##### Table of Contents









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




---

FORM 10-Q

|     |  |                                                                                             
|---- |  | --------------------------------------------------------------------------------------------
|[X]  |  | QUARTERLY REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|    
|     |  | For the quarterly period ended April 3,
    2004                                            
|    
|     |  | 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
May 17, 2004: 5,086,917



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TABLE OF CONTENTS






|         |         |                                                                                                                       |                                                                                           |      |    |    | 
|-------- | ------- | --------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ---- | -- | -- | 
|         |         |                                                                                                                       |                                                                                           | Page
|         |         |                                                                                                                       |                                                                                           |     
|PART I.  |         | FINANCIAL
    INFORMATION                                                                                             |                                                                                           |      |    |   
|        
|         | ITEM 1. |                                                                                                                       | Financial Statements                                                                      |      |    |    | 
|         |         | Condensed Consolidated
    Balance Sheets  April 3, 2004
    (unaudited) and December 27, 2003                       |                                                                                           |      | 1  |   
|         |         | Condensed Consolidated
    Statements of Operations (unaudited)  Quarters Ended
    April 3, 2004 and March 29, 2003 |                                                                                           |      | 2  |   
|         |         | Condensed Consolidated
    Statements of Cash Flows (unaudited)  Quarters Ended
    April 3, 2004 and March 29, 2003 |                                                                                           |      | 3  |   
|         |         | Notes to Condensed
    Consolidated Financial Statements                                                              |                                                                                           |      | 4  |   
|        
|         | ITEM 2. |                                                                                                                       | Managements Discussion
    and Analysis of Financial Condition and Results of Operations |      |    | 15 | 
|        
|         | ITEM 3. |                                                                                                                       | Quantitative and Qualitative
    Disclosures about Market Risk                            |      |    | 18 | 
|        
|         | ITEM 4. |                                                                                                                       | Controls and Procedures                                                                   |      |    | 18 | 
|        
|PART II. |         | OTHER
    INFORMATION                                                                                                 |                                                                                           |      |    |   
|        
|         | ITEM 1. |                                                                                                                       | Legal Proceedings                                                                         |      |    | 19 | 
|        
|         | ITEM 6. |                                                                                                                       | Exhibits and Reports on
    Form 8-K                                                      |      |    | 19 | 
|         |         | Signatures                                                                                                            |                                                                                           |      | 20 |   
|EX-10.1 
|EX-31.1 
|EX-31.2 





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Cautionary Statements on Forward-Looking
Information

This Form 10-Q contains forward-looking
statements relating to the Companys business and financial
outlook, which are based on the Companys current
expectations, estimates, forecast and projections. In some
cases, you can identify forward-looking statements by
terminology such as may, will,
should, expects, plans,
anticipates, believes,
estimates, predicts,
potential, continue or other comparable
terminology. These forward-looking statements are not guarantees
of future performance and involve risks, uncertainties,
estimates and assumptions that are difficult to predict.
Therefore, actual outcomes and results may differ materially
from those expressed in these forward-looking statements. You
should not place undue reliance on any of these forward-looking
statements. Further, any forward-looking statement speaks only
as of the date on which it is made, and the Company undertakes
no obligation to update any such statement to reflect new
information, the occurrence of future events or circumstances or
otherwise.

The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking
statements to encourage companies to provide prospective
information about their companies without fear of litigation.
The Company would like to take advantage of the safe
harbor provisions of the Private Securities Litigation
Reform Act in connection with the forward-looking statements
included in this document.

Factors that could cause actual results to differ
materially from those indicated by the forward-looking
statements or that could contribute to such differences include,
but are not limited to, integration of new systems,
unanticipated expenditures, acquisitions and the successful
integration of acquisitions into the business, changing
relationships with customers, suppliers and strategic partners,
changes to governmental regulation of the tire industry, the
impact of competitive products, changes to the competitive
environment, the acceptance of new products in the market, the
economy and world events.



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##### Table of Contents






PART I.     FINANCIAL
INFORMATION





|        |                      
|------- | ---------------------
|Item 1. | Financial Statements.

American Tire Distributors, Inc.



Condensed Consolidated Balance
Sheets


(dollars in thousands, except per share amounts)


|                                                   |                                                                                                                       |                            |                                            |              |         |         |         |         |         |         | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ------------ | ------- | ------- | ------- | ------- | ------- | ------- | 
|                                                   |                                                                                                                       | April 3,                   |                                            | December 27,
|                                                   |                                                                                                                       | 2004                       |                                            | 2003        
|                                                   |                                                                                                                       |                            |                                            |             
|                                                   |                                                                                                                       | (Unaudited)                |                                            |             
|Assets                                             |                                                                                                                       |                            |                                            |              |         |         |         |        
|Current assets:                                    |                                                                                                                       |                            |                                            |              |         |         |         |        
|                                                   | Cash and cash equivalents                                                                                             |                            | $                                          | 3,014        |         |         | $       | 3,326   |        
|                                                   | Accounts receivable, net of allowance for
    doubtful accounts of $1,040 and $1,112                                  |                            |                                            | 117,944      |         |         |         | 96,120  |        
|                                                   | Inventories                                                                                                           |                            |                                            | 177,516      |         |         |         | 174,051 |        
|                                                   | Deferred income taxes                                                                                                 |                            |                                            | 5,742        |         |         |         | 6,462   |        
|                                                   | Other current assets                                                                                                  |                            |                                            | 12,246       |         |         |         | 10,625  |        
|                                                   |                                                                                                                       |                            |                                            |              |         |         |         |        
|                                                   |                                                                                                                       | Total current assets       |                                            |              | 316,462 |         |         |         | 290,584 |        
|                                                   |                                                                                                                       |                            |                                            |              |         |         |         |        
|Property and equipment, net                        |                                                                                                                       |                            | 19,242                                     |              |         |         | 17,662  |        
|Goodwill, net                                      |                                                                                                                       |                            | 93,940                                     |              |         |         | 93,940  |        
|Other intangible assets, net                       |                                                                                                                       |                            | 2,045                                      |              |         |         | 2,238   |        
|Deferred income taxes                              |                                                                                                                       |                            | 8,680                                      |              |         |         | 8,849   |        
|Other assets                                       |                                                                                                                       |                            | 6,562                                      |              |         |         | 5,730   |        
|                                                   |                                                                                                                       |                            |                                            |              |         |         |         |        
|                                                   |                                                                                                                       |                            | Total assets                               |              | $       | 446,931 |         |         | $       | 419,003 | 
|                                                   |                                                                                                                       |                            |                                            |              |         |         |         |        
|                                                  
|Liabilities and Stockholders
    Equity           |                                                                                                                       |                            |                                            |              |         |         |         |        
|Current liabilities:                               |                                                                                                                       |                            |                                            |              |         |         |         |        
|                                                   | Accounts payable                                                                                                      |                            | $                                          | 196,598      |         |         | $       | 170,716 |        
|                                                   | Accrued expenses                                                                                                      |                            |                                            | 20,843       |         |         |         | 17,952  |        
|                                                   | Current maturities of long-term debt                                                                                  |                            |                                            | 1,759        |         |         |         | 2,919   |        
|                                                   |                                                                                                                       |                            |                                            |              |         |         |         |        
|                                                   |                                                                                                                       | Total current liabilities  |                                            |              | 219,200 |         |         |         | 191,587 |        
|                                                   |                                                                                                                       |                            |                                            |              |         |         |         |        
|Revolving credit facility and other long-term debt |                                                                                                                       |                            | 132,387                                    |              |         |         | 137,044 |        
|Series D Senior Notes                              |                                                                                                                       |                            | 28,600                                     |              |         |         | 28,600  |        
|Capital lease obligations                          |                                                                                                                       |                            | 14,128                                     |              |         |         | 14,153  |        
|Other liabilities                                  |                                                                                                                       |                            | 4,431                                      |              |         |         | 4,590   |        
|Redeemable preferred stock (Note 9)                |                                                                                                                       |                            | 10,035                                     |              |         |         | 10,535  |        
|Commitments and contingencies
    (Note 11)        |                                                                                                                       |                            |                                            |              |         |         |         |        
|Stockholders equity:                              |                                                                                                                       |                            |                                            |              |         |         |         |        
|                                                   | Preferred stock (Note 10)                                                                                             |                            |                                            | 52,172       |         |         |         | 50,944  |        
|                                                   | 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                                                                                            |                            |                                            | 22,818       |         |         |         | 22,388  |        
|                                                   | Warrants                                                                                                              |                            |                                            | 1,352        |         |         |         | 1,782   |        
|                                                   | Note receivable from sale of stock                                                                                    |                            |                                            |             |         |         |         | (17     | )      
|                                                   | Accumulated deficit                                                                                                   |                            |                                            | (38,243      | )       |         |         | (42,654 | )      
|                                                   |                                                                                                                       |                            |                                            |              |         |         |         |        
|                                                   |                                                                                                                       | Total stockholders equity |                                            |              | 38,150  |         |         |         | 32,494  |        
|                                                   |                                                                                                                       |                            |                                            |              |         |         |         |        
|                                                   |                                                                                                                       |                            | Total liabilities and stockholders equity |              | $       | 446,931 |         |         | $       | 419,003 | 
|                                                   |                                                                                                                       |                            |                                            |              |         |         |         |        

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

1



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American Tire Distributors, Inc.




