. seven days a week.

                                       2
<PAGE>

The Company's Retail segment stores are currently located as follows:


<TABLE>
<CAPTION>
                   Number of                         Number of                                  Number of
                  Stores as of                       Stores as of                             Stores as of
  Location        December 30,       Location        December 30,          Location           December 30,
                     2000                                2000                                   2000
-----------    --------------    ---------------    --------------     -----------------     --------------
<S>            <C>               <C>                <C>                <C>                   <C>
Alabama              60           Maine                   7             Pennsylvania             124
Arkansas             19           Maryland               30             Puerto Rico               39
Colorado             15           Massachusetts          20             Rhode Island               3
Connecticut          24           Michigan               42             South Carolina            95
Delaware              5           Mississippi            22             South Dakota               6
Florida              25           Missouri               37             Tennessee                114
Georgia             130           Nebraska               16             Texas                     41
Illinois             23           New Hampshire           3             Vermont                    2
Iowa                 25           New Jersey             17             Virgin Islands             2
Indiana              65           New York               95             Virginia                 125
Kansas               26           North Carolina        165             West Virginia             61
Kentucky             62           Ohio                  140             Wisconsin                 16
Louisiana            23           Oklahoma                2             Wyoming                    2
</TABLE>


        Wholesale Operations

        The wholesale dealer operations are managed by one Senior Vice
President, a Vice President, a National Sales Manager, an Operations Manager and
various field and support personnel. The wholesale dealer operations consist of
a network of independently owned locations, which include associate, licensee,
sales center and franchise dealers. Associate, licensee and franchise stores
have rights to the use of the "Western Auto" name and certain services provided
by the Company. Sales centers only have the right to purchase certain products
from Western. The Company and Western also provide services to Wholesale through
various administrative and support functions chosen by each independent
location.

Purchasing and Merchandising

        Merchandise is selected and purchased for all stores in the Retail and
Wholesale segments by personnel at the Company's corporate offices in Roanoke,
Virginia and Kansas City, Missiouri. In fiscal 2000, the Company purchased from
over 200 vendors, with no single vendor accounting for 10% or more of purchases.
The Company's purchasing strategy involves negotiating multi-year agreements
with certain vendors. In connection with the Western Merger, the Company entered
into several long-term agreements that provide more favorable terms and pricing,
which will continue through the current term of the agreements, generally three
to five years.

        The Company's merchandising objective related to automotive products is
to carry a broad selection of brand names in the Advance Auto Parts stores such
as: Fram-Bendix-Autolite, Fel-Pro, Federal-Mogul and AC Delco, that generate
customer traffic and appeal to the Company's commercial delivery customers.
Additionally, the Service Stores and the Wholesale segment carry home and
garden products by Whirlpool, Maytag, MTD Lawn Products, Electrolux Home
Products and automotive products by Michelin, Goodyear, General/Continental and
Bridgestone in addition to those products carried in the Advance Auto Parts
stores. In connection with the Western Merger, the Company reached agreements
with Sears to supply the Service Stores and the Wholesale segment with
certain DieHard(R) and Craftsman(R) brand products. In addition to such branded
products, the Company stocks a wide selection of high quality private label
products that appeal to value conscious customers. Sales of replacement parts
account for approximately 60% of the Company's sales and generate higher gross
profit margins than maintenance items or general

                                       3
<PAGE>

accessories. The Company determines its product mix based on a merchandising
program designed to identify the optimal inventory mix at each individual store
based on that store's historical and projected sales.

Warehouse and Distribution

        The Company currently operates six distribution centers that service
Advance Auto Parts stores in the United States. The Company also operates a
separate distribution center in the United States that services the Service
Stores and the Wholesale segment.

        All distribution centers are equipped with technologically advanced
material handling equipment, including carousels, "pick to light" systems, radio
frequency technology and automated sorting systems.

        The Company offers approximately 25,000 SKUs on a next day basis to
substantially all of its domestic retail stores via its nine PDQ(R) warehouses.
Stores place orders to these facilities through an on-line ordering system, and
ordered parts are delivered to substantially all stores the next day through the
Company's dedicated PDQ(R) trucking fleet. In addition, the Company operates a
PDQ(R) warehouse that stocks approximately 90,000 SKUs of harder to find
automotive parts and accessories. This facility is known as the "Master PDQ(R)"
warehouse and utilizes existing PDQ(R) distribution infrastructure to provide
next day service to substantially all of the Advance Auto Parts stores. During
fiscal year 2000, the Company embarked on a new Mini PDQ(R) distribution concept
that utilizes store space to provide certain demographic markets with an
additional customized mix of approximately 7,500 to 12,000 SKUs. As of December
30, 2000, the Company operates four Mini PDQ(R) facilities and plans to open up
to six additional facilities in fiscal 2001.

The following table sets forth certain information relating to the Company's
main distribution facilities:

<TABLE>
<CAPTION>
                                                                 Opening                                              Size
              Distribution Facility                                Date             Area Served                     (Sq. ft.)
------------------------------------------------------------    -----------   -------------------------          --------------
<S>                                                             <C>           <C>                                <C>
Main Distribution Centers
       Roanoke, Virginia....................................       1988       Mid-Atlantic                           440,000
       Gadsden, Alabama.....................................       1994       South                                  240,000
       Jeffersonville, Ohio.................................       1996       Mid West                               383,000
       Gastonia, North Carolina (1).........................       1969       Service Stores, Wholesale              663,000
                                                                              Dealer Netwo
       Salina, Kansas (1)...................................       1971       West                                   441,000
       Delaware, Ohio (1)...................................       1972       Northeast                              510,000
       Thomson, Georgia.....................................       1999       Southeast                              383,000

PDQ(R) Warehouses

       Salem, Virginia......................................       1983       Mid-Atlantic                            50,400
       Smithfield, North Carolina...........................       1991       Southeast                               42,000
       Jeffersonville, Ohio (2).............................       1996       Mid West                                50,000
       Thomson, Georgia (2).................................       1998       South, Southeast                        50,000
       Goodlettesville, Tennessee...........................       1999       Central                                 41,900
       Youngwood, Pennsylvania..............................       1999       East                                    49,000
       Riverside, Missouri..................................       1999       West                                    45,000
       Guilderland Center, New York.........................       1999       Northeast                               47,400
       Temple, Texas (1)(3).................................       1999       Southwest                              100,000

Master PDQ(R) Warehouse

       Andersonville, Tennessee.............................       1998       All                                    116,000
</TABLE>


(1)   The Company acquired these facilities in the Western Merger in November
      1998.
(2)   This facility is located within the main distribution center.
(3)   Total capacity of this facility is approximately 550,000 square feet and
      is held for sale at December 30, 2000.

                                       4
<PAGE>

Management Information Systems

        Store Based Information Systems

        The Company has store-based information systems located in its Advance
Auto Parts stores, which are designed to improve the efficiency of its
operations and enhance customer service, and are comprised of Point-of-Sale
("POS"), Electronic Parts Catalogs ("EPC") and Store Level Inventory Management
("SLIM") systems. These systems are tightly integrated in the store and interact
with the Company's corporate offices in Roanoke, Virginia via a frame relay
communications network. Together, these systems provide real time, comprehensive
information to store personnel, resulting in improved customer service and in-
stock availability.

        Point-of-Sale: The POS system has improved store productivity and
customer service by streamlining store procedures. POS information is used to
formulate the Company's pricing, marketing and merchandising strategies as well
as to rapidly replenish inventory. Beginning in second quarter of fiscal 2001,
the Company will begin to install a new POS system in all stores. The system is
designed to improve customer check out time as well as decrease the amount of
time required to train new store associates. In addition, the new POS system
will provide additional customer purchase and warranty history, which may be
used for targeted marketing programs in the future.

        Electronic Parts Catalog: The EPC system is a software based system that
identifies the application, location and availability of over 2 million
automotive parts and accessory applications. Additionally, the EPC system
enables sales associates to assist customers in parts selection and ordering
based on the year, model, engine type and application needed. The EPC system
displays an identified part, its inventory status and its availability through
the PDQ(R) system, if the part is not available at the store. The EPC system
also displays related parts for sales associates to recommend to a customer,
which leads to increased average sales per customer. The integration of this
system with the POS system improves customer service by reducing time spent at
the cash register and fully automating the sales process between the parts
counter and the POS register. Additionally, this system allows sales associates
to order parts and accessories electronically from the Company's PDQ(R) system
with immediate confirmation of price, availability and delivery schedule.
Information about a customer's automobile can be entered into a permanent
customer database that can be accessed immediately whenever the customer visits
or telephones the store. In conjunction with the rollout of the new POS system
beginning in the second quarter of fiscal 2001, the Company will also install a
new EPC in its stores. This new catalog, which is fully integrated with the new
POS system, will provide store associates with additional product information
and easier parts lookup via search engines and system navigation tools.

        To ensure ongoing improvement of EPC information in all stores, the
Company has developed a corporate based EPC data management system that allows
the Company to reduce the cycle time for cataloging and delivering updated
product data to stores. This system also provides the capability of cataloging
non-application specific parts and additional product information such as
technical bulletins, images of parts and related diagrams of automobiles and
expanded related parts for the item being purchased. The new corporate based EPC
data management system will also be included in the rollout of the new point of
sale system beginning in second quarter of fiscal 2001.

        Store Level Inventory Management System ("SLIM"): The SLIM system
provides real-time inventory tracking at the store level. With SLIM, store
personnel can check the quantity of on-hand inventory for any SKU, automatically
process returns and defective merchandise, designate SKUs for cycle counts and
track merchandise transfers. The Company is testing the effectiveness and
viability of radio frequency hand held devices in approximately 170 of its
retail stores that should increase inventory utilization and ensure the accuracy
of inventory movements.

        Store IntraNet ("STORENET"): The STORENET provides all stores
browser-based access to additional corporate information. This provides store
personnel access to on-line training, operational manuals, store planograms,
planning calendars and financial information.

        Communications Network: All Company locations in the United States
communicate via a frame relay network. The Puerto Rico and Virgin Islands
Service Stores are supported via a satellite network. The frame relay network
provides adequate capacity to support the Company's growth strategy and future
in-store applications.

                                       5
<PAGE>

        Financial Systems

        The Company is in the process of transitioning its administrative
software to support key Financial and Human Resource functions to the software
PeopleSoft, an enterprise resourse planning software. This transition will be
completed in phases during the second and third quarters of fiscal 2001. The new
software will bring about process improvements and efficiencies through the
implementation of improved business processes. It will also provide improved
reporting and access to information, and is intended to enable the Company to
sustain future growth with current staffing levels.

        Logistics and Purchasing Information Systems

        Distribution Center Management System ("DCMS"): DCMS provides real-time
inventory tracking throughout the stages of receiving, picking, shipping and
replenishment at the distribution center level. The DCMS, integrated with
material handling equipment, significantly reduces warehouse and distribution
costs while improving efficiency. All of the Company's logistic facilities
currently operate using this technology. As a result, the Company has the
capacity to service over 2,000 stores from its six retail distribution centers
that serve Advance Auto Parts stores and has the capability to support the
Service Stores and the Wholesale segment from its Gastonia distribution center.

        E3 Replenishment System ("E3"): E3, which was implemented in 1994,
monitors the Company's distribution center and PDQ(R) warehouse inventory levels
and orders additional products when appropriate. In addition, the system tracks
sales trends by SKU, allowing the Company to adjust future orders to evolving
demand. The Company is currently implementing a store level replenishment
version of E3 and has converted approximately 430 stores as of December 30,
2000. The Company plans to have all stores converted by the end of third quarter
fiscal 2001.

Employees

        As of December 30, 2000, the Company employed approximately 15,500
full-time employees and 8,500 part-time employees. Approximately 83% of the
Company's workforce is employed in store level operations, 13% in distribution
and 4% in the Company's corporate offices in Roanoke, Virginia and Kansas City,
Missouri. The Company has never experienced any labor disruption and believes
that its labor relations are good.

Competition

        The Company competes in the automotive aftermarket industry, which
consists of replacement parts, maintenance items and accessories which,
according to industry estimates, generates approximately $90 billion in sales
per year. The Company competes for both DIY and DIFM customers. Although the
number of competitors and the level of competition vary by market area, both
markets are highly fragmented and generally very competitive. The Company
competes primarily with national and regional retail automotive parts chains
(such as AutoZone, Inc., Discount Auto Parts, Inc., O'Reilly Automotive, Inc.
and The Pep Boys--Manny, Moe & Jack), wholesalers or jobber stores (some of
which are associated with national automotive parts distributors or
associations, such as NAPA), independent operators, automobile dealers and mass
merchandisers that carry automotive replacement parts, maintenance items and
accessories (such as Wal-Mart Stores, Inc.). The Company believes that chains of
automotive parts stores, such as the Company, with multiple locations in
regional markets, have competitive advantages in customer service, marketing,
inventory selection, purchasing and distribution as compared to independent
retailers and jobbers that are not part of a chain or associated with other
retailers or jobbers. The principal competitive factors that affect the
Company's business are store location, customer service and product selection,
availability, quality and price.

E-commerce

        In January of fiscal 2000, the Company announced a joint venture with
CSK Auto, Inc. ("CSK") and Sequoia Capital to form PartsAmerica.com, Inc.
("PartsAmerica.com"). PartsAmerica.com is an e-commerce destination in the
automotive aftermarket that operates independently from its partners and
utilizes the Company's and CSK's existing logistic systems to support its web-
based operations. The Company has contributed the use of the "Parts America"
trade name to PartsAmerica.com under a royalty free license agreement and the
use of certain other assets. The Company is also party to a service agreement
with PartsAmerica.com that defines the wholesale sale of merchandise to
PartsAmerica.com and certain other services to be provided by the Company. The
Company began selling product to PartsAmerica.com during third quarter of fiscal
2000.

                                       6
<PAGE>

Tradenames, Service Marks and Trademarks

        The Company owns and has registrations for the trade names "Advance Auto
Parts," "Western Auto" and "Parts America" and the trademark "PDQ(R)" with the
United States Patent and Trademark Office for use in connection with the
automotive parts retailing business. In addition, the Company owns and has
registered a number of trademarks with respect to its private label products.
The Company believes that its various tradenames, service marks and trademarks
are important to its merchandising strategy, but that its business is not
otherwise dependent on any particular service mark, tradename or trademark.
There are no infringing uses known by the Company that materially affects the
use of such marks.

Environmental Matters

        The Company is subject to various federal, state and local laws and
governmental regulations relating to the operation of its business, including
those governing recycling of batteries and used lubricants, and regarding
ownership and operation of real property. The Company handles hazardous
materials during its operations, and its customers may also use hazardous
materials on the Company's properties or bring hazardous materials or used oil
onto the Company's properties. The Company currently provides collection and
recycling programs for spent automotive batteries and used lubricants at certain
of its stores as a service to its customers pursuant to agreements with third
party vendors. Pursuant to these agreements, spent batteries and used lubricants
are collected by Company employees, deposited into vendor supplied
containers/pallets and stored by the Company until collected by the third party
vendors for recycling or proper disposal. Persons who arrange for the disposal,
treatment or other handling of hazardous or toxic substances may be liable for
the costs of removal or remediation at any affected disposal, treatment or other
site affected by such substances.

        The Company owns and leases real property. Under various environmental
laws and regulations, a current or previous owner or operator of real property
may be liable for the cost of removal or remediation of hazardous or toxic
substances on, under, or in such property. Such laws often impose joint and
several liability and may be imposed without regard to whether the owner or
operator knew of, or was responsible for, the release of such hazardous or toxic
substances. Certain other environmental laws and common law principles also
could be used to impose liability for releases of hazardous materials into the
environment or work place, and third parties may seek recovery from owners or
operators of real properties for personal injury or property damage associated
with exposure to released hazardous substances. Compliance with such laws and
regulations has not had a material impact on its operations to date, but there
can be no assurance that future compliance with such laws and regulations will
not have a material adverse effect on the Company or its operations. The Company
believes it is currently in compliance with such laws and regulations.

                                       7
<PAGE>

Item 2.        Properties

        The following table sets forth certain information concerning the
Company's principal facilities:

<TABLE>
<CAPTION>
                                                                                                     Size       Nature of
                         Primary Use                             Location                          (Sq. ft.)    Occupancy
--------------------------------------------------------      ---------------------------        ------------  --------------
<S>                                                           <C>                                <C>           <C>
Corporate offices.......................................      Roanoke, Virginia                       49,000      Leased (1)
Corporate offices.......................................      Kansas City, Missouri                   12,500      Leased
Administrative offices..................................      Roanoke, Virginia                       40,000      Leased
Distribution center.....................................      Roanoke, Virginia                      440,000      Leased (2)
Distribution center.....................................      Gadsden, Alabama                       240,000      Owned
Distribution center.....................................      Salina, Kansas                         441,000      Owned
Distribution center.....................................      Delaware, Ohio                         510,000      Owned
Distribution center.....................................      Gastonia, North Carolina               663,000      Owned
Distribution center and regional PDQ(R)warehouses.......      Jeffersonville, Ohio                   383,000      Owned
Distribution center and regional PDQ(R)warehouses.......      Thomson, Georgia                       383,000      Leased (3)
Regional PDQ(R)Warehouse................................      Temple, Texas                          100,000      Owned (4)
Regional PDQ(R)Warehouse................................      Salem, Virginia                         50,400      Leased
Regional PDQ(R)Warehouse................................      Smithfield, North Carolina              42,000      Leased
Regional PDQ(R)Warehouse................................      Goodlettsville, Tennessee               41,900      Leased
Regional PDQ(R)Warehouse................................      Youngwood, Pennsylvania                 49,000      Leased
Regional PDQ(R)Warehouse................................      Riverside, Missouri                     45,000      Leased
Regional PDQ(R)Warehouse................................      Guilderland Center, New York            47,400      Leased
Master PDQ(R)Warehouse..................................      Andersonville, Tennessee               116,000      Leased
</TABLE>


(1)  This facility is owned by Ki, L.C., a Virginia limited liability company
     owned by two trusts for the benefit of a child and grandchild of Nicholas
     F. Taubman. See "Item 13. Certain Relationships and Related Transactions."
(2)  This facility is owned by Nicholas F. Taubman. See "Item 13. Certain
     Relationships and Related Transactions."
(3)  The construction of this facility was financed in fiscal 1997 by a $10.0
     million IRB issuance from the Development Authority of McDuffie County of
     the State of Georgia, from which the Company leases the facility. The
     Company has an option to purchase this facility for $10.00 at the end of
     five years or upon prepayment of the outstanding bonds.
(4)  Total capacity of this facility is approximately 550,000 square feet and is
     held for sale at December 30, 2000.

        At December 30, 2000, 134 and 1,595 of the Company's stores were owned
and leased, respectively. The expiration dates (including renewal options) of
the store leases are summarized as follows:

                  Years                Stores (1)
             ---------------         --------------
                2001-2002                  40
                2003-2007                 163
                2008-2012                 317
                2013-2022                 967
                2023-2032                  85
                2033-2048                  23


(1) Of these stores, 23 are owned by affiliates of the Company. See "Item 13.
    Certain Relationships and Related Transactions."

                                       8
<PAGE>

Item 3.      Legal Proceedings.

        In March 2000, the Company was notified that it has been named in a
lawsuit filed on behalf of independent retailers and jobbers against the Company
and others for various claims under the Robinson-Patman Act. The Company
believes these claims are without merit and intends to defend them vigorously;
however, the ultimate outcome of this matter can not be ascertained at this
time.

        In January 1999, the Company was notified by the United States
Environmental Protection Agency ("EPA") that Western may have potential
liability under the Comprehensive Environmental Response Compensation and
Liability Act relating to two battery salvage and recycling sites that were in
operation in the 1970s and 1980s. The EPA has indicated the total cleanup for
this site will be approximately $1.6 million. Management is continuing their
investigation of the EPA notification. An estimate of the range of liability is
not reasonably possible until technical studies are sufficiently completed and
the amount of potential indemnification from Sears, if any, is further
investigated. The ultimate exposure will also depend upon the participation of
other parties named in the notification who are believed to share in
responsibility. The Company believes the claim could be settled for an amount
not material to the Company's current financial position or future results of
operations.

        In November 1997, Joe C. Proffitt, Jr. on behalf of himself and all
others in the states of Alabama, California, Georgia, Kentucky, Michigan, North
Carolina, Ohio, South Carolina, Tennessee, Texas, Virginia and West Virginia who
purchased batteries from the Company from November 1, 1991 to November 5, 1997
filed a class action complaint and motion of class certification against the
Company in the circuit court for Jefferson County, Tennessee, alleging the sale
by the Company of used, old or out-of-warranty automotive batteries as new. The
complaint seeks compensatory and punitive damages. The Company believes it has
no liability for such claims and intends to defend them vigorously.

        In addition to the above, the Company currently and from time to time is
involved in litigation incidental to the conduct of its business. The damages
claimed against the Company in some of these proceedings are substantial.
Although the amount of liability that may result from these matters cannot be
ascertained, the Company does not currently believe that, in the aggregate they
will result in liabilities material to the Company's consolidated financial
condition, future results of operations or cash flow.

Item 4.      Submission of Matters to a Vote of Securityholders.

        None.

                                       9
<PAGE>

                                    PART II

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

        There is no established public trading market for the Holding Common
Stock. As of March 30, 2001, there were approximately 61 holders of record of
the Holding Common Stock.

        Holding has not paid cash dividends to its stockholders since the
Recapitalization, and does not intend to pay cash dividends in the foreseeable
future. In fiscal 1998, prior to the Recapitalization, Holding paid a dividend
to its stockholders of approximately $15.0 million. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results Operations -
Liquidity and Capital Resources" for a discussion of restrictions on Holding's
ability to pay cash dividends.

Item 6.      Selected Financial Data.

        The following table sets forth selected consolidated statement of
operations, balance sheet and other operating data of Holding. The selected
consolidated financial data for each of the five fiscal years during the period
ended December 30, 2000 are derived from the audited financial statements of
Holding which have been audited by Arthur Andersen LLP. The data presented below
should be read in conjunction with the consolidated financial statements of
Holding and the notes thereto included herein, the other financial information
included herein and "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations." The following financial data includes
certain expenses related to the merger integration and Parts America Conversion
incurred in fiscal 1998 and fiscal 1999 and certain private company expenses
that were eliminated in the Recapitalization. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" for a
detailed discussion of these expenses.

<TABLE>
<CAPTION>
                                                                                             Fiscal Year (1)
                                                                         ---------------------------------------------------------
                                                                           1996        1997         1998      1999         2000
                                                                         ---------   ---------   ---------- ----------   ---------
                                                                                           (dollars in thousands)
<S>                                                                      <C>         <C>         <C>        <C>          <C>
Statement of Operations Data:
Net sales............................................................    $ 705,983   $ 848,108   $1,220,759 $2,206,945   2,288,022
Cost of sales........................................................      437,615     524,586      766,198  1,404,113   1,392,127
Selling, general and administrative expenses (2).....................      228,113     280,900      400,546    780,114     800,845
Expenses associated with the Recapitalization (3)....................            -           -       14,277          -           -
Expenses associated with the restructuring in
 conjunction with the Western Merger(4)..............................            -           -        6,774          -           -
Non-cash and other employee compensation (5) (6).....................          113         195        1,135      2,483       2,261
Operating income.....................................................       40,142      42,427       31,829     20,235      92,789
Interest expense.....................................................        4,891       6,086       35,038     62,792      66,640
Other, net...........................................................          187        (321)         943      4,647       1,012
Income (loss) before income taxes....................................       35,438      36,020       (2,266)   (37,910)     27,161
Income tax expense (benefit).........................................       14,174      14,733          (84)   (12,584)     10,535
Income (loss) before extraordinary item..............................       21,264      21,287       (2,182)   (25,326)     16,626
Extraordinary item, gain on debt extinguishment,
   net of $1,759 income taxes........................................            -           -            -          -       2,933
Net income (loss)....................................................       21,264      21,287       (2,182)   (25,326)     19,559
</TABLE>

                                       10
<PAGE>

<TABLE>
<CAPTION>
                                                                                               Fiscal Year (1)
                                                                        --------------------------------------------------------
                                                                            1996         1997       1998       1999      2000
                                                                        ----------     --------   --------   --------  ---------
                                                                                           (dollars in thousands)
<S>                                                                     <C>            <C>        <C>        <C>       <C>
Other Data:
EBITDA (7).............................................................   $ 57,641    $  64,228 $   61,793 $   78,382 $  159,615
EBITDAR (8)............................................................     96,249      112,538    130,067    191,302    280,611
Capital expenditures...................................................     44,264       48,864     65,790    105,017     70,566
Percentage increase in comparable store net
   sales (9)...........................................................        2.1%         5.7%       7.8%      10.3%       4.4%
Commercial sales (10)..................................................     68,878      100,180    129,926    244,940     355,923
Net cash provided by (used in) operating
   activities..........................................................     26,518       42,478     44,022    (20,976)   103,951
Net cash used in investing activities..................................    (44,121)     (48,607)  (230,672)  (113,824)   (64,940)
Net cash provided by (used in) financing activities....................     12,548        6,759    207,302    121,262    (43,579)
Stores open at end of period...........................................        649          814      1,567      1,617      1,729

Balance Sheet Data:
Net working capital (11)...............................................  $ 110,080    $ 121,140 $  310,113 $  355,608 $  321,540
Total assets...........................................................    394,395      461,257  1,265,355  1,348,629  1,356,360
Total debt (including current maturities and bank overdrafts)..........    105,861      111,096    521,591    650,044    600,548
Stockholders' equity...................................................    122,323      143,548    159,091    133,954    156,271
</TABLE>


(1)  Holding's fiscal year consists of 52 or 53 weeks ending on the Saturday
     nearest to December 31. All fiscal years presented are 52 weeks except for
     fiscal 1997, which consists of 53 weeks.
(2)  Fiscal 1999 and fiscal 1998 amounts include certain merger integration and
     Parts America Conversion expenses that total $41,034 and $7,788,
     respectively. Fiscal 1997 amount includes an unusual medical claim that
     exceeded Holding's stop loss insurance coverage. Holding has increased its
     stop loss coverage effective January 1, 1998 to a level that would provide
     insurance coverage for a medical claim of this magnitude. The pre-tax
     amount of this claim, net of related increased insurance costs, was $882.
     In addition, amounts are included for all fiscal years for private company
     expenses incurred prior to the Recapitalization that relate primarily to
     compensation and benefits paid to Holding's Chairman that were eliminated
     after the Recapitalization. These amounts are $2,482, $3,056 and $845 for
     fiscal 1996, fiscal 1997 and fiscal 1998, respectively. There are no
     private company expenses in the fiscal 1999 or fiscal 2000 amounts.
(3)  Represents expenses incurred in the Recapitalization related primarily to
     bonuses paid to certain employees and professional services.
(4)  Represents fiscal 1998 expenses primarily related to lease costs associated
     with the 31 Advance Auto Parts stores closed in overlapping markets in
     connection with the Western Merger.
(5)  Represents interest component of net periodic postretirement benefit cost
     related to the Company's unfunded post retirement benefit obligation.
(6)  Represents non-cash compensation expenses related to stock options granted
     to certain Company employees.
(7)  EBITDA represents operating income plus depreciation and amortization
     included in operating income. EBITDA is not intended to represent cash flow
     from operations as defined by GAAP and should not be considered as a
     substitute for net income as an indicator of operating performance or as an
     alternative to cash flow (as measured by GAAP) as a measure of liquidity.
     Holding has included it herein because management believes this information
     is useful to investors as such measure provides additional information with
     respect to Holding's ability to meet its future debt service, capital
     expenditure and working capital requirements and, in addition, certain
     covenants in the indentures and Credit Facility (See "Item 7. Management's
     Discussion and Analysis of Financial Condition and Results of Operations")
     are based upon an EBITDA calculation. Holding's method for calculating
     EBITDA may differ from similarly titled measures reported by other
     companies. Management believes certain one-time expenses, private company
     expenses, Recapitalization expenses, non-cash and other employee
     compensation expenses (see Note 5 & 6 above), restructuring expenses and
     merger integration expenses should be eliminated from the EBITDA
     calculation to evaluate the operating performance of the Company.

