##### Table of Contents









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549




---

FORM 10-Q

|     |  |                                                                                             
|---- |  | --------------------------------------------------------------------------------------------
|    
|    
|    
|    
|[X]  |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|     |  | For the quarterly period ended June 29,
    2002                                            
|     |  | 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 333-61713

American Tire Distributors, Inc.

|                       |  |                                               
|---------------------- |  | ----------------------------------------------
|                      
|                      
|                      
|                      
|                      
|A Delaware Corporation |  | IRS Employer Identification No.
    56-0754594

12200 Herbert Wayne Court

Suite 150


Huntersville, North Carolina 28078


(704) 992-2000

Indicate by a 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 o

Number of common shares outstanding at August 12, 2002:
5,086,917



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---

TABLE OF CONTENTS



|                                            |                                                                                                |                                                                                                                           |  |  |  |  |  | 
|------------------------------------------- | ---------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|TABLE OF CONTENTS                          
|PART I. FINANCIAL INFORMATION              
|                                            | Item 1. Financial Statements.                                                                 
|                                            |                                                                                                | Condensed Consolidated Balance Sheets -- June 29, 2002 and December 29, 2001                                             
|                                            |                                                                                                | Condensed Consolidated Statements of Operations (unaudited)  Quarters and Six Months Ended June29, 2002 and June30, 2001
|                                            |                                                                                                | Condensed Consolidated Statements of Cash Flows (unaudited) Six Months Ended June29, 2002 and June30, 2001              
|                                            |                                                                                                | Notes to Condensed Consolidated Financial Statements                                                                     
|                                            | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
|                                            | Item 3. Quantitative and Qualitative Disclosure about Market Risk.                            
|PART II. OTHER INFORMATION                 
|                                            | Item 1. Legal Proceedings.                                                                    
|                                            | Item 6. Exhibits and Reports on Form 8-K.                                                     
|SIGNATURES                                 
|Third Restated Certificate of Incorporation
|Section 906 Certification of the CEO       
|Section 906 Certification of the CFO       



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##### Table of Contents






TABLE OF CONTENTS

|         |         |                       |                                                                                           |                                                                                                                                     |    |      |   |  | 
|-------- | ------- | --------------------- | ----------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | -- | ---- | - |  | 
|         |         |                       |                                                                                           |                                                                                                                                     |    | Page
|         |         |                       |                                                                                           |                                                                                                                                     |    |     
|PART I.  |         | FINANCIAL INFORMATION |                                                                                           |                                                                                                                                     |    |     
|        
|        
|        
|        
|        
|         | ITEM 1. |                       | Financial Statements                                                                      |                                                                                                                                     |    |      |  
|        
|        
|        
|        
|         |         |                       |                                                                                           | Condensed Consolidated Balance Sheets 
    June 29, 2002 (unaudited) and December 29, 2001                                         |    |      | 1 | 
|        
|        
|        
|        
|         |         |                       |                                                                                           | Condensed Consolidated Statements of Operations
    (unaudited)  Quarters and Six Months Ended
    June 29, 2002 and June 30, 2001 |    |      | 2 | 
|        
|        
|        
|        
|         |         |                       |                                                                                           | Condensed Consolidated Statements of Cash Flows
    (unaudited)  Six Months Ended June 29, 2002 and
    June 30, 2001              |    |      | 3 | 
|        
|        
|        
|        
|         |         |                       |                                                                                           | Notes to Condensed Consolidated Financial
    Statements                                                                            |    |      | 4 | 
|        
|        
|        
|        
|        
|         | ITEM 2. |                       | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |                                                                                                                                     |    | 16   |  
|        
|        
|        
|        
|        
|         | ITEM 3. |                       | Quantitative and Qualitative Disclosures about
    Market Risk                            |                                                                                                                                     |    | 19   |  
|        
|        
|        
|        
|        
|PART II. |         | OTHER INFORMATION     |                                                                                           |                                                                                                                                     |    |     
|        
|        
|        
|        
|        
|         | ITEM 1. |                       | Legal Proceedings                                                                         |                                                                                                                                     |    | 20   |  
|        
|        
|        
|        
|        
|         | ITEM 6. |                       | Exhibits and Reports on Form 8-K                                                          |                                                                                                                                     |    | 20   |  
|        
|        
|        
|        
|         |         | Signatures            |                                                                                           |                                                                                                                                     | 21 |     



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##### Table of Contents






PART I.     FINANCIAL INFORMATION




Item 1.     Financial
Statements.

American Tire Distributors, Inc.






Condensed Consolidated Balance
Sheets  June 29, 2002 and December 29,
2001




|                                                   |                                                                                                                                                    |                                |                                                    |                   |         |         |         |         |         |         | 
|-------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------ | -------------------------------------------------- | ----------------- | ------- | ------- | ------- | ------- | ------- | ------- | 
|                                                   |                                                                                                                                                    | June 29, 2002                  |                                                    | December 29, 2001
|                                                   |                                                                                                                                                    |                                |                                                    |                  
|                                                   |                                                                                                                                                    | (Unaudited)                    |                                                    |                  
|                                                  
|                                                  
|                                                  
|                                                  
|Assets                                             |                                                                                                                                                    |                                |                                                    |                   |         |         |         |        
|                                                  
|                                                  
|                                                  
|                                                  
|Current assets:                                    |                                                                                                                                                    |                                |                                                    |                   |         |         |         |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Cash and cash equivalents                                                                                                                          |                                | $                                                  | 4,435             |         |         | $       | 4,131   |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Accounts receivable, net of allowances of $2,599
    and $3,571                                                                                    |                                |                                                    | 112,246           |         |         |         | 93,621  |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Inventories                                                                                                                                        |                                |                                                    | 158,244           |         |         |         | 154,212 |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Deferred income taxes                                                                                                                              |                                |                                                    | 12,540            |         |         |         | 27,364  |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Other current assets                                                                                                                               |                                |                                                    | 7,514             |         |         |         | 10,851  |        
|                                                   |                                                                                                                                                    |                                |                                                    |                   |         |         |         |        
|                                                   |                                                                                                                                                    | Total current assets           |                                                    |                   | 294,979 |         |         |         | 290,179 |        
|                                                   |                                                                                                                                                    |                                |                                                    |                   |         |         |         |        
|Property and equipment, net                        |                                                                                                                                                    |                                | 22,122                                             |                   |         |         | 27,486  |        
|                                                  
|                                                  
|                                                  
|                                                  
|Goodwill, net                                      |                                                                                                                                                    |                                | 93,940                                             |                   |         |         | 93,940  |        
|                                                  
|                                                  
|                                                  
|                                                  
|Other intangible assets, net                       |                                                                                                                                                    |                                | 3,753                                              |                   |         |         | 5,171   |        
|                                                  
|                                                  
|                                                  
|                                                  
|Deferred income taxes                              |                                                                                                                                                    |                                | 12,004                                             |                   |         |         | 16,626  |        
|                                                  
|                                                  
|                                                  
|                                                  
|Other assets                                       |                                                                                                                                                    |                                | 5,770                                              |                   |         |         | 9,618   |        
|                                                   |                                                                                                                                                    |                                |                                                    |                   |         |         |         |        
|                                                   |                                                                                                                                                    |                                | Total assets                                       |                   | $       | 432,568 |         |         | $       | 443,020 | 
|                                                   |                                                                                                                                                    |                                |                                                    |                   |         |         |         |        
|Liabilities and Stockholders
    Investment       |                                                                                                                                                    |                                |                                                    |                   |         |         |         |        
|                                                  
|                                                  
|                                                  
|                                                  
|Current liabilities:                               |                                                                                                                                                    |                                |                                                    |                   |         |         |         |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Accounts payable                                                                                                                                   |                                | $                                                  | 181,929           |         |         | $       | 170,571 |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Accrued expenses                                                                                                                                   |                                |                                                    | 17,216            |         |         |         | 20,643  |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Current maturities of long-term debt                                                                                                               |                                |                                                    | 4,676             |         |         |         | 5,295   |        
|                                                   |                                                                                                                                                    |                                |                                                    |                   |         |         |         |        
|                                                   |                                                                                                                                                    | Total current liabilities      |                                                    |                   | 203,821 |         |         |         | 196,509 |        
|                                                   |                                                                                                                                                    |                                |                                                    |                   |         |         |         |        
|Revolving credit facility and other long-term debt |                                                                                                                                                    |                                | 159,038                                            |                   |         |         | 126,544 |        
|                                                  
|                                                  
|                                                  
|                                                  
|Series D Senior Notes                              |                                                                                                                                                    |                                | 28,600                                             |                   |         |         | 150,000 |        
|                                                  
|                                                  
|                                                  
|                                                  
|Capital lease obligations                          |                                                                                                                                                    |                                | 15,018                                             |                   |         |         | 1,346   |        
|                                                  
|                                                  
|                                                  
|                                                  
|Other liabilities                                  |                                                                                                                                                    |                                | 4,890                                              |                   |         |         | 8,042   |        
|Commitments and contingencies                      |                                                                                                                                                    |                                |                                                    |                   |         |         |         |        
|                                                  
|                                                  
|                                                  
|                                                  
|Redeemable preferred stock (Note 10)               |                                                                                                                                                    |                                | 11,035                                             |                   |         |         | 24,115  |        
|                                                  
|                                                  
|                                                  
|                                                  
|Stockholders investment:                          |                                                                                                                                                    |                                |                                                    |                   |         |         |         |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Preferred stock (Note 11)                                                                                                                          |                                |                                                    | 43,580            |         |         |         |        |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Common stock, par value $.01 per share;
    50,000,000 and 15,000,000 shares authorized; 5,086,917 and
    5,136,917 shares issued and outstanding |                                |                                                    | 51                |         |         |         | 51      |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Additional paid-in capital                                                                                                                         |                                |                                                    | 22,388            |         |         |         | 22,751  |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Warrants                                                                                                                                           |                                |                                                    | 1,759             |         |         |         | 1,137   |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Notes receivable from sale of stock                                                                                                                |                                |                                                    | (17               | )       |         |         | (340    | )      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Accumulated deficit                                                                                                                                |                                |                                                    | (57,595           | )       |         |         | (87,135 | )      
|                                                   |                                                                                                                                                    |                                |                                                    |                   |         |         |         |        
|                                                   |                                                                                                                                                    | Total stockholders investment |                                                    |                   | 10,166  |         |         |         | (63,536 | )      
|                                                   |                                                                                                                                                    |                                |                                                    |                   |         |         |         |        
|                                                   |                                                                                                                                                    |                                | Total liabilities and stockholders
    investment |                   | $       | 432,568 |         |         | $       | 443,020 | 
|                                                   |                                                                                                                                                    |                                |                                                    |                   |         |         |         |        

The accompanying notes to condensed consolidated financial
statements



1



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##### Table of Contents



American Tire Distributors, Inc.












