<PAGE>

                          SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C. 20549

                                 --------------------

                                      FORM 10-K

(Mark One)
  /X/            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934
                     For the fiscal year ended December 31, 1996

                                          OR

  / /          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                           SECURITIES EXCHANGE ACT OF 1934
                            COMMISSION FILE NUMBER 0-21803

                                  ------------------

                             AFTERMARKET TECHNOLOGY CORP.
                (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              DELAWARE                           95-4486486
    (State or other jurisdiction of          (I.R.S. Employer
    incorporation or organization)           Identification No.)

    33309 FIRST WAY SOUTH, SUITE A-206
         FEDERAL WAY, WASHINGTON                    98003
  (Address of Principal Executive Offices)       (Zip Code)

         REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:  (206) 838-0346
           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
             SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                             COMMON STOCK, $.01 PAR VALUE


         Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes /X/  No / /  

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.  / /

         The aggregate market value of the voting stock held by non-affiliates
of the Registrant (based on the closing price of such stock, as reported by The
Nasdaq National Market, on February 28, 1997) was $92,848,490.


         The number of shares outstanding of the Registrant's Common Stock, as
of February 28, 1997, was 16,980,794 shares.

                         DOCUMENTS INCORPORATED BY REFERENCE
         None.



<PAGE>

                             AFTERMARKET TECHNOLOGY CORP.

                              ANNUAL REPORT ON FORM 10-K
                     FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
                                                                           Page 
                                                                           ----

ITEM 1.  BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

ITEM 2.  PROPERTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . .7


ITEM 3.  LEGAL PROCEEDINGS.. . . . . . . . . . . . . . . . . . . . . . . . .8

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.. . . . . . . .9

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
         STOCKHOLDER MATTERS.. . . . . . . . . . . . . . . . . . . . . . . .9

ITEM 6.  SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . .9


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS.. . . . . . . . . . . . . . . 11

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.. . . . . . . . . . . 16

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE.. . . . . . . . . . . . . . . 35

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. . . . . . . . 35


ITEM 11. EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . . 37

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. . 41

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . . . . . 43

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
         ON FORM 8-K.. . . . . . . . . . . . . . . . . . . . . . . . . . . 45


                                          i

<PAGE>

                                        PART I

ITEM 1.  BUSINESS.

BACKGROUND

         Aftermarket Technology Corp. ("ATC") was incorporated under the laws
of Delaware in July 1994 at the direction of Aurora Capital Partners L.P.
("ACP") to acquire Aaron's Automotive Products, Inc. ("Aaron's"), H.T.P., Inc.
("HTP"), Mamco Converters, Inc. ("Mamco") and RPM Merit, Inc. ("RPM")
(collectively, the "Initial Acquisitions").  Aaron's, HTP, Mamco and RPM as they
existed prior to the Initial Acquisitions are hereinafter collectively referred
to as the "Predecessor Companies." Subsequent to the Initial Acquisitions, the
Company acquired Component Remanufacturing Specialists, Inc. ("CRS") and Mascot
Truck Parts Inc. ("Mascot") in June 1995, and King-O-Matic Industries Limited
("King-O-Matic") in September 1995 (collectively, the "1995 Acquisitions"),
Tranzparts, Inc. ("Tranzparts") in April 1996 and Diverco, Inc. ("Diverco") in
October 1996 (collectively, the "1996 Acquisitions") and Replacement and
Exchange Parts Co., Inc. ("Repco") in January 1997.  ATC conducts all of its
operations through its wholly-owned subsidiaries and each of their respective
subsidiaries.  Throughout this Annual Report, except where the context otherwise
requires, the "Company" refers collectively to ATC and its subsidiaries and the
Predecessor Companies.

         On December 20, 1996, ATC consummated an initial public offering of
its Common Stock (the "IPO").  Simultaneous with the consummation of the IPO,
Aftermarket Technology Holdings Corp., the sole stockholder of ATC prior to the
IPO ("Holdings") was merged into ATC (the "Reorganization").  Upon the
effectiveness of such merger, each outstanding share of Holdings Common Stock
was converted into one share of ATC Common Stock, and each outstanding share of
Holdings Redeemable Exchangeable Cumulative Preferred Stock (the "Holdings
Preferred Stock") was converted into one share of ATC Redeemable Exchangeable
Cumulative Preferred Stock (the "Preferred Stock"), which was immediately
thereafter redeemed for an amount in cash equal to $100.00 plus an amount in
cash equal to accrued and unpaid dividends on the Holdings Preferred Stock to
the date of the Reorganization.

GENERAL

         The Company is a leading remanufacturer and distributor of drive train
products used in the aftermarket repair of passenger cars and light trucks.  The
Company's principal products include remanufactured transmissions, torque
converters and engines, as well as remanufactured and new parts for the repair
of automotive drive train and engine assemblies.  The Company's principal
customers include: (i) independent transmission rebuilders, general repair shops
and distributors (the "Independent Aftermarket"); (ii) original equipment
manufacturers ("OEMs"), principally Chrysler, for use as replacement parts by
their dealers; and (iii) retail automotive parts stores.

         The Company believes the key elements of its success are the quality
and breadth of its product offerings and the Company's emphasis on strong
customer relationships, promoted by strong technical support, rapid delivery
time, innovative product development and competitive pricing.  In addition, the
Company has benefited from the increasing use of remanufactured transmissions,
engines and other parts for aftermarket repairs as the industry recognizes that
remanufacturing provides a higher quality, lower cost alternative to rebuilding
the assembly or replacing it with a new assembly manufactured by an OEM.

         The automotive aftermarket in the United States and Canada consists of
sales of parts and services for vehicles after their original purchase.  The
Company competes specifically in the aftermarket segment for automotive
transmissions, engines and other drive train related products.


                                          1


<PAGE>

PRODUCTS

         The Company's product lines include remanufactured transmissions,
remanufactured engines and hard parts used in drive train repairs.  In addition,
the Company distributes repair kits used in drive train repairs and certain
other products.

         In its remanufacturing operations, the Company obtains used
transmissions, hard parts, engines and related components, commonly known as
"cores," which are sorted by make and model and either placed into immediate
production or stored until needed.  In the remanufacturing process, the cores
are evaluated and disassembled into their component parts.  The components that
can be incorporated into the remanufactured product are cleaned, tested and
refurbished.  All components determined not reusable or repairable are replaced
by other remanufactured or new components.  The units are then reassembled using
high-volume precision manufacturing techniques into finished assemblies. 
Inspection and testing are conducted at various stages of the remanufacturing
process, and each finished assembly is tested on equipment designed to simulate
performance under operating conditions.  Primarily as a result of its rigorous
quality control procedures, the Company has experienced an insignificant number
of warranty claims on its products.  After testing, completed products are then
packaged for immediate delivery or shipped to one of the Company's distribution
centers. 

         Generally, the cores used in the Company's remanufacturing process for
sale to its OEM customers are provided to the Company by the OEM or its dealer
network.  The majority of the cores used in the Company's remanufacturing
process for sale to its Independent Aftermarket and retail customers are
obtained from customers as trade-ins.  The Company encourages its Independent
Aftermarket and retail customers to return cores on a timely basis and charges
customers a supplemental core charge in connection with purchases of engines and
critical hard parts.  The customer can satisfy this charge by returning a usable
core or making a cash payment equal to the amount of the supplemental core
charge.  If cores are not returned in a timely manner, the Company then must
procure cores through its network of independent core brokers.  While core
prices are subject to supply and demand price volatility, the Company believes
its procurement network for cores will continue to provide cores at reasonable
prices.  The preceding sentence contains a forward-looking statement, and there
can be no assurance that actual results will not differ materially from the
information contained in the preceding sentence.

    TRANSMISSIONS
    
         The Company remanufactures transmissions which are factory approved
and suitable for warranty and post-warranty replacement of transmissions for
Chrysler and 12 foreign OEMs, including Hyundai Motor America, Subaru of America
and American Isuzu, for their United States dealer networks.  The number of
transmission models remanufactured by the Company has been increasing to
accommodate the greater number of models currently used in vehicles manufactured
by the Company's OEM customers.  The majority of the Company's transmissions are
sold to Chrysler under Chrysler's MOPAR brand name.  In addition, the Company
rebuilds heavy duty and light duty truck transmissions and air compressors.


    HARD PARTS
    
         The Company remanufactures torque converters (the coupler between the
transmission and engine), planetary gears (speed regulating devices inside the
transmission) and transmission fluid pumps.  These "hard" parts are sold
principally to the Independent Aftermarket for use in drive train repairs.  Hard
parts are sold under the RPM, HTP, MAMCO, TRANZPARTS and DIVERCO brand names. 

    ENGINES
    
         The Company remanufactures engines designed as replacement engines for
use in many domestic passenger cars and light trucks.  Principal customers are
Western Auto and O'Reilly Auto Parts, as well as the Independent Aftermarket. 
Over the past three years, the variety of engine models remanufactured by the
Company has increased as the Company has expanded the range of engines offered
to meet customer requirements.  


                                          2


<PAGE>

    REPAIR KITS AND OTHER PRODUCTS
    
         Repair kits sold by the Company consist of gaskets, friction plates,
seals, bands, filters and other "soft" parts that are used in rebuilding
transmissions for substantially all domestic and most imported passenger cars
and light trucks.  Kits are currently sold principally to the Independent
Aftermarket.  Each kit is designed specifically to include substantially all of
the soft parts necessary for rebuilding a particular model of transmission.  In
addition to manufacturing or remanufacturing certain of the components that are
used in its kits, the Company maintains a variety of supply relationships that
allow it to purchase components for its kits at competitive prices.  The
components manufactured or remanufactured by the Company include various
friction plates, gaskets and bands.  The repair kits are sold under the RPM,
HTP, KING-O-MATIC, TRANZPARTS and DIVERCO brand names. 

         Other products consist principally of remanufactured rack and pinion
assemblies and CV axles for passenger cars and light trucks for the Independent
Aftermarket, and cleaning and testing equipment for the Independent Aftermarket
and other industrial businesses.  These products are sold under the RPM, HTP,
KING-O-MATIC, TRANZPARTS and INTERCONT brand names.  

MARKETING AND DISTRIBUTION

         The Company distributes its products to: (i) the Independent
Aftermarket; (ii) its OEM customers for use as replacement parts by their
dealers; and (iii) retail automotive parts stores.

    INDEPENDENT AFTERMARKET
    
         The Company supplies transmission repair kits and hard parts used in
drive train repairs to independent transmission rebuilders and distributors in
the United States and Canada, such as AAMCO Transmissions Inc., MOTRA Corp. and
Lee Myles Associates Corp.  These products are used in the Independent
Aftermarket to rebuild transmissions and other assemblies using remanufactured
and new component parts purchased from a variety of suppliers.  In addition, the
Company supplies transmission and engine repair kits, hard parts used in drive
train repairs, remanufactured engines and certain remanufactured components such
as CV axles to general repair shops in the United States.  Transmission and
engine repairs performed in the Independent Aftermarket are generally for
vehicles no longer covered by warranty or for OEM dealers who do not have access
to remanufactured assemblies.  The Company believes that it currently supplies
less than one-third of the remanufactured or new drive train component
requirements of its Independent Aftermarket customers.

         There are two characteristics of the Independent Aftermarket that
influence the Company's business strategy.  First, as the number of vehicle
models has proliferated and repairs have become increasingly complex, the
Independent Aftermarket has grown more dependent on its suppliers for technical
support and for assistance in managing inventory by delivering product on a
just-in-time basis at competitive prices.  Second, Independent Aftermarket
customers (including those affiliated with larger organizations such as AAMCO,
MOTRA and Lee Myles) generally purchase parts at the individual repair shop
level.  Independent Aftermarket customers tend to make purchasing decisions
based on availability and rapid delivery of products, competitive pricing,
breadth of product offering and technical assistance.  To respond to these
requirements, the Company has developed a strategy of geographic expansion of
its distribution system to provide its Independent Aftermarket customers with
short-notice rapid delivery, high service levels and technical support for a
broad product offering in each local market.  This is accomplished through
47 distribution centers located throughout the United States and Canada from
which the Company provides local technical support and a wide range of products
delivered by Company-operated trucks to its customers.

         The Company has developed a common product identification and
numbering system which is currently being implemented on a Company-wide basis. 
In addition, the Company is in the process of electronically linking its
distribution centers through a computer network that will enable each center to
determine more quickly if and where a particular part is located within the
distribution system, thereby further enhancing customer service.  The Company
expects to implement this process in stages during 1997 and 1998, and it
believes that the process will be completed by the third quarter of 1998.  These
changes are expected to improve customer service, increase

                                          3


<PAGE>

product availability, enhance inventory management and improve operational
efficiencies.  The preceding sentence contains a forward-looking statement, and
there can be no assurance that actual results will not differ materially from
the information contained in the preceding sentence.

         New customers are developed by a direct sales force operating from the
Company's local distribution centers, by national and local trade publication
advertising and by telemarketing.  The Company also participates in trade shows.
The Company believes its RPM, HTP, KING-O-MATIC, MAMCO, TRANZPARTS, INTERCONT
and DIVERCO brand names are well recognized and respected in their regional
markets.  Net sales to Independent Aftermarket customers accounted for 47.8% of
the Company's revenues in 1995 and 41.1% in 1996. 

    OEM CUSTOMERS
    
         The Company provides factory-approved remanufactured transmissions to
OEMs for use in warranty and, to a lesser extent, post-warranty repair work by
their dealers.  The Company's largest OEM customer is Chrysler, to whom the
Company also supplies certain factory-approved remanufactured engines.  The
Company sells to 12 foreign OEMs, including Hyundai Motor America, Subaru of
America and American Isuzu.  Products are sold to each OEM pursuant to supply
arrangements for individual transmission models.  Net sales to the Company's OEM
customers accounted for 44.7% of the Company's 1995 revenues and 51.9% of
revenues in 1996.  Net sales to Chrysler accounted for 35.4% and 37.2% of the
Company's revenues in 1995 and 1996, respectively.  Net sales to Chrysler grew
from $67.6 million in 1995 to $101.5 million in 1996.

         Over the past 12 years, the Company has developed and maintained
strong relationships at many levels of both the corporate and the factory
organizations of Chrysler.  In recognition of the Company's consistently high
level of service and product quality throughout its relationship with Chrysler,
in 1995 and 1996 the Company was awarded the Platinum Pentastar award, the
highest award Chrysler bestows on a supplier.  Chrysler awarded only 14 Platinum
Pentastar awards in 1995 and only 13 in 1996.  The 1995 award marked the first
time that the Platinum Pentastar had been awarded to a remanufacturer or to a
supplier that serves exclusively as a MOPAR aftermarket parts supplier.  In
addition to its Platinum Pentastar, the Company received Gold Pentastar awards
in 1993, 1994, 1995 and 1996.  Only seven suppliers received the Gold Pentastar
award in each of these years.

         Chrysler began implementing remanufacturing programs for its
transmission models in 1986 and selected the Company as its sole supplier of
remanufactured transmissions in 1989.  Chrysler has advised the Company that, by
implementing a remanufacturing program, Chrysler has realized substantial
warranty cost savings, standardized the quality of its dealers' aftermarket
repairs and reduced its own inventory of replacement parts.  Currently, Chrysler
has remanufacturing programs for transmission models that are used in less than
70% of its vehicles, and the Company is the only factory-approved supplier of
remanufactured transmissions for these models.  

         As part of its expanding relationship with Chrysler and in response to
a periodic shortage of cores, in 1996 the Company established a central core
return center for all of Chrysler's transmission models.  Chrysler dealers make
arrangements to ship transmission and engine cores to a regional depot, which
then ships directly to the Company's central core return center located near its
main remanufacturing facility.  The Company thus assists Chrysler by improving
the efficient and timely return of cores at a cost savings to Chrysler. 
Furthermore, the Company performs value-added services such as core audit and
analysis in conjunction with Chrysler engineers.  The Company is currently
working with Chrysler to improve the tracking and management of cores, which
will allow the Company to schedule its production more efficiently.  The Company
believes that this central core facility has reduced the risk of future Chrysler
core shortages.

         Although the Company is currently the only factory-approved supplier
of remanufactured transmissions to Chrysler, Chrysler is not obligated to
continue to purchase the Company's products and there can be no assurance that
the Company will be able to maintain or increase the level of its sales to
Chrysler or that Chrysler will not approve other suppliers in the future.  In
addition, Chrysler reduced its standard new vehicle warranty from seven
years/70,000 miles to three years/36,000 miles and could implement a shorter
warranty in the

                                          4


<PAGE>

future. Any such action could have the effect of reducing the amount of warranty
work performed by Chrysler dealers.

    RETAIL AUTOMOTIVE PARTS STORES
    
         The Company supplies remanufactured engines, transmission filter kits,
engine components and engine repair kits to automotive aftermarket retail stores
throughout the United States, which offer new and remanufactured parts and
assemblies to a broad range of customers, principally "do-it-yourself" customers
and general repair shops.  The retail automotive parts store market is highly
fragmented with most retail stores obtaining products similar to those provided
by the Company from a variety of regional suppliers.  These customers tend to
make purchasing decisions based on price, rapid delivery of products and breadth
of product offering.  As a supplier with a national scope and a broader product
line than many of its competitors, the Company provides high quality products,
competitive prices and high service levels as well as promotional literature and
advertisements.  The Company's principal retail customers are Western Auto,
O'Reilly Auto Parts and Advance Auto.  Net sales to retail automotive parts
stores accounted for 7.6% of the Company's revenues in 1995 and 7.1% in 1996.

ACQUISITIONS

         Strategic acquisitions have been an important element in the Company's
historical growth.  By integrating an acquired company's products into the
Company's distribution system, the Company is able to offer these products to a
substantially greater number of markets than was the case prior to the
acquisition.  In addition, the Company expects to realize economies of scale in
areas including purchasing, administration and inventory management.   The
Company's management is experienced in identifying acquisition opportunities and
completing and integrating acquisitions within the automotive aftermarket. 
Since its formation and acquisition of Aaron's, HTP, Mamco and RPM in 1994, ATC
has acquired CRS, Mascot and King-O-Matic in 1995, Tranzparts and Diverco in
1996 and Repco in 1997.

COMPETITION

         The Company competes in the highly fragmented yet highly competitive
automobile aftermarket for transmissions, engines and other drive train
components, in which the majority of industry supply comes from small
local/regional participants.  However, certain of the Company's competitors are
larger than the Company and have greater financial and other resources available
to them than does the Company.  Competition is based primarily on product
quality, service, delivery, technical support and price.

EMPLOYEES


         As of January 31, 1997, the Company employed approximately 3,250
people.  The Company believes its employee and labor relations are good.  None
of the Company's subsidiaries has experienced a work stoppage in its history,
and the Company has not experienced any work stoppage since its formation in
1994.  None of the Company's employees are members of any labor union.

ENVIRONMENTAL

         The Company is subject to various evolving federal, state, local and
foreign environmental laws and regulations governing, among other things,
emissions to air, discharge to waters and the generation, handling, storage,
transportation, treatment and disposal of a variety of hazardous and
non-hazardous substances and wastes.  These laws and regulations provide for
substantial fines and criminal sanctions for violations.  The operation of
automotive parts remanufacturing plants involves environmental risks. 

         Prior to the RPM Acquisition, the company from which RPM acquired its
assets (the "Prior RPM Company") leased nine properties in the City of Azusa,
California (the "Azusa Properties") from a general partnership consisting of the
Prior RPM Company shareholders.  The Azusa Properties are within an area which,
as a result of regional groundwater contamination, has been designated by the
Environmental Protective Agency (the

                                          5


<PAGE>

"EPA") as the Baldwin Park Operable Unit ("BPOU") of the San Gabriel Valley
Superfund Sites.  The federal Superfund law (the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended ("CERCLA")) both
provides for the appropriate cleanup of contaminated sites and assigns liability
for the cost of such cleanups.  The parties held responsible for cleanup costs
are broadly defined under CERCLA, and generally include present owners and
operators of a site and certain past owners and operators.  Liability for
cleanup costs imposed against such "responsible parties" is strict, joint and
several.  However, such costs are typically allocable among responsible parties
through settlement or litigation based on factors including each particular
party's relative contribution of contaminants to the site and ability to pay. 