                                       11
<PAGE>

     The following table reflects the effect of these items:

<TABLE>
<CAPTION>
                                                                                                Fiscal Year (1)
                                                                                        ---------------------------------
                                                                                          1998        1999         2000
                                                                                        -------     ---------    --------
                                                                                             (dollars in thousands)
<S>                                                                                    <C>         <C>          <C>
Other Data:
EBITDA............................................................................     $ 61,793    $  78,382    $159,615
    Private company expenses (a)..................................................          845            -           -
    Recapitalization expenses (b).................................................       14,277            -           -
    Non-cash and other employee compensation (see note 5 & 6 above)...............        1,135        2,483       2,261
    Restructuring expenses in conjunction with the Western Merger
     (see note 4 above)...........................................................        6,774            -           -
    Merger integration expenses (c)...............................................        7,788       41,034           -
                                                                                      ---------   ----------   ---------
EBITDA, as adjusted...............................................................     $ 92,612    $ 121,899    $161,876
</TABLE>




     (a) Reflects management's estimate of expenses primarily related to
         compensation and other benefits of the Company's Chairman, who prior to
         the Recapitalization was Holding's principal stockholder, that were
         eliminated after the Recapitalization.
     (b) Represents non-recurring management bonuses and other expenses incurred
         in connection with the Recapitalization.
     (c) Represents certain expenses related to the merger integration and Parts
         America Conversion. See "Item 7. Management's Discussion and Analysis
         of Financial Condition and Results of Operations."

(8)  EBITDAR represents EBITDA plus operating lease expense. Because the
     proportion of stores leased versus owned varies among industry competitors,
     Holding believes that EBITDAR permits a meaningful comparison of operating
     performance among industry competitors. The Company leases substantially
     all of its stores.
(9)  Comparable store net sales is calculated based on the change in net sales
     starting once a store has been opened for thirteen complete accounting
     periods (each period represents four weeks). Relocations are included in
     comparable store net sales from the original date of opening. Additionally,
     each converted Parts America store is included in the comparable store net
     sales calculation after thirteen complete accounting periods following its
     physical conversion to an Advance Auto Parts store. Holding has not
     included Service Stores in its comparable store net sales calculation but
     plans to in the future.
(10) Represents net sales from Advance Auto Parts stores and Parts America
     stores after store level management information systems conversion (the
     "MIS Conversion") to commercial customers, both delivery and non-delivery.
(11) Net working capital represents total current assets less total current
     liabilities.


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

     The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the consolidated financial
statements of Holding, the notes thereto and other data and information
appearing elsewhere in this Report on Form 10-K. Holding's fiscal year ends on
the Saturday nearest December 31. The Company's first quarter consists of 16
weeks, and the other three quarters consist of 12 weeks.

General

     Holding's combined operations are conducted in two operating segments,
Retail and Wholesale. The Retail segment consists of the retail operations of
the Company operating under the "Advance Auto Parts" name in the United States
and "Western Auto" in Puerto Rico and the Virgin Islands. Wholesale consists of
the wholesale operations, including distribution services to independent dealers
and franchises throughout the United States and one Company-owned store in
California all operating under the "Western Auto" trade name.

     During the first quarter of 1998, Holding consummated a Recapitalization
through the sale of common stock, the issuance of debt, the redemption of common
and preferred stock and the repayments of notes payable and long-term debt. See
Note 15 to "Item 8. Financial Statements" for a detailed discussion of the
Recapitalization. Additionally, on November 2, 1998, Western Auto Supply Company
merged with a subsidiary of the Company. See "Item 1. Business" for a discussion
of the Western Merger.

                                       12
<PAGE>

     The Western Merger has been accounted for under the purchase method of
accounting. Accordingly, the results of operations of Western for the periods
from November 2, 1998 are included in the accompanying consolidated financial
statements. The purchase price has been allocated to assets acquired and
liabilities assumed based on their respective fair values. The final purchase
price allocation resulted in total excess fair value over the purchase price of
$4.7 million and was allocated to non-current assets, primarily property and
equipment.

     The Company has achieved benefits from the combination with Western
through improved product pricing and terms from vendors, consolidated
advertising, distribution and corporate support efficiencies, and the closure of
certain overlapping locations. Additionally, the Company continues to evaluate
store performance and identified 25 Advance Auto Parts stores during fiscal 2000
for closure. The identification of these stores resulted in the Company adding
$1.8 million in other exit costs to its restructuring reserves during fiscal
2000. As of December 30, 2000, 20 of these stores have been closed.

     Subsequent to December 30, 2000 but prior to this filing, the Company
signed a definitive agreement to purchase certain assets of Carport Auto Parts,
Inc ("Carport"). Carport operates 51 automotive retail parts stores in Alabama
and Mississippi, which carry products similar to those offered in the stores of
the Retail segment. The Company plans to account for this acquisition, which is
expected to close in the second quarter of fiscal 2001, under the purchase
method of accounting.

Results of Operations

     The following tables set forth certain operating data for Holding expressed
in dollars and as a percentage of net sales for the periods indicated.

                                       13

<PAGE>

<TABLE>
<CAPTION>
                                                                                   Fiscal Year Ended
                                                                  --------------------------------------------------
                                                                  January 2,          January 1,         December 30,
                                                                    1999                2000                 2000
                                                                  ----------        -------------       -------------
                                                                                  (dollars in thousands)
<S>                                                               <C>               <C>                 <C>
Statement of Operations Data:
Net sales....................................................     $ 1,220,759       $  2,206,945        $ 2,288,022
Cost of sales................................................         766,198          1,404,113          1,392,127
                                                                  -----------       ------------        -----------
Gross profit.................................................         454,561            802,832            895,895
Selling, general and administrative expenses(1)..............         391,913            739,080            800,845
                                                                  -----------       ------------        -----------
Expenses associated with the Recapitalization................          14,277                  -                  -
Expenses associated with the restructuring in conjuction
 with the Western Merger.....................................           6,774                  -                  -
Expenses associated with merger integration..................           7,788             41,034                  -
Expenses associated with private company.....................             845                  -                  -
Non-cash and other employee compensation.....................           1,135              2,483              2,261
                                                                  -----------       ------------        -----------
Operating income.............................................          31,829             20,235             92,789
Interest expense.............................................         (35,038)           (62,792)           (66,640)
Other, net...................................................             943              4,647              1,012
Income tax expense (benefit).................................             (84)           (12,584)            10,535
                                                                  -----------       ------------        -----------
Income (loss) before extraordinary item.....................           (2,182)           (25,326)            16,626
Extraordinary item, gain on debt extinguishment,
 net of $1,759 income taxes.................................                -                  -              2,933
                                                                  -----------       ------------        -----------
Net income (loss)...........................................      $    (2,182)      $    (25,326)       $    19,559
                                                                  ===========       ============        ===========



<CAPTION>
                                                                               Fiscal Year Ended
                                                              --------------------------------------------------
                                                              January 2,        January 1,          December 30,
                                                                1999                2000                 2000
                                                              -----------      -----------       ---------------
<S>                                                           <C>              <C>               <C>
Net sales................................................        100.0%              100.0%                 100.0%
Cost of sales............................................         62.8                63.6                   60.8
                                                              --------         -----------       ----------------
Gross profit.............................................         37.2                36.4                   39.2
Selling, general and administrative expenses(1)..........         32.1                33.5                   35.0
                                                              --------         -----------       ----------------
Expenses associated with the Recapitalization............          1.2                   -                      -
Expenses associated with the restructuring in conjuction
 with the Western Merger.................................          0.5                   -                      -
Expenses associated with merger integration..............          0.6                 1.9                      -
Expenses associated with private company.................          0.1                   -                      -
Non-cash and other employee compensation.................          0.1                 0.1                    0.1
                                                              --------         -----------       ----------------
Operating income.........................................          2.6                 0.9                    4.1
Interest expense.........................................         (2.9)               (2.8)                  (2.9)
Other, net...............................................          0.1                 0.2                    0.0
Income tax expense (benefit).............................          0.0                (0.6)                   0.5
                                                              --------         -----------       ----------------
Income (loss) before extraordinary item..................         (0.2)               (1.1)                   0.7
Extraordinary item, gain on debt
 extinguishment, net of $1,759 income taxes..............            -                   -                    0.1
                                                              --------         -----------       ----------------

Net income (loss)........................................         (0.2)%              (1.1)%                  0.8%
                                                              ========         ===========       ================
</TABLE>

(1) Selling, general and administrative expenses are adjusted for certain
non-recurring and other items.

                                       14
<PAGE>

        Net sales consist primarily of comparable store net sales, new store net
sales, Service Store net sales, net sales to the wholesale dealer network and
finance charges on installment sales. Comparable store net sales is calculated
based on the change in net sales starting once a store has been opened for
thirteen complete accounting periods (each period represents four weeks).
Relocations are included in comparable store net sales from the original date of
opening. Additionally, each converted Parts America store has been included in
the comparable store net sales calculation after thirteen complete accounting
periods following the completion of its physical conversion to an Advance Auto
Parts store. Holding has not included the Service Stores in its comparable store
net sales calculation but does plan to in the future.

        Holding's cost of sales includes merchandise costs and warehouse and
distribution expenses as well as service labor costs for the Service Stores.
Gross profit as a percentage of net sales may be affected by variations in
Holding's product mix, price changes in response to competitive factors and
fluctuations in merchandise costs and vendor programs. The Company seeks to
avoid fluctuation in merchandise costs by entering into long-term purchasing
agreements with vendors in exchange for pricing certainty, but there can be no
assurance such measures will in fact mitigate the effect of fluctuations in
merchandise costs on gross profits.

        Selling, general and administrative expenses are comprised of store
payroll, store occupancy, net advertising expenses, other store expenses and
general and administrative expenses, including salaries and related benefits of
corporate employees, administrative office expenses, professional expenses and
other related expenses.

Fiscal 2000 Compared to Fiscal 1999

        Net sales for fiscal 2000 were $2,288.0 million, an increase of $81.1
million or 3.7% over net sales for fiscal 1999. Net sales for the Retail segment
increased $149.9 million or 7.5%. The net sales increase for the Retail segment
was due to an increase in the comparable store sales of 4.4% and contributions
from new stores opened within the last year. The comparable store sales increase
of 4.4% was primarily a result of growth in both the DIY and DIFM market
segments, as well as the continued maturation of new stores and the converted
Parts America stores. Net sales for the Wholesale segment decreased 33.1% or
$68.8 million due to a decline in the number of dealer stores serviced by the
Company and lower average sales to each dealer.

        During fiscal 2000, the Company opened 140 new stores, relocated 10
stores and closed 28 stores, bringing the total Retail segment stores to 1,728.
The Company has 1,209 stores participating in Commercial Delivery, a result of
adding 115 net stores to the program during fiscal 2000. Additionally, as of
December 30, 2000, the Company supplied approximately 590 independent dealers
through the wholesale dealer network and one Company-owned store in California.

        Gross profit for fiscal 2000 was $895.9 million or 39.2% of net sales,
as compared to $802.8 million or 36.4% of net sales in fiscal 1999. The increase
in the gross profit percentage is reflective of the realization of certain
purchasing synergies, fewer product liquidations, lower inventory shrinkage and
freight costs and the continued decline in net sales of the lower margin
Wholesale segment. The higher shrinkage and freight costs in fiscal year 1999
were primarily related to merchandise conversions and product liquidations
resulting from the Western Merger. The gross profit for the Retail segment was
$873.1 million or 40.6% of net sales for fiscal 2000, as compared to $784.1
million or 39.2% of net sales for fiscal 1999. During the fourth quarter of
fiscal 2000, the Company recorded a gain as a reduction to cost of sales of $3.3
million related to a lawsuit against a supplier. The gain represents actual
damages incurred under an interim supply agreement with the supplier, which
provided for higher merchandise costs. Subsequent to December 30, 2000, the
Company agreed to a cash settlement of $16.6 million from the supplier. The
remainder of the cash settlement over the originally recorded gain, less higher
product costs incurred under the interim supply agreement, will be recognized as
a reduction of cost of sales during first quarter of fiscal 2001.

        Selling, general and administrative expenses, before integration
expenses and non-cash and other employee compensation, increased to $800.8
million or 35.0% of net sales for fiscal 2000, from $739.1 or 33.5% of net sales
for fiscal 1999. The increase in selling, general and administrative expenses is
primarily attributable to the continued sales decline in the Wholesale segment,
which carries lower selling, general and administrative expenses as a percentage
of sales as compared to the Retail segment. Additionally, the Company has
incurred higher than expected medical claims as well as higher payroll,
insurance and depreciation expense, partially offset by a decrease in net
advertising costs, as a percentage of sales, as compared to fiscal 1999. The
Company has made certain

                                       15
<PAGE>

investments in personnel and labor, which it believes is critical to the
Company's long-term success. The Company expects this commitment to increase the
productivity of store personnel, which will positively impact store
profitability and customer service. The increase in depreciation expense is
primarily related to the change in an accounting estimate to reduce the
depreciable lives of certain property and equipment on a prospective basis.

        EBITDA (operating income plus depreciation and amortization), as
adjusted for non-cash and other employee compensation and integration expenses
(fiscal 1999 only) , was $161.9 million in fiscal 2000 or 7.1% of net sales, as
compared to $121.9 million or 5.5% of net sales in fiscal 1999. EBITDA is not
intended to represent cash flow from operations as defined by GAAP and should
not be considered as a substitute for net income as an indicator of operating
performance or as an alternative to cash flow (as measured by GAAP) as a measure
of liquidity. Holding's method for calculating EBITDA may differ from similarly
titled measures reported by other companies. Management believes certain one-
time expenses, expenses associated with merger integration and non-cash and
other employee compensation should be eliminated from the EBITDA calculation to
evaluate the operating performance of the Company.

        Interest expense for fiscal 2000 was $66.6 million or 2.9% of net sales,
as compared to $62.8 million or 2.8% of net sales fiscal 1999. The increase in
interest expense was a result of an increase in interest rates over fiscal 1999
offset by a decrease in net outstanding borrowings. During fiscal 2000, the
Company repurchased $30.6 million of Senior Subordinated Notes on the open
market for $25.0 million. As a result of the early extinguishment of debt, the
Company expects to benefit from lower interest expense in the future.

        The Company's effective income tax rate was 38.8% of pre-tax income for
fiscal 2000 and 33.2% of pre-tax loss for fiscal 1999. This increase is due to
the Company having pre-tax income in fiscal 2000 and pre-tax loss in fiscal 1999
and the resulting effect of permanent differences between book and tax reporting
treatment on total income tax expense (benefit). Due to uncertainties related to
the realization of deferred tax assets for certain net operating loss
carryforwards, the Company recognized additional valuation allowances of $0.9
million during fiscal 2000.

        Holding recorded net income of $19.6 million on a consolidated basis for
fiscal 2000, as compared to a net loss of $25.3 million for fiscal 1999. In
addition to the items previously discussed, Holding also recorded an
extraordinary gain related to the early extinguishment of debt of $2.9 million,
net of $1.8 million provided for income taxes and $0.9 million for the write-off
of associated deferred debt issuance costs. As a percentage of sales, net income
for fiscal 2000 was 0.8% as compared to a net loss of 1.1% for fiscal 1999.

Fiscal 1999 Compared to Fiscal 1998

        Fiscal 1999 results include a full fiscal year of the operations
acquired in the Western Merger as compared to fiscal 1998 results, which include
Western operating results from November 2, 1998.

        Net sales for fiscal 1999 were $2,206.9 million, an increase of $986.2
million or 80.8% over net sales for fiscal 1998. Net sales for the Retail
segment increased $812.8 million or 68.5%. The net sales increase for the Retail
segment was a result of the Western Merger, opening of new stores and a 10.3%
increase in comparable store sales over fiscal 1998. The comparable store sales
increase was due to maturation of stores opened in 1997 and 1998, increased
product availability, continued growth in the commercial sales program and the
closure of Parts America and Advance Auto Parts stores in overlapping markets.
Net sales for the Wholesale segment increased $173.4 million due to the
inclusion of the Wholesale segment for all of fiscal 1999 after the Western
Merger in November 1998.

        During fiscal 1999, the Company opened 99 new stores, reopened three
closed locations, relocated 13 stores and closed 52 stores in addition to the
stores closed due to relocations (33 of which were Parts America and Advance
Auto Parts stores in overlapping markets closed in connection with the Western
Merger). Also, the Company added 562 stores to Commercial Delivery, bringing the
total to 1,094 stores. As of January 1, 2000, the Company operated 1,617 stores
in 38 states, Puerto Rico and the Virgin Islands and supplied approximately 670
independent dealers through the wholesale dealer network.

        Gross profit for fiscal 1999 was $802.8 million or 36.4% of net sales,
compared with $454.6 million or 37.2% of net sales, in fiscal 1998. The decrease
in the gross profit percentage resulted largely from the lower margins

                                       16
<PAGE>

associated with the Wholesale segment and certain non-recurring items such as
the liquidation of certain product lines and increased shrinkage primarily
associated with the Parts America Conversion. The decline in margins discussed
above was partially offset by better pricing from vendors in fiscal 1999
compared to fiscal 1998, due to vendor agreements entered into as a result of
the Western Merger. The better pricing will continue through the current term of
these vendor agreements, generally three to five years. The gross profit for the
Retail segment was $784.1 million or 39.2% for fiscal 1999, as compared to
$452.8 million or 38.2% of net sales for fiscal 1998.

        Selling, general and administrative expenses, before expenses associated
with the Recapitalization, restructuring, merger integration, private company
and non-cash and other employee compensation, increased to $739.1 million or
33.5% of net sales, in fiscal 1999 from $391.9 million or 32.1% of net sales in
fiscal 1998. The increase as a percentage of sales was due primarily to
increased costs realized by the Retail segment related to higher store labor, an
increase in advertising and costs associated with the Company's national
manager's conference.

        EBITDA (operating income plus depreciation and amortization), as
adjusted for expenses associated with the Recapitalization, merger integration,
private company and non-cash and other employee compensation was $121.9 million
for fiscal 1999, or 5.5% of net sales, as compared to $92.6 million or 7.6% of
net sales for fiscal 1998. EBITDA is not intended to represent cash flow from
operations as defined by GAAP and should not be considered as a substitute for
net income as an indicator of operating performance or as an alternative to cash
flow (as measured by GAAP) as a measure of liquidity. Holding's method for
calculating EBITDA may differ from similarly titled measures reported by other
companies. Management believes certain one-time expenses, expenses associated
with the Recapitalization, merger integration, private company and non-cash and
other employee compensation should be eliminated from the EBITDA calculation to
evaluate the operating performance of the Company.

        Interest expense in fiscal 1999 was $62.8 million compared to $35.0
million in fiscal 1998. The increase in interest in 1999 was primarily due to
the additional debt incurred in the Western Merger, the increase in borrowings
under the Company's revolving and delayed draw credit facilities and higher
interest rates.

        Other income in fiscal 1999 was $4.6 million compared to $0.9 million in
fiscal 1998. The increase in other income was primarily the result of the
Advance Stores segment recognizing the settlement of a dispute between the
Company and a vendor due to non-performance by the vendor under a supply
agreement.

        Income tax benefit for fiscal 1999 was $12.6 million as compared to a
benefit of $0.1 million in fiscal 1998, with effective tax rates of 33.2% and
3.7%, respectively. In fiscal 1999, the Company recognized federal and state net
operating loss carryforwards ("NOLs") of approximately $22.1 million. The
Company believes it will utilize these NOLs through a combination of the
reversal of temporary differences, projected future taxable income during the
NOL carryforward periods and available tax planning strategies. Due to
uncertainties related to the realization of deferred tax assets for certain
state NOLs, the Company recorded a valuation allowance of $0.6 million as of
January 1, 2000. The amount of deferred income tax assets realizable, however,
could change in the near future if estimates of future taxable income are
changed.

        As a result of the above factors, Holding incurred a net loss of $25.3
million in fiscal 1999 as compared to a net loss of $2.2 million in fiscal 1998.
As a percentage of net sales, net loss for fiscal 1999 was 1.1% as compared to a
net loss of 0.2% for fiscal 1998.

Liquidity and Capital Resources

        As a holding company, Holding relies on dividends from the Company as
its primary source of liquidity. Holding does not have, and in the future may
not have, any assets other than the capital stock of the Company. The ability of
the Company to pay cash dividends to Holding when required is restricted by law
and the terms of the Company's debt instruments, including the Credit Facility
and the Senior Subordinated Notes (see below). No assurance can be made that the
Company will be able to pay cash dividends to Holding when required to redeem
the Debentures (see below).

        Holding and the Company believe it will have sufficient liquidity to
fund its debt service obligations, including indebtedness incurred in connection
with the Western Merger, and implement its growth strategy over the next twelve

                                       17
<PAGE>

months. As of December 30, 2000, Holding and the Company had outstanding
indebtedness consisting of $84.2 million of Senior Discount Debentures (the
"Debentures"), $169.5 million of Senior Subordinated Notes (the "Senior
Subordinated Notes"), borrowings of $311.7 million under the Credit Facility,
$10.0 million of indebtedness under the McDuffie County Development Authority
Taxable Industrial Bonds ("IRB") and $0.8 million of other borrowings.

        The Debentures accrete at a rate of 12.875%, compounded semiannually, to
an aggregate principal amount of $112.0 million by April 15, 2003. Commencing
April 15, 2003, cash interest on the Debentures will accrue and be payable
semiannually at a rate of 12.875% per annum. The indenture governing the
Debentures contains certain covenants that, among other things, limit the
ability of Holding and its restricted subsidiaries to incur indebtedness and
issue preferred stock, repurchase stock and certain indebtedness, engage in
transactions with affiliates, create or incur certain liens, pay dividends or
certain other distributions, make certain investments, enter into new
businesses, sell stock of restricted subsidiaries, sell assets and engage in
certain mergers and consolidations.

        The Senior Subordinated Notes bear interest at a rate of 10.25%, payable
semiannually, and require no principal payments until maturity. The indenture
governing the Senior Subordinated Notes contains certain covenants that limit,
among other things, the ability of the Company and its restricted subsidiaries
to incur additional indebtedness and issue preferred stock, pay dividends or
certain other distributions, issue stock of subsidiaries, make certain
investments, repurchase stock and certain indebtedness, create or incur liens,
engage in transactions with affiliates, enter into new businesses, sell stock of
restricted subsidiaries and restrict the Company from engaging in certain
mergers or consolidations and sell assets. The $10.0 million principal amount
IRB bears interest at a variable rate and will require no principal payments
until maturity in November 2002.

        The Company has access to a total of $462.5 million (net of scheduled
principal payments made through December 30, 2000) through the Credit Facility
in addition to its operating cash flow. The Credit Facility provides for (i) a
$123.5 million Tranche B term loan, which was made at the closing of the
Recapitalization; (ii) a revolver with maximum borrowings including letters of
credit of approximately $125.0 million, of which $15.0 million was borrowed and
$11.9 million was outstanding for stand-by letters of credit, at December 30,
2000, (iii) a $124.0 million delayed draw term loan of which $94.0 million was
borrowed at December 30, 2000, and (iv) a $90.0 million deferred term loan
facility which was drawn at the closing of the Western Merger. The term loan
facilities, other than the Tranche B term loan, will mature on the sixth
anniversary of initial borrowing, and the Tranche B term loan will mature on the
eighth anniversary of initial borrowing. Annual principal payments on the term
loan facilities prior to the sixth anniversary of initial borrowing will be
nominal; thereafter, required principal payments will be approximately $234.7
million in 2004, $60.0 million in 2005 and $28.6 million in 2006, assuming the
term loan facilities have been fully borrowed. The revolving loan facility will
mature on the sixth anniversary of initial borrowing. The interest rates under
the delayed draw facilities and the revolver are determined by reference to a
pricing grid that will provide for reductions in the applicable interest rate
margins based on the Company's trailing total debt to EBITDA ratio (as defined
in the Credit Facility). Based upon the Company's operating ratios at December
30, 2000, the margins were 1.75% and 0.75% for Eurodollar and base rate
borrowings, respectively. Additionally, at December 30, 2000, the margin under
the Tranche B term loan and the deferred term loan facility was 2.50% on a
Eurodollar rate and 1.50% on the base rate borrowings.

        Borrowings under the Credit Facility are required to be prepaid, subject
to certain exceptions, with (a) 50% of defined excess cash flow, (b) 100% of the
net cash proceeds of all asset sales or other dispositions of property by the
Company and its subsidiaries (including certain insurance and condemnation
proceeds), subject to certain exceptions (including exceptions for (i)
reinvestment of certain asset sale proceeds within 270 days of such sale and
(ii) certain sale-leaseback transactions), (c) 100% of the net proceeds of
issuances of debt obligations of the Company and its subsidiaries, and (d) 100%
of the net proceeds of issuance of equity of the Company and its subsidiaries.
Because increases in net working capital, capital expenditures and debt
repayments are deducted in calculating excess cash flow, the Company does not
anticipate that the prepayment obligation under the Credit Facility in respect
thereof will have a material effect on its operating strategy. With respect to
growth through acquisitions, the operation of this covenant may result in the
application of cash resources for prepayments which would require the Company to
secure additional equity or debt financing to fund an acquisition, but while no
assurance can be given, the Company does not anticipate that this would have a
material effect on its ability to finance acquisitions in the future. The
Company will be required to make a mandatory prepayment of $6.2 million for
fiscal 2000 in fiscal 2001.

                                       18
<PAGE>

        The loans under the Credit Facility are secured by a first priority
security interest in substantially all tangible and intangible assets of the
Company. Amounts available to the Company under portions of the Credit Facility
are subject to a borrowing base formula, which is based on certain percentages
of the Company's inventories, and certain debt covenants. As of December 30,
2000, $118.3 million was available under these facilities. The Company intends
to use borrowings under the revolver and delayed draw term loans, as well as
internally generated funds, for store expansion and funding of working capital,
including funding of the restructuring program.

        The Credit Facility contains covenants restricting the ability of the
Company and its subsidiaries to, among others things, (i) pay dividends on any
class of capital stock or make any payment to purchase, redeem, retire, acquire,
cancel or terminate capital stock, (ii) prepay, redeem, retire, acquire, cancel
or terminate debt, (iii) incur liens or engage in sale-leaseback transactions,
(iv) make loans, investments, advances or guarantees, (v) incur additional debt
(including hedging arrangements), (vi) make capital expenditures, (vii) engage
in mergers, acquisitions and asset sales, (viii) engage in transactions with
affiliates, (ix) enter into any agreement which restricts the ability to create
liens on property or assets or the ability of subsidiaries to pay dividends or
make payments on advances or loans to the Company or other subsidiaries, (x)
change the nature of the business conducted by the Company and its subsidiaries,
(xi) change the passive holding company status of Holding and (xii) amend
existing debt agreements or the Company's or Holding's certificate of
incorporation, by-laws or other organizational documents. The Company is also
required to comply with financial covenants in the Credit Facility with respect
to (a) limits on annual aggregate capital expenditures, (b) a maximum leverage
ratio, (c) a minimum interest coverage ratio and (d) a minimum retained cash
earnings test. The Company is generally prohibited from paying dividends
(including to Holding) except that as long as no defined event of default under
the Credit Facility then exists, the Company will be permitted to pay dividends
to Holding in an amount sufficient to cover the cash interest due on the
Debentures commencing October 15, 2003. The Company was in compliance with the
above covenants under the Credit Facility as of December 30, 2000.