Condensed Consolidated Statements of
Operations

(Unaudited)


(dollars in thousands)


|                                             |                             |                |         |           |   |   |         |        |  
|-------------------------------------------- | --------------------------- | -------------- | ------- | --------- | - | - | ------- | ------ | -
|                                             |                             |               
|                                             |                             | Quarters Ended
|                                             |                             |               
|                                             |                             | April 3,       |         | March 29,
|                                             |                             | 2004           |         | 2003     
|                                             |                             |                |         |          
|Net sales                                    |                             | $              | 301,366 |           |   | $ | 258,079 |       
|Cost of goods sold                           |                             |                | 241,649 |           |   |   | 211,979 |       
|                                             |                             |                |         |           |   |   |         |       
|                                             | Gross profit                |                |         | 59,717    |   |   |         | 46,100 |  
|Selling, general and administrative expenses |                             |                | 46,522  |           |   |   | 40,928  |       
|                                             |                             |                |         |           |   |   |         |       
|                                             | Operating income            |                |         | 13,195    |   |   |         | 5,172  |  
|Other income (expense):                      |                             |                |         |           |   |   |         |       
|                                             | Interest expense            |                |         | (3,500    | ) |   |         | (3,756 | )
|                                             | Other income (expense), net |                |         | (297      | ) |   |         | 228    |  
|                                             |                             |                |         |           |   |   |         |       
|Income from operations before income taxes   |                             |                | 9,398   |           |   |   | 1,644   |       
|Provision for income taxes                   |                             |                | 3,759   |           |   |   | 658     |       
|                                             |                             |                |         |           |   |   |         |       
|Net income                                   |                             | $              | 5,639   |           |   | $ | 986     |       
|                                             |                             |                |         |           |   |   |         |       

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

2



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American Tire Distributors, Inc.



Condensed Consolidated Statements of Cash
Flows


(Unaudited)


(dollars in thousands)


|                                                         |                                                                                       |                                                    |       |           |         |   |       |        |         |  
|-------------------------------------------------------- | ------------------------------------------------------------------------------------- | -------------------------------------------------- | ----- | --------- | ------- | - | ----- | ------ | ------- | -
|                                                         |                                                                                       |                                                   
|                                                         |                                                                                       | Quarters Ended                                    
|                                                         |                                                                                       |                                                   
|                                                         |                                                                                       | April 3,                                           |       | March 29,
|                                                         |                                                                                       | 2004                                               |       | 2003     
|                                                         |                                                                                       |                                                    |       |          
|Cash flows from operating
    activities:                |                                                                                       |                                                    |       |           |         |   |       |       
|                                                         | Net income                                                                            |                                                    | $     | 5,639     |         |   | $     | 986    |        
|                                                         | Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                    |       |           |         |   |       |        |        
|                                                         |                                                                                       | Depreciation and amortization of other intangibles |       |           | 1,152   |   |       |        | 1,759   |  
|                                                         |                                                                                       | Amortization of other assets                       |       |           | 266     |   |       |        | 302     |  
|                                                         |                                                                                       | Provision for doubtful accounts                    |       |           | 237     |   |       |        | 476     |  
|                                                         |                                                                                       | Deferred income taxes                              |       |           | 889     |   |       |        | 656     |  
|                                                         |                                                                                       | Other, net                                         |       |           | 320     |   |       |        | (8      | )
|                                                         | Change in operating assets and liabilities:                                           |                                                    |       |           |         |   |       |        |        
|                                                         |                                                                                       | Accounts receivable                                |       |           | (22,061 | ) |       |        | (10,537 | )
|                                                         |                                                                                       | Inventories                                        |       |           | (3,465  | ) |       |        | (8,497  | )
|                                                         |                                                                                       | Other current assets                               |       |           | (1,621  | ) |       |        | 53      |  
|                                                         |                                                                                       | Accounts payable and accrued expenses              |       |           | 28,773  |   |       |        | 16,505  |  
|                                                         |                                                                                       | Other, net                                         |       |           | (1,377  | ) |       |        | (230    | )
|                                                         |                                                                                       |                                                    |       |           |         |   |       |       
|                                                         |                                                                                       | Net cash provided by operating activities          |       |           | 8,752   |   |       |        | 1,465   |  
|                                                         |                                                                                       |                                                    |       |           |         |   |       |       
|Cash flows from investing
    activities:                |                                                                                       |                                                    |       |           |         |   |       |       
|                                                         | Purchase of property and equipment                                                    |                                                    |       | (915      | )       |   |       | (674   | )      
|                                                         | Proceeds from sale of property and equipment                                          |                                                    |       | 7         |         |   |       | 496    |        
|                                                         | Other, net                                                                            |                                                    |       |          |         |   |       | (50    | )      
|                                                         |                                                                                       |                                                    |       |           |         |   |       |       
|                                                         |                                                                                       | Net cash used in investing activities              |       |           | (908    | ) |       |        | (228    | )
|                                                         |                                                                                       |                                                    |       |           |         |   |       |       
|Cash flows from financing
    activities:                |                                                                                       |                                                    |       |           |         |   |       |       
|                                                         | Net repayments of revolving credit facility and
    other long-term debt              |                                                    |       | (7,656    | )       |   |       | (1,230 | )      
|                                                         | Series A preferred stock redemption                                                   |                                                    |       | (500      | )       |   |       |       |        
|                                                         |                                                                                       |                                                    |       |           |         |   |       |       
|                                                         |                                                                                       | Net cash used in financing activities              |       |           | (8,156  | ) |       |        | (1,230  | )
|                                                         |                                                                                       |                                                    |       |           |         |   |       |       
|Net increase (decrease) in cash and cash
    equivalents |                                                                                       |                                                    | (312  | )         |         |   | 7     |       
|Cash and cash equivalents, beginning of period           |                                                                                       |                                                    | 3,326 |           |         |   | 2,693 |       
|                                                         |                                                                                       |                                                    |       |           |         |   |       |       
|Cash and cash equivalents, end of period                 |                                                                                       | $                                                  | 3,014 |           |         | $ | 2,700 |       
|                                                         |                                                                                       |                                                    |       |           |         |   |       |       
|Supplemental disclosures of cash flow
    information   |                                                                                       |                                                    |       |           |         |   |       |       
|                                                         | Cash payments for interest                                                            |                                                    | $     | 2,552     |         |   | $     | 2,794  |        
|                                                         |                                                                                       |                                                    |       |           |         |   |       |       
|                                                         | Cash payments for taxes, net                                                          |                                                    | $     | 505       |         |   | $     | 525    |        
|                                                         |                                                                                       |                                                    |       |           |         |   |       |       
|Supplemental disclosures of noncash
    activities      |                                                                                       |                                                    |       |           |         |   |       |       
|                                                         | Capital expenditures financed by debt                                                 |                                                    | $     | 1,636     |         |   | $     |       |        
|                                                         |                                                                                       |                                                    |       |           |         |   |       |       

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

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American Tire Distributors, Inc.



Notes to Condensed 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 condensed 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 accounting principles
generally accepted in the United States. In the opinion of the
Company, all adjustments, consisting of 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 27, 2003. The results of operations for the
quarter ended April 3, 2004 are subject to year-end audit
and adjustments, and are not necessarily indicative of the
operating results for the full fiscal year.

The Companys fiscal year is based on either
a 52 or 53 week period ending on the Saturday closest to
each December 31. Therefore, the financial results of
certain fiscal years, and the associated 14-week quarters, will
not be exactly comparable to the prior and subsequent 52-week
fiscal years and the associated quarters having only
13 weeks. The quarters ended April 3, 2004 and
March 29, 2003 contain operating results for 14 weeks
and 13 weeks, respectively.