|                                                                                                                                             |                             |                |         |                  |   |               |         |               |   |   |         |         |   |   |         |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------- | -------------- | ------- | ---------------- | - | ------------- | ------- | ------------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                                                                                             |                             |                |         |                 
|                                                                                                                                             |                             | Quarters Ended |         | Six Months Ended
|                                                                                                                                             |                             |                |         |                 
|                                                                                                                                             |                             | June 29, 2002  |         | June 30, 2001    |   | June 29, 2002 |         | June 30, 2001
|                                                                                                                                             |                             |                |         |                  |   |               |         |              
|Net sales                                                                                                                                    |                             | $              | 277,582 |                  |   | $             | 301,840 |               |   | $ | 529,146 |         |   | $ | 569,632 |        
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|Cost of goods sold                                                                                                                           |                             |                | 228,102 |                  |   |               | 243,443 |               |   |   | 432,006 |         |   |   | 459,834 |        
|                                                                                                                                             |                             |                |         |                  |   |               |         |               |   |   |         |         |   |   |         |        
|                                                                                                                                             | Gross profit                |                |         | 49,480           |   |               |         | 58,397        |   |   |         | 97,140  |   |   |         | 109,798 |  
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|Selling, general and administrative expenses                                                                                                 |                             |                | 41,494  |                  |   |               | 52,793  |               |   |   | 84,021  |         |   |   | 105,637 |        
|                                                                                                                                             |                             |                |         |                  |   |               |         |               |   |   |         |         |   |   |         |        
|                                                                                                                                             | Operating income            |                |         | 7,986            |   |               |         | 5,604         |   |   |         | 13,119  |   |   |         | 4,161   |  
|                                                                                                                                             |                             |                |         |                  |   |               |         |               |   |   |         |         |   |   |         |        
|Other income (expense):                                                                                                                      |                             |                |         |                  |   |               |         |               |   |   |         |         |   |   |         |        
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                             | Interest expense, net       |                |         | (4,279           | ) |               |         | (7,573        | ) |   |         | (10,608 | ) |   |         | (14,983 | )
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                             | Other income (expense), net |                |         | (3               | ) |               |         | 369           |   |   |         | 157     |   |   |         | 703     |  
|                                                                                                                                             |                             |                |         |                  |   |               |         |               |   |   |         |         |   |   |         |        
|Income (loss) from continuing operations
    before income taxes                                                                             |                             |                | 3,704   |                  |   |               | (1,600  | )             |   |   | 2,668   |         |   |   | (10,119 | )      
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|Provision (benefit) for income taxes                                                                                                         |                             |                | 1,482   |                  |   |               | (154    | )             |   |   | 1,068   |         |   |   | (803    | )      
|                                                                                                                                             |                             |                |         |                  |   |               |         |               |   |   |         |         |   |   |         |        
|Income (loss) from continuing operations
    before extraordinary item                                                                       |                             |                | 2,222   |                  |   |               | (1,446  | )             |   |   | 1,600   |         |   |   | (9,316  | )      
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|Loss from discontinued operations, net of income
    tax benefit of $514                                                                     |                             |                |        |                  |   |               |        |               |   |   |        |         |   |   | (769    | )      
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|Loss on disposal of discontinued operations, net
    of income tax benefit of $130, $2,936, $219 and $2,936                                  |                             |                | (194    | )                |   |               | (11,166 | )             |   |   | (328    | )       |   |   | (11,166 | )      
|                                                                                                                                             |                             |                |         |                  |   |               |         |               |   |   |         |         |   |   |         |        
|Income (loss) before extraordinary item                                                                                                      |                             |                | 2,028   |                  |   |               | (12,612 | )             |   |   | 1,272   |         |   |   | (21,251 | )      
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|                                                                                                                                            
|Extraordinary gain (loss) on repurchase of
    Series D Senior Notes, net of income tax provision
    (benefit) of $(86), $0, $19,904 and $0 |                             |                | (120    | )                |   |               |        |               |   |   | 29,855  |         |   |   |        |        
|                                                                                                                                             |                             |                |         |                  |   |               |         |               |   |   |         |         |   |   |         |        
|Net income (loss)                                                                                                                            |                             | $              | 1,908   |                  |   | $             | (12,612 | )             |   | $ | 31,127  |         |   | $ | (21,251 | )      
|                                                                                                                                             |                             |                |         |                  |   |               |         |               |   |   |         |         |   |   |         |        

The accompanying notes to condensed consolidated financial
statements



2



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##### Table of Contents



American Tire Distributors, Inc.






Condensed Consolidated Statements of Cash Flows






|                                                        |                                                                                          |                                                                     |                                                  |               |         |         |       |         |         |         |  
|------------------------------------------------------- | ---------------------------------------------------------------------------------------- | ------------------------------------------------------------------- | ------------------------------------------------ | ------------- | ------- | ------- | ----- | ------- | ------- | ------- | -
|                                                        |                                                                                          |                                                                    
|                                                        |                                                                                          | Six Months Ended                                                   
|                                                        |                                                                                          |                                                                    
|                                                        |                                                                                          | June 29, 2002                                                       |                                                  | June 30, 2001
|                                                        |                                                                                          |                                                                     |                                                  |              
|Cash flows from operating
    activities:               |                                                                                          |                                                                     |                                                  |               |         |         |       |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Net income (loss)                                                                        |                                                                     | $                                                | 31,127        |         |         | $     | (21,251 | )      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Adjustments to reconcile net income
    (loss) to net cash used in operating activities: |                                                                     |                                                  |               |         |         |       |         |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | Loss on disposal of discontinued operations                         |                                                  |               | 328     |         |       |         | 11,166  |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | Loss from discontinued operations                                   |                                                  |               |        |         |       |         | 769     |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | Extraordinary gain                                                  |                                                  |               | (29,855 | )       |       |         |        |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | Depreciation and amortization of goodwill and
    other intangibles |                                                  |               | 4,150   |         |       |         | 8,745   |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | Amortization of other assets                                        |                                                  |               | 679     |         |       |         | 595     |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | Other, net                                                          |                                                  |               | (2,231  | )       |       |         | (42     | )      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Change in operating assets and liabilities:                                              |                                                                     |                                                  |               |         |         |       |         |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | Accounts receivable, net                                            |                                                  |               | (18,760 | )       |       |         | (24,175 | )      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | Inventories                                                         |                                                  |               | (4,032  | )       |       |         | 8,281   |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | Other current assets                                                |                                                  |               | 2,693   |         |       |         | 1,855   |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | Accounts payable and accrued expenses                               |                                                  |               | 7,195   |         |       |         | 909     |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        |                                                                                          | Other, net                                                          |                                                  |               | (3,418  | )       |       |         | (290    | )      
|                                                        |                                                                                          |                                                                     |                                                  |               |         |         |       |        
|                                                        |                                                                                          |                                                                     | Net cash used in continuing operating activities |               |         | (12,124 | )     |         |         | (13,438 | )
|                                                        |                                                                                          |                                                                     |                                                  |               |         |         |       |        
|                                                        |                                                                                          |                                                                     | Net cash provided by discontinued operations     |               |         |        |       |         |         | 63      |  
|                                                        |                                                                                          |                                                                     |                                                  |               |         |         |       |        
|Cash flows from investing
    activities:               |                                                                                          |                                                                     |                                                  |               |         |         |       |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Net proceeds from sale of discontinued operations                                        |                                                                     |                                                  |              |         |         |       | 9,285   |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Acquisitions, net of cash acquired                                                       |                                                                     |                                                  |              |         |         |       | (885    | )      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Payments on deferred purchase price of acquired
    businesses                           |                                                                     |                                                  |              |         |         |       | (2,495  | )      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Purchase of property and equipment                                                       |                                                                     |                                                  | (627          | )       |         |       | (4,155  | )      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Proceeds from sale of property and equipment                                             |                                                                     |                                                  | 1,958         |         |         |       | 1,365   |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other, net                                                                               |                                                                     |                                                  | (92           | )       |         |       | 42      |        
|                                                        |                                                                                          |                                                                     |                                                  |               |         |         |       |        
|                                                        |                                                                                          |                                                                     | Net cash provided by investing activities        |               |         | 1,239   |       |         |         | 3,157   |  
|                                                        |                                                                                          |                                                                     |                                                  |               |         |         |       |        
|Cash flows from financing
    activities:               |                                                                                          |                                                                     |                                                  |               |         |         |       |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Net proceeds from revolving credit facility and
    other long-term debt                 |                                                                     |                                                  | 36,899        |         |         |       | 1,585   |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Repurchase of Series D Senior Notes                                                      |                                                                     |                                                  | (64,959       | )       |         |       |        |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Net proceeds from sale-leaseback transaction                                             |                                                                     |                                                  | 13,285        |         |         |       |        |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Proceeds received from issuance of preferred stock                                       |                                                                     |                                                  | 28,913        |         |         |       | 12,000  |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Principal payments on other long-term debt                                               |                                                                     |                                                  | (2,909        | )       |         |       | (703    | )      
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Cash paid for stock repurchase                                                           |                                                                     |                                                  | (40           | )       |         |       |        |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other, net                                                                               |                                                                     |                                                  |              |         |         |       | 15      |        
|                                                        |                                                                                          |                                                                     |                                                  |               |         |         |       |        
|                                                        |                                                                                          |                                                                     | Net cash provided by financing activities        |               |         | 11,189  |       |         |         | 12,897  |  
|                                                        |                                                                                          |                                                                     |                                                  |               |         |         |       |        
|Net increase in cash and cash equivalents               |                                                                                          |                                                                     | 304                                              |               |         |         | 2,679 |        
|                                                       
|                                                       
|                                                       
|                                                       
|Cash and cash equivalents, beginning of period          |                                                                                          |                                                                     | 4,131                                            |               |         |         | 3,327 |        
|                                                        |                                                                                          |                                                                     |                                                  |               |         |         |       |        
|Cash and cash equivalents, end of period                |                                                                                          | $                                                                   | 4,435                                            |               |         | $       | 6,006 |        
|                                                        |                                                                                          |                                                                     |                                                  |               |         |         |       |        
|Supplemental disclosures of cash flow
    information  |                                                                                          |                                                                     |                                                  |               |         |         |       |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Cash payments for interest                                                               |                                                                     | $                                                | 10,930        |         |         | $     | 14,125  |        
|                                                        |                                                                                          |                                                                     |                                                  |               |         |         |       |        
|                                                        | Cash payments for taxes                                                                  |                                                                     | $                                                | 1,319         |         |         | $     | 420     |        
|                                                        |                                                                                          |                                                                     |                                                  |               |         |         |       |        

The accompanying notes to condensed consolidated financial
statements



3



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##### Table of Contents



American Tire Distributors, Inc.






Notes to Condensed Consolidated Financial Statements


June 29, 2002


1.     Nature of Business:

American Tire Distributors, Inc. (together with its
subsidiaries, the Company) (formerly Heafner Tire
Group, Inc.), is a Delaware corporation primarily engaged in the
wholesale distribution of tires and tire accessories. On
May 30, 2002, the Company changed its name from Heafner
Tire Group, Inc. to American Tire Distributors, Inc. The new
name is part of the Companys transition from a collection
of companies joined through acquisition into a single-minded
organization with an unmatched, coast-to-coast footprint in the
distribution market. The move follows two years of
reorganization during which the Company discontinued its venture
into tire retailing.

2.     Basis of Presentation:

The unaudited condensed consolidated financial statements have
been prepared by the Company and have not been audited. In the
opinion of management, all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation
of the financial position of the Company, the results of its
operations and cash flows have been made. Certain information
and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. These
financial statements should be read in conjunction with the
financial statements and notes thereto included in the
Companys consolidated financial statements reported on
Form 10-K for the fiscal year ended December 29, 2001. The
results of the operations for the quarter and six months ended
June 29, 2002 are not necessarily indicative of the
operating results for the full fiscal year. Certain prior period
amounts have been reclassified to conform to the current period
presentation.

