##### 









UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




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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 October 2,
    2004                                          
| 
|  |  | OR                                                                                          
| 
|o |  | 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 þ          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 þ

Number of common shares outstanding at
November 15, 2004: 5,161,917



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TABLE OF CONTENTS

|         |         |                                                                                                                                                 |                                                                                           |      |    |    | 
|-------- | ------- | ----------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ---- | -- | -- | 
|         |         |                                                                                                                                                 |                                                                                           | Page
|         |         |                                                                                                                                                 |                                                                                           |     
|PART I.  |         | FINANCIAL
    INFORMATION                                                                                                                       |                                                                                           |      |    |   
|        
|         | ITEM 1. |                                                                                                                                                 | Financial
    Statements                                                                  |      |    |    | 
|         |         | Condensed Consolidated
    Balance Sheets  October 2, 2004
    (unaudited) and December 27, 2003                                               |                                                                                           |      | 1  |   
|         |         | Condensed Consolidated
    Statements of Operations (unaudited)  Quarters and
    Nine Months Ended October 2, 2004 and September 27,
    2003 |                                                                                           |      | 2  |   
|         |         | Condensed Consolidated
    Statements of Cash Flows (unaudited)  Nine Months
    Ended October 2, 2004 and September 27, 2003                  |                                                                                           |      | 3  |   
|         |         | Notes to Condensed
    Consolidated Financial Statements                                                                                        |                                                                                           |      | 4  |   
|        
|         | ITEM 2. |                                                                                                                                                 | Managements Discussion
    and Analysis of Financial Condition and Results of Operations |      |    | 17 | 
|        
|         | ITEM 3. |                                                                                                                                                 | Quantitative and Qualitative
    Disclosures about Market Risk                            |      |    | 22 | 
|        
|         | ITEM 4. |                                                                                                                                                 | Controls and Procedures                                                                   |      |    | 22 | 
|        
|PART II. |         | OTHER
    INFORMATION                                                                                                                           |                                                                                           |      |    |   
|        
|         | ITEM 1. |                                                                                                                                                 | Legal Proceedings                                                                         |      |    | 23 | 
|        
|         | ITEM 6. |                                                                                                                                                 | Exhibits                                                                                  |      |    | 23 | 
|         |         | Signatures                                                                                                                                      |                                                                                           |      | 24 |   



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Cautionary Statement 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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##### 






PART I.     FINANCIAL
INFORMATION





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

American Tire Distributors, Inc.



Condensed Consolidated Balance
Sheets


(dollars in thousands, except per share amounts)


|                                                   |                                                                                                                                     |                            |                                            |              |         |         |         |         |         |         | 
|-------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ------------ | ------- | ------- | ------- | ------- | ------- | ------- | 
|                                                   |                                                                                                                                     | October 2,                 |                                            | December 27,
|                                                   |                                                                                                                                     | 2004                       |                                            | 2003        
|                                                   |                                                                                                                                     |                            |                                            |             
|                                                   |                                                                                                                                     | (Unaudited)                |                                            |             
|Assets                                             |                                                                                                                                     |                            |                                            |              |         |         |         |        
|Current assets:                                    |                                                                                                                                     |                            |                                            |              |         |         |         |        
|                                                   | Cash and cash equivalents                                                                                                           |                            | $                                          | 3,776        |         |         | $       | 3,326   |        
|                                                   | Accounts receivable, net of allowance for
    doubtful accounts of $1,578 and $1,112                                                |                            |                                            | 146,526      |         |         |         | 96,120  |        
|                                                   | Inventories                                                                                                                         |                            |                                            | 227,545      |         |         |         | 174,051 |        
|                                                   | Deferred income taxes                                                                                                               |                            |                                            | 6,235        |         |         |         | 6,462   |        
|                                                   | Other current assets                                                                                                                |                            |                                            | 10,905       |         |         |         | 10,625  |        
|                                                   |                                                                                                                                     |                            |                                            |              |         |         |         |        
|                                                   |                                                                                                                                     | Total current assets       |                                            |              | 394,987 |         |         |         | 290,584 |        
|                                                   |                                                                                                                                     |                            |                                            |              |         |         |         |        
|Property and equipment, net                        |                                                                                                                                     |                            | 23,229                                     |              |         |         | 17,662  |        
|Goodwill, net                                      |                                                                                                                                     |                            | 124,765                                    |              |         |         | 93,940  |        
|Other intangible assets, net                       |                                                                                                                                     |                            | 13,927                                     |              |         |         | 2,238   |        
|Deferred income taxes                              |                                                                                                                                     |                            | 8,269                                      |              |         |         | 8,849   |        
|Other assets                                       |                                                                                                                                     |                            | 7,244                                      |              |         |         | 5,730   |        
|                                                   |                                                                                                                                     |                            |                                            |              |         |         |         |        
|                                                   |                                                                                                                                     |                            | Total assets                               |              | $       | 572,421 |         |         | $       | 419,003 | 
|                                                   |                                                                                                                                     |                            |                                            |              |         |         |         |        
|                                                  
|Liabilities and Stockholders
    Equity           |                                                                                                                                     |                            |                                            |              |         |         |         |        
|Current liabilities:                               |                                                                                                                                     |                            |                                            |              |         |         |         |        
|                                                   | Accounts payable                                                                                                                    |                            | $                                          | 227,790      |         |         | $       | 170,716 |        
|                                                   | Accrued expenses                                                                                                                    |                            |                                            | 28,877       |         |         |         | 17,952  |        
|                                                   | Current maturities of long-term debt                                                                                                |                            |                                            | 1,499        |         |         |         | 2,919   |        
|                                                   |                                                                                                                                     |                            |                                            |              |         |         |         |        
|                                                   |                                                                                                                                     | Total current liabilities  |                                            |              | 258,166 |         |         |         | 191,587 |        
|                                                   |                                                                                                                                     |                            |                                            |              |         |         |         |        
|Revolving credit facility and other long-term debt |                                                                                                                                     |                            | 199,774                                    |              |         |         | 137,044 |        
|Series D Senior Notes                              |                                                                                                                                     |                            | 28,600                                     |              |         |         | 28,600  |        
|Capital lease obligations                          |                                                                                                                                     |                            | 14,131                                     |              |         |         | 14,153  |        
|Other liabilities                                  |                                                                                                                                     |                            | 10,183                                     |              |         |         | 4,590   |        
|Redeemable preferred stock (Note 10)               |                                                                                                                                     |                            | 9,535                                      |              |         |         | 10,535  |        
|Commitments and contingencies
    (Note 12)        |                                                                                                                                     |                            |                                            |              |         |         |         |        
|Stockholders equity:                              |                                                                                                                                     |                            |                                            |              |         |         |         |        
|                                                   | Preferred stock (Note 11)                                                                                                           |                            |                                            | 54,627       |         |         |         | 50,944  |        
|                                                   | Common stock, par value $.01 per share;
    50,000,000 shares authorized; 5,161,917 and
    5,086,917 shares issued and outstanding |                            |                                            | 52           |         |         |         | 51      |        
|                                                   | Additional paid-in capital                                                                                                          |                            |                                            | 23,030       |         |         |         | 22,388  |        
|                                                   | Warrants                                                                                                                            |                            |                                            | 1,352        |         |         |         | 1,782   |        
|                                                   | Note receivable from sale of stock                                                                                                  |                            |                                            |             |         |         |         | (17     | )      
|                                                   | Accumulated deficit                                                                                                                 |                            |                                            | (27,029      | )       |         |         | (42,654 | )      
|                                                   |                                                                                                                                     |                            |                                            |              |         |         |         |        
|                                                   |                                                                                                                                     | Total stockholders equity |                                            |              | 52,032  |         |         |         | 32,494  |        
|                                                   |                                                                                                                                     |                            |                                            |              |         |         |         |        
|                                                   |                                                                                                                                     |                            | Total liabilities and stockholders equity |              | $       | 572,421 |         |         | $       | 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 |         | Nine Months Ended
|                                             |                  |                |         |                  
|                                             |                  | October 2,     |         | September 27,     |   | October 2, |         | September 27,
|                                             |                  | 2004           |         | 2003              |   | 2004       |         | 2003         
|                                             |                  |                |         |                   |   |            |         |              
|Net sales                                    |                  | $              | 330,208 |                   |   | $          | 292,365 |               |   | $ | 945,679 |         |   | $ | 836,580 |        
|Cost of goods sold                           |                  |                | 269,955 |                   |   |            | 239,336 |               |   |   | 773,329 |         |   |   | 687,409 |        
|                                             |                  |                |         |                   |   |            |         |               |   |   |         |         |   |   |         |        
|                                             | Gross profit     |                |         | 60,253            |   |            |         | 53,029        |   |   |         | 172,350 |   |   |         | 149,171 |  
|Selling, general and administrative expenses |                  |                | 44,277  |                   |   |            | 40,670  |               |   |   | 130,331 |         |   |   | 120,350 |        
|                                             |                  |                |         |                   |   |            |         |               |   |   |         |         |   |   |         |        
|                                             | Operating income |                |         | 15,976            |   |            |         | 12,359        |   |   |         | 42,019  |   |   |         | 28,821  |  
|                                             |                  |                |         |                   |   |            |         |               |   |   |         |         |   |   |         |        
|Other income (expense):                      |                  |                |         |                   |   |            |         |               |   |   |         |         |   |   |         |        
|                                             | Interest expense |                |         | (3,552            | ) |            |         | (3,110        | ) |   |         | (9,405  | ) |   |         | (10,796 | )
|                                             | Other, net       |                |         | (103              | ) |            |         | (52           | ) |   |         | (436    | ) |   |         | 127     |  
|                                             |                  |                |         |                   |   |            |         |               |   |   |         |         |   |   |         |        
|Income from operations before income taxes   |                  |                | 12,321  |                   |   |            | 9,197   |               |   |   | 32,178  |         |   |   | 18,152  |        
|Provision for income taxes                   |                  |                | 4,928   |                   |   |            | 3,678   |               |   |   | 12,871  |         |   |   | 7,260   |        
|                                             |                  |                |         |                   |   |            |         |               |   |   |         |         |   |   |         |        
|Net income                                   |                  | $              | 7,393   |                   |   | $          | 5,519   |               |   | $ | 19,307  |         |   | $ | 10,892  |        
|                                             |                  |                |         |                   |   |            |         |               |   |   |         |         |   |   |         |        