Certain prior period amounts have been
reclassified to conform to the current period presentation.



|   |                                               
|-- | ----------------------------------------------
|3. | Recently Issued Accounting
    Pronouncements:

In May 2003, the Financial Accounting Standards
Board (FASB) issued Statement of Financial
Accounting Standards (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,
except for mandatorily redeemable financial instruments of
nonpublic entities. On November 7, 2003, the FASB issued
FASB Staff Position (FSP) No. 150-3
Effective Date, Disclosures, and Transition for
Mandatorily Redeemable Financial Instruments of Certain
Nonpublic Entities and Certain Mandatorily Redeemable
Noncontrolling Interests under FASB Statement No. 150,
Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity.FSP
No. 150-3 requires that implementation of certain
provisions of SFAS No. 150 be deferred indefinitely.
The adoption of SFAS No. 150 did not have a material
impact on the Companys consolidated financial position or
results of operations.



|   |               
|-- | --------------
|4. | Stock Options:

As permitted by SFAS No. 123,
Accounting For Stock-Based Compensation, 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) and its
related interpretations. Pursuant to APB No. 25,
compensation expense is recognized for financial reporting
purposes using the intrinsic value method. The amount of
compensation expense to be recognized is determined by the
excess of the fair value of common

4



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American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

stock over the exercise price of the related
option at the measurement date. The exercise price of all stock
options represented fair value of the underlying common stock at
the date of grant. Accordingly, no compensation expense has been
recorded in the condensed consolidated statements 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. 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 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 Quarter Ended
|                                                                                                                                        |  |                      
|                                                                                                                                        |  | April 3,              |       | March 29,  
|                                                                                                                                        |  | 2004                  |       | 2003       
|                                                                                                                                        |  |                       |       |            
|                                                                                                                                        |  | (Unaudited)           |       | (Unaudited)
|Net income, as reported                                                                                                                 |  | $                     | 5,639 |             |  | $ | 986  |  
|Deduct: Total stock-based employee compensation
    expense determined under the fair value based method for all
    awards, net of tax |  |                       | (262  | )           |  |   | (181 | )
|                                                                                                                                        |  |                       |       |             |  |   |      |  
|Pro forma net income                                                                                                                    |  | $                     | 5,377 |             |  | $ | 805  |  
|                                                                                                                                        |  |                       |       |             |  |   |      |  

During first quarter 2004, the Company granted
options for 268,226 shares with an exercise price of $4.25.
The weighted average fair value of options granted during first
quarter 2004 estimated on the date of grant using the
Black-Scholes option pricing model was $1.40. The fair value of
options granted in first quarter 2004 was determined using the
following assumptions: a weighted average risk-free interest
rate of 3.98%, no dividend yield, expected life of 10 years
which equals the terms of the options, and no expected
volatility.

The Company granted options for
198,308 shares in first quarter 2003 with an exercise price
of $3.00. The weighted average fair value of options granted
during 2003 estimated on the date of grant using the
Black-Scholes option pricing model was $1.00. The fair value of
options granted in first quarter 2003 was determined using the
following assumptions: a risk-free interest rate of 4.05%, no
dividend yield, expected life of 10 years which equals the
terms of the options, and no expected volatility.



|   |             
|-- | ------------
|5. | 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. All of the Companys inventories are held as
collateral under the revolving credit facility
(Revolver).



|   |                             
|-- | ----------------------------
|6. | Shipping and Handling Costs:

Outbound shipping and handling costs are
classified as selling, general and administrative expenses in
the accompanying condensed consolidated statements of
operations. Such expenses totaled $18.0 million and
$17.0 million for the quarters ended April 3, 2004 and
March 29, 2003, respectively.

5



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American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)



|   |                       
|-- | ----------------------
|7. | Deferred Income Taxes:

The Company has deferred tax assets of
$14.4 million and $15.3 million at April 3, 2004
and December 27, 2003, 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
April 3, 2004, unchanged from December 27, 2003. 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.



|   |                                                     
|-- | ----------------------------------------------------
|8. | Long-term Debt and Other Financing
    Arrangements:



| |                          
| | -------------------------
| | Revolving Credit Facility

On March 19, 2004, the Company executed a
Third Amended and Restated Loan and Security Agreement (the
Revolver). The Borrowers to the Revolver are the
Company and its subsidiaries. The Revolver provides for
borrowings in the aggregate principal amount of up to the lesser
of $245.0 million, less defined reserves, or the Borrowing
Base, as defined in the agreement. On April 2, 2004, the
Company and its lenders executed an amendment to the Revolver to
amend the requirements and form of the officers compliance
certificate to be issued to the lenders.

Borrowings under the Revolver bear interest, at
(i) the Base Rate, as defined, plus the applicable margin
(0.75% as of April 3, 2004) or (ii) the Eurodollar
Rate, as defined, plus the applicable margin (2.25% as of
April 3, 2004). These margins are subject to
performance-based step-downs resulting in margins ranging from
0.25% to 1.25% for Base Rate loans and 1.75% to 2.75% for
Eurodollar Rate loans, respectively.

The Revolver, as amended, requires the Company to
meet a fixed charge coverage test, as defined, as well as
certain covenants, which among other things, limits 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 April 3, 2004, the
Company was in compliance with these covenants. The
Companys obligations under the Revolver are secured by all
inventories and accounts receivable. The Revolver expires
February 15, 2008.



| |                       
| | ----------------------
| | Derivative Instruments

During the 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 April 3, 2004, 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 condensed consolidated balance sheets and any
changes in the fair value are recorded as adjustments to
interest expense in the accompanying condensed consolidated
statements of

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##### Table of Contents



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

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. The fair value of
the Swap was an asset of $0.1 million and $0.2 million
at April 3, 2004 and December 27, 2003, respectively,
and is included in other assets in the accompanying condensed
consolidated balance sheets. As a result of the change in fair
value, $0.1 million net increase to interest expense was
recorded for the quarter ended April 3, 2004.



| |                          
| | -------------------------
| | Capital Lease Obligations

As of April 3, 2004, the Company has a
capital lease obligation of $14.1 million relating to the
sale and leaseback of three of its owned facilities. 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 Consumer Price Index changes every two years. As of
April 25, 2004, the annual rent increased to
$1.7 million. 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 warrant. The Company
recorded these warrants at fair value and has presented them as
a component of stockholders equity in the condensed
consolidated balance sheets.



| |                
| | ---------------
| | Debt Maturities

Aggregate annual maturities of long-term debt at
April 3, 2004, are as follows (in thousands):

|                 |  |   |         | 
|---------------- |  | - | ------- | 
|Year Ending      |  |  
|December:        |  |  
|                 |  |  
|2004 (remainder) |  | $ | 1,297   | 
|2005             |  |   | 1,097   | 
|2006             |  |   | 240     | 
|2007             |  |   | 53      | 
|2008             |  |   | 159,995 | 
|Thereafter       |  |   | 14,192  | 
|                 |  |   |         | 
|                 |  | $ | 176,874 | 
|                 |  |   |         | 



|   |                            
|-- | ---------------------------
|9. | Redeemable Preferred Stock:

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

|                                                                                                                                                      |                                  |             |       |              |  |   |       |        | 
|----------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------- | ----------- | ----- | ------------ |  | - | ----- | ------ | 
|                                                                                                                                                      |                                  | April 3,    |       | December 27,
|                                                                                                                                                      |                                  | 2004        |       | 2003        
|                                                                                                                                                      |                                  |             |       |             
|                                                                                                                                                      |                                  | (Unaudited) |       |             
|Redeemable preferred stock
    Series A  4% cumulative; 7,000 shares
    authorized; 6,000 and 6,500 shares issued and outstanding,
    respectively |                                  | $           | 6,000 |              |  | $ | 6,500 |       
|Redeemable preferred stock
    Series B  variable rate cumulative;
    4,500 shares authorized, issued and outstanding                               |                                  |             | 4,035 |              |  |   | 4,035 |       
|                                                                                                                                                      |                                  |             |       |              |  |   |       |       
|                                                                                                                                                      | Total redeemable preferred stock |             | $     | 10,035       |  |   | $     | 10,535 | 
|                                                                                                                                                      |                                  |             |       |              |  |   |       |       

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

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##### Table of Contents



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

will accrue, when and if declared by the Board of
Directors, and are payable on the last business day of January.
In first quarter 2004, 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 condensed
consolidated balance sheets and the related dividends are
included in interest expense in the accompanying condensed
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
January 2004, 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 dividend 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 condensed consolidated balance
sheets. To date, the Company has met the purchase requirements,
thus no dividends have been declared and paid.



|    |                 
|--- | ----------------
|10. | Preferred Stock:

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

|                                                                                                       |                       |             |        |              |  |   |        |        | 
|------------------------------------------------------------------------------------------------------ | --------------------- | ----------- | ------ | ------------ |  | - | ------ | ------ | 
|                                                                                                       |                       | April 3,    |        | December 27,
|                                                                                                       |                       | 2004        |        | 2003        
|                                                                                                       |                       |             |        |             
|                                                                                                       |                       | (Unaudited) |        |             
|Preferred stock Series C  12%
    cumulative; 1,333,334 shares authorized, issued and
    outstanding |                       | $           | 16,320 |              |  | $ | 15,960 |       
|Preferred stock Series D  12%
    cumulative; 9,637,592 shares authorized, issued and
    outstanding |                       |             | 35,852 |              |  |   | 34,984 |       
|                                                                                                       |                       |             |        |              |  |   |        |       
|                                                                                                       | Total preferred stock |             | $      | 52,172       |  |   | $      | 50,944 | 
|                                                                                                       |                       |             |        |              |  |   |        |       

Shares of Series C preferred stock accrue
dividends at an annual rate of 12%. However, as long as any
shares of Series A preferred stock or Series B
preferred stock remain outstanding, no dividends may be paid.
Shares of Series C preferred stock are convertible into
common stock at a conversion price of $3.00 per common
share.

