##### 









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
    September 27, 2003                                       
|    
|     |  | 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

Indicate by a check mark whether the registrant
is an accelerated filer (as defined in Rule 12b-2 of the
Exchange
Act).     Yes o     No x

Number of common shares outstanding at
November 12, 2003: 5,086,917



---






---



##### 



TABLE OF CONTENTS

|         |         |                       |                                                                                           |                                                                                                                                      |    |      |   |  | 
|-------- | ------- | --------------------- | ----------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------ | -- | ---- | - |  | 
|         |         |                       |                                                                                           |                                                                                                                                      |    | Page
|         |         |                       |                                                                                           |                                                                                                                                      |    |     
|PART I.  |         | FINANCIAL INFORMATION |                                                                                           |                                                                                                                                      |    |     
|        
|         | ITEM 1. |                       | Financial Statements                                                                      |                                                                                                                                      |    |      |  
|         |         |                       |                                                                                           | Condensed Consolidated Balance Sheets 
    September 27, 2003 (unaudited) and December 28, 2002                                     |    |      | 1 | 
|         |         |                       |                                                                                           | Consolidated Statements of Operations
    (unaudited)  Quarters and Nine Months Ended
    September 27, 2003 and September 28, 2002 |    |      | 2 | 
|         |         |                       |                                                                                           | Consolidated Statements of Cash Flows
    (unaudited)  Nine Months Ended September 27,
    2003 and September 28, 2002              |    |      | 3 | 
|         |         |                       |                                                                                           | Notes to Consolidated Financial Statements                                                                                           |    |      | 4 | 
|        
|         | ITEM 2. |                       | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |                                                                                                                                      |    | 17   |  
|        
|         | ITEM 3. |                       | Quantitative and Qualitative Disclosures about
    Market Risk                            |                                                                                                                                      |    | 21   |  
|        
|         | ITEM 4. |                       | Controls and Procedures                                                                   |                                                                                                                                      |    | 21   |  
|        
|PART II. |         | OTHER INFORMATION     |                                                                                           |                                                                                                                                      |    |     
|        
|         | ITEM 1. |                       | Legal Proceedings                                                                         |                                                                                                                                      |    | 22   |  
|        
|         | ITEM 6. |                       | Exhibits and Reports on Form 8-K                                                          |                                                                                                                                      |    | 22   |  
|        
|         |         | Signatures            |                                                                                           |                                                                                                                                      | 23 |     



---



##### 



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.



---



##### 



PART I.     FINANCIAL
INFORMATION



Item 1.     Financial
Statements.


American Tire Distributors, Inc.



Condensed Consolidated Balance Sheets 
September 27, 2003 and December 28, 2002


(in thousands, except share amounts)


|                                                   |                                                                                                                       |                            |                                            |                   |         |         |         |         |         |         | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ----------------- | ------- | ------- | ------- | ------- | ------- | ------- | 
|                                                   |                                                                                                                       | September 27, 2003         |                                            | December 28, 2002
|                                                   |                                                                                                                       |                            |                                            |                  
|                                                   |                                                                                                                       | (Unaudited)                |                                            |                  
|Assets                                             |                                                                                                                       |                            |                                            |                   |         |         |         |        
|Current assets:                                    |                                                                                                                       |                            |                                            |                   |         |         |         |        
|                                                   | Cash and cash equivalents                                                                                             |                            | $                                          | 3,710             |         |         | $       | 2,693   |        
|                                                   | Accounts receivable, net of allowances of $1,027
    and $1,231                                                       |                            |                                            | 110,773           |         |         |         | 94,674  |        
|                                                   | Inventories                                                                                                           |                            |                                            | 165,706           |         |         |         | 156,722 |        
|                                                   | Deferred income taxes                                                                                                 |                            |                                            | 623               |         |         |         | 3,785   |        
|                                                   | Other current assets                                                                                                  |                            |                                            | 11,759            |         |         |         | 11,899  |        
|                                                   |                                                                                                                       |                            |                                            |                   |         |         |         |        
|                                                   |                                                                                                                       | Total current assets       |                                            |                   | 292,571 |         |         |         | 269,773 |        
|                                                   |                                                                                                                       |                            |                                            |                   |         |         |         |        
|Property and equipment, net                        |                                                                                                                       |                            | 18,397                                     |                   |         |         | 20,634  |        
|Goodwill, net                                      |                                                                                                                       |                            | 93,940                                     |                   |         |         | 93,940  |        
|Other intangible assets, net                       |                                                                                                                       |                            | 2,430                                      |                   |         |         | 3,572   |        
|Deferred income taxes                              |                                                                                                                       |                            | 15,331                                     |                   |         |         | 18,440  |        
|Other assets                                       |                                                                                                                       |                            | 4,631                                      |                   |         |         | 4,911   |        
|                                                   |                                                                                                                       |                            |                                            |                   |         |         |         |        
|                                                   |                                                                                                                       |                            | Total assets                               |                   | $       | 427,300 |         |         | $       | 411,270 | 
|                                                   |                                                                                                                       |                            |                                            |                   |         |         |         |        
|Liabilities and Stockholders
    Equity           |                                                                                                                       |                            |                                            |                   |         |         |         |        
|Current liabilities:                               |                                                                                                                       |                            |                                            |                   |         |         |         |        
|                                                   | Accounts payable                                                                                                      |                            | $                                          | 176,576           |         |         | $       | 165,409 |        
|                                                   | Accrued expenses                                                                                                      |                            |                                            | 24,395            |         |         |         | 18,549  |        
|                                                   | Current maturities of long-term debt                                                                                  |                            |                                            | 2,394             |         |         |         | 2,742   |        
|                                                   |                                                                                                                       |                            |                                            |                   |         |         |         |        
|                                                   |                                                                                                                       | Total current liabilities  |                                            |                   | 203,365 |         |         |         | 186,700 |        
|                                                   |                                                                                                                       |                            |                                            |                   |         |         |         |        
|Revolving credit facility and other long-term debt |                                                                                                                       |                            | 139,339                                    |                   |         |         | 149,793 |        
|Series D Senior Notes                              |                                                                                                                       |                            | 28,600                                     |                   |         |         | 28,600  |        
|Capital lease obligations                          |                                                                                                                       |                            | 14,263                                     |                   |         |         | 14,709  |        
|Other liabilities                                  |                                                                                                                       |                            | 3,817                                      |                   |         |         | 3,944   |        
|Redeemable preferred stock (Note 10)               |                                                                                                                       |                            | 10,535                                     |                   |         |         | 11,035  |        
|Commitments and contingencies (Note 12)            |                                                                                                                       |                            |                                            |                   |         |         |         |        
|Stockholders equity:                              |                                                                                                                       |                            |                                            |                   |         |         |         |        
|                                                   | Preferred stock (Note 11)                                                                                             |                            |                                            | 49,717            |         |         |         | 46,035  |        
|                                                   | 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                                                                                                              |                            |                                            | 1,782             |         |         |         | 1,782   |        
|                                                   | Notes receivable from sale of stock                                                                                   |                            |                                            | (17               | )       |         |         | (17     | )      
|                                                   | Accumulated deficit                                                                                                   |                            |                                            | (46,540           | )       |         |         | (53,750 | )      
|                                                   |                                                                                                                       |                            |                                            |                   |         |         |         |        
|                                                   |                                                                                                                       | Total stockholders equity |                                            |                   | 27,381  |         |         |         | 16,489  |        
|                                                   |                                                                                                                       |                            |                                            |                   |         |         |         |        
|                                                   |                                                                                                                       |                            | Total liabilities and stockholders equity |                   | $       | 427,300 |         |         | $       | 411,270 | 
|                                                   |                                                                                                                       |                            |                                            |                   |         |         |         |        

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

1



---



##### 



American Tire Distributors, Inc.



Consolidated Statements of
Operations


(Unaudited)


(in thousands)


|                                                                                                    |                                             |                |         |                   |   |               |         |               |   |   |         |         |   |   |         |         |  
|--------------------------------------------------------------------------------------------------- | ------------------------------------------- | -------------- | ------- | ----------------- | - | ------------- | ------- | ------------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                                                    |                                             |                |         |                  
|                                                                                                    |                                             | Quarters Ended |         | Nine Months Ended
|                                                                                                    |                                             |                |         |                  
|                                                                                                    |                                             | September 27,  |         | September 28,     |   | September 27, |         | September 28,
|                                                                                                    |                                             | 2003           |         | 2002              |   | 2003          |         | 2002         
|                                                                                                    |                                             |                |         |                   |   |               |         |              
|Net sales                                                                                           |                                             | $              | 291,858 |                   |   | $             | 280,059 |               |   | $ | 835,187 |         |   | $ | 809,205 |        
|Cost of goods sold                                                                                  |                                             |                | 237,194 |                   |   |               | 228,663 |               |   |   | 681,465 |         |   |   | 660,669 |        
|                                                                                                    |                                             |                |         |                   |   |               |         |               |   |   |         |         |   |   |         |        
|                                                                                                    | Gross profit                                |                |         | 54,664            |   |               |         | 51,396        |   |   |         | 153,722 |   |   |         | 148,536 |  
|Selling, general and administrative expenses                                                        |                                             |                | 42,340  |                   |   |               | 41,794  |               |   |   | 125,009 |         |   |   | 125,815 |        
|                                                                                                    |                                             |                |         |                   |   |               |         |               |   |   |         |         |   |   |         |        
|                                                                                                    | Operating income                            |                |         | 12,324            |   |               |         | 9,602         |   |   |         | 28,713  |   |   |         | 22,721  |  
|                                                                                                    |                                             |                |         |                   |   |               |         |               |   |   |         |         |   |   |         |        
|Other income (expense):                                                                             |                                             |                |         |                   |   |               |         |               |   |   |         |         |   |   |         |        
|                                                                                                    | Interest expense                            |                |         | (3,110            | ) |               |         | (4,153        | ) |   |         | (10,796 | ) |   |         | (14,761 | )
|                                                                                                    | Gain on repurchase of Series D Senior Notes |                |         |                  |   |               |         |              |   |   |         |        |   |   |         | 49,759  |  
|                                                                                                    | Other income (expense), net                 |                |         | (17               | ) |               |         | 155           |   |   |         | 235     |   |   |         | 312     |  
|                                                                                                    |                                             |                |         |                   |   |               |         |               |   |   |         |         |   |   |         |        
|Income from continuing operations before income
    taxes                                           |                                             |                | 9,197   |                   |   |               | 5,604   |               |   |   | 18,152  |         |   |   | 58,031  |        
|Provision for income taxes                                                                          |                                             |                | 3,678   |                   |   |               | 2,241   |               |   |   | 7,260   |         |   |   | 23,213  |        
|                                                                                                    |                                             |                |         |                   |   |               |         |               |   |   |         |         |   |   |         |        
|Income from continuing operations                                                                   |                                             |                | 5,519   |                   |   |               | 3,363   |               |   |   | 10,892  |         |   |   | 34,818  |        
|Loss on disposal of discontinued operations, net
    of income tax benefit of $0, $24, $0 and $243. |                                             |                |        |                   |   |               | (36     | )             |   |   |        |         |   |   | (364    | )      
|                                                                                                    |                                             |                |         |                   |   |               |         |               |   |   |         |         |   |   |         |        
|Net income                                                                                          |                                             | $              | 5,519   |                   |   | $             | 3,327   |               |   | $ | 10,892  |         |   | $ | 34,454  |        
|                                                                                                    |                                             |                |         |                   |   |               |         |               |   |   |         |         |   |   |         |        

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

2



---



##### 



American Tire Distributors, Inc.