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)


|                                                       |                                                                                          |                                                         |       |               |         |   |       |         |         |  
|------------------------------------------------------ | ---------------------------------------------------------------------------------------- | ------------------------------------------------------- | ----- | ------------- | ------- | - | ----- | ------- | ------- | -
|                                                       |                                                                                          |                                                        
|                                                       |                                                                                          | Nine Months Ended                                      
|                                                       |                                                                                          |                                                        
|                                                       |                                                                                          | October 2,                                              |       | September 27,
|                                                       |                                                                                          | 2004                                                    |       | 2003         
|                                                       |                                                                                          |                                                         |       |              
|Cash flows from operating
    activities:              |                                                                                          |                                                         |       |               |         |   |       |        
|                                                       | Net income                                                                               |                                                         | $     | 19,307        |         |   | $     | 10,892  |        
|                                                       | Adjustments to reconcile net income to net cash
    provided by operating activities:    |                                                         |       |               |         |   |       |         |        
|                                                       |                                                                                          | Depreciation and amortization of other intangibles      |       |               | 4,174   |   |       |         | 4,920   |  
|                                                       |                                                                                          | Amortization of other assets                            |       |               | 736     |   |       |         | 906     |  
|                                                       |                                                                                          | Provision for doubtful accounts                         |       |               | 17      |   |       |         | 859     |  
|                                                       |                                                                                          | Deferred income taxes                                   |       |               | 1,299   |   |       |         | 6,271   |  
|                                                       |                                                                                          | Other, net                                              |       |               | (1      | ) |       |         | 41      |  
|                                                       | Change in operating assets and liabilities:                                              |                                                         |       |               |         |   |       |         |        
|                                                       |                                                                                          | Accounts receivable                                     |       |               | (31,585 | ) |       |         | (16,958 | )
|                                                       |                                                                                          | Inventories                                             |       |               | (27,824 | ) |       |         | (8,984  | )
|                                                       |                                                                                          | Other current assets                                    |       |               | (27     | ) |       |         | 140     |  
|                                                       |                                                                                          | Accounts payable and accrued expenses                   |       |               | 45,656  |   |       |         | 17,013  |  
|                                                       |                                                                                          | Other, net                                              |       |               | (1,105  | ) |       |         | (1,089  | )
|                                                       |                                                                                          |                                                         |       |               |         |   |       |        
|                                                       |                                                                                          | Net cash provided by operating activities               |       |               | 10,647  |   |       |         | 14,011  |  
|                                                       |                                                                                          |                                                         |       |               |         |   |       |        
|Cash flows from investing
    activities:              |                                                                                          |                                                         |       |               |         |   |       |        
|                                                       | Purchase of property and equipment                                                       |                                                         |       | (2,829        | )       |   |       | (1,315  | )      
|                                                       | Proceeds from sale of property and equipment                                             |                                                         |       | 77            |         |   |       | 566     |        
|                                                       | Acquisitions, net of cash acquired                                                       |                                                         |       | (59,096       | )       |   |       |        |        
|                                                       | Other, net                                                                               |                                                         |       |              |         |   |       | (50     | )      
|                                                       |                                                                                          |                                                         |       |               |         |   |       |        
|                                                       |                                                                                          | Net cash used in investing activities                   |       |               | (61,848 | ) |       |         | (799    | )
|                                                       |                                                                                          |                                                         |       |               |         |   |       |        
|Cash flows from financing
    activities:              |                                                                                          |                                                         |       |               |         |   |       |        
|                                                       | Net proceeds from (repayments of) revolving
    credit facility and other long-term debt |                                                         |       | 52,438        |         |   |       | (11,695 | )      
|                                                       | Series A preferred stock redemption                                                      |                                                         |       | (1,000        | )       |   |       | (500    | )      
|                                                       | Other                                                                                    |                                                         |       | 213           |         |   |       |        |        
|                                                       |                                                                                          |                                                         |       |               |         |   |       |        
|                                                       |                                                                                          | Net cash provided by (used in) financing
    activities |       |               | 51,651  |   |       |         | (12,195 | )
|                                                       |                                                                                          |                                                         |       |               |         |   |       |        
|Net increase in cash and cash equivalents              |                                                                                          |                                                         | 450   |               |         |   | 1,017 |        
|Cash and cash equivalents, beginning of period         |                                                                                          |                                                         | 3,326 |               |         |   | 2,693 |        
|                                                       |                                                                                          |                                                         |       |               |         |   |       |        
|Cash and cash equivalents, end of period               |                                                                                          | $                                                       | 3,776 |               |         | $ | 3,710 |        
|                                                       |                                                                                          |                                                         |       |               |         |   |       |        
|Supplemental disclosures of cash flow
    information: |                                                                                          |                                                         |       |               |         |   |       |        
|                                                       | Cash payments for interest                                                               |                                                         | $     | 8,454         |         |   | $     | 9,522   |        
|                                                       |                                                                                          |                                                         |       |               |         |   |       |        
|                                                       | Cash payments for taxes, net                                                             |                                                         | $     | 11,896        |         |   | $     | 1,119   |        
|                                                       |                                                                                          |                                                         |       |               |         |   |       |        
|Supplemental disclosures of noncash
    activities:    |                                                                                          |                                                         |       |               |         |   |       |        
|                                                       | Capital expenditures financed by debt                                                    |                                                         | $     | 3,391         |         |   | $     | 765     |        
|                                                       |                                                                                          |                                                         |       |               |         |   |       |        

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

3



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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 engaged in the
wholesale distribution of tires, wheels, equipment and related
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 only normal recurring
adjustments, necessary for a fair presentation of the financial
position of the Company, the results of its operations and cash
flows have been made. These financial statements should be read
in conjunction with the financial statements and notes thereto
included in the Companys consolidated financial statements
reported on Form 10-K for the fiscal year ended
December 27, 2003. The results of the operations for the
quarter and nine months ended October 2, 2004 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 October 2, 2004 and September 27, 2003
contain operating results for 13 weeks. The nine months
ended October 2, 2004 and September 27, 2003 contain
operating results for 40 weeks and 39 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. | Acquisitions:

On July 30, 2004, the Company completed the
purchase of all the outstanding stock of Texas Market Tire
Holdings I, Inc., dba Big State Tire Supply (Big
State), a tire distributor located in Lubbock, Texas
pursuant to the terms of that certain Stock Purchase Agreement
dated July 2, 2004. Big State operates nine

4



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##### 



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

distribution centers located in Texas, Oklahoma
and New Mexico. The acquisition was financed by the
Companys existing revolving credit facility (see
Note 9).

On September 2, 2004, the Company completed
the purchase of all the outstanding stock of Target Tire, Inc.
(Target Tire), a tire distributor located in
Jacksonville, North Carolina pursuant to the terms of that
certain Stock Purchase Agreement dated September 1, 2004.
Target Tire operates eleven distribution centers located in
North Carolina, Georgia, South Carolina, Virginia and Tennessee.
The acquisition was financed by the Companys existing
revolving credit facility, as amended (see Note 9).

These acquisitions have been accounted for using
the purchase method of accounting and, accordingly, results of
operations for the acquired businesses have been included in the
unaudited condensed consolidated statements of operations from
the acquisition dates. Preliminary allocations of the purchase
prices have been recorded in the accompanying unaudited
condensed consolidated financial statements as of
October 2, 2004, based on managements best estimate
of fair values for the assets acquired and liabilities assumed.
These acquisitions are not material individually or in the
aggregate to the results of operations for the period.



|   |               
|-- | --------------
|5. | 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 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 unaudited
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 Quarters Ended |       | For the Nine Months Ended
|                                                                                                                                        |  |                        |       |                          
|                                                                                                                                        |  | October 2,             |       | September 27,             |  | October 2,  |       | September 27,
|                                                                                                                                        |  | 2004                   |       | 2003                      |  | 2004        |       | 2003         
|                                                                                                                                        |  |                        |       |                           |  |             |       |              
|                                                                                                                                        |  | (Unaudited)            |       | (Unaudited)               |  | (Unaudited) |       | (Unaudited)  
|Net income, as reported                                                                                                                 |  | $                      | 7,393 |                           |  | $           | 5,519 |               |  | $ | 19,307 |   |  | $ | 10,892 |  
|Deduct: Total stock-based employee compensation
    expense determined under the fair value based method for all
    awards, net of tax |  |                        | (82   | )                         |  |             | (160  | )             |  |   | (380   | ) |  |   | (315   | )
|                                                                                                                                        |  |                        |       |                           |  |             |       |               |  |   |        |   |  |   |        |  
|Pro forma net income                                                                                                                    |  | $                      | 7,311 |                           |  | $           | 5,359 |               |  | $ | 18,927 |   |  | $ | 10,577 |  
|                                                                                                                                        |  |                        |       |                           |  |             |       |               |  |   |        |   |  |   |        |  

The Company granted options for
268,226 shares in first quarter 2004 and 50,000 shares
in third quarter 2004 with an exercise price of $4.25. The
weighted average fair value of options granted during the first
and

5



---



##### 



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

third quarter 2004, estimated on the date of
grant using the Black-Scholes option pricing model, was $1.40
and $1.54, respectively. The fair value of options granted in
the first and third quarter 2004 was determined using the
following assumptions: a weighted average risk-free interest
rate of 3.98% and 4.48%, respectively, no dividend yield,
expected life of 10 years, which equals the terms of the
options, and no expected volatility. There were no options
granted in second quarter 2004.