         The EPA has proposed a groundwater treatment system as an interim
remedial measure for the BPOU.  The EPA has estimated that it will cost
approximately $47 million to construct this system and approximately $4 million
per year for an indefinite period to operate it.  The Company has not
independently evaluated this estimate, and the actual cost may vary
substantially from this estimate.  In addition, the EPA has incurred substantial
costs to date and will likely continue to incur such costs in overseeing the
implementation of remedial measures.  The EPA has informally estimated that
these costs may be in excess of $1 million.  Further, if the EPA determines that
the interim remedial measures are not adequate, additional costs could be
incurred.  As discussed above, the "responsible parties" for this site could be
held liable for these EPA costs.  In addition to cleanup costs, the responsible
parties may be required to pay for damages for injuries to natural resources
such as soil, groundwater or wildlife caused by the contamination at the BPOU. 
To date, the government agencies authorized to claim natural resource damages
for this site have not made any assessment of the value, if any, of such
damages.  In 1993, the EPA notified the Prior RPM Company, the general
partnership consisting of the Prior RPM Company shareholders which owns the
Azusa Properties and approximately 100 other entities that they may be
potentially responsible parties ("PRPs") for the San Gabriel Valley Superfund
Sites as present or former owners or operators of properties located within that
Site.  In January 1995, the EPA sent letters to 16 of these parties with respect
to 15 properties in the BPOU, describing 4 of those properties as apparently the
"largest contributors to the groundwater contamination" and the remaining 11
properties as apparently in a range of moderate to lesser contributors.  The
letters identify the recipients as PRPs for the proposed interim remediation and
request that they enter into negotiations to design, construct and operate the
cleanup remedy.  The recipients of the letters included a general partnership
comprised of the Prior RPM Company shareholders, which was informed that the EPA
considers it responsible for two of the sites described as lesser to moderate
contributors to the contamination. 

         In conjunction with the federal and state environmental investigation
of this area, the Prior RPM Company has been required by the California Regional
Water Quality Control Board (the "Water Board") to conduct an investigation on
the Azusa Properties.  This investigation has detected soil contamination on
certain of the Azusa Properties formerly leased by RPM and as a result, the
Prior RPM Company is being required by the Water Board to undertake further
investigations and may be required to undertake remedial action on those
properties. 

         For one year after the RPM Acquisition, the Company leased the Azusa
Properties pursuant to leases which provide that the Company has not assumed any
liabilities with respect to environmental conditions existing on or about these
properties prior to the commencement of the lease period, although the Company
could be held responsible for such liabilities under various legal theories. 
Since the RPM Acquisition, the Company has been engaged in negotiations with the
EPA to settle any liability that it may have for this site.  The RPM acquisition
agreement provides that the Company did not assume any environmental liabilities
associated with hazardous substances existing on or about the Azusa Properties
occupied by the Prior RPM Company prior to the RPM Acquisition and that the
Prior RPM Company and the Prior RPM Company shareholders will jointly and
severally indemnify the Company for all liabilities or damages (other than
consequential damages) that the Company may reasonably incur as a result of any
claim asserted against the Company relating to unassumed environmental
liabilities.  There can be no assurance, however, that the Company would be able
to make any recovery under any indemnification provisions.  The Company also
could become responsible if the conduct of its business contributed to any
environmental contamination on these properties.  The Company took steps to
ensure that its business at these properties was conducted in compliance with
applicable environmental laws and in a manner that does not contribute to any
environmental contamination.  Moreover, the Company has significantly reduced
its presence at the site and has moved all manufacturing operations off-site. 
Since July 18, 1995, the Company's only real property

                                          6
<PAGE>

interest in the Azusa Properties has been the lease of a 6,000 square foot
storage and distribution facility.  The Company believes, although there can be
no assurance, that it will not incur any material liability as a result of the
pre-existing environmental conditions. 

         In connection with the CRS, Mascot, King-O-Matic, Aaron's, RPM, HTP,
Mamco, Tranzparts, Diverco and Repco acquisitions, the Company conducted certain
investigations of these companies' facilities and their compliance with
applicable environmental laws.  The investigations, which included "Phase I"
assessments by independent consultants of all manufacturing and certain
distribution facilities, found that certain remedial, reporting and other
regulatory requirements, including certain waste management procedures, were not
or may not have been satisfied.  Based in part on the investigations conducted,
and the indemnification provisions of the agreements entered into in connection
with these acquisitions, the Company believes, although there can be no
assurance, that its liabilities relating to these environmental matters will not
have a material adverse effect, individually or in the aggregate, on the
Company. 

ITEM 2.  PROPERTIES.

         The Company currently leases 60 facilities with total leased space of
approximately 2.1 million square feet.  The following table sets forth certain
information regarding the manufacturing facilities and distribution centers of
the Company.
                                        LEASE
                         APPROXIMATE EXPIRATION  TYPE OF FACILITY/PRODUCTS
LOCATION                   SQ. FEET     DATE           MANUFACTURED
--------                  ----------- ----------  --------------------------
Phoenix, Arizona              22,000   1997      Distribution Center
Tucson, Arizona                6,400   1998      Distribution Center
Azusa, California              6,000   1998      Distribution Center
Fresno, California            14,000   1997      Distribution Center
Los Angeles, California        4,700   1998      Distribution Center
Oakland, California           10,000   1997      Distribution Center
Rancho Cucamonga, California 153,000   2002      Distribution Center, Torque
                                                 Converters, Repair Kits, Hard
                                                 Parts
Sacramento, California        11,200   1998      Distribution Center
San Diego, California         10,000   1997      Distribution Center
San Jose, California          10,000   2000      Distribution Center
Van Nuys, California           6,800   2000      Distribution Center
Colorado Springs, Colorado     5,000   1997      Distribution Center
Denver, Colorado               9,000   1997      Distribution Center
Orlando, Florida              11,900   2001      Distribution Center
Atlanta, Georgia              14,900   1998      Distribution Center
Hillside, Illinois            20,000   2000      Distribution Center
Harvey, Illinois              46,000   2001      Distribution Center, 
                                                 Transmissions, Hard Parts,
                                                 Engine Repair Kits
Louisville, Kentucky          51,500   1999      Distribution Center, Repair
                                                 Kits, Hard Parts
Louisville, Kentucky           9,200   (1)       CV Axles
Grand Rapids, Michigan         9,000   1998      Distribution Center
Taylor, Michigan              12,200   2000      Distribution Center
Joplin, Missouri             264,000   1998      Transmissions, Engines
Creve Coeur, Missouri          9,700   1998      Distribution Center
Kansas City, Missouri         10,200   2000      Distribution Center
Springfield, Missouri        280,800   2004      Transmissions, Engines
Springfield, Missouri         30,000   1998      Torque Converters
Springfield, Missouri         12,100   2001      Distribution Center
Springfield, Missouri         34,000   1998      Cleaning and Testing Equipment
Springfield, Missouri         60,400   2000      Core Storage
Springfield, Missouri         98,800   (1)       Core Storage


                                          7


<PAGE>

Springfield, Missouri         10,000   (1)       Core Storage
Springfield, Missouri        200,000   2006      Core Storage
Las Vegas, Nevada              7,500   1999      Distribution Center
Mahwah, New Jersey            92,900   2002      Distribution Center, 
                                                 Transmissions
Albuquerque, New Mexico        7,000   1997      Distribution Center
Charlotte, North Carolina     23,000   2001      Distribution Center
Dayton, Ohio                  42,000   1999      Torque Converters
Portland, Oregon              20,000   1997      Distribution Center
Memphis, Tennessee            37,800   2003      Distribution Center, Repair
                                                 Kits
Austin, Texas                  5,000   1997      Distribution Center
Dallas, Texas                 93,000   2011      Distribution Center, Repair 
                                                 Kits, Hard Parts
Houston, Texas                13,500   2011      Distribution Center
San Antonio, Texas            13,000   2001      Distribution Center
Salt Lake City, Utah          15,000   1997      Distribution Center
Norfolk, Virginia              9,700   2000      Distribution Center
Federal Way, Washington        1,600   1998      Corporate Offices
Seattle, Washington           22,000   1997      Distribution Center
Spokane, Washington            9,500   2000      Distribution Center
Janesville, Wisconsin         30,000   2001      Distribution Center, Repair
                                                 Kits, Hard Parts
Calgary, Alberta               9,200   2001      Distribution Center
Edmonton, Alberta             14,800   1998      Distribution Center, Heavy
                                                 Duty Truck Transmissions
Vancouver, British Columbia    7,800   1997      Distribution Center
Vancouver, British Columbia    7,300   1997      Distribution Center
Moncton, New Brunswick        12,000   2000      Distribution Center
Mississauga, Ontario          35,100   1998      Distribution Center, Heavy
                                                 Duty Truck Transmissions and
                                                 Air Compressors
Mississauga, Ontario          12,200   2001      Repair Kits
Mississauga, Ontario          24,000   2000      Distribution Center
Montreal, Quebec              11,200   2000      Distribution Center
Regina, Saskatchewan             600   (1)       Distribution Center
Mexicali, Mexico              77,100   1998      Torque Converters, Cleaning
                                                 and Testing Equipment
-------------

(1) Month-to-month lease.
    
         The Company believes that its current manufacturing facilities and
distribution centers are adequate for the current level of the Company's
activities.  The Company's transmission and engine remanufacturing facility in
Springfield, Missouri is currently employing two work shifts, seven days a week.
Other manufacturing sites have the flexibility to add both additional shifts and
production workers needed to accommodate additional demand for products and
services.  However, in the event the Company were to experience a material
increase in sales, the Company may require additional manufacturing facilities. 
The Company believes such additional facilities are readily available on a
timely basis on commercially reasonable terms.  Further, the Company believes
that the leased space housing its existing manufacturing and distribution
facilities is not unique and could be readily replaced, if necessary, at the end
of the terms of its existing leases on commercially reasonable terms.  Many of
the Company's leases are renewable at the option of the Company. 

ITEM 3.  LEGAL PROCEEDINGS.

         From time to time, the Company has been and is involved in various
legal proceedings.  Management believes that all of such litigation is routine
in nature and incidental to the conduct of its business, and that none of such
litigation, if determined adversely to the Company, would have a material
adverse effect, individually or in the aggregate, on the Company.


                                          8


<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         One matter was submitted to a vote of the sole stockholder of the
Company during the quarter ended December 31, 1996.  On December 13, 1996, a
special meeting of the sole stockholder was held to approve the amendment and
restatement of the Company's Certificate of Incorporation to increase the
authorized number of shares of Common Stock to 30,000,000 and Preferred Stock to
5,000,000.  All 1,000 votes held by the sole stockholder were cast in favor of
the proposal.

                                       PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The Company's Common Stock presently is traded on the Nasdaq National
Market under the symbol "ATAC."  As of February 28, 1997, there were
approximately 1,680 record holders of its Common Stock.  The Common Stock was
not listed on the Nasdaq National Market for a full quarterly period during the
fiscal year ended December 31, 1996.

         The Company has not paid cash dividends on its Common Stock to date. 
Because the Company currently intends to retain any earnings to provide funds
for the operation and expansion of its business and for the servicing and
repayment of indebtedness, the Company does not intend to pay cash dividends on
the Common Stock in the foreseeable future.  Furthermore, as a holding company
with no independent operations, the ability of the Company to pay cash dividends
will be dependent upon the receipt of dividends or other payments from its
subsidiaries.  Under the terms of the indentures governing the Company's senior
subordinated notes due 2004, the Company is not permitted to pay any dividends
on the Common Stock unless certain financial ratio tests are satisfied.  In
addition, the Company's revolving credit facility contains certain covenants
that, among other things, prohibit the payment of dividends by the Company.  See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."  Any determination to pay cash
dividends on the Common Stock in the future will be at the sole discretion of
the Company's Board of Directors. 

ITEM 6.  SELECTED FINANCIAL DATA.

         The selected financial data presented below with respect to the
statements of income data for the seven months ended July 31, 1994, five months
ended December 31, 1994, and the years ended December 31, 1995 and 1996 and the
balance sheet data at December 31, 1995 and 1996 are derived from the Combined
Financial Statements of the Predecessor Companies and Consolidated Financial
Statements of the Company that have been audited by Ernst & Young LLP,
independent auditors, and are included elsewhere herein, and are qualified by
reference to such financial statements and notes related thereto.  The selected
financial data with respect to the statement of income data for the year ended
December 31, 1992 and 1993 and the balance sheet data at December 31, 1992, 1993
and 1994, are derived from the audited Combined Financial Statements of the
Predecessor Companies that have been audited by Ernst & Young LLP, independent
auditors, but are not included herein.  The data provided should be read in
conjunction with the Consolidated Financial Statements, related notes, and other
financial information included in this Annual Report.


                                          9


<PAGE>
 

<TABLE>
<CAPTION>

                                             COMBINED                          CONSOLIDATED
                                  ---------------------------------  ---------------------------------
                                                         
                                        FOR THE          FOR THE                     FOR THE YEAR
                                       YEAR ENDED     SEVEN MONTHS  FOR THE FIVE         ENDED
                                       DECEMBER 31,       ENDED     MONTHS ENDED      DECEMBER 31,
                                  --------------------   JULY 31,    DECEMBER 31, --------------------
                                    1992        1993      1994(1)       1994        1995        1996
                                  --------   ---------   ---------    --------    ---------    --------
                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                               <C>        <C>         <C>          <C>         <C>          <C>
STATEMENT OF INCOME DATA:
Net sales. . . . . . . . . .      $75,264    $110,702     $90,056     $67,736     $190,659    $272,879
Cost of sales. . . . . . . .       45,588      66,687      52,245      40,112      115,499     166,811
                                  --------   ---------   ---------    --------    ---------    --------
Gross profit . . . . . . . .       29,676      44,015      37,811      27,624       75,160     106,068
Selling, general and
 administrative expenses . .       22,103      25,682      20,475      14,206       38,971      55,510
Amortization of intangible 
 assets. . . . . . . . . . .           28          28          16       1,210        3,308       3,738
Operating income . . . . . .        7,545      18,305      17,320      12,208       32,881      46,820
Interest expense (income), 
 net . . . . . . . . . . . .         (258)       (302)       (158)      6,032       16,915      19,106
Income taxes (2) . . . . . .          150         471          (5)      2,565        6,467      11,415
                                  --------   ---------   ---------    --------    ---------    --------
Net income . . . . . . . . .     $  7,653   $  18,136   $  17,483    $  3,611    $   9,499    $ 16,299
                                  --------   ---------   ---------    
                                  --------   ---------   ---------   
Preferred stock dividends. .                                              853        2,093       2,222
                                                                      --------    ---------    --------
Net income available to
 common stockholders . . . .                                         $  2,758     $  7,406    $ 14,077
                                                                      --------    ---------    --------
                                                                      --------    ---------    --------
Pro forma (unaudited) (3)
 Net income per share. . . .                                                      $   0.65    $   1.02
Shares used in computation
 of net income per share . .                                                        14,616      15,918

OTHER DATA:
Capital expenditures (4) . .     $  1,141    $  2,310    $  1,850    $  1,336     $  5,187    $  7,843

</TABLE>

<TABLE>
<CAPTION>

                                                     COMBINED                    CONSOLIDATED
                                               -------------------   ---------------------------------
                                                                     DECEMBER 31,
                                               -------------------------------------------------------
                                                 1992        1993        1994        1995        1996
                                               -------     -------     -------     -------    --------
                                                                    (IN THOUSANDS)
<S>                                            <C>         <C>        <C>          <C>        <C>
BALANCE SHEET DATA:
Working capital. . . . . . . . . . . .        $18,639     $26,651     $40,499     $60,012    $103,371
Property, plant and
 equipment (net) . . . . . . . . . . .          3,274       4,678       6,196      10,784      17,482
Total assets . . . . . . . . . . . . .         32,654      45,618     187,293     247,932     320,747
Long-term debt (5) . . . . . . . . . .          1,497         998     121,483     165,724     167,233
Preferred stock. . . . . . . . . . . .             --          --      20,853      22,946          --
Common stockholders' equity. . . . . .         22,107      31,720      22,757      30,188     105,832

</TABLE>
 

-----------------

(1) The combined financial statements for the seven months ended July 31, 1994
    include the operations of the Predecessor Companies up to their respective
    acquisition dates; operations for RPM between July 20, 1994 and July 31,
    1994 and for the other three Predecessor Companies for August 1st and 2nd,
    1994 are not significant.  All material transactions between the
    Predecessor Companies have been eliminated. 

(2) Two of the Predecessor Companies elected to be taxed as S Corporations for
    all periods through consummation of the Initial Acquisitions; therefore,
    for federal and state income tax purposes, any income or loss generally was
    not taxed to these companies but was reported by their respective
    stockholders.  A pro forma provision for taxes based on income reflecting
    the estimated provision for federal and state income taxes which would have
    been provided had these companies been C Corporations and included in
    consolidated returns with the Company is as follows: $3,036 and $7,334 for
    the years ended December 31, 1992 and 1993, respectively, and $7,004 for
    the seven months ended July 31, 1994. 
    
(3) See Note 1 to consolidated financial statements.


                                          10


<PAGE>


(4) Excludes capital expenditures made by each of CRS, Mascot, King-O-Matic,
    Tranzparts and Diverco prior to such subsidiaries' respective acquisitions
    and any capital expenditures made in connection with such acquisitions. 
    
(5) Includes deferred tax liabilities of $1,438, $3,478 and $5,252 at
    December 31, 1994, 1995 and 1996, respectively.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS.

OVERVIEW

         The following discussion should be read in conjunction with the
Combined Financial Statements of the Predecessor Companies and the Consolidated
Financial Statements of the Company and notes thereto included elsewhere in this
Annual Report.  The Combined Financial Statements of the Predecessor Companies
represent the combination of the historical financial statements of the four
separate businesses of the Predecessor Companies. 

         The Company's revenues are generated through the sale of drive train
products used in the automotive aftermarket repair of passenger cars and light
trucks.  Since its formation, the Company has benefited from a combination of
internal and acquisition-related revenue growth.  The Company achieved compound
annual growth in revenue of 38.0% from 1992 through 1996 (29.2% if the 1995 and
1996 Acquisitions are excluded). 

         The Company's revenues from sales to Independent Aftermarket customers
increased by 17.7% compounded annually from $58.5 million to $112.1 million
between 1992 and 1996.  This growth was due to geographic expansion through the
addition of distribution centers, a broadened product line, enhanced customer
service, effective sales efforts and acquisitions.  During the same period,
revenues from sales to OEM customers increased by 70.4% compounded annually from
$16.8 million to $141.5 million due to increased sales to existing customers,
including Chrysler, and the addition of new customers.  Revenues from sales to
retail automotive parts stores increased from virtually zero in 1992 to $19.3
million in 1996. 

         The primary components of the Company's cost of goods sold are the
cost of cores and component parts, labor costs and overhead.  While certain of
these costs have fluctuated as a percentage of sales over time, cost of goods
sold as a percentage of sales has remained relatively constant from 1992 through
1996.  Selling, general and administrative ("SG&A") expenses consist primarily
of salaries, commissions, rent, marketing expenses and other management
infrastructure expenses.  SG&A expenses as a percentage of sales declined from
29.4% in 1992 to 20.3% in 1996 principally due to the effect of spreading
certain fixed costs over a larger sales base. 

         In the fourth quarter of 1996, the Company recorded a non-cash charge
of approximately $485,000 for deferred compensation expense relating to the
difference between the exercise price and the intrinsic value for financial
statement presentation purposes of the Company's Common Stock for 628,176
options granted in October 1996.  Substantially all of such options were granted
to Mr. Stephen J. Perkins, the Company's Chief Executive Officer, and other
members of senior management at $4.67 per share.  This compensation expense will
aggregate $3.3 million, and will be recognized over the respective vesting
periods of the options, which generally range from three to five years.

RESULTS OF OPERATIONS

         The following table sets forth certain financial statement data
expressed in millions of dollars and as a percentage of net sales.  The pro
forma statement of income for the year ended December 31, 1994 reflects the
combined financial statements for the seven months ended July 31, 1994 for
Aaron's, HTP, Mamco and RPM, and the consolidated operations of these companies
for the five months ended December 31, 1994.  Pro forma expense adjustments were
made to reflect the Initial Acquisitions as if they had occurred on January 1,
1994. 