Consolidated Statements of Cash
Flows


(Unaudited)


(in thousands)


|                                                        |                                                                                                 |                                                                    |       |               |         |   |       |         |         |  
|------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | ----- | ------------- | ------- | - | ----- | ------- | ------- | -
|                                                        |                                                                                                 |                                                                   
|                                                        |                                                                                                 | Nine Months Ended                                                 
|                                                        |                                                                                                 |                                                                   
|                                                        |                                                                                                 | September 27,                                                      |       | September 28,
|                                                        |                                                                                                 | 2003                                                               |       | 2002         
|                                                        |                                                                                                 |                                                                    |       |              
|Cash flows from operating
    activities:               |                                                                                                 |                                                                    |       |               |         |   |       |        
|                                                        | Net income                                                                                      |                                                                    | $     | 10,892        |         |   | $     | 34,454  |        
|                                                        | Adjustments to reconcile net income to net cash
    provided by (used in) operating activities: |                                                                    |       |               |         |   |       |         |        
|                                                        |                                                                                                 | Loss on disposal of discontinued operations                        |       |               |        |   |       |         | 364     |  
|                                                        |                                                                                                 | Gain on repurchase of Series D Senior Notes                        |       |               |        |   |       |         | (49,759 | )
|                                                        |                                                                                                 | Depreciation and amortization of other intangibles                 |       |               | 4,920   |   |       |         | 6,228   |  
|                                                        |                                                                                                 | Amortization of other assets                                       |       |               | 906     |   |       |         | 995     |  
|                                                        |                                                                                                 | Deferred income taxes                                              |       |               | 6,271   |   |       |         | 20,983  |  
|                                                        |                                                                                                 | Other, net                                                         |       |               | 41      |   |       |         | 225     |  
|                                                        | Change in operating assets and liabilities:                                                     |                                                                    |       |               |         |   |       |         |        
|                                                        |                                                                                                 | Accounts receivable, net                                           |       |               | (16,099 | ) |       |         | (16,053 | )
|                                                        |                                                                                                 | Inventories                                                        |       |               | (8,984  | ) |       |         | 1,870   |  
|                                                        |                                                                                                 | Other current assets                                               |       |               | 140     |   |       |         | 3,347   |  
|                                                        |                                                                                                 | Accounts payable and accrued expenses                              |       |               | 17,013  |   |       |         | (4,003  | )
|                                                        |                                                                                                 | Other, net                                                         |       |               | (1,089  | ) |       |         | (3,910  | )
|                                                        |                                                                                                 |                                                                    |       |               |         |   |       |        
|                                                        |                                                                                                 | Net cash provided by (used in) continuing
    operating activities |       |               | 14,011  |   |       |         | (5,259  | )
|                                                        |                                                                                                 |                                                                    |       |               |         |   |       |        
|Cash flows from investing
    activities:               |                                                                                                 |                                                                    |       |               |         |   |       |        
|                                                        | Purchase of property and equipment                                                              |                                                                    |       | (1,315        | )       |   |       | (874    | )      
|                                                        | Proceeds from sale of property and equipment                                                    |                                                                    |       | 566           |         |   |       | 2,080   |        
|                                                        | Other, net                                                                                      |                                                                    |       | (50           | )       |   |       | (92     | )      
|                                                        |                                                                                                 |                                                                    |       |               |         |   |       |        
|                                                        |                                                                                                 | Net cash provided by (used in) investing
    activities            |       |               | (799    | ) |       |         | 1,114   |  
|                                                        |                                                                                                 |                                                                    |       |               |         |   |       |        
|Cash flows from financing
    activities:               |                                                                                                 |                                                                    |       |               |         |   |       |        
|                                                        | Net proceeds from (repayments of) revolving
    credit facility and other long-term debt        |                                                                    |       | (9,369        | )       |   |       | 32,749  |        
|                                                        | 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  |        
|                                                        | Principal payments on other long-term debt                                                      |                                                                    |       | (2,326        | )       |   |       | (4,612  | )      
|                                                        | Cash paid for Series A preferred stock
    redemption                                           |                                                                    |       | (500          | )       |   |       |        |        
|                                                        | Other, net                                                                                      |                                                                    |       |              |         |   |       | (40     | )      
|                                                        |                                                                                                 |                                                                    |       |               |         |   |       |        
|                                                        |                                                                                                 | Net cash provided by (used in) financing
    activities            |       |               | (12,195 | ) |       |         | 5,336   |  
|                                                        |                                                                                                 |                                                                    |       |               |         |   |       |        
|Net increase in cash and cash equivalents               |                                                                                                 |                                                                    | 1,017 |               |         |   | 1,191 |        
|Cash and cash equivalents, beginning of period          |                                                                                                 |                                                                    | 2,693 |               |         |   | 4,131 |        
|                                                        |                                                                                                 |                                                                    |       |               |         |   |       |        
|Cash and cash equivalents, end of period                |                                                                                                 | $                                                                  | 3,710 |               |         | $ | 5,322 |        
|                                                        |                                                                                                 |                                                                    |       |               |         |   |       |        
|Supplemental disclosures of cash flow
    information  |                                                                                                 |                                                                    |       |               |         |   |       |        
|                                                        | Cash payments for interest                                                                      |                                                                    | $     | 9,522         |         |   | $     | 13,942  |        
|                                                        |                                                                                                 |                                                                    |       |               |         |   |       |        
|                                                        | Cash payments for income taxes, net                                                             |                                                                    | $     | 1,119         |         |   | $     | 2,178   |        
|                                                        |                                                                                                 |                                                                    |       |               |         |   |       |        

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

3



---



##### 



American Tire Distributors, Inc.



Notes to Consolidated Financial
Statements


(Unaudited)


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.

2.     Basis of
Presentation:

The unaudited consolidated financial statements
have been prepared in accordance with the instructions to
Form 10-Q and therefore do not include all information and
footnotes necessary for a fair presentation of financial
position, results of operations, and changes in financial
position in conformity with generally accepted accounting
principles. In the opinion of the Company, 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. 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 28, 2002.
The results of the operations for the quarter and nine months
ended September 27, 2003 are subject to year-end audit
adjustments, and 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 April 2002, the Financial Accounting Standards
Board (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 most debt
extinguishments that was previously required under SFAS
No. 4. The provisions of this statement related to the
rescission of Statement 4 apply in fiscal years beginning after
May 15, 2002. The Company adopted the provisions of SFAS
No. 145 in the first quarter of fiscal year 2003, which
required reclassification of the Companys 2002
extraordinary gain (Note 9).

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). 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 (other than employee termination
benefits), as defined, was recognized at the date of an
entitys commitment to an exit plan. The provisions of SFAS
No. 146 are effective for exit or disposal activities that
are initiated after December 31, 2002, with early
application encouraged. The Company adopted the provisions of
SFAS No. 146 in the first quarter of fiscal year 2003. The
adoption of this statement had no material impact on the
Companys financial position or results of operations.

In November 2002, the FASB issued FASB
Interpretation No. (FIN) 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others  an
interpretation of FASB Statements No. 5, 57, and 107 and a
rescission of FASB Interpretation No. 34. FIN 45
elaborates on the disclosures to be made regarding obligations
under certain guarantees in interim and annual financial
statements. It also clarifies the requirement of a guarantor to
recognize a liability at the inception of the guarantee based on
the fair value of the obligation. The provisions relating to the
initial recognition and measurement of a liability are
applicable on a prospective basis for guarantees issued or

4



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

modified subsequent to December 31, 2002.
The disclosure requirements of FIN 45 are effective for interim
and annual financial statements for periods ending after
December 15, 2002. The Company adopted the disclosure
provisions of this statement effective December 15, 2002.
The liability recognition provisions of this statement were
adopted in the first quarter of fiscal year 2003 and had no
material impact on the Companys financial position or
results of operations.

In November 2002, the EITF reached a consensus on
Issue No. 02-16, Accounting by a Customer (Including
a Reseller) for Cash Considerations Received from a
Vendor. Issue No. 02-16 provides guidance on how cash
consideration received by a customer or reseller should be
classified in the customers statement of earnings. Issue
No. 02-16 is effective for all transactions with vendors
after December 31, 2002. The adoption of Issue No. 02-16
did not have a material impact on the Companys
consolidated financial position or results of operations.

In December 2002, the FASB issued SFAS
No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure, an
amendment of SFAS No. 123, Accounting for Stock-Based
Compensation. The transition guidance and annual
disclosure provisions are effective for fiscal years ending
after December 15, 2002 and the interim disclosure
provisions are effective for interim periods beginning after
December 15, 2002. This statement provides alternative
methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee
compensation. In addition, this statement amends the disclosure
requirements of SFAS No. 123 to require more prominent
disclosures in both annual and interim financial statements
regarding the method of accounting for stock-based employee
compensation and the effect of the method used on reported
results. At this time, the Company has not voluntarily adopted
the fair value method of accounting under SFAS No. 123, but is
required to provide certain pro forma disclosures, which are
presented below.

The Company accounts for stock option grants in
accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB
No. 25). Pursuant to APB No. 25, compensation
expense is recognized for financial reporting purposes using the
intrinsic value method over the vesting period. The amount of
compensation expense to be recognized is determined by the
excess of the fair value of common stock over the exercise price
of the related option at the date of grant. Accordingly, no
compensation expense has been recorded in the consolidated
statements of operations, as the exercise price of all stock
options was equal to fair value of the underlying common stock
at the date of grant.

The following information is presented as if the
Company had accounted for its employee stock options under the
fair value method prescribed by SFAS No. 123 (in thousands):

|                                                                                                                                        |  |                        |       |                           |  |               |       |               |  |   |        |   |  |   |        |  
|--------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------- | ----- | ------------------------- |  | ------------- | ----- | ------------- |  | - | ------ | - |  | - | ------ | -
|                                                                                                                                        |  |                        |       |                          
|                                                                                                                                        |  | For the Quarters Ended |       | For the Nine Months Ended
|                                                                                                                                        |  |                        |       |                          
|                                                                                                                                        |  | September 27,          |       | September 28,             |  | September 27, |       | September 28,
|                                                                                                                                        |  | 2003                   |       | 2002                      |  | 2003          |       | 2002         
|                                                                                                                                        |  |                        |       |                           |  |               |       |              
|                                                                                                                                        |  | (Unaudited)            |       | (Unaudited)               |  | (Unaudited)   |       | (Unaudited)  
|Net income, as reported                                                                                                                 |  | $                      | 5,519 |                           |  | $             | 3,327 |               |  | $ | 10,892 |   |  | $ | 34,454 |  
|Deduct: Total stock-based employee compensation
    expense determined under the fair value based method for all
    awards, net of tax |  |                        | (160  | )                         |  |               | (198  | )             |  |   | (315   | ) |  |   | (395   | )
|                                                                                                                                        |  |                        |       |                           |  |               |       |               |  |   |        |   |  |   |        |  
|Pro forma net income                                                                                                                    |  | $                      | 5,359 |                           |  | $             | 3,129 |               |  | $ | 10,577 |   |  | $ | 34,059 |  
|                                                                                                                                        |  |                        |       |                           |  |               |       |               |  |   |        |   |  |   |        |  

The Company granted options for 158,308 shares in
first quarter 2003 and 2,462,426 shares in second quarter 2002
with an exercise price of $3.00 and $1.40, respectively. The
weighted average fair value of options granted during 2003 and
2002 estimated on the date of grant using the Black-Scholes
option pricing model was $1.00 and $0.55, respectively. The fair
value of options granted in the first quarter 2003 and second
quarter 2002 were determined using the following assumptions: a
risk-free interest rate of 4.05% and 4.93%,

5



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

respectively, no dividend yield, expected life of
10 years which equals the terms of the options, and no
expected volatility.