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 first quarter 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.
There were no options granted in second and third quarter 2003.



|   |             
|-- | ------------
|6. | Inventories:

Inventories consist of tires, wheels, equipment
and related 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 for return of tire
products, within limitations, as specified in their supply
agreements. All of the Companys inventories, excluding
Target Tires inventories, are held as collateral under the
revolving credit facility.



|   |                             
|-- | ----------------------------
|7. | Shipping and Handling Costs:

Certain outbound shipping and handling costs are
classified as selling, general and administrative expenses in
the accompanying unaudited condensed consolidated statements of
operations. Such expenses totaled $16.3 million and
$15.5 million for the quarters ended October 2, 2004
and September 27, 2003, respectively, and
$47.9 million and $46.3 million for the nine months
ended October 2, 2004 and September 27, 2003,
respectively.



|   |                       
|-- | ----------------------
|8. | Deferred Income Taxes:

The Company has net deferred tax assets,
consisting primarily of net operating loss carryforwards
(NOLs) of $14.3 million and $15.3 million
at October 2, 2004 and December 27, 2003,
respectively. The decrease in net deferred tax assets is
primarily attributable to current period income and the
corresponding NOL utilization partially offset by the addition
of $0.3 million in net deferred tax assets as a result of
the Target Tire acquisition in third quarter 2004. Management
has evaluated the Companys net deferred tax assets and has
concluded that the realizability of the net 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 was
included in the accompanying condensed consolidated balance
sheets as of October 2, 2004, unchanged from
December 27, 2003. The valuation allowance relates to
certain deferred tax assets, that in managements
assessment, may not be realized due to the sale of Winston Tire
Company (Winston) in May 2001. This evaluation
considered the historical and long-term expected profitability
of the Company. Given the timing of the reversal of its
temporary differences and the expiration date of its NOLs, the
Company believes that taxable income generated in current and
future years will be sufficient to utilize the remaining net
deferred tax assets. The Companys ability to generate
future taxable income is dependent on numerous factors including
general economic conditions, the state of the replacement tire
market and other factors beyond managements control. There
can be no assurance that the Company will meet its expectation
of future taxable income and adjustments to the valuation
allowance may be required in the future.

6



---



##### 



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)



|   |                                                     
|-- | ----------------------------------------------------
|9. | 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
(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 October 2, 2004) or (ii) the Eurodollar
Rate, as defined, plus the applicable margin (2.25% as of
October 2, 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 October 2, 2004, the
Company was in compliance with these covenants. Obligations
under the Revolver are secured by all inventories and accounts
receivables of the Company, excluding the inventories and
accounts receivable acquired in the Target Tire acquisition. The
Revolver expires February 15, 2008.

On September 2, 2004, the Company and its
lenders executed a Second Amendment to the Revolver to provide
the Company with a $20.0 million term loan to facilitate
the acquisition of Target Tire. The term loan is evidenced by a
promissory note and is due and payable, in full, no later than
March 1, 2005. Borrowings under the term loan bear interest
at (i) the Base Rate, as defined, plus the applicable
margin or (ii) the Eurodollar Rate, as defined, plus the
applicable margin. The applicable margin is 6.0% for Base Rate
loans and 7.5% for Eurodollar Rate loans. The term loan is
subject to acceleration prior to maturity upon default of the
Revolver. The Company may prepay the term loan in whole or in
part at any time.

7



---



##### 



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)



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

During second quarter 2003, the Company entered
into an interest rate swap agreement (Swap) to
manage exposure to fluctuations in interest rates. The Swap
represents a contract to exchange floating rate for fixed
interest payments periodically over the life of the agreement
without exchange of the underlying notional amount. The notional
amount of the Swap is used to measure interest to be paid or
received and does not represent the amount of exposure to credit
loss. At October 2, 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. The 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 unaudited 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 $0.6 million and
$0.2 million at October 2, 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, the Company recorded additional
interest expense of $0.1 million for the quarter ended
October 2, 2004 and $0.3 million net reductions to
interest expense for the nine months ended October 2, 2004.
In 2003, the Company recorded net reductions to interest expense
of $0.4 million and $0.1 million for the quarter and
nine months ended September 27, 2003, respectively.



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

As of October 2, 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 accompanying
condensed consolidated balance sheets.



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

Aggregate annual maturities of long-term debt at
October 2, 2004, are as follows (in thousands):

|                 |  |   |         | 
|---------------- |  | - | ------- | 
|Year Ending      |  |  
|December:        |  |  
|                 |  |  
|2004 (remainder) |  | $ | 1,402   | 
|2005             |  |   | 1,419   | 
|2006             |  |   | 1,151   | 
|2007             |  |   | 609     | 
|2008             |  |   | 225,231 | 
|Thereafter       |  |   | 14,192  | 
|                 |  |   |         | 
|                 |  | $ | 244,004 | 
|                 |  |   |         | 

8



---



##### 



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)



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

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

|                                                                                                                                                      |                                  |             |       |              |  |   |       |        | 
|----------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------- | ----------- | ----- | ------------ |  | - | ----- | ------ | 
|                                                                                                                                                      |                                  | October 2,  |       | December 27,
|                                                                                                                                                      |                                  | 2004        |       | 2003        
|                                                                                                                                                      |                                  |             |       |             
|                                                                                                                                                      |                                  | (Unaudited) |       |             
|Redeemable preferred stock
    Series A  4% cumulative; 7,000 shares
    authorized; 5,500 and 6,500 shares issued and outstanding,
    respectively |                                  | $           | 5,500 |              |  | $ | 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 |             | $     | 9,535        |  |   | $     | 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 one
of the Companys suppliers. Additional dividends will
accrue, when and if declared by the Board of Directors, and are
payable on the last business day of January. For the nine months
ended October 2, 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 unaudited
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. During the nine months ending October 2, 2004,
the Company redeemed 1,000 shares of the Series A
preferred stock for $1.0 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,
and no dividends have been declared and paid.



|    |                 
|--- | ----------------
|11. | Preferred Stock:

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

|                                                                                                       |                       |             |        |              |  |   |        |        | 
|------------------------------------------------------------------------------------------------------ | --------------------- | ----------- | ------ | ------------ |  | - | ------ | ------ | 
|                                                                                                       |                       | October 2,  |        | December 27,
|                                                                                                       |                       | 2004        |        | 2003        
|                                                                                                       |                       |             |        |             
|                                                                                                       |                       | (Unaudited) |        |             
|Preferred stock Series C  12%
    cumulative; 1,333,334 shares authorized, issued and
    outstanding |                       | $           | 17,040 |              |  | $ | 15,960 |       
|Preferred stock Series D  12%
    cumulative; 9,637,592 shares authorized, issued and
    outstanding |                       |             | 37,587 |              |  |   | 34,984 |       
|                                                                                                       |                       |             |        |              |  |   |        |       
|                                                                                                       | Total preferred stock |             | $      | 54,627       |  |   | $      | 50,944 | 
|                                                                                                       |                       |             |        |              |  |   |        |       

9



---



##### 



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

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.



|    |                               
|--- | ------------------------------
|12. | Commitments and Contingencies:



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

The Company remains liable as a guarantor on
certain leases of Winston, its discontinued retail segment. As
of October 2, 2004, total obligations of the Company, as
guarantor on these leases is approximately $11.5 million
extending over 15 years. However, the Company has secured
assignments or sublease agreements for the vast majority of
these commitments with contractual assigned or subleased rentals
of approximately $10.9 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.



|    |                  
|--- | -----------------
|13. | Subsequent Event:

On November 4, 2004, the Company paid off
the $20.0 million term loan with borrowings from the
Revolver (see Note 9).