        The Company's primary capital requirements have been the funding of its
continued store expansion program, store relocations and remodels, inventory
requirements, the construction and upgrading of distribution centers, the
development and implementation of proprietary information systems and the
Western Merger. From fiscal 1996 through fiscal 2000, the Company opened 581
stores, opened seven new PDQ(R)s, opened four Mini-PDQ(R)'s, a Master PDQ(R),
closed the Western Merger, constructed two new distribution centers and expanded
its Roanoke distribution center. The Company has financed its growth through a
combination of internally generated funds, borrowings under the Credit Facility
and issuances of equity.

                                       19
<PAGE>

        The Company's new Advance Auto Parts stores require capital expenditures
of approximately $120,000 per store and an inventory investment of approximately
$300,000 per store, a portion of which is held at a distribution facility. A
substantial portion of these inventories is financed through vendor payables.
Pre-opening expenses, consisting primarily of store set-up costs and training of
new store employees, average approximately $25,000 per store and are expensed
when incurred. The Company opened 140 new stores during fiscal 2000 and
anticipates opening up to 130 new stores though internal growth or strategic
acquisitions in fiscal 2001.

        Historically, the Company has negotiated extended payment terms from
suppliers that help finance inventory growth, and the Company believes that it
will be able to continue financing much of its inventory growth through such
extended payment terms. The Company anticipates that inventory levels will
continue to increase primarily as a result of new store openings and increased
SKU levels.

        As a result of the Western Merger, the Company closed certain Advance
Auto Parts stores in overlapping markets with Parts America stores or stores not
meeting profitability objectives. As part of normal operations, the Company
reviewed store performance and decided to close additional stores not meeting
profitability objectives during fiscal 2000. The Western Merger also resulted in
restructuring reserves recorded in purchase accounting for the closure of
certain Parts America stores, severance and relocation costs and other facility
exit costs. As of December 30, 2000, these reserves had a remaining balance of
$10.6 million. The Company also assumed certain restructuring and deferred
compensation liabilities previously recorded by Western Auto Supply Company. At
December 30, 2000, the total liability for the restructuring and deferred
compensation plans was $3.1 million and $5.4 million, respectively, of which
$1.7 million and $1.5 million, respectively, is recorded as a current liability.
The classification for deferred compensation is determined by payment terms
elected by the employee, which can be changed upon 12 months' notice.

        In fiscal 2000, net cash provided by operating activities was $104.0
million. This amount consisted of $19.6 million in net income, depreciation and
amortization of $66.8 million, amortization of deferred debt issuance costs and
bond discount of $13.1 million and a decrease of $4.5 million in net working
capital and other. Net cash used for investing activities was $65.0 million and
was comprised primarily of net capital expenditures. Net cash used in financing
activities was $43.6 million and was comprised primarily of net repayments of
long-term debts.

        In fiscal 1999, net cash used in operating activities was $21.0 million.
This amount consisted of a $25.3 million net loss, offset by depreciation and
amortization of $58.1 million and amortization of deferred debt issuance costs
and bond discount of $12.2 million, and an increase of $66.0 million in net
working capital and other requirements. Net cash used for investing activities
was $113.8 million and was comprised primarily of net capital expenditures of
$101.9 million and cash consideration of $13.0 million in the Western Merger.
Net cash provided by financing activities was $121.3 million and was comprised
primarily of net borrowings.

        In fiscal 1998, net cash provided by operating activities was $44.0
million. This amount consisted of a $2.2 million net loss, offset by
depreciation and amortization of $30.0 million and amortization of deferred debt
issuance costs and bond discount of $7.7 million, and a decrease of $8.5 million
of net working capital and other. Net cash used for investing activities was
$230.7 million and was comprised primarily of net capital expenditures of
approximately $59.7 million and cash consideration of approximately $171.0
million in the Western Merger. Net cash provided by financing activities was
$207.3 million and was comprised primarily of net borrowings and issuance of
equity.

Seasonality

        The Company's business is somewhat seasonal in nature, with the highest
sales occurring in the spring and summer months. In addition, the Company's
business is affected by weather conditions. While unusually heavy precipitation
tends to soften sales as elective maintenance is deferred during such periods,
extremely hot and cold weather tends to enhance sales by causing parts to fail.

                                       20
<PAGE>

Risk Factors

    Substantial Leverage and Debt Service Obligations

        Holding and the Company have substantial indebtedness and debt service
obligations. Holding has entered into the indenture governing the Senior
Discount Debentures (the "Indenture") and the Company has entered into an
indenture governing the Senior Subordinated Notes (the "Senior Subordinated
Notes Indenture") pursuant to which they borrowed money in order to finance the
Recapitalization, including refinancing the existing outstanding indebtedness of
Holding and the Company. As of December 30, 2000, (i) Holding had outstanding
approximately $84.2 million of indebtedness under the Debentures, excluding its
secured guarantee of the Company's obligations under the Credit Facility, (ii)
the Company and its subsidiaries had $1,117.9 million of liabilities
outstanding, including indebtedness under the Senior Subordinated Notes and the
Credit Facility, trade payables and other accrued liabilities, and (iii) Holding
had stockholders' equity of $156.3 million. In addition, the Company has $128.1
million to borrow under the Credit Facility which is limited to $118.3 million
based on certain borrowing base formulas as of December 30, 2000.

        The level of Holding's and the Company's indebtedness may have important
consequences to the holders of the Debentures, including: (i) the ability of
Holding or the Company to obtain additional debt financing in the future for
acquisitions, working capital and capital expenditures may be limited; (ii) a
substantial portion of Holding's and the Company's cash flow must be dedicated
to debt service and will not be available for other purposes; (iii) Holding's
level of indebtedness could limit its flexibility in reacting to changes in its
operating environment and economic conditions generally and (iv) the covenants
contained in Holding's and the Company's debt instruments, including the
indentures discussed above, limit Holding's and the Company's ability to, among
other things, borrow additional funds, dispose of assets or make investments.

        In order to satisfy Holding's obligations under the Debentures and the
Company's obligations under the Senior Subordinated Notes, its operating leases,
the Credit Facility, the IRB and certain other indebtedness presently
outstanding, Holding and the Company must generate substantial operating cash
flow. The ability of Holding and the Company to meet their respective debt
service and other obligations or to refinance any such obligation will depend on
the future performance of the Company, which will be subject to prevailing
economic conditions and to financial, business and other factors beyond the
control of Holding and the Company. In addition, the Credit Facility, the Senior
Subordinated Notes and the IRB will mature prior to the maturity of the
Debentures. While Holding believes that, based on current levels of operations,
it and the Company will be able to meet their respective debt service and other
obligations and to refinance such indebtedness, there can be no assurances with
respect thereto, including with respect to the Company's ability to refinance
borrowings under the Credit Facility at the maturity of the obligations arising
thereunder. Furthermore, because the Credit Facility bears interest at floating
rates, Holding's and the Company's financial performance and flexibility may be
adversely affected by fluctuations in interest rates.


    Limitation on Access to Cash Flow of Subsidiaries; Holding Company Structure

        As a holding company, Holding's ability to pay principal and interest on
the Debentures is dependent upon the receipt of dividends from the Company and
any other future direct and indirect subsidiaries. Holding does not have, and
may not in the future have, any material assets other than the capital stock of
the Company. Any payment of dividends or making of loans by the Company to
Holding are subject to substantial restrictions under and to the satisfaction of
certain financial conditions set forth in the Senior Subordinated Note Indenture
and the Credit Facility. The ability of the Company to comply with such
conditions may be affected by events that are beyond the control of Holding. The
breach of any such conditions could result in a default under the Senior
Subordinated Note Indenture and/or the Credit Facility, and in the event of any
such default, the holders of the Senior Subordinated Notes or the lenders under
the Credit Facility could elect to accelerate the maturity of all the Senior
Subordinated Notes or the loans under such facility. If the maturity of the
Senior Subordinated Notes or the loans under the Credit Facility were to be
accelerated, all such outstanding debt would be, and other indebtedness of the
Company may be, required to be paid in full before the Company would be
permitted to distribute any assets or cash to Holding.

                                       21
<PAGE>

        In addition, indebtedness outstanding under the Credit Facility is
secured by substantially all of the assets of the Company and is guaranteed by
Holding. Holding's guarantee of the Credit Facility is secured by a pledge of
all of the capital stock of the Company as well as any future subsidiaries of
Holding. There can be no assurance that the assets of Holding would be
sufficient to repay all of such outstanding debt and to meet its obligations
under the Indenture. Future borrowings by the Company can be expected to contain
restrictions or prohibitions on the payment of dividends by the Company to
Holding or the making of loans or advances by the Company to Holding. In
addition, under Virginia law, a company is permitted to make distributions
including dividends on its capital stock only if, after giving effect to such
distribution, the Company is able to pay its debts as they become due in the
usual course of business and the Company's total assets are greater than the sum
of its total liabilities, plus any amounts needed, if the Company were dissolved
at the time of the distribution, to satisfy preferential rights upon dissolution
to shareholders whose preferential rights are superior to those receiving the
distribution.

        As a result of the holding company structure of Holding, the holders of
the Debentures will be structurally junior to all creditors of the Company or
any future subsidiary of Holding, except to the extent that Holding is itself
recognized as a creditor of the Company or such future subsidiary, in which case
the claims of Holding would still be subordinate to any security in the assets
of the Company or such future subsidiary and any indebtedness of the Company or
such future subsidiary senior to that held by Holding. In the event of
insolvency, liquidation, reorganization, dissolution or other winding-up of the
Company or any future subsidiary of Holding, Holding will not receive any funds
available to pay to creditors of the Company or any future subsidiary of
Holding.

    Uncertainty Relating to Ability to Implement Growth Strategy

        The Company has significantly increased its store count in the past five
fiscal years, from 536 stores at the end of fiscal 1995 to 1,729
Company-operated stores included in the Retail and Wholesale segments at the end
of fiscal 2000. The Company intends to continue to expand its base of stores as
part of its growth strategy, both by opening new stores and by acquisition.
There can be no assurance that this strategy will be successful. The actual
number of new stores to be opened and their success will be dependent on a
number of factors, including, among other things, the ability of the Company to
manage such expansion and hire and train qualified sales associates, the
availability of suitable store locations and the negotiation of acceptable lease
terms for new locations. There can be no assurance that the Company will be able
to open and operate such stores on a timely or profitable basis or that opening
new stores in markets already served by the Company will not adversely affect
existing store profitability or comparable store sales. Furthermore, the success
of the Company's acquisition strategy will depend on the extent to which it is
able to acquire, successfully absorb and profitably manage additional
businesses, and no assurance can be given that the Company's strategy will
succeed.

    Competition

        The retail sale of automotive parts and accessories is highly
competitive. The Company competes primarily with national and regional retail
automotive parts chains, wholesalers or jobber stores (some of which are
associated with national automotive parts distributors or associations),
independent operators, automobile dealers that supply original equipment
manufacturer parts and mass merchandisers that carry automotive replacement
parts and accessories. Some of the Company's competitors are larger and have
greater financial, marketing and other resources than the Company. In addition,
some e-commerce companies have recently established internet sites that sell
automotive parts, products and services. If these internet sites are successful
and the Company is unable to effectively sell its parts, products and services
over the internet through PartsAmerica.com, the Company may lose market share.

    Dependence on Vendor Relationships

        The Company's business is dependent upon developing and maintaining
close relationships with its vendors and upon its ability to purchase products
from these vendors on favorable price and other terms. A disruption of these
vendor relationships could have a material adverse effect on the Company's
business.

                                       22
<PAGE>

    Dependence on Certain Key Personnel

        The Company is dependent upon the services and experience of its
executive officers and senior management team and there can be no assurance that
the Company's business would not be affected if one or more of these individuals
left the Company. The Company has entered into an employment agreement with
Lawrence P. Castellani, Chief Executive Officer, Jimmie L. Wade, President,
Chief Financial Officer and Secretary, David R. Reid, Executive Vice President
and Chief Operating Officer, Paul W. Klasing, Executive Vice President,
Merchandising and Marketing, Joe H. Vaughn, Jr., Senior Vice President, Human
Resources and Benefits and Shirley L. Stevens, Senior Vice President and Chief
Information Officer.

    Economic and Weather Conditions

        The Company's business is sensitive to the economic and weather
conditions of the regions in which it operates. In recent years, certain of
these regions have experienced economic recessions and extreme weather
conditions. Temperature extremes tend to enhance sales by causing a higher
incidence of parts failure and increasing sales of seasonal products. However,
unusually inclement weather can reduce sales by causing deferral of elective
maintenance. No prediction can be made as to future economic or weather
conditions in the regions in which the Company operates or the effect such
conditions may have on the business or results of operations of the Company.

    Control of Company

        Through ownership of Holding Common Stock and an irrevocable proxy
granted to FS&Co. by Ripplewood, FS&Co. and Sears combined control approximately
89.8% of the outstanding voting securities of Holding. As a result, FS&Co. and
Sears have the ability to control Holding's, and thus the Company's management
policies and financing decisions.

                                       23
<PAGE>

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

        The Company currently utilizes no material derivative financial
instruments that expose it to significant market risk. Holding and the Company
is exposed to cash flow and fair value risk due to changes in interest rates
with respect to its long-term debt. While Holding and the Company cannot predict
the impact interest rate movements will have on its debt, exposure to rate
changes is managed through the use of fixed and variable rate debt. Holding's
and the Company's future exposure to interest rate risk decreased during fiscal
2000 due to decreased outstanding borrowings and decreased interest rates.

        Holding's and the Company's fixed rate debt consists primarily of
outstanding balances on the Debentures and Senior Subordinated Notes,
respectively. The Company's variable rate debt relates to borrowings under the
Credit Facility and the IRB (see "Item 7. Management's Discussion and Analysis
and Results of Operations--Liquidity and Capital Resources"). The Company's
variable rate debt is primarily vulnerable to movements in the LIBOR, Prime,
Federal Funds and Base CD rates.

        The table below presents principal cash flows and related weighted
average interest rates on Holding's and the Company's long-term debt at December
30, 2000 by expected maturity dates. Expected maturity dates approximate
contract terms. Fair values included herein have been determined based on quoted
market prices. Weighted average variable rates are based on implied forward
rates in the yield curve at December 30, 2000. Implied forward rates should not
be considered a predictor of actual future interest rates.

<TABLE>
<CAPTION>
                                                                                                                     Fair
                                    Fiscal     Fiscal    Fiscal     Fiscal     Fiscal                               Market
                                     2001       2002      2003       2004       2005      Thereafter     Total      Value
                                  ----------  ---------  -------- ----------- ----------  ----------- ---------- ----------
Long-term debt:                                                   (dollars in thousands)
<S>                               <C>         <C>        <C>      <C>         <C>        <C>         <C>        <C>
Fixed rate.........................      $ -       $ -        $ -        $ -        $ -    $281,450    $281,450   $163,473
Weighted average
  interest rate....................        -         -          -          -          -        11.3%       11.3%
Variable rate......................  $ 7,028   $14,000    $ 4,000  $ 219,668   $ 60,000    $ 28,588    $333,284   $333,284
Weighted average
  interest rate....................      7.5%      7.8%       8.0%       8.3%       8.6%        8.6%        7.9%
</TABLE>

Item 8.        Financial Statements.

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

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

        None.

                                       24
<PAGE>

                                    PART III

Item 10.              Directors and Executive Officers of the Registrant.

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

<TABLE>
<CAPTION>
                  Name             Age                                    Position
<S>                                  <C>   <C>
Nicholas F. Taubman................   66     Chairman of the Board and Director of Holding and the Company
Garnett E. Smith...................   61     Vice Chairman of the Board and Director of Holding and the Company
Lawrence P. Castellani.............   55     Chief Executive Officer and Director of Holding and the Company
Jimmie L. Wade.....................   46     President and Chief Financial Officer, Secretary of Holding and
                                             the Company
David R. Reid......................   38     Executive Vice President and Chief Operating Officer of Holding
                                             and the Company
Paul W. Klasing....................   41     Executive Vice President, Merchandising and Marketing of Holding
                                             and the Company
Jeffrey T. Gray....................   36     Senior Vice President, Controller, Assistant Secretary of Holding
                                             and the Company
Joe H. Vaughn, Jr..................   40     Senior Vice President, Human Resources and Benefits
John M. Roth.......................   42     Director of Holding and the Company
Mark J. Doran......................   37     Director of Holding and the Company
Timothy C. Collins.................   44     Director of Holding and the Company
Peter M. Starrett..................   53     Director of Holding and the Company
Jeffrey N. Boyer...................   42     Director of Holding and the Company
William L. Salter..................   57     Director of Holding and the Company
Jeffrey B. Conner..................   42     Director of Holding and the Company
</TABLE>


        Mr. Taubman, Chairman of the Board of Holding and the Company, joined
the Company in 1956. Mr. Taubman has served as Chairman of the Company since
January 1985 and as Chief Executive Officer of the Company from January 1985 to
July 1997. From 1969 to 1984, Mr. Taubman served as President of the Company. In
addition, Mr. Taubman has served as Chairman of Holding since May 1992, the year
it was formed, as Chief Executive Officer of Holding from May 1992 to March
1998, and as Secretary and Treasurer of Holding from May 1992 to February 1998.

        Mr. Smith, Vice Chairman of the Board of Holding and the Company, joined
the Company in November 1959. Mr. Smith was named Vice Chairman of the Board of
Holding and the Company in January 2000. Prior to that Mr. Smith served as
President and Chief Operating Officer of the Company from January 1985 until
July 1997 at which time he became Chief Executive Officer. Mr. Smith has also
served in numerous other positions including Executive Vice President and
General Manager, Vice President of Purchasing, Buyer and Store Manager. In
addition, Mr. Smith has served as President of Holding from May 1992 to October
1999, as Chief Operating Officer of Holding from May 1992 to March 1998, and as
Chief Executive Officer from March 1998 to January 2000.

        Mr. Castellani, Chief Executive Officer and Director of Holding and the
Company, joined the Company in February 2000 and is responsible for overall
management and operations of the Company. Prior to joining the Company, Mr.
Castellani was President and Chief Executive Officer of Ahold Support Services
in Latin America from 1998 to 2000 and Chief Executive Officer of Tops Friendly
Markets from 1991 to 1998.

                                       25

<PAGE>

        Mr. Wade, President, Chief Financial Officer and Secretary, joined the
Company in February 1994. Mr. Wade was named President in October 1999 and Chief
Financial Officer, Secretary in March 2000. Mr. Wade is responsible for finance,
logistics, information services and e-commerce. From 1987 to 1993, Mr. Wade was
Vice President, Finance and Operations, for S.H. Heironimus, and from 1979 to
1987, he was Vice President of Finance for American Motor Inns. Mr. Wade is a
certified public accountant.

        Mr. Reid, Executive Vice President and Chief Operating Officer, joined
the Company in October 1984 and has held his current position since October
1999. Mr. Reid is responsible for all retail operations, commercial sales, store
development and construction. In addition, from March 1999 to October 1999, Mr.
Reid served as the Chief Executive Officer of Western. From 1994 to 1995, Mr.
Reid was Assistant Vice President, Store Support for the Company. Mr. Reid has
also served in training and store operations as Store Manager and Division
Manager.

        Mr. Klasing, Executive Vice President, Merchandising and Marketing,
joined the Company in April 1995 and has held his current position since October
1999. Mr. Klasing is responsible for merchandising, marketing, quality control
and retail pricing. From 1981 to 1992, Mr. Klasing worked for Kragen Auto Parts
(now CSK Automotive) and from 1992 to 1995 for Montgomery Ward/Auto Express in
various positions.

        Mr. Gray, Senior Vice President, Controller and Assistant Secretary
joined the Company in March 1994 and has held his current position since April
2000. Mr. Gray is responsible for accounting, treasury, budgeting, financial
analysis and risk management. From 1994 to 2000, Mr. Gray held several positions
within the Company, most recently as Vice President of Inventory Management.
From 1993 to 1994, Mr. Gray served as controller of Hollins University, and from
1987 to 1993, Mr. Gray was employed by KPMG LLP. Mr. Gray is a certified public
accountant.

        Mr. Vaughn, Senior Vice President, Human Resources and Benefits joined
the Company in May 1995 and has held his current position since November 1999.
Mr. Vaughn is responsible for human resources, employee benefits and payroll.
From 1983 to 1989, Mr. Vaughn worked for KPMG LLP, from 1989 to 1992, he worked
for Dominion Bank, and from 1992 to 1995, he worked for Ferguson Andrews &
Associates. Mr. Vaughn is a certified public accountant.

        Mr. Roth, Director, became a member of the Board in connection with the
Recapitalization. Mr. Roth joined Freeman Spogli & Co. Incorporated ("Freeman
Spogli") in March 1988 and became a principal in March 1993. Mr. Roth is also a
director of AFC Enterprises, Inc. and Envirosource, Inc.

        Mr. Doran, Director, became a member of the Board in connection with the
Recapitalization. Mr. Doran joined Freeman Spogli in 1988 and became a principal
in January 1998. Mr. Doran is also a director of AFC Enterprises, Inc. and
Century Maintenance Supply, Inc.

        Mr. Collins, Director, became a member of the Board in connection with
the Recapitalization. Mr. Collins is Senior Managing Director and Chief
Executive Officer of Ripplewood Holdings L.L.C., a private investment firm
formed by him in October 1995. From February 1990 to October 1995, Mr. Collins
was a Senior Managing Director of the New York office of Onex Corporation, an
Ontario corporation listed on the Toronto and Montreal Stock Exchanges. Mr.
Collins is also a director of WRC Media, Inc. and the Strong Schafer Value Fund.

        Mr. Starrett, Director, became a member of the Board in November 1998.
Since August 1998, Mr. Starrett has served as a consultant to Freeman Spogli.
Prior to August 1998, Mr. Starrett was President of Warner Bros. Studio Stores
Worldwide and had been employed by Warner Bros. since May 1990. Mr. Starrett is
also a director of AFC Enterprises, Inc., Guitar Center, Inc. and The Pantry,
Inc.

        Mr. Boyer, Director, became a member of the Board in December 2000. Mr.
Boyer has been Senior Vice President and Chief Financial Officer of Sears since
January 2000. Prior to this appointment, Mr. Boyer held a variety of senior
level positions at Sears including Vice President of Finance for the Full Line
Stores and Corporate Controller. From 1995 to 1996, Mr. Boyer served as Vice
President of Business Development for the Pillsbury Company. From 1989 to 1995,
Mr. Boyer was employed by Kraft Foods, a unit of Philip Morris, where he held
positions of Vice President of Finance for General Foods and Vice President of
Financial Planning for Kraft General Foods.

        Mr. Salter, Director, became a member of the Board in April 1999. Mr.
Salter is the retired President of the Specialty Retail Division of Sears. From
1995 to 1999, Mr. Salter served as President of the Home Stores and Hard

                                       26
<PAGE>

Lines division of Sears, and from 1993 to 1995 as the Vice President and General
Manager of the Home Appliances and Electronics Division of Sears.

        Mr. Conner, Director, became a member of the Board in December 2000. Mr.
Conner has served as Vice President of Business Development for Sears since May
2000. From 1998 to 2000, Mr. Conner served as Vice President of Stores for Sears
Tire Group. Mr. Conner joined Sears in 1987 and held a number of strategic and
operational positions before becoming Vice President of Operations for Sears
Tire Group in 1997.

        Directors of the Company and Holding are elected annually and hold
office until the next annual meeting of stockholders or until their successors
are duly elected and qualified.

        Executive Officers are elected by, and serve at the discretion of, the
Board of Directors. The Company has entered into employment agreements with
certain of its executive officers. See "Item 11. Executive Employment
Contracts."

                                       27
<PAGE>

Item 11.       Executive Compensation

          The following table sets forth information with respect to
compensation earned by the Chief Executive Officer, the four other most highly
compensated executives serving as officers at the end of the last completed
fiscal year (collectively, the "Executive Officers") and two additional
executives, who served as officers during the fiscal year and would have been
included in the top four if serving as such at the end of the fiscal year.

                          Summary Compensation Table

<TABLE>
<CAPTION>
                                                                                                         Long Term
                                                                                                        Compensation
                                                                          Annual Compensation              Awards
                                                                 ------------------------------------- -------------
                                                                                                        Securities
                                                      Fiscal                           Other Annual     Underlying     All Other
            Name and Principal Position                Year     Salary     Bonus (1)   Compensation(2) Options/SARs  Compensation(3)
---------------------------------------------------    ----     ------     ---------   --------------- ------------  ---------------
<S>                                                   <C>       <C>        <C>          <C>             <C>           <C>
Lawrence P. Castellani.............................    2000    $ 542,308  $    75,000    $         -      1,050,000    $         -
      Chief Executive Officer                          1999            -    3,272,700              -              -              -
                                                       1998            -            -              -              -              -

Jimmie L. Wade.....................................    2000    $ 265,865  $   110,056    $         -         30,000     $    6,336
      President and Chief                              1999      174,421      157,976              -         34,500          6,080
      Financial Officer                                1998      108,537      221,887              -         25,000          6,665

David R. Reid......................................    2000    $ 250,000  $    83,250    $         -         25,000     $    6,379
      Executive Vice                                   1999      198,808      155,955              -         34,500          6,080
      President and Chief                              1998      108,131      208,464              -         25,000          5,320
      Operating Officer

Paul W. Klasing....................................    2000    $ 184,128  $    77,087    $         -         18,000     $    6,298
      Executive Vice President,                        1999      151,031      116,023              -         34,500          6,080
      Merchandising and Marketing                      1998      140,000      231,382              -         25,000          6,589

Jeffrey T. Gray....................................    2000    $ 112,081  $    34,031    $         -          8,000     $    6,013
      Senior Vice President,                           1999       93,706       80,200              -          4,000          6,080
      Controller                                       1998       81,504      139,849              -         10,500          6,687

Shirley L. Stevens.................................    2000    $ 172,782  $    61,820    $         -         10,000     $    6,302
      Senior Vice President and Chief                  1999      164,665      130,840              -          8,000          6,080
      Information Officer                              1998      150,800      231,242              -         25,000          6,982

Garnett E. Smith (4)...............................    2000    $ 280,758     $ 25,000    $         -         55,000     $    6,000
      Former Chief Executive                           1999      507,965      220,408              -        417,500          8,000
      Officer                                          1998      457,600    7,948,011              -        362,500          8,000

J. O'Neil Leftwich (5).............................    2000    $ 203,291     $ 18,000    $         -              -     $    6,326
      Former Senior Vice President and                 1999      188,092      145,826              -         86,500          6,080
      Chief Financial Officer,                         1998      164,415      828,220              -         72,500          6,932
      Secretary and Treasurer
</TABLE>

(1)  In connection with the Recapitalization, an aggregate of $11.5 million in
     extraordinary bonuses were paid to senior employees in April 1998.
(2)  While certain officers received perquisites, such perquisites do not exceed
     the lesser of $50,000 or 10% of each officer's respective salary and bonus.
(3)  Consists of matching contributions made by the Company under the Company's
     401(k) savings plan.
(4)  In January 2000, Mr. Smith became Vice Chairman of the Board of Holding and
     the Company.
(5)  As of December 30, 2000, Mr. Leftwich was no longer employed by the
     Company.