In April 2003, the FASB issued SFAS No. 149,
Amendment of Statement 133 on Derivative Instruments and
Hedging Activities. SFAS No. 149 amends and clarifies
financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other
contracts and for hedging activities under SFAS No. 133,
Accounting for Derivative Instruments and Hedging
Activities. SFAS No. 149 is effective for contracts
entered into or modified after June 30, 2003 and for
hedging relationships designated after June 30, 2003. The
adoption of SFAS No. 149 did not have a material impact on
the Companys consolidated financial position or results of
operations.

In May 2003, the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity. SFAS
No. 150 establishes standards for how financial instruments
with characteristics of both liabilities and equity should be
measured and classified and requires that an issuer classify a
financial instrument that is within its scope as a liability.
SFAS No. 150 is effective for financial instruments entered
into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning
after June 15, 2003, except for mandatorily redeemable
financial instruments of nonpublic entities. For nonpublic
entities, as defined, mandatorily redeemable financial
instruments are subject to the provisions of SFAS No. 150
for the first fiscal period beginning after December 15,
2003. Accordingly, the Company is required to adopt the
provisions of SFAS No. 150 in the first quarter of fiscal
2004 and does not expect the adoption to 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 consolidated statements of operations. Such
expenses totaled $17.1 million and $16.4 million for the
quarters ended September 27, 2003 and September 28,
2002, respectively, and $50.5 million and $48.3 million for the
nine months ended September 27, 2003 and September 28,
2002, respectively.

6.     Deferred
Income Taxes:

The Company has deferred tax assets of $16.0
million and $22.2 million at September 27, 2003 and
December 28, 2002, respectively. The decrease in net
deferred tax assets is primarily attributable to current period
income and the corresponding net operating loss carryforward
(NOLs) utilization. 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 NOLs, for
which a valuation allowance of $1.0 million is recorded as of
September 27, 2003, unchanged from December 28, 2002.
This evaluation considered the historical and long-term expected
profitability of the Company. Given the timing of the reversal
of its temporary differences and the expiration date of its
NOLs, 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. There can be no assurance that the
Company will meet its expectation of future taxable income and
adjustments to the valuation allowance may be required in the
future.

6



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

7.     Financing
Arrangements:

Revolving Credit
Facility

At September 27, 2003, the Companys
revolving credit facility (Revolver), as amended,
provides for borrowings in the aggregate principal amount of up
to the lesser of $180.0 million less defined reserves or the
Borrowing Base, as defined in the agreement, which is based on
85% of eligible accounts receivable plus 50%-65% of eligible
inventories less defined reserves.

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
(1.50% as of September 27, 2003) or (ii) the
Eurodollar Rate, as defined, plus the applicable margin (3.00%
as of September 27, 2003). 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 covenants, 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 November 12, 2003,
the Company was in compliance with these covenants, as amended.
The Companys obligations under the Revolver are secured by
all inventories and accounts receivable.

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. In
connection therewith, the Company recorded a $14.0 million
capital lease obligation during the first quarter of 2002. All
cash paid to the lessor is recorded as interest expense and 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 (paid quarterly) and is adjusted for
CPI changes every two years. In addition, the purchaser received
warrants to purchase 153,597 shares of the Companys common
stock. The warrants have a term of 10 years with a stated
exercise price of $3.00 per share. The Company recorded these
warrants at fair value and has presented them as a component of
stockholders equity.

Debt
Maturities

Aggregate annual maturities of long-term debt
(excluding capital lease obligations and reflecting the debt
restructuring discussed in Note 9) at September 27, 2003,
are as follows (in thousands):

|                 |  |   |         | 
|---------------- |  | - | ------- | 
|Year Ending      |  |  
|December:        |  |  
|                 |  |  
|2003 (remainder) |  | $ | 731     | 
|2004             |  |   | 2,139   | 
|2005             |  |   | 138,477 | 
|2006             |  |   | 169     | 
|2007             |  |   | 53      | 
|Thereafter       |  |   | 28,764  | 
|                 |  |   |         | 
|                 |  | $ | 170,333 | 
|                 |  |   |         | 

7



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

Derivative
Instruments

During second quarter 2003, the Company entered
into an interest rate swap agreement (Swap) to
manage exposure to fluctuations in interest rates. The Swap
represents a contract to exchange floating rate for fixed
interest payments periodically over the life of the agreement
without exchange of the underlying notional amount. The notional
amount of the Swap is used to measure interest to be paid or
received and does not represent the amount of exposure to credit
loss. At September 27, 2003, the Swap in place covers a
notional amount of $50.0 million of indebtedness at a fixed
interest rate of 2.14% and expires in June 2006. This Swap has
not been designated for hedge accounting treatment. Accordingly,
the Company recognizes the fair value of the Swap in the
accompanying unaudited condensed consolidated balance sheets and
any changes in the fair value are recorded as adjustments to
interest expense in the accompanying consolidated statements of
operations. The fair value of the Swap is the estimated amount
that the Company would pay or receive to terminate the agreement
at the reporting date. As of September 27, 2003, the fair
value of the Swap was an asset of $0.1 million, and is included
in other assets in the accompanying unaudited condensed
consolidated balance sheets at September 27, 2003. As a result
of the change in fair value, $0.4 million and $0.1 million net
reductions to interest expense were recorded for the quarter and
nine months ended September 27, 2003, respectively.

8.     Discontinued
Operations:

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), the Companys retail segment, to
Performance Management, Inc. for a purchase price of
approximately $10.0 million. As of September 27, 2003, $2.8
million of the purchase price remains outstanding and a reserve
is maintained for the full amount. The Company has initiated
legal proceedings to collect the $2.8 million. This segment has
been reflected as a discontinued operation in the accompanying
consolidated financial statements.

The Company remains liable as a guarantor on
certain of Winstons leases. As of September 27, 2003,
total obligations of the Company, as guarantor on these leases,
is approximately $14.1 million extending over 16 years.
However, the Company has secured assignments or sublease
agreements for the vast majority of these commitments with
contractually assigned or subleased rental of approximately
$11.9 million. A provision has been made for the estimated
shortfall.

9.     Gain on
Repurchase of Series D Senior Notes:

On March 27, 2002, the Company repurchased
$121.4 million in outstanding principal amount of the
Series D Senior Notes (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 Revolver 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.

In connection with the Restructuring
Transactions, the Company issued warrants to several vendors,
which permit the holders to acquire up to 307,193 shares of the
Companys common stock at $.01 per share. The warrants
expire on March 27, 2005. The Company recorded these
warrants at fair value and has presented them as a component of
stockholders equity.

8



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

The Company recorded a pre-tax gain of $49.8
million on the repurchase of the Senior Notes and a related
income tax provision of $19.9 million for the nine months ended
September 28, 2002.

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):

|                                                                                                                                    |                                  |                    |       |                   |  |   |       |        | 
|----------------------------------------------------------------------------------------------------------------------------------- | -------------------------------- | ------------------ | ----- | ----------------- |  | - | ----- | ------ | 
|                                                                                                                                    |                                  | September 27, 2003 |       | December 28, 2002
|                                                                                                                                    |                                  |                    |       |                  
|                                                                                                                                    |                                  | (Unaudited)        |       |                  
|Redeemable preferred stock
    Series A  4% cumulative; 7,000 shares
    authorized; 6,500 and 7,000 shares issued and outstanding |                                  | $                  | 6,500 |                   |  | $ | 7,000 |       
|Redeemable preferred stock
    Series B  variable rate cumulative; 4,500 shares
    authorized, issued and outstanding             |                                  |                    | 4,035 |                   |  |   | 4,035 |       
|                                                                                                                                    |                                  |                    |       |                   |  |   |       |       
|                                                                                                                                    | Total redeemable preferred stock |                    | $     | 10,535            |  |   | $     | 11,035 | 
|                                                                                                                                    |                                  |                    |       |                   |  |   |       |       

The stated value of Series A preferred stock
is $1,000 per share. Holders of Series A preferred stock
are entitled to receive, when and if declared by the Board of
Directors, cumulative cash dividends at an annual rate of 4%,
subject to adjustment based on the volume of purchases from the
supplier. Additional dividends will accrue, when and if declared
by the Board of Directors, and are payable on the last business
day of January. For the nine months ended September 27,
2003, the Company declared and paid a dividend based on a 4%
rate. The Series A preferred stock is classified as a
liability in the accompanying unaudited condensed consolidated
balance sheets and the related dividends are included in
interest expense in the accompanying consolidated statements of
operations. The Series A preferred stock can be redeemed by
the Company, beginning on the last business day of December 2002
and on the last business day of each June and December
thereafter, through June 2007. In June 2003, the Company
redeemed 500 shares of the Series A preferred stock for
$0.5 million.

The stated value of Series B preferred stock
is initially $1,000 per share, to be adjusted based on tire
purchase credits as determined by the number of units purchased
under a purchase agreement with a supplier entered into in May
1997. If the Company does not meet certain tire purchase
requirements, holders of Series B preferred stock are
entitled to receive dividends payments, when and if declared by
the Board of Directors, at the prime rate. The remaining value
of Series B preferred stock shall be redeemed by the
Company on the last business day of June 2007 at a price equal
to the adjusted stated value plus all accrued and unpaid
dividends. The Series B preferred stock is classified as a
liability in the accompanying unaudited condensed consolidated
balance sheets. To date, the Company has met the purchase
requirements, thus no dividends have been declared and paid.

11.     Stockholders
Equity:

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



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

Preferred
Stock

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

|                                                                                                   |                       |                    |        |                   |  |   |        |        | 
|-------------------------------------------------------------------------------------------------- | --------------------- | ------------------ | ------ | ----------------- |  | - | ------ | ------ | 
|                                                                                                   |                       | September 27, 2003 |        | December 28, 2002
|                                                                                                   |                       |                    |        |                  
|                                                                                                   |                       | (Unaudited)        |        |                  
|Preferred stock Series C  12%
    cumulative; 1,333,334 shares authorized, issued and outstanding |                       | $                  | 15,600 |                   |  | $ | 14,520 |       
|Preferred stock Series D  12%
    cumulative; 9,637,592 shares authorized, issued and outstanding |                       |                    | 34,117 |                   |  |   | 31,515 |       
|                                                                                                   |                       |                    |        |                   |  |   |        |       
|                                                                                                   | Total preferred stock |                    | $      | 49,717            |  |   | $      | 46,035 | 
|                                                                                                   |                       |                    |        |                   |  |   |        |       

Shares of Series C preferred stock accrue
dividends at an annual rate of 12% and are redeemable by the
Company 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. Shares of Series C preferred stock
are convertible into common stock at a conversion price of $3.00
per common share.

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 at the option of the Company 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 shall redemption
occur. Shares of Series D preferred stock are convertible
into common stock at a conversion price of $3.00 per common
share.

On October 31, 2003, the Company amended and
restated its articles of incorporation to eliminate the
redemption clause of the Series C and Series D
preferred stock. No dividends have been declared or paid to date
on the Series C or Series D preferred stock.

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.