Shares of Series D preferred stock accrue
dividends at an annual rate of 12%. However, as long as any
shares of Series A preferred stock or Series B
preferred stock remain outstanding, no dividends may be paid. In
addition, 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.



|    |                               
|--- | ------------------------------
|11. | Commitments and Contingencies:



| |                             
| | ----------------------------
| | Guaranteed Lease Obligations

The Company remains liable as a guarantor on
certain leases of Winston Tire Company (Winston),
its discontinued retail segment. As of April 3, 2004, total
obligations of the Company, as guarantor on these leases is
approximately $12.0 million extending over 15 years.
However, the Company has secured

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##### Table of Contents



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

assignments or sublease agreements for the vast
majority of these commitments with contractual assigned or
subleased rentals of approximately $11.4 million. A
provision has been made for the net present value of the
estimated shortfall.



| |                  
| | -----------------
| | Legal Proceedings

The Company is involved from time to time in
various lawsuits, including alleged class action lawsuits
arising out of the ordinary conduct of its business. Although no
assurances can be given, management does not expect that any of
these matters will have a material adverse effect on the
Companys business or financial condition. The Company is
also involved in various proceedings incidental to the ordinary
course of its business. The Company believes, based on
consultation with legal counsel, that none of these will have a
material adverse effect on its financial condition or results of
operations.

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##### Table of Contents



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)



|    |                                                
|--- | -----------------------------------------------
|12. | Subsidiary Guarantor Financial
    Information:

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

Condensed consolidating balance sheets as of
April 3, 2004 and December 27, 2003, are as follows:

|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |         |         |         |         |         | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ---------- | ------- | ------------ | ------ | ------------ | ------ | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | 
|                                                   |                                                                                                                       |                           
|                                                   |                                                                                                                       | As of April 3, 2004       
|                                                   |                                                                                                                       |                           
|                                                   |                                                                                                                       | Parent                     |                                            | Subsidiary |         |             
|                                                   |                                                                                                                       | Company                    |                                            | Guarantors |         | Eliminations |        | Consolidated
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |             
|                                                   |                                                                                                                       |                           
|                                                   |                                                                                                                       | (Unaudited)               
|Assets                                             |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |         |         |        
|Current assets:                                    |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |         |         |        
|                                                   | Cash and cash equivalents                                                                                             |                            | $                                          | 2,979      |         |              | $      | 35           |        |         | $       |        |         |         | $       | 3,014   |        
|                                                   | Accounts receivable, net                                                                                              |                            |                                            | 86,483     |         |              |        | 31,461       |        |         |         |        |         |         |         | 117,944 |        
|                                                   | Inventories                                                                                                           |                            |                                            | 128,472    |         |              |        | 49,044       |        |         |         |        |         |         |         | 177,516 |        
|                                                   | Other current assets                                                                                                  |                            |                                            | 17,452     |         |              |        | 536          |        |         |         |        |         |         |         | 17,988  |        
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |         |         |        
|                                                   |                                                                                                                       | Total current assets       |                                            |            | 235,386 |              |        |              | 81,076 |         |         |         |        |         |         |         | 316,462 |        
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |         |         |        
|Property and equipment, net                        |                                                                                                                       |                            | 16,035                                     |            |         |              | 3,207  |              |        |         |        |         |         |         | 19,242  |        
|Goodwill and other intangible assets, net          |                                                                                                                       |                            | 51,324                                     |            |         |              | 44,661 |              |        |         |        |         |         |         | 95,985  |        
|Investment in subsidiaries                         |                                                                                                                       |                            | 52,835                                     |            |         |              |       |              |        |         | (52,835 | )       |         |         |        |        
|Other assets                                       |                                                                                                                       |                            | 14,805                                     |            |         |              | 437    |              |        |         |        |         |         |         | 15,242  |        
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |         |         |        
|                                                   |                                                                                                                       |                            | Total assets                               |            | $       | 370,385      |        |              | $      | 129,381 |         |         | $       | (52,835 | )       |         | $       | 446,931 | 
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |         |         |        
|                                                  
|Liabilities and Stockholders
    Equity           |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |         |         |        
|Current liabilities:                               |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |         |         |        
|                                                   | Accounts payable                                                                                                      |                            | $                                          | 196,598    |         |              | $      |             |        |         | $       |        |         |         | $       | 196,598 |        
|                                                   | Accrued expenses                                                                                                      |                            |                                            | 19,548     |         |              |        | 1,295        |        |         |         |        |         |         |         | 20,843  |        
|                                                   | Current maturities of long-term debt                                                                                  |                            |                                            | 1,759      |         |              |        |             |        |         |         |        |         |         |         | 1,759   |        
|                                                   | Intercompany payables (receivables)                                                                                   |                            |                                            | (73,923    | )       |              |        | 73,923       |        |         |         |        |         |         |         |        |        
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |         |         |        
|                                                   |                                                                                                                       | Total current liabilities  |                                            |            | 143,982 |              |        |              | 75,218 |         |         |         |        |         |         |         | 219,200 |        
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |         |         |        
|Revolving credit facility and other long-term debt |                                                                                                                       |                            | 132,387                                    |            |         |              |       |              |        |         |        |         |         |         | 132,387 |        
|Series D Senior Notes                              |                                                                                                                       |                            | 28,600                                     |            |         |              |       |              |        |         |        |         |         |         | 28,600  |        
|Capital lease obligations                          |                                                                                                                       |                            | 14,128                                     |            |         |              |       |              |        |         |        |         |         |         | 14,128  |        
|Other liabilities                                  |                                                                                                                       |                            | 3,103                                      |            |         |              | 1,328  |              |        |         |        |         |         |         | 4,431   |        
|Redeemable preferred stock                         |                                                                                                                       |                            | 10,035                                     |            |         |              |       |              |        |         |        |         |         |         | 10,035  |        
|Stockholders equity:                              |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |         |         |        
|                                                   | Intercompany investment                                                                                               |                            |                                            |           |         |              |        | 49,454       |        |         |         | (49,454 | )       |         |         |        |        
|                                                   | Preferred stock                                                                                                       |                            |                                            | 52,172     |         |              |        |             |        |         |         |        |         |         |         | 52,172  |        
|                                                   | 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                                                                                            |                            |                                            | 22,818     |         |              |        |             |        |         |         |        |         |         |         | 22,818  |        
|                                                   | Warrants                                                                                                              |                            |                                            | 1,352      |         |              |        |             |        |         |         |        |         |         |         | 1,352   |        
|                                                   | Accumulated deficit                                                                                                   |                            |                                            | (38,243    | )       |              |        | 3,381        |        |         |         | (3,381  | )       |         |         | (38,243 | )      
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |         |         |        
|                                                   |                                                                                                                       | Total stockholders equity |                                            |            | 38,150  |              |        |              | 52,835 |         |         |         | (52,835 | )       |         |         | 38,150  |        
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |         |         |        
|                                                   |                                                                                                                       |                            | Total liabilities and stockholders equity |            | $       | 370,385      |        |              | $      | 129,381 |         |         | $       | (52,835 | )       |         | $       | 446,931 | 
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |        |         |         |         |         |         |         |        