                                          11
<PAGE>

<TABLE>
<CAPTION>

                                                                   YEAR ENDED DECEMBER 31,
                                                ---------------------------------------------------------
                                                   PRO FORMA           CONSOLIDATED        CONSOLIDATED
                                                      1994                 1995                1996
                                                      ----                 ----                ----
                                                                      (IN MILLIONS)
<S>                                             <C>       <C>       <C>       <C>       <C>       <C>
Net sales. . . . . . . . . . . . . . . . . .    $157.8     100.0%   $190.7     100.0%  $ 272.9     100.0%
Cost of sales. . . . . . . . . . . . . . . .      92.9      58.9     115.5      60.6     166.8      61.1
                                                -------   -------   -------   -------   -------   -------
Gross profit . . . . . . . . . . . . . . . .      64.9      41.1      75.2      39.4     106.1      38.9
Selling, general and administrative. . . . .      30.4      19.2      39.0      20.5      55.5      20.3
Amortization of intangible assets. . . . . .       3.0       1.9       3.3       1.7       3.8       1.4
                                                -------   -------   -------   -------   -------   -------
Operating income . . . . . . . . . . . . . .      31.5      20.0      32.9      17.2      46.8      17.2
Interest expense (income), net . . . . . . .      14.5       9.2      16.9       8.8      19.1       7.0
Provision for income taxes . . . . . . . . .       6.9       4.4       6.5       3.4      11.4       4.2
                                                -------   -------   -------   -------   -------   -------
Net income . . . . . . . . . . . . . . . . .   $  10.1       6.4%  $   9.5       5.0%    $16.3       6.0%
                                                -------   -------   -------   -------   -------   -------
                                                -------   -------   -------   -------   -------   -------

</TABLE>
 

    YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
    
         Net income increased 71.6% from $9.5 million in 1995 to $16.3 million
in 1996, as the Company experienced significant revenue growth from all three of
its customer groups, OEMs, retail automotive parts stores and the Independent
Aftermarket.  More than half of the revenue growth occurred from OEM customers. 
Growth from the Independent Aftermarket was achieved largely through two
strategic acquisitions (Tranzparts and Diverco), and to a lesser extent from
internal growth.  The higher net income was primarily achieved from the
Company's ability to spread its overhead expenses over a larger revenue base.

         Although the Company's IPO resulted in an increase in the number of
shares used in the earnings per share ("EPS") calculation, EPS increased
significantly from $0.65 in 1995 to $1.02 in 1996.  The numbers of shares used
in the calculation of EPS were 14.6 million for 1995 and 15.9 million for 1996 .

         NET SALES.   Net sales increased $82.2 million or 43.1%, from $190.7
million in 1995 to $272.9 million in 1996.  Of this increase, $42.8 million was
due to internal growth and $39.4 million was due to the incremental net sales
generated by the companies acquired in 1995 and 1996: CRS, Mascot, King-O-Matic,
Tranzparts and Diverco, which were acquired on June 1, 1995, June 9, 1995,
September 12, 1995, April 2, 1996 and October 1, 1996, respectively.

         The internal growth was generated primarily from increased sales
volumes with existing OEM customers.  To a lesser extent, internal growth was
also generated by the incremental sales from five new distribution centers
opened during the second half of 1995, increased sales volumes through existing
distribution centers and increased sales volumes with existing retail customers.

         Net sales to Chrysler of $101.5 million in 1996 represented 37.2% of
the Company's total net sales for the year, as compared to $67.6 million and
35.4% in 1995.  The increase in net sales to Chrysler is partially reflective of
an effort by Chrysler during the third quarter of 1995 to reduce its inventory
of remanufactured transmissions.  Management believes that the Chrysler
inventory reduction during the third quarter of 1995 was a one-time effort to
reverse an inventory build-up in 1994 and is not expected to recur.  The
preceding sentence contains a forward-looking statement, and there can be no
assurance that actual results will not differ materially from the information
contained in the preceding sentence.

         GROSS PROFIT.   Gross profit as a percentage of net sales decreased
slightly from 39.4% in 1995 to 38.9% in 1996.  The decrease in gross profit
margin was largely attributable to certain non-recurring start-up costs incurred
during 1996 in connection with the Company's new plant in Joplin, Missouri and
the expansion of capacity at the Company's plant in Springfield, Missouri needed
to support sales growth to retail and OEM customers.


                                          12


<PAGE>

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  SG&A expenses decreased
slightly as a percentage of net sales from 20.4% in 1995 to 20.3% in 1996. 
However, SG&A expenses increased in absolute dollars from $39.0 million in 1995
to $55.5 million in 1996, representing an increase of $16.5 million or 42.4%.
The increase in SG&A expenses was due largely to the ongoing incremental SG&A
expenses of the companies acquired in 1995 and 1996: CRS, Mascot, King-O-Matic,
Tranzparts and Diverco.  Other significant factors contributing to the increase
in SG&A expenses include the ongoing incremental expenses associated with the
five new distribution centers opened during the second half of 1995, and certain
start-up and ongoing SG&A expenses incurred in connection with the Company's new
plant in Joplin, Missouri.  In addition, SG&A expenses in 1996 included a charge
of $0.7 million for certain planned reorganization costs associated with the
relocation of the Company's corporate headquarters to the Chicago area and the
integration of the Independent Aftermarket division.

         AMORTIZATION OF INTANGIBLE ASSETS.  Amortization of intangible assets
increased $0.4 million in 1996 as compared to 1995, reflecting the increase in
intangible assets that occurred as a result of the acquisitions of CRS, Mascot,
King-O-Matic, Tranzparts and Diverco.

         INCOME FROM OPERATIONS.   Principally as a result of the factors
described above, income from operations increased 42.2%, from $32.9 million in
1995 to $46.8 million in 1996.  As a percentage of net sales, income from
operations in 1996 was 17.2%, equal to the same percentage of net sales in 1995.

         INTEREST EXPENSE (INCOME), NET.   Interest expense increased $2.3
million from $18.0 million in 1995 to $20.3 million in 1996.  The increase was
due to a full year of interest expense on the Series D senior subordinated notes
which were used to finance the acquisitions of CRS, Mascot and King-O-Matic, and
the related amortization of debt issuance costs.  The Series D notes were issued
on June 1, 1995 and therefore were only outstanding for the last seven months of
1995.

    YEAR ENDED DECEMBER 31, 1995 COMPARED TO PRO FORMA YEAR ENDED DECEMBER 31, 
    1994
    
         The Company experienced revenue growth of 20.8% in 1995, its first
full year of operation since its formation.  However, net income decreased from
$10.1 million in 1994 (on a pro forma basis) to $9.5 million in 1995.  The
decrease in net income resulted from the combined effect on 1995 results of
higher interest expense and a lower percentage of income from operations.  On
June 1, 1995, the Company issued its Series D senior subordinated notes, which
added $2.7 million of interest expense for the year.  Income from operations
decreased from 20.0% of net sales in 1994 to 17.2% in 1995, principally as a
result of a lower gross profit margin and higher SG&A expenses as discussed
below.

         NET SALES.  Net sales increased by $32.9 million or 20.8% from $157.8
million in 1994 to $190.7 in 1995 primarily as a result of the acquisitions of
CRS, Mascot, and King-O-Matic.  The three new acquisitions provided
$24.7 million in additional revenues.  Net sales of remanufactured transmissions
increased from $68.4 million in 1994 to $85.9 million in 1995.  The volume
increase of remanufactured transmissions resulted principally from the
acquisitions of CRS and Mascot, partially offset by a reduction in net sales of
remanufactured transmissions to Chrysler from $66.8 million in 1994 to $64.8
million in 1995.  Net sales to Chrysler reflected a decrease from $19.8 million
during the third quarter of 1994 to $13.2 million for the third quarter of 1995
as Chrysler reduced its inventory of remanufactured transmissions, partially
offset by an increase from $16.4 million during the fourth quarter of 1994 to
$18.9 million for the fourth quarter of 1995.  Net sales of repair kits, hard
parts and other drive train products increased $6.0 million from $69.0 million
in 1994 to $75.0 million in 1995 primarily as a result of the Company's
acquisition of King-O-Matic.  Net sales of remanufactured engines increased $4.6
million from $15.2 million in 1994 to $19.8 million in 1995.  The volume
increase of remanufactured engines resulted from increased demand from Western
Auto at its retail outlets, and the addition of new retail customers. 

         GROSS PROFIT.  Gross profit as a percentage of net sales decreased
from 41.1% in 1994 to 39.4% in 1995.  The gross profit decrease of 1.7% of net
sales was due in large part to increased labor costs relating to remanufactured
engines and transmissions.  The Company was not able to recover all of the
additional costs through increased selling prices. 


                                          13


<PAGE>

         In addition, the aggregate gross profit was affected by the
acquisitions that occurred in 1995.  Total net sales in 1995 includes $24.7
million for CRS, Mascot and King-O-Matic at a combined gross profit, which was
somewhat lower than that of the Company as a whole for 1995. 

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  SG&A expenses increased
from $30.4 million in 1994 to $39.0 in 1995 or, as a percentage of net sales,
from 19.2% in 1994 to 20.5% in 1995.  The increase was partly due to the
Company's acquisitions of CRS, Mascot and King-O-Matic, which comprised $3.3
million of the Company's SG&A expenses in 1995.  Other significant factors that
contributed to the increase in SG&A expenses were the relocation of RPM's main
facilities from Azusa, California to Rancho Cucamonga, California and the
addition of a new manufacturing plant in Joplin, Missouri, both of which
resulted in an increase in ongoing SG&A expenses and a significant amount of
non-recurring SG&A expenses being incurred during 1995.  Legal, audit, tax and
other professional fees were also higher in 1995 principally due to a full year
of ATC operations  as compared with only five months of operations in 1994. 

         AMORTIZATION OF INTANGIBLE ASSETS.  Amortization of intangible assets
increased $0.3 million in 1995, reflecting the increase in intangible assets
that occurred as a result of the acquisitions of CRS, Mascot and King-O-Matic. 

         INCOME FROM OPERATIONS.  Principally as a result of the factors
described above, income from operations increased 4.4% from $31.5 million in
1994 to $32.9 million in 1995.  As a percentage of net sales, income from
operations decreased from 20.0% in 1994 to 17.2% in 1995.

         INTEREST EXPENSE (INCOME), NET.  Interest expense increased $2.4
million from $14.5 million in 1994 to $16.9 million in 1995.  The increase in
interest expense reflects additional interest on the Series D notes that were
issued principally to finance the acquisitions of CRS, Mascot and King-O-Matic
and the related amortization of debt issuance costs. 

LIQUIDITY AND CAPITAL RESOURCES

         The Company raised total net proceeds of $61.6 million in its IPO and
concurrent private placement of Common Stock in December 1996.  From the
Company's inception in July 1994 to December 1996, the Company had funded its
operations and investments in property and equipment, including acquisitions,
through the issuance of senior subordinated notes totaling $162.4 million, the
private sale of Preferred Stock of $20 million and Common Stock of $20.0
million, and to a lesser extent through cash provided by operating activities
and revolving bank lines.  In December 1996, the Preferred Stock was redeemed
and, in February 1997, $40 million of the Senior Subordinated notes were
redeemed, with a combination of the proceeds from the IPO and borrowings under
the Company's revolving credit facility.

         The Company had total cash and cash equivalents on hand of $46.5
million at December 31, 1996, representing an increase in net cash of $37.7
million for the year then ended.  Net cash provided by operating activities was
$17.8 million in 1996.  Net cash used in investing activities was $20.0 million
in 1996, including a total of $12.2 million for the acquisition of Tranzparts
and Diverco, and $7.8 million in capital expenditures largely for transmission
and engine remanufacturing equipment and other improvements related to the
Company's new plant in Joplin, Missouri.  Net cash provided by financing
activities was $39.9 million, including net proceeds of $61.6 million from the
IPO and concurrent private placement of Common Stock, payments totaling $25.2
million in connection with the redemption of Preferred Stock, and net borrowings
of $3.5 million on bank lines of credit.

         The Company has budgeted a total of $9.6 million for capital
expenditures in 1997, including approximately $2.0 million carried over from the
1996 budget.  The 1997 budget consists primarily of additional transmission,
engine and torque converter remanufacturing equipment and other improvements to
support planned increases in production capacity in the Joplin, Missouri,
Springfield, Missouri and Mahwah, New Jersey plants.  Overall, planned capital
expenditures for 1997 are considered adequate for normal replacement and
consistent with projections for future sales and earnings.


                                          14


<PAGE>

         As of December 31, 1996, the Company had approximately $27.0 million
available on its then existing $30 million revolving credit facility with The
Chase Manhattan Bank ("Chase") that had been scheduled to mature in July 1999. 
In February 1997, the Company terminated that facility and replaced it with a
new $100 million revolving credit facility with Chase.  The new revolving credit
facility is available to finance the Company's working capital requirements,
future acquisitions and other general corporate needs, and will expire in
December 2001.  Amounts advanced under the agreement are secured by
substantially all assets of the Company.

         In July 1996, the Company entered into an agreement with Bank of
Montreal for a revolving credit facility to accommodate the working capital
needs of the Company's Canadian subsidiaries.  Borrowings under the agreement
are limited to certain advance rates based upon the eligible accounts receivable
and inventory of King-O-Matic and Mascot up to an aggregate maximum of C$3.0
million.

         In January 1997, the Company acquired Repco, a drive train parts
distributor based in Dallas, Texas with three additional distribution centers in
Texas and one in Florida, for a purchase price of approximately $12.0 million. 
With the acquisition of Repco, the Company has entered geographic markets of
distribution in several cities where it previously had little or no presence. 
The Company evaluates potential acquisitions on an ongoing basis and expects to
continue to do so in the future.

         The Company believes that cash on hand, cash flow from operations and
existing borrowing capacity will be sufficient to fund its ongoing operations. 
In pursuing future acquisitions, the Company expects to have to consider the
effect any such acquisition costs may have on its liquidity.  In order to
consummate such acquisitions, the Company may need to raise additional capital
through additional debt or equity financings.

INFLATION; LACK OF SEASONALITY

         Although the Company is subject to the effects of changing prices, the
impact of inflation has not been a significant factor in results of operations
for the periods presented.  In some circumstances, market conditions or customer
expectations may prevent the Company from increasing the prices of its products
to offset the inflationary pressures that may increase its costs in the future. 
Historically, there has been little seasonal fluctuation in the Company's
business. 

ENVIRONMENTAL MATTERS

         See "Business -- Environmental" for a discussion of certain
environmental matters relating to the Company. 


                                          15


<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                             Aftermarket Technology Corp.

                          Consolidated Financial Statements

                     Years Ended December 31, 1994, 1995 and 1996


                                       CONTENTS

    Report of Ernst & Young LLP, Independent Auditors.....................17

    Audited Consolidated Financial Statements 

    Consolidated Balance Sheets...........................................18
    Consolidated Statements of Income.....................................19
    Consolidated Statements of Stockholders' Equity.......................20
    Consolidated Statements of Cash Flows.................................21
    Notes to Consolidated Financial Statements............................22


                                          16


<PAGE>

                  REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS


Stockholders and Board of Directors
Aftermarket Technology Corp.

         We have audited the accompanying consolidated balance sheets of
Aftermarket Technology Corp. (the Company) as of December 31, 1995 and 1996, and
the related consolidated statements of income, stockholders' equity, and cash
flows for the five months ended December 31, 1994 and for the years ended
December 31, 1995 and 1996.  We have also audited the accompanying combined
statements of income, stockholders' equity, and cash flows of the Predecessor
Companies to Aftermarket Technology Corp. (the Predecessor Companies) for the
seven months ended July 31, 1994.  Our audits also included the financial
statement schedule listed in the Index at Item 14(a).  These financial
statements are the responsibility of the Company's and Predecessor Companies'
managements. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits. 

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

         In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Aftermarket Technology Corp. at December 31, 1995 and 1996, and the
consolidated results of the Company's operations and cash flows for the five
months ended December 31, 1994, and for the years ended December 31, 1995 and
1996 and the combined results of the operations of the Predecessor Companies to
Aftermarket Technology Corp. and their cash flows for the seven months ended
July 31, 1994, in conformity with generally accepted accounting principles. 
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth herein.

                                  ERNST & YOUNG LLP

Seattle, Washington
February 14, 1997


                                          17


<PAGE>

                             AFTERMARKET TECHNOLOGY CORP.
                             CONSOLIDATED BALANCE SHEETS

                                                          December 31,
                                                  -------------  -------------
                                                       1995          1996
                                                  -------------  -------------
ASSETS
Current assets:
 Cash and cash equivalents . . . . . . . . . .     $ 8,755,691   $ 46,498,249
 Accounts receivable, net. . . . . . . . . . .      32,965,874     38,779,538
 Inventories . . . . . . . . . . . . . . . . .      43,064,712     60,586,056
 Prepaid and other assets. . . . . . . . . . .       2,032,671      2,916,197
 Deferred tax assets . . . . . . . . . . . . .       2,267,000      2,272,000
                                                  -------------  -------------
Total current assets . . . . . . . . . . . . .      89,085,948    151,052,040
Equipment and leasehold improvements:
 Machinery and equipment . . . . . . . . . . .       7,187,840     12,907,232
 Autos and trucks. . . . . . . . . . . . . . .       1,503,760      2,012,450
 Furniture and fixtures. . . . . . . . . . . .         858,070      1,552,660
 Leasehold improvements. . . . . . . . . . . .       2,860,711      4,584,329
                                                  -------------  -------------
                                                    12,410,381     21,056,671
 
 Less accumulated depreciation
   and amortization. . . . . . . . . . . . . .      (1,625,917)    (3,574,276)
                                                  -------------  -------------
                                                    10,784,464     17,482,395
Debt issuance costs, net . . . . . . . . . . .       7,162,690      6,320,179
Cost in excess of net assets acquired, net . .     140,652,620    145,430,296
Other assets . . . . . . . . . . . . . . . . .         245,897        461,714
                                                  -------------  -------------
Total assets . . . . . . . . . . . . . . . . .   $ 247,931,619  $ 320,746,624
                                                  -------------  -------------
                                                  -------------  -------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable. . . . . . . . . . . . . . .   $  12,951,575  $  25,225,797
 Accrued payroll and related costs . . . . . .       2,094,237      4,429,339
 Accrued interest payable. . . . . . . . . . .       8,097,647      7,995,405
 Other accrued expenses. . . . . . . . . . . .       3,170,162      3,371,562
 Bank lines of credit. . . . . . . . . . . . .         811,067      4,334,686
 Income taxes payable. . . . . . . . . . . . .       1,912,116        321,299
 Due to former stockholders. . . . . . . . . .          36,734      2,002,824
                                                  -------------  -------------
Total current liabilities. . . . . . . . . . .      29,073,538     47,680,912

12% Series B and D Senior Subordinated Notes .     162,245,762    161,981,356
Deferred tax liabilities . . . . . . . . . . .       3,478,000      5,252,000
Commitments and contingencies. . . . . . . . . 
Stockholders' equity:
 Preferred stock, $.01 par value:
  Authorized shares - 5,000,000
  Issued and outstanding shares - 200,000
    and 0 at December 31, 1995 and 1996,
    respectively . . . . . . . . . . . . . . .      22,946,300             --
 Common stock, $.01 par value:
   Authorized shares - 30,000,000
   Issued and outstanding shares - 12,000,000
    and 16,980,794 at December 31, 1995 and
    1996, respectively . . . . . . . . . . . .      20,000,000     81,549,668
 Retained earnings . . . . . . . . . . . . . .      10,163,019     24,239,467
 Cumulative translation adjustment . . . . . .          25,000         43,221
                                                  -------------  -------------
Total stockholders' equity . . . . . . . . . .      53,134,319    105,832,356
                                                  -------------  -------------
Total liabilities and stockholders' equity . .   $ 247,931,619  $ 320,746,624
                                                  -------------  -------------
                                                  -------------  -------------


                                          18


<PAGE>


                             AFTERMARKET TECHNOLOGY CORP.
                          CONSOLIDATED STATEMENTS OF INCOME
 


<TABLE>
<CAPTION>

                                             Combined                    Consolidated
                                          -------------   ------------------------------------------
                                           Seven Months    Five Months
                                              Ended           Ended 
                                             July 31,      December 31,    Year Ended December 31,
                                               1994           1994           1995           1996
                                          -------------   ------------   ------------   ------------
<S>                                       <C>            <C>            <C>            <C>
Net sales. . . . . . . . . . . . . . .    $ 90,055,996   $ 67,735,869   $190,659,143   $272,878,458
Cost of sales. . . . . . . . . . . . .      52,245,178     40,111,819    115,499,023    166,810,941
                                          -------------   ------------   ------------   ------------
Gross profit . . . . . . . . . . . . .      37,810,818     27,624,050     75,160,120    106,067,517

Selling, general, and 
 administrative expense. . . . . . . .      20,475,113     14,205,750     38,971,230     55,509,529
Amortization of intangible assets. . .          15,534      1,209,971      3,307,563      3,738,382
                                          -------------   ------------   ------------   ------------

Income from operations . . . . . . . .      17,320,171     12,208,329     32,881,327     46,819,606

Interest and other income. . . . . . .         288,059        341,342      1,099,588      1,181,473
Interest expense . . . . . . . . . . .         130,036      6,373,921     18,015,346     20,287,419
                                          -------------   ------------   ------------   ------------