10



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

13.     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 consolidating balance sheets as of
September 27, 2003 and December 28, 2002, are as follows:

|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |          |         |         |         |         | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ---------- | ------- | ------------ | ------ | ------------ | ------ | ------- | ------- | ------- | ------- | -------- | ------- | ------- | ------- | ------- | 
|                                                   |                                                                                                                       |                           
|                                                   |                                                                                                                       | As of September 27, 2003  
|                                                   |                                                                                                                       |                           
|                                                   |                                                                                                                       | Parent                     |                                            | Subsidiary |         |             
|                                                   |                                                                                                                       | Company                    |                                            | Guarantors |         | Eliminations |        | Consolidated
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |             
|                                                   |                                                                                                                       |                           
|                                                   |                                                                                                                       | (Unaudited)               
|Assets                                             |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |          |         |        
|Current assets:                                    |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |          |         |        
|                                                   | Cash and cash equivalents                                                                                             |                            | $                                          | 3,668      |         |              | $      | 42           |        |         | $       |        |         |          | $       | 3,710   |        
|                                                   | Accounts receivable, net                                                                                              |                            |                                            | 79,921     |         |              |        | 30,852       |        |         |         |        |         |          |         | 110,773 |        
|                                                   | Inventories                                                                                                           |                            |                                            | 116,456    |         |              |        | 49,250       |        |         |         |        |         |          |         | 165,706 |        
|                                                   | Deferred income taxes and other current assets                                                                        |                            |                                            | 11,820     |         |              |        | 562          |        |         |         |        |         |          |         | 12,382  |        
|                                                   | Intercompany receivables                                                                                              |                            |                                            | 52,293     |         |              |        |             |        |         |         | (52,293 | )       |          |         |        |        
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |          |         |        
|                                                   |                                                                                                                       | Total current assets       |                                            |            | 264,158 |              |        |              | 80,706 |         |         |         | (52,293 | )        |         |         | 292,571 |        
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |          |         |        
|Property and equipment, net                        |                                                                                                                       |                            | 14,379                                     |            |         |              | 4,018  |              |        |         |        |         |         |          | 18,397  |        
|Goodwill and other intangible assets, net          |                                                                                                                       |                            | 51,557                                     |            |         |              | 44,813 |              |        |         |        |         |         |          | 96,370  |        
|Investment in subsidiaries                         |                                                                                                                       |                            | 74,888                                     |            |         |              |       |              |        |         | (74,888 | )       |         |          |        |        
|Deferred income taxes and other assets             |                                                                                                                       |                            | 19,498                                     |            |         |              | 464    |              |        |         |        |         |         |          | 19,962  |        
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |          |         |        
|                                                   |                                                                                                                       |                            | Total assets                               |            | $       | 424,480      |        |              | $      | 130,001 |         |         | $       | (127,181 | )       |         | $       | 427,300 | 
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |          |         |        
|Liabilities and Stockholders
    Equity           |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |          |         |        
|Current liabilities:                               |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |          |         |        
|                                                   | Accounts payable                                                                                                      |                            | $                                          | 176,576    |         |              | $      |             |        |         | $       |        |         |          | $       | 176,576 |        
|                                                   | Accrued expenses                                                                                                      |                            |                                            | 22,450     |         |              |        | 1,945        |        |         |         |        |         |          |         | 24,395  |        
|                                                   | Current maturities of long-term debt                                                                                  |                            |                                            | 2,384      |         |              |        | 10           |        |         |         |        |         |          |         | 2,394   |        
|                                                   | Intercompany payables                                                                                                 |                            |                                            |           |         |              |        | 52,293       |        |         |         | (52,293 | )       |          |         |        |        
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |          |         |        
|                                                   |                                                                                                                       | Total current liabilities  |                                            |            | 201,410 |              |        |              | 54,248 |         |         |         | (52,293 | )        |         |         | 203,365 |        
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |          |         |        
|Revolving credit facility and other long-term debt |                                                                                                                       |                            | 139,339                                    |            |         |              |       |              |        |         |        |         |         |          | 139,339 |        
|Series D Senior Notes                              |                                                                                                                       |                            | 28,600                                     |            |         |              |       |              |        |         |        |         |         |          | 28,600  |        
|Capital lease obligations                          |                                                                                                                       |                            | 14,263                                     |            |         |              |       |              |        |         |        |         |         |          | 14,263  |        
|Other liabilities                                  |                                                                                                                       |                            | 2,952                                      |            |         |              | 865    |              |        |         |        |         |         |          | 3,817   |        
|Redeemable preferred stock                         |                                                                                                                       |                            | 10,535                                     |            |         |              |       |              |        |         |        |         |         |          | 10,535  |        
|Stockholders equity:                              |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |          |         |        
|                                                   | Intercompany investment                                                                                               |                            |                                            |           |         |              |        | 76,633       |        |         |         | (76,633 | )       |          |         |        |        
|                                                   | Preferred stock                                                                                                       |                            |                                            | 49,717     |         |              |        |             |        |         |         |        |         |          |         | 49,717  |        
|                                                   | 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                                                                                                              |                            |                                            | 1,782      |         |              |        |             |        |         |         |        |         |          |         | 1,782   |        
|                                                   | Notes receivable from sale of stock                                                                                   |                            |                                            | (17        | )       |              |        |             |        |         |         |        |         |          |         | (17     | )      
|                                                   | Accumulated deficit                                                                                                   |                            |                                            | (46,540    | )       |              |        | (1,745       | )      |         |         | 1,745   |         |          |         | (46,540 | )      
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |          |         |        
|                                                   |                                                                                                                       | Total stockholders equity |                                            |            | 27,381  |              |        |              | 74,888 |         |         |         | (74,888 | )        |         |         | 27,381  |        
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |          |         |        
|                                                   |                                                                                                                       |                            | Total liabilities and stockholders equity |            | $       | 424,480      |        |              | $      | 130,001 |         |         | $       | (127,181 | )       |         | $       | 427,300 | 
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |          |         |        

11



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

|                                                   |                                                                                                                       |                            |                                            |             |         |             |        |              |        |         |         |         |         |          |         |         |         |         | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ----------- | ------- | ----------- | ------ | ------------ | ------ | ------- | ------- | ------- | ------- | -------- | ------- | ------- | ------- | ------- | 
|                                                   |                                                                                                                       |                           
|                                                   |                                                                                                                       | As of December 28, 2002   
|                                                   |                                                                                                                       |                           
|                                                   |                                                                                                                       | Parent                     |                                            | Subsidiary  |         |            
|                                                   |                                                                                                                       | Company                    |                                            | Guarantors  |         | Elimination |        | Consolidated
|                                                   |                                                                                                                       |                            |                                            |             |         |             |        |             
|                                                   |                                                                                                                       | (Unaudited)                |                                            | (Unaudited) |         | (Unaudited) |        |             
|Assets                                             |                                                                                                                       |                            |                                            |             |         |             |        |              |        |         |         |         |         |          |         |        
|Current assets:                                    |                                                                                                                       |                            |                                            |             |         |             |        |              |        |         |         |         |         |          |         |        
|                                                   | Cash and cash equivalents                                                                                             |                            | $                                          | 2,538       |         |             | $      | 155          |        |         | $       |        |         |          | $       | 2,693   |        
|                                                   | Accounts receivable, net                                                                                              |                            |                                            | 67,514      |         |             |        | 27,160       |        |         |         |        |         |          |         | 94,674  |        
|                                                   | Inventories                                                                                                           |                            |                                            | 109,143     |         |             |        | 47,579       |        |         |         |        |         |          |         | 156,722 |        
|                                                   | Deferred income taxes and other current assets                                                                        |                            |                                            | 14,727      |         |             |        | 957          |        |         |         |        |         |          |         | 15,684  |        
|                                                   | Intercompany receivables                                                                                              |                            |                                            | 54,577      |         |             |        |             |        |         |         | (54,577 | )       |          |         |        |        
|                                                   |                                                                                                                       |                            |                                            |             |         |             |        |              |        |         |         |         |         |          |         |        
|                                                   |                                                                                                                       | Total current assets       |                                            |             | 248,499 |             |        |              | 75,851 |         |         |         | (54,577 | )        |         |         | 269,773 |        
|                                                   |                                                                                                                       |                            |                                            |             |         |             |        |              |        |         |         |         |         |          |         |        
|Property and equipment, net                        |                                                                                                                       |                            | 15,742                                     |             |         |             | 4,892  |              |        |         |        |         |         |          | 20,634  |        
|Goodwill and other intangible assets, net          |                                                                                                                       |                            | 51,856                                     |             |         |             | 45,656 |              |        |         |        |         |         |          | 97,512  |        
|Investment in subsidiaries                         |                                                                                                                       |                            | 69,142                                     |             |         |             |       |              |        |         | (69,142 | )       |         |          |        |        
|Deferred income taxes and other assets             |                                                                                                                       |                            | 22,812                                     |             |         |             | 539    |              |        |         |        |         |         |          | 23,351  |        
|                                                   |                                                                                                                       |                            |                                            |             |         |             |        |              |        |         |         |         |         |          |         |        
|                                                   |                                                                                                                       |                            | Total assets                               |             | $       | 408,051     |        |              | $      | 126,938 |         |         | $       | (123,719 | )       |         | $       | 411,270 | 
|                                                   |                                                                                                                       |                            |                                            |             |         |             |        |              |        |         |         |         |         |          |         |        
|Liabilities and Stockholders
    Equity           |                                                                                                                       |                            |                                            |             |         |             |        |              |        |         |         |         |         |          |         |        
|Current liabilities:                               |                                                                                                                       |                            |                                            |             |         |             |        |              |        |         |         |         |         |          |         |        
|                                                   | Accounts payable                                                                                                      |                            | $                                          | 165,206     |         |             | $      | 203          |        |         | $       |        |         |          | $       | 165,409 |        
|                                                   | Accrued expenses                                                                                                      |                            |                                            | 16,550      |         |             |        | 1,999        |        |         |         |        |         |          |         | 18,549  |        
|                                                   | Current maturities of long-term debt                                                                                  |                            |                                            | 2,742       |         |             |        |             |        |         |         |        |         |          |         | 2,742   |        
|                                                   | Intercompany payables                                                                                                 |                            |                                            |            |         |             |        | 54,577       |        |         |         | (54,577 | )       |          |         |        |        
|                                                   |                                                                                                                       |                            |                                            |             |         |             |        |              |        |         |         |         |         |          |         |        
|                                                   |                                                                                                                       | Total current liabilities  |                                            |             | 184,498 |             |        |              | 56,779 |         |         |         | (54,577 | )        |         |         | 186,700 |        
|                                                   |                                                                                                                       |                            |                                            |             |         |             |        |              |        |         |         |         |         |          |         |        
|Revolving credit facility and other long-term debt |                                                                                                                       |                            | 149,793                                    |             |         |             |       |              |        |         |        |         |         |          | 149,793 |        
|Series D Senior Notes                              |                                                                                                                       |                            | 28,600                                     |             |         |             |       |              |        |         |        |         |         |          | 28,600  |        
|Capital lease obligations                          |                                                                                                                       |                            | 14,709                                     |             |         |             |       |              |        |         |        |         |         |          | 14,709  |        
|Other liabilities                                  |                                                                                                                       |                            | 2,927                                      |             |         |             | 1,017  |              |        |         |        |         |         |          | 3,944   |        
|Redeemable preferred stock                         |                                                                                                                       |                            | 11,035                                     |             |         |             |       |              |        |         |        |         |         |          | 11,035  |        
|Stockholders equity:                              |                                                                                                                       |                            |                                            |             |         |             |        |              |        |         |         |         |         |          |         |        
|                                                   | Intercompany investment                                                                                               |                            |                                            |            |         |             |        | 76,633       |        |         |         | (76,633 | )       |          |         |        |        
|                                                   | Preferred stock                                                                                                       |                            |                                            | 46,035      |         |             |        |             |        |         |         |        |         |          |         | 46,035  |        
|                                                   | 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                                                                                                              |                            |                                            | 1,782       |         |             |        |             |        |         |         |        |         |          |         | 1,782   |        
|                                                   | Notes receivable from sale of stock                                                                                   |                            |                                            | (17         | )       |             |        |             |        |         |         |        |         |          |         | (17     | )      
|                                                   | Accumulated deficit                                                                                                   |                            |                                            | (53,750     | )       |             |        | (7,491       | )      |         |         | 7,491   |         |          |         | (53,750 | )      
|                                                   |                                                                                                                       |                            |                                            |             |         |             |        |              |        |         |         |         |         |          |         |        
|                                                   |                                                                                                                       | Total stockholders equity |                                            |             | 16,489  |             |        |              | 69,142 |         |         |         | (69,142 | )        |         |         | 16,489  |        
|                                                   |                                                                                                                       |                            |                                            |             |         |             |        |              |        |         |         |         |         |          |         |        
|                                                   |                                                                                                                       |                            | Total liabilities and stockholders equity |             | $       | 408,051     |        |              | $      | 126,938 |         |         | $       | (123,719 | )       |         | $       | 411,270 | 
|                                                   |                                                                                                                       |                            |                                            |             |         |             |        |              |        |         |         |         |         |          |         |        