3.     New Accounting
Pronouncements:

In July 2001, the FASB issued Statement No. 141
Business Combinations (SFAS 141)
and Statement No. 142 Goodwill and Other Intangible
Assets (SFAS 142). SFAS 141 requires
that the purchase method of accounting be used for all business
combinations completed after June 30, 2001. This statement
also specifies that intangible assets acquired in a purchase
method business combination must meet certain criteria to be
recognized and reported apart from goodwill. SFAS 142
revises the accounting for purchased goodwill and intangible
assets. Under SFAS 142, goodwill and intangible assets with
indefinite lives will no longer be amortized, but will be tested
for impairment annually and in the event of an impairment
indicator adjustments will be made to comply with the standard.
SFAS 142 also requires that intangible assets with definite
useful lives be amortized over their respective estimated useful
lives to their estimated residual values, and reviewed for
impairment in accordance with Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of
(SFAS 121). The provisions of SFAS 141
apply to all business combinations initiated after June 30,
2001. The Company adopted the provisions of SFAS 142
effective January 1, 2002. The Company has completed the
first step analysis effective as of the beginning of 2002 and
has determined that there is no goodwill impairment. The
following table

4



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##### Table of Contents



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

illustrates the comparable adjusted net income (loss) for
the quarters and six months ended June 29, 2002 and
June 30, 2001, respectively:

|                                                                                         |                                                      |                        |       |                          |  |          |         |          |   |   |        |        |  |   |         |         |  
|---------------------------------------------------------------------------------------- | ---------------------------------------------------- | ---------------------- | ----- | ------------------------ |  | -------- | ------- | -------- | - | - | ------ | ------ |  | - | ------- | ------- | -
|                                                                                         |                                                      |                        |       |                         
|                                                                                         |                                                      | For the Quarters Ended |       | For the Six Months Ended
|                                                                                         |                                                      |                        |       |                         
|                                                                                         |                                                      | June 29,               |       | June 30,                 |  | June 29, |         | June 30,
|                                                                                         |                                                      | 2002                   |       | 2001                     |  | 2002     |         | 2001    
|                                                                                         |                                                      |                        |       |                          |  |          |         |         
|Reported income (loss) before extraordinary
    item                                     |                                                      | $                      | 2,028 |                          |  | $        | (12,612 | )        |   | $ | 1,272  |        |  | $ | (21,251 | )      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Add back: goodwill amortization, net of income
    tax benefit of $0, $177, $0 and $290  |                                                      |                        |      |                          |  |          | 1,736   |          |   |   |       |        |  |   | 3,371   |        
|                                                                                         |                                                      |                        |       |                          |  |          |         |          |   |   |        |        |  |   |         |        
|                                                                                         | Adjusted income (loss) before extraordinary
    item |                        | $     | 2,028                    |  |          | $       | (10,876  | ) |   | $      | 1,272  |  |   | $       | (17,880 | )
|                                                                                         |                                                      |                        |       |                          |  |          |         |          |   |   |        |        |  |   |         |        
|Reported net income (loss)                                                               |                                                      | $                      | 1,908 |                          |  | $        | (12,612 | )        |   | $ | 31,127 |        |  | $ | (21,251 | )      
|                                                                                        
|                                                                                        
|                                                                                        
|                                                                                        
|Add back: goodwill amortization, net of income
    tax benefit of $0, $177, $0 and $290. |                                                      |                        |      |                          |  |          | 1,736   |          |   |   |       |        |  |   | 3,371   |        
|                                                                                         |                                                      |                        |       |                          |  |          |         |          |   |   |        |        |  |   |         |        
|                                                                                         | Adjusted net income (loss)                           |                        | $     | 1,908                    |  |          | $       | (10,876  | ) |   | $      | 31,127 |  |   | $       | (17,880 | )
|                                                                                         |                                                      |                        |       |                          |  |          |         |          |   |   |        |        |  |   |         |        

In August 2001, the FASB issued Statement No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets (SFAS 144). This Statement
addresses financial accounting and reporting for the impairment
or disposal of long-lived assets. This Statement supersedes
SFAS 121. However, this Statement retains the fundamental
provisions of SFAS 121 for (a) recognition and
measurement of the impairment of long-lived assets to be held
and used and (b) measurement of long-lived assets to be
disposed of by sale. This Statement supersedes the accounting
and reporting provisions of APB Opinion No. 30,
Reporting the Results of Operations  Reporting
the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and
Transactions (APB 30), for the disposal
of a segment of a business. However, this Statement retains the
requirement of APB 30 to report discontinued operations
separately from continuing operations and extends that reporting
to a component of an entity that either has been disposed of (by
sale, by abandonment, or in a distribution to owners) or is
classified as held for sale. This Statement also amends ARB
No. 51, Consolidated Financial Statements, to
eliminate the exception to consolidation for a temporarily
controlled subsidiary. The provisions of SFAS 144 are effective
for financial statements issued for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal
years. The Company has adopted the provisions effective
January 1, 2002 and the effective adoption was not material.

In April 2002, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 145, Recission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement
No. 13, and Technical Corrections as of April 2002.
This statement contains a number of changes under existing GAAP,
including the elimination of extraordinary item classification
of debt extinguishments that was previously required under
SFAS 4. The provisions of this Statement related to the
rescission of Statement 4 shall be applied in fiscal years
beginning after May 15, 2002 with early adoption encouraged.

In June 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. This Statement addresses financial accounting
and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force
(EITF) Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a
Restructuring). The principal difference between this
Statement and Issue 94-3 relates to its requirements for
recognition of a liability for a cost associated with an exit or
disposal activity. This Statement requires that a liability for
a cost associated with an exit or disposal activity be
recognized when the liability is incurred. Under
Issue 94-3, a liability for an exit cost as defined in
Issue 94-3 was recognized at the date of an entitys
commitment to an exit plan. The provisions of this Statement are
effective for exit or disposal activities

5



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##### Table of Contents



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

that are initiated after December 31, 2002, with early
application encouraged. The Company does not expect that
adoption of this statement will have a material impact on the
results of operations or financial position in the foreseeable
future.

4.     Inventories:

Inventories consist primarily of automotive tires, wheels and
accessories and are valued at the lower of cost, determined on
the first-in, first-out (FIFO) method or market. The
Company performs periodic assessments to determine the existence
of obsolete, slow-moving and non-saleable inventories and
records necessary provisions to reduce such inventories to net
realizable value. Terms with a majority of the Companys
tire vendors allow return of tire products, within limitations,
specified in their supply agreements.

5.     Shipping and Handling
Costs:

Outbound shipping and handling costs are classified as selling,
general and administrative expenses in the accompanying
condensed consolidated statements of operations. Such expenses
totaled $16.2 million and $18.4 million for the
quarters ended June 29, 2002 and June 30, 2001,
respectively and $31.9 million and $36.4 million for
the six months ended June 29, 2002 and June 30, 2001,
respectively.

6.     Deferred Income Taxes:

The Company has deferred tax assets of $24.5 million and
$44.0 million at June 29, 2002 and December 29,
2001, respectively. The decrease in net deferred tax assets is
primarily attributable to the utilization of net operating loss
carryforwards as it relates to the extraordinary gain on
retirement of the Series D Senior Notes and from net income
generated from continuing operations through June 29, 2002.
Management has evaluated the Companys deferred tax assets
and has concluded that the realizability of the deferred tax
assets is more likely than not, except as it relates
to certain state net operating loss carryforwards
(NOLs). Accordingly, a valuation allowance of
$2.0 million has been provided. This evaluation considered
the historical and long-term expected profitability of the
Companys continuing operations and the expected
efficiencies to be gained from efforts initiated in 2001 to
streamline operations. Given the timing of the reversal of its
temporary differences and the expiration date of its net
operating loss carryovers, the Company believes that taxable
income generated in current and future years will be sufficient
to utilize the remaining net deferred tax assets. The
Companys ability to generate future taxable income is
dependent on numerous factors including general economic
conditions, the state of the replacement tire market and other
factors beyond managements control. Therefore, there can
be no assurance that the Company will meet its expectation of
future taxable income.

7.     Financing Arrangements:

Revolving
Credit Facility

On March 18, 2002, the Company and its lenders executed an
amendment to the revolving credit facility
(Revolver) to, among other things, amend the
financial covenants contained therein, change the rate at which
borrowings thereunder bear interest and amend certain
definitions contained therein. In addition, the amended facility
provides for additional availability due in part to a reduction
in the minimum availability reserve (as defined in the
agreement). The minimum availability reserve will begin to
increase by $0.5 million in August 2002 and will increase
each month until the reserve reaches the original amount in
August 2003. The amended agreement provides for borrowings in
the aggregate principal amount of up to the lesser of
$180.0 million or the Borrowing Base, as defined in the
agreement, which is based on 85% of eligible accounts
receivable, the lesser of 65% of eligible tire inventory plus
65% of certain secured tire inventory (within limitations as
defined in the agreement) or $90 million and the lesser of
50% of all other eligible inventory or

6



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##### Table of Contents



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

$35 million less defined reserves. A nonrefundable fee of
approximately $0.5 million was charged in connection with
this amendment.

The Revolver term expires in March 2005, extendable by the
Company and the banks for an additional five years. Borrowings
under the Revolver bear interest, at (i) the Base Rate, as
defined, plus the applicable margin (2.0% as of June 29,
2002) or (ii) the Eurodollar Rate, as defined, plus the
applicable margin (3.5% as of June 29, 2002). As a result
of the amendment, the applicable margins as of April 1,
2002 for Eurodollar Rate loans were increased to 3.5%. These
margins are subject to performance-based step-downs resulting in
margins ranging from 0.75% to 2.0% for Base Rate loans and 2.0%
to 3.5% for Eurodollar Rate loans, respectively.

The Revolver, as amended, requires the Company to meet certain
financial requirements, including minimum EBITDA, fixed charge
coverage and tangible capital funds, all as defined, and minimum
loan availability and certain covenants which, among other
things, restrict the ability of the Company to incur additional
indebtedness; enter into guarantees; make loans and investments;
make capital expenditures; declare dividends; engage in mergers,
consolidations and asset sales; enter into transactions with
affiliates; create liens and encumbrances; enter into
sale/leaseback transactions; modify material agreements; and
change the business it conducts. As of August 12, 2002, the
Companys financial measures were in excess of the minimums
required, as amended, and management expects that such amounts
will remain above the minimums for the foreseeable future. The
Companys obligations under the Revolver are secured by all
inventories and accounts receivable.

Aggregate annual maturities of long-term debt, reflecting the
debt restructuring discussed in Note 9, (excluding capital
lease obligations) at June 29, 2002, are as follows (in
thousands):

|                 |  |   |         | 
|---------------- |  | - | ------- | 
|Year Ending      |  |  
|December:        |  |  
|                 |  |  
|2002 (remainder) |  | $ | 3,242   | 
|                
|                
|                
|                
|2003             |  |   | 2,741   | 
|                
|                
|                
|                
|2004             |  |   | 1,752   | 
|                
|                
|                
|                
|2005             |  |   | 155,593 | 
|                
|                
|                
|                
|2006             |  |   | 169     | 
|                
|                
|                
|                
|Thereafter       |  |   | 28,817  | 
|                 |  |   |         | 
|                 |  | $ | 192,314 | 
|                 |  |   |         | 

Capital
Lease Obligations

On March 27, 2002, the Company completed an agreement for
the sale and leaseback of three of its owned facilities
generating cash proceeds of $13.9 million. The Company
reports this transaction as a capital lease using direct
financing lease accounting. As such, the Company recorded a
$14.0 million capital lease obligation during the first
quarter. The Company has determined that all cash paid to the
lessor is properly recorded as interest expense and that the
capital lease obligation will be reduced when the Company no
longer has continuing involvement with the properties. The
initial term of the lease is for 20 years, followed by two,
10-year renewal options. The annual rent paid under the terms of
the lease is $1.6 million annually (paid quarterly) and is
adjusted for CPI changes every two years. In addition, the
purchaser received warrants to purchase 0.75% of the
Companys fully diluted common stock. The warrants have a
term of 10 years with a stated exercise price of $3.00 per
warrant.

7



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##### Table of Contents



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

8.     Discontinued Operations:

Effective January 26, 2001, the Companys Board of
Directors authorized the exit of its retail operations and
determined that it was in the Companys best interest to
solely concentrate on wholesale distribution, which is its core
business. In that regard, effective May 15, 2001, the
Company completed a transaction pursuant to a Stock Purchase
Agreement to sell all the capital stock in Winston Tire Company
(Winston), its retail segment, to Performance
Management, Inc. for a purchase price of approximately
$10.0 million, of which $2.8 million was payable
May 15, 2002. As of August 12, 2002 this balance
remains outstanding and the Company is currently pursuing
collection from Performance Management, Inc. Accordingly, this
segment has been reflected as a discontinued operation in the
accompanying consolidated financial statements and previously
reported financial results for all periods have been restated to
reflect this treatment. Winston incurred operating losses
subsequent to the January 26, 2001 measurement date through
the date of sale, which were charged to the Companys
existing reserve for discontinued operations. In the second
quarter 2002, the Company recorded an additional loss on
disposal of discontinued operations of approximately
$0.2 million, net of income tax benefit of
$0.1 million, for a cumulative net loss on sale of
$14.1 million, of which $0.3 million was recognized in
2002.

Net sales of discontinued operations for the period ended
January 26, 2001, the measurement date, were approximately
$12.8 million. Net sales from continuing operations for the
three months ended June 30, 2001 include approximately
$5.4 million of intersegment sales to Winston that have not
been eliminated in the accompanying statement of operations. For
the six months ended June 30, 2001, such intersegment sales
totaled $15.8 million.

On January 15, 2002, Winston filed for protection from
creditors under Chapter 11 of the United States Bankruptcy
Code. In connection therewith, the Company has agreed to provide
Winston with a $2.0 million trade credit facility to
acquire inventory from the Company and as such, the Supply and
Retail Distribution Agreement dated May 15, 2001, was
terminated in its entirety. The Company entered into a
Settlement Agreement, dated January 16, 2002, with Winston,
which was approved by the Bankruptcy Court by order dated
February 6, 2002.