                                       28
<PAGE>

Executive Employment Contracts

        Mr. Castellani was appointed Chief Executive Officer and began
employment with the Company on February 1, 2000, at which time he signed an
employment and non-competition agreement. Mr. Castellani signed an irrevocable
acceptance letter with the Company in December 1999 that obligated the Company
to pay Mr. Castellani a signing bonus of $3.3 million. The signing bonus of $3.3
million was accrued at January 1, 2000 and was paid in the first quarter of
fiscal 2000. Approximately $1.9 million of the bonus was used to purchase shares
of Holding common stock pursuant to a restricted stock agreement, which limits
the sale or transfer of rights to the stock during the term of the contract.
This portion of the bonus was deferred and is being amortized over the two-year
term of the contract. The contract has an initial term of two years, and renews
automatically each year thereafter unless terminated by the Company or Mr.
Castellani. The contract provides for a base salary of $600,000, subject to
annual increases at the discretion of the Board of Directors, and an annual cash
bonus based on the Company's achievement of performance targets established by
the Board of Directors. In the event Mr. Castellani is terminated without cause,
or terminates his employment for "good reason" as defined in the employment
agreement, he will receive salary through the later of the end of the term of
employment or one year from the effective date of termination, less any amounts
earned in other employment. Mr. Castellani has agreed not to compete with the
Company, to preserve its confidential information, not to recruit or employ
employees of the Company to or in other businesses, and not to solicit customers
or suppliers of the Company for competitors.

        On April 15, 1998, Mr. Smith entered into an employment and non-
competition agreement with the Company. In January of fiscal 2000, Mr. Smith was
named Vice Chairman of Holding and the Company. The agreement has an initial
term of three years, and renews automatically each year thereafter unless
terminated by the Company or Mr. Smith. The agreement provides for a base salary
of $200,000, adjusted for his new responsibilities, effective April 1, 2000, and
is subject to annual increases at the discretion of the Board of Directors.
Additionally, Mr. Smith may earn annual cash bonuses based on the Company's
achievement of performance targets established by the Board of Directors. The
bonus to be paid upon achievement of targets will be consistent in amount with
the bonuses paid to Mr. Smith by the Company historically. In the event Mr.
Smith is terminated without cause, or terminates his employment for "good
reason" as defined in the employment agreement, he will receive salary through
the later of the end of the term of employment or one year from the effective
date of termination, less any amounts earned in other employment. Mr. Smith has
agreed not to compete with the Company, to preserve its confidential
information, not to recruit or employ employees of the Company to or in other
businesses, and not to solicit customers or suppliers of the Company for
competitors.

        On April 15, 1998, Messrs. Reid, Wade, Klasing and Ms. Stevens entered
into employment agreements with the Company. The agreements provide that each
Executive Officer will receive a base salary of $110,000, $110,000, $140,000 and
$150,800 respectively, subject to annual increases at the discretion of the
Board of Directors. Such agreements contain severance provisions that provide
for base salary for the remainder of the term of the agreement upon termination
of employment or one year, unless the termination is due to death, disability or
retirement, by the Company for "cause" (as defined in the agreements) or by the
employee other than for "good reason" (as defined in the agreements), less any
amounts earned in other employment. The initial term of the employment
agreements is two years, after which the term of employment will extend from
year-to-year unless terminated by either the Company or the employee. Other
provisions require the Company to pay bonuses earned by the employee upon the
Company's achievement of earnings targets established by the Board of Directors,
and an agreement by the employee not to compete with the Company, to preserve
its confidential information, not to recruit or employ employees of the Company
to or in other businesses, and not to solicit customers or suppliers of the
Company for competitors.

Consulting Agreement

        On April 15, 1998, Mr. Taubman entered into a consulting and non-
competition agreement with Holding and the Company. The agreement, which has a
term of three years, requires Holding or the Company to pay consulting fees in
an amount of $300,000 per annum, plus an annual bonus of at least $300,000 based
upon the achievement of targeted performance goals established by the Board of
Directors. In fiscal 2000, 1999 and 1998, Mr. Taubman earned $320,000, $400,000
and $708,222 respectively, pursuant to the consulting agreement. Mr. Taubman has
agreed not to compete with the Company, to preserve its confidential
information, not to recruit or employ employees of the Company to or in other
businesses, and not to solicit customers or suppliers of the Company for
competitors. Pursuant to the consulting agreement, Holding and Mr. Taubman have
entered into an indemnity agreement whereby Holding will

                                       29
<PAGE>

indemnify Mr. Taubman for actions taken as an officer or director of or
consultant to Holding or the Company to the fullest extent permitted by law. The
amount of time Mr. Taubman must devote to his consultation duties declines
throughout the term of the agreement. The Company has entered into
indemnification agreements similar to that with Mr. Taubman with five of its
other directors.

Compensation of Directors

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

Stock Subscription Plans

        Holding has adopted Stock Subscription Plans (the "Stock Subscription
Plans") pursuant to which certain directors, officers and key employees of the
Company have purchased 820,450 shares, net of cancellations, of the outstanding
Holding Common Stock at the same price as Freeman Spogli's purchase of its
shares in the Recapitalization, or fair market value at the time of purchase.
Three Million Eight Hundred Ninety Six Thousand Dollars of the purchase price
for such shares has been paid by delivery of full recourse promissory notes
bearing interest at the prime rate and due five years from their inception,
secured by all of the stock each such individual owns in Holding. As of December
30, 2000 $2.4 million under these notes remained outstanding. Messrs. Smith,
Wade, Reid, Klasing, Gray and Ms. Stevens purchased 250,000 shares, 25,000
shares, 20,000 shares, 20,000 shares, 10,000 shares and 20,000 shares
respectively. For these individuals, $0, $75,000, $115,000, $110,000, $50,000
and $100,000 of their purchase price, respectively, was financed through the
delivery of promissory notes on the terms described above. As of March 30, 2001,
the outstanding balance on the promissory notes was $115,000, $110,000, $40,000
and $100,000 for each of Messrs. Reid, Klasing, Gray and Ms. Stevens,
respectively. The agreements entered into in connection with the Stock
Subscription Plans provide for restrictions on transferability, and acquired
shares are subject to a right of first refusal and a repurchase right at stated
prices in favor of Holding and co-sale rights in favor of the executive if
Freeman Spogli sells its shares to a third party. The agreements also include an
obligation to sell at the request of Freeman Spogli. These rights (but not the
restrictions on transferability) will terminate upon an initial public offering
by Holding of Holding Common Stock, as further defined in agreements entered
into under the Stock Subscription Plans.

        Mr. Castellani entered into a stock subscription agreement under the
Stock Subscription Plan in fiscal 2000, pursuant to which he purchased 75,000
shares of Holding Common Stock. $900,000 of Mr. Castellani's purchase price was
financed through the delivery to the Company of a promissory note. As of March
30, 2001, the outstanding balance of the promissory note was $600,000.

Stock Option Plans

        Holding has adopted stock option plans (the "Option Plans"), under which
Holding made initial grants of approximately 898,750 shares of Holding Common
Stock in April 1998. As of December 30, 2000, the Company has granted a total of
2,203,125 shares under the Option Plan. Each Option Plan participant has entered
into an option agreement (an "Option Agreement") with Holding. The Option Plans
and each outstanding option thereunder are subject to termination in the event
of a change in control of Holding or other extraordinary corporate transactions,
as more fully described in the Option Plans. In addition, all options granted
pursuant to the Option Plans will terminate 90 days after termination of
employment (unless termination was for cause, in which event an option will
terminate immediately) or 180 days in the event of termination due to death or
disability. Shares received upon exercise of options are subject to both a right
of first refusal and a repurchase right at stated prices in favor of Holding,
and co-sale rights in favor of the optionee. These rights will terminate upon an
initial public offering by Holding of its Common Stock, as further defined in
the Option Agreements. Shares received upon exercise of options, as well as all
outstanding options, are also subject to obligations to sell at the request of
Freeman Spogli. All options will terminate on the seventh anniversary of the
Option Agreement under which they were granted if not exercised prior thereto.

        Three different types of options may be granted pursuant to the Option
Plans. Fixed Price Service Options vest over a three-year period in three equal
annual installments beginning one year from the date of grant. Performance

                                       30
<PAGE>

Options are earned in installments based upon satisfaction of certain
performance targets for the four-year period ending in fiscal 2001. Variable
Price Service Options vest in equal annual installments over a two-year period
beginning in 2000, and have an exercise price that increases over time.

Option Grants

        The following table sets forth information concerning Options granted in
fiscal 2000 to each of the Executive Officers.

<TABLE>
<CAPTION>
                                                           Individual Grants                      Potential Realizable Value at
                                        -----------------------------------------------------     Assumed Annual Rates of Stock
                                                         % of Total                                    Price Appreciation
                                          Number of      Options/                                        for Option Term
                                         Securities        SARs                                        Fixed Price Options
                                         Underlying     Granted to   Exercise or              -----------------------------------
                                        Options/SARs   Employees in  Base Price   Expiration
                    Name                  Granted #    Fiscal Year    ($/Sh)(1)     Date      0% (2)     5% ($)(3)     10% ($)(3)
--------------------------------------- -------------- -----------   -----------  ----------- ------    ----------    -----------
<S>                                     <C>            <C>           <C>          <C>         <C>       <C>            <C>
Lawrence P. Castellani................     350,000 (4)       26.2        $ 16.82       2/1/07      -    $ 2,396,600    $ 5,585,098

Lawrence P. Castellani................     350,000 (4)       26.2          20.00       2/1/07      -      2,849,703      6,641,020

Lawrence P. Castellani................     350,000 (4)       26.2          25.00       2/1/07      -      3,562,129      8,301,275

Jimmie L. Wade........................      30,000 (5)        2.2          16.82      4/14/07      -        205,423        478,723

David R. Reid.........................      25,000 (6)        1.9          16.82      4/14/07      -        171,186        398,936

Paul W. Klasing.......................      18,000 (7)        1.3          16.82      4/14/07      -        123,254        287,324

Garnett E. Smith......................      18,000 (8)        1.3          16.82      4/14/07      -        123,254        287,324

Shirley L. Stevens....................      10,000 (9)        0.7          16.82      4/14/07      -         68,474        159,574

Jeffrey T. Gray.......................       8,000 (10)       0.5          16.82      4/14/07      -         54,779        127,659
</TABLE>

(1)  Represents the fair market value of the underlying shares of Common Stock
     at the time of the grant as determined by Holding's Board of Directors.
(2)  Unless the stock price increases, which will benefit all stockholders
     commensurately, an Option holder will realize no gain.
(3)  Represents the value of the shares of Common Stock issuable upon the
     exercise of the Option, assuming the stated rates of price appreciation for
     seven years, compounded annually, with the aggregate exercise price
     deducted from the final appreciated value. The 5% and 10% rates are
     established by the SEC as examples only and are not intended to forecast
     future appreciation in the Common Stock price.
(4)  Represents 350,000 Fixed Price Service Options.
(5)  Represents 30,000 Fixed Price Service Options.
(6)  Represents 25,000 Fixed Price Service Options.
(7)  Represents 18,000 Fixed Price Service Options.
(8)  Represents 18,000 Fixed Price Service Options.
(9)  Represents 10,000 Fixed Price Service Options.
(10) Represents 8,000 Fixed Price Service Options.

                                       31
<PAGE>

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

    The following table sets forth information with respect to the Executive
Officers concerning option exercises for fiscal 2000 and exercisable and
unexercisable options held as of December 30, 2000.

<TABLE>
<CAPTION>
                                                                              Number of Securities
                                                                                   Underlying                    Value of
                                                                                   Options at             In-the-Money Options at
                                                   Shares                     December 30, 2000(#)      December 30, 2000($)(a)(b)
                                                Acquired on      Value     ---------------------------  ----------------------------
                  Name                          Exercise(#)    Realized($) Exercisable   Unexercisable  Exercisable    Unexercisable
---------------------------------------------   -----------    ----------- -----------   -------------  -----------    -------------
<S>                                             <C>            <C>         <C>           <C>            <C>            <C>
Lawrence P. Castellani.......................             -              -           -      1,050,000   $         -    $  1,813,000

Jimmie L. Wade...............................             -              -      10,667         53,833        95,737         344,373

David R. Reid................................             -              -      10,667         48,833        95,737         323,473

Paul W. Klasing..............................             -              -      10,667         41,833        95,737         294,213

Garnett E. Smith.............................             -              -     124,583        310,917     1,245,381       3,047,258

Shirley L. Stevens...........................             -              -      10,167         32,833        93,647         256,593

Jeffrey T. Gray..............................             -              -       4,583         17,917        41,323         124,337
</TABLE>

(a)  There is no established public trading market for the Holding Common Stock.
     Holding believes that the fair market value of the Holding Common Stock was
     $21.00 per share as of December 30, 2000.
(b)  Values for "in-the-money" outstanding options represent the positive spread
     between the respective exercise prices of the outstanding options and the
     fair market value underlying the Holding Common Stock of $21.00 as
     described in note (a).

Compensation Committee Interlocks and Insider Participation

        The Compensation Committee of the Board of Directors determines the
compensation of the Executive Officers. During fiscal 2000, Messrs. Roth, Salter
and Smith served on the Compensation Committee. Mr. Smith also served as an
officer of the Company during fiscal 2000.

                                       32
<PAGE>

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

        A beneficial owner of a security includes any person who directly or
indirectly has or shares voting power and/or investment power with respect to
such security or has the right to obtain such voting power and/or investment
power within 60 days. Except as otherwise noted, each designated beneficial
owner in the table below has sole voting power with respect to the shares
beneficially owned by such person. The following table sets forth certain
information, as of March 30, 2001 with respect to the beneficial ownership of
Holding Common Stock by (i) each person who beneficially owns more than 5% of
such shares, (ii) each of the Executive Officers named in the Summary
Compensation Table, (iii) each member of the Board of Directors of Holding and
(iv) all Executive Officers and Directors of Holding and the Company as a group.

<TABLE>
<CAPTION>
                                                                                                     Amount of
                                                                                                     Beneficial         Percent
                                Name of Beneficial Owner                                             Ownership         of Class
-------------------------------------------------------------------------------------                -----------       ----------
<S>                                                                                                  <C>               <C>
Freeman Spogli & Co. Incorporated (1)................................................                 11,022,652            37.1 %
John M. Roth (1)                                                                                                               -
Mark J. Doran (1)                                                                                                              -

WA Holding Co. (2)...................................................................                  11,474,606           38.6%
Jeffrey N. Boyer (2)                                                                                            -
Jeffrey B. Conner (4)................................................................                           -

Ripplewood Partners, L.P. and affiliates (3).........................................                   2,891,795            9.7%
Timothy C. Collins (3)                                                                                          -

William L. Salter (4)................................................................                           -              *

Nicholas F. Taubman (5)..............................................................                   1,398,632            4.7%

Arthur Taubman Trust dated July 13, 1964 (6).........................................                   1,148,633            3.9%

Garnett E. Smith (8)(9)..............................................................                     492,666            1.7

Lawrence P. Castellani (7)(8)(9).....................................................                     535,000            1.8

Peter J. Starrett....................................................................                      23,782              *

Paul W. Klasing (8)(9)...............................................................                      46,334              *

David R. Reid (8)(9).................................................................                      48,667              *

Jimmie L. Wade (8)(9)................................................................                      55,334              *

Shirley L. Stevens (8)(9)............................................................                      42,667              *

Jeffrey T. Gray (8)(9)...............................................................                      21,333              *

All directors and officers as a group (14 individuals)...............................                  29,180,934           98.1%
</TABLE>

__________________________
*       Less than 1%

(1)     11,022,652 shares of Holding Common Stock are held of record by FS
        Equity Partners IV, L.P. ("FSEP IV"). As general partner of FSEP IV, FS
        Capital Partners LLC ("FS Capital") has the sole power to vote and
        dispose of the shares owned by FSEP IV. Messrs. Doran, Roth, Bradford M.
        Freeman, Todd W. Halloran, Jon D. Ralph, Charles P. Rullman, J.
        Frederick Simmons, Ronald P. Spogli and William M. Wardlaw are the sole
        managing members of FS Capital, and Messrs. Doran, Freeman, Halloran,
        Ralph, Roth, Rullman, Simmons, Spogli and Wardlaw are the sole
        directors, officers and shareholders of Freeman Spogli & Co.
        Incorporated, and as such may be deemed to be the beneficial owners of
        the shares of Holding Common Stock and rights to acquire Holding Common
        Stock owned by FSEP IV. Freeman Spogli and its named officers and
        directors have, in addition, sole power to vote 2,891,795 shares of
        Holding Common Stock owned of record by Ripplewood Partners, L.P. (the
        "Ripplewood Partners") and Ripplewood Advance Auto Parts Employee Fund I
        L.L.C. (the "Ripplewood Fund") pursuant to an irrevocable proxy
        delivered to Freeman Spogli under the terms of the Stockholders
        Agreement. Such irrevocable proxy will expire upon an initial public
        offering by

                                       33
<PAGE>

        Holding. Freeman Spogli neither has shared nor sole power to dispose of
        shares held by Ripplewood Partners or Ripplewood Fund. The business
        address of Freeman Spogli & Co. Incorporated, FSEP IV, FS Capital, and
        Messrs. Freeman, Spogli, Wardlaw, Simmons, Roth, Rullman and Doran is
        11100 Santa Monica Boulevard, Suite 1900, Los Angeles, California 90025.
(2)     11,474,606 shares of Holding Common Stock are held of record by WA
        Holding Co. ("WAH"), a wholly owned subsidiary of Sears. As the sole
        stockholder of WAH, Sears has the sole power to vote and dispose of the
        shares owned by WAH. As Senior Vice President and Chief Financial
        Officer of Sears, Mr. Boyer has the power to direct the voting of the
        shares of Holding Common Stock held by WAH, and as such may be deemed to
        be the beneficial owner of the shares of Holding Common Stock owned by
        WAH. The business address of WAH and Mr. Boyer is 3333 Beverly Road,
        Hoffman Estates, Illinois 60179.
(3)     2,763,110 shares of Holding Common Stock are held of record by
        Ripplewood Partners, and 128,685 shares of Holding Common Stock are held
        of record by Ripplewood Fund. Ripplewood Holdings, L.L.C. is the sole
        general partner of Ripplewood Partners and the sole managing member of
        Ripplewood Fund and, therefore, has the sole power to dispose of the
        shares owned by Ripplewood Partners or Ripplewood Fund. Until an initial
        public offering by Holding, pursuant to the Stockholders Agreement and
        an irrevocable proxy required by the terms thereof, Freeman Spogli has
        sole voting power over all of the shares of Holding Common Stock held by
        Ripplewood Partners and Ripplewood Fund. Mr. Collins is the Senior
        Managing Director and Chief Executive Officer of Ripplewood Holdings
        L.L.C. and as such may be deemed to be the beneficial owner of the
        shares of Holding Common Stock and the rights to acquire Holding Common
        Stock owned by Ripplewood Partners and Ripplewood Fund. The business
        address of Ripplewood Holdings L.L.C., Ripplewood Partners, Ripplewood
        Fund, and Mr. Collins is 1 Rockefeller Plaza, 32nd Floor, New York, New
        York 10020.
(4)     The business address of Messrs. Salter and Conner is 3333 Beverly Road,
        Hoffman Estates, Illinois 60179.
(5)     Includes 250,000 shares subject to immediately exercisable options. The
        stockholder's business address is 5673 Airport Road, Roanoke, Virginia
        24012.
(6)     Includes 250,000 shares subject to immediately exercisable options. The
        trustees of the Arthur Taubman Trust dated July 13, 1964 are Eugenia
        Taubman, who is the spouse of Nicholas F. Taubman, and Grace W. Taubman,
        who is his mother. The business address of the trust is 5673 Airport
        Road, Roanoke, Virginia 24012.
(7)     Includes an aggregate of 11,890 shares held by Mr. Castellani's
        children.
(8)     Includes 420,000 shares, which have been acquired by Messrs. Smith,
        Castellani, Klasing, Reid, Wade , Gray and Ms. Stevens pursuant to the
        stock subscription plan.
(9)     Includes shares of Holding Common Stock subject to options beneficially
        owned by the following persons: Mr. Smith - 242,666 options; Mr.
        Castellani - 350,000 options; Mr. Klasing - 26,334 options; Mr. Reid -
        28,667 options; Mr. Wade - 30,334 options; Mr. Gray - 11,333 and Ms.
        Stevens - 22,667 options.

Item 13. Certain Relationships and Related Transactions.

Affiliated Leases

        The Company leases its Roanoke, Virginia distribution center, an office
and warehouse facility, two warehouses, 20 of its stores and three former stores
from Nicholas F. Taubman or members of his immediate family, and its corporate
headquarters from Ki, L.C., a Virginia limited liability company owned by two
trusts for the benefit of a child of Mr. Taubman. Rents for the affiliated
leases may be slightly higher than rents for non-affiliated leases, but the
Company does not believe the amount of such difference to be material. In
addition, certain terms of the affiliated leases may be more favorable to the
landlord than those contained in leases with non-affiliates, primarily terms
relating to the maintenance of the facilities. However, in connection with the
Recapitalization, certain other terms of the leases with affiliates (including
provisions relating to assignment, damage by casualty and default cure periods)
were amended so that they would be no less favorable to the Company than non-
affiliated leases. All affiliated leases are on a triple net basis. Lease
expense for leases with these affiliates was $2.9 million for fiscal 1998 and
$3.3 million for each of fiscal 1999 and 2000.

        Three Western Auto Puerto Rico stores are on the premises of Sears
stores and the buildings are subleased from Sears. The rental rates were
established prior to the Western Merger by arm's-length negotiation between the
Company and Sears, and the Company believes that the rent and terms of the
subleases reflect market rates and terms at the time of the Western Merger.
During fiscal 2000 and 1999, the Company paid Sears approximately $660,000 and
$681,000, respectively, for the use of these facilities.

                                       34
<PAGE>

Stockholders Agreement

        Mr. Taubman and the Arthur Taubman Trust Dated July 13, 1964 (the
"Taubman Trust" and, together with Mr. Taubman, the "Continuing Stockholders"),
Freeman Spogli, Ripplewood Partners, L.P. and Ripplewood Advance Auto Parts
Employee Fund I L.L.C. (collectively, "Ripplewood"), WAH and Holding have
entered into an Amended and Restated Stockholders Agreement (the "Stockholders
Agreement"). Under the Stockholders Agreement, Freeman Spogli, Ripplewood, WAH
and the Continuing Stockholders have the right to purchase their pro rata share
of certain new issuances of securities, including capital stock by Holding.
Prior to April 15, 2001 (or if earlier, the date of an initial public offering),
any transfers of Holding Common Stock by any Continuing Stockholder and
Ripplewood are subject to rights of first offer in favor of Freeman Spogli and
WAH on a pro rata basis. Prior to an initial public offering, any transfers of
Holding Common Stock are subject to rights of first refusal in favor of (i)
Freeman Spogli and WAH on a pro rata basis, in the case of a transfer by
Ripplewood, (ii) WAH, in the case of a transfer by Freeman Spogli and (iii)
Freeman Spogli, in the case of a transfer by WAH. The Stockholders Agreement
further provides tag-along rights such that (i) upon transfers of Holding Common
Stock by Freeman Spogli (excluding transfers to affiliates of Freeman Spogli),
the Continuing Stockholders, Ripplewood and WAH will have the right to
participate in such sales on a pro rata basis, (ii) upon transfers of Holding
Common Stock by WAH (excluding transfers to affiliates of WAH), Freeman Spogli,
the Continuing Stockholders and Ripplewood will have the right to participate in
such sales on a pro rata basis and (iii) upon transfers of Holding Common Stock
by Ripplewood (excluding transfers to affiliates of Ripplewood), Freeman Spogli
will have the right to participate in such sales on a pro rata basis, and if
Freeman Spogli exercises such right, the Continuing Stockholders and WAH will
have the right to participate in such sales on a pro rata basis. In addition,
after April 1, 2000 if Freeman Spogli sells all of its holdings of Holding
Common Stock, Ripplewood and the Continuing Stockholders will be obligated to
sell all of their shares of Holding Common Stock at the request of Freeman
Spogli. Without the consent of the majority of the other stockholders, Sears
will not sell WAH to a third party so as to dispose of its indirect interest in
Holding.

        The Stockholders Agreement further provides that the parties will vote
at each annual meeting of Holding to elect to the Board of Directors Mr.
Taubman, the Chief Executive Officer of Holding, three nominees of Freeman
Spogli, three nominees of WAH and one nominee of Ripplewood. Certain transfers
of Holding Common Stock by either Freeman Spogli or WAH will reduce the number
of directors such parties are entitled to nominate. Ripplewood has granted
Freeman Spogli an irrevocable proxy to vote Ripplewood's stock in Holding on all
matters, expiring upon an initial public offering of common stock by Holding,
but Freeman Spogli will nominate one director designated by Ripplewood. The
Ripplewood director will agree to vote with the Freeman Spogli directors on all
matters prior to an initial public offering of common stock by Holding. Pursuant
to the Stockholders Agreement, Mr. Taubman has certain approval rights with
respect to major corporate transactions.

Options Granted to the Continuing Stockholders

        In connection with the Recapitalization, Holding entered into an Option
Agreement with Mr. Taubman and the Taubman Trust whereby each of them has been
granted immediately exercisable options to purchase 250,000 shares of Holding
Common Stock. The options have an initial exercise price of $10.00, with the
exercise price increasing by $2.00 on each anniversary of the Recapitalization.
Both the exercise price and the number of shares, which may be purchased
pursuant to the options, are subject to certain adjustments. The options will
expire if not exercised by the seventh anniversary of the Recapitalization.
Shares received upon exercise of all or any part of the option by the Continuing
Stockholders will be subject to the Stockholders Agreement.

Registration Rights Agreement

        Pursuant to the Stockholders Agreement, Holding agreed, beginning 180
days after consummation of an initial public offering of common stock by
Holding, that upon the request of Freeman Spogli, WAH and the Continuing
Stockholders it will register under the Securities Act and applicable state
securities laws the sale of Holding Common Stock owned by Freeman Spogli, WAH
and the Continuing Stockholders subject to certain limitations. Holding has
granted unlimited piggy-back registration rights to Freeman Spogli, Ripplewood,
WAH and the Continuing Stockholders. Holding also granted three demand
registrations to each of Freeman Spogli and WAH, two demand registrations to the
Continuing Stockholders, and one demand registration to Ripplewood. Holding
granted WAH the right, beginning 180 days after the consummation of an initial
public offering, to distribute its shares of Holding Common Stock to Sears'
stockholders. Holding's obligation is subject to certain limitations relating to
the minimum

                                       35
<PAGE>

amount required for registration, the timing of registrations and other similar
matters. Holding is obligated to pay any registration expenses incidental to
such registrations, excluding underwriters' commissions and discounts. Holding
has agreed to indemnify Freeman Spogli, Ripplewood, WAH, the Continuing
Stockholders and the control person of any of the foregoing against certain
liabilities including liabilities under the Securities Act.

Management Equity Plans

        See "Item 11. Executive Compensation--Stock Subscription Plans" and "--
Stock Option Plans."

Indemnification Agreements

        In connection with the Recapitalization, the Company entered into
indemnification agreements with certain of the directors of the Company.

Certain Payments

        In connection with the Recapitalization, a portion of the common stock
and all of the preferred stock of Holding were converted into the right to
receive in the aggregate approximately $351.0 million in cash and certain
options to purchase shares of Holding Common Stock. In addition, Freeman Spogli
and Ripplewood, stockholders of Holding, received collectively a $5.0 million
fee for arranging the financing, performing advisory and consulting services and
negotiating the Recapitalization, and Freeman Spogli, Ripplewood and the
Continuing Stockholders received collectively a $3.5 million fee for performing
similar services with respect to the Western Merger. In connection with the
Recapitalization, certain employees of the Company, including the Executive
Officers, received an aggregate of approximately $11.5 million in bonuses with
Mr. Smith receiving $7.0 million and Messrs. Reid, Wade and Klasing and Ms.
Stevens receiving $150,000 each.