12



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

Consolidating statements of operations for the
quarters ended September 27, 2003 and September 28,
2002 are as follows:

|                                                          |                                      |                       |         |            |   |             |        |              |  |   |        |        |   |   |         |        |  
|--------------------------------------------------------- | ------------------------------------ | --------------------- | ------- | ---------- | - | ----------- | ------ | ------------ |  | - | ------ | ------ | - | - | ------- | ------ | -
|                                                          |                                      |                      
|                                                          |                                      | For the Quarter Ended
|                                                          |                                      | September 27, 2003   
|                                                          |                                      |                      
|                                                          |                                      | Parent                |         | Subsidiary |   |            
|                                                          |                                      | Company               |         | Guarantors |   | Elimination |        | Consolidated
|                                                          |                                      |                       |         |            |   |             |        |             
|                                                          |                                      |                      
|                                                          |                                      | (Unaudited)          
|Net sales                                                 |                                      | $                     | 203,512 |            |   | $           | 88,346 |              |  | $ |       |        |   | $ | 291,858 |       
|Cost of goods sold                                        |                                      |                       | 164,539 |            |   |             | 72,655 |              |  |   |       |        |   |   | 237,194 |       
|                                                          |                                      |                       |         |            |   |             |        |              |  |   |        |        |   |   |         |       
|                                                          | Gross profit                         |                       |         | 38,973     |   |             |        | 15,691       |  |   |        |       |   |   |         | 54,664 |  
|Selling, general and administrative expenses              |                                      |                       | 31,689  |            |   |             | 10,651 |              |  |   |       |        |   |   | 42,340  |       
|                                                          |                                      |                       |         |            |   |             |        |              |  |   |        |        |   |   |         |       
|                                                          | Operating income                     |                       |         | 7,284      |   |             |        | 5,040        |  |   |        |       |   |   |         | 12,324 |  
|Other income (expense):                                   |                                      |                       |         |            |   |             |        |              |  |   |        |        |   |   |         |       
|                                                          | Interest expense                     |                       |         | (3,110     | ) |             |        |             |  |   |        |       |   |   |         | (3,110 | )
|                                                          | Other income (expense), net          |                       |         | (91        | ) |             |        | 74           |  |   |        |       |   |   |         | (17    | )
|                                                          | Equity in net income of subsidiaries |                       |         | 3,069      |   |             |        |             |  |   |        | (3,069 | ) |   |         |       |  
|                                                          |                                      |                       |         |            |   |             |        |              |  |   |        |        |   |   |         |       
|Income from continuing operations before income
    taxes |                                      |                       | 7,152   |            |   |             | 5,114  |              |  |   | (3,069 | )      |   |   | 9,197   |       
|Provision for income taxes                                |                                      |                       | 1,633   |            |   |             | 2,045  |              |  |   |       |        |   |   | 3,678   |       
|                                                          |                                      |                       |         |            |   |             |        |              |  |   |        |        |   |   |         |       
|Net income                                                |                                      | $                     | 5,519   |            |   | $           | 3,069  |              |  | $ | (3,069 | )      |   | $ | 5,519   |       
|                                                          |                                      |                       |         |            |   |             |        |              |  |   |        |        |   |   |         |       

|                                                          |                                      |                       |         |            |   |             |        |              |  |   |        |        |   |   |         |        |  
|--------------------------------------------------------- | ------------------------------------ | --------------------- | ------- | ---------- | - | ----------- | ------ | ------------ |  | - | ------ | ------ | - | - | ------- | ------ | -
|                                                          |                                      |                      
|                                                          |                                      | For the Quarter Ended
|                                                          |                                      | September 28, 2002   
|                                                          |                                      |                      
|                                                          |                                      | Parent                |         | Subsidiary |   |            
|                                                          |                                      | Company               |         | Guarantors |   | Elimination |        | Consolidated
|                                                          |                                      |                       |         |            |   |             |        |             
|                                                          |                                      |                      
|                                                          |                                      | (Unaudited)          
|Net sales                                                 |                                      | $                     | 198,463 |            |   | $           | 81,596 |              |  | $ |       |        |   | $ | 280,059 |       
|Cost of goods sold                                        |                                      |                       | 161,108 |            |   |             | 67,555 |              |  |   |       |        |   |   | 228,663 |       
|                                                          |                                      |                       |         |            |   |             |        |              |  |   |        |        |   |   |         |       
|                                                          | Gross profit                         |                       |         | 37,355     |   |             |        | 14,041       |  |   |        |       |   |   |         | 51,396 |  
|Selling, general and administrative expenses              |                                      |                       | 29,792  |            |   |             | 12,002 |              |  |   |       |        |   |   | 41,794  |       
|                                                          |                                      |                       |         |            |   |             |        |              |  |   |        |        |   |   |         |       
|                                                          | Operating income                     |                       |         | 7,563      |   |             |        | 2,039        |  |   |        |       |   |   |         | 9,602  |  
|Other income (expense):                                   |                                      |                       |         |            |   |             |        |              |  |   |        |        |   |   |         |       
|                                                          | Interest income (expense)            |                       |         | (4,155     | ) |             |        | 2            |  |   |        |       |   |   |         | (4,153 | )
|                                                          | Other income, net                    |                       |         | 58         |   |             |        | 97           |  |   |        |       |   |   |         | 155    |  
|                                                          | Equity in net income of subsidiaries |                       |         | 1,311      |   |             |        |             |  |   |        | (1,311 | ) |   |         |       |  
|                                                          |                                      |                       |         |            |   |             |        |              |  |   |        |        |   |   |         |       
|Income from continuing operations before income
    taxes |                                      |                       | 4,777   |            |   |             | 2,138  |              |  |   | (1,311 | )      |   |   | 5,604   |       
|Provision for income taxes                                |                                      |                       | 1,414   |            |   |             | 827    |              |  |   |       |        |   |   | 2,241   |       
|                                                          |                                      |                       |         |            |   |             |        |              |  |   |        |        |   |   |         |       
|Income from continuing operations                         |                                      |                       | 3,363   |            |   |             | 1,311  |              |  |   | (1,311 | )      |   |   | 3,363   |       
|Loss on disposal of discontinued operations               |                                      |                       | (36     | )          |   |             |       |              |  |   |       |        |   |   | (36     | )     
|                                                          |                                      |                       |         |            |   |             |        |              |  |   |        |        |   |   |         |       
|Net income                                                |                                      | $                     | 3,327   |            |   | $           | 1,311  |              |  | $ | (1,311 | )      |   | $ | 3,327   |       
|                                                          |                                      |                       |         |            |   |             |        |              |  |   |        |        |   |   |         |       

13



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

Consolidating statements of operations for the
nine months ended September 27, 2003 and September 28,
2002 are as follows:

|                                                          |                                      |                           |         |            |   |             |         |              |  |   |        |        |   |   |         |         |  
|--------------------------------------------------------- | ------------------------------------ | ------------------------- | ------- | ---------- | - | ----------- | ------- | ------------ |  | - | ------ | ------ | - | - | ------- | ------- | -
|                                                          |                                      |                          
|                                                          |                                      | For the Nine Months Ended
|                                                          |                                      | September 27, 2003       
|                                                          |                                      |                          
|                                                          |                                      | Parent                    |         | Subsidiary |   |            
|                                                          |                                      | Company                   |         | Guarantors |   | Elimination |         | Consolidated
|                                                          |                                      |                           |         |            |   |             |         |             
|                                                          |                                      |                          
|                                                          |                                      | (Unaudited)              
|Net sales                                                 |                                      | $                         | 593,991 |            |   | $           | 241,196 |              |  | $ |       |        |   | $ | 835,187 |        
|Cost of goods sold                                        |                                      |                           | 481,840 |            |   |             | 199,625 |              |  |   |       |        |   |   | 681,465 |        
|                                                          |                                      |                           |         |            |   |             |         |              |  |   |        |        |   |   |         |        
|                                                          | Gross profit                         |                           |         | 112,151    |   |             |         | 41,571       |  |   |        |       |   |   |         | 153,722 |  
|Selling, general and administrative expenses              |                                      |                           | 92,808  |            |   |             | 32,201  |              |  |   |       |        |   |   | 125,009 |        
|                                                          |                                      |                           |         |            |   |             |         |              |  |   |        |        |   |   |         |        
|                                                          | Operating income                     |                           |         | 19,343     |   |             |         | 9,370        |  |   |        |       |   |   |         | 28,713  |  
|Other income (expense):                                   |                                      |                           |         |            |   |             |         |              |  |   |        |        |   |   |         |        
|                                                          | Interest expense                     |                           |         | (10,796    | ) |             |         |             |  |   |        |       |   |   |         | (10,796 | )
|                                                          | Other income, net                    |                           |         | 29         |   |             |         | 206          |  |   |        |       |   |   |         | 235     |  
|                                                          | Equity in net income of subsidiaries |                           |         | 5,746      |   |             |         |             |  |   |        | (5,746 | ) |   |         |        |  
|                                                          |                                      |                           |         |            |   |             |         |              |  |   |        |        |   |   |         |        
|Income from continuing operations before income
    taxes |                                      |                           | 14,322  |            |   |             | 9,576   |              |  |   | (5,746 | )      |   |   | 18,152  |        
|Provision for income taxes                                |                                      |                           | 3,430   |            |   |             | 3,830   |              |  |   |       |        |   |   | 7,260   |        
|                                                          |                                      |                           |         |            |   |             |         |              |  |   |        |        |   |   |         |        
|Net income                                                |                                      | $                         | 10,892  |            |   | $           | 5,746   |              |  | $ | (5,746 | )      |   | $ | 10,892  |        
|                                                          |                                      |                           |         |            |   |             |         |              |  |   |        |        |   |   |         |        