Income before income taxes . . . . . .      17,478,194      6,175,750     15,965,569     27,713,660
Provision (benefit) for income 
 taxes . . . . . . . . . . . . . . . .          (5,000)     2,565,000      6,467,000     11,415,000
                                          -------------   ------------   ------------   ------------

Net income . . . . . . . . . . . . . .   $  17,483,194      3,610,750      9,498,569     16,298,660
                                          -------------   ------------   ------------   ------------
                                          -------------
Dividends accrued on preferred
 stock . . . . . . . . . . . . . . . .                        853,288      2,093,012      2,222,212
                                                          ------------   ------------   ------------
Net income available to common
 stockholders. . . . . . . . . . . . .                   $  2,757,462   $  7,405,557   $ 14,076,448
                                                          ------------   ------------   ------------
                                                          ------------   ------------   ------------
Pro forma (unaudited):
 Income before income taxes per
   above . . . . . . . . . . . . . . .   $  17,478,194
 Provision for income taxes. . . . . .       7,004,000
                                          -------------
 Pro forma net income. . . . . . . . .   $  10,474,194
                                          -------------
                                          -------------
 Net income per share. . . . . . . . .                                         $0.65          $1.02
                                                                         ------------   ------------
                                                                         ------------   ------------

 Shares used in calculation of pro
   forma net income per share. . . . .                                    14,616,160     15,918,384
                                                                         ------------   ------------
                                                                         ------------   ------------

</TABLE>
 

                                          19


<PAGE>

                             AFTERMARKET TECHNOLOGY CORP.
                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                                            Combined
                                                          Seven Months
                                                              Ended
                                                            July 31,
                                                              1994
                                                          ------------
Stockholders' equity at beginning of period............    $31,719,717
  Distributions to stockholders........................     (5,503,000)
  Net income...........................................     17,483,194
                                                          ------------
Stockholders' equity at end of period..................    $43,699,911
                                                          ------------
                                                          ------------
 

<TABLE>
<CAPTION>

                                                                         Consolidated
                                           ------------------------------------------------------------------------
                                                                                         Cumulative
                                             Preferred      Common         Retained     Translation
                                               Stock         Stock         Earnings      Adjustment       Total
                                           ------------   ------------   ------------   ------------   ------------
<S>                                        <C>            <C>            <C>            <C>            <C>
Issuance of 200,000 shares of
  preferred stock for cash at $100
  per share, August 2, 1994. . . . . .    $ 20,000,000          $  --          $  --          $  --    $20,000,000
Issuance of 12,000,000 shares of
  common stock for cash at $1.67
  per share, August 2, 1994. . . . . .              --     20,000,000             --             --     20,000,000
Net income for the five months
  ended December 31, 1994. . . . . . .              --             --      3,610,750             --      3,610,750
Accrued dividends on preferred
  stock. . . . . . . . . . . . . . . .         853,288             --       (853,288)            --             --
                                           ------------   ------------   ------------   ------------   ------------
Balance at December 31, 1994 . . . . .      20,853,288     20,000,000      2,757,462             --     43,610,750
Translation adjustment . . . . . . . .              --             --             --         25,000         25,000
Net income for the year ended
  December 31, 1995. . . . . . . . . .              --             --      9,498,569             --      9,498,569
Accrued dividends on preferred
  stock. . . . . . . . . . . . . . . .       2,093,012             --     (2,093,012)            --             --
                                           ------------   ------------   ------------   ------------   ------------
Balance at December 31, 1995 . . . . .      22,946,300     20,000,000     10,163,019         25,000     53,134,319
Issuance of 4,980,794 shares of
  common stock for cash at
  $13.50 per share, December 17,
  1996 net of offering costs of
  $4,787,832 . . . . . . . . . . . . .              --     61,549,668             --             --     61,549,668
Accrued dividends on preferred
  stock. . . . . . . . . . . . . . . .       2,222,212             --     (2,222,212)            --             --
Redeem preferred stock,
  December 20, 1996. . . . . . . . . .     (25,168,512)            --             --             --    (25,168,512)
Translation adjustment . . . . . . . .              --             --             --         18,221         18,221
Net income for the year ended
  December 31, 1996. . . . . . . . . .              --             --     16,298,660             --     16,298,660
                                           ------------   ------------   ------------   ------------   ------------
Balance at December 31, 1996 . . . . .           $  --    $81,549,668    $24,239,467      $  43,221   $105,832,356
                                           ------------   ------------   ------------   ------------   ------------
                                           ------------   ------------   ------------   ------------   ------------

</TABLE>
 


                                          20


<PAGE>


                             AFTERMARKET TECHNOLOGY CORP.
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                             Combined                    Consolidated
                                           ------------   ------------------------------------------
                                           Seven Months   Five Months
                                               Ended         Ended
                                              July 31,    December 31,     Year Ended December 31,
                                               1994           1994           1995           1996
                                           ------------   ------------   ------------   ------------
<S>                                        <C>           <C>            <C>            <C>
OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . .   $17,483,194   $  3,610,750   $  9,498,569   $ 16,298,660
Adjustments to reconcile net income to net
 cash provided by operating activities:
  Depreciation and amortization. . . . .       726,761      1,598,491      4,680,388      5,773,238
  Amortization of debt issuance costs. .            --        268,650        710,281        842,511
  Increase (decrease) in allowance for
    losses on accounts receivable. . . .       249,176        192,208        496,591     (1,149,916)
  Loss (gain) on sale of equipment . . .        24,276          4,804         (5,955)        21,912
  Increase in net deferred tax
   liabilities . . . . . . . . . . . . .            --         50,000      1,274,000      1,769,000
  Changes in operating assets and
   liabilities:
     Accounts receivable . . . . . . . .    (6,218,650)    (1,799,626)    (3,172,303)    (2,719,859)
     Inventories . . . . . . . . . . . .    (2,716,807)      (576,145)    (8,118,364)   (12,574,161)
     Prepaid and other assets. . . . . .      (519,553)       299,101     (1,137,901)      (987,949)
     Accounts payable and accrued
      expenses . . . . . . . . . . . . .     2,102,961      4,249,395      6,555,947     10,520,582
                                           ------------   ------------   ------------   ------------
Net cash provided by operating
 activities. . . . . . . . . . . . . . .    11,131,358      7,897,628     10,781,253     17,794,018

INVESTING ACTIVITIES:
Purchases of equipment . . . . . . . . .    (1,850,224)    (1,335,551)    (5,187,400)    (7,843,401)
Acquisition of companies, net of cash 
 received. . . . . . . . . . . . . . . .            --   (146,954,457)   (40,264,452)   (12,199,106)
Proceeds from sale of fixed assets . . .        78,657         55,603          7,685         86,271
                                           ------------   ------------   ------------   ------------
Net cash used in investing activities. .    (1,771,567)  (148,234,405)   (45,444,167)   (19,956,236)

FINANCING ACTIVITIES:
Issuance of senior subordinated notes. .            --    120,000,000     42,400,000             --
Borrowings on revolving credit facility.            --     18,160,000      3,500,000             --
Payments on revolving credit facility. .            --    (17,000,000)    (4,742,458)            --
Borrowings (payments) on bank lines
 of credit . . . . . . . . . . . . . . .    (1,000,000)            --             --      3,523,619
Payment of debt issuance costs . . . . .            --     (5,697,413)    (2,179,167)            --
Payment of offering costs. . . . . . . .            --     (5,339,855)            --             --
Payment of initial public
 offering costs. . . . . . . . . . . . .            --             --             --     (4,787,832)
Net payments on other long-term debt . .      (100,584)      (358,637)            --             --
Sale of common stock . . . . . . . . . .            --     20,000,000             --     66,337,500
Sale of preferred stock. . . . . . . . .            --     20,000,000             --             --
Preferred stock redemption . . . . . . .            --             --             --    (25,168,511)
Net payments to related parties. . . . .       (88,737)            --             --             --
Distributions to stockholders. . . . . .    (5,503,000)            --             --             --
Payments on amounts due to former 
 stockholders. . . . . . . . . . . . . .            --             --     (4,987,088)            --
                                           ------------   ------------   ------------   ------------
Net cash provided by (used in)
 financing activities. . . . . . . . . .    (6,692,321)   149,764,095     33,991,287     39,904,776
Increase (decrease) in cash and cash 
 equivalents . . . . . . . . . . . . . .     2,667,470      9,427,318       (671,627)    37,742,558
Cash and cash equivalents at
 beginning of period . . . . . . . . . .       581,680             --      9,427,318      8,755,691
                                           ------------   ------------   ------------   ------------
Cash and cash equivalents at end
 of period . . . . . . . . . . . . . . .   $ 3,249,150   $  9,427,318   $  8,755,691   $ 46,498,249
                                           ------------   ------------   ------------   ------------
                                           ------------   ------------   ------------   ------------
Cash paid during the period for:
 Interest. . . . . . . . . . . . . . . .   $   128,259   $    185,817   $ 15,376,365   $ 19,411,691
                                           ------------   ------------   ------------   ------------
                                           ------------   ------------   ------------   ------------
 Income taxes. . . . . . . . . . . . . .   $   209,671   $  2,571,000   $  3,221,356   $ 10,970,402
                                           ------------   ------------   ------------   ------------
                                           ------------   ------------   ------------   ------------

</TABLE>


                                          21


<PAGE>


                             AFTERMARKET TECHNOLOGY CORP.

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

         The consolidated financial statements of Aftermarket Technology Corp.
(ATC or the Company) include the results of the following remanufactured
automotive products businesses which sell to customers throughout the United
States and Canada: (i) Aaron's Automotive Products, Inc. (Aaron's), a
Springfield, Missouri-based remanufacturer of transmissions, engines, torque
converters, and other drive train parts for automotive original equipment
manufacturers, independent rebuilders and distributors, and retail chain store
customers; (ii) Component Remanufacturing Specialists (CRS), a Mahwah, New
Jersey-based remanufacturer and distributor of automotive drive train and
transmission components; (iii) H.T.P., Inc. (HTP), a Louisville, Kentucky-based
remanufacturer and warehouse distributor of new and remanufactured parts for
independent transmission rebuilders; (iv) Mamco Converters, Inc. (Mamco), a
Dayton, Ohio-based remanufacturer of torque converters for independent
transmission rebuilders and distributors; (v) King-O-Matic (King) and Mascot
Truck Parts Inc. (Mascot), Canadian-based remanufacturers and distributors of
automotive components and a rebuilder of heavy duty truck transmissions,
respectively, are located in Mississauga, Canada; (vi) RPM Merit (RPM), a Rancho
Cucamonga, California (formerly Azusa, California)-based remanufacturer of
torque converters, constant velocity axles, and transmission fluid pumps, and a
warehouse distributor of remanufactured parts and new part kits to independent
transmission rebuilders; (vii) Tranzparts, Inc. (Tranzparts), a Janesville,
Wisconsin-based remanufacturer and warehouse distributor of new and
remanufactured parts for independent transmission rebuilders; (viii) ATC
Components, Inc. (ATAC), a Memphis, Tennessee-based warehouse distributor of
transmission parts, engines, engine kits, and parts to independent transmission
and engine rebuilders; and (ix) Diverco, Inc. (Diverco) a Harvey, Illinois-based
distributor of standard drive train parts, engine parts, gaskets, and other soft
parts for transmission and engine repair and complete transmissions for light
trucks and automobiles.

         The combined financial statements of the Predecessor Companies to
Aftermarket Technology Corp. (the Predecessor Companies) represent the
combination of the historical financial statements of Aaron's, RPM, HTP, and
Mamco. The Company was formed for the purpose of effecting the acquisitions of
the Predecessor Companies. The Predecessor Companies were acquired pursuant to
four separate purchase agreements for a total purchase price of approximately
$160.4 million (the Initial Acquisitions). The combined financial statements for
the seven months ended July 31, 1994 include the operations of the Predecessor
Companies up to their respective closing dates, which approximated July 31,
1994. 

PRINCIPLES OF CONSOLIDATION

         The Company's acquisitions have been accounted for as purchases, and
the consolidated financial statements for the years ended December 31, 1995 and
1996 and the five months ended December 31, 1994 include operations of the
Company and its wholly owned operating subsidiaries from the dates of
acquisition. Significant intercompany accounts and transactions have been
eliminated in consolidation. 

CASH AND CASH EQUIVALENTS

         The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.


                                          22


<PAGE>


                             AFTERMARKET TECHNOLOGY CORP.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

USE OF ESTIMATES

         The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates. 

INVENTORIES

         Inventories are stated at the lower of cost (first-in, first-out
method) or market and consist primarily of new and used engine and transmission
parts, and cores and finished goods. Appropriate consideration is given to
deterioration, obsolescence, and other factors in evaluating estimated market
value. 

EQUIPMENT AND LEASEHOLD IMPROVEMENTS

         Equipment and leasehold improvements are stated at cost. Depreciation
is computed using accelerated and straight-line methods over the estimated
useful lives of the assets, which range from three to fifteen years. 
Depreciation expense was $711,227, $388,520, $1,372,825 and $2,034,856 for the
seven months ended July 31, 1994, the five months ended December 31, 1994, and
the years ended December 31, 1995 and 1996, respectively.

FOREIGN CURRENCY TRANSLATION

         The financial statements of Canadian subsidiaries have been translated
into U.S. dollars in accordance with Statement of Financial Accounting Standards
(SFAS) No. 52, "Foreign Currency Translation." All balance sheet accounts have
been translated using the exchange rates in effect at the balance sheet date.
Income statement amounts have been translated using the average exchange rate
for the year. The translation gain resulting from the changes in exchange rates
has been reported separately as a component of stockholders' equity. 

         The effect on the statements of income of transaction gains or losses
is insignificant for the periods presented. 

DEBT ISSUANCE COSTS

         Debt issuance costs incurred in connection with the sale of the 12%
Series B and Series D Senior Subordinated Notes (Note 6) and Revolving Credit
Facility (Note 5) are being amortized over the life of the debt of ten, nine,
and seven years, respectively. 

COST IN EXCESS OF NET ASSETS ACQUIRED

         The excess of the purchase price over the fair value of the assets
purchased is being amortized over 40 years on a straight-line basis. Cost in
excess of net assets acquired is reflected net of accumulated amortization of
$4,466,669 and $8,261,622 at December 31, 1995 and 1996, respectively. 

         In accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of," the Company
assesses the recoverability of cost in excess of net assets acquired by
determining whether the amortization of the asset balance over its remaining
life can be recovered through the undiscounted future operating cash flows of
the acquired operation. The amount of the impairment, if any, is measured based
on projected discounted future operating cash flows. The Company believes that
no impairment has occurred and that no reduction in the estimated useful life is
warranted. 


                                          23


<PAGE>

                             AFTERMARKET TECHNOLOGY CORP.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

CONCENTRATION OF CREDIT RISK

         Financial instruments that potentially subject the Company to a
significant concentration of credit risk consist of accounts receivable from its
customers, which are primarily in the automotive aftermarket industry throughout
the United States and Canada. The credit risk associated with the Company's
accounts receivable is mitigated by its credit evaluation process, reasonably
short collection terms and, except for one significant customer, the
geographical dispersion of sales transactions. 

         The Company grants credit to certain customers who meet
pre-established credit requirements. Customers who do not meet those
requirements are required to pay for products upon delivery. Credit losses are
provided for in the financial statements and consistently have been within
management's expectations. 

         Accounts receivable is reflected net of an allowance for doubtful
accounts of $2,469,000 and $1,326,000 December 31, 1995 and 1996, respectively. 

WARRANTY POLICY

         For certain products on which the Company provides a warranty, the
warranty period is generally up to twelve months or 12,000 miles. 

STOCK-BASED COMPENSATION

         Effective January 1, 1996, the Company adopted SFAS No. 123,
"Accounting for Stock-Based Compensation."  As permitted under SFAS No. 123, the
Company has continued its current accounting for employee stock-based
compensation in accordance with Accounting Principles Board Opinion No. 25.  The
effect of applying SFAS No. 123 to the Company's stock-based awards on net
income and earnings per share is immaterial.

RECLASSIFICATIONS

         Certain prior-year amounts have been reclassified to conform to the
1996 presentation.

PRO FORMA DATA (UNAUDITED)

INCOME TAXES

         Two of the Predecessor Companies elected to be taxed as S Corporations
for all periods through the respective closing dates of the Acquisitions;
therefore, for federal and state income tax purposes, any income or loss accrued
prior to that date generally was not taxed to these companies but was reported
by their respective stockholders. The pro forma provision for taxes reflects the
estimated provision for federal and state income taxes which could have been
provided had these companies been C Corporations and filed consolidated returns.
Because these pro forma income taxes do not represent obligations of, and will
not be paid by, the Predecessor Companies, they have not been reflected in the
combined balance sheets or in the combined statements of cash flows. 

PRO FORMA NET INCOME PER SHARE

         Pro forma net income per share is based on the weighted average number
of shares of common stock and common equivalent shares outstanding using the
treasury stock method and the estimated number of shares of common stock issued
in the Company's initial public offering whose net proceeds were used to redeem
the outstanding preferred stock including accrued dividends. Pursuant to the
Securities and Exchange Commission requirements, common and common equivalent
shares issued during the 12-month period prior to the filing of the


                                          24


<PAGE>

                             AFTERMARKET TECHNOLOGY CORP.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Company's initial public offering have been included in the calculation as if
they were outstanding for all periods presented using the treasury stock method,
based on the initial public offering price. 

         Historical earnings per share is not considered meaningful due to the
significant changes in the Company's capital structure that occurred upon the
closing of the Company's initial public offering; accordingly, such per share
information is not presented. 

2.  ACQUISITIONS

         During the year ended December 31, 1995, the Company acquired three
companies for a total purchase price of approximately $42.8 million. The CRS and
Mascot acquisitions closed on June 1, 1995, and June 9, 1995 respectively, and
the King acquisition closed on September 12, 1995 (collectively, the 1995
Acquisitions).  The Company issued $40 million in principal amount of 12% Senior
Subordinated Notes due in 2004 concurrently with the acquisition of CRS, the
proceeds of which financed the 1995 Acquisitions (Note 6). In addition, on
April 2, 1996, the Company acquired Tranzparts, Inc. for $4.0 million and on
October 1, 1996 the Company acquired Diverco, Inc. for $10.5 million
(collectively the 1996 Acquisitions).  All such acquisitions have been accounted
for as purchases. Accordingly, the allocation of the cost of the acquired assets
and liabilities has been made on the basis of the estimated fair value.

         The consolidated financial statements include the operating results of
each business from the date of acquisition. The following unaudited pro forma
information for the year ended December 31, 1995 gives effect to the 1995
acquisitions as if such acquisitions had occurred on January 1, 1995.  Pro forma
information to reflect the 1996 acquisitions has not been presented because the
effect of such acquisitions was not material to prior periods.  The pro forma
information includes adjustments for interest expense that would have been
incurred to finance the acquisitions, additional depreciation based on the fair
market values of the property, plant, and equipment acquired, and amortization
of intangibles arising from the transactions. The pro forma financial
information is not necessarily indicative of the results of operations as they
would have been had the transactions been effected on the assumed dates. 

                                                 YEAR ENDED
                                             DECEMBER 31, 1995
                                              -----------------
                                               (IN THOUSANDS)
    Net sales..........................          $ 210,958
    Net income.........................             10,043

3.  RELATED-PARTY TRANSACTIONS

         The Company had liabilities to former stockholders totaling $36,734 at
December 31, 1995 and $2,002,824 at December 31, 1996. The 1996 amounts are
composed primarily of an additional purchase price payable to Diverco's former
stockholder. The remaining amount will be paid in the first quarter of 1997.

         The Company paid Aurora Capital Partners (ACP), a significant
stockholder, approximately $1.1 million in fees for investment banking services
provided in connection with the 1995 and 1996 acquisitions. In addition, ACP was
paid management fees of $500,000 and $513,015 in 1995 and 1996, respectively. 
ACP is also entitled to various additional fees depending on the Company's
profitability or future acquisitions. No such additional fees were paid in 1995
and 1996.


                                          25


<PAGE>

                             AFTERMARKET TECHNOLOGY CORP.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

4.  INVENTORIES

         Inventories consist of the following: 

                                                           DECEMBER 31,
                                                    ------------------------
                                                      1995         1996
                                                    -----------  -----------
Raw materials, including core inventories........   $19,015,530  $30,412,730
Work-in-process..................................     1,394,479    1,166,275
Finished goods...................................    22,654,703   29,007,051
                                                    -----------  -----------
                                                    $43,064,712 $60,586,056
                                                    -----------  -----------
                                                    -----------  -----------

         Finished goods include purchased parts which are available for sale. 