10



---



##### 



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)



|    |                                                
|--- | -----------------------------------------------
|14. | 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
October 2, 2004 and December 27, 2003, are as follows:

|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |         |         |          |          |          |          |         |         |         |         | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ---------- | ------- | ------------ | ------ | ------------ | ------- | ------- | -------- | -------- | -------- | -------- | ------- | ------- | ------- | ------- | 
|                                                   |                                                                                                                       |                           
|                                                   |                                                                                                                       | As of October 2, 2004     
|                                                   |                                                                                                                       |                           
|                                                   |                                                                                                                       | Parent                     |                                            | Subsidiary |         |             
|                                                   |                                                                                                                       | Company                    |                                            | Guarantors |         | Eliminations |        | Consolidated
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |             
|                                                   |                                                                                                                       |                           
|                                                   |                                                                                                                       | (Unaudited)               
|Assets                                             |                                                                                                                       |                            |                                            |            |         |              |        |              |         |         |          |          |          |          |         |        
|Current assets:                                    |                                                                                                                       |                            |                                            |            |         |              |        |              |         |         |          |          |          |          |         |        
|                                                   | Cash and cash equivalents                                                                                             |                            | $                                          | 3,469      |         |              | $      | 307          |         |         | $        |         |          |          | $       | 3,776   |        
|                                                   | Accounts receivable, net                                                                                              |                            |                                            | 91,424     |         |              |        | 55,102       |         |         |          |         |          |          |         | 146,526 |        
|                                                   | Inventories                                                                                                           |                            |                                            | 143,101    |         |              |        | 84,444       |         |         |          |         |          |          |         | 227,545 |        
|                                                   | Other current assets                                                                                                  |                            |                                            | 15,648     |         |              |        | 1,492        |         |         |          |         |          |          |         | 17,140  |        
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |         |         |          |          |          |          |         |        
|                                                   |                                                                                                                       | Total current assets       |                                            |            | 253,642 |              |        |              | 141,345 |         |          |          |         |          |         |         | 394,987 |        
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |         |         |          |          |          |          |         |        
|Property and equipment, net                        |                                                                                                                       |                            | 17,384                                     |            |         |              | 5,845  |              |         |         |         |          |          |          | 23,229  |        
|Goodwill and other intangible assets, net          |                                                                                                                       |                            | 51,093                                     |            |         |              | 87,599 |              |         |         |         |          |          |          | 138,692 |        
|Investment in subsidiaries                         |                                                                                                                       |                            | 119,209                                    |            |         |              |       |              |         |         | (119,209 | )        |          |          |        |        
|Other assets                                       |                                                                                                                       |                            | 14,723                                     |            |         |              | 790    |              |         |         |         |          |          |          | 15,513  |        
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |         |         |          |          |          |          |         |        
|                                                   |                                                                                                                       |                            | Total assets                               |            | $       | 456,051      |        |              | $       | 235,579 |          |          | $        | (119,209 | )       |         | $       | 572,421 | 
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |         |         |          |          |          |          |         |        
|                                                  
|Liabilities and Stockholders
    Equity           |                                                                                                                       |                            |                                            |            |         |              |        |              |         |         |          |          |          |          |         |        
|Current liabilities:                               |                                                                                                                       |                            |                                            |            |         |              |        |              |         |         |          |          |          |          |         |        
|                                                   | Accounts payable                                                                                                      |                            | $                                          | 216,805    |         |              | $      | 10,985       |         |         | $        |         |          |          | $       | 227,790 |        
|                                                   | Accrued expenses                                                                                                      |                            |                                            | 22,280     |         |              |        | 6,597        |         |         |          |         |          |          |         | 28,877  |        
|                                                   | Current maturities of long-term debt                                                                                  |                            |                                            | 1,420      |         |              |        | 79           |         |         |          |         |          |          |         | 1,499   |        
|                                                   | Intercompany payables (receivables)                                                                                   |                            |                                            | (91,368    | )       |              |        | 91,368       |         |         |          |         |          |          |         |        |        
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |         |         |          |          |          |          |         |        
|                                                   |                                                                                                                       | Total current liabilities  |                                            |            | 149,137 |              |        |              | 109,029 |         |          |          |         |          |         |         | 258,166 |        
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |         |         |          |          |          |          |         |        
|Revolving credit facility and other long-term debt |                                                                                                                       |                            | 198,746                                    |            |         |              | 1,028  |              |         |         |         |          |          |          | 199,774 |        
|Series D Senior Notes                              |                                                                                                                       |                            | 28,600                                     |            |         |              |       |              |         |         |         |          |          |          | 28,600  |        
|Capital lease obligations                          |                                                                                                                       |                            | 14,085                                     |            |         |              | 46     |              |         |         |         |          |          |          | 14,131  |        
|Other liabilities                                  |                                                                                                                       |                            | 3,916                                      |            |         |              | 6,267  |              |         |         |         |          |          |          | 10,183  |        
|Redeemable preferred stock                         |                                                                                                                       |                            | 9,535                                      |            |         |              |       |              |         |         |         |          |          |          | 9,535   |        
|Stockholders equity:                              |                                                                                                                       |                            |                                            |            |         |              |        |              |         |         |          |          |          |          |         |        
|                                                   | Intercompany investment                                                                                               |                            |                                            |           |         |              |        | 108,674      |         |         |          | (108,674 | )        |          |         |        |        
|                                                   | Preferred stock                                                                                                       |                            |                                            | 54,627     |         |              |        |             |         |         |          |         |          |          |         | 54,627  |        
|                                                   | Common stock, par value $.01 per share;
    50,000,000 shares authorized; 5,161,917 shares issued
    and outstanding |                            |                                            | 52         |         |              |        |             |         |         |          |         |          |          |         | 52      |        
|                                                   | Additional paid-in capital                                                                                            |                            |                                            | 23,030     |         |              |        |             |         |         |          |         |          |          |         | 23,030  |        
|                                                   | Warrants                                                                                                              |                            |                                            | 1,352      |         |              |        |             |         |         |          |         |          |          |         | 1,352   |        
|                                                   | Accumulated deficit                                                                                                   |                            |                                            | (27,029    | )       |              |        | 10,535       |         |         |          | (10,535  | )        |          |         | (27,029 | )      
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |         |         |          |          |          |          |         |        
|                                                   |                                                                                                                       | Total stockholders equity |                                            |            | 52,032  |              |        |              | 119,209 |         |          |          | (119,209 | )        |         |         | 52,032  |        
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |         |         |          |          |          |          |         |        
|                                                   |                                                                                                                       |                            | Total liabilities and stockholders equity |            | $       | 456,051      |        |              | $       | 235,579 |          |          | $        | (119,209 | )       |         | $       | 572,421 | 
|                                                   |                                                                                                                       |                            |                                            |            |         |              |        |              |         |         |          |          |          |          |         |        

11



---



##### 



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

|                                                   |                                                                                                                       |                            |                                            |            |        |              |        |              |        |         |         |         |         |         |         |         |        |         | 
|-------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------------------------------------------ | ---------- | ------ | ------------ | ------ | ------------ | ------ | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ------ | ------- | 
|                                                   |                                                                                                                       |                           
|                                                   |                                                                                                                       | As of December 27, 2003   
|                                                   |                                                                                                                       |                           
|                                                   |                                                                                                                       | Parent                     |                                            | Subsidiary |        |             
|                                                   |                                                                                                                       | Company                    |                                            | Guarantors |        | Eliminations |        | 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 | 
|                                                   |                                                                                                                       |                            |                                            |            |        |              |        |              |        |         |         |         |         |         |         |        

12



---



##### 



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

Condensed consolidating statements of operations
for the quarters ended October 2, 2004 and
September 27, 2003 are as follows:

|                                             |                                 |                       |         |            |   |              |         |              |   |   |        |        |   |   |         |        |  
|-------------------------------------------- | ------------------------------- | --------------------- | ------- | ---------- | - | ------------ | ------- | ------------ | - | - | ------ | ------ | - | - | ------- | ------ | -
|                                             |                                 |                      
|                                             |                                 | For the Quarter Ended
|                                             |                                 | October 2, 2004      
|                                             |                                 |                      
|                                             |                                 | Parent                |         | Subsidiary |   |             
|                                             |                                 | Company               |         | Guarantors |   | Eliminations |         | Consolidated
|                                             |                                 |                       |         |            |   |              |         |             
|                                             |                                 |                      
|                                             |                                 | (Unaudited)          
|Net sales                                    |                                 | $                     | 215,497 |            |   | $            | 114,711 |              |   | $ |       |        |   | $ | 330,208 |       
|Cost of goods sold                           |                                 |                       | 175,191 |            |   |              | 94,764  |              |   |   |       |        |   |   | 269,955 |       
|                                             |                                 |                       |         |            |   |              |         |              |   |   |        |        |   |   |         |       
|                                             | Gross profit                    |                       |         | 40,306     |   |              |         | 19,947       |   |   |        |       |   |   |         | 60,253 |  
|Selling, general and administrative expenses |                                 |                       | 31,441  |            |   |              | 12,836  |              |   |   |       |        |   |   | 44,277  |       
|                                             |                                 |                       |         |            |   |              |         |              |   |   |        |        |   |   |         |       
|                                             | Operating income                |                       |         | 8,865      |   |              |         | 7,111        |   |   |        |       |   |   |         | 15,976 |  
|Other income (expense):                      |                                 |                       |         |            |   |              |         |              |   |   |        |        |   |   |         |       
|                                             | Interest expense                |                       |         | (3,545     | ) |              |         | (7           | ) |   |        |       |   |   |         | (3,552 | )
|                                             | Other, net                      |                       |         | (208       | ) |              |         | 105          |   |   |        |       |   |   |         | (103   | )
|                                             | Equity earnings of subsidiaries |                       |         | 4,326      |   |              |         |             |   |   |        | (4,326 | ) |   |         |       |  
|                                             |                                 |                       |         |            |   |              |         |              |   |   |        |        |   |   |         |       
|Income from operations before income taxes   |                                 |                       | 9,438   |            |   |              | 7,209   |              |   |   | (4,326 | )      |   |   | 12,321  |       
|Provision for income taxes                   |                                 |                       | 2,045   |            |   |              | 2,883   |              |   |   |       |        |   |   | 4,928   |       
|                                             |                                 |                       |         |            |   |              |         |              |   |   |        |        |   |   |         |       
|Net income                                   |                                 | $                     | 7,393   |            |   | $            | 4,326   |              |   | $ | (4,326 | )      |   | $ | 7,393   |       
|                                             |                                 |                       |         |            |   |              |         |              |   |   |        |        |   |   |         |       