|                                                          |                                             |                           |         |            |   |             |         |              |   |   |        |        |   |   |         |         |  
|--------------------------------------------------------- | ------------------------------------------- | ------------------------- | ------- | ---------- | - | ----------- | ------- | ------------ | - | - | ------ | ------ | - | - | ------- | ------- | -
|                                                          |                                             |                          
|                                                          |                                             | For the Nine Months Ended
|                                                          |                                             | September 28, 2002       
|                                                          |                                             |                          
|                                                          |                                             | Parent                    |         | Subsidiary |   |            
|                                                          |                                             | Company                   |         | Guarantors |   | Elimination |         | Consolidated
|                                                          |                                             |                           |         |            |   |             |         |             
|                                                          |                                             |                          
|                                                          |                                             | (Unaudited)              
|Net sales                                                 |                                             | $                         | 578,051 |            |   | $           | 231,154 |              |   | $ |       |        |   | $ | 809,205 |        
|Cost of goods sold                                        |                                             |                           | 468,980 |            |   |             | 191,689 |              |   |   |       |        |   |   | 660,669 |        
|                                                          |                                             |                           |         |            |   |             |         |              |   |   |        |        |   |   |         |        
|                                                          | Gross profit                                |                           |         | 109,071    |   |             |         | 39,465       |   |   |        |       |   |   |         | 148,536 |  
|Selling, general and administrative expenses              |                                             |                           | 88,897  |            |   |             | 36,918  |              |   |   |       |        |   |   | 125,815 |        
|                                                          |                                             |                           |         |            |   |             |         |              |   |   |        |        |   |   |         |        
|                                                          | Operating income                            |                           |         | 20,174     |   |             |         | 2,547        |   |   |        |       |   |   |         | 22,721  |  
|Other income (expense):                                   |                                             |                           |         |            |   |             |         |              |   |   |        |        |   |   |         |        
|                                                          | Interest expense                            |                           |         | (14,701    | ) |             |         | (60          | ) |   |        |       |   |   |         | (14,761 | )
|                                                          | Gain on repurchase of Series D Senior Notes |                           |         | 49,759     |   |             |         |             |   |   |        |       |   |   |         | 49,759  |  
|                                                          | Other income, net                           |                           |         | 96         |   |             |         | 216          |   |   |        |       |   |   |         | 312     |  
|                                                          | Equity in net income of subsidiaries        |                           |         | 1,715      |   |             |         |             |   |   |        | (1,715 | ) |   |         |        |  
|                                                          |                                             |                           |         |            |   |             |         |              |   |   |        |        |   |   |         |        
|Income from continuing operations before income
    taxes |                                             |                           | 57,043  |            |   |             | 2,703   |              |   |   | (1,715 | )      |   |   | 58,031  |        
|Provision for income taxes                                |                                             |                           | 22,225  |            |   |             | 988     |              |   |   |       |        |   |   | 23,213  |        
|                                                          |                                             |                           |         |            |   |             |         |              |   |   |        |        |   |   |         |        
|Income from continuing operations                         |                                             |                           | 34,818  |            |   |             | 1,715   |              |   |   | (1,715 | )      |   |   | 34,818  |        
|Loss on disposal of discontinued operations               |                                             |                           | (364    | )          |   |             |        |              |   |   |       |        |   |   | (364    | )      
|                                                          |                                             |                           |         |            |   |             |         |              |   |   |        |        |   |   |         |        
|Net income                                                |                                             | $                         | 34,454  |            |   | $           | 1,715   |              |   | $ | (1,715 | )      |   | $ | 34,454  |        
|                                                          |                                             |                           |         |            |   |             |         |              |   |   |        |        |   |   |         |        

14



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

Consolidating statements of cash flows for the
nine months ended September 27, 2003 and September 28,
2002 are as follows:

|                                                         |                                                                                       |                                                                         |                                                         |            |         |             |      |              |        |        |   |        |       |   |       |        |         |         |  
|-------------------------------------------------------- | ------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------------------------------------------- | ---------- | ------- | ----------- | ---- | ------------ | ------ | ------ | - | ------ | ----- | - | ----- | ------ | ------- | ------- | -
|                                                         |                                                                                       |                                                                        
|                                                         |                                                                                       | For the Nine Months Ended                                              
|                                                         |                                                                                       | September 27, 2003                                                     
|                                                         |                                                                                       |                                                                        
|                                                         |                                                                                       | Parent                                                                  |                                                         | Subsidiary |         |            
|                                                         |                                                                                       | Company                                                                 |                                                         | Guarantors |         | Elimination |      | Consolidated
|                                                         |                                                                                       |                                                                         |                                                         |            |         |             |      |             
|                                                         |                                                                                       |                                                                        
|                                                         |                                                                                       | (Unaudited)                                                            
|Cash flows from operating
    activities:                |                                                                                       |                                                                         |                                                         |            |         |             |      |              |        |        |   |        |       |   |       |       
|                                                         | Net income                                                                            |                                                                         | $                                                       | 10,892     |         |             | $    | 5,746        |        |        | $ | (5,746 | )     |   | $     | 10,892 |        
|                                                         | Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                         |                                                         |            |         |             |      |              |        |        |   |        |       |   |       |        |        
|                                                         |                                                                                       | Depreciation and amortization of other
    intangibles and other assets |                                                         |            | 3,669   |             |      |              | 2,157  |        |   |        |      |   |       |        | 5,826   |        
|                                                         |                                                                                       | Other, net                                                              |                                                         |            | 6,282   |             |      |              | 30     |        |   |        |      |   |       |        | 6,312   |        
|                                                         |                                                                                       | Equity in net income of subsidiaries                                    |                                                         |            | (5,746  | )           |      |              |       |        |   |        | 5,746 |   |       |        |        |        
|                                                         | Change in operating assets and liabilities:                                           |                                                                         |                                                         |            |         |             |      |              |        |        |   |        |       |   |       |        |        
|                                                         |                                                                                       | Accounts receivable, net                                                |                                                         |            | (12,407 | )           |      |              | (3,692 | )      |   |        |      |   |       |        | (16,099 | )      
|                                                         |                                                                                       | Inventories                                                             |                                                         |            | (7,313  | )           |      |              | (1,671 | )      |   |        |      |   |       |        | (8,984  | )      
|                                                         |                                                                                       | Other current assets                                                    |                                                         |            | (255    | )           |      |              | 395    |        |   |        |      |   |       |        | 140     |        
|                                                         |                                                                                       | Accounts payable and accrued expenses                                   |                                                         |            | 17,270  |             |      |              | (257   | )      |   |        |      |   |       |        | 17,013  |        
|                                                         |                                                                                       | Other, net                                                              |                                                         |            | (1,010  | )           |      |              | (79    | )      |   |        |      |   |       |        | (1,089  | )      
|                                                         |                                                                                       |                                                                         |                                                         |            |         |             |      |              |        |        |   |        |       |   |       |       
|                                                         |                                                                                       |                                                                         | Net cash provided by continuing operations              |            |         | 11,382      |      |              |        | 2,629  |   |        |       |  |       |        |         | 14,011  |  
|                                                         |                                                                                       |                                                                         |                                                         |            |         |             |      |              |        |        |   |        |       |   |       |       
|Cash flows from investing
    activities:                |                                                                                       |                                                                         |                                                         |            |         |             |      |              |        |        |   |        |       |   |       |       
|                                                         | Purchase of property and equipment                                                    |                                                                         |                                                         | (773       | )       |             |      | (542         | )      |        |   |       |       |   |       | (1,315 | )      
|                                                         | Proceeds from sale of property and equipment                                          |                                                                         |                                                         | 495        |         |             |      | 71           |        |        |   |       |       |   |       | 566    |        
|                                                         | Other, net                                                                            |                                                                         |                                                         | (50        | )       |             |      |             |        |        |   |       |       |   |       | (50    | )      
|                                                         | Intercompany                                                                          |                                                                         |                                                         | 2,259      |         |             |      | (2,259       | )      |        |   |       |       |   |       |       |        
|                                                         |                                                                                       |                                                                         |                                                         |            |         |             |      |              |        |        |   |        |       |   |       |       
|                                                         |                                                                                       |                                                                         | Net cash provided by (used in) investing
    activities |            |         | 1,931       |      |              |        | (2,730 | ) |        |       |  |       |        |         | (799    | )
|                                                         |                                                                                       |                                                                         |                                                         |            |         |             |      |              |        |        |   |        |       |   |       |       
|Cash flows from financing
    activities:                |                                                                                       |                                                                         |                                                         |            |         |             |      |              |        |        |   |        |       |   |       |       
|                                                         | Net repayments of revolving credit facility and
    other long-term debt              |                                                                         |                                                         | (9,369     | )       |             |      |             |        |        |   |       |       |   |       | (9,369 | )      
|                                                         | Principal payments on other long-term debt                                            |                                                                         |                                                         | (2,314     | )       |             |      | (12          | )      |        |   |       |       |   |       | (2,326 | )      
|                                                         | Cash paid for Series A preferred stock
    redemption                                 |                                                                         |                                                         | (500       | )       |             |      |             |        |        |   |       |       |   |       | (500   | )      
|                                                         |                                                                                       |                                                                         |                                                         |            |         |             |      |              |        |        |   |        |       |   |       |       
|                                                         |                                                                                       |                                                                         | Net cash used in financing activities                   |            |         | (12,183     | )    |              |        | (12    | ) |        |       |  |       |        |         | (12,195 | )
|                                                         |                                                                                       |                                                                         |                                                         |            |         |             |      |              |        |        |   |        |       |   |       |       
|Net increase (decrease) in cash and cash
    equivalents |                                                                                       |                                                                         | 1,130                                                   |            |         |             | (113 | )            |        |        |  |        |       |   | 1,017 |       
|Cash and cash equivalents, beginning of period           |                                                                                       |                                                                         | 2,538                                                   |            |         |             | 155  |              |        |        |  |        |       |   | 2,693 |       
|                                                         |                                                                                       |                                                                         |                                                         |            |         |             |      |              |        |        |   |        |       |   |       |       
|Cash and cash equivalents, end of period                 |                                                                                       | $                                                                       | 3,668                                                   |            |         | $           | 42   |              |        | $      |  |        |       | $ | 3,710 |       
|                                                         |                                                                                       |                                                                         |                                                         |            |         |             |      |              |        |        |   |        |       |   |       |       

15



---



##### 



American Tire Distributors, Inc.