The Company remains liable as a guarantor on certain of
Winstons leases. As of June 29, 2002, total
obligations of the Company, as guarantor on these leases is
approximately $17 million. However, the Company has secured
assignments or sublease agreements for a substantial amount of
these commitments. The Company has assessed the terms of the
settlement and its estimated guarantor obligations and believes
that any potential liability has been adequately considered in
prior provisions. However, due to the inherent uncertainties of
the bankruptcy process, the Company may be exposed to additional
liabilities, which are currently not known or quantifiable.

9.     Extraordinary Item:

On February 5, 2002, the Company commenced an offer (as
amended, the Offer) to purchase its outstanding 10%
Series D Senior Notes (Senior Notes) due in
2008. The Offer contemplated the purchase by the Company of up
to $126 million in aggregate principal amount of
outstanding Senior Notes at a purchase price of not less than
$450 nor greater than $535 per $1,000 in outstanding principal
amount plus accrued but unpaid interest to but excluding the
payment date. Concurrently with the Offer, the Company solicited
consents to the amendment of certain covenants contained in the
Indenture governing the Senior Notes, dated as December 1,
1998 (as amended and supplemented from time to time, the
Indenture), among the Company, the Subsidiary
Guarantors from time to time party thereto (the Subsidiary
Guarantors) and First Union National Bank, as trustee (the
Trustee).

On March 27, 2002, the Company completed the Offer and
repurchased $121.4 million in outstanding principal amount
of the Senior Notes at a purchase price of $535 per $1,000 in
face amount of Senior Notes,

8



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##### Table of Contents



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

plus accrued and unpaid interest of $4.5 million. The
Company funded the repurchase of the Senior Notes through
several debt restructuring transactions (Restructuring
Transactions). The Restructuring Transactions consisted of
(i) an amendment to the Companys revolving credit
facility to provide additional availability, (ii) a sale
and leaseback of three of the Companys tire distribution
warehouses generating cash proceeds of $13.9 million and
(iii) an equity investment of $28.9 million from the
issuance of 9,637,592 shares of Series D preferred
stock to the Companys existing stockholders. Concurrently
with the repurchase of the Senior Notes, the Company, the
Subsidiary Guarantors and the Trustee executed the Fourth
Supplemental Indenture to the Indenture. The amendments to the
Indenture were effected primarily to permit the Restructuring
Transactions and make other required modifications.

The Company has accounted for the repurchase and extinguishment
of the Senior Notes as an extraordinary item. In the second
quarter 2002, the Company has recorded additional charges of
$0.1 million against the extraordinary gain, net of income
tax benefit of $0.1 million, for a cumulative net
extraordinary gain of $29.9 million.

10.     Redeemable Preferred
Stock:

The following represents the Companys issued and
outstanding redeemable preferred stock, reflecting the amendment
and modifications discussed in Note 11 below (in thousands,
except share amounts):

|                                                                                                                                        |                                  |               |       |                   |  |   |        |        | 
|--------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------- | ------------- | ----- | ----------------- |  | - | ------ | ------ | 
|                                                                                                                                        |                                  | June 29, 2002 |       | December 29, 2001
|                                                                                                                                        |                                  |               |       |                  
|                                                                                                                                        |                                  | (Unaudited)   |       |                  
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Redeemable preferred stock
    Series A  4% cumulative; 7,000 shares
    authorized, issued and outstanding                            |                                  | $             | 7,000 |                   |  | $ | 7,000  |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Redeemable preferred stock
    Series B  variable rate cumulative; 4,500 shares
    authorized, issued and outstanding                 |                                  |               | 4,035 |                   |  |   | 4,035  |       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|                                                                                                                                       
|Redeemable preferred stock
    Series C  12% cumulative; 1,333,334 shares
    authorized, issued and outstanding at December 29, 2001. |                                  |               |      |                   |  |   | 13,080 |       
|                                                                                                                                        |                                  |               |       |                   |  |   |        |       
|                                                                                                                                        | Total redeemable preferred stock |               | $     | 11,035            |  |   | $      | 24,115 | 
|                                                                                                                                        |                                  |               |       |                   |  |   |        |       

11.     Stockholders
Investment:

Amendment
to Articles of Incorporation

In conjunction with the Restructuring Transactions, the Company
amended and restated its articles of incorporation to authorize
50,000,000 shares of a single class of $.01 par value
common stock and 10,982,426 shares of $.01 par value
preferred stock. Of the 10,982,426 shares of preferred
stock, 7,000 shares are initially designated Series A
preferred stock, 4,500 shares are initially designated
Series B preferred stock, 1,333,334 shares are
initially designated Series C preferred stock and
9,637,592 shares are initially designated Series D
preferred stock. The conversion price of the Series C
preferred stock was reduced to $3.00 per common share and the
holders redemption rights were eliminated.

9



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##### Table of Contents



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

Preferred
Stock

The following represents the Companys issued and
outstanding preferred stock (in thousands, except share amounts):

|                                                                                                                              |                       |               |        |                   |  |   |   |   | 
|----------------------------------------------------------------------------------------------------------------------------- | --------------------- | ------------- | ------ | ----------------- |  | - | - | - | 
|                                                                                                                              |                       | June 29, 2002 |        | December 29, 2001
|                                                                                                                              |                       |               |        |                  
|                                                                                                                              |                       | (Unaudited)   |        |                  
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Preferred stock Series C  12%
    cumulative; 1,333,334 shares authorized; 1,333,334 and
    0 shares issued and outstanding |                       | $             | 13,800 |                   |  | $ |  |  
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|                                                                                                                             
|Preferred stock Series D  12%
    cumulative; 9,637,592 shares authorized; 9,637,592 and 0 shares
    issued and outstanding |                       |               | 29,780 |                   |  |   |  |  
|                                                                                                                              |                       |               |        |                   |  |   |   |  
|                                                                                                                              | Total preferred stock |               | $      | 43,580            |  |   | $ |  | 
|                                                                                                                              |                       |               |        |                   |  |   |   |  

On March 27, 2002, the Company issued 9,637,592 shares
of Series D preferred stock for $3.00 per share in exchange
for $28.9 million in cash contributed by certain of its
principal stockholders. The proceeds were used to repurchase
certain of the Companys Senior Notes. Shares of
Series D preferred stock accrue dividends at an annual rate
of 12% and are redeemable by the Company, but not the holder, at
the initial price plus any cumulative unpaid dividends as of the
redemption date. However, as long as any shares of Series A
preferred stock or Series B preferred stock remain
outstanding, no dividends may be paid, nor redemption occur. In
addition, shares of Series D preferred stock are
convertible into common stock at a conversion price of $3.00 per
common share.

12.     Commitments and
Contingencies:

See PART II  OTHER INFORMATION, Item 1.
Legal Proceedings.

The Company is party to various lawsuits and claims, including
purported class actions, arising in the normal course of
business. In the opinion of management, these lawsuits and
claims are not, singularly or in the aggregate, material to the
Companys financial position or results of operations.

13.     Subsequent Event:

On July 10, 2002, the Company amended and restated its
articles of incorporation to modify the terms of the
Series C and Series D preferred stock of the Company
so that such preferred stock will be redeemable in cash or stock
at the option of the Company and not of the holders thereof.

10



---



##### Table of Contents



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

14.     Subsidiary Guarantor
Financial Information:

The Companys Senior Notes are guaranteed on a full,
unconditional and joint and several basis by all of the
Companys direct subsidiaries, each of which is
wholly-owned. The condensed consolidating financial information
for the Company is as follows (in thousands):

Condensed consolidated balance sheets as of June 29, 2002
and December 29, 2001, are as follows:

|                                                   |                                                                                                                       |                                |                                                    |            |         |              |        |              |        |         |         |         |         |          |         |         |         |         | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | ------------------------------ | -------------------------------------------------- | ---------- | ------- | ------------ | ------ | ------------ | ------ | ------- | ------- | ------- | ------- | -------- | ------- | ------- | ------- | ------- | 
|                                                   |                                                                                                                       |                               
|                                                   |                                                                                                                       | As of June 29, 2002           
|                                                   |                                                                                                                       |                               
|                                                   |                                                                                                                       | Parent                         |                                                    | Subsidiary |         |             
|                                                   |                                                                                                                       | Company                        |                                                    | Guarantors |         | Eliminations |        | Consolidated
|                                                   |                                                                                                                       |                                |                                                    |            |         |              |        |             
|Assets                                             |                                                                                                                       |                                |                                                    |            |         |              |        |              |        |         |         |         |         |          |         |        
|                                                  
|                                                  
|                                                  
|                                                  
|Current assets:                                    |                                                                                                                       |                                |                                                    |            |         |              |        |              |        |         |         |         |         |          |         |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Cash and cash equivalents                                                                                             |                                | $                                                  | 3,809      |         |              | $      | 626          |        |         | $       |        |         |          | $       | 4,435   |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Accounts receivable, net                                                                                              |                                |                                                    | 81,293     |         |              |        | 30,953       |        |         |         |        |         |          |         | 112,246 |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Inventories                                                                                                           |                                |                                                    | 108,028    |         |              |        | 50,216       |        |         |         |        |         |          |         | 158,244 |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Other current assets                                                                                                  |                                |                                                    | 18,513     |         |              |        | 1,541        |        |         |         |        |         |          |         | 20,054  |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Intercompany receivables                                                                                              |                                |                                                    | 65,174     |         |              |        |             |        |         |         | (65,174 | )       |          |         |        |        
|                                                   |                                                                                                                       |                                |                                                    |            |         |              |        |              |        |         |         |         |         |          |         |        
|                                                   |                                                                                                                       | Total current assets           |                                                    |            | 276,817 |              |        |              | 83,336 |         |         |         | (65,174 | )        |         |         | 294,979 |        
|                                                   |                                                                                                                       |                                |                                                    |            |         |              |        |              |        |         |         |         |         |          |         |        
|Property and equipment, net                        |                                                                                                                       |                                | 16,734                                             |            |         |              | 5,388  |              |        |         |        |         |         |          | 22,122  |        
|                                                  
|                                                  
|                                                  
|                                                  
|Goodwill and other intangible assets, net          |                                                                                                                       |                                | 50,472                                             |            |         |              | 47,221 |              |        |         |        |         |         |          | 97,693  |        
|                                                  
|                                                  
|                                                  
|                                                  
|Investment in subsidiaries                         |                                                                                                                       |                                | 66,589                                             |            |         |              |       |              |        |         | (66,589 | )       |         |          |        |        
|                                                  
|                                                  
|                                                  
|                                                  
|Other assets                                       |                                                                                                                       |                                | 17,214                                             |            |         |              | 560    |              |        |         |        |         |         |          | 17,774  |        
|                                                   |                                                                                                                       |                                |                                                    |            |         |              |        |              |        |         |         |         |         |          |         |        
|                                                   |                                                                                                                       |                                | Total assets                                       |            | $       | 427,826      |        |              | $      | 136,505 |         |         | $       | (131,763 | )       |         | $       | 432,568 | 
|                                                   |                                                                                                                       |                                |                                                    |            |         |              |        |              |        |         |         |         |         |          |         |        
|Liabilities and Stockholders
    Investment       |                                                                                                                       |                                |                                                    |            |         |              |        |              |        |         |         |         |         |          |         |        
|                                                  
|                                                  
|                                                  
|                                                  
|Current liabilities:                               |                                                                                                                       |                                |                                                    |            |         |              |        |              |        |         |         |         |         |          |         |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Accounts payable                                                                                                      |                                | $                                                  | 181,803    |         |              | $      | 126          |        |         | $       |        |         |          | $       | 181,929 |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Accrued expenses                                                                                                      |                                |                                                    | 14,104     |         |              |        | 3,112        |        |         |         |        |         |          |         | 17,216  |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Current maturities of long-term debt                                                                                  |                                |                                                    | 4,266      |         |              |        | 410          |        |         |         |        |         |          |         | 4,676   |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Intercompany payables                                                                                                 |                                |                                                    |           |         |              |        | 65,174       |        |         |         | (65,174 | )       |          |         |        |        
|                                                   |                                                                                                                       |                                |                                                    |            |         |              |        |              |        |         |         |         |         |          |         |        
|                                                   |                                                                                                                       | Total current liabilities      |                                                    |            | 200,173 |              |        |              | 68,822 |         |         |         | (65,174 | )        |         |         | 203,821 |        
|                                                   |                                                                                                                       |                                |                                                    |            |         |              |        |              |        |         |         |         |         |          |         |        
|Revolving credit facility and other long-term debt |                                                                                                                       |                                | 159,038                                            |            |         |              |       |              |        |         |        |         |         |          | 159,038 |        
|                                                  
|                                                  
|                                                  
|                                                  
|Series D Senior Notes                              |                                                                                                                       |                                | 28,600                                             |            |         |              |       |              |        |         |        |         |         |          | 28,600  |        
|                                                  
|                                                  
|                                                  
|                                                  
|Capital lease obligations                          |                                                                                                                       |                                | 15,018                                             |            |         |              |       |              |        |         |        |         |         |          | 15,018  |        
|                                                  
|                                                  
|                                                  
|                                                  
|Other liabilities                                  |                                                                                                                       |                                | 3,796                                              |            |         |              | 1,094  |              |        |         |        |         |         |          | 4,890   |        
|                                                  
|                                                  
|                                                  
|                                                  
|Redeemable preferred stock                         |                                                                                                                       |                                | 11,035                                             |            |         |              |       |              |        |         |        |         |         |          | 11,035  |        
|                                                  
|                                                  
|                                                  
|                                                  
|Stockholders investment:                          |                                                                                                                       |                                |                                                    |            |         |              |        |              |        |         |         |         |         |          |         |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Intercompany investment                                                                                               |                                |                                                    |           |         |              |        | 76,633       |        |         |         | (76,633 | )       |          |         |        |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Preferred stock                                                                                                       |                                |                                                    | 43,580     |         |              |        |             |        |         |         |        |         |          |         | 43,580  |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Common stock, par value $.01 per share;
    50,000,000 shares authorized; 5,086,917 shares issued and
    outstanding |                                |                                                    | 51         |         |              |        |             |        |         |         |        |         |          |         | 51      |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Additional paid-in capital                                                                                            |                                |                                                    | 22,388     |         |              |        |             |        |         |         |        |         |          |         | 22,388  |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Warrants                                                                                                              |                                |                                                    | 1,759      |         |              |        |             |        |         |         |        |         |          |         | 1,759   |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Notes receivable from sale of stock                                                                                   |                                |                                                    | (17        | )       |              |        |             |        |         |         |        |         |          |         | (17     | )      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Accumulated deficit                                                                                                   |                                |                                                    | (57,595    | )       |              |        | (10,044      | )      |         |         | 10,044  |         |          |         | (57,595 | )      
|                                                   |                                                                                                                       |                                |                                                    |            |         |              |        |              |        |         |         |         |         |          |         |        
|                                                   |                                                                                                                       | Total stockholders investment |                                                    |            | 10,166  |              |        |              | 66,589 |         |         |         | (66,589 | )        |         |         | 10,166  |        
|                                                   |                                                                                                                       |                                |                                                    |            |         |              |        |              |        |         |         |         |         |          |         |        
|                                                   |                                                                                                                       |                                | Total liabilities and stockholders
    investment |            | $       | 427,826      |        |              | $      | 136,505 |         |         | $       | (131,763 | )       |         | $       | 432,568 | 
|                                                   |                                                                                                                       |                                |                                                    |            |         |              |        |              |        |         |         |         |         |          |         |        