|                                             |                                 |                       |         |            |   |              |        |              |  |   |        |        |   |   |         |        |  
|-------------------------------------------- | ------------------------------- | --------------------- | ------- | ---------- | - | ------------ | ------ | ------------ |  | - | ------ | ------ | - | - | ------- | ------ | -
|                                             |                                 |                      
|                                             |                                 | For the Quarter Ended
|                                             |                                 | September 27, 2003   
|                                             |                                 |                      
|                                             |                                 | Parent                |         | Subsidiary |   |             
|                                             |                                 | Company               |         | Guarantors |   | Eliminations |        | Consolidated
|                                             |                                 |                       |         |            |   |              |        |             
|                                             |                                 |                      
|                                             |                                 | (Unaudited)          
|Net sales                                    |                                 | $                     | 203,824 |            |   | $            | 88,541 |              |  | $ |       |        |   | $ | 292,365 |       
|Cost of goods sold                           |                                 |                       | 166,359 |            |   |              | 72,977 |              |  |   |       |        |   |   | 239,336 |       
|                                             |                                 |                       |         |            |   |              |        |              |  |   |        |        |   |   |         |       
|                                             | Gross profit                    |                       |         | 37,465     |   |              |        | 15,564       |  |   |        |       |   |   |         | 53,029 |  
|Selling, general and administrative expenses |                                 |                       | 30,139  |            |   |              | 10,531 |              |  |   |       |        |   |   | 40,670  |       
|                                             |                                 |                       |         |            |   |              |        |              |  |   |        |        |   |   |         |       
|                                             | Operating income                |                       |         | 7,326      |   |              |        | 5,033        |  |   |        |       |   |   |         | 12,359 |  
|Other income (expense):                      |                                 |                       |         |            |   |              |        |              |  |   |        |        |   |   |         |       
|                                             | Interest expense                |                       |         | (3,110     | ) |              |        |             |  |   |        |       |   |   |         | (3,110 | )
|                                             | Other, net                      |                       |         | (133       | ) |              |        | 81           |  |   |        |       |   |   |         | (52    | )
|                                             | Equity earnings of subsidiaries |                       |         | 3,069      |   |              |        |             |  |   |        | (3,069 | ) |   |         |       |  
|                                             |                                 |                       |         |            |   |              |        |              |  |   |        |        |   |   |         |       
|Income from operations before income taxes   |                                 |                       | 7,152   |            |   |              | 5,114  |              |  |   | (3,069 | )      |   |   | 9,197   |       
|Provision for income taxes                   |                                 |                       | 1,633   |            |   |              | 2,045  |              |  |   |       |        |   |   | 3,678   |       
|                                             |                                 |                       |         |            |   |              |        |              |  |   |        |        |   |   |         |       
|Net income                                   |                                 | $                     | 5,519   |            |   | $            | 3,069  |              |  | $ | (3,069 | )      |   | $ | 5,519   |       
|                                             |                                 |                       |         |            |   |              |        |              |  |   |        |        |   |   |         |       

13



---



##### 



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

Condensed consolidating statements of operations
for the nine months ended October 2, 2004 and
September 27, 2003 are as follows:

|                                             |                                 |                           |         |            |   |              |         |              |   |   |         |         |   |   |         |         |  
|-------------------------------------------- | ------------------------------- | ------------------------- | ------- | ---------- | - | ------------ | ------- | ------------ | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                             |                                 |                          
|                                             |                                 | For the Nine Months Ended
|                                             |                                 | October 2, 2004          
|                                             |                                 |                          
|                                             |                                 | Parent                    |         | Subsidiary |   |             
|                                             |                                 | Company                   |         | Guarantors |   | Eliminations |         | Consolidated
|                                             |                                 |                           |         |            |   |              |         |             
|                                             |                                 |                          
|                                             |                                 | (Unaudited)              
|Net sales                                    |                                 | $                         | 652,211 |            |   | $            | 293,468 |              |   | $ |        |         |   | $ | 945,679 |        
|Cost of goods sold                           |                                 |                           | 531,296 |            |   |              | 242,033 |              |   |   |        |         |   |   | 773,329 |        
|                                             |                                 |                           |         |            |   |              |         |              |   |   |         |         |   |   |         |        
|                                             | Gross profit                    |                           |         | 120,915    |   |              |         | 51,435       |   |   |         |        |   |   |         | 172,350 |  
|Selling, general and administrative expenses |                                 |                           | 95,362  |            |   |              | 34,969  |              |   |   |        |         |   |   | 130,331 |        
|                                             |                                 |                           |         |            |   |              |         |              |   |   |         |         |   |   |         |        
|                                             | Operating income                |                           |         | 25,553     |   |              |         | 16,466       |   |   |         |        |   |   |         | 42,019  |  
|Other income (expense):                      |                                 |                           |         |            |   |              |         |              |   |   |         |         |   |   |         |        
|                                             | Interest expense                |                           |         | (9,396     | ) |              |         | (9           | ) |   |         |        |   |   |         | (9,405  | )
|                                             | Other, net                      |                           |         | (681       | ) |              |         | 245          |   |   |         |        |   |   |         | (436    | )
|                                             | Equity earnings of subsidiaries |                           |         | 10,022     |   |              |         |             |   |   |         | (10,022 | ) |   |         |        |  
|                                             |                                 |                           |         |            |   |              |         |              |   |   |         |         |   |   |         |        
|Income from operations before income taxes   |                                 |                           | 25,498  |            |   |              | 16,702  |              |   |   | (10,022 | )       |   |   | 32,178  |        
|Provision for income taxes                   |                                 |                           | 6,191   |            |   |              | 6,680   |              |   |   |        |         |   |   | 12,871  |        
|                                             |                                 |                           |         |            |   |              |         |              |   |   |         |         |   |   |         |        
|Net income                                   |                                 | $                         | 19,307  |            |   | $            | 10,022  |              |   | $ | (10,022 | )       |   | $ | 19,307  |        
|                                             |                                 |                           |         |            |   |              |         |              |   |   |         |         |   |   |         |        

|                                             |                                 |                           |         |            |   |              |         |              |  |   |        |        |   |   |         |         |  
|-------------------------------------------- | ------------------------------- | ------------------------- | ------- | ---------- | - | ------------ | ------- | ------------ |  | - | ------ | ------ | - | - | ------- | ------- | -
|                                             |                                 |                          
|                                             |                                 | For the Nine Months Ended
|                                             |                                 | September 27, 2003       
|                                             |                                 |                          
|                                             |                                 | Parent                    |         | Subsidiary |   |             
|                                             |                                 | Company                   |         | Guarantors |   | Eliminations |         | Consolidated
|                                             |                                 |                           |         |            |   |              |         |             
|                                             |                                 |                          
|                                             |                                 | (Unaudited)              
|Net sales                                    |                                 | $                         | 594,807 |            |   | $            | 241,773 |              |  | $ |       |        |   | $ | 836,580 |        
|Cost of goods sold                           |                                 |                           | 486,865 |            |   |              | 200,544 |              |  |   |       |        |   |   | 687,409 |        
|                                             |                                 |                           |         |            |   |              |         |              |  |   |        |        |   |   |         |        
|                                             | Gross profit                    |                           |         | 107,942    |   |              |         | 41,229       |  |   |        |       |   |   |         | 149,171 |  
|Selling, general and administrative expenses |                                 |                           | 88,485  |            |   |              | 31,865  |              |  |   |       |        |   |   | 120,350 |        
|                                             |                                 |                           |         |            |   |              |         |              |  |   |        |        |   |   |         |        
|                                             | Operating income                |                           |         | 19,457     |   |              |         | 9,364        |  |   |        |       |   |   |         | 28,821  |  
|Other income (expense):                      |                                 |                           |         |            |   |              |         |              |  |   |        |        |   |   |         |        
|                                             | Interest expense                |                           |         | (10,796    | ) |              |         |             |  |   |        |       |   |   |         | (10,796 | )
|                                             | Other, net                      |                           |         | (85        | ) |              |         | 212          |  |   |        |       |   |   |         | 127     |  
|                                             | Equity earnings of subsidiaries |                           |         | 5,746      |   |              |         |             |  |   |        | (5,746 | ) |   |         |        |  
|                                             |                                 |                           |         |            |   |              |         |              |  |   |        |        |   |   |         |        
|Income from operations before income taxes   |                                 |                           | 14,322  |            |   |              | 9,576   |              |  |   | (5,746 | )      |   |   | 18,152  |        
|Provision for income taxes                   |                                 |                           | 3,430   |            |   |              | 3,830   |              |  |   |       |        |   |   | 7,260   |        
|                                             |                                 |                           |         |            |   |              |         |              |  |   |        |        |   |   |         |        
|Net income                                   |                                 | $                         | 10,892  |            |   | $            | 5,746   |              |  | $ | (5,746 | )      |   | $ | 10,892  |        
|                                             |                                 |                           |         |            |   |              |         |              |  |   |        |        |   |   |         |        