5.  BANK LINES OF CREDIT

CURRENT LIABILITIES

         In July 1996, the Company entered into a Revolving Credit Agreement
with Bank of Montreal (BOM Revolving Credit Agreement) providing for a revolving
credit facility to accommodate the working capital needs of King and Mascot (the
Canadian subsidiaries).  Advances under the BOM Revolving Credit Agreement may
be made, due upon demand, up to an aggregate of 75% of the eligible accounts
receivable and 50% of the eligible inventory of the Canadian subsidiaries, in
each case as defined in the BOM Revolving Credit Agreement, up to a maximum of
C$3.0 million.  Amounts advanced are secured by substantially all assets of the
Canadian subsidiaries and are guaranteed by the Company.  The agreement will
expire initially in June 1997 and may be renewed subject to an annual review. 
Interest is payable monthly at the Bank of Montreal prime lending rate plus
0.25%.  At December 31, 1996, $1.4 million was outstanding under this line of
credit and the interest rate in effect was 5.0%.  At December 31, 1995, $0.8
million was outstanding under a former credit line used by the Canadian
subsidiaries.

         In January 1996, the Company entered into an agreement with Commerce
Bank, N.A. providing financing for equipment purchases by Aaron's up to a
maximum of $2.9 million, secured by the underlying equipment purchased. 
Interest is payable monthly at a fixed rate equal to 70% of the bank's prime
lending rate at the date of the advance plus 1%.  As of December 31, 1996, $2.9
million was outstanding under this loan agreement.  The agreement contains
several covenants including levels of net worth, leverage, interest coverage and
earnings before interest, taxes, depreciation, and amortization (EBITDA).

REVOLVING CREDIT FACILITY

         On July 19, 1994, the Company entered into an agreement with The Chase
Manhattan Bank, as agent, providing for a $30 million revolving credit facility
(Revolving Credit Facility) to finance the Initial Acquisitions and for working
capital purposes. The funds available to be advanced may not exceed 85% of the
Company's eligible accounts receivable and 60% of the Company's eligible
inventories, as defined in the agreement. The available borrowing base at
December 31, 1996 was approximately $27 million. All amounts advanced are
secured by all accounts receivable and inventories and become due on July 31,
1999. The Company may prepay outstanding advances in whole or in part without
incurring any premium or penalty. 

         At the Company's election, amounts advanced under the Revolving Credit
Facility will bear interest at either (i) the Alternate Base Rate plus 1.25% or
(ii) the Eurodollar Rate plus 2.25%. The Alternate Base Rate is equal to the
highest of (a) the Bank's prime rate, (b) the secondary market rate for
three-month certificates of deposit plus 1.0%, or (c) the federal funds rate
plus 0.5%. Interest payments on advances which bear interest based upon the
Alternate Base Rate are due quarterly in arrears, and interest payments on
advances which bear interest


                                          26


<PAGE>

                             AFTERMARKET TECHNOLOGY CORP.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5.  BANK LINES OF CREDIT(CONTINUED)

based upon the Eurodollar Rate are due on the last day of each relevant interest
period (or, if such period exceeds three months, quarterly after the first day
of such period).

         The Company paid the Bank a one-time facility and commitment fee upon
establishing the Revolving Credit Facility and is required to pay the Bank
quarterly in arrears a commitment fee of 0.5% per annum of the average daily
unused portion of the Revolving Credit Facility. 

         The Revolving Credit Facility contains several covenants, including
levels of net worth, leverage, EBITDA and cash flow coverage, and certain limits
on the Company to incur indebtedness, make capital expenditures, create liens,
engage in mergers and consolidations, make restricted payments (including
dividends), make asset sales, make investments, issue stock, and engage in
transactions with affiliates of the Company and its subsidiaries. At
December 31, 1996, no amounts were outstanding under this line of credit. 

6.  12% SERIES B AND SERIES D SENIOR SUBORDINATED NOTES

         On August 2, 1994, the Company completed a private placement issuance
of $120 million in principal amount of 12% Series A Senior Subordinated Notes
due in 2004. Proceeds from the issuance were used to partially finance the
Initial Acquisitions. The privately placed debt was exchanged for public debt
(designated Series B) on February 22, 1995. 

         On June 1, 1995, the Company completed another private placement
issuance of $40 million in principal amount of 12% Series C Senior Subordinated
Notes due in 2004. Proceeds of $42.4 million from the issuance were used to
finance the 1995 Acquisitions. These notes have an effective interest rate of
10.95%. The privately placed debt was exchanged for public debt (designated
Series D) on September 10, 1995. 

         Interest on the Notes is payable semiannually on February 1 and
August 1 of each year, commencing on February 1, 1995 for the Series B Notes and
August 1, 1995 for the Series D Notes. The Notes will mature on August 1, 2004.
On or after August 1, 1999, the Notes may be redeemed at the option of the
Company, in whole or in part, at specified redemption prices plus accrued and
unpaid interest: 

     Year                                         Redemption Price
      ----                                         ----------------
     1999.....................................         106%
     2000.....................................         104
     2001.....................................         102
     2002 and thereafter......................         100

         In addition, at any time on or prior to August 1, 1997, the Company
may, subject to certain requirements, redeem up to $30 million of the Series B
Notes and $10 million of the Series D Notes aggregate principal amounts with the
net cash proceeds of one or more public equity offerings, at a price equal to
112% of the principal amount to be redeemed plus accrued and unpaid interest. On
February 16, 1997 the Company exercised its right and redeemed $30 million in
principal amount of the Series B Notes and $10 million in principal amount of
the Series D Notes resulting in a loss on early extinguishment of debt of $4.8
million.

         In the event of a change in control, the Company would be required to
offer to repurchase the Notes at a price equal to 101% of the principal amount
plus accrued and unpaid interest.

         The Notes are general obligations of the Company, subordinated in
right of payment to all existing and future senior debt (including the Revolving
Credit Facility). The Notes are guaranteed by each of the Company's existing and
future subsidiaries other than any subsidiary designated as an unrestricted
subsidiary (as defined). The Company may incur additional indebtedness,
including borrowings under its $30 million Revolving Credit Facility (Note 5),
subject to certain limitations. 


                                          27


<PAGE>

                             AFTERMARKET TECHNOLOGY CORP.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6.  12% SERIES B AND SERIES D SENIOR SUBORDINATED NOTES (CONTINUED)

         The indenture under which the Notes were issued contains certain
covenants that, among other things, limit the Company from incurring other
indebtedness, issuing disqualified capital stock, engaging in transactions with
affiliates, incurring liens, making certain restricted payments (including
dividends), making certain asset sales, and permitting certain restrictions on
the ability of its subsidiaries to make distributions. As of December 31, 1996,
the Company was in compliance with such covenants. 

7.  INCOME TAXES

         Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. 
Significant components of the Company's deferred tax liabilities and assets are
as follows: 

                                                        DECEMBER 31
                                                   ----------    ----------
                                                     1995          1996
                                                   ----------    ----------
Deferred tax liabilities:
    Book basis of intangible assets
      in excess of tax amounts..................  $3,208,000    $4,630,000
    Other......................................      270,000       622,000
                                                   ----------    ----------
Total deferred tax liabilities..................   3,478,000     5,252,000
Deferred tax assets:
    Inventory obsolescence reserve.............      898,000     1,182,000
    Bad debt reserves..........................      545,000       778,000
    Product warranty accruals..................      438,000       312,000
    Other......................................      386,000           --
                                                   ----------    ----------
Total deferred tax assets.......................   2,267,000     2,272,000
                                                   ----------    ----------
Net deferred tax liability......................  $1,211,000    $2,980,000
                                                   ----------    ----------
                                                   ----------    ----------


         Significant components of the provision for income taxes attributable
to operations are as follows: 
                                                         YEAR ENDED
                               FIVE MONTHS ENDED         DECEMBER 31,
                                  DECEMBER 31,    -------------------------
                                      1994          1995           1996
                                   ----------     ----------    -----------
Current:
    Federal....................   $2,136,000     $4,429,000     $8,499,000
    State......................      379,000        764,000      1,147,000
                                   ----------     ----------    -----------
Total current...................   2,515,000      5,193,000      9,646,000
Deferred:
    Federal....................       53,000      1,137,000      1,621,000
    State......................       (3,000)       137,000        148,000
                                   ----------     ----------    -----------
Total deferred..................      50,000      1,274,000      1,769,000
                                   ----------     ----------    -----------
                                  $2,565,000     $6,467,000    $11,415,000
                                   ----------     ----------    -----------
                                   ----------     ----------    -----------


                                          28


<PAGE>

                             AFTERMARKET TECHNOLOGY CORP.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7.  INCOME TAXES (CONTINUED)


         The components of the provision for deferred income taxes are as
follows: 

                                          FIVE MONTHS        YEAR ENDED
                                              ENDED          DECEMBER 31,
                                          DECEMBER 31, ------------------------
                                              1994       1995          1996
                                           ----------  ----------   -----------
Amortization of intangible assets.........  $754,000  $1,759,000    $1,422,000
Inventory obsolescence reserve............  (483,000)   (333,000)     (284,000)
Bad debt reserves.........................   (85,000)   (223,000)     (233,000)
Product warranty accruals.................   (56,000)    (20,000)      126,000
Depreciation..............................     2,000     339,000       427,000
Other.....................................   (82,000)   (248,000)      311,000
                                           ----------  ----------   -----------
Provision for deferred income taxes.......   $50,000  $1,274,000    $1,769,000
                                           ----------  ----------   -----------
                                           ----------  ----------   -----------
    
         
         The reconciliation of income tax expense computed at the U.S. federal
statutory tax rates to income tax expense is as follows: 
 

<TABLE>
<CAPTION>
                                                 FIVE MONTHS                          YEAR ENDED
                                                    ENDED                          DECEMBER 31, 1995
                                             --------------------     ---------------------------------------------
                                               DECEMBER 31, 1994                  1995                     1996
                                             --------------------     --------------------    ---------------------
                                               Amount     Percent       Amount    Percent       Amount     Percent
                                             ----------   -------     ----------   -------    -----------   -------
<S>                                          <C>          <C>         <C>          <C>        <C>           <C>
Tax at U.S. statutory rates...............  $2,159,000     35.0%     $5,588,000     35.0%     $9,700,000     35.0%
State income taxes, net of 
 federal tax benefit......................     244,000      3.9         529,000      3.3         842,000      3.0   
Other.....................................     162,000      2.7         350,000      2.2         873,000      3.2
                                             ----------   -------     ----------   -------    -----------   -------    
                                            $2,565,000     41.6%     $6,467,000     40.5%    $11,415,000     41.2%
                                             ----------   -------     ----------   -------    -----------   -------
                                             ----------   -------     ----------   -------    -----------   -------

</TABLE>
 

8.  COMMON AND PREFERRED STOCK

         On December 13, 1996, the Company amended and restated its charter to
increase its authorized Common Stock to 30,000,000 shares and consummated a
six-for-one stock split, and to increase its authorized Preferred Stock to
5,000,000 shares.  The accompanying financial statements have been retroactively
adjusted to reflect the stock split.

         The Company sold 4,025,000 shares of common stock through a public
offering (Public Offering).  The price per share for such Common Stock was
$13.50 (Public Offering Price).  At approximately the same time, the Company
sold to General Electric Pension Trust (GEPT) $12.0 million of Common Stock
(955,794 shares) in a private placement.  The price per share for such privately
placed Common Stock was the price per share paid by the Underwriters in the
Public Offering ($12.555), that is the public offering price per share less
Underwriters' discounts and commissions.  Although GEPT received Common Stock
which has not been registered under the Securities Act of 1933, it also received
a "demand" registration right and a "piggyback" registration right with respect
to such stock and 300,000 shares of Common Stock it currently owns, which rights
are not exercisable until after June 14, 1997.


                                          29


<PAGE>


                             AFTERMARKET TECHNOLOGY CORP.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8.  COMMON AND PREFERRED STOCK (CONTINUED)

STOCK OPTION PLAN

         The Company adopted its 1994 Stock Incentive Plan (Plan) in July 1994
in order to provide incentives to employees and directors of the Company. The
Company had reserved 1,800,000 shares of common stock for issuance under the
plan.  On September 19, 1996, the shareholders approved an amendment to the Plan
to increase the number of shares available for issuance to 2,400,000.  Options
are generally granted at the fair value on the date of grant and vest over a
period of time to be determined by the Board of Directors, generally from three
to five years. The options expire 10 years from the date of grant. 

         The following table summarizes the stock option activity: 

                                               SHARES SUBJECT     PRICE
                                                  TO OPTION     PER SHARE
                                               --------------  -----------
    Granted in 1994.....................         1,403,514     $     1.67
                                               --------------
 Balance, December 31, 1994..............        1,403,514           1.67
    Granted in 1995.....................           123,264           1.67
                                               --------------
 Balance, December 31, 1995..............        1,526,778           1.67
    Granted in 1996.....................           745,440           4.67
                                               --------------
 Balance, December 31, 1996..............        2,272,218     $1.67-4.67
                                               --------------               
                                               --------------
    
         At December 31, 1996, 1,117,098 options are exercisable and 127,782
options remain available for future grant. 

         In connection with the prior acquisitions, warrants to purchase
350,880 shares of common stock at $1.67 per share were issued to two
individuals. The warrants are exercisable through 2004. The Company has also
issued a warrant to one member of the Board of Directors to purchase 70,176
shares of common stock at $1.67 per share, the fair value of the common stock on
the date of grant.

         At December 31, 1996, the Company had 2,821,056 shares of common stock
reserved for the exercise and future granting of stock options and warrants. 

         Following the completion of the Public Offering, the Company redeemed
its outstanding Preferred Stock.

9.  EMPLOYEE RETIREMENT PLAN

         The Company sponsors several defined contribution plans to provide
substantially all U.S. salaried and hourly employees of the Company an
opportunity to accumulate personal funds for their retirement, subject to
minimum duration of employment requirements.  Contributions are made on a
before-tax basis to substantially all of these plans.

         As determined by the provisions of each plan, the Company matches a
portion of the employees' basic voluntary contributions.  Company matching
contributions to the plans were approximately $65,000, $108,000, and $206,000
for the plan years ending in 1994, 1995, and 1996, respectively.  The net assets
of these plans approximated $2.6 million as of the 1996 plan year ends.


                                          30


<PAGE>

                             AFTERMARKET TECHNOLOGY CORP.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. COMMITMENTS AND CONTINGENCIES (CONTINUED)

         The Company leases certain facilities under various operating lease
agreements, which expire on various dates through 2004. Leases that expire
generally are expected to be renewed or replaced by other leases. Future minimum
lease payments as of December 31, 1996 are as follows: 

    YEAR ENDING DECEMBER 31  
     -----------------------
    1997............................................. $  5,062,498
    1998.............................................    4,230,712
    1999.............................................    3,383,449
    2000.............................................    2,690,464
    2001.............................................    2,369,592
    Thereafter.......................................    4,042,372
                                                       ------------
                                                       $21,779,087
                                                       ------------
                                                       ------------

         Rent expense under operating leases approximated $1,159,000, $902,000,
$3,114,999 and $4,582,000 for the seven months ended July 31, 1994, the five
months ended December 31, 1994, and the years ended December 31, 1995 and 1996,
respectively. 

         Rent expense includes amounts paid to related parties of $254,000,
$611,000, and $940,000 for the five months ended December 31, 1994, the year
ended December 31, 1995, and the year ended December 31, 1996, respectively. 

         The Company is subject to various evolving federal, state, local and
foreign environmental laws and regulations governing, among other things,
emissions to air, discharge to waters and the generation, handling, storage,
transportation, treatment and disposal of a variety of hazardous and
non-hazardous substances and wastes.  These laws and regulations provide for
substantial fines and criminal sanctions for violations.  The operation of
automotive parts remanufacturing plants involves environmental risks. 

         Prior to the RPM Acquisition, the company from which RPM acquired its
assets (the "Prior RPM Company") leased nine properties in the City of Azusa,
California (the "Azusa Properties") from a general partnership consisting of the
Prior RPM Company shareholders.  The Azusa Properties are within an area which,
as a result of regional groundwater contamination, has been designated by the
Environmental Protection Agency (EPA) as the Baldwin Park Operable Unit ("BPOU")
of the San Gabriel Valley Superfund Sites.  The federal Superfund law (the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended ("CERCLA")) both provides for the appropriate cleanup of contaminated
sites and assigns liability for the cost of such cleanups.  The parties held
responsible for cleanup costs are broadly defined under CERCLA, and generally
include present owners and operators of a site and certain past owners and
operators.  Liability for cleanup costs imposed against such "responsible
parties" is strict, joint and several.  However, such costs are typically
allocable among responsible parties through settlement or litigation based on
factors including each particular party's relative contribution of contaminants
to the site and ability to pay. 

         The EPA has proposed a groundwater treatment system as an interim
remedial measure for the BPOU.  The EPA has estimated that it will cost
approximately $47 million to construct this system and approximately $4 million
per year for an indefinite period to operate it.  The Company has not
independently evaluated this estimate, and the actual cost may vary
substantially from this estimate.  In addition, the EPA has incurred substantial
costs to date and will likely continue to incur such costs in overseeing the
implementation of remedial measures.  The EPA has informally estimated that
these costs may be in excess of $1 million.  Further, if the EPA determines that
the interim remedial measures are not adequate, additional costs could be
incurred.  As discussed above, the "responsible parties" for this site could be
held liable for these EPA costs.  In addition to


                                          31


<PAGE>

                             AFTERMARKET TECHNOLOGY CORP.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. COMMITMENTS AND CONTINGENCIES (CONTINUED)

cleanup costs, the responsible parties may be required to pay for damages for
injuries to natural resources such as soil, groundwater, or wildlife caused by
the contamination at the BPOU.  To date, the government agencies authorized to
claim natural resource damages for this site have not made any assessment of the
value, if any, of such damages.  In 1993, the EPA notified the Prior RPM
Company, the general partnership consisting of the Prior RPM Company
shareholders which owns the Azusa Properties and approximately 100 other
entities that they may be potentially responsible parties ("PRPs") for the San
Gabriel Valley Superfund Sites as present or former owners or operators of
properties located within that Site.  In January 1995, the EPA sent letters to
16 of these parties with respect to 15 properties in the BPOU, describing four
of those properties as apparently the "largest contributors to the groundwater
contamination" and the remaining 11 properties as apparently in a range of
moderate to lesser contributors.  The letters identify the recipients as PRPs
for the proposed interim remediation and request that they enter into
negotiations to design, construct, and operate the cleanup remedy.  The
recipients of the letters included a general partnership comprised of the Prior
RPM Company shareholders, which was informed that the EPA considers it
responsible for two of the sites described as lesser to moderate contributors to
the contamination. 

         In conjunction with the federal and state environmental investigation
of this area, the Prior RPM Company has been required by the California Regional
Water Quality Control Board (the "Water Board") to conduct an investigation on
the Azusa Properties.  This investigation has detected soil contamination on
certain of the Azusa Properties formerly leased by RPM and as a result, the
Prior RPM Company is being required by the Water Board to undertake further
investigations and may be required to undertake remedial action on those
properties. 

         For one year after the RPM Acquisition, the Company leased the Azusa
Properties pursuant to leases which provide that the Company has not assumed any
liabilities with respect to environmental conditions existing on or about these
properties prior to the commencement of the lease period, although the Company
could be held responsible for such liabilities under various legal theories. 
Since the RPM Acquisition, the Company has been engaged in negotiations with the
EPA to settle any liability that it may have for this site.  The RPM acquisition
agreement provides that the Company did not assume any environmental liabilities
associated with hazardous substances existing on or about the Azusa Properties
occupied by the Prior RPM Company prior to the RPM Acquisition and that the
Prior RPM Company and the Prior RPM Company shareholders will jointly and
severally indemnify the Company for all liabilities or damages (other than
consequential damages) that the Company may reasonably incur as a result of any
claim asserted against the Company relating to unassumed environmental
liabilities.  There can be no assurance, however, that the Company would be able
to make any recovery under any indemnification provisions.  The Company also
could become responsible if the conduct of its business contributed to any
environmental contamination on these properties.  The Company took steps to
ensure that its business at these properties was conducted in compliance with
applicable environmental laws and in a manner that does not contribute to any
environmental contamination.  Moreover, the Company has significantly reduced
its presence at the site and has moved all manufacturing operations off-site. 
Since July 18, 1995, the Company's only real property interest in the Azusa
Properties has been the lease of a 6,000 square foot storage and distribution
facility.  The Company believes, although there can be no assurance, that it
will not incur any material liability as a result of the pre-existing
environmental conditions. 