Notes to Consolidated Financial
Statements  (Continued)

|                                                                         |                                                                                                 |                                                                         |                                                          |            |         |             |        |              |        |        |   |        |       |   |         |        |         |        |  
|------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | -------------------------------------------------------- | ---------- | ------- | ----------- | ------ | ------------ | ------ | ------ | - | ------ | ----- | - | ------- | ------ | ------- | ------ | -
|                                                                         |                                                                                                 |                                                                        
|                                                                         |                                                                                                 | For the Nine Months Ended                                              
|                                                                         |                                                                                                 | September 28, 2002                                                     
|                                                                         |                                                                                                 |                                                                        
|                                                                         |                                                                                                 | Parent                                                                  |                                                          | Subsidiary |         |            
|                                                                         |                                                                                                 | Company                                                                 |                                                          | Guarantors |         | Elimination |        | Consolidated
|                                                                         |                                                                                                 |                                                                         |                                                          |            |         |             |        |             
|                                                                         |                                                                                                 |                                                                        
|                                                                         |                                                                                                 | (Unaudited)                                                            
|Cash flows from operating
    activities:                                |                                                                                                 |                                                                         |                                                          |            |         |             |        |              |        |        |   |        |       |   |         |       
|                                                                         | Net income                                                                                      |                                                                         | $                                                        | 34,454     |         |             | $      | 1,715        |        |        | $ | (1,715 | )     |   | $       | 34,454 |        
|                                                                         | Adjustments to reconcile net income to net cash
    provided by (used in) operating activities: |                                                                         |                                                          |            |         |             |        |              |        |        |   |        |       |   |         |        |        
|                                                                         |                                                                                                 | Loss on disposal of discontinued operations                             |                                                          |            | 364     |             |        |              |       |        |   |        |      |   |         |        | 364     |       
|                                                                         |                                                                                                 | Gain on repurchase of Series D Senior Notes                             |                                                          |            | (49,759 | )           |        |              |       |        |   |        |      |   |         |        | (49,759 | )     
|                                                                         |                                                                                                 | Depreciation and amortization of other
    intangibles and other assets |                                                          |            | 3,881   |             |        |              | 3,342  |        |   |        |      |   |         |        | 7,223   |       
|                                                                         |                                                                                                 | Other, net                                                              |                                                          |            | 17,422  |             |        |              | 3,786  |        |   |        |      |   |         |        | 21,208  |       
|                                                                         |                                                                                                 | Equity in net income of subsidiaries                                    |                                                          |            | (1,715  | )           |        |              |       |        |   |        | 1,715 |   |         |        |        |       
|                                                                         | Change in operating assets and liabilities:                                                     |                                                                         |                                                          |            |         |             |        |              |        |        |   |        |       |   |         |        |        
|                                                                         |                                                                                                 | Accounts receivable, net                                                |                                                          |            | (13,930 | )           |        |              | (2,123 | )      |   |        |      |   |         |        | (16,053 | )     
|                                                                         |                                                                                                 | Inventories                                                             |                                                          |            | (567    | )           |        |              | 2,437  |        |   |        |      |   |         |        | 1,870   |       
|                                                                         |                                                                                                 | Other current assets                                                    |                                                          |            | 3,290   |             |        |              | 57     |        |   |        |      |   |         |        | 3,347   |       
|                                                                         |                                                                                                 | Accounts payable and accrued expenses                                   |                                                          |            | (4,459  | )           |        |              | 456    |        |   |        |      |   |         |        | (4,003  | )     
|                                                                         |                                                                                                 | Other, net                                                              |                                                          |            | (3,465  | )           |        |              | (445   | )      |   |        |      |   |         |        | (3,910  | )     
|                                                                         |                                                                                                 |                                                                         |                                                          |            |         |             |        |              |        |        |   |        |       |   |         |       
|                                                                         |                                                                                                 |                                                                         | Net cash provided by (used in) continuing
    operations |            |         | (14,484     | )      |              |        | 9,225  |   |        |       |  |         |        |         | (5,259 | )
|                                                                         |                                                                                                 |                                                                         |                                                          |            |         |             |        |              |        |        |   |        |       |   |         |       
|Cash flows from investing
    activities:                                |                                                                                                 |                                                                         |                                                          |            |         |             |        |              |        |        |   |        |       |   |         |       
|Purchase of property and equipment                                       |                                                                                                 |                                                                         | (674                                                     | )          |         |             | (200   | )            |        |        |  |        |       |   | (874    | )     
|Proceeds from sale of property and equipment                             |                                                                                                 |                                                                         | 1,471                                                    |            |         |             | 609    |              |        |        |  |        |       |   | 2,080   |       
|Other, net                                                               |                                                                                                 |                                                                         | (92                                                      | )          |         |             |       |              |        |        |  |        |       |   | (92     | )     
|Intercompany                                                             |                                                                                                 |                                                                         | 8,779                                                    |            |         |             | (8,779 | )            |        |        |  |        |       |   |        |       
|                                                                         |                                                                                                 |                                                                         |                                                          |            |         |             |        |              |        |        |   |        |       |   |         |       
|                                                                         |                                                                                                 |                                                                         | Net cash provided by (used in) investing
    activities  |            |         | 9,484       |        |              |        | (8,370 | ) |        |       |  |         |        |         | 1,114  |  
|                                                                         |                                                                                                 |                                                                         |                                                          |            |         |             |        |              |        |        |   |        |       |   |         |       
|Cash flows from financing
    activities:                                |                                                                                                 |                                                                         |                                                          |            |         |             |        |              |        |        |   |        |       |   |         |       
|Net proceeds from revolving credit facility and
    other long-term debt |                                                                                                 |                                                                         | 32,749                                                   |            |         |             |       |              |        |        |  |        |       |   | 32,749  |       
|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                               |                                                                                                 |                                                                         | (3,728                                                   | )          |         |             | (884   | )            |        |        |  |        |       |   | (4,612  | )     
|Other                                                                    |                                                                                                 |                                                                         | (40                                                      | )          |         |             |       |              |        |        |  |        |       |   | (40     | )     
|                                                                         |                                                                                                 |                                                                         |                                                          |            |         |             |        |              |        |        |   |        |       |   |         |       
|                                                                         |                                                                                                 |                                                                         | Net cash provided by (used in) financing
    activities  |            |         | 6,220       |        |              |        | (884   | ) |        |       |  |         |        |         | 5,336  |  
|                                                                         |                                                                                                 |                                                                         |                                                          |            |         |             |        |              |        |        |   |        |       |   |         |       
|Net increase (decrease) in cash and cash
    equivalents                 |                                                                                                 |                                                                         | 1,220                                                    |            |         |             | (29    | )            |        |        |  |        |       |   | 1,191   |       
|Cash and cash equivalents, beginning of period                           |                                                                                                 |                                                                         | 3,423                                                    |            |         |             | 708    |              |        |        |  |        |       |   | 4,131   |       
|                                                                         |                                                                                                 |                                                                         |                                                          |            |         |             |        |              |        |        |   |        |       |   |         |       
|Cash and cash equivalents, end of period                                 |                                                                                                 | $                                                                       | 4,643                                                    |            |         | $           | 679    |              |        | $      |  |        |       | $ | 5,322   |       
|                                                                         |                                                                                                 |                                                                         |                                                          |            |         |             |        |              |        |        |   |        |       |   |         |       

16



---



##### 





|        |                                                                                           
|------- | ------------------------------------------------------------------------------------------
|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 September 27, 2003
Compared to Quarter Ended September 28, 2002

Consolidated net sales in the third quarter 2003
increased by $11.8 million, or 4.2% to $291.9 million from
$280.1 million in the third quarter 2002. The sales increase is
primarily attributable to an increase in the volume of
passenger, light truck tire, and custom wheel sales that is
partially offset by a decrease in large truck tire sales.

Gross profit increased by $3.3 million, or 6.4%
to $54.7 million in the third quarter 2003 from $51.4 million in
the third quarter 2002. Gross profit as a percentage of sales
increased 0.3% to 18.7% in the third quarter 2003 compared to
18.4% in the third quarter 2002. Margin increases were primarily
attributable to increased custom wheel sales, which carry higher
margins.

Selling, general and administrative expenses
increased by $0.5 million in the third quarter 2003 representing
14.5% as a percentage of sales compared to 14.9% in the third
quarter 2002. The increase in these expenses is primarily due to
increased business activity during the period.

Interest expense decreased $1.0 million in the
third quarter of 2003 to $3.1 million from $4.2 million in the
third quarter of 2002. The decrease is primarily attributable to
the decline in interest rates and reduced debt levels as well as
a $0.4 million net reduction in interest expense relating to the
change in fair value of the interest rate swap agreement entered
into in the second quarter of 2003.

Pre-tax income for the third quarter 2003 was
$9.2 million resulting in an income tax provision of $3.7
million compared to pre-tax income of $5.6 million in third
quarter 2002 resulting in an income tax provision of $2.2
million. The effective tax rate in each quarter was
approximately 40%.

Nine Months Ended September 27, 2003
Compared to Nine Months Ended September 28, 2002

Consolidated net sales for the nine-month period
in 2003 increased by $26.0 million, or 3.2% to $835.2 million
from $809.2 million in the nine-month period in 2002. The sales
increase is primarily attributable to an increase in the volume
of passenger, light truck tire, and custom wheel sales that is
partially offset by a decrease in large truck tire sales. The
increase in sales experienced by the Company was more than that
of the industry as a whole. Units of replacement passenger and
light truck tires shipped for the industry were down
approximately 0.1% for the nine-month period in 2003 versus the
nine-month period in 2002.

Gross profit increased by $5.2 million, or 3.5%
to $153.7 million in the nine-month period in 2003 from $148.5
million in the nine-month period in 2002. Gross profit as a
percentage of sales remained at 18.4% for the nine-month period
in 2003 compared to the nine-month period 2002. Margins in 2003
benefited from increased custom wheels sales, which carry higher
margins, offset by an aggressive first quarter 2003 marketing
program, which resulted in reduced margins on selected products.

Selling, general and administrative expenses
decreased by $0.8 million in the nine-month period ending
September 27, 2003 representing 15.0% as a percentage of
sales compared to 15.5% in the nine-month period ending
September 28, 2002. This decrease was primarily a result of
reduced costs associated with the Companys workers
compensation plan due to new safety initiatives implemented by
the Company as well as a reduction in amortization expense
relating to noncompete agreements that ended during 2003. These
decreases were partially offset by increased costs associated
with the Companys group health plan.

Interest expense decreased $4.0 million in the
nine-month period in 2003 to $10.8 million from $14.8 million in
the nine-month period in 2002. The decrease is primarily due to
lower outstanding principal on the Companys Series D
Senior Notes and other debt levels as well as a decline in
interest rates.

17



---



##### 



Pre-tax income for the nine-month period ending
September 27, 2003 was $18.2 million resulting in an income
tax provision of $7.3 million compared to pre-tax income of
$58.0 million for the nine-month period ending
September 28, 2002 resulting in an income tax provision of
$23.2 million. The nine-month period ending September 28,
2002 included the $49.8 million gain on repurchase of
Series D Senior Notes and the related tax provision of
$19.9 million. The effective tax rate for each of the nine-month
periods was approximately 40%.

Liquidity and Capital Resources

At September 27, 2003, the combined net
indebtedness (net of cash and excluding capital lease
obligations) of the Company was $166.6 million compared to
$178.4 million at December 28, 2002. Total commitments by
the lenders under the Companys revolving credit facility
(Revolver) were $180.0 million at September 27,
2003. As of September 27, 2003, the Company had $34.5
million available for additional borrowings. The amount
available to borrow is limited by the Borrowing Base
computation, as defined in the agreement.