11



---



##### Table of Contents



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

|                                                   |                                                                                                                       |                                |                                                    |            |         |             |        |              |        |         |         |         |         |          |         |         |         |         | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | ------------------------------ | -------------------------------------------------- | ---------- | ------- | ----------- | ------ | ------------ | ------ | ------- | ------- | ------- | ------- | -------- | ------- | ------- | ------- | ------- | 
|                                                   |                                                                                                                       |                               
|                                                   |                                                                                                                       | As of December 29, 2001       
|                                                   |                                                                                                                       |                               
|                                                   |                                                                                                                       | Parent                         |                                                    | Subsidiary |         |            
|                                                   |                                                                                                                       | Company                        |                                                    | Guarantors |         | Elimination |        | Consolidated
|                                                   |                                                                                                                       |                                |                                                    |            |         |             |        |             
|Assets                                             |                                                                                                                       |                                |                                                    |            |         |             |        |              |        |         |         |         |         |          |         |        
|                                                  
|                                                  
|                                                  
|                                                  
|Current assets:                                    |                                                                                                                       |                                |                                                    |            |         |             |        |              |        |         |         |         |         |          |         |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Cash and cash equivalents                                                                                             |                                | $                                                  | 3,423      |         |             | $      | 708          |        |         | $       |        |         |          | $       | 4,131   |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Accounts receivable, net                                                                                              |                                |                                                    | 67,368     |         |             |        | 26,253       |        |         |         |        |         |          |         | 93,621  |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Inventories                                                                                                           |                                |                                                    | 105,296    |         |             |        | 48,916       |        |         |         |        |         |          |         | 154,212 |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Other current assets                                                                                                  |                                |                                                    | 33,835     |         |             |        | 4,380        |        |         |         |        |         |          |         | 38,215  |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Intercompany receivables                                                                                              |                                |                                                    | 65,072     |         |             |        |             |        |         |         | (65,072 | )       |          |         |        |        
|                                                   |                                                                                                                       |                                |                                                    |            |         |             |        |              |        |         |         |         |         |          |         |        
|                                                   |                                                                                                                       | Total current assets           |                                                    |            | 274,994 |             |        |              | 80,257 |         |         |         | (65,072 | )        |         |         | 290,179 |        
|                                                   |                                                                                                                       |                                |                                                    |            |         |             |        |              |        |         |         |         |         |          |         |        
|Property and equipment, net                        |                                                                                                                       |                                | 19,628                                             |            |         |             | 7,858  |              |        |         |        |         |         |          | 27,486  |        
|                                                  
|                                                  
|                                                  
|                                                  
|Goodwill and other intangible assets, net          |                                                                                                                       |                                | 50,543                                             |            |         |             | 48,568 |              |        |         |        |         |         |          | 99,111  |        
|                                                  
|                                                  
|                                                  
|                                                  
|Investment in subsidiaries                         |                                                                                                                       |                                | 66,350                                             |            |         |             |       |              |        |         | (66,350 | )       |         |          |        |        
|                                                  
|                                                  
|                                                  
|                                                  
|Other assets                                       |                                                                                                                       |                                | 24,032                                             |            |         |             | 2,212  |              |        |         |        |         |         |          | 26,244  |        
|                                                   |                                                                                                                       |                                |                                                    |            |         |             |        |              |        |         |         |         |         |          |         |        
|                                                   |                                                                                                                       |                                | Total assets                                       |            | $       | 435,547     |        |              | $      | 138,895 |         |         | $       | (131,422 | )       |         | $       | 443,020 | 
|                                                   |                                                                                                                       |                                |                                                    |            |         |             |        |              |        |         |         |         |         |          |         |        
|Liabilities and Stockholders
    Investment       |                                                                                                                       |                                |                                                    |            |         |             |        |              |        |         |         |         |         |          |         |        
|                                                  
|                                                  
|                                                  
|                                                  
|Current liabilities:                               |                                                                                                                       |                                |                                                    |            |         |             |        |              |        |         |         |         |         |          |         |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Accounts payable                                                                                                      |                                | $                                                  | 170,170    |         |             | $      | 401          |        |         | $       |        |         |          | $       | 170,571 |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Accrued expenses                                                                                                      |                                |                                                    | 17,628     |         |             |        | 3,015        |        |         |         |        |         |          |         | 20,643  |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Current maturities of long-term debt                                                                                  |                                |                                                    | 3,568      |         |             |        | 1,727        |        |         |         |        |         |          |         | 5,295   |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Intercompany payables                                                                                                 |                                |                                                    |           |         |             |        | 65,072       |        |         |         | (65,072 | )       |          |         |        |        
|                                                   |                                                                                                                       |                                |                                                    |            |         |             |        |              |        |         |         |         |         |          |         |        
|                                                   |                                                                                                                       | Total current liabilities      |                                                    |            | 191,366 |             |        |              | 70,215 |         |         |         | (65,072 | )        |         |         | 196,509 |        
|                                                   |                                                                                                                       |                                |                                                    |            |         |             |        |              |        |         |         |         |         |          |         |        
|Revolving credit facility and other long-term debt |                                                                                                                       |                                | 126,036                                            |            |         |             | 508    |              |        |         |        |         |         |          | 126,544 |        
|                                                  
|                                                  
|                                                  
|                                                  
|Series D Senior Notes                              |                                                                                                                       |                                | 150,000                                            |            |         |             |       |              |        |         |        |         |         |          | 150,000 |        
|                                                  
|                                                  
|                                                  
|                                                  
|Capital lease obligations                          |                                                                                                                       |                                | 1,163                                              |            |         |             | 183    |              |        |         |        |         |         |          | 1,346   |        
|                                                  
|                                                  
|                                                  
|                                                  
|Other liabilities                                  |                                                                                                                       |                                | 6,403                                              |            |         |             | 1,639  |              |        |         |        |         |         |          | 8,042   |        
|                                                  
|                                                  
|                                                  
|                                                  
|Redeemable preferred stock                         |                                                                                                                       |                                | 24,115                                             |            |         |             |       |              |        |         |        |         |         |          | 24,115  |        
|                                                  
|                                                  
|                                                  
|                                                  
|Stockholders investment:                          |                                                                                                                       |                                |                                                    |            |         |             |        |              |        |         |         |         |         |          |         |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Intercompany investment                                                                                               |                                |                                                    |           |         |             |        | 76,634       |        |         |         | (76,634 | )       |          |         |        |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Common stock, par value $.01 per share;
    15,000,000 shares authorized; 5,136,917 shares issued and
    outstanding |                                |                                                    | 51         |         |             |        |             |        |         |         |        |         |          |         | 51      |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Additional paid-in capital                                                                                            |                                |                                                    | 22,751     |         |             |        |             |        |         |         |        |         |          |         | 22,751  |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Warrants                                                                                                              |                                |                                                    | 1,137      |         |             |        |             |        |         |         |        |         |          |         | 1,137   |        
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Notes receivable from sale of stock                                                                                   |                                |                                                    | (340       | )       |             |        |             |        |         |         |        |         |          |         | (340    | )      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Accumulated deficit                                                                                                   |                                |                                                    | (87,135    | )       |             |        | (10,284      | )      |         |         | 10,284  |         |          |         | (87,135 | )      
|                                                   |                                                                                                                       |                                |                                                    |            |         |             |        |              |        |         |         |         |         |          |         |        
|                                                   |                                                                                                                       | Total stockholders investment |                                                    |            | (63,536 | )           |        |              | 66,350 |         |         |         | (66,350 | )        |         |         | (63,536 | )      
|                                                   |                                                                                                                       |                                |                                                    |            |         |             |        |              |        |         |         |         |         |          |         |        
|                                                   |                                                                                                                       |                                | Total liabilities and stockholders
    investment |            | $       | 435,547     |        |              | $      | 138,895 |         |         | $       | (131,422 | )       |         | $       | 443,020 | 
|                                                   |                                                                                                                       |                                |                                                    |            |         |             |        |              |        |         |         |         |         |          |         |        