         In connection with the CRS, Mascot, King-O-Matic, Aaron's, RPM, HTP,
Mamco, Tranzparts, and Diverco acquisitions, the Company conducted certain
investigations of these companies' facilities and their compliance with
applicable environmental laws.  The investigations, which included "Phase I"
assessments by independent consultants of all manufacturing and certain
distribution facilities, found that certain remedial, reporting, and other
regulatory requirements, including certain waste management procedures, were not
or may not have been satisfied.  Based in part on the investigations conducted,
and the indemnification provisions of the agreements entered into in connection
with these acquisitions, the Company believes, although there can be no
assurance, that its liabilities relating to these environmental matters will not
have a material adverse effect, individually or in the aggregate, on the
Company. 


                                          32

<PAGE>

                             AFTERMARKET TECHNOLOGY CORP.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. COMMITMENTS AND CONTINGENCIES (CONTINUED)

         The Company is also involved in several lawsuits which arise in the
ordinary course of business which management believes will not have a material
adverse effect, individually or in the aggregate, on the Company's consolidated
financial position or results of operations. 

11. FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying amounts of all financial instruments approximate their
fair values at December 31, 1995 and 1996, except for the Series B and Series D
subordinated debt. 

         The fair values of the Company's Series B and Series D subordinated
debt are estimated using discounted cash flow analyses, based on the Company's
current incremental borrowing rates for similar types of borrowing arrangements.

         The carrying amounts and fair values of these financial instruments at
December 31 are as follows: 

                                                1995                1996
                                         ------------------  ------------------
                                         CARRYING    FAIR    CARRYING    FAIR
                                          AMOUNT     VALUE    AMOUNT     VALUE
                                         --------  --------  --------  --------
                                                     (IN THOUSANDS)
12% subordinated notes (Series B)....... $120,000  $126,600  $120,000  $126,900
12% subordinated notes (Series D).......   40,000    42,200    40,000    42,300

12. SIGNIFICANT CUSTOMER

         For the seven months ended July 31, 1994, the five months ended
December 31, 1994, the year ended December 31, 1995, and the year ended
December 31, 1996, sales to one customer accounted for 43%, 45%, 35%, and 37% of
net sales, respectively. Additionally, at December 31, 1995 and 1996, this
customer accounted for approximately 46% and 51% of accounts receivable,
respectively. No other customer accounted for more than 10% of net sales in any
period.

13. SUBSEQUENT EVENTS

         On February 14, 1997 the Company terminated its $30 million revolving
credit facility and replaced it with a new $100 million revolving credit
facility with The Chase Manhattan Bank, as agent, (New Revolving Credit
Facility) to finance the Company's working capital requirements, future
acquisitions, and other general corporate needs.  Amounts advanced under the New
Revolving Credit Facility are secured by substantially all assets of the Company
and will become due on December 31, 2001, although the Company may prepay
outstanding advances in whole or in part without incurring any premium or
penalty.  The New Revolving Credit Facility contains several covenants,
including levels of net worth, leverage, EBITDA, and cash flow coverage, and
certain limits on the Company to incur indebtedness, make capital expenditures,
create liens, engage in mergers and consolidations, make restricted payments
(including dividends), make asset sales, make investments, issue stock, and
engage in transactions with affiliates of the Company and its subsidiaries.


                                          33


<PAGE>

                             AFTERMARKET TECHNOLOGY CORP.

                NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. QUARTERLY RESULTS (UNAUDITED)

                                                 Quarter
                                   -------------------------------------
                                   First    Second     Third    Fourth
                                   -------  --------   -------  --------
1995
----
 Net sales....................... $40,638   $45,094   $46,740   $58,187
 Gross profit....................  15,668    18,066    16,686    24,740
 Net income......................   1,953     2,924     1,344     3,278
 Pro forma earnings per share....   $0.14     $0.20     $0.09     $0.22


1996
----
 Net sales....................... $64,146   $66,873   $68,287   $73,572
 Gross profit....................  25,788    25,063    25,998    29,219
 Net income......................   4,399     3,891     4,051     3,958
 Pro forma earnings per share....   $0.28     $0.25     $0.26     $0.23


                                          34


<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

         None.

                                       PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The following table sets forth the name, age and position with the
Company of each of the persons who serve as directors and executive officers of
the Company. Each director of the Company will hold office until the next annual
meeting of stockholders of the Company or until his successor has been elected
and qualified. Officers of the Company are elected by the Board of Directors of
the Company and serve at the discretion of the Board.

         NAME                AGE            POSITIONS
          ----                ---            ---------
     William A. Smith         51       Chairman of the Board of Directors
     Stephen J. Perkins       49       President, Chief Executive Officer and
                                       Director
     John C. Kent             45       Chief Financial Officer
     Wesley N. Dearbaugh      45       President and General Manager,
                                       Independent Aftermarket
     James R. Wehr            43       President, Aaron's
     Michael L. LePore        43       President, CRS
     Robert Anderson          75       Director
     Richard R. Crowell       42       Director
     Mark C. Hardy            33       Director
     Dr. Michael J. Hartnett  51       Director
     William E. Myers, Jr.    37       Director
     Gerald L. Parsky         55       Director
     Richard K. Roeder        48       Director
 
         WILLIAM A. SMITH has been the Chairman of the Board of Directors since
July 1994. Mr. Smith was the President and Chief Executive Officer of the
Company from July 1994 until October 1996. From March 1993 to July 1994,
Mr. Smith served as a consultant to ACP in connection with the Initial
Acquisitions. From March 1992 to March 1993, Mr. Smith was President of the
Rucker Fluid Power Division of Lucas Industries, plc. From October 1988 to
March 1992, Mr. Smith was Vice President of Parts Operations for Navistar
International Transportation Corporation, a truck engine manufacturer, where
Mr. Smith managed its aftermarket parts business, including four new aftermarket
business lines. From July 1985 to October 1988, Mr. Smith served as President
for Labinal, Inc., a French automotive and aerospace equipment manufacturer,
where he was in charge of its North American operations. From 1979 to 1985,
Mr. Smith was Vice President of Marketing of the Cummins Diesel Recon business,
Cummins Engine Company's aftermarket remanufacturing division. From 1972 to
1979, Mr. Smith held several director level positions at Cummins Engine Company
covering distribution, technical service, service training, market planning,
parts marketing, service publications and warranty administration. 

         STEPHEN J. PERKINS was elected as the President and Chief Executive
Officer of the Company in October 1996. From February 1992 to October 1996, Mr.
Perkins was President and Chief Executive Officer of Senior Flexonics, an
international division of Senior Engineering, plc. Senior Flexonics included 20
operations in 13 countries which manufactured and distributed engineered
flexible tubular products for the automotive, aerospace and industrial markets.
From September 1983 to February 1992, Mr. Perkins was President and Chief
Executive Officer of Flexonics, Inc., the privately held predecessor of Senior
Flexonics. From March 1979 to September 1983, Mr. Perkins was the Director of
Manufacturing and then Vice President and General Manager of the Flexonics
Division of what is now Allied Signal. From July 1971 to March 1979, Mr. Perkins
held several management positions in manufacturing at multiple facilities for
the Steel Tubing Group of Copperweld Corporation. Mr. Perkins began his career
with U.S. Steel as an Industrial Engineer. 

         JOHN C. KENT became Chief Financial Officer of the Company in
July 1994. From March 1990 to July 1994, Mr. Kent was Vice President, Finance
and Chief Financial Officer of Aerotest, Inc., an aircraft


                                          35


<PAGE>

maintenance and modification company. In March 1995, Aerotest filed a voluntary
petition for relief under Chapter 11 of the United States Bankruptcy Code. The
Aerotest bankruptcy proceedings are still pending. From 1987 to March 1990,
Mr. Kent was an Assistant Treasurer at Security Pacific Auto Finance. From 1978
to 1987 Mr. Kent served in several capacities at Western Airlines, Inc.,
including Director of Cash and Risk Management. 

         WESLEY N. DEARBAUGH joined ATC as President and General Manager of
Independent Aftermarket in June 1996. From 1993 to June 1996, Mr. Dearbaugh was
a Partner and Vice President of Marketing for Cummins, S.W., a multi-branch
distributor of heavy duty parts and service. From 1992 to 1993, he was Vice
President of Marketing for SEI, a large pension consulting firm. From 1983 to
1992, Mr. Dearbaugh held senior management and partner positions in value
investment funds and limited partnerships. From 1979 to 1983, Mr. Dearbaugh held
positions at Cummins Diesel Recon, Cummins Engine Company's Aftermarket
Remanufacturing Division including General Manager of Fuel Systems,
Director-Product Management, and Manager of Sales & Marketing. From 1974 to
1979, Mr. Dearbaugh held several positions in industrial engineering and
technical sales at Atlas Crankshaft, a manufacturing division of Cummins Engine
Company. 

         JAMES R. WEHR has been President of Aaron's, since August 1990 and has
responsibility for developing and maintaining the relationships between Aaron's
and Chrysler, other OEMs and Western Auto. In 1983 Mr. Wehr founded
Intercont, Inc., a cleaning and testing equipment division of Aaron's. Mr. Wehr
has been involved in the automotive aftermarket since 1969. 

         MICHAEL L. LEPORE has been President of CRS since 1984. From 1976 to
1984 Mr. LePore was manager of U.S. Operations for Borg-Warner Parts and Service
Division, a subsidiary of Borg Warner LTD U.K. 

         ROBERT ANDERSON became a director of the Company in March 1997. Mr.
Anderson has been associated with Rockwell International Corporation since 1968,
where he has been Chairman Emeritus since 1990 and served previously as Chairman
of the Executive Committee from 1988 to 1990 and as Chairman of the Board and
Chief Executive Officer from 1979 to 1988.  Mr. Anderson is a director of
Gulfstream Aerospace Corporation, Optical Data Systems Company and Timken
Company.

         RICHARD R. CROWELL became a director of the Company in July 1994.
Mr. Crowell is a founding partner and Managing Director of ACP. Prior to forming
ACP in 1991, Mr. Crowell was a Managing Director of Rosecliff, Inc., the
management company for Acadia Partners L.P. since its inception in 1987. Mr.
Crowell is a also director of Astor Corporation.

         MARK C. HARDY became a director of the Company in July 1994. Mr. Hardy
is a Vice President of ACP and joined ACP in June 1993. Prior to joining ACP,
Mr. Hardy was an Associate at Bain & Company, a consulting firm.  Mr. Hardy is
also a director of Astor Corporation.

         DR. MICHAEL J. HARTNETT became a director of the Company in July 1994.
Since March 1992 Dr. Hartnett has been Chairman, President and Chief Executive
Officer of Roller Bearing Company of America, Inc., a manufacturer of ball and
roller bearings that is controlled by an affiliate of ACP. Prior to joining
Roller Bearing in 1990 as General Manager of its Industrial Tectonics
subsidiary, Dr. Hartnett spent 18 years with The Torrington Company, a bearing
manufacturer. 

         WILLIAM E. MYERS, JR. became a director of the Company in July 1994.
Mr. Myers has been, for more than the past five years, the Chairman of the Board
and Chief Executive Officer of W.E. Myers and Company, a private merchant bank. 

         GERALD L. PARSKY became a director of the Company in March 1997. Mr.
Parsky is the Chairman and a founding partner of ACP.  Prior to forming ACP in
1991, Mr. Parsky was a senior partner and a member of the Executive and
Management Committees with the law firm of Gibson, Dunn & Crutcher LLP.  Prior
to that, he served as an official with the United States Treasury Department and
the Federal Energy Office, and as Assistant Secretary of the Treasury for
International Affairs.


                                          36


<PAGE>

         RICHARD K. ROEDER became a director of the Company in July 1994.
Mr. Roeder is a founding partner and Managing Director of ACP. Prior to forming
ACP in 1991, Mr. Roeder was a partner in the law firm of Paul, Hastings,
Janofsky & Walker, where he served as Chairman of the firm's Corporate Law
Department and a member of its National Management Committee.  Mr. Roeder is a
also director of Astor Corporation.

         SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. 
Section 16(a) of the Exchange Act requires the Company's officers, directors and
persons who own more than 10% of any equity security of the Company to file
reports of ownership and changes in ownership with the SEC and to furnish copies
of these reports to the Company.  Based solely on a review of the copies of the
forms that the Company received, the Company believes that Forms 4 were not
timely filed on January 10, 1997 by reporting persons to report (i) the purchase
of shares in the Company's IPO and/or (ii) the redemption of preferred stock
following the Reorganization, which purchases and redemptions occurred on
December 20, 1996.  These transactions were subsequently reported on Forms 5
that were timely filed on February 14, 1997, thereby correcting the oversight. 
The reporting persons who purchased shares in the IPO are William A. Smith,
Stephen J. Perkins, John C. Kent, Wesley N. Dearbaugh, Michael L. LePore and
Gerald L. Parsky.  The reporting persons who's preferred stock was redeemed
following the Reorganization are William A. Smith, James R. Wehr, Richard R.
Crowell, Mark C. Hardy, Kurt B. Larsen (a former director), Gerald L. Parsky and
Richard K. Roeder.

ITEM 11. EXECUTIVE COMPENSATION.

         COMPENSATION SUMMARY.  The following table sets forth, for the period
beginning with the commencement of the Company's operations in July 1994 and
ending on December 31, 1994, and for the years ended December 31, 1995 and 1996,
the cash compensation paid or awarded by the Company to the Chief Executive
Officer, and the other four most highly compensated executive officers of ATC
and its subsidiaries (the "Named Executive Officers"). 


                              SUMMARY COMPENSATION TABLE
 

<TABLE>
<CAPTION>
                                                                                          LONG-TERM
                                                                    ANNUAL               COMPENSATION
                                                                 COMPENSATION              AWARDS
                                                           -------------------------    --------------
                                                                                          NUMBER OF
                                                                                          SECURITIES
                                                                                          UNDERLYING     ALL OTHER
NAME AND PRINCIPAL POSITION                  YEAR            SALARY($)      BONUS($)     OPTIONS(#)(1)  COMPENSATION($)
---------------------------                 ------         ----------     ----------    --------------  --------------
<S>                                         <C>            <C>            <C>           <C>             <C>
 William A. Smith (2)                       1996           $319,196       $315,803           --              --
  Chairman of the Board of Directors        1995            300,000            --            --              --
                                            1994            150,000            --        842,106        $250,000(3)

 Stephen J. Perkins (4)                     1996             70,385        125,000       498,000             --
  President and Chief Executive Officer     1995                --             --            --              --
                                            1994                --             --            --              --

 James R. Wehr                              1996            284,070        300,000           --              --
  President, Aaron's                        1995            258,000            --            --              --
                                            1994            109,000            --        140,352             --

 Michael L. LePore                          1996            226,520        181,745           --              --
  President, CRS                            1995            160,838(5)     179,038(6)     70,176             --
                                            1994            120,451        131,119           --              --

 John C. Kent                               1996            127,918        100,000        35,088             --
  Chief Financial Officer                   1995            124,615         12,000           --              --
                                            1994             56,154            --         70,176             --

 Kenneth A. Bear                            1996            107,467         80,000           --              --
  Executive Vice President and General      1995            103,200         60,000           --              --
 Manager, Aaron's                           1994             44,140         32,960        70,176             --

</TABLE>
 

---------------
(1) Includes only options to purchase securities of the Company, which options
    were issued pursuant to the Stock Incentive Plan. Pursuant to the Stock
    Incentive Plan, the Compensation Committee of the Board of Directors
    determines the terms and conditions of each option granted.


                                          37


<PAGE>

(2) Mr. Smith served as the Company's Chief Executive Officer until October
    1996.
    
(3) In July 1994 the Company paid Mr. Smith $250,000 for consultation services
    rendered in connection with the Initial Acquisitions.

(4) Mr. Perkins was appointed as the Company's President and Chief Executive
    Officer in October 1996.  See "Management Compensation and Employment
    Agreements" below.
    
(5) Includes five months salary of $56,777 prior to the acquisition by the
    Company of CRS in April 1995.

(6) Includes $86,759 of bonus earned prior to the acquisition by the Company of
    CRS in April 1995. 
    
         OPTION GRANTS.  Shown below is information concerning grants of
options issued by the Company to the Named Executive Officers for the year ended
December 31, 1996.

                          OPTION GRANTS IN LAST FISCAL YEAR
 

<TABLE>
<CAPTION>
                                                                                                      POTENTIAL REALIZABLE
                                           INDIVIDUAL                                                       VALUE AT
                                             GRANTS                                                   ASSUMED ANNUAL RATES
                                 ---------------------------------                                             OF
                                   NUMBER OF         % OF TOTAL                                           STOCK PRICE
                                   SECURITIES         OPTIONS                                             APPRECIATION
                                   UNDERLYING        GRANTED TO       EXERCISE                          FOR OPTION TERM(1)
                                 OPTIONS GRANTED    EMPLOYEES IN        PRICE        EXPIRATION   -----------------------------
      NAME                             (#)           FISCAL YEAR      ($/SHARE)         DATE           5%($)          10%($)
      ----                       ----------------  ---------------   -----------    ------------  -------------  --------------
<S>                              <C>               <C>               <C>            <C>           <C>            <C>         
 William A. Smith. . . . . .           --                --              --             --             --              --   
 Stephen J. Perkins. . . . .       498,000(2)          66.8%           $4.67         10/7/06      $1,462,608      $3,706,404
 James R. Wehr . . . . . . .           --                --              --             --             --              --   
 John C. Kent. . . . . . . .        35,088(3)            4.7            4.67         10/1/06         103,052         261,145
 Michael L. LePore . . . . .           --                --              --             --             --              --   
 Kenneth A. Bear . . . . . .           --                --              --             --             --              --   

</TABLE>
 

-------------
    
(1) The potential gains shown are net of the option exercise price and do not
    include the effect of any taxes associated with exercise. The amounts shown
    are for the assumed rates of appreciation only, do not constitute
    projections of future stock price performance, and may not necessarily be
    realized. Actual gains, if any, on stock option exercises depend on the
    future performance of the Common Stock, continued employment of the
    optionee through the term of the options, and other factors. 

(2) These options were granted under the Stock Incentive Plan. One third of the
    options vest and become exercisable on each of the first three
    anniversaries of the date of grant. 
    
(3) These options were granted under the Stock Incentive Plan. One third of the
    options vest and become exercisable on the first, third and fifth
    anniversaries of the date of the grant. 

         EXERCISES OF OPTIONS AND AGGREGATE YEAR-END OPTION VALUES.  Shown
below is information with respect to the year-end values of all options held by
the Named Executive Officers. No Named Executive Officer exercised any options
during the fiscal year ended December 31, 1996.


                                          38


<PAGE>

                   AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                          AND FISCAL YEAR-END OPTION VALUES



                             NUMBER OF SECURITIES       VALUE OF UNEXERCISED
                            UNDERLYING UNEXERCISED      IN-THE-MONEY OPTIONS
                          OPTIONS AT FISCAL YEAR-END     AT FISCAL YEAR-END (1)
                          --------------------------  --------------------------
 NAME                    EXERCISABLE  UNEXERCISABLE   EXERCISABLE  UNEXERCISABLE
 ----                     -----------  -------------  ------------ -------------
 William A. Smith.......        842,106         --    $13,120,012           --
 Stephen J. Perkins.....           --       498,000           --     $6,264,840
 James R. Wehr..........         93,568      46,784     1,457,789       728,895
 John C. Kent...........         23,392      81,872       364,447     1,170,302
 Michael L. LePore......         23,392      46,784       364,447       728,895
 Kenneth A. Bear........         23,392      46,784       364,447       728,895

----------
    
(1) Calculated using closing price on December 31, 1996 of $17.25 per share.

MANAGEMENT COMPENSATION AND EMPLOYMENT AGREEMENTS

         William A. Smith has an employment agreement with the Company 
pursuant to which he serves as Chairman of the Board of Directors of the 
Company at an annual salary of $316,000 (subject to cost-of-living 
adjustments). The employment agreement with Mr. Smith contains a noncompete 
provision for a period of five years from the cessation of his employment 
with the Company and a nondisclosure provision which is effective for the 
term of the employment agreement and indefinitely thereafter. Mr. Smith is 
also entitled to participate in any bonus, incentive or other benefit plans 
provided by the Company to its employees. 

         Stephen J. Perkins entered into an employment agreement with the
Company effective as of October 7, 1996, pursuant to which he will serve as
President and Chief Executive Officer of the Company at an annual salary of
$300,000 for a period of three years. The employment agreement with Mr. Perkins
contains a noncompete provision for a period of 18 months from the cessation of
his employment with the Company and a nondisclosure provision which is effective
for the term of the employment agreement and indefinitely thereafter.
Mr. Perkins is also entitled to participate in any bonus, incentive or other
benefit plans provided by the Company to its employees. 