10



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##### Table of Contents



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

|                                                   |                                                                                                                       |                                            |         |            |         |             |        |              |         |  |         |         |         |   |         |         |         | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ---------- | ------- | ----------- | ------ | ------------ | ------- |  | ------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                                   |                                                                                                                       |                                           
|                                                   |                                                                                                                       | As of December 27, 2003                   
|                                                   |                                                                                                                       |                                           
|                                                   |                                                                                                                       | Parent                                     |         | Subsidiary |         |            
|                                                   |                                                                                                                       | Company                                    |         | Guarantors |         | Elimination |        | Consolidated
|                                                   |                                                                                                                       |                                            |         |            |         |             |        |             
|Assets                                             |                                                                                                                       |                                            |         |            |         |             |        |              |         |  |         |         |         |   |         |        
|Current assets:                                    |                                                                                                                       |                                            |         |            |         |             |        |              |         |  |         |         |         |   |         |        
|                                                   | Cash and cash equivalents                                                                                             |                                            | $       | 3,295      |         |             | $      | 31           |         |  | $       |        |         |   | $       | 3,326   |        
|                                                   | Accounts receivable, net                                                                                              |                                            |         | 71,058     |         |             |        | 25,062       |         |  |         |        |         |   |         | 96,120  |        
|                                                   | Inventories                                                                                                           |                                            |         | 123,126    |         |             |        | 50,925       |         |  |         |        |         |   |         | 174,051 |        
|                                                   | Other current assets                                                                                                  |                                            |         | 16,548     |         |             |        | 539          |         |  |         |        |         |   |         | 17,087  |        
|                                                   |                                                                                                                       |                                            |         |            |         |             |        |              |         |  |         |         |         |   |         |        
|                                                   |                                                                                                                       | Total current assets                       |         |            | 214,027 |             |        |              | 76,557  |  |         |         |        |   |         |         | 290,584 | 
|                                                   |                                                                                                                       |                                            |         |            |         |             |        |              |         |  |         |         |         |   |         |        
|Property and equipment, net                        |                                                                                                                       |                                            | 14,421  |            |         |             | 3,241  |              |         |  |        |         |         |   | 17,662  |        
|Goodwill and other intangible assets, net          |                                                                                                                       |                                            | 51,441  |            |         |             | 44,737 |              |         |  |        |         |         |   | 96,178  |        
|Investment in subsidiaries                         |                                                                                                                       |                                            | 49,967  |            |         |             |       |              |         |  | (49,967 | )       |         |   |        |        
|Other assets                                       |                                                                                                                       |                                            | 14,142  |            |         |             | 437    |              |         |  |        |         |         |   | 14,579  |        
|                                                   |                                                                                                                       |                                            |         |            |         |             |        |              |         |  |         |         |         |   |         |        
|                                                   |                                                                                                                       | Total assets                               |         | $          | 343,998 |             |        | $            | 124,972 |  |         | $       | (49,967 | ) |         | $       | 419,003 | 
|                                                   |                                                                                                                       |                                            |         |            |         |             |        |              |         |  |         |         |         |   |         |        
|                                                  
|Liabilities and Stockholders
    Equity           |                                                                                                                       |                                            |         |            |         |             |        |              |         |  |         |         |         |   |         |        
|Current liabilities:                               |                                                                                                                       |                                            |         |            |         |             |        |              |         |  |         |         |         |   |         |        
|                                                   | Accounts payable                                                                                                      |                                            | $       | 170,716    |         |             | $      |             |         |  | $       |        |         |   | $       | 170,716 |        
|                                                   | Accrued expenses                                                                                                      |                                            |         | 16,408     |         |             |        | 1,544        |         |  |         |        |         |   |         | 17,952  |        
|                                                   | Current maturities of long-term debt                                                                                  |                                            |         | 2,915      |         |             |        | 4            |         |  |         |        |         |   |         | 2,919   |        
|                                                   | Intercompany payables (receivables)                                                                                   |                                            |         | (72,159    | )       |             |        | 72,159       |         |  |         |        |         |   |         |        |        
|                                                   |                                                                                                                       |                                            |         |            |         |             |        |              |         |  |         |         |         |   |         |        
|                                                   |                                                                                                                       | Total current liabilities                  |         |            | 117,880 |             |        |              | 73,707  |  |         |         |        |   |         |         | 191,587 | 
|                                                   |                                                                                                                       |                                            |         |            |         |             |        |              |         |  |         |         |         |   |         |        
|Revolving credit facility and other long-term debt |                                                                                                                       |                                            | 137,044 |            |         |             |       |              |         |  |        |         |         |   | 137,044 |        
|Series D Senior Notes                              |                                                                                                                       |                                            | 28,600  |            |         |             |       |              |         |  |        |         |         |   | 28,600  |        
|Capital lease obligations                          |                                                                                                                       |                                            | 14,153  |            |         |             |       |              |         |  |        |         |         |   | 14,153  |        
|Other liabilities                                  |                                                                                                                       |                                            | 3,292   |            |         |             | 1,298  |              |         |  |        |         |         |   | 4,590   |        
|Redeemable preferred stock                         |                                                                                                                       |                                            | 10,535  |            |         |             |       |              |         |  |        |         |         |   | 10,535  |        
|Stockholders equity:                              |                                                                                                                       |                                            |         |            |         |             |        |              |         |  |         |         |         |   |         |        
|                                                   | Intercompany investment                                                                                               |                                            |         |           |         |             |        | 49,454       |         |  |         | (49,454 | )       |   |         |        |        
|                                                   | Preferred stock                                                                                                       |                                            |         | 50,944     |         |             |        |             |         |  |         |        |         |   |         | 50,944  |        
|                                                   | 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   |        
|                                                   | Note receivable from sale of stock                                                                                    |                                            |         | (17        | )       |             |        |             |         |  |         |        |         |   |         | (17     | )      
|                                                   | Accumulated deficit                                                                                                   |                                            |         | (42,654    | )       |             |        | 513          |         |  |         | (513    | )       |   |         | (42,654 | )      
|                                                   |                                                                                                                       |                                            |         |            |         |             |        |              |         |  |         |         |         |   |         |        
|                                                   |                                                                                                                       | Total stockholders equity                 |         |            | 32,494  |             |        |              | 49,967  |  |         |         | (49,967 | ) |         |         | 32,494  | 
|                                                   |                                                                                                                       |                                            |         |            |         |             |        |              |         |  |         |         |         |   |         |        
|                                                   |                                                                                                                       | Total liabilities and stockholders equity |         | $          | 343,998 |             |        | $            | 124,972 |  |         | $       | (49,967 | ) |         | $       | 419,003 | 
|                                                   |                                                                                                                       |                                            |         |            |         |             |        |              |         |  |         |         |         |   |         |        

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American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

Condensed consolidating statements of operations
for the quarters ended April 3, 2004 and March 29,
2003 are as follows:

|                                             |                                 |                       |         |            |   |              |        |              |   |   |        |        |   |   |         |        |  
|-------------------------------------------- | ------------------------------- | --------------------- | ------- | ---------- | - | ------------ | ------ | ------------ | - | - | ------ | ------ | - | - | ------- | ------ | -
|                                             |                                 |                      
|                                             |                                 | For the Quarter Ended
|                                             |                                 | April 3, 2004        
|                                             |                                 |                      
|                                             |                                 | Parent                |         | Subsidiary |   |             
|                                             |                                 | Company               |         | Guarantors |   | Eliminations |        | Consolidated
|                                             |                                 |                       |         |            |   |              |        |             
|                                             |                                 |                      
|                                             |                                 | (Unaudited)          
|Net sales                                    |                                 | $                     | 214,333 |            |   | $            | 87,033 |              |   | $ |       |        |   | $ | 301,366 |       
|Cost of goods sold                           |                                 |                       | 170,799 |            |   |              | 70,850 |              |   |   |       |        |   |   | 241,649 |       
|                                             |                                 |                       |         |            |   |              |        |              |   |   |        |        |   |   |         |       
|                                             | Gross profit                    |                       |         | 43,534     |   |              |        | 16,183       |   |   |        |       |   |   |         | 59,717 |  
|Selling, general and administrative expenses |                                 |                       | 35,051  |            |   |              | 11,471 |              |   |   |       |        |   |   | 46,522  |       
|                                             |                                 |                       |         |            |   |              |        |              |   |   |        |        |   |   |         |       
|                                             | Operating income                |                       |         | 8,483      |   |              |        | 4,712        |   |   |        |       |   |   |         | 13,195 |  
|Other income (expense):                      |                                 |                       |         |            |   |              |        |              |   |   |        |        |   |   |         |       
|                                             | Interest expense                |                       |         | (3,498     | ) |              |        | (2           | ) |   |        |       |   |   |         | (3,500 | )
|                                             | Other income (expense), net     |                       |         | (367       | ) |              |        | 70           |   |   |        |       |   |   |         | (297   | )
|                                             | Equity earnings of subsidiaries |                       |         | 2,868      |   |              |        |             |   |   |        | (2,868 | ) |   |         |       |  
|                                             |                                 |                       |         |            |   |              |        |              |   |   |        |        |   |   |         |       
|Income from operations before income taxes   |                                 |                       | 7,486   |            |   |              | 4,780  |              |   |   | (2,868 | )      |   |   | 9,398   |       
|Provision for income taxes                   |                                 |                       | 1,847   |            |   |              | 1,912  |              |   |   |       |        |   |   | 3,759   |       
|                                             |                                 |                       |         |            |   |              |        |              |   |   |        |        |   |   |         |       
|Net income                                   |                                 | $                     | 5,639   |            |   | $            | 2,868  |              |   | $ | (2,868 | )      |   | $ | 5,639   |       
|                                             |                                 |                       |         |            |   |              |        |              |   |   |        |        |   |   |         |       