12



---



##### Table of Contents



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

Condensed consolidated statements of operations for the six
months ended June 29, 2002 and June 30, 2001 are as follows:

|                                                                |                                      |                          |         |            |   |             |         |              |   |   |      |      |   |   |         |         |  
|--------------------------------------------------------------- | ------------------------------------ | ------------------------ | ------- | ---------- | - | ----------- | ------- | ------------ | - | - | ---- | ---- | - | - | ------- | ------- | -
|                                                                |                                      |                         
|                                                                |                                      | For the Six Months Ended
|                                                                |                                      | June 29, 2002           
|                                                                |                                      |                         
|                                                                |                                      | Parent                   |         | Subsidiary |   |            
|                                                                |                                      | Company                  |         | Guarantors |   | Elimination |         | Consolidated
|                                                                |                                      |                          |         |            |   |             |         |             
|Net sales                                                       |                                      | $                        | 385,926 |            |   | $           | 143,220 |              |   | $ |     |      |   | $ | 529,146 |        
|                                                               
|                                                               
|                                                               
|                                                               
|Cost of goods sold                                              |                                      |                          | 313,372 |            |   |             | 118,634 |              |   |   |     |      |   |   | 432,006 |        
|                                                                |                                      |                          |         |            |   |             |         |              |   |   |      |      |   |   |         |        
|                                                                | Gross profit                         |                          |         | 72,554     |   |             |         | 24,586       |   |   |      |     |   |   |         | 97,140  |  
|                                                               
|                                                               
|                                                               
|                                                               
|Selling, general and administrative expenses                    |                                      |                          | 59,773  |            |   |             | 24,248  |              |   |   |     |      |   |   | 84,021  |        
|                                                                |                                      |                          |         |            |   |             |         |              |   |   |      |      |   |   |         |        
|                                                                | Operating income                     |                          |         | 12,781     |   |             |         | 338          |   |   |      |     |   |   |         | 13,119  |  
|                                                               
|                                                               
|                                                               
|                                                               
|Other income (expense):                                         |                                      |                          |         |            |   |             |         |              |   |   |      |      |   |   |         |        
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Interest expense, net                |                          |         | (10,546    | ) |             |         | (62          | ) |   |      |     |   |   |         | (10,608 | )
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Other income, net                    |                          |         | 32         |   |             |         | 125          |   |   |      |     |   |   |         | 157     |  
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Equity in net income of subsidiaries |                          |         | 240        |   |             |         |             |   |   |      | (240 | ) |   |         |        |  
|                                                                |                                      |                          |         |            |   |             |         |              |   |   |      |      |   |   |         |        
|Income from continuing operations before income
    taxes       |                                      |                          | 2,507   |            |   |             | 401     |              |   |   | (240 | )    |   |   | 2,668   |        
|                                                               
|                                                               
|                                                               
|                                                               
|Provision for income taxes                                      |                                      |                          | 907     |            |   |             | 161     |              |   |   |     |      |   |   | 1,068   |        
|                                                                |                                      |                          |         |            |   |             |         |              |   |   |      |      |   |   |         |        
|Income from continuing operations before
    extraordinary item |                                      |                          | 1,600   |            |   |             | 240     |              |   |   | (240 | )    |   |   | 1,600   |        
|                                                               
|                                                               
|                                                               
|                                                               
|Loss on disposal of discontinued operations                     |                                      |                          | (328    | )          |   |             |        |              |   |   |     |      |   |   | (328    | )      
|                                                                |                                      |                          |         |            |   |             |         |              |   |   |      |      |   |   |         |        
|Income before extraordinary item                                |                                      |                          | 1,272   |            |   |             | 240     |              |   |   | (240 | )    |   |   | 1,272   |        
|                                                               
|                                                               
|                                                               
|                                                               
|Extraordinary gain on repurchase of Senior Notes                |                                      |                          | 29,855  |            |   |             |        |              |   |   |     |      |   |   | 29,855  |        
|                                                                |                                      |                          |         |            |   |             |         |              |   |   |      |      |   |   |         |        
|Net income                                                      |                                      | $                        | 31,127  |            |   | $           | 240     |              |   | $ | (240 | )    |   | $ | 31,127  |        
|                                                                |                                      |                          |         |            |   |             |         |              |   |   |      |      |   |   |         |        

|                                                        |                                    |                          |         |            |   |             |         |              |   |   |       |       |  |   |         |         |  
|------------------------------------------------------- | ---------------------------------- | ------------------------ | ------- | ---------- | - | ----------- | ------- | ------------ | - | - | ----- | ----- |  | - | ------- | ------- | -
|                                                        |                                    |                         
|                                                        |                                    | For the Six Months Ended
|                                                        |                                    | June 30, 2001           
|                                                        |                                    |                         
|                                                        |                                    | Parent                   |         | Subsidiary |   |            
|                                                        |                                    | Company                  |         | Guarantors |   | Elimination |         | Consolidated
|                                                        |                                    |                          |         |            |   |             |         |             
|Net sales                                               |                                    | $                        | 390,244 |            |   | $           | 179,388 |              |   | $ |      |       |  | $ | 569,632 |        
|                                                       
|                                                       
|                                                       
|                                                       
|Cost of goods sold                                      |                                    |                          | 317,271 |            |   |             | 142,563 |              |   |   |      |       |  |   | 459,834 |        
|                                                        |                                    |                          |         |            |   |             |         |              |   |   |       |       |  |   |         |        
|                                                        | Gross profit                       |                          |         | 72,973     |   |             |         | 36,825       |   |   |       |      |  |   |         | 109,798 |  
|                                                       
|                                                       
|                                                       
|                                                       
|Selling, general and administrative expenses            |                                    |                          | 66,059  |            |   |             | 39,578  |              |   |   |      |       |  |   | 105,637 |        
|                                                        |                                    |                          |         |            |   |             |         |              |   |   |       |       |  |   |         |        
|                                                        | Operating income (loss)            |                          |         | 6,914      |   |             |         | (2,753       | ) |   |       |      |  |   |         | 4,161   |  
|                                                       
|                                                       
|                                                       
|                                                       
|Other income (expense):                                 |                                    |                          |         |            |   |             |         |              |   |   |       |       |  |   |         |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Interest expense, net              |                          |         | (14,892    | ) |             |         | (91          | ) |   |       |      |  |   |         | (14,983 | )
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Other income, net                  |                          |         | 387        |   |             |         | 316          |   |   |       |      |  |   |         | 703     |  
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | Equity in net loss of subsidiaries |                          |         | (2,944     | ) |             |         |             |   |   |       | 2,944 |  |   |         |        |  
|                                                        |                                    |                          |         |            |   |             |         |              |   |   |       |       |  |   |         |        
|Loss from continuing operations before income
    taxes |                                    |                          | (10,535 | )          |   |             | (2,528  | )            |   |   | 2,944 |       |  |   | (10,119 | )      
|                                                       
|                                                       
|                                                       
|                                                       
|Benefit for income taxes                                |                                    |                          | (450    | )          |   |             | (353    | )            |   |   |      |       |  |   | (803    | )      
|                                                        |                                    |                          |         |            |   |             |         |              |   |   |       |       |  |   |         |        
|Loss from continuing operations                         |                                    |                          | (10,085 | )          |   |             | (2,175  | )            |   |   | 2,944 |       |  |   | (9,316  | )      
|                                                       
|                                                       
|                                                       
|                                                       
|Loss from discontinued operations                       |                                    |                          |        |            |   |             | (769    | )            |   |   |      |       |  |   | (769    | )      
|                                                       
|                                                       
|                                                       
|                                                       
|Loss from disposal of discontinued operations           |                                    |                          | (11,166 | )          |   |             |        |              |   |   |      |       |  |   | (11,166 | )      
|                                                        |                                    |                          |         |            |   |             |         |              |   |   |       |       |  |   |         |        
|Net loss                                                |                                    | $                        | (21,251 | )          |   | $           | (2,944  | )            |   | $ | 2,944 |       |  | $ | (21,251 | )      
|                                                        |                                    |                          |         |            |   |             |         |              |   |   |       |       |  |   |         |        

13



---



##### Table of Contents



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

Condensed consolidated statements of cash flows for the six
months ended June 29, 2002 and June 30, 2001 are as follows:

|                                                                         |                                                                                                 |                                                                         |                                                          |            |         |             |      |              |        |      |   |      |     |   |         |        |         |         |  
|------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | -------------------------------------------------------- | ---------- | ------- | ----------- | ---- | ------------ | ------ | ---- | - | ---- | --- | - | ------- | ------ | ------- | ------- | -
|                                                                         |                                                                                                 |                                                                        
|                                                                         |                                                                                                 | For the Six Months Ended                                               
|                                                                         |                                                                                                 | June 29, 2002                                                          
|                                                                         |                                                                                                 |                                                                        
|                                                                         |                                                                                                 | Parent                                                                  |                                                          | Subsidiary |         |            
|                                                                         |                                                                                                 | Company                                                                 |                                                          | Guarantors |         | Elimination |      | Consolidated
|                                                                         |                                                                                                 |                                                                         |                                                          |            |         |             |      |             
|Cash flows from operating
    activities:                                |                                                                                                 |                                                                         |                                                          |            |         |             |      |              |        |      |   |      |     |   |         |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Net income                                                                                      |                                                                         | $                                                        | 31,127     |         |             | $    | 240          |        |      | $ | (240 | )   |   | $       | 31,127 |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Adjustments to reconcile net income to net cash
    provided by (used in) operating activities: |                                                                         |                                                          |            |         |             |      |              |        |      |   |      |     |   |         |        |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                                 | Loss on disposal of discontinued operations                             |                                                          |            | 328     |             |      |              |       |      |   |      |    |   |         |        | 328     |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                                 | Extraordinary gain                                                      |                                                          |            | (29,855 | )           |      |              |       |      |   |      |    |   |         |        | (29,855 | )      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                                 | Depreciation and amortization of other
    intangibles and other assets |                                                          |            | 2,594   |             |      |              | 2,235  |      |   |      |    |   |         |        | 4,829   |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                                 | Other, net                                                              |                                                          |            | (6,009  | )           |      |              | 3,778  |      |   |      |    |   |         |        | (2,231  | )      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                                 | Equity in net income of subsidiary                                      |                                                          |            | (240    | )           |      |              |       |      |   |      | 240 |   |         |        |        |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Change in operating assets and liabilities:                                                     |                                                                         |                                                          |            |         |             |      |              |        |      |   |      |     |   |         |        |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                                 | Accounts receivable, net                                                |                                                          |            | (14,060 | )           |      |              | (4,700 | )    |   |      |    |   |         |        | (18,760 | )      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                                 | Inventories                                                             |                                                          |            | (2,732  | )           |      |              | (1,300 | )    |   |      |    |   |         |        | (4,032  | )      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                                 | Other current assets                                                    |                                                          |            | 2,430   |             |      |              | 263    |      |   |      |    |   |         |        | 2,693   |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                                 | Accounts payable and accrued expenses                                   |                                                          |            | 7,440   |             |      |              | (245   | )    |   |      |    |   |         |        | 7,195   |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                                 | Other, net                                                              |                                                          |            | (3,193  | )           |      |              | (225   | )    |   |      |    |   |         |        | (3,418  | )      
|                                                                         |                                                                                                 |                                                                         |                                                          |            |         |             |      |              |        |      |   |      |     |   |         |       
|                                                                         |                                                                                                 |                                                                         | Net cash provided by (used in) continuing
    operations |            |         | (12,170     | )    |              |        | 46   |   |      |     |  |         |        |         | (12,124 | )
|                                                                         |                                                                                                 |                                                                         |                                                          |            |         |             |      |              |        |      |   |      |     |   |         |       
|Cash flows from investing
    activities:                                |                                                                                                 |                                                                         |                                                          |            |         |             |      |              |        |      |   |      |     |   |         |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Purchase of property and equipment                                       |                                                                                                 |                                                                         | (456                                                     | )          |         |             | (171 | )            |        |      |  |      |     |   | (627    | )     
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Proceeds from sale of property and equipment                             |                                                                                                 |                                                                         | 1,383                                                    |            |         |             | 575  |              |        |      |  |      |     |   | 1,958   |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Other, net                                                               |                                                                                                 |                                                                         | (92                                                      | )          |         |             |     |              |        |      |  |      |     |   | (92     | )     
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Intercompany                                                             |                                                                                                 |                                                                         | (102                                                     | )          |         |             | 102  |              |        |      |  |      |     |   |        |       
|                                                                         |                                                                                                 |                                                                         |                                                          |            |         |             |      |              |        |      |   |      |     |   |         |       
|                                                                         |                                                                                                 | Net cash provided by investing activities                               |                                                          |            | 733     |             |      |              | 506    |      |   |      |    |   |         |        | 1,239   |        
|                                                                         |                                                                                                 |                                                                         |                                                          |            |         |             |      |              |        |      |   |      |     |   |         |       
|Cash flows from financing
    activities:                                |                                                                                                 |                                                                         |                                                          |            |         |             |      |              |        |      |   |      |     |   |         |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Net proceeds from revolving credit facility and
    other long-term debt |                                                                                                 |                                                                         | 36,899                                                   |            |         |             |     |              |        |      |  |      |     |   | 36,899  |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Repurchase of Series D Senior Notes                                      |                                                                                                 |                                                                         | (64,959                                                  | )          |         |             |     |              |        |      |  |      |     |   | (64,959 | )     
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Net proceeds from sale-leaseback transaction                             |                                                                                                 |                                                                         | 13,285                                                   |            |         |             |     |              |        |      |  |      |     |   | 13,285  |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Proceeds received from issuance of preferred stock                       |                                                                                                 |                                                                         | 28,913                                                   |            |         |             |     |              |        |      |  |      |     |   | 28,913  |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Principal payments on other long-term debt                               |                                                                                                 |                                                                         | (2,275                                                   | )          |         |             | (634 | )            |        |      |  |      |     |   | (2,909  | )     
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Cash paid for stock repurchase                                           |                                                                                                 |                                                                         | (40                                                      | )          |         |             |     |              |        |      |  |      |     |   | (40     | )     
|                                                                         |                                                                                                 |                                                                         |                                                          |            |         |             |      |              |        |      |   |      |     |   |         |       
|                                                                         |                                                                                                 |                                                                         | Net cash provided by (used in) financing
    activities  |            |         | 11,823      |      |              |        | (634 | ) |      |     |  |         |        |         | 11,189  |  
|                                                                         |                                                                                                 |                                                                         |                                                          |            |         |             |      |              |        |      |   |      |     |   |         |       
|Net increase (decrease) in cash and cash
    equivalents                 |                                                                                                 |                                                                         | 386                                                      |            |         |             | (82  | )            |        |      |  |      |     |   | 304     |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Cash and cash equivalents, beginning of period                           |                                                                                                 |                                                                         | 3,423                                                    |            |         |             | 708  |              |        |      |  |      |     |   | 4,131   |       
|                                                                         |                                                                                                 |                                                                         |                                                          |            |         |             |      |              |        |      |   |      |     |   |         |       
|Cash and cash equivalents, end of period                                 |                                                                                                 | $                                                                       | 3,809                                                    |            |         | $           | 626  |              |        | $    |  |      |     | $ | 4,435   |       
|                                                                         |                                                                                                 |                                                                         |                                                          |            |         |             |      |              |        |      |   |      |     |   |         |       