         John C. Kent entered into an employment agreement with the Company
effective as of October 1, 1996, pursuant to which he will serve as Chief
Financial Officer of the Company at an annual salary of $150,000 for a period of
three years. The employment agreement with Mr. Kent contains a noncompete
provision for a period of 18 months from the cessation of his employment with
the Company and a nondisclosure provision which is effective for the term of the
employment agreement and indefinitely thereafter. Mr. Kent is also entitled to
participate in any bonus, incentive or other benefit plans provided by the
Company to its employees. 

         James R. Wehr entered into an employment agreement with Aaron's
effective as of August 2, 1994, pursuant to which he will serve as President of
Aaron's at an annual salary of $260,000 (subject to cost-of-living adjustments
which make the current annual salary approximately $274,000) for a period of
three years, which Aaron's may renew annually for an additional one year term.
The employment agreement and related agreements with Mr. Wehr contain a
noncompete provision for a period ending August 1, 1999 and a nondisclosure
provision which is effective for the term of his employment with Aaron's and
indefinitely thereafter. Mr. Wehr is also entitled to participate in any bonus,
incentive or other benefit plans provided by Aaron's to its employees. 

         Michael L. LePore entered into an employment agreement with CRS
effective as of June 1, 1995, pursuant to which he will serve as President of
CRS at an annual salary of approximately $180,000 (subject to


                                          39


<PAGE>

cost-of-living adjustments which make the current annual salary approximately
$185,000) for a period of five years, which CRS may renew for an additional one
year term. The employment agreement and related agreements with Mr. LePore
contain a noncompete provision for a period ending June 1, 2002 and a
nondisclosure provision which is effective for the term of his employment with
CRS and indefinitely thereafter. Mr. LePore is also entitled to participate in
any bonus, incentive or other benefit plans provided by CRS to its employees. 

         Kenneth A. Bear entered into an employment agreement with Aaron's
effective July 28, 1994, pursuant to which he will serve as Executive Vice
President and General Manager of Aaron's at an annual salary of $104,000 for a
period of three years, which Aaron's may renew annually for an additional one
year term. The employment agreement with Mr. Bear contains a nondisclosure
provision which is effective for the term of his employment with Aaron's and
indefinitely thereafter. Mr. Bear is also entitled to participate in any bonus,
incentive or other benefit plans provided by Aaron's to its employees. 

         The Compensation Committee is also considering implementation of one
or more forms of retirement or similar plans for its officers and employees. In
addition, the Compensation Committee reviews the employment contracts described
above on an annual basis. 

         1996 STOCK INCENTIVE PLAN.  In 1994, Holdings adopted the 1994 Stock
Incentive Plan in order to provide incentives to employees and directors of the
Company by granting them awards tied to the common stock of Holdings. In
February 1995, the plan was amended to include non-employee directors and
independent contractors. Upon effectiveness of the Reorganization, the plan
became the stock incentive plan of ATC and was renamed the 1996 Stock Incentive
Plan (the "Stock Incentive Plan"). The Stock Incentive Plan is administered by
the Compensation Committee, which has broad authority in administering and
interpreting the Stock Incentive Plan. Awards are not restricted to any
specified form or structure and may include, without limitation, sales or
bonuses of stock, restricted stock, stock options, reload stock options, stock
purchase warrants, other rights to acquire stock, securities convertible into or
redeemable for stock, stock appreciation rights, phantom stock, dividend
equivalents, performance units or performance shares (collectively, "Awards").
Options granted to employees under the Stock Incentive Plan may be options
intended to qualify as incentive stock options under Section 422 of the Internal
Revenue Code of 1986, as amended, or options not intended to so qualify. An
Award granted under the Stock Incentive Plan to an employee or independent
contractor may include a provision terminating the Award upon termination of
employment under certain circumstances or accelerating the receipt of benefits
upon the occurrence of specified events, including, at the discretion of the
Compensation Committee, any change of control of the Company. 

         As of February 28, 1997, the Company had granted options to purchase
an aggregate of up to 2,272,218 shares of Common Stock to officers and employees
of the Company. The exercise price for these options to purchase an aggregate of
1,526,778 shares is $1.67 per share and $4.67 per share for options to purchase
an aggregate of 745,440 shares. Each option is subject to certain vesting
provisions. All options expire on the tenth anniversary of the date of grant. 
As of February 28, 1997, the number of shares available for issuance pursuant to
options not yet granted under the Stock Incentive Plan was 127,782. For certain
information regarding options granted to officers of the Company, see "Security
Ownership of Certain Beneficial Owners and Management."

         COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.  The
members of the Compensation Committee are Richard K. Roeder, William A. Smith
and Richard R. Crowell. Mr. Smith does not participate in any matters considered
by the Committee relating to his compensation.  Messrs. Roeder and Crowell are
(i) two of the three stockholders and directors of Aurora Advisors, Inc., the
general partner of ACP, which is the general partner of Aurora Equity Partners,
a significant stockholder of ATC, and (ii) two of the three stockholders and
directors of Aurora Overseas Advisors, Ltd., the general partner of Aurora
Overseas Capital Partners L.P., the general partner of Aurora Overseas Equity
Partners I, L.P., also a significant stockholder of ATC.  See "Security
Ownership of Certain Beneficial Owners and Management."  In addition, Messrs.
Roeder and Crowell are two of the three managing directors of ACP, which
provides management services to the Company pursuant to a management services
agreement.  See "Certain Relationships and Related Transactions."


                                          40


<PAGE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth the beneficial ownership of each class
of issued and outstanding voting securities of the Company, as of February 28,
1997, by each director of the Company, each of the Named Executive Officers, the
directors and executive officers of the Company as a group and each person who
at such time beneficially owned more than 5% of the outstanding shares of any
class of voting securities of the Company.

                                                           NUMBER OF    VOTING
                                                           SHARES (1) PERCENTAGE
                                                          ------------ ---------
Aurora Equity Partners L.P. (Other beneficial owners:
  Richard R. Crowell, Richard K. Roeder and
  Gerald L. Parsky) (2)(4)(5). . . . . . . . . . . . .     11,772,339    69.3
Aurora Overseas Equity Partners I, L.P. (Other
  beneficial owners: Richard R. Crowell, Richard K.
  Roeder and Gerald L. Parsky) (3)(4)(5) . . . . . . .      5,519,889    32.5
General Electric Pension Trust(4). . . . . . . . . . .      2,018,652    11.9
  3003 Summer Street
  Stamford, CT 06905 . . . . . . . . . . . . . . . . . 
William A. Smith (6)(7). . . . . . . . . . . . . . . .        895,984     5.0
Stephen J. Perkins (7)(8). . . . . . . . . . . . . . .          1,000       *
John C. Kent (7)(9). . . . . . . . . . . . . . . . . .         24,392       *
James R. Wehr (10)(11) . . . . . . . . . . . . . . . .        971,068     5.7
Michael L. LePore (12) . . . . . . . . . . . . . . . .         24,992       *
  400 Corporate Drive
  Mahwah, NJ 07430
Kenneth A. Bear (11)(12) . . . . . . . . . . . . . . .         23,692       *
Robert Anderson (13) . . . . . . . . . . . . . . . . .         18,918       *
  10877 Wilshire Boulevard, Suite 1405
  Los Angeles, CA 90024-4341
Richard R. Crowell (2)(3)(4)(14)(15) . . . . . . . . .     12,960,489    76.3
Mark C. Hardy (14)(15) . . . . . . . . . . . . . . . .          8,460       *
Dr. Michael J. Hartnett (16) . . . . . . . . . . . . .         70,176       *
  60 Round Hill Road
  Fairfield, CT 06430
William E. Myers, Jr. (16) . . . . . . . . . . . . . .        280,704     1.6
  2 North Lake Avenue, Suite 650
  Pasadena, CA 91101
Gerald L. Parsky (2)(3)(4)(14)(15)(17) . . . . . . . .     12,960,489    76.3
Richard K. Roeder (2)(3)(4)(14)(15). . . . . . . . . .     12,960,489    76.3
All directors and officers as a group (14 persons)(18)     15,259,787    83.2

-----------
    
 *  Less than 1%. 

(1) The shares of Common Stock underlying options, warrants, rights or
    convertible securities that are exercisable as of February 28, 1997 or that
    will become exercisable within 60 days thereafter are deemed to be
    outstanding for the purpose of calculating the beneficial ownership of the
    holder of such options, warrants, rights or convertible securities, but are
    not deemed to be outstanding for the purpose of computing the beneficial
    ownership of any other person. 
    
(2) Includes 2,313,087 shares of Common Stock that are subject to an
    irrevocable proxy granted to Aurora Equity Partners L.P. ("AEP") and Aurora
    Overseas Equity Partners I, L.P. ("AOEP") by certain holders of Common
    Stock, including Messrs. Crowell, Hardy, Parsky, Roeder, certain other
    limited partners of AEP and certain affiliates of a limited partner of
    AOEP. The proxy terminates upon the transfer of such shares. AEP is a
    Delaware limited partnership the general partner of which is ACP, a
    Delaware limited partnership


                                          41


<PAGE>

    whose general partner is Aurora Advisors, Inc. ("AAI"). Messrs. Crowell,
    Parsky and Roeder are the sole stockholders and directors of AAI, are
    limited partners of ACP and may be deemed to beneficially share ownership
    of the Company's Common Stock beneficially owned by AEP and may be deemed
    to be the organizers of the Company under regulations promulgated under the
    Securities Act. Also includes the 2,018,652 shares of the Company's Common
    Stock held by General Electric Pension Trust ("GEPT"). See Footnote (4)
    below. 

(3) Includes 2,313,087 shares of the Company's Common Stock that are subject to
    an irrevocable proxy granted to AEP and AOEP by certain holders of Common
    Stock, including Messrs. Crowell, Hardy, Parsky, Roeder, certain other
    limited partners of AEP and certain affiliates of a limited partner of
    AOEP. The proxy terminates upon the transfer of such shares. AOEP is a
    Cayman Islands limited partnership the general partner of which is Aurora
    Overseas Capital Partners, L.P. ("AOCP"), a Cayman Islands limited
    partnership whose general partner is Aurora Overseas Advisors, Ltd.
    ("AOAL"). Messrs. Crowell, Parsky and Roeder are the sole stockholders and
    directors of AOAL, are limited partners of AOCP and may be deemed to
    beneficially own the shares of the Company's Common Stock beneficially
    owned by AOEP.  Also includes the 2,018,652 shares of the Company's Common
    Stock held by GEPT. See Footnote (4) below. 
    
(4) With limited exceptions, GEPT has agreed to vote these shares in the same
    manner as AEP and AOEP vote their respective shares of the Company's Common
    Stock. This provision terminates upon the transfer of such shares. 

(5) The address for this beneficial holder is West Wind Building, P.O. Box
    1111, Georgetown, Grand Cayman, Cayman Islands, B.W.I. 
    
(6) Includes 842,106 shares of Common Stock subject to options granted under
    the Stock Incentive Plan that are exercisable as of February 28, 1997 or
    that will become exercisable within 60 days thereafter. 

(7) The address for this beneficial holder is 33309 First Way South,
    Suite A-206, Federal Way, WA 98003. 
    
(8) Excludes 498,000 shares of Common Stock subject to options granted under
    the Stock Incentive Plan that are not exercisable within 60 days of
    February 28, 1997. 

(9) Consists of 23,392 shares of Common Stock subject to options granted under
    the Stock Incentive Plan that are exercisable as of February 28, 1997 or
    that will become exercisable within 60 days thereafter. Excludes 81,872
    shares of Common Stock subject to options granted under the Stock Incentive
    Plan that are not exercisable within 60 days of February 28, 1997. 
    
(10)Includes 93,568 shares of Common Stock subject to options granted under the
    Stock Incentive Plan that are exercisable as of February 28, 1997 or that
    will become exercisable within 60 days thereafter. Excludes 46,784 shares
    of Common Stock subject to options granted under the Stock Incentive Plan
    that are not exercisable within 60 days of February 28, 1997. 

(11)The address for this beneficial holder is 2699 North Westgate, Springfield,
    MO 65803. 
    
(12)Consists of 23,392 shares of Common Stock subject to options granted under
    the Stock Incentive Plan that are exercisable as of February 28, 1997 or
    that will become exercisable within 60 days thereafter. Excludes
    46,784 shares of  Common Stock subject to options granted under the Stock
    Incentive Plan that are not exercisable within 60 days of February 28,
    1997. 

(13)Includes 4,290 shares held by Mr. Anderson's wife (including 2,790 shares 
    held by her as trustee for her relatives), as to which Mr. Anderson 
    disclaims beneficial ownership.
    
(14)The address for this beneficial holder is 1800 Century Park East,
    Suite 1000, Los Angeles, CA 90067. 


                                          42


<PAGE>

(15)The holder of these shares has granted an irrevocable proxy covering these
    shares to AEP and AOEP. 
    
(16)Consists of shares of Common Stock subject to exercisable warrants. 

(17)Includes 2,000 shares held by Mr. Parsky's wife, as to which Mr. Parsky
    disclaims beneficial ownership.
    
(18)Includes 1,356,730 shares of Common Stock subject to warrants and employee
    stock options that are exercisable as of February 28, 1997 or that will
    become exercisable within 60 days thereafter.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The Company believes the transactions described below that were
entered into by the Company and its subsidiaries were beneficial to the
respective companies, and were at least as favorable to the respective companies
as could have been obtained from unaffiliated third parties pursuant to
arms-length negotiations. 

RELATIONSHIP WITH ACP

         Fees of approximately $1.1 million were paid to ACP for investment
banking services provided in connection with the acquisitions of Mascot, CRS and
King-O-Matic in 1995 and Tranzparts and Diverco in 1996. The Company has also
agreed to pay to ACP a base annual management fee of approximately $530,000 for
advisory and consulting services pursuant to a written management services
agreement (the "Management Services Agreement"). ACP is also entitled to
reimbursements from the Company for all of its reasonable out-of-pocket costs
and expenses incurred in connection with the performance of its obligations
under the Management Services Agreement. The base annual management fee is
subject to increase, at the discretion of the disinterested members of the
Company's Board of Directors, by up to an aggregate of $250,000 in the event the
Company consummates one or more significant corporate transactions. The base
annual management fee was not increased as a result of the acquisitions of CRS,
Mascot, King-O-Matic, Tranzparts and Diverco. The base annual management fee is
also subject to increase for specified cost of living increases. If the
Company's EBITDA in any year exceeds management's budgeted EBITDA by 15.0% or
more for that year, ACP will be entitled to receive an additional management fee
equal to one half of its base annual management fee for such year. Because the
Company's EBITDA did not exceed management's budgeted EBITDA by 15.0% in 1995
and 1996, ACP did not receive this additional management fee in 1995 or 1996. In
the event the Company consummates any significant corporate transaction, ACP
will be entitled to receive a closing fee from the Company equal to 2.0% of the
first $75.0 million of the acquisition consideration (including debt assumed and
current assets retained) and 1.0% of acquisition consideration (including debt
assumed and current assets retained) in excess of $75.0 million. Notwithstanding
the foregoing, no payment will be made to ACP pursuant to the Management
Services Agreement at any time that certain events of default shall have
occurred and be then continuing under either of the indentures governing the
Company's senior subordinated notes or the Revolving Credit Agreement. The
Management Services Agreement also provides that the Company shall provide ACP
and its directors, employees, partners and affiliates with customary
indemnification against all actions not involving gross negligence or willful
misconduct. The base annual management fee payable to ACP will be reduced as the
collective beneficial ownership of Common Stock by AEP and AOEP declines below
50%: for any period during which the collective beneficial ownership of AEP and
AOEP is less than 50% but at least 40%, the base annual management fee payable
for the period will be 80% of the original base annual management fee (as such
original base annual management fee may previously have been adjusted due to
discretionary increases by the Board of Directors or cost of living increases as
described above, the "Original Fee"); for any period during which AEP's and
AOEP's collective beneficial ownership is less than 40% but at least 30%, the
base annual management fee payable for the period will be 60% of the Original
Fee; and for any period during which the collective beneficial ownership of AEP
and AOEP is less than 30% but at least 20%, the base annual management fee
payable for the period will be 40% of the Original Fee. If AEP's and AOEP's
collective beneficial ownership declines below 20%, the Management Services
Agreement will terminate. For information regarding the general and certain of
the limited partners of ACP, see "Security Ownership of Certain Beneficial
Owners and Management." 


                                          43


<PAGE>

         In October 1996, the Company granted options for an aggregate of
48,000 shares to certain directors and consultants of the Company who are
employees of ACP, including Mr. Hardy. 

FACILITY LEASES

         In connection with its acquisition of Aaron's, the Company entered
into a lease with an affiliate of James R. Wehr for Aaron's headquarters and
primary remanufacturing facility located in Springfield, Missouri with an
initial term beginning January 1, 1994 and expiring December 31, 2004, subject
to the Company's option to extend the term for a period of five years. The
monthly base rent is $33,105 and the Company is responsible for paying property
taxes, insurance and maintenance expenses for the leased premises. The Company
also entered into three leases with affiliates of Mr. Wehr for three
manufacturing facilities comprising approximately 84,000 square feet for an
aggregate rent of $12,000 per month with an initial term beginning January 1,
1994 and expiring December 31, 1996 and December 31, 1998 (depending upon the
facility), subject to the Company's option to extend the term of the lease for a
30,000 square foot facility for one successive period of five years through
December 31, 2003. In November 1994, the Company entered into another lease with
the same parties for a 98,800 square foot storage facility for monthly rent of
$7,300 per month. The initial term of the lease expired during 1995 and pursuant
to its terms, continues as a month-to-month lease until terminated. In January
1996, the Company entered into a new lease with an affiliate of Mr. Wehr' for
Aaron's 200,000 square foot core storage facility for an initial term of ten
years, expiring October 31, 2006, with an option to renew for five years. The
base monthly rent is currently $36,667 for the initial term, with specified
increases every three years. The Company is also required to pay taxes,
maintenance and operating expenses.  On January 1, 1997 the Company entered into
a three-year lease with an affiliate of Mr. Wehr for a 60,430 square foot
facility used for core storage, warehousing and office space for rent of $5,973
per month.  The Company also leases from Mr. Wehr eight acres adjacent to the
manufacturing facility in Joplin, Missouri.  This acreage is used for employee
parking at the manufacturing facility.  The lease was entered into on July 1,
1996 and expires on June 30, 2006 with a monthly base rent of $1,265.  The
Company is responsible for paying property taxes, insurance and maintenance
expenses for each of these leased premises. Mr. Wehr is an executive officer of
the Company. 

PAYMENT OF PREFERRED STOCK REORGANIZATION CONSIDERATION

         In connection with the formation of Holdings, in July and August 1994
it issued Holdings Preferred Stock to each purchaser of its common stock for
consideration of $100 per share, totaling an aggregate of 200,000 outstanding
shares. In the Reorganization, each outstanding shares of Holdings preferred
stock was converted into one share of the Company's Preferred Stock, following
which the Preferred Stock was redeemed for an amount in cash equal to
$100.00 plus an amount in cash equal to accrued and unpaid dividends on the
Holdings Preferred Stock to the date of the Reorganization.  Messrs. Smith,
Wehr, Anderson, Crowell, Hardy, Parsky and Roeder (each of whom is a director
and/or executive officer of the Company) held the following numbers of shares of
Preferred Stock, respectively: 563; 11,250; 188; 1,264; 109; 1,401; and 243.
Upon redemption of such shares, Messrs. Smith, Wehr, Anderson, Crowell, Hardy,
Parsky and Roeder received the following amounts, respectively: $70,765;
$1,414,051; $23,630; $159,195; $13,701; $176,403; and $30,596. AEP and AOEP
originally purchased 95,392 and 15,233 shares of Preferred Stock, respectively,
which were subsequently distributed to their general and limited partners,
including AOCP and ACP, which received $19,183 and $120,159, respectively, upon
redemption of ATC's Preferred Stock. 

REGISTRATION RIGHTS

         The holders of the Company's Common Stock outstanding before the IPO
have been granted certain "demand" and "piggyback" registration rights pursuant
to a Stockholders Agreement. In addition, GEPT was granted certain "demand" and
"piggyback" registration rights with respect to 300,000 shares of Common Stock
owned by GEPT and 955,794 shares sold to GEPT in a private placement
concurrently with the IPO.


                                          44


<PAGE>

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS 
         ON FORM 8-K.

(a) Index to Financial Statements, Financial Statement Schedules and Exhibits:
    
         1.   Financial Statements Index

         See Index to Financial Statements and Supplemental Data on page 16.

         2.   Financial Statement Schedules Index

         II -- Valuation and Qualifying Accounts.......................S-1
    
         All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not required
under the related instructions or are inapplicable and therefore have been
omitted.