Other Transactions with Sears

        On November 2, 1998, Western Auto Supply Company merged into a
subsidiary of the Company. In the Western Auto Merger, WAH was issued 11,474,606
shares of Holding Common Stock, representing approximately 40.6% of the
outstanding Holding Common Stock. In connection with the Western Merger, WAH
became entitled, under the Stockholders Agreement described above, to nominate
three directors to the Board of Directors of Holding. At December 30, 2000,
Jeffrey N. Boyer, Jeffrey B. Conner and William L. Salter served on the Board of
Directors as WAH nominees.

        In connection with the Western Merger, Western entered into agreements
with Sears in order to continue to obtain supplies of certain products bearing
trademarks owned by Sears for the Wholesale segment and the Service
Stores for three years. Pursuant to these agreements, Western purchased directly
from the manufacturers approximately $9.2 million, $13.5 million and $6.0
million of these products in fiscal 2000, 1999 and fiscal 1998, respectively,
and the Company believes that Sears received fees in association with such
sales. The prices paid per unit for the products sold in the Western Auto stores
were determined prior to the Western Merger by arm's-length negotiation between
the Company and Sears.

        In connection with the Western Merger, Western entered
into agreements with Sears and its affiliates whereby consumers can make retail
purchases at the Service Stores and the stores included in the Wholesale segment
using the Sears credit card and other Western Auto private label credit cards.
The Sears affiliates are paid a discount fee on each retail transaction that is
competitive with the fees paid by Western and the Company to third party credit
card providers such as Visa, MasterCard and American Express. Under this
agreement, Western incurred approximately $405,000, $348,000 and $657,000 in
discount fees in fiscal 2000, 1999 and fiscal 1998, respectively. In addition, a
portion of a Service Store and certain Western employees were leased to Sears
during fiscal 1999 and 1998, for use in Sears' administration of the credit card
program. The lease payments, which aggregated approximately $2.3 million and
$697,000 in fiscal 1999 and fiscal 1998, respectively, are intended to reimburse
the Company for its expense in connection with the facility and the employees.
The leasing arrangement was terminated prior to fiscal 2000.

                                       36
<PAGE>

        In connection with the Western Merger, Sears provided certain services
to effect an orderly transition of Western Auto Supply Company from a subsidiary
of Sears to a subsidiary of the Company. Such services included payroll and
accounts payable. As of January 1, 2000, these services were completed and
transitioned to the Company. Pursuant to this arrangement, the Company incurred
$887,000 and $844,000 for services performed by Sears for the Company in fiscal
1999 and fiscal 1998, of which $844,000 was accrued at January 2, 1999. As of
January 1, 2000, all amounts under this arrangement had been paid.

        During fiscal 1999, the Company signed an agreement with Sears Logistic
Systems ("SLS"), an affiliate of Sears, to provide the Company billing
administration services related to certain courier firms used by the Company.
SLS manages the invoice processing procedure and bills the Company for the
courier services provided by the outside firm plus a four-percent administration
fee. During fiscal 1999, the Company paid SLS approximately $62,000.

        Under the terms of an insurance program established by a Sears
subsidiary on behalf of Western Auto Supply Company prior to the Western Merger,
with respect to certain insurable losses where the Company may otherwise have a
retention obligation or deductible under the applicable insurance policy
providing coverage, the Company will be entitled to be reimbursed by Sears for
its losses. No material payments were made under the insurance program in fiscal
1999 or fiscal 1998. The Company received approximately $1.5 million during
fiscal 2000 for a claim processed under the insurance program.

        In connection with the Western Merger, Sears and the Company entered
into an agreement under which the Company may be given a priority position as a
local supplier to up to approximately 250 Sears Auto Centers or National Tire &
Battery ("NTB") stores that are located near Company stores. Under this
agreement, upon request from a Sears Auto Center or NTB Store, the Company will
deliver parts and charge a price negotiated prior to the Western Merger between
the Company and Sears. In addition, if the volume of activity under this
agreement meets certain agreed-upon thresholds, Sears will receive rebates on
its purchases. The supply arrangement was phased in by the Company and Sears
during late fiscal 1998; therefore, no material purchases were made by Sears in
fiscal 1998. During fiscal 2000 and 1999, the Company sold $7.5 million and $5.3
million, respectively of merchandise to Sears under the supply agreement.

        In connection with the Western Merger, Sears arranged to buy from the
Company certain products in bulk for its automotive centers, at cost plus a set
handling fee. In fiscal 1998, the Company shipped approximately $2.1 million in
products to Sears. During the first quarter of fiscal 1999, the Company made
final shipments to Sears under this arrangement of $530,000.

                                       37
<PAGE>

                                     PART IV

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

          (a)  Documents filed as part of this Report:

               (1 & 2) Index to Consolidated Financial Statements and Schedules:

                       Advance Holding Corporation and Subsidiaries
                       Consolidated Financial Statements:
<TABLE>
                       <S>                                                                <C>
                       Report of Independent Public Accountants--Arthur
                         Andersen LLP...............................................      F-1

                       Consolidated Balance Sheets as of December 30, 2000
                         and January 1, 2000........................................      F-2

                       Consolidated Statements of Operations for the Years Ended
                         December 30, 2000, January 1, 2000 and January 2, 1999.....      F-3

                       Consolidated Statements of Changes in Stockholders'
                         Equity for the Years Ended December 30, 2000,
                         January 1, 2000, and January 2, 1999.......................      F-4

                       Consolidated Statements of Cash Flows for the Years Ended
                         December 30, 2000, January 1, 2000 and January 2, 1999.....      F-5

                       Notes to Consolidated Financial Statements December                F-7
                          30, 2000, January 1, 2000 and January 2, 1999.............

                       Schedule I-- Condensed Financial Information of the
                         Registrant.................................................       I-1

                       Schedule II-- Valuation and Qualifying Accounts..............      II-1
</TABLE>


               (3)     Exhibits:

                       Exhibit
                       Number                Description
                       ------                -----------

                         3.1(1)    Articles of Incorporation of Holding, as
                                   amended to date.

                         3.2(1)    Bylaws of Holding, as amended to date.

                         4.1(1)    Indenture dated as of April 15, 1998 between
                                   Holding and United States Trust Company of
                                   New York, as Trustee, with respect to the
                                   12.875% Senior Discount Debentures due 2009
                                   (including the form of 12.875% Senior
                                   Discount Debenture due 2009).

                         4.2(2)    Amended and Restated Stockholders Agreement
                                   dated November 2, 1998 among FS Equity
                                   Partners IV, L.P., Ripplewood Partners, L.P.,
                                   Ripplewood Advance Auto Parts Employee Fund I
                                   L.L.C., Nicholas F. Taubman, The Arthur
                                   Taubman Trust dated July 13, 1964, WA Holding
                                   Co. and Holding. (including the Terms of the
                                   Registration Rights of Common Stock).

                        10.1(4)    Amended and Restated Credit Agreement dated
                                   as of October 19, 1998 among Holding, the
                                   Registrant, the lenders party thereto, The
                                   Chase Manhattan Bank ("Chase"), Chase
                                   Securities Inc., DLJ Capital Funding, Inc.
                                   and First Union National Bank.

                        10.2(5)    Pledge Agreement dated as of April 15, 1998,
                                   as amended and restated as of November 2,
                                   1998, among the Registrant, Holding, the
                                   Subsidiary Pledgors listed therein and Chase,
                                   as collateral agent.

                        10.3(6)    Guarantee Agreement dated as of April 15,
                                   1998, as amended and restated as of November
                                   2, 1998, among Holding, the Subsidiary

                                       39
<PAGE>

                       Exhibit
                       Number                Description
                       ------                -----------
                                   Guarantors listed therein and Chase, as
                                   collateral agent.

                         10.4(7)   Indemnity, Subrogation and Contribution
                                   Agreement dated as of April 15, 1998, as
                                   amended and restated as of November 2, 1998,
                                   among the Registrant, Holding, the Guarantors
                                   listed therein and Chase, as collateral
                                   agent.

                         10.5(8)   Security Agreement dated as of April 15,
                                   1998, as amended and restated as of November
                                   2, 1998, among the Registrant, Holding, the
                                   Subsidiary Guarantors listed therein and
                                   Chase, as collateral agent.

                         10.6(2)   Lease Agreement dated as of March 16, 1995
                                   between Ki, L.C. and the Company for the
                                   Company's headquarters located at 5673
                                   Airport Road, Roanoke, Virginia, as amended.

                         10.7(2)   Lease Agreement dated as of January 1, 1997
                                   between Nicholas F. Taubman and the Company
                                   for the distribution center located at 1835
                                   Blue Hills Drive, N.E., Roanoke, Virginia, as
                                   amended.

                         10.8(2)   Trust Indenture dated as of December 1, 1997
                                   among McDuffie County Development Authority,
                                   First Union National Bank, as trustee, and
                                   Branch Banking and Trust Company, as credit
                                   facility trustee, relating to the $10,000,000
                                   Taxable Industrial Development Revenue Bonds
                                   (Advance Stores Company, Incorporated
                                   Project) Series 1997 (the "IRB").

                         10.9(2)   Lease Agreement dated as of December 1, 1997
                                   between Development Authority of McDuffie
                                   County and the Company relating to the IRB.

                         10.10(2)  Letter of Credit and Reimbursement Agreement
                                   dated as of December 1, 1997 among the
                                   Company, Holding and First Union National
                                   Bank relating to the IRB.

                         10.11(2)  Advance Holding Corporation 1998 Senior
                                   Executive Stock Option Plan.

                         10.12(2)  Form of Advance Holding Corporation 1998
                                   Senior Executive Stock Option Agreement.

                         10.13(2)  Advance Holding Corporation 1998 Executive
                                   Stock Option Plan.

                         10.14(2)  Form of Advance Holding Corporation 1998
                                   Stock Option Agreement.

                         10.15(2)  Advance Holding Corporation 1998 Senior
                                   Executive Stock Subscription Plan.

                         10.16(2)  Form of Advance Holding Corporation Senior
                                   Executive Stock Subscription Agreement.

                         10.17(2)  Advance Holding Corporation 1998 Employee
                                   Stock Subscription Plan.

                         10.18(2)  Form of Advance Holding Corporation Employee
                                   Stock Subscription Agreement.

                         10.19(2)  Form of Secured Promissory Note.

                         10.20(2)  Form of Stock Pledge Agreement.

                         10.21(2)  Form of Employment and Non-Competition
                                   Agreement between Childs, Cox, Gearheart,
                                   Gerald, Gray, Gregory, Hale, Helms, Jeter,
                                   Knighten, Kyle, Livesay, McDaniel, Miley,
                                   Quinn, Richardson, Smith, Turner and Williams
                                   and the Company (one-year agreement).

                         10.22(2)  Form of Employment and Non-Competition
                                   Agreement between Bigoney, Buskirk, Felts,
                                   Fralin, Haan, Klasing, Reid, Stevens, Vaughn,
                                   Wade, Weatherly and Wirth and the Company
                                   (two-year agreement).

                                       40
<PAGE>

                         Exhibit
                         Number                Description
                         ------                -----------


                         10.23(2)  Form of Indemnity Agreement between certain
                                   directors of Holding (other than Nicholas F.
                                   Taubman) and Holding.

                         10.24(2)  Form of Consulting and Non-Competition
                                   Agreement among Nicholas F. Taubman, Holding
                                   and the Company.

                         10.25(2)  Indemnity Agreement dated as of April 15,
                                   1998 between Nicholas F. Taubman and Holding.

                         10.26(2)  Option Agreement dated as of April 15, 1998
                                   between Nicholas F. Taubman and Holding.

                         10.27(2)  Option Agreement dated as of April 15, 1998
                                   between Arthur Taubman Trust dated July 13,
                                   1968 and Holding.

                         10.28(2)  Form of Employment and Non-Competition
                                   Agreement among Garnett E. Smith, Holding and
                                   the Company.

                         10.29(1)  Form of Series B Debenture.

                         10.30(9)  First Amendment dated as of June 30, 1999, to
                                   the Credit Agreement dated as of April 15,
                                   1998 as amended and restated as of October
                                   19, 1998, among Holding, the Company, the
                                   lenders party thereto and The Chase Manhattan
                                   Bank ("Chase"), as administrative agent.

                         10.31(10) Supplement No. 1 dated as of June 30, 1999,
                                   to the Guarantee Agreement dated as of April
                                   15, 1998 as amended and restated as of
                                   November 2, 1998, among Holding, the
                                   Subsidiary Guarantors listed therein and
                                   Chase, as collateral agent.

                         10.32(11) Supplement No. 1 dated as of June 30, 1999,
                                   to the Pledge Agreement dated as of April 15,
                                   1998 as amended and restated as of November
                                   2, 1998, among the Company, Holding, the
                                   Subsidiary Pledgors listed therein and Chase,
                                   as collateral agent

                         10.33(12) Supplement No. 1 dated as of June 30, 1999,
                                   to the Security Agreement dated as of April
                                   15, 1998 as amended and restated as of
                                   November 2, 1998, among the Company, Holding,
                                   the Subsidiary Guarantors listed therein and
                                   Chase, as collateral agent.

                         10.34(13) Supplement No. 1 dated as of June 30, 1999,
                                   to the indemnity, Subrogation and
                                   Contribution Agreement dated as of April 15,
                                   1998 as amended and restated as of November
                                   2, 1998 among the Company, Holding, the
                                   Guarantors listed therein and Chase, as
                                   collateral agent.

                         10.35(14) Employment and Noncompetition Agreement dated
                                   as of February 1, 2000 among the Company,
                                   Holding and Lawrence P. Castellani.

                         10.36(15) Senior Executive Stock Subscription Agreement
                                   dated as of February 1, 2000, between Holding
                                   and Lawrence P. Castellani.

                         10.37(16) Restricted Stock Agreement dated as of
                                   February 1, 2000, between Holding and
                                   Lawrence P. Castellani.

                         10.38(17) Second Amendment and Consent, dated as of
                                   December 1, 1999, to the Credit Agreement
                                   dated as of April 15, 1998, among Holding,
                                   the Company, the lenders party thereto and
                                   Chase, as Administrative Agent.

                         10.39(18) Third Amendment, dated as of February 11,
                                   2000, to the Credit Amendment dated as of
                                   April 15, 1998, among Holding, the Company
                                   and Chase, as Administrative Agent.

                         21.1      Subsidiaries of the Company.

                         24.1      Power of Attorney (contained in the signature
                                   pages hereof).

                        ________________________________

                                       41
<PAGE>

                              (1)  Incorporated by reference to the exhibit
                                   designated as the same number in the
                                   Registration Statement on Form S-4 of Holding
                                   effective October 30, 1998 (No. 333-56031).

                              (2)  Incorporated by reference to the exhibit
                                   designated as exhibit 4.3 in the Registration
                                   Statement on Form S-4 of Advance Stores
                                   Company, Incorporated effective October 30,
                                   1998 (No. 333-56013).

                              (3)  Incorporated herein by reference to the
                                   exhibit designated as exhibit 10.31 filed
                                   with the Current Report on Form 8-K of
                                   Advance Stores Company, Incorporated dated
                                   November 2, 1998.

                              (4)  Incorporated herein by reference to the
                                   exhibit designated as exhibit 10.32 filed
                                   with the Current Report on Form 8-K of
                                   Advance Stores Company, Incorporated dated
                                   November 2, 1998.

                              (5)  Incorporated herein by reference to the
                                   exhibit designated as exhibit 10.33 filed
                                   with the Current Report on Form 8-K of
                                   Advance Stores Company, Incorporated dated
                                   November 2, 1998.

                              (6)  Incorporated herein by reference to the
                                   exhibit designated as exhibit 10.34 filed
                                   with the Current Report on Form 8-K of
                                   Advance Stores Company, Incorporated dated
                                   November 2, 1998.

                              (7)  Incorporated herein by reference to the
                                   exhibit designated as exhibit 10.35 filed
                                   with the Current Report on Form 8-K of
                                   Advance Stores Company, Incorporated dated
                                   November 2, 1998.

                              (8)  Incorporated herein by reference to the
                                   exhibit designated as exhibit 10.36 filed
                                   with the Current Report on Form 8-K of
                                   Advance Stores Company, Incorporated dated
                                   November 2, 1998.

                              (9)  Incorporated herein by reference to the
                                   exhibit designated as exhibit 10.1 filed with
                                   the Quarterly Report on Form 10-Q filed by
                                   Advance Stores Company, Incorporated for the
                                   period ended July 17, 1999 (File No.
                                   333-56013).

                              (10) Incorporated herein by reference to the
                                   exhibit designated as exhibit 10.2 filed with
                                   the Quarterly Report on Form 10-Q filed by
                                   Advance Stores Company, Incorporated for the
                                   period ended July 17, 1999 (File No.
                                   333-56013).

                              (11) Incorporated herein by reference to the
                                   exhibit designated as exhibit 10.3 filed with
                                   the Quarterly Report on Form 10-Q filed by
                                   Advance Stores Company, Incorporated for the
                                   period ended July 17, 1999 (File No.
                                   333-56013).

                              (12) Incorporated herein by reference to the
                                   exhibit designated as exhibit 10.41 filed
                                   with the Quarterly Report on Form 10-Q filed
                                   by Advance Stores Company, Incorporated for
                                   the period ended July 17, 1999 (File No.
                                   333-56013).

                              (13) Incorporated herein by reference to the
                                   exhibit designated as exhibit 10.5 filed with
                                   the Quarterly Report on Form 10-Q filed by
                                   Advance Stores Company, Incorporated for the
                                   period ended July 17, 1999 (File No.
                                   333-56013).

                              (14) Incorporated herein by reference as the same
                                   exhibit in the Annual Report on Form 10-K
                                   filed by Advance Holding Corporation for the
                                   year ended January 1, 2000 (File No. 333-
                                   56031).

                              (15) Incorporated herein by reference as the same
                                   exhibit in the Annual Report on Form 10-K
                                   filed by Advance Holding Corporation for the
                                   year ended January 1, 2000 (File No. 333-
                                   56031).

                              (16) Incorporated herein by reference as the same
                                   exhibit in the Annual Report on Form 10-K
                                   filed by Advance Holding Corporation for the
                                   year ended January 1, 2000 (File No. 333-
                                   56031).

                              (17) Incorporated herein by reference as the same
                                   exhibit in the Annual Report on Form 10-K
                                   filed by Advance Holding Corporation for the
                                   year ended January 1, 2000 (File No. 333-
                                   56031).

                              (18) Incorporated herein by reference as the same
                                   exhibit in the Annual Report on Form 10-K
                                   filed by Advance Holding Corporation for the
                                   year ended January 1, 2000 (File No. 333-
                                   56031).


                         (4)  Reports on Form 8-K.

                              None.

                                       42
<PAGE>

Report of Independent Public Accountants



To the Board of Directors and Stockholders of
Advance Holding Corporation:


We have audited the accompanying consolidated balance sheets of Advance Holding
Corporation (a Virginia company) and subsidiaries (the Company), as of December
30, 2000, and January 1, 2000, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for each of the three
years in the period ended December 30, 2000. These financial statements and the
schedules referred to below are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
schedules based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Advance Holding Corporation and
subsidiaries as of December 30, 2000, and January 1, 2000, and the results of
their operations and their cash flows for each of the three years in the period
ended December 30, 2000, in conformity with accounting principles generally
accepted in the United States.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedules listed in the index to consolidated
financial statements and schedules are presented for purposes of complying with
the Securities and Exchange Commission's rules and are not part of the basic
financial statements. The schedules have been subjected to the auditing
procedures applied in the audits of basic financial statements and, in our
opinion, fairly state in all material respects, the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.

                                                             ARTHUR ANDERSEN LLP

Greensboro, North Carolina,
   March 2, 2001.

                                      F-1
<PAGE>

                 Advance Holding Corporation and Subsidiaries
        Consolidated Balance Sheets - December 30, 2000 and January 1,
              2000 (dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                             December 30,   January 1,
              Assets                                             2000          2000
              ------                                         ------------   -----------
<S>                                                          <C>            <C>
Current assets:
   Cash and cash equivalents                                  $    18,009    $    22,577
   Receivables, net                                                80,578        100,323
   Inventories                                                    788,914        749,447
   Other current assets                                            10,274         12,025
                                                             ------------   ------------
     Total current assets                                         897,775        884,372
Property and equipment, net                                       410,960        402,476
Assets held for sale                                               25,077         29,694
Other assets, net                                                  22,548         32,087
                                                             ------------   ------------
                                                              $ 1,356,360    $ 1,348,629
                                                             ============   ============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
   Bank overdrafts                                            $    13,599    $    11,715
   Current portion of long-term debt                                7,028          3,665
   Accounts payable                                               387,852        341,188
   Accrued expenses                                               124,962        146,024
   Other current liabilities                                       42,794         26,172
                                                             ------------   ------------
     Total current liabilities                                    576,235        528,764
                                                             ------------   ------------
Long-term debt                                                    579,921        634,664
                                                             ------------   ------------
Other long-term liabilities                                        43,933         51,247
                                                             ------------   ------------
Commitments and contingencies Stockholders' equity:

   Preferred stock, 8% noncumulative, nonvoting, $10 par value,
    redeemable by the Company at par; liquidation value at par;
    100,000 shares authorized; no shares issued or outstanding          -              -
   Common stock, Class A, voting, $.01 par value; 62,500,000
    shares authorized; 28,288,550 and 28,144,050 issued
    and outstanding                                                   283            281
   Common stock, Class B, nonvoting, $.01 par value,
    21,875,000 shares authorized; no shares
    issued or outstanding                                               -              -
   Additional paid-in capital                                     372,169        369,399
   Other                                                              396             69
   Accumulated deficit                                           (216,577)      (235,795)
                                                             ------------   ------------
     Total stockholders' equity                                   156,271        133,954
                                                             ------------   ------------
                                                              $ 1,356,360    $ 1,348,629
                                                             ============   ============
</TABLE>

               The accompanying notes to consolidated financial
               statements are an integral part of these balance
                                    sheets.

                                      F-2
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                     Consolidated Statements of Operations
                    For the Years Ended December 30, 2000,
                     January 1, 2000, and January 2, 1999
                            (dollars in thousands)

<TABLE>
<CAPTION>
                                                                              2000         1999        1998
                                                                           ----------  -----------  ----------
<S>                                                                        <C>         <C>          <C>
Net sales                                                                  $ 2,288,022  $2,206,945  $1,220,759
Cost of sales, including purchasing and warehousing costs                    1,392,127   1,404,113     766,198
                                                                           ----------  -----------  ----------
       Gross profit                                                            895,895     802,832     454,561
Selling, general and administrative expenses                                   803,106     782,597     401,681
Expenses associated with Recapitalization                                            -           -      14,277
Expenses associated with restructuring in conjunction with
  the Western Merger                                                                 -           -       6,774
                                                                           ----------  -----------  ----------
       Operating income                                                         92,789      20,235      31,829
Other (expense) income:
  Interest expense                                                             (66,640)    (62,792)    (35,038)
  Other, net                                                                     1,012       4,647         943
                                                                           ----------  -----------  ----------
       Total other expense, net                                                (65,628)    (58,145)    (34,095)
                                                                           ----------  -----------  ----------
Income (loss) before provision (benefit) for income taxes
  and extraordinary item                                                        27,161     (37,910)     (2,266)
Provision (benefit) for income taxes                                            10,535     (12,584)        (84)
                                                                           ----------  -----------  ----------
Income (loss) before extraordinary item                                         16,626     (25,326)     (2,182)
Extraordinary item, gain on debt extinguishment,
         net of $1,759 income taxes                                              2,933           -           -
                                                                           ----------  -----------  ----------
Net income (loss)                                                          $    19,559  $  (25,326) $   (2,182)
                                                                           ==========  ===========  ==========
</TABLE>

               The accompanying notes to consolidated financial
             statements are an integral part of these statements.

                                      F-3
<PAGE>

                 Advance Holding Corporation and Subsidiaries
          Consolidated Statements of Changes in Stockholders' Equity
                    For the Years Ended December 30, 2000,
                     January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                      Class A                Class B
                                            Preferred Stock        Common Stock           Common Stock
                                          -----------------  ---------------------  ---------------------
                                            Shares   Amount      Shares     Amount     Shares      Amount
                                          --------  -------  ------------  -------  ------------  -------
<S>                                       <C>       <C>      <C>           <C>      <C>           <C>
Balance, January 3, 1998                    77,300   $  773     2,412,500   $   19    21,875,000   $  175
  Change in par value of stock                   -        -             -        5             -       44
  Redemption of stock                      (77,300)    (773)     (662,500)      (7)  (21,875,000)    (219)
  Issuance of Class A common stock
   associated with the Recapitalization,
   net of issuance costs of $775                 -        -    10,853,800      109             -        -
  Issuance of Class A common stock
   associated with Western Merger,
   net of issuance costs of $575                 -        -    15,636,318      156             -        -
  Other                                          -        -        21,782        1
  Net loss                                       -        -             -        -             -        -
  Preferred dividend,
   $0.80 per share                               -        -             -        -             -        -
                                          ---------------------------------------------------------------
Balance, January 2, 1999                         -        -    28,261,900      283             -        -
  Other                                                          (117,850)      (2)
  Net loss                                       -        -             -        -             -        -
                                          ---------------------------------------------------------------
Balance, January 1, 2000                         -        -    28,144,050      281             -        -
Other                                            -        -       144,500        2             -        -
Net income                                       -        -             -        -             -        -
                                          ---------------------------------------------------------------
Balance, December 30, 2000                       -   $    -    28,288,550   $  283             -   $    -
                                          ===============================================================

<CAPTION>
                                                                       Retained
                                            Additional                 Earnings           Total
                                             Paid-in                 (Accumulated     Stockholders'
                                             Capital        Other      Deficit)          Equity
<S>                                         <C>           <C>        <C>              <C>
Balance, January 3, 1998                    $        -          -    $    142,581     $     143,548
  Change in par value of stock                       -          -             (49)                -
  Redemption of stock                                -        300        (350,301)         (351,000)
  Issuance of Class A common stock
   associated with the Recapitalization,
   net of issuance costs of $775               107,654          -               -           107,763
  Issuance of Class A common stock
   associated with Western Merger,
   net of issuance costs of $575               262,272          -               -           262,428
  Other                                            380     (1,832)              -            (1,451)
  Net loss                                           -          -          (2,182)           (2,182)
  Preferred dividend,
   $0.80 per share                                   -          -             (15)              (15)
                                            -------------------------------------------------------
Balance, January 2, 1999                       370,306     (1,532)       (209,966)          159,091
  Other                                           (907)     1,601            (503)              189
  Net loss                                           -          -         (25,326)          (25,326)
                                            -------------------------------------------------------
Balance, January 1, 2000                       369,399         69        (235,795)          133,954
Other                                            2,770        327            (341)            2,758
Net income                                           -          -          19,559            19,559
                                            -------------------------------------------------------
Balance, December 30, 2000                  $  372,169    $   396    $   (216,577)    $     156,271
                                            =======================================================
</TABLE>

               The accompanying notes to consolidated financial
             statements are an integral part of these statements.