|                                             |                                 |                       |         |            |   |              |        |              |  |   |      |      |   |   |         |        |  
|-------------------------------------------- | ------------------------------- | --------------------- | ------- | ---------- | - | ------------ | ------ | ------------ |  | - | ---- | ---- | - | - | ------- | ------ | -
|                                             |                                 |                      
|                                             |                                 | For the Quarter Ended
|                                             |                                 | March 29, 2003       
|                                             |                                 |                      
|                                             |                                 | Parent                |         | Subsidiary |   |             
|                                             |                                 | Company               |         | Guarantors |   | Eliminations |        | Consolidated
|                                             |                                 |                       |         |            |   |              |        |             
|                                             |                                 |                      
|                                             |                                 | (Unaudited)          
|Net sales                                    |                                 | $                     | 187,341 |            |   | $            | 70,738 |              |  | $ |     |      |   | $ | 258,079 |       
|Cost of goods sold                           |                                 |                       | 152,837 |            |   |              | 59,142 |              |  |   |     |      |   |   | 211,979 |       
|                                             |                                 |                       |         |            |   |              |        |              |  |   |      |      |   |   |         |       
|                                             | Gross profit                    |                       |         | 34,504     |   |              |        | 11,596       |  |   |      |     |   |   |         | 46,100 |  
|Selling, general and administrative expenses |                                 |                       | 30,209  |            |   |              | 10,719 |              |  |   |     |      |   |   | 40,928  |       
|                                             |                                 |                       |         |            |   |              |        |              |  |   |      |      |   |   |         |       
|                                             | Operating income                |                       |         | 4,295      |   |              |        | 877          |  |   |      |     |   |   |         | 5,172  |  
|Other income (expense):                      |                                 |                       |         |            |   |              |        |              |  |   |      |      |   |   |         |       
|                                             | Interest expense                |                       |         | (3,756     | ) |              |        |             |  |   |      |     |   |   |         | (3,756 | )
|                                             | Other income, net               |                       |         | 148        |   |              |        | 80           |  |   |      |     |   |   |         | 228    |  
|                                             | Equity earnings of subsidiaries |                       |         | 574        |   |              |        |             |  |   |      | (574 | ) |   |         |       |  
|                                             |                                 |                       |         |            |   |              |        |              |  |   |      |      |   |   |         |       
|Income from operations before income taxes   |                                 |                       | 1,261   |            |   |              | 957    |              |  |   | (574 | )    |   |   | 1,644   |       
|Provision for income taxes                   |                                 |                       | 275     |            |   |              | 383    |              |  |   |     |      |   |   | 658     |       
|                                             |                                 |                       |         |            |   |              |        |              |  |   |      |      |   |   |         |       
|Net income                                   |                                 | $                     | 986     |            |   | $            | 574    |              |  | $ | (574 | )    |   | $ | 986     |       
|                                             |                                 |                       |         |            |   |              |        |              |  |   |      |      |   |   |         |       

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American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

Condensed consolidating statements of cash flows
for the quarters ended April 3, 2004 and March 29,
2003 are as follows:

|                                                                                                |                                                                         |                                                         |        |            |        |              |       |              |        |   |        |       |   |   |        |         |        |  
|----------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------------------------------------------- | ------ | ---------- | ------ | ------------ | ----- | ------------ | ------ | - | ------ | ----- | - | - | ------ | ------- | ------ | -
|                                                                                                |                                                                         |                                                        
|                                                                                                |                                                                         | For the Quarter Ended                                  
|                                                                                                |                                                                         | April 3, 2004                                          
|                                                                                                |                                                                         |                                                        
|                                                                                                |                                                                         | Parent                                                  |        | Subsidiary |        |             
|                                                                                                |                                                                         | Company                                                 |        | Guarantors |        | Eliminations |       | Consolidated
|                                                                                                |                                                                         |                                                         |        |            |        |              |       |             
|                                                                                                |                                                                         |                                                        
|                                                                                                |                                                                         | (Unaudited)                                            
|Cash flows from operating
    activities:                                                       |                                                                         |                                                         |        |            |        |              |       |              |        |   |        |       |   |   |        |        
|Net income                                                                                      |                                                                         | $                                                       | 5,639  |            |        | $            | 2,868 |              |        | $ | (2,868 | )     |   | $ | 5,639  |        
|Adjustments to reconcile net income to net cash
    provided by (used in) operating activities: |                                                                         |                                                         |        |            |        |              |       |              |        |   |        |       |   |   |        |        
|                                                                                                | Depreciation and amortization of other
    intangibles and other assets |                                                         |        | 1,073      |        |              |       | 345          |        |   |        |      |   |   |        | 1,418   |       
|                                                                                                | Provision for doubtful accounts                                         |                                                         |        | 227        |        |              |       | 10           |        |   |        |      |   |   |        | 237     |       
|                                                                                                | Other, net                                                              |                                                         |        | 1,213      |        |              |       | (4           | )      |   |        |      |   |   |        | 1,209   |       
|                                                                                                | Equity earnings of subsidiaries                                         |                                                         |        | (2,868     | )      |              |       |             |        |   |        | 2,868 |   |   |        |        |       
|Change in operating assets and liabilities:                                                     |                                                                         |                                                         |        |            |        |              |       |              |        |   |        |       |   |   |        |        
|                                                                                                | Accounts receivable                                                     |                                                         |        | (15,652    | )      |              |       | (6,409       | )      |   |        |      |   |   |        | (22,061 | )     
|                                                                                                | Inventories                                                             |                                                         |        | (5,346     | )      |              |       | 1,881        |        |   |        |      |   |   |        | (3,465  | )     
|                                                                                                | Other current assets                                                    |                                                         |        | (1,624     | )      |              |       | 3            |        |   |        |      |   |   |        | (1,621  | )     
|                                                                                                | Accounts payable and accrued expenses                                   |                                                         |        | 29,022     |        |              |       | (249         | )      |   |        |      |   |   |        | 28,773  |       
|                                                                                                | Other, net                                                              |                                                         |        | (1,405     | )      |              |       | 28           |        |   |        |      |   |   |        | (1,377  | )     
|                                                                                                |                                                                         |                                                         |        |            |        |              |       |              |        |   |        |       |   |   |        |        
|                                                                                                |                                                                         | Net cash provided by (used in) operations               |        |            | 10,279 |              |       |              | (1,527 | ) |        |       |  |   |        |         | 8,752  |  
|                                                                                                |                                                                         |                                                         |        |            |        |              |       |              |        |   |        |       |   |   |        |        
|Cash flows from investing
    activities:                                                       |                                                                         |                                                         |        |            |        |              |       |              |        |   |        |       |   |   |        |        
|Purchase of property and equipment                                                              |                                                                         |                                                         | (691   | )          |        |              | (224  | )            |        |   |       |       |   |   | (915   | )      
|Proceeds from sale of property and equipment                                                    |                                                                         |                                                         |       |            |        |              | 7     |              |        |   |       |       |   |   | 7      |        
|Intercompany                                                                                    |                                                                         |                                                         | (1,752 | )          |        |              | 1,752 |              |        |   |       |       |   |   |       |        
|                                                                                                |                                                                         |                                                         |        |            |        |              |       |              |        |   |        |       |   |   |        |        
|                                                                                                |                                                                         | Net cash provided by (used in) investing
    activities |        |            | (2,443 | )            |       |              | 1,535  |   |        |       |  |   |        |         | (908   | )
|                                                                                                |                                                                         |                                                         |        |            |        |              |       |              |        |   |        |       |   |   |        |        
|Cash flows from financing
    activities:                                                       |                                                                         |                                                         |        |            |        |              |       |              |        |   |        |       |   |   |        |        
|Net repayments of revolving credit facility and
    other long-term debt                        |                                                                         |                                                         | (7,652 | )          |        |              | (4    | )            |        |   |       |       |   |   | (7,656 | )      
|Series A preferred stock redemption                                                             |                                                                         |                                                         | (500   | )          |        |              |      |              |        |   |       |       |   |   | (500   | )      
|                                                                                                |                                                                         |                                                         |        |            |        |              |       |              |        |   |        |       |   |   |        |        
|                                                                                                |                                                                         | Net cash used in financing activities                   |        |            | (8,152 | )            |       |              | (4     | ) |        |       |  |   |        |         | (8,156 | )
|                                                                                                |                                                                         |                                                         |        |            |        |              |       |              |        |   |        |       |   |   |        |        
|Net increase (decrease) in cash and cash
    equivalents                                        |                                                                         |                                                         | (316   | )          |        |              | 4     |              |        |   |       |       |   |   | (312   | )      
|Cash and cash equivalents, beginning of period                                                  |                                                                         |                                                         | 3,295  |            |        |              | 31    |              |        |   |       |       |   |   | 3,326  |        
|                                                                                                |                                                                         |                                                         |        |            |        |              |       |              |        |   |        |       |   |   |        |        
|Cash and cash equivalents, end of period                                                        |                                                                         | $                                                       | 2,979  |            |        | $            | 35    |              |        | $ |       |       |   | $ | 3,014  |        
|                                                                                                |                                                                         |                                                         |        |            |        |              |       |              |        |   |        |       |   |   |        |        