14



---



##### Table of Contents



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

|                                                                         |                                                                                 |                                                                                   |                                                         |            |         |             |        |              |         |        |   |       |        |   |        |         |         |         |  
|------------------------------------------------------------------------ | ------------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------------- | ---------- | ------- | ----------- | ------ | ------------ | ------- | ------ | - | ----- | ------ | - | ------ | ------- | ------- | ------- | -
|                                                                         |                                                                                 |                                                                                  
|                                                                         |                                                                                 | For the Six Months Ended                                                         
|                                                                         |                                                                                 | June 30, 2001                                                                    
|                                                                         |                                                                                 |                                                                                  
|                                                                         |                                                                                 | Parent                                                                            |                                                         | Subsidiary |         |            
|                                                                         |                                                                                 | Company                                                                           |                                                         | Guarantors |         | Elimination |        | Consolidated
|                                                                         |                                                                                 |                                                                                   |                                                         |            |         |             |        |             
|Cash flows from operating
    activities:                                |                                                                                 |                                                                                   |                                                         |            |         |             |        |              |         |        |   |       |        |   |        |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Net loss                                                                        |                                                                                   | $                                                       | (21,251    | )       |             | $      | (2,944       | )       |        | $ | 2,944 |        |   | $      | (21,251 | )      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Adjustments to reconcile net loss to net cash
    used in operating activities: |                                                                                   |                                                         |            |         |             |        |              |         |        |   |       |        |   |        |         |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                 | Loss on disposal of discontinued operations                                       |                                                         |            | 11,166  |             |        |              |        |        |   |       |       |   |        |         | 11,166  |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                 | Loss from discontinued operations                                                 |                                                         |            |        |             |        |              | 769     |        |   |       |       |   |        |         | 769     |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                 | Depreciation and amortization of goodwill, other
    intangibles and other assets |                                                         |            | 5,105   |             |        |              | 4,235   |        |   |       |       |   |        |         | 9,340   |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                 | Other, net                                                                        |                                                         |            | (97     | )           |        |              | 55      |        |   |       |       |   |        |         | (42     | )      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                 | Equity in net loss of subsidiaries                                                |                                                         |            | 2,944   |             |        |              |        |        |   |       | (2,944 | ) |        |         |        |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Change in operating assets and liabilities:                                     |                                                                                   |                                                         |            |         |             |        |              |         |        |   |       |        |   |        |         |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                 | Accounts receivable, net                                                          |                                                         |            | (13,648 | )           |        |              | (10,527 | )      |   |       |       |   |        |         | (24,175 | )      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                 | Inventories                                                                       |                                                         |            | 14,723  |             |        |              | (6,442  | )      |   |       |       |   |        |         | 8,281   |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                 | Other current assets                                                              |                                                         |            | 1,022   |             |        |              | 833     |        |   |       |       |   |        |         | 1,855   |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                 | Accounts payable and accrued expenses                                             |                                                         |            | (8,266  | )           |        |              | 9,175   |        |   |       |       |   |        |         | 909     |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         |                                                                                 | Other, net                                                                        |                                                         |            | (78     | )           |        |              | (212    | )      |   |       |       |   |        |         | (290    | )      
|                                                                         |                                                                                 |                                                                                   |                                                         |            |         |             |        |              |         |        |   |       |        |   |        |        
|                                                                         |                                                                                 |                                                                                   | Net cash used in continuing operations                  |            |         | (8,380      | )      |              |         | (5,058 | ) |       |        |  |        |         |         | (13,438 | )
|                                                                         |                                                                                 |                                                                                   |                                                         |            |         |             |        |              |         |        |   |       |        |   |        |        
|                                                                         |                                                                                 |                                                                                   | Net cash provided by discontinued operations            |            |         |            |        |              |         | 63     |   |       |        |  |        |         |         | 63      |  
|                                                                         |                                                                                 |                                                                                   |                                                         |            |         |             |        |              |         |        |   |       |        |   |        |        
|Cash flows from investing
    activities:                                |                                                                                 |                                                                                   |                                                         |            |         |             |        |              |         |        |   |       |        |   |        |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Net proceeds from sale of discontinued operations                        |                                                                                 |                                                                                   | 9,285                                                   |            |         |             |       |              |         |        |  |       |        |   | 9,285  |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Acquisitions, net of cash acquired                                       |                                                                                 |                                                                                   | (885                                                    | )          |         |             |       |              |         |        |  |       |        |   | (885   | )      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Payments on deferred purchase price of acquired
    businesses           |                                                                                 |                                                                                   | (2,495                                                  | )          |         |             |       |              |         |        |  |       |        |   | (2,495 | )      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Purchase of property and equipment                                       |                                                                                 |                                                                                   | (2,445                                                  | )          |         |             | (1,710 | )            |         |        |  |       |        |   | (4,155 | )      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Proceeds from sale of property and equipment                             |                                                                                 |                                                                                   | 1,333                                                   |            |         |             | 32     |              |         |        |  |       |        |   | 1,365  |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Other, net                                                               |                                                                                 |                                                                                   | 42                                                      |            |         |             |       |              |         |        |  |       |        |   | 42     |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Intercompany                                                             |                                                                                 |                                                                                   | (8,787                                                  | )          |         |             | 8,787  |              |         |        |  |       |        |   |       |        
|                                                                         |                                                                                 |                                                                                   |                                                         |            |         |             |        |              |         |        |   |       |        |   |        |        
|                                                                         |                                                                                 |                                                                                   | Net cash provided by (used in) investing
    activities |            |         | (3,952      | )      |              |         | 7,109  |   |       |        |  |        |         |         | 3,157   |  
|                                                                         |                                                                                 |                                                                                   |                                                         |            |         |             |        |              |         |        |   |       |        |   |        |        
|Cash flows from financing
    activities:                                |                                                                                 |                                                                                   |                                                         |            |         |             |        |              |         |        |   |       |        |   |        |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Net proceeds from revolving credit facility and
    other long-term debt |                                                                                 |                                                                                   | 1,585                                                   |            |         |             |       |              |         |        |  |       |        |   | 1,585  |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Proceeds received from issuance of preferred stock                       |                                                                                 |                                                                                   | 12,000                                                  |            |         |             |       |              |         |        |  |       |        |   | 12,000 |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Principal payments on other long-term debt                               |                                                                                 |                                                                                   | (184                                                    | )          |         |             | (519   | )            |         |        |  |       |        |   | (703   | )      
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Other                                                                    |                                                                                 |                                                                                   | 15                                                      |            |         |             |       |              |         |        |  |       |        |   | 15     |        
|                                                                         |                                                                                 |                                                                                   |                                                         |            |         |             |        |              |         |        |   |       |        |   |        |        
|                                                                         |                                                                                 |                                                                                   | Net cash provided by (used in) financing
    activities |            |         | 13,416      |        |              |         | (519   | ) |       |        |  |        |         |         | 12,897  |  
|                                                                         |                                                                                 |                                                                                   |                                                         |            |         |             |        |              |         |        |   |       |        |   |        |        
|Net increase in cash and cash equivalents                                |                                                                                 |                                                                                   | 1,084                                                   |            |         |             | 1,595  |              |         |        |  |       |        |   | 2,679  |        
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Cash and cash equivalents, beginning of period                           |                                                                                 |                                                                                   | 3,518                                                   |            |         |             | (191   | )            |         |        |  |       |        |   | 3,327  |        
|                                                                         |                                                                                 |                                                                                   |                                                         |            |         |             |        |              |         |        |   |       |        |   |        |        
|Cash and cash equivalents, end of period                                 |                                                                                 | $                                                                                 | 4,602                                                   |            |         | $           | 1,404  |              |         | $      |  |       |        | $ | 6,006  |        
|                                                                         |                                                                                 |                                                                                   |                                                         |            |         |             |        |              |         |        |   |       |        |   |        |        

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|        |                                                                                           
|------- | ------------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations.

The following discussion and analysis of the results of
operations, financial condition and liquidity of the Company
should be read in conjunction with the financial statements and
related notes included in this report.

Results of Operations

Quarter Ended June 29, 2002 Compared to Quarter Ended
June 30, 2001

Consolidated net sales in the second quarter 2002 decreased by
$24.3 million, or 8.0%, from the second quarter 2001. The
decrease is attributable primarily to weaker consumer demand in
2002 versus 2001, as well as the sale of Winston Tire Company
(Winston) in second quarter 2001. Weaker consumer
demand in the current quarter is attributable to a slower
economy creating a more competitive environment. Units of
replacement passenger and light truck tires shipped for the
industry were down approximately 7.4% for the second quarter
2002 versus second quarter 2001.

Gross profit decreased by $8.9 million, or 15.3%, from the
second quarter 2001 due to the decrease in sales discussed
above, combined with a decrease in gross profit as a percentage
of sales which fell to 17.8% in the second quarter 2002 compared
to 19.3% in the second quarter 2001. Margin decreases are
primarily attributable to an increase in competitive activity as
the Companys primary competitors fight to hold market
share in a declining market.

Selling, general and administrative expenses decreased
$11.3 million in the second quarter 2002 representing 14.9%
as a percentage of sales compared to 17.5% in the second quarter
2001. The decrease in operating expenses is primarily due to
reduced employment levels throughout the Company.

Interest expense decreased $3.3 million in the second
quarter of 2002 to $4.3 million versus $7.6 million in
the second quarter of 2001. The decrease is attributable
primarily to reduced interest cost on the Companys
outstanding Series D Senior Notes.

EBITDA from continuing operations decreased to
$10.0 million for the second quarter 2002 from
$10.7 million for second quarter 2001. EBITDA includes
earnings from continuing operations before interest, taxes,
depreciation and amortization and should not be considered an
alternative to, or more meaningful than, net income or cash flow
as determined in accordance with generally accepted accounting
principles.

In the current quarter, the Company has recorded an additional
loss on disposal of discontinued operations of approximately
$0.2 million, net of income tax benefit of
$0.1 million, for a cumulative net loss on sale of
$14.1 million, of which $12.6 million was recognized
in 2001. The additional loss results primarily from settlement
of issues surrounding leases where the Company is a guarantor.