The Company evaluates performance based on
several factors, of which the primary financial measure is
earnings from continuing operations before interest, taxes,
depreciation and amortization and gain on repurchase of Series D
Senior Notes (EBITDA). EBITDA 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. The following table is a
reconciliation of income from continuing operations to EBITDA:

|                                                   |  |                        |        |                           |  |               |        |               |  |   |        |  |  |   |         |  
|-------------------------------------------------- |  | ---------------------- | ------ | ------------------------- |  | ------------- | ------ | ------------- |  | - | ------ |  |  | - | ------- | -
|                                                   |  |                        |        |                          
|                                                   |  | For the Quarters Ended |        | For the Nine Months Ended
|                                                   |  |                        |        |                          
|                                                   |  | September 27,          |        | September 28,             |  | September 27, |        | September 28,
|                                                   |  | 2003                   |        | 2002                      |  | 2003          |        | 2002         
|                                                   |  |                        |        |                           |  |               |        |              
|                                                   |  |                        |        |                          
|                                                   |  | in thousands           |        | in thousands             
|Income from continuing operations                  |  | $                      | 5,519  |                           |  | $             | 3,363  |               |  | $ | 10,892 |  |  | $ | 34,818  |  
|Interest expense                                   |  |                        | 3,110  |                           |  |               | 4,153  |               |  |   | 10,796 |  |  |   | 14,761  |  
|Provision for income taxes                         |  |                        | 3,678  |                           |  |               | 2,241  |               |  |   | 7,260  |  |  |   | 23,213  |  
|Depreciation and amortization of other intangibles |  |                        | 1,490  |                           |  |               | 2,078  |               |  |   | 4,920  |  |  |   | 6,228   |  
|Gain on repurchase of Series D Senior Notes        |  |                        |       |                           |  |               |       |               |  |   |       |  |  |   | (49,759 | )
|                                                   |  |                        |        |                           |  |               |        |               |  |   |        |  |  |   |         |  
|EBITDA                                             |  | $                      | 13,797 |                           |  | $             | 11,835 |               |  | $ | 33,868 |  |  | $ | 29,261  |  
|                                                   |  |                        |        |                           |  |               |        |               |  |   |        |  |  |   |         |  

EBITDA from continuing operations increased to
$13.8 million for the third quarter 2003 from $11.8 million for
third quarter 2002. This increase is primarily attributed to
higher sales and gross profit margins in the third quarter 2003
that were partially offset by slightly higher operating costs.

EBITDA from continuing operations increased to
$33.9 million for the nine-month period 2003 from $29.3 million
for the nine-month period 2002. The increase is primarily
attributable to increased sales and reduced operating costs in
2003.

The Companys principal sources of cash
during the nine-month period ending September 27, 2003 came
from operations and were offset by cash used to make capital
expenditures and payments of long-term debt. Net working capital
at September 27, 2003 totaled $89.2 million compared to
$83.1 million at December 28, 2002, an increase of $6.1
million. The increase in working capital is primarily
attributable to increased business activity during the period
resulting in higher accounts receivable and inventory balances
partially offset by an increase in accounts payable and accrued
expenses.

Capital expenditures for the nine-month period
ending September 27, 2003 and September 28, 2002
amounted to $1.3 million and $0.9 million, respectively. Capital
expenditures in 2003 were primarily for warehouse racking and
leasehold improvements.

At September 27, 2003, the Companys
Revolver, as amended, provides for borrowings in the aggregate
principal amount of up to the lesser of $180.0 million less
defined reserves or the Borrowing Base, as defined in

18



---



##### 



the agreement, which is based on 85% of eligible
accounts receivable plus 50%-65% of eligible inventories less
defined reserves.


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
(1.50% as of September 27, 2003) or (ii) the
Eurodollar Rate, as defined, plus the applicable margin (3.00%
as of September 27, 2003). 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 covenants, 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 November 12, 2003,
the Company was in compliance with these covenants, as amended.
The Companys obligations under the Revolver are secured by
all inventories and accounts receivable.

During second quarter 2003, the Company entered
into an interest rate swap agreement (Swap) to
manage exposure to fluctuations in interest rates. The Swap
represents a contract to exchange floating rate for fixed
interest payments periodically over the life of the agreement
without exchange of the underlying notional amount. The notional
amount of the Swap is used to measure interest to be paid or
received and does not represent the amount of exposure to credit
loss. At September 27, 2003, the Swap in place covers a
notional amount of $50.0 million of indebtedness at a fixed
interest rate of 2.14% and expires in June 2006. This Swap has
not been designated for hedge accounting treatment. Accordingly,
the Company recognizes the fair value of the Swap in the
accompanying unaudited condensed consolidated balance sheets and
any changes in the fair value are recorded as adjustments to
interest expense in the accompanying consolidated statements of
operations. The fair value of the Swap is the estimated amount
that the Company would pay or receive to terminate the agreement
at the reporting date. As of September 27, 2003, the fair
value of the Swap was an asset of $0.1 million, and is included
in other assets in the accompanying unaudited condensed
consolidated balance sheets at September 27, 2003. As a result
of the change in fair value, $0.4 million and $0.1 million net
reductions to interest expense were recorded for the quarter and
nine months ended September 27, 2003, respectively.

On March 27, 2002, the Company repurchased
$121.4 million in outstanding principal amount of the
Series D Senior Notes (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 Revolver 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 recorded a pre-tax gain of $49.8
million on the repurchase of the Senior Notes and a related
income tax provision of $19.9 million for the nine months ended
September 28, 2002.

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. 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

19



---



##### 



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 $16.0
million and $22.2 million at September 27, 2003 and
December 28, 2002, respectively. The decrease in net
deferred tax assets is primarily attributable to current period
income and the corresponding net operating loss carryforward
(NOLs) utilization. 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 NOLs, for
which a valuation allowance of $1.0 million is recorded as of
September 27, 2003, unchanged from December 28, 2002.
This evaluation considered the historical and long-term expected
profitability of the Company. Given the timing of the reversal
of its temporary differences and the expiration date of its
NOLs, 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. There can be no assurance that the
Company will meet its expectation of future taxable income and
adjustments to the valuation allowance may be required in the
future.

New Accounting
Pronouncements

In April 2002, the Financial Accounting Standards
Board (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 most debt
extinguishments that was previously required under SFAS
No. 4. The provisions of this statement related to the
rescission of Statement 4 apply in fiscal years beginning after
May 15, 2002. The Company adopted the provisions of SFAS
No. 145 in the first quarter of fiscal year 2003, which
required reclassification of the Companys 2002
extraordinary gain (Note 9).

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). 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 (other than employee termination
benefits), as defined, was recognized at the date of an
entitys commitment to an exit plan. The provisions of SFAS
No. 146 are effective for exit or disposal activities that
are initiated after December 31, 2002, with early
application encouraged. The Company adopted the provisions of
SFAS No. 146 in the first quarter of fiscal year 2003. The
adoption of this statement had no material impact on the
Companys financial position or results of operations.

In November 2002, the FASB issued FASB
Interpretation No. (FIN) 45, Guarantors
Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others  an
interpretation of FASB Statements No. 5, 57, and 107 and a
rescission of FASB Interpretation No. 34. FIN 45
elaborates on the disclosures to be made regarding obligations
under certain guarantees in interim and annual financial
statements. It also clarifies the requirement of a guarantor to
recognize a liability at the inception of the guarantee based on
the fair value of the obligation. The provisions relating to the
initial recognition and measurement of a liability are
applicable on a prospective basis for guarantees issued or
modified subsequent to December 31, 2002. The disclosure
requirements of FIN 45 are effective for interim and annual
financial statements for periods ending after December 15,
2002. The Company adopted the disclosure provisions of this
statement effective December 15, 2002. The liability
recognition provisions of this

20



---



##### 



statement were adopted in the first quarter of
fiscal year 2003 and had no material impact on the
Companys financial position or results of operations.


In November 2002, the EITF reached a consensus on
Issue No. 02-16, Accounting by a Customer (Including
a Reseller) for Cash Considerations Received from a
Vendor. Issue No. 02-16 provides guidance on how cash
consideration received by a customer or reseller should be
classified in the customers statement of earnings. Issue
No. 02-16 is effective for all transactions with vendors
after December 31, 2002. The adoption of Issue No. 02-16
did not have a material impact on the Companys
consolidated financial position or results of operations.

In December 2002, the FASB issued SFAS
No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure, an amendment of
SFAS No. 123, Accounting for Stock-Based
Compensation. The transition guidance and annual
disclosure provisions are effective for fiscal years ending
after December 15, 2002 and the interim disclosure
provisions are effective for interim periods beginning after
December 15, 2002. This statement provides alternative
methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee
compensation. In addition, this statement amends the disclosure
requirements of SFAS No. 123 to require more prominent
disclosures in both annual and interim financial statements
regarding the method of accounting for stock-based employee
compensation and the effect of the method used on reported
results. At this time, the Company has not voluntarily adopted
the fair value method of accounting under SFAS No. 123.

In April 2003, the FASB issued SFAS No. 149,
Amendment of Statement 133 on Derivative Instruments and
Hedging Activities. SFAS No. 149 amends and clarifies
financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other
contracts and for hedging activities under SFAS No. 133,
Accounting for Derivative Instruments and Hedging
Activities. SFAS No. 149 is effective for contracts
entered into or modified after June 30, 2003 and for
hedging relationships designated after June 30, 2003. The
adoption of SFAS No. 149 did not have a material impact on
the Companys consolidated financial position or results of
operations.

In May 2003, the FASB issued SFAS No. 150,
Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity. SFAS
No. 150 establishes standards for how financial instruments
with characteristics of both liabilities and equity should be
measured and classified and requires that an issuer classify a
financial instrument that is within its scope as a liability.
SFAS No. 150 is effective for financial instruments entered
into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning
after June 15, 2003, except for mandatorily redeemable
financial instruments of nonpublic entities. For nonpublic
entities, as defined, mandatorily redeemable financial
instruments are subject to the provisions of SFAS No. 150
for the first fiscal period beginning after December 15,
2003. Accordingly, the Company is required to adopt the
provisions of SFAS No. 150 in the first quarter of fiscal
2004 and does not expect the adoption to have a material impact
on the results of operations or financial position in the
foreseeable future.

Item 3.     Quantitative
and Qualitative Disclosure about Market Risk.

For the period ended September 27, 2003, 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 28, 2002.

Item 4.     Controls
and Procedures.

Evaluation of
Disclosure Controls and Procedures

Based on their evaluation as of the end of the
period covered by this quarterly report on Form 10-Q, the
Companys principal executive officer and principal
financial officer have concluded that the Companys
disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934 (the Exchange Act)) are effective to
ensure that information required to be disclosed by the Company
in reports that it files or submits under the Exchange Act is
recorded, processed,

21



---



##### 



summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms.


Changes in
Internal Controls

During the quarter ended September 27, 2003,
there was no change in the Companys internal controls over
financial reporting that has materially affected, or is
reasonably likely to materially affect, the Companys
internal control over financial reporting.

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 28, 2002.

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

(a) Exhibits



| |     |                                                                                     
| | --- | ------------------------------------------------------------------------------------
| | 3.1 | Fourth Restated Certificate of Incorporation of
    American Tire Distributors, Inc.



| |      |                                                                                                                                                                                                                    
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 31.1 | Certification of Principal Executive Officer
    pursuant to Rules 13a-14(a) and 15d-14(a) under the
    Securities Exchange Act of 1934, as adopted pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002.
|
| | 31.2 | Certification of Principal Financial Officer
    pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities
    Exchange Act of 1934, as adopted pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002.
|
| | 32.1 | Certification of Principal Executive Officer
    pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                     
|
| | 32.2 | Certification of Principal Financial Officer
    pursuant to 18 U.S.C. Section 1350, as adopted 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
    August 12, 2003 relating to the press release reporting
    second quarter 2003 financial results.

22



---



##### 



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: November 12, 2003

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



| |     |                       
| | --- | ----------------------
| | By: | /s/ SCOTT A. DEININGER

| |                                 
| | --------------------------------
| |                                 
| | Scott A. Deininger              
| | Senior Vice President of        
| | Finance and Administration      
| | (On behalf of the Registrant and
| | as Principal Financial Officer) 

23