         3.   Exhibit Index

         The following exhibits are filed as part of this Annual Report on Form
10-K, or are incorporated herein by reference.
         

 EXHIBIT
 NUMBER  DESCRIPTION
 -------  -----------
 *3.1    Amended and Restated Certificate of Incorporation of Aftermarket
         Technology Corp.
 *3.2    Certificate of Designations, Preferences, and Relative, Participating,
              Option and Other Special Rights of Preferred Stock and
              Qualifications, Limitations and Restrictions Thereof of
              Redeemable Exchangeable Cumulative Preferred Stock of Aftermarket
              Technology Corp.
 *3.3    Amended and Restated Bylaws of Aftermarket Technology Corp.
  4.1    Indenture, dated August 2, 1994, among Aftermarket Technology Corp.,  
              the Guarantors named therein and Firstar Bank of Minnesota, N.A.
              (formerly known as American Bank N.A.), as Trustee for the Series
              B Notes (previously filed as Exhibit 4.1 to the Company's
              Registration Statement on Form S-4 filed on November 30, 1994,
              Commission File No. 33-86838, and incorporated herein by this
              reference)
  4.2    Indenture, dated June 1, 1995, among Aftermarket Technology Corp., the
              Guarantors named therein and Firstar Bank of Minnesota, N.A.
              (formerly known as American Bank N.A.), as Trustee for the
              Series D Notes (previously filed as Exhibit 4.1 to the Company's
              Registration Statement on Form S-4 filed on June 21, 1995,
              Commission File No. 33-93776, and incorporated herein by this
              reference)
  4.3    First Supplemental Indenture, dated as of February 23, 1995, among    
              Aftermarket Technology Corp., the Guarantors named therein and
              Firstar Bank of Minnesota, N.A. (formerly known as American Bank
              N.A.), as Trustee for the Series B Notes (previously filed as 
              Exhibit 4.3 to Amendment No. 1 to the Company's Registration
              Statement on Form S-1 filed on October 25, 1996, Commission File 
              No. 333-6697, and incorporated herein by this reference)
  4.4    Second Supplemental Indenture, dated as of June 1, 1995, among 
              Aftermarket Technology Corp., the Guarantors named therein and 
              Firstar Bank of Minnesota, N.A. (formerly known as American 
              Bank N.A.), as Trustee for the Series B Notes (previously filed 
              as Exhibit 4.4 to Amendment No. 1 to the Company's Registration 
              Statement on Form S-1 filed on October 25, 1996, Commission 
              File No. 333-5597, and incorporated herein by this reference)
  4.5    Third Supplemental Indenture to the Series B Indenture and First      
              Supplemental Indenture to the Series D Indenture, dated as of July
              25, 1996, among Aftermarket Technology Corp., the Guarantors 
              named therein and Firstar Bank of Minnesota, N.A. (formerly known
              as American Bank N.A.), as Trustee for the Notes (previously
              filed as Exhibit 4.5 to Amendment No. 1 to the Company's
              Registration Statement on Form S-1 filed on October 25, 1996,
              Commission File No. 333-5597, and incorporated herein by this
              reference)


                                          45


<PAGE>

  10.1   Stockholders Agreement, dated as of August 2, 1994, among Holdings,   
              and certain of its stockholders, optionholders and warrant holders
              (the "Stockholders Agreement") (previously filed as Exhibit 10.1
              to the Company's Registration Statement on Form S-4 filed on
              November 30, 1994, Commission File No. 33-86838, and incorporated
              herein by this reference)
  10.2   Amendment No. 1 to the Stockholders Agreement, dated as of June 24,   
              1996 (previously filed as Exhibit 10.38 to Amendment No. 2 to the
              Company's Registration Statement on Form S-1 filed on November 6,
              1996, Commission File No. 333-5597, and incorporated herein by 
              this reference)
  10.3   Amendment No. 2 to the Stockholders Agreement, dated as of October 24,
              1996 (previously filed as Exhibit 10.39 to Amendment No. 2 to the
              Company's Registration Statement on Form S-1 filed on November 6,
              1996, Commission File No. 333-5597, and incorporated herein by
              this reference)
 *10.4   Amendment No. 3 to Stockholders Agreement, dated as of December 4,    
              1996
 *10.5   Amendment No. 4 to Stockholders Agreement, dated as of December 16,   
              1996
 *10.6   Credit Agreement, dated as of February 14, 1996, among Aftermarket    
              Technology Corp., the Lenders from time to time parties thereto
              and The Chase Manhattan Bank (the "Credit Agreement")
 *10.7   Guarantee and Collateral Agreement, dated as of February 14, 1996, by 
              Aftermarket Technology Corp. and each of the signatories thereto 
              in favor of The Chase Manhattan Bank as Agent for the banks and
              other financial institutions from time to time parties to the 
              Credit Agreement
 *10.8   Amended and Restated Tax Sharing Agreement, dated as of December 20,  
              1996, among Aftermarket Technology Holdings Corp., Aaron's
              Automotive Products, Inc., ATC Components, Inc., CRS Holdings 
              Corp., Diverco Acquisition Corp., H.T.P., Inc., Mamco Converters,
              Inc., R.P.M. Merit, Inc. and Tranzparts Acquisition Corp.
  10.9   Amended and Restated Management Services Agreement, dated as of 
              November 18, 1996, by and among Aftermarket Technology Corp., the
              subsidiaries of Aftermarket Technology Corp., and Aurora Capital
              Partners L.P. (previously filed as Exhibit 10.4 to Amendment No.
              4 to the Company's Registration Statement on Form S-1 filed on
              October 25, 1996, Commission File No. 333-5597, and incorporated
              herein by this reference)
 *10.10  Aftermarket Technology Corp. 1996 Stock Incentive Plan
  10.11  Form of Incentive Stock Option Agreement (previously filed as Exhibit 
              10.36 to Amendment No. 1 to the Company's Registration Statement
              on Form S-1 filed on October 25, 1996, Commission File No. 
              333-5597, and incorporated herein by this reference)
  10.12  Form of Non-Qualified Stock Option Agreement (previously filed as 
              Exhibit 10.37 to Amendment No. 1 to the Company's Registration
              Statement on Form S-1 filed on October 25, 1996, Commission File
              No. 333-5597, and incorporated herein by this reference)
  10.13  Employment Agreement, dated as of October 7, 1996, between Aftermarket
              Technology Corp. and William A. Smith (previously filed as
              Exhibit 10.6 to the Company's Registration Statement on 
              Form S-4 filed on November 30, 1994, Commission File 
              No. 33-86838, and incorporated herein by this reference)
  10.14  Employment Agreement, dated as of October 7, 1996, between Stephen J. 
              Perkins and Aftermarket Technology Corp. (previously filed as 
              Exhibit 10.35 to Amendment No. 1 to the Company's Registration
              Statement on Form S-1 filed on October 25, 1996, Commission File
              No. 333-5597, and incorporated herein by this reference)
  10.15  Employment Agreement, dated as of October 1, 1996, between John C.  
              Kent and Aftermarket Technology Corp. (previously filed as 
              Exhibit 10.7 to Amendement No. 2 to the Company's Registration 
              Statement on Form S-1 filed on November 6, 1996, Commission 
              File No. 333-5597, and incorporated  herein by this reference)
  10.16  Employment Agreement, dated August 2, 1994, between James R. Wehr and 
              Aaron's Automotive Products, Inc. (previously filed as Exhibit 
              10.9 to the Company's Registration Statement on Form S-4 filed on 
              November 30, 1994, Commission File No. 33-86838, and incorporated 
              herein by this reference)
  10.17  Employment Agreement, dated as of June 1, 1995, between Michael L.    
              LePore and Component Remanufacturing Specialists, Inc. (previously
              filed as Exhibit 10.11 to the Company's Registration Statement on
              Form S-4 filed on June 21, 1995, Commission File No. 33-93776, and
              incorporated herein by this reference)


                                          46


<PAGE>

 *10.18  Amended and Restated Warrant Certificate, dated as of August 2, 1994, 
              for 280,704 warrants issued to William E. Myers, Jr.
 *10.19  Amended and Restated Warrant Certificate, dated as of August 2, 1994, 
              for 70,176 warrants issued to Brian E. Sanderson
 *10.20  Amended and Restated Warrant Certificate, dated June 24, 1996, for    
              70,176 warrants issued to Michael J. Hartnett
  10.21  Stock Purchase Agreement, dated May 16, 1994, by and among C.R. Wehr, 
              Jr., Rev. Liv. Trust, James R. Wehr, Aaron's Automotive Products,
              Inc. and AAP Acquisition Corp. (previously filed as Exhibit 10.14
              to the Company's Registration Statement on Form S-4 filed on 
              November 30, 1994, Commission File No. 33-86838, and incorporated
              herein by this reference)
  10.22  Stock Purchase Agreement, dated July 21, 1994, by and among John B.   
              Maynard, Kenneth T. Hester, H.T.P., Inc. and HTP Acquisition Corp.
              (previously filed as Exhibit 10.15 to the Company's Registration
              Statement on Form S-4 filed on November 30, 1994, Commission File
              No. 33-86838, and incorporated herein by this reference)
  10.23  Stock Purchase Agreement, dated July 21, 1994, by and among John B.   
              Maynard, Mamco Converters, Inc. and Mamco Acquisition Corp.
              (previously filed as Exhibit 10.16 to the Company's Registration
              Statement on Form S-4 filed on November 30, 1994, Commission File
              No. 33-86838, and incorporated herein by this reference)
  10.24  Asset Purchase Agreement, dated June 24, 1994, by and among RPM Merit,
              Donald W. White, John A. White, The White Family Trust and RPM
              Acquisition Corp. (previously filed as Exhibit 10.17 to the
              Company's Registration Statement on Form S-4 filed on
              November 30, 1994, Commission File No. 33-86838, and incorporated
              herein by this reference)
  10.25  Agreement and Plan of Merger and Reorganization, dated May 10, 1995,  
              by and among Component Remanufacturing Specialists, Inc., James
              R. Crane, Michael L. LePore, Aftermarket Technology Corp., CRS
              Holdings Corp. and CRS Acquisition Corp. (previously filed as
              Exhibit 2 to the Company's Current Report on Form 8-K filed on
              June 15, 1995, Commission File No. 33-80838-01, and incorporated
              herein by this reference)
  10.26  Stock Purchase Agreement, dated June 9, 1995, by and among Dianne     
              Hanthorn, Jobian Limited, Randall Robinson, Barry E. Schwartz, 
              Bradley Schwartz, Angela White, John White, Incorporated
              Investments Limited, Glenn M. Hanthorn, Guido Sala and Tony
              Macharacek, Mascot Truck Parts Inc. and Mascot Acquisition
              Corp. (previously filed as Exhibit 10.22 to the Company's
              Registration Statement on Form S-4 filed on June 21, 1995,
              Commission File No. 33-93776, and incorporated herein by this
              reference)
  10.27  Stock Purchase Agreement, dated September 12, 1995, by and among      
              Gordon King, 433644 Ontario Limited, 3179338 Canada Inc., 
              King-O-Matic Industries Limited, KOM Acquisition Corp. and
              Aftermarket Technology Corp. (previously filed as Exhibit 10.23
              to the Company's Annual Report on Form 10-K for the year ended
              December 31, 1995 and incorporated herein by
              this reference)
  10.28  Stock Purchase Agreement, dated as of April 2, 1996, by and among the 
              Charles T. and Jean F. Gorham Charitable Remainder Trust dated
              March 27, 1996, Charles T. Gorham, J. Peter Donoghue, Tranzparts,
              Inc. and Tranzparts Acquisition Corp. (previously filed as Exhibit
              10.23 to Amendment No. 1 to the Company's Registration Statement
              on Form S-1 filed on October 25, 1996, Commission File
              No. 333-5597, and incorporated herein by this reference)
  10.29  Stock Purchase Agreement, dated as of October 1, 1996, by and among  
              Robert T. Carren Qualified Annuity Trust, Robert T. Carren, 
              Diverco, Inc., and Diverco Acquisition Corp. (previously filed 
              as Exhibit 10.34 to Amendment No. 1 to the Company's 
              Registration Statement on Form S-1 filed on October 25, 1996, 
              Commission File No. 333-5597, and incorporated herein by this 
              reference)
 *10.30  Stock Purchase Agreement, dated as of January 31, 1997, by and among 
              S. Jay Wilemon, Ricki J. Wilemon, Bradley J. Wilemon, Corby L. 
              Wilemon, Replacement & Exchange Parts Co., Inc., Aftermarket 
              Technology Corp. and Repco Acquisition Corp.
  10.31  Lease, dated February 24, 1995, between 29 Santa Anita Partnership   
              L.P. and Replacement Parts Manufacturing with respect to 
              property located at 12250 E. 4th Street, Rancho Cucamonga, 
              California (previously filed as Exhibit 10.24 to Amendment No. 
              2 to the Company's Registration Statement on Form S-1 filed on 
              November 6, 1996, Commission File No. 333-5597, and 
              incorporated herein by this reference)

                                          47


<PAGE>

  10.32  Lease, dated January 1, 1994, between CRW, Incorporated and Aaron's 
              Automotive Products, Inc. with respect to property located at 
              2600 North Westgate, Springfield, Missouri (previously filed as 
              Exhibit 10.4 to the Company's Registration Statement on Form 
              S-4 filed on November 30, 1994, Commission File No. 33-86838, 
              and incorporated herein by this reference)
  10.33  Lease Purchase Agreement, dated April 21, 1995, between Fleming  
              Companies, Inc. and Aaron 's Automotive Products, Inc. with 
              respect to property located at 3001 Davis Boulevard, Joplin, 
              Missouri, as amended (previously filed as Exhibit 10.26 to 
              Amendment No. 2 to the Company's Registration Statement on Form 
              S-1 filed on November 6, 1996, Commission File No. 333-5 597, 
              and incorporated herein by this reference)
  10.34  Sublease, dated April 20, 1994, between Troll Associates, Inc. and   
              Component Remanufacturing Specialists, Inc. with respect to 
              property located at 400 Corporate Drive, Mahwah, New Jersey 
              (previously filed as Exhibit 10.40 to Amendment No. 2 to the 
              Company's Registration Statement on Form S-1 filed on November 
              6, 1996, Commission File No. 333-5597, and incorporated herein 
              by this reference)
  10.35  Sublease Modification and Extension Agreement, dated as of February 
              28, 1996, between Olde Holding Company and Component 
              Remanufacturing Specialists, Inc. with respect to property 
              located at 400 Corporate Drive, Mahwah, New Jersey (previously 
              filed as Exhibit 10.41 to Amendment No. 2 to the Company's 
              Registration Statement on Form S-1 filed on November 6, 1996, 
              Commission File No. 333-55 97, and incorporated herein by this 
              reference)
  10.36  Exchange and Registration Rights Agreement, dated August 2, 1994, by 
              and among Aftermarket Technology Corp., the subsidiaries of 
              Aftermarket Technology Corp., Chemical Securities Inc., and 
              Donaldson, Lufkin & Jenrette Securities Corporation (previously 
              filed as Exhibit 10.13 to the Company's Registration Statement 
              on Form S-4 filed on November 30, 1994, Commission File No. 
              33-83868, and incorporated herein by this reference)
  10.37  Exchange and Registration Rights Agreement, dated June 1, 1995, by and
              among Aftermarket Technology Corp., the subsidiaries of
              Aftermarket Technology Corp., Chemical Securities Inc., and
              Donaldson, Lufkin & Jenrette Securities Corporation (previously
              filed as Exhibit 10.16 to the Company's Registration Statement on
              Form S-4 filed on June 21, 1995, Commission File No. 33-93776,
              and incorporated herein by this reference)
  10.38  Firstbank Lending Agreement, dated as of June 28, 1996, between Mascot
              Trust Parts Inc. and/or King-O-Matic Industries Ltd. and Bank of
              Montreal (previously filed as Exhibit 10.33 to Amendment No. 1 to
              the Company's Registration Statement on Form S-1 filed on October
              25, 1996, Commission File No. 333-5597, and incorporated herein
              by this reference)
  10.29  Stock Subscription Agreement, dated as of November 18, 1996, between 
              Aftermarket Technology Corp. and the Trustees of the General 
              Electric Pension Trust (previously filed as Exhibit 10.44 to 
              Amendment No. 4 to the Company's Registration Statement on Form 
              S-1 filed on October 25, 1996, Commission File No. 333-5597, 
              and incorporated herein by this reference)
  *11.1  Computation of Pro Forma Net Income Per Share
  *21.1  List of Subsidiaries
  *23.1  Consent of Ernst & Young LLP, independent auditors

-----------
*   Filed herewith

(b) Reports on Form 8-K

         The Company filed no Reports on Form 8-K during the last quarter of
         the 1996 fiscal year.

(c) Refer to (a) 3 above.

(d) Refer to (a) 2 above.


                                          48


<PAGE>

                                      SIGNATURES

         Pursuant to the requirements of Section 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized,
on March 14, 1997.

                                  AFTERMARKET TECHNOLOGY CORP.
                             
                             
                                  By:   /S/  STEPHEN J. PERKINS 
                                        -------------------------
                                       Stephen J. Perkins
                                       CHIEF EXECUTIVE OFFICER

         Pursuant to the requirements of the Securities Act of 1933, this
Annual Report on Form 10-K has been signed by the following persons in the
capacities indicated on the dates indicated. 

        SIGNATURE                 TITLE                         DATE
--------------------------  -----------------------------  ------------------
 /S/ STEPHEN J. PERKINS 
 -------------------------
     Stephen J. Perkins    Chief Executive Officer 
                           (Principal Executive Officer)  March 14, 1997
 /S/ JOHN C. KENT  
 -------------------------
     John C. Kent          Chief Financial Officer
                           (Principal Financial Officer)  March 14, 1997
 /S/ DANIEL C. BUIE     
 -------------------------
     Daniel C. Buie        Corporate Controller
                           (Principal Accounting Officer) March 14, 1997
 /S/ WILLIAM A. SMITH   
 -------------------------
     William A. Smith      Chairman of the Board of
                           Directors                      March 14, 1997
 /S/ ROBERT ANDERSON    
 -------------------------
     Robert  Anderson      Director                       March 14, 1997

 /S/ RICHARD R. CROWELL 
 -------------------------
     Richard R. Crowell    Director                       March 14, 1997

 /S/ MARK C. HARDY 
 -------------------------
     Mark C. Hardy         Director                       March 14, 1997

 /S/ MICHAEL J. HARTNETT     
 -------------------------
     Michael J. Hartnett   Director                       March 14, 1997

 /S/ WILLIAM E. MYERS, JR.   
 -------------------------
     William E. Myers, Jr. Director                       March 14, 1997



                                          49



<PAGE>

 /S/ GERALD L. PARSKY   
 -------------------------
     Gerald L. Parsky      Director                       March 14, 1997

 /S/ RICHARD K. ROEDER  
 -------------------------
     Richard K. Roeder     Director                       March 14, 1997


                                          50


<PAGE>

                             AFTERMARKET TECHNOLOGY CORP.

                   SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
 

<TABLE>
<CAPTION>

                                                                                 ADDITIONS
                                                                        ---------------------------
                                                           BALANCE AT     CHARGED TO    CHARGE TO
                                                          BEGINNING OF     COSTS AND      OTHER                       BALANCE AT END
                                                             PERIOD        EXPENSES      ACCOUNTS       DEDUCTIONS       OF PERIOD  
                                                         ---------------------------------------------------------------------------
<S>                                                      <C>            <C>            <C>             <C>            <C>
                     Combined:
Seven months ended July 31, 1994:
  Reserve and allowances deducted from asset accounts:
    Allowance for uncollectible accounts                   $324,750       $ 308,550      $     -       $  32,588(1)      $  600,712
                     Consolidated:
Five months ended December 31, 1994:
  Reserve and allowances deducted from asset accounts:
    Allowance for uncollectible accounts                    600,712         190,044            -          24,756(1)         766,000
    Reserve for inventory obsolescence                            -         785,603            -               -            785,603
                Year ended December 31, 1995:
  Reserve and allowances deducted from asset accounts:
    Allowance for uncollectible accounts                    766,000       1,239,138    1,216,529(2)      752,667(1)       2,469,000
    Reserve for inventory obsolescence                      785,603       1,034,259      294,442(2)            -          2,114,304
                Year ended December 31, 1996:
  Reserve and allowances deducted from asset accounts:
    Allowance for Uncollectible accounts                  2,469,000         667,857       14,594(2)    1,825,368(1)       1,326,476
    Reserve for inventory obsolescence                    2,114,304       1,411,013            -         784,543          2,740,774

(1) Accounts written off, net of recoveries
    
(2) Balances added through new acquisitionsh

</TABLE>
 


                                         S-1