                                      F-4
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                     Consolidated Statements of Cash Flows
                    For the Years Ended December 30, 2000,
                     January 1, 2000, and January 2, 1999
                            (dollars in thousands)

<TABLE>
<CAPTION>
                                                                                  2000         1999            1998
                                                                                --------     ---------       --------
<S>                                                                             <C>          <C>             <C>
Cash flows from operating activities:
  Net income (loss)                                                             $ 19,559     $ (25,326)      $ (2,182)
  Adjustments to reconcile net income (loss) to net cash
    provided by (used in) operating activities:
    Depreciation and amortization                                                 66,826        58,147         29,964
    Amortization of stock option compensation                                        729         1,082            695
    Amortization of deferred debt issuance costs                                   3,276         3,478          2,070
    Amortization of bond discount                                                  9,853         8,700          5,645
    Amortization of interest on capital lease obligation                              42           201              -
    Extraordinary gain on extinguishment of debt, net of tax                      (2,933)            -              -
    Net losses on sales of property and equipment                                    885           119            150
    Impairment of asset held for sale                                                856             -              -
    Sales of marketable securities                                                     -             -          2,025
    Provision (benefit) for deferred income taxes                                    683       (12,650)        (5,348)
    Restructuring charge                                                               -             -          6,774
    Net decrease (increase) in:
     Receivables, net                                                             19,676        (8,128)         4,295
     Inventories                                                                 (39,467)      (23,090)       (99,653)
     Other assets                                                                 14,921        (4,817)          (297)
    Net increase (decrease) in:
     Accounts payable                                                             46,664        (5,721)        55,329
     Accrued expenses                                                            (29,540)      (21,958)        35,718
     Other liabilities                                                            (8,079)        8,987          8,837
                                                                                --------     ---------       --------
      Net cash provided by (used in) operating activities                        103,951       (20,976)        44,022
                                                                                --------     ---------       --------
Cash flows from investing activities:
  Purchases of property and equipment                                            (70,566)     (105,017)       (65,790)
  Proceeds from sales of property and equipment and assets held for sale           5,626         3,130          6,073
  Western Merger, net of cash acquired                                                 -       (13,028)      (170,955)
  Other                                                                                -         1,091              -
                                                                                --------     ---------       --------
      Net cash used in investing activities                                      (64,940)     (113,824)      (230,672)
                                                                                --------     ---------       --------
Cash flows from financing activities:
  Increase (decrease) in bank overdrafts                                           1,884        (8,688)        13,434
  Net borrowings (repayments) under notes payable                                    784             -         (2,959)
  Proceeds from issuance of long-term debt                                             -             -         11,500
  Principal payments of long-term debt                                                 -             -       (102,667)
  Early extinguishment of debt                                                   (24,990)            -              -
  Borrowings under credit facilities                                             278,100       465,000        485,017
  Payments on credit facilities                                                 (306,100)     (339,500)             -
  Payment of debt issuance costs                                                       -          (972)       (23,374)
  Proceeds from issuance of Class A common stock, net of repurchases               1,602           423              -
  Proceeds from issuance of Class A common stock - Recapitalization                    -             -        105,148
  Payment for redemption of preferred and common stock - Recapitalization              -             -       (351,000)
  Proceeds from issuance of Class A common stock - Western Merger                      -             -         69,806
  Other                                                                            5,141         4,999          2,397
                                                                                --------     ---------       --------
      Net cash (used in) provided by financing activities                        (43,579)      121,262        207,302
                                                                                --------     ---------       --------
Net (decrease) increase in cash and cash equivalents                              (4,568)      (13,538)        20,652
Cash and cash equivalents, beginning of year                                      22,577        36,115         15,463
                                                                                --------     ---------       --------
Cash and cash equivalents, end of year                                          $ 18,009     $  22,577       $ 36,115
                                                                                ========     =========       ========
</TABLE>

          The accompanying notes to consolidated financial statements
                   are an integral part of these statements.

                                      F-5
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                        2000     1999       1998
                                                                                      --------  -------   --------
<S>                                                                                   <C>       <C>       <C>
Supplemental cash flow information:
   Interest paid                                                                      $ 51,831  $46,264   $ 23,639
   Income tax refunds (payments), net                                                    6,175   (3,792)    (3,129)
Noncash transactions:
   Conversion of capital lease obligation                                                3,509        -          -
   Accrued purchases of property and equipment                                           9,299      543          -
   Net issuances of common stock under stockholder subscription
     receivable plan                                                                       538    1,316          -
   Loans receivable related to issuance of common stock                                    402      344      2,527
   Appreciation of cancelled shares under stockholder
      subscription receivable plan                                                         341        -          -
   Debt issuance and acquisition costs accrued at January 2, 1999                            -        -      3,734
   Stock options issued for redemption of stock                                              -        -        300
   Issuance of common stock - Western Merger                                                 -        -    193,003
   Accrued Credit Card Liability - Western Merger                                            -        -     10,000
   Obligations under capital lease                                                           -    3,266          -
                                                                                      ========  =======   ========
</TABLE>

         The accompanying notes to consolidated financial statements
                   are an integral part of these statements.

                                      F-6
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)

1.    Description of Business:

Advance Holding Corporation and its Subsidiaries (the "Company") maintain two
operating segments within the United States, Puerto Rico and the Virgin Islands.
The Retail segment operates 1,728 retail stores under the "Advance Auto Parts"
and "Western Auto" trade names. The Advance Auto Parts stores offer automotive
replacement parts, accessories and maintenance items throughout the Eastern and
Midwest portions of the United States. The Western Auto stores, located in
Puerto Rico and the Virgin Islands, included in the Retail segment offer home
and garden merchandise in addition to automotive parts, accessories and service.
The Wholesale segment consists of the wholesale operations, including
distribution services to approximately 590 independent dealers located
throughout the United States, and one Company-owned store in California all
operating under the "Western Auto" trade name.

2.    Summary of Significant Accounting Policies:

Accounting Period

The Company's fiscal year ends on the Saturday nearest the end of December.

Principles of Consolidation

The consolidated financial statements include the accounts of Advance Holding
Corporation and its wholly owned subsidiaries. The Company also participates in
a joint venture in which it has less than a 50% ownership. The investment in the
joint venture is accounted for by the equity method. All significant
intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

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

Cash, Cash Equivalents and Bank Overdrafts

Cash and cash equivalents consist of cash in banks and money market funds. Bank
overdrafts include net outstanding checks not yet presented to a bank for
settlement.

Allowances

The Company receives cooperative advertising allowances, rebates and various
other incentives from vendors that are recorded as a reduction of cost of sales
or selling, general and administrative expenses when earned. Cooperative
advertising revenue is earned as advertising expenditures are incurred. Rebates
and other incentives are earned based on purchases. Amounts received or
receivable from vendors that are not yet earned are reflected as deferred
revenue in the accompanying consolidated balance sheets. Management's estimate
of the portion of deferred revenue that will be realized within one year of the
balance sheet date has been included in other current liabilities in the
accompanying consolidated balance sheets. Total deferred revenue is $26,994 and
$25,015 at December 30, 2000 and January 1, 2000, respectively.

                                      F-7
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)


Preopening Expenses

Preopening expenses, which consist primarily of payroll and occupancy costs, are
expensed as incurred.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising expense incurred
was approximately $53,658, $65,524, and $35,972 in fiscal 2000, 1999 and 1998,
respectively.

Warranty Costs

The Company's vendors are primarily responsible for warranty claims. Warranty
costs relating to merchandise and services sold under warranty, which are not
covered by vendors' warranties are estimated based on the Company's historical
experience and are recorded in the period the product is sold.

Revenue Recognition

The Company recognizes merchandise revenue at the point of sale to a retail
customer and point of shipment to a wholesale customer, while service revenue is
recognized upon performance of service. The majority of sales are made for cash;
however, the Company extends credit to certain commercial customers through a
third-party provider of private label credit cards. Receivables under the
private label credit card program are transferred to the third-party provider on
a limited recourse basis. The Company provides an allowance for doubtful
accounts on receivables sold with recourse based upon factors related to credit
risk of specific customers, historical trends and other information. Statement
of Financial Accounting Standards ("SFAS") No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishment of Liabilities," provides
that this arrangement be accounted for as a secured borrowing. Receivables under
the private label credit card and the related payable to the third-party
provider were $15,666 and $10,525 at December 30, 2000 and January 1, 2000,
respectively.

Change in Accounting Estimate

In July of fiscal 2000, the Company adopted a change in an accounting estimate
to reduce the depreciable lives of certain property and equipment on a
prospective basis. The effect on operations for fiscal 2000 was to increase
depreciation expense by $2,458. The Company expects to discontinue the
operations of the effected assets by the third quarter of fiscal 2001, at which
time they will be fully depreciated under the reduced useful lives.

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities". This
Statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts (collectively referred to as derivatives) and for hedging activities.
It requires companies to recognize all derivatives as either assets or
liabilities in their statement of financial position and measure those
instruments at fair value. In September 1999, the FASB issued SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement No. 133," which delayed the effective date of
SFAS No. 133 to fiscal years beginning after June 15, 2000. In June 2000, the
FASB issued SFAS No. 138, "Accounting for Derivative Instruments and Certain
Hedging - an Amendment of SFAS No. 133," which amended the accounting and
reporting standards for certain risks related to normal purchases and sales,
interest and foreign currency transactions addressed by SFAS No. 133. The
Company adopted SFAS No. 133 on December 31, 2000 with no material impact on its
financial position or the results of its operations.

                                      F-8
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)


In September 2000, the FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing Financial Assets and Extinguishment of Liabilities". This statement
replaces SFAS No. 125, but carries over most of the provisions of SFAS No. 125
without reconsideration. Management is currently analyzing the impact of
adopting SFAS No. 140, which will become effective for first quarter of fiscal
2001.

Reclassifications

Certain items in the fiscal 1999 and fiscal 1998 financial statements have been
reclassified to conform with the fiscal 2000 presentation.

3.   Restructuring Charges:

The Company's restructuring activities relate to the ongoing analysis of the
profitability of store locations and the settlement of restructuring activities
undertaken and assumed as a result of the Western Merger (see Note 16). The
Company recognizes a provision for future obligations at the time a decision is
made to close a facility, primarily store locations. The provision for closed
facilities includes the present value of the remaining lease obligations,
reduced by the present value of estimated revenues from subleases, and
management's estimate of future costs of insurance, property tax and common area
maintenance. The Company uses discount rates ranging from 6.5% to 7.7%.

During fiscal 2000, the Company closed five stores included in the fiscal 1999
restructuring activities and made the decision to close or relocate 25
additional stores not meeting profitability objectives, of which 20 have been
closed as of December 30, 2000.

A reconciliation of activity with respect to these restructuring accruals is as
follows:


                                                                     Other
                                                                     Exit
                                                       Severance     Costs
                                                       ---------    ------


        Restructuring reserves assumed
         in Western Merger                             $   1,092    $ 8,569
        Restructuring provision for Advance store
         exit costs and fixed asset write-downs                -      6,774
        Reserves utilized                                   (410)      (570)
                                                      ----------   --------
        Balance, January 2, 1999                       $     682    $14,773
        New provisions                                         -      1,307
        Change in estimates                                    -     (1,249)
        Reserves utilized                                   (664)    (4,868)
                                                      ----------   --------
        Balance, January 1, 2000                       $      18    $ 9,963
        New provisions                                         -      1,768
        Change in estimates                                    -        (95)
        Reserves utilized                                    (18)    (4,848)
                                                      ----------   --------
        Balance, December 30, 2000                     $       -    $ 6,788
                                                      ==========   ========


Other exit cost liabilities will be settled over the remaining terms of the
underlying lease agreements.

                                      F-9
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
              (dollars in thousands, except per share data)

As a result of Western Merger, the Company established restructuring reserves in
connection with the decision to close certain Parts America stores, to relocate
certain Western administrative functions, to exit certain facility leases and to
terminate certain employees of Western. As of December 30, 2000, all employees
have been terminated and all leased stores have been closed.

A reconciliation of activity with respect to these restructuring accruals is as
follows:
                                                                        Other
                                                                        Exit
                                                Severance  Relocation   Costs
                                                ---------  ----------  ------
       Recognized as liabilities assumed
        in purchase accounting and
        included in purchase price
        allocation                              $  8,000    $   970    $ 14,384
       Reserves utilized                            (262)      (132)       (652)
                                                --------    -------    --------
       Balance at January 2, 1999               $  7,738    $   838    $ 13,732
       Purchase accounting adjustments             3,630       (137)     (1,833)
       Reserves utilized                          (7,858)      (701)     (4,074)
                                                --------    -------    --------
       Balance at January 1, 2000               $  3,510    $     -    $  7,825
       Purchase accounting adjustments                 -          -      (1,261)
       Reserves utilized                          (3,510)         -      (2,767)
                                                --------    -------    --------
       Balance at December 30, 2000             $      -    $     -    $  3,797
                                                ========    =======    ========



Other exit cost liabilities will be settled over the remaining terms of the
underlying lease agreements.

4.   Receivables:

Receivables consist of the following:


                                                   December 30, January 1,
                                                      2000         2000
                                                   ------------ -----------
     Trade:
       Wholesale                                   $   12,202   $   22,221
       Retail                                          15,666       10,525
     Vendor                                            36,260       50,208
     Installment (Note 18)                             14,197       13,616
     Related parties                                    3,540        6,647
     Employees                                            607          552
     Other                                              3,127        3,481
                                                   ----------   ----------
     Total receivables                                 85,599      107,250
     Less:  Allowance for doubtful accounts            (5,021)      (6,927)
                                                   ----------   ----------
     Receivables, net                              $   80,578   $  100,323
                                                   ==========   ==========

                                      F-10
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)



5.   Inventories

Inventories are stated at the lower of cost or market. Cost is determined using
the last-in, first-out ("LIFO") method for approximately 90% and 89% of
inventories at December 30, 2000 and January 1, 2000, respectively, and the
first-in, first-out ("FIFO") method for remaining inventories. The Company
capitalizes certain purchasing and warehousing costs into inventory. Purchasing
and warehousing costs included in inventory, at FIFO, at December 30, 2000 and
January 1, 2000, were $56,305 and $49,252, respectively. Inventories consist of
the following:

                                                       December 30,  January 1,
                                                          2000          2000
                                                       ------------  ----------
     Inventories at FIFO                                $ 779,376    $ 735,762
     Adjustments to state inventories at LIFO               9,538       13,685
                                                        -----------  ----------
     Inventories at LIFO                                $ 788,914    $ 749,447
                                                        ===========  ==========


Replacement cost approximated FIFO cost at December 30, 2000 and January 1,
2000.

6.   Property and Equipment:

Property and equipment are stated at cost, less accumulated depreciation and
amortization. Expenditures for maintenance and repairs are charged directly to
expense when incurred; major improvements are capitalized. When items are sold
or retired, the related cost and accumulated depreciation are removed from the
accounts, with any gain or loss reflected in the consolidated statements of
operations.

Depreciation of land improvements, buildings, furniture, fixtures and equipment,
and vehicles is provided over the estimated useful lives, which range from 2 to
40 years, of the respective assets using the straight-line method. Amortization
of building and leasehold improvements is provided over the shorter of the
estimated useful lives of the respective assets or the term of the lease using
the straight-line method.

Property and equipment consists of the following:

<TABLE>
<CAPTION>
                                                                 Estimated          December 30,         January 1,
                                                                 Useful Lives          2000                2000
                                                                 ------------       ------------         ----------
<S>                                                              <C>                <C>                  <C>
     Land and land improvements                                   0 - 10 years      $   40,371           $  40,927
     Buildings                                                        40 years          79,109              70,788
     Building and leasehold improvements                         10 - 40 years          84,658              76,605
     Furniture, fixtures and equipment                            3 - 12 years         357,642             331,238
     Vehicles                                                     2 - 10 years          30,506              27,555
     Other                                                                              10,571               2,010
                                                                                    ------------         -----------
                                                                                       602,857             549,123
     Less - Accumulated depreciation and amortization                                 (191,897)           (146,647)
                                                                                    ------------         -----------
     Property and equipment, net                                                    $  410,960           $ 402,476
                                                                                    ============         ===========
</TABLE>

                                      F-11
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)

Effective January 3, 1999, the Company adopted the American Institute of
Certified Public Accountant's Statement of Position ("SOP") 98-1, "Accounting
for the Cost of Computer Software Developed or Obtained for Internal Use". The
SOP requires companies to capitalize certain expenditures related to development
of or obtaining computer software for internal use. The adoption of the SOP
resulted in the Company capitalizing approximately $9,400 and $561 in costs
incurred during fiscal 2000 and fiscal 1999, respectively.

7.   Assets Held for Sale

The Company applies SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," which requires that
long-lived assets and certain identifiable intangible assets to be disposed of
be reported at the lower of the carrying amount or the fair market value less
selling costs. As of December 30, 2000 and January 1, 2000, the Company's assets
held for sale primarily consist of real property acquired in the Western Merger
of $25,077 and $29,694, respectively.

During fiscal 2000, the Company recorded an impairment of the value assigned to
a property held in the Wholesale segment. This facility consisted of excess
space not required by the Company's current needs, therefore, leading to the
Company's decision to dispose. The Company expects to dispose of this property
during fiscal 2001. The impairment charge of $856, included in operating income,
reduced the carrying value of the property to approximately $8,000.

8.   Other Assets:

As of December 30, 2000 and January 1, 2000, other assets include deferred debt
issuance costs of $14,843 and $18,886, respectively (net of accumulated
amortization of $8,232 and $5,261, respectively), relating to the
Recapitalization (Note 15) and the Western Merger (Note 16). Such costs are
being amortized over the term of the related debt (6 years to 11 years). Other
assets also include the non-current portion of deferred income tax assets (Note
13).

                                      F-12
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)


9.   Accrued Expenses:

Accrued expenses consist of the following:

                                                December 30,      January 1,
                                                    2000             2000
                                                ------------      ----------
     Payroll and related benefits               $    25,507       $  32,682
     Restructuring                                    3,772           8,238
     Warranty                                        18,962          19,780
     Other                                           76,721          85,324
                                                ------------      ----------
     Total accrued expenses                     $   124,962       $ 146,024
                                                ============      ==========


10.  Other Long-Term Liabilities:

Other long-term liabilities consist of the following:

                                                  December 30,      January 1,
                                                     2000             2000
                                                  ------------      ----------
     Other employee benefits                      $   24,625        $  26,587
     Restructuring                                     6,813           13,078
     Other                                            12,495           11,582
                                                  ------------      ----------
     Total other long-term liabilities            $   43,933        $  51,247
                                                  ============      ==========

                                      F-13
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
              (dollars in thousands, except per share data)



11.  Long-term Debt:

Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                       December 30,     January 1,
                                                                          2000             2000
                                                                       ------------     ----------
<S>                                                                    <C>              <C>
Senior Debt:
 Deferred term loan at variable interest
  rates (9.25% at December 30, 2000), due April 2004                   $  90,000        $  90,000
 Delayed draw facilities at variable interest rates,
  (8.47% at December 30, 2000), due April 2004                            94,000           70,000
 Revolving facility at variable interest rates
  (8.50% at December 30, 2000), due April 2004                            15,000           66,000
 Tranche B facility at variable interest rates
  (9.19% at December 30, 2000), due April 2006                           123,500          124,500
 McDuffie County Authority taxable industrial development
  revenue bonds, issued December 31, 1997, interest due
  monthly at an adjustable rate established by
  the Remarketing Agent (6.90% at December 30, 2000),
  principal due on November 1, 2002                                       10,000           10,000
 Capital lease obligation                                                      -            3,467
 Other                                                                       784                -
Subordinated debt:
 Subordinated notes payable, interest due semi-annually
  at 10.25%, due April 2008                                              169,450          200,000
 Discount debentures, interest at 12.875%, due April 2009,
  face amount of $112,000 less unamortized discount of
  $27,785 and $37,638 at December 30, 2000 and January 1,
  2000, respectively (subordinate to substantialy all
  other liabilities)                                                      84,215           74,362
                                                                       ---------        ---------
   Total long-term debt                                                  586,949          638,329
Less: Current portion of long-term debt                                   (7,028)          (3,665)
                                                                       ---------        ---------
Long-term debt, excluding current portion                              $ 579,921       $  634,664
                                                                      ==========       ==========
</TABLE>


Senior Debt:

The deferred term loan, delayed draw facilities, revolving facility and Tranche
B facility ("Credit Facility") are with a syndicate of banks. The Credit
Facility provides for the Company to borrow up to $462,500 (net of scheduled
principal payments through December 30, 2000) in the form of senior secured
credit facilities, consisting of (i) $90,000 senior secured deferred term loan,
(ii) $49,000 senior secured delayed draw term loan facility (the "Delayed Draw
Facility I"), (iii) $75,000 senior secured delayed draw term loan facility (the
"Delayed Draw Facility II") and, together with the Delayed Draw Facility I, (the
"Delayed Draw Facilities"), (iv) a $123,500 Tranche B senior secured term loan
facility (the "Tranche B Facility"), and (v) a $125,000 senior secured revolving
credit facility (the "Revolving Facility"). The Revolving Facility has a letter
of credit sub-limit of $25,000, of which $11,910 was outstanding for stand-by
letters of credit as of December 30, 2000. Amounts available under the revolver,
delayed draw term and deferred term loans are subject to a borrowing base
formula, which is based on certain percentages of the Company's inventories and
certain debt covenants. As of December 30, 2000, $118,300 was available under
these facilities.

                                      F-14
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)


Borrowings under the Credit Facility are required to be prepaid, subject to
certain exceptions, with (a) 50% of the Excess Cash Flow (as defined), (b) the
net cash proceeds of all asset sales or other dispositions of property (as
defined), (c) the net proceeds of issuances of debt obligations and (d) the net
proceeds of issuance of equity securities. Excess Cash Flow is defined as the
excess of (A) the sum of Advance Stores Company, Incorporated's ("Stores"), a
wholly owned subsidiary, (i) consolidated net income (excluding certain gains
and losses and restricted payments made to its parent), (ii) depreciation,
amortization and other noncash charges, (iii) any decrease in Net Working
Capital (as defined), (iv) increases in the deferred revenues, and (v) proceeds
of certain indebtedness incurred, less (B) the sum of (a) any noncash gains, (b)
any increases in Net Working Capital, (c) decreases in consolidated deferred
revenues, (d) capital expenditures and (e) repayments of indebtedness (subject
to certain exceptions). The Company was not required to make an Excess Cash Flow
prepayment for fiscal 1999 but will make a $6,244 mandatory prepayment for
fiscal 2000 in fiscal 2001.

The interest rates under the delayed draw facilities and the revolver are
determined by reference to a pricing grid that provides for reductions in the
applicable interest rate margins based on the Company's trailing total debt to
EBITDA ratio (as defined in the Credit Facility). Based upon the Company's
operating ratios at December 30, 2000, the margins were 1.75% and 0.75% for
Eurodollar and base rate borrowings, respectively. Additionally, at December 30,
2000, the margin under the Tranche B term loan and the deferred term loan
facility was 2.50% on a Eurodollar rate and 1.50% on the base rate borrowings. A
commitment fee of 0.50% per annum is charged on the unused portion of the Credit
Facility.

The Credit Facility is secured by all assets of the Company and contains
covenants restricting the ability of the Company and its subsidiaries to, among
others, (i) declare dividends or redeem or repurchase capital stock, (ii) make
loans and investments and (iii) engage in transactions with affiliates or the
Company to change its passive holding company status. The Company is required to
comply with financial covenants with respect to (a) a maximum leverage ratio,
(b) a minimum interest coverage ratio, (c) a minimum retained cash earnings test
and (d) maximum limits on capital expenditures.

On December 31, 1997, the Company entered into an agreement with McDuffie County
Authority under which bond proceeds of $10,000 were issued to construct a
distribution center. Proceeds of the bond offering were fully expended during
fiscal 1999. These industrial development revenue bonds currently bear interest
at a variable rate, with a one-time option to convert to a fixed rate, and are
secured by a letter of credit.

Subordinated Debt:

The $169,450 Senior Subordinated Notes (the "Notes") are unsecured and are
subordinate in right of payment to all existing and future Senior Debt. The
Notes are redeemable at the option of the Company, in whole or in part, at any
time on or after April 15, 2003. In addition, at any time prior to April 15,
2001, the Company may redeem up to 35% of the initially outstanding aggregate
principal amount of the Notes at a redemption price equal to 110.25% of the
principal amount thereof, plus accrued and unpaid interest and liquidated
damages, if any, thereon to the date of redemption, with the net proceeds of one
or more equity offerings; provided that, in each case, at least 65% of the
initially outstanding aggregate principal amount of the Notes remains
outstanding immediately after the occurrence of any such redemption; and
provided further, that such redemption shall occur within 90 days of the date of
the closing of such equity offering.

Upon the occurrence of a change of control, each holder of the Notes will have
the right to require the Company to repurchase all or any part of such holder's
Notes at an offering price in cash equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest and liquidated damages, if any,
thereon to the date of purchase.

The Notes contain various non-financial restrictive covenants that limit, among
other things, the ability of the Company and its subsidiaries to issue preferred
stock, repurchase stock and incur certain indebtedness, engage in transactions
with affiliates, pay dividends or certain other distributions, make certain
investments and sell stock of subsidiaries.

                                      F-15
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)



During fiscal 2000, the Company repurchased on the open market $30,550 face
value of Notes at a price ranging from 81.5 to 82.5 percent of their face value.
Accordingly, the Company recorded a gain related to the extinguishment of this
debt of $2,933, net of $1,759 provided for income taxes and $868 for the write
off of the associated deferred debt issuance costs.

The Senior Discount Debentures (the "Debentures") accrue at a rate of 12.875%,
compounded semi-annually, to an aggregate principal amount of $112,000 by April
15, 2003. Cash interest will not accrue on the Debentures prior to April 15,
2003. Commencing April 15, 2003, cash interest on the Debentures will accrue and
be payable, at a rate of 12.875% per annum, semi-annually in arrears on each
April 15 and October 15. As of December 30, 2000, the Debentures have been
accreted by $24,198 with corresponding interest expense of $9,853, $8,700 and
$5,645 recognized for the years ended December 30, 2000, January 1, 2000 and
January 2, 1999, respectively.

The Debentures are redeemable at the option of the Company, in whole or in part,
at any time on or after April 15, 2003. In addition, at any time prior to April
15, 2001 the Company may, at its option, redeem up to 35% of the aggregate
principal amount at maturity of the Debentures originally issued at a redemption
price equal to 112.875% of the accreted value thereof, plus liquidated damages,
if any, with the net cash proceeds of one or more equity offerings; provided
that at least 65% of the original aggregate principal amount at maturity of the
Debentures will remain outstanding immediately following each such redemption.

Upon the occurrence of a change of control, each holder of the Debentures will
have the right to require the Company to purchase the Debentures at a price in
cash equal to 101% of the accreted value thereof plus liquidated damages, if
any, thereon in the case of any such purchase prior to April 15, 2003, or 101%
of the aggregate principal amount thereof, plus accrued and unpaid interest and
liquidated damages, if any, thereon to the date of purchase in the case of any
such purchase on or after April 15, 2003. As the Company may not have any
significant assets other than capital stock of Stores (which is pledged to
secure the Company's obligations under the Credit Facility), the Company's
ability to purchase all or any part of the Debentures upon the occurrence of a
change in control will be dependent upon the receipt of dividends or other
distributions from Stores or its subsidiaries. The Credit Facility and the
Senior Subordinated Notes have certain restrictions for Stores with respect to
paying dividends and making any other distributions.

The Debentures are subordinated to substantially all of the Company's other
liabilities. The Debentures contain certain non-financial restrictive covenants
that are similar to the covenants contained in the Notes.