Six Months Ended June 29, 2002 Compared to Six Months
Ended June 30, 2001

Consolidated net sales decreased by $40.5 million, or 7.1%,
from the six-month period 2001. The sales decrease is partially
attributable to a decline in sales to Winston due to the sale of
Winston on May 15, 2001. Sales for the six-month period
2001 included $15.8 million of such sales. The remainder of
the decrease is attributable to a decline in sales in the second
quarter as discussed above. Units of replacement passenger and
light truck tires shipped for the industry were down
approximately 1.7% in the six-month period 2002 versus the
six-month period 2001.

Gross profit decreased by $12.7 million, or 11.5%, from the
six-month period in 2001. Gross profit as a percentage of sales
decreased to 18.4% in the six-month period 2002 compared to
19.3% in the six-month period of 2001. Margin decreases are
primarily attributed to an increase in competitive activity as
the Companys primary competitors fight to hold market
share in a declining market.

Selling, general and administrative expenses decreased by
$21.6 million in the six-month period ending June 29,
2002 representing 15.9% as a percentage of sales compared to
18.5% in the six-month period ending June 30, 2001.
Decreased operating expenses were primarily a direct result of
reduced employment levels and

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Interest expense decreased in the six-month period ending
June 29, 2002 by $4.4 million to $10.6 million
due to lower interest costs related to the Companys
Series D Senior Notes.

In the six-month period ending June 29, 2002, the Company
recorded an additional loss on disposal of discontinued
operations of approximately $0.3 million, net of income tax
benefit of $0.2 million, for a cumulative net loss on sale
of $14.1 million of which $12.6 million was recognized
in 2001. The majority of the 2002 charges relate to the
settlement of issues surrounding leases guaranteed by the
Company.

EBITDA from continuing operations increased $3.8 million to
$17.4 million in the six-month period 2002 compared to
$13.6 million in the six-month period 2001. The increase is
primarily due to reduced operating costs in 2002 that are
partially offset by a decrease in gross profit as discussed
above.

Liquidity and Capital Resources

At June 29, 2002, the combined net indebtedness (net of
cash) of the Company was $187.9 million compared to
$287.3 million at June 30, 2001 and
$277.7 million at December 29, 2001. Total commitments
by the lenders under the Companys revolving credit
facility (Revolver) were $180.0 million at
June 29, 2002, of which $19.9 million was available
for additional borrowings.

Net working capital at June 29, 2002 totaled
$91.2 million compared to $93.7 million at
December 29, 2001, a decrease of $2.5 million. The
decrease in working capital is primarily attributable to a
decrease in deferred tax assets as a result of the extraordinary
gain on the repurchase of the Series D Senior Notes
partially offset by an increase in accounts receivable.

The Company used $12.1 million of cash in operating activities
for the six months ended June 29, 2002 compared to $13.4
million for the comparable period in the prior year. The cash
used in 2002 related principally to increases in accounts
receivable and inventories which were partially offset by an
increase in accounts payable. Cash used in 2001 related
principally to the loss from continuing operations and an
increase in accounts receivable partially offset by a decrease
in inventories.

Capital expenditures for the six-months ended June 29, 2002
and June 30, 2001 amounted to $0.6 million and
$4.2 million, respectively. Capital expenditures in 2002
included warehouse racking and computer system upgrades.

On March 18, 2002, the Company and its lenders executed an
amendment to the revolving credit facility
(Revolver) to, among other things, amend the
financial covenants contained therein, change the rate at which
borrowings thereunder bear interest and amend certain
definitions contained therein. In addition, the amended facility
provides for additional availability due in part to a reduction
in the minimum availability reserve (as defined in the
agreement). The minimum availability reserve will begin to
increase by $0.5 million in August 2002 and will increase
each month until the reserve reaches the original amount in
August 2003. The amended agreement provides for borrowings in
the aggregate principal amount of up to the lesser of
$180.0 million or the Borrowing Base, as defined in the
agreement, which is based on 85% of eligible accounts
receivable, the lesser of 65% of eligible tire inventory plus
65% of certain secured tire inventory (within limitations as
defined in the agreement) or $90 million and the lesser of
50% of all other eligible inventory or $35 million less
defined reserves. A nonrefundable fee of approximately
$0.5 million was charged in connection with this amendment.

The Revolver term expires in March 2005, extendable by the
Company and the banks for an additional five years. Borrowings
under the Revolver bear interest, at (i) the Base Rate, as
defined, plus the applicable margin (2.0% as of June 29,
2002) or (ii) the Eurodollar Rate, as defined, plus the
applicable margin (3.5% as of June 29, 2002). As a result
of the amendment, the applicable margins as of April 1,
2002 for Eurodollar Rate loans were increased to 3.5%. These
margins are subject to performance-based step-downs resulting in
margins ranging from 0.75% to 2.0% for Base Rate loans and 2.0%
to 3.5% for Eurodollar Rate loans, respectively.

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##### Table of Contents



The Revolver, as amended, requires the Company to meet certain
financial requirements, including minimum EBITDA, fixed charge
coverage and tangible capital funds, all as defined, and minimum
loan availability and certain covenants which, among other
things, restrict the ability of the Company to incur additional
indebtedness; enter into guarantees; make loans and investments;
make capital expenditures; declare dividends; engage in mergers,
consolidations and asset sales; enter into transactions with
affiliates; create liens and encumbrances; enter into
sale/leaseback transactions; modify material agreements; and
change the business it conducts. As of August 12, 2002, the
Companys financial measures were in excess of the minimums
required, as amended, and management expects that such amounts
will remain above the minimums for the foreseeable future. The
Companys obligations under the Revolver are secured by all
inventories and accounts receivable.

On February 5, 2002, the Company commenced an offer (as
amended, the Offer) to purchase its outstanding 10%
Series D Senior Notes (Senior Notes) due in
2008. The Offer contemplated the purchase by the Company of up
to $126 million in aggregate principal amount of
outstanding Senior Notes at a purchase price of not less than
$450 nor greater than $535 per $1,000 in outstanding principal
amount plus accrued but unpaid interest to but excluding the
payment date. Concurrently with the Offer, the Company solicited
consents to the amendment of certain covenants contained in the
Indenture governing the Senior Notes, dated as December 1,
1998 (as amended and supplemented from time to time, the
Indenture), among the Company, the Subsidiary
Guarantors from time to time party thereto (the Subsidiary
Guarantors) and First Union National Bank, as trustee (the
Trustee).

On March 27, 2002, the Company completed the Offer and
repurchased $121.4 million in outstanding principal amount
of the Senior Notes at a purchase price of $535 per $1,000 in
face amount of Senior Notes, plus accrued and unpaid interest of
$4.5 million. The Company funded the repurchase of the
Senior Notes through several debt restructuring transactions
(Restructuring Transactions). The Restructuring
Transactions consisted of (i) an amendment to the
Companys revolving credit facility to provide additional
availability, (ii) a sale and leaseback of three of the
Companys tire distribution warehouses generating cash
proceeds of $13.9 million and (iii) an equity
investment of $28.9 million from the issuance of
9,637,592 shares of Series D preferred stock to the
Companys existing stockholders. Concurrently with the
repurchase of the Senior Notes, the Company, the Subsidiary
Guarantors and the Trustee executed the Fourth Supplemental
Indenture to the Indenture. The amendments to the Indenture were
effected primarily to permit the Restructuring Transactions and
make other required modifications.

The Company anticipates that its principal use of cash going
forward will be to meet working capital and debt service
requirements and to make capital expenditures (expected to be
approximately $1.4 million for the remainder of the year).
Based upon current and anticipated levels of operations, the
Company believes that its cash flow from operations, together
with amounts available under the Revolver, will be adequate to
meet its anticipated requirements. There can be no assurance,
however, that the Companys business will continue to
generate sufficient cash flow from operations in the future to
meet these requirements or to service its debt, and the Company
may be required to refinance all or a portion of its existing
debt, or to obtain additional financing. These increased
borrowings may result in higher interest payments. In addition,
there can be no assurance that any such refinancing would be
possible or that any additional financing could be obtained. The
inability to obtain additional financing could have a material
adverse effect on the Company.

Income Taxes

The Company has deferred tax assets of $24.5 million and
$44.0 million at June 29, 2002 and December 29,
2001, respectively. The decrease in net deferred tax assets is
primarily attributable to the utilization of net operating loss
carryforwards as it relates to the extraordinary gain on
retirement of the Series D Senior Notes and from net income
generated from continuing operations through June 29, 2002.
Management has evaluated the Companys deferred tax assets
and has concluded that the realizability of the deferred tax
assets is more likely than not, except as it relates
to certain state net operating loss carryforwards. Accordingly,
a valuation allowance of $2.0 million has been provided.
This evaluation considered the historical and long-term expected
profitability of the Companys continuing operations and
the efficiencies realized in the Companys operating cost
structure over the past year. The Companys ability to

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New Accounting Pronouncements

In April 2002, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 145, Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement
No. 13, and Technical Corrections as of April 2002.
This statement contains a number of changes under existing GAAP,
including the elimination of extraordinary item classification
of debt extinguishments that was previously required under
SFAS 4. The provisions of this Statement related to the
rescission of Statement 4 shall be applied in fiscal years
beginning after May 15, 2002 with early adoption encouraged.

In June 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities. This Statement addresses financial accounting
and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force
(EITF) Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a
Restructuring). The principal difference between this
Statement and Issue 94-3 relates to its requirements for
recognition of a liability for a cost associated with an exit or
disposal activity. This Statement requires that a liability for
a cost associated with an exit or disposal activity be
recognized when the liability is incurred. Under Issue 94-3, a
liability for an exit cost as defined in Issue 94-3 was
recognized at the date of an entitys commitment to an exit
plan. The provisions of this Statement are effective for exit or
disposal activities that are initiated after December 31,
2002, with early application encouraged. The Company does not
expect that adoption of this statement will have a material
impact on the results of operations or financial position in the
foreseeable future.

Cautionary Statement on Forward-Looking Information

This report contains forward-looking statements,
which are statements other than statements of historical facts.
These forward-looking statements use phrases such as
expects or anticipates. The
forward-looking statements include, among other things, the
Companys expectations and estimates about its business
operations, strategy, and its expectations and estimates about
its future financial performance, including its financial
position, cash flows from operations, capital expenditures and
ability to refinance indebtedness. The forward-looking
statements in this Form 10-Q are intended to be subject to
the safe harbor protection provided by the federal securities
laws.

The forward-looking statements are subject to risks,
uncertainties and assumptions about the Company and about the
future, and could prove not to be correct. Cautionary statements
describing factors that could cause actual results to differ
materially from the Companys expectations are discussed in
this report, including in conjunction with the forward-looking
statements included in this report. All subsequent written or
oral forward-looking statements attributable to the Company or
to persons acting on behalf of the Company are expressly
qualified in their entirety by those cautionary statements.

The Company undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of
new information, future events or otherwise. In light of these
risks, uncertainties and assumptions, the forward-looking events
discussed in this report may not occur.






|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosure about Market
    Risk.

For the period ended June 29, 2002, the Company did not
experience any material changes from the quantitative and
qualitative disclosures about market risk presented in the
Companys Report on Form 10-K for the fiscal year
ended December 29, 2001.

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##### Table of Contents






PART II.     OTHER
INFORMATION






|        |                   
|------- | ------------------
|Item 1. | Legal Proceedings.

There have been no material developments in legal proceedings
involving the Company since those reported in the Companys
Report on Form 10-K for the fiscal year ended
December 29, 2001.






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

(a) Exhibits

|     |  |                                                                                                        
|---- |  | -------------------------------------------------------------------------------------------------------
|3.1  |  | Third Restated Certificate of Incorporation of
    American Tire Distributors, Inc.                    
|99.1 |  | Certification of Chief Executive Officer pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002.
|99.2 |  | Certification of Chief Financial Officer pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002.



| |     |                    
| | --- | -------------------
| | (b) | Reports on Form 8-K

Report on Form 8-K was filed on June 18, 2002 related
to the change in registrants certifying accountant.

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SIGNATURES

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

Date: August 12, 2002

| |                                 
| | --------------------------------
| | AMERICAN TIRE DISTRIBUTORS, INC.



| |     |                     
| | --- | --------------------
| | By: | /s/ WILLIAM E. BERRY

| |                                 
| | --------------------------------
| |                                 
| | William E. Berry                
| | Executive Vice President and    
| | Chief Financial Officer         
| | (On behalf of the Registrant and
| | as Principal Financial Officer) 

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