14



---



##### 



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

Condensed consolidating statements of cash flows
for the nine months ended October 2, 2004 and
September 27, 2003 are as follows:

|                                                                                         |                                                                                                 |                                                                         |                                                         |            |         |              |        |              |         |         |   |         |        |   |         |        |         |         |  
|---------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------------------------------------------- | ---------- | ------- | ------------ | ------ | ------------ | ------- | ------- | - | ------- | ------ | - | ------- | ------ | ------- | ------- | -
|                                                                                         |                                                                                                 |                                                                        
|                                                                                         |                                                                                                 | For the Nine Months Ended                                              
|                                                                                         |                                                                                                 | October 2, 2004                                                        
|                                                                                         |                                                                                                 |                                                                        
|                                                                                         |                                                                                                 | Parent                                                                  |                                                         | Subsidiary |         |             
|                                                                                         |                                                                                                 | Company                                                                 |                                                         | Guarantors |         | Eliminations |        | Consolidated
|                                                                                         |                                                                                                 |                                                                         |                                                         |            |         |              |        |             
|                                                                                         |                                                                                                 |                                                                        
|                                                                                         |                                                                                                 | (Unaudited)                                                            
|Cash flows from operating
    activities:                                                |                                                                                                 |                                                                         |                                                         |            |         |              |        |              |         |         |   |         |        |   |         |       
|                                                                                         | Net income                                                                                      |                                                                         | $                                                       | 19,307     |         |              | $      | 10,022       |         |         | $ | (10,022 | )      |   | $       | 19,307 |        
|                                                                                         | Adjustments to reconcile net income to net cash
    provided by (used in) operating activities: |                                                                         |                                                         |            |         |              |        |              |         |         |   |         |        |   |         |        |        
|                                                                                         |                                                                                                 | Depreciation and amortization of other
    intangibles and other assets |                                                         |            | 3,565   |              |        |              | 1,345   |         |   |         |       |   |         |        | 4,910   |        
|                                                                                         |                                                                                                 | Provision for doubtful accounts                                         |                                                         |            | 61      |              |        |              | (44     | )       |   |         |       |   |         |        | 17      |        
|                                                                                         |                                                                                                 | Other, net                                                              |                                                         |            | 1,313   |              |        |              | (15     | )       |   |         |       |   |         |        | 1,298   |        
|                                                                                         |                                                                                                 | Equity earnings of subsidiaries                                         |                                                         |            | (10,022 | )            |        |              |        |         |   |         | 10,022 |   |         |        |        |        
|                                                                                         | Change in operating assets and liabilities:                                                     |                                                                         |                                                         |            |         |              |        |              |         |         |   |         |        |   |         |        |        
|                                                                                         |                                                                                                 | Accounts receivable                                                     |                                                         |            | (20,427 | )            |        |              | (11,158 | )       |   |         |       |   |         |        | (31,585 | )      
|                                                                                         |                                                                                                 | Inventories                                                             |                                                         |            | (19,975 | )            |        |              | (7,849  | )       |   |         |       |   |         |        | (27,824 | )      
|                                                                                         |                                                                                                 | Other current assets                                                    |                                                         |            | 181     |              |        |              | (208    | )       |   |         |       |   |         |        | (27     | )      
|                                                                                         |                                                                                                 | Accounts payable and accrued expenses                                   |                                                         |            | 51,961  |              |        |              | (6,305  | )       |   |         |       |   |         |        | 45,656  |        
|                                                                                         |                                                                                                 | Other, net                                                              |                                                         |            | (961    | )            |        |              | (144    | )       |   |         |       |   |         |        | (1,105  | )      
|                                                                                         |                                                                                                 |                                                                         |                                                         |            |         |              |        |              |         |         |   |         |        |   |         |       
|                                                                                         |                                                                                                 |                                                                         | Net cash provided by (used in) operating
    activities |            |         | 25,003       |        |              |         | (14,356 | ) |         |        |  |         |        |         | 10,647  |  
|                                                                                         |                                                                                                 |                                                                         |                                                         |            |         |              |        |              |         |         |   |         |        |   |         |       
|Cash flows from investing
    activities:                                                |                                                                                                 |                                                                         |                                                         |            |         |              |        |              |         |         |   |         |        |   |         |       
|Purchase of property and equipment                                                       |                                                                                                 |                                                                         | (2,234                                                  | )          |         |              | (595   | )            |         |         |  |         |        |   | (2,829  | )     
|Proceeds from sale of property and equipment                                             |                                                                                                 |                                                                         | 50                                                      |            |         |              | 27     |              |         |         |  |         |        |   | 77      |       
|Acquisitions, net of cash acquired                                                       |                                                                                                 |                                                                         | (59,220                                                 | )          |         |              | 124    |              |         |         |  |         |        |   | (59,096 | )     
|Intercompany                                                                             |                                                                                                 |                                                                         | (19,209                                                 | )          |         |              | 19,209 |              |         |         |  |         |        |   |        |       
|                                                                                         |                                                                                                 |                                                                         |                                                         |            |         |              |        |              |         |         |   |         |        |   |         |       
|                                                                                         |                                                                                                 |                                                                         | Net cash provided by (used in) investing
    activities |            |         | (80,613      | )      |              |         | 18,765  |   |         |        |  |         |        |         | (61,848 | )
|                                                                                         |                                                                                                 |                                                                         |                                                         |            |         |              |        |              |         |         |   |         |        |   |         |       
|Cash flows from financing
    activities:                                                |                                                                                                 |                                                                         |                                                         |            |         |              |        |              |         |         |   |         |        |   |         |       
|Net proceeds from (repayments of) revolving
    credit facility and other long-term debt |                                                                                                 |                                                                         | 56,571                                                  |            |         |              | (4,133 | )            |         |         |  |         |        |   | 52,438  |       
|Series A preferred stock redemption                                                      |                                                                                                 |                                                                         | (1,000                                                  | )          |         |              |       |              |         |         |  |         |        |   | (1,000  | )     
|Other                                                                                    |                                                                                                 |                                                                         | 213                                                     |            |         |              |       |              |         |         |  |         |        |   | 213     |       
|                                                                                         |                                                                                                 |                                                                         |                                                         |            |         |              |        |              |         |         |   |         |        |   |         |       
|                                                                                         |                                                                                                 |                                                                         | Net cash provided by (used in) financing
    activities |            |         | 55,784       |        |              |         | (4,133  | ) |         |        |  |         |        |         | 51,651  |  
|                                                                                         |                                                                                                 |                                                                         |                                                         |            |         |              |        |              |         |         |   |         |        |   |         |       
|Net increase in cash and cash equivalents                                                |                                                                                                 |                                                                         | 174                                                     |            |         |              | 276    |              |         |         |  |         |        |   | 450     |       
|Cash and cash equivalents, beginning of period                                           |                                                                                                 |                                                                         | 3,295                                                   |            |         |              | 31     |              |         |         |  |         |        |   | 3,326   |       
|                                                                                         |                                                                                                 |                                                                         |                                                         |            |         |              |        |              |         |         |   |         |        |   |         |       
|Cash and cash equivalents, end of period                                                 |                                                                                                 | $                                                                       | 3,469                                                   |            |         | $            | 307    |              |         | $       |  |         |        | $ | 3,776   |       
|                                                                                         |                                                                                                 |                                                                         |                                                         |            |         |              |        |              |         |         |   |         |        |   |         |       

15



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##### 



American Tire Distributors, Inc.


Notes to Condensed Consolidated Financial
Statements  (Continued)