As of December 30, 2000, the Company was in compliance with the covenants of the
Credit Facility, the Notes and Debentures. Substantially all of the net assets
of the Company's subsidiaries are restricted at December 30, 2000.

The aggregate future annual maturities of long-term debt, net of the unamortized
discount related to the Debentures, are as follows:

2001                  $   7,028
2002                     14,000
2003                      4,000
2004                    219,668
2005                     60,000
Thereafter              282,253
                      ---------
                      $ 586,949
                      =========

                                      F-16
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)




12.  Stockholder Subscription Receivables:

As a result of the Recapitalization (See Note 15) the Company established a
stock subscription plan which allows certain directors, officers and key
employees of the Company to purchase shares of Class A common stock. The plan
requires that the purchase price of the stock equal the fair market value at the
time of the purchase and allows fifty percent of the purchase price be executed
through the delivery of a full recourse promissory note. The notes provide for
annual interest payments, at the prime rate, with the entire principal amount
due in five years. As of December 30, 2000 and January 1, 2000, outstanding
stockholder subscription receivables were $2,364 and $2,008, respectively, and
are included as a reduction to Stockholders' equity in the accompanying
consolidated balance sheets.

                                      F-17
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)


13.  Income Taxes:

Provision (benefit) for income taxes for fiscal 2000, fiscal 1999 and fiscal
1998 consists of the following:

                                 Current      Deferred         Total
                                 -------      --------         -----
     2000-
      Federal                    $  8,005     $    976       $  8,981
      State                         1,847         (293)         1,554
                                 --------     --------       --------
                                 $  9,852     $    683       $ 10,535
                                 ========     ========       ========
     1999-
      Federal                    $ (1,913)    $ (6,535)      $ (8,448)
      State                         1,979       (6,115)        (4,136)
                                 --------     --------       --------
                                 $     66     $(12,650)      $(12,584)
                                 ========     ========       ========
     1998-
      Federal                    $  3,845     $ (4,528)      $   (683)
      State                         1,419         (820)           599
                                 --------     --------       --------
                                 $  5,264     $ (5,348)      $    (84)
                                 ========     ========       ========




The provision (benefit) for income taxes differed from the amount computed by
applying the federal statutory income tax rate due to:

                                                      2000     1999     1998
                                                    -------  --------  -------
     Pre-tax income (loss) at statutory U.S.
       federal income tax rate                     $   9,507 $(13,269) $  (793)
     State income taxes, net of federal
       income tax benefit                                896   (2,688)     389
     Non-deductible interest & other expenses          1,010    1,125      609
     Changes in certain tax accounting methods             -        -     (366)
     Valuation allowance                                 914      596        -
     Puerto Rico dividend withholding tax                  -      150      120
     Other, net                                       (1,792)   1,502      (43)
                                                    -------- --------  -------
                                                    $ 10,535 $(12,584) $   (84)
                                                    ======== ========  =======


Deferred income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each period-end, based on enacted tax laws and statutory
income tax rates applicable to the periods in which the differences are expected
to affect taxable income. Deferred income taxes reflect the net income tax
effect of temporary differences between the base of assets and liabilities for
financial reporting purposes and for income tax reporting purposes. Net deferred
income tax balances are comprised of the following:

                                      F-18
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)



                                                       December 30, January 1,
                                                          2000         2000
                                                       ------------ ----------
     Deferred income tax assets                        $   57,378   $   65,572
     Deferred income tax liabilities                      (62,121)     (54,731)
                                                       ------------ ----------
     Net deferred income tax (liabilities) assets      $   (4,743)  $   10,841
                                                       ============ ==========

Net deferred income tax assets of $8,792 were recorded in the purchase price
allocation of Western.

The Company incurred financial reporting and tax losses in 1999 primarily due to
integration and interest costs incurred as a result of the Western Merger and
the Recapitalization (See Notes 15 and 16). As of December 30, 2000, the Company
has cumulative net deferred income tax liabilities of $4,743. The gross deferred
income tax assets include federal and state net operating loss carryforwards
("NOLs") of approximately $16,931. These NOLs may be used to reduce future
taxable income and expire periodically through fiscal year 2020. The Company
believes it will realize these tax benefits through a combination of the
reversal of temporary differences, projected future taxable income during the
NOL carryforward periods and available tax planning strategies. Due to
uncertainties related to the realization of certain deferred tax assets for NOLs
in various jurisdictions, the Company recorded a valuation allowance of $1,510
as of December 30, 2000 and $596 as of January 1, 2000. The amount of deferred
income tax assets realizable, however, could change in the near future if
estimates of future taxable income are changed.

Temporary differences which give rise to significant deferred income tax assets
(liabilities) are as follows:

<TABLE>
<CAPTION>
                                                                       December 30,      January 1,
                                                                          2000             2000
                                                                       ------------      ----------
<S>                                                                    <C>               <C>
     Current deferred income taxes-
       Inventory valuation differences                                 $  (36,051)       $ (30,708)
       Accrued medical and workers compensation                             2,319            2,462
       Accrued expenses not currently deductible for tax                   16,391           26,778
       Net operating loss carryforwards                                     7,124            4,000
                                                                       ----------        ---------
       Total current deferred income taxes                             $  (10,217)       $   2,532
                                                                       ==========        =========
     Long-term deferred income taxes-
       Property and equipment                                             (24,571)         (24,023)
       Postretirement benefit obligation                                    8,254            8,580
       Amortization of bond discount                                        8,184            4,861
       Net operating loss carryforwards                                     9,807           18,140
       Minimum tax credit carryforward (no expiration)                      6,809                -
       Valuation allowance                                                 (1,510)            (596)
       Other, net                                                          (1,499)           1,347
                                                                       ----------        ---------
       Total long-term deferred income taxes                           $    5,474        $   8,309
                                                                       ==========        =========
</TABLE>


The Company currently has four years that are open to audit by the Internal
Revenue Service. In addition, various state and foreign income and franchise tax
returns for several years are open to audit. In management's opinion, adequate
reserves have been established and any amounts assessed will not have a material
effect on the Company's financial position or results of operations.

                                      F-19
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)

14.  Lease Commitments:

The Company leases store locations, distribution centers, office space,
equipment and vehicles under lease arrangements, some of which are with related
parties.

At December 30, 2000, future minimum lease payments due under non-cancelable
operating leases are as follows:

                                     Related

                            Other (a)         Parties (a)        Total
                            ---------         -----------        -------
     2001                   $115,628          $   3,688         $119,316
     2002                    107,908              3,688          111,596
     2003                     97,119              3,496          100,615
     2004                     84,711              2,536           87,247
     2005                     76,686              2,239           78,925
     Thereafter              228,300              2,211          230,511
                            --------          ---------         --------
                            $710,355          $  17,858         $728,213
                            ========          =========         ========


     (a)The Other and Related Parties columns include stores closed as a
        result of the Company's restructuring plans (See Note 3).

At December 30, 2000, future minimum sub-lease income to be received under
non-cancelable operating leases is $10,152.

Net rent expense for fiscal 2000, fiscal 1999 and fiscal 1998 was as follows:

                                         2000          1999        1998
                                      ----------    ----------  ---------
     Minimum facility rentals         $  112,768    $  103,807  $  63,787
     Contingent facility rentals           1,391         2,086        718
     Equipment rentals                     1,875         3,831      1,804
     Vehicle rentals                       6,709         4,281      2,391
                                      ----------    ----------  ---------
                                         122,743       114,005     68,700
     Less:  Sub-lease income              (1,747)       (1,085)      (426)
                                      ----------    ----------  ---------
                                      $  120,996    $  112,920  $  68,274
                                      ==========    ==========  =========



Contingent facility rentals are determined on the basis of a percentage of sales
in excess of stipulated minimums for certain store facilities. Most of the
leases provide that the Company pay taxes, maintenance, insurance and certain
other expenses applicable to the leased premises and include options to renew.
Certain leases contain rent escalation clauses, which are recorded on a
straight-line basis. Management expects that, in the normal course of business,
leases that expire will be renewed or replaced by other leases. Rental payments
to related parties of approximately $3,921 in fiscal 2000, $3,998 in fiscal 1999
and $2,984 in fiscal 1998 are included in net rent expense.

                                      F-20
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)


15.  Recapitalization:

On April 15, 1998, the Company consummated its recapitalization pursuant to an
Agreement and Plan of Merger dated March 4, 1998 (the "Merger Agreement"). In
connection with the Merger Agreement, the Company's Board of Directors
authorized a 12,500 to 1 split of the common stock and a change in the par value
of the common stock from $100 to $.01 per share.

Pursuant to the Merger Agreement, AHC Corporation ("AHC"), a corporation
controlled by an investment fund organized by Freeman Spogli & Co. Incorporated
("FS&Co."), merged into the Company (the "Merger"), with the Company as the
surviving corporation. In the Merger, a portion of the common stock and all of
the preferred stock of the Company were converted into the right to receive in
the aggregate approximately $351,000 in cash and certain stock options (See Note
23). Certain shares representing approximately 14% of the outstanding Class A
common stock remained outstanding upon consummation of the Merger. Immediately
prior to the Merger, FS&Co. purchased approximately $80,500 of the common stock
of AHC which was converted in the Merger into approximately 64% of the Company's
outstanding common stock and Ripplewood Partners, L.P. and its affiliates
("Ripplewood") purchased approximately $20,000 of the common stock of AHC which
was converted in the Merger into approximately 16% of the Company's outstanding
common stock. In connection with the Merger, management purchased approximately
$8,000, or approximately 6%, of the Company's outstanding common stock, a
portion of which resulted in stockholder subscription receivables.

The Merger, the retirement of certain notes payable and long-term debt,
borrowings under the Credit Facility, the issuance of the Debentures and the
issuance of the Notes collectively represent the "Recapitalization". The Company
has accounted for the Recapitalization for financial reporting purposes as the
sale of common stock, the issuance of debt, the redemption of common and
preferred stock and the repayment of notes payable and long-term debt.

16.   Western Merger:

On November 2, 1998, the Company consummated a Plan of Merger (the "Western
Merger") with Sears, Roebuck and Co. ("Sears"), to acquire Western (Western Auto
Supply Company), for $175,000 in cash and 11,474,606 shares of the Company's
common stock. Additionally, the Company agreed to share losses incurred by Sears
as a result of the sale, or as a result of continuing the private label credit
card programs up to a maximum of $10,000 ("Credit Card Liability"). The Company
recorded the $10,000, which was paid in fiscal 1999, as additional purchase
price. In connection with the transaction, the Company sold 4,161,712 shares of
common stock to certain stockholders for $70,000 and the Company borrowed
$90,000 under a new deferred term loan facility. The remainder of the $175,000
was funded through cash on hand. As of the transaction date, Sears owned
approximately 40.6% of the Company's issued and outstanding common stock.

The Western Merger has been accounted for under the purchase method of
accounting. Accordingly, the results of operations of Western for the periods
from November 2, 1998 are included in the accompanying consolidated financial
statements. The purchase price has been allocated to assets acquired and
liabilities assumed based on their respective fair values. The final purchase
price allocation resulted in total excess fair value over the purchase price of
$4,667 and was allocated to non-current assets, primarily property and
equipment.

                                      F-21
<PAGE>


                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)


17.  Stockholders' Agreement:

A former owner of the Company and a trust established for the founder of the
Company (the "Continuing Stockholders"), WA Holding Co. ("WAH"), a subsidiary of
Sears, and the Company have entered into a Stockholders' Agreement (the
"Stockholders' Agreement"). Under the Stockholders' Agreement, the Continuing
Stockholders and WAH have the right to purchase their pro rata share of certain
new issuances of common stock as well as the right to participate pro rata in
any sale of common stock by a stockholder. Sales of common stock by the Chairman
of the Board, an affiliated trust and Ripplewood are subject to a right of first
offer in favor of FS&Co. and Sears through April 2001. The Stockholders'
Agreement provides Ripplewood, the Chairman of the Board and an affiliated trust
with tag-along rights in the event of sales by FS&Co. or WAH. If FS&Co. sells
all of its common stock, Ripplewood, the Chairman of the Board and an affiliated
trust will be obligated to sell all of their shares of common stock at the
request of FS&Co.

The Stockholders' Agreement further provides that FS&Co., WAH and Ripplewood
will have defined levels of representation on the Board of Directors. Ripplewood
has granted FS&Co. an irrevocable proxy to vote Ripplewood's common stock on all
matters, expiring upon an initial public offering. Pursuant to the Stockholders'
Agreement, the existing Chairman of the Board has certain approval rights with
respect to major corporate transactions.

18.  Installment Sales Program:

A subsidiary of the Company maintains an in-house finance program, which offers
financing to retail customers. Finance charges of $3,063, $2,662 and $376 on the
installment sales program are included in net sales in the accompanying
consolidated statements of operations for the years ended December 30, 2000,
January 1, 2000 and January 2, 1999, respectively. The cost of administering the
installment sales program is included in selling, general and administrative
expenses as a cost of operations.

19.  Subsequent Event:

Subsequent to December 30, 2000 but prior to this filing, the Company signed a
definitive agreement to purchase certain assets of Carport Auto Parts, Inc.
("Carport"). Carport operates 51 automotive retail part stores in Alabama and
Mississippi, which carry products similar to those offered in the Advance Auto
Parts stores of the Retail segment. The Company plans to account for the
acquisition under the purchase method of accounting.

20.  Contingencies:

In the case of all known contingencies, the Company accrues for an obligation
when it is probable and the amount is reasonably estimable. As facts concerning
contingencies become known to the Company, the Company reassesses its position
both with respect to gain contingencies and accrued liabilities and other
potential exposures. Estimates that are particularly sensitive to future change
include tax and legal matters, which are subject to change as events evolve and
as additional information becomes available during the administrative and
litigation process.

                                      F-22
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)


In October 2000, a vendor repudiated a long-term purchase agreement entered into
with the Company in January 2000. The Company filed suit against the vendor in
November of fiscal 2000. While legal remedies were being pursued, an interim
agreement was entered into to ensure the continuous supply of products. In its
suit, the Company attempted to recover monetary damages for the increased costs
charged by the vendor under the interim agreement, the increased costs to
acquire product from other sources, plus any consequential damages. Based on
consultation with the Company's legal counsel, management believed the purchase
agreement was entered into in good faith and it was highly probable that the
Company would prevail in its suit. Therefore, the Company recorded a gain of
$3,300, which represented actual damages incurred through December 30, 2000, as
a reduction of cost of sales in the accompanying statements of operations.
Related income taxes and legal fees of $1,300 were also recorded in the
accompanying consolidated statement of operations for the year ended December
30, 2000. On March 23, 2001, the Company agreed to a cash settlement of $16,600
from the vendor. The remainder of the cash settlement over the originally
recorded gain, less higher product costs incurred under the interim supply
agreement, related legal expenses and taxes, will be recognized during first
quarter of fiscal 2001.

In March 2000, the Company was notified it has been named in a lawsuit filed on
behalf of independent retailers and jobbers against the Company and others for
various claims under the Robinson-Patman Act. The suit is in preliminary stages.
The Company believes these claims are without merit and intends to defend them
vigorously; however, the ultimate outcome of this matter can not be ascertained
at this time.

In January 1999, the Company was notified by the United States Environmental
Protection Agency ("EPA") that Western Auto may have potential liability under
the Comprehensive Environmental Response Compensation and Liability Act relating
to two battery salvage and recycling sites that were in operation in the 1970's
and 1980's. The EPA has indicated the total cleanup for this site will be
approximately $1,600. Management is continuing their investigation of the EPA
notification. An estimate of the range of liability is not reasonably possible
until technical studies are sufficiently completed and the amount of potential
indemnification from Sears, if any, is further investigated. The ultimate
exposure will also depend upon the participation of other parties named in the
notification who are believed to share in responsibility. The Company believes
the claim could be settled for an amount not material to the Company's financial
position or results of operations.

Sears has agreed to indemnify the Company for certain litigation and
environmental matters of Western that existed as of the Western Merger date. The
Company has recorded a receivable from Sears of approximately $2,685, which is
included in the fair value of Western's assets (Note 16), relating to certain
environmental matters that had been accrued by Western as of the Western Merger
date. As of the Western Merger date, Sears has agreed to partially indemnify the
Company for up to 5 years for certain additional environmental matters that may
arise relating to the period prior to the Western Merger. The Company's maximum
exposure during the indemnification period for certain matters covered in the
Western Merger agreement is $3,750.

In November 1997 a plaintiff, on behalf of himself and others similarly
situated, filed a class action complaint and motion of class certification
against the Company in the circuit court for Jefferson County, Tennessee,
alleging misconduct in the sale of automobile batteries. The complaint seeks
compensatory and punitive damages. The Company believes it has no liability for
such claims and intends to defend them vigorously. In addition, three lawsuits
were filed against the Company on July 28, 1998, for wrongful death relating to
an automobile accident involving an employee of the Company. The Company
believes the financial exposure is covered by insurance.

The Company is also involved in various other claims and lawsuits arising in the
normal course of business. The damages claimed against the Company in some of
these proceedings are substantial. Although the final outcome of these legal
matters cannot be determined, based on the facts presently known, it is
management's opinion that the final outcome of such claims and lawsuits will not
have a material adverse effect on the Company's financial position or results of
operations.

The Company has certain periods open to examination by taxing authorities in
various states for sales and use tax. In management's opinion, adequate reserves
have been established and any amounts assessed will not have a material effect
on the Company's financial position or results of operations.

                                      F-23
<PAGE>

                   Advance Holding Corporation Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)

The Company is self-insured with respect to workers' compensation and health
care claims for eligible active employees. The Company maintains certain levels
of stop-loss insurance coverage for these claims through an independent
insurance provider. The cost of workers' compensation and general health care
claims is accrued based on actual claims reported plus an estimate for claims
incurred but not reported. These estimates are based on historical information
along with certain assumptions about future events, and are subject to change as
additional information comes available.

The Company has entered into employment agreements with certain employees that
provide severance pay benefits under certain circumstances after a change in
control of the Company or upon termination by the Company. The maximum
contingent liability under these employment agreements is approximately $4,740
and $4,400 at December 30, 2000 and January 1, 2000, respectively.

21.  Related-party Transactions:

Rents for related-party leases may be slightly higher than rents for
non-affiliated leases, and certain terms of the related-party leases are more
favorable to the landlord than those contained in leases with non-affiliates.

Under the terms of a shared services agreement, Sears provided certain services
to the Company, including payroll and payable processing for Western, among
other services through the third quarter of fiscal year 1999. The Company and
Sears have entered into agreements that provide for the Western stores to
continue to purchase and carry certain Sears branded products during periods
defined in the agreements. The Company is also a first-call supplier of certain
automotive products to certain Sears Automotive Group stores.

In connection with the Western Merger, Sears arranged to buy from the Company
certain products in bulk for its automotive centers through January 1999. These
amounts are included in net sales to Sears in the following table.

The following table presents the related party transactions with Sears for
fiscal 2000, 1999 and 1998 and as of December 30, 2000 and January 1, 2000:

                                                     Years Ended
                                     -----------------------------------------
                                     December 30,      January 1,    January 2,
                                        2000              2000          1999
                                     ------------      ----------    ----------
     Net sales to Sears              $     7,487       $    5,326    $    2,124
     Shared services revenue                   -            2,286           697
     Shared services expense                   -              887           844
     Credit card fees expense                405              348           657
                                     ===========       ==========    ==========

                                     December 30,      January 1,
                                        2000              2000
                                     ------------      ----------
     Receivables from Sears          $     3,160       $    6,625
     Payables to Sears                     1,321            4,304
                                     ===========       ==========

                                      F-24
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)



22.   Benefit Plans:

401(k) Plan

The Company maintains a defined contribution employee benefit plan, which covers
substantially all employees after one year of service. The plan allows for
employee salary deferrals, which are matched at the Company's discretion.
Company contributions were $5,245 in fiscal 2000, $4,756 in fiscal 1999, and
$2,634 in fiscal 1998.

The Company also maintains a profit sharing plan covering Western employees that
was frozen prior to the Western Merger on November 2, 1998 (Note 16). This plan
covered all full-time employees who had completed one year of service and had
attained the age of 21 on the first day of each month. All employees covered
under this plan were included in the Company's plan on January 1, 1999.

Deferred Compensation

The Company maintains an unfunded deferred compensation plan established for
certain key employees of Western prior to the Western Merger (Note 16). The
Company assumed the plan liability of $15,253 through the Western Merger. The
plan was frozen at the date of the Western Merger. As of December 30, 2000 and
January 1, 2000, $5,359 and $8,504, respectively was accrued related to the
plan.

Postretirement Plan

The Company provides certain health care and life insurance benefits for
eligible retired employees. Employees retiring from the Company with 20
consecutive years of service after age 40 are eligible for these benefits,
subject to deductibles, co-payment provisions and other limitations.

The estimated cost of retiree health and life insurance benefits is recognized
over the years that the employees render service as required by SFAS No. 106,
"Employers Accounting for Postretirement Benefits Other Than Pensions." The
initial accumulated liability, measured as of January 1, 1995, the date the
Company adopted SFAS No. 106, is being recognized over a 20-year amortization
period.

In connection with the Western Merger, the Company assumed Western's benefit
obligation under its postretirement health care plan. This plan was merged into
the Company's plan effective July 1, 1999.

                                      F-25
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)


The Company maintains the existing plan and the assumed plan covering Western
employees. Financial information related to the plans was determined by the
Company's independent actuaries as of December 30, 2000 and January 1, 2000. The
following provides a reconciliation of the benefit obligation and the funded
status of the plan:

<TABLE>
<CAPTION>
                                                                   2000                  1999
                                                                ----------            ---------
<S>                                                             <C>                   <C>
     Change in benefit obligation:
      Benefit obligation at beginning of the year                $  22,095            $   23,559
      Service cost                                                     451                   336
      Interest cost                                                  1,532                 1,401
      Benefits paid                                                 (2,826)               (1,843)
      Actuarial loss (gain)                                            830                (1,358)
                                                                 ---------              --------
     Benefit obligation at end of the year                          22,082                22,095
     Change in plan assets:
      Fair value of plan assets at beginning of the year                 -                     -
      Employer contributions                                         2,826                 1,843
      Benefits paid                                                 (2,826)               (1,843)
                                                                 ---------           -----------
      Fair value of plan assets at end of year                           -                     -
     Reconciliation of funded status:
      Funded status                                                (22,082)              (22,095)
      Unrecognized transition obligation                               810                   868
      Unrecognized actuarial loss (gain)                               530                  (300)
                                                                 ---------           -----------
     Accrued postretirement benefit cost                         $ (20,742)           $  (21,527)
                                                                 =========           ===========


Net periodic postretirement benefit cost is as follows:

<CAPTION>
                                                        2000              1999               1998
                                                     ----------         --------           --------
<S>                                                  <C>                <C>                <C>
     Service cost                                    $     451          $    336           $     240
     Interest cost                                       1,532             1,401                 440
     Amortization of the transition obligation              58                58                  58
     Amortization of recognized net losses                   -                43                  60
                                                     ---------          --------           ---------
                                                     $   2,041          $  1,838           $     798
                                                     =========          ========           =========
</TABLE>


The postretirement benefit obligation was computed using an assumed discount
rate of 7.5% and 6.5% in 2000 and 1999, respectively. The health care cost trend
rate was assumed to be 9.0% for 2000, 8.5% for 2001, 8.0% for 2002, 7.5% for
2003, 7.0% for 2004, 6.5% for 2005, and 5.0% to 6.0% for 2006 and thereafter.

If the health care cost were increased 1% for all future years the accumulated
postretirement benefit obligation would have increased by $1,496 as of December
30, 2000. The effect of this change on the combined service and interest cost
would have been an increase of $130 for 2000.

If the health care cost were decreased 1% for all future years the accumulated
postretirement benefit obligation would have decreased by $1,308 as of December
30, 2000. The effect of this change on the combined service and interest cost
would have been a decrease of $113 for 2000.

                                      F-26
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)


The Company reserves the right to change or terminate the benefits at any time.
The Company also continues to evaluate ways in which it can better manage these
benefits and control costs. Any changes in the plan or revisions to assumptions
that affect the amount of expected future benefits may have a significant impact
on the amount of the reported obligation and annual expense.

23.  Stock Options:

The Company maintains a senior executive stock option plan and an executive
stock option plan (the "Option Plans") for key employees of the Company. The
Option Plans provide for the granting of non-qualified stock options. All
options will terminate on the seventh anniversary of the grant date. Shares
authorized for grant under the senior executive and the executive stock option
plans are 1,650,000 and 1,240,000, respectively, at December 30, 2000.
Subsequent to December 30, 2000, an additional 250,000 shares were authorized
for grant under the senior executive stock option plan.

Three different types of options are granted pursuant to the Option Plans. Fixed
Price Service Options will vest over a three-year period in three equal
installments beginning on the first anniversary of the grant date. Performance
Options will be earned in installments based upon satisfaction of certain
performance targets for the four-year period ending in fiscal 2001. Variable
Price Service Options will vest in equal annual installments over a two-year
period beginning in 1999, and have an exercise price that increases over time.

As a result of the Recapitalization certain existing stockholders received stock
options to purchase up to 500,000 shares of common stock. The stock options are
fully vested, nonforfeitable and provide for a $10 per share exercise price,
increasing $2.00 per share annually, through the expiration date of April 2005.
The Company retained a reputable firm with expertise in valuing stock options to
determine the fair value of these options as of April 15, 1998 (the "valuation
date"). Based on their analysis, the fair value of the options was approximately
$300 in the aggregate. The value of the options as of the valuation date has
been reflected as additional consideration for the shares of common stock
repurchased in the Recapitalization.

                                      F-27
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)

Total option activity was as follows:

<TABLE>
<CAPTION>
                                                       2000                           1999                          1998
                                          ----------------------------     ---------------------------    -------------------------
                                                           Weighted-                       Weighted-                   Weighted-
                                          Number of         Average        Number of        Average       Number of     Average
                                            Shares      Exercise Price      Shares      Exercise Price    Shares     Exercise Price
                                          ----------    --------------     ---------   ---------------    ---------  --------------
   <S>                                    <C>           <C>                <C>         <C>                <C>         <C>
   Fixed Price Service Options
   ---------------------------
   Outstanding at beginning of year          296,655        $ 14.79         104,580        $ 10.00               -          $     -
   Granted                                 1,335,500          19.80         230,000          16.82         104,580            10.00
   Exercised                                       -              -               -              -               -                -
   Forfeited                                 (22,500)         14.55         (37,925)         13.90               -                -
                                           ---------        -------         -------        -------         -------          -------
   Outstanding at end of year              1,609,655        $ 18.95         296,655        $ 14.79         104,580          $ 10.00
                                           =========        =======         =======        =======         =======          =======

   Variable Price Service Options
   ------------------------------
   Outstanding at beginning of year          329,235        $ 15.00         397,085        $ 15.00               -          $     -
   Granted                                         -              -               -              -         397,085            15.00
   Exercised                                       -              -               -              -               -                -
   Forfeited                                 (32,500)         15.00         (67,850)         15.00               -                -
                                           ---------        -------         -------        -------         -------          -------
   Outstanding at end of year                296,735        $ 15.00         329,235        $ 15.00         397,085          $ 15.00
                                           =========        =======         =======        =======         =======          =======

   Performance Options
   -------------------
   Outstanding at beginning of year          329,235        $ 10.00         397,085        $ 10.00               -          $     -
   Granted                                         -              -               -              -         397,085            10.00
   Exercised                                       -              -               -              -               -                -
   Forfeited                                 (32,500)         10.00         (67,850)         10.00               -                -
                                           ---------        -------         -------        -------         -------          -------
   Outstanding at end of year                296,735        $ 10.00         329,235        $ 10.00         397,085          $ 10.00
                                           =========        =======         =======        =======         =======          =======

   Other Options
   -------------
   Outstanding at beginning of year          500,000        $ 12.00         500,000        $ 10.00               -          $     -
   Granted                                         -              -               -              -         500,000            10.00
   Exercised                                       -              -               -              -               -                -
   Forfeited                                       -              -               -              -               -                -
                                           ---------        -------         -------        -------         -------          -------
   Outstanding at end of year                500,000        $ 14.00         500,000        $ 12.00         500,000          $ 10.00
                                           =========        =======         =======        =======         =======          =======
</TABLE>

As of December 30, 2000, 118,270 of the Fixed Price Service Options, 148,368 of
the variable options and 500,000 of the other options were exercisable. Only the
500,000 of other options and 29,385 of the fixed options were exercisable at
January 1, 2000. The exercise price for the above options range from $10.00 per
share to $16.82 per share. The remaining weighted-average contractual life of
all options, excluding 1,050,000 of the options granted in fiscal 2000, is five
years. The 1,050,000 options have a weighted-average contractual life of six
years and five months for which none of the options are exercisable as of
December 30, 2000.