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American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

|                                                                         |                                                                                                 |                                                                         |                                                         |            |         |              |       |              |        |        |   |      |     |   |        |     |         |        |  
|------------------------------------------------------------------------ | ----------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------------------------------------------- | ---------- | ------- | ------------ | ----- | ------------ | ------ | ------ | - | ---- | --- | - | ------ | --- | ------- | ------ | -
|                                                                         |                                                                                                 |                                                                        
|                                                                         |                                                                                                 | For the Quarter Ended                                                  
|                                                                         |                                                                                                 | March 29, 2003                                                         
|                                                                         |                                                                                                 |                                                                        
|                                                                         |                                                                                                 | Parent                                                                  |                                                         | Subsidiary |         |             
|                                                                         |                                                                                                 | Company                                                                 |                                                         | Guarantors |         | Eliminations |       | Consolidated
|                                                                         |                                                                                                 |                                                                         |                                                         |            |         |              |       |             
|                                                                         |                                                                                                 |                                                                        
|                                                                         |                                                                                                 | (Unaudited)                                                            
|Cash flows from operating
    activities:                                |                                                                                                 |                                                                         |                                                         |            |         |              |       |              |        |        |   |      |     |   |        |    
|                                                                         | Net income                                                                                      |                                                                         | $                                                       | 986        |         |              | $     | 574          |        |        | $ | (574 | )   |   | $      | 986 |        
|                                                                         | Adjustments to reconcile net income to net cash
    provided by (used in) operating activities: |                                                                         |                                                         |            |         |              |       |              |        |        |   |      |     |   |        |     |        
|                                                                         |                                                                                                 | Depreciation and amortization of other
    intangibles and other assets |                                                         |            | 1,190   |              |       |              | 871    |        |   |      |    |   |        |     | 2,061   |       
|                                                                         |                                                                                                 | Provision for doubtful accounts                                         |                                                         |            | 587     |              |       |              | (111   | )      |   |      |    |   |        |     | 476     |       
|                                                                         |                                                                                                 | Other, net                                                              |                                                         |            | 649     |              |       |              | (1     | )      |   |      |    |   |        |     | 648     |       
|                                                                         |                                                                                                 | Equity earnings of subsidiaries                                         |                                                         |            | (574    | )            |       |              |       |        |   |      | 574 |   |        |     |        |       
|                                                                         | Change in operating assets and liabilities:                                                     |                                                                         |                                                         |            |         |              |       |              |        |        |   |      |     |   |        |     |        
|                                                                         |                                                                                                 | Accounts receivable                                                     |                                                         |            | (10,979 | )            |       |              | 442    |        |   |      |    |   |        |     | (10,537 | )     
|                                                                         |                                                                                                 | Inventories                                                             |                                                         |            | (4,514  | )            |       |              | (3,983 | )      |   |      |    |   |        |     | (8,497  | )     
|                                                                         |                                                                                                 | Other current assets                                                    |                                                         |            | (306    | )            |       |              | 359    |        |   |      |    |   |        |     | 53      |       
|                                                                         |                                                                                                 | Accounts payable and accrued expenses                                   |                                                         |            | 16,378  |              |       |              | 127    |        |   |      |    |   |        |     | 16,505  |       
|                                                                         |                                                                                                 | Other, net                                                              |                                                         |            | (207    | )            |       |              | (23    | )      |   |      |    |   |        |     | (230    | )     
|                                                                         |                                                                                                 |                                                                         |                                                         |            |         |              |       |              |        |        |   |      |     |   |        |    
|                                                                         |                                                                                                 |                                                                         | Net cash provided by (used in) operations               |            |         | 3,210        |       |              |        | (1,745 | ) |      |     |  |        |     |         | 1,465  |  
|                                                                         |                                                                                                 |                                                                         |                                                         |            |         |              |       |              |        |        |   |      |     |   |        |    
|Cash flows from investing
    activities:                                |                                                                                                 |                                                                         |                                                         |            |         |              |       |              |        |        |   |      |     |   |        |    
|Purchase of property and equipment                                       |                                                                                                 |                                                                         | (358                                                    | )          |         |              | (316  | )            |        |        |  |      |     |   | (674   | )  
|Proceeds from sale of property and equipment                             |                                                                                                 |                                                                         | 460                                                     |            |         |              | 36    |              |        |        |  |      |     |   | 496    |    
|Other, net                                                               |                                                                                                 |                                                                         | (50                                                     | )          |         |              |      |              |        |        |  |      |     |   | (50    | )  
|Intercompany                                                             |                                                                                                 |                                                                         | (1,928                                                  | )          |         |              | 1,928 |              |        |        |  |      |     |   |       |    
|                                                                         |                                                                                                 |                                                                         |                                                         |            |         |              |       |              |        |        |   |      |     |   |        |    
|                                                                         |                                                                                                 |                                                                         | Net cash provided by (used in) investing
    activities |            |         | (1,876       | )     |              |        | 1,648  |   |      |     |  |        |     |         | (228   | )
|                                                                         |                                                                                                 |                                                                         |                                                         |            |         |              |       |              |        |        |   |      |     |   |        |    
|Cash flows from financing
    activities:                                |                                                                                                 |                                                                         |                                                         |            |         |              |       |              |        |        |   |      |     |   |        |    
|Net repayments of revolving credit facility and
    other long-term debt |                                                                                                 |                                                                         | (1,230                                                  | )          |         |              |      |              |        |        |  |      |     |   | (1,230 | )  
|                                                                         |                                                                                                 |                                                                         |                                                         |            |         |              |       |              |        |        |   |      |     |   |        |    
|                                                                         |                                                                                                 |                                                                         | Net cash used in financing activities                   |            |         | (1,230       | )     |              |        |       |   |      |     |  |        |     |         | (1,230 | )
|                                                                         |                                                                                                 |                                                                         |                                                         |            |         |              |       |              |        |        |   |      |     |   |        |    
|Net increase (decrease) in cash and cash
    equivalents                 |                                                                                                 |                                                                         | 104                                                     |            |         |              | (97   | )            |        |        |  |      |     |   | 7      |    
|Cash and cash equivalents, beginning of period                           |                                                                                                 |                                                                         | 2,538                                                   |            |         |              | 155   |              |        |        |  |      |     |   | 2,693  |    
|                                                                         |                                                                                                 |                                                                         |                                                         |            |         |              |       |              |        |        |   |      |     |   |        |    
|Cash and cash equivalents, end of period                                 |                                                                                                 | $                                                                       | 2,642                                                   |            |         | $            | 58    |              |        | $      |  |      |     | $ | 2,700  |    
|                                                                         |                                                                                                 |                                                                         |                                                         |            |         |              |       |              |        |        |   |      |     |   |        |    

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

The following discussion and analysis provides
information which management believes is relevant to an
assessment and understanding of the Companys consolidated
results of operations and financial condition. The discussion
should be read in conjunction with the condensed consolidated
financial statements and notes thereto contained in Part I
of this report on Form 10-Q and with the Companys
Annual Report on Form 10-K for the fiscal year ended
December 27, 2003.

The Companys fiscal year is based on either
a 52 or 53 week period ending on the Saturday closest to
each December 31. Therefore, the financial results of
certain fiscal years, and the associated 14-week quarters, will
not be exactly comparable to the prior and subsequent 52-week
fiscal years and the associated quarters having only
13 weeks. The quarters ended April 3, 2004 and
March 29, 2003 contain operating results for 14 weeks
and 13 weeks, respectively.

Results of Operations

Quarter Ended April 3, 2004 Compared
to Quarter Ended March 29, 2003

Consolidated net sales in first quarter 2004
increased $43.3 million or 16.8%, to $301.4 million
from $258.1 million in first quarter 2003. The increase in
sales is primarily attributable to the inclusion of an
additional week in first quarter 2004. In addition, the Company
experienced an increase in passenger tires, light truck tires
and wheel sales as well as certain manufacturer price increases
that were passed along to the Companys customers.

Gross profit increased $13.6 million, or
29.5%, to $59.7 million in first quarter 2004 from
$46.1 million in first quarter 2003 due primarily to the
increase in sales as well as a continuing shift to sales of the
Companys higher margin tires and wheels. Gross profit as a
percentage of sales increased 1.9% to 19.8% in first quarter
2004 compared to 17.9% in first quarter 2003. Gross profit
margins in 2003 were negatively impacted by an aggressive first
quarter marketing program, which resulted in reduced margins on
certain products.

Selling, general and administrative expenses
increased $5.6 million to $46.5 million in first
quarter 2004 compared to $40.9 million in first quarter
2003. The increase in selling, general and administrative
expenses is primarily due to increases in employee related
expenses ($4.6 million), freight costs ($0.5 million)
and other net increases ($0.9 million), partially offset by
a reduction in amortization expense ($0.4 million) relating
to noncompete agreements that ended in the second quarter of
2003. The increase in employee related expenses is due in part
to compensation associated with an increase in sales and the
inclusion of an additional week in first quarter 2004. As a
percentage of sales, selling, general and administrative
expenses decreased to 15.4% in first quarter 2004 compared to
15.9% in first quarter 2003.