|                                                                         |                                                                                       |                                                                         |                                                         |            |         |              |        |              |        |        |   |        |       |   |         |        |         |         |  
|------------------------------------------------------------------------ | ------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------------------------------------------- | ---------- | ------- | ------------ | ------ | ------------ | ------ | ------ | - | ------ | ----- | - | ------- | ------ | ------- | ------- | -
|                                                                         |                                                                                       |                                                                        
|                                                                         |                                                                                       | For the Nine Months Ended                                              
|                                                                         |                                                                                       | September 27, 2003                                                     
|                                                                         |                                                                                       |                                                                        
|                                                                         |                                                                                       | Parent                                                                  |                                                         | Subsidiary |         |             
|                                                                         |                                                                                       | Company                                                                 |                                                         | Guarantors |         | Eliminations |        | Consolidated
|                                                                         |                                                                                       |                                                                         |                                                         |            |         |              |        |             
|                                                                         |                                                                                       |                                                                        
|                                                                         |                                                                                       | (Unaudited)                                                            
|Cash flows from operating
    activities:                                |                                                                                       |                                                                         |                                                         |            |         |              |        |              |        |        |   |        |       |   |         |       
|                                                                         | Net income                                                                            |                                                                         | $                                                       | 10,892     |         |              | $      | 5,746        |        |        | $ | (5,746 | )     |   | $       | 10,892 |        
|                                                                         | Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                         |                                                         |            |         |              |        |              |        |        |   |        |       |   |         |        |        
|                                                                         |                                                                                       | Depreciation and amortization of other
    intangibles and other assets |                                                         |            | 3,669   |              |        |              | 2,157  |        |   |        |      |   |         |        | 5,826   |        
|                                                                         |                                                                                       | Provision for doubtful accounts                                         |                                                         |            | 833     |              |        |              | 26     |        |   |        |      |   |         |        | 859     |        
|                                                                         |                                                                                       | Other, net                                                              |                                                         |            | 6,282   |              |        |              | 30     |        |   |        |      |   |         |        | 6,312   |        
|                                                                         |                                                                                       | Equity earnings of subsidiaries                                         |                                                         |            | (5,746  | )            |        |              |       |        |   |        | 5,746 |   |         |        |        |        
|                                                                         | Change in operating assets and liabilities:                                           |                                                                         |                                                         |            |         |              |        |              |        |        |   |        |       |   |         |        |        
|                                                                         |                                                                                       | Accounts receivable                                                     |                                                         |            | (13,240 | )            |        |              | (3,718 | )      |   |        |      |   |         |        | (16,958 | )      
|                                                                         |                                                                                       | Inventories                                                             |                                                         |            | (7,313  | )            |        |              | (1,671 | )      |   |        |      |   |         |        | (8,984  | )      
|                                                                         |                                                                                       | Other current assets                                                    |                                                         |            | (255    | )            |        |              | 395    |        |   |        |      |   |         |        | 140     |        
|                                                                         |                                                                                       | Accounts payable and accrued expenses                                   |                                                         |            | 17,270  |              |        |              | (257   | )      |   |        |      |   |         |        | 17,013  |        
|                                                                         |                                                                                       | Other, net                                                              |                                                         |            | (1,010  | )            |        |              | (79    | )      |   |        |      |   |         |        | (1,089  | )      
|                                                                         |                                                                                       |                                                                         |                                                         |            |         |              |        |              |        |        |   |        |       |   |         |       
|                                                                         |                                                                                       |                                                                         | Net cash provided by operating activities               |            |         | 11,382       |        |              |        | 2,629  |   |        |       |  |         |        |         | 14,011  |  
|                                                                         |                                                                                       |                                                                         |                                                         |            |         |              |        |              |        |        |   |        |       |   |         |       
|Cash flows from investing
    activities:                                |                                                                                       |                                                                         |                                                         |            |         |              |        |              |        |        |   |        |       |   |         |       
|Purchase of property and equipment                                       |                                                                                       |                                                                         | (773                                                    | )          |         |              | (542   | )            |        |        |  |        |       |   | (1,315  | )     
|Proceeds from sale of property and equipment                             |                                                                                       |                                                                         | 495                                                     |            |         |              | 71     |              |        |        |  |        |       |   | 566     |       
|Other, net                                                               |                                                                                       |                                                                         | (50                                                     | )          |         |              |       |              |        |        |  |        |       |   | (50     | )     
|Intercompany                                                             |                                                                                       |                                                                         | 2,259                                                   |            |         |              | (2,259 | )            |        |        |  |        |       |   |        |       
|                                                                         |                                                                                       |                                                                         |                                                         |            |         |              |        |              |        |        |   |        |       |   |         |       
|                                                                         |                                                                                       |                                                                         | Net cash provided by (used in) investing
    activities |            |         | 1,931        |        |              |        | (2,730 | ) |        |       |  |         |        |         | (799    | )
|                                                                         |                                                                                       |                                                                         |                                                         |            |         |              |        |              |        |        |   |        |       |   |         |       
|Cash flows from financing
    activities:                                |                                                                                       |                                                                         |                                                         |            |         |              |        |              |        |        |   |        |       |   |         |       
|Net repayments of revolving credit facility and
    other long-term debt |                                                                                       |                                                                         | (11,683                                                 | )          |         |              | (12    | )            |        |        |  |        |       |   | (11,695 | )     
|Series A preferred stock redemption                                      |                                                                                       |                                                                         | (500                                                    | )          |         |              |       |              |        |        |  |        |       |   | (500    | )     
|                                                                         |                                                                                       |                                                                         |                                                         |            |         |              |        |              |        |        |   |        |       |   |         |       
|                                                                         |                                                                                       |                                                                         | Net cash used in financing activities                   |            |         | (12,183      | )      |              |        | (12    | ) |        |       |  |         |        |         | (12,195 | )
|                                                                         |                                                                                       |                                                                         |                                                         |            |         |              |        |              |        |        |   |        |       |   |         |       
|Net increase (decrease) in cash and cash
    equivalents                 |                                                                                       |                                                                         | 1,130                                                   |            |         |              | (113   | )            |        |        |  |        |       |   | 1,017   |       
|Cash and cash equivalents, beginning of period                           |                                                                                       |                                                                         | 2,538                                                   |            |         |              | 155    |              |        |        |  |        |       |   | 2,693   |       
|                                                                         |                                                                                       |                                                                         |                                                         |            |         |              |        |              |        |        |   |        |       |   |         |       
|Cash and cash equivalents, end of period                                 |                                                                                       | $                                                                       | 3,668                                                   |            |         | $            | 42     |              |        | $      |  |        |       | $ | 3,710   |       
|                                                                         |                                                                                       |                                                                         |                                                         |            |         |              |        |              |        |        |   |        |       |   |         |       

16



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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 October 2, 2004 and September 27, 2003
contain operating results for 13 weeks. The nine months
ended October 2, 2004 and September 27, 2003 contain
operating results for 40 weeks and 39 weeks,
respectively.

During third quarter 2004, the Company completed
the purchase of all the outstanding stock of Texas Market Tire
Holdings I, Inc., dba Big State Tire Supply (Big
State) and Target Tire, Inc. (Target Tire).
These acquisitions have been accounted for using the purchase
method of accounting and, accordingly, results of operations for
the acquired businesses have been included in the unaudited
condensed consolidated statements of operations from the
acquisition date.

Results of Operations



| |                                                                               
| | ------------------------------------------------------------------------------
| | Quarter Ended October 2, 2004 Compared
    to Quarter Ended September 27, 2003

Consolidated net sales in third quarter 2004
increased $37.8 million, or 12.9%, to $330.2 million
from $292.4 million in third quarter 2003. Of the increase,
the operations acquired from Big State and Target Tire accounted
for $21.3 million. Excluding the Big State and Target Tire
operations, sales increased $16.5 million, a 5.6% increase
over third quarter 2003. This increase is primarily attributable
to an increase in medium truck tire sales as well as certain
manufacturer price increases that were part of an overall
industry increase.

Gross profit increased $7.3 million, or
13.6%, to $60.3 million in third quarter 2004 from
$53.0 million in third quarter 2003. Acquired operations
contributed $3.5 million in gross profit, or 6.6%. The
remainder of the increase in 2004 is primarily due to increased
sales. Gross profit as a percentage of sales increased 0.1% to
18.2% in third quarter 2004 compared to 18.1% in third quarter
2003. The inclusion of Big State and Target Tire decreased
margin percentages in third quarter 2004 by 0.2%. The increase
in margin percentage, excluding newly acquired operations, of
0.3% was a result of the Companys efforts to enhance
margin through improved mix and purchasing efficiencies.

Selling, general and administrative expenses
increased $3.6 million to $44.3 million in third
quarter 2004 compared to $40.7 million in third quarter
2003. The inclusion of acquired operations accounted for
$2.5 million of the increase. The remaining increase in
selling, general and administrative expenses of
$1.1 million is primarily due to increases in employee
related expenses ($1.1 million), rising fuel costs
($0.2 million) and costs associated with the acquisition of
Big State and Target Tire ($0.4 million), partially offset
by a decrease in the provision for doubtful accounts
($0.2 million) and other net decreases ($0.4 million).
The increase in employee related expenses is due, in part, to
incentive based compensation associated with the increase in
sales and profits. As a percentage of sales, selling, general
and administrative expenses decreased to 13.4% in third quarter
2004 compared to 13.9% in third quarter 2003.

Operating income increased $3.6 million in
third quarter 2004 to $16.0 million from $12.4 million
in third quarter 2003 due primarily to an overall increase in
sales partially offset by an increase in selling, general and
administrative expenses.

Interest expense increased $0.5 million in
third quarter 2004 to $3.6 million from $3.1 million
in third quarter 2003. The increase is due primarily to
increased borrowings on the Companys revolving credit
facility as a result of the two acquisitions completed in third
quarter 2004, as well as additional interest expense relating to
the change in fair value of the interest rate swap agreement,
partially offset by a reduction in other long-term debt levels.

17



---



##### 



The Company recognized an income tax provision of
$4.9 million in third quarter 2004 compared to
$3.7 million in third quarter 2003. The effective tax rate
in each quarter was approximately 40%.

Net income increased $1.9 million in third
quarter 2004 to $7.4 million from $5.5 million in
third quarter 2003. The increase is due primarily to the
increase in operating income partially offset by an increase in
interest expense and an increase in the income tax provision.

Nine Months Ended October 2, 2004
Compared to Nine Months Ended September 27,
2003

Consolidated net sales for the nine-month period
in 2004 increased $109.1 million, or 13.0%, to
$945.7 million from $836.6 million for the nine-month
period in 2003. The inclusion of sales for Big State
(2 months) and Target Tire (1 month) accounted for
$21.3 million, or 2.5%. The remaining increase in sales of
$87.8 million is primarily attributable to an increase in
light and medium truck tire, equipment and wheel sales, as well
as certain manufacturer price increases that were part of an
overall industry increase. The results for 2004 also include an
additional week of sales.

Gross profit increased $23.2 million, or
15.5%, to $172.4 million in the nine-month period in 2004
from $149.2 million in the nine-month period in 2003.
Acquired operations contributed $3.5 million in gross
profit, or 2.3%. The remaining increase is primarily
attributable to increased sales levels 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 0.4% to
18.2% in the nine-month period in 2004 compared to 17.8% in the
nine-month period in 2003. Margins in 2004 benefited from
increased wheel sales, which carry higher margins, offset by a
negative impact from various marketing programs that were in
effect in second and third quarter 2004. Margins in 2003 were
negatively impacted by an aggressive first quarter 2003
marketing program, which resulted in reduced margins on certain
products.

Selling, general and administrative expenses
increased $9.9 million to $130.3 million in the
nine-month period in 2004 compared to $120.4 million in the
nine-month period in 2003. The inclusion of acquired operations
accounted for $2.5 million, or 2.1%. The remaining increase
in selling, general and administrative expenses of
$7.4 million is primarily due to increases in employee
related expenses ($7.1 million), rising fuel costs
($0.2 million), costs associated with the acquisition of
Big State and Target Tire ($0.4 million) and other net
increases ($1.1 million), partially offset by a reduction
in amortization expense ($0.6 million) relating to
noncompete agreements that ended in the second quarter of 2003
and a reduction in the provision for doubtful accounts
($0.8 million). The increase in employee related expenses
is due, in part, to incentive based compensation associated with
an increase in sales and profits and the inclusion of an
additional week in first quarter 2004. As a percentage of sales,
selling, general and administrative expenses decreased to 13.8%
for the nine-month period in 2004 compared to 14.4% for the
nine-month period in 2003.