                                      F-28
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)

As permitted under SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company accounts for its employee stock options using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB No. 25"). Under APB No. 25, compensation cost for
stock options is measured as the excess, if any, of the market price of the
Company's common stock at the measurement date over the exercise price.
Accordingly, the Company did not recognize compensation expense on the issuance
of its Fixed Price Service Options because the exercise price equaled the fair
market value of the underlying stock on the grant date. The fair market value of
the stock as of December 30, 2000 and January 1, 2000, as determined by the
Board of Directors, was $21.00 and $16.82, respectively. The excess of the fair
market value per share over the exercise price per share for the Performance
Options and Variable Price Service Options is recorded as outstanding stock
options and unamortized stock option compensation and is included in other
stockholders' equity. At December 30, 2000, outstanding stock options and
unamortized stock option compensation was $3,948 and $1,488, respectively. This
compensation is amortized to expense over the vesting periods. Compensation
expense related to these options of $729, $1,082 and $695 is included in
selling, general and administrative expenses in the accompanying consolidated
statements of operations for the fiscal year ended December 30, 2000, January 1,
2000 and January 2, 1999, respectively.

The following information is presented as if the Company elected to account for
compensation cost related to the stock options using the fair value method as
prescribed by SFAS No. 123:

                              2000                 1999                  1998
                            --------             ---------             --------
     Net income (loss):
       As reported          $ 19,559             ($25,326)             ($2,182)
       Pro-forma              19,674              (24,842)              (1,700)
                            ========             =========             ========

For the above information, the fair value of each option granted in fiscal 2000
was estimated on the grant date using the Black-Scholes option-pricing model
with the following assumptions: (i) risk-free interest rate of 4.47% and 4.57%;
(ii) weighted-average expected life of options of two and three years and (iii)
expected dividend yield of zero. As permitted by SFAS No. 123 for companies with
non-public equity securities, the Company used the assumption of zero volatility
in valuing their options.

For the above information, the fair value of each option granted in fiscal 1999
was estimated on the grant date using the Black-Scholes option-pricing model
with the following assumptions: (i) risk-free interest rate of 5.19% and 5.27%;
(ii) weighted-average expected life of options of two and three years and (iii)
expected dividend yield of zero. As permitted by SFAS No. 123 for companies with
non-public equity securities, the Company used the assumption of zero volatility
in valuing their options.

For the above information, the fair value of each option granted in fiscal 1998
was estimated on the grant date using the Black-Scholes option-pricing model
with the following assumptions: (i) risk-free interest rate of 5.61%, 5.62% and
5.65%; (ii) weighted-average expected life of options of two, three and four
years and (iii) expected dividend yield of zero. As permitted by SFAS No. 123
for companies with non-public equity securities, the Company used the assumption
of zero volatility in valuing their options.

24.   Fair Value of Financial Instruments:

The carrying amount of cash and cash equivalents, receivables, bank overdrafts,
accounts payable, borrowings secured by receivables and current portion of
long-term debt approximates fair value because of the short maturity of those
instruments. The carrying amount for variable rate long-term debt approximates
fair value for similar issues available to the Company. The fair value of all
fixed rate long-term debt was determined based on current market prices, which
approximated $163,473 and $222,640 at December 30, 2000 and January 1, 2000,
respectively.

                                      F-29
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)

25.   Segment and Related Information:

During 1998, the Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". This statement requires entities to report
financial and descriptive information related to segments within the
organization.

The Company has the following operating segments: Holding, Retail and Wholesale.
Holding has no operations but holds certain assets and liabilities. Retail
consists of the retail operations of the Company, operating under the trade name
"Advance Auto Parts" in the United States and "Western Auto" in Puerto Rico and
the Virgin Islands. Wholesale consists of the wholesale operations, including
distribution services to independent dealers, franchisees and one Company-owned
store in California all operating under the "Western Auto" trade name. The
California store location generates approximately 13% of the total Wholesale
segment revenues.

The financial information for fiscal 1999 and 1998 has been restated to reflect
the operating segments described above. Prior to January 1, 2000, management
received and used financial information at the Advance Stores and consolidated
Western levels. The Advance Stores segment consisted of the "Advance Auto Parts"
retail locations and the Western segment consisted of the "Western Auto" retail
locations and wholesale operations described above. The accounting policies of
the reportable segments are the same as those of the Company.

                                      F-30
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)

<TABLE>
<CAPTION>
2000                                                    Advance
                                                        Holding         Retail      Wholesale (b)      Eliminations      Totals
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>            <C>            <C>               <C>              <C>
Net sales (a)                                          $       -      $ 2,148,904    $      139,118    $            -   $ 2,288,022
Gross profit                                                   -          873,119            22,776                 -       895,895
Operating income                                               -           87,600             5,189                 -        92,789
Net interest (expense) income                             (9,871)         (49,976)           (5,849)                -       (65,696)
(Loss) income before (benefit) provision for
  income taxes and extraordinary item (c)                 (9,871)          37,345              (313)                -        27,161
Extraordinary item, gain on debt extinguishment,
  net of $1,759 income taxes                                   -            2,933                 -                 -         2,933
Segment assets (c)                                        10,556        1,293,208            56,088            (3,492)    1,356,360
Depreciation and amortization                                              66,513               313                 -        66,826
Capital expenditures                                           -           70,492                74                 -        70,566

1999 (d)
-----------------------------------------------------------------------------------------------------------------------------------
Net sales (a)                                          $       -      $ 1,999,002    $      207,943   $             -   $ 2,206,945
Gross profit                                                   -          784,147            18,685                 -       802,832
Operating income (loss)                                        -           24,588            (4,353)                -        20,235
Net interest (expense) income                             (8,717)         (50,789)           (2,654)                -       (62,160)
Loss before benefit for income taxes (c)                  (8,717)         (26,200)           (2,993)                -       (37,910)
Segment assets (c)                                        13,036        1,250,654            94,298            (9,359)    1,348,629
Depreciation and amortization                                  -           53,280             4,867                 -        58,147
Capital expenditures                                           -           96,989             8,028                 -       105,017

1998 (d)
-----------------------------------------------------------------------------------------------------------------------------------
Net sales (a)                                          $       -      $ 1,186,167    $       34,592    $            -   $ 1,220,759
Gross profit                                                   -          452,817             1,744                 -       454,561
Operating (loss) income                                     (564)          41,228            (8,818)              (17)       31,829
Net interest (expense) income                             (6,252)         (28,310)              416             1,068       (33,078)
(Loss) income before (benefit) provision                  (6,825)          11,901            (8,402)            1,060        (2,266)
  for income taxes (c)
Segment assets (c)                                         6,749        1,150,592           110,924            (2,910)    1,265,355
Depreciation and amortization                                  -           29,208               756                 -        29,964
Capital expenditures                                           -           64,131             1,659                 -        65,790
</TABLE>

(a)  For fiscal years 2000, 1999, and 1998, total net sales include
     approximately $356,000, $245,000 and $130,000, respectively, related to
     revenues derived from commercial sales.

(b)  During fiscal 1999, certain assets, liabilities and the corresponding
     activity related to the Parts America store operations and a distribution
     center were transferred to the Retail segment through a dividend to Retail.
     Additionally, throughout fiscal 2000, the Company transferred certain
     assets to the Retail segment related to the Western Auto retail operations
     in Puerto Rico and the Virgin Islands.

(c)  Excludes investment in and equity in net earnings or losses of
     subsidiaries.

(d)  Fiscal 1999 and 1998 results of operations do not reflect the allocation of
     certain shared expenses to the Wholesale segment. During fiscal 2000,
     Management adopted a method for allocating shared expenses.

                                      F-31
<PAGE>

                 Advance Holding Corporation and Subsidiaries
                  Notes to Consolidated Financial Statements
            December 30, 2000, January 1, 2000, and January 2, 1999
                 (dollars in thousands, except per share data)

26.   Quarterly Financial Data (Unaudited):

The following table summarizes quarterly financial data for fiscal years 2000
and 1999:

<TABLE>
<CAPTION>
          2000                                          First         Second           Third            Fourth
          ------------------------------------------------------------------------------------------------------
          <S>                                          <C>            <C>             <C>               <C>
          Net sales                                    $677,582       $557,650        $552,138          $500,652
          Gross profit                                  258,975        216,533         223,903           196,484
          Operating income                               19,184         32,249          30,111            11,245
          Net (loss) income                                (956)        10,381          12,440            (2,306)


          1999                                          First         Second           Third            Fourth
          ------------------------------------------------------------------------------------------------------
          Net sales                                    $670,453       $542,320        $522,846          $471,326
          Gross profit                                  226,361        196,526         199,637           180,308
          Operating (loss) income                       (17,002)        14,096          14,860             8,281
          Net (loss) income                             (24,942)         2,067             191            (2,642)
</TABLE>

                                      F-32
<PAGE>

                          Advance Holding Corporation
         Schedule I - Condensed Financial Information of the Registrant
                     December 30, 2000 and January 1, 2000
                    Condensed Parent Company Balance Sheets
                 (dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                                    December 30,           January 1,
                                                                                      2000                   2000
                                                                                   -------------       --------------
<S>                                                                                <C>                 <C>
Assets
Cash and cash equivalents                                                            $     178             $     467
Merchandise and other receivables                                                          214                   203
Refundable income taxes                                                                      -                 5,252
Investment in subsidiary                                                               231,371               202,528
Deferred income taxes                                                                    8,185                 4,911
Other assets                                                                             1,979                 2,203
                                                                                     ---------             ---------
            Total assets                                                             $ 241,927             $ 215,564
                                                                                     =========             =========

Liabilities and stockholders' equity
Accrued expenses                                                                     $     838                 $ 716
Long-term debt                                                                          84,215                74,362
Other long-term liabilities                                                                  -                   620
Intercompany liabilities                                                                   603                 5,912
                                                                                     ---------             ---------
            Total liabilities                                                           85,656                81,610
Stockholders' equity
     Preferred stock, 8% noncumulative, nonvoting, $10 par value, redeemable
         by the Company at par; liquidation value at par;

         100,000 shares authorized; no shares issued or outstanding                          -                     -
     Common stock, Class A, voting, $.01 par value;
         62,500,000 shares authorized; 28,288,550 and
         28,144,050 issued and outstanding                                                 283                   281
     Common stock, Class B, nonvoting; $.01 par value,
         21,875,000 shares authorized; no shares
         issued or outstanding                                                               -                     -
     Additional paid-in capital                                                        372,169               369,399
     Other                                                                                 396                    69
     Accumulated deficit                                                              (216,577)             (235,795)
                                                                                     ---------             ---------
            Total stockholders' equity                                                 156,271               133,954
                                                                                     ---------             ---------
            Total liabilities and stockholders' equity                               $ 241,927             $ 215,564
                                                                                     =========             =========
</TABLE>

   The accompanying notes to condensed parent company financial statements
                 are an integral part of these balance sheets.


                                      I-1
<PAGE>

                          Advance Holding Corporation
         Schedule I - Condensed Financial Information of the Registrant
               Condensed Parent Company Statements of Operations
                            (dollars in thousands)

<TABLE>
<CAPTION>
                                                                             For the Years Ended
                                                           --------------------------------------------------
                                                              2000                   1999              1998
                                                           ---------             ----------         ---------
<S>                                                       <C>                    <C>                <C>
Selling, general and administrative expenses              $        -             $        -         $    (564)
Interest expense                                             (10,121)                (8,948)           (7,436)
Interest income                                                  250                    231             1,184
Other, net                                                         -                      -                (9)
Equity in earnings of subsidiaries                            26,104                (19,565)            2,322
Income tax benefit                                             3,326                  2,956             2,321
                                                         -----------            -----------        ----------
Net income (loss)                                         $   19,559             $  (25,326)        $  (2,182)
                                                         ===========            ===========        ==========
</TABLE>



   The accompanying notes to condensed parent company financial statements
                 are an integral part of these balance sheets.

                                      I-2
<PAGE>

                          Advance Holding Corporation
         Schedule I - Condensed Financial Information of the Registrant
   Condensed Parent Company Statements of Cash Flows (dollars in thousands)

<TABLE>
<CAPTION>
                                                                                          For the Years Ended
                                                                             ---------------------------------------------
                                                                                2000              1999              1998
                                                                             ---------         ---------          --------
<S>                                                                          <C>               <C>                <C>
Cash flows from operating activities:

    Net income (loss)                                                         $ 19,559         $ (25,326)        $  (2,182)
    Adjustments to reconcile net income (loss) to net cash
      provided by operations:
       Amortization of deferred debt issuance costs                                224               248               179
       Amortization of bond discount                                             9,853             8,700             5,645
       Benefit for deferred income taxes                                        (3,326)           (2,994)           (1,894)
       Equity in earnings of subsidiary                                        (26,104)           19,565            (2,322)
       Net decrease (increase) in:
          Other assets                                                           5,225               (59)            3,647
          Other liabilities                                                         40             1,154              (303)
                                                                              --------         ---------         ---------
            Net cash provided by operating activities                            5,471             1,288             2,770
                                                                              --------         ---------         ---------
Cash flows from investing activities:
    Change in net intercompany with subsidiaries                                (5,309)           (2,944)           49,799
    Purchase of Advance Stores Class A Common Stock                             (2,053)                -                 -
    Distributions from subsidiaries                                                  -                 -           242,023
    Capital contributions                                                            -                 -           (10,259)
    Purchase of stores common stock - Western Merger                                 -                 -          (263,000)
                                                                              --------         ---------         ---------
            Net cash (used in) provided by investing activities                 (7,362)           (2,944)           18,563
                                                                              --------         ---------         ---------
Cash flows from financing activities:
    Repayments of long-term debt                                                     -                 -           184,616
    Borrowings under new credit facilities                                           -                 -          (218,725)
    Payment of debt issuance costs                                                   -               (42)           (2,587)
    Proceeds from issuance of Class A Common Stock                               1,602               423           368,045
    Redemption of preferred and common stock                                         -                 -          (351,000)
    Payment of preferred dividend                                                    -                 -               (15)
                                                                              --------         ---------         ---------
            Net cash provided by (used in) financing activities                  1,602               381           (19,666)
                                                                              --------         ---------         ---------
Net (decrease) increase in cash and cash equivalents                              (289)           (1,275)            1,667
Cash and cash equivalents, beginning of year                                       467             1,742                75
                                                                              --------         ---------         ---------
Cash and cash equivalents, end of year                                        $    178         $     467         $   1,742
                                                                              ========         =========         =========

Supplemental cash flow information:
    Interest paid                                                             $      -         $       -         $   1,848
    Income taxes paid, net of refunds received                                       -               939             2,272
Noncash transactions:
    Net issuances of common stock under stockholder subscription
      receivable plan                                                              538             1,316                 -
    Loans receivable related to issuance of common stock                           402               344             2,527
    Appreciation of cancelled shares under stockholder subscription
      receivable plan                                                              341                 -                 -
    Debt issuance and acquisition costs accrued at January 1, 2000                   -                 -               137
    Stock options issued for redemption of stock                                     -                 -               300
    Issuance of common stock - Western Merger                                        -                 -           193,003
    Equity method impact of outstanding stock options                             (729)           (1,082)             (695)
</TABLE>




   The accompanying notes to condensed parent company financial statements
                 are an integral part of these balance sheets.


                                      I-3
<PAGE>

                          Advance Holding Corporation
        Schedule I - Condensed Financial Information of the Registrant
                 Notes to Condensed Parent Company Statements
                     December 30, 2000 and January 1, 2000
                 (dollars in thousands, except per share data)

1. Presentation

These condensed financial statements have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and note disclosures normally included in annual financial statements prepared
in accordance with accounting principles generally accepted in the United States
have been condensed or omitted pursuant to those rules and regulations, although
management believes that the disclosures made are adequate to make the
information presented not misleading.

2. Organization

Advance Holding Corporation (the "Company") is a holding company which was the
100% shareholder of Advance Stores Company, Incorporated ("Stores") and certain
other subsidiaries during the periods presented. During fiscal 1998, the other
subsidiaries of the Company were liquidated, leaving Stores as the only
operating subsidiary of the Company. The parent/subsidiary relationship between
the Company and its subsidiaries includes certain related party transactions.
These transactions consist primarily of interest on intercompany advances,
dividends, capital contributions and allocations of certain costs. Deferred
income taxes have not been provided for financial reporting and tax basis
differences on the undistributed earnings of the subsidiaries.

3. Recapitalization

On April 15, 1998, the Company consummated its recapitalization pursuant to an
Agreement and Plan of Merger dated March 4, 1998 (the "Merger Agreement"). In
connection with the Merger, the Company's Board of Directors authorized a 12,500
to 1 split of the common stock and a change in the par value of the common stock
from $100 to $.01 per share. The effects of the 12,500 to 1 stock split have
been retroactively applied to all common share information for all periods
presented in these financial statements.

Pursuant to the Merger Agreement, AHC Corporation ("AHC"), a corporation
controlled by an investment fund organized by Freeman Spogli & Co. Incorporated
("FS&Co."), merged into the Company (the "Merger"), with the Company as the
surviving corporation. In the Merger, a portion of the common stock and all of
the preferred stock of the Company were converted into the right to receive in
the aggregate approximately $351,000 in cash and certain stock options (see
below). Certain shares representing approximately 14% of the outstanding Class A
common stock remained outstanding upon consummation of the Merger. Immediately
prior to the Merger, FS&Co. purchased approximately $80,500 of the common stock
of AHC which was converted in the Merger into approximately 64% of the Company's
outstanding common stock and Ripplewood Partners, L.P. and its affiliates
(Ripplewood) purchased approximately $20,000 of the common stock of AHC which
was converted in the Merger into approximately 16% of the Company's outstanding
common stock. In connection with the Merger, management purchased approximately
$8,000, or approximately 6%, of the Company's outstanding common stock. The
purchase of common stock by management resulted in stockholder subscription
receivables. The notes provide for annual interest payments, at the prime rate,
with the entire principal amount due in five years.

                                      I-4
<PAGE>

                          Advance Holding Corporation
        Schedule I - Condensed Financial Information of the Registrant
                 Notes to Condensed Parent Company Statements
                     December 30, 2000 and January 1, 2000
                 (dollars in thousands, except per share data)

On April 15, 1998, the Company entered into a Credit Facility that provides for
(i) three senior secured term loan facilities in the aggregate amount of
$250,000 and (ii) a secured revolving credit facility of up to $125,000. At the
closing of the Merger, $125,000 was borrowed under one of the term loan
facilities. On April 15, 1998, the Company also issued $200,000 of senior
subordinated notes and approximately $112,000 of senior discount debentures (see
Note 4). In connection with these transactions, the Company extinguished a
substantial portion of its existing notes payable and long-term debt.

The merger, the retirement of debt, borrowings under the Credit Facility, the
issuance of the senior discount debentures and the issuance of the senior
subordinated notes collectively represent the "Recapitalization". The Company
has accounted for the Recapitalization for financial reporting purposes as the
sale of common stock, the issuance of debt, the redemption of common and
preferred stock and the repayment of notes payable and long-term debt.

The stock options received by the existing stockholders are for 500,000 shares
of common stock. The stock options are fully vested, nonforfeitable and provide
for a $10 per share exercise price, increasing $2.00 per share annually, through
the expiration date of April 2005. The Company retained a reputable firm with
expertise in valuing stock options to determine the fair value of these options
as of April 15, 1998 (the valuation date). Based on their analysis, the fair
value of the options is approximately $300 in the aggregate. The value of the
options has been reflected as additional consideration for the shares of common
stock repurchased in the Recapitalization.

Concurrent with the Recapitalization, the Company incurred $3,404 of costs and
expenses. Of these costs, $2,629 were capitalized as debt issuance costs and
$775 has been recorded as a reduction of proceeds from the sale of common stock.

In connection with the Recapitalization, FS&Co. and an affiliate of Ripplewood
collectively received $5,000 in fees for negotiating the Recapitalization,
advisory and consulting services, arranging financing and raising equity
funding.

4. Long-term Debt

Long-term debt at December 30, 2000 consists of senior discount debentures (the
"Debentures") issued during fiscal 1998 in connection with the Recapitalization.
The Debentures were issued at a discount and accrue at a rate of 12.875%,
compounded semi-annually, to an aggregate principal amount of $112,000 by April
15, 2003. Cash interest will not accrue on the Debentures prior to April 15,
2003. Commencing April 15, 2003, cash interest on the Debentures will accrue and
be payable, at a rate of 12.875% per annum, semi-annually in arrears on each
April 15 and October 15. As of December 30, 2000 and January 1, 2000, the
Debentures have been accreted by $24,198 and $14,345 with corresponding interest
expense of $9,853, $8,700 and $5,645 recognized for the years ended December 30,
2000, January 1, 2000 and January 2, 1999, respectively.

The Debentures are redeemable at the option of the Company, in whole or in part,
at any time on or after April 15, 2003. In addition, at any time prior to April
15, 2001 the Company may, at its option, redeem up to 35% of the aggregate
principal amount at maturity of the Debentures originally issued at a redemption
price equal to 112.875% of the accreted value thereof, plus liquidated damages,
if any, with the net cash proceeds of one or more equity offerings; provided
that at least 65% of the original aggregate principal amount at maturity of the
Debentures will remain outstanding immediately following each such redemption.

Upon the occurrence of a change of control (as defined), each holder of the
Debentures will have the right to require the Company to purchase the Debentures
at a price in cash equal to 101% of the accreted value thereof plus liquidated
damages, if any, thereon in the case of any such purchase prior to April 15,
2003, or 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest and liquidated damages, if any, thereon to the date of purchase in the
case of any such purchase on or after April 15, 2003. The Company may not have
any significant assets other than capital stock of the Stores (which is pledged
to secure the Company's obligations under

                                      I-5
<PAGE>

                          Advance Holding Corporation
        Schedule I - Condensed Financial Information of the Registrant
                 Notes to Condensed Parent Company Statements
                     December 30, 2000 and January 1, 2000
                 (dollars in thousands, except per share data)

the Credit Facility). As a result, the Company's ability to purchase all or any
part of the Debentures will be dependent upon the receipt of dividends or other
distributions from Stores or its subsidiaries. The Credit Facility and the
Senior Subordinated Notes have certain restrictions for Stores with respect to
paying dividends and making any other distributions.

The Debentures are subordinated to all of the Company's other liabilities. The
Debentures contain certain non-financial restrictive covenants that are similar
to the covenants contained in the notes. Substantially all of the net assets of
the Company's subsidiaries are restricted at December 30, 2000.

5.  See Notes to Consolidated Financial Statements for Additional Disclosures

                                      I-6
<PAGE>

                          ADVANCE HOLDING CORPORATION
                               AND SUBSIDIARIES

                SCHEDULE II-- VALUATION AND QUALIFYING ACCOUNTS

                            (dollars in thousands)

<TABLE>
<CAPTION>
                                                    Balance at                                                      Balance at
                                                    Beginning     Charges to                                          End of
Allowance for doubtful accounts receivable:         of Period      Expenses      Deductions          Other            Period
                                                   -----------   ------------   -----------        ---------       -----------
<S>                                                <C>           <C>            <C>                <C>             <C>
     January 2, 1999.............................    $   575       $  1,193      $     (582)(2)     $  2,594 (1)    $   3,780
     January 1, 2000.............................      3,780          3,901            (754)(2)            -            6,927
     December 30, 2000...........................      6,927          2,152          (4,058)(2)            -            5,021
</TABLE>

    (1)  Allowance for doubtful accounts receivable assumed in the Western
         Merger.
    (2)  Accounts written off during the period.

<TABLE>
Restructuring reserves:
<S>                                                  <C>           <C>           <C>                <C>             <C>
      January 2, 1999..............................  $     -       $  6,774      $   (2,026)(2)     $ 33,015 (1)    $  37,763
      January 1, 2000..............................   37,763             58         (18,165)(2)        1,660 (1)       21,316
      December 30, 2000............................   21,316          1,673         (11,143)(2)       (1,261)(3)       10,585
</TABLE>

      (1)  Restructuring reserves assumed and established in the Western Merger.
      (2)  Represents amounts paid for restructuring charges.
      (3)  Reductions to reserves assumed and established in the Western Merger
           that exceeded the ultimate cost expended by the Company.

                                     II-1
<PAGE>

SIGNATURE

     Pursuant to the requirements of the Section 15(d) of the Securities Act of
1934, the Registrant has duly caused this Report on Form 10-K to be signed on
its behalf by the undersigned; thereunto duly authorized, in Roanoke,
Commonwealth of Virginia, on March 30, 2001.

                               ADVANCE HOLDING CORPORATION

                               By: /s/ Jimmie L. Wade
                                   ------------------------------------
                                         Jimmie L. Wade
                                         President and Chief Financial Officer,
                                          Secretary

                               POWER OF ATTORNEY

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

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

<TABLE>
<CAPTION>
         Signature                                         Title                                  Date
<S>                                         <C>                                               <C>
/s/ Lawrence P. Castellani                  Chief Executive Officer and Director              March 30, 2001
--------------------------------            (Principal Executive Officer)
        Lawrence P. Castellani

/s/ Jimmie L. Wade                          President and Chief Financial Officer,            March 30, 2001
--------------------------------            Secretary (Principal Financial &
        Jimmie L. Wade                      Accounting Officer)


/s/ Nicholas F. Taubman                     Chairman of the Board and Director                March 30, 2001
---------------------------------
        Nicholas F. Taubman

/s/ Garnett E. Smith                        Vice Chairman of the Board and                    March 30, 2001
---------------------------------
        Garnett E. Smith                    Director

/s/ Mark J. Doran                           Director                                          March 30, 2001
---------------------------------
        Mark J. Doran

/s/ John M. Roth                            Director                                          March 30, 2001
---------------------------------
        John M. Roth

/s/ Timothy C. Collins                      Director                                          March 30, 2001
---------------------------------
        Timothy C. Collins


/s/ Peter M. Starrett                       Director                                          March 30, 2001
---------------------------------
        Peter M. Starrett

/s/ Jeffrey N. Boyer                        Director                                          March 30, 2001
---------------------------------
        Jeffrey N. Boyer
</TABLE>

                                      S-1
<PAGE>

<TABLE>
<S>                                         <C>                                               <C>
/s/ William L. Salter                       Director                                          March 30, 2001
---------------------------------
        William L. Salter

/s/ Jeffrey B. Conner                       Director                                          March 30, 2001
---------------------------------
        Jeffrey B. Conner
</TABLE>

                                      S-2
<PAGE>

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

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