Operating income increased $8.0 million in
first quarter 2004 to $13.2 million from $5.2 million
in first quarter 2003 due primarily to an overall increase in
the profitability of the Company and improvements in the
Companys gross profit margins partially offset by an
increase in selling, general and administrative expenses.

Interest expense decreased $0.3 million in
first quarter 2004 to $3.5 million from $3.8 million
in first quarter 2003. The decrease is due primarily to a
decline in interest rates and reduced debt levels partially
offset by a $0.1 million net increase in interest expense
relating to the change in fair value of the interest rate swap
agreement entered into in second quarter 2003.

The Company recognized an income tax provision of
$3.8 million in first quarter 2004 compared to
$0.7 million in first quarter 2003. The effective tax rate
in each quarter was approximately 40%.

Net income increased $4.6 million in first
quarter 2004 to $5.6 million from $1.0 million in
first quarter 2003. The increase is due primarily to an overall
increase in the profitability of the Company, improvements in
the Companys gross profit margins and a reduction in
interest expense partially offset by an increase in selling,
general and administrative expenses and an increase in the
income tax provision.

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EBITDA

The Company evaluates performance based on
several factors, of which the primary financial measure is
earnings before interest, taxes, depreciation and amortization
(EBITDA). EBITDA should not be considered an
alternative to, or more meaningful than, net income or cash flow
as determined in accordance with accounting principles generally
accepted in the United States. The following table is a
reconciliation of net income to EBITDA:

Reconciliation of net income to EBITDA:

|                                                   |  |                       |        |           |  |   |       | 
|-------------------------------------------------- |  | --------------------- | ------ | --------- |  | - | ----- | 
|                                                   |  |                      
|                                                   |  | For the Quarter Ended
|                                                   |  |                      
|                                                   |  | April 3,              |        | March 29,
|                                                   |  | 2004                  |        | 2003     
|                                                   |  |                       |        |          
|                                                   |  |                      
|                                                   |  | (in thousands)       
|Net income                                         |  | $                     | 5,639  |           |  | $ | 986   | 
|Interest expense                                   |  |                       | 3,500  |           |  |   | 3,756 | 
|Provision for income taxes                         |  |                       | 3,759  |           |  |   | 658   | 
|Depreciation and amortization of other intangibles |  |                       | 1,152  |           |  |   | 1,759 | 
|                                                   |  |                       |        |           |  |   |       | 
|EBITDA                                             |  | $                     | 14,050 |           |  | $ | 7,159 | 
|                                                   |  |                       |        |           |  |   |       | 

EBITDA increased $6.9 million to
$14.1 million in first quarter 2004 compared to
$7.2 million in first quarter 2003. The increase in EBITDA
is due primarily to an overall increase in the profitability of
the Company and improvements in the Companys gross profit
margins partially offset by an increase in selling, general and
administrative expenses.

Critical Accounting Polices

The preparation of financial statements and
related disclosures in conformity with accounting principles
generally accepted in the United States requires management to
make judgments, assumptions and estimates that affect the
amounts reported. Please see the discussion of critical
accounting policies and estimates in the Companys Annual
Report on Form 10-K for the fiscal year ended
December 27, 2003.

Liquidity and Capital Resources

At April 3, 2004, the combined net
indebtedness (net of cash) of the Company was
$173.9 million compared to $179.4 million at
December 27, 2003. Total commitments by the lenders under
the Companys revolving credit facility
(Revolver) were $245.0 million at April 3,
2004, of which $47.1 million was available for additional
borrowings. The amount available to borrow is limited by the
Borrowing Base computation, as defined in the agreement.

Cash Flows from Operating Activities

The Companys principal source of cash
during first quarter 2004 was provided by operations. Net cash
provided by operating activities increased to $8.8 million
in first quarter 2004, an increase of $7.3 million,
compared to $1.5 million in first quarter 2003. The
increase is primarily due to an overall increase in the
profitability of the Company, improvements in the Companys
gross profit margins and an increase in accounts payable due to
inventory purchases in anticipation of seasonal sales volume.
These increases are partially offset by an increase in the
Companys accounts receivable balance at April 3, 2004
due to increased sales. Net working capital at April 3,
2004, totaled $97.3 million compared to $99.0 million
at December 27, 2003, a decrease of $1.7 million.

Cash Flows from Investing Activities

Net cash used in investing activities increased
$0.7 million to $(0.9) million in first quarter 2004
compared to $(0.2) million in first quarter 2003 due
primarily to the sale of property and equipment in first quarter
2003 which generated proceeds of $0.5 million. Cash
outflows for capital expenditures remained

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consistent from first quarter 2003 to first
quarter 2004. Capital expenditures during first quarter 2004 of
$0.9 million were primarily for warehouse racking,
leasehold improvements and information technology upgrades.
During first quarter 2004, the Company also had capital
expenditures financed by debt of $1.6 million relating to
information technology upgrades.


Cash Flows from Financing Activities

Net cash used in financing activities increased
$7.0 million to $(8.2) million in first quarter 2004
compared to $(1.2) million in first quarter 2003 due
primarily to principal payments on other long-term debt as well
as the redemption on the Series A preferred stock partially
offset by net borrowings from the Revolver.

Revolving Credit Facility

On March 19, 2004, the Company executed a
Third Amended and Restated Loan and Security Agreement. The
Borrowers to the Revolver are the Company and its subsidiaries.
The Revolver provides for borrowings in the aggregate principal
amount of up to the lesser of $245.0 million, less defined
reserves, or the Borrowing Base, as defined in the agreement. On
April 2, 2004, the Company and its lenders executed an
amendment to the Revolver to amend the requirements and form of
the officers compliance certificate to be issued to the
lenders.

Borrowings under the Revolver bear interest, at
(i) the Base Rate, as defined, plus the applicable margin
(0.75% as of April 3, 2004) or (ii) the Eurodollar
Rate, as defined, plus the applicable margin (2.25% as of
April 3, 2004). These margins are subject to
performance-based step-downs resulting in margins ranging from
0.25% to 1.25% for Base Rate loans and 1.75% to 2.75% for
Eurodollar Rate loans, respectively.

The Revolver, as amended, requires the Company to
meet a fixed charge coverage test, as defined, as well as
certain covenants, which among other things, limits 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 April 3, 2004, the
Company was in compliance with these covenants. The
Companys obligations under the Revolver are secured by all
inventories and accounts receivable. The Revolver expires
February 15, 2008.

During the 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 April 3, 2004, 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 condensed consolidated balance sheets and any
changes in the fair value are recorded as adjustments to
interest expense in the accompanying condensed 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. The fair value of
the Swap was an asset of $0.1 million and $0.2 million
at April 3, 2004 and December 27, 2003, respectively,
and is included in other assets in the accompanying condensed
consolidated balance sheets. As a result of the change in fair
value, $0.1 million net increase to interest expense was
recorded for the quarter ended April 3, 2004.

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 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

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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
$14.4 million and $15.3 million at April 3, 2004
and December 27, 2003, 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
April 3, 2004, unchanged from December 27, 2003. 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.

Recently Issued Accounting
Pronouncements

In May 2003, the Financial Accounting Standards
Board (FASB) issued Statement of Financial
Accounting Standards (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,
except for mandatorily redeemable financial instruments of
nonpublic entities. On November 7, 2003, the FASB issued
FASB Staff Position (FSP) No. 150-3
Effective Date, Disclosures, and Transition for
Mandatorily Redeemable Financial Instruments of Certain
Nonpublic Entities and Certain Mandatorily Redeemable
Noncontrolling Interests under FASB Statement No. 150,
Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity. FSP
No. 150-3 requires that implementation of certain
provisions of SFAS No. 150 be deferred indefinitely.
The adoption of SFAS No. 150 did not have a material
impact on the Companys consolidated financial position or
results of operations.






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

For the period ended April 3, 2004, the
Company did not experience any material changes from the
quantitative and qualitative disclosures about market risk
presented in the Companys Annual Report on Form 10-K
for the fiscal year ended December 27, 2003.






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

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##### Table of Contents



Changes
in Internal Controls

During the quarter ended April 3, 2004,
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, except that as part
of an ongoing implementation of an Oracle enterprise resource
planning system, the Company is updating the internal controls
over financial reporting as necessary to accommodate any
modifications to its business processes or accounting procedures.




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 Annual Report on Form 10-K for the fiscal
year ended December 27, 2003.






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

(a) Exhibits



| |      |                                                                                                                                                                                                                    
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.1 | First Amendment to Third Amended and Restated
    Loan and Security Agreement.                                                                                                                                     
|
| | 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.

(b) Reports on Form 8-K



| |                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Report on Form 8-K was filed on
    March 26, 2004 relating to the press release reporting
    fiscal year ended December 27, 2003 selected financial
    results.

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SIGNATURES

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

Date: May 17, 2004

| |                                 
| | --------------------------------
| | 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) 

20