Operating income increased $13.2 million in
the nine-month period in 2004 to $42.0 million from
$28.8 million in the nine-month period in 2003 due
primarily to an overall increase in sales and improvements in
the Companys gross profit margins, partially offset by an
increase in selling, general and administrative expenses.

Interest expense decreased $1.4 million in
the nine-month period in 2004 to $9.4 million from
$10.8 million in the nine-month period in 2003. The
decrease is due primarily to a decline in interest rates, a
reduction in other long-term debt levels and a $0.2 million
net reduction in interest expense relating to the change in fair
value of the interest rate swap agreement, partially offset by
increased borrowings on the Companys revolving credit
facility as a result of the two acquisitions completed in third
quarter 2004.

The Company recognized an income tax provision of
$12.9 million in the nine-month period of 2004 compared to
$7.3 million in the nine-month period of 2003. The
effective tax rate in each period was approximately 40%.

Net income increased $8.4 million in the
nine-month period of 2004 to $19.3 million from
$10.9 million in the nine-month period of 2003. The
increase is due primarily to the increase in operating income
partially offset by the increase in the income tax provision.

18



---



##### 



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:

|                                                   |  |                |        |                   |  |            |        |               |  |   |        |  |  |   |        | 
|-------------------------------------------------- |  | -------------- | ------ | ----------------- |  | ---------- | ------ | ------------- |  | - | ------ |  |  | - | ------ | 
|                                                   |  |                |        |                  
|                                                   |  | Quarters Ended |        | Nine Months Ended
|                                                   |  |                |        |                  
|                                                   |  | October 2,     |        | September 27,     |  | October 2, |        | September 27,
|                                                   |  | 2004           |        | 2003              |  | 2004       |        | 2003         
|                                                   |  |                |        |                   |  |            |        |              
|                                                   |  |                |        |                  
|                                                   |  | (in thousands) |        | (in thousands)   
|Net income                                         |  | $              | 7,393  |                   |  | $          | 5,519  |               |  | $ | 19,307 |  |  | $ | 10,892 | 
|Interest expense                                   |  |                | 3,552  |                   |  |            | 3,110  |               |  |   | 9,405  |  |  |   | 10,796 | 
|Provision for income taxes                         |  |                | 4,928  |                   |  |            | 3,678  |               |  |   | 12,871 |  |  |   | 7,260  | 
|Depreciation and amortization of other intangibles |  |                | 1,666  |                   |  |            | 1,490  |               |  |   | 4,174  |  |  |   | 4,920  | 
|                                                   |  |                |        |                   |  |            |        |               |  |   |        |  |  |   |        | 
|EBITDA                                             |  | $              | 17,539 |                   |  | $          | 13,797 |               |  | $ | 45,757 |  |  | $ | 33,868 | 
|                                                   |  |                |        |                   |  |            |        |               |  |   |        |  |  |   |        | 

EBITDA increased $3.7 million to
$17.5 million in third quarter 2004 compared to
$13.8 million in third quarter 2003. The increase in EBITDA
is due primarily to the increase in sales and improvements in
the Companys gross profit margins, partially offset by the
increase in selling, general and administrative expenses. EBITDA
from the acquired operations of Big State and Target Tire
accounted for $1.2 million of this increase.

EBITDA increased $11.9 million to
$45.8 million for the nine-month period 2004 compared to
$33.9 million for the nine-month period 2003. The increase
in EBITDA is due primarily to the increase in sales and
improvements in the Companys gross profit margins,
partially offset by the increase in selling, general and
administrative expenses. EBITDA from the acquired operations of
Big State and Target Tire accounted for $1.2 million of
this increase.

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 October 2, 2004, the combined net
indebtedness (net of cash) of the Company was
$240.2 million compared to $179.4 million at
December 27, 2003. Total commitments by the lenders under
the Companys revolving credit facility, excluding the
$20.0 million term loan, were $245.0 million at
October 2, 2004, of which $41.1 million was available
for additional borrowings. The amount available to borrow is
limited by the Borrowing Base computation, as defined in the
agreement.

Operating Activities

Net cash provided by operating activities
decreased $3.4 million to $10.6 million in the
nine-month period of 2004 compared to $14.0 million in the
nine-month period of 2003. The decrease is primarily due to an
increase in the Companys net working capital requirements
as a result of increased business activity and the acquisition
of Big State and Target Tire. In addition, the Company paid
$11.9 million in income taxes in the nine-month period of
2004, an increase of $10.8 million over the nine-month
period of 2003. This is due to

19



---



##### 



the utilization of net operating loss
carryforwards (NOLs) in 2003, which were not
available in 2004. These items, which caused decreases in the
cash flows from operations, were offset by the improved
profitability of the Company. Net working capital at
October 2, 2004, totaled $136.8 million compared to
$99.0 million at December 27, 2003, an increase of
$37.8 million.


Investing Activities

Net cash used in investing activities increased
$61.0 million to $(61.8) million in the nine-month
period of 2004 compared to $(0.8) million in the nine-month
period of 2003 due primarily to the acquisition of Big State and
Target Tire in third quarter 2004. Capital expenditures during
the nine-month period in 2004 of $2.8 million were
primarily for information technology upgrades and leasehold
improvements. During the nine-month period of 2004, the Company
also had capital expenditures financed by debt of
$3.4 million relating to information technology upgrades.

Financing Activities

Net cash provided by financing activities
increased $63.9 million to $51.7 million in the
nine-month period of 2004 compared to net cash used in financing
activities of $(12.2) million in the nine-month period of
2003 primarily due to increased borrowings on the Companys
revolving credit facility as a result of the two acquisitions
completed in third quarter 2004, partially offset by the
redemption on the Series A preferred stock.

Revolving Credit Facility

On March 19, 2004, the Company executed a
Third Amended and Restated Loan and Security Agreement
(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 October 2, 2004) or (ii) the Eurodollar
Rate, as defined, plus the applicable margin (2.25% as of
October 2, 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 October 2, 2004, the
Company was in compliance with these covenants. Obligations
under the Revolver are secured by all inventories and accounts
receivables of the Company, excluding the inventories and
accounts receivable acquired in the Target Tire acquisition. The
Revolver expires February 15, 2008.

On September 2, 2004, the Company and its
lenders executed a Second Amendment to the Revolver to provide
the Company with a $20.0 million term loan to facilitate
the acquisition of Target Tire. The term loan is evidenced by a
promissory note and is due and payable, in full, no later than
March 1, 2005. Borrowings under the term loan bear interest
at (i) the Base Rate, as defined, plus the applicable
margin or (ii) the Eurodollar Rate, as defined, plus the
applicable margin. The applicable margin is 6.0% for Base Rate
loans and 7.5% for Eurodollar Rate loans. The term loan is
subject to acceleration prior to maturity upon default of the
Revolver. The Company may prepay the term loan in whole or in
part at any time. On November 4, 2004, the Company paid off
the $20.0 million term loan with borrowings from the
Revolver (see Note 9).

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During second quarter 2003, the Company entered
into an interest rate swap agreement (Swap) to
manage exposure to fluctuations in interest rates. The Swap
represents a contract to exchange floating rate for fixed
interest payments periodically over the life of the agreement
without exchange of the underlying notional amount. The notional
amount of the Swap is used to measure interest to be paid or
received and does not represent the amount of exposure to credit
loss. At October 2, 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. The 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 unaudited 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 $0.6 million and
$0.2 million at October 2, 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, the Company recorded additional
interest expense of $0.1 million for the quarter ended
October 2, 2004 and $0.3 million net reductions to
interest expense for the nine months ended October 2, 2004.
In 2003, the Company recorded net reductions to interest expense
of $0.4 million and $0.1 million for the quarter and
nine months ended September 27, 2003, respectively.

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 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 net deferred tax assets,
consisting primarily of NOLs of $14.3 million and
$15.3 million at October 2, 2004 and December 27,
2003, respectively. The decrease in net deferred tax assets is
primarily attributable to current period income and the
corresponding NOL utilization partially offset by the addition
of $0.3 million in net deferred tax assets as a result of
the Target Tire acquisition in third quarter 2004. Management
has evaluated the Companys net deferred tax assets and has
concluded that the realizability of the net 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 was
included in the accompanying condensed consolidated balance
sheets as of October 2, 2004, unchanged from
December 27, 2003. The valuation allowance relates to
certain deferred tax assets, that in managements
assessment, may not be realized due to the sale of Winston Tire
Company (Winston) in May 2001. 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

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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 October 2, 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.



| |                             
| | ----------------------------
| | Changes in Internal Controls

During the quarter ended October 2, 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.

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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.

| |      |  |  |                                                                                                                                                                                                                                                       
| | ---- |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3.1  |  |  | Amended By-laws of the Company.                                                                                                                                                                                                                       
| | 4.1  |  |  | Fifth Supplemental Indenture to the Series D
    Indenture, dated as of July 30, 2004, among the Company,
    the subsidiary guarantors party thereto and Wachovia Bank,
    National Association f/k/a First Union National Bank, as Trustee.        
| | 4.2  |  |  | Sixth Supplemental Indenture to the Series D
    Indenture, dated as of September 1, 2004, among the
    Company, the subsidiary guarantors party thereto and Wachovia
    Bank, National Association f/k/a First Union National Bank, as
    Trustee.
| | 10.1 |  |  | Second 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.                                   

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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: November 15, 